Consolidated net earnings totaled $11.0 million, or $0.44 per share for fiscal 1995, an increase of $6.4 million (139%), or $0.25 per share. The increase in net earnings was attributable primarily to operating income improvement, offset by losses on the New Jersey contract ($12.6 million pretax or $0.31 per share after tax), and lack of counterpart to prior year shareholder litigation settlement costs ($12.0 million pretax or $0.31 per share after tax) incurred in fiscal 1994. Excluding non-recurring fiscal 1995 New Jersey contract losses and non-recurring fiscal 1994 shareholder litigation settlement costs, fiscal 1995 net earnings would have been $18.7 million or $0.75 per share compared with $12.5 million or $0.50 per share in fiscal 1994.
Integrated pharmacy service operating income totaled $15.1 million for fiscal 1994, an increase of $11.1 million or 278% from fiscal 1993. The increase in operating income was attributable primarily to higher profit margins ($10.1 million) related to improved purchasing from pharmaceutical suppliers and volume increases, lack of counterpart to prior year bad debt provisions ($4.7 million) in excess of customary levels; offset partly by higher general and administrative costs ($1.8 million) related partly to the Perform acquisition and selling and marketing costs ($1.6 million) attributable mainly to the introduction of the RxChoice(c) product.
Managed care pharmacy service operating income totaled ($2.7) million for fiscal 1995, a decrease of $11.9 million or 129% from fiscal 1994. The decrease in operating income was attributable primarily to losses associated with the Company's unit dose dispensing contract with the State of New Jersey implemented February 1, 1995 ($12.6 million, including estimated future losses over the three year contract term of $9.6 million, Note 13 to Notes to Consolidated Financial Statements).
Availability and price of pharmaceuticals are subject to market conditions. Cost increases can affect the Company's cost of sales; however, increases in purchased drug costs are, in the case of certain managed care pharmacy contracts and for the vast majority of integrated pharmacy service contracts, recoverable from clients under periodic rate adjustment contractual clauses. To the extent that the Company has entered risk/reward ("capitated") contracts based on the Company's ability to control pharmaceutical dispensing patterns, operating results could be affected to a greater degree by drug cost inflation. Historically, inflation has not materially affected the Company. During fiscal 1996 and future periods, a significant number of patents protecting high volume brand medications are scheduled to expire which could result in the availability of lower cost generic equivalent products. The Company has not forecast the impact that might result from the introduction of these generic products, however, pharmaceutical costs might decrease in future periods.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Diagnostek, Inc. and subsidiaries as of March 31, 1995 and 1994 and the results of their operations and their cash flows for each of the years in the three year period ended March 31, 1995 in conformity with generally accepted accounting principles.