##### Table of Contents



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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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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, 2001

| |        |                                                                                         
| | ------ | ----------------------------------------------------------------------------------------
| | [    ] | 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 1-9957

Diagnostic Products Corporation

(Exact name of registrant as specified in its charter)


|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|California                                                     |  | 95-2802182                       
|(State or other jurisdiction of
incorporation or organization) |  | (IRS Employer
Identification No.)

5700 West 96th Street
Los Angeles, California 90045

(Address of principal executive offices)


Registrants telephone number: (310) 645-8200

No change

(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 Common Stock, no par value, outstanding as of June 30,
2001, was 28,182,990.



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TABLE OF CONTENTS



|                              |                                                                                               |                                            |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM I. FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF INCOME         
|                              |                                                                                               | CONSOLIDATED BALANCE SHEETS               
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                              |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|PART II. OTHER INFORMATION   
|                              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.                                                    
|SIGNATURES                   
|EXHIBIT INDEX                
|Exhibit 3.1                  



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##### Table of Contents






PART I. FINANCIAL INFORMATION




ITEM I. FINANCIAL STATEMENTS




DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)

In Thousands, except per share data)

|                                          |                           |  |                    |        |                  |  |        |        |      |  |        |         |  |  |        |         | 
|----------------------------------------- | ------------------------- |  | ------------------ | ------ | ---------------- |  | ------ | ------ | ---- |  | ------ | ------- |  |  | ------ | ------- | 
|                                          |                           |  | Three Months Ended |        | Six Months Ended
|                                          |                           |  | June 30,           |        | June 30,        
|                                          |                           |  |                    |        |                 
|                                          |                           |  | 2001               |        | 2000             |  | 2001   |        | 2000
|                                          |                           |  |                    |        |                  |  |        |        |     
|SALES:                                    |                           |  |                    |        |                  |  |        |        |      |  |        |         |  |  |        |        
|                                         
|                                         
|                                         
|                                         
|                                          | Non-Affiliated Customers  |  | $                  | 64,013 |                  |  | $      | 57,098 |      |  | $      | 126,363 |  |  | $      | 109,273 | 
|                                          | Unconsolidated Affiliates |  |                    | 8,785  |                  |  |        | 6,547  |      |  |        | 14,232  |  |  |        | 13,556  | 
|                                         
|                                         
|                                         
|                                         
|                                          |                           |  |                    |        |                  |  |        |        |      |  |        |         |  |  |        |        
|                                          | Total Sales               |  |                    | 72,798 |                  |  |        | 63,645 |      |  |        | 140,595 |  |  |        | 122,829 | 
|                                         
|                                         
|                                         
|                                         
|COST OF SALES                             |                           |  | 31,196             |        |                  |  | 28,865 |        |      |  | 60,212 |         |  |  | 55,154 |        
|                                          |                           |  |                    |        |                  |  |        |        |      |  |        |         |  |  |        |        
|                                          | Gross Profit              |  |                    | 41,602 |                  |  |        | 34,780 |      |  |        | 80,383  |  |  |        | 67,675  | 
|                                          |                           |  |                    |        |                  |  |        |        |      |  |        |         |  |  |        |        
|OPERATING EXPENSES:                       |                           |  |                    |        |                  |  |        |        |      |  |        |         |  |  |        |        
|                                         
|                                         
|                                         
|                                         
|Selling                                   |                           |  | 12,724             |        |                  |  | 11,274 |        |      |  | 24,836 |         |  |  | 22,075 |        
|                                         
|                                         
|                                         
|                                         
|Research and Development                  |                           |  | 7,985              |        |                  |  | 7,056  |        |      |  | 16,287 |         |  |  | 13,249 |        
|                                         
|                                         
|                                         
|                                         
|General and Administrative                |                           |  | 6,271              |        |                  |  | 6,720  |        |      |  | 12,798 |         |  |  | 13,294 |        
|                                         
|                                         
|                                         
|                                         
|Equity in Income of Affiliates            |                           |  | (746               | )      |                  |  | (603   | )      |      |  | (1,601 | )       |  |  | (1,098 | )      
|                                          |                           |  |                    |        |                  |  |        |        |      |  |        |         |  |  |        |        
|OPERATING EXPENSES  NET                  |                           |  | 26,234             |        |                  |  | 24,447 |        |      |  | 52,320 |         |  |  | 47,520 |        
|                                          |                           |  |                    |        |                  |  |        |        |      |  |        |         |  |  |        |        
|                                          | OPERATING INCOME          |  |                    | 15,368 |                  |  |        | 10,333 |      |  |        | 28,063  |  |  |        | 20,155  | 
|                                         
|                                         
|                                         
|                                         
|Interest/Other Income (Expense)  Net     |                           |  | (613               | )      |                  |  | 237    |        |      |  | (700   | )       |  |  | (7     | )      
|                                          |                           |  |                    |        |                  |  |        |        |      |  |        |         |  |  |        |        
|INCOME BEFORE TAXES
AND MINORITY INTEREST |                           |  | 14,755             |        |                  |  | 10,570 |        |      |  | 27,363 |         |  |  | 20,148 |        
|                                         
|                                         
|                                         
|                                         
|PROVISION FOR INCOME TAXES                |                           |  | 4,486              |        |                  |  | 3,160  |        |      |  | 8,319  |         |  |  | 6,129  |        
|                                         
|                                         
|                                         
|                                         
|MINORITY INTEREST                         |                           |  | 260                |        |                  |  | 381    |        |      |  | 483    |         |  |  | 699    |        
|                                          |                           |  |                    |        |                  |  |        |        |      |  |        |         |  |  |        |        
|                                          | NET INCOME                |  | $                  | 10,009 |                  |  | $      | 7,029  |      |  | $      | 18,561  |  |  | $      | 13,320  | 
|                                          |                           |  |                    |        |                  |  |        |        |      |  |        |         |  |  |        |         | 
|EARNINGS PER SHARE:                       |                           |  |                    |        |                  |  |        |        |      |  |        |         |  |  |        |        
|                                         
|                                         
|                                         
|                                         
|                                          | BASIC                     |  | $                  | 0.36   |                  |  | $      | 0.26   |      |  | $      | 0.66    |  |  | $      | 0.49    | 
|                                         
|                                         
|                                         
|                                         
|                                          | DILUTED                   |  | $                  | 0.34   |                  |  | $      | 0.25   |      |  | $      | 0.63    |  |  | $      | 0.48    | 
|                                         
|                                         
|                                         
|                                         
|WEIGHTED AVERAGE SHARES
OUTSTANDING:      |                           |  |                    |        |                  |  |        |        |      |  |        |         |  |  |        |        
|                                         
|                                         
|                                         
|                                         
|                                          | BASIC                     |  |                    | 28,081 |                  |  |        | 27,452 |      |  |        | 27,987  |  |  |        | 27,406  | 
|                                         
|                                         
|                                         
|                                         
|                                          | DILUTED                   |  |                    | 29,440 |                  |  |        | 27,754 |      |  |        | 29,246  |  |  |        | 27,612  | 

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##### Table of Contents






DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)

(Dollars in Thousands)

|                                           |                                                                                                                                                                |   |          |         |              |   |         |         |  
|------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------- | ------- | ------------ | - | ------- | ------- | -
|                                           |                                                                                                                                                                |   | June 30, |         | December 31,
|                                           |                                                                                                                                                                |   | 2001     |         | 2000        
|                                           |                                                                                                                                                                |   |          |         |             
|Assets                                     |                                                                                                                                                                |   |          |         |              |   |         |        
|                                          
|                                          
|                                          
|                                          
|CURRENT ASSETS:                            |                                                                                                                                                                |   |          |         |              |   |         |        
|                                          
|                                          
|                                          
|                                          
|                                           | Cash and cash equivalents                                                                                                                                      |   | $        | 18,290  |              |   | $       | 26,395  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts receivable  (including receivables from
unconsolidated affiliates of $10,893 and
$7,127)  net of allowance for doubtful
accounts of $1,167 and $750 |   |          | 80,536  |              |   |         | 68,222  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Inventories                                                                                                                                                    |   |          | 59,817  |              |   |         | 60,247  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Prepaid expenses and other current assets                                                                                                                      |   |          | 876     |              |   |         | 528     |  
|                                          
|                                          
|                                          
|                                          
|                                           | Deferred income taxes                                                                                                                                          |   |          | 2,881   |              |   |         | 2,881   |  
|                                           |                                                                                                                                                                |   |          |         |              |   |         |        
|                                           | Total current assets                                                                                                                                           |   |          | 162,400 |              |   |         | 158,273 |  
|                                          
|                                          
|                                          
|                                          
|PROPERTY, PLANT AND EQUIPMENT:             |                                                                                                                                                                |   |          |         |              |   |         |        
|                                          
|                                          
|                                          
|                                          
|                                           | Land and buildings                                                                                                                                             |   |          | 35,868  |              |   |         | 37,394  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Machinery and equipment                                                                                                                                        |   |          | 70,573  |              |   |         | 66,137  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Leasehold improvements                                                                                                                                         |   |          | 7,257   |              |   |         | 7,242   |  
|                                          
|                                          
|                                          
|                                          
|                                           | Construction in progress                                                                                                                                       |   |          | 10,813  |              |   |         | 3,607   |  
|                                           |                                                                                                                                                                |   |          |         |              |   |         |        
|                                           | Total                                                                                                                                                          |   |          | 124,511 |              |   |         | 114,380 |  
|                                          
|                                          
|                                          
|                                          
|                                           | Less accumulated depreciation and amortization                                                                                                                 |   |          | 63,867  |              |   |         | 61,367  |  
|                                           |                                                                                                                                                                |   |          |         |              |   |         |        
|                                           | Property, plant and equipment  net                                                                                                                            |   |          | 60,644  |              |   |         | 53,013  |  
|                                          
|                                          
|                                          
|                                          
|SALES-TYPE AND OPERATING LEASES  net      |                                                                                                                                                                |   | 40,786   |         |              |   | 40,582  |        
|                                          
|                                          
|                                          
|                                          
|DEFERRED INCOME TAXES                      |                                                                                                                                                                |   | 2,536    |         |              |   | 2,536   |        
|                                          
|                                          
|                                          
|                                          
|INVESTMENTS IN AFFILIATED COMPANIES        |                                                                                                                                                                |   | 14,922   |         |              |   | 13,465  |        
|                                          
|                                          
|                                          
|                                          
|EXCESS OF COST OVER NET ASSETS ACQUIRED   |                                                                                                                                                                |   |          |         |              |   |         |        
|                                          
|                                          
|                                          
|                                          
|                                           | Net of accumulated amortization of $11,278 and $10,735                                                                                                         |   |          | 12,010  |              |   |         | 12,615  |  
|                                           |                                                                                                                                                                |   |          |         |              |   |         |        
|TOTAL ASSETS                               |                                                                                                                                                                | $ | 293,298  |         |              | $ | 280,484 |        
|                                           |                                                                                                                                                                |   |          |         |              |   |         |        
|Liabilities and Shareholders Equity       |                                                                                                                                                                |   |          |         |              |   |         |        
|                                          
|                                          
|                                          
|                                          
|CURRENT LIABILITIES:                       |                                                                                                                                                                |   |          |         |              |   |         |        
|                                          
|                                          
|                                          
|                                          
|                                           | Notes payable                                                                                                                                                  |   | $        | 13,258  |              |   | $       | 15,557  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts payable                                                                                                                                               |   |          | 25,261  |              |   |         | 24,987  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued liabilities                                                                                                                                            |   |          | 9,363   |              |   |         | 11,409  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Income taxes payable                                                                                                                                           |   |          | 3,941   |              |   |         | 1,507   |  
|                                           |                                                                                                                                                                |   |          |         |              |   |         |        
|                                           | Total current liabilities                                                                                                                                      |   |          | 51,823  |              |   |         | 53,460  |  
|                                          
|                                          
|                                          
|                                          
|COMMITMENTS AND CONTINGENCIES              |                                                                                                                                                                |   |          |         |              |   |         |        
|                                          
|                                          
|                                          
|                                          
|SHAREHOLDERS EQUITY:                      |                                                                                                                                                                |   |          |         |              |   |         |        
|                                          
|                                          
|                                          
|                                          
|                                           | Common Stockno par value, authorized 60,000,000
shares; outstanding 28,182,990 shares and
27,836,788 shares, respectively                                     |   |          | 49,433  |              |   |         | 44,838  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Retained earnings                                                                                                                                              |   |          | 223,674 |              |   |         | 208,465 |  
|                                          
|                                          
|                                          
|                                          
|                                           | Accumulated other comprehensive loss                                                                                                                           |   |          | (31,632 | )            |   |         | (26,279 | )
|                                           |                                                                                                                                                                |   |          |         |              |   |         |        
|Total shareholders equity                 |                                                                                                                                                                |   | 241,475  |         |              |   | 227,024 |        
|                                           |                                                                                                                                                                |   |          |         |              |   |         |        
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |                                                                                                                                                                | $ | 293,298  |         |              | $ | 280,484 |        
|                                           |                                                                                                                                                                |   |          |         |              |   |         |        

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##### Table of Contents






DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

(Dollars in Thousands)

|                                                 |                                              |                                                                                  |                                                             |         |                          |         |        |         |   |         |  
|------------------------------------------------ | -------------------------------------------- | -------------------------------------------------------------------------------- | ----------------------------------------------------------- | ------- | ------------------------ | ------- | ------ | ------- | - | ------- | -
|                                                 |                                              |                                                                                  |                                                             |         | Six Months EndedJune 30,
|                                                 |                                              |                                                                                  |                                                             |         |                         
|                                                 |                                              |                                                                                  |                                                             |         | 2001                     |         | 2000  
|                                                 |                                              |                                                                                  |                                                             |         |                          |         |       
|CASH FLOWS FROM OPERATING ACTIVITIES:            |                                              |                                                                                  |                                                             |         |                          |         |        |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Net income                                   |                                                                                  | $                                                           | 18,561  |                          |         | $      | 13,320  |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              | Adjustments to reconcile net income to net cash
flows from operating activities: |                                                             |         |                          |         |        |         |   |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              |                                                                                  | Depreciation and amortization                               |         |                          | 12,386  |        |         |   | 9,732   |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              |                                                                                  | Equity in undistributed income of unconsolidated affiliates |         |                          | (1,601  | )      |         |   | (1,098  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              | Changes in operating assets and liabilities:                                     |                                                             |         |                          |         |        |         |   |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              |                                                                                  | Accounts receivable                                         |         |                          | (15,538 | )      |         |   | (15,183 | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              |                                                                                  | Inventories                                                 |         |                          | (1,220  | )      |         |   | (141    | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              |                                                                                  | Prepaid expenses and other current assets                   |         |                          | (348    | )      |         |   | (124    | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              |                                                                                  | Accounts payable                                            |         |                          | 4,119   |        |         |   | 3,282   |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              |                                                                                  | Accrued liabilities                                         |         |                          | (2,046  | )      |         |   | (272    | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              |                                                                                  | Income taxes payable                                        |         |                          | 2,637   |        |         |   | (1,612  | )
|                                                 |                                              |                                                                                  |                                                             |         |                          |         |        |        
|                                                 | Net cash flows from operating activities     |                                                                                  |                                                             | 16,950  |                          |         |        | 7,904   |  
|                                                 |                                              |                                                                                  |                                                             |         |                          |         |        |        
|CASH FLOWS USED FOR INVESTING ACTIVITIES:        |                                              |                                                                                  |                                                             |         |                          |         |        |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              |                                                                                  | Additions to property, plant, and equipment                 |         |                          | (15,517 | )      |         |   | (6,354  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              |                                                                                  | Sales-type and operating leases                             |         |                          | (10,081 | )      |         |   | (6,983  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              |                                                                                  | Investment in affiliated companies                          |         |                          | (851    | )      |         |   | (366    | )
|                                                 |                                              |                                                                                  |                                                             |         |                          |         |        |        
|                                                 | Net cash flows used for investing activities |                                                                                  |                                                             | (26,449 | )                        |         |        | (13,703 | )
|                                                 |                                              |                                                                                  |                                                             |         |                          |         |        |        
|CASH FLOWS FROM FINANCING ACTIVITIES:            |                                              |                                                                                  |                                                             |         |                          |         |        |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              |                                                                                  | (Repayment) borrowing of notes payable                      |         |                          | (288    | )      |         |   | 1,831   |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              |                                                                                  | Proceeds from exercise of stock options                     |         |                          | 4,595   |        |         |   | 1,823   |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              |                                                                                  | Cash dividends paid                                         |         |                          | (3,352  | )      |         |   | (3,289  | )
|                                                 |                                              |                                                                                  |                                                             |         |                          |         |        |        
|                                                 | Net cash flows from financing activities     |                                                                                  |                                                             | 955     |                          |         |        | 365     |  
|                                                 |                                              |                                                                                  |                                                             |         |                          |         |        |        
|EFFECT OF EXCHANGE RATE CHANGES ON CASH          |                                              |                                                                                  | 439                                                         |         |                          |         | (216   | )      
|                                                 |                                              |                                                                                  |                                                             |         |                          |         |        |        
|                                                
|                                                
|                                                
|                                                
|NET DECREASE IN CASH AND CASH EQUIVALENTS        |                                              |                                                                                  | (8,105                                                      | )       |                          |         | (5,650 | )      
|                                                
|                                                
|                                                
|                                                
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |                                              |                                                                                  | 26,395                                                      |         |                          |         | 14,547 |        
|                                                 |                                              |                                                                                  |                                                             |         |                          |         |        |        
|CASH AND CASH EQUIVALENTS
AT END OF PERIOD       |                                              | $                                                                                | 18,290                                                      |         |                          | $       | 8,897  |        
|                                                 |                                              |                                                                                  |                                                             |         |                          |         |        |         |  

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DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1  Basis of Presentation

The information for the three and six months ended June 30, 2001 and 2000 has
not been audited by independent accountants, but includes all adjustments
(consisting of normal recurring accruals) that are, in the opinion of
management, necessary to a fair statement of the results for such periods.

Certain information and footnote disclosure normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been omitted pursuant to the requirements
of the Securities and Exchange Commission, although the Company believes that
the disclosures included in these financial statements are adequate to make the
information not misleading.

The consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Companys
2000 Annual Report on Form 10-K as filed with the Securities and Exchange
Commission.

The results of operations for the three and six-month periods ended June 30,
2001 are not necessarily indicative of the results to be expected for the year
ending December 31, 2001.

Basic earnings per share is computed by dividing net income by the
weighted-average number of shares outstanding. Diluted earnings per share
includes the dilutive effect of stock options. All share and per share amounts
have been adjusted to give effect to a 2 for 1 stock split occurring on June 1,
2001.

Note 2  Inventories

Inventories by major categories are summarized as follows:

|                       |  |          |        |              |  |   |        | 
|---------------------- |  | -------- | ------ | ------------ |  | - | ------ | 
|(Dollars in Thousands) |  | June 30, |        | December 31,
|                       |  | 2001     |        | 2000        
|                       |  |          |        |             
|Raw materials          |  | $        | 25,986 |              |  | $ | 23,381 | 
|                      
|                      
|                      
|                      
|Work in process        |  |          | 22,501 |              |  |   | 23,862 | 
|                      
|                      
|                      
|                      
|Finished goods         |  |          | 11,330 |              |  |   | 13,004 | 
|                       |  |          |        |              |  |   |        | 
|Total                  |  | $        | 59,817 |              |  | $ | 60,247 | 
|                       |  |          |        |              |  |   |        | 

Note 3  Comprehensive Income

Comprehensive income is summarized as follows:

|                                        |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |        |  
|--------------------------------------- |  | ------------------ | ------ | ---------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|(Dollars in Thousands)                  |  | Three Months Ended |        | Six Months Ended
|                                        |  | June 30,           |        | June 30,        
|                                        |  |                    |        |                 
|                                        |  | 2001               |        | 2000             |  | 2001 |        | 2000
|                                        |  |                    |        |                  |  |      |        |     
|Net income                              |  | $                  | 10,009 |                  |  | $    | 7,029  |      |  | $ | 18,561 |   |  | $ | 13,320 |  
|                                       
|                                       
|                                       
|                                       
|Foreign currency
translation
adjustment |  |                    | (871   | )                |  |      | (2,959 | )    |  |   | (5,353 | ) |  |   | (3,998 | )
|                                        |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |        |  
|Comprehensive income                    |  | $                  | 9,138  |                  |  | $    | 4,070  |      |  | $ | 13,208 |   |  | $ | 9,322  |  
|                                        |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |        |  

The Company does not provide for U.S. income taxes on foreign currency
translation adjustments because it does not provide for such taxes on
undistributed earnings of foreign subsidiaries.

5



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4  Segment and Product Line Information

The Company considers its manufactured instruments and medical immunodiagnostic
test kits as one operating segment, as the kits are required to run the
instruments and utilize similar technology and instrument manufacturing
processes. The Company manufactures its instruments and kits principally from
facilities in the United States and the United Kingdom. Kits and instruments
are sold to hospitals, medical centers, clinics, physicians, and other clinical
laboratories throughout the world through a network of distributors, including
consolidated distributors located in the United Kingdom, Germany, Czech
Republic, Poland, Spain, The Netherlands, Belgium, Luxemborg, Finland, Norway,
France, Australia, New Zealand, China, Brazil, Uruguay, Venezuela, Costa Rica,
Panama, Sweden, Latvia, Lithuania, Estonia, and Denmark.

The Company sells its instruments and immunodiagnostic test kits under several
product lines. Product line sales information is as follows:

|                                          |  |                    |        |                  |  |      |        |      |  |   |         |  |  |   |         | 
|----------------------------------------- |  | ------------------ | ------ | ---------------- |  | ---- | ------ | ---- |  | - | ------- |  |  | - | ------- | 
|(Dollars in Thousands)                    |  | Three Months Ended |        | Six Months Ended
|                                          |  | June 30,           |        | June 30,        
|                                          |  |                    |        |                 
|Sales:                                    |  | 2001               |        | 2000             |  | 2001 |        | 2000
|                                          |  |                    |        |                  |  |      |        |     
|IMMULITE                                  |  | $                  | 59,582 |                  |  | $    | 49,301 |      |  | $ | 113,441 |  |  | $ | 93,372  | 
|                                         
|                                         
|                                         
|                                         
|Radioimmunoassay (RIA)                    |  |                    | 8,581  |                  |  |      | 8,753  |      |  |   | 17,218  |  |  |   | 17,797  | 
|                                         
|                                         
|                                         
|                                         
|Other (Includes DPC and
non-DPC products) |  |                    | 4,635  |                  |  |      | 5,591  |      |  |   | 9,936   |  |  |   | 11,660  | 
|                                          |  |                    |        |                  |  |      |        |      |  |   |         |  |  |   |         | 
|                                          |  | $                  | 72,798 |                  |  | $    | 63,645 |      |  | $ | 140,595 |  |  | $ | 122,829 | 
|                                          |  |                    |        |                  |  |      |        |      |  |   |         |  |  |   |         | 

The Company is organized and managed by geographic area. Transactions between
geographic segments are accounted for as normal sales for internal reporting
and management purposes with all intercompany amounts eliminated in
consolidation. Sales are attributed to geographic area based on the location
from which the instrument or kit is shipped to the customer. Information
reviewed by the Companys chief operating decision maker on significant
geographic segments is prepared on the same basis as the consolidated financial
statements and is as follows:

|                                 |  |        |         |          |  |          |        |            |  |             |        |             |  |              |        |       |  |   |        |   |  |   |         |   |  |   |         | 
|-------------------------------- |  | ------ | ------- | -------- |  | -------- | ------ | ---------- |  | ----------- | ------ | ----------- |  | ------------ | ------ | ----- |  | - | ------ | - |  | - | ------- | - |  | - | ------- | 
|                                 |  |        |         |          |  | Euro/DPC |        | DPC        |  |             |        |             |  |              |        |       |  |   |        |   |  |   |         |  
|                                 |  |        |         |          |  | Limited  |        | Biermann*  |  | DPC Medlab* |        |             |  |              |        | Less: |  |   |        |  
|                                 |  | United |         | (United  |  | (German  |        | (Brazilian |  |             |        |             |  | Intersegment |        |       |  |  
|(Dollars in Thousands)           |  | States |         | Kingdom) |  | Group)   |        | Group)     |  | Other       |        | Elimination |  | Total       
|                                 |  |        |         |          |  |          |        |            |  |             |        |             |  |             
|                                 |  |        |         |          |  |          |        |            |  |             |        |             |  |              |        |       |  |   |        |   |  |   |         |   |  |   |         | 
|Three Months Ended June 30, 2001 |  |        |         |          |  |          |        |            |  |             |        |             |  |              |        |       |  |   |        |   |  |   |         |   |  |   |         | 
|                                
|                                
|                                
|                                
|Sales                            |  | $      | 54,396  |          |  | $        | 8,831  |            |  | $           | 7,961  |             |  | $            | 7,768  |       |  | $ | 14,367 |   |  | $ | (20,525 | ) |  | $ | 72,798  | 
|                                
|                                
|                                
|                                
|Net income (loss)                |  |        | 7,420   |          |  |          | 1,411  |            |  |             | 150    |             |  |              | 330    |       |  |   | 1,198  |   |  |   | (500    | ) |  |   | 10,009  | 
|                                
|                                
|                                
|                                
|Three Months Ended June 30, 2000 |  |        |         |          |  |          |        |            |  |             |        |             |  |              |        |       |  |   |        |   |  |   |         |   |  |   |         | 
|                                
|                                
|                                
|                                
|Sales                            |  | $      | 44,067  |          |  | $        | 8,269  |            |  | $           | 7,533  |             |  | $            | 7,383  |       |  | $ | 13,335 |   |  | $ | (16,942 | ) |  | $ | 63,645  | 
|                                
|                                
|                                
|                                
|Net income (loss)                |  |        | 5,975   |          |  |          | 1,306  |            |  |             | (70    | )           |  |              | 486    |       |  |   | (68    | ) |  |   | (600    | ) |  |   | 7,029   | 
|                                
|                                
|                                
|                                
|Six Months Ended June 30, 2001   |  |        |         |          |  |          |        |            |  |             |        |             |  |              |        |       |  |   |        |   |  |   |         |   |  |   |         | 
|                                
|                                
|                                
|                                
|Sales                            |  | $      | 103,898 |          |  | $        | 17,605 |            |  | $           | 16,536 |             |  | $            | 14,700 |       |  | $ | 27,914 |   |  | $ | (40,058 | ) |  | $ | 140,595 | 
|                                
|                                
|                                
|                                
|Net income (loss)                |  |        | 13,901  |          |  |          | 2,757  |            |  |             | 438    |             |  |              | 613    |       |  |   | 2,052  |   |  |   | (1,200  | ) |  |   | 18,561  | 
|                                
|                                
|                                
|                                
|Six Months Ended June 30, 2000   |  |        |         |          |  |          |        |            |  |             |        |             |  |              |        |       |  |   |        |   |  |   |         |   |  |   |         | 
|                                
|                                
|                                
|                                
|Sales                            |  | $      | 83,994  |          |  | $        | 16,008 |            |  | $           | 15,491 |             |  | $            | 13,953 |       |  | $ | 25,862 |   |  | $ | (32,479 | ) |  | $ | 122,829 | 
|                                
|                                
|                                
|                                
|Net income (loss)                |  |        | 10,422  |          |  |          | 2,412  |            |  |             | (220   | )           |  |              | 891    |       |  |   | 115    |   |  |   | (300    | ) |  |   | 13,320  | 

6



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##### Table of Contents



*DPC Biermann includes the Companys operations in Germany, the Czech Republic,
and Poland. DPC Medlab includes the Companys operations in Brazil, Uruguay,
Venezuela, Costa Rica, and Panama.

Note 5  New Accounting Pronouncements

On June 29, 2001, the Financial Accounting Standards Board approved the
issuance of Statement of Financial Accounting Standards (SFAS) No. 141,
Business Combinations and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 requires that the purchase method of accounting be used
for all business combinations initiated after June 30, 2001. SFAS No. 142
changes the accounting for goodwill from an amortization method to an
impairment-only approach. Amortization of goodwill, including goodwill
recorded in business combinations occurring prior to June 30, 2001, will cease
upon adoption of this statement. In addition, the standard includes provisions
for the reclassification of certain existing recognized intangibles as
goodwill, reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill,
and the identification of reporting units for purposes of assessing potential
future impairments of goodwill. Under SFAS Nos. 141 and 142, goodwill and
other intangibles are initially assessed for impairment upon adoption of the
statements with subsequent assessments required annually and when there is
reason to suspect that their values have been diminished or impaired, with any
corresponding write-downs recognized as necessary.

The Company is required to implement SFAS No. 141 on July 1, 2001, and has
determined that the impact of this statement will not be material to its
consolidated financial position or results of operations. The Company is
required to implement SFAS No. 142 on January 1, 2002 and once adopted annual
goodwill amortization of approximately $1.1 million will cease. Beyond the
impact to its amortization of goodwill, the Company has not determined the
impact that this statement will have on its consolidated financial position or
results of operations.




ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

The Companys sales increased 14% in the second quarter of 2001 to $72.8
million compared to sales of $63.6 million in the second quarter of 2000.
Sales also increased 14% in the first six months of 2001 to $140.6 million from
$122.8 million in the first six months of 2000. Sales of all IMMULITE products
(instruments and reagents) in the second quarter of 2001 were $59.6 million, a
21% increase over the second quarter of 2000. Sales of IMMULITE products
represented 82% of second quarter 2001 sales, compared to 77% of second quarter
2000 sales. Sales of all IMMULITE products in the first six months of 2001
were $113.4 million, a 21% increase over the first six months of 2000.
IMMULITE products represented 81% of sales in the first six months of 2001
versus 76% in 2000.

IMMULITE reagents represented $45.1 million of 2001 second quarter sales, a 22%
increase and $87.4 million in the first six months of 2001, a 26% increase over
2000. Sales of IMMULITE systems (including service revenue and parts) were
$14.5 million, up 17% over the second quarter of 2000 and $26.0 million in the
first six months of 2001, an 8% increase over 2000. Additionally, the Company expects to release its allergy product line for the
IMMULITE 2000 in September 2001. The Company shipped a
total of 312 IMMULITE systems during the 2001 second quarter, including 189
IMMULITE 2000 systems and 123 IMMULITE One systems. The total base of IMMULITE
systems shipped grew to 6,520, including 1,465 of the IMMULITE 2000 systems.

Sales of the Companys mature RIA products declined approximately 2% in the
second quarter of 2001, and 3% in the first six months of 2001, representing
12% of sales in each period compared to 14% of sales in the second quarter and
the first six months of 2000. The sales decline in this product line is
expected to continue. Sales of other DPC products, including allergy reagents,
fell by 12% over the second quarter of 2000 and by 14% in the first six months
to 5% of 2001 second quarter sales, down from 6% in the second quarter in 2000
and 5% of sales in the first six months of 2001 from 6% in the first six months
of 2000. Sales of non-DPC products through its
consolidated international affiliates decreased 27% in the second quarter of
2001 to $1.3 million and decreased 18% in the first six months of 2001 to $3.1
million.

7



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##### Table of Contents



Due to the significance of foreign sales (73% of total sales in the second
quarter and 73% in the first six months of 2001), particularly in Europe and
South America, the Company is subject to currency risks based on the relative
strength or weakness of the U.S. dollar. In periods when the U.S. dollar is
strengthening, the effect of the translation of the financial statements of
consolidated foreign affiliates is that of lower sales and net income. In the
second quarter of 2001, the strong dollar had a 7% negative impact on sales.
In the first six months of 2001, the strong dollar had a 7% negative impact on
sales. Due to intense competition, the Companys foreign distributors are
generally unable to increase prices to offset the negative effect when the U.S.
dollar is strong.

In the second quarter of 2001, domestic sales grew at 32%, to 27% of total
sales, while foreign sales grew at 9%. In the first six months of 2001,
domestic sales grew 35% to 27% of total sales while international sales grew at
8%.

Gross profit as a percentage of sales increased from 54.6% in the second
quarter 2000 to 57.1% in the second quarter 2001 and from 55.1% in the first
six months of 2000 to 57.2% in the first six months of 2001. These increases
were due in part to a shift toward higher margin domestic sales from third
party international sales, an increase in manufacturing volumes, and a shift
toward IMMULITE 2000 reagent sales.

The Company believes that because it sells to its affiliates in dollars, a
strengthening dollar as well as potential increases in product sales through
distribution agreements in the United States could put pressure on gross
margins in the future.

Selling and research and development expenses increased in absolute dollars in
the second quarter and first six months of 2001 relative to the second quarter
and first six months of 2000, but decreased as a percentage of sales. General
and administrative expenses decreased in the second quarter and the first six
months of 2001 in part due to the strong U.S. dollar. It is expected that
general and administrative expenses will be closer to historical levels in the
future.

Equity in income of affiliates represents the Companys share of earnings of
non-consolidated affiliates, principally the 45%-owned Italian distributor.
This amount increased to $.7 million in the second quarter of 2001 from $.6
million in the second quarter of 2000. In the first six months of 2001, this
amount increased to $1.6 million from $1.1 million for the comparable period in
2000.

Interest/other income (expense)-net includes interest income, interest expense,
and foreign exchange transaction losses and gains. In the second quarter of
2001 the Company had other expenses of $613,000 versus income of $237,000 in
2000. In the first six months of 2001 the Company had other expenses of
$700,000 versus $7,000 in the same period of 2000. The second quarter of 2001
included a $587,000 foreign currency translation loss versus a $148,000 foreign
currency gain in 2000 and net interest expense versus net interest income in
2000. Also included in the first six months of 2000 is a gain of approximately
$215,000 on the sale of a building in the United Kingdom.

The Companys effective tax rate includes Federal, state, and foreign taxes.
The Companys tax rate increased to 30.4% in the second quarter of 2001 from
29.9% in the second quarter of 2000. The rate remained at 30.4% in the first
six months of 2001, the same as that period in 2000.

Net income increased 42% to $10.0 million in the second quarter of 2001 or $.34
per diluted share from $7.0 million or $.25 per diluted share in the second
quarter of 2000 on a split-adjusted basis. Net income increased 39% in the
first six months of 2001 to $18.6 million or $.63 per diluted share from $13.3
million or $.48 per diluted share in 2000 on a split-adjusted basis.

Liquidity

The Company has adequate working capital and sources of capital to carry on its
current business and to meet its existing capital requirements. Net cash flow
from operating activities was $17.0 million in the first six months of 2001 and
$7.9 million in the first six months of 2000. Additions to property, plant,
and equipment in the first six months of 2001 were $15.5 million, principally
the result of the Companys continued construction of its new manufacturing
facility in New Jersey, compared to $6.4 million in the first six months of
2000. Cash flow used for the placement of IMMULITE systems under sales-type
and operating leases was $10.1 million in
the first six months of 2001 compared to $7.0 million in the first six months
of 2000. These leases have periods ranging from three to five years. The
Company decreased borrowings by $0.3 million in the first six months of 2001
and increased borrowings by $1.8 million in the first six months of 2000.

8



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##### Table of Contents



The Companys foreign operations are subject to risks, such as currency
devaluations, associated with political and economic instability. See
discussion above under Results of Operations.

The Company purchased real property in New Jersey in 2000 at a cost of
approximately $2.6 million. The Company is constructing an 80,000 square foot
manufacturing facility, which should be completed by year-end, on this property
at a cost of $10 million to $12 million. The Company has no other material
commitments for capital expenditures in 2001.

The Company has a $20 million domestic unsecured line of credit under which
there were no borrowings outstanding at June 30, 2001 or December 31, 2000.
The Company had other notes payable (consisting of bank borrowings by the
Companys foreign consolidated subsidiaries payable in their local currency,
some of which are guaranteed by the Company) of $13.3 million at June 30, 2001
compared to $15.6 million at December 31, 2000. The Company received $4.6
million from the exercise of stock options in the first six months of 2001
versus $1.8 million in the first six months of 2000. The Company has paid a
quarterly cash dividend of $.06 per share, on a split-adjusted basis, since
1995.

Euro Conversion

The Company has significant sales to European countries (the participating
countries) which began converting to a common legal currency (the Euro) on
January 1, 1999. During the transition period of January 1, 1999 to January 1,
2002, public and private parties may pay for goods and services using either
the Euro or local currency. During the transition period, conversion rates are
not computed directly from one local currency to another. Instead, local
currencies are converted first to a Euro denomination and then to the second
local currency. Beginning in January 2002, new Euro-denominated bills and
coins become legal currency and all former currencies will, over the ensuing
months, be withdrawn from circulation. The ultimate conversion to the Euro
will eliminate currency exchange risk among the participating countries.

The Company sells its products in the participating countries through
affiliated and non-affiliated distributors that determine sales prices in their
respective territories. The use of a single currency in the participating
countries may affect this variable pricing in the various European markets
because of price transparency. Nevertheless, other market factors such as
local taxes, customer preferences, and product assortment may reduce the need
for price equalization.

The Company has significant sales in Europe and is currently evaluating the
business implications of the conversion to the Euro, including the need to
adapt internal systems to accommodate Euro-denominated transactions, the
competitive implications of cross-border price transparency, the impact on
existing marketing programs, and other strategic implications. Due to the
existence of many unknown variables, it is not permissible for the Company to
predict the precise implications of the Euro conversion on its operations. The
Company has implemented a plan to convert or upgrade certain of its European
subsidiaries to a similar computer software system that will allow them to
operate in the European currency environment and to create a central repository
for all European information. The Company anticipates the software conversion
will be completed in the fourth quarter of 2001, with an expected cost of
approximately $1.0 million. Through June 30, 2001, the Company had expended
approximately $340,000.

Forward-Looking Statements

Except for the historical information contained herein, this report contains
forward-looking statements (identified by the words estimate, project,
anticipate, expect, intend, believe, hope, and similar expressions)
that are based upon Managements current expectations and speak only as of the
date made. These forward-looking statements are subject to risks,
uncertainties, and factors that could cause actual results to differ materially
from the results anticipated in the forward-looking statements. These risks
and uncertainties include the degree of customer demand for the Companys
products, customer acceptance of the IMMULITE 2000 and other new products, the
Companys ability to keep abreast of technological innovations, the risks
inherent in the development and release of new products (such as delays,
unforeseen costs, and technical difficulties), competitive pressures, currency
risks based on the relative strength or weakness of the U.S. dollar, health
care regulation and cost containment measures, political and economic
instability in certain foreign markets, and the impact of the conversion to the
Euro.

9



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##### Table of Contents






ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no material change during the quarter ended June 30, 2001, from
the disclosures about market risk provided in the Companys Annual Report on
Form 10-K for the year ended December 31, 2000.




PART II. OTHER INFORMATION




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The following persons were elected directors of the Company at the Annual
Meeting of Shareholders held on May 8, 2001:

|                  |  |            |            |          |  |  |           | 
|----------------- |  | ---------- | ---------- | -------- |  |  | --------- | 
|                  |  | Votes Cast
|                  |  |           
|Name              |  | For        |            | Withheld
|                  |  |            |            |         
|Sidney A. Aroesty |  |            | 10,455,607 |          |  |  | 1,761,854 | 
|                 
|                 
|                 
|                 
|Frederick Frank   |  |            | 9,235,180  |          |  |  | 2,982,281 | 
|                 
|                 
|                 
|                 
|Maxwell H. Salter |  |            | 11,212,133 |          |  |  | 1,005,328 | 
|                 
|                 
|                 
|                 
|James D. Watson   |  |            | 11,215,168 |          |  |  | 1,002,293 | 
|                 
|                 
|                 
|                 
|Ira Ziering       |  |            | 10,549,262 |          |  |  | 1,668,199 | 
|                 
|                 
|                 
|                 
|Michael Ziering   |  |            | 10,551,937 |          |  |  | 1,665,524 | 

The Shareholders approved the following proposal:

|                                        |  |            |           |         |  |         |           |           |  |  |        |  |  |  |           | 
|--------------------------------------- |  | ---------- | --------- | ------- |  | ------- | --------- | --------- |  |  | ------ |  |  |  | --------- | 
|                                        |  | Votes Cast
|                                        |  |           
|                                        |  | For        |           | Against |  | Abstain |           | Not Voted
|                                        |  |            |           |         |  |         |           |          
|Amendment of the 1997 Stock Option Plan |  |            | 7,470,481 |         |  |         | 4,004,734 |           |  |  | 20,471 |  |  |  | 2,445,888 | 

The number of votes indicated has not been adjusted to reflect the 2 for 1
stock split on June 1, 2001.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits

|     |  |                                                                                                                                                                
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1  |  | Amended and Restated Articles of Incorporation                                                                                                                 
|    
|    
|    
|    
|10.1 |  | 1997 Stock Option Plan as amended (incorporated by reference to
the registrants registration
statement on Form S-8 (File No. 333-60690) filed on May 11, 2001.

(b)  Reports on Form 8-K. None.




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.

DIAGNOSTIC PRODUCTS CORPORATION
(Registrant)

|                                   |  |                                                                                                        |  |                
|---------------------------------- |  | ------------------------------------------------------------------------------------------------------ |  | ---------------
|/s/ Michael ZieringMichael Ziering |  | President and
Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
Director |  | August 10, 2001
|                                  
|/s/ James L. BrillJames L. Brill   |  | Vice President-Finance
(Principal Financial and
Accounting Officer)                                    |  | August 10, 2001

10



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##### Table of Contents






EXHIBIT INDEX

|     |  |                                                                                                                                                                
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1  |  | Amended and Restated Articles of Incorporation                                                                                                                 
|    
|    
|    
|    
|10.1 |  | 1997 Stock Option Plan as amended (incorporated by reference to
the registrants registration
statement on Form S-8 (File No. 333-60690) filed on May 11, 2001.

11