UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Mark One
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period ended March 31, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934
For the transition period from ______ to _______
Commission File Number 0-24249
PROFESSIONAL DETAILING, INC.
(Exact name of Registrant as specified in its charter)
Delaware 22-2919486
------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Mountainview Road
Upper Saddle River, New Jersey 07458
------------------------------------
(Address of principal executive offices)
(201) 258-8450
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
As of May 7, 1999 the Registrant had a total of 10,689,562 shares of Common
Stock, $.01 par value, outstanding.
<PAGE>
INDEX
PROFESSIONAL DETAILING, INC.
PART I. FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements
Balance Sheets
March 31, 1999 and December 31, 1998........................... 3
Statements of Operations -- Three
Months Ended March 31, 1999 and 1998........................... 4
Statements of Cash Flows -- Three
Months Ended March 31, 1999 and 1998........................... 5
Notes to Financial Statements.................................. 6
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations........................... 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ...................................... Not Applicable
Item 2. Changes in Securities and Use of Proceeds .............. 13
Item 3. Default Upon Senior Securities.......................... Not Applicable
Item 4. Submission of Matters to a Vote of
Security Holders...................................... Not Applicable
Item 5. Other Information....................................... Not Applicable
SIGNATURES ..................................................... 14
2
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PROFESSIONAL DETAILING, INC.
BALANCE SHEETS
(unaudited)
March 31, December 31,
1999 1998
------------ ------------
Assets
Current assets:
Cash and cash equivalents ...................... $ 64,640,680 $ 56,191,563
Short-term investments ......................... -- 1,000,000
Contract payments receivable ................... 12,501,471 4,474,091
Unbilled costs and accrued profits on
contracts in progress ....................... 1,526,823 3,297,250
Deferred training .............................. 1,899,364 1,222,103
Other current assets ........................... 512,144 677,690
Deferred tax asset ............................. 336,400 368,400
------------ ------------
Total current assets ....................... 81,416,882 67,231,097
Net property, plant & equipment ................ 2,344,293 2,166,283
Other long-term assets ......................... 611,777 542,606
------------ ------------
Total assets ................................... $ 84,372,952 $ 69,939,986
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable ............................... $ 2,389,962 $ 1,049,023
Payable to affiliates, net ..................... 190,618 56,236
Accrued incentives ............................. 5,536,194 6,750,648
Accrued salaries and wages ..................... 4,441,318 2,553,946
Unearned contract revenue ...................... 15,446,280 7,343,435
Other accrued expenses ......................... 5,997,535 4,550,017
------------ ------------
Total current liabilities .................. $ 34,001,907 $ 22,303,305
------------ ------------
Long-term liabilities:
Deferred tax liability ......................... 58,952 32,000
------------ ------------
Total long-term liabilities ................ 58,952 32,000
------------ ------------
Total liabilities .............................. $ 34,060,859 $ 22,335,305
============ ============
Shareholders' equity:
Common stock, $.01 par value; 30,000,000 shares
authorized; shares issued and outstanding
March 31, 1999 - 10,689,562 and December 31,
1998 - 10,689,562 ........................... 106,896 106,896
Additional paid-in capital ..................... 46,408,466 46,408,466
Retained earnings .............................. 5,269,966 2,573,870
Deferred compensation .......................... (45,241) (56,557)
Loan to officer ................................ (1,427,994) (1,427,994)
------------ ------------
Total shareholders' equity ................. 50,312,093 47,604,681
------------ ------------
Total liabilities & shareholders' equity ....... $ 84,372,952 $ 69,939,986
============ ============
The accompanying notes are an integral part of these financial statements
3
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PROFESSIONAL DETAILING, INC.
STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
March 31,
-------------------------
1999 1998
----------- -----------
Revenue ............................................ $36,013,617 $23,450,219
Program expenses (including related party amounts of
$704,462 and $533,430 for the quarters ended
March 31, 1999 and 1998, respectively) .......... 27,738,852 15,960,536
----------- -----------
Gross profit ....................................... 8,274,765 7,489,683
Compensation expense ............................... 3,256,586 1,997,311
Other general, selling and administrative expenses . 1,367,647 601,804
----------- -----------
Total general, selling and administrative expenses . 4,624,233 2,599,115
----------- -----------
Operating income ................................... 3,650,532 4,890,568
Other income, net .................................. 778,943 89,874
----------- -----------
Income before provision for income taxes ........... 4,429,475 4,980,442
Provision for income taxes ......................... 1,733,378 --
----------- -----------
Net income ......................................... $ 2,696,097 $ 4,980,442
=========== ===========
Basic net income per share ......................... $ 0.25 $ 0.67
=========== ===========
Diluted net income per share ....................... $ 0.25 $ 0.66
=========== ===========
Basic weighted average
number of shares outstanding .................... 10,689,562 7,464,562
=========== ===========
Diluted weighted average
number of shares outstanding .................... 10,921,717 7,524,983
=========== ===========
Pro forma data (see note 2)
Income before provision for taxes .................. 4,980,442
Pro forma provision for income tax ................. 996,084
-----------
Pro forma net income ............................... $ 3,984,358
===========
Pro forma basic net income per share ............... $ 0.53
===========
Pro forma diluted net income per share ............. $ 0.53
===========
Pro forma basic weighted average
number of shares outstanding .................... 7,464,562
===========
Pro forma diluted weighted average
number of shares outstanding .................... 7,524,983
===========
The accompanying notes are an integral part of these financial statements
4
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PROFESSIONAL DETAILING, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income from operations .............................. $ 2,696,097 $ 4,980,442
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation ....................................... 126,277 46,678
Deferred compensation .............................. 11,316 11,317
Other changes in assets and liabilities:
(Increase) decrease in contract payments receivable (8,027,380) (7,133,938)
(Increase) decrease in unbilled costs .............. 1,770,427 1,568,107
(Increase) decrease in deferred training ........... (677,261) --
(Increase) decrease in other current assets ........ 165,546 (786,758)
(Increase) decrease in other long-term assets ...... (69,171) --
Increase (decrease) in accounts payable ............ 1,340,939 256,454
Increase (decrease) in accounts payable to affiliate 134,382 --
Increase (decrease) in accrued liabilities ......... 672,918 (736,427)
Increase (decrease) in unearned contract revenue ... 8,102,845 6,582,136
Increase (decrease) in other current liabilities ... 1,506,469 951,139
------------ ------------
Net cash provided by operating activities ............... 7,753,404 5,739,150
------------ ------------
Cash Flows Provided by (Used In) Investing Activities
Sale of short-term investments ..................... 1,000,000 --
Purchase of property and equipment ................. (304,287) (767,367)
Advances to affiliate .............................. -- (50,111)
------------ ------------
Net cash provided by (used in) investing activities ..... 695,713 (817,478)
------------ ------------
Cash Flows Used In Financing Activities
Payments on note payable ........................... -- (8,070)
------------ ------------
Net cash used in financing activities ................... -- (8,070)
------------ ------------
Net increase in cash and cash equivalents ............... 8,449,117 4,913,602
Cash and cash equivalents - beginning ................... 56,191,563 5,759,918
------------ ------------
Cash and cash equivalents - ending ...................... $ 64,640,680 $ 10,673,520
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
PROFESSIONAL DETAILING, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The accompanying unaudited interim financial statements and related notes
should be read in conjunction with the financial statements of Professional
Detailing, Inc. (the "Company") and related notes as included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998 (the "Annual
Report") as filed with the Securities and Exchange Commission. The unaudited
interim financial statements of the Company have been prepared in accordance
with generally accepted accounting principles for interim financial reporting
and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The unaudited
interim financial statements include all adjustments (consisting only of normal
recurring adjustments) which, in the judgement of management, are necessary for
a fair presentation of such financial statements. Operating results for the
three month period ended March 31, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999.
2. Initial Public Offering of Common Stock
On May 19, 1998, the Company completed its initial public offering (the
"IPO") of 3,220,000 shares of Common Stock (including 420,000 shares in
connection with the exercise of the underwriters' over-allotment option) at a
price per share of $16.00. Net proceeds to the Company after expenses of the IPO
were approximately $46.5 million. As disclosed in the IPO Prospectus, the
Company made a distribution of $5.8 million to the S Corporation shareholders,
representing shareholders' equity of the Company as of March 31, 1998 plus the
earnings of the Company from April 1, 1998 to May 18, 1998.
The Company was an S Corporation for Federal income tax purposes in the
first quarter of 1998. As a result of the termination of its status as an S
Corporation in May 1998, the Company is subject to Federal and state income
taxes. The pro forma income tax provision is based upon the statutory rates in
effect for C Corporations during the first quarter of 1998. The pro forma
effective tax rate for the period ended March 31, 1998 is 20%. The difference
between the 1999 estimated effective tax rate of 39% and the 20% pro forma tax
rate used for the first quarter of 1998 relates to the net operating loss
carryforwards assumed to be recognized in 1998, for which a valuation allowance
would have been previously recorded.
6
<PAGE>
3. Basic and Diluted Net Income Per Share
Basic and diluted net income per share was calculated based on the
requirements of Statement of Financial Accounting Standards No. 128, "Earnings
Per Share."
A reconciliation of the number of shares used in the calculation of basic
and diluted earnings per share for the three months ended March 31, 1999 and
1998 is as follows:
Three Months Ended
March 31,
--------------------------
1999 1998
---------- ---------
Average shares outstanding - basic 10,689,562 7,464,562
Dilutive effect of stock options 232,155 60,421
---------- ---------
Average shares outstanding - diluted 10,921,717 7,524,983
========== =========
4. New Accounting Pronouncements
The Financial Accounting Standards Board released in June 1998, Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999. This statement
addresses the accounting for derivative instruments including certain derivative
instruments embedded in other contracts and for hedging activities. As the
Company does not enter into transactions involving derivative instruments, the
Company does not believe that the adoption of this new statement will have a
material effect on the Company's financial statements.
In the second quarter of 1998, the Accounting Standard Executive Committee
of the AICPA issued Statement of Position 98-5, "Reporting on the Costs of
Start-up Activities." This statement provides guidance on financial reporting of
start-up costs and organizational costs. This Statement of Position is effective
for financial statements for fiscal years beginning after December 15, 1998.
This Statement of Position requires start-up costs to be expensed as incurred.
The adoption of this Statement of Position has not had a material impact on the
Company's financial statements.
7
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain statements made in this Quarterly Report on Form 10-Q are
"forward-looking statements"(within the meaning of the Private Securities
Litigation Reform Act of 1995) regarding the plans and objectives of management
for future operations. Such statements involve known and unknown risks,
uncertainties and other factors that may cause actual results, performance or
achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. The forward-looking statements included herein are based on current
expectations that involve numerous risks and uncertainties. The Company's plans
and objectives are based, in part, on assumptions involving judgements with
respect to, among other things, 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 the control of the
Company. Although the Company believes that its assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the forward-looking
statements included in this report will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded by the Company
or any other person that the objectives and plans of the Company will be
achieved. Factors that could cause actual results to differ materially from
those expressed or implied by such forward-looking statements include, but are
not limited to, the factors set forth in "Certain Factors That May Affect Future
Growth," under Part I, Item 1, of the Company's Annual Report on Form 10-K for
the year ended December 31, 1998, as filed with the Securities and Exchange
Commission.
GENERAL
Professional Detailing, Inc. (the "Company" or "PDI") is a leading
provider of comprehensive customized sales solutions on an outsourced basis to
the United States pharmaceutical industry. The Company's primary objective is to
enhance its leadership position in the growing contract sales organization
("CSO") industry and to become the premier supplier of comprehensive sales
solutions to the pharmaceutical industry and other segments of the healthcare
market. The Company has demonstrated strong internal growth generated by
securing new business from leading pharmaceutical companies and by renewing and
expanding programs with existing clients. PDI is engaged by its clients to
design and implement customized product detailing programs for both prescription
and OTC pharmaceutical products, and believes that it is one of the largest CSOs
operating in the United States measured both by revenue and number of sales
representatives used in programs.
Given the Company's customized approach to its business, the Company
utilizes a variety of contract structures with its clients. Generally, contracts
provide for a fee to be paid based on the Company delivering a specified package
of services. Contracts typically include performance benchmarks, such as a
minimum number of sales representatives or a minimum number of calls. Under
certain contracts, the Company may be entitled to additional compensation based
upon the
8
<PAGE>
success of the program and/or subject to penalties for failing to meet stated
performance benchmarks. In addition, contracts typically provide that the
Company is entitled to a fee for each sales representative hired by the client
during or at the conclusion of a program.
Revenue is earned primarily by performing services under contracts and is
recognized as the services are performed and the right to receive payment for
such service is assured. Program expenses consist primarily of the costs
associated with the execution of a detailing program. Such expenses include
personnel costs and the initial direct costs associated with staffing a program.
Personnel costs, which constitute the largest portion of program expenses,
include all labor related costs, such as salaries, bonuses, fringe benefits and
payroll taxes for the sales representatives and managers who are directly
responsible for the rendering of services in connection with a particular
program. Initial direct program costs are those costs associated with initiating
a program, such as recruiting, hiring and training sales representatives who
staff a particular program. All personnel costs and initial direct program
costs, other than training costs, are expensed as incurred. Training costs
include costs of training the sales representatives and managers on a particular
program. Training costs are deferred and amortized on a straight-line basis over
the shorter of (i) the life of the contract to which they relate, or (ii) 12
months. The Company may incur significant initial direct costs prior to
recognizing revenue under a particular contract.
General, selling and administrative expenses include compensation expense
and other general, selling and administrative expenses. Compensation expense
consists primarily of salaries, related fringe benefits and training expenses
for senior management and other administrative, marketing, finance, information
technology, recruiting and human resources personnel who are not directly
involved with the execution of a particular program. Other general, selling and
administrative expenses include corporate overhead such as facilities costs,
depreciation and amortization expenses and professional services fees.
The Company's growth strategy emphasizes: (i) enhancing its leadership
position in the growing CSO market by maintaining its historic focus on
high-quality contract sales services and by continuing to build and invest in
the Company's core competencies and operations; (ii) expanding both its
relationship with existing clients and its selling efforts to capture new
clients; (iii) offering additional promotional, marketing and educational
services and further developing its existing detailing services; (iv) entering
new geographic markets; and (v) investigating and pursuing appropriate
acquisitions of companies.
The Company completed an initial public offering of 2,800,000 shares of
its common stock at $16.00 per share on May 19, 1998. Additionally, 420,000
shares of common stock were purchased from the Company at $16.00 per share by
the underwriters upon exercise of an over-allotment option. The net proceeds to
the Company, after deducting underwriting discounts and expenses, were
approximately $46.5 million. Additionally, the Company made $5.8 million of
distributions to the S Corporation shareholders, representing shareholders'
equity of the Company as of March 31, 1998 plus the earnings of the Company from
April 1, 1998 to May 18, 1998.
Prior to its IPO, the Company was an S Corporation and not subject to
Federal or New Jersey state income taxes other than a New Jersey state corporate
tax of approximately 2%. Accordingly, during such period the net income of the
Company has been reported by and taxed directly to the Company's shareholders,
rather than the Company. Accordingly, had the Company been a C Corporation for
the first quarter of 1998, utilizing the first quarter 1999 effective tax rate,
net income and diluted net income per share for the quarter ended March 31, 1998
would have been approximately $3.0 million and $0.40, respectively.
9
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated, certain
statements of operations data as a percentage of revenue. The trends illustrated
in this table may not be indicative of future results.
Three Months
Ended
March 31,
--------------
1999 1998
----- -----
Revenue ...................................................... 100.0% 100.0%
Program expenses ............................................. 77.0 68.1
----- -----
Gross profit ................................................. 23.0 31.9
Compensation expense ......................................... 9.1 8.5
Other general, selling & administrative expenses ............. 3.8 2.6
----- -----
Total general, selling & administrative expenses ............. 12.9 11.1
----- -----
Operating income ............................................. 10.1 20.8
Other income, net ............................................ 2.2 0.4
----- -----
Income before provision for taxes ............................ 12.3 21.2
Provision for income taxes ................................... 4.8 --
----- -----
Net Income ................................................... 7.5% 21.2%
===== =====
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998
Revenue. Revenue for the quarter ended March 31, 1999 was $36.0 million,
an increase of approximately 53.6% over revenue of $23.5 million for the quarter
ended March 31, 1998. The increase in revenue for the quarter ended March 31,
1999 was generated primarily from an increase in the number and size of
programs, new business activity, additional recruiting and hiring programs and
the positive effect of performance incentives.
Program expenses. Program expenses for the quarter ended March 31, 1999
were $27.7 million, an increase of 73.8% over program expenses of $16.0 million
for the quarter ended March 31, 1998. As a percentage of revenue, program
expenses increased to 77.0% in the first quarter of 1999 from 68.1% in the first
period of 1998. Program expenses for first quarter 1998 benefited from certain
costs associated with the initiation of programs scheduled to begin in the first
quarter of 1998 being expensed as incurred in fourth quarter of 1997. The
revenue from such programs could not be recognized until the Company began
performing services in connection with such programs in the first quarter of
1998.
Compensation expense. Compensation expense for the quarter ended March 31,
1999 was $3.3 million compared to $2.0 million for the quarter ended March 31,
1998. As a percentage of revenue, compensation expense increased to 9.1% in the
first quarter of 1999 from 8.5% in the comparable 1998 period. This percentage
increase is primarily attributable to an increase in training costs related to
the Company's expanded national sales meeting and the cost of additions to staff
primarily in the business development and recruiting and hiring areas.
Other general, selling and administrative expenses. Other general, selling
and administrative expenses for the quarter ended March 31, 1999 were $1.4
million, compared to $602,000 for the quarter ended March 31, 1998. As a
percentage of revenue, other general, selling and administrative expenses
increased to 3.8% in the first quarter of 1998 from 2.6% in the comparable 1998
period.
10
<PAGE>
This percentage increase is in line with 1999 budgets and reflects higher rent
and other costs associated with the Company's move to its new headquarters in
May of 1998, as well as higher depreciation, leasing and professional service
costs associated with investments in information technology and public company
expense.
Operating income. Operating income for the quarter ended March 31, 1999
was $3.7 million compared to operating income of $4.9 million for the quarter
ended March 31, 1998. Operating results for the first quarter of 1998 benefited
from the fact that certain costs associated with the initiation of programs
scheduled to begin in 1998 were expensed as incurred in the fourth quarter of
1997 while revenue from such programs could not be recognized until the Company
began performing services in connection with such programs in the first quarter
of 1998. As a percentage of revenue, operating income for the first quarter of
1999 decreased to 10.1% from 20.8% for the comparable 1998 period.
Other income, net. Other income consists primarily of interest income
earned on the Company's cash and cash equivalents. Other income for the quarter
ended March 31, 1999 was $779,000, compared to other income of $90,000 for the
quarter ended March 31, 1998. The increase is primarily due to the investment of
the net proceeds of the IPO.
Income tax provision. Income taxes for the three months ended March 31,
1999 were $1.7 million. For the three months ended March 31, 1998, the Company
was an S Corporation under subchapter S of the Code and was not subject to
Federal income taxes. The tax rate for the period ended March 31, 1999
approximated 39%.
Net income. Net income for the quarter ended March 31, 1999 was $2.7
million compared to a net income of $5.0 million for the quarter ended March 31,
1998. Had the Company been a C Corporation for the first quarter ended March 31,
1998, utilizing the first quarter 1999 effective tax rate of approximately 39%,
net income for the quarter ended March 31, 1998 would have been approximately
$3.0 million.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999, the Company had $64.6 million of cash and cash
equivalents and no bank indebtedness. As of March 31, 1999, working capital was
$47.4 million.
For the three months ended March 31, 1999, cash provided from operating
activities was $7.8 million compared to cash from operating activities of $5.7
million for the same period in 1998. The main components of cash provided from
operating activities for the three months ended March 31, 1999 were net income
from operations of $2.7 million and a net change in various current asset and
current liability accounts of $4.7 million relating to normal business activity.
Contracts generally provide for advance payments which typically fund the
initial costs of a program. Furthermore, the balances in certain current asset
and current liability accounts may fluctuate depending on a number of factors,
including the number and size of programs, contract terms and other timing
issues. Accordingly, contract payments receivable increased by $8.0 million from
December 31, 1998 to March 31, 1999 as a result of significant periodic payments
pursuant to several contracts being due towards the end of the first quarter.
Some of these payments contributed to an increase of $8.1 million in unearned
contract revenue.
Cash provided by investing activities consisted of the sale of short-term
investments of $1.0 million and purchases of property and equipment of $304,000.
11
<PAGE>
There were no cash flows provided by or used in financing activities for
the three months ended March 31, 1999.
The Company presently believes that its cash and cash equivalents,
short-term investments, future cash flows generated from operations, and
borrowings available under its line of credit agreement will be sufficient to
meet its foreseeable operating and capital requirements. As part of the
Company's plan for the use of the proceeds from the Offering, the Company will
be evaluating and reviewing acquisition candidates in the ordinary course of
business.
YEAR 2000 COMPLIANCE
The Company has undertaken a project that addresses the Year 2000 issue of
computer systems and other equipment with embedded chips or processors not being
able to properly recognize and process date-sensitive information after December
31, 1999. Many systems use only two digits rather than four to define the year
and these systems will not be able to distinguish between the year 1900 and the
year 2000. This may lead to disruptions in the operations of business and
governmental entities resulting from miscalculations or system failures. The
Company's project to address the year 2000 issue has been divided into two
sections. One section addresses the Company's internal business systems. The
other section addresses the business systems of the Company's key business
partners. Key business partners are those clients and vendors that have a
material impact on the Company's operations.
The portion of the project that deals with the internal business systems
of the Company has six major phases: (i) inventorying all Y2K items; (ii)
prioritizing all Y2K items; (iii) assessing all Y2K items; (iv) repairing or
replacing all systems or hardware that are not Y2K compliant; (v) testing
repaired or replaced Y2K items; and (vi) designing and implementing contingency
plans for those systems that cannot be repaired or replaced by January 1, 2000.
As of March 31, 1999, substantially all phases related to the internal business
systems of the Company were complete.
The section of the project that deals with the business systems of key
business partners has three major phases: (i) identifying all key business
partners; (ii) evaluating the status of their Y2K compliance efforts; and (iii)
determining alternatives and contingency plan requirements. As of March 31,
1999, all key business partners have been identified and the Company has
completed the evaluation of their Y2K compliance efforts. The determination of
alternatives and contingency planning is expected to be completed during the
third quarter.
The Company does not expect to incur any additional material costs
relating to its internal business systems as all phases associated with
determining Y2K compliance of the internal business systems have been completed.
Costs associated with the determination of alternatives and contingency
planning, based on the Company's evaluation of Y2K compliance efforts of our key
business partners, will not be material.
Failure to make all internal business systems Y2K compliant could result
in an interruption in, or a failure of, some of the Company's business
activities or operations. In addition, Y2K disruptions in client operations
could result, among other things, in one or more clients missing scheduled
payments which could impact the Company's cash flow. Y2K disruptions in the
operations of key vendors could also impact the Company's ability to fulfill
some of its contractual obligations. If one or more of these situations occur,
the Company's financial position, results of operations or cash flows could be
materially and adversely affected.
12
<PAGE>
Part II - Other Information
Item 1 - Not Applicable
Item 2 - Changes in Securities and Use of Proceeds On May 19, 1998, the Company
completed its initial public offering (the "IPO") of 3,220,000 shares of Common
Stock (including 420,000 shares in connection with the exercise of the
underwriters' over-allotment option) at a price per share of $16.00. Net
proceeds to the Company after expenses of the IPO were approximately $46.5
million.
(1) Effective date of Registration Statement: May 19, 1998 (File No.
333-46321).
(2) The Offering commenced on May 19, 1998 and was consummated on May 22,
1998.
(3) Not applicable.
(4)(i) All securities registered in the Offering were sold.
(4)(ii) The managing underwriters of the Offering were Morgan Stanley Dean
Witter, William Blair & Company and Hambrecht & Quist.
(4)(iii) Common Stock, $.01 par value
(4)(iv) Amount registered and sold: 3,220,000 shares
Aggregate purchase price: $51,520,000
All shares were sold for the account of the Issuer.
(4)(v) $3,606,400 in underwriting discounts and commissions were paid to the
underwriters. $1,375,000 of other expenses were incurred, including
estimated expenses.
(4)(vi) $46,538,600 of net Offering proceeds to the Issuer.
(4)(vii) Use of Proceeds:
$46,538,000 of temporary investments with maturities of three months or
less as of March 31, 1999.
Items 3 - 5 - Not Applicable
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereto
duly authorized.
May 7, 1999 PROFESSIONAL DETAILING, INC.
By: /s/ Charles T. Saldarini
-------------------------------
Charles T. Saldarini, President
and Chief Executive Officer
By: /s/ Bernard C. Boyle
-------------------------------
Bernard C. Boyle
Chief Financial and Accounting
Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 64,641
<SECURITIES> 0
<RECEIVABLES> 12,501
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 81,417
<PP&E> 3,320
<DEPRECIATION> 976
<TOTAL-ASSETS> 84,373
<CURRENT-LIABILITIES> 34,002
<BONDS> 0
0
0
<COMMON> 107
<OTHER-SE> 50,205
<TOTAL-LIABILITY-AND-EQUITY> 84,373
<SALES> 36,014
<TOTAL-REVENUES> 36,792
<CGS> 27,739
<TOTAL-COSTS> 32,363
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,429
<INCOME-TAX> 1,733
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,696
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
