SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q

[  X  ] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the quarterly period ended September 30, 2002

[   ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the transition period from ___ to ___

Commission File Number  0-26138

1200 Mount Kemble Avenue
Morristown, NJ 07960
973-425-1200

(Address, including zip code, and telephone
number (including area code) of registrant’s
principal executive office)

          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  [    ]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: at November 8, 2002 there were 39,921,965 shares of common stock outstanding.

DENDRITE INTERNATIONAL, INC.
INDEX

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PART I.     FINANCIAL INFORMATION

ITEM 1.  Consolidated Financial Statements

DENDRITE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)

     The accompanying notes are an integral part of these consolidated financial statements.

3

DENDRITE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)

     The accompanying notes are an integral part of these consolidated financial statements.

4

DENDRITE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

     The accompanying notes are an integral part of these consolidated financial statements.

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DENDRITE INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.  Basis of Presentation

     The consolidated financial statements of Dendrite International, Inc. and its subsidiaries (the “Company”) included in this Form 10-Q are unaudited and reflect all adjustments (consisting of normal recurring adjustments except as disclosed herein) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the three and nine month periods ended September 30, 2002 and 2001. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001.

     Our interim operating results may not be indicative of operating results for the full year.

2.  Net Income (Loss) Per Share

     Basic net income (loss) per share was computed by dividing the net income (loss) for each period by the weighted average number of shares of common stock outstanding for each period. Diluted net income per share was computed by dividing net income for each period by the weighted average number of shares of common stock and common stock equivalents (stock options) outstanding during each period. For the three and nine month periods ended September 30, 2002, common stock equivalents used in computing diluted net income per share were 60,000 and 321,000 shares, respectively. For the three month period ended September 30, 2001, common stock equivalents used in computing diluted net income per share was 417,000 shares. For the nine month period ended September 30, 2001, common stock equivalents were anti-dilutive and were therefore excluded from the computation of diluted net loss per share.

3.  Comprehensive Income

     Assets and liabilities of the Company’s wholly-owned international subsidiaries are translated at their respective period-end exchange rates and revenues and expenses are translated at average currency exchange rates for the period. The resulting translation adjustments are included as “Accumulated other comprehensive loss” and are reflected as a separate component of stockholders’ equity. Total comprehensive income for the three months ended September 30, 2002 was $2,448,000 compared to total comprehensive income of $2,802,000 for the three months ended September 30, 2001. Total comprehensive income for the nine months ended September 30, 2002 was $10,653,000 compared to total comprehensive loss of $16,020,000 for the nine months ended September 30, 2001.

4.  Reclassifications

     Certain prior period balances have been reclassified to conform with current year presentation.

5.  Restructuring Charge

     On June 14, 2001, the Company announced a restructuring of its business operations to reflect a lower expected revenue growth model in the near term. The restructuring plan consisted of the resizing of the Company’s personnel by a reduction of 155 employees and the elimination of 35 independent contractors across various departments in the United States and Europe as well as 192 additional personnel associated with the restructuring of the Company’s facility in Stroudsburg, PA. The Stroudsburg, PA operations were substantially relocated to the Company’s facilities in New Jersey, Virginia and a new facility in Bethlehem, PA. The exit costs were included in the restructuring charge while the moving and other start-up costs were not included in this restructuring charge and were being expensed as incurred.

     During the second quarter of 2001, the Company recorded a charge of $6,134,000 associated with this restructuring. This charge was reduced by $24,000 to $6,110,000 in the fourth quarter of 2001 due to the variance between the amounts originally recorded and management’s current estimate of the total costs of the restructuring. Of the restructuring charge, $602,000 related primarily to severance has not been paid as of September 30, 2002 and, accordingly, is classified as accrued restructuring charge in the accompanying consolidated balance sheet. The restructuring charges were based upon formal plans approved by the Company’s management using the information available at the time. Management of the Company believes this provision will be adequate to cover the costs incurred relating to the restructuring. The Company anticipates that the accrued restructuring balance of $602,000 as of September 30, 2002 will be utilized during 2002. The activity on the accrued restructuring charge balance as of September 30, 2002 is summarized in the table below:

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6.  Acquisitions

     On August 12, 2002, the Company acquired Pharma Vision for cash consideration of approximately $700,000. Pharma Vision collects and sells data for customer targeting that pharmaceutical representatives use in Europe and provides support to pharmaceutical customers in Belgium and the Netherlands. The results of Pharma Vision’s operations have been included in the consolidated financial statements from the date of acquisition.

     On September 19, 2002, the Company acquired Software Associates International (“SAI”), a privately held company based in New Jersey. SAI provides software products and solutions that enable corporate level sales and marketing analysis for pharmaceutical companies. These solutions are complementary to the Company’s core suite of business products. The results of SAI’s operations have been included in the consolidated financial statements since the acquisition date.

     The aggregate purchase price was approximately $16,570,000 which included: cash of approximately $14,923,000; accrued professional service fees of approximately $410,000 and options to purchase Dendrite common stock valued at approximately $1,237,000. The fair value of the stock options was estimated using the Black-Scholes valuation model.

     The following table summarizes the estimated fair value of the assets acquired and the liabilities assumed at the date of the acquisition. The Company is in the process of finalizing a third-party valuation of certain intangible assets, and evaluating its facilities and personnel for redundancy. Therefore, the purchase price allocation is preliminary and subject to adjustment.

     Of the $5,721,000 of acquired intangible assets, approximately $732,000 was assigned to registered trademarks that are not subject to amortization. The remaining $4,989,000 of acquired intangible assets includes purchased software development costs of approximately $3,468,000 (5 year estimated useful life), approximately $328,000 of non-compete agreements (3 year estimated useful life) and approximately $1,193,000 of customer relationship assets (3 year estimated useful life).

7.  Pro Forma Results of Operations

     The Company’s unaudited pro forma results of operations for the three and nine months ended September 30, 2002 and 2001 assuming that the acquisition of SAI described in Note 6 occurred on January 1, 2001 are as follows: