##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
  FORM 10-Q þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2005
 OR o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 0-11250
 DIONEX CORPORATION   Delaware
    
    94-2647429(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
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 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 R NO £ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). YES R NO £ Indicate the number of shares outstanding of each of the issuers classes of common stock, as
of May 6, 2005: CLASS
    
    NUMBER OF SHARESCommon Stock
    
    20,291,859




---



DIONEX CORPORATION
INDEX PagePART I. FINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTSCONDENSED CONSOLIDATED BALANCE SHEETS March 31, 2005 and June 30, 2004
    
    
    3CONDENSED CONSOLIDATED STATEMENTS OF INCOME Three Months Ended March 31,2005 and 2004
    
    
    4CONDENSED CONSOLIDATED STATEMENTS OF INCOME Nine Months Ended March 31, 2005and 2004
    
    
    5CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended March 31,2005 and 2004
    
    
    6NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    
    
    7-12ITEM 2.
    
    MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    13-21ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
    
    
    21-22ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    
    22PART II. OTHER INFORMATIONITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    23ITEM 6.
    
    EXHIBITS
    
    
    24-25SIGNATURES
    
    
    
    
    26EXHIBITS
    
    
    
    
    27EXHIBIT 10.15EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2.




---



##### Table of Contents



DIONEX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited) March 31,
    
    
    June 30,2005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    42,927
    
    
    $
    46,673Short-term investments
    
    
    24,454
    
    
    
    12,113Accounts receivable (net of allowance for doubtful accounts of $907 at March 31, 2005 and
$760 at June 30, 2004)
    
    
    56,883
    
    
    
    53,128Inventories
    
    
    27,220
    
    
    
    24,838Deferred taxes
    
    
    10,659
    
    
    
    10,293Prepaid expenses and other
    
    
    4,056
    
    
    
    3,875Total current assets
    
    
    166,199
    
    
    
    150,920Property, plant and equipment, net
    
    
    49,311
    
    
    
    46,656Goodwill
    
    
    25,126
    
    
    
    24,675Intangible assets, net
    
    
    3,333
    
    
    
    4,357Other assets
    
    
    8,194
    
    
    
    8,857$
    252,163
    
    
    $
    235,465LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Notes payable to banks
    
    $
    140
    
    
    $
    1,468Accounts payable
    
    
    8,417
    
    
    
    8,113Accrued liabilities
    
    
    30,897
    
    
    
    31,822Income taxes payable
    
    
    95
    
    
    
    2,214Accrued product warranty
    
    
    3,820
    
    
    
    3,584Total current liabilities
    
    
    43,369
    
    
    
    47,201Deferred taxes
    
    
    3,615
    
    
    
    3,557Other long-term liabilities
    
    
    869
    
    
    
    1,253Stockholders equity:Preferred stock (par value $.001 per share; 1,000,000 shares authorized; none outstanding)
    
    
    
    
    
    
    Common stock (par value $.001 per share; 80,000,000 shares authorized; issued and outstanding:20,706,957 shares at March 31, 2005 and 20,840,881 shares at June 30, 2004)
    
    
    122,495
    
    
    
    103,943Retained earnings
    
    
    69,040
    
    
    
    71,217Accumulated other comprehensive income
    
    
    12,775
    
    
    
    8,294Total stockholders equity
    
    
    204,310
    
    
    
    183,454$
    252,163
    
    
    $
    235,465
 See notes to condensed consolidated financial statements. 3.




---



##### Table of Contents



DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(In thousands, except per share amounts)
(Unaudited) Three Months EndedMarch
31,2005
    
    
    2004Net sales
    
    $
    70,801
    
    
    $
    70,746Cost of sales
    
    
    22,941
    
    
    
    24,629Gross profit
    
    
    47,860
    
    
    
    46,117Operating expenses:Selling, general and administrative
    
    
    26,060
    
    
    
    23,367Research and product development
    
    
    4,801
    
    
    
    4,606Total operating expenses
    
    
    30,861
    
    
    
    27,973Operating income
    
    
    16,999
    
    
    
    18,144Interest income
    
    
    351
    
    
    
    214Interest expense
    
    
    (4
    )
    
    
    (66
    )Other income (expense), net
    
    
    67
    
    
    
    60Income before taxes
    
    
    17,413
    
    
    
    18,352Taxes on income
    
    
    5,453
    
    
    
    5,965Net income
    
    $
    11,960
    
    
    $
    12,387Basic earnings per share
    
    $
    0.58
    
    
    $
    0.58Diluted earnings per share
    
    $
    0.56
    
    
    $
    0.56Shares used in computing per share amounts:Basic
    
    
    20,763
    
    
    
    21,180Diluted
    
    
    21,543
    
    
    
    22,177
 See notes to condensed consolidated financial statements. 4.




---



##### Table of Contents



DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED MARCH 31, 2005 AND 2004
(In thousands, except per share amounts)
(Unaudited) Nine Months EndedMarch 31,2005
    
    
    2004Net sales
    
    $
    208,161
    
    
    $
    189,561Cost of sales
    
    
    69,190
    
    
    
    64,474Gross profit
    
    
    138,971
    
    
    
    125,087Operating expenses:Selling, general and administrative
    
    
    73,895
    
    
    
    65,429Research and product development
    
    
    15,127
    
    
    
    14,204Total operating expenses
    
    
    89,022
    
    
    
    79,633Operating income
    
    
    49,949
    
    
    
    45,454Interest income
    
    
    890
    
    
    
    530Interest expense
    
    
    (136
    )
    
    
    (170
    )Other income (expense), net
    
    
    380
    
    
    
    (268
    )Income before taxes
    
    
    51,083
    
    
    
    45,546Taxes on income
    
    
    16,732
    
    
    
    14,803Net income
    
    $
    34,351
    
    
    $
    30,743Basic earnings per share
    
    $
    1.66
    
    
    $
    1.46Diluted earnings per share
    
    $
    1.59
    
    
    $
    1.40Shares used in computing per share amounts:Basic
    
    
    20,755
    
    
    
    21,099Diluted
    
    
    21,561
    
    
    
    21,983
 See notes to condensed consolidated financial statements. 5.




---



##### Table of Contents



DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 2005 AND 2004
(In thousands)
(Unaudited) Nine Months EndedMarch 31,2005
    
    
    2004Cash flows from operating activities:Net income
    
    $
    34,351
    
    
    $
    30,743Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    4,528
    
    
    
    4,372Gain on sale of marketable securities
    
    
    (644
    )
    
    
    Tax benefit related to stock option plans
    
    
    5,177
    
    
    
    6,313Deferred taxes
    
    
    (120
    )
    
    
    (937
    )Changes in assets and liabilities:Accounts receivable
    
    
    (1,788
    )
    
    
    (6,202
    )Inventories
    
    
    (1,074
    )
    
    
    1,216Prepaid expenses and other assets
    
    
    (1,045
    )
    
    
    (344
    )Accounts payable
    
    
    122
    
    
    
    4,818Accrued liabilities
    
    
    1,450
    
    
    
    121Income taxes payable
    
    
    (2,500
    )
    
    
    (4,417
    )Accrued product warranty
    
    
    107
    
    
    
    248Net cash provided by operating activities
    
    
    38,564
    
    
    
    35,931Cash flows from investing activities:Earnout provision of LC Packings
    
    
    (3,500
    )
    
    
    (3,000
    )Purchase of marketable securities
    
    
    (50,475
    )
    
    
    (16,550
    )Proceeds from sale of marketable securities
    
    
    39,522
    
    
    
    4,451Purchase of property, plant and equipment
    
    
    (5,175
    )
    
    
    (3,108
    )Acquisition of other intangible assets
    
    
    
    
    
    
    (975
    )Proceeds from sale of property & equipment
    
    
    4
    
    
    
    Other
    
    
    64
    
    
    
    91Net cash used for investing activities
    
    
    (19,650
    )
    
    
    (19,091
    )Cash flows from financing activities:Net change in revolving line of credit
    
    
    (942
    )
    
    
    662Principal payments on debt
    
    
    (423
    )
    
    
    (484
    )Proceeds from issuance of common stock
    
    
    17,365
    
    
    
    17,794Repurchase of common stock
    
    
    (40,520
    )
    
    
    (30,458
    )Net cash used for financing activities
    
    
    (24,520
    )
    
    
    (12,486
    )Effect of exchange rate changes on cash
    
    
    1,770
    
    
    
    1,195Net increase in cash and equivalents
    
    
    (3,746
    )
    
    
    5,549Cash and equivalents, beginning of period
    
    
    46,673
    
    
    
    40,821Cash and equivalents, end of period
    
    $
    42,927
    
    
    $
    46,370Supplemental disclosures of cash flow information:Income taxes paid
    
    $
    13,470
    
    
    $
    13,371Interest paid
    
    $
    93
    
    
    $
    126
 See notes to condensed consolidated financial statements. 6.




---



##### Table of Contents



DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 1. Basis of Presentation The condensed consolidated financial statements included herein have been prepared by Dionex
Corporation (the Company), without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant to such rules and regulations. It
is suggested that these condensed consolidated financial statements be read in conjunction with the
condensed consolidated financial statements and the notes thereto included in the Companys Annual
Report on Form 10-K for the fiscal year ended June 30, 2004. The unaudited condensed consolidated financial statements included herein reflect all
adjustments (which include only normal, recurring adjustments) that are, in the opinion of
management, necessary to state fairly the results for the periods presented. The results for such
periods are not necessarily indicative of the results to be expected for the entire fiscal year
ending June 30, 2005. 2. Reclassification of Auction Rate Securities (ARS) The Company has determined that investments in auction rate securities should be classified as
short-term investments. Previously, such investments had been classified as cash and cash
equivalents. ARS generally have long-term maturities; however, these investments have
characteristics similar to short-term investments because at predetermined intervals, generally
every 28 to 49 days, there is a new auction process, and a ready market exists for these
securities. The Company recorded investments in ARS as of March 31, 2005 as short-term investments
and reclassified ARS as of June 30, 2004 that were previously included in cash and cash equivalents
as short-term investments. The following is a summary of the effects of the reclassification (in thousands): Consolidated Balance SheetAs PreviouslyAs of June 30, 2004
    
    Reported
    
    
    Adjustments
    
    
    As ReclassifiedCash and cash equivalents
    
    $
    57,182
    
    
    $
    (10,509
    )
    
    $
    46,673Short-term investments
    
    
    1,604
    
    
    
    10,509
    
    
    
    12,113
 3. Stock-Based Compensation The 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. 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. 7.




---



##### Table of Contents



Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, sets forth a fair-value based method of recognizing stock-based compensation
expense. As permitted by SFAS No. 123, the Company has 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 (in thousands, except per share amounts): Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income, as reported
    
    $
    11,960
    
    
    $
    12,387
    
    
    $
    34,351
    
    
    $
    30,743Less: Total stock-based
employee compensation
expense determined under
fair value method for all
awards, net of related tax
effects
    
    
    1,265
    
    
    
    1,283
    
    
    
    4,340
    
    
    
    4,066Pro forma net income
    
    $
    10,695
    
    
    $
    11,104
    
    
    $
    30,011
    
    
    $
    26,677Earnings per share:Basic  as reported
    
    $
    0.58
    
    
    $
    0.58
    
    
    $
    1.66
    
    
    $
    1.46Basic  pro forma
    
    $
    0.52
    
    
    $
    0.52
    
    
    $
    1.45
    
    
    $
    1.26Diluted  as reported
    
    $
    0.56
    
    
    $
    0.56
    
    
    $
    1.59
    
    
    $
    1.40Diluted  pro forma
    
    $
    0.50
    
    
    $
    0.50
    
    
    $
    1.39
    
    
    $
    1.21
 The resulting pro forma compensation expense may not be representative of the amount to be
expected for the year ending June 30, 2005. Pro forma compensation expense may be greater as
additional options are granted. The fair value of each option on the date of grant is estimated using the Black-Scholes
option-pricing model with a volatility of 47% for 2005 and 49% for 2004, expected life of options
of 5.6 years for 2005 and 5.9 years for 2004, risk free interest rate of approximately 3.56% in
2005 and 3.30% in 2004 and a dividend yield of 0% for fiscal years 2005 and 2004, respectively. The Black-Scholes option-pricing model was developed for estimating the fair value of publicly
traded options that 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. The Companys employee stock options have characteristics significantly different
from publicly traded options, and changes in the subjective input assumptions can materially affect
the fair value estimate. 4. New Accounting Pronouncements In September 2004, the Financial Accounting Standards Board (FASB) issued FASB Staff Position
(FSP) Emerging Issues Task Force (EITF) Issue 03-1, Effective Date of Paragraphs 10-20 of EITF
Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments, which delays the effective date for the recognition and measurement guidance in EITF
Issue No. 03-1. In addition, the FASB has issued a proposed FSP to consider whether further
application guidance is necessary for securities analyzed for impairment under EITF Issue No. 03-1.
The Company continues to assess the potential impact of the adoption of the proposed FSP could
have on the Companys consolidated financial statements. In November 2004, the FASB issued SFAS No. 151, Inventory Costs (SFAS No. 151) which
clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs,
and wasted material. SFAS No. 151 will be effective for inventory costs incurred during fiscal
years beginning after June 15, 2005. The Company continues to assess the potential impact the
adoption of SFAS No. 151 could have on the Companys consolidated financial statements. In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment (SFAS 123R), which
eliminates the alternative of applying the intrinsic value measurement to stock compensation awards
issued to employees. Rather, the new standard requires companies to measure the cost of employee
services received in exchange for an award of equity instruments based on the grant date fair value
of the award. That cost will be recognized over the period during which an employee is required to
provide services in exchange for the award, as is referred to as the requisite service period
(usually the vesting period). 8.




---



##### Table of Contents



The Company has not yet quantified the effects of the adoption of SFAS 123R, but it is
expected that the new standard will result in significant stock-based compensation expense. The pro
forma effects on net income and earnings per share if the Company had applied the fair value
recognition provisions of original SFAS 123 on stock compensation awards are disclosed in Note 3.
Although such pro forma effects of applying original SFAS 123 may be indicative of the effects of
adopting SFAS 123R, the provisions of these two statements differ in some important respects. The
actual effect of adopting SFAS 123R will be dependent on numerous factors including, but not
limited to, the valuation model chosen by the Company to value stock-based awards; the assumed
award forfeiture rate; the accounting policies adopted concerning the method of recognizing the
fair value of awards over the requisite service period; and the transition method (as described
below) chosen for adopting SFAS 123R. SFAS 123R will be effective for the Companys fiscal quarter beginning July 1, 2005, and
requires the use of the Modified Prospective Application Method. Under this method SFAS 123R will
be applied to new awards and to awards modified, repurchased or cancelled after the effective date.
Additionally, compensation cost for the portion of awards for which the requisite service has not
been rendered (such as unvested options) that are outstanding as of the date of adoption shall be
recognized as the remaining requisite services are rendered. The compensation cost relating to
unvested awards at the date of adoption shall be based on the grant-date fair value of those awards
as calculated for pro forma disclosures under the original SFAS 123. In addition, companies may use
the Modified Retrospective Application Method. This method may be applied to all prior years for
which the original SFAS 123 was effective or only to prior interim periods in the year of initial
adoption. If the Modified Retrospective Application Method is applied, financial statements for
prior periods shall be adjusted to give effect to the fair-value-based method of accounting for
awards on a consistent basis with the pro forma disclosures required for those periods under the
original SFAS 123. In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets, an amendment
of APB Opinion No. 29 (SFAS No. 153) which eliminates the exception for nonmonetary exchanges of
similar productive assets and replaces it with a general exception for exchanges of nonmonetary
assets that do not have commercial substance. SFAS No. 153 will be effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. The Company expects that the
adoption of SFAS No. 153 will not have any impact on the Companys condensed consolidated financial
statements. 5. Marketable Securities During the year ended June 30, 2004, the Company acquired debt instruments with maturities of
more than one year. These securities are classified as held-to-maturity securities. At March 31,
2005, the aggregate unamortized value of these securities was approximately $4.2 million, of which
approximately $1.0 and $3.2 million are classified on the balance sheet as short-term investments
and other assets, respectively. The aggregate amount of unrealized losses for these securities
was approximately $97,000 at March 31, 2005, all of which had been in a loss position for less than
12 months. In the three months ended March 31, 2005 the Company sold a held to maturity
security. The Company realized proceeds of $97,000 and reported a loss of $2,600 on the sale. 6. Inventories Inventories consist of (in thousands): March 31,
    
    
    June 30,2005
    
    
    2004Finished goods
    
    $
    14,850
    
    
    $
    13,208Work in process
    
    
    2,110
    
    
    
    2,654Raw materials
    
    
    10,260
    
    
    
    8,976$
    27,220
    
    
    $
    24,838
 9.




---



##### Table of Contents



7. Comprehensive Income Comprehensive income is the change in stockholders equity arising from transactions other
than investments by owners and distributions to owners. For the Company, the significant components
of comprehensive income, other than net income, are foreign currency translation adjustments and
net unrealized gains or losses on securities available for sale. The components of accumulated
other comprehensive income is summarized as follows (in thousands): Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income, as reported
    
    $
    11,960
    
    
    $
    12,387
    
    
    $
    34,351
    
    
    $
    30,743Foreign currency translation adjustments
    
    
    (4,147
    )
    
    
    (938
    )
    
    
    4,731
    
    
    
    6,351Unrealized gain/(loss) on securities available for sale, net
    
    
    (32
    )
    
    
    (7
    )
    
    
    (249
    )
    
    
    157Comprehensive income
    
    $
    7,781
    
    
    $
    11,442
    
    
    $
    38,833
    
    
    $
    37,251
 8. Common Stock Repurchases During the three months ended March 31, 2005, the Company repurchased 246,300 shares of its
common stock on the open market for approximately $14.3 million (at an average repurchase price of
$58.19 per share), compared with 316,700 shares repurchased for approximately $16.9 million (at an
average repurchase price of $53.31 per share) in the same period in the prior fiscal year. During the nine months ended March 31, 2005, the Company repurchased 767,500 shares of its
common stock on the open market for approximately $40.5 million (at an average repurchase price of
$52.80 per share) compared with 652,700 shares repurchased for approximately $30.5 million (at an
average repurchase price of $46.66 per share) in the same period in the prior year. During the year ended June 30, 2004, the Company repurchased a total of 1,116,300 shares of
its common stock on the open market for approximately $53.7 million (at an average repurchase price
of $48.11 per share). 9. 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 earnings per share is determined by
dividing net income by the weighted average number of common shares used in the basic earnings per
share calculation, plus the number of common shares that would be issued assuming conversion of all
potentially dilutive securities outstanding under the treasury stock method. The following table is a reconciliation of the numerators and denominators used in computing
basic and diluted earnings per share (in thousands, except per share data): Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Numerator:Net Income
    
    $
    11,960
    
    
    $
    12,387
    
    
    $
    34,351
    
    
    $
    30,743Denominator:Weighted average shares used to
compute net income per common
share  basic
    
    
    20,763
    
    
    
    21,180
    
    
    
    20,755
    
    
    
    21,099Effect of dilutive stock options
    
    
    780
    
    
    
    997
    
    
    
    806
    
    
    
    884Weighted average shares used to
compute net income per common
share  diluted
    
    
    21,543
    
    
    
    22,177
    
    
    
    21,561
    
    
    
    21,983Basic earnings per share
    
    $
    0.58
    
    
    $
    0.58
    
    
    $
    1.66
    
    
    $
    1.46Diluted earnings per share
    
    $
    0.56
    
    
    $
    0.56
    
    
    $
    1.59
    
    
    $
    1.40
 Antidilutive common equivalent shares related to stock options are excluded from the
calculation of diluted shares. At March 31, 2005 and 2004 all stock options were included in the
diluted earnings per share calculation. 10.




---



##### Table of Contents



10. Goodwill and Other Intangible Assets Information regarding the Companys goodwill and other intangible assets reflects current
foreign exchange rates. Changes in the carrying amount of goodwill for the nine months ended March 31, 2005 are as
follows (in thousands): TotalBalance as of July 1, 2004
    
    $
    24,675Goodwill acquired during the period
    
    
    Translation adjustments
    
    
    451Balance as of March 31, 2005
    
    $
    25,126
 The Company performed an annual impairment test of goodwill in April 2005 and determined that
goodwill was not impaired. Information regarding the Companys other intangible assets follows (in thousands): As of March 31, 2005
    
    
    As of June 30, 2004Carrying
    
    
    Accumulated
    
    
    
    
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Net
    
    
    Amount
    
    
    Amortization
    
    
    NetDeveloped technology
    
    
    10,057
    
    
    
    (7,864
    )
    
    
    2,193
    
    
    
    9,750
    
    
    
    (6,505
    )
    
    
    3,245Other
    
    
    1,341
    
    
    
    (201
    )
    
    
    1,140
    
    
    
    1,186
    
    
    
    (74
    )
    
    
    1,112Total
    
    $
    11,398
    
    
    $
    (8,065
    )
    
    $
    3,333
    
    
    $
    10,936
    
    
    $
    (6,579
    )
    
    $
    4,357
 The Company amortizes developed technology over a period of three to seven years and the
remaining weighted average amortization period for this category approximates two years. The
Company amortizes other intangibles over a period of five to ten years and the remaining weighted
average amortization period for this category approximates eight years. Amortization expense related to intangible assets was $354,000 and $1.2 million, respectively,
for the three and nine months ended March 31, 2005 as compared to $396,000 and $1.1 million,
respectively, for the three and nine months ended March 31, 2004. The estimated amortization for
each of the five fiscal years subsequent to June 30, 2004 is as follows: Year Ending
    
    AmortizationJune 30,
    
    Expense2005
    
    $
    1,6002006
    
    
    1,0682007
    
    
    8702008
    
    
    3642009
    
    
    155Thereafter
    
    
    445Total
    
    $
    4,502
 11. Warranty Product warranties are recorded at the time revenue is recognized for certain product
shipments. Warranty expense is affected by product failure rates, material usage and service costs
incurred in correcting a product failure. Should actual product failure rates, material usage or
service costs differ from our estimates, revisions to the warranty liability would be required. 11.




---



##### Table of Contents



Details of the change in accrued product warranty for the nine months ended March 31, 2005 and
2004 are as follows (in thousands): Balance
    
    Provision
    
    
    
    
    
    Actual
    
    BalanceBeginning
    
    for
    
    
    
    
    
    Warranty
    
    End ofof Period
    
    Warranties(2)
    
    Other(1)
    
    Costs Incurred(3)
    
    PeriodAccrued Product Warranty
Nine Months Ended:March 31, 2005
    
    
    $3,584
    
    
    
    1,705
    
    
    
    134
    
    
    
    (1,603
    )
    
    
    $3,820March, 31, 2004
    
    
    $3,188
    
    
    
    1,797
    
    
    
    172
    
    
    
    (1,563
    )
    
    
    $3,594
   
 12. Commitments One of the Companys foreign subsidiaries discounts trade notes receivable with banks. The
uncollected balances of notes receivable due to the discounting banks at March 31, 2005 and June
30, 2004 were $2.7 million and $7.4 million, respectively. The Company is contingently liable for
these unpaid balances to the extent the amounts are not paid to the bank by the end customer. The
Company has determined that the carrying amount of its contingent liability under this guarantee
was insignificant at March 31, 2005 and June 30, 2004 based on its past experience of discounting
trade notes receivable. 12.




---



##### Table of Contents



DIONEX CORPORATION 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Statement Regarding Forward-Looking Statements Except for historical information contained herein, the discussion below and in the footnotes
to the Companys financial statements contained in this Report on Form 10-Q contains
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and
the Private Securities Litigation Reform Act of 1995, and are made under the safe harbor provisions
thereof. Such statements are subject to certain risks, uncertainties and other factors that may
cause actual results, performance or achievements, or industry results, to be materially different
from any future results, performance or achievements, or industry results, expressed or implied by
such forward-looking statements. Such risks and uncertainties include, among other things: general
economic conditions, foreign currency fluctuations, fluctuations in worldwide demand for analytical
instrumentation, fluctuations in quarterly operating results, competition from other products,
existing product obsolescence, new product development, including market receptiveness, the ability
to manufacture products on an efficient and timely basis and at a reasonable cost and in sufficient
volume, the ability to attract and retain talented employees and other risks as described in more
detail below under the heading Risks and Uncertainties. Readers are cautioned not to place undue
reliance on these forward-looking statements that reflect managements analysis only as of the date
hereof. The Company undertakes no obligation to update these forward-looking statements. The Company Dionex 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 electronic
industries in a variety of applications. Results of Operations  Three Months Ended March 31, 2005 and 2004 Net sales for the third quarter of fiscal 2005 were $70.8 million, compared with $70.7 million
reported for the same period in the prior year. The Company is subject to the effects of foreign
currency fluctuations that have an impact on net sales and gross profit. Overall, currency
fluctuations increased reported net sales by approximately 2% for the three months ended March 31,
2005 compared to 11% for the same period in the prior year. In the third quarter of fiscal 2005, net sales increased or decreased compared to the third
quarter of fiscal 2004 as indicated in the table below: Three MonthsEndedMarch 31, 2004toPercentage change in net sales
    
    March 31, 2005Total:
    
    
    0
    %By geographic region:North America
    
    
    -1
    %Europe
    
    
    5
    %Asia/Pacific
    
    
    -6
    %Percentage of change in net sales excluding currency fluctuationsTotal:
    
    
    -2
    %By geographic region:North America
    
    
    -2
    %Europe
    
    
    0
    %Asia/Pacific
    
    
    -7
    %
 13.




---



##### Table of Contents



Net sales for the third quarter of fiscal 2005 in North America decreased from the third
quarter of fiscal 2004 primarily due to weaker conditions in the environmental and pharmaceutical
markets due to reduced customer and governmental spending. Net sales for the third quarter of
fiscal 2005 in Europe increased from the third quarter of fiscal 2004 primarily due to good sales
growth in the United Kingdom and France. The Asia/Pacific region declined primarily due to $5
million of nonrecurring sales in Japan related to new drinking water regulations reported in the
third quarter last year. Excluding this incremental revenue in the prior period, Asia/Pacific
region net sales increased 23% for the third quarter fiscal 2005, as we saw continued strong growth
in all countries outside of Japan. Gross margin for the third quarter ended March 31, 2005 was 67.6% compared to 65.2% in the
third quarter last year. Gross margin improved significantly from the third quarter last year. In
the third quarter last year, the incremental $5 million in sales from Japan, described above,
included an OEM component that had a significantly lower gross margin, causing our gross margin to
be approximately 2 percentage points lower. Operating expenses of $30.9 million for the third quarter of fiscal 2005 increased $2.9
million, or 10.3%, from the $28.0 million reported in the same quarter last year. As a percentage
of net sales described above, operating expenses increased to 43.6% for the three months ended
March 31, 2005 compared to 39.5% for the same quarter last year. Selling, general and administrative (SG&A) expenses increased $2.7 million or 11.5%, to $26.1
million in the three months ended March 31, 2005 compared to $23.4 million for the same quarter
last year. As a percentage of net sales, SG&A expenses increased to 36.8% for the third quarter of
fiscal 2005 compared to 33.0% for the same quarter last year. The increase in SG&A expenses was
primarily due to higher personnel costs of approximately $600,000, effects from currency
fluctuations of approximately $800,000 and the costs of the Companys Australian subsidiary
(established in May 2004) and compliance with Section 404 of the Sarbanes-Oxley Act of
approximately $300,000 each. Research and product development (R&D) costs of $4.8 million for the three months ended March
31, 2005 increased $195,000, or 4.2%, from the $4.6 million reported in the same period last year.
Increased R&D spending in the three months ending March 31, 2005 is primarily due to higher
personnel costs. Overall, the level of R&D spending varies depending on both the breadth of the
Companys R&D efforts and the stage of specific product development. In the third quarter of
fiscal 2005, the Company introduced two new high end systems, the ICS-3000 Premiere Ion
Chromatography system and the Ultimate 3000 Micro, Capillary and Nano flow system. Other income was $67,000 in the three months ended March 31, 2005 compared to income of
$60,000 for the same period in the prior year. Other income in fiscal 2005 is attributable to
foreign currency exchange gains. The effective tax rate for the three months ended March 31, 2005 was 31.3%, down from 32.5%
reflected in the same period last year. The lower tax rate was due to tax credits that were
recognized in the current quarter. Net income in the three months ended March 31, 2005 declined 3.4% to $12.0 million compared
with $12.4 million reported for the same period last year. Diluted earnings per share for the three
months ended March 31, 2005 were $.56, unchanged from the $.56 reported for the same period last
year. Results of Operations  Nine Months Ended March 31, 2005 and 2004 Net sales for the nine months ended March 31, 2005 were $208.2 million, an increase of 10%
over the $189.6 million reported for the same period last year. The Company is subject to the
effects of foreign currency fluctuations that have an impact on net sales and gross profit.
Overall, currency fluctuations increased net sales by approximately 4% for the first nine months of
fiscal 2005 and by approximately 8% for the same period last year. 14.




---



##### Table of Contents



Net sales for the first nine months of fiscal 2005 increased over the same period last year as
indicated in the table below: Nine Months EndedPercentage change in net sales
    
    March 31, 2004 toMarch 31, 2005Total:
    
    
    10
    %By geographic region:North America
    
    
    7
    %Europe
    
    
    12
    %Asia/Pacific
    
    
    10
    %Percentage of growth in net sales excluding currency fluctuationsTotal:
    
    
    6
    %By geographic region:North America
    
    
    6
    %Europe
    
    
    4
    %Asia/Pacific
    
    
    8
    %
 Net sales in North America increased primarily due to improvements in economic conditions.
Net sales in Europe increased primarily due to strong growth throughout the region. Net sales in
the Asia/Pacific region increased primarily due to strong growth in all countries except Japan,
resulting from the incremental sales previously discussed. The sales growth in the first nine
months of fiscal 2005 was affected by the weaker third quarter sales growth. The Company believes
that the fourth quarter will continue to be affected by weaker economic conditions and $3.0 million in
nonrecurring sales in Japan in the fourth quarter of fiscal 2004. Gross margin for the first nine months of fiscal 2005 was 66.8%, a slight increase from the
66.0% reported for the same period last year. Gross margin was higher due to the high OEM component
previously discussed in the third quarter last year. Operating expenses of $89.0 million for the first nine months of fiscal 2005 increased $9.4
million, or 11.8%, from the $79.6 million reported for the same period last year. As a percentage
of sales, operating expenses in the first nine months of fiscal year 2005 were 42.8%, compared with
42.0% in the same period last year. SG&A expenses were $73.9 million for the first nine months of fiscal 2005, an increase of
12.9% compared with the $65.4 million reported in the same period last year. The increase in SG&A
expenses was due to personnel costs of approximately $3.0 million, effects of currency fluctuations
of approximately $2.8 million, costs associated with Sarbanes-Oxley Section 404 compliance
activities of approximately $1.7 million, and the Companys expansion efforts internationally in
Korea and Australia of approximately $1.1 million. R&D costs for the first nine months of fiscal 2005 were $15.1 million, an increase of 6.5%
compared with the $14.2 million reported in the same period last year. R&D costs in fiscal 2005
increased due to the Companys higher spending for project materials and personnel costs to develop
the Companys IC and HPLC products. The level of R&D spending varies depending on both the breadth
of the Companys R&D efforts and the stage of specific product development. Other income was $380,000 for the first nine months of fiscal 2005 primarily due to a gain on
the sale of marketable equity securities of $644,000 partially offset by losses on foreign
exchange. Other expense was $268,000 for the first nine months of fiscal 2004, resulting from
losses incurred in the Companys foreign currency hedging activities. The effective tax rate for the first nine months of fiscal 2005 was 32.8%, up from 32.5% for
the same period last year. The increase was attributable to a higher portion of foreign-sourced
income in the current fiscal year. The Companys tax rate is subject to fluctuation due to changes
in tax regulations in the jurisdictions in which the Company does business. Net income for the first nine months of fiscal 2005 was $34.4 million, an increase of 11.7%
compared with $30.7 million reported for the same period last year. Diluted earnings per share for
the first nine months of fiscal 2005 were $1.59, an increase of 13.6% over the $1.40 reported for
the same period last year. 15.




---



##### Table of Contents



Liquidity and Capital Resources At March 31, 2005, the Company had cash and cash equivalents of $42.9 million. The Companys
working capital was $122.8 million, an increase of $19.1 million from the $103.7 million reported
at June 30, 2004. Cash generated by operating activities for the nine months ended March 31, 2005
was $38.6 million compared with $35.9 million for the same period last year. The increase in
operating cash flow was primarily due to increases in net income, higher collections of accounts
receivable and lower income tax payments partially offset by higher payments to suppliers and
higher inventory levels related to higher sales and new products. Cash used for investing activities was $19.6 million and $19.1 million in the nine months
ended March 31, 2005 and 2004, respectively. For nine months of fiscal 2005, investments included
the purchases of marketable securities, net of proceeds from sales, for $11.0 million, capital
expenditures of $5.2 million and the payment of $3.5 million for LC Packings earn-out. Capital
expenditures for the first nine months of fiscal 2005 include costs to implement several
information technology and business-related strategic initiatives. For the nine months of fiscal
2004, investments included purchases of marketable securities, net of proceeds from sales, for
$12.1 million, capital expenditures of $3.1 million, payment of LC Packings earn-out of $3.0
million and $975,000 of intangibles related to our Korean subsidiary. Capital expenditures in
fiscal 2004 included building improvements at the corporate headquarters and computer hardware and
software spending in connection with the Companys website. Cash used for financing activities was $24.5 million and $12.5 million in the first nine
months of fiscal 2005 and 2004, respectively. The increase is primarily attributable to the
repurchase of 767,500 shares of the Companys common stock for $40.5 million in fiscal 2005 (at an
average repurchase price of $52.80 per share) compared with 652,700 shares for $30.5 million in
fiscal 2004 (at an average repurchase price of $46.66 per share), partially offset by proceeds
received from the issuance of common stock for the exercise of employee stock options and from the
employee stock purchase plan of $17.4 million in fiscal 2005 and $17.8 million in fiscal 2004. At March 31, 2005, the Company had utilized $140,000 of its $34.9 million in committed bank
lines of credit, due to borrowings related to the Companys Japanese operations. The Company
believes that its cash flow from operations, current cash and cash investments and the remainder of
its bank lines of credit will be adequate to meet its cash requirements for fiscal 2005 and the
foreseeable future, and at least the next twelve months. The following table summarizes the Companys contractual obligations at June 30, 2004, and the
effect such obligations are expected to have on its liquidity and cash flows in future periods (in
thousands): Payments Due by PeriodLessThan 1
    
    
    1-3
    
    
    4-5
    
    
    After 5Contractual Obligations
    
    Total
    
    
    Year
    
    
    Years
    
    
    Years
    
    
    YearsLines of Credit
    
    $
    917
    
    
    $
    917
    
    
    $
    
    
    
    $
    
    
    
    $
    Mortgage Note Payable
    
    
    551
    
    
    
    551
    
    
    
    
    
    
    
    
    
    
    
    Operating Lease Obligations
    
    
    15,307
    
    
    
    3,752
    
    
    
    4,655
    
    
    
    2,521
    
    
    
    4,379Other Obligations
    
    
    3,500
    
    
    
    3,500
    
    
    
    
    
    
    
    
    
    
    
    Total Contractual Commitments
    
    $
    20,275
    
    
    $
    8,720
    
    
    $
    4,655
    
    
    $
    2,521
    
    
    $
    4,379
 At June 30, 2004, the Company had recorded $3.5 million of Other Obligations in its
condensed consolidated financial statements. Other Obligations relate to the earn-out from the
acquisition of LC Packings in fiscal 2000 and recorded within Accrued liabilities. This earn-out
payment in Other Obligations was made in January 2005. There have been no material changes to the Companys contractual obligations outside ordinary
business activities since June 30, 2004, except those changes described above related to earn-out
payments and outstanding borrowings. New Accounting Pronouncements In September 2004, the Financial Accounting Standards Board (FASB) issued FASB Staff Position
(FSP) Emerging Issues Task Force (EITF) Issue 03-1, Effective Date of Paragraphs 10-20 of EITF
Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments, which delays the effective date for the recognition and measurement guidance in EITF
Issue No. 03-1. In addition, the FASB has issued a proposed FSP to consider whether further
application guidance is necessary for securities analyzed for impairment under EITF Issue No. 03-1.
The Company continues to assess the potential impact the adoption of the proposed FSP could have on
the Companys consolidated financial statements. 16.




---



##### Table of Contents



In November 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 151,
Inventory Costs  (SFAS No. 151) which clarifies the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material. SFAS No. 151 will be effective for
inventory costs incurred during fiscal years beginning after June 15, 2005. The Company continues
to assess the potential impact the adoption of SFAS No. 151 could have on the Companys
consolidated financial statements. In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment (SFAS 123R), which
eliminates the alternative of applying the intrinsic value measurement to stock compensation awards
issued to employees. Rather, the new standard requires companies to measure the cost of employee
services received in exchange for an award of equity instruments based on the grant date fair value
of the award. That cost will be recognized over the period during which an employee is required to
provide services in exchange for the award, known as the requisite service period (usually the
vesting period). The Company has not yet quantified the effects of the adoption of SFAS 123R, but it is
expected that the new standard may result in significant stock-based compensation expense. The pro
forma effects on net income and earnings per share if the Company had applied the fair value
recognition provisions of original SFAS 123 on stock compensation awards are disclosed in Note 3.
Although such pro forma effects of applying original SFAS 123 may be indicative of the effects of
adopting SFAS 123R, the provisions of these two statements differ in some important respects. The
actual effect of adopting SFAS 123R will be dependent on numerous factors including, but not
limited to, the valuation model chosen by the Company to value stock-based awards; the assumed
award forfeiture rate; the accounting policies adopted concerning the method of recognizing the
fair value of awards over the requisite service period; and the transition method (as described
below) chosen for adopting SFAS 123R. SFAS 123R will be effective for the Companys fiscal quarter beginning July 1, 2005, and
requires the use of the Modified Prospective Application Method. Under this method SFAS 123R
applied to new awards and to awards modified, repurchased, or cancelled after the effective date.
Additionally, compensation cost for the portion of awards for which the requisite service has not
been rendered (such as unvested options) that are outstanding as of the date of adoption shall be
recognized as the remaining requisite services are rendered. The compensation cost relating to
unvested awards at the date of adoption shall be based on the grant-date fair value of those awards
as calculated for pro forma disclosures under the original SFAS 123. In addition, companies may use
the Modified Retrospective Application Method. This method may be applied to all prior years for
which the original SFAS 123 was effective or only to prior interim periods in the year of initial
adoption. If the Modified Retrospective Application Method is applied, financial statements for
prior periods shall be adjusted to give effect to the fair-value-based method of accounting for
awards on a consistent basis with the pro forma disclosures required for those periods under the
original SFAS 123. In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets, an amendment
of APB Opinion No. 29 (SFAS 153) which eliminates the exception for nonmonetary exchanges of
similar productive assets and replaces it with a general exception for exchanges of nonmonetary
assets that do not have commercial substance. SFAS 153 will be effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. The Company expects that the
adoption of SFAS 153 will not have any impact on the Companys consolidated financial statements. Critical Accounting Policies and Estimates Summary: The 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 revenues 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 intangible assets, income taxes, warranty 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. 17.




---



##### Table of Contents



Revenue Recognition Policy The Company derives revenues from the sale of products, the delivery of services to its customers,
including installation and training, and from maintenance, which includes product repair
obligations under extended warranty, unspecified software upgrades, telephone support and time and
material repairs. Generally, the Companys products contain embedded software that is essential to
their functionality. The Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104 Revenue
Recognition and Statement of Position 97-2, Software Revenue Recognition, as amended, when
persuasive evidence of an arrangement exists, the product has been delivered, or service performed,
the price is fixed or determinable, collection is probable and vendor specific objective evidence
exists to allocate revenue to the various elements of the arrangement. In all cases, the portion
of revenue allocated to the undelivered elements is deferred until those items are delivered to the
customer or the services are performed. Delivery of the product is generally considered to have
occurred when shipped. Undelivered elements in the Companys sales arrangements, which are not
considered to be essential to the functionality of a product, generally include product
accessories, installation services and/or training that are delivered after the related products
have been delivered. Installation consists of system set-up, calibration and basic functionality
training and generally requires one to three days depending on the product. Vendor specific
objective evidence for product, product accessories and training services is based on the price
charged when an element is sold separately or, if not sold separately, when the price is
established by authorized management. The fair value of installation services is calculated by
applying standard service billing rates to the estimate of the number of hours to install a
specific product based on historical experience. These estimated hours for installation have
historically been accurate and consistent from product to product. However, to the extent these
estimates were to reflect unfavorable variability, the Companys ability to maintain vendor
specific objective evidence of fair value for such element could be impacted which in turn could
delay the recognition of the revenue currently allocated to the delivered elements. The Company recognizes revenue under extended warranty arrangements (maintenance fees) ratably over
the period of the related maintenance contract and cost of the time and material repairs when
incurred. Maintenance consists of product repair obligations under extended warranty, unspecified
software upgrades, telephone support and time and material repairs. The Companys equipment
typically includes a one-year warranty. The estimated cost of product warranty claims is accrued
at the time the sale is recognized, based on historical experience. While the Company believes its
historical experience provides a reliable basis for estimating such warranty cost, unforeseen
quality issues or component failure rates could result in future costs in excess of such estimates,
or alternatively, improved quality and reliability in its products could result in actual expenses
that are below those currently estimated. The Companys sales are typically not subject to rights of return and, historically, actual sales
returns have not been significant. Loss Provisions on Accounts Receivable and Inventory The Company maintains allowances for doubtful accounts for estimated losses resulting from the
inability of its customers to make required payments. If the financial condition of the Companys
customers were to deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. The Company assesses 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 the Companys
revenue for any period. Historically, the Company has not experienced significant bad debt losses. The Company values all of its inventories at the lower of standard cost (which approximates
cost on a first-in, first-out basis) or market. The Company estimates revisions to its 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, then higher margins could be realized to the extent inventory
is sold which had previously been written down. 18.




---



##### Table of Contents



Long-Lived Assets, Intangible Assets with Finite Lives and Goodwill The Company assesses 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, the Company assesses goodwill for impairment at least annually.
Factors the Company considers important that could trigger an impairment review include but are not
limited to the following:  
    significant underperformance relative to historical or projected future operating results;
    significant negative industry or economic trends; and
    significant changes or developments in strategic technology. When the Company determines that the carrying value of long-lived assets, intangible assets
with finite lives may not be recoverable based upon the existence of one or more of the above or
other indicators, it measures any impairment based on a projected discounted cash flow method using
a discount rate determined by the Companys management to be commensurate with the risk inherent in
the Companys current business model. Goodwill is tested for impairment by comparing the fair
values of related reporting units to their carrying values. The Company completed its annual review
in April, 2004 and at that time found that no impairment was necessary. Income Taxes As part of the process of preparing the condensed consolidated financial statements, the
Company is required to estimate its income taxes in each of the jurisdictions in which it operates.
This process involves the Companys estimate of its 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 the Companys condensed consolidated
balance sheets. The Company must then assess the likelihood that its deferred tax assets will be recovered
from future taxable income and to the extent the Company believes that recovery is not likely, it
must establish a valuation allowance. In the event that actual results differ from these estimates,
the Company may need to establish a valuation allowance that could materially impact its financial
position and results of operations. Risks and Uncertainties The continuation or spread of the current economic uncertainty in key markets would likely harm the
Companys 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 the Companys
products is likely to be reduced. Despite economic uncertainty in Europe, the Company showed
continued growth in the European market; however, a continuation of an economic downturn in any of
its major markets would likely harm its results of operations. Foreign currency fluctuations and other risks related to international operations may adversely
affect the Companys operating results. The Company derived approximately 69% of its net sales from outside North America in the nine
months ended March 31, 2005 and expects to continue to derive the majority of net sales from
outside North America for the foreseeable future. Most of the Companys sales outside North America
are denominated in the local currency of its customers. As a result, the U.S. dollar value of the
Companys 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 the
Companys results of operations. 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. Fluctuation in worldwide demand for analytical instrumentation could affect the Companys operating
results. 19.




---



##### Table of Contents



The demand for analytical instrumentation products can fluctuate depending upon capital
expenditure and/or R&D expenditure cycles. Most companies consider the Companys instrumentation
products to be capital equipment and 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 the Companys 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 its significant sales,
research and product development and manufacturing costs. Small declines in revenue caused by
fluctuations in currency rates, worldwide demand for analytical instrumentation or other factors
could disproportionately affect the Companys quarterly operating results, which may in turn cause
its stock price to decline. If the Company does not introduce new products that are attractive to its customers on a timely
basis, the Companys products may become obsolete. 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 recover costs of research and product development and marketing, and may fail to
achieve material components of its business plan. The Companys revenues depend on successfully competing for market share in a highly competitive
market. 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 the Company 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s ability to maintain inventories and meet customer demand for its products is critical
to its operating results. Most raw materials, components and supplies purchased by the Company are available from a
number of suppliers. However, certain items are purchased from limited or sole source suppliers and
a disruption of these sources could adversely affect the Companys ability to ship products as
needed. A prolonged inability to obtain certain materials or components would likely reduce product
inventory, hinder sales and harm the Companys reputation with customers. The Company manufactures products at three sites 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 its business, they may not
remain with the Company in the future and finding talented replacements would be difficult. The operations of the Company 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s headquarters are
located in Sunnyvale, California, where the demand for qualified personnel is high and is likely to
remain so for the foreseeable future. As a result, competition for personnel is intense and the
turnover rate for qualified personnel is comparatively high. The loss of any of the Companys
executive officers or key employees could cause the Company 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 the Companys ability
to conduct its business. The success of the Company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 the Company 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 20.




---



##### 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 its technology. Third parties may seek to challenge, circumvent or
invalidate issued patents that the Company owns. In addition to its patents, the Company has a vast number of 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. The Companys failure to achieve and maintain effective internal controls in accordance with
Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on its stock
price. The Company is in the process of documenting and testing its internal control procedures in
order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires
annual management assessments of the effectiveness of the Companys internal control over financial
reporting and a report by the Companys independent registered public accountants attesting to and
reporting on these assessments. During the course of the Companys testing, the Company may
identify deficiencies that cannot be remediated in time to meet the deadline imposed by the
Sarbanes-Oxley Act for compliance with the requirements of Section 404. In addition, if the Company
fails to maintain the adequacy of its internal control over financial reporting, as such standards
are modified, supplemented or amended from time to time, it may not be able to ensure that it can
conclude in future periods that its has effective internal control over financial reporting in
accordance with Section 404. If the Company cannot favorably assess, or its independent registered
accountants are unable to provide an unqualified attestation report on the Companys assessment of,
the effectiveness of its internal control over financial reporting, investor confidence in the
reliability of the Companys financial reports may be adversely affected, which could have a
material adverse effect on the Companys stock price. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The Company is exposed to financial market risks, including changes in foreign currency rates,
interest rates and marketable equity securities, as well as debt and interest expense. Foreign Currency Exchange. Revenues generated from international operations are generally denominated in foreign
currencies. The Company enters into forward foreign exchange contracts to hedge against
fluctuations of intercompany account balances. Market value gains and losses on these hedge
contracts are substantially offset by fluctuations in the underlying balances being hedged, and the
net financial impact is not expected to be material in future periods. At March 31, 2005, the
Company had forward exchange contracts to sell foreign currencies totaling $19.1 million dollars,
including approximately $9.6 million in Euros, $8.4 million in Japanese yen and $1.1 million in
Canadian dollars. The foreign exchange contracts at the end of each fiscal quarter mature within
the following quarter. 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 hedging contracts and underlying balances being hedged at March 31, 2005 indicated that
these market movements would not have a material effect on the Companys business, operating
results or financial condition. Foreign currency rate fluctuations can impact the U.S. dollar translation of the Companys
foreign operations in the Companys condensed consolidated financial statements. Currency
fluctuations increased reported net sales by 2% for both the quarter and 4% for the nine months
ended March 31, 2005 compared to 11% for the quarter and 8% for the nine months ended March 31,
2005. Interest and Investment Income. The Companys interest and investment income is subject to changes in the general level of
interest rates. Changes in 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 the Companys investment balances at March 31, 2005, indicated that such market
movement would not have a material effect on the business, operating results or financial
condition. Actual gains or losses in the future may differ materially from this analysis, depending
upon actual balances and changes in the timing and amount of interest rate movements. 21.




---



##### Table of Contents



Marketable Equity Securities. The Company is exposed to market price risks on its marketable equity securities. These
investments are in publicly traded companies in the laboratory analytical instruments sector. The
Company does 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 $458,000 decrease in the fair
value of its marketable equity securities as of March 31, 2005. Debt and Interest Expense. A sensitivity analysis assuming a hypothetical 10% movement in interest rates applied to the
Companys outstanding debt balance at March 31, 2005, indicated that such market movement would not
have a material effect on its business, operating results or financial condition. Actual gains or
losses in the future may differ materially from this analysis, depending on the level of the
Companys outstanding debt and changes in the timing and amount of interest rate movements. 
 ITEM 4. 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 Companys disclosure controls and procedures as of March 31, 2005 were effective
to ensure that information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms. Like many public companies, the Company has been engaged in a diligent review of its disclosure
controls and procedures and internal control over financial reporting in order to be able to comply
with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the rules promulgated
thereunder when such requirements become applicable to the Company. In connection with these
efforts, the Company has identified a number of internal control deficiencies, primarily in the
areas of documentation, segregation of duties and information technology systems. The Companys
management does not believe that any of these deficiencies is significant when considered by
itself, but believes that such deficiencies could be viewed as significant when taken in the
aggregate. An internal control deficiency is significant when it results in a more than remote
likelihood that a misstatement in the Companys annual or interim financial statements is more
than inconsequential. To address these deficiencies, management is executing a number of
initiatives, including modifying existing and launching new management information systems,
documenting operating procedures and controls in all of its organizations and improving segregation
of duties within its financial organization. Other than the initiatives described above, there were no changes in the Companys internal
control over financial reporting during the period covered by this report that have materially
affected, or are reasonably likely to materially affect, the Companys internal control over
financial reporting. The Companys management, including the Chief Executive Officer and Chief Financial Officer,
does not expect that the Companys disclosure controls and procedures or its internal control over
financial reporting will prevent all error and all fraud. A control system, no matter how well
designed and operated, can provide only reasonable, not absolute, assurance that the control
systems objectives will be met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if any, within the
Company have been detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.
Controls can also be circumvented by the individual acts of some persons, by collusion of two or
more people, or by management override of the controls. The design of any system of controls is
based in part upon certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all potential future
conditions. Over time, controls may become inadequate because of changes in conditions or
deterioration in the degree of compliance with its policies or procedures. Because of the inherent
limitations in a cost-effective control system, misstatements due to error or fraud may occur and
not be detected. 
 PART II. OTHER INFORMATION 22.




---



##### Table of Contents



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 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. The Company started a series
of repurchase programs in 1989 with the Board of Directors authorizing future repurchases of an
aggregate of 1.5 million shares of common stock in April 2002 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
repurchase program during the three months ended March 31, 2005: ISSUER PURCHASES OF EQUITY SECURITIES Total
    
    
    
    
    
    
    MaximumShares
    
    
    
    
    
    
    Number ofPurchased
    
    
    Additional
    
    
    Shares thatTotal
    
    
    
    
    
    
    as Part of
    
    
    Shares
    
    
    May Yet BeNumber
    
    
    Avg.
    
    
    Publicly
    
    
    Authorized
    
    
    Purchasedof Shares
    
    
    Price Paid
    
    
    Announced
    
    
    for
    
    
    Under thePeriod
    
    Purchased
    
    
    per Share
    
    
    Program(1)
    
    
    Purchase (1)
    
    
    Program (1)January 1 - 31, 2005
    
    
    23,000
    
    
    $
    58.45
    
    
    
    2,688,000
    
    
    
    27,426
    
    
    
    1,659,699February 1 - 28, 2005
    
    
    199,700
    
    
    $
    58.20
    
    
    
    2,887,700
    
    
    
    148,366
    
    
    
    1,608,365March 1 - 31, 2005
    
    
    23,600
    
    
    $
    57.81
    
    
    
    2,911,300
    
    
    
    3,560
    
    
    
    1,588,325
   (1)
    The current repurchase of 1.5 million shares of common stock plus that number of shares of
common stock equal to the number of shares issued pursuant to employee stock plans subsequent
to that date. 23.




---



##### Table of Contents



Item 6. EXHIBITS ExhibitNumber
    
    Description
    
    Reference3.1
    
    Restated Certificate of Incorporation, filed November 6, 1996
    
    
    (2
    )3.2
    
    Bylaws, as amended on July 29, 2002
    
    
    (5
    )4.1
    
    Shareholder Rights Agreement dated January 21, 1999, between the Registrant and BankBoston N.A.
    
    
    (3
    )10.1
    
    Agreement, effective as of January 1, 1975, between The Dow Chemical Company and International
Plasma Corporation
    
    
    (1
    )10.2
    
    Agreement, dated March 6, 1975, between International Plasma Corporation and the former Dionex
Corporation
    
    
    (1
    )10.3
    
    Memorandum agreement, dated March 14, 1975, between The Dow Chemical Company and International
Plasma 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)
    
    
    (4
    )10.9
    
    First amendment to Credit Agreement dated November 13, 2000 between Wells Fargo Bank and the
Registrant
    
    
    (6
    )10.10
    
    Registrants Employee Stock Participation Plan (Exhibit 10.13)
    
    
    (7
    )10.10
    
    Registrants Stock Option Plan (Exhibit 99.1)
    
    
    (8
    )10.11
    
    Registrants Form of Stock Option Agreement for non-employee directors (Exhibit 99.2)
    
    
    (8
    )
 24.




---



##### Table of Contents



ExhibitNumber
    
    Description
    
    Reference10.12
    
    Registrants Form of Stock Option Agreement for other than non-employee directors (Exhibit 99.3)
    
    
    (8
    )10.14
    
    Second amendment to Credit Agreement dated November 13, 2000 between Wells Fargo Bank and the
Registrant (Exhibit 10.1)
    
    
    (9
    )10.15
    
    Registrants Change in Control Severance Benefit Plan.
    
    
    *21.1
    
    Subsidiaries of Registrant
    
    
    (7
    )31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
    
    
    *31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
    
    
    *32.1
    
    Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    
    
    *32.2
    
    Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    
    
    *
  *
    Filed herewith(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 corresponding exhibit in the Registrants Annual Report on
Form 10-Q filed February 13, 1997.(3)
    Incorporated by reference to the corresponding exhibit in the Registrants Quarterly Report
on Form 10-Q filed February 16, 1999.(4)
    Incorporated by reference to the indicated exhibit in the Registrants Quarterly Report on
Form 10-Q filed February 14, 2001.(5)
    Incorporated by reference to the indicated exhibit in the Registrants Annual Report on Form
10-K filed August 28, 2002.(6)
    Incorporated by reference to the indicated exhibit in the Registrants Annual Report on Form
10-K filed September 24, 2003.(7)
    Incorporated by reference to the indicated exhibit in the Registrants Annual Report on Form
10-K filed September 10, 2004.(8)
    Incorporated by reference to the Registrants Registration Statement on Form S-8 filed
December 8, 2004.(9)
    Incorporated by reference to the indicated exhibit in the Registrants current Report on Form
8-K filed December 22, 2004. 25.




---



##### Table of Contents



SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED
THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED. DIONEX CORPORATION
(Registrant)Date: May 9, 2005
    
    By:
    
    /s/ Lukas BraunschweilerLukas BraunschweilerPresident, Chief Executive Officer And DirectorBy:
    
    /s/ Craig A. McCollamCraig A. McCollamVice President, and Chief Financial Officer
 26.




---



##### Table of Contents



Exhibit Index 10.15 Registrants Change in Control Severance Benefit Plan. 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 27.