<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 September 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)
<TABLE>
<S> <C>
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)
</TABLE>
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: 22,144,432 shares of common
stock, $.001 par value, outstanding at September 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 September 30, 1995 (unaudited)
and December 31, 1994 3
Consolidated statements of income (unaudited) - three months ended
September 30, 1995 and 1994 4
Consolidated statements of income (unaudited) - nine months ended
September 30, 1995 and 1994 5
Consolidated statements of cash flows (unaudited) - nine months ended
September 30, 1995 and 1994 6
Notes to unaudited consolidated financial statements 7-8
Item 2. Management's discussion and analysis of financial condition and results
of operations 9-11
PART II - Other information
Item 6. Exhibits and reports on Form 8-K 12
SIGNATURES 13
</TABLE>
2
<PAGE> 3
Part I. Item 1.
SYSTEMED INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $13,755,000 $12,849,000
Accounts receivable, less allowance of $485,000 at
September 30, 1995 and $655,000 at December 31, 1994 16,694,000 19,141,000
Inventories 4,875,000 4,538,000
Prepaid expenses and other 3,764,000 3,454,000
----------- -----------
Total current assets 39,088,000 39,982,000
Property, plant and equipment, net 8,229,000 6,075,000
Goodwill, less accumulated amortization of $1,796,000 at
September 30, 1995 and $1,649,000 at December 31, 1994 6,247,000 6,394,000
Other, including deferred debt offering costs, less related
accumulated amortization of $538,000 at September 30, 1995
and $496,000 at December 31, 1994 3,352,000 880,000
----------- -----------
$56,916,000 $53,331,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ - $ 40,000
Accounts payable 4,959,000 4,012,000
Other accrued liabilities 6,210,000 6,900,000
Accrued restructuring and other charges 494,000 1,113,000
Reserve for estimated loss on disposal of
discontinued operations - 1,340,000
----------- -----------
Total current liabilities 11,663,000 13,405,000
Long-term debt 6,300,000 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 September 30, 1995
and 163,325 shares issued and outstanding at December 31, 1994;
(liquidation preference of $1,613,000 at September 30, 1995 and $1,633,000
at December 31, 1994) - -
Common stock, $.001 par value; 30,000,000 shares
authorized; 22,144,432 shares issued and outstanding
at September 30, 1995 and 21,706,488 shares issued and
outstanding at December 31, 1994 22,000 22,000
Additional paid-in capital 73,772,000 72,437,000
Accumulated deficit (34,858,000) (38,227,000)
Foreign currency translation adjustment - (657,000)
----------- -----------
Total stockholders' equity 38,936,000 33,575,000
----------- -----------
$56,916,000 $53,331,000
=========== ===========
</TABLE>
See accompanying notes
3
<PAGE> 4
SYSTEMED INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------
September 30, September 30,
1995 1994
------------ -------------
<S> <C> <C>
Net operating revenues $38,008,000 $35,831,000
Operating costs and expenses:
Cost of sales 31,559,000 29,425,000
Selling, marketing and customer service 3,008,000 2,357,000
General and administrative 2,099,000 2,775,000
----------- -----------
Total operating costs and expenses 36,666,000 34,557,000
----------- -----------
Operating income 1,342,000 1,274,000
Other income (expense):
Interest income 185,000 106,000
Interest expense (163,000) (167,000)
Other non-operating, net (31,000) -
----------- -----------
Total other income (expense) (9,000) (61,000)
----------- -----------
Income before provision for income taxes 1,333,000 1,213,000
Provision for income taxes 159,000 144,000
----------- -----------
Net income $ 1,174,000 $ 1,069,000
=========== ===========
Per common share information:
- -----------------------------
Net income per common and common equivalent share $ .05 $ .05
=========== ===========
Weighted average number of common and common equivalent shares 23,053,000 23,024,000
=========== ===========
</TABLE>
See accompanying notes
4
<PAGE> 5
SYSTEMED INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------------
September 30, September 30,
1995 1994
------------- -------------
<S> <C> <C>
Net operating revenues $115,254,000 $103,758,000
Operating costs and expenses:
Cost of sales 95,932,000 86,874,000
Selling, marketing and customer service 9,160,000 6,589,000
General and administrative 6,421,000 7,824,000
------------ ------------
Total operating costs and expenses 111,513,000 101,287,000
------------ ------------
Operating income 3,741,000 2,471,000
Other income (expense):
Interest income 548,000 288,000
Interest expense (489,000) (504,000)
Other non-operating, net (57,000) (10,000)
------------ ------------
Total other income (expense) 2,000 (226,000)
------------ ------------
Income before provision for income taxes 3,743,000 2,245,000
Provision for income taxes 374,000 268,000
------------ ------------
Net income $ 3,369,000 $ 1,977,000
============ ============
Per common share information:
- -----------------------------
Net income per common and common equivalent share $ 0.15 $ .09
============ ============
Weighted average number of common and common equivalent shares 23,035,000 22,497,000
============ ============
</TABLE>
See accompanying notes
5
<PAGE> 6
SYSTEMED INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------
September 30, September 30,
1995 1994
------------- -------------
<S> <C> <C>
Operating Activities:
Net income $ 3,369,000 $ 1,977,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,435,000 1,275,000
Provision for losses on accounts receivable - 535,000
Other (154,000) 56,000
Changes in assets and liabilities:
Decrease in accounts receivable 998,000 617,000
Increase in inventories (1,939,000) (1,833,000)
Increase in prepaid expenses and other (162,000) (2,020,000)
Increase in other assets (8,000) (10,000)
Net increase in accounts payable and other accruals 1,565,000 3,459,000
Decrease in accrued restructuring and other charges (619,000) (910,000)
Net increase in reserve for estimated loss on disposal of
discontinued operations - 540,000
----------- -----------
Net cash provided by operating activities 4,485,000 3,686,000
----------- -----------
Investing Activities:
Capital expenditures (4,474,000) (1,668,000)
Net assets transferred (409,000) -
Other 21,000 20,000
----------- -----------
Net cash used in investing activities (4,862,000) (1,648,000)
----------- -----------
Financing Activities:
Net repayments under line of credit agreements - (237,000)
Repayment of long-term debt - (165,000)
Proceeds from issuances of common stock 1,412,000 1,095,000
Dividends on preferred stock (129,000) (131,000)
----------- -----------
Net cash provided by financing activities 1,283,000 562,000
----------- -----------
Net increase in cash and cash equivalents 906,000 2,600,000
Cash and cash equivalents at beginning of period 12,849,000 9,007,000
----------- -----------
Cash and cash equivalents at end of period $13,755,000 $11,607,000
=========== ===========
</TABLE>
See accompanying notes
6
<PAGE> 7
SYSTEMED INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 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 nine month periods
ending September 30, 1995 and 1994 and its cash flows for the nine month
periods ended September 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 3% 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 approximately $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 $2,057,000
for the three months and $4,722,000 for the nine months ended September 30,
1994. Income from discontinued operations of $398,000 for the three months
and $718,000 for the nine months ended September 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
September 30, 1995
3. Inventories
-----------
<TABLE>
<CAPTION>
Inventories consisted of the following: September 30, December 31,
1995 1994
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<S> <C> <C>
Raw materials $ 384,000 $ 432,000
Work in progress 117,000 649,000
Finished goods 4,374,000 3,457,000
---------- ----------
$4,875,000 $4,538,000
========== ==========
</TABLE>
Finished goods inventory included $3,819,000 and $2,067,000 of
pharmaceutical drugs at the Company's mail service pharmacy at September 30,
1995 and December 31, 1994, respectively.
4. Long-term debt
--------------
<TABLE>
<CAPTION>
Long-term debt consisted of the following at: September 30, December 31,
1995 1994
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<S> <C> <C>
10% senior secured convertible notes $6,300,000 $6,320,000
Less current portion - -
---------- ----------
Long-term portion $6,300,000 $6,320,000
========== ==========
</TABLE>
At September 30, 1995, the Company was in compliance with all covenants of
the above debt agreement.
5. Statements of cash flows
------------------------
During the nine months ended September 30, 1995 and 1994, cash payments for
interest were $631,000 and $655,000, respectively. Cash payments for income
taxes were $243,000 in 1995 and $41,000 in 1994.
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.
8
<PAGE> 9
SYSTEMED INC.
September 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 Nine Months Ended
------------------ -----------------
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net operating revenues:
Prescription benefits management $36,947 $34,825 $112,365 $101,189
Other 1,061 1,006 2,889 2,569
------- ------- -------- --------
Total net operating revenues $38,008 $35,831 $115,254 $103,758
======= ======= ======== ========
Operating income (loss):
Prescription benefits management $ 2,283 $ 2,138 $ 6,329 $ 4,736
Corporate and other (941) (864) (2,588) (2,265)
------- ------- -------- --------
Total operating income 1,342 1,274 3,741 2,471
Non-operating income (expenses) (9) (61) 2 (226)
Provision for income taxes (159) (144) (374) (268)
------- ------- -------- --------
Net income $ 1,174 $ 1,069 $ 3,369 $ 1,977
======= ======= ======== ========
</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 Nine Months Ended
------------------ -----------------
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net operating revenues:
Prescription benefits management 97.2% 97.2% 97.5% 97.5%
Other 2.8 2.8 2.5 2.5
----- ----- ----- -----
Total net operating revenues 100.0 100.0 100.0 100.0
Cost of sales 83.1 82.1 83.2 83.7
Selling, marketing and customer service 7.9 6.6 8.0 6.4
General and administrative 5.5 7.7 5.6 7.5
----- ----- ----- -----
Operating income 3.5 3.6 3.2 2.4
Non-operating income (expenses) - (.2) - (.2)
----- ----- ----- -----
Income before provision for income taxes 3.5 3.4 3.2 2.2
Provision for income taxes (.4) (.4) (.3) (.2)
----- ----- ----- -----
Net income 3.1% 3.0% 2.9% 2.0%
===== ===== ===== =====
</TABLE>
9
<PAGE> 10
SYSTEMED INC.
September 30, 1995
Results of Operations (Cont'd)
- ------------------------------
Consolidated net operating revenues for the third quarter and nine months ended
September 30, 1995 increased 6 percent and 11 percent, respectively, over the
similar periods of the prior year. The Company had consolidated 1995 operating
income of $1,342,000 for the third quarter, the seventh consecutive quarter of
positive operating income, and $3,741,000 for the nine month period, primarily
resulting from ongoing operational improvements, versus $1,274,000 and
$2,471,000 for the same periods of the prior year, respectively. Consolidated
1995 net income for the Company was $1,174,000 for the third quarter and
$3,369,000 for the nine month period, which represents an increase of 10
percent and 70 percent, respectively, from the comparable quarter and nine
month periods of last year.
The prescription benefits management revenue, which represents 97 percent of the
quarter's and 98 percent of the nine month period's consolidated revenues,
increased $2.1 million (or 6 percent) and $11.2 million (or 11 percent),
respectively, over the same periods of 1994. Operating income as a percentage
of revenue for the prescription benefits management activities was 6.2 percent
for the quarter and 5.6 percent for the nine month period, compared to 6.1
percent and 4.7 percent, respectively, for the similar periods of the prior
year. Revenues from the mail service pharmacy operations increased over the
prior year's similar periods by 6.8 percent for the third quarter and 11.4
percent for the first nine months as a result of a rise in the volume of
prescriptions dispensed of 5 percent and 11.1 percent for the third quarter
and first nine months of 1995, respectively, coupled with a slight increase
in the average revenue per prescription dispensed during the year. The
increase in the number of prescriptions dispensed was attributable to the
addition of new clients at the beginning of the year combined with increased
utilization of mail service pharmacy benefits by existing accounts. The 1995
third quarter claims processing revenues decreased 1.6 percent from the prior
year quarter, while the nine month period revenues increased 7.7 percent over
last year's comparable amount. The decline in third quarter claims processing
revenues was due to a sizable customer converting a large component of its
eligible members earlier in the year to lower-cost electronic versus
traditional paper prescription claims-processing services, combined with the
repricing of several accounts. The improvement in the nine month period
revenues was due to the higher volume of electronic claims processed, as a
result of increased utilization of pharmacy benefit services which resulted
primarily from the customer product conversion noted above. The volume of
claims processed for the quarter and nine month period increased 23 percent
and 29 percent, respectively.
Third quarter and year to date revenues are not necessarily predictive of
future prescription benefit management operating revenues due to the renewal
decision making process for existing customers that typically culminates in the
fourth quarter, and the potential for new business to be added at the start of
the next fiscal year.
Other net 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 percentage of consolidated net operating revenues for the
third quarter increased over the prior year quarter, and decreased modestly for
the nine month period. The nominal rise in the cost of sales percentage for the
third quarter resulted from continued pricing pressure, an increase in the cost
of drugs and administrative costs associated with the implementation of
therapeutic alternative programs. Management anticipates that the prescription
benefits management industry will continue to experience competitive pricing
pressure consistent with what has been experienced over the last year. So far,
the Company has been able to control its cost of sales through aggressive drug
procurement strategies, which include purchase and market performance discounts,
integration of operating activities, on-going process improvements at both the
mail service pharmacy and claim processing operations and the Company's quality
management activities initiated earlier this year. On-going process improvement
programs, additional strategies for drug procurement cost reduction, quality
management activities, new value added clinical pharmacy management products and
the automation and capacity expansion of the mail service pharmacy are
anticipated to further the Company's competitive posture.
Selling, marketing and customer service expense for the third quarter and first
nine months of the current year increased 28 percent and 39 percent,
respectively, over the similar periods of the previous year. During 1994, the
Company restructured its selling, marketing and customer service activities.
The initial aspects of the restructuring plan, which lowered selling, marketing
and customer service costs below normal levels, included staff reductions,
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 upgraded staffing, facilities, new
marketing and product literature and information systems development designed
to enhance customer service
10
<PAGE> 11
SYSTEMED INC.
September 30, 1995
Results of Operations (Con'd)
- -----------------------------
and position the Company to capitalize on new marketing and customer service
capabilities. During the first nine months of 1995, the Company has continued
to invest in the new marketing and sales organizations, as well as in the
development of advanced knowledge-based products for the prescription benefits
management marketplace.
General and administrative expenses decreased 24 percent and 18 percent for the
1995 third quarter and nine month periods, respectively. The lower expenses
for the quarter and nine months resulted from the rearrangement of management
responsibilities at the beginning of the year, which included the transfer of
personnel from general and administrative capacities to sales and operational
roles, and expense reductions realized through substantial improvements made in
accounts receivable management thereby reducing expenses associated with the
collection of outstanding accounts. Further cost reduction activities
implemented in 1995 contributed to the reduced current year level of expenses,
while last year's third quarter costs were inflated due to non-recurring
investment advisory fees incurred for implementation of the stockholder rights
plan and other corporate governance matters.
Interest income for the third quarter and nine months of 1995 increased 75
percent and 90 percent, respectively, as a result of higher amounts of invested
cash. Interest expense was consistent with the prior year periods. Other
non-operating expenses included a small gain on disposal of equipment reduced
by foreign exchange losses.
The Company's 1995 effective tax rate for the third quarter and nine months was
12 percent and 10 percent, respectively, and consisted of amounts accrued for
state, federal alternative minimum and foreign taxes. The Company has
significant net operating loss carryforwards available to offset future federal
tax liabilities in the near term.
Liquidity and Capital Resources
- -------------------------------
At September 30, 1995, the Company had cash and cash equivalents of $13.8
million available to meet its operating and other cash needs. Management is
contemplating renewing its line of credit, however it is also considering other
expanded credit facility arrangements which are designed to meet anticipated
growth requirements of the Company. Management is currently engaged in
dialogue with several financial institutions, and expects to have its new
credit facility arrangements completed shortly after year end.
The Company had working capital at September 30, 1995 of $27.4 million, an
increase of $850,000 over the prior year end working capital balance. The year
end working capital balance included $2.0 million of working capital from
Newport Synthesis, Ltd. which was sold in March 1995. Therefore, the actual
rise in working capital at the end of the 1995 nine month period was $2.9
million. The increase in working capital was due to increased cash and cash
equivalents attained through improved accounts receivable management, and
reduction of accrued restructuring and other charges and other accrued
liabilities.
The Company's capital expenditures for the first nine months of the current
year were $4.5 million, and were primarily comprised of the $3.0 million
invested in state of the art, automated prescription processing technology and
capacity expansion of the mail service pharmacy in Iowa, advanced data
processing technologies, and to a lesser degree, office furniture and equipment
for core activities. Management believes that the new facility capacity, as a
result of improvements being made this year, will be adequate to accommodate
significant growth.
11
<PAGE> 12
SYSTEMED INC.
September 30, 1995
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
September 30, 1995.
12
<PAGE> 13
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: November 13, 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)
13
<PAGE> 1
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
SYSTEMED INC.
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
------------------
September 30, September 30,
1995 1994
------------ -------------
<S> <C> <C>
Primary
- -------
Average common shares outstanding 22,132 21,583
Net effect of dilutive stock options and warrants
based on the treasury stock method 703 1,221
Assumed conversion of 8% preferred stock 218 220
------- -------
Total 23,053 23,024
======= =======
Net income applicable to common stock $ 1,174 $ 1,069
======= =======
Net income per common and common equivalent share $ .05 $ .05
======= =======
Fully Diluted
- -------------
Average common shares outstanding 22,132 21,583
Net effect of dilutive stock options and warrants -
based on the treasury stock method 703 1,509
Assumed conversion of 8% preferred stock 218 220
------- -------
Total 23,053 23,312
======= =======
Net income applicable to common stock $ 1,174 $ 1,069
======= =======
Net income per common and
common equivalent share
assuming issuance of all dilutive
contingent shares $ .05 $ .05
======= =======
</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>
Nine Months Ended
-----------------
September 30, September 30,
1995 1994
------------- -------------
<S> <C> <C>
Primary
- -------
Average common shares outstanding 21,959 21,468
Net effect of dilutive stock options and warrants -
based on the treasury stock method 858 809
Assumed conversion of 8% preferred stock 218 220
------- -------
Total 23,035 22,497
======= =======
Net income applicable to common stock $ 3,369 $ 1,977
======= =======
Net income per common and common equivalent share $ .15 $ .09
======= =======
Fully Diluted
- -------------
Average common shares outstanding 21,959 21,468
Net effect of dilutive stock options and warrants -
based on the treasury stock method 896 970
Assumed conversion of 8% preferred stock 218 220
------- -------
Total 23,073 22,658
======= =======
Net income applicable to common stock $ 3,369 $ 1,977
======= =======
Net income per common and
common equivalent share
assuming issuance of all dilutive
contingent shares $ .15 $ .09
======= =======
</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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 13,755,000
<SECURITIES> 0
<RECEIVABLES> 17,179,000
<ALLOWANCES> 485,000
<INVENTORY> 4,875,000
<CURRENT-ASSETS> 39,088,000
<PP&E> 14,840,000
<DEPRECIATION> 6,611,000
<TOTAL-ASSETS> 56,916,000
<CURRENT-LIABILITIES> 11,663,000
<BONDS> 6,300,000
<COMMON> 22,000
0
0
<OTHER-SE> 38,914,000
<TOTAL-LIABILITY-AND-EQUITY> 56,916,000
<SALES> 115,254,000
<TOTAL-REVENUES> 115,254,000
<CGS> 95,932,000
<TOTAL-COSTS> 111,513,000
<OTHER-EXPENSES> (2,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 489,000
<INCOME-PRETAX> 3,743,000
<INCOME-TAX> 374,000
<INCOME-CONTINUING> 3,369,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,369,000
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
