UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

þ		ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-11250

DIONEX CORPORATION

Delaware (State or other jurisdiction of Incorporation or organization)		94-2647429 (I.R.S. Employer Identification No.)
1228 Titan Way,
Sunnyvale, California (Address of principal executive offices)		94085 (Zip Code)

Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, par value $.001 per share		The Nasdaq Stock Market LLC

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES þ NO o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO þ

Indicate by check market whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ		Accelerated filer o		Non-Accelerated filer o		Smaller reporting company o
				(do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The aggregate market value of the registrant’s Common Stock held by non-affiliates on December 31, 2009 (based upon the closing price of such stock as of such date) was $1,285,409,824.

As of August 27, 2010, 17,456,907 shares of the registrant’s Common Stock were outstanding.

Portions of the registrant’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on October 26, 2010 are incorporated by reference in Part III of this Annual Report.

 

 

TABLE OF CONTENTS

PART I
Item 1. Business			3
Item 1A. Risk Factors			9
Item 1B. Unresolved Staff Comments			13
Item 2. Properties			13
Item 3. Legal Proceedings			13
PART II
Item 5. Market for our Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities			13
Item 6. Selected Consolidated Financial Data			16
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			24
Item 8. Financial Statements and Supplementary Data			26
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			50
Item 9A. Controls and Procedures			50
Item 9B. Other Information			50
PART III
Item 10. Directors, Executive Officers and Corporate Governance			52
Item 11. Executive Compensation			52
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			52
Item 13. Certain Relationships and Related Transactions, and Director Independence			52
Item 14. Principal Accounting Fees and Services			52
PART IV
Item 15. Exhibits and Financial Statement Schedules			52
Signatures			53
Exhibit Index			57
Exhibit 10.12
Exhibit 21.1
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements set forth or incorporated by reference in this Form 10-K, as well as in the Dionex Annual Report to Stockholders for the year ended June 30, 2010, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities and 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 conditions, 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: general economic conditions, foreign currency fluctuations, the risks associated with international sales and operations, risks associated with the transition to upgraded accounting information and technology infrastructure systems, costs associated with potential enhancements to internal controls over financial reporting, changes in our provision for income taxes or adverse outcomes resulting from examination of our income tax returns, natural disasters, terrorist attacks or acts of war, credit risks associated with our customers, fluctuation in worldwide demand for analytical instrumentation, fluctuations in quarterly operating results, risks associated with maintaining a significant portion of our cash overseas, 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 set forth under “Item 1A. “Risk Factors” and elsewhere in this Form 10-K. Readers are cautioned not to place undue reliance on these forward-looking statements that reflect management’s analysis only as of the date hereof. Dionex undertakes no obligation to update these forward-looking statements.

PART I

Item 1.		BUSINESS

GENERAL

Dionex Corporation (“Dionex,” “we,” “us,” and “our”) was founded in 1975 to help scientists automate and apply chemistry solutions for improved laboratory productivity. We design, manufacture, market, and service a range of liquid chromatography systems, sample preparation devices, and related products used to separate and quantify the individual components of complex chemical mixtures relevant to several major industrial, research, and laboratory markets. Our systems are complementary products that can be integrated together and used along with other analytical instruments. Dionex Corporation was incorporated as a California corporation in 1980 and reincorporated in Delaware in 1986.

Our current portfolio of liquid chromatography (LC) systems is focused in two product areas: ion chromatography (IC) and high performance liquid chromatography (HPLC). In addition, we offer a mass spectrometer detector that can be coupled with either IC or HPLC systems. For sample preparation, we provide accelerated solvent extraction (ASE^®) systems and AutoTrace^® instruments. In addition, we also develop and manufacture columns, consumables, suppressors, detectors, automation, and software analysis systems for use in or with liquid chromatography systems. All these products can be used to analyze chemical substances in the environment and in a broad range of industrial and scientific applications.

BUSINESS UNITS

Dionex has two business units, Chemical Analysis Business Unit (CABU) and Life Sciences Business Unit (LSBU), which have similar economic characteristics; product processes; products and services; types and classes of customers; methods of distribution and regulatory environments. These units, for which discrete financial information is available, are regularly reviewed and evaluated by the chief operating decision maker, which we have determined to be our Chief Executive Officer. Because of these similarities, the two units have been aggregated into one reporting segment for financial statement purposes. Financial information for our one reportable segment is provided in Note 15 in the Notes to the Consolidated Financial Statements.

Information concerning revenues and long-lived assets attributable to each of the Company’s products, services and geographic areas is set forth in Note 15 in the Notes to the Consolidated Financial Statements, which is included elsewhere in this Annual Report on Form 10-K.

PRODUCTS

Ion Chromatography

Ion chromatography is a form of chromatography that separates ionic (charged) or highly polar molecules (e.g. sugars and carbohydrates), usually found in water-based solutions, and typically detects them based on their electrical conductivity. The sale of our IC systems and related columns, suppressors, detectors, automation, and other products accounted for over 60% of our net sales in each of fiscal 2010, 2009, and 2008.

Our IC products are used in a wide range of analytical applications, including environmental monitoring, quality control of pharmaceuticals, corrosion monitoring, and evaluation of raw materials, quality control of industrial processes and products, research and development, and regulation of the chemical composition of food, beverage, and cosmetic products. Major customers include environmental testing laboratories, life science and food companies, chemical/petrochemical firms, power generation facilities, electronics manufacturers, government agencies, and academic institutions.

Dionex has been an innovator in ion chromatography for over 30 years. This year, we extended our history of innovation with the introduction of the first commercially available capillary IC system, the ICS-5000 Capillary RFIC^tm System. The heart of this innovation is the IC Cube^tm which houses all of the capillary chemistry in a unique “plug and play” design. Capillary IC has a powerful value proposition: greatly reduced sample size requirements, increased sensitivity and reduced running costs.

In addition to the ICS-5000 Capillary RFIC^tm System, we offer a full range of IC products to address the analytical needs of our customers. These other system consists of the following:

•

Our ICS-2100 RFIC system, introduced in fiscal 2009, provides RFIC eluent generation and regeneration, along with sample-preparation capabilities. The ICS-2100 is an integrated and preconfigured RFIC system designed to perform with all types of electrolytically generated eluents for isocratic and gradient IC separations. The system is controlled from an LCD touch pad front panel or using our Chromeleon Chromatography Data System software (“Chromeleon”). The ICS-2100 occupies minimal space and delivers all the advantages of an RFIC system, including ease-of use, consistency and superior performance compared to systems using manually prepared eluents.

•

Our ICS-1600 system, introduced in fiscal 2009, is a fully integrated and preconfigured system with RFIC-ER (Eluent Regeneration) capabilities designed to perform IC separations using suppressed conductivity detection. The system is controlled from an LCD touch pad front panel or using Chromeleon software.

•

Our ICS-1100, introduced in fiscal 2009, is an integrated and preconfigured system with RFIC-ER capabilities that performs IC separations using conductivity detection.

•

Our ICS-900 integrated IC system, introduced in fiscal 2008, is designed for routine ion analysis and provides easy operation and stable performance. It occupies minimal bench space, making it an attractive solution for small laboratories.

High Performance Liquid Chromatography

HPLC is a form of chromatography that separates a wide range of small and large molecules, such as pharmaceuticals, metabolites, and biologics. HPLC typically quantifies the components by measuring the amount of light that the molecules absorb or emit when exposed to a light source. Sales of our HPLC products and related columns, suppressors, detectors, automation, and other products accounted for approximately 30% of our net sales in each of fiscal 2010, 2009, and 2008.

In fiscal 2010, we revamped all of our HPLC systems to Ultra High Pressure LC (UHPLC+) systems. UHPLC features high pressures, high flow rates and small particles in columns to accelerate separations. Our UHPLC+ portfolio consists of four major systems:

•

UltiMate® 3000 Basic Automated LC system is optimized for reliability and ease-of-use with routine LC applications, and also offers UHPLC application compatibility up to 620 bar. The ACC-3000 Autosampler Column Compartment is at the heart of the system. Its unique instrument design combines a rugged sample injection principle with a powerful column oven.

•

UltiMate® 3000 Standard Analytical systems offer full support of all HPLC applications and provide UHPLC application compatibility up to 620 bar, allowing customers to move to UHPLC whenever necessary.

•

UltiMate® 3000 Rapid Separation LC (“RSLC”) system provides higher performance and flexibility in UHPLC applications up to 1,000 bar. Precision-engineered instrumentation, advanced data processing, and highly optimized chemistries enable the most challenging chromatographic applications. This system offers industry leading versatility covering the maximum range of UHPLC applications, while keeping fully compatible to conventional LC.

•

UltiMate® 3000 RSLCnano system was developed for maximum performance in the field of proteomics and other complex life science applications. The robust, continuous direct-flow delivery is designed for interruption-free analysis providing the highest resolution of sample components. This feature, in addition to the widest flow-pressure footprint enables the application of UHPLC to the nano scale, allowing scientists to tune for the highest resolution or the fastest analysis time, even for trypsin-digested peptide patterns of utmost complexity.

Our acquisition from ESA Biosciences, Inc. of its Life Sciences Tools business in fiscal 2010 increased our portfolio of detection strategies for HPLC. The Corona^® ultra™ Charged Aerosol Detector for UHPLC systems is a universal detector, allowing determination of analytes independent of charge or chromophore. The Coulochem^® and CoulArray^® electrochemical detectors are targeted for neuroscience, clinical, and metabolomics research. Together with our new fluorescence detector, the FLD-3000, these detection solutions have greatly improved our ability to serve our pharmaceutical, biopharmaceutical, and life sciences customers. This acquisition further expands our presence in life sciences and opens some new markets in clinical research and neurosciences.

Other Dionex product offerings

Sample Preparation - In fiscal 2008, we introduced the Accelerated Solvent Extraction (“ASE”) 150 and ASE 350 systems which extract components of interest from solid and semisolid samples using common solvents at elevated temperatures and pressures. The ASE 150 and 350 systems offer several advantages over other solvent-based extraction techniques including lower solvent consumption, reduced extraction time, higher throughput, automation and ease of use. Both of these systems contain pH-hardened flow pathways featuring Dionium^™ components allowing the extraction of samples that have been pretreated with strong acids or bases. The ASE 350 also features built-in solvent mixing capability that allows sampling from three different bottles to allow the customer to perform extractions using a wide variety of solvents. Along with these ASE systems, we added ASE Prep CR NA⁺ and ASE Prep CR H⁺ adsorbents which neutralize strong acids or bases so samples can be extracted with organic or aqueous solvents to remove analytes of interest as part of the ASE process.

In fiscal 2009, we acquired our AutoTrace^® line of products from Caliper Life Sciences. The AutoTrace SPE workstation automates the extraction of large volume aqueous samples prior to analysis. In fiscal 2010, we introduced the new AutoTrace 280 SPE instrument which automates SPE processes: conditioning, loading, rinsing and elution. AutoTrace 280 can be used for a wide variety of SPE testing methods including those approved by the Environmental Protection Agency (EPA) for testing of ground water, surface water, waste water and drinking water and other organic pollutants such as endocrine disrupters and personal care product ingredients in aqueous samples. AutoTrace 280 complements our ASE, IC and HPLC product lines, giving us the opportunity to expand our sample preparation market.

Mass Spectrometry - Mass spectrometry (MS) is used to identify the molecular weight of compounds within a sample substance and renders structural molecular information. Through an agreement with Thermo Fisher Scientific, we offer the MSQ Plus^™ mass spectrometer which can be coupled with certain IC and HPLC products. LC/MS and IC/MS systems using the MSQ Plus are used worldwide, particularly in the pharmaceutical market, but also for environmental testing, drug, food and beverage quality control, and many other applications.

In fiscal 2006, we introduced the Dionex Chromatography Mass Spectrometry Link (DCMS^Link™) software which provides an interface for controlling a wide range of our chromatography instruments from third-party mass spectrometry software (MS software) such as Analyst^® from Applied Biosystems/MDS Sciex (now owned by Danaher Corporation), Xcalibur^® from Thermo Fisher Scientific Inc., and HyStar^™ from Bruker Corporation. In fiscal 2009, we introduced version 2.7 of DCMS^Link which delivered many new features, including a unique graphical control interface for Dionex instruments, providing real-time modification of instrument parameters. The new version also supports digital acquisition of 3-D data from the UltiMate 3000 photodiode array detector, for assessing peak purities, spectral matching and peak tracking. DCMS^Link enables us to expand to additional markets for our chromatography systems to customers who desire the quality and features of our chromatography with higher-end mass spectrometers.

Process Instrumentation - In fiscal 2009, we introduced the Integral^™ Process Analyzer for continuous on-line monitoring necessary in a variety of industrial applications. The Integral systems combine the Dionex ICS and UltiMate systems with advanced sample handling and preparation modules and industrial enclosures to automate a wide variety of in-process analyses. Major applications for Integral are in the power generation industry for the continuous monitoring of corrosive contaminants in boiler water, the semiconductor industry for continuous monitoring of contaminants in high purity water, and the pharmaceutical and chemical industries for continuous monitoring of biological and chemical synthesis processes. Integral uses our Chromeleon PA software for automation, data acquisition, reporting, and security. The software allows the user to view analyzer status, handle alarms, and interface with the computing and control systems in place at the enterprise where Integral is installed.

Chromatography Data Management Software Systems (CDS) - We offer a family of chromatography data management software products that automate sample handling, system operation, and data analysis for chromatography systems. Our industry-leading CDS package called Chromeleon can control IC and HPLC systems, either manufactured by Dionex or other vendors. Our advanced CDS provides analysis and automation support for applications such as discovery processes, quality control, and complex research activities such as proteomics and biomarker discovery. Chromeleon software is offered in our Chromeleon 6.8 version to customers desiring to control several IC or HPLC systems at once. Chromeleon 6.8 can control over 250 LC and gas chromatography (GC) instruments and modules produced by more than 30 vendors. In fiscal 2009, we introduced Chromeleon^® 7 Chromatography Data System, a next-generation chromatography data system that provides the fastest, easiest path from samples to results, boosting productivity and improving user experience. Chromeleon 7 includes capabilities to speed up data evaluation by providing an even more intuitive way to access all information for an experiment and includes new methods to identify peaks and save time in analysis.

Consumables - We offer a wide variety of consumables for our IC, HPLC and sample preparation customers. Our primary consumable items are columns, suppressors, and RFIC eluent generation cartridges. These consumables are replaced at regular intervals depending on the volume of use and sample composition.

Columns - A chromatography column consists of a hollow cylinder packed with a unique material allowing for separation of the various chemical components contained in a sample. We develop and manufacture separation materials such as ion-exchange resins, silica-based bonded phases, and monolithic phases using proprietary processes that are designed and tested for specific applications in the HPLC and IC markets. We offer polymer-based ion-exchange and silica-based reversed-phase columns supporting capillary, analytical, preparative, and semi-preparative scale applications. Our most recent introductions for column technologies focus on Fast IC columns designed for faster analysis of standard anions and sugars as well as UHPLC columns for faster HPLC separations used for a broad range of customer applications. We also offer a number of columns in monolith formats for increased resolution, speed and capacity for IC and HPLC application including applications for protein separations. In addition, we offer a variety of micro, capillary and nano LC columns in varying formats packed with a variety of chromatographic materials.

Eluent Suppressors - We manufacture the SRS 300 family of Self-Regenerating Suppressors to enhance detection and sensitivity in ion chromatography. Our offering includes an array of suppressors that include the SRS 300, the Atlas^® Electrolytic Suppressor, and the MicroMembrane^™ Suppressor (MMS III).

RFIC Eluent Generation Cartridges - We manufacture eluent generation cartridges used with RFIC systems for the automatic production of high-purity eluents. We offer cartridges for generation of hydroxide, methanesulfonic acid, and carbonate/bicarbonate eluents designed to cover the range of ions and polar compounds that our customers typically measure.

IonSwift^tm line - Introduced in 2010, these are new columns for IC based on our patented monolith technology and feature fast mass transfer and improved resolution even at elevated flow rates with low backpressure. This faster analysis and high resolution are key benefits of this new monolith column line. This chemistry can be coupled with the new ICS-5000, providing customers the experience of Fast IC in capillary, microbore or standard bore format.

Fast IonPac line - We also introduced in 2010 new resin based fast IC columns for analytical and capillary flow rates based on our traditional packed-particle IonPac line. These anion and cation columns allow increased flow rates, therefore reducing typical run times to less than five minutes.

Other services - We provide services and service products through our customer and field service organization. These services include maintenance contracts, spare part sales, customer training and sales of other products and valued-added services (refer to the “Technical Support, Installation and Service” section below).

CUSTOMERS, MARKETING, AND SALES

Our products are used extensively in the environmental, life science, and industrial markets that typically utilize chromatography and extraction technologies. The environmental market is characterized by water analysis, safety and security applications, and pollution testing, with chemists from private and governmental laboratories being our primary customers in this field. The life science markets we serve include the pharmaceutical and biopharmaceutical segment, biosciences, and medical sciences, with customers from industrial, academic, and government accounts. Industrial markets include the electronics and power industries, with a demand for analyzing the high-purity water quality in their production facilities. We also serve many of the world’s largest industrial companies within the chemical industry, which produce specialty chemicals/petrochemicals, and consumer products, and increasingly within the food and beverage market, which test for product quality assurance, purity, and contaminants.

One of our key marketing strategies is to target all market segments mentioned above to increase demand for our chromatography solutions. This is accomplished by approaching all existing and potential customers through direct marketing and sales activities including direct sales calls, mailings, advertising, electronic marketing, seminars, and workshops. In addition, we build visibility and branding for our global presence through scientific conferences and exhibitions. Continuous growth in all these markets results from identifying new customers in existing sales regions, extending geographic penetration, and increasing demand for our products and technical support capabilities. In addition, we grow through the constant introduction of new technologies and products which stimulates our current customers to adopt our more advanced offerings.

The second component of our marketing strategy is to explore and develop new applications through collaborations with existing and potential customers, and to leverage these new methods in other market areas. A prerequisite to establishing this process is the availability of highly skilled technical and support staff to work with customers to define and develop these novel applications. In order to meet and exceed customer expectations in our commercial markets, our goal is to optimize and diversify our technology expertise in the LC market, including sample preparation, separation, analysis, testing, and data management.

Geographically, we market and distribute our products and services through our sales force in Austria, Australia, Belgium, Brazil, Canada, China, Denmark, France, Germany, India, Ireland, Italy, Japan, Korea, the Netherlands, New Zealand, Singapore, Sweden, Switzerland, Taiwan, the United Kingdom, and the United States (U.S.). In each of these countries other than Canada, we maintain one or more local sales offices in order to support and service our customers in the regions. In other international locations where we do not have a direct sales force, we have developed a network of distributors and sales agents. In fiscal 2010, our net sales by geographic region were approximately 27% in North America, 38% in Europe and 35% in Asia/Pacific and other. In fiscal 2009, our net sales by geographic region were approximately 26% in North America, 41% in Europe and 33% in Asia/Pacific and other. In fiscal 2008, our net sales by geographic region were approximately 28% in North America, 43% in Europe and 29% in Asia/Pacific and other.

We manufacture our products based upon our forecast of customer demand and 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 four to six weeks after receipt of an order. We do not maintain a substantial backlog, and backlog as of any particular date may not be indicative of our actual sales in any succeeding period. The level of backlog as of June 30, 2010 was $68 million and as of June 30, 2009 was $55 million.

FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS

For financial information by geographic area, refer to Note 15 of the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

COMPETITION

Competition in our industry is based upon the performance capabilities of the analytical instruments, technical support and after-market services, the manufacturer’s reputation as a technological leader and selling prices. We believe that performance capabilities are the most important of these criteria. Customers measure system performance based on sensitivity (the ability to discern minute quantities of a particular sample component), selectivity (the ability to distinguish between similar components), speed and throughput of analysis, and the range of chemical and biological samples the system can effectively analyze. We believe that we enjoy a favorable reputation in terms of performance capabilities.

Companies competing with us in LC portion of the analytical instruments market include Agilent Technologies, Inc., Shimadzu Corporation, Thermo Fisher Scientific Inc., Waters Corporation and Metrohm Ltd.

We believe we have a substantial market share in the IC market, which is a segment of the broader LC market. Our IC systems generally compete with a number of analytical techniques used in identifying and quantifying ionic and polar compounds. The primary source of competition are conventional manual and automated wet chemistry procedures and certain modified liquid chromatography systems that are used with or without an ion suppression device. Companies competing with us in the IC market include Metrohm AG, Shimadzu Corporation, Waters Corporation and other smaller companies.

We believe we have a smaller but growing market share in the combined ultra-high pressure, analytical and capillary/nano-LC HPLC portions of the LC market. Our UltiMate 3000 UHPLC+ systems compete directly with other manufacturers in ultra high pressure, standard and capillary-/nano- HPLC applications. We believe that the UltiMate UHPLC+ systems have certain benefits over competing systems, including advanced pump and dual pump technology, thermostatted temperature control, and high performance auto sampling capabilities. The UltiMate 3000 offers benefits over competing systems, including the ability to analyze minute contents of sample at very low flow rates or at higher pressure over a wider range of flow rates. In addition, we are unique in that our entire HPLC product line is compatible with ultra high pressure methods giving the customer flexibility in transferring methods from standard to UHPLC methods. We also believe that our Chromeleon software package is considered the most advanced chromatography data management system in the market which provides us a competitive advantage over other vendor’s software offerings. Our competitors in the HPLC market include such vendors as Agilent Technologies, Inc., Shimadzu Corporation, Thermo Fisher Scientific, Waters Corporation and various smaller competitors.

Our Accelerated Solvent Extraction systems compete directly with standard Soxhlet, sonication, supercritical fluid extraction and microwave extraction techniques provided by other companies. We believe that our ASE systems have certain benefits compared to competing techniques, including faster extraction time, reduced solvent usage, built-in automation and ease of use.

PATENTS AND LICENSES

We have a patent portfolio covering certain technologies employed in our products. These technologies include but are not limited to those used in our instruments, suppressors, eluent generators, columns, sample preparation devices, pumps, autosamplers, and detectors. The portfolio includes both apparatus and method of use patents. Our patents are presently issued in the U.S. and number of foreign countries including those in North America, Europe and Asia. As a matter of company policy, we vigorously protect our intellectual property rights and seek patent coverage on developments that we regard as strategic, material and patentable. Our patents, including those licensed from others, expire between 2010 and 2029. We believe that, while our patent portfolio has value, no single patent or patent application is in itself essential and that the invalidity or expiration of any single patent would not have a material adverse effect on our business.

We regard our Chromeleon software as proprietary and we rely on a combination of patents, copyrights, trademarks, trade secret laws and other proprietary rights, laws, license agreements and other restrictions on disclosure, copying and transferring title to protect our rights to our software products. We have one issued patent and a limited number of patent applications covering our software, and existing copyright laws afford only limited protection. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the U.S.

INTERNATIONAL OPERATIONS

Financial information about foreign and domestic operations and export sales is provided in Note 15 of the Notes to Consolidated Financial Statements found elsewhere in this report.

We have subsidiaries in Austria, Australia, Brazil, Canada, China, Denmark, France, Germany, India, Ireland, Italy, Japan, Korea, the Netherlands, New Zealand, Singapore, Sweden, Switzerland, Taiwan, the United Kingdom and the U.S. Our foreign sales are affected by fluctuations in currency exchange rates and by regulation adopted by foreign governments. Such fluctuations have materially affected, both positively and negatively, our results of operation in past periods and will likely materially affect our results of operations in the future. Export sales are subject to certain controls and restrictions, but we have not experienced any material difficulties related to these limitations.

MANUFACTURING AND SUPPLIERS

We produce most of our consumables, including IC and HPLC columns and IC suppressors, and assemble our IC systems and modules in our California manufacturing facilities. We assemble the systems and modules for our UltiMate 3000 systems in our manufacturing facility in Germany. We assemble our charged aerosol (CAD) and electrochemical HPLC detectors in our Massachusetts manufacturing location. We have developed proprietary processes for the manufacture of polystyrene-based resins and for packing columns with these resins. We believe that our resins, columns and suppressor manufacturing know-how are critical to the performance and reliability of our chromatography systems. We require each employee and consultant to sign a nondisclosure agreement to protect our proprietary processes. However, there can be no assurances that these agreements will provide meaningful protection or adequate remedies for our proprietary processes in the event of unauthorized use or disclosure.

We have emphasized a modular design for the principal subsystems of our pumping and flow systems, sample injection systems, chromatography modules, detectors, and control and data analysis systems. We believe that this modular approach has enabled us to meet the wide range of system configurations required by our customers. Manufacturing has transitioned into flow-line production for our major systems while maintaining subassembly cell production for our integrated modules. These practices have enhanced our ability to effectively manage our inventory levels.

We manufacture many subassemblies used in our products. Components, including formed-plastic and sheet-metal packaging materials, machine-metal parts, integrated circuits, microprocessors, microcomputers and certain detector and data analysis modules, are purchased from other manufacturers. Most of the raw materials, components and supplies purchased by us are available from a number of different suppliers, although a number of items are purchased from limited or single source of supply.

TECHNICAL SUPPORT, INSTALLATION AND SERVICE

Users of our chromatography systems may require technical support before and after a system sale. Services provided before the sale are recorded in operating expenses as incurred. Chromatography systems sold by us generally include a one-year warranty. These costs are accrued for at the time of the system sale. Installation and certain basic user training are provided to the customer, with revenues for these services recognized at the time the services are provided. Maintenance contracts may be purchased by customers to cover equipment no longer under warranty. Maintenance work not performed under warranty or maintenance contracts is performed on a time and materials basis. We offer training courses and periodically send our customers information on applications development. We install and service our products through our own field service organizations in Austria, Australia, Brazil, Belgium, Canada, China, Denmark, France, Germany, India, Italy, Ireland, Japan, Korea, the Netherlands, New Zealand, Singapore, Sweden, Switzerland, Taiwan, the United Kingdom and the U.S. Installation and service in other foreign countries are typically provided by our distributors or agents.

RESEARCH AND PRODUCT DEVELOPMENT

Our research and product development efforts are focused on increasing the performance of our chromatography and other products and expanding the number of chemical and biological compounds that can be analyzed efficiently with our products. Research and product development expenditures were $31.6 million, $29.0 million, and $28.9 million in fiscal 2010, 2009, and 2008, respectively. We pursue active development programs in the areas of system hardware, applications, CDS, suppressors, and resin and column technologies. There can be no assurances that our product development efforts will be successful or that the products developed will be accepted by the marketplace.

EMPLOYEES

We had approximately 1,550 employees as of June 30, 2010 and 1,400 employees as of June 30, 2009.

AVAILABLE INFORMATION

We maintain a website at www.dionex.com; however, information found on our website is not incorporated by reference into this report. We make available free of charge on or through our website our proxy statement, annual report on Form 10-K, quarterly reports on Form 10-Q, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). Our Board of Directors has adopted charters for the Audit, Compensation, and Nominating and Corporate Governance Committees of our Board of Directors and a Code of Business Ethics and Values applicable to all of our officers and employees. These charters and our Code of Business Ethics and Values are available on our website at http://investor.dionex.com/governance-PDFs.cfm and a printed copy of this information is available without charge by sending a written request to: Investor Relations, Dionex Corporation, 1228 Titan Way, Sunnyvale, California 94085. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, DC 20549, and may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.

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.

A downturn in economic conditions could affect our operating results.

Our business, financial condition and results of operations have been affected by the weaker global economic conditions of the last several years. These conditions resulted in reduced sales of our products in the last two quarters of fiscal 2009 and the first two quarters of fiscal 2010. In a continued economic recession or under other adverse economic conditions, our customers may be less likely to purchase our products and vendors may be more likely to fail to meet contractual terms. A further downturn in economic conditions or a slow recovery from the current recession may make it more difficult for us to maintain and continue our revenue growth and profitability performance resulting in a material adverse effect on our business.

Foreign currency fluctuations related to international operations may adversely affect our operating results.

We derived over 70% of our net sales from outside the U.S. in fiscal 2010 and expect to continue to derive the majority of net sales from outside the U.S. for the foreseeable future. Most of our sales outside the U.S. 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 positively affected from the depreciation of the U.S. dollar against the Euro, the Japanese yen and several other foreign currencies, but there can be no assurance that this positive impact will continue. In the past, our results of operations have also been negatively impacted by the appreciation of the U.S. dollar against other currencies.

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 U.S., 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 net sales. In addition, we expect that the proportion of our employees, contract manufacturers, suppliers, job functions and manufacturing facilities located outside the U.S. will 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 economic, political or other conditions;

•

trade protection measures and import or export licensing requirements;

•

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.

If we fail to effectively transition to our new and/or upgraded accounting information and technology infrastructure systems, it may have an adverse impact on our business and results of operations.

We may experience difficulties in transitioning to new or upgraded accounting information and technology infrastructure systems, including loss of data and decreases in productivity as personnel become familiar with new, upgraded or modified systems. Our accounting information and technology infrastructure systems will require modification and refinement as we grow and as our business and customers’ needs change, which could prolong the difficulties we experience with systems transitions, and we may not always employ the most effective information systems. If we experience difficulties in implementing new or upgraded accounting information and technology infrastructure systems or experience significant system failures, or if we are unable to successfully modify our accounting information and technology infrastructure systems and respond to changes in our customers’ needs in a timely manner, it may have an adverse impact on our business and results of operations.

We continually evaluate our system of internal controls over financial reporting and may make enhancements where appropriate, which may require significant resources.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We continually evaluate and, where appropriate, enhance our policies, procedures and internal controls. If we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we could be subject to regulatory scrutiny and investors could lose confidence in the accuracy and completeness of our financial reports. In addition, failure to maintain adequate internal controls could result in financial statements that do not accurately reflect our financial condition. Implementing changes when necessary may take a significant amount of time, money, and management resources and may require specific compliance training of our directors, officers and other personnel.

Changes in our provision for income taxes or adverse outcomes resulting from examination of our income tax returns could adversely affect our results.

Our provision for income taxes is subject to volatility and could be adversely affected by earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates; by changes in the valuation of our deferred tax assets and liabilities; by expiration of or lapses in the R&D tax credit laws; by transfer pricing adjustments; by tax effects of nondeductible compensation; by changes in accounting principles; or by changes in tax laws and regulations including possible U.S. or foreign changes to the taxation of earnings of our foreign subsidiaries, and the deductibility of expenses attributable to foreign income, or the foreign tax credit rules. Significant judgment is required to determine the recognition and measurement attribute prescribed in Financial Accounting Standards Board (FASB) Accounting Standards Codification 740, Income Taxes (“ASC 740”) (formerly referenced as FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes —an interpretation of FASB Statement No. 109”). ASC 740 applies to all income tax positions, including the potential recovery of previously paid taxes, which if settled unfavorably could adversely impact our provision for income taxes or additional paid-in capital. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuous examinations will not have an adverse effect on our operating results and financial condition.

Natural disasters, terrorist attacks or acts of war may cause damage or disruption to us and our employees, facilities, information systems, security systems, vendors and customers, which could significantly impact our net sales, costs and expenses, and financial condition.

We have significant manufacturing and distribution facilities, particularly in the western U.S. (i.e. California) and in Germany. In particular, California has experienced a number of earthquakes, wildfires, flooding, landslides and other natural disasters in recent years. Occurrences of these types of events could damage or destroy our facilities which may result in interruptions to our business and losses that exceed our insurance coverage. Terrorist attacks have contributed to economic instability in the U.S. (such as those that occurred on September 11, 2001), and further acts of terrorism, bioterrorism, violence or war could affect the markets in which we operate, our business operations, our expectations and other forward-looking statements contained or incorporated in this document. Any of these events could have an adverse effect on our operating results and financial condition.

Credit risks associated with our customers may adversely affect our financial position or result of operations.

Because trade credit is extended to many of our customers, the current global economic condition may adversely affect our ability to collect on accounts receivable that are owed to us. In general, our customers are evaluated for their credit worthiness as part of our operating policy, and letters of credit are utilized to mitigate credit risks when possible. We believe we have adopted the appropriate operating policies to address the customer credit risk under a stable economic environment. Nevertheless, given the current global economic situation we could experience delays in collection on accounts receivable that are owed to us. As a result, this could adversely affect our financial position or result of operations.

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 and marketing, 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.

A significant portion of our cash is maintained overseas.

Most of our short-term debt is in the U.S. While there is a substantial cash requirement in the U.S. to fund operations and capital expenditures, service debt obligations, finance potential acquisitions and continue authorized stock repurchases, a significant portion of our cash is maintained and generated from foreign operations. Our financial condition and results of operations could be adversely impacted if we are unable to maintain a sufficient level of cash flow in the U.S. to address these requirements through cash from U.S. operations, efficient and timely repatriation of cash from overseas and other sources obtained at an acceptable cost.

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, our results of operations would be adversely impacted and we may be unable to recover the costs of research and product development and marketing associated with such products.

The analytical instrumentation 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 we are 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.

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 effect on our results of operations.

We manufacture products in our facilities in Germany, the Netherlands and the U.S. 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.

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 may be difficult.

Our operations require managerial and technical expertise. Each of our executive officers and key employees is employed “at will” and may leave our 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, whether or not such suits have merit, 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 acceptance terms, if at all.

Our issued U.S. patents, and corresponding foreign patents, expire at various dates ranging from 2010 to 2029. 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.

Item 1B.		UNRESOLVED STAFF COMMENTS

Not applicable.

Item 2.		PROPERTIES

We own nine buildings in Sunnyvale, California, providing approximately 252,000 square feet of space utilized for administration, marketing, sales, service, research and product development and manufacturing. We also own an approximate 20,000 square foot building utilized for sales, service and administration in Idstein, Germany, with approximately 77,000 square foot building for marketing, research and development, manufacturing and administration in Germering, Germany and an approximate 32,000 square foot building in Osaka, Japan for sales, service and administration. As part of the acquisition of ESA Life Sciences Tools business in fiscal 2010, we acquired an approximately 58,000 square foot building utilized for research and development and manufacturing in Chelmsford, Massachusetts.

We lease sales and service offices in Austria, Australia, Brazil, China, Denmark, France, Germany, India, Ireland, Italy, Japan, Korea, the Netherlands, Singapore, Sweden, Switzerland, Taiwan, the United Kingdom and the U.S. In addition, we lease marketing and research and product development offices in Salt Lake City, Utah. We also lease marketing and research and product development offices in Amsterdam, the Netherlands. Our facilities are well maintained, adequate to conduct our current business.

Item 3.		LEGAL PROCEEDINGS

We are a party to various legal proceedings arising in the ordinary course of our business, but are not currently a party to any legal proceeding that management believes will have a material adverse effect on our financial position or results of operations.

PART II

Item 5.		MARKET FOR OUR COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER REPURCHASES OF EQUITY SECURITIES

MARKET PRICE OF COMMON STOCK

Our common stock is traded in the over-the-counter market through the Nasdaq Global Select Market under the symbol DNEX. The following table sets forth, for the periods indicated, the high and low sales price as reported by the Nasdaq Global Select Market.

		Fiscal 2010								Fiscal 2009
Quarter		High				Low				High				Low
First		$	65.91			$	56.09			$	74.83			$	61.39
Second		$	73.88			$	62.97			$	64.59			$	43.01
Third		$	76.13			$	65.71			$	52.62			$	40.03
Fourth		$	85.97			$	74.46			$	63.59			$	47.83

As of August 27, 2010, there were 666 holders of record of our common stock as shown on the records of our transfer agent.

DIVIDENDS

As of August 27, 2010, we have paid no cash dividends on our common stock and we do not anticipate doing so in the foreseeable future.

ISSUER PURCHASES OF EQUITY SECURITIES

During the fourth quarter of fiscal 2010, 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 fiscal 1989, with the Board of Directors most recently authorizing in October 2008 future repurchases of 1,000,000 shares of common stock as well as authorizing the repurchase of additional shares of common stock equal to the number of common shares issued pursuant to our employee stock plans.

The following table indicates common shares repurchased and additional shares added to the program during the quarter ended June 30, 2010:

										Total
										Number of								Maximum
										Shares								Number of
										Purchased								Shares that
		Total				Avg.				as Part of				Additional				May Yet be
		Number of				Price				Publicly				Shares				Purchased
		Shares				Paid per				Announced				Authorized for				Under the
Period		Purchased				Share				Program(1)				Purchase(1)				Program(2)
April 1 - 30, 2010			—								8,290,151				3,229				1,000,740
May 1 - 31, 2010			218,216			$	80.26				8,508,367				106,362				888,886
June 1 - 30, 2010			81,302			$	76.01				8,589,669				10,260				817,844
Total			299,518			$	79.11				8,589,669				119,851				817,844

PERFORMANCE GRAPH

This section is not “soliciting material”, is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

The following graph demonstrates a comparison of cumulative total returns for our Common Stock, the SIC Code Index and the Standard & Poor’s 500 Stock Index, assuming $100 invested as of June 30, 2005:

Assumes $100 invested June 30 2005 — Assumes dividend reinvested
Fiscal year ended June 30, 2010

COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE
COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS

		Fiscal Year Ending
COMPANY/INDEX/MARKET		6/30/2005				6/30/2006				6/30/2007				6/30/2008				6/30/2009				6/30/2010
Dionex Corporation			100.00				125.37				162.82				152.22				139.98				170.78
Analytical Instruments (SIC)			100.00				113.14				150.44				176.81				141.62				171.54
S&P Composite			100.00				108.63				131.00				113.81				83.98				96.09

Item 6.		SELECTED CONSOLIDATED FINANCIAL DATA

Statement of operations information:

		Year Ended June 30,
		2010				2009 (1)				2008 (1)				2007 (1)				2006 (1)
		(In thousands, except per share amounts)
Net sales		$	419,607			$	385,048			$	377,538			$	327,284			$	291,300
Cost of sales			139,637				128,651				126,756				109,015				99,857
Gross profit			279,970				256,397				250,782				218,269				191,443
Operating expenses:
Selling, general and administrative			160,062				143,171				142,545				123,525				113,241
Research and product development			31,586				28,979				28,943				24,737				22,392
Total operating expenses			191,648				172,150				171,488				148,262				135,633
Operating income			88,322				84,247				79,294				70,007				55,810
Interest income			342				1,300				2,212				1,435				1,874
Interest expense			(175	)			(493	)			(878	)			(335	)			(184	)
Other income (expense), net			592				(1,146	)			(1,433	)			696				1,200
Income before taxes on income			89,081				83,908				79,195				71,803				58,700
Taxes on income			28,659				27,818				25,598				25,968				22,820
Net income			60,422				56,090				53,597				45,835				35,880
Less: Net income attributable to noncontrolling interests			1,366				635				797				513				187
Net income attributable to Dionex Corporation		$	59,056			$	55,455			$	52,800			$	45,322			$	35,693
Basic earnings per share attributable to Dionex Corporation		$	3.35			$	3.10			$	2.85			$	2.37			$	1.78
Diluted earnings per share attributable to Dionex Corporation		$	3.28			$	3.04			$	2.77			$	2.31			$	1.74
Shares used in computing earnings per share amounts:
Basic			17,643				17,903				18,506				19,136				20,013
Diluted			17,983				18,228				19,072				19,615				20,527

Balance sheet information:

		At June 30,
		2010				2009				2008				2007				2006
		(In thousands)
Working capital		$	140,129			$	128,223			$	106,269			$	93,780			$	97,769
Total assets			361,988				329,984				330,430				272,188				250,402
Long-term debt			—				—				—				—				—
Dionex stockholders’ equity			248,783				222,414				196,749				185,708				185,382

ITEM 7.		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 notes to our financial statements contained in this Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of 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, the risks associated with international sales and operations, 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 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.

Overview

Dionex Corporation 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, food and electronics industries in a variety of applications.

During fiscal 2010, Dionex achieved growth in certain of its end-user markets, including the life sciences, environmental, chemical/petrochemical, food and beverage and electronics markets. We saw weaker demand in our power market, which resulted in decreased sales. Our chemical/petrochemical, food, and beverage, electronics and power markets are the most sensitive of our end-markets to economic conditions. These markets showed weaker demand in the first half of the fiscal 2010 but rebounded in the last half of fiscal 2010. We were pleased to report sales growth in all three of our major geographic regions. We saw a strong rebound in sales in North America in the second half of fiscal 2010 as all of our end markets, except electronics, showed stronger demand resulting in growth for the full fiscal year. In our European regions, our life sciences customers increased spending during fiscal 2010, along with our chemical/petrochemical customers but these increases were offset by lower sales in our environmental and food and beverage markets. Our net sales in Asia Pacific region increased by 16% in fiscal 2010 driven by growth in Japan, China, India, Taiwan and Singapore. Despite the weaker economic conditions in the first six months of the fiscal year, we also achieved our key initiatives for the year. In product development, we introduced the largest number of new instruments and consumables in any year in the history of the company. We believe that these new products and related applications position us well for future growth.

Looking ahead to next year, we anticipate that foreign currency fluctuations will have a negative impact on our reported sales and earnings per share for the first quarter and the full fiscal year of approximately 2 percentage points. Looking at our regions, we anticipate that we will see good growth in North America in fiscal 2011 as the economy continues to recover. We anticipate that sales in Europe will grow but not as strongly as North America in fiscal 2011. Finally, sales in Asia/Pacific will likely grow but more in line with European rates, as we had one large sale in Japan in fiscal 2010 that will not repeat in fiscal 2011. We expect that our gross margin will remain in the 66% to 67% range in fiscal 2011 and that our operating expenses will increase less than sales.

Results of Operations

The following table summarizes our consolidated statements of income for the last three fiscal years with each line item shown as a percentage of net sales.

		Year Ended June 30
		2010				2009				2008
Net sales			100.0	%			100.0	%			100.0	%
Cost of sales			33.3				33.4				33.6
Gross profit			66.7				66.6				66.4
Operating expenses:
Selling, general and administrative			38.2				37.2				37.8
Research and product development			7.5				7.5				7.7
Total operating expenses			45.7				44.7				45.5
Operating income			21.0				21.9				20.9
Interest income, net			0.1				0.2				0.4
Other income (expense), net			0.1				(0.3	)			(0.4	)
Income before taxes			21.2				21.8				20.9
Taxes on income			6.8				7.2				6.8
Net income			14.4				14.6				14.1
Less: Net income attributable to noncontrolling interests			0.3				0.2				0.2
Net income attributable to Dionex			14.1	%			14.4	%			13.9	%

Unless otherwise noted below, our fiscal years ending June 30, 2010, June, 30, 2009 and June 30, 2008 are referred to as “2010,” “2009,” and “2008,” respectively.

Net Sales

Net sales increased $34.6 million, or 9% in 2010 compared to 2009 due to higher demand for our products in the North America and Asia Pacific regions, partially driven by our acquisition of the ESA Life Sciences Tools business and introduction of the Ultimate 3000 RSLCnano system and ICS-5000 RFIC System towards the end of 2010. Dionex is subject to the effects of foreign currency fluctuations, which have an impact on net sales and gross profits. Foreign currency fluctuations increased net sales by 3% in 2010, decreased net sales by 3% in 2009 and increased net sales by 5% in 2008. Additionally, changes in sales or demand in any year due to price changes were insignificant.

Including the impact of foreign currency fluctuations, percentage changes in net sales were as follows:

		From 2009				From 2008
		to				to
		2010				2009
Total:			9	%			2	%
By geographic region:
North America			12	%			-6	%
Europe			1	%			-3	%
Asia/Pacific			16	%			17	%

Excluding the impact of foreign currency fluctuations, percentage changes in net sales were as follows:

		From 2009				From 2008
		to				to
		2010				2009
Total:			6	%			5	%
By geographic region:
North America			12	%			-5	%
Europe			-2	%			2	%
Asia/Pacific			12	%			18	%

Net sales outside North America accounted for 73%, 74%, and 72% of net sales in 2010, 2009, and 2008, respectively. Direct sales accounted for 94%, 95%, and 93% of net sales in 2010, 2009, and 2008, respectively. International distributors and representatives in Europe, Asia and other international markets accounted for the remaining balance of net sales. There were no significant price changes to our products during the three-year period ended June 30, 2010.

Net sales from a regional perspective

North America - Net sales in this region increased 12% in 2010 compared to 2009 primarily due to strong demand for our products in the life science, chemical/petrochemical, food and beverage and environmental markets, partially driven by the acquisition of the ESA Life Sciences Tools business that was completed in September 2009. Net sales decreased by 6% in fiscal 2009 compared to 2008 primarily due to the unfavorable economic conditions affecting the demand for our products in all our end markets, except for our food and beverage customers.

Europe - Net sales in this region increased 1% in reported dollars in 2010 compared to 2009 (excluding the impact of foreign currency, net sales decreased 2% in 2010 compared to 2009) reflecting weaker demand in our environmental and power markets, offset by increased demand for our products in the life science and chemical/petrochemical markets offset by weaker demand in our environmental and power markets. Net sales decreased 3% in reported dollars in 2009 compared to 2008 (excluding the impact of foreign currency, net sales increased 2% in 2009 compared to fiscal 2008) reflecting growth in our HPLC products offset by an unfavorable foreign currency fluctuation as result of the strengthening U.S. dollar against the Euro in 2009.

Asia Pacific - Net sales in this region increased 16% in reported dollars in 2010 compared to 2009 (excluding the impact of foreign currency, net sales in Asia Pacific increased 12% in 2010 compared to 2009) driven by higher demand for our products in the life sciences, environmental, food and beverage, and electronic markets, primarily from Japan (which includes a significant one-time order in 2010), China, India, Taiwan and Singapore. We continue to make investments in our sales and service organization in certain emerging markets in Asia, such as China and India. Net sales increased 17% in reported dollars in 2009 compared to 2008 (excluding the impact of foreign currency, net sales in Asia Pacific increased 18% in 2009 compared to 2008) partially due to continued sales force expansion in emerging markets driving higher demand for our products in the life sciences, environmental and food and beverage markets in countries such as China, India and Taiwan.

Net sales from a product line perspective

IC - Net sales of our IC products increased 7% in 2010 compared to 2009 driven by higher demand in the environmental and industrial markets for our RFIC instrumentation, consumables and services in North America and Asia/Pacific regions. Net sales increased 2% in 2009 compared to 2008 driven primarily by higher demand in the environmental and food and beverage markets for our RFIC instrumentation, consumables and services in the Asia/Pacific region.

HPLC - Net sales of HPLC products increased 16% in fiscal 2010 compared to 2009 primarily due to net sales generated from our ESA products acquired in September 2009, combined with significant new products introduced during the year, including our new RSLCnano systems. Net sales increased slightly by 1% in 2009 compared to 2008 driven primarily by increased demands in Asia/Pacific, partially offset by weaker demand in North America.

Gross Profit

Gross profit increased by approximately 9% in 2010 compared to 2009 and increased by approximately 2% in 2009 compared to 2008. Gross profit as a percentage of sales was 66.7%, 66.6% and 66.4% in 2010, 2009, and 2008, respectively. The increase in gross profit between the years was proportional to the increase in net sales in those same years. Gross profit as a percentage of net sales in 2010 compared to 2009 remained relatively consistent, while gross profit as a percentage of sales in 2009 compared to 2008 increased slightly due to a higher percentage of sales occurring internationally where there are higher gross profits in certain countries, partially offset by a strengthening U.S. dollar against certain local currencies resulting in unfavorable foreign currency fluctuations.

Selling, General and Administrative

Selling, general and administrative (SG&A) expenses as a percentage of net sales were approximately 38%, 37%, and 38% in 2010, 2009, and 2008, respectively. SG&A increased 12% to $160.1 million in 2010 compared to $143.2 million in 2009 due to headcount increases, including staff added from the ESA acquisition, and increased selling and other expenses which are attributed to the higher net sales. In addition, our Oracle IT implementation efforts in Europe added operating expenses during the year. SG&A expenses increased less than 1% to $143.2 million in 2009 compared to $142.6 million in fiscal 2008 which included $3.6 million of expenses from our continued expansion efforts in Asia/Pacific region offset by a decrease of $5.0 million due to foreign currency fluctuations. A significant portion of the increased expenses in Asia/Pacific region was attributable to increased selling costs.

Research and Product Development

Research and product development (R&D) expenses as a percentage of net sales were approximately 8% in each year for 2010, 2009, and 2008. While R&D expenses increased by 9% in 2010 compared to 2009 due to increased headcount from the ESA acquisition, R&D as a percentage of net sales in 2009 compared to 2008 was in line with the revenue contributed by the acquisition of the ESA Life Sciences Tools business.

Interest Income

Interest income was $0.3 million, $1.3 million, and $2.2 million in 2010, 2009, and 2008, respectively. The declining trend in interest income from 2008 to 2010 was primarily due to lower interest rates in the U.S. and Europe.

Interest Expense

Interest expense was $0.2 million, $0.5 million, and $0.9 million in 2010, 2009, and 2008, respectively. The declining trend in interest expense from 2008 to 2010 was primarily due to lower interest rates on short-term borrowings.

Other Income (Expense), Net

Other income (expense), net was $0.6 million, ($1.1 million), and ($1.4 million) in 2010, 2009, and 2008, respectively. The changes were primarily due to changes in foreign currency exchanges gains or losses in those years.

Taxes on Income

Our effective tax rate was 32.0%, 33.4%, and 32.6% for fiscal 2010, 2009, and 2008, respectively. Our effective tax rate is affected by the mix of taxable income among the various tax jurisdictions in which we do business. The decrease in the effective tax rate in 2010 compared to 2009 was primarily due to favorable resolutions of certain tax audits where we had previously accounted for uncertain tax positions. The increase in the effective tax rate in 2009 compared to 2008 was primarily due to higher state taxes.

Net income Attributable to Noncontrolling Interests

Net income attributing to noncontrolling interest was $1.4 million, $0.6 million and $0.8 million in 2010, 2009, and 2008, respectively. These amounts result from net income in our majority-owned subsidiaries.

Earnings per Share

Diluted earnings per share were $3.28, $3.04, and $2.77 in 2010, 2009, and 2008, respectively. The increase in diluted earnings per share in 2010 compared to 2009 and 2009 compared to 2008 was primarily due to increased sales during those years.

Liquidity and Capital Resources

Cash, cash equivalents and short-term investments combined were approximately $70.3 million as of each of June 30, 2010 and 2009. Our working capital was $140.1 million and $128.2 million as of June 30, 2010, and 2009, respectively.

Cash generated by operating activities was $67.8 million, $64.1 million, and $70.7 million in 2010, 2009, and 2008, respectively. The increase in operating cash flow in 2010 compared to 2009 was due primarily to improved operating results resulting from higher revenues, higher deferred revenue and an increase in accrued liabilities and income taxes payable, partially offset by higher prepaid expense and higher accounts receivable from an increase in day sales outstanding. The decrease in operating cash flows in 2009 compared to 2008 was due to higher inventory levels due to a new subsidiary, higher prepaid income taxes on intercompany dividends partially offset by higher operating results, lower accruals for variable compensation and lower accounts receivable due to faster payments from customers.

Cash used for investing activities was $34.0 million, $17.9 million, and $15.3 million in 2010, 2009, and 2008, respectively. The increase of cash used in 2010 compared to 2009 was primarily due to our purchase of the ESA Life Science Tools business for approximately $21.1 million in fiscal 2010 as well as our ongoing global Oracle system upgrade and its associated worldwide rollout project cost and other related capital expenditures. The increase of cash used in 2009 compared to 2008 was primarily due to our purchase of the AutoTrace product line from Caliper Life Sciences, Inc. for approximately $5 million in fiscal 2009 as well as an ongoing Oracle system upgrade and its associated worldwide rollout project cost and other related capital expenditures.

Cash used for financing activities was $29.3 million, $48.3 million and $37.9 million in 2010, 2009, and 2008, respectively. Financing activities for all three years consisted primarily of common stock repurchases, partially offset by proceeds from issuances of shares pursuant to our equity incentive plans, repayment of short-term obligations, and the tax benefits related to stock option plans in 2010. In 2010, we repurchased 775,644 shares of our common stock on the open market for $54.9 million, compared with 791,517 shares repurchased for $44.2 million in 2009 and 928,131 shares repurchased for $70.3 million in 2008.

Our available lines of credit totaled $25.7 million and $28.8 million at June 30, 2010 and 2009, respectively. The decrease in available lines of credit was due to increased borrowings outstanding during fiscal 2010. We believe our cash flow from operations, our existing cash and cash equivalents and our bank lines of credit will be adequate to meet our cash requirements for at least the next 12 months. The line of credit matures on December 31, 2010 and it is our intention to renew the line of credit. The impact of inflation on our financial position and results of operations was not significant during any of the periods presented.

CONTRACTUAL OBLIGATIONS

The following summarizes our contractual obligations as of June 30, 2010, and the effect such obligations are expected to have on our liquidity and cash flows in future periods:

		Payments Due by Period
						Less Than				1-3				4-5				After 5
(in thousands)		Total				1 Year				Year				Years				Years
Short-Term Borrowings		$	3,149			$	3,149			$	—			$	—			$	—
Purchase Obligations			527				—				527				—				—
Operating Lease Obligations			12,336				5,507				4,367				1,102				1,360
Total		$	16,012			$	8,656			$	4,894			$	1,102			$	1,360

As of June 30, 2010, we had approximately $8.0 million recorded pertaining to unrecognized tax benefits. We are unable to make a reasonable estimate as to when these amounts will be paid or released due to the uncertainties related to these tax matters, therefore these amounts are excluded from the table above.

ACCOUNTING PRONOUNCEMENTS

Refer to Note 1 in the Notes to Consolidated Financial Statements contained elsewhere in this Annual Report on Form 10-K, which is incorporated herein by reference

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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 net sales and expenses during the reporting period. We evaluate our estimates, including those related to product returns and allowances, inventory valuation, goodwill and other intangible assets, income taxes, warranty and installation provisions, and contingencies, on an on-going 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

Net sales consist primarily of sales of products, software licenses, and services (including installation, training, other consulting services, and extended maintenance contracts on our products). Dionex recognizes revenue when persuasive evidence of an arrangement exists, the product has been delivered or service has been performed, the sales price is fixed or determinable, and collection is reasonably assured. Delivery of the product is generally considered to have occurred when shipped. Shipping charges billed to customers are included in net sales, and the related costs are included in cost of sales.

In all cases, the portion of revenue allocated to any 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 maintenance, installation services, and/or training that are delivered after the related products have been delivered. Product installation consists of system set-up, calibration and basic functionality training and generally requires one to three days depending on the product. The fair value of these product 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 product installation have historically been accurate and consistent from product to product. The fair value of training services are based on the price charged when the element is sold separately or, if not sold separately, when the price is established by authorized management. 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. For sales of extended maintenance contracts with a separate contract price, Dionex defers revenue equal to the separately stated price and recognize revenue on a straight-line basis over the contract period.

Sales from products are typically not subject to rights of return and, historically, actual sales returns have not been significant. Dionex sells products through its direct sales force and through distributors and resellers. Sales through distributors and resellers are recognized as revenue upon sale to the distributor or reseller as these sales are considered to be final and no right of return or price protection exists. Customer acceptance is generally limited to performance under our published product specifications. When additional customer acceptance conditions apply, all revenue related to the sale is deferred until acceptance is obtained.

In accordance with the software revenue guidance, Dionex recognizes revenue from perpetual software licenses at the inception of the license term assuming all revenue recognition criteria have been met. Dionex uses the residual method to allocate revenue to software licenses at the inception of the license term when vendor specific objective evidence (“VSOE”) of fair value for the undelivered elements exists, such as software installations, and all other revenue recognition criteria have been satisfied. If Dionex cannot objectively determine the fair value of any undelivered elements included in these multiple-element arrangements, revenue is deferred until all elements are delivered, or until fair value can be objectively determined for the remaining undelivered elements.

Product Warranty

The sales of Dionex products generally include a limited one-year warranty on product quality. The estimated cost of product warranty claims is accrued at the time the sale is recognized, based on historical experience. While Dionex believes that 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 our products could result in actual expenses that are below those currently estimated.

Loss Provisions on Accounts Receivable and Inventory

Dionex maintains allowances for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. If the financial condition of any of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Dionex assesses collectability based on a number of factors including, but not limited to, past transaction history with 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. Material differences may result in the amount and timing of our revenue for any period.

Inventories, consisting of raw materials, work-in-process and finished goods are stated at the lower of cost (first-in, first-out) or market. Dionex plans production based on orders received and forecasted demand and assesses the valuation of its inventory on a quarterly basis. Products may be unsalable due to market and economic conditions, technology changes, new product introductions and changes in strategic direction and require estimates that may include uncertain elements. Actual demand may differ from forecasted demand and such differences may have a material effect on recorded inventory values. Based on management’s estimate, adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess or obsolete inventory.

Long-Lived Assets, Intangible Assets with Finite Lives and Goodwill

Dionex assesses for the impairment of long-lived assets, intangible assets and goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In addition, we assess goodwill and intangible assets with indefinitely lives for impairment at least annually. Factors Dionex consider important which 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 Dionex determines that the carrying value of long-lived assets and 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. Dionex performs an impairment review for goodwill at least annually in April of each year.

Intangible assets with indefinite lives are not amortized but rather are tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test, which is performed in April of each year, involves comparing the fair value of the intangible asset with its carrying amount. If the carrying amount exceeds the fair value of the intangible asset, an impairment loss is recognized in an amount equal to that excess. No impairment charges for indefinite life intangible assets have been recorded in any period presented.

Taxes on Income

As part of the process of preparing the consolidated financial statements, Dionex estimates 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 with our consolidated balance sheets.

Dionex accounts for income taxes in accordance with the accounting standards for income taxes which require that deferred tax assets and liabilities be recognized for the effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. These accounting standards also require that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized.

In first quarter of fiscal 2008, Dionex adopted a new accounting standards which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. 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 interpretation, 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. Dionex evaluates 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 Dionex later determine that the exposure is lower or that the liability is not sufficient to cover our revised expectations, Dionex will adjust the liability and effect a related change in tax provision during the period in which Dionex makes such determination.

Stock-Based Compensation

Dionex accounts for stock-based compensation costs in accordance with the accounting standards for stock-based compensation, which requires that all share-based payments to employees be recognized in the statements of operations based on their fair values. The fair value of each option on the date of grant is estimated using the Black-Scholes option-pricing model using the single option approach for options granted after June 30, 2005. Dionex recognizes the expense ratably on a straight-line basis over the requisite service period. The stock-based compensation expense recognized in the consolidated statements of operations is based on awards that ultimately are expected to vest; therefore, the amount of expense has been reduced for estimated forfeitures. This accounting standard requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience. If actual results differ significantly from these estimates, stock-based compensation expense and Dionex’s results of operations could be materially impacted. In addition, if Dionex employs different assumptions in the application of this accounting standard, the compensation expense that Dionex records in the future periods may differ significantly from what Dionex has recorded in the current period.

Item 7A.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Dionex is exposed to financial market risks from 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, we 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 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 2010 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 Exchange

Revenues generated from international operations are generally denominated in foreign currencies. We entered 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. As of June 30, 2010, we had forward exchange contracts to sell foreign currencies totaling approximately $23.7 million, including approximately $17.7 million in Euros, $4.3 million in Japanese yen, $0.8 million in Australian dollars and $0.9 million in Canadian dollars. As of June 30, 2009, we had forward exchange contracts to sell foreign currencies totaling approximately $15.2 million, including approximately $9.8 million in Euros, $3.9 million in Japanese yen, $0.9 million in Australian dollars and $0.6 million in Canadian dollars. At June 30, 2010 and 2009, the aggregate unrealized gains or losses on the forward exchange contracts were not material.

Dionex uses a $10 million cross-currency swap arrangement for Japanese yen designated as a net investment hedge to hedge the exchange rate exposure of our net investment in its Japanese subsidiary. During fiscal 2010, the arrangement was extended to March 2012. Prior to January 1, 2008, this derivative instrument did not qualify for net investment hedge accounting and was deemed to be an ineffective hedge instrument because, 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, Dionex marked to market the decrease in value of approximately $1.0 million for the six months ended December 31, 2007 and this amount was recorded in other expense, net. Starting on January 1, 2008, Dionex determined that the cross-currency swap qualified as a net investment hedge in which the effective portion of the gain or loss on the derivative instruments is reported in accumulated other comprehensive income as part of the foreign currency translation adjustment. Dionex evaluates the need to redesignate the hedging relationship on a quarterly basis. In fiscal 2010 and 2009, we marked to market $1.2 million and $1.1 million, respectively, in unrealized losses associated with the hedge, which is reported in accumulated other comprehensive income as part of the foreign currency translation adjustment.

A sensitivity analysis assuming a hypothetical 10% movement in foreign currency exchange rates applied to our hedging contracts and underlying balances being hedged as of June 30, 2010 and 2009 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 sales by 3% in fiscal 2010 and decreased sales by 3% in fiscal 2009 and increased sales by 5% in fiscal 2008.

Interest and Investment Income

Our interest and investment income is subject to changes in the general level of U.S. interest rates. Changes in U.S. interest rates affect the interest earned on our cash equivalents and short-term investments. A sensitivity analysis assuming a hypothetical 10% movement in interest rates applied to our investment balances as of June 30, 2010 and 2009 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 our actual balances and changes in the timing and amount of interest rate movements.

Debt and Interest Expense

As of June 30, 2010, Dionex had short-term notes payable of $3.1 million. A sensitivity analysis assuming a hypothetical 10% movement in interest rates applied to our outstanding debt balance as of June 30, 2010, 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.

Item 8.		FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

		Page
FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm			27
Consolidated Balance Sheets as of June 30, 2010 and 2009			28
Consolidated Statements of Income for the years ended June 30, 2010, 2009, and 2008			29
Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years ended June 30, 2010, 2009, and 2008			30
Consolidated Statements of Cash Flows for the years ended June 30, 2010, 2009, and 2008			31
Notes to Consolidated Financial Statements			32

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Dionex Corporation:

We have audited the accompanying consolidated balance sheets of Dionex Corporation and subsidiaries (the “Company”) as of June 30, 2010 and 2009, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended June 30, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Dionex Corporation and subsidiaries at June 30, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2010, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of June 30, 2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 27, 2010 expressed an unqualified opinion on the Company’s internal control over financial reporting.

 

/s/ Deloitte & Touche LLP
San Jose, California
August 27, 2010

DIONEX CORPORATION

		2010				2009
ASSETS
Current assets:
Cash and cash equivalents		$	69,830			$	69,684
Short-term investments			448				641
Accounts receivable (net of allowance for doubtful accounts of $543 and $560 in 2010 and 2009, respectively)			86,780				70,535
Inventories			37,458				31,274
Deferred taxes			14,036				12,171
Prepaid expenses and other current assets			18,991				21,917
Total current assets			227,543				206,222
Property, plant and equipment, net			76,062				71,927
Goodwill			35,013				29,354
Intangible assets, net			13,859				8,506
Other assets			9,511				13,975
Total assets		$	361,988			$	329,984
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Borrowings under line of credit		$	3,149			$	64
Accounts payable			17,303				16,545
Accrued liabilities			33,980				31,222
Deferred revenues			25,203				22,559
Income taxes payable			5,247				4,581
Accrued product warranty			2,532				3,028
Total current liabilities			87,414				77,999
Deferred and other income taxes payable			16,427				24,348
Other long-term liabilities			7,272				3,707
Commitments and contingencies (Note 14)
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; 17,437,276 and 17,759,690 shares issued and outstanding in 2010 and 2009, respectively) and capital in excess of par value			207,855				186,649
Retained earnings			34,195				21,459
Accumulated other comprehensive income			6,733				14,306
Total Dionex Corporation stockholders’ equity			248,783				222,414
Noncontrolling interests			2,092				1,516
Total stockholders’ equity			250,875				223,930
Total liabilities and stockholders’ equity		$	361,988			$	329,984

See notes to consolidated financial statements.

DIONEX CORPORATION

		2010				2009				2008
Net sales		$	419,607			$	385,048			$	377,538
Cost of sales			139,637				128,651				126,756
Gross profit			279,970				256,397				250,782
Operating expenses:
Selling, general and administrative			160,062				143,171				142,545
Research and product development			31,586				28,979				28,943
Total operating expenses			191,648				172,150				171,488
Operating income			88,322				84,247				79,294
Interest income			342				1,300				2,212
Interest expense			(175	)			(493	)			(878	)
Other income (expense), net			592				(1,146	)			(1,433	)
Income before taxes			89,081				83,908				79,195
Taxes on income			28,659				27,818				25,598
Net income			60,422				56,090				53,597
Less: Net income attributable to noncontrolling interests			1,366				635				797
Net income attributable to Dionex Corporation		$	59,056			$	55,455			$	52,800
Basic earnings per share attributable to Dionex Corporation		$	3.35			$	3.10			$	2.85
Diluted earnings per share attributable to Dionex Corporation		$	3.28			$	3.04			$	2.77
Shares used in computing earnings per share:
Basic			17,643				17,903				18,506
Diluted			17,983				18,228				19,072

See notes to consolidated financial statements.

DIONEX CORPORATION

														Accumulated
														Other
		Common Stock								Retained				Comprehensive				Noncontrolling								Comprehensive
		Shares				Amount				Earnings				Income				Interest				Total				Income
Balance, June 30, 2007			18,845,802			$	161,409			$	13,223			$	11,076			$	722			$	186,430
Distributions to noncontrolling interest																			(179	)			(179	)
Net income											52,800								797				53,597			$	53,597
Cumulative translation adjustments (net of tax of $6,308)															13,042								13,042				13,042
Unrealized gain on securities															4								4				4
Comprehensive income, net of tax																											66,643
Comprehensive income attributable to noncontrolling interests																											(797	)
Comprehensive income attributable to Dionex Corporation																										$	65,846
Common stock issued under employee stock-based compensation plans			213,042				9,143																9,143
Repurchase of common stock			(928,131	)			(8,278	)			(62,019	)											(70,297	)
Stock-based compensation expense							5,939																5,939
Tax benefit from employee stock transactions							1,832																1,832
Adoption of uncertain tax positions accounting standards											(1,422	)											(1,422	)
Balance, June 30, 2008			18,130,713			$	170,045			$	2,582			$	24,122			$	1,340			$	198,089
Distributions to noncontrolling interest																			(459	)			(459	)
Net income											55,455								635				56,090			$	56,090
Cumulative translation adjustments (net of tax of $3,805)															(9,815	)							(9,815	)			(9,815	)
Unrealized loss on securities															(1	)							(1	)			(1	)
Comprehensive income, net of tax																											46,274
Comprehensive income attributable to noncontrolling interests																											(635	)
Comprehensive income attributable to Dionex Corporation																										$	45,639
Common stock issued under employee stock-based compensation plans			420,494				15,864																15,864
Repurchase of common stock			(791,517	)			(7,654	)			(36,578	)											(44,232	)
Stock-based compensation expense							6,594																6,594
Tax benefit from employee stock transactions							1,800																1,800
Balance, June 30, 2009			17,759,690			$	186,649			$	21,459			$	14,306			$	1,516			$	223,930
Distributions to noncontrolling interest																			(790	)			(790	)
Net income											59,056								1,366				60,422			$	60,422
Cumulative translation adjustments (net of tax of $4,020)															(7,574	)							(7,574	)			(7,574	)
Unrealized gain on securities															1								1				1
Comprehensive income																											52,849
Comprehensive income attributable to noncontrolling interests																											(1,366	)
Comprehensive income attributable to Dionex Corporation																										$	51,483
Common stock issued under employee stock-based compensation plans			453,230				20,373																20,373
Repurchase of common stock			(775,644	)			(8,575	)			(46,320	)											(54,895	)
Stock-based compensation expense							6,783																6,783
Tax benefit from employee stock transactions							2,625																2,625
Balance, June 30, 2010			17,437,276			$	207,855			$	34,195			$	6,733			$	2,092			$	250,875

See notes to consolidated financial statements.

DIONEX CORPORATION

		2010				2009				2008
Cash flows from operating activities:
Net income		$	60,422			$	56,090			$	53,597
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			12,092				9,491				8,767
Stock-based compensation			6,783				6,594				5,939
Allowance for bad debts			69				135				(232	)
Loss on disposal of fixed assets			344				363				543
Tax benefit related to stock transactions			(2,625	)			(1,800	)			(1,832	)
Deferred income taxes			930				1,184				(944	)
Changes in assets and liabilities:
Accounts receivable			(19,835	)			(38	)			(1,321	)
Inventories			(5,681	)			(2,343	)			1,688
Prepaid expenses and other assets			(58	)			(7,322	)			(725	)
Accounts payable			1,821				432				1,506
Deferred revenue			4,215				2,079				2,398
Accrued liabilities			6,486				(1,298	)			3,912
Income taxes payable			3,214				733				(2,895	)
Accrued product warranty			(406	)			(228	)			290
Net cash provided by operating activities			67,771				64,072				70,691
Cash flows from investing activities:
Proceeds from sale of marketable securities			225				—				124
Purchase of short term investments			—				(568	)			(77	)
Purchase of property, plant and equipment			(13,019	)			(11,379	)			(13,847	)
Purchase of intangible assets			(112	)			—				(2,071	)
Acquisition, net of cash acquired			(21,147	)			(5,976	)			543
Proceeds from property, plant and equipments disposed			42				—				—
Net cash used for investing activities			(34,011	)			(17,923	)			(15,328	)
Cash flows from financing activities:
Net borrowings (payments) under line-of-credit			3,087				(21,746	)			21,506
Proceeds from issuance of common stock			20,373				15,864				9,143
Repayments of capital lease obligations			—				—				(58	)
Tax benefit related to stock transactions			2,625				1,800				1,832
Repurchase of common stock			(54,895	)			(44,232	)			(70,297	)
Dividends paid			(453	)			—				—
Net cash used for financing activities			(29,263	)			(48,314	)			(37,874	)
Effect of exchange rate changes on cash			(4,351	)			(3,775	)			3,197
Net increase (decrease) in cash and equivalents			146				(5,940	)			20,686
Cash and cash equivalents, beginning of year			69,684				75,624				54,938
Cash and cash equivalents, end of year		$	69,830			$	69,684			$	75,624
Supplemental disclosures of cash flow information:
Income taxes paid		$	20,685			$	28,865			$	31,162
Interest expense paid		$	151			$	451			$	790
Supplemental schedule of non-cash investing and financing activities:
Accrued purchases of property, plant and equipment		$	477			$	919			$	1,563
Accrued purchase consideration		$	—			$	657			$	—
Elimination of equity interest associated with step-acquisition of business		$	—			$	760			$	—
Effect of adoption of uncertain tax positions accounting standards:
Cumulative effect on retained earnings		$	—			$	—			$	1,422
Increase in deferred and other income taxes payable		$	—			$	—			$	16,033
Increase in other assets		$	—			$	—			$	11,409
Decrease in income taxes payable		$	—			$	—			$	3,202
Capital lease obligation for equipment purchases		$	—			$	—			$	487

See notes to consolidated financial statements.

DIONEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Summary of Significant Accounting Policies

Organization and Basis of Presentation

Dionex Corporation designs, manufactures and markets chromatography systems for chemical analysis. Our products are used in environmental analysis and by the pharmaceutical, life sciences, chemical/petrochemical, power generation, food and electronics industries in a variety of applications. The consolidated financial statements include the accounts of Dionex Corporation and all of our wholly and majority owned subsidiaries (referred to in this report as “Dionex,” “we,” “us” and “our”).

All significant intercompany accounts and transactions have been eliminated in consolidation. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of net sales and expenses during the reported periods. Actual results could differ materially from those estimates and assumptions.

Cash, Cash Equivalents and Short-Term Investments

Cash and cash equivalents are carried at market value. Dionex considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Dionex has classified short-term investments, which consist primarily of debt and equity securities as “held-to-maturity” or “available-for-sale.” Securities classified as held-to-maturity are reported at amortized cost. Available-for-sale securities are reported at fair market value, with the aggregate unrealized holding gains and losses (net of tax effect) reported as a component of accumulated other comprehensive income in stockholders’ equity. Dionex does not have any held-to-maturity securities as of June 30, 2010 and 2009.

Concentration of Credit Risk

Dionex places cash, cash equivalents and short-term investments with and in the custody of financial institutions that management believes are of high credit quality, which at times, are in excess of amounts insured by the Federal Deposit Insurance Corporation (FDIC). Management monitors the ongoing creditworthiness of these institutions. To date, Dionex has not experienced significant credit losses on these financial instruments.

Dionex sells its products primarily to large organizations in diversified industries worldwide. Credit risk is further mitigated by our credit evaluation process and the reasonably short collection terms. Dionex does not require collateral or other security to support accounts receivable and Dionex maintains allowances for potential credit losses.

Dionex is subject to certain risks and uncertainties and believes that changes in any of the following areas could have a material adverse effect on our future financial position or results of operations. Such factors include, among others: the continuation or spread of economic uncertainties; risks related to international operations, including foreign currency fluctuations; the importance of meeting customer demand for new products; competition in the analytical instrumentation market; our ability to maintain inventories; the importance of attracting and retaining key personnel; our ability to protect our proprietary information and acceptance of new products.

Inventories

Inventories, consisting of raw materials, work-in-process and finished goods are stated at the lower of cost (first-in, first-out) or market. Dionex plans production based on orders received and forecasted demand and assesses the valuation of its inventory on a quarterly basis. Products may be unsalable due to market and economic conditions, technology changes, new product introductions and changes in strategic direction and require estimates that may include uncertain elements. Actual demand may differ from forecasted demand and such differences may have a material effect on recorded inventory values. Based on management’s estimate, adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess or obsolete inventory.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Dionex capitalizes additions and improvements and expense maintenance and repairs as incurred. Depreciation is computed using the straight-line method based on estimated useful lives, ranging from 3 to 30 years. Leasehold improvements are amortized over the lesser of the useful life or the remaining term of the lease.

Capitalized Software

Dionex capitalizes certain internal and external costs incurred to acquire or create internal use software. Capitalized software is included in property, plant, and equipment and is depreciated using the straight-line method over the estimated useful life of the software, generally 3 to 5 years.

Goodwill and Intangible Assets

Dionex tests goodwill for impairment on an annual basis in April or more frequently if we believe indicators of impairment exist. The performance of the test involves a two-step process. The first step requires comparing the fair value of the reporting unit to its net book value, including goodwill. A potential impairment exists if the fair value of the reporting unit is lower than its net book value. The second step of the process is only performed if a potential impairment exists, and it involves comparing the aggregate fair value of the reporting unit’s net assets other than goodwill to the fair value of the reporting unit as a whole. Goodwill is considered impaired, and an impairment charge is recorded, if the excess of the fair value of the reporting unit over the fair value of the net assets is less than the carrying value of goodwill. Dionex found no impairment as a result of our fiscal 2010, 2009, and 2008 annual impairment reviews, as the fair value of our operating segments were in excess of its carrying value.

Intangible assets with finite lives include purchased technology, patents, trademarks and other intellectual properties. Intangible assets with finite lives are recorded at their fair market values as of the date of acquisition and amortized over their estimated useful lives of up to ten years.

Valuation of Long-lived Assets

The carrying value of our long-lived assets is reviewed for impairment whenever events or changes in circumstances indicated that an asset may not be recoverable. Dionex looks at current and future profitability, as well as current and future undiscounted cash flows, as primary indicators of recoverability. If impairment is determined to exist, any related impairment loss is calculated based on the amount by which the carrying value of the asset exceeds the fair value of the asset with fair value determined on a discounted cash flow basis.

Intangible assets with indefinite lives are not amortized but rather are tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test, which is performed in April of each year, involves comparing the fair value of the intangible asset with its carrying amount. If the carrying amount exceeds the fair value of the intangible asset, an impairment loss is recognized in an amount equal to that excess. No impairment charges for indefinite life intangible assets have been recorded in any period presented.

Revenue Recognition

Net sales consist primarily of sales of products, software licenses, and services (including installation, training, other consulting services, and extended maintenance contracts on our products). Dionex recognizes revenue when persuasive evidence of an arrangement exists, the product has been delivered or service has been performed, the sales price is fixed or determinable, and collection is reasonably assured. Delivery of the product is generally considered to have occurred when shipped. Shipping charges billed to customers are included in net sales, and the related costs are included in cost of sales.

In all cases, the portion of revenue allocated to any 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 maintenance, installation services, and/or training that are delivered after the related products have been delivered. Product installation consists of system set-up, calibration and basic functionality training and generally requires one to three days depending on the product. The fair value of these product 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 product installation have historically been accurate and consistent from product to product. The fair value of training services are based on the price charged when the element is sold separately or, if not sold separately, when the price is established by authorized management. 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. For sales of extended maintenance contracts with a separate contract price, Dionex defers revenue equal to the separately stated price and recognize revenue on a straight-line basis over the contract period.

Sales from products are typically not subject to rights of return and, historically, actual sales returns have not been significant. Dionex sells products through its direct sales force and through distributors and resellers. Sales through distributors and resellers are recognized as revenue upon sale to the distributor or reseller as these sales are considered to be final and no right of return or price protection exists. Customer acceptance is generally limited to performance under our published product specifications. When additional customer acceptance conditions apply, all revenue related to the sale is deferred until acceptance is obtained.

In accordance with the software revenue guidance, Dionex recognizes revenue from perpetual software licenses at the inception of the license term assuming all revenue recognition criteria have been met. Dionex uses the residual method to allocate revenue to software licenses at the inception of the license term when vendor specific objective evidence (“VSOE”) of fair value for the undelivered elements exists, such as software installations, and all other revenue recognition criteria have been satisfied. If Dionex cannot objectively determine the fair value of any undelivered elements included in these multiple-element arrangements, revenue is deferred until all elements are delivered, or until fair value can be objectively determined for the remaining undelivered elements.

Product Warranty

The sales of Dionex products generally include a limited one-year warranty on product quality. The estimated cost of product warranty claims is accrued at the time the sale is recognized, based on historical experience. While Dionex believes that 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 our products could result in actual expenses that are below those currently estimated.

Advertising

All advertising costs are expensed as incurred and are included in selling, general and administrative in the consolidated statements of income. Advertising expenses were $5.6 million, $4.4 million, and $5.2 million for fiscal 2010, 2009, and 2008, respectively.

Stock-based Compensation Plans

All share-based payments to employees are recognized as expense in the statements of income based on their fair values. The fair value of each option on the date of grant is estimated using the Black-Scholes option-pricing model using the single option approach for options granted after June 30, 2005. Dionex recognizes the expense ratably on a straight-line basis over the requisite service period. The stock-based compensation expense recognized in the consolidated statements of operations is based on awards that ultimately are expected to vest; therefore, the amount of expense has been reduced for estimated forfeitures. This accounting standard requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience. If actual results differ significantly from these estimates, stock-based compensation expense and Dionex’s results of operations could be materially impacted. In addition, if Dionex employs different assumptions in the application of this accounting standard, the compensation expense that Dionex records in the future periods may differ significantly from what Dionex has recorded in the current period.

Common Stock Repurchases

Dionex has an ongoing authorization, amended in October 2008, from Dionex’s Board of Directors to repurchase shares of our common stock in the open market or in private transactions. For each share repurchased, Dionex reduces the common stock account by the average value per share reflected in the account prior to the repurchase with the excess allocated to retained earnings. Dionex currently retires all shares upon repurchase.

In fiscal 2010, Dionex repurchased 775,644 shares of our common stock on the open market for $54.9 million (an average of $70.77 per share), compared with 791,517 shares repurchased for $44.2 million (an average of $55.88 per share) in 2009 and 928,131 shares repurchased for $70.3 million (an average of $75.74 per share) in fiscal 2008.

Translation of Foreign Currency

Foreign subsidiaries designate the local currency as their functional currency. Translation adjustments for their assets and liabilities into U.S. dollars at the balance sheet dates and the results of their operations using average rates for the year are included as a component of accumulated other comprehensive income.

Derivative Securities

Starting in fiscal 2010, Dionex adopted certain recently issued accounting standards related to derivative instruments and hedging. The adoption requires additional disclosures about the objectives and strategies for using derivative instruments, the accounting for the derivative instruments and related hedged items and the effect of derivative instruments and related hedged items on the consolidated financial statements, as well as the level of derivative activity Dionex engages in. The adoption had no impact on Dionex’s consolidated financial statements. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the consolidated balance sheets at fair value as either assets or liabilities. If the derivative is designated as a fair-value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. If the derivative is designated as a cash flow hedge or net investment hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income and are recognized in earnings when the hedged item affects earnings; ineffective portions of changes in fair value are recognized in earnings.

Dionex operates on a global basis and is exposed to foreign currency exchange rate fluctuations in the normal course of its business. As part of its risk management strategy, Dionex uses derivative instruments to manage exposures to foreign currency. The objective is to offset gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them, thereby reducing volatility of earnings or protecting fair value of assets and liabilities. Dionex does not have any leveraged derivatives nor use derivative contracts for speculative purposes. Currently, Dionex designates its derivatives as hedges of the foreign currency exposure of a net investment in a foreign operation (‘‘net investment hedges’’). Dionex considers the impact of its counterparties’ credit risk on the fair value of the contracts as well as the ability of each party to execute under the contracts. Dionex also assesses and documents, both at the hedges’ inception and on a quarterly basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows associated with the hedged items. For derivatives not designated as hedging instruments, Dionex categorizes those economic hedges as other derivatives.

Net Investment Hedge

Dionex uses a $10 million cross-currency swap arrangement for Japanese yen designated as a net investment hedge to hedge the exchange rate exposure of our net investment in our Japanese subsidiary. During fiscal 2010, the arrangement was extended to March 2012. Prior to January 1, 2008, this derivative instrument did not qualify for net investment hedge accounting and was deemed to be an ineffective hedge instrument because, 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, Dionex marked to market the decrease in value of approximately $1.0 million for the six months ended December 31, 2007 and this amount was recorded in other expense, net. Starting on January 1, 2008, Dionex determined that the cross-currency swap qualified as a net investment hedge in which the effective portion of the gain or loss on the derivative instruments is reported in accumulated other comprehensive income as part of the foreign currency translation adjustment. Dionex evaluates the need to redesignate the hedging relationship on a quarterly basis.

Other Derivatives

Other derivatives not designated as hedging instruments consist primarily of foreign exchange forward contracts with high quality financial institutions to manage our exposure to the impact of fluctuations in foreign currency exchange rates on our intercompany receivables balances. Principal hedged currencies include the Euro, Japanese yen, Australian dollar and Canadian dollar. The periods of these forward contracts is approximately 30 days and have varying notional amounts that are intended to be consistent with changes in the underlying exposures and require Dionex to exchange foreign currencies for U.S. dollars at maturity.

Total gross notional amounts for outstanding derivatives were as follows as of June 30:

(in thousands)		2010				2009
Currency forwards:
Euro		$	17,659			$	9,785
Japanese yen			4,282				3,938
Australian dollar			791				857
Canadian dollar			853				635
Currency swaps			10,000				10,000
Total		$	33,585			$	25,215