<PAGE> 1
UNITED STATES 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 June 30, 1995
OR
[ ] 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 0-5118
SYSTEMED INC.
-------------
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 95-2544661
----------------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
970 West 190th Street, Suite 400
Torrance, California 90502
-------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 538-5300
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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 22,067,083 shares of common
stock, $.001 par value, outstanding at June 30, 1995.
<PAGE> 2
SYSTEMED INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - Financial information
Item 1. Financial statements
Consolidated balance sheets - as of June 30, 1995 (unaudited)
and December 31, 1994 3
Consolidated statements of income (unaudited) - three months ended
June 30, 1995 and 1994 4
Consolidated statements of income (unaudited) - six months ended
June 30, 1995 and 1994 5
Consolidated statements of cash flows (unaudited) - six months ended
June 30, 1995 and 1994 6
Notes to unaudited consolidated financial statements 7-9
Item 2. Management's discussion and analysis of financial condition and results
of operations 10-12
PART II - Other information
Item 6. Exhibits and reports on Form 8-K 13
SIGNATURES 14
</TABLE>
<PAGE> 3
Part I. Item 1.
SYSTEMED INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13,740,000 $ 12,849,000
Accounts receivable, less allowance of $679,000 at
June 30, 1995 and $655,000 at December 31, 1994 16,960,000 19,141,000
Inventories 5,052,000 4,538,000
Prepaid expenses and other 3,788,000 3,454,000
------------ ------------
Total current assets 39,540,000 39,982,000
Property, plant and equipment, net 6,630,000 6,075,000
Goodwill, less accumulated amortization of $1,747,000
at June 30, 1995 and $1,649,000 at December 31, 1994 6,296,000 6,394,000
Other, including deferred debt offering costs, less
related accumulated amortization of $517,000 at June 30, 1995
and $496,000 at December 31, 1994 3,380,000 880,000
------------ ------------
$ 55,846,000 $ 53,331,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ - $ 40,000
Accounts payable 5,067,000 4,012,000
Other accrued liabilities 6,144,000 6,900,000
Accrued restructuring and other charges 767,000 1,113,000
Reserve for estimated loss on disposal of
discontinued operations - 1,340,000
------------ ------------
Total current liabilities 11,978,000 13,405,000
Long-term debt 6,320,000 6,320,000
Other liabilities 17,000 31,000
Commitments and contingencies (Note 2)
Stockholders' equity:
Preferred stock, $.001 par value; 2,000,000 shares
authorized; 8% cumulative and convertible;
161,325 shares issued and outstanding at
June 30, 1995 and 163,325 shares issued and outstanding at
December 31, 1994; (liquidation preference of $1,613,000
at June 30, 1995 and $1,633,000 at December 31, 1994) - -
Common stock, $.001 par value; 30,000,000 shares
authorized; 22,067,083 shares issued and outstanding
at June 30, 1995 and 21,706,488 shares issued and
outstanding at December 31, 1994 22,000 22,000
Additional paid-in capital 73,541,000 72,437,000
Accumulated deficit (36,032,000) (38,227,000)
Foreign currency translation adjustment - (657,000)
------------ ------------
Total stockholders' equity 37,531,000 33,575,000
------------ ------------
$ 55,846,000 $ 53,331,000
============ ============
</TABLE>
See accompanying notes
3
<PAGE> 4
SYSTEMED INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
June 30, June 30,
1995 1994
----------- -----------
<S> <C> <C>
Net operating revenues $38,880,000 $34,806,000
Operating costs and expenses:
Cost of sales 32,587,000 29,073,000
Selling, marketing and customer service 3,216,000 2,232,000
General and administrative 1,857,000 2,675,000
----------- -----------
Total operating costs and expenses 37,660,000 33,980,000
----------- -----------
Operating income 1,220,000 826,000
Other income (expense):
Interest income 201,000 89,000
Interest expense (162,000) (167,000)
Other non-operating, net (29,000) (6,000)
----------- -----------
Total other income (expense) 10,000 (84,000)
----------- -----------
Income before provision for income taxes 1,230,000 742,000
Provision for income taxes 109,000 95,000
----------- -----------
Net income $ 1,121,000 $ 647,000
=========== ===========
Per common share information:
Net income per common and common equivalent share $ .05 $ .03
=========== ===========
Weighted average number of common and common equivalent 23,040,000 22,429,000
=========== ===========
</TABLE>
See accompanying notes
4
<PAGE> 5
SYSTEMED INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------------
June 30, June 30,
1995 1994
----------- -----------
<S> <C> <C>
Net operating revenues $77,246,000 $67,927,000
Operating costs and expenses:
Cost of sales 64,373,000 57,449,000
Selling, marketing and customer service 6,152,000 4,232,000
General and administrative 4,322,000 5,049,000
----------- -----------
Total operating costs and expenses 74,847,000 66,730,000
----------- -----------
Operating income 2,399,000 1,197,000
Other income (expense):
Interest income 363,000 182,000
Interest expense (326,000) (336,000)
Other non-operating, net (26,000) (11,000)
----------- -----------
Total other income (expense) 11,000 (165,000)
----------- -----------
Income before provision for income taxes 2,410,000 1,032,000
Provision for income taxes 215,000 124,000
----------- -----------
Net income $ 2,195,000 $ 908,000
=========== ===========
Per common share information:
Net income per common and common equivalent share $ 0.10 $ .04
=========== ===========
Weighted average number of common and common equivalent shares 23,047,000 22,233,000
=========== ===========
</TABLE>
See accompanying notes
5
<PAGE> 6
SYSTEMED INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
-------------------------------
June 30, June 30,
1995 1994
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,195,000 $ 908,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 918,000 843,000
Provision for losses on accounts receivable 80,000 420,000
Other (1,000) 28,000
Changes in assets and liabilities:
Decrease in accounts receivable 1,090,000 1,173,000
Increase in inventories (2,113,000) (1,017,000)
Increase in prepaid expenses and other (183,000) (706,000)
Increase in other assets (9,000) (1,000)
Net increase in accounts payable and other accruals 918,000 3,578,000
Decrease in accrued restructuring and other charges (346,000) (685,000)
Net increase in reserve for estimated loss on disposal of
discontinued operations - 265,000
----------- -----------
Net cash provided by operating activities 2,549,000 4,806,000
INVESTING ACTIVITIES:
Capital expenditures (2,431,000) (635,000)
Net assets transferred (409,000) -
Other 14,000 13,000
----------- -----------
Net cash used in investing activities (2,826,000) (622,000)
----------- -----------
FINANCING ACTIVITIES:
Net repayments under line of credit agreements - (192,000)
Repayment of long-term debt - (165,000)
Proceeds from issuances of common stock 1,168,000 755,000
----------- -----------
Net cash provided by financing activities 1,168,000 398,000
----------- -----------
Net increase in cash and cash equivalents 891,000 4,582,000
Cash and cash equivalents at beginning of period 12,849,000 9,007,000
----------- -----------
Cash and cash equivalents at end of period $13,740,000 $13,589,000
=========== ===========
</TABLE>
See accompanying notes
6
<PAGE> 7
SYSTEMED INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
1. Basis of presentation
In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of the
consolidated financial position of Systemed Inc. and subsidiaries (the
Company) and the consolidated results of its operations for the three
and six month periods ending June 30, 1995 and 1994 and its cash flows
for the six month periods ended June 30, 1995 and 1994. Although the
Company believes that the disclosures in these financial statements
are adequate to make the information presented not misleading, certain
information normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. Results of operations for the
periods presented are not necessarily indicative of results to be
expected for the full year. For further information, refer to the
consolidated financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended December
31, 1994.
Systemed Inc. is a Delaware corporation with substantially all of its
business derived from activities in the prescription benefits
management (PBM) industry, through its mail service pharmacy and
prescription claims administration subsidiaries. In addition,
approximately 2% of consolidated net operating revenues are generated
by the distribution of pharmaceutical products through its subsidiary,
Newport Pharmaceuticals de Costa Rica (NPCR).
The consolidated financial statements include the accounts of the
Company and its domestic and foreign subsidiaries, all of which are
wholly-owned. Significant intercompany accounts and transactions have
been eliminated in consolidation.
Certain 1994 accounts have been reclassified to conform to the 1995
presentation.
2. Sale of Subsidiary
In March 1995, the Company sold its subsidiary, Newport Synthesis Ltd
(NSL), to the principal management of NSL for a nominal value. The
agreement requires NSL to repay its outstanding intercompany
obligations of $2,710,000, which were converted to a promissory note
payable in equal annual installments of $165,000 over 15 years, with
interest at 8.1%, and a balloon payment of $240,000 plus interest due
in the fifth year if certain profit thresholds are achieved. The
principal amount of this promissory note is equivalent to the
Company's net investment in NSL. Therefore, no additional provision
for loss on disposal was required. Under the terms of the agreement,
the Company retains Board representation rights at NSL until the note
is paid in full. Due to the nature and structure of the transaction,
generally accepted accounting principles dictate that it should be
reflected in the financial statements as a transferred business and
the net assets which constitute the note receivable have been
classified in Other assets. Payments received on the note will be
recorded as a reduction to the carrying value of the segregated
assets.
The consolidated statements of income exclude revenues and expenses,
for all periods presented, of NSL. Net operating revenues for NSL
were $1,541,000 for the three months and $2,665,000 for the six months
ended June 30, 1994. Income from discontinued operations of $401,000
for the three months and $320,000 for the six months ended June 30,
1994 were added to the reserve for estimated loss on disposal of
discontinued operations.
7
<PAGE> 8
SYSTEMED INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
3. Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- ------------
<S> <C> <C>
Raw materials $ 456,000 $ 432,000
Work in progress 54,000 649,000
Finished goods 4,542,000 3,457,000
---------- ----------
$5,052,000 $4,538,000
========== ==========
</TABLE>
Finished goods inventory included $3,932,000 and $2,067,000 of
pharmaceutical drugs at the Company's mail service pharmacy at June 30, 1995
and December 31, 1994, respectively.
4. Long-term debt
Long-term debt consisted of the following at:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---------- ------------
<S> <C> <C>
10% senior secured convertible notes $6,320,000 $6,320,000
Less current portion - -
---------- ----------
Long-term portion $6,320,000 $6,320,000
========== ==========
</TABLE>
At June 30, 1995, the Company was in compliance with all covenants of the
above debt agreement.
5. Statements of cash flows
During the six months ended June 30, 1995 and 1994, cash payments for
interest were $316,000 and $332,000, respectively. Cash payments for income
taxes were $79,000 in 1995 and $37,000 in 1994.
8
<PAGE> 9
SYSTEMED INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
6. Per share data
Per share data have been computed by dividing the net income by the weighted
average number of common and common share equivalents outstanding during the
periods. Common stock equivalents include dilutive stock options and
warrants and the dilutive effects of preferred stock conversions. Fully
diluted per share calculations are not presented in the financial statements
because the assumed conversion of convertible debt and any additional
incremental issuance of stock options or warrants would be antidilutive.
9
<PAGE> 10
SYSTEMED INC.
June 30, 1995
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Health Care Reform
Employers, insurers, and government payor programs are continuing to attempt to
contain health care costs by limiting the price or reimbursement levels of
medical products and services or establishing managed care programs to increase
efficiency in medical care procurement and utilization. The Company believes
it should benefit from the increasing use of managed care programs since it
offers prescription benefits management services which are easily adaptable
into a variety of managed care programs and provide efficiencies and cost
savings compared to traditional indemnity health insurance programs where
insurers obtain prescriptions from local pharmacies at retail prices. However,
proposals to restructure the health care system by the Clinton Administration
and by members of Congress, industry consolidation and restructurings resulting
from actual and anticipated changes in the U.S. health care delivery system,
and the investment community's reaction thereto, create an environment which
could produce significant volatility in the trading and market price of the
Company's common stock.
Results of Operations
The following table summarizes, by segment, the operations of the Company for
the periods indicated (amounts in 000's):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------------- ------------------------------
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net operating revenues:
Prescription benefits management $38,068 $33,987 $75,418 $ 66,364
Other 812 819 1,828 1,563
------- ------- ------- --------
Total net operating revenues $38,880 $34,806 $77,246 $ 67,927
======= ======= ======= ========
Operating income (loss):
Prescription benefits management $ 1,877 $ 1,549 $ 4,046 $ 2,598
Corporate and other (657) (723) (1,647) (1,401)
------- ------- ------- --------
Total operating income 1,220 826 2,399 1,197
Non-operating income (expenses) 10 (84) 11 (165)
Provision for income taxes (109) (95) (215) (124)
------- ------- ------- --------
Net income $ 1,121 $ 647 $ 2,195 $ 908
======= ======= ======= ========
</TABLE>
The following table sets forth certain financial data as a percentage of
consolidated net operating revenues of the Company for the periods presented:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------------- ---------------------------
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net operating revenues:
Prescription benefits management 97.9% 97.6% 97.6% 97.7%
Other 2.1 2.4 2.4 2.3
----- ----- ----- -----
Total net operating revenues 100.0 100.0 100.0 100.0
Cost of sales 83.8 83.5 83.3 84.6
Selling, marketing and customer service 8.3 6.4 8.0 6.2
General and administrative 4.8 7.7 5.6 7.4
----- ----- ----- -----
Operating income 3.1 2.4 3.1 1.8
Non-operating income (expenses) .1 (.2) - (.3)
----- ----- ----- -----
Income before provision for income taxes 3.2 2.2 3.1 1.5
Provision for income taxes (.3) (.3) (.3) (.2)
----- ----- ----- -----
Net income 2.9% 1.9% 2.8% 1.3%
===== ===== ===== =====
</TABLE>
10
<PAGE> 11
SYSTEMED INC.
June 30, 1995
Results of Operations (Cont'd)
Consolidated net operating revenues for the second quarter and first half of
1995 increased 12% and 14%, respectively, over the same periods of the prior
year. Consolidated operating income of $1,220,000 for the second quarter and
$2,399,000 for the first half of 1995 significantly surpassed the prior year's
operating income for the comparable periods as a result of ongoing operational
improvements. The Company had consolidated net income of $1,221,000 and
$2,195,000 for the second quarter and first half of 1995, respectively, versus
net income of $647,000 and $908,000 for the similar periods of the prior year.
The prescription benefits management segment revenues, which comprise 98% of
the Company's consolidated revenues, increased $4,081,000 (12%) and $9,054,000
(14%) for the second quarter and first half of the current year, respectively,
over the comparable prior year periods. Operating income improved to 3.1% of
revenues for the second quarter and first half of 1995 versus 2.4% and 1.8% for
the same periods of the prior year. The Company's mail service pharmacy
revenues increased 12% for the second quarter and 14% for the first half of
the year over the comparable prior year amounts due to an increase in
prescriptions dispensed of 12.6% for the quarter and 14.2% for the six month
period. The impact of the increase in volume was partially offset by a slight
decrease in the average revenue per branded prescription dispensed. The rise
in the volume of prescriptions dispensed for the current quarter and six month
period was due to the addition of new clients at the beginning of the year
along with increased utilization by existing accounts. Second quarter claims
processing revenues increased 11% over the prior year period, while revenues
for the first half of the year experienced a similar increase (12%) over the
comparable prior year period revenues. The rise in claims processing revenues
was due to the higher volume of transactions processed (26% for the second
quarter and 32% for the first half of the year), offset by the impact of
competitive pricing pressures and a significant customer converting a large
component of its eligible members to a lesser revenue, but higher margin, per
transaction product.
Other operating revenues represents sales by the Company's Costa Rican
operation. The Company anticipates disposing of this operation sometime in the
near future, thus concentrating its efforts in the prescription benefits
management industry, which management believes will offer the greatest revenue
growth potential for the Company.
Cost of sales as a percent of consolidated net operating revenues for the
second quarter was consistent with the prior year quarter and decreased
nominally for the first half of 1995 as compared to the similar period of the
previous year. Management anticipates that the prescription benefits
management industry will continue to experience pricing pressure consistent
with what has evolved over the last year. The Company has been able to maintain
or reduce its cost of sales as a percentage of sales, despite increased pricing
competition, through implementation of aggressive drug procurement strategies,
which includes purchase and market performance discounts, integration of
operating activities and further cost reduction derived from on-going process
improvements at both the mail service pharmacy and claims processing
operations. The Company believes that its operations are performing at levels
which are competitive with industry norms. The new quality management
activities initiated earlier this year, ongoing process improvement programs,
further strategies for drug procurement cost reductions and an approximately
$3.0 million capital expenditure for automation and capacity expansion of the
Company's mail service pharmacy are profit enhancement measures which are
anticipated to provide future savings to the Company.
Selling, marketing and customer service expense increased over 44% for both the
second quarter and first half of the current year over the prior year similar
periods. The increase in these expenses are the result of the Company
restructuring its selling, marketing and customer service organizations during
1994. The initial aspects of the restructuring plan, which lowered selling,
marketing and customer service costs below normal levels last year, included
staff reduction, consolidation of selected activities and relocation of certain
functions. Subsequent to the first quarter of last year when the restructuring
took place, the Company began to make investments in staffing, facilities,
marketing and product literature and information systems development designed
to enhance client service and position the Company to capitalize on new
marketing and customer service capabilities. During the first half of 1995,
the Company has continued to invest in the new sales organization, as well as
in the development of advanced knowledge-based products for the prescription
benefits management marketplace. As the year progresses, the increase in this
expense category should not be as pronounced, since the levels of
organizational costs incurred will be more comparable.
General and administrative expenses for the second quarter and first half of
1995 declined 31% and 14%, respectively. The decrease in expenses for the
quarter and first half of the current year was primarily due to the Company
realigning management responsibilities at the start of the year which resulted
in a transfer of personnel from general and administrative roles to sales and
operational responsibilities. Further expense reductions were realized due to
substantial improvements made in accounts receivable management, thus reducing
expenses associated during these periods with the collection of outstanding
accounts. In addition, the Company has reduced numerous miscellaneous expenses
through on-going cost reduction activities.
Interest income for the second quarter and first half of the current year
increased 126% and 99%, respectively, as a result of increased amounts of
invested cash. Interest expense was consistent with the prior year. Other
non-operating expenses include a small gain on disposal of equipment reduced by
modest amounts of foreign currency exchange losses.
The effective tax rate for the quarter and year to date was 9 percent, and
consists of amounts provided for state income taxes, Federal alternative
minimum taxes and foreign taxes. The Company has significant net operating
loss carryforwards available to offset future Federal tax liabilities in the
near term.
11
<PAGE> 12
SYSTEMED INC.
June 30, 1995
Liquidity and Capital Resources
At June 30, 1995, the Company had cash and cash equivalents of $13.7 million
available to meet its operating and other cash needs. Management is
contemplating an offer to extend its existing line of credit, however it is
also considering other expanded credit facility arrangements which are designed
to meet the anticipated growth requirements of the Company. Management is
currently engaged in a dialogue with several financial institutions, and
expects to have its new credit facility arrangements completed by the end of
the year.
Working capital at June 30, 1995, was $27.6 million, which reflects an increase
of $985,000 over the December 31, 1994 balance. Working capital at December
31, 1994 included $2.0 million of working capital from Newport Synthesis Ltd.
(NSL) which was sold in March 1995. Therefore, the increase in working capital
at June 30, 1995, adjusting for the sale of NSL, was approximately $3.0
million. The rise in working capital was primarily due to increases in cash
and cash equivalents attained through improved accounts receivable management
and higher inventories maintained at the mail service pharmacy due to favorable
pricing opportunities, coupled with the reclassification of a reserve due to
the sale of NSL and the reduction of accrued liabilities as a result of the
timing of payments.
The Company's capital expenditures were primarily comprised of amounts invested
for the approximately $3.0 million program designed to further automate and
increase the capacity of the Company's mail service pharmacy in Iowa, and for
data processing equipment, new product offerings, and to a lesser degree,
office furniture and equipment for core activities. Management believes that
facility capacity, as a result of improvements being made this year will be
adequate to accommodate significant growth.
In the fourth quarter of 1993, the Company recorded a charge against earnings
for restructuring and other charges, including an accrual for estimated future
cash expenditures associated with that charge. During the first half of the
current year, the Company funded $346,000 of the then estimated future cash
expenditures. Management believes that the estimates originally derived for
both the accrual and cash expenditures are still appropriate.
12
<PAGE> 13
SYSTEMED INC.
June 30, 1995
<TABLE>
<S> <C>
Part II.
Item 6. Exhibits and reports on Form 8-K
(a) Computation of earnings per share - see Exhibit 11.
(b) Financial Data Schedule - see Exhibit 27.
(c) No reports on form 8-K were filed during the quarter ended June 30, 1995.
</TABLE>
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYSTEMED INC.
Date: August 14, 1995 By: /s/ KENNETH J. KAY
--------------- -------------------------------------------
Kenneth J. Kay, Senior Vice President,
Finance & Administration
and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
14
<PAGE> 1
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
SYSTEMED INC.
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------
June 30, June 30,
1995 1994
-------- --------
<S> <C> <C>
PRIMARY
Average common shares outstanding 21,974 21,467
Net effect of dilutive stock options and warrants
based on the treasury stock method 848 742
Assumed conversion of 8% preferred stock 218 220
------- -------
Total 23,040 22,429
======= =======
Net income applicable to common stock $ 1,121 $ 647
======= =======
Net income per common and common equivalent share $ .05 $ .03
======= =======
FULLY DILUTED
Average common shares outstanding 21,974 21,467
Net effect of dilutive stock options and warrants -
based on the treasury stock method 848 742
Assumed conversion of 8% preferred stock 218 220
------- -------
Total 23,040 22,429
======= =======
Net income applicable to common stock $ 1,121 $ 647
======= =======
Net income per common and
common equivalent share
assuming issuance of all dilutive
contingent shares $ .05 $ .03
======= =======
</TABLE>
Income per common and common equivalent share was calculated by dividing net
income by the weighted average number of common and common equivalent shares
outstanding during the period. Common stock equivalents include dilutive stock
options and warrants and the dilutive effects of preferred stock conversions.
Income per common and common equivalent share - assuming full dilution is not
presented in the financial statements because the assumed conversion of
convertible debt and any additional incremental issuance of stock options or
warrants would be antidilutive.
<PAGE> 2
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
SYSTEMED INC.
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended
-----------------------------
June 30, June 30,
1995 1994
-------- --------
<S> <C> <C>
PRIMARY
Average common shares outstanding 21,873 21,411
Net effect of dilutive stock options and warrants -
based on the treasury stock method 956 602
Assumed conversion of 8% preferred stock 218 220
------- -------
Total 23,047 22,233
======= =======
Net income applicable to common stock $ 2,195 $ 908
======= =======
Net income per common and common equivalent share $ .10 $ .04
======= =======
FULLY DILUTED
Average common shares outstanding 21,873 21,411
Net effect of dilutive stock options and warrants -
based on the treasury stock method 992 700
Assumed conversion of 8% preferred stock 218 220
------- -------
Total 23,083 22,331
======= =======
Net income applicable to common stock $ 2,195 $ 908
======= =======
Net income per common and
common equivalent share
assuming issuance of all dilutive
contingent shares $ .10 $ .04
======= =======
</TABLE>
Income per common and common equivalent share was calculated by dividing net
income by the weighted average number of common and common equivalent shares
outstanding during the period. Common stock equivalents include dilutive stock
options and warrants and the dilutive effects of preferred stock conversions.
Income per common and common equivalent share - assuming full dilution is not
presented in the financial statements because the assumed conversion of
convertible debt and any additional incremental issuance of stock options or
warrants would be antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 13,740,000
<SECURITIES> 0
<RECEIVABLES> 17,639,000
<ALLOWANCES> 679,000
<INVENTORY> 5,052,000
<CURRENT-ASSETS> 39,540,000
<PP&E> 12,795,000
<DEPRECIATION> 6,165,000
<TOTAL-ASSETS> 55,846,000
<CURRENT-LIABILITIES> 11,978,000
<BONDS> 6,320,000
<COMMON> 22,000
0
0
<OTHER-SE> 37,509,000
<TOTAL-LIABILITY-AND-EQUITY> 55,846,000
<SALES> 77,246,000
<TOTAL-REVENUES> 77,246,000
<CGS> 64,373,000
<TOTAL-COSTS> 74,847,000
<OTHER-EXPENSES> 11,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 326,000
<INCOME-PRETAX> 2,410,000
<INCOME-TAX> 215,000
<INCOME-CONTINUING> 2,410,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,195,000
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
