Dendrite International, Inc. (NASDAQ: DRTE) today reported its
financial results for the quarter ended September 30, 2006.
Revenues for the quarter were $103.0 million, compared to revenues
of $114.4 million in the prior year period. Year over year revenue
comparisons are negatively affected by approximately $14 million of
revenue in the prior period from the Company�s largest customer
primarily related to a significant one-time project. On a GAAP
basis, the Company reported a loss of $0.14 per diluted share in
the third quarter 2006. Adjusted earnings per diluted share were
$0.09 in the third quarter 2006, excluding $0.21 per share in
severance and asset impairment charges and $0.02 per share in
compensation expense (related to stock options and shares issued
under the Company�s employee stock purchase plan). The Company
reported that adjusted results also include approximately $0.02 per
share of additional expense related to the implementation of its
previously announced Operational Effectiveness program and
strategic initiatives. GAAP earnings were $0.24 per diluted share
for the third quarter 2005. �Dendrite�s repositioning is well
underway, and our Operational Effectiveness program remains on
track to generate our targeted savings of $40 million against our
2006 budget, which we expect will substantially enhance our bottom
line going forward. With our exciting product development pipeline,
streamlined cost structure and strengthened management team, we
believe we are well positioned to both identify and capitalize on
revenue growth opportunities in the months ahead,� stated Chief
Operating Officer Joe Ripp. Segment Results Sales solutions Sales
solutions revenue of $66.8 million was down 19% compared to $82.6
million in the third quarter of 2005, due largely to the previously
noted non-recurring project in the third quarter 2005. Operating
income in this segment decreased to $7.6 million for the quarter
compared to $23.0 million in the prior year period. Third quarter
2006 Sales solutions operating income included approximately $5.8
million of restructuring charges related to severance for the
Company�s Operational Effectiveness initiatives. Marketing
solutions Marketing solutions revenue of $28.8 million in the third
quarter 2006 increased 14% versus $25.3 million in the third
quarter 2005. All regions experienced growth versus the prior year.
Marketing solutions reported an operating loss of approximately
$2.9 million in the third quarter 2006 compared to an operating
loss of approximately $1.4 million in the third quarter of 2005.
This change was due to additional selling and marketing efforts in
support of future growth in this segment, as well as third quarter
2006 restructuring costs of $1.9 million. Emerging solutions
Emerging solutions revenue of $7.4 million increased 15% from
revenue of $6.4 million in the prior year period. The Emerging
solutions segment reported operating income in the third quarter of
2006 of approximately $0.1 million; this was essentially flat
compared to the same period of the prior year. Third quarter 2006
restructuring charges were $0.1 million for this segment. Corporate
segment Dendrite reported Corporate expenses of $13.1 million in
the third quarter of 2006 compared to $4.2 million in the third
quarter of 2005, primarily reflecting the substantial costs the
Company is incurring as it implements its Operational Effectiveness
initiative. Costs associated with stock options and restricted
stock units contributed nearly $2.0 million of additional expense
in the third quarter 2006. The third quarter 2006 Corporate segment
expense also included approximately $4.9 million of restructuring
charges primarily related to an asset impairment charge related to
a facility that Dendrite expects to sell as part of the Company�s
Operational Effectiveness initiative. A further $2 million increase
in Corporate segment expense is attributable primarily to
consulting and other miscellaneous costs relating principally to
the Company�s Operational Effectiveness program and other strategic
initiatives. Summary of Key Balance Sheet Items The Company
generated $13.3 million of cash from operations in the third
quarter 2006. Days sales outstanding (DSO) was 59 days, remaining
below the Company�s target of 60-63 days The Company ended the
third quarter 2006 with $84.1 million in cash and cash equivalents.
Total capital expenditures were $2.9 million in the third quarter
2006. Business Highlights Solid business performance was seen
elsewhere in all three segments. Sales Solutions segment: Signed a
global agreement with Procter and Gamble in Q406 to: Upgrade its
core sales force automation solution to Dendrite�s Mobile
Intelligence Extend its existing support services and prescriber
data management solutions Add regional tool to enable greater
territory and compliance management Secured contract expansions
with Daiichi Sankyo and UCB, together adding more than 450 new
sales force effectiveness users Launched the new Dendrite MICRO�
mobile phone based sales force effectiveness solution and signed
the first new customer In Europe, the Company entered into a
significant three-year sales rep support services agreement with a
prominent pharmaceutical company to implement and manage support
services for over 1000 sales representatives in France Added more
than 1000 new sales force effectiveness users in Europe, including
two new customers on its human centered design based Mobile
Intelligence� platform In Latin America, the Company implemented
and rolled out its sales force effectiveness solution for
approximately 350 users of Valeant, Mexico In Australia, the
Company signed an agreement with BMS to upgrade to the latest
version of Dendrite�s sales force automation solution, including a
service renewal for three years. In Asia, the Company signed an
agreement for its jforceNET� sales force effectiveness solution
with its first domestic Korean pharmaceutical customer, LG Life
Sciences Marketing Solutions segment: In the US, the Company closed
forty new agreements with several customers, including seven with a
leading pharmaceutical company for persistence campaigns and
campaign management programs with a total contract value of over $
4.5M. Acquired OPUS Health(TM), a leading provider of
direct-to-patient persistence technologies. The acquisition enables
Dendrite to add its breadth of marketing services around OPUS
Health technology to deliver complete patient persistence programs
and analysis. In Europe, increased penetration of our DocScan(R),
Physician Connect(SM) and Market Research solutions, growing 32%
versus the third quarter 2005. In Japan, the Company delivered its
first two Physician Connect and DocScan projects for the region,
following the recent launch of those offerings in the second
quarter 2006. Emerging Solutions Segment: The Company�s Buzzeo
Compliance group achieved a profitable quarter with a revenue
increase of 18% year-to-date. Since its acquisition, the Company
has rapidly expanded its customer base to include not only
pharmaceutical companies, but also pharmaceutical distributors and
pharmacy chains. Other Matters The Company revised its 2006 revenue
outlook to approximately $419 to $424 million, down from $427 to
$437 million, primarily as a result of slower than planned US
Marketing Solutions sales in the second half of the year. From time
to time the Company has received expressions of interest in
strategic opportunities. As a consequence, the Board of Directors
has appointed JPMorgan to advise the Board on their full range of
options. The Company stated that there could be no assurances of
any action as a result of their review and that it does not intend
to discuss or provide interim updates. To participate in Dendrite�s
earnings call to be telecast on November 2, 2006 at 5 p.m. EST, or
to obtain replay information, please visit the Investors�
Highlights Section of our website at www.dendrite.com. About
Dendrite Founded in 1986, Dendrite International (NASDAQ: DRTE)
enables sales, marketing, clinical and compliance solutions for the
global pharmaceutical industry. The Company�s clients are located
in more than 50 countries and include the world's top 20
pharmaceutical companies. For more information, please visit
www.dendrite.com. Note: Dendrite is a registered trademark of
Dendrite International, Inc. FORWARD LOOKING INFORMATION: This
document contains forward-looking statements that may be identified
by such forward-looking terminology as �expect,� �believe,�
�anticipate,� �will,� �intend,� �plan,� �target,� �outlook,�
�guidance,� and similar statements or variations. Such
forward-looking statements are based on our current expectations,
estimates, assumptions and projections and involve significant
risks and uncertainties, including risks which may result from our
dependence on the pharmaceutical industry; our fixed expenses in
relation to fluctuating revenues and variations in customers'
budget cycles; dependence on certain major customers, including the
risk associated with our largest customer�s plans to transition a
significant portion of its U.S. sales force effectiveness services
needs; fluctuations in quarterly revenues due to lengthy sales and
implementation cycles; our ability to successfully implement our
Operational Effectiveness program and to achieve the cost savings
in the amounts and time periods expected or budgeted; changes in
demand for our products and services attributable to any weakness
experienced in the economy or mergers, acquisitions and
consolidations in the pharmaceutical industry; risks associated
with foreign currency fluctuations as they affect our non-U.S.
operations; risks associated with our expanded international
operations and our ability to adopt and respond successfully to the
unique risks involved in our non-U.S. operations; any difference
between estimated and actual stock option expense; and risks
associated with reviewing strategic options and with any
transaction occurring or being consummated at any subsequent time.
Other important factors that should be reviewed and carefully
considered are included in the Company's 10-K under �Factors That
May Affect Future Results� and its 10-Qs and other reports filed
with the SEC. Actual results may differ materially. The Company
assumes no obligation for updating any such forward-looking
statements to reflect actual results, changes in expectations or
assumptions or other changes affecting such forward-looking
statements, even if such results or changes make it clear that any
such projected results will not be achieved. Any�outlook and other
forward-looking information is as of the date of this release only.
At any such time in the future as the Company may provide
revenue,�earnings and other outlook information, prior related
outlook should no�longer be considered current. Our outlook and
other forward-looking information do not take into account or
reflect any possible future acquisitions, dispositions or similar
transactions which may occur. TABLE 1 DENDRITE INTERNATIONAL, INC.
� CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP � (IN THOUSANDS,
EXCEPT PER SHARE DATA) (UNAUDITED) � � Three Months Ended September
30, � 2006� % � 2005� % Change � Revenues: � Services &
Technology: Sales solutions $ 66,762� 64.8% $ 82,642� 72.3% -19%
Marketing solutions 28,835� 28.0% 25,310� 22.1% 14% Emerging
solutions � 7,376� 7.2% � 6,408� 5.6% 15% Total revenues 102,973�
100.0% 114,360� 100.0% -10% � Operating Costs & Expenses:
Operating costs (including shipping) 56,172� 54.6% 61,252� 53.6%
-8% Selling, general and administrative 39,816� (1) 38.7% 33,395�
(2) 29.2% 19% Research and development 1,607� 1.6% 1,343� 1.2% 20%
Restructuring and other charges 12,660� (3) 12.3% -� 0.0% NM�
Amortization of acquired intangible assets � 1,074� 1.0% � 960�
0.8% 12% Total operating costs & expenses 111,329� 108.1%
96,950� 84.8% 15% � Operating (loss) income (8,356) -8.1% 17,410�
15.2% NM� � Interest income, net (644) -0.6% (150) -0.1% NM� Other
expense, net � 31� 0.0% � 35� 0.0% NM� � (Loss) income before
income tax (benefit) expense (7,743) -7.5% 17,525� 15.3% 144% �
Income tax (benefit) expense � (1,698) -1.6% � 6,747� 5.9% 125% �
Net (loss) income $ (6,045) -5.9% $ 10,778� 9.4% 156% � Net (loss)
income per share: Basic $ (0.14) $ 0.25� NM� Diluted $ (0.14) $
0.24� NM� � Shares used in computing net (loss) income per share:
Basic � 43,713� � 42,944� Diluted � 43,713� � 44,331� (1) Includes
$937 out of $975 total stock-based compensation expense from the
adoption of SFAS 123(R) and $887 out of $905 total restricted stock
expense, respectively. (2) Includes $69 of restricted stock
expense. (3) $8,206 of severance expense and $4,454 of an asset
impairment charge. � NM - Not meaningful. TABLE 2 DENDRITE
INTERNATIONAL, INC. � CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP
� (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) � � Nine Months
Ended September 30, � 2006� % � 2005� % Change � Revenues: �
Services & Technology: Sales solutions $ 202,316� 64.7% $
230,641� 70.1% -12% Marketing solutions 90,414� 28.9% 79,091� 24.0%
14% Emerging solutions � 19,753� 6.3% � 19,141� 5.8% 3% Total
revenues 312,483� 100.0% 328,873� 100.0% -5% � Operating Costs
& Expenses: Operating costs (including shipping) 175,321� 56.1%
173,732� 52.8% 1% Selling, general and administrative 121,707� (1)
38.9% 103,258� (2) 31.4% 18% Research and development 4,835� 1.5%
4,615� 1.4% 5% Restructuring and other charges 15,238� (3) 4.9%
9,372� (4) 2.8% 63% Amortization of acquired intangible assets �
3,131� 1.0% � 3,340� 1.0% -6% Total operating costs & expenses
320,232� 102.5% 294,317� 89.5% 9% � Operating (loss) income (7,749)
-2.5% 34,556� 10.5% -122% � Interest income, net (1,602) -0.5%
(315) -0.1% NM� Other expense, net � 77� 0.0% � 32� 0.0% NM� �
(Loss) income before income tax expense (6,224) -2.0% 34,839� 10.6%
118% � (Loss) income before income tax (benefit) expense � (174)
-0.1% � 13,413� 4.1% 101% � Net (loss) income $ (6,050) -1.9% $
21,426� 6.5% 128% � Net (loss) income per share: Basic $ (0.14) $
0.50� NM� Diluted $ (0.14) $ 0.49� NM� � Shares used in computing
net (loss) income per share: Basic � 43,638� � 42,670� Diluted �
43,638� � 43,903� � � (1) Includes $3,392 out of $3,591 total
stock-based compensation expense from the adoption of SFAS 123(R)
and $2,213 out of $2,244 total restricted stock expense,
respectively. (2) Includes $103 of restricted stock expense. (3)
$10,248 of severance expense, $4,454 of an asset impairment charge
and $536 of other expense. (4) $7,649 of facility related charges
and $1,723 of severance expense. � NM-Not Meaningful TABLE 3
DENDRITE INTERNATIONAL, INC. � SUPPLEMENTAL FINANCIAL INFORMATION
(SEE NOTES) � (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) � �
� � � � � � � � � � � � � � � Three Months Ended September 30, Nine
Months Ended September 30, 2006� 2005� % Change� 2006� 2005� %
Change� � Total revenue - GAAP $ 102,973� $ 114,360� -10% $
312,483� $ 328,873� -5% � Impact of foreign exchange rates (1) 748�
-� 3,459� -� � Total revenue - Adjusted $ 103,721� $ 114,360� -9% $
315,942� $ 328,873� -4% � � � � � � � � � � � � � � � � � � � � � �
� � � � � � � Three Months Ended September 30, Nine Months Ended
September 30, � 2006� � 2005� � 2006� � 2005� Operating (loss)
income - GAAP $ (8,356) $ 17,410� $ (7,749) $ 34,556� � Stock
option expense (2) 1,023� -� 3,750� -� Surplus facility charges (3)
-� -� -� 7,649� Severance charges 8,206� (5) -� 10,248� (5) 1,723�
(4) Asset impairment 4,454� (7) -� 4,454� (7) -� Other
restructuring charges � -� � -� � 536� (6) � -� � Operating income
- Adjusted $ 5,327� $ 17,410� $ 11,239� $ 43,928� � � � � � � � � �
� � � � � � � � � � � � � � � � � � � � � � � Three Months Ended
September 30, Nine Months Ended September 30, � 2006� � 2005� �
2006� � 2005� Net income per share: Diluted - GAAP $ (0.14) $ 0.24�
$ (0.14) $ 0.49� � Stock option expense (2) 0.02� (8) -� 0.06� (8)
-� Surplus facility charges (3) -� -� -� 0.10� (9) Severance
charges 0.15� (10) -� 0.17� (10) 0.03� (11) Asset impairment 0.06�
(12) -� 0.06� (12) -� Other restructuring charges � -� � -� � 0.01�
(13) � -� � Diluted - Adjusted $ 0.09� $ 0.24� $ 0.17� $ 0.62� � �
� � � � � � � � � � � � � � � � Note: 2006 EPS does not foot down
due to the mathematical rounding ofthe individual calculations. �
(1) The impact of exchange rates are calculated by taking 2006
local currency revenue and applying the 2005 exchange rates for
comparison purposes. � (2) Prior to January 1, 2006, the Company
accounted for stock-based compensation under Accounting Principles
Board, Opinion No. 25, �Accounting for Stock Issued to Employees�
(�APB 25�). In accordance with APB 25, the Company historically
used the intrinsic value method to account for stock-based
compensation expense. Under APB 25, stock options and shares issued
under the Company�s employee stock purchase plan were not an
expense for accounting purposes and, as a result, no compensation
expense is included in the 2005 reporting period related to these
items. As of January 1, 2006, the Company accounts for stock-based
compensation expense, including expense related to stock options
and shares issued under the employee stock purchase program, under
the fair value method of Statement of Financial Accounting No.
123(R), �Shared-Based Payment� (�FAS 123(R)�). As the Company
adopted the modified prospective method, results for prior periods
have not been restated under the fair value method for GAAP
purposes. � (3) The surplus facility charges relates to vacating a
New Jersey facility and for additional facilities vacated in
previous periods due to changes in market conditions, as well as
the write-off of leasehold improvements associated with the exited
facility. � (4) The 2005 severance charges relates to the
elimination of certain senior and mid-level management positions. �
(5) The 2006 severance charges relates to the elimination of
certain positions relating to our Operational Effectiveness
initiative ("OE"). � (6) The 2006 other restructuring charges
primarily relates to the refocusing of our Japanese business. � (7)
The 2006 asset impairment charge relates to a facility held for
sale that was reduced to its estimated fair market value less costs
to sell. � (8) The tax effect using the marginal tax rate is $352
and $1,248 for the three and nine months ended September 30, 2006,
respectively. � (9) The tax effect using the marginal tax rate is
$3,075 for the nine months ended September 30, 2005. � (10) The tax
effect using the marginal tax rate is $1,658 and $2,352 for the
three and nine months ended September 30, 2006, respectively. �
(11) The tax effect using the marginal tax rate is $487 for the
nine months ended September 30, 2005. � (12) The tax effect using
the marginal tax rate is $1,782 for the three and nine months ended
September 30, 2006. � (13) The tax effect using the marginal tax
rate is $226 for the nine months ended September 30, 2006. TABLE 4
DENDRITE INTERNATIONAL, INC. � SEGMENT REVENUE, OPERATING INCOME
(LOSS) AND RESTRUCTURING AND OTHER CHARGES � (IN THOUSANDS)
(UNAUDITED) � For the Three Months Ended September 30, 2006 Sales
Solutions Marketing Solutions� Emerging Solutions Corporate Total
Revenue $ 66,762� $ 28,835� $ 7,376� $ -� $ 102,973� Operating
income (loss) $ 7,570� $ (2,919) $ 137� $ (13,144) $ (8,356)
Restructuring charges $ 5,758� $ 1,930� $ 63� $ 4,909� $ 12,660� �
� For the Three Months Ended September 30, 2005 Sales Solutions
Marketing Solutions� Emerging Solutions Corporate Total Revenue $
82,642� $ 25,310� $ 6,408� $ -� $ 114,360� Operating income (loss)
$ 23,019� $ (1,440) $ 69� $ (4,238) $ 17,410� Restructuring charges
$ -� $ -� $ -� $ -� $ -� � � For the Nine Months Ended September
30, 2006 Sales Solutions Marketing Solutions Emerging Solutions
Corporate Total Revenue $ 202,316� $ 90,414� $ 19,753� $ -� $
312,483� Operating income (loss) $ 33,751� $ (8,253) $ (379) $
(32,868) $ (7,749) Restructuring charges $ 6,517� $ 2,884� $ 67� $
5,770� $ 15,238� � � For the Nine Months Ended September 30, 2005
Sales solutions Marketing solutions� Emerging solutions Corporate
Total Revenue $ 230,641� $ 79,091� $ 19,141� $ -� $ 328,873�
Operating income (loss) $ 56,433� $ (3,566) $ 970� $ (19,281) $
34,556� Restructuring charges $ -� $ -� $ -� $ 9,372� $ 9,372�
TABLE 5 DENDRITE INTERNATIONAL, INC. � CONSOLIDATED BALANCE SHEETS
� (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED) � September 30,
2006 December 31, 2005 Assets � Current Assets: Cash and cash
equivalents $ 84,147� $ 66,145� Accounts receivable, net 67,106�
80,167� Prepaid expenses and other current assets 7,945� 8,544�
Asset held for sale 8,545� -� Deferred income taxes � 13,035� �
8,848� Total current assets � 180,778� � 163,704� � Property and
equipment, net 38,578� 52,592� Other assets 9,355� 8,856� Goodwill
92,332� 90,440� Intangible assets, net 27,038� 25,083� Capitalized
software development costs, net 10,380� 10,341� Deferred income
taxes � 12,011� � 11,991� $ 370,472� $ 363,007� Liabilities and
Stockholders' Equity � Current Liabilities: Accounts payable $
8,138� $ 7,677� Income taxes payable 8,272� 9,518� Capital lease
obligations 1,408� 1,383� Accrued compensation and benefits 18,887�
17,950� Accrued professional and consulting fees 6,164� 5,690�
Accrued restructuring and other charges 8,138� 1,490� Other accrued
expenses 20,376� 17,468� Purchase accounting restructuring accrual
960� 1,601� Deferred revenues � 15,430� � 18,680� Total current
liabilities � 87,773� � 81,457� � Capital lease obligations 389�
1,648� Purchase accounting restructuring accrual 2,269� 3,009�
Accrued restructuring and other charges 3,387� 4,143� Deferred rent
5,425� 5,740� Other non-current liabilities 5,617� 5,595� �
Stockholders' Equity: Preferred stock, no par value, 15,000,000
shares authorized, none issued -� -� Common stock, no par value,
150,000,000 shares authorized, 46,583,869 and 46,353,252 shares
issued; 43,722,566 and 43,491,949 shares outstanding at September
30, 2006 and December 31, 2005, respectively 153,728� 149,947�
Retained earnings 142,899� 148,948� Deferred compensation -�
(4,419) Accumulated other comprehensive income (loss) 722� (1,324)
Less treasury stock, at cost � (31,737) � (31,737) � Total
stockholders' equity 265,612� 261,415� � $ 370,472� $ 363,007�
TABLE 6 DENDRITE INTERNATIONAL, INC. � CONSOLIDATED STATEMENTS OF
CASH FLOWS � (IN THOUSANDS) (UNAUDITED) � Nine Months Ended
September 30, � 2006� � 2005� Operating activities: Net (loss)
income $ (6,050) $ 21,426� Adjustments to reconcile net (loss)
income to net cash provided by operating activities: Depreciation
and amortization 19,090� 18,026� Asset impairment 4,454� 1,030�
Stock-based compensation 5,941� 103� Deferred income taxes (3,869)
(2,277) Excess tax benefits from stock-based awards (229) -�
Changes in assets and liabilities, net of effects from
acquisitions: Decrease (increase) in accounts receivable 14,725�
(1,825) Decrease in prepaid expenses and other current assets 860�
56� Increase in other assets (368) (1,277) Increase in accounts
payable and accrued expenses 567� 1,599� Increase in accrued
restructuring and other charges 5,829� 6,618� Decrease in purchase
accounting restructuring accrual (1,118) (2,180) Decrease in income
taxes payable (1,004) (1,621) (Decrease) increase in deferred
revenue (3,579) 221� Decrease in other non-current liabilities �
(2) � (70) � Net cash provided by operating activities � 35,247� �
39,829� � Investing activities: Acquisitions, net of cash acquired
(5,706) (21,439) Purchases of property and equipment (9,863)
(22,633) Additions to capitalized software development costs �
(3,668) � (3,845) � Net cash used in investing activities �
(19,237) � (47,917) � Financing activities: Payments on capital
lease obligations (1,234) (1,241) Excess tax benefits from
stock-based awards 229� -� Issuance of common stock � 2,030� �
10,938� � Net cash provided by financing activities � 1,025� �
9,697� � Effect of foreign exchange rate changes on cash 967�
(1,011) � Net increase in cash and cash equivalents 18,002� 598�
Cash and cash equivalents, beginning of year � 66,145� � 64,020� �
Cash and cash equivalents, end of period $ 84,147� $ 64,618�
Dendrite International, Inc. (NASDAQ: DRTE) today reported its
financial results for the quarter ended September 30, 2006.
Revenues for the quarter were $103.0 million, compared to revenues
of $114.4 million in the prior year period. Year over year revenue
comparisons are negatively affected by approximately $14 million of
revenue in the prior period from the Company's largest customer
primarily related to a significant one-time project. On a GAAP
basis, the Company reported a loss of $0.14 per diluted share in
the third quarter 2006. Adjusted earnings per diluted share were
$0.09 in the third quarter 2006, excluding $0.21 per share in
severance and asset impairment charges and $0.02 per share in
compensation expense (related to stock options and shares issued
under the Company's employee stock purchase plan). The Company
reported that adjusted results also include approximately $0.02 per
share of additional expense related to the implementation of its
previously announced Operational Effectiveness program and
strategic initiatives. GAAP earnings were $0.24 per diluted share
for the third quarter 2005. "Dendrite's repositioning is well
underway, and our Operational Effectiveness program remains on
track to generate our targeted savings of $40 million against our
2006 budget, which we expect will substantially enhance our bottom
line going forward. With our exciting product development pipeline,
streamlined cost structure and strengthened management team, we
believe we are well positioned to both identify and capitalize on
revenue growth opportunities in the months ahead," stated Chief
Operating Officer Joe Ripp. Segment Results Sales solutions Sales
solutions revenue of $66.8 million was down 19% compared to $82.6
million in the third quarter of 2005, due largely to the previously
noted non-recurring project in the third quarter 2005. Operating
income in this segment decreased to $7.6 million for the quarter
compared to $23.0 million in the prior year period. Third quarter
2006 Sales solutions operating income included approximately $5.8
million of restructuring charges related to severance for the
Company's Operational Effectiveness initiatives. Marketing
solutions Marketing solutions revenue of $28.8 million in the third
quarter 2006 increased 14% versus $25.3 million in the third
quarter 2005. All regions experienced growth versus the prior year.
Marketing solutions reported an operating loss of approximately
$2.9 million in the third quarter 2006 compared to an operating
loss of approximately $1.4 million in the third quarter of 2005.
This change was due to additional selling and marketing efforts in
support of future growth in this segment, as well as third quarter
2006 restructuring costs of $1.9 million. Emerging solutions
Emerging solutions revenue of $7.4 million increased 15% from
revenue of $6.4 million in the prior year period. The Emerging
solutions segment reported operating income in the third quarter of
2006 of approximately $0.1 million; this was essentially flat
compared to the same period of the prior year. Third quarter 2006
restructuring charges were $0.1 million for this segment. Corporate
segment Dendrite reported Corporate expenses of $13.1 million in
the third quarter of 2006 compared to $4.2 million in the third
quarter of 2005, primarily reflecting the substantial costs the
Company is incurring as it implements its Operational Effectiveness
initiative. Costs associated with stock options and restricted
stock units contributed nearly $2.0 million of additional expense
in the third quarter 2006. The third quarter 2006 Corporate segment
expense also included approximately $4.9 million of restructuring
charges primarily related to an asset impairment charge related to
a facility that Dendrite expects to sell as part of the Company's
Operational Effectiveness initiative. A further $2 million increase
in Corporate segment expense is attributable primarily to
consulting and other miscellaneous costs relating principally to
the Company's Operational Effectiveness program and other strategic
initiatives. Summary of Key Balance Sheet Items -- The Company
generated $13.3 million of cash from operations in the third
quarter 2006. -- Days sales outstanding (DSO) was 59 days,
remaining below the Company's target of 60-63 days -- The Company
ended the third quarter 2006 with $84.1 million in cash and cash
equivalents. -- Total capital expenditures were $2.9 million in the
third quarter 2006. Business Highlights Solid business performance
was seen elsewhere in all three segments. Sales Solutions segment:
-- Signed a global agreement with Procter and Gamble in Q406 to: --
Upgrade its core sales force automation solution to Dendrite's
Mobile Intelligence -- Extend its existing support services and
prescriber data management solutions -- Add regional tool to enable
greater territory and compliance management -- Secured contract
expansions with Daiichi Sankyo and UCB, together adding more than
450 new sales force effectiveness users -- Launched the new
Dendrite MICRO(TM) mobile phone based sales force effectiveness
solution and signed the first new customer -- In Europe, the
Company entered into a significant three-year sales rep support
services agreement with a prominent pharmaceutical company to
implement and manage support services for over 1000 sales
representatives in France -- Added more than 1000 new sales force
effectiveness users in Europe, including two new customers on its
human centered design based Mobile Intelligence(TM) platform -- In
Latin America, the Company implemented and rolled out its sales
force effectiveness solution for approximately 350 users of
Valeant, Mexico -- In Australia, the Company signed an agreement
with BMS to upgrade to the latest version of Dendrite's sales force
automation solution, including a service renewal for three years.
-- In Asia, the Company signed an agreement for its jforceNET(TM)
sales force effectiveness solution with its first domestic Korean
pharmaceutical customer, LG Life Sciences Marketing Solutions
segment: -- In the US, the Company closed forty new agreements with
several customers, including seven with a leading pharmaceutical
company for persistence campaigns and campaign management programs
with a total contract value of over $ 4.5M. -- Acquired OPUS
Health(TM), a leading provider of direct-to-patient persistence
technologies. The acquisition enables Dendrite to add its breadth
of marketing services around OPUS Health technology to deliver
complete patient persistence programs and analysis. -- In Europe,
increased penetration of our DocScan(R), Physician Connect(SM) and
Market Research solutions, growing 32% versus the third quarter
2005. In Japan, the Company delivered its first two Physician
Connect and DocScan projects for the region, following the recent
launch of those offerings in the second quarter 2006. Emerging
Solutions Segment: -- The Company's Buzzeo Compliance group
achieved a profitable quarter with a revenue increase of 18%
year-to-date. Since its acquisition, the Company has rapidly
expanded its customer base to include not only pharmaceutical
companies, but also pharmaceutical distributors and pharmacy
chains. Other Matters The Company revised its 2006 revenue outlook
to approximately $419 to $424 million, down from $427 to $437
million, primarily as a result of slower than planned US Marketing
Solutions sales in the second half of the year. From time to time
the Company has received expressions of interest in strategic
opportunities. As a consequence, the Board of Directors has
appointed JPMorgan to advise the Board on their full range of
options. The Company stated that there could be no assurances of
any action as a result of their review and that it does not intend
to discuss or provide interim updates. To participate in Dendrite's
earnings call to be telecast on November 2, 2006 at 5 p.m. EST, or
to obtain replay information, please visit the Investors'
Highlights Section of our website at www.dendrite.com. -0- *T About
Dendrite *T Founded in 1986, Dendrite International (NASDAQ: DRTE)
enables sales, marketing, clinical and compliance solutions for the
global pharmaceutical industry. The Company's clients are located
in more than 50 countries and include the world's top 20
pharmaceutical companies. For more information, please visit
www.dendrite.com. Note: Dendrite is a registered trademark of
Dendrite International, Inc. FORWARD LOOKING INFORMATION: This
document contains forward-looking statements that may be identified
by such forward-looking terminology as "expect," "believe,"
"anticipate," "will," "intend," "plan," "target," "outlook,"
"guidance," and similar statements or variations. Such
forward-looking statements are based on our current expectations,
estimates, assumptions and projections and involve significant
risks and uncertainties, including risks which may result from our
dependence on the pharmaceutical industry; our fixed expenses in
relation to fluctuating revenues and variations in customers'
budget cycles; dependence on certain major customers, including the
risk associated with our largest customer's plans to transition a
significant portion of its U.S. sales force effectiveness services
needs; fluctuations in quarterly revenues due to lengthy sales and
implementation cycles; our ability to successfully implement our
Operational Effectiveness program and to achieve the cost savings
in the amounts and time periods expected or budgeted; changes in
demand for our products and services attributable to any weakness
experienced in the economy or mergers, acquisitions and
consolidations in the pharmaceutical industry; risks associated
with foreign currency fluctuations as they affect our non-U.S.
operations; risks associated with our expanded international
operations and our ability to adopt and respond successfully to the
unique risks involved in our non-U.S. operations; any difference
between estimated and actual stock option expense; and risks
associated with reviewing strategic options and with any
transaction occurring or being consummated at any subsequent time.
Other important factors that should be reviewed and carefully
considered are included in the Company's 10-K under "Factors That
May Affect Future Results" and its 10-Qs and other reports filed
with the SEC. Actual results may differ materially. The Company
assumes no obligation for updating any such forward-looking
statements to reflect actual results, changes in expectations or
assumptions or other changes affecting such forward-looking
statements, even if such results or changes make it clear that any
such projected results will not be achieved. Any outlook and other
forward-looking information is as of the date of this release only.
At any such time in the future as the Company may provide revenue,
earnings and other outlook information, prior related outlook
should no longer be considered current. Our outlook and other
forward-looking information do not take into account or reflect any
possible future acquisitions, dispositions or similar transactions
which may occur. -0- *T TABLE 1 DENDRITE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP (IN THOUSANDS, EXCEPT
PER SHARE DATA) (UNAUDITED) Three Months Ended September 30,
--------------------------------------------- 2006 % 2005 % Change
--------- ------ --------- ------ ------ Revenues: Services &
Technology: Sales solutions $ 66,762 64.8% $ 82,642 72.3% -19%
Marketing solutions 28,835 28.0% 25,310 22.1% 14% Emerging
solutions 7,376 7.2% 6,408 5.6% 15% --------- --------- Total
revenues 102,973 100.0% 114,360 100.0% -10% Operating Costs &
Expenses: Operating costs (including shipping) 56,172 54.6% 61,252
53.6% -8% Selling, general and administrative 39,816 (1) 38.7%
33,395 (2) 29.2% 19% Research and development 1,607 1.6% 1,343 1.2%
20% Restructuring and other charges 12,660 (3) 12.3% - 0.0% NM
Amortization of acquired intangible assets 1,074 1.0% 960 0.8% 12%
--------- --------- Total operating costs & expenses 111,329
108.1% 96,950 84.8% 15% Operating (loss) income (8,356) -8.1%
17,410 15.2% NM Interest income, net (644) -0.6% (150) -0.1% NM
Other expense, net 31 0.0% 35 0.0% NM --------- --------- (Loss)
income before income tax (benefit) expense (7,743) -7.5% 17,525
15.3% 144% Income tax (benefit) expense (1,698) -1.6% 6,747 5.9%
125% --------- --------- Net (loss) income $ (6,045) -5.9% $ 10,778
9.4% 156% ========= ========= Net (loss) income per share: Basic $
(0.14) $ 0.25 NM ========= ========= Diluted $ (0.14) $ 0.24 NM
========= ========= Shares used in computing net (loss) income per
share: Basic 43,713 42,944 --------- --------- Diluted 43,713
44,331 --------- --------- (1) Includes $937 out of $975 total
stock-based compensation expense from the adoption of SFAS 123(R)
and $887 out of $905 total restricted stock expense, respectively.
(2) Includes $69 of restricted stock expense. (3) $8,206 of
severance expense and $4,454 of an asset impairment charge. NM -
Not meaningful. *T -0- *T TABLE 2 DENDRITE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP (IN THOUSANDS, EXCEPT
PER SHARE DATA) (UNAUDITED) Nine Months Ended September 30,
------------------------------------------- 2006 % 2005 % Change
--------- ------ --------- ------------ Revenues: Services &
Technology: Sales solutions $202,316 64.7% $230,641 70.1% -12%
Marketing solutions 90,414 28.9% 79,091 24.0% 14% Emerging
solutions 19,753 6.3% 19,141 5.8% 3% --------- --------- Total
revenues 312,483 100.0% 328,873 100.0% -5% Operating Costs &
Expenses: Operating costs (including shipping) 175,321 56.1%
173,732 52.8% 1% Selling, general and administrative 121,707 (1)
38.9% 103,258 (2) 31.4% 18% Research and development 4,835 1.5%
4,615 1.4% 5% Restructuring and other charges 15,238 (3) 4.9% 9,372
(4) 2.8% 63% Amortization of acquired intangible assets 3,131 1.0%
3,340 1.0% -6% --------- --------- Total operating costs &
expenses 320,232 102.5% 294,317 89.5% 9% Operating (loss) income
(7,749) -2.5% 34,556 10.5% -122% Interest income, net (1,602) -0.5%
(315) -0.1% NM Other expense, net 77 0.0% 32 0.0% NM ---------
--------- (Loss) income before income tax expense (6,224) -2.0%
34,839 10.6% 118% (Loss) income before income tax (benefit) expense
(174) -0.1% 13,413 4.1% 101% --------- --------- Net (loss) income
$ (6,050) -1.9% $ 21,426 6.5% 128% ========= ========= Net (loss)
income per share: Basic $ (0.14) $ 0.50 NM ========= =========
Diluted $ (0.14) $ 0.49 NM ========= ========= Shares used in
computing net (loss) income per share: Basic 43,638 42,670
--------- --------- Diluted 43,638 43,903 --------- --------- (1)
Includes $3,392 out of $3,591 total stock-based compensation
expense from the adoption of SFAS 123(R) and $2,213 out of $2,244
total restricted stock expense, respectively. (2) Includes $103 of
restricted stock expense. (3) $10,248 of severance expense, $4,454
of an asset impairment charge and $536 of other expense. (4) $7,649
of facility related charges and $1,723 of severance expense. NM-Not
Meaningful *T -0- *T TABLE 3 DENDRITE INTERNATIONAL, INC.
SUPPLEMENTAL FINANCIAL INFORMATION (SEE NOTES) (IN THOUSANDS,
EXCEPT PER SHARE DATA) (UNAUDITED)
----------------------------------------------------------------------
Three Months Ended Nine Months Ended September 30, September 30,
----------------------------- ----------------------------- 2006
2005 % Change 2006 2005 % Change --------- --------- ---------
--------- --------- --------- Total revenue - GAAP $102,973
$114,360 -10% $312,483 $328,873 -5% Impact of foreign exchange
rates (1) 748 - 3,459 - --------- --------- --------- ---------
Total revenue - Adjusted $103,721 $114,360 -9% $315,942 $328,873
-4% ========= ========= ========= =========
----------------------------------------------------------------------
*T -0- *T
----------------------------------------------------------------------
Three Months Ended Nine Months Ended September 30, September 30,
---------------------- ---------------------- 2006 2005 2006 2005
-------- -------- -------- -------- Operating (loss) income - GAAP
$(8,356) $17,410 $(7,749) $34,556 Stock option expense (2) 1,023 -
3,750 - Surplus facility charges (3) - - - 7,649 Severance charges
8,206 (5) - 10,248 (5) 1,723 (4) Asset impairment 4,454 (7) - 4,454
(7) - Other restructuring charges - - 536 (6) - -------- --------
-------- -------- Operating income - Adjusted $ 5,327 $17,410
$11,239 $43,928 ======== ======== ======== ========
----------------------------------------------------------------------
*T -0- *T
----------------------------------------------------------------------
Three Months Ended Nine Months Ended September 30, September 30,
-------------------- --------------------- 2006 2005 2006 2005
------- ------ ------- ------ Net income per share: Diluted - GAAP
$(0.14) $0.24 $(0.14) $0.49 Stock option expense (2) 0.02 (8) -
0.06 (8) - Surplus facility charges (3) - - - 0.10 (9) Severance
charges 0.15 (10) - 0.17 (10) 0.03 (11) Asset impairment 0.06 (12)
- 0.06 (12) - Other restructuring charges - - 0.01 (13) - -------
------ ------- ------ Diluted - Adjusted $ 0.09 $0.24 $ 0.17 $0.62
======= ====== ======= ======
----------------------------------------------------------------------
Note: 2006 EPS does not foot down due to the mathematical rounding
of the individual calculations. (1) The impact of exchange rates
are calculated by taking 2006 local currency revenue and applying
the 2005 exchange rates for comparison purposes. (2) Prior to
January 1, 2006, the Company accounted for stock-based compensation
under Accounting Principles Board, Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25"). In accordance with APB 25,
the Company historically used the intrinsic value method to account
for stock-based compensation expense. Under APB 25, stock options
and shares issued under the Company's employee stock purchase plan
were not an expense for accounting purposes and, as a result, no
compensation expense is included in the 2005 reporting period
related to these items. As of January 1, 2006, the Company accounts
for stock-based compensation expense, including expense related to
stock options and shares issued under the employee stock purchase
program, under the fair value method of Statement of Financial
Accounting No. 123(R), "Shared-Based Payment" ("FAS 123(R)"). As
the Company adopted the modified prospective method, results for
prior periods have not been restated under the fair value method
for GAAP purposes. (3) The surplus facility charges relates to
vacating a New Jersey facility and for additional facilities
vacated in previous periods due to changes in market conditions, as
well as the write-off of leasehold improvements associated with the
exited facility. (4) The 2005 severance charges relates to the
elimination of certain senior and mid-level management positions.
(5) The 2006 severance charges relates to the elimination of
certain positions relating to our Operational Effectiveness
initiative ("OE"). (6) The 2006 other restructuring charges
primarily relates to the refocusing of our Japanese business. (7)
The 2006 asset impairment charge relates to a facility held for
sale that was reduced to its estimated fair market value less costs
to sell. (8) The tax effect using the marginal tax rate is $352 and
$1,248 for the three and nine months ended September 30, 2006,
respectively. (9) The tax effect using the marginal tax rate is
$3,075 for the nine months ended September 30, 2005. (10) The tax
effect using the marginal tax rate is $1,658 and $2,352 for the
three and nine months ended September 30, 2006, respectively. (11)
The tax effect using the marginal tax rate is $487 for the nine
months ended September 30, 2005. (12) The tax effect using the
marginal tax rate is $1,782 for the three and nine months ended
September 30, 2006. (13) The tax effect using the marginal tax rate
is $226 for the nine months ended September 30, 2006. *T -0- *T
TABLE 4 DENDRITE INTERNATIONAL, INC. SEGMENT REVENUE, OPERATING
INCOME (LOSS) AND RESTRUCTURING AND OTHER CHARGES (IN THOUSANDS)
(UNAUDITED) For the Three Months Ended September 30, 2006
----------------------------------------------------- Sales
Marketing Emerging Solutions Solutions Solutions Corporate Total
---------- ---------- ---------- --------- --------- Revenue $
66,762 $28,835 $ 7,376 $ - $102,973 Operating income (loss) $ 7,570
$(2,919) $ 137 $(13,144) $ (8,356) Restructuring charges $ 5,758 $
1,930 $ 63 $ 4,909 $ 12,660 For the Three Months Ended September
30, 2005 -----------------------------------------------------
Sales Marketing Emerging Solutions Solutions Solutions Corporate
Total ---------- ---------- ---------- --------- --------- Revenue
$ 82,642 $25,310 $ 6,408 $ - $114,360 Operating income (loss) $
23,019 $(1,440) $ 69 $ (4,238) $ 17,410 Restructuring charges $ - $
- $ - $ - $ - For the Nine Months Ended September 30, 2006
----------------------------------------------------- Sales
Marketing Emerging Solutions Solutions Solutions Corporate Total
---------- ---------- ---------- --------- --------- Revenue
$202,316 $90,414 $19,753 $ - $312,483 Operating income (loss) $
33,751 $(8,253) $ (379) $(32,868) $ (7,749) Restructuring charges $
6,517 $ 2,884 $ 67 $ 5,770 $ 15,238 For the Nine Months Ended
September 30, 2005
----------------------------------------------------- Sales
Marketing Emerging solutions solutions solutions Corporate Total
---------- ---------- ---------- --------- --------- Revenue
$230,641 $79,091 $19,141 $ - $328,873 Operating income (loss) $
56,433 $(3,566) $ 970 $(19,281) $ 34,556 Restructuring charges $ -
$ - $ - $ 9,372 $ 9,372 *T -0- *T TABLE 5 DENDRITE INTERNATIONAL,
INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED) September 30, December 31, 2006 2005 -------------
------------ Assets Current Assets: Cash and cash equivalents $
84,147 $ 66,145 Accounts receivable, net 67,106 80,167 Prepaid
expenses and other current assets 7,945 8,544 Asset held for sale
8,545 - Deferred income taxes 13,035 8,848 -------------
------------ Total current assets 180,778 163,704 -------------
------------ Property and equipment, net 38,578 52,592 Other assets
9,355 8,856 Goodwill 92,332 90,440 Intangible assets, net 27,038
25,083 Capitalized software development costs, net 10,380 10,341
Deferred income taxes 12,011 11,991 ------------- ------------ $
370,472 $363,007 ============= ============ Liabilities and
Stockholders' Equity Current Liabilities: Accounts payable $ 8,138
$ 7,677 Income taxes payable 8,272 9,518 Capital lease obligations
1,408 1,383 Accrued compensation and benefits 18,887 17,950 Accrued
professional and consulting fees 6,164 5,690 Accrued restructuring
and other charges 8,138 1,490 Other accrued expenses 20,376 17,468
Purchase accounting restructuring accrual 960 1,601 Deferred
revenues 15,430 18,680 ------------- ------------ Total current
liabilities 87,773 81,457 ------------- ------------ Capital lease
obligations 389 1,648 Purchase accounting restructuring accrual
2,269 3,009 Accrued restructuring and other charges 3,387 4,143
Deferred rent 5,425 5,740 Other non-current liabilities 5,617 5,595
Stockholders' Equity: Preferred stock, no par value, 15,000,000
shares authorized, none issued - - Common stock, no par value,
150,000,000 shares authorized, 46,583,869 and 46,353,252 shares
issued; 43,722,566 and 43,491,949 shares outstanding at September
30, 2006 and December 31, 2005, respectively 153,728 149,947
Retained earnings 142,899 148,948 Deferred compensation - (4,419)
Accumulated other comprehensive income (loss) 722 (1,324) Less
treasury stock, at cost (31,737) (31,737) -------------
------------ Total stockholders' equity 265,612 261,415 $ 370,472
$363,007 ============= ============ *T -0- *T TABLE 6 DENDRITE
INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN
THOUSANDS) (UNAUDITED) Nine Months Ended September 30,
------------------- 2006 2005 --------- --------- Operating
activities: Net (loss) income $ (6,050) $ 21,426 Adjustments to
reconcile net (loss) income to net cash provided by operating
activities: Depreciation and amortization 19,090 18,026 Asset
impairment 4,454 1,030 Stock-based compensation 5,941 103 Deferred
income taxes (3,869) (2,277) Excess tax benefits from stock-based
awards (229) - Changes in assets and liabilities, net of effects
from acquisitions: Decrease (increase) in accounts receivable
14,725 (1,825) Decrease in prepaid expenses and other current
assets 860 56 Increase in other assets (368) (1,277) Increase in
accounts payable and accrued expenses 567 1,599 Increase in accrued
restructuring and other charges 5,829 6,618 Decrease in purchase
accounting restructuring accrual (1,118) (2,180) Decrease in income
taxes payable (1,004) (1,621) (Decrease) increase in deferred
revenue (3,579) 221 Decrease in other non-current liabilities (2)
(70) --------- --------- Net cash provided by operating activities
35,247 39,829 --------- --------- Investing activities:
Acquisitions, net of cash acquired (5,706) (21,439) Purchases of
property and equipment (9,863) (22,633) Additions to capitalized
software development costs (3,668) (3,845) --------- --------- Net
cash used in investing activities (19,237) (47,917) ---------
--------- Financing activities: Payments on capital lease
obligations (1,234) (1,241) Excess tax benefits from stock-based
awards 229 - Issuance of common stock 2,030 10,938 ---------
--------- Net cash provided by financing activities 1,025 9,697
--------- --------- Effect of foreign exchange rate changes on cash
967 (1,011) Net increase in cash and cash equivalents 18,002 598
Cash and cash equivalents, beginning of year 66,145 64,020
--------- --------- Cash and cash equivalents, end of period $
84,147 $ 64,618 ========= ========= *T
Dendrite (NASDAQ:DRTE)
Historical Stock Chart
From Jul 2024 to Aug 2024
Dendrite (NASDAQ:DRTE)
Historical Stock Chart
From Aug 2023 to Aug 2024