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UNITED STATES SECURITIES AND EXCHANGE COMMISSION 
 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [X]
    
    ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended June 30, 2004OR[  ]
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934Commission File Number 0-11250
 DIONEX CORPORATION  Delaware
    
    94-2647429(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 1228 Titan Way, Sunnyvale, California
    
    94085(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code (408) 737-0700 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.001 per share Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X]  NO [  ] 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. [X] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). YES [X]  NO [  ] The aggregate market value of the Registrants Common Stock held by
nonaffiliates on September 8, 2004 (based upon the closing price of such stock
as of such date) was $955,789,567.




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As of September 8, 2004, 20,654,536 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 22, 2004 are incorporated by reference in
Part III of this Report. 2




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TABLE OF CONTENTS PART IItem 1.
    
    Business
    
    
    4Item 2.
    
    Properties
    
    
    18Item 3.
    
    Legal Proceedings
    
    
    18Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    18PART IIItem 5.
    
    Market for the Registrants Common Stock, Related
Stockholder Matters and Issuer Repurchases of
Equity Securities
    
    
    19Item 6.
    
    Selected Consolidated Financial Data
    
    
    20Item 7.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    21Item 7A.
    
    Quantitative and Qualitative Disclosures About
Market Risk
    
    
    27Item 8.
    
    Financial Statements and Supplementary Data
    
    
    29Item 9.
    
    Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
    
    
    48Item 9A.
    
    Controls and Procedures
    
    
    48Item 9B.
    
    Other Information
    
    
    48PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    49Item 11.
    
    Executive Compensation
    
    
    49Item 12.
    
    Security Ownership of Certain Beneficial Owners and
Management
    
    
    49Item 13.
    
    Certain Relationships and Related Transactions
    
    
    49Item 14.
    
    Principal Accountant Fees and Services
    
    
    49PART IVItem 15.
    
    Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
    
    
    49Signatures
    
    
    50Exhibit Index
    
    
    54EXHIBIT 10.12EXHIBIT 10.13EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  3




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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,
2004, 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 (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: general economic conditions,
foreign currency fluctuations, fluctuation 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 set
forth under Risks and Uncertainties 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 OVERVIEW Dionex designs, manufactures, markets and services analytical instrumentation
and related accessories and chemicals. The Companys products are used to
analyze chemical substances in the environment and in a broad range of
industrial and scientific applications. Since July 1, 2002, there have been no
material changes in the mode of conducting the business of the Company. The Company operates in a single industry segment consisting of analytical
instruments and related services. PRODUCTS AND SERVICES Dionex designs, manufactures, markets and services a range of liquid
chromatography systems, sample preparation devices and related products that
are used by chemists to separate and quantify the individual components of
complex chemical mixtures in many major industrial, research and laboratory
markets. The Companys chromatography systems are currently focused in several product
areas: ion chromatography (IC), high performance liquid chromatography (HPLC)
and capillary-/nano-liquid chromatography (capillary-/nano-LC). The Company
also offers a mass spectrometer coupled with either an IC or HPLC system. For
sample preparation, the Company provides automated solvent extraction systems.
In addition, the Company develops and manufactures columns, detectors, data
collection and analysis systems for use in or with liquid chromatographs. Each
of these product areas is described below.    4




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Ion Chromatography Ion Chromatography is a form of chromatography that
separates ionic (charged) molecules, usually found in water-based solutions,
and typically separates and detects them based on their electrical
conductivity. The sale of Dionex IC systems and related columns, suppressors, detectors, automation and
other products accounted for over 60% of the Companys net sales in fiscal
2004, 2003 and 2002, respectively. Dionex IC products are used in a wide range of analytical applications,
including environmental monitoring, quality control of pharmaceuticals,
corrosion monitoring, 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 and petrochemical firms, power generation facilities,
electronics manufacturers, government agencies and academic institutions. In fiscal 2003, the Company introduced the industrys first Reagent-Free IC
(RFIC) systems by combining eluent generation and advanced eluent suppression
technologies, eliminating the need for manual preparation of eluents and
reagents. Dionex believes RFIC simplifies ion chromatography while increasing
its sensitivity and reproducibility. RFIC also eliminates the errors associated
with manual reagent preparation. The Company offers a complete range of systems for IC: ICS-90 System  In fiscal 2002, the Company introduced the ICS-90 integrated IC
system. The ICS-90 is designed for routine ion analysis and provides rapid
start up times, easy operation and stable performance. ICS-1000 System  The ICS-1000, introduced in fiscal 2003, is an integrated and
preconfigured system that performs IC separations using conductivity detection.
The system features a dual-piston pump, LED status front panel and is
controlled by the Companys Chromeleon software (see Automation Products 
Chromeleon Software for a description of this softwares capabilities).
Options include column heating and in-line vacuum degassing. The ICS-1000
provides built-in control for electrolytic suppression technology to provide
high performance and ease of use. ICS-1500 System  In fiscal 2003, the Company introduced the ICS-1500, a fully
integrated and preconfigured system designed to perform IC separations using
conductivity detection. The system is available with a dual-piston pump,
thermally controlled conductivity cell, column heater, and optional in-line
vacuum degassing. The system is controlled from an LCD touch pad front panel
or using Chromeleon software. Using AutoSuppression, the ICS-1500 combines
exceptional signal to noise ratios with ease of use. ICS-2000 RFIC System  The ICS-2000, introduced in fiscal 2003, is the
industrys first totally integrated and preconfigured RFIC system designed to
perform with all types of electrolytically generated eluents for isocratic and
gradient IC separations using suppressed conductivity detection. The system is
controlled from an LCD touch pad front panel or using Chromeleon software.
RFIC technology uses advanced eluent generation, continuously regenerated trap
columns and post-column eluent suppression technology, and eliminates manual
preparation of eluents and regenerants. ICS-2500 RFIC System  The premier product in the Dionex IC family, the modular
ICS-2500 RFIC system features the EG50 eluent generator with continuously
regenerated trap column capabilities, introduced in fiscal 2003, and the SRS
Self-Regenerating Suppressor. The ICS-2500 also includes a dual-piston pump
with microbore to semiprep flow control. Detectors available for the system
include conductivity, electrochemical, UV-Vis and photodiode array, and mass
spectrometer detectors 5




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providing flexible analytical capability. For sample introduction, the system
is available with either the AS40 or full-featured AS50 autosampler.
Chromeleon chromatography data management software, bundled with the ICS-2500,
provides powerful data processing, control features, audit trail, intuitive
database management, and full client-server capabilities. Together, the
hardware and software offer system wellness, a feature that automatically
schedules calibration, validation, and routine maintenance on each module.
Built-in diagnostics can be prompted from the software to help troubleshoot and
track useful parameters such as absorbance detector lamp life and column usage. Process Instrumentation  The Company offers the DX-800 Process Analyzer for
continuous on-line monitoring necessary in a variety of industrial
applications. The DX-800 uses Chromeleon software for automation, data
acquisition, reporting and security features. 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 the DX-800 is installed.
Major applications for the DX-800 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. The Companys IC systems and related accessories and software are marketed and
sold worldwide. High Performance Liquid Chromatography HPLC is a form of chromatography that
separates a wide range of molecules, such as proteins, carbohydrates, amino
acids, and pharmaceuticals, and quantifies the components by measuring the
amount of light that the molecules absorb or emit when exposed to a light
source. The Companys HPLC customers include life science companies active in
biological research, biotechnology, pharmaceutical drug discovery and
development, and other industrial companies. The sales of Dionex HPLC products
accounted for approximately 25% of the Companys net sales in fiscal 2004, 2003
and 2002. The Company offers the following products for HPLC: Summit HPLC System The Summit HPLC System includes an isocratic or gradient
pump, a photodiode array or absorbance detector and an autosampler with
optional thermal cooling. In fiscal 2003, Dionex added a new thermostated
column compartment, the TCC-100 to the Summit product line. The TCC-100
maintains stable column temperatures, improving reproducibility of peak
retention times. The Summit HPLC System uses Chromeleon software to offer full
system control, multi-instrument control (including control of other companies
equipment), validation provisions as required by 21 CFR Part 11 and many other
powerful features. In fiscal 2004, Dionex introduced the Dual Gradient Summit
allowing faster analysis times resulting in higher throughput. The Summit HPLC
System and Chromeleon are marketed and sold worldwide. Auto-Purification Systems (APS)  The Company introduced in fiscal 2004 the
APS-2000 System Series for the purification of synthesized biological and
natural compounds. The APS-2000 brings the power of Summit HPLC system and
Chromeleon software to purification. The APS-2000 is designed to increase
throughput in the purification of compounds. The APS-2000 is marketed and sold
worldwide. BioLC System  The BioLC features an inert, metal-free, polyetheretherketone
(PEEK) flow path to preserve chemically unstable biomolecules. The BioLC
provides high performance dual piston pumps and detectors, including a choice
of electrochemical, absorbance and photodiode array detectors. These options
allow for a wide range of applications including quantification of
carbohydrates, amino acids, proteins and peptides, nucleic acids and small
biomolecules. The BioLC system is controlled by Chromeleon software and is
marketed and sold worldwide. 6




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Capillary-/nano-LC Capillary-/nano-LC is a form of HPLC that uses low flow
rates for analyzing sample volumes much smaller than those analyzed using
traditional analytical HPLC. The Company offers the following products for capillary-/nano-HPLC: UltiMate Capillary-/Nano-LC System  The UltiMate system, a dedicated
microseparation system, consists of a high-precision pump that is coupled with
a proprietary method of flow splitting to provide accurate, reproducible
isocratic and gradient separations from 40 μl/min to 100 nL/min. The UltiMate
also has a specially developed UV detector. This detector coupled with the
Companys proprietary capillary flow cells allows the most sensitive UV
detection in microcolumn separations. Accessories for the UltiMate system
include the FAMOS autosampler and the Switchos module for use with large volume
samples. UltiMate Plus Dual Gradient System  Introduced in fiscal 2004, the dual
gradient UltiMate Plus is offered for parallel Capillary/Nano LC separations.
The dual gradient system provides significantly increased throughput and
resolution, translating into powerful identification of peptides and proteins
for pharmaceutical, research and other applications. The system offers
flow-sensor capabilities and to monitor flow rates to ensure reproducibility of
analytical results. The Company offers the Probot microfraction collector for the micro-analysis
market. The Probot allows collection or dispensation of micro-fractions and is
also used for precision spotting of MALDI-TOF mass spectrometer target plates. Sample Preparation The Company offers a number of solutions for sample
preparation: Accelerated Solvent Extraction (ASE) Instruments  The ASE 300 and ASE 100 are
automated sample extraction instruments for large samples up to 100 mL and the
ASE 200 is for samples less than 34 mL. The ASE 200 and ASE 300 can
automatically extract 24 samples and 12 samples, respectively, while the ASE
100 is a single-sample automated extractor. Each ASE system extracts
components of interest from solid samples using common solvents (the same used
in traditional soxhlet techniques) at elevated temperatures and pressures.
Competitive techniques include soxhlet, sonication, microwave extraction and
supercritical fluid extraction. The ASE 200 and 300 systems offer several
advantages over other solvent based extraction techniques including lower
solvent consumption, reduced extraction time, higher throughput automation and
ease of use. ASE systems are marketed and sold worldwide for a number of
environmental, pharmaceutical, industrial and food and beverage applications.
The Company offers the Solvent Controller Module, which automates the delivery
of multiple solvents to the ASE systems, and AutoASE, an add-on software
feature which allows control of up to eight ASE systems from one location, as
well as provides methods of data storage and documentation. Detectors Detectors are used to measure the quantity of various sample
components after they have been separated in a chromatography column. Dionex
currently offers several detector products based on conductivity,
electrochemistry, absorbance (including the PDA-100 photodiode array detector),
fluorescence and refractive index absorbance. This range of detectors is
designed to meet customer requirements for analysis of organics, inorganics,
metals, amino acids, biological compounds and pharmaceuticals. Mass Spectrometry Mass spectrometry (MS) is used to identify the molecular
weight of compounds within a sample substance and renders structural molecular
information. The Company, through an agreement with Thermo Electron
Corporation, offers the MSQ mass spectrometer (MSQ) together with Dionex Summit
HPLC, BioLC and IC-2500 systems. Dionex sells LC/MS and IC/MS systems using
the MSQ to existing and new customers 7




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worldwide, particularly in the pharmaceutical market, but also for
environmental testing, drug, beverage and food quality control and many other
applications. The MSQ mass spectrometer is a compact, benchtop, single
quadrupole mass detector. The standard system is supplied with both
Electrospray (ESI) and Atmospheric Pressure Chemical Ionization (APCI) for
maximum analytical flexibility. The agreement with Thermo Electron enables
Dionex to reach chemists desiring MS capabilities who previously were not among
the Companys potential customers. Automation Products As part of its efforts to make chemical analyses
simpler, faster and more reliable, Dionex offers a family of products that
automate sample handling, system operation and data analysis for
chromatography systems. These products include Chromeleon software and
several automated sample injection modules available for IC and HPLC
applications. Chromeleon Software  In fiscal 2004, the Company introduced Chromeleon 6.6,
the latest version of its chromatography data management system. From a single
user interface, Chromeleon provides full control of over 200 LC and GC
instruments from more than 25 vendors of liquid and gas chromatography systems.
It is an easy-to-use, adaptable data management system with scalable
client/server architecture for customers requiring a single workstation to lab-
or campus-wide deployment. Data is organized by instrument, user, project or
product. All data is stored locally on a personal computer, centrally on a
network server, or both. Chromeleon features a flexible graphical user
interface and report generator which can be adapted to dedicated applications.
Chromeleon also offers a complete suite of features for regulatory compliance:
security, validation, audit trails and electronic signatures. Chromeleon
provides all the features that laboratories need to comply with GLP, GMP and 21
CFR Part 11 without losing productivity. Autosamplers  The Company offers a number of autosamplers that address a
variety of customer needs. The AS40 Automated Sample Injection module (AS40) is a low-cost, metal-free,
rugged automated sample loading device designed especially for ion
chromatography applications. The AS40 can be used with the Companys IC
systems. For more complex needs, the Company offers the AS50 Auto-Select Autosampler
(AS50). The AS50 is a high-performance, random vial access autosampler with
automated sample injection which is used primarily with the BioLC and high-end
RFIC systems. For HPLC applications, the Company offers the ASI-100 Autosampler (ASI-100)
with optional thermal control for temperature-sensitive samples. The ASI-100
provides speed, simplicity, reliability and precision with an innovative
in-line split-loop injection technology. The removable carousels and
programmable needle depth allows the ASI-100 to accommodate a variety of
sample vials and sizes. The ASI-100 is marketed mainly with our Summit
product line. For capillary-/nano-LC, the Company offers the FAMOS Micro Autosampler. The
FAMOS is a fully automated micro autosampler for sample injections from 96 or
386 well plates, PCR tubes or conventional 1.5 milliliter vials. The unique
design allows for automated injection of volumes ranging from 50 nanoliters to
up to 5 microliters. FAMOS has a proprietary injection technique that
guarantees high performance and virtually no sample dispersion. The FAMOS is
marketed mainly with the UltiMate Systems. Columns The Company offers a wide variety of separation columns for use in
IC, HPLC and capillary-/nano-HPLC separation applications. A chromatography
column consists of a hollow cylinder packed with a unique separation material.
The columns function is to separate various chemical components in a sample.
The Company develops and manufactures separation materials such as
ion-exchange resins, silica-based bonded 8




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phases and monolithic phases using proprietary processes. Dionex currently
manufactures and markets a broad range of column types designed and tested for
specific applications in the liquid and ion chromatography market. Dionex
offers a wide range of polymer-based ion-exchange and reversed-phase columns
supporting capillary, analytical and semipreparative scale applications. Recent column introductions augment a continuing program of product launches
geared to address market requirements. For ion chromatography, the Company
introduced the IonPac AS19 anion-exchange and the IonPac CS18 cation-exchange
columns. The IonPac AS19 allows users to apply the Companys reagent free
(RFIC) technology for virtually all anion-exchange applications, including EPA
method 300.1 and is a companion column to the AS18 introduced in fiscal 2003;
both columns target markets that analyze drinking water and related ionic
analysis application, even at trace level. The IonPac CS18 is ideally used
with RFIC technology and meets the separation requirements for small amines,
including alkanolamines and alkylamines in the chemical, petrochemical,
personal care products and the power generation industries. The introduction in fiscal 2003 of the Continuously Regenerated Trap
Columns(CR-TC), which are electrolytically regenerated for use with the Eluent
Generator systems, was an important advance in ease of use of RFIC systems for
samples requiring inert flow paths. Also introduced in fiscal 2003 were two
important advances in carbohydrate analysis, the CarboPac PA20 column for
monosaccaride determinations and Disposable Gold Electrodes for amperometric
detection. In fiscal 2002, the Company introduced a number of consumable
products. For the HPLC market, the Company expanded the silica-based Acclaim family of
products in fiscal 2004 by introducing the Acclaim OA column for organic acids
and Acclaim PA for applications in the environmental and pharmaceutical
martketplace. These columns further expand the Acclaim family of HPLC columns
that were introduced in fiscal 2002. In fiscal 2004 the Company expanded its polymeric Monolithic Capillary column
offerings for ultra-fast separation of proteins and peptides. In addition, to
the Monolithic Capillary Columns, the Company offers a wide variety of micro,
capillary and nano-LC columns. The columns range in size from 75 microns to 1
millimeter internal diameter and are packed with a variety of stationary
phase materials. Eluent Suppressors Dionex manufactures eluent suppressors that are used to
enhance detection and sensitivity in ion chromatography. The Companys
suppressors lower background conductivity and support a wide range of ion
exchange columns separations including separations using high capacity columns
and more concentrated eluents (liquids used to carry a sample through a liquid
chromatography system). Dionex offers an array of suppressors that include
the Self Regenerating Suppressor (SRS Ultra II), the Atlas Suppressor and the
MicroMembrane Suppressor (MMS III). The Self Regenerating Suppressor enhances IC performance during long-term
operation, without user intervention. The SRS ULTRA II provides superior
performance for all IC applications, particularly trace level ion
chromatography using hydroxide eluents and is a key component of the ICS-2500
Reagent Free IC (RFIC) systems. The Atlas Suppressor (AES) provides improved sensitivity, lower noise and
faster start-up over our previous, industry leading AutoSuppression
technology, raising the performance goals even higher for IC electrolytic
suppression. The Atlas suppressor offers optimal performance for most anion
applications using carbonate eluents and cation applications using
methanesulfonic acid eluents. The MMS III MicroMembrane Suppressor, with an innovative displacement chemical
regeneration mode of operation, can be used with all Dionex ion-exchange
columns, 9




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providing ultra-low noise operation, and is recommended for anion and cation
separations when using eluents containing organic solvents. Service and Other The Company also generates sales from its Customer Service
organization through maintenance contracts, spare part sales, customer
training and sales of other products and valued-added services. (See
Technical Support, Installation and Service below.) MARKETING, CUSTOMERS AND SALES The Companys marketing strategy is twofold. First, in those applications
where Dionex technology is well established, the Company works to increase
demand for its chromatography systems through direct mailings, advertising in
trade publications, seminars and workshops, conferences and exhibitions, and
direct sales calls. Growth in these markets results from identifying new
customers in existing sales regions, extending geographic penetration and
increasing demand for the Companys products and technical support capabilities
among existing customers. The second component of the Companys marketing strategy is to work closely
with existing and potential customers to develop new applications. Technical
support staff assist such customers in problem definition, development of new
applications needed to solve problems and providing user training and ongoing
user support. By combining this support function with direct sales efforts,
the Company works to increase the range of applications and the potential
market for its products. The Company currently markets and distributes its products and services through
its own sales force in the United Kingdom, Germany, Italy, France, the
Netherlands, Belgium, Switzerland, Austria, Denmark, Japan, China, Korea,
Australia, Canada and the United States. In each of these countries, the
Company maintains one or more local sales offices in order to support and
service customers in regional markets. In other international locations where
it does not have a direct sales force, the Company has developed a network of
distributors and sales agents. The Companys products are used extensively in environmental analysis and by
the pharmaceutical, life science, biotechnology, chemical, petrochemical, power
generation, food and beverage and electronics industries. Its customers
include a number of the largest industrial companies worldwide, as well as
government agencies, research institutions and universities. Geographically,
sales to customers outside the United States accounted for 71% of net sales in
fiscal 2004, 67% of net sales in fiscal 2003 and 64% of net sales in fiscal
2002. Sales in Japan accounted for 16% of net sales in fiscal 2004 and 13% of
net sales in both fiscal 2003 and fiscal 2002. The Company attributes net
sales to a particular country based on the location of its customers. No
single customer accounted for 10% or more of the Companys net sales in fiscal
2004, 2003 or 2002. Dionex manufactures its products based upon its forecast of customer demand and
maintains adequate inventories of completed modules in advance of receipt of
firm orders from its customers. Orders are generally placed by the customer on
an as-needed basis, and products are usually shipped within four to six weeks
after receipt of an order. Dionex does not maintain a substantial backlog, and
backlog as of any particular date may not be indicative of the Companys actual
sales in any succeeding period. The level of backlog at June 30, 2004 was
$39.4 million and at June 30, 2003 was $33.0 million. COMPETITION Competition in the Companys business segment is based upon the performance
capabilities of the analytical instrument, technical support and after-market
service, the manufacturers reputation as a technological leader and the
selling 10




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price. Management believes that performance capabilities are the most
important of these criteria. Customers measure system performance in terms of
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 breadth of chemical and
biological samples that the system can effectively analyze. Management
believes that Dionex enjoys a favorable reputation in terms of performance
capabilities, technical support and service. Companies competing with Dionex in the analytical instruments market include
Agilent Technologies, Inc., Metrohm Ltd., Perkin-Elmer, Inc., Shimadzu
Corporation, Thermo Electron Corporation, Varian, Inc. and Waters Corporation.
The Company believes no single competitor has a dominant position in the
analytical instruments market. The Company believes it has a substantial market share in the IC market.
Dionex IC systems generally compete with a number of analytical techniques used
in identifying and quantifying ionic and polar compounds. The primary sources
of competition for IC are conventional manual and automated wet chemistry
procedures and certain modified liquid chromatography systems and liquid
chromatography systems using a single column ion chromatography method that
does not use a suppressor device. The Companys competitors also offer
products to compete in ion analysis and chromatography using suppression
technology similar to that offered by the Company in earlier generation modules
during the 1980s. Companies competing with Dionex in IC include such vendors
as Alltech Associates, Metrohm Ltd., Shimadzu Corporation, Waters Corporation
and other smaller companies. The Company believes it has a smaller but growing market share in the HPLC and
capillary-/nano-LC markets. The Companys Summit HPLC and UltiMate Plus
systems compete directly with other manufacturers HPLC systems in traditional
and capillary-/nano- HPLC applications. Dionex believes that the Summit HPLC
system has certain benefits over competing systems, including advanced pump
technology, thermostated temperature control, a high performance autosampler
and higher throughput. The Company believes that its UltiMate Plus systems
offer certain benefits over competing systems including the ability to analyze
minute contents of sample at very low flow rates. The Company also believes
that its CHROMELEON software package provides competitive advantages over its
competitors software offerings. The Companys APS-2000 Auto Purification Systems compete with other
purification systems offered by other HPLC vendors. Management believes that
its APS systems have certain benefits over competing systems including higher
throughput and advanced software functionality. The Companys BioLC system also competes directly with other manufacturers
HPLC systems in certain traditional HPLC applications. Management believes
that its BioLC system has certain benefits over competing systems, including a
non-metallic flow path and the capability of performing gradient ion
chromatography and HPLC, on a single analytical system. Competitors of the Company in the HPLC market include such vendors as Agilent
Technologies, Inc., Shimadzu Corporation, Thermo Electron Corporation, Varian,
Inc., Waters Corporation and various smaller companies. The Companys ASE 100, 200 and 300 systems compete directly with standard
soxhlet, sonication, supercritical fluid extraction and microwave extraction
techniques provided by other companies. Management believes that its ASE
systems have certain benefits compared to competing techniques, including
faster extraction time, reduced solvent usage, built-in automation and ease of
use. 11




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PATENTS AND LICENSES The Company has a patent portfolio covering certain of the Companys products.
The primary benefits of the Companys patents are presently limited to the
United States and a limited number of foreign countries where the Companys
patents have been issued. As a matter of Company policy, the Company vigorously protects its intellectual
property rights and seeks patent coverage on developments that it regards as
strategic, material and patentable. The Companys patents, including those
licensed from others, expire on various dates through 2022. The Company
believes that, while its 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 its business. The Company regards its PeakNet and CHROMELEON software as proprietary and
relies on a combination of copyrights, trademarks, trade secret laws and other
proprietary rights, laws, license agreements and other restrictions on
disclosure, copying and transferring title to protect its rights to its
software products. The Company has no patents covering its software, and
existing copyright laws afford only limited protection. In addition, the laws
of some foreign countries do not protect the Companys proprietary rights to
the same extent as do the laws of the United States. INTERNATIONAL OPERATIONS Financial information about foreign and domestic operations and export sales is
provided in Note 14 of the Notes to Consolidated Financial Statements found
elsewhere in this report. The Company has subsidiaries in the United Kingdom, Germany, Italy, France, the
Netherlands, Belgium, Switzerland, Austria, Denmark, Japan, China, Korea,
Australia and Canada. The Companys foreign sales are affected by fluctuations
in currency exchange rates and by regulations adopted by foreign governments.
Such fluctuations have materially affected, both positively and negatively, the
Companys results of operation in past periods and will likely materially
affect the Companys results of operations in the future. Export sales are
subject to certain controls and restrictions, but the Company has not
experienced any material difficulties related to these limitations. MANUFACTURING AND SUPPLIERS The Company produces chemicals and resins and assembles IC systems and modules
in its California manufacturing facilities. The Company assembles the systems
and modules for its Summit HPLC system in its manufacturing facility in
Germany. The Company assembles the systems and modules for its UltiMate Plus
system in its manufacturing facility in the Netherlands. Dionex has developed
proprietary processes for the manufacture of polystyrene-based resins and for
packing columns with these resins. The Company believes that its resins,
columns and suppressor manufacturing know-how are critical to the performance
and reliability of its chromatography systems. The Company requires each
employee and consultant to sign a nondisclosure agreement to protect its
proprietary processes. However, there can be no assurances that these
agreements will provide meaningful protection or adequate remedies for the
Companys proprietary processes in the event of unauthorized use or disclosure. The Company has emphasized a modular design for the principal subsystems of its
pumping and flow systems, sample injection systems, chromatography modules,
detectors, and control and data analysis systems. The Company believes that
this modular approach has enabled it to meet the wide range of system
configurations required by its customers. Manufacturing has transitioned into
flow-line production for its major systems while maintaining subassembly cell
production for its 12




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##### Table of Contents



integrated modules. These practices have enhanced the Companys ability to
effectively manage its inventory levels. Many subassemblies used in the Companys products, including proprietary analog
and digital circuitry, are manufactured by Dionex. 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 the Company are available from
a number of different suppliers, although a number of items are purchased from
limited or single sources of supply. TECHNICAL SUPPORT, INSTALLATION AND SERVICE Users of the Companys chromatography systems may require technical support
before and after a system sale. Services provided before the sale are recorded
in operating expenses as incurred. Costs incurred after the sale are accrued
for at the time of the system sale. The Company offers training courses and
periodically sends its customers information on applications development.
Chromatography systems sold by the Company generally include a one-year
warranty. Installation and certain basic user training are provided to the
customer, with revenues for these services recognized at that 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.
The Company installs and services its products through its own field service
organizations in the United Kingdom, Germany, Italy, France, the Netherlands,
Belgium, Switzerland, Austria, Denmark, Japan, China, Korea, Australia, Canada
and the United States. Installation and service in other foreign countries are
typically provided by the Companys distributors or agents. RESEARCH AND PRODUCT DEVELOPMENT The Companys research and product development efforts are focused on
increasing the performance of its chromatography and other products and
expanding the number of chemical and biological compounds that can be analyzed
efficiently with its products. Research and product development expenditures
were $19.2 million, $16.9 million and $15.1 million in fiscal 2004, 2003 and
2002, respectively. The Company pursues active development programs in the
areas of system hardware, applications, computer software, suppressors, resin
and column technologies. There can be no assurances that the Companys product
development efforts will be successful or that the products developed will be
accepted by the marketplace. EMPLOYEES Dionex had 1,008 employees at June 30, 2004, compared with 941 employees at
June 30, 2003. AVAILABLE INFORMATION The Company maintains a website at www.dionex.com; however, information found
on the Companys website is not incorporated by reference into this report.
The Company makes available free of charge on or through its website the
Companys annual report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K 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 the Company electronically files such material with, or furnishes it to,
the Securities and Exchange Commission (SEC). 13




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##### Table of Contents



RISKS AND UNCERTAINTIES The continuation or spread of the current economic uncertainty in key markets
would likely harm our operating results. The Company sells products in many geographical regions throughout the world.
If economic conditions in any of these regions decline or continue to decline,
the demand for our products is likely to be reduced. Despite economic
uncertainty in certain European countries, we showed continued growth in the
European market; however a continuation of an economic downturn in any of our
major markets would likely harm our results of operations. Foreign currency fluctuations and other risks related to international
operations may adversely affect our operating results. The Company derived approximately 71% of its net sales from outside the United
States in fiscal 2004 and expects to continue to derive the majority of net
sales from outside the United States for the foreseeable future. Most of the
Companys sales outside the United States are denominated in the local currency
of its 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, the Companys results
of operations have benefited from the depreciation of the U.S. dollar against
the Euro, the Japanese yen and other foreign currencies; should the U.S. dollar
begin appreciating against these currencies, our results of operations could be
affected negatively. Tariffs and other trade barriers, difficulties in
staffing and managing foreign operations, changes in political environments,
interruptions in overseas shipments and changes in tax laws may also impact
international sales negatively. The Companys results of operations may be adversely affected by its customers
fluctuating capital expenditure budgets and cycles. The demand for analytical instrumentation products can fluctuate depending upon
capital expenditure cycles. Most companies consider the Companys
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 the Companys quarterly operating results may cause the
Companys stock price to decline. A high proportion of the Companys costs are fixed due in part to our
significant sales, research and product development and manufacturing costs.
Declines in revenue caused by fluctuations in currency rates, worldwide demand
for analytical instrumentation or other factors could disproportionately affect
our quarterly operating results, which may in turn cause our stock price to
decline. The Companys results of operations and financial condition will suffer if the
Company does not introduce new products that are attractive to its customers on
a timely basis. The Companys products are highly technical in nature. As a result, many of
the Companys products must be developed months or even years in advance of the
potential need by a customer. If the Company fails to introduce new products
and enhancements as demand arises or in advance of the competition, the
Companys products are likely to become obsolete over time, which would harm
operating results. Also, if the market is not receptive to newly developed
products, the Company may be unable to 14




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##### Table of Contents



recover costs of research and product development and marketing, and may fail
to achieve material components of the business plan. The analytical instrument market is highly competitive, and the Companys
inability to compete effectively in this market would adversely affect its
results of operations and financial condition. The analytical instrumentation market is highly competitive and the Company
competes with many competitors on a local and international level that are
significantly larger than Dionex 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 to acquire and
retain customers. If this occurs, the Companys market share may decline and
operating results could suffer. The Company may experience difficulties with obtaining components sole- or
limited-source suppliers, or manufacturing delays, either of which could
adversely affect its results of operations. Most raw materials, components and supplies purchased by the Company 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 having an adverse affect on our results of
operations. The Company manufactures products in its facilities in Germany, the Netherlands
and the United States. Any prolonged disruption to the operations at these
facilities, whether due to labor unrest, supplier issues, damage to the
physical plants or equipments or other reasons, could also adversely affect the
Companys results of operations. The Companys executive officers and other key employees are critical to our
business, they may not remain with us in the future and finding talented
replacements would be difficult. The operations of Dionex require managerial and technical expertise. Each of
the executive officers and key employees located in the United States is
employed at will and may leave the employment of the Company at any time. In
addition, the Company operates 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. The success of Dionexs business is dependent in part on protection of
proprietary information and inventions. Obtaining and protecting the Companys
proprietary products, processes and technologies can be difficult and
expensive. Patent and trade secret protection is important to Dionex because developing
new technologies and products is time-consuming and expensive. The Company
owns many U.S. and foreign patents and intends to apply for additional patents
to cover its 15




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##### Table of Contents



technology and products. The Company may be unable to obtain issued patents
from any pending or future patent applications that it owns. The claims
allowed under any issued patents may not be sufficiently broad to protect our
technology. Third parties may seek to challenge, circumvent or invalidate
issued patents that Dionex owns. In addition to patents, the Company has unpatented proprietary products and
know-how. The measures employed by the Company to protect this technology,
such as maintaining the confidentiality of proprietary information and relying
on trade secret laws, may be inadequate. The Company may incur significant expense in any legal proceedings to protect
its proprietary rights. 16




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##### Table of Contents



EXECUTIVE OFFICERS OF THE REGISTRANT The following table lists the names and positions of all current executive
officers of the Company, and their ages as of August 19, 2004. Except as noted
below, there are no other family relationships between any director or
executive officer and any other director or executive officer of the
Registrant. Executive officers serve at the discretion of the Board of
Directors. Name
    
    Age
    
    PositionsLukas Braunschweiler
    
    
    48
    
    
    President and Chief Executive OfficerBruce Barton
    
    
    45
    
    
    Vice PresidentDavid Bow
    
    
    40
    
    
    Vice PresidentKevin Chance
    
    
    37
    
    
    Vice PresidentPeter Jochum
    
    
    53
    
    
    Vice PresidentCraig A. McCollam
    
    
    44
    
    
    Vice President and Chief Financial OfficerChristopher Pohl
    
    
    53
    
    
    Vice PresidentRene Trost
    
    
    53
    
    
    Vice President
 Dr. Braunschweiler joined the Company as its President and Chief Executive
Officer and as a director in August 2002. Prior to that time, Dr.
Braunschweiler was employed by Mettler-Toledo, a supplier of precision
instruments, where he served most recently as Group Vice-President and Head of
the Laboratory and Packaging Division. Prior to that, he served in a variety
of management positions at Mettler-Toledo. Mr. Barton has served as Vice President of Sales and Service Asia/Pacific since
October 2003. Previously he held various positions including Head of
Distributor Operations as well as Vice President-International Operations.
Upon joining the Company in 1987 he served in numerous positions in the Sales,
Accounting and Finance departments. Mr. Bow has served as Vice President of North American Sales, Service and
Corporate Marketing since joining the Company in September 2003. Prior to
that, he founded and served as President of Genesis Chemicals, Buffers &
Biochemicals Corp, GW Incorporated and GenChem GmbH. Mr. Chance has served as Vice President of the Chemical Analysis Business Unit
(CABU) since April 2003. From 2000 to 2003 he served as CEO of Aptus
Pharmaceuticals, Inc., a biotech company. From 1989 through 2000 he served as
a business unit general manager and in various other positions at Siemens
Industrial Automation (Moore Products Company), an automation technology
provider. Dr. Jochum has served as Vice President, Life Sciences Business Unit (LSBU)
since October 2000. Prior to that, he served as Managing Director of Dionex
Softron since joining the Company in October 1998. Prior to joining the
Company, he served as Managing Director of Softron GmbH. 17




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##### Table of Contents



Mr. McCollam has served as Vice President and Chief Financial Officer since
October 1999. Prior to that, he served as Director of Finance and Corporate
Controller since joining the Company in 1993. Mr. Pohl has served as Vice President, Research and Development and Chief
Science Officer since May 2004. Prior to that, he served as Vice President,
Research and Development since rejoining the Company in June 2001. From March
2000 to June 2001, Mr. Pohl served as Vice President, Research and Development
of Ciphergen Biosystems, Inc., a provider of enabling tools for proteomics.
From 1981 to 2000, he served as Vice President, Consumables and in various
other capacities for the Company. Mr. Trost was promoted as Vice President European Sales and Service in October
2003 after serving as Manager for Dionexs European operations since 1999.
Prior to that, he was the Country Manager for Dionex Switzerland since joining
the Company in 1994. Prior to working for the Company, he served with Sarasin
Ltd. in Switzerland. 
 Item 2. PROPERTIES The Company owns nine buildings in Sunnyvale, California, providing 252,000
square feet of space utilized for administration, marketing, sales, service,
research and product development and manufacturing. The Company also owns a
20,000 square foot building utilized for sales, service and administration in
Idstein, Germany and a 45,000 square foot building for manufacturing and
administration in Germering, Germany. The Company also owns a 32,000 square
foot building in Osaka, Japan for sales, service and administration. The Company leases sales and service offices in: Atlanta, Georgia; Houston,
Texas; Westmont, Illinois; Marlton, New Jersey; and in the United Kingdom,
France, Italy, the Netherlands, Belgium, Switzerland, Austria, Denmark, Japan,
China, Australia, Korea and Canada. In addition, the Company leases marketing
and research and product development offices in Salt Lake City, Utah. The
Company also leases manufacturing, marketing and research and product
development offices in Amsterdam, the Netherlands. The Companys facilities
are well maintained, adequate to conduct the Companys current business and
substantially utilized by the Company. 
 Item 3. LEGAL PROCEEDINGS The Company is a party to various legal proceedings arising in the ordinary
course of its business, but is not currently a party to any legal proceeding
that management believes will have a material adverse effect on the Companys
financial position or results of operations. 
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the quarter
ended June 30, 2004. 18




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##### Table of Contents



PART II 
 Item 5.
    
    MARKET FOR THE REGISTRANTS COMMON STOCK, RELATED STOCKHOLDER MATTERS
AND ISSUER REPURCHASES OF EQUITY SECURITIES
 MARKET PRICE OF COMMON STOCK The Companys common stock is traded in the over-the-counter market through the
Nasdaq National Market under the symbol DNEX. The following table sets forth,
for the periods indicated, the high and low bid prices as reported by the
NASDAQ National Market. Fiscal 2004
    
    Fiscal 2003Quarter
    
    High
    
    Low
    
    High
    
    LowFirst
    
    $
    41.85
    
    
    $
    37.41
    
    
    $
    29.85
    
    
    $
    22.04Second
    
    $
    48.50
    
    
    $
    38.92
    
    
    $
    32.09
    
    
    $
    25.33Third
    
    $
    56.30
    
    
    $
    46.07
    
    
    $
    34.00
    
    
    $
    29.12Fourth
    
    $
    56.40
    
    
    $
    48.04
    
    
    $
    41.18
    
    
    $
    31.75
 As of August 27, 2004 there were 1,007 holders of record of the Companys
common stock as shown on the records of its transfer agent. DIVIDENDS As of September 8, 2004, the Company has paid no cash dividends on its common
stock and does not anticipate doing so in the foreseeable future. ISSUER PURCHASES OF EQUITY SECURITIES Dionex repurchases shares of its 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. Dionex started a series of repurchase programs in
fiscal 1989, with the Board of Directors most recently authorizing in April
2002 future repurchases of an aggregate of 1.5 million 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 the Companys employee
stock plans. The following table indicates common shares repurchased and additional
shares added to the program during the three months ended June 30, 2004: ISSUER PURCHASES OF EQUITY SECURITIES Total
    
    
    
    
    
    MaximumShares
    
    Additional
    
    Number ofPurchased
    
    Shares
    
    Shares thatTotal
    
    Avg.
    
    as Part of
    
    Authorized
    
    May Yet BeNumber
    
    Price
    
    Publicly
    
    for
    
    Purchasedof Shares
    
    Paid per
    
    Announced
    
    Purchase
    
    Under thePeriod
    
    Purchased
    
    Share
    
    Program(1)
    
    (1)
    
    Program (1)Apr. 1 - 30, 2004
    
    
    22,200
    
    
    $
    51.37
    
    
    
    1,702,400
    
    
    
    16,542
    
    
    
    1,988,163May 1 - 31, 2004
    
    
    441,400
    
    
    $
    50.08
    
    
    
    2,143,800
    
    
    
    101,636
    
    
    
    1,648,399Jun. 1 - 30, 2004
    
    
    0
    
    
    $
    0
    
    
    
    2,143,800
    
    
    
    73,850
    
    
    
    1,722,249
  (1)
    
    The current stock repurchase program was initiated in April
2002
with authorization to purchase 1.5 million shares plus that
number of common shares equal to the number issued pursuant to
employee stock plans subsequent to that date. 19




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##### Table of Contents



Item 6. SELECTED CONSOLIDATED FINANCIAL DATA Operating Information: Years ended June 30(In thousands, except per share amounts)
    
    2004
    
    2003
    
    2002
    
    2001
    
    2000Net sales
    
    $
    258,834
    
    
    $
    214,909
    
    
    $
    182,434
    
    
    $
    186,757
    
    
    $
    179,529Cost of sales
    
    
    88,944
    
    
    
    73,273
    
    
    
    63,740
    
    
    
    64,071
    
    
    
    56,462Revaluation of acquired inventory
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121
    
    
    
    Gross profit
    
    
    169,890
    
    
    
    141,636
    
    
    
    118,694
    
    
    
    122,565
    
    
    
    123,067Operating expenses:Selling, general and administrative
    
    
    89,100
    
    
    
    76,565
    
    
    
    64,607
    
    
    
    63,288
    
    
    
    58,577Research and product development
    
    
    19,155
    
    
    
    16,888
    
    
    
    15,094
    
    
    
    14,742
    
    
    
    14,850Write-off of in-process research
and development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    865
    
    
    
    Total operating expenses
    
    
    108,255
    
    
    
    93,453
    
    
    
    79,701
    
    
    
    78,895
    
    
    
    73,427Operating income
    
    
    61,635
    
    
    
    48,183
    
    
    
    38,993
    
    
    
    43,670
    
    
    
    49,640Interest income
    
    
    801
    
    
    
    504
    
    
    
    528
    
    
    
    850
    
    
    
    844Interest expense
    
    
    (240
    )
    
    
    (192
    )
    
    
    (203
    )
    
    
    (353
    )
    
    
    (431
    )Other income/(expense)
    
    
    (340
    )
    
    
    133
    
    
    
    1,582
    
    
    
    2,893
    
    
    
    381Write-off of a non-affiliated
investment
    
    
    
    
    
    
    (2,067
    )
    
    
    
    
    
    
    
    
    
    
    Income before taxes on income and
cumulative effect of change in
accounting principle
    
    
    61,856
    
    
    
    46,561
    
    
    
    40,900
    
    
    
    47,060
    
    
    
    50,434Taxes on income
    
    
    20,481
    
    
    
    15,133
    
    
    
    13,292
    
    
    
    15,295
    
    
    
    16,391Net income before effect of
change in accounting principle
    
    
    41,375
    
    
    
    31,428
    
    
    
    27,608
    
    
    
    31,765
    
    
    
    34,043Cumulative effect of change in
accounting principle, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    359
    
    
    
    Net income
    
    $
    41,375
    
    
    $
    31,428
    
    
    $
    27,608
    
    
    $
    31,406
    
    
    $
    34,043Basic earnings per share
    
    $
    1.96
    
    
    $
    1.49
    
    
    $
    1.27
    
    
    $
    1.42
    
    
    $
    1.54Diluted earnings per share
    
    $
    1.89
    
    
    $
    1.45
    
    
    $
    1.24
    
    
    $
    1.37
    
    
    $
    1.46Shares used in computing earnings per
share amounts:Basic
    
    
    21,056
    
    
    
    21,057
    
    
    
    21,705
    
    
    
    22,137
    
    
    
    22,174Diluted
    
    
    21,943
    
    
    
    21,632
    
    
    
    22,184
    
    
    
    22,895
    
    
    
    23,364
 The Company has paid no cash dividends. Balance sheet information: At June 30(In thousands)
    
    2004
    
    2003
    
    2002
    
    2001
    
    2000Working capital
    
    $
    103,719
    
    
    $
    88,014
    
    
    $
    62,539
    
    
    $
    68,071
    
    
    $
    48,390Total assets
    
    
    235,465
    
    
    
    213,100
    
    
    
    180,718
    
    
    
    173,682
    
    
    
    163,153Long-term debt
    
    
    
    
    
    
    500
    
    
    
    1,002
    
    
    
    966
    
    
    
    Stockholders equity
    
    
    183,454
    
    
    
    159,280
    
    
    
    131,707
    
    
    
    129,858
    
    
    
    118,442
 20




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##### Table of Contents



Item 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 RESULTS OF OPERATIONS The following table summarizes the Companys consolidated statement of income
items for the last three fiscal years as a percentage of net sales. Years ended June 30
    
    2004
    
    2003
    
    2002Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    34.4
    
    
    
    34.1
    
    
    
    34.9Gross profit
    
    
    65.6
    
    
    
    65.9
    
    
    
    65.1Operating expenses:Selling, general and administrative
    
    
    34.4
    
    
    
    35.6
    
    
    
    35.4Research and product development
    
    
    7.4
    
    
    
    7.9
    
    
    
    8.3Total operating expenses
    
    
    41.8
    
    
    
    43.5
    
    
    
    43.7Operating income
    
    
    23.8
    
    
    
    22.4
    
    
    
    21.4Interest income, net
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.2Write-off of a non-affiliate investment
    
    
    
    
    
    
    (1.0
    )
    
    
    Other income/(expense)
    
    
    (0.1
    )
    
    
    0.1
    
    
    
    0.8Income before taxes
    
    
    23.9
    
    
    
    21.6
    
    
    
    22.4Taxes on income
    
    
    7.9
    
    
    
    7.0
    
    
    
    7.3Net income
    
    
    16.0
    %
    
    
    14.6
    %
    
    
    15.1
    %
 Net Sales and Gross ProfitIn fiscal 2004, Dionex reported sales of $258.8
million, an increase of 20% compared with the $214.9 million reported in fiscal
2003. Sales in fiscal 2002 were $182.4 million. The Company is subject to the
effects of foreign currency fluctuations that have an impact on net sales and
gross profits. Currency fluctuations increased net sales by 8% in fiscal 2004
and by 7% in fiscal 2003; currency fluctuations decreased net sales by 1% in
fiscal 2002. The increase in net sales from fiscal 2002 to fiscal 2003 and 2004 was the
result of increased sales in all of the geographic regions in which the Company
does business. Growth rates for the last three fiscal years are indicated in
the tables below: Percentage increase in net sales From Fiscal 2003
    
    From Fiscal 2002to
    
    toFiscal 2004
    
    Fiscal 2003Total:
    
    
    20
    %
    
    
    18
    %By geographic region:North America
    
    
    6
    %
    
    
    8
    %Europe
    
    
    19
    %
    
    
    24
    %Asia/Pacific
    
    
    48
    %
    
    
    27
    %
 21




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##### Table of Contents



Percentage of growth in net sales excluding currency fluctuations From Fiscal 2003
    
    From Fiscal 2002to
    
    toFiscal 2004
    
    Fiscal 2003Total:
    
    
    12
    %
    
    
    11
    %By geographic region:North America
    
    
    4
    %
    
    
    8
    %Europe
    
    
    5
    %
    
    
    9
    %Asia/Pacific
    
    
    40
    %
    
    
    22
    %
 Growth in the Asia/Pacific region in fiscal 2004 reflects the impact of the new
Japanese drinking water regulations requiring bromate analysis as well as the
expansion of sales in our China operation and the opening of our new subsidiary
in Korea. Sales outside North America accounted for 68% of net sales in fiscal 2004, 64%
in fiscal 2003 and 61% in fiscal 2002. The Company sells directly through its
sales forces in the United Kingdom, Germany, Italy, France, the Netherlands,
Belgium, Switzerland, Austria, Denmark, Japan, China, Korea, Australia, Canada
and the United States. Direct sales accounted for 91% of consolidated net sales
in fiscal 2004, compared with 92% in fiscal 2003, and 90% in fiscal 2002.
International distributors and representatives in Europe, Asia and other
international markets accounted for the balance of the consolidated net sales.
There were no significant price changes during the three-year period ended June
30, 2004. Gross profit in fiscal 2004 was 65.6% compared with 65.9% in fiscal 2003 and
65.1% in fiscal 2002. Gross profit in fiscal 2004 declined slightly due to
higher costs for third-party product content in the Japanese products related
to the new drinking water regulations partially offset by favorable currency
fluctuations. Gross profit in fiscal 2003 was higher than fiscal 2002 due to
the effects of favorable currency fluctuations and product mix. Operating ExpensesSelling, general and administrative (SG&A) expenses as a
percentage of net sales were 34.4% in fiscal 2004 compared with 35.6% in fiscal
2003 and 35.4% in fiscal 2002. SG&A expenses were $89.1 million in fiscal 2004,
an increase of 16% from $76.6 million in fiscal 2003. SG&A expenses in fiscal
2003 increased 19% from $64.6 million in fiscal 2002. The absolute dollar
increase in SG&A expenses in fiscal 2004 was attributable to currency
fluctuations, continued expansion of our operations in China, and incurred
costs related to opening a subsidiary in Korea in October 2003 and a second
subsidiary in Australia in May 2004. SG&A expenses were higher in fiscal 2003
than those in fiscal 2002 primarily as a result of the introduction and
marketing activities of the Companys RFIC products, continued expansion in
China, further development of the Companys sales and service organizations in
Europe and currency fluctuations. The Company anticipates that SG&A expenses
will be in the range of 33% to 36% of net sales in the near term. Research and product development expenses were 7.4% of net sales in fiscal 2004
compared with 7.9% in fiscal 2003 and 8.3% in fiscal 2002. Research and product
development expenses in fiscal 2004 of $19.2 million increased by $2.3 million 22




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compared with $16.9 million in fiscal 2003. Research and development expenses
in fiscal 2003 of $16.9 million increased by $1.8 million compared with $15.1
million in fiscal 2002. Research and product development expenses have
increased in absolute dollars due to higher spending to develop the Companys
IC and HPLC product lines and the effects of currency fluctuations. Research
and product development spending depends on both the breadth of the Companys
research and product development efforts and the stage of specific product
development projects. The Company anticipates that the level of research and
product development expenses will remain in the range of 7% to 9% of net sales
in the near term. Interest IncomeInterest income in fiscal 2004 of $801,000 was higher than the
$504,000 reported for fiscal 2003 and the $528,000 reported in fiscal 2002. The
increase in both periods was due to higher average cash balances. Interest ExpenseInterest expense in fiscal 2004 of $240,000 was higher than
the $192,000 reported in fiscal 2003 and the $203,000 reported in fiscal 2002.
The increase in both periods was due to longer sustained periods of average
borrowing. Other Income/(Expense)Other expense in fiscal 2004 was $340,000 which was
attributable primarily to settlement of certain foreign currency contracts.
The Company had other income in fiscal 2003 and 2002 of $133,000 and $1.6
million, respectively. The income in fiscal year 2003 and 2002 primarily
consisted of the gain on sale of marketable equity securities. Write-off of a Non-Affiliate InvestmentDuring fiscal 2003, the Company wrote
off an investment in an unaffiliated entity, PharmaSeq, Inc., in the amount of
$2.1 million. Management determined that the decline in value of the
investment, accounted for under the cost method, was other than temporary. Taxes on IncomeThe Companys effective tax rate was 33.1% for fiscal 2004 and
32.5% for fiscal 2003 and 2002. The Companys effective tax rate is affected by
the mix of taxable income among the various tax jurisdictions in which the
Company does business. The effective tax rate for fiscal 2004 reflects a larger
portion of our income being generated in higher tax jurisdictions than in
previous years; increased sales in Japan contributed significantly to this
increase. The Company anticipates that its effective tax rate will be in the
range of 32% to 35% in the near term. Earnings per ShareDiluted earnings per share were $1.89 for fiscal 2004
compared with $1.45 for fiscal 2003 and $1.24 for fiscal 2002. The number of
shares used in computing diluted and basic earnings per share is affected by
the Companys stock repurchase program. Liquidity and Capital ResourcesAt June 30, 2004, the Company had cash and cash
equivalents of $57.2 million. The Companys working capital was $103.7 million
at June 30, 2004, compared with $88.0 million at June 30, 2003. Working
capital increased in fiscal 2004 primarily due to increased cash, cash
equivalents and accounts receivable partially offset by a decrease in income
taxes payable. Cash generated by operating activities was $52.9 million in fiscal 2004,
compared with $43.4 million in fiscal 2003 and $41.8 million in fiscal 2002.
The increase in operating cash flows in fiscal 2004 was primarily due to
improvements in net income and tax benefits derived from stock option exercises
partially offset by increases in accounts receivable and a decrease in income
taxes payable. The increase in operating cash flows for fiscal 2003 was
primarily due to improvements in net income and tax benefits related to stock
option plans. Cash used for investing activities was $12.3 million in fiscal 2004, compared
with $6.3 million in fiscal 2003, and $5.4 million in fiscal 2002. The
increase in cash used for investing activities in fiscal 2004 was primarily
attributable to the 23




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acquisition of marketable debt securities, the acquisition of intangibles
related to acquiring our Korean and Australian subsidiaries and an increase in
capital expenditures. Higher capital expenditures was primarily due to
building improvements incurred at our corporate site and computer hardware and
software spending in connection with the Companys e-commerce initiative. Cash used for financing activities was $31.7 million in fiscal 2004, compared
with $15.6 million in fiscal 2003 and $31.3 million in fiscal 2002. Financing
activities for all three years consisted primarily of common stock repurchases,
partially offset by issuances of shares pursuant to option exercises. The
Company repurchased 1,116,300 shares of its common stock for $53.7 million in
fiscal 2004 under its stock repurchase program. The Company repurchased
722,700 shares for $22.5 million in fiscal 2003 and 1,333,870 shares for $34.5
million in fiscal 2002. At June 30, 2004, the Company had outstanding borrowings of $917,000 from bank
lines of credit and $551,000 from a foreign currency-denominated mortgage note
payable. At June 30, 2004, available bank lines of credit totaled $31.7
million. The Company believes its cash flow from operations, its existing cash
and cash equivalents and its bank lines of credit will be adequate to meet its
cash requirements for the next 12 months. The impact of inflation on the
Companys financial position and results of operations was not significant
during any of the periods presented. The following summarizes our contractual obligations at June 30, 2004, and the
effect such obligations are expected to have on our liquidity and cash flows in
future periods (in thousands): Payments Due by PeriodLess Than
    
    1-3
    
    4-5
    
    After 5Contractual Obligations
    
    Total
    
    1 Year
    
    Years
    
    Years
    
    YearsLines of Credit
    
    $
    917
    
    
    $
    917
    
    
    $
    
    
    
    $
    
    
    
    $
    Mortgage Note Payable
    
    
    551
    
    
    
    551
    
    
    
    
    
    
    
    
    
    
    
    Operating Lease Obligations
    
    
    15,307
    
    
    
    3,752
    
    
    
    4,655
    
    
    
    2,251
    
    
    
    4,379Other Obligations
    
    
    3,500
    
    
    
    3,500
    
    
    
    
    
    
    
    
    
    
    
    Total Contractual
Commitments
    
    $
    20,275
    
    
    $
    8,720
    
    
    $
    4,655
    
    
    $
    2,251
    
    
    $
    4,379
 At June 30, 2004 and 2003, the Company had recorded $3.5 million and $6.5
million, respectively, of Other Obligations in its consolidated financial
statements. Other Obligations relate to the earn-out from the acquisition of LC
Packings. The final payment of $3.5 million is payable on January 30, 2005. EFFECT OF NEW ACCOUNTING STANDARDS In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective immediately for all new variable interest entities created or
acquired after January 31, 2003. For variable interest entities created or
acquired prior to February 1, 2003, the provision of FIN 46 must be applied for
the first interim or annual period beginning after June 15, 2003. The adoption
of FIN 46 to date did not have any impact on the Companys consolidated
financial statements. 24




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In December 2003, the SEC issued SAB No. 104, Revenue Recognition, which
supersedes SAB 101, Revenue Recognition in Financial Statements. SAB 104
primarily rescinds the accounting guidance contained in SAB 101 related to
multiple-element revenue arrangements that was superseded as a result of the
issuance of Emerging Issue Task Force (EITF) EITF 00-21, Accounting for
Revenue Arrangements with Multiple Deliverables. While the wording of SAB 104
has changed to reflect the issuance of EITF 00-21, the revenue recognition
principles of SAB 101 remain largely unchanged by the issuance of SAB 104,
which was effective upon issuance. The adoption of SAB 104 did not have a
material impact on the Companys consolidated results of operations or
financial position. In May 2003, FASB issued Statement of Financial Accounting Standard (SFAS)
No. 150, Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity, which requires that certain financial instruments
be presented as liabilities, and for which the financial instruments were
previously properly presented as equity or as temporary equity. Such
instruments include mandatory redeemable preferred and common stock, and
certain options and warrants. SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003 and was effective at
the beginning of the first interim period beginning after June 15, 2003. In
November 2003, the FASB issued FASB Staff Position (FSP) No. 150-3,
Effective Date, Disclosures, and Transition for Mandatorily Redeemable
Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily
Redeemable Noncontrolling Interests under SFAS No. 150, which defers the
effective date for various provisions of SFAS No. 150. The Company believes
that it has properly classified and measured in its balance sheets and
disclosed in its consolidated financial statements certain financial
instruments with characteristics of both liabilities and equity. In November 2003, the Emerging Issues Task Force (EITF) reached an interim
consensus on Issue 03-01, The Meaning of Other-Than-Temporary Impairment and
its Application to Certain Investments, to require additional disclosure
requirements for securities classified as available-for-sale or
held-to-maturity for fiscal years ending after December 15, 2003. In March
2004, the EITF reached a final consensus on this Issue and provided additional
guidance in determining whether investment securities have an impairment which
should be considered other-than-temporary in reporting periods after June 15,
2004. The adoption of this Issue did not have a material impact on the
Companys consolidated results of operations or financial position. CRITICAL ACCOUNTING POLICIES AND ESTIMATES SummaryThe preparation of consolidated financial statements requires the
Company 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. The Company evaluates its estimates on an
on-going basis, including those related to product returns and allowances, bad
debts, inventory valuation, goodwill and other intangible assets, income taxes,
warranty and installation provisions, and contingencies. The Company bases its 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. The Company believes the
following critical accounting policies affect its more significant judgments
and estimates used in the preparation of its consolidated financial statements. 25




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Revenue Recognition PolicyThe Company derives revenues from the sale of
products and from services rendered to its customers, including installation,
training and maintenance. Generally, the Companys products contain embedded
software that is essential to their functionality. The Company recognizes revenues in accordance with Staff Accounting Bulletin
No. 104 Revenue Recognition and Statement of Position 97-2, Software Revenue
Recognition, (SOP 97-2), when persuasive evidence of an arrangement exists,
the product has been delivered, the price is fixed or determinable, collection
is probable and vendor specific objective evidence exists to allocate revenue
to the various elements of the arrangement. Vendor specific objective evidence
is based on the price charged when an element is sold separately or, if not yet
sold separately, when the price is established by authorized management.
Delivery is generally considered to have occurred when shipped. The Company sells its equipment through our 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. Our
equipment typically includes a one-year warranty. The estimated cost of product
warranty claims is accrued at the time the sale is recognized, based on
historical experience. Installation and training services are not considered to be essential to the
functionality of our products, and revenue related to these items is recognized
when the services are completed. We recognize maintenance fees ratably over the
period of the related maintenance contract. Maintenance consists of product
repair services, unspecified software upgrades and telephone support. Loss Provisions on Accounts Receivable and InventoryWe maintain allowances for
doubtful accounts for estimated losses resulting from the inability of
customers to make required payments. If the financial condition of our
customers were to deteriorate, resulting in an impairment of their ability to
make payments, additional allowances may be required. We assess collectibility
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. Historically, we have not experienced
significant sales returns or bad debt losses. We value our inventory at the lower of standard cost (which approximates costs
on a first-in, first-out basis) or market. We estimate revisions to inventory
valuations based on technical obsolescence, historical demand, projections of
future demand and industry and market conditions. If actual future demand or
market conditions are less favorable than those projected by management,
additional valuation provisions may be required. If demand or market conditions
are more favorable than projected, high margins could be realized to the extent
inventory is sold which had previously been written down. Long-Lived Assets, Intangible Assets with Finite Lives and GoodwillWe assess
the impairment of long-lived assets, intangible assets with finite lives and
goodwill whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. In addition, we assess goodwill for impairment at
least annually. Factors we consider important which could trigger an impairment
review include but are not limited to the following: 26




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
    
    significant underperformance relative to historical or
projected future operating results;
    
    significant negative industry or economic trends; and
    
    significant changes or developments in strategic technology. When we determine that the carrying value of long-lived assets 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. We are required to perform an
impairment review at least annually. WarrantyProduct warranties are recorded at the time revenue is recognized for
certain product shipments based on historical experience. While the Company
engages in extensive product quality programs and processes, our warranty
obligation is affected by product failure rates, material usage and service
costs incurred in correcting a product failure. Should actual product failure
rates, material usage or service costs differ from our previous estimates,
revisions to the estimated warranty liability would be required. Taxes on IncomeAs part of the process of preparing our consolidated financial
statements, we are required to estimate our income taxes in each of the
jurisdictions in which we operate. This process involves estimating 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 within our
consolidated balance sheets. We must then assess the likelihood that our
deferred tax assets will be recovered from future taxable income and, to the
extent we believe that recovery is not likely, we must establish a valuation
allowance. In the event that actual results differ from these estimates, we may
need to revise the valuation allowance, which could materially impact our
financial position and results of operations. 
 Item 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 We are 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 our customers buying practices.
We have not substantially changed our risk management practices during fiscal
2004 and do not currently anticipate significant changes in financial market
risk exposures in the near future that would require us to change our risk
management practices. Foreign Currency ExchangeRevenues generated from international operations are
generally denominated in foreign currencies. We enter into forward foreign
exchange contracts to hedge against fluctuations of intercompany account
balances. Market value gains and losses on these hedge contracts are
substantially offset by fluctuations in the underlying balances being hedged,
and the net financial impact is not expected to be material in future periods.
At June 30, 2004, the Company had forward exchange contracts to sell foreign
currencies totaling $15.3 million dollars, 27




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including approximately $5.9 million in Euros, $8.6 million in Japanese yen and
$800,000 in Canadian dollars. At June 30, 2003, the Company had forward
exchange contracts to sell foreign currencies totaling $19.1 million dollars,
including approximately $10.6 million in Euros, $7.6 million in Japanese yen,
and $900,000 in Canadian dollars. The foreign exchange contracts at the end of
each fiscal year mature within the first quarter of the following fiscal year.
Additionally, contract values and fair market values are the same. A
sensitivity analysis assuming a hypothetical 10% movement in foreign currency
exchange rates applied to our hedging contracts and underlying balances being
hedged at June 30, 2004 and 2003, indicated that these market movements would
not have a material effect on our business, operating results or financial
condition. Foreign currency rate fluctuations can impact the U.S. dollar translation of
our foreign operations in our consolidated financial statements. Currency
fluctuations increased reported sales by 8% in fiscal 2004 and by 7% in fiscal
2003 and decreased reported sales by 1% in fiscal 2002. Interest and Investment IncomeOur 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 at June 30, 2004 and 2003
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. Marketable Equity SecuritiesWe are exposed to market price risks on our
marketable equity securities. These investments are in publicly traded
companies in the laboratory analytical instruments sector. We do not attempt to
reduce or eliminate our market exposure on these securities. A 50% adverse
change in the equity price would result in an approximate $802,000 and $701,000
decrease in the fair value of our marketable equity securities as of June 30,
2004 and 2003, respectively. Debt and Interest ExpenseA sensitivity analysis assuming a hypothetical 10%
movement in interest rates applied to our outstanding debt balance at June 30,
2004 and 2003, 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. 28




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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA FINANCIAL STATEMENTS
    
    PageReport of Independent Registered Public Accounting Firm
    
    
    30Consolidated Balance Sheets at June 30, 2004 and 2003
    
    
    31Consolidated Statements of Income for the years
ended June 30, 2004, 2003 and 2002
    
    
    32Consolidated Statements of Stockholders Equity for
the years ended June 30, 2004, 2003 and 2002
    
    
    33Consolidated Statements of Cash Flows for the years
ended June 30, 2004, 2003 and 2002
    
    
    34Notes to Consolidated Financial Statements
    
    
    35-48
 29




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders, Dionex Corporation: We have audited the accompanying consolidated balance sheets of Dionex
Corporation and its subsidiaries (the Company) as of June 30, 2004 and 2003,
and the related consolidated statements of income, stockholders equity and
cash flows for each of the three years in the period ended June 30, 2004.
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 auditing 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 its
subsidiaries at June 30, 2004 and 2003, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 2004
in conformity with accounting principles generally accepted in the United
States of America. DELOITTE & TOUCHE LLP San Jose, California
August 27, 2004 30




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CONSOLIDATED BALANCE SHEETS At June 30(In thousands, except per share amounts)
    
    2004
    
    2003ASSETSCurrent assets:Cash and equivalents
    
    $
    57,182
    
    
    $
    46,831Marketable securities
    
    
    1,604
    
    
    
    1,402Accounts receivable (net of allowance for doubtful
accounts of $760 in 2004 and $1,275 in 2003)
    
    
    53,128
    
    
    
    46,613Inventories
    
    
    24,838
    
    
    
    25,462Deferred taxes
    
    
    10,293
    
    
    
    9,612Prepaid expenses and other
    
    
    3,875
    
    
    
    3,293Total current assets
    
    
    150,920
    
    
    
    133,213Property, plant and equipment, net
    
    
    46,656
    
    
    
    45,436Goodwill
    
    
    24,675
    
    
    
    24,261Intangible assets, net
    
    
    4,357
    
    
    
    4,595Other assets
    
    
    8,857
    
    
    
    5,595$
    235,465
    
    
    $
    213,100LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Notes payable to banks
    
    $
    1,468
    
    
    $
    1,334Accounts payable
    
    
    8,113
    
    
    
    5,443Accrued liabilities
    
    
    31,822
    
    
    
    29,045Income taxes payable
    
    
    2,214
    
    
    
    6,189Accrued product warranty
    
    
    3,584
    
    
    
    3,188Total current liabilities
    
    
    47,201
    
    
    
    45,199Deferred taxes
    
    
    3,557
    
    
    
    4,107Long-term debt
    
    
    
    
    
    
    500Other long-term liabilities
    
    
    1,253
    
    
    
    4,014Commitments and other contingencies (Note 13)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; shares
outstanding: 20,840,881 in 2004 and 20,933,913
in 2003)
    
    
    103,943
    
    
    
    77,395Retained earnings
    
    
    71,217
    
    
    
    78,774Accumulated other comprehensive income
    
    
    8,294
    
    
    
    3,111Total stockholders equity
    
    
    183,454
    
    
    
    159,280$
    235,465
    
    
    $
    213,100
 See notes to consolidated financial statements. 31




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CONSOLIDATED STATEMENTS OF INCOME Years ended June 30(In thousands, except per share amounts)
    
    2004
    
    2003
    
    2002Net sales
    
    $
    258,834
    
    
    $
    214,909
    
    
    $
    182,434Cost of sales
    
    
    88,944
    
    
    
    73,273
    
    
    
    63,740Gross profit
    
    
    169,890
    
    
    
    141,636
    
    
    
    118,694Operating expenses:Selling, general and administrative
    
    
    89,100
    
    
    
    76,565
    
    
    
    64,607Research and product development
    
    
    19,155
    
    
    
    16,888
    
    
    
    15,094Total operating expenses
    
    
    108,255
    
    
    
    93,453
    
    
    
    79,701Operating income
    
    
    61,635
    
    
    
    48,183
    
    
    
    38,993Interest income
    
    
    801
    
    
    
    504
    
    
    
    528Interest expense
    
    
    (240
    )
    
    
    (192
    )
    
    
    (203
    )Other income/(expense)
    
    
    (340
    )
    
    
    133
    
    
    
    1,582Write-off of a non-affiliate investment
    
    
    
    
    
    
    (2,067
    )
    
    
    Income before taxes on income
    
    
    61,856
    
    
    
    46,561
    
    
    
    40,900Taxes on income
    
    
    20,481
    
    
    
    15,133
    
    
    
    13,292Net income
    
    $
    41,375
    
    
    $
    31,428
    
    
    $
    27,608Basic earnings per share:
    
    $
    1.96
    
    
    $
    1.49
    
    
    $
    1.27Diluted earnings per share:
    
    $
    1.89
    
    
    $
    1.45
    
    
    $
    1.24Shares used in computing earnings per share:Basic
    
    
    21,056
    
    
    
    21,057
    
    
    
    21,705Diluted
    
    
    21,943
    
    
    
    21,632
    
    
    
    22,184
 See notes to consolidated financial statements. 32




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CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AccumulatedCommon Stock
    
    Retained
    
    OtherComprehensive
    
    
    
    
    
    Comprehensive(Dollars in thousands)
    
    Shares
    
    Amount
    
    Earnings
    
    Income(Loss)
    
    Total
    
    IncomeBalance, June 30, 2001
    
    
    22,177,005
    
    
    $
    67,282
    
    
    $
    70,204
    
    
    $
    (7,628
    )
    
    $
    129,858Comprehensive income,
net of tax:Net income
    
    
    
    
    
    
    
    
    
    
    27,608
    
    
    
    
    
    
    
    27,608
    
    
    $
    27,608Foreign currency
translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,644
    
    
    
    5,644
    
    
    
    5,644Unrealized loss on
Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,374
    )
    
    
    (1,374
    )
    
    
    (1,374
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    31,878Common stock issued
under employee
benefit plans
including related tax
benefits
    
    
    246,237
    
    
    
    4,468
    
    
    
    
    
    
    
    
    
    
    
    4,468Repurchase of common
stock
    
    
    (1,333,870
    )
    
    
    (4,124
    )
    
    
    (30,373
    )
    
    
    
    
    
    
    (34,497
    )Balance, June 30, 2002
    
    
    21,089,372
    
    
    
    67,626
    
    
    
    67,439
    
    
    
    (3,358
    )
    
    
    131,707Comprehensive income,
net of tax:Net income
    
    
    
    
    
    
    
    
    
    
    31,428
    
    
    
    
    
    
    
    31,428
    
    
    $
    31,428Foreign currency
translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,808
    
    
    
    6,808
    
    
    
    6,808Unrealized loss on
Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (339
    )
    
    
    (339
    )
    
    
    (339
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    37,897Common stock issued
under employee
benefit plans
including related tax
benefits
    
    
    567,241
    
    
    
    12,185
    
    
    
    
    
    
    
    
    
    
    
    12,185Repurchase of common
stock
    
    
    (722,700
    )
    
    
    (2,416
    )
    
    
    (20,093
    )
    
    
    
    
    
    
    (22,509
    )Balance, June 30, 2003
    
    
    20,933,913
    
    
    
    77,395
    
    
    
    78,774
    
    
    
    3,111
    
    
    
    159,280Comprehensive income,
net of tax:Net income
    
    
    
    
    
    
    
    
    
    
    41,375
    
    
    
    
    
    
    
    41,375
    
    
    $
    41,375Foreign currency
translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,037
    
    
    
    5,037
    
    
    
    5,037Unrealized gain on
Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146
    
    
    
    146
    
    
    
    146Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    46,558Common stock issued
under employee
benefit plans
including related tax
benefits
    
    
    1,023,268
    
    
    
    31,324
    
    
    
    
    
    
    
    
    
    
    
    31,324Repurchase of common
stock
    
    
    (1,116,300
    )
    
    
    (4,776
    )
    
    
    (48,932
    )
    
    
    
    
    
    
    (53,708
    )Balance, June 30, 2004
    
    
    20,840,881
    
    
    $
    103,943
    
    
    $
    71,217
    
    
    $
    8,294
    
    
    $
    183,454
 See notes to consolidated financial statements 33




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CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended June 30(In thousands)
    
    2004
    
    2003
    
    2002Cash and equivalents provided by (used for):Cash flows from operating activities:Net income
    
    $
    41,375
    
    
    $
    31,428
    
    
    $
    27,608Adjustments to reconcile net income to
net cash provided by operating activities:Write-off of a non-affiliate investment
    
    
    
    
    
    
    2,067
    
    
    
    Depreciation and amortization
    
    
    5,817
    
    
    
    5,912
    
    
    
    4,827Gain on sale of marketable securities
    
    
    
    
    
    
    (414
    )
    
    
    (2,093
    )Tax benefit related to stock option plans
    
    
    8,730
    
    
    
    3,598
    
    
    
    1,225Deferred taxes
    
    
    (1,159
    )
    
    
    (2,221
    )
    
    
    807Changes in assets and liabilities:Accounts receivable
    
    
    (4,120
    )
    
    
    1,851
    
    
    
    3,046Inventories
    
    
    1,856
    
    
    
    (1,770
    )
    
    
    4,187Prepaid expenses and other assets
    
    
    (239
    )
    
    
    (1,658
    )
    
    
    282Accounts payable
    
    
    2,504
    
    
    
    (110
    )
    
    
    (1,313
    )Accrued liabilities
    
    
    2,214
    
    
    
    3,315
    
    
    
    2,320Income taxes payable
    
    
    (4,352
    )
    
    
    1,301
    
    
    
    1,187Accrued product warranty
    
    
    271
    
    
    
    65
    
    
    
    (249
    )Net cash provided by operating activities
    
    
    52,897
    
    
    
    43,364
    
    
    
    41,834Cash flows from investing activities:Proceeds from sale of marketable securities
    
    
    
    
    
    
    728
    
    
    
    3,380Purchase of marketable securities
    
    
    (4,147
    )
    
    
    
    
    
    
    Purchase of property, plant and equipment
    
    
    (4,101
    )
    
    
    (3,659
    )
    
    
    (4,790
    )Acquisition, net of cash acquired
    
    
    (4,169
    )
    
    
    (3,000
    )
    
    
    (2,500
    )Investments in unaffiliated companies
    
    
    
    
    
    
    (500
    )
    
    
    (1,567
    )Other
    
    
    141
    
    
    
    143
    
    
    
    94Net cash used for investing activities
    
    
    (12,276
    )
    
    
    (6,288
    )
    
    
    (5,383
    )Cash flows from financing activities:Net change in notes payable to banks
    
    
    50
    
    
    
    (1,169
    )
    
    
    (80
    )Proceeds from long-term debt
    
    
    
    
    
    
    
    
    
    
    483Principal payments on long-term debt
    
    
    (595
    )
    
    
    (502
    )
    
    
    (475
    )Sale of common stock
    
    
    22,594
    
    
    
    8,586
    
    
    
    3,243Repurchase of common stock
    
    
    (53,708
    )
    
    
    (22,509
    )
    
    
    (34,497
    )Net cash used for financing activities
    
    
    (31,659
    )
    
    
    (15,594
    )
    
    
    (31,326
    )Effect of exchange rate changes on cash
    
    
    1,389
    
    
    
    3,180
    
    
    
    (267
    )Net increase in cash and equivalents
    
    
    10,351
    
    
    
    24,662
    
    
    
    4,858Cash and equivalents, beginning of year
    
    
    46,831
    
    
    
    22,169
    
    
    
    17,311Cash and equivalents, end of year
    
    $
    57,182
    
    
    $
    46,831
    
    
    $
    22,169Income taxes paid
    
    $
    16,307
    
    
    $
    11,730
    
    
    $
    9,398Interest expense paid
    
    $
    177
    
    
    $
    123
    
    
    $
    118
 See notes to consolidated financial statements 34




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Note 1 / SIGNIFICANT ACCOUNTING POLICIES OrganizationDionex Corporation (the Company) is a leading manufacturer and
marketer of chromatography systems for chemical analysis. The Companys 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. Principles of ConsolidationThe consolidated financial statements include the
Company and its subsidiaries. All significant intercompany transactions and
accounts are eliminated in consolidation. Certain Risks and UncertaintiesThe 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 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. Actual results
could differ from those estimates. Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of investments and trade receivables. The
Company invests in high-grade instruments which it places for safekeeping with
high quality financial institutions. The Company sells its products primarily
to large organizations in diversified industries worldwide. Credit risk is
further mitigated by the Companys credit evaluation process and the reasonably
short collection terms. The Company does not require collateral or other
security to support accounts receivable. The Company maintains allowances for
potential credit losses. The Company is subject to certain risks and uncertainties and believes that
changes in any of the following areas could have a material adverse effect on
the Companys future financial position or results of operations. Such factors
include, among others: the continuation or spread of the current economic
uncertainty; 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;
and our ability to protect our proprietary information. Cash EquivalentsCash equivalents are highly liquid debt instruments with a
maturity, at the date of purchase, of three months or less. Marketable SecuritiesThe Company classifies its debt and equity securities as
held to maturity or available for sale. Securities classified as held to
maturity are reported at amortized cost and available for sale securities
are reported at fair market value, with a corresponding recognition of the
unrealized gains and losses (net of tax effect) as a separate component of
stockholders equity. The Companys investments in marketable equity securities
have been classified as available for sale. InventoriesInventories are stated at the lower of standard cost (which
approximates cost on a first-in, first-out basis) or market. Property, Plant and EquipmentProperty, plant and equipment are stated at cost.
Depreciation is computed using the straight-line method based on estimated
useful lives of 3 to 30 years. Leasehold improvements are amortized over the
lesser of the useful life or the remaining term of the lease. 35




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Purchased Technology and GoodwillPurchased technology amounts 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. Goodwill is not amortized but is tested for impairment as required.
Identifiable intangible assets are recognized separately from goodwill if
certain criteria are met and those assets are amortized over their useful
economic life. The Company tests goodwill for impairment in April each year and
more often if circumstances indicate that goodwill may be impaired. If
impaired, a charge is recorded in income from operations. Valuation of Long-Lived AssetsThe carrying value of the Companys long-lived
assets is reviewed for impairment whenever events or changes in circumstances
indicate that an asset may not be recoverable. The Company looks to 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 fair value. Revenue RecognitionRevenue is derived from the sale of products and from
services rendered to our customers including installation, training and
maintenance. Generally, our products contain embedded software that is
essential to their functionality. Revenue is recognized in accordance with Staff Accounting Bulletin No. 104,
Revenue Recognition (SAB 104) and Statement of Position 97-2, Software
Revenue Recognition (SOP 97-2), when persuasive evidence of an arrangement
exists, the product has been delivered, the price is fixed or determinable,
collection is probable and vendor specific objective evidence exists to
allocate revenue to the various elements of the arrangement. Vendor specific
objective evidence is based on the price charged when an element is sold
separately or, if not yet sold separately, when the price is established by
authorized management. Delivery is generally considered to have occurred when
shipped. The Company sells equipment 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 the Companys
published product specifications. When additional customer acceptance
conditions apply, all revenue related to the sale is deferred until acceptance
is obtained. Equipment typically includes a one-year warranty. The estimated
cost of product warranty claims is accrued at the time the sale is recognized,
based on historical experience. Installation and training services are not considered to be essential to the
functionality of the Companys products, and revenue related to these services
is recognized when the services are completed. Maintenance fees are recognized
ratably over the period of the related maintenance contract. Maintenance
consists of product repair services, unspecified software upgrades and
telephone support. Stock-based Compensation PlansThe Company applies Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees (APB No. 25) and
related interpretations in accounting for its stock-based compensation plans
(Note 10). Accordingly, no accounting recognition is given to stock options
granted at fair market value until they are exercised. Upon exercise, net
proceeds, including tax benefits realized, are credited to equity. Statement of Financial Accounting Standard No. 123, Accounting for Stock-Based
Compensation (SFAS No. 123) sets forth a fair-value based method of
recognizing stock-based compensation expense. As permitted by SFAS No. 123, the
Company has 36




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elected to continue to apply APB No. 25 to account for its stock-based
compensation plans. Had compensation costs under the Companys stock-based
compensation plans been
determined based on the fair value at the grant dates consistent with the
method set forth under SFAS No. 123, the effect on the Companys net income and
earnings per share would have been as follows: Years ended June 30(In thousands, except per share data)
    
    2004
    
    2003
    
    2002Net income, as reported
    
    $
    41,375
    
    
    $
    31,428
    
    
    $
    27,608Less: Total stock-based employee
compensation expense determined
under fair value method for all
awards, net of tax effects
    
    
    5,460
    
    
    
    5,309
    
    
    
    5,909Pro forma net income
    
    $
    35,915
    
    
    $
    26,119
    
    
    $
    21,699Basic earnings per share:As reported
    
    $
    1.96
    
    
    $
    1.49
    
    
    $
    1.27Pro forma
    
    $
    1.71
    
    
    $
    1.24
    
    
    $
    1.00Diluted earnings per share:As reported
    
    $
    1.89
    
    
    $
    1.45
    
    
    $
    1.24Pro forma
    
    $
    1.64
    
    
    $
    1.21
    
    
    $
    0.98Basic shares
    
    
    21,056
    
    
    
    21,057
    
    
    
    21,705Diluted shares
    
    
    21,943
    
    
    
    21,632
    
    
    
    22,184
 The resulting pro forma compensation expense may not be representative of the
amount to be expected in future years. Pro forma compensation expense for
options granted is reflected over the vesting period; therefore, future pro
forma compensation expense may be greater as additional options are granted. The fair value of each option grant was estimated on the grant date using the
Black-Scholes option-pricing model, using the multiple option approach, with
the following weighted-average assumptions: 2004
    
    2003
    
    2002Volatility
    
    
    49
    %
    
    
    53
    %
    
    
    52
    %Risk-free interest rate
    
    
    3.30
    %
    
    
    3.03
    %
    
    
    3.94
    %Expected life of options
    
    5.9 years
    
    5.9 years
    
    5.9 yearsExpected dividend
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00
 The Black-Scholes option-pricing model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option-pricing models require the input of highly
subjective assumptions, including expected stock price volatility. Because the
Companys employee stock options have characteristics significantly different
from 37




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those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in managements
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options. Common Stock RepurchasesThe Company repurchases shares in the open market
under its ongoing stock repurchase program. For each share repurchased, the
Company 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. The Company currently retires all shares repurchased. During fiscal 2004, the Company repurchased 1,116,300 shares of its common
stock on the open market for $53.7 million (an average of $48.11 per share),
compared with 722,700 shares repurchased for $22.5 million (an average of
$31.15 per share) for fiscal 2003. During fiscal 2002, the Company repurchased
1,333,870 shares of its common stock on the open market for $34.5 million (an
average of $25.86 per share). Translation of Foreign CurrencyThe Companys foreign operations are measured
using local currencies as the functional currency. Assets and liabilities are
translated into U.S. dollars at year-end rates of exchange, and results of
operations are translated at average rates for the year. Translation
adjustments are included in stockholders equity as accumulated other
comprehensive income/(loss). Derivative SecuritiesDerivative instruments, including certain derivative
instruments embedded in other contracts, are recorded on the consolidated
balance sheet at their fair value as required by SFAS No. 133 Accounting for
Derivative Instruments and Hedging Activities. Changes in the fair value of
derivatives is recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. The Company formally
documents, designates and assesses the effectiveness of transactions that
receive hedge accounting. The Company enters into foreign exchange forward contracts with high quality
financial institutions to manage its exposure to the impact of fluctuations in
foreign currency exchange rates on its intercompany receivables balances. These
contracts generally have maturities of approximately 30 days and require the
Company to exchange foreign currencies for U.S. dollars at maturity. The
Company has not designated these contracts as hedging instruments. The
contracts are recorded at fair value on the consolidated balance sheet. Changes
in the fair values of these derivative instruments are recognized in earnings
in the period they occur. At June 30, 2004, the Company had forward exchange contracts to sell foreign
currencies totaling $15.3 million dollars, including approximately $5.9 million
in Euros, $8.6 million in Japanese yen and $800,000 in Canadian dollars. At
June 30, 2003, the Company had forward exchange contracts to sell foreign
currencies totaling $19.1 million dollars, including approximately $10.6
million in Euros, $7.6 million in Japanese yen and $900,000 in Canadian
dollars. At June 30, 2004 and 2003, the aggregate unrealized gains or losses on
the forward exchange contracts were not material. Comprehensive IncomeThe Company is required to report comprehensive income in
the financial statements, in addition to net income. For the Company, the
primary differences between net income and comprehensive income are foreign
currency
translation adjustments and net unrealized gains or losses on securities
available for sale. At June 30, 2004 and 2003, the components of accumulated
other comprehensive income were as follows: (In thousands)
    
    2004
    
    2003Foreign currency translation adjustments
    
    $
    7,720
    
    
    $
    2,683Unrealized gain on securities available
for sale, net
    
    
    574
    
    
    
    428$
    8,294
    
    
    $
    3,111
 38




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ReclassificationsCertain reclassifications have been made to the prior year
financial statements to conform with the fiscal 2004 financial statements
presentation. New Accounting PronouncementsIn January 2003, the Financial Accounting
Standards Board (FASB) issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, and in December 2003 issued a
revised interpretation of FIN 46 (FIN 46-R). FIN 46 requires certain variable
interest entities (VIEs) to be consolidated by the primary beneficiary of the
entity if the equity investors in the entity do not have the characteristics of
a controlling financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional subordinated financial
support from other parties. The provisions of FIN 46 are effective immediately
for all arrangements entered into after January 31, 2003. The Company has not
invested in any entities it believes are variable interest entities for which
it is the primary beneficiary. The adoption of FIN 46-R had no impact on the
financial position, results of operations or cash flows of the Company. In December 2003, the SEC issued SAB No. 104, Revenue Recognition, which
supersedes SAB 101, Revenue Recognition in Financial Statements. SAB 104
primarily rescinds the accounting guidance contained in SAB 101 related to
multiple-element revenue arrangements that was superseded as a result of the
issuance of Emerging Issue Task Force (EITF) EITF 00-21, Accounting for
Revenue Arrangements with Multiple Deliverables. While the wording of SAB 104
has changed to reflect the issuance of EITF 00-21, the revenue recognition
principles of SAB 101 remain largely unchanged by the issuance of SAB 104,
which was effective upon issuance. The adoption of SAB 104 did not have a
material impact on the Companys consolidated results of operations or
financial position. In May 2003, FASB issued Statement of Financial Accounting Standard (SFAS)
No. 150, Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity, which requires that certain financial instruments
be presented as liabilities, and for which the financial instruments were
previously properly presented as equity or as temporary equity. Such
instruments include mandatory redeemable preferred and common stock, and
certain options and warrants. SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003 and was effective at
the beginning of the first interim period beginning after June 15, 2003. In
November 2003, the FASB issued FASB Staff Position (FSP) No. 150-3,
Effective Date, Disclosures, and Transition for Mandatorily Redeemable
Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily
Redeemable Noncontrolling Interests under SFAS No. 150, which defers the
effective date for various provisions of SFAS No. 150. The Company believes
that it has properly classified and measured in its balance sheets and
disclosed in its consolidated financial statements certain financial
instruments with characteristics of both liabilities and equity. In November 2003, the Emerging Issues Task Force (EITF) reached an interim
consensus on Issue 03-01, The Meaning of Other-Than-Temporary Impairment and
its Application to Certain Investments, to require additional disclosure
requirements for securities classified as available-for-sale or
held-to-maturity for fiscal years ending after December 15, 2003. In March
2004, the EITF reached a final consensus on this Issue and provided additional
guidance in determining whether investment securities have an impairment which
should be considered other-than-temporary in reporting periods after June 15,
2004. The adoption of this Issue did not have a 39




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material impact on the Companys consolidated results of operations or
financial position. Note 2 / EARNINGS PER SHARE Basic earnings per share is determined by dividing net income by the weighted
average number of common shares outstanding during the period. Diluted net
income per share is determined by dividing net income by the weighted average
number of common shares used in the basic earnings per share calculation, plus
the number of common shares that would be issued assuming conversion of all
potentially dilutive securities outstanding under the treasury stock method. The following table is a reconciliation of the numerators and denominators used
in computing basic and diluted earnings per share (in thousands, except per
share data): Years ended June 30
    
    2004
    
    2003
    
    2002Numerator:Net Income
    
    $
    41,375
    
    
    $
    31,428
    
    
    $
    27,608Denominator:Shares used to compute net income
per common share  basic
    
    
    21,056
    
    
    
    21,057
    
    
    
    21,705Effect of dilutive stock options
    
    
    887
    
    
    
    575
    
    
    
    479Shares used to compute net income per
common share  diluted
    
    
    21,943
    
    
    
    21,632
    
    
    
    22,184Basic earnings per share
    
    $
    1.96
    
    
    $
    1.49
    
    
    $
    1.27Diluted earnings per share
    
    $
    1.89
    
    
    $
    1.45
    
    
    $
    1.24
 Antidilutive common equivalent shares related to stock options excluded from
the calculation of diluted shares were approximately 854,000 and 1,167,000
shares for fiscal 2003 and 2002, respectively. There were no antidilutive
shares related to stock options for fiscal 2004. Note 3 / MARKETABLE SECURITIES The Company had no temporary cash investments at June 30, 2004 and 2003. There were no sales of held-to-maturity securities for the years ended June 30,
2004, 2003 and 2002. During fiscal 2004, the Company acquired highly liquid debt instruments with
maturities of more than one year. These securities totaling $4.1 million at
June 30, 2004 are classified as held-to-maturity securities and are reported
in other assets on the balance sheet. At June 30, 2004, the amortized value
of this investment was $4.1 million. The aggregate amount of unrealized losses
for these 40




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securities was approximately $63,000 at June 30, 2004, all of which had been in
a loss position for less than twelve months. In December 1989, the Company invested $3.0 million in the stock of Molecular
Devices Corporation (MDC). The Companys Chairman and a director serve on the
Board of Directors of MDC. The Companys ownership interest in MDC is
approximately 1% and has been classified as available for sale and is
included in marketable securities. At June 30, 2004 and 2003, the fair value of
this investment was $1.6 million and $1.4 million, respectively, and cost was
$692,000 for both periods. During fiscal 2004 the Company did not change their
investment in MDC; however in the years ended June 30, 2003 and 2002, the
Company realized gross proceeds from the sale of marketable securities of
$728,000 and $3.4 million, respectively, and recognized net gains on sale of
$414,000 and $2.1 million, respectively. During fiscal 2003, the Company wrote off an investment in an unaffiliated
entity, PharmaSeq, Inc., in the amount of $2.1 million. Management determined
that the decline in value of the investment, accounted for under the cost
method, was other than temporary. Note 4 / INVENTORIES Inventories at June 30 consist of: (In thousands)
    
    2004
    
    2003Finished goods
    
    $
    13,208
    
    
    $
    11,638Work in process
    
    
    2,654
    
    
    
    3,822Raw materials and subassemblies
    
    
    8,976
    
    
    
    10,002$
    24,838
    
    
    $
    25,462
 Note 5 / PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment at June 30 consist of: (In thousands)
    
    2004
    
    2003Land
    
    $
    20,176
    
    
    $
    19,610Buildings and improvements
    
    
    30,105
    
    
    
    28,471Machinery, equipment and tooling
    
    
    20,720
    
    
    
    20,907Furniture and fixtures
    
    
    7,823
    
    
    
    7,19178,824
    
    
    
    76,179Accumulated depreciation and amortization
    
    
    (32,168
    )
    
    
    (30,743
    )Property, plant and equipment, net
    
    $
    46,656
    
    
    $
    45,436
 Note 6 / GOODWILL AND INTANGIBLE ASSETS Information regarding the Companys goodwill and other intangible assets
reflect current foreign exchange rates. 41




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##### Table of Contents



Changes in the carrying amount of goodwill for the years ended June 30, 2004
and 2003 are as follows (in thousands): Balance as of June 30, 2002
    
    $
    19,549Goodwill acquired during the period
    
    
    3,795Translation adjustments and other
    
    
    917Balance as of June 30, 2003
    
    $
    24,261Translation adjustments and other
    
    
    414Balance as of June 30, 2004
    
    $
    24,675
 In connection with SFAS No. 142, the Company performed an annual impairment
test on goodwill in April 2004 and 2003 and determined that goodwill was not
impaired. Information regarding the Companys other intangible assets having a finite
life is as follows (in thousands): As of June 30, 2004
    
    As of June 30, 2003Carrying
    
    Accumulated
    
    
    
    
    
    Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Net
    
    Amount
    
    Amortization
    
    NetPatents and
Trademarks
    
    $
    379
    
    
    $
    (379
    )
    
    $
    
    
    
    $
    379
    
    
    $
    (379
    )
    
    $
    Developed Technology
    
    
    9,750
    
    
    
    (6,505
    )
    
    
    3,245
    
    
    
    9,475
    
    
    
    (4,880
    )
    
    
    4,595Customer
Relationships
    
    
    1,186
    
    
    
    (74
    )
    
    
    1,112
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    11,315
    
    
    $
    (6,958
    )
    
    $
    4,357
    
    
    $
    9,854
    
    
    $
    (5,259
    )
    
    $
    4,595
 The Company amortizes developed technology and other intangibles over a period
of up to ten years. Amortization expense of other intangible assets was
$1,500,000, $1,366,000 and $1,214,000 respectively, for the twelve months
ended June 30, 2004, 2003 and 2002. The estimated amortization for each of the
five fiscal years subsequent to June 30, 2004 is as follows: Year Ended
    
    AmortizationJune 30,
    
    Expense2005
    
    $
    1,5522006
    
    $
    1,0462007
    
    $
    8522008
    
    $
    3962009
    
    $
    138$
    3,984
 Note 7 / FINANCING ARRANGEMENTS The Company has unsecured lines of credit with various domestic and foreign
banks totaling approximately $32.0 million which have been used primarily to
minimize the Companys exposure to foreign currency fluctuations and to fund
acquisitions. These lines of credit expire between December 31, 2004 and June
30, 2005. Borrowings in each country bear interest at local reference rates
which ranged from 0.7% to 9.25% at June 30, 2004. Amounts outstanding under
these lines totaled $917,000 at June 30, 2004 ($834,000 at June 30, 2003). 42




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##### Table of Contents



Such line of credit agreements impose certain financial restrictions relating
to cash dividends, working capital and tangible net worth. At June 30, 2004,
the Company was in compliance with all such covenants. At June 30, 2004, the Company had a mortgage note payable denominated in
Japanese yen totaling $551,000 ($1.0 million at June 30, 2003). This note bears
interest at a rate of 1.5% per annum. Principal payments are due monthly until
June 30, 2005 with a current portion totaling $551,000. One of the Companys foreign subsidiaries discounts trade notes receivable with
banks. Total notes receivable discounted were approximately $14.5 million in
fiscal 2004 and $5.0 million in fiscal 2003. The uncollected balances of notes
receivable due to the discounting banks at June 30, 2004 and 2003 were
approximately $7.4 million and $2.9 million, respectively. The Company has
determined that the carrying amount of its contingent liability under this
guarantee was insignificant at June 30, 2004 and 2003 based on its past
experience of discounting trade notes receivable. Total interest paid was $177,000 in 2004, $123,000 in 2003 and $118,000 in
2002. Note 8 / WARRANTY Product warranties are recorded at the time revenue is recognized for certain
product shipments. While the Company engages in extensive product quality
programs and processes, our warranty obligation is affected by product failure
rates, material usage and service costs incurred in correcting a product
failure. Should actual product failure rates, material usage or service costs
differ from our previous estimates, revisions to the estimated warranty
liability would be required. Details of the change in accrued product warranty for fiscal 2004, 2003 and
2002 are as follows (in thousands): CHARGEDBALANCE
    
    
    
    
    
    (CREDITED)
    
    
    
    
    
    BALANCEBEGINNING
    
    
    
    
    
    TO OTHER
    
    
    
    
    
    ENDOF YEAR
    
    ADDITIONS
    
    ACCOUNTS (1)
    
    DEDUCTIONS(2)
    
    OF YEARAccrued product warranty:June 30, 2004
    
    $
    3,188
    
    
    $
    2,417
    
    
    $
    164
    
    
    $
    (2,185
    )
    
    $
    3,584June 30, 2003
    
    $
    2,912
    
    
    $
    2,642
    
    
    $
    216
    
    
    $
    (2,582
    )
    
    $
    3,188June 30, 2002
    
    $
    2,983
    
    
    $
    3,191
    
    
    $
    181
    
    
    $
    (3,443
    )
    
    $
    2,912
  (1)
    
    Effects of exchange rate changes.  (2)
    
    Product warranty costs. Note 9 / ACCRUED LIABILITIES Accrued liabilities at June 30 consist of: (In thousands)
    
    2004
    
    2003Accrued payroll and related expenses
    
    $
    12,465
    
    
    $
    11,771Deferred revenues
    
    
    9,775
    
    
    
    8,280Accrued earn-out on acquisition
    
    
    3,500
    
    
    
    3,000Other accrued liabilities
    
    
    6,082
    
    
    
    5,994$
    31,822
    
    
    $
    29,045
 43




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##### Table of Contents



Note 10 / STOCK OPTION AND PURCHASE PLANS Stock Option PlansThe Company has two stock option plans (the Option Plans)
under which incentive and nonqualified options may be granted. Options are
granted at the stocks fair market value at the grant date. Options generally
become exercisable in increments over a period of four years from the date of
grant and expire five or ten years from the grant date. Activity under the Option Plans for the three-year period ended June 30, 2004
is summarized below. 2004
    
    2003
    
    2002Wtd. Avg.
    
    
    
    
    
    Wtd. Avg.
    
    
    
    
    
    Wtd. Avg.Exercise
    
    
    
    
    
    Exercise
    
    
    
    
    
    ExerciseShares
    
    Price
    
    Shares
    
    Price
    
    Shares
    
    PriceOptions outstanding,
beginning of year
    
    
    3,119,358
    
    
    $
    24.97
    
    
    
    3,419,172
    
    
    $
    23.39
    
    
    
    2,839,047
    
    
    $
    22.54Granted
    
    
    584,500
    
    
    
    39.87
    
    
    
    269,000
    
    
    
    26.03
    
    
    
    852,700
    
    
    
    23.99Exercised
    
    
    (987,850
    )
    
    
    21.80
    
    
    
    (509,187
    )
    
    
    14.40
    
    
    
    (190,050
    )
    
    
    10.22Canceled
    
    
    (73,292
    )
    
    
    29.47
    
    
    
    (59,629
    )
    
    
    29.20
    
    
    
    (82,525
    )
    
    
    30.57Options outstanding,
end of year
    
    
    2,642,716
    
    
    $
    29.33
    
    
    
    3,119,356
    
    
    $
    24.97
    
    
    
    3,419,172
    
    
    $
    23.39Options exercisable
at year-end
    
    
    1,615,195
    
    
    $
    26.81
    
    
    
    2,038,353
    
    
    $
    24.03
    
    
    
    1,976,010
    
    
    $
    20.48Weighted average fair
value of options
granted during the year
    
    
    
    
    
    $
    20.39
    
    
    
    
    
    
    $
    13.70
    
    
    
    
    
    
    $
    12.79
 Additional information regarding options outstanding and exercisable as of June
30, 2004 is as follows: Options Outstanding
    
    Options ExercisableWeighted Avg.
    
    Weighted
    
    
    
    
    
    WeightedRemaining
    
    Avg.
    
    
    
    
    
    Avg.Range of
    
    Number
    
    Contractual
    
    Exercise
    
    Number
    
    ExerciseExercise Prices
    
    Outstanding
    
    Life (yrs)
    
    Price
    
    Exercisable
    
    Price$
    
    
    10.44 - 16.31
    
    
    
    193,125
    
    
    
    2.02
    
    
    $
    14.73
    
    
    
    193,125
    
    
    $
    14.7323.98 - 23.98
    
    
    
    615,872
    
    
    
    7.32
    
    
    
    23.98
    
    
    
    350,528
    
    
    
    23.9824.06 - 29.95
    
    
    
    532,078
    
    
    
    5.97
    
    
    
    25.44
    
    
    
    370,511
    
    
    
    25.2030.72 - 32.25
    
    
    
    639,641
    
    
    
    5.49
    
    
    
    32.01
    
    
    
    617,372
    
    
    
    32.0633.50 - 51.17
    
    
    
    662,000
    
    
    
    8.51
    
    
    
    39.10
    
    
    
    83,660
    
    
    
    34.88$
    
    
    10.44 - 51.17
    
    
    
    2,642,716
    
    
    
    6.52
    
    
    $
    29.33
    
    
    
    1,615,195
    
    
    $
    26.81
 At June 30, 2004, 884,152 shares were available for future grants under the
Option Plans. 44




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##### Table of Contents



Employee Stock Purchase PlanUnder the Companys Employee Stock Purchase Plan,
(the Purchase Plan), eligible employees are permitted to have salary
withholdings to purchase shares of common stock at a price equal to 85% of the
lower of the market value of the stock at the beginning or end of each
six-month offer period, subject to certain annual limitations. Stock issued
under the Purchase Plan was 35,418, 58,054 and 56,187 shares in fiscal 2004,
2003 and 2002 at weighted average prices of $29.99, $21.62 and $23.16,
respectively. The weighted average fair value of the fiscal 2004, 2003 and 2002
awards was $12.52, $7.16 and $8.35, respectively. At June 30, 2004, 788,893
shares were reserved for future issuances under the Purchase Plan. At the
October 2003 Annual Meeting the shareholders approved 800,000 shares for
issuance under the new 2003 Employee Stock Participation Plan. Note 11 / EMPLOYEE 401(K) PLAN The Company has a 401(k) tax deferred savings plan covering most U.S.
employees. Participants may contribute up to 10% of their compensation and the
Company makes matching contributions ($1,380,000 in fiscal 2004, $1,267,000 in
fiscal 2003 and $1,223,000 in fiscal 2002) limited to 5% of each participants
compensation. Matching contributions vest in 25% increments each year beginning
two years after the participants date of employment. Note 12 / TAXES ON INCOME The provision for taxes on income consists of: Years ended June 30(In thousands)
    
    2004
    
    2003
    
    2002Current:Federal
    
    $
    9,439
    
    
    $
    6,961
    
    
    $
    5,981State
    
    
    1,449
    
    
    
    1,015
    
    
    
    1,063Foreign
    
    
    10,280
    
    
    
    8,639
    
    
    
    5,348Total current
    
    

    21,168
    
    
    
    16,615
    
    
    
    12,392Deferred:Federal
    
    
    (1,197
    )
    
    
    (780
    )
    
    
    346State
    
    
    (111
    )
    
    
    (80
    )
    
    
    29Foreign
    
    
    621
    
    
    
    (622
    )
    
    
    525Total deferred
    
    
    (687
    )
    
    
    (1,482
    )
    
    
    900$
    20,481
    
    
    $
    15,133
    
    
    $
    13,292
 Domestic and foreign income before taxes on income is as follows: Years ended June 30(In thousands)
    
    2004
    
    2003
    
    2002Domestic
    
    $
    45,699
    
    
    $
    30,516
    
    
    $
    29,928Foreign
    
    
    16,157
    
    
    
    16,045
    
    
    
    10,972$
    61,856
    
    
    $
    46,561
    
    
    $
    40,900
 Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The components of the
current and noncurrent deferred tax assets and liabilities are as follows: 45




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##### Table of Contents



Years ended June 30(In
thousands)
    
    2004
    
    2003Current deferred tax assets:Accounting accruals deductible in
different periods for tax purposes
    
    $
    9,883
    
    
    $
    9,245State income tax
    
    
    265
    
    
    
    221Other
    
    
    145
    
    
    
    146Total current deferred tax assets
    
    
    10,293
    
    
    
    9,612Noncurrent deferred tax asset  Difference
in tax basis from acquisition
    
    
    2,250
    
    
    
    2,798Noncurrent deferred tax liabilities:Accelerated depreciation
    
    
    849
    
    
    
    966Net unrealized gain on available for
sale securities
    
    
    368
    
    
    
    286Excess tax basis from acquisition
    
    
    2,250
    
    
    
    2,798Other
    
    
    90
    
    
    
    57Total deferred tax liabilities
    
    
    3,557
    
    
    
    4,107Net deferred tax assets
    
    $
    8,986
    
    
    $
    8,303
 Total income tax expense differs from the amount computed by applying the
statutory Federal income tax rate to income before taxes as follows: Years ended June 30
    
    2004
    
    2003
    
    2002Statutory Federal income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State income taxes, net of Federal income
tax effect
    
    
    1.4
    
    
    
    1.3
    
    
    
    1.7Foreign Sales Corporation income not taxed
    
    
    (2.1
    )
    
    
    (2.9
    )
    
    
    (2.4
    )Taxes on foreign income
    
    
    1.1
    
    
    
    0.1
    
    
    
    0.2Other
    
    
    (2.3
    )
    
    
    (1.0
    )
    
    
    (2.0
    )33.1
    %
    
    
    32.5
    %
    
    
    32.5
    %
 Income taxes paid were $16,307,000 in fiscal 2004, $11,730,000 in fiscal 2003
and $9,398,000 in fiscal 2002. The Company has not provided for Federal income taxes on approximately $45.7
million of undistributed earnings of certain foreign subsidiaries, which have
been permanently reinvested in subsidiary operations. If these earnings were
distributed to the parent company, foreign tax credits available under current
law would substantially eliminate the resulting Federal income tax liability. Note 13 / COMMITMENTS AND OTHER CONTINGENCIES Certain facilities and equipment are leased under noncancelable operating
leases. The Company generally pays taxes, insurance and maintenance costs on
leased facilities and equipment. Minimum annual rental commitments under these
noncancelable operating leases are $3,752,000 for fiscal 2005, $2,703,000 for
fiscal 2006, $1,952,000 for fiscal 2007, $1,369,000 for fiscal 2008, $1,152,000
for fiscal 2009 and $4,379,000 thereafter. Total rental expense for all operating leases was $5,172,000 in fiscal 2004,
$4,636,000 in fiscal 2003 and $3,928,000 in fiscal 2002. The Company enters into standard indemnification agreements with many of its
customers and certain other business partners in the ordinary course of
business. These agreements include provisions for indemnifying the customer
against any claim brought by a third party to the extent any such claim alleges
that a Dionex product infringes a patent, copyright or trademark, or violates
any other proprietary rights 46




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##### Table of Contents



of that third party. The maximum potential amount
of future payments the Company could be required to make under these
indemnification agreements is not estimable, however, the Company has not
incurred any costs to defend lawsuits or settle claims related to these
indemnification agreements. To date, no material claims for such
indemnifications are outstanding as of June 30, 2004. The Company has not
recorded any liabilities for these indemnification agreements at June 30, 2004
and 2003. Note 14 / BUSINESS SEGMENT INFORMATION SFAS No. 131 establishes standards for reporting information about operating
segments in annual financial statements of public business enterprises. It also
establishes standards for related disclosures about products and service,
geographic areas and major customers. The Company evaluated its business
activities that are regularly reviewed by the Companys senior management and
has determined that it has two segments that are aggregated into one reporting
segment. The Company sells products, installation and training services and maintenance
within this reportable segment, detailed as follows: (In thousands)
    
    2004
    
    2003
    
    2002Products
    
    $
    227,270
    
    
    $
    187,410
    
    
    $
    160,053Installation and Training Services
    
    
    7,127
    
    
    
    6,976
    
    
    
    6,276Maintenance
    
    
    24,437
    
    
    
    20,523
    
    
    
    16,105$
    258,834
    
    
    $
    214,909
    
    
    $
    182,434
 Geographic information is presented below: (In thousands)
    
    2004
    
    2003
    
    2002Net sales to unaffiliated customers:United States
    
    $
    74,169
    
    
    $
    71,418
    
    
    $
    66,585Europe
    
    
    106,773
    
    
    
    90,060
    
    
    
    72,696Japan
    
    
    42,140
    
    
    
    27,299
    
    
    
    22,853Other International
    
    
    35,752
    
    
    
    26,132
    
    
    
    20,300Consolidated net sales to
unaffiliated customers
    
    $
    258,834
    
    
    $
    214,909
    
    
    $
    182,434Long-lived assets:United States
    
    $
    38,582
    
    
    $
    39,017Europe
    
    
    33,883
    
    
    
    30,964Japan
    
    
    10,699
    
    
    
    9,758Other International
    
    
    1,381
    
    
    

    148Consolidated assets
    
    $
    84,545
    
    
    $
    79,887
 No individual customer was greater than 10% of net sales in fiscal 2004, 2003
and 2002 or greater than 10% of consolidated accounts receivable at June 30,
2004 and 2003. 47




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##### Table of Contents



Note 15 / QUARTERLY RESULTS OF OPERATIONS (unaudited) The following is a summary of the unaudited quarterly results of operations for
the years ended June 30, 2004 and 2003. Quarter(In thousands,except per share amounts)
    
    First
    
    Second
    
    Third
    
    FourthFiscal 2004:Net sales
    
    $
    53,276
    
    
    $
    65,539
    
    
    $
    70,746
    
    
    $
    69,273Gross profit
    
    
    35,268
    
    
    
    43,702
    
    
    
    46,117
    
    
    
    44,803Net income
    
    
    7,591
    
    
    
    10,766
    
    
    
    12,387
    
    
    
    10,631Basic earnings per share
    
    $
    0.36
    
    
    $
    0.51
    
    
    $
    0.58
    
    
    $
    0.51Diluted earnings per
share
    
    $
    0.35
    
    
    $
    0.49
    
    
    $
    0.56
    
    
    $
    0.49Fiscal 2003:Net sales
    
    $
    47,272
    
    
    $
    54,478
    
    
    $
    56,069
    
    
    $
    57,090Gross profit
    
    
    30,321
    
    
    
    36,157
    
    
    
    37,259
    
    
    
    37,899Net income
    
    
    6,309
    
    
    
    8,899
    
    
    
    7,612
    
    
    
    8,608Basic earnings per share
    
    $
    0.30
    
    
    $
    0.42
    
    
    $
    0.36
    
    
    $
    0.41Diluted earnings per
share
    
    $
    0.29
    
    
    $
    0.41
    
    
    $
    0.35
    
    
    $
    0.40
 
 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE None. 
 Item 9A. CONTROLS AND PROCEDURES The Company carried out an evaluation, under the supervision and with the
participation of the Companys Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the Companys disclosure controls and
procedures (as defined in rules promulgated under the Exchange Act). Based on
that evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that the Registrants disclosure controls and procedures as of June
30, 2004 were effective to ensure that information required to be disclosed by
the Company in reports that it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms. There were no changes in the Companys internal controls over financial
reporting that occurred during the year ended June 30, 2004 that have
materially affected, or
are reasonably likely to materially affect, the Companys internal controls
over financial reporting. A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues,
if any, within a company have been detected. The Companys disclosure controls
and procedures are designed to provide reasonable assurance of achieving their
objectives, and the Companys Chief Executive Officer and Chief Financial
Officer have concluded that these controls and procedures are effective at the
reasonable assurance level. 
 Item 9B. OTHER INFORMATION None. 48




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##### Table of Contents



PART III 
 Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT IDENTIFICATION OF DIRECTORS The information required by Item 10 of Form 10-K with respect to identification
of directors is incorporated by reference to the information contained in the
sections captioned Election of Directors, Section 16(a) Beneficial Ownership
Reporting and Compliance and Code of Ethics in the Registrants definitive
Proxy Statement for the Annual Meeting of Stockholders to be held October 22,
2004 (2004 Proxy Statement), which will be filed in accordance with Regulation
14A under the Exchange Act. IDENTIFICATION OF OFFICERS See Pages 16 and 17 of this Report captioned Executive Officers of the
Registrant. 
 Item 11. EXECUTIVE COMPENSATION The information required by Item 11 of Form 10-K is incorporated by reference
to the information contained in the section captioned Executive Compensation
in the 2004 Proxy Statement. 
 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS The information required by Item 12 of Form 10-K is incorporated by reference
to the information contained in the sections captioned Security Ownership of
Certain Beneficial Owners and Management and Equity Compensation Plan
Information in the 2004 Proxy Statement. 
 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by Item 13 of Form 10-K is incorporated by reference
to the information contained in the section captioned Certain Relationships
and Related Transactions in the 2004 Proxy Statement. 
 Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by Item 14 of Form 10-K is incorporated by reference
to the information contained in the sections captioned Auditors Fees and
Policy on Audit Committee Pre-Approval in the 2004 Proxy Statement. 
 PART IV 
 Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)
    
    
    (1
    )
    
    Financial Statements  See Index to Financial Statements at
Page 27 of this Report.
  (2)
    
    Financial Statement Schedules  See Index to Financial Statement
Schedules at page 50 of this Report.(3)
    
    Exhibits  See Exhibit Index at page 54 through 55 of this Report.  (b)
    
    Reports on Form 8-K  On April 20, 2004, the Company issued a press
release announcing the Companys third quarter financial results for the
period ended March 31, 2004. A copy of the press release was attached as
Exhibit 99.1 to a current report on Form 8-K filed on April 20, 2004. 49




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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized. DIONEX CORPORATION
(Registrant)Date September 8, 2004
    
    By
    
    /s/ Lukas BraunschweilerLukas BraunschweilerPresident and Chief Executive
Officer
 KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Lukas Braunschweiler and Craig A. McCollam, and each or either of them, each
with the power of substitution, his attorney-in-fact, to sign any amendments to this report, with exhibits thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on
the dates indicated. Signature
    
    Title
    
    Date/s/ Lukas Braunschweiler
Lukas Braunschweiler
    
    President, Chief Executive
Officer, and Director
(Principal Executive Officer)
    
    September 8, 2004/s/ Craig A. McCollam

Craig A. McCollam
    
    Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
    
    September 8, 2004/s/ A. Blaine Bowman
    
    Chairman of the Board
    
    September 8, 2004A. Blaine Bowman/s/ David L. Anderson
    
    Director
    
    September 8, 2004David L. Anderson/s/ B.J. Moore

B.J. Moore
    
    Director
    
    September 8, 2004/s/ Riccardo Pigliucci
Riccardo Pigliucci
    
    Director
    
    September 8, 2004/s/ Michael W. Pope
    
    Director
    
    September 8, 2004Michael W. Pope
 50




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INDEX TO FINANCIAL STATEMENT SCHEDULES PageFINANCIAL STATEMENT SCHEDULESIndependent Registered Public Accounting Firm Report
    
    
    52Schedule II  Valuation and Qualifying Accounts
and Reserves
    
    
    53
 All other schedules are omitted because they are not required, are not applicable or the information is included in the consolidated financial statements or notes thereto. 51




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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM REPORT Dionex Corporation We have audited the consolidated financial statements of Dionex Corporation and its subsidiaries as of June 30, 2004 and 2003, and for each of the three years in the period ended June
30, 2004, and have issued our report thereon August 27, 2004; such financial statements and report are included herein. Our audits also included the consolidated financial statement
schedule of Dionex Corporation and its subsidiaries, listed in the accompanying Index to Financial Statement Schedules. This financial statement schedule is the responsibility of the
Companys management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP
San Jose, California
August 27, 2004 52




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SCHEDULE II DIONEX CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED JUNE 30, 2004, 2003 AND 2002
(IN THOUSANDS) ChargedBalance
    
    
    
    
    
    (Credited)Beginning
    
    
    
    
    
    to Other
    
    
    
    
    
    Balanceof Year
    
    Additions
    
    Accounts (1)
    
    Deductions
    
    End of YearYEAR ENDED JUNE 30, 2004:Allowance for doubtful accounts
    
    $
    1,275
    
    
    $
    130
    
    
    $
    26
    
    
    $
    (671
    )(2)
    
    $
    760Accrued product warranty
    
    $
    3,188
    
    
    $
    2,417
    
    
    $
    164
    
    
    $
    (2,185
    )(3)
    
    $
    3,584YEAR ENDED JUNE 30, 2003:Allowance for doubtful accounts
    
    $
    989
    
    
    $
    356
    
    
    $
    (36
    )
    
    $
    (34
    )(2)
    
    $
    1,275Accrued product warranty
    
    $
    2,912
    
    
    $
    2,642
    
    
    $
    216
    
    
    $
    (2,582
    )(3)
    
    $
    3,188YEAR ENDED JUNE 30, 2002:Allowance for doubtful accounts
    
    $
    890
    
    
    $
    181
    
    
    $
    84
    
    
    $
    (166
    )(2)
    
    $
    989Accrued product warranty and installation
    
    $
    2,983
    
    
    $
    3,191
    
    
    $
    181
    
    
    $
    (3,443
    )(3)
    
    $
    2,912
  (1)
    
    Effects of exchange rate changes(2)
    
    Accounts written off, net of recoveries(3)
    
    Product warranty and installation costs 53




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EXHIBIT INDEX ExhibitNumber
    
    Description
    
    Reference3.1
    
    Restated Certificate of Incorporation, filed
November 6, 1996
    
    
    (3
    )3.2
    
    Bylaws, as amended on July 29, 2002
    
    
    (7
    )4.1
    
    Shareholder Rights Agreement dated January 21, 1999,
between the Registrant and BankBoston N.A.
    
    
    (4
    )10.1
    
    Agreement, effective as of January 1, 1975,
between The Dow Chemical Company and
International Plasma Corporation
    
    
    (1
    )10.2
    
    Memorandum agreement, dated March 14, 1975,
between The Dow Chemical Company and
International Plasma Corporation
    
    
    (1
    )10.3
    
    Agreement, dated March 6, 1975, between
International Plasma Corporation and the
former Dionex Corporation
    
    
    (1
    )10.4
    
    Consent to Assignment executed as of March 26,
1980, between the Dow Chemical Company and the
former Dionex Corporation
    
    
    (1
    )10.5
    
    Amendatory Agreement, effective as of November 1,
1981,between The Dow Chemical Company and the
Registrant (with certain confidential information
deleted)
    
    
    (1
    )10.6
    
    Amendatory Agreement, effective as of July 1, 1982,
between The Dow Chemical Company and the Registrant
(with certain confidential information deleted)
    
    
    (1
    )10.7
    
    Registrants Medical Care Reimbursement Plan
(Exhibit 10.17)
    
    
    (1
    )10.8
    
    Credit Agreement dated November 13, 2000
between Wells Fargo Bank and the Registrant
(Exhibit 10.15)
    
    
    (6
    )10.9
    
    1988 Directors Stock Option Plan (and related
stock option grant form) (Exhibit 10.20)
    
    
    (2
    )10.10
    
    Dionex Corporation Stock Option Plan, as
amended and restated (formerly, the 1990 Stock
Option Plan) (Exhibit 10.12)
    
    
    (5
    )
 54




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ExhibitNumber
    
    Description
    
    Reference10.11
    
    First amendment to Credit Agreement dated
November 13, 2000 between Wells Fargo Bank and the
Registrant
    
    
    (7
    )10.12
    
    Registrants Stock Option Plan10.13
    
    Registrants Employee Stock Participation Plan21.1
    
    Subsidiaries of Registrant23.1
    
    Consent of Independent Registered Public Accounting Firm31.1
    
    Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of the Chief Executive Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of the Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
  (1)
    
    Incorporated by reference to the indicated exhibit in Amendment No. 1 of
the Registrants Registration Statement on Form S-1 filed December 7,
1982.  (2)
    
    Incorporated by reference to the indicated exhibit in the Registrants
Annual Report on Form 10-K filed September 27, 1988.  (3)
    
    Incorporated by reference to the corresponding exhibit in the
Registrants Annual Report on Form 10-Q filed February 13, 1997.  (4)
    
    Incorporated by reference to the corresponding exhibit in the
Registrants Quarterly Report on Form 10-Q filed February 16, 1999.  (5)
    
    Incorporated by reference to the indicated exhibit in the Registrants
Statement on Form S-8 filed December 22, 1999.  (6)
    
    Incorporated by reference to the indicated exhibit in the Registrants
Quarterly Report on Form 10-Q filed February 14, 2001.  (7)
    
    Incorporated by reference to the indicated Exhibit 10.17 in the
Registrants Annual Report on Form 10-K filed August 28, 2002. 55