SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended March 31, 2001
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 000-19392
DIANON SYSTEMS, INC.
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(exact name of registrant as specified in its charter)
Delaware 06-1128081
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(State of incorporation) (IRS Employer
Identification No.)
200 Watson Blvd, Stratford, CT 06615
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (203) 381-4000
NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed since last report)
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
--- ----
The number of shares of registrant's Common Stock, $.01 par value, outstanding
on April 10, 2001 was 7,394,950 shares.
DIANON SYSTEMS, INC.
AND SUBSIDIARIES
INDEX
Part I FINANCIAL INFORMATION PAGE NO.
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Item 1. FINANCIAL STATEMENTS
Balance Sheets as of March 31, 2001
and December 31, 2000. 3
Income Statements for the three months
ended March 31, 2001 and 2000. 4
Statements of Stockholders' Equity for the three
months ended March 31, 2001 and 2000. 5
Statements of Cash Flows for the three months
ended March 31, 2001 and 2000. 6
Notes to Financial Statements. 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8-11
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 11
Part II OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 12
Signatures 13
DIANON SYSTEMS, INC.
BALANCE SHEETS
MARCH 31, DECEMBER 31,
2001 2000
-------------------- -------------------
ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $11,777,865 $ 12,515,424
Accounts receivable, net of allowances of $1,302,096 and
$1,302,096, respectively 22,973,607 21,413,404
Prepaid expenses and employee advances 1,035,953
1,472,652
Refundable income taxes 900,776 2,245,894
Inventory 1,422,324 1,417,247
Deferred income tax asset 729,417 774,150
-------------------- -------------------
Total current assets 39,276,641 39,402,072
-------------------- -------------------
PROPERTY AND EQUIPMENT, at cost
Laboratory and office equipment 15,386,471 14,930,672
Leasehold improvements 5,425,769 5,327,052
Less - accumulated depreciation and amortization (15,449,107) (14,644,420)
--------------------- ------------------
5,363,133 5,613,304
--------------------- ------------------
INTANGIBLE ASSETS, net of accumulated amortization of
$4,903,397 and $4,648,029 respectively 13,972,909 14,228,274
DEFERRED INCOME TAX ASSET 1,719,138 1,783,632
OTHER ASSETS 718,220 725,720
-------------------- -------------------
TOTAL ASSETS $61,050,041 $61,753,002
==================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,488,268 $ 977,817
Accrued employee compensation 689,627 1,909,767
Current portion of capitalized lease obligations 37,612 31,811
Other accrued expenses 4,124,429 3,857,370
-------------------- -------------------
Total current liabilities 6,339,936 6,776,765
--------------------- ------------------
LONG-TERM LIABILITIES:
Long-term note payable - 2,500,000
Long-term deferred tax liability 186,773 202,072
Long-term portion of capitalized lease obligations 7,070 15,427
-------------------- -------------------
Total Liabilities 6,533,779 9,494,264
-------------------- -------------------
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share, 20,000,000 shares authorized,
7,407,068 and 7,397,323 shares issued and
outstanding at March 31, 2001 and December 31, 2000, respectively 74,071 73,974
Additional paid-in capital 36,080,584 35,877,828
Retained earnings 18,477,652 16,427,788
Common stock held in treasury, at cost - 12,118 and 12,620
shares at March 31, 2001 and December 31, 2000, respectively (116,045) (120,852)
--------------------- ------------------
Total stockholders' equity 54,516,262 52,258,738
--------------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $61,050,041 $ 61,753,002
===================== ==================
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
DIANON SYSTEMS, INC.
INCOME STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 2001 and 2000
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
2001 2000
---------------- -----------------
Net revenues $26,802,607 $22,078,913
Cost of goods 14,994,798 12,747,168
---------------- -----------------
GROSS PROFIT 11,807,809 9,331,745
Selling, general and administrative expenses 7,869,837 6,884,469
Amortization of intangible assets 255,368 202,716
Research and development expenses 351,589 171,810
---------------- -----------------
INCOME FROM OPERATIONS 3,331,015 2,072,750
Interest income, net 114,134 44,227
---------------- -----------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 3,445,149 2,116,977
Provision for income taxes 1,395,285 857,376
---------------- -----------------
NET INCOME $ 2,049,864 $ 1,259,601
================ =================
EARNINGS PER SHARE
BASIC $.28 $.18
DILUTED $.26 $.17
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC 7,387,647 7,040,376
DILUTED 8,006,625 7,597,009
The accompanying notes to consolidated financial statements are
an integral part of these statements.
DIANON SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings
--------------------------- ---------------- --------------
BALANCE, December 31, 1999 7,060,749 $ 70,608 $ 29,428,647 $ 9,828,769
Stock options exercised 62,507 625 399,293 --
Employee stock purchase plan -- -- (37,081) --
Stock grants 745 7 9,957 --
Net income -- -- -- 1,259,601
------------ ------------ ------------ ------------
BALANCE, March 31, 2000 7,124,001 $ 71,240 $ 29,800,816 $ 11,088,370
============ ============ ============ ============
BALANCE, December 31, 2000 7,397,323 $ 73,974 $35,877,828 $16,427,788
Stock options exercised 9,500 95 79,467 --
Tax effect for stock options
exercised -- -- 99,572 --
Employee stock purchase plan -- -- 13,904 --
Stock grants 245 2 9,813 --
Net income -- -- -- 2,049,864
------------ ------------ ------------ ------------
BALANCE, March 31, 2001 7,407,068 $ 74,071 $36,080,584 $18,477,652
============ ============ ============ ============
DIANON SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
(continued)
Common Stock
Acquired for Treasury
Shares Amount Total
----------------------------- ---------------
BALANCE, December 31, 1999 (58,734) ($ 562,462) $ 38,765,562
Stock options exercised -- -- 399,918
Employee stock purchase plan 7,418 71,038 33,957
Stock grants -- -- 9,964
Net income -- -- 1,259,601
------------ ------------ ------------
BALANCE, March 31, 2000 (51,316) ($ 491,424) $ 40,469,002
============ ============ ============
BALANCE, December 31, 2000 (12,620) ($ 120,852) $ 52,258,738
Stock options exercised -- -- 79,562
Tax effect for stock options
exercised -- -- 99,572
Employee stock purchase plan 502 4,807 18,711
Stock grants -- -- 9,815
Net income -- -- 2,049,864
------------ ------------ ------------
BALANCE, March 31, 2001 (12,118) ($ 116,045) $ 54,516,262
============ ============ ============
The accompanying notes to consolidated financial statements
are an integral part of these statements.
DIANON SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
MARCH 31,
2001 2000
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,049,864 $1,259,601
Adjustments to reconcile net income to net
cash provided by operations -
Non-cash charges
Depreciation and amortization 1,060,052 942,852
Tax effect of stock options exercised 99,572 --
Provision for bad debts -- 200,000
Stock compensation expense 9,815 9,964
Changes in other current assets and liabilities
Increase in accounts receivable (1,560,203) (1,291,070)
Decrease in refundable income taxes 1,345,118 --
(Increase) decrease in prepaid expenses and employee advances (436,699) 76,226
Increase in inventory (5,077) (373,947)
Decrease in other assets 116,727 256,572
Decrease in accounts payable and accrued liabilities (457,929) (45,771)
------------- ------------
Net cash provided by operating activities 2,221,240 1,034,427
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (554,516) (439,633)
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Net cash used in investing activities (554,516) (439,633)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of note payable (2,500,000) (500,000)
Employee stock purchase plan 18,711 33,957
Stock options exercised 79,562 399,918
Repayments of capitalized lease obligations (2,556) (8,861)
------------ ------------
Net cash used in financing activities (2,404,283) (74,986)
------------ ------------
Net (decrease) increase in cash and cash equivalents (737,559) 519,808
CASH AND CASH EQUIVALENTS, beginning of period 12,515,424 9,761,047
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $11,777,865 $10,280,855
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period:
Interest $47,174 $107,727
Income Taxes 6,600 557,171
The accompanying notes to consolidated financial statements are
an integral part of these statements.
DIANON SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
1. The Company - The consolidated financial statements as of and for the three
months ended March 31, 2001 and 2000 have been prepared by DIANON Systems,
Inc. ("Dianon") without audit. In the opinion of management, all
adjustments necessary to present fairly the financial position, results of
operations and cash flows for such periods have been made, and the interim
accounting policies followed are in conformity with generally accepted
accounting principles and are consistent with those applied for annual
periods as described in Dianon's annual report for the year ended December
31, 2000, previously filed on Form 10-K with the Securities and Exchange
Commission (the "Annual Report"). Certain amounts in prior year statements
may have been reclassified to conform with current year presentation.
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these consolidated
financial statements be read in conjunction with the financial statements
included in Dianon's Annual Report for the year ended December 31, 2000.
The results of operations for the three months ended March 31, 2001 and
2000 are not necessarily indicative of the operating results for the full
years.
2. Earnings per share - Basic earnings per share have been computed based on
the weighted average number of common shares outstanding during each year.
Diluted earnings per share have been computed based on the weighted average
number of common shares and common equivalent shares outstanding during
each year. Common equivalent shares outstanding include the common
equivalent shares calculated for warrants and stock options under the
treasury stock method. Below is a reconciliation of the numerators and
denominators of the basic and diluted earnings per share computations for
the first quarter 2001 and 2000.
First quarter ended
March 31,
2001 2000
------------------------
BASIC EARNING PER SHARE:
Weighted-average
number of common
shares outstanding 7,387,647 7,040,376
DILUTIVE EFFECT OF:
Stock options 618,978 556,633
--------- ------------
DILUTED EARNINGS PER SHARE:
Weighted-average
number of common 8,006,625 7,597,009
shares outstanding
========= ============
NET INCOME $2,049,864 $1,259,601
========= ============
BASIC EARNINGS PER SHARE $0.28 $0.18
========= ============
DILUTED EARNINGS PER SHARE $0.26 $0.17
========= ============
Options to purchase 344,515 shares of common stock at prices ranging from
$35.50 to $40.06 per share were outstanding as of March 31, 2001 but were
not included in the computation of diluted earnings per share because the
options' exercise price was greater than the average market price of common
shares.
Options to purchase 1,000 shares of common stock at $18.75 per share were
outstanding as of March 31, 2000 but were not included in the computation
of diluted earnings per share because the options' exercise price was
greater than the average market price of common shares.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
The descriptive analysis contained herein compares the financial results of the
three months ended March 31, 2001 ("First Quarter-2001") to the three months
ended March 31, 2000 ("First Quarter-2000").
RESULTS OF OPERATIONS
o NET REVENUES
Net revenues increased 21% to $26.8 million in the First Quarter-2001 from $22.1
million in the First Quarter-2000. This increase reflects the effects of strong
volume gains in pathology and genetics and a favorable reimbursement climate.
The clinical laboratory industry, which includes both clinical chemistry and
anatomic pathology, has seen steady and continuing downward pressure on prices
exerted by both government and private third-party payers. Payment for services
such as those provided by Dianon is and will likely continue to be affected by
periodic reevaluations made by payers concerning the level of reimbursement for
services provided by Dianon. Over time, Congress has reduced the national cap on
Medicare laboratory fee schedules (under which Dianon's clinical chemistry
services are reimbursed) to 74% of the national median. In addition, the
Balanced Budget Act of 1997 ("BBA") freezes fee schedule payments (i.e., no
updates) for the 1998-2002 period.
Beginning in 1998, Medicare began covering screening pap smears for certain
Medicare beneficiaries, and the Balanced Budget Refinement Act of 1999 ("BBRA")
required the Secretary of the Department of Health and Human Services to
establish a national minimum payment amount equal to $14.60 for diagnostic or
screening pap smear laboratory tests furnished on or after January 1, 2000.
Previously, the national payment cap for a pap smear was approximately $7.15.
The BBRA also encouraged the Health Care Financing Administration ("HCFA") to
institute an appropriate increase in the payment rate for new cervical cancer
screening technologies, such as the technologies used by Dianon, that have been
approved by the FDA as significantly more effective than a conventional pap
smear. In March 2001, HCFA established a national limit of $28 for the new pap
smear technologies used by Dianon, which is nearly twice the level of
reimbursement for the conventional pap smear. Current payments in states in
which Dianon has laboratories that furnish tests range from $25.60 to $28.00.
The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of
2000 (BIPA), signed into law on December 21, 2000, requires that the national
limitation amount for new lab tests equal 100% of the national median for such
tests (versus the 74% applied to other tests). In addition, BIPA included a
provision to change the frequency of covered screening pap smears from at least
every three years to at least every two years. The addition of Medicare coverage
for more frequent pap tests and higher reimbursement for certain types of pap
tests have provided and are expected to continue to provide additional revenues
for Dianon.
With respect to Dianon's anatomic pathology services, which are not reimbursed
under the Medicare laboratory fee schedules, Medicare reimbursement amounts also
generally declined with the implementation of the resource-based relative value
scale ("RBRVS") system, which went into effect in 1992 and was fully phased in
by the end of 1996. Overall, anatomic pathology reimbursement rates declined
during the fee schedule phase in period, despite an increase in payment rates
for certain pathology services performed by Dianon. Due to a five-year review,
in 1997 there was an overall decrease in the work value component used along
with practice and malpractice expenses to calculate the relative value units
(RVUs) established for services. Another five-year review of the work value
component is underway and HCFA is scheduled to propose revised work schedules in
Spring 2001. After a comment period, these revised work values will be finalized
and implemented on January 1, 2002.
Looking forward to 2002, HCFA has not proposed any major changes that would
affect pathology reimbursement as a whole; however, proposed adjustments in the
practice expense component of the relative value units ("RVUs") used to
calculate payment amounts will result in minor changes in reimbursement for many
medical specialties. Revisions in practice expense RVUs must be budget neutral,
meaning that increases for some services must be offset by decreases for others.
HCFA has estimated that the practice expense changes would result in a 3%
decrease in total allowed charges for pathology over the period 2001-2002.
However, the net effect of the changes with respect to the most common pathology
service provided by Dianon will result in an increase in payment for Dianon.
The BBA also required the Secretary of the Department of Health and Human
Services to use a negotiated rulemaking process to adopt uniform coverage,
administration and payment policies for lab tests. A proposed rule was published
on March 10, 2000, which would establish national coverage policies for many of
the most commonly ordered lab tests, thereby replacing local Medicare policies,
which sometimes vary. The rule also would establish other uniform requirements
related to submission of claims for lab tests. It is uncertain when a final rule
will be published or how it may differ from the proposed rule, but if adopted as
proposed, Dianon believes that the new rule will bring more consistency to
reimbursement among providers of laboratory testing services.
HCFA had announced that effective January 1, 2001, independent labs may no
longer bill Medicare for the technical component ("TC") of pathology services
furnished to Medicare beneficiaries who are hospital inpatients. Independent
labs would still be able to bill and be paid for the TC of pathology services
provided to beneficiaries who are in non-hospital settings, but for the TC of
services provided to a hospital inpatient, the independent lab will have to make
arrangements with the hospital in order to receive payment. Also beginning on
January 1, 2001, under new regulations for hospital outpatient reimbursement
(see following paragraph), independent labs are limited to billing the hospital
for the TC of any pathology services furnished to hospital outpatients. In other
words, under the regulation, independent laboratories that perform the technical
component of pathology services for hospital outpatient services may no longer
bill Medicare for these services and must, instead, bill the hospital. However,
BIPA includes a provision allowing independent labs to continue to bill and be
paid for the TC of services provided to hospital inpatients and outpatients for
an additional two years. Since Dianon does only minimal testing for hospital
inpatients and outpatients, these changes are not expected to have a material
financial impact on Dianon.
The BBA contained measures to establish market-oriented purchasing for Medicare,
including prospective payment systems ("PPS") for hospital outpatient services,
home health care, and nursing home care. All of these systems have now been
implemented. Since Dianon does only minimal clinical laboratory testing for home
health care and nursing facility patients, these changes are not expected to
materially affect Dianon's business.
Dianon's Form 10-K for the year ended December 31, 2000, previously filed with
the Securities and Exchange Commission, contains additional information
regarding the complex area of reimbursement.
o COST OF SALES
Cost of sales, which consists primarily of payroll, laboratory supplies, outside
services, logistics and depreciation expense, increased to $15.0 million in the
First Quarter-2001 from $12.7 million in the First Quarter-2000. As a percentage
of revenues, cost of sales was 56% and 58% for the First Quarter-2001 and the
First Quarter-2000, respectively.
o GROSS PROFIT
Gross profit totaled $11.8 million in First Quarter-2001 versus $9.3 million in
First Quarter-2000, reflecting a gross profit margin of 44% and 42%,
respectively. The increase in gross profits is a direct result of increased
revenues and increased efficiencies.
o SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
For the first quarters 2001 and 2000, selling, general and administrative
expenses increased to $7.9 million in 2001 from $6.9 million in 2000. While
absolute expenses increased, they decreased as a percentage of sales to 29% in
the First Quarter-2001 from 31% in the First Quarter-2000.
The expense increases were primarily due to higher commissions associated with
obtaining new sales; and from increased risk management, medical and other
insurance costs due to the acquisition of additional facilities and employees.
o AMORTIZATION OF INTANGIBLE ASSETS
Amortization of intangible assets increased to $255,000 in the First
Quarter-2001 from $203,000 in the First Quarter-2000. This increase is a result
of acquisitions made in the fourth quarter of 2000.
o RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased to $352,000 in the First
Quarter-2001 from $172,000 in the First Quarter-2000. This increase is primarily
the result of the continued development of the Carepath program, a disease
management information service for patients, physicians and managed care
organizations.
o INCOME FROM OPERATIONS
Income from operations increased to $3.3 million in the First Quarter-2001 from
$2.1 million in the First Quarter-2000. This increase in operating income
reflects the increase in sales and the containment of expenses.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
increased to $4.4 million in the First Quarter-2001 from $3.0 million in the
First Quarter-2000. As a percentage of sales, EBITDA increased to 16.4% in the
First Quarter-2001 from 13.7% in the First-Quarter-2000.
EBITDA is defined as income before interest expense, income tax expense and
depreciation and amortization. Non-recurring items and gains and losses from
sales of real estate and investments are also excluded from EBITDA as these
items do not impact operating results on a recurring basis. Dianon had no such
items for the three months ended March 31, 2001 and 2000, respectively.
Management considers EBITDA to be one measure of the cash flows from operations
of Dianon before debt service that provides a relevant basis for comparison, and
EBITDA is presented to assist investors in analyzing the performance of Dianon.
This information should not be considered as an alternative to any measure of
performance as promulgated under accounting principles generally accepted in the
United States, nor should it be considered as an indicator of the overall
financial performance of Dianon. Dianon's calculation of EBITDA may be different
from the calculation used by other companies and, therefore, comparability may
be limited.
EBITDA for the first quarter ended 2001 and 2000 are as follows:
First Quarter
------------------------
2001 2000
---------- ----------
EBITDA $4,391,000 $3,016,000
EBITDA as a percentage of sales 16.4% 13.7%
o NET INTEREST INCOME
Net interest income increased to $114,000 in the First Quarter-2001 from $44,000
in the First Quarter-2000, due to the reduction of debt and the corresponding
interest expense.
o PROVISION FOR INCOME TAXES
The provision for income taxes reflects a 40.5% effective tax rate in the First
Quarter-2001 and the First Quarter-2000, respectively, totaling $1.4 million and
$857,000, respectively.
o NET INCOME
For the first quarters 2001 and 2000, net income increased 63% to $2.1 million
in 2001 from $1.3 million in 2000. Basic earnings per share increased to $0.28
per share in 2001 from $0.18 per share in 2000, while diluted earnings per share
increased to $0.26 per share in 2001 from $0.17 per share in 2000.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2001, Dianon had total cash and cash equivalents of $11.8 million,
substantially all of which was invested in a fund holding U.S. Treasury
securities with maturities of less than three months. Working capital was $32.9
million and $32.6 million as of March 31, 2001 and December 31, 2000,
respectively, and the current ratios (current assets divided by current
liabilities) were 6.2:1 and 5.8:1, respectively.
Accounts receivable totaled $23.0 million as of March 31, 2001 representing
approximately 77 days of sales outstanding, compared to $21.4 million or 77 days
as of December 31, 2000.
Capital expenditures for the First Quarter-2001 totaled approximately $555,000.
Effective February 17, 1998, Dianon entered into a three-year, $15 million line
of credit agreement with a bank. The agreement includes various provisions
regarding borrowings under the facility, including financial and negative
covenants. In December 2000, the loan was extended to August 2003, and certain
covenants were modified. As of March 31, 2001, the loan was paid in full.
Dianon's Board of Directors authorized the repurchase of approximately 1.7
million shares of Dianon's Common Stock on the open market or in private
transactions. Total expenditures for share repurchases is limited to $12.0
million. As of March 31, 2001, Dianon had repurchased approximately 336,000
shares of Dianon's Common Stock for approximately $2.8 million.
Dianon believes that cash flows from operations and available cash and cash
equivalents are adequate to fund Dianon's operations for the foreseeable future.
RISK FACTORS; FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis contains forward-looking statements
regarding Dianon's future plans, objectives, and expected performance. These
statements are based on assumptions that Dianon believes are reasonable, but are
subject to a wide range of risks and uncertainties, and a number of factors
could cause Dianon's actual results to differ materially from those expressed in
the forward-looking statements referred to above. These factors include, among
others, the uncertainties in reimbursement rates and reimbursement coverage of
various tests sold by Dianon to beneficiaries of the Medicare program; the
possibility of being deemed to be not in compliance with Federal or state
regulatory requirements; the uncertainties relating to the ability of Dianon to
convince physicians and/or managed care organizations to use Dianon as a
provider of anatomic pathology testing services; the ability of Dianon to
maintain superior quality relative to its competitors; the ability of Dianon to
maintain its hospital-based business in light of the competitive pressures and
changes occurring in hospital healthcare delivery; the uncertainties relating to
states erecting barriers to the performance of national anatomic laboratories,
together with the competitive pressures from small specialized laboratories and
well established local pathologists; and the uncertainties which would arise if
integrated delivery systems closed to outside providers emerged as the dominant
form of health care delivery.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Dianon is not subject to market risk with respect to its cash and cash
equivalents since substantially all amounts are invested in a fund holding U.S.
Treasury securities with maturities of less than three months.
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
None
(11.1) Statement regarding computation of per share earnings is not
required because the relevant computation can be determined from
the material contained in the Financial Statements included
herein.
(b) Reports:
No reports on Form 8-K were filed during the first quarter of 2001.
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.
DIANON Systems, Inc.
April 27, 2001 /s/ KEVIN C. JOHNSON
----------------------------
By: Kevin C. Johnson
President and
Chief Executive Officer
(Principal Executive Officer)
April 27, 2001 /s/ DAVID R. SCHREIBER
----------------------------
By: David R. Schreiber
Senior Vice President,
Finance and Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)