UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
   
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,September 30, 2007
OR
   
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-11250
DIONEX CORPORATION
(Exact Name of Registrant as Specified in its Charter)
   
Delaware 94-2647429
   
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
   
1228 Titan Way, Sunnyvale, California 94085
   
(Address of principal executive offices) (Zip Code)
(408) 737-0700
(Registrant’s Telephone Number, including Area Code)
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. YESþ NOo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check One)
Large accelerated filerþ     Accelerated Filero     Non-accelerated filero
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)YESo NOþ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of May 9,November 7, 2007:
   
CLASS NUMBER OF SHARES
   
Common Stock 19,024,049 18,653,660
 
 

 


 

DIONEX CORPORATION
INDEX
DIONEX CORPORATION
INDEX
     
  Page Page
FINANCIAL STATEMENTS    
 
  3 
  4 
  5 
  6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS76-12 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  1313-16 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS  1917 
CONTROLS AND PROCEDURES  1918 
 18–20
  20 
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS  22
EXHIBITS22–23 
  2524 
    
26EXHIBIT 10.1
EXHIBIT 10.8
 EXHIBIT 31.1
 EXHIBIT 31.2
 EXHIBIT 32.1
 EXHIBIT 32.2

2


Part I. Financial Information
Item 1. Financial Statements
DIONEX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
                
 March 31, June 30,  September 30, June 30, 
 2007 2006  2007 2007 
ASSETS  
Current assets:  
Cash and cash equivalents $55,265 $43,524  $69,577 $54,938 
Short-term investments 236 7,490   124 
Accounts receivable (net of allowance for doubtful accounts of $712 at March 31, 2007 and $674 at June 30, 2006) 67,951 63,008 
Accounts receivable (net of allowance for doubtful accounts of $686 at September 30, 2007 and $610 at June 30, 2007) 64,527 65,990 
Inventories 28,289 27,702  31,001 28,626 
Deferred taxes 9,453 9,915  9,164 8,983 
Prepaid expenses and other 9,108 5,791  11,501 12,113 
          
Total current assets 170,302 157,430  185,770 170,774 
Property, plant and equipment, net 62,284 58,700  63,297 62,366 
Goodwill 25,334 24,982  25,823 25,443 
Intangible assets, net 3,991 4,522  6,650 6,955 
Other assets 4,233 4,768  16,967 6,231 
          
 $266,144 $250,402  $298,507 $271,769 
          
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Notes payable $2,546 $  $18,246 $231 
Accounts payable 12,241 9,395  12,663 12,293 
Accrued liabilities 47,360 39,673  28,108 30,329 
Deferred revenue 17,813 18,617 
Income taxes payable 9,018 7,100  6,920 13,068 
Accrued product warranty 3,313 3,493  2,954 2,875 
          
Total current liabilities 74,478 59,661  86,704 77,413 
Deferred taxes 4,213 3,952 
Deferred and other income taxes payable 22,455 5,060 
Other long-term liabilities 2,128 1,407  4,102 3,588 
Stockholders’ equity:  
Preferred stock (par value $.001 per share; 1,000,000 shares authorized; none outstanding)      
Common stock (par value $.001 per share; 80,000,000 shares authorized; issued and outstanding: 
18,941,757 shares at March 31, 2007 and 19,624,839 shares at June 30, 2006) 154,081 148,214 
Common stock (par value $.001 per share; 80,000,000 shares authorized; issued and outstanding: 18,646,591 shares at September 30, 2007 and 18,845,802 shares at June 30, 2007) 163,493 161,409 
Retained earnings 19,257 28,589  5,571 13,223 
Accumulated other comprehensive income 11,987 8,579  16,182 11,076 
          
Total stockholders’ equity 185,325 185,382  185,246 185,708 
          
 $266,144 $250,402  $298,507 $271,769 
          
See notes to condensed consolidated financial statements.

3


DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
(In thousands, except per share amounts)
(Unaudited)
                
 Three Months Ended  Three Months Ended 
 March 31,  September 30, 
 2007 2006  2007 2006 
Net sales $84,954 $73,674  $82,423 $72,857 
Cost of sales 29,172 25,126  28,696 24,959 
          
Gross profit 55,782 48,548  53,727 47,898 
          
Operating expenses:  
Selling, general and administrative 31,389 27,739  31,156 28,429 
Research and product development 6,360 5,675  6,601 5,748 
          
Total operating expenses 37,749 33,414  37,757 34,177 
          
Operating income 18,033 15,134  15,970 13,721 
Interest income 319 495  629 339 
Interest expense  (83)  (36)  (162)  (30)
Other income, net 205  (73)
Other expense, net  (751)  (331)
          
Income before taxes 18,474 15,520  15,686 13,699 
Taxes on income 6,977 5,155  5,536 5,028 
          
Net income $11,497 $10,365  $10,150 $8,671 
          
Basic earnings per share $0.60 $0.52  $0.54 $0.45 
          
Diluted earnings per share $0.59 $0.50  $0.53 $0.44 
          
Shares used in computing per share amounts:  
Basic 19,047 20,049  18,765 19,441 
          
Diluted 19,551 20,542  19,294 19,855 
          
See notes to condensed consolidated financial statements.

4


DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED MARCH 31, 2007 AND 2006
(In thousands, except per share amounts)
(Unaudited)
         
  Nine Months Ended 
  March 31, 
  2007  2006 
Net sales $241,330  $216,115 
Cost of sales  81,786   73,425 
       
Gross profit  159,544   142,690 
       
Operating expenses:        
Selling, general and administrative  90,394   82,219 
Research and product development  18,209   16,649 
       
Total operating expenses  108,603   98,868 
       
Operating income  50,941   43,822 
Interest income  941   1,134 
Interest expense  (205)  (122)
Other income, net  136   1,465 
       
Income before taxes  51,813   46,299 
Taxes on income  18,378   16,020 
       
Net income $33,435  $30,279 
       
Basic earnings per share $1.74  $1.51 
       
Diluted earnings per share $1.70  $1.47 
       
Shares used in computing per share amounts:        
Basic  19,214   20,067 
       
Diluted  19,672   20,595 
       
See notes to condensed consolidated financial statements.

5


DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)(Unaudited)
                
 Nine Months Ended  Three Months Ended 
 March 31,  September 30, 
 2007 2006  2007 2006 
Cash flows from operating activities:  
Net income $33,435 $30,279  $10,150 $8,671 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization 5,235 4,810  2,149 1,635 
Stock based compensation 3,797 4,397 
Stock-based compensation 1,443 1,230 
Allowance for bad debts 47 135 
Loss on disposal of fixed assets 403 399  9 74 
Excess tax benefit related to stock option plans  (1,043) (5,752)
Tax benefit related to stock transactions  (487)  (109)
Deferred income taxes 726 4,184  238  (33)
Changes in assets and liabilities:  
Accounts receivable  (3,590)  (2,835) 3,515 953 
Inventories 385  (966)  (876)  (488)
Prepaid expenses and other assets  (1,696)  (1,288) 1,606 623 
Accounts payable 2,715 67  143  (206)
Deferred revenue  (438)  (1,281)
Accrued liabilities 7,318 2,976   (1,657)  (1,221)
Income taxes payable 2,737 7,906   (2,748) 2,430 
Accrued product warranty  (221)  (105)  (28)  (238)
          
Net cash provided by operating activities 50,201 44,072  13,066 12,175 
          
Cash flows from investing activities:  
Proceeds from sale of marketable securities 9,700 23,346   9,700 
Purchase of marketable securities  (2,600)  (28,800)   (2,600)
Purchase of property, plant and equipment  (7,446)  (8,037)  (854)  (2,471)
Purchase of intangible assets  (439)  (3,005)  (1,572)  (423)
Proceeds of property and equipment  (26)   
          
Net cash used for investing activities  (811)  (16,496)
Net cash provided by (used for) investing activities  (2,426) 4,206 
          
Cash flows from financing activities:  
Net change in revolving line of credit 2,546  
Proceeds from issuance of common stock 7,730 23,023 
Excess tax benefit related to stock option plans 1,043 5,752 
Net change in notes payable 18,012 3,066 
Proceeds from issuance of common stock pursuant to stock-based compensation plans 2,361 1,302 
Tax benefit related to stock transactions 487 109 
Repurchase of common stock  (49,474)  (49,722)  (18,587)  (21,491)
          
Net cash used for financing activities  (38,155)  (20,947)
Net cash provided by (used for) financing activities 2,273  (17,014)
     
      
Effect of exchange rate changes on cash 506  (1,420) 1,726 174 
          
Net increase in cash and cash equivalents 11,741 5,209 
 
Net increase (decrease) in cash and cash equivalents 14,639  (459)
Cash and cash equivalents, beginning of period 43,524 42,679  54,938 43,524 
          
Cash and cash equivalents, end of period $55,265 $47,888  $69,577 $43,065 
          
Supplemental disclosures of cash flow information:  
Income taxes paid $16,018 $7,310  $7,721 $56 
Interest expense paid 105 41  135 3 
Other non-cash activities: 
Property and equipment purchased (but not paid for) $247 $601 
Supplemental schedule of non-cash investing and financing activities: 
Accrued purchases of property, plant and equipment 328 1,891 
See notes to condensed consolidated financial statements

65


DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements included herein have been prepared by Dionex Corporation, (referred to herein as “We” or “Our”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the condensed consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2006.2007. Unless the context otherwise requires, the terms “Dionex,” “we,” “our” and “us” and words of similar import as used in these notes to condensed consolidated financial statements include Dionex Corporation and its consolidated subsidiaries.
The unaudited condensed consolidated financial statements included herein reflect all adjustments (which include only normal, recurring adjustments) that are, in the opinion of management, necessary to state fairly the results for the periods presented. The results for such periods are not necessarily indicative of the results to be expected for the entire fiscal year ending June 30, 2007.2008.
2. New Accounting Pronouncements
In February 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 159,The Fair Value Option for Financial Assets and Financial Liabilities (“(“SFAS No. 159”). SFAS No. 159 permits entities to choose, at specified election dates, to measure eligible items at fair value (or “fair value option”) and to report in earnings unrealized gains and losses on those items for which the fair value option has been elected. SFAS No. 159 also requires entities to display the fair value of those assets and liabilities on the face of the balance sheet. SFAS No. 159 establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for us as of the first quarter of fiscal 2009. We are currently evaluating the impact of this pronouncement on our financial statements.
In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108,Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements(“SAB 108”). SAB 108 provides interpretive guidance on how the effects of prior-year uncorrected misstatements should be considered when quantifying misstatements in the current year’s financial statements. SAB 108 requires registrants to quantify misstatements using both an income statement (“rollover”) and balance sheet (“iron curtain”) approach and evaluate whether either approach results in a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. If prior years’ errors that had been previously considered immaterial now are considered material based on either approach, no restatement is required so long as management properly applied its previous approach and all relevant facts and circumstances were considered. If prior years are not restated, the cumulative effect adjustment is recorded in opening accumulated earnings as of the beginning of the fiscal year of adoption. SAB 108 is effective for fiscal years ended after November 15, 2006. We do not believe that the adoption of the provisions of SAB 108 will materially impact our financial position and results of operations.
In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements(“SFAS No. 157”). SFAS No. 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. The changes to current practice resulting from the application of SFAS No. 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. We do not believe that the adoption of the provisions of SFAS No. 157 will materially impact our financial position and results of operations.
In June 2006, the FASB issued Interpretation No. (“FIN”) 48,“Accounting for Uncertainty in Income Taxes”, which is effective for fiscal years beginning after December 15, 2006. FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing rules for recognition, measurement, classification and disclosure in our financial statements of tax positions taken or expected to be taken in a tax return. We are currently evaluating the provisions in FIN 48 and have not yet determined its expected impact. We plan to adopt this new standard on July 1, 2007.

7


In February 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 155,“Accounting for Certain Hybrid Financial Instruments– an amendment of FASB Statements No. 133 and 140”. This standard permits fair value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation; clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133; requires evaluation of interests in securitized financial assets; clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and eliminates the prohibition of a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest of another derivative financial instrument. This standard is effective for all financial instruments acquired or issued after fiscal years beginning after September 15, 2006. The adoption of SFAS No. 155 did not have a material effect on our financial position, results of operations or cash flows.
3. Stock-Based Compensation
We account for our stock plans as required by SFAS No. 123 (Revised 2004),Share-Based Payment (“SFAS No. 123R”). SFAS No. 123R requires companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. We have a stock-based employee compensation plan (Option Plan) and an employee stock purchase plan (ESPP). Generally, stock options granted to employees fully vest four years from the grant date and have a term of ten years. We recognize stock-based compensation expense over the requisite service period of the individual grants, generally, equal to the vesting period.

6


The effect of recording stock-based compensation for the three months and nine months ended March 31,September 30, 2007 and 2006 was as follows (in thousands):
                        
 Three Months Ended Nine Months Ended  Three Months Ended 
 March 31, March 31,  September 30, 
 2007 2006 2007 2006  2007 2006 
Cost of sales $106 $106 $287 $278  $131 $86 
Selling, general and administrative expenses 873 852 2,594 3,024 
Research and development expenses 313 309 920 1,096 
Selling, general and administrative expense 927 849 
Research and development expense 385 295 
              
Total stock-based compensation expenses 1,293 1,267 3,801 4,398 
Total stock-based compensation expense 1,443 1,230 
Tax effect on stock-based compensation  (472)  (428)  (1,389)  (1,167)  (430)  (354)
              
Net effect on net income $821 $839 $2,412 $3,231  $1,013 $876 
              
Excess tax benefit related to stock option plans:  
Cash flows from operations $(581) $(2,245) $(1,043) $(5,752)  (487)  (109)
Cash flows from financing activities 581 2,245 1,043 5,752  487 109 
Effects on earnings per share:  
Basic $0.05 $0.04 $0.13 $0.16  $(0.05) $(0.05)
Diluted $0.05 $0.04 $0.12 $0.16  $(0.05) $(0.04)
The fair value of each option on the date of grant is estimated using the Black-Scholes option-pricing model using a single option approach for options granted after June 30, 2005, with the following weighted-average assumptions:
                
 Nine Months Ended  Three Months Ended 
 March 31  September 30, 
 2007 2006  2007 2006 
Volatility for option plan  28.9%  40%  28%  29%
Volatility for ESPP  34.2%  29%  23%  28%
Risk-free interest rate for option plan  4.50 – 4.75%  4–4.50%  4.6%  4.9%
Risk-free interest rate for ESPP  4.98%  3.6%  4.8%  4.9%
Expected life of ESPP months months
Expected life of option plan 4.04 years 4.75 years  years years
Expected life of ESPP 6 months 6 months 
Expected dividend  $0.00  $0.00  $0.00 $0.00 
During the ninethree months ended March 31,September 30, 2007, we granted options to purchase 326,250321,250 shares of our common stock with an estimated fair value of $5.9$7.7 million after estimated forfeitures (at a weighted average exercise price of $53.58)$72.56).
As of March 31,September 30, 2007, the unrecorded deferred stock-based compensation balance related to stock options was $9.9$15.7 million after estimated forfeitures and will be recognized over an estimated weighted average amortization period of 1.82.2 years.
Approximately $40,000$61,000 of stock-based compensation was capitalized as inventory at March 31,September 30, 2007.

8


Determining Fair Value
Valuation and amortization method  We estimate the fair value of stock options granted using the Black-Scholes option–Black-Scholes-Merton option – pricing modelformula and a single option award approach. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.
Expected Term – The expected term represents the period that our stock-based awards are expected to be outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of our stock-based awards.
Expected Volatility – Expected volatilitiesOur computation of expected volatility for the sixthree months ended March 31,September 30, 2007 and 2006 wereis based on thea combination of historical volatility of our stock price.and market-based implied volatility.
Risk-Free Interest Rate – The risk-free interest rate used in the Black-ScholesBlack-Scholes-Merton valuation method is based on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term.
Expected Dividend  The expected dividend assumption is based on our current expectations about our anticipated dividend policy.

7


Under our ESPP, eligible employees are permitted to have salary withholdings to purchase shares of common stock at a price equal to 85% of the lower of the market value of the stock at the beginning or end of each six-month offer period, subject to certain annual limitations.
Stock option activity under our plans during the ninethree months ended March 31,September 30, 2007 was as follows:
                 
          Weighted    
          Average  Aggregate 
      Weighted  Remaining  Intrinsic 
  Options  Average  Contractual  Value 
  Outstanding  Exercise Price  Term (Years)  (in 000’s ) 
Balance at June 30, 2006  1,736,593  $37.43         
Options granted  326,250   53.58         
Options exercised  (181,210)  33.27         
Options forfeited/cancelled/expired  (17,111)  48.14         
Balance at March 31, 2007  1,864,522   40.56   6.58  $51,368 
Options vested and expected to vest at March 31, 2007  1,855,820   40.51   5.89  $51,214 
Exercisable at March 31, 2007  1,159,055   34.92   5.43  $38,469 
In August 2006, our Board of Directors approved an amendment to our Option Plan to increase the number of shares authorized for issuance by 1,500,000 shares. The amendment was approved by our stockholders at the 2006 Annual Meeting of Stockholders.
                 
          Weighted  
          Average Aggregate
      Weighted Remaining Intrinsic
  Options Average Contractual Value
  Outstanding Exercise Price Term (Years) (in 000’s )
Balance at June 30, 2007  1,694,471  $41.91         
Options granted  321,250   72.56         
Options exercised  (42,248)  35.15         
Options forfeited/cancelled/expired  (10,627)  50.81         
Balance at September 30, 2007  1,962,846  $47.02   6.87  $63,672 
Options vested and expected to vest at September 30, 2007  1,922,246  $46.77   6.83  $62,829 
Exercisable at September 30, 2007  1,132,040  $37.75   5.42  $47,223 
The aggregate intrinsic values in the table above represent the total pretax intrinsic values based on our closing stock price of $68.11$79.46 at March 31,September 30, 2007, which would have been received by the option holders had all option holders exercised their options as of that date.
The total pre-tax intrinsic value of options exercised were $3,695,967$1.5 million and $6,313,356 respectively$353,000 during the three and nine months ended March 31, 2007.September 30, 2007 and 2006, respectively.
4. Inventories
Inventories consisted of (in thousands):
                
 March 31 June 30,  September 30, June 30, 
 2007 2006  2007 2007 
Finished goods $16,023 $13,962  $18,651 $16,536 
Work in process 1,856 1,840  1,227 1,328 
Raw materials 10,412 11,900  11,123 10,762 
          
 $28,289 $27,702  $31,001 $28,626 
          
5. Short-term Investments
We generally hold highly liquid debt instruments with maturities of less than one year. These securities are currently classified as “available-for-sale” securities and recorded at their fair value. The difference between the fair value and the amortized cost of the securities were recorded in other comprehensive income, net of deferred taxes.

9


The aggregate market value, cost basis, and gross unrealized gains and losses of short-term investments by major security type were as follows (in thousands):
             
      Gross    
  Cost  Unrealized Losses  Fair Value 
March 31, 2007            
Corporate debt securities (1) $246  $(10) $236 
          
June 30, 2006            
Auction rate securities $7,100  $  $7,100 
Corporate debt securities (1)  415   (25)  390 
          
  $7,515  $(25) $7,490 
          
             
      Gross    
  Cost  Unrealized Losses  Fair Value 
September 30, 2007 Corporate debt securities $0  $0  $0 
          
June 30, 2007 Corporate debt securities $127  $(3) $124 
          

8


(1)These short-term investments have been in a loss position for greater than 12 months.
6. Comprehensive Income
Comprehensive income is the change in stockholders’ equity arising from transactions other than investments by owners and distributions to owners. The significant components of comprehensive income, other than net income, are foreign currency translation adjustments and net unrealized gains or losses on securities available for sale. The components of accumulated other comprehensive income was as follows (in thousands):
                        
 Three Months Ended Nine Months Ended  Three Months Ended 
 March 31, March 31,  September 30, 
 2007 2006 2007 2006  2007 2006 
Net income, as reported $11,497 $10,365 $33,435 $30,279  $10,150 $8,671 
Foreign currency translation adjustments, net of taxes  (1,051) 1,518  (3,388)  (446) 5,106  (448)
Unrealized gain on securities available for sale, net of taxes  (6)  (6)  (20) 9 
              
Comprehensive income $10,440 $11,877 $30,027 $29,842  $15,256 $8,223 
              
7. Common Stock Repurchases
During the three months ended March 31,September 30, 2007, we repurchased 258,310257,825 shares of our common stock on the open market for approximately $16.3$18.6 million (at an average repurchase price of $63.23$72.09 per share), compared with 394,672437,000 shares repurchased for approximately $21.3$21.5 million (at an average repurchase price of $53.98 per share) in the same period in the prior fiscal year.
During the nine months ended March 31, 2007, we repurchased 902,876 shares of our common stock on the open market for approximately $49 million (at an average price of $56.18 per share), compared with 979,855 shares repurchased for approximately $50 million (at an average price of $50.35$49.20 per share) in the same period in the prior fiscal year.
8. Earnings Per Share
Basic earnings per share are determined by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined by dividing net income by the weighted average number of common shares used in the basic earnings per share calculation, plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding under the treasury stock method.
The following table is a reconciliation of the numerators and denominators used in computing basic and diluted earnings per share (in thousands, except per share data):
                        
 Three Months Ended Nine Months Ended  Three Months Ended 
 March 31, March 31,  September 30, 
 2007 2006 2007 2006  2007 2006 
Numerator:  
Net income $11,497 $10,365 $33,435 $30,279  $10,150 $8,671 
         
Denominator:  
Weighted average shares used to compute net income per common share — basic 19,047 20,049 19,214 20,067 
Weighted average shares used to compute net income per common share – basic 18,765 19,441 
Effect of dilutive stock options 504 493 458 528  529 414 
              
Weighted average shares used to compute net income per common share — diluted 19,551 20,542 19,672 20,595 
Weighted average shares used to compute net income per common share – diluted 19,294 19,855 
              
Basic earnings per share $0.60 $0.52 $1.74 $1.51  $0.54 $0.45 
              
Diluted earnings per share $0.59 $0.50 $1.70 $1.47  $0.53 $0.44 
              

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Antidilutive common equivalent shares related to stock options are excluded from the calculation of diluted shares. Approximately 317,902
218,545 and 634,920669,611 shares were excluded at March 31,September 30, 2007 and 2006, respectively because they were antidilutive.

9


9. Goodwill and Other Intangible Assets
Information regarding our goodwill and other intangible assets reflects current foreign exchange rates.
The change in the carrying amount of goodwill for the ninethree months ended March 31,September 30, 2007 was as follows (in thousands):
     
  Total 
Balance as of July 1, 2006 $24,982 
Translation adjustments  352 
    
Balance as of March 31, 2007 $25,334 
    
     
  Total 
Balance as of July 1, 2007 $25,443 
Translation adjustments  380 
    
Balance as of September 30, 2007 $25,823 
    
WeOur reporting units represent our operating segments. All goodwill has been assigned to one reporting unit. The evaluation of goodwill is based upon the fair value of this reporting unit. Pursuant to the provisions of SFAS No. 142,Goodwill and Other Intangible Assets, we performed an annual impairment test oftests on goodwill in April 2007 and determined that goodwill was not impaired.
Information regarding our other intangible assets follows (in thousands):
                                                
 As of March 31, 2007 As of June 30, 2006  As of September 30, 2007 As of June 30, 2007 
 Carrying Accumulated Carrying Accumulated    Carrying Accumulated Carrying Accumulated   
 Amount Amortization Net Amount Amortization Net  Amount Amortization Net Amount Amortization Net 
Patents and trademarks $2,958 $(674) $2,284 $3,337 $(735) $2,602  $5,958 $(925) $5,033 $5,958 $(779) $5,179 
Developed technology 9,941  (9,554) 387 9,695  (8,773) 922  10,265  (10,235) 30 10,013  (9,805) 208 
Other 1,890  (570) 1,320 1,411  (413) 998  2,297  (710) 1,587 2,205  (637) 1,568 
                          
Total $14,789 $(10,798) $3,991 $14,443 $(9,921) $4,522  $18,520 $(11,870) $6,650 $18,176 $(11,221) $6,955 
                          
The value of ourWe amortize patents and trademarks is amortized over a period of seven to sixteen years and the remaining weighted average amortization period for this category is approximately sixeight years. 
We amortize developed technology over a period of three to seven years and the remaining weighted average amortization period for this category is approximatelyless than one year. 
We amortize other intangibles over a period of five to ten years and the remaining weighted average amortization period for this category is approximately sixseven years.
Amortization expense related to intangible assets was $997,374$649,000 and $1,097,532$325,000 for the ninethree months ended March 31,September 30, 2007 and 2006, respectively. The remaining estimated amortization for each of the five fiscal years subsequent to March 31,September 30, 2007 is as follows (in thousands):
        
 Remaining  Remaining 
Year Ending Amortization 
June 30, Expense 
2007 (remaining three months) $336 
2008 839 
Ending Amortization 
September 30, Expense 
2008 (remaining nine months) $660 
2009 632  842 
2010 585  821 
2011 585  800 
2012 800 
Thereafter 1,014  2,727 
      
Total $3,991  $6,650 
      

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10. Warranty
Product warranties are recorded at the time revenue is recognized for certain product shipments. Warranty expense is affected by product failure rates, material usage and service costs incurred in correcting a product failure. Should actual product failure rates, material usage or service costs differ from our estimates, revisions to the warranty liability would be required.

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Details of the change in accrued product warranty for the ninethree months ended March 31,September 30, 2007 and 2006 were as follows (in thousands):
                     
  Balance         Actual Balance
  Beginning Provision Other Adjustments Warranty End of
  of Period For Warranties Accounts (1) Costs Incurred Period
Accrued Product Warranty                    
Nine Months Ended:                    
March 31, 2007 $3,493  $2,151  $74  $(2,406) $3,313 
                     
March 31, 2006 $3,514  $2,555  $(22) $(2,661) $3,386 
                     
                     
  Balance     Other Actual Balance
  Beginning Provision Adjustments Warranty End of
  of Period For Warranties Accounts (1) Costs Incurred Period
Accrued Product Warranty                    
Three Months Ended:                    
September 30, 2007 $2,875  $572  $178  $(671) $2,954 
September 30, 2006 $3,493  $684  $(13) $(935) $3,229 
 
(1) Effects of exchange rate changes
11. Commitments
Revenue generated from international operations is generally denominated in foreign currencies. We enter into forward foreign exchange contracts to hedge against fluctuations of intercompany account balances. Market valuesvalue gains and losses on these hedge contracts are substantially offset by fluctuations in the underlying balances being hedged, and the net financial impact is not expected to be material in future periods. We had forward exchange contracts to sell foreign currencies totaling $10.9$15.5 million and $16.4$11.8 million at March 31,September 30, 2007 and 2006, respectively.
One of our foreign subsidiaries periodically discounts trade notes receivable with banks. The uncollected balances of notes receivable due to the discounting were $2.9 million at March 31, 2007 and $4.3 million at June 30, 2006.
We enter into standard indemnification agreements with many of our customers and certain other business partners in the ordinary course of business. These agreements include provisions for indemnifying the customer against any claim brought by a third party to the extent any such claim alleges that our product infringes a patent, copyright or trademark, or violates any other proprietary rights of that third party. The maximum potential amount of future payments we could be required to make under these indemnification agreements is not estimable, however, we have not incurred any costs to defend lawsuits or settle claims related to these indemnification agreements. No material claims for such indemnifications were outstanding as of March 31,September 30, 2007. We have not recorded any liabilities for these indemnification agreements at March 31,September 30, 2007 or June 30, 2006.2007.
12. Business Segment Information
SFAS No. 131Disclosures about Segments of an Enterprise and Related Informationestablishes standards for reporting information about operating segments in annual and interim financial statements of public business enterprises. It also establishes standards for related disclosure about products and service, geographic areas and major customers.
We have two operating segments, the Chemical Analysis Business Unit (“CABU”) and the Life Sciences Business Unit (“LSBU”). CABU sells ion chromatography and accelerated solvent extraction products, services and related consumables. LSBU sells high performance liquid chromatography products, services and related consumables. These two operating segments are aggregated into one reportable segment for financial statement purposes.
Our sales of products, installation and training services and maintenance within this reportable segment were detailed as follows (in thousands):
                        
 Three Months Ended Nine Months Ended  Three Months Ended 
 March 31, March 31,  September 30, 
 2007 2006 2007 2006  2007 2006 
Products $74,191 $64,359 $211,628 $188,692  $71,946 $64,210 
Installation and Training Services 2,250 2,030 6,755 6,598  2,493 1,917 
Maintenance 8,513 7,285 22,947 20,825  7,984 6,730 
              
 $84,954 $73,674 $241,330 $216,115  $82,423 $72,857 
              

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13. Income Taxes
Effective July 1, 2007, we adopted the provisions of the Financial Accounting Standards Board’s interpretation of FIN 48,Accounting for Uncertainty in Income Taxes(“FIN No. 48”). FIN No. 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in a company’s income tax return, and also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN No. 48 utilizes a two-step approach for evaluating uncertain tax positions accounted for in accordance with SFAS No. 109.
The first step is to determine whether it is more likely than not that each income tax position would be sustained upon audit. The second step is to estimate and measure the tax benefit as the amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. Estimating these amounts requires us to determine the probability of various possible outcomes. We evaluate these uncertain tax positions on a quarterly basis. This evaluation is based on the consideration of several factors, including changes in facts or circumstances, changes in applicable tax law, settlement of issues under audit, and new exposures. If we later determine that our exposure is lower or that the liability is not sufficient to cover our revised expectations, we adjust the liability and effect a related change in our tax provision during the period in which we make such determination. The cumulative effect of adopting FIN No. 48 on July 1, 2007 is recognized as a change in accounting principle, recorded as an adjustment to the opening balance of accumulated deficit on the adoption date.
Our total amount of unrecognized tax benefits as of July 1, 2007 was $14.4 million, of which $3.3 million, if recognized, would affect our effective tax rate. The liability for income taxes associated with uncertain tax positions is classified in deferred and other income taxes payable. There have been no significant changes in these amounts during the quarter ended September 30, 2007.
We record interest and penalties related to unrecognized tax benefits in income tax expense. At July 1, 2007, we had approximately $1.7 million accrued for estimated interest and penalties related to uncertain tax positions. During the quarter, we accrued an additional $240,000 in interest on these uncertain tax positions.
We are subject to audit by the Internal Revenue Service and California Franchise Tax Board for the fiscal years 2003 through the fiscal year 2007. As we have operations in most other US states, other state tax authorities may assess deficiencies related to prior year activities; however, the years open to assessment vary with each state.  We also file income tax returns for non-US jurisdictions; the most significant of which are Germany, Japan and Hong Kong.  The years open to adjustment for Germany, UK and Hong Kong are for the fiscal years 2002 through the fiscal year 2007.  The years open to adjustment for Japan are the fiscal years 2001 through the fiscal year 2007.
A number of years may elapse before an uncertain tax position is audited and ultimately settled. It is difficult to predict the ultimate outcome or the timing of resolution for uncertain tax positions. It is reasonably possible that the amount of unrecognized tax benefits could significantly increase or decrease within the next twelve months. These changes could result from the settlement of ongoing litigation, the completion of ongoing examinations, the expiration of the statute of limitations, or other circumstances. At this time, an estimate of the range of the reasonably possible change cannot be made.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement Regarding Forward-Looking Statements
Except for historical information contained herein, the discussion below and in the footnotes to our financial statements contained in this Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, and are made under the safe harbor provisions thereof. Such statements are subject to certain risks, uncertainties and other factors that may cause actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements, or industry results, expressed or implied by such forward-looking statements. Such risks and uncertainties include, among other things: general economic conditions, foreign currency fluctuations, fluctuations in worldwide demand for analytical instrumentation, fluctuations in quarterly operating results, competition from other products, existing product obsolescence, new product development, including market receptiveness, the ability to manufacture products on an efficient and timely basis and at a reasonable cost and in sufficient volume, the ability to attract and retain talented employees and other risks as described in more detail below under the heading “Risk Factors.” Readers are cautioned not to place undue reliance on these forward-looking statements that reflect management’s analysis only as of the date hereof. We undertake no obligation to update these forward-looking statements.
The CompanyOverview
Dionex Corporation (referred to herein as “We” or “Our”) designs, manufactures, markets and services analytical instrumentation and related accessories and chemicals. Our products are used to analyze chemical substances in the environment and in a broad range of industrial and scientific applications. Our systems are used in environmental analysis and by the pharmaceutical, life sciences, chemical, petrochemical, power generation, and food and electronics industries in a variety of applications. Unless the context otherwise requires, the terms “Dionex,” “we,” “our” and “us” and words of similar import as used in these notes to condensed consolidated financial statements include Dionex Corporation and its consolidated subsidiaries.
Our liquid chromatography systems are currently focused in severaltwo product areas: ion chromatography (IC), and high performance liquid chromatography (HPLC) and capillary-/nano-liquid chromatography (capillary-/nano-LC). We also offer a mass spectrometer coupled with either an IC or HPLC system. For sample preparation, we provide automated solvent extraction systems. In addition, we develop and manufacture columns,consumables, detectors, data collectionautomation and analysis systems for use in or with liquid chromatographs.
Geographically, weWe market and distribute our products and services through our own sales force in Austria, Australia, Brazil, Canada, China, Singapore, Denmark, France, Germany, India, Ireland, Italy, Japan, Korea, Netherlands, Switzerland, Taiwan, United Kingdom, and the United States. In each of these countries, we maintain one or more local sales offices in order to support and service our customers in the regions. We manufacture our products based upon a forecast of customer demand and we generally try to maintain adequate inventories of completed modules or finished goods in advance of receipt of firm orders. System or instrument orders are generally placed by the customer on an as-needed basis, and instruments are usually shipped within two to six weeks after receipt of an order.
Results of Operations
We reported the highest quarterlyfirst quarter sales in our history with $85.0$82.4 million for the thirdfirst quarter of fiscal 2007,2008, which isreflects a growth of 15%13% compared with $73.7$72.9 million in the same period last year. Operating income for the quarter was $18.0$16 million or 21%16% growth over Q3 prior year operating income for the first quarter of $15.1fiscal 2007 of $13.7 million. Cash flow from operations during the quarter was strong at $20$13.1 million. Our gross profit margin for the quarter was 65.6%65.2% compared to 65.9%65.7% reported in the same period last year. SG&ASelling, general and administrative expenses were 37%37.8% of sales, compared with 38%39.0% reported in the same period last year. R&DResearch and product development expenses for the quarter were 8%8.0% of sales, unchangedup slightly from the 8%7.9% reported in the same period last year. Diluted earnings per share grew 18%20% to $0.59$0.53 for the thirdfirst quarter, compared to $0.50$0.44 reported in the same period last year.
Net sales in the nine months ended March 31, 2007 were $241.3 million, an increase of 12% compared with the $216.1 million reported in the first nine months of fiscal 2006. Diluted earnings per share grew 16% to $1.70 in the first nine months from $1.47 in the prior year. Operating income was $50.9 million, for the nine months ended March 31, 2007 growing 16% from $43.8 million for the same period in the prior year. Gross profit margin for the nine months ended March 31, 2007 was 66.1% compared to 66.0% in the prior nine month period. Net income in the first nine months this yearquarter of fiscal 2008 included costs of approximately $700,000,$650,000, net of tax, or $0.04$0.03 per diluted share, related to our initiative to centralize some of our field related technical, administrative and support functions inwithin North America and Europe, and a discrete tax benefit from the extension of the federal research credit of approximately $550,000, or $0.03 per share reported in the second quarter of this fiscal year. Europe.
Net income insales for the first quarter of fiscal 2006 included other income of $1.02008 were $82.4 million net of tax, or $0.05 per share, related primarily towhich reflects a one-time gain from the favorable settlement of a patent litigation.

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Net sales for the third quarter of fiscal 2007 were $85.0 million or 15% growth,13% increase, compared with $73.7$72.9 million reported for the same period in the prior year. We are subject to the effects of foreign currency fluctuations that have an impact on net sales, and gross profit and operating expense.expenses. Overall, currency fluctuations increased reported net sales by $2.5$2.2 million, or 3% for the three months ended March 31, 2007 compared to a decrease of $4.4 million, or 6% for the same period in the prior year.September 30, 2007.

13


Currency fluctuations increased reported net sales growth by $6.3 million, or 3%, for the nine month period compared to a decrease of 3% for the same period last year.
Percentage changes in net sales over the prior yearfirst quarter of fiscal 2007 were as indicated in the table below:
         
  Three Months  Nine Months 
  Ended  Ended 
  March 31, 2007  March 31, 2007 
Percentage change in net sales        
Total:  15%   12% 
By geographic region:        
North America  13%     4% 
Europe  19%   16% 
Asia/Pacific  12%   14% 
Three Months
Ended
September 30, 2007
Percentage change in net sales
Total:13%
By geographic region:
North America15%
Europe12%
Asia/Pacific14%
Percentage of change in net sales excluding currency fluctuations were as indicated in the table below:
         
  Three Months  Nine Months 
  Ended  Ended 
  March 31, 2007  March 31, 2007 
Percentage change in net sales excluding currency fluctuations        
Total:  12%     9% 
By geographic region:        
North America  13%     4% 
Europe  11%     9% 
Asia/Pacific  12%   15% 
Three Months
Ended
September 30, 2007
Percentage change in net sales excluding currency fluctuations
Total:10%
By geographic region:
North America15%
Europe 4%
Asia/Pacific15%
Net sales in North America increased 13%15% in the thirdfirst quarter of fiscal 2007,2008, reflecting a solid reboundan increase in demand from our customers, overall. Sales increased 4% forprincipally in the nine months ending March 31, 2007.environmental and life science markets. Net sales in Europe increased 19% and 16%by 12% for the quarter and nine month period, respectively, due to sales growth in all countries with Italy, France, Netherlands and Switzerland all showing stronger than average growth. The increase in sales wasthree months ending September 30, 2007, driven by healthy growthcurrency fluctuations and strong results in the HPLC, ASEItaly, Switzerland and consumables product lines.Denmark. Net sales in the Asia/Pacific region grew 12% in the third quarter, andby 14% in the nine month period. Salesfirst fiscal quarter of 2008 as a result of increased sales in Japan,China, Korea, India, Australia and in our largest countrynew subsidiaries in this region, grew 13% for the quarter showing a continued strong performance.Brazil and Taiwan.
We achieved growth in each of our product markets in the third quarter, including life sciences, environmental, chemical/petrochemical and chemical/petrochemical.food markets and a saw a slight decline in the power and electronics markets.
Gross margin for the thirdfirst quarter of fiscal 20072008 was 65.6%65.2%, down slightly from the 65.9% reported in the third quarter last year. Gross margin for the first nine months of fiscal 2007 was 66.1%, virtually unchanged compared to the 66.0%65.7% reported in the first nine monthsquarter last year. The decrease in gross margin was due to a greater proportion of fiscal 2006.revenue attributable to the Asia/Pacific region and relatively slower growth in Europe.
Operating expenses of $37.7$37.8 million for the thirdfirst quarter of fiscal 20072008 increased $4.3by $3.6 million, or 13%11% from the $33.4$34.2 million reported in the same quarter last year. Operating expenses for the nine month period were $108.6 million, representing a 10% increase over the prior year period of $98.9 million. As a percentage of sales, operating expenses were 44% and 45% in Q346% for the first quarter of fiscal 2007 and 2006, respectively.2008 down from the 47% of sales reported in the first quarter of fiscal 2007. The effects of foreign currency increased total operating expenses by four percentage points for the quarter and three percentage points for the nine month period.quarter.

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Selling, general and administrative (SG&A) expenses increased $3.6by $2.8 million or 13%10% to $31.4$31.2 million in the thirdfirst quarter of fiscal 20072008 compared to $27.7$28.4 million for the same quarter last year. Effects of foreign currency increased SG&A by $1.1 million compared with the thirdfirst quarter of fiscal 2006. Increased marketing costs related to sales initiatives and continued expansion in the Asia Pacific region made up the majority of the increase.2007. As a percentage of net sales SG&A expenses were 37%37.8% and 38%39.0% in the thirdfirst quarter of fiscal 2008 and 2007, and 2006, respectively.
SG&A expenses for the nine month period ended March 31, 2007 were up 10%, or $82.2 million from the same period last year. The increase in SG&A expenses was due primarily to the incremental costs Effects of approximately $1.0 million related to our centralization initiatives in North America and Europe, higher marketing and selling costs of approximately $1.8 million in Asia where we are expanding, $1.4 million in Europe and $600,000 in North America where we expanded our Corporate Marketing function. Foreignforeign currency fluctuations increased SG&A expenses by $2.6 million,$920,000, or three percentage points forin the nine month period mainly attributable to our European operations.first quarter of fiscal 2008 compared with the first quarter of fiscal 2007. SG&A expenses as a percentagegrew by $1.2 million due to the addition of net sales were 37%our two new subsidiaries, Brazil and 38% for the nine-month periodsTaiwan in fiscalOctober 2006 and July 2007 and 2006, respectively.the continued expansion in our Asia/Pacific region. The remaining increase was due to additional headcount resulting in increased salaries and expenses.
Research and product development (R&D) expenses of $6.4were $6.6 million for the thirdfirst quarter of fiscal 2007 increased $687,0002008, an increase of $900K or 12%15% from the $5.7 million reported in the same period last year.first quarter of fiscal 2007. As a percentage of net sales, R&D expenses remained constant atincreased slightly from 7.9% in the first quarter of fiscal 2007 to 8% in the thirdfirst quarter of bothin fiscal 2007 and 2006.2008. The increase is partially attributable to our cost reduction effortssalaries for increased personnel and project materials related to new products in our Ultimate 3000 product line.
R&D expenses for the nine month period ended March 31 increased 9% from $16.6 million to $18.2 million in fiscal 2006 and 2007, respectively. The increase is partially attributable to our cost reduction efforts related to our Ultimate 3000 product line.development pipeline.
The effective tax rate in the thirdfirst quarter of fiscal 20072008 was 37.8%35.3%, compared to 33.2%reflecting a decrease from 36.7% reflected infor the same period last year.first quarter of fiscal 2007. The increasedecrease in our tax rate was due to the mix between variousfavorable settlement of a tax jurisdictions and true-ups affecting permanent items for fiscal 2006.audit. We anticipate our tax rate will be in the range of 35-36%36% to 37% for the fullremainder of fiscal year 2007.2008.

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Net income in the thirdfirst quarter of fiscal 20072008 increased 11%17% to $11.5$10.2 million compared with $10.4$8.7 million reported for the same period last year. Diluted earnings per share were $0.59$0.53 and $0.50$0.44 in the thirdfirst quarter of fiscal years2008 and 2007, and 2006, respectively. Net income for the nine month period was $33.4 million in fiscal 2007 and $30.3 million in fiscal 2006, representing 10% growth. Our diluted earnings per share were $0.59 for the third quarter, an increase of 18% compared with the third quarter of last year. Diluted earnings per share for the first nine months of fiscal 2007 were $1.70, an increase of 16% compared with the diluted earnings per share of $1.47 reported for the first nine months of fiscal 2006.
Liquidity and Capital Resources
At March 31,September 30, 2007, we had cash and cash equivalents and short-term investments of $55.3$69.6 million. Our working capital was $95.8$96 million, a decreasean increase of $2.0$11 million from the $97.8$85 million reported at JuneSeptember 30, 2006. The decreaseincrease was primarily attributable to our repurchases of common stock during the quarter. an increase in cash, inventory and prepaid expenses, other.
Cash generated by operating activities for the ninethree months ended March 31,September 30, 2007 was $50.2$13.1 million compared with $43.7$12.2 million for the same period last year. The increase in operating cash flow was primarily due to an increase in operating results and higher accrued liabilities due to deferred revenuebetter cash collections on accounts receivable partially offset by higher accounts receivable dueincome tax payments.
Cash used for investing activities was $2.4 million in the first three months of fiscal 2008 compared to lower customer receipts and increased sales.
Cashcash provided by investing activities was $0.8of $4.2 million in the first ninethree months of fiscal 2007 compared to cash used2007. Purchases of intangible assets were $1.6 million for investing activitiesthe first quarter of $16.5 million infiscal 2008. Capital expenditures for the first ninethree months of fiscal 2006. The net proceeds of $7.12008 were $0.9 million from the sale of marketable securities were offset by approximately $7.8 million of capital expenditures and intangibles in fiscal 2007. Capital expenditures in fiscal 2007 of $7.4 millionwhich included additional tooling for molded parts, information technology expansion costs and purchases related to our general operation.operations.
Cash used forprovided by financing activities was $38.2$2.3 million and $20.9cash used by financing activities was $18.6 million in the first ninethree months of fiscal 20072008 and 2006,at June 30, 2007, respectively. The increase was primarily attributable to the repurchase of 903,876257,825 shares of our common stock for $49.5$18.6 million in fiscal 2008 compared with 437,000 shares for $21.5 million in fiscal 2007, compared with 979,855 shares for $49.7 million in fiscal 2006, reducedincreased proceeds from issuance of common stock ($7.72.3 million for fiscal 20072008 compared to $20.9$1.3 million for fiscal 2006)2007) and decreasedincreased tax benefit related to stock option plans of $1.0$0.5 million for fiscal 2007 compared to $5.8 million in fiscal 2006).2008. The increase was partially offset by net proceeds of $2.5$18 million received from short term borrowings in fiscal 20072008 as compared to no borrowings$3.1 million in fiscal 2006. The increase in short-term borrowings resulted from our repurchases of our common stock.2007.

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At March 31,September 30, 2007, we had utilized $2.5$18.3 million in committed bank lines of credit. credit in the United States. The borrowings were used to repurchase shares of our common stock and other corporate activities.
We believe that our cash flow from operations, current cash, cash equivalents and short-term investments and the remainder of our bank lines of credit will be adequate to meet our cash requirements for at least the next twelve months.
Contractual Obligations and Commercial Commitments
The following table summarizes our contractual obligations at March 31,September 30, 2007, and the effect that such obligations are expected to have on our liquidity and cash flows in future periods (in thousands):
                                        
 Payments Due by Period  Payments Due by Period 
 Less        Less       
 Than 1 1-3 4-5 After 5  Than 1 1-3 4-5 After 5 
Contractual Obligations Total Year Years Years Years  Total Year Years Years Years 
Operating Lease Obligations $17,760 $4,505 $6,347 $4,054 $2,854  $17,750 $4,864 $6,546 $3,465 $2,875 
                      
There have been no material changes to our contractual obligations outside ordinary business activities since June 30, 2006,2007, except the change described above related to outstanding borrowings.borrowings and changes related to the adoption of FIN 48. FIN 48 prescribes a new methodology by which a company must measure, report, present and disclose in its financial statements the effects of any uncertain tax return reporting positions that a company has taken or expects to take. Because of the uncertainty regarding timing of FIN 48 liabilities, the amounts calculated and discussed in Footnote 13 are excluded from the table above.
New Accounting Pronouncements
In February 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 159,The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 permits entities to choose, at specified election dates, to measure eligible items at fair value (or “fair value option”) and to report in earnings unrealized gains and losses on those items for which the fair value option has been elected. SFAS 159 also requires entities to display the fair value of those assets and liabilities on the face of the balance sheet. SFAS 159 establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 is effective for us as of the first quarter of fiscal 2009. We are currently evaluating the impact of this pronouncement on our financial statements.

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In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108,Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements(“SAB 108”). SAB 108 provides interpretive guidance on how the effects of prior-year uncorrected misstatements should be considered when quantifying misstatements in the current year’s financial statements. SAB 108 requires registrants to quantify misstatements using both an income statement (“rollover”) and balance sheet (“iron curtain”) approach and evaluate whether either approach results in a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. If prior years’ errors that had been previously considered immaterial now are considered material based on either approach, no restatement is required so long as management properly applied its previous approach and all relevant facts and circumstances were considered. If prior years are not restated, the cumulative effect adjustment is recorded in opening accumulated earnings as of the beginning of the fiscal year of adoption. SAB 108 is effective for fiscal years ended after November 15, 2006. We do not believe that the adoption of the provisions of SAB 108 will materially impact our financial position and results of operations.
In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements(“SFAS No. 157”). SFAS No. 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. The changes to current practice resulting from the application of SFAS No. 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. We do not believe that the adoption of the provisions of SFAS No. 157 will materially impact our financial position and results of operations.
In June 2006, the FASB issued Interpretation No. (“FIN”) 48,Critical Accounting for Uncertainty in Income Taxes”, which is effective for fiscal years beginning after December 15, 2006. FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing rules for recognition, measurement, classificationPolicies and disclosure in our financial statements of tax positions taken or expected to be taken in a tax return. We are currently evaluating the provisions in FIN 48 and have not yet determined its expected impact. We plan to adopt this new standard on July 1, 2007.Estimates
In February 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 155,“Accounting for Certain Hybrid Financial Instruments– an amendment of FASB Statements No. 133 and 140”. This standard permits fair value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation; clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133; requires evaluation of interests in securitized financial assets; clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and

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eliminates the prohibition of a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest of another derivative financial instrument. This standard is effective for all financial instruments acquired or issued after fiscal years beginning after September 15, 2006. The adoption of SFAS No. 155 did not have a material effect on our financial position, results of operations or cash flows.
Summary
The preparation of consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenuesnet sales and expenses during the reporting period. We evaluate our estimates, on an ongoing basis, including those related to product returns and allowances, bad debts, inventory valuation, goodwill and other intangible assets, income taxes, warranty and installation provisions, and contingencies.contingencies on an ongoing basis.
We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition Policy
We derive revenues fromWith the saleexception of products, the deliveryadoption of services to our customers, including installation and training, and from maintenance, which includes product repair obligations under extended warranty, unspecified software upgrades, telephone support and time and material repairs.
We recognize revenueFIN No. 48,Accounting for Uncertainty in accordance with Staff Accounting BulletinIncome Taxes — an interpretation of FASB Statement No. 104 “Revenue Recognition” and Statement109, there have been no significant changes during the first quarter of Position 97-2, “Software Revenue Recognition,” as amended, when persuasive evidence of an arrangement exists, the product has been delivered, or service performed, the price is fixed or determinable, collection is probable and vendor specific objective evidence exists to allocate revenuefiscal 2008 to the various elementsitems that we disclosed as our critical accounting policies and estimates in the Management’s Discussion and Analysis of the arrangement. In all cases, the portionFinancial Condition and Results of revenue allocated to the undelivered elements is deferred until those items are delivered to the customer or the services are performed. Delivery of the product is generally considered to have occurred when shipped. Undelivered elements in our sales arrangements, which are not considered to be essential to the functionality of a product, generally include product accessories; installation services and/or training that are delivered after the related products have been delivered. Installation consists of system set-up, calibration and basic functionality training and generally requires one to three days depending on the product. Vendor specific objective evidence of fair value for product, product accessories and training services is based on the price charged when an element is sold separately or, if not sold separately, when the price is established by authorized management. The fair value of installation services is calculated by applying standard service billing rates to the estimate of the number of hours to install a specific product based on historical experience. These estimated hours for installation have historically been accurate and consistent from product to product. However, to the extent these estimates were to reflect unfavorable variability, our ability to maintain objective reliable evidence of fair value for such element could be impacted which in turn could delay the recognition of the revenue currently allocated to the delivered elements.
We recognize revenue under extended warranty arrangements (maintenance fees) ratably over the period of the related maintenance contract and cost of the time and material repairs when incurred. Maintenance consists of product repair obligations under extended warranty, unspecified software upgrades, telephone support and time and material repairs. Our equipment typically includes a one-year warranty. The estimated cost of product warranty claims is accrued at the time the sale is recognized, based on historical experience. While we believe our historical experience provides a reliable basis for estimating such warranty cost, unforeseen quality issues or component failure rates could result in future costs in excess of such estimates, or alternatively, improved quality and reliability in its products could result in actual expenses that are below those currently estimated.
Our sales are typically not subject to rights of return and, historically, actual sales returns have not been significant.
Loss Provisions on Accounts Receivable and Inventory
We maintain allowances for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. If the financial conditionOperations section of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Our assessmentAnnual Report on collectibility is based on a number of factors including, but not limited to, past transaction history withForm 10-K for the customer, the credit-worthiness of the customer, independent credit reports, industry trends and the macro-economic environment. Sales returns and allowances are estimates of future product returns related to current period revenue.

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Material differences may result in the amount and timing of our revenue for any period. Historically, we have not experienced significant sales returns or bad debt losses.
We value our inventory at the lower of standard cost (which approximates cost on a first-in, first-out basis) or market. We estimate revisions to inventory valuations based on technical obsolescence, historical demand, and projections of future demand and industry and market conditions. If actual future demand or market conditions are less favorable than those projected by management, additional valuation provisions may be required. If demand or market conditions are more favorable than projected, higher margins could be realized to the extent inventory is sold which had previously been written down.
Long-Lived Assets, Intangible Assets with Finite Lives and Goodwill
We assess the impairment of long-lived assets, intangible assets with finite lives and goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In addition, our assessment of goodwill for impairment is performed at least annually. Factors we consider important that could trigger an impairment review include but are not limited to the following:
significant underperformance relative to historical or projected future operating results;
significant negative industry or economic trends; and
significant changes or developments in strategic technology.
When we determine that the carrying value of long-lived assets or intangible assets with finite lives may not be recoverable based upon the existence of one or more of the above or other indicators, we measure any impairment based on a projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model. Goodwill is tested for impairment by comparing the fair values of related reporting units to their carrying values. We completed our annual review in April 2006 and determined that no impairment was necessary.
Warranty
Product warranties are recorded at the time revenue is recognized for certain product shipments based on historical experience. While we engage in extensive product quality programs and processes, our warranty obligation is affected by product failure rates, material usage and service costs incurred in correcting a product failure. Should actual product failure rates, material usage or service costs differ from our previous estimates, revisions to the estimated warranty liability would be required.fiscal year ended June 30, 2007.
Income Taxes
As part of the process of preparing the consolidated financial statements, we estimate our income taxes in each of the jurisdictions in which we operate. The determination of our tax provision is subject to judgments and estimates due to the complexity of the tax laws that we are subject to in several tax jurisdictions. This process involves our estimate of our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as depreciation, amortization and inventory reserves for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included withinwith our consolidated balance sheets.
We must then assess the likelihoodaccount for income taxes in accordance with SFAS No. 109,Accounting for Income Taxes(“SFAS 109”).SFAS No. 109 requires that our deferred tax assets willand liabilities be recovered from future taxablerecognized for the effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income and to the extent we believetax purposes. SFAS No. 109 also requires that recovery is not likely, we must establish a valuation allowance. In the event that actual results differ from these estimates, we may need to establishdeferred tax assets be reduced by a valuation allowance if it is more likely than not that could materially impactsome or all of the deferred tax asset will not be realized.
On July 1, 2007, we adopted FIN No. 48,Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109(“FIN No. 48”). FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with Statement of Financial Accounting Standards No. 109,Accounting for Income Taxes(“SFAS 109”). This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As a result of the implementation of FIN No. 48, we recognize the tax liability for uncertain income tax positions on the income tax return based on the two-step process prescribed in the interpretation. The first step is to determine whether it is more likely than not that each income tax position would be sustained upon audit. The second step is to estimate and measure the tax benefit as the amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. Estimating these amounts requires us to determine the probability of various possible outcomes. We evaluate these uncertain tax positions on a quarterly basis. This evaluation is based on the consideration of several factors, including changes in facts or circumstances, changes in applicable tax law, settlement of issues under audit, and new exposures. If we later determine that our financial positionexposure is lower or that the liability is not sufficient to cover our revised expectations, we adjust the liability and results of operations.effect a related change in our tax provision during the period in which we make such determination.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Our exposure is based onWe are exposed to financial market risks including changesfrom fluctuations in foreign currency exchange rates, interest rates and stock prices of marketable securities. With the exception of the stock price volatility of our marketable equity securities, as well as debtwe manage our exposure to these and other risks through our regular operating and financing activities and, when appropriate, through our hedging activities. Our policy is not to use hedges or other derivative financial instruments for speculative purposes. We deal with a diversified group of major financial institutions to limit the risk of nonperformance by any one institution on any financial instrument. Separate from our financial hedging activities, material changes in foreign exchange rates, interest expense.rates and, to a lesser extent, commodity prices could cause significant changes in the costs to manufacture and deliver our products and in customers’ buying practices. We have not substantially changed our risk management practices during fiscal 2007 or the first three months of fiscal 2008 and we do not currently anticipate significant changes in financial market risk exposures in the near future that would require us to change our current risk management practices.
Foreign Currency ExchangeExchange.Revenues generated from international operations are generally denominated in foreign currencies. We enterentered into forward foreign exchange contracts to hedge against fluctuations of intercompany account balances. Market value gains and losses on these hedge contracts are substantially offset by fluctuations in the underlying balances being hedged, and the net financial impact is not expected to be material in future periods. At March 31,September 30, 2007, we had forward exchange contracts to sell foreign currencies totaling $10.9$15.5 million, including approximately $3.9$8.5 million in Euros, $5.2$4.7 million in Japanese yen, $1.5 million in Australian dollars and $0.8 million in Canadian dollars and $1.0 million in Australian dollars. The foreign exchange contracts at the end of each fiscal quarteryear mature within the first quarter of the following quarter.fiscal year. Additionally, contract values and fair market values are the same.
In March 2007, we entered into a cross-currency swap of Japanese Yen for $10.0 million which matures in March 2010. This derivative instrument did not qualify for net investment hedge accounting and was deemed to be an ineffective hedge instrument, given that, at the inception of the hedge transaction, there was no formal documentation of the hedging relationship and our risk management objective and strategy for undertaking the hedge. Therefore, we marked to market the decrease in value of approximately $698,000 for September 30, 2007 and this amount was recorded in other expense, net. A sensitivity analysis assuming a hypothetical 10% movement in foreign currency exchange rates applied to our hedging contracts and underlying balances being hedged at March 31,September 30, 2007 and June 30, 2007 indicated that these market movements would not have a material effect on our business, operating results or financial condition.
Foreign currency rate fluctuations can impact the U.S. dollar translation of our foreign operations in our consolidated financial statements. Currency fluctuations increased reported sales by 3.1% for
Interest and Investment Income.  Our interest and investment income is subject to changes in the quarter ended March 31, 2007 compared to a decreasegeneral level of U.S. interest rates. Changes in reported net sales of (4.0%) forU.S. interest rates affect the quarter ended March 31, 2006.
Debtinterest earned on our cash equivalents and Interest Expenseshort-term investments. A sensitivity analysis assuming a hypothetical 10% movement in interest rates applied to our outstanding debt balanceinvestment balances at March 31,September 30, 2007 and June 30, 2007 indicated that such market movement would not have a material effect on our business, operating results or financial condition. Actual gains or losses in the future may differ materially from this analysis, depending on the level of our outstanding debtactual balances and changes in the timing and amount of interest rate movements.
Debt and Interest Expense.  At September 30, 2007, we had notes payable of $18.2 million. A sensitivity analysis assuming a hypothetical 10% movement in interest rates applied to our outstanding debt balance at September 30, 2007, indicated that such market movement would not have a material effect on our business, operating results or financial condition. Actual gains or losses in the future may differ materially from this analysis, depending on changes in the timing and amount of interest rate movements and the level of borrowings maintained by us.

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ITEM 4. CONTROLS AND PROCEDURES
We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our “disclosure controls and procedures” (as defined in rules promulgated under the Securities Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of March 31,September 30, 2007 were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act is (i) recorded processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’sSEC’s rules and forms and (ii) accumulated and communicated to our management, including itsour principal executive and principal financial officers, to allow timely decisions regarding required disclosures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and our Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective at the “reasonable assurance” level. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a companyCompany have been detected.
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Securities Exchange Act) during the period covered by this quarterly report on Form 10-Q that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

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PART II. OTHER INFORMATION
ITEM 1A. RISK FACTORS
You should consider carefully the following risk factors as well as other information in this report before investing in any of our securities. If any of the following risks actually occur, our business operating results and financial condition could be adversely affected. This could cause the market price for our common stock to decline, and you may lose all or part of your investment. These risk factors include any material changes to, and supersede, the risk factors previously disclosed in our most recent annual report on Form 10-K and subsequently filed quarterly reports on Form 10-Q.10-K.
Economic, political and other risks associated with international sales and operations could adversely affect our results of operations.
Because we sell our products worldwide and have significant operations outside of the United States, our business is subject to risks associated with doing business internationally. We anticipate that revenue from international operations will continue to represent a majority of our total revenue.sales. In addition, manywe expect that the proportion of our employees, contract manufacturers, suppliers, job functions and manufacturing facilities are increasingly located outside the United States.States may increase. Accordingly, our future results could be harmed by a variety of factors, including:
• interruption to transportation flows for delivery of parts to us and finished goods to our customers;
• changes in a specific country’s or region’s political, economic or other conditions;
• trade protection measures and import or export licensing requirements;
• negative consequences from changes in tax laws;
• difficulty in staffing and managing widespread operations;
• differing labor regulations;
• differing protection of intellectual property;
• unexpected changes in regulatory requirements; and
interruption to transportation flows for delivery of parts to us and finished goods to our customers;
changes in a specific country’s or region’s political, economic or other conditions;
trade protection measures and import or export licensing requirements;
negative consequences from changes in tax laws;
difficulty in staffing and managing widespread operations;
differing labor regulations;
differing protection of intellectual property;
unexpected changes in regulatory requirements; and
geopolitical turmoil, including terrorism and war.

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Foreign currency fluctuations and other risks related to international operations may adversely affect our operating results.
We derived approximately 72% of our net sales from outside the United States in the thirdfirst quarter ended March, 31,of 2008 compared to 71% in all of fiscal 2007 and expect to continue to derive the majority of net sales from outside the United States for the foreseeable future. Most of our sales outside the United States are denominated in the local currency of our customers. As a result, the U.S. dollar value of our net sales varies with currency rate fluctuations. Significant changes in the value of the U.S. dollar relative to certain foreign currencies could have a material adverse effect on our results of operations. In recent periods, our results of operations have been negativelypositively affected from the appreciationdepreciation of the U.S. dollar against the Euro, the Japanese yen and other foreign currencies. Tariffs andcurrencies, but there can be no assurance that this positive impact will continue. In the past, our results of operations have been negatively impacted by the appreciation of the U.S. dollar against other trade barriers, difficulties in staffing and managing foreign operations, changes in political environments, interruptions in overseas shipments and changes in tax laws may also impact international sales negatively.currencies.
Fluctuations in worldwide demand for analytical instrumentation could affect our operating results.
The demand for analytical instrumentation products can fluctuate depending upon capital expenditure cycles. Most companies consider our instrumentation products capital equipment and some customers may be unable to secure the necessary capital expenditure approvals due to general economic or customer specific conditions. Significant fluctuations in demand could harm our results of operations.
Fluctuations in our quarterly operating results may cause our stock price to decline.
A high proportion of our costs are fixed due in part to our significant sales, research and product development and manufacturing costs. Declines in revenue caused by fluctuations in currency rates, worldwide demand for analytical instrumentation or other factors could disproportionately affect our quarterly operating results, which may in turn cause our stock price to decline.
Our results of operations and financial condition will suffer if we do not introduce new products that are attractive to our customers on a timely basis.
Our products are highly technical in nature. As a result, many of our products must be developed months or even years in advance of the potential need by a customer. If we fail to introduce new products and enhancements as demand arises or in advance of the competition, our products are likely to become obsolete over time, which would harm operating results. Also, if the market is not receptive to our newly developed products, we may be unable to recover costs of research and product development and marketing, and may fail to achieve material components of our business plan.
The analytical instrumentinstrumentation market is highly competitive, and our inability to compete effectively in this market would adversely affect our results of operations and financial condition.
The analytical instrumentation market is highly competitive and we compete with many companies on a local and international level that are significantly larger than us and have greater resources, including larger sales forces and technical staff. Competitors may introduce more effective and less costly products and, in doing so, may make it difficult for us to acquire and retain customers. If this occurs, our market share may decline and operating results could suffer.

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We may experience difficulties with obtaining components from sole- or limited-source suppliers, or manufacturing delays, either of which could adversely affect our results of operations.
Most raw materials, components and supplies that we purchase are available from many suppliers. However, certain items are purchased from sole or limited-source suppliers and a disruption of these sources could adversely affect our ability to ship products as needed. A prolonged inability to obtain certain materials or components would likely reduce product inventory, hinder sales and harm our reputation with customers. Worldwide demand for certain components may cause the cost of such components to rise or limit the availability of these components, which could have an adverse affect on our results of operations.
We manufacture products in our facilities in Germany the Netherlands and the United States. Any prolonged disruption to the operations at these facilities, whether due to labor unrest, supplier issues, damage to the physical plants or equipment or other reasons, could also adversely affect our results of operations.

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Our executive officers and other key employees are critical to our business, they may not remain with us in the future and finding talented replacements wouldmay be difficult.
Our operations require managerial and technical expertise. Each of the executive officers and key employees located in the United States is employed “at will” and may leave theirour employment at any time. In addition, we operate in a variety of locations around the world where the demand for qualified personnel may be extremely high and is likely to remain so for the foreseeable future. As a result, competition for personnel can be intense and the turnover rate for qualified personnel may be high. The loss of any of our executive officers or key employees could cause us to incur increased operating expenses and divert senior management resources in searching for replacements. An inability to hire, train and retain sufficient numbers of qualified employees would seriously affect our ability to conduct our business.
We may be unable to protect our intellectual property rights and may face intellectual property infringement claims.
Our success will depend, in part, on our ability to obtain patents, maintain trade secret protection and operate without infringing the proprietary rights of third parties. We cannot be certain that:
  any of our pending patent applications or any future patent applications will result in issued patents;
 
  the scope of our patent protection will exclude competitors or provide competitive advantages to us;
 
  any of our patents will be held valid if subsequently challenged; or
 
  others will not claim rights in or ownership of the patents and other proprietary rights held by us.
Furthermore, we cannot be certain that others have not or will not develop similar products, duplicate any of our products or design around any patents issued, or that may be issued, in the future to us or to our licensors. Whether or not patents are issued to us or to our licensors, others may hold or receive patents which contain claims having a scope that covers products developed by us. We could incur substantial costs in defending any patent infringement suits or in asserting any patent rights, including those granted by third parties. In addition, we may be required to obtain licenses to patents or proprietary rights from third parties. There can be no assurance that such licenses will be available on acceptableacceptance terms, if at all.
Our issued U.S. patents, and corresponding foreign patents, expire at various dates ranging from 20102008 to 2023.2024. When each of our patents expires, competitors may develop and sell products based on the same or similar technologies as those covered by the expired patent. We have invested in significant new patent applications, and we cannot be certain that any of these applications will result in an issued patent to enhance our intellectual property rights.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We repurchased shares of our common stock under a systematic program to manage the dilution created by shares issued under employee stock plans and for other purposes. This program authorizes repurchases in the open market or in private transactions. We started a series of repurchase programs in 1989 with the Board of Directors authorizing future repurchases of an additional 1.5 million shares of common stock in August 2006 as well as authorizing the repurchase of additional shares of common stock equal to the number of shares of common stock issued pursuant to our employee stock plans.

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The following table indicates common shares repurchased and additional shares added to the repurchase program during the three months ended March 31,September 30, 2007:
ISSUER PURCHASES OF EQUITY SECURITIES
                     
          Total     Maximum
          Number of Shares     Number of
          Purchased Additional Shares that
  Total     as Part of Shares May Yet Be
  Number Avg. Publicly Authorized Purchased
  of Shares Price Paid Announced for Under the
Period Purchased per Share Program (1) Purchase (1) Program (2)
January 1 – 31, 2007        5,553,843   2,062   1,458,335 
February 1 – 28, 2007  128,079   63.53   5,681,922   97,866   1,428,122 
March 1 – 31, 2007  130,231   63.10   5,812,153   25,234   1,323,125 
                     
          Total      
          Number of     Maximum
          Shares     Number of
          Purchased Additional Shares that
  Total     as Part of Shares May Yet Be
  Number Avg. Publicly Authorized Purchased
  of Shares Price Paid Announced for Under the
Period Purchased per Share Program Purchase (1) Program (2)
July 1– 31, 2007        6,094,377   10,218   1,237,388 
August 1– 31, 2007  231,025   72.10   6,325,402   42,704   1,049,067 
September 1 – 30, 2007  26,800   72.01   6,352,202   5,692   1,027,959 
 
(1) The number of shares represents the number of shares issued pursuant to employee stock plans that are authorized for purchase but does not include the current repurchase of 1.5 million shares of common stock approved in August 2006.purchase.
 
(2) The number of shares includes current repurchase of 1.5 million shares of common stock approved in August 2006 plus that number of shares of common stock equal to the number of shares issued pursuant to employee stock plans subsequent to August 2006 minus the number of shares purchased.

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EXHIBIT INDEX
Item 6. EXHIBITS
          
Exhibit     Exhibit   
Number Description Reference NumberDescription Reference
    
3.1 Restated Certificate of Incorporation, filed November 6, 1996  (2) Restated Certificate of Incorporation, filed December 12, 1988  (1)
         
3.2 Bylaws, as amended on July 29, 2002  (5) Certificate of Amendment of Restated Certificate of Incorporation, filed December 1, 1999 (Exhibit 3.2)  (13)
         
3.3 Amendment to Bylaws on January 11, 2007  (11) Bylaws, as amended on July 29, 2002 (Exhibit 3.2)  (4)
         
3.4 Amendment to Bylaws, adopted on January 11, 2007 (Exhibit 3.1)  (10)
      
4.1 Stockholder Rights Agreement dated January 21, 1999, between Dionex Corporation and Bank Boston N.A.  (3) Stockholder Rights Agreement dated January 21, 1999, between Dionex Corporation and Bank Boston N.A.  (2)
         
10.1 Medical Care Reimbursement Plan (Exhibit 10.17)  (1) Medical Care Reimbursement Plan as amended October 30, 2007    
         
10.2 Credit Agreement dated November 13, 2000 between Wells Fargo Bank and Dionex Corporation (Exhibit  (4) Credit Agreement dated November 13, 2000 between Wells Fargo Bank and Dionex Corporation (Exhibit 10.15)  (3)
 10.15)       
   
10.3 First amendment to Credit Agreement dated November 13, 2000 between Wells Fargo Bank and Dionex  (6) First amendment to Credit Agreement dated November 13, 2000 between Wells Fargo Bank and Dionex Corporation (Exhibit 10.17)  (5)
 Corporation 
         
10.4 Dionex Corporation 2004 Equity Incentive Plan (Exhibit 99.1)  (8) Dionex Corporation 2004 Equity Incentive Plan, as amended October 2006 (Exhibit 10.1)  (14)
         
10.5 Form of Stock Option Agreement for non-employee directors (Exhibit 99.2)  (8) Form of Stock Option Agreement for non-employee directors (Exhibit 99.2)  (7)
         
10.6 Form of Stock Option Agreement for other than non-employee directors (Exhibit 99.3)  (8) Form of Stock Option Agreement for other than non-employee directors (Exhibit 99.3)  (7)
         
10.7 Employee Stock Participation Plan (Exhibit 10.13)  (7) Form of Stock Unit Award Agreement (Exhibit 10.2)  (14)
         
10.8 Third amendment to Credit Agreement dated December 1, 2006 between Wells Fargo Bank and Dionex  (10) Form of International Stock Option Agreement    
 Corporation       
   
10.9 Change in Control Severance Benefit Plan (Exhibit 10.15)  (9) Employee Stock Participation Plan (Exhibit 10.13)  (6)
         
10.10 Executive Employment Agreement for Lukas Braunschweiler dated November 20, 2006  (12) Second amendment to Credit Agreement dated November 13, 2000 between Wells Fargo Bank and Dionex Corporation (Exhibit 10.1)  (8)
      
10.11 Change in Control Severance Benefit Plan (Exhibit 10.15)  (9)
      
10.12 Third amendment to Credit Agreement dated December 1, 2006 between Wells Fargo Bank and Dionex Corporation (Exhibit 10.8)  (11)
      
10.13 Executive Employment Agreement for Lukas Braunschweiler dated November 20, 2006 (Exhibit 10.1)  (12)
      
24.1 Power of Attorney (reference is made to the signature page of this report on Form 10-K)    
         
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002    
         
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002    
         
32.1 Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002    
         
32.2 Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002    

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(1) Incorporated by reference to the indicated exhibit in Amendment No. 1 of Dionex Corporation’s Registration Statement on Form S-1 filed December 7, 1982.
(2)Incorporated by reference to the corresponding exhibit in Dionex Corporation’sour Annual Report on Form 10-Q filed February 13, 1997.September 20, 1989.
(3)(2) Incorporated by reference to the corresponding exhibit in Dionex Corporation’sour Quarterly Report on Form 10-Q filed February 16, 1999.
(4)(3) Incorporated by reference to the indicated exhibit in Dionex Corporation’sour Quarterly Report on Form 10-Q filed February 14, 2001.
(5)(4) Incorporated by reference to the indicated Exhibit 10.17 in Dionex Corporation’sour Annual Report on Form 10-K filed August 28, 2002.
(6)(5) Incorporated by reference to the indicated Exhibit in Dionex Corporation’sour Annual Report on Form 10-K filed September 24, 2003.

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(7)(6) Incorporated by reference to the indicated exhibit in Dionex Corporation’sour Annual Report on Form 10-K filed September 10, 2004.
(8)(7) Incorporated by reference to Dionex Corporation’sour Registration Statement on Form S-8 filed December 8, 2004.
(8)    Incorporated by reference to the indicated exhibit in our current Report on Form 8-K filed December 22, 2004.
(9) Incorporated by reference to the indicated exhibit in Dionex Corporation’sour Quarterly Report on Form 10-Q filed May 10, 2005.
(10) Incorporated by reference to the indicated exhibit in Dionex Corporation’s Quarterly Report onour Form 10-Q8-K filed February 9,January 17, 2007.
(11) Incorporated by reference to the indicated exhibit in Dionex Corporation’sour Quarterly Report on Form 8-K10-Q filed January 17,February 9, 2007.
 
(12) Incorporated by reference to the indicated exhibit in Dionex Corporation’sour Form 8-K filed November 21, 2006.
(13)Incorporated by reference to the indicated exhibit in our Form 10-K filed August 29, 2007.
(14)Incorporated by reference to the indicated exhibit in our Form 8-K filed October 15, 2007.

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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.
     
 DIONEX CORPORATION
(Registrant)
 
 
Date: May 10,November 9, 2007 By:  /s/ Lukas Braunschweiler   
  Lukas Braunschweiler  
  President, Chief Executive Officer And Director  
 
   
 By:  /s/ Craig A. McCollam   
  Craig A. McCollam  
  Vice President and Chief Financial Officer  

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Exhibit IndexEXHIBIT INDEX
10.1Medical Care Reimbursement Plan, as amended October 30, 2007
10.8Form of International Stock Option Agreement
   
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.2002
   
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.2002
   
32.1 Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.2002
   
32.2 Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.2002

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