UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C.  20549





FORM
10-Q





[X]                      QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
quarterly period ended June 30, 2010





OR





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





For the
transition period from _______to _______








Commission
file number 000-23213





YOUNG
INNOVATIONS, INC.


(Exact
name of registrant as specified in its charter)





Missouri
            
            43-1718931(State
      or other jurisdiction
            
            (I.R.S.
      Employer Identification No.)of
      incorporation or organization)











13705
      Shoreline Court East
              Earth
      City, Missouri
            63045(Address
      of principal executive offices)
            (Zip
      Code)








(314)
344-0010


(Registrant’s
telephone number, including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes
[X]  No [ ]





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [_] No
[_]





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


(Check
one):  Large accelerated filer  [ ]  Accelerated
filer  [X]  Non-accelerated filer  [
]  Smaller reporting company  [ ]





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





Number of
shares outstanding of the registrant’s Common Stock at July 31, 2010:


7,967,923
shares of Common Stock, $0.01 par value per share





1


























PART
I


FINANCIAL
INFORMATION





Item 1.
Financial Statements.


YOUNG
INNOVATIONS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(In
thousands, except per share data)








June
      30,
            
            
            December
      31,2010
            
            
            2009(unaudited)AssetsCurrent
      assets:Cash
      and cash equivalents
            
            $
            405
            
            
            $
            67Trade
      accounts receivable, net of allowance for doubtful accounts
      of  $218
              and
      $232 in 2010 and 2009, respectively
            
            
            11,575
            
            
            
            11,397Inventories
            
            
            14,248
            
            
            
            14,816Other
      current assets
            
            
            5,283
            
            
            
            4,849Total
      current assets
            
            
            31,511
            
            
            
            31,129Property,
      plant and equipment, net
            
            
            33,445
            
            
            
            33,668Goodwill
            
            
            80,200
            
            
            
            80,374Other
      intangible assets
            
            
            11,797
            
            
            
            12,097Other
      assets
            
            
            2,266
            
            
            
            2,732Total
      assets
            
            $
            159,219
            
            
            $
            160,000Liabilities
      and Stockholders’ EquityCurrent
      liabilities:
              Accounts
      payable and accrued liabilities
            
            $
            9,601
            
            
            $
            8,377Total
      current liabilities
            
            
            9,601
            
            
            
            8,377Long-term
      debt
            
            
            5,942
            
            
            
            13,979Long-term
      secured borrowing
            
            
            305
            
            
            
            550Deferred
      income taxes
            
            
            15,886
            
            
            
            15,947Other
      noncurrent liabilities
            
            
            264
            
            
            
            282Total liabilities
            
            
            31,998
            
            
            
            39,135Stockholders’
      equity:Common
      stock, voting, $.01 par value, 25,000 shares authorized,
              10,219
      shares issued in 2010 and 2009
            
            
            102
            
            
            
            102Additional
      paid-in capital
            
            
            23,323
            
            
            
            23,985Retained
      earnings
            
            
            152,416
            
            
            
            145,756Common
      stock in treasury, at cost; 2,242 and 2,294 shares in 2010
and
              2009,
      respectively
            
            
            (48,231
            )
            
            
            (49,090
            )Accumulated
      other comprehensive (loss)  income
            
            
            (389
            )
            
            
            112Total
      stockholders' equity
            
            
            127,221
            
            
            
            120,865Total
      liabilities and stockholders' equity
            
            $
            159,219
            
            
            $
            160,000








The
accompanying notes are an integral part of these statements.








2


























YOUNG
INNOVATIONS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF INCOME


(In
thousands, except per share data)


(unaudited)








Three
      Months Ended
              June
      30,
            
            
            Six
      Months Ended
              June
      30,2010
            
            
            2009
            
            
            2010
            
            
            2009Net
      sales
            
            $
            25,778
            
            
            $
            24,637
            
            
            $
            50,559
            
            
            $
            48,401Cost
      of goods sold
            
            
            11,182
            
            
            
            10,953
            
            
            
            22,161
            
            
            
            21,407Gross
      profit
            
            
            14,596
            
            
            
            13,684
            
            
            
            28,398
            
            
            
            26,994Selling,
      general and administrative expenses
            
            
            8,903
            
            
            
            8,286
            
            
            
            17,298
            
            
            
            16,601Income
      from operations
            
            
            5,693
            
            
            
            5,398
            
            
            
            11,100
            
            
            
            10,393Interest
      expense, net
            
            
            82
            
            
            
            180
            
            
            
            183
            
            
            
            334Other
      expense (income),net
            
            
            (65
            )
            
            
            55
            
            
            
            (148
            )
            
            
            42Income
      before provision for income taxes
            
            
            5,676
            
            
            
            5,163
            
            
            
            11,065
            
            
            
            10,017Provision
      for income taxes
            
            
            1,975
            
            
            
            1,832
            
            
            
            3,807
            
            
            
            3,531Net
      income
            
            
            3,701
            
            
            $
            3,331
            
            
            
            7,258
            
            
            $
            6,486Basic
      earnings per share
            
            $
            0.46
            
            
            $
            0.42
            
            
            $
            0.91
            
            
            $
            0.82Diluted
      earnings per share
            
            $
            0.46
            
            
            $
            0.42
            
            
            $
            0.90
            
            
            $
            0.82Basic
      weighted average shares outstanding
            
            
            7,971
            
            
            
            7,873
            
            
            
            7,978
            
            
            
            7,842Diluted
      weighted average shares outstanding
            
            
            8,039
            
            
            
            7,934
            
            
            
            8,050
            
            
            
            7,885The
      accompanying notes are an integral part of these
    statements.














3























YOUNG
INNOVATIONS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(In
thousands)


(unaudited)


Six
      Months EndedJune
      30,2010
            
            
            2009Cash
      flows from operating activities:Net
      income
            
            $
            7,258
            
            
            $
            6,486Adjustments
      to reconcile net income to net cash flows fromoperating
      activities --Depreciation
      and amortization
            
            
            2,132
            
            
            
            1,970Share
      based compensation expense
            
            
            856
            
            
            
            813Excess
      Tax Benefit from share exercises
            
            
            (392)
            
            
            
            -Loss
      on private equity investment fund
            
            
            -
            
            
            
            57Changes
      in assets and liabilitiesTrade
      accounts receivable
            
            
            (456)
            
            
            
            (587)Inventories
            
            
            472
            
            
            
            223Other
      current assets
            
            
            125
            
            
            
            (232)Other
      assets
            
            
            374
            
            
            
            535Accounts
      payable and accrued liabilities
            
            
            1,125
            
            
            
            1,135Total
      adjustments
            
            
            4,236
            
            
            
            4,007Net
      cash flows from operating activities
            
            
            11,494
            
            
            
            10,493Cash
      flows from investing activities:Purchase
      of distribution rights
            
            
            -
            
            
            
            (1,350)Purchases
      of property, plant and equipment
            
            
            (1,832)
            
            
            
            (2,308)Purchases
      of private equity investment
            
            
            -
            
            
            
            (300)Net
      cash flows from investing activities
            
            
            (1,832)
            
            
            
            (3,958)Cash
      flows from financing activities:Payment
      of deferred finance costs
            
            
            -
            
            
            
            (158)Payments
      on long-term debt
            
            
            (33,038)
            
            
            
            (33,674)Borrowings
      on long-term debt
            
            
            25,001
            
            
            
            28,028Payments
      of long-term secured borrowings
            
            
            (245)
            
            
            
            (696)Borrowings
      of long-term secured borrowings
            
            
            -
            
            
            
            346Excess
      tax benefit/ (deficit) from stock option exercises
            
            
            392
            
            
            
            176Proceeds
      from stock options exercised
            
            
            1,020
            
            
            
            580Purchase
      of treasury stock
            
            
            (1,602)
            
            
            
            (635)Payment
      of cash dividend
            
            
            (628)
            
            
            
            (628)Net
      cash flows from financing activities
            
            
            (9,100)
            
            
            
            (6,661)Effect
      of exchange rate changes on cash and cash equivalents
            
            
            (224)
            
            
            
            (16)Net
      increase in cash and cash equivalents
            
            
            338
            
            
            
            (110)Cash
      and cash equivalents, beginning of period
            
            
            67
            
            
            
            667Cash
      and cash equivalents, end of period
            
            $
            405
            
            
            $
            557The
      accompanying notes are an integral part of these
    statements.








4


























YOUNG
INNOVATIONS, INC. AND SUBSIDIARIES


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


June
30, 2010


(In
thousands, except per share data)





GENERAL:





This
report includes information in a condensed format and should be read in
conjunction with the audited consolidated financial statements and footnotes
included in our Annual Report on Form 10-K for the year ended December 31,
2009.  The results of operations for the three and six months ended
June 30, 2010 are not necessarily indicative of the results expected for the
full year or any other interim period.





The
accompanying condensed consolidated financial statements have been prepared in
conformity with generally accepted accounting principles for interim financial
information and with the instructions for Form 10-Q and Article 10 of Regulation
S-X.  Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed, or omitted, pursuant to the
rules of the Securities and Exchange Commission.  In our opinion, the
statements include all adjustments necessary (which are of a normal recurring
nature) for the fair presentation of the results of the interim periods
presented.





The
balance sheet information at December 31, 2009 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.





1.           ORGANIZATION:





Young
Innovations, Inc. and its subsidiaries (“the Company”) develops, manufactures
and markets supplies and equipment used by dentists, dental hygienists, dental
assistants and consumers.  The Company's product offerings include
disposable and metal prophylaxis (“prophy”) angles, prophy cups and brushes,
dental micro-applicators, panoramic X-ray machines, moisture control products,
infection control products, dental handpieces (drills) and related components,
endodontic systems, orthodontic toothbrushes, flavored examination gloves,
children's toothbrushes, and children's toothpastes.  The Company’s
manufacturing and distribution facilities are located in Missouri, Illinois,
California, Indiana, Texas, Wisconsin and Ireland.





2.           SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES:





Principles
of Consolidation





The
condensed consolidated financial statements include the accounts of Young
Innovations, Inc. and its direct and indirect wholly owned
subsidiaries.  All significant intercompany accounts and transactions
are eliminated in consolidation.





Use
of Estimates





The
preparation of the financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosures of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reported period.  Actual results could differ from those
estimates.  Some of the more significant estimates include allowances
for doubtful accounts, inventory valuation reserves, rebate accruals, warranty
reserves, liabilities for potential incentive compensation, and uncertain income
tax positions.














5


























Revenue
Recognition





Revenue
from the sale of products is recorded at the time title passes, generally when
the products are shipped, as the Company’s shipping terms are customarily FOB
shipping point.  Revenue from the rental of equipment to others is
recognized on a month-to-month basis as the revenue is earned.  The Company
generally requires payment within 30 days from the date of invoice and offers
cash discounts for early payment.  For certain acquired businesses that
offer different terms, the Company migrates these customers to the terms
referred above over time.





The
Company offers discounts to its distributors if certain conditions are
met.  Customer allowances, volume discounts and rebates, and other
short-term incentive programs are recorded as a reduction in reported revenues
at the time of sale.  The Company reduces product revenue for the estimated
redemption of annual rebates on certain current product sales. Customer
allowances and rebates are estimated based on historical experience and known
trends.





The
policy with respect to sales returns generally provides that a customer may not
return inventory except at the Company’s option.   The Company generally
warrants its products against defects, and its most generous policy provides a
two-year parts and labor warranty on X-ray machines.  The Company owns
X-ray equipment rented on a month-to-month basis to customers.  A liability
for the removal costs of the rented X-ray machines is capitalized and amortized
over four years.





The
Company adopted the disclosure requirements of ASC Topic 605, “Revenue
Recognition” (that is, gross versus net presentation) for tax receipts on the
face of its income statements. The scope of this guidance includes any tax
assessed by a governmental authority that is directly imposed on a
revenue-producing transaction between a seller and a customer and may include,
but is not limited to, sales, use, value added, and some excise taxes (gross
receipts taxes are excluded). The Company presents such taxes on a net
basis.





Fair
Value of Financial Instruments





Financial
instruments consist principally of cash, accounts receivable, notes receivable,
accounts payable and debt.  The estimated fair value of these
instruments approximates their carrying value.  The carrying value of
debt approximates fair value as the interest rate adjusts to market interest
rates.  Due to the short term nature of the notes receivable, book
value approximates fair value.





Income
Taxes





The
Company uses an estimated annual effective income tax rate to compute the
quarterly tax provision pursuant to the Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) 270, “Interim Reporting”, and
ASC 740, “Income Taxes.”  Calculation of the estimated annual
effective income tax rate requires significant judgment and is affected by,
among others, variances in expected operating income for the year, projections
of income earned and taxed in foreign jurisdictions, variances in non-deductible
expenses, and changes in tax rates.  The year-to-date effect of the
change is recorded in the current period when the Company’s estimate of the
annual effective income tax rate changes,.





The
Company accounts for uncertain tax positions in accordance with the provisions
of ASC 740, “Income Taxes.”  As of December 31, 2009, the Company had
$95 of unrecognized tax benefits. The entire amount of unrecognized tax benefits
would favorably impact the effective income tax rate if recognized. Penalties
and interest related to unrecognized tax benefits are included in income tax
expense.  As of December 31, 2009, the Company had accrued $27 of
penalties and interest related to uncertain tax positions.





The
Company decreased the amount of unrecognized tax benefits during the six months
ended June 30, 2010 by approximately $46 due to a change in measurement of an
uncertain tax position recognized in a prior period.  The Company is
not aware of any other tax positions for which it is reasonably possible that
the total amounts of unrecognized tax benefits will significantly increase or
decrease within the next twelve months.








6


























The
Company anticipates repatriation of earnings from its foreign subsidiary and has
provided a deferred tax liability for United States income taxes on the
undistributed earnings of its foreign subsidiary, in accordance with ASC 740
“Income Taxes” as it relates to investments in foreign
subsidiaries.





The
Company and its subsidiaries are subject to domestic federal and state income
taxes as well as foreign income taxes. With certain exceptions, the Company is
no longer subject to U.S. federal, state, and local or non-U.S. income tax
examinations by tax authorities for years prior to 2005.





Interest
Expense, net





Interest
expense, net includes interest paid related to borrowings on the Company’s
credit facility and secured borrowing, as well as offsetting interest income
earned on various investments.  For the three months ended June, 2010
and 2009, interest income totaled $40 and $55, and $75 and $121 for the six
months ended June 30, 2010 and 2009 respectively.  For the three
months ended June 30, 2010 and 2009, interest expense totaled $122 and $235, and
$258 and $455, for the six months ended June 30, 2010 and 2009,
respectively.





Other
Income, net





Other
income, net includes foreign currency transaction gain/loss and other
miscellaneous income, all of which are not directly related to the Company’s
primary business.





Supplemental
Cash Flow Information





Cash
flows from operating activities include $3,397 and $2,533 for the payment of
income taxes and $152 and $471 for the payment of interest or loan charges for
the six months ended June 30, 2010 and 2009, respectively.





Foreign
Currency Translation





The
translation of financial statements into U.S dollars has been performed in
accordance with ASC 830 “Foreign Currency Matters.”  The local
currency for all entities included in the condensed consolidated financial
statements has been designated as the functional currency.  Non-U.S.
dollar denominated assets and liabilities have been translated into U.S. dollars
at the rate of exchange prevailing at the balance sheet
date.  Revenues and expenses have been translated at the weighted
average of exchange rates in effect during the quarter.  Translation
adjustments are recorded in accumulated other comprehensive income
(loss).  Net currency transaction gains and (loss) included in other
income, net were $66 and ($35) for the three months ended June 30, 2010 and
2009, respectively and $126 and ($33) for the six months ended June 30, 2010 and
2009, respectively.





3.           INVESTMENTS:





On
February 21, 2006, the Company invested in a private equity investment
fund.  At June 30, 2010, the Company has an unfunded capital
commitment of up to $300.  As of June 30, 2010, the total capital
commitment paid by the Company was $1,950.  Through December 31, 2009,
the Company accounted for this investment under the equity method as the Company
had an ability to exercise significant influence over the fund through board
membership.  Effective January 2010, the Company’s investment no
longer qualifies for equity method accounting as the Company’s delegate to the
board resigned.  As of January 1, 2010, the Company is accounting for
its investment using cost method.  The Company no longer records
equity earnings or losses as a result of this change.  The Company
recorded a $34 loss attributed to this private equity investment for the three
months ended June 30, 2009 and $57 for the six months ended June 30, 2009
included in other expense (income).





4.           NOTES
RECEIVABLE:





The
Company offers various financing options to its equipment customers, including
notes payable to the Company.  The equipment purchased is used to
secure the notes.  The Company earned $0 and $20 of financing revenue
from sales of equipment for the three and six months ended June 30,
2010.  The Company earned $0 and $20 during the three and six months
ended 2009.  These transactions are recorded as a sale upon the
transfer of title to the purchaser, which generally occurs at the time of
shipment, at an amount equal to the sales price of non-financed
sales.  Interest on these notes was accrued as earned and recorded as
interest income.








7


























The
Company transferred a portion of its X-ray equipment loans to a third party
through a series of transactions.  The initial transaction transferred
a majority of the loans for a cash payment of $3,519.  The Company
subsequently transferred an additional $4,154 of the notes receivable portfolio
for a purchase price of $4,140.  Of the purchase price, $621 is
subject to a recourse holdback pool that has been established with respect to
the limited recourse the third party has on the loans.  Additional
loans were transferred for  a cash payment of $235 which included an
additional $42 subject to a recourse holdback pool.  As the
transactions do not qualify as sales of assets under ASC Topic 860 “Transfers
and Servicing” the transactions have been treated as financing and the loans
remain on the Company’s balance sheet.  As the third party receives
payments on these loans, the Company reduces the corresponding notes receivable
and secured borrowing balances.  As of June 30, 2010, the residual
amount of notes receivable transferred to a third party was $1,038, of which
$601 is classified as a short-term notes receivable and $437 as a long-term
notes receivable.  A corresponding long-term and short-term liability
has been recorded, net of the recourse holdback pool of $139, on the Company’s
balance sheet.








8


























Notes
receivable consist of the following:


June
      30,
            
            
            December
      31,2010
            
            
            2009Notes
      receivable, short-term
            
            $
            755
            
            
            $
            892Notes
      receivable, long-term
            
            
            516
            
            
            
            890Total
      notes receivable
            
            $
            1,271
            
            
            $
            1,782





Notes
receivable are included in other current assets and other assets in the
accompanying condensed consolidated balance sheets.





5.           INVENTORIES:





Inventories
consist of the following:


June
      30,
            
            
            December
      31,2010
            
            
            2009Finished
      products                                                                   .
            
            $
            6,545
            
            
            $
            6,905Work
      in process
            
            
            2,985
            
            
            
            2,584Raw
      materials and supplies
            
            
            4,718
            
            
            
            5,327Total
      inventories
            
            $
            14,248
            
            
            $
            14,816





6.           PROPERTY,
PLANT AND EQUIPMENT:





Property,
plant and equipment consist of the following:


June
      30,
            
            
            December
      31,2010
            
            
            2009Land
            
            $
            3,449
            
            
            $
            3,449Buildings
      and
      improvements
            
            
            21,954
            
            
            
            21,550Machinery
      and
      equipment
            
            
            28,252
            
            
            
            27,560Equipment
      rented to
      others
            
            
            5,128
            
            
            
            5,464Construction
      in
      progress
            
            
            1,193
            
            
            
            1,527$
            59,976
            
            
            $
            59,550Accumulated
      depreciation
            
            
            (26,531
            )
            
            
            (25,882
            )Total
      property, plant and equipment,
      net
            
            $
            33,445
            
            
            $
            33,668





7.           GOODWILL
AND INTANGIBLE ASSETS:





Goodwill
activity is as follows:


Balance
      at December 31, 2009
            
            $
            80,374Foreign
      currency translation
            
            
            (174)Balance
      at June 30, 2010.
            
            $
            80,200

















9


























As
      of June 30, 2010Gross
      Carrying Amount
            
            
            Accumulated
      Amortization
            
            
            Net
      Carrying AmountAmortized
      intangible assetsLicense
      agreements
            
            $
            1,251
            
            
            $
            436
            
            
            $
            815Core
      technology
            
            
            739
            
            
            
            206
            
            
            
            533Patents
            
            
            2,265
            
            
            
            1,195
            
            
            
            1,070Product
      formulas
            
            
            430
            
            
            
            97
            
            
            
            333Customer
      relationships
            
            
            813
            
            
            
            538
            
            
            
            275Non-compete
      agreements
            
            
            519
            
            
            
            338
            
            
            
            181Supplier
      relationships
            
            
            399
            
            
            
            359
            
            
            
            40Total
            
            $
            6,416
            
            
            $
            3,169
            
            
            $
            3,247Intangible
      assets not subject to amortizationLicense
      agreements
            
            $
            1,693
            
            
            $
            --
            
            
            $
            1,693Trademarks
            
            
            6,857
            
            
            
            --
            
            
            
            6,857Total
            
            
            8,550
            
            
            
            --
            
            
            
            8,550Total
      intangible assets
            
            $
            14,966
            
            
            $
            3,169
            
            
            $
            11,797











As
      of December 31, 2009Gross
      Carrying Amount
            
            
            Accumulated
      Amortization
            
            
            Net
      Carrying AmountAmortized
      intangible assetsLicense
      agreements
            
            $
            1,251
            
            
            $
            382
            
            
            $
            869Core
      technology
            
            
            739
            
            
            
            184
            
            
            
            555Patents
            
            
            2,265
            
            
            
            1,094
            
            
            
            1,171Product
      formulas
            
            
            430
            
            
            
            92
            
            
            
            338Customer
      relationships
            
            
            813
            
            
            
            479
            
            
            
            334Non-compete
      agreements
            
            
            519
            
            
            
            306
            
            
            
            213Supplier
      relationships
            
            
            399
            
            
            
            332
            
            
            
            67Total
            
            $
            6,416
            
            
            $
            2,869
            
            
            $
            3,547Intangible
      assets not subject to amortizationLicense
      agreements
            
            $
            1,693
            
            
            
            --
            
            
            $
            1,693Trademarks
            
            
            6,857
            
            
            
            --
            
            
            
            6,857Total
            
            
            8,550
            
            
            
            
            
            
            
            8,550Total
      intangible assets
            
            $
            14,966
            
            
            $
            2,869
            
            
            $
            12,097





The costs
of other intangible assets with finite lives are amortized over their expected
useful lives using the straight-line method.  The amortization lives
are as follows: 10 to 20 years for patents, license agreements and core
technology; 40 years for product formulations; and 5 to 8 years for supplier and
customer relationships.  Non-compete agreements are amortized over the
length of the signed agreement.  The weighted average life for
amortizable intangible assets is 16 years.  Aggregate amortization
expense for the three months ended June 30, 2010 and 2009 was $150 and $133,
respectively, and $300 and $266 for the six months ended June 30, 2010, and
2009, respectively.  Estimated amortization expense for each of the
next five years is as follows:











10


























For the
year ending
12/31/10                                                                $545


For the
year ending
12/31/11                                                                  440


For the
year ending
12/31/12                                                                  408


For the
year ending
12/31/13                                                                  408


For the
year ending
12/31/14                                                                  325





8.           CREDIT
ARRANGEMENTS AND NOTES PAYABLE:





On May
21, 2009, the Company renewed its credit facility.  The new credit
facility reduced the aggregate commitment from $75,000 to $60,000 and expires in
July 2012.  The Company has $54,058 available under the line of credit
at June 30, 2010.  Borrowings under the arrangement bear interest at
rates ranging from LIBOR + 2.00% to LIBOR +2.50% or Prime + .50% to Prime +
1.00%, depending on the Company’s level of indebtedness.  Commitment
fees for this arrangement range from .25% to .50% of the unused
balance.  Borrowings under the previous arrangement had interest rates
ranging from LIBOR +.75% to LIBOR +1.50% or Prime and commitment fees from .125%
to .15% of the unused balance.  The agreement is unsecured and
contains various financial and other covenants.  As of June 30, 2010
and December 31, 2009 the Company was in compliance with these
covenants.





Long-term
      debt was as follows:
            
            June
      30,
            
            
            December
      31,2010
            
            
            2009Revolving
      credit facility due 2012 with a weighted-average interestrate
      of 2.45% and 2.97% at June 30, 2010 and December 31, 2009,
      respectively
            
            $
            5,942
            
            
            $
            13,979Less
      - current portion
            
            
            --
            
            
            
            --$
            5,942
            
            
            $
            13,979





9.      SHARE-BASED
COMPENSATION:





The
Company adopted the 1997 Stock Option Plan (the “1997 Plan”) effective in
November 1997 and amended the Plan in 1999 and 2001.  A total of 1,725
shares of Common Stock were reserved for issuance under this plan which is
administered by the compensation committee of the Board of Directors
(“Compensation Committee”).  The Company adopted the 2006 Long-Term
Incentive Plan (“the 2006 Plan”) effective in May 2006.  The 2006 Plan
is intended to be a successor to the 1997 Plan.  A total of 700 shares
were authorized for grant under the 2006 Plan.  Awards under the 2006
Plan may be stock options, stock appreciation rights, restricted stock,
restricted stock units, and other equity awards.





Any
employee of the Company or its affiliates, any consultant whom the Compensation
Committee determines is significantly responsible for the Company’s success and
future growth and profitability, and any member of the Board of Directors, may
be eligible to receive awards under the 2006 Plan.  The purpose of the
2006 Plan is to: (a) attract and retain highly competent persons as employees,
directors, and consultants of the Company; (b) provide additional incentives to
such employees, directors, and consultants by aligning their interests with
those of the Company’s shareholders; and (c) promote the success of the business
of the Company.  The Compensation Committee establishes vesting
schedules for each option issued under the Plan.  Under the 1997 Plan,
outstanding options generally vested over a period of up to four years while
non-vested equity shares vested over five years.  Under the 2006 Plan,
outstanding options generally vest over a period of up to three years while
non-vested equity shares vest over one, two, three, four and five year
periods.  All outstanding options expire ten years from the date of
grant under the 1997 Plan and five years from the date of grant under the 2006
Plan.





Stock
Options


During
the three months ended June 30, 2010 and 2009, the Company recorded pre-tax
compensation expense of $13 and $59 related to the Company’s stock option
shares, and $50 and $102 for the six months ended June 30 2010, and 2009,
respectively.  As of June 30, 2010, there was approximately $34 of
unrecognized compensation expense related to stock options, which will be
recognized over the weighted-average remaining requisite service period of 0.6
years.  The total aggregate intrinsic value of options exercised
during the








11























three
months ended June 30, 2010 and 2009 was $751 and $440, respectively, and $953
and $500 for the six months ended June 30, 2010, and 2009,
respectively. Payments received upon the exercise of stock options for the
three months ended June 30, 2010 and 2009 totaled $808 and $491, respectively,
and $1,020 and $580 for the six months ended June 30, 2010, and 2009,
respectively.  The related tax benefit realized related to these
exercises was $270 and $155 for the three months ended June 30, 2010 and 2009,
and $392 and $176 for the six months ended June 30,2010, and 2009,
respectively.  The Company issues shares from treasury upon share
option exercises.





The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model. There were no stock options granted during
the three months ended June 30, 2010 or 2009, or the six months ended June 30,
2010, or 2009.











The
following table summarizes stock option activity for the six months ended June
30, 2010:


Options
            
            Shares
              (000)
            
            
            Weighted-Average
      Exercise Price
            
            Weighted-Average
      Remaining Contractual Term
            
            Aggregate
              Intrinsic Value
              ($000)Outstanding
      at January 1, 2010
            
            
            712
            
            
            $
            26.27Granted
            
            
            --
            
            
            
            --Exercised
            
            
            (72
            )
            
            $
            14.29Forfeited
      or expired
            
            
            (1)
            
            
            
            --Outstanding
      at June 30, 2010
            
            
            639
            
            
            $
            27.62
            
            3.11
      yrs
            
            $
            2,754Exercisable
      at June 30, 2010
            
            
            629
            
            
            $
            27.69
            
            3.12
      yrs
            
            $
            2,709





The
aggregate intrinsic value in the table above represents the total pre-tax
intrinsic value (the difference between the Company’s closing stock price on the
last trading day of the second quarter of 2010 and the exercise price,
multiplied by the number of in-the-money options).





Non-Vested
Equity Shares





Under the
2006 Plan, non-vested equity share units and restricted stock may be awarded or
sold to participants under terms and conditions established by the Compensation
Committee.  The Company calculates compensation cost for restricted
stock grants to employees and non-employee directors by using the fair market
value of its Common Stock at the date of grant and the number of shares issued.
This compensation cost is amortized over the applicable vesting period. The
Company recorded pre-tax compensation expense of $402 and $379 during the three
months ended June 30, 2010, and 2009, respectively, and $806 and $711 during the
six months ended June 30, 2010, and 2009, respectively, related to the Company’s
non-vested equity shares.  As of June 30, 2010, there was
approximately $3,672 of unrecognized compensation cost related to non-vested
equity shares which will be amortized over the weighted-average remaining
requisite service period of 1.7 years.  The Company issues share
grants from treasury.





The
following table details the status and changes in non-vested equity shares for
the six months ended June 30, 2010:





Shares
              (000)
            
            
            Weighted-Average
              Grant
      Date
              Fair
      ValueNon-vested
      equity shares, January 1, 2010
            
            
            189
            
            
            $
            20.98Granted
            
            
            69
            
            
            $
            24.81Vested
            
            
            (64
            )
            
            $
            23.24Forfeited
            
            
            (1)
            
            
            
            17.73Non-vested
      equity shares, June 30, 2010
            
            
            193
            
            
            $
            21.62











10.           RELATED-PARTY
TRANSACTIONS:





During
the three months ended June 30, 2009, and six months ended June 30, 2009, the
Company paid consulting fees of $13 and $25, respectively,  to a
corporation which is wholly owned by George E. Richmond, the Company’s Vice
Chairman and principal stockholder.   On February 25, 2010, the
Company terminated its consulting agreement with this corporation effective
December 31, 2009.





The
Company has an employment agreement with George E. Richmond, the Company’s Vice
Chairman and principal stockholder, which paid him $27 for the three months
ended June 30, 2010 and $50 for the six months ended June 30,
2010.  On February 25,    2010, the








12

















Company
increased his annual salary from $50 to $100, to offset the reduction in his
consulting agreement, which was effective January 1, 2010.  The
Company paid $13 during the three months ended June 30, 2009, and $25 for the
six months ended June 30, 2009.











11.           EARNINGS
PER SHARE:





Basic
earnings per share (Basic EPS) is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the
period.  Diluted earnings per share (Diluted EPS) includes the
dilutive effect of stock options and restricted stock, if any, using the
treasury stock method.  The following table sets forth the computation
of basic and diluted earnings per share:





Three Months Ended
              June 30,
            
            
            Six Months Ended
              June 30,2010
            
            
            2009
            
            
            2010
            
            
            2009(unaudited)
            
            
            (unaudited)Net
      income
            
            $
            3,701
            
            
            $
            3,331
            
            
            $
            7,258
            
            
            $
            6,486Weighted
      average shares outstanding for basic earnings per share
            
            
            7,971
            
            
            
            7,873
            
            
            
            7,978
            
            
            
            7,842Dilutive
      effect of stock options and restricted stock
            
            
            68
            
            
            
            61
            
            
            
            72
            
            
            
            43Weighted
      average shares outstanding for diluted earnings per share
            
            
            8,039
            
            
            
            7,934
            
            
            
            8,050
            
            
            
            7,885Basic
      earnings per share
            
            $
            0.46
            
            
            $
            0.42
            
            
            $
            0.91
            
            
            $
            0.82Diluted
      earnings per share
            
            $
            0.46
            
            
            $
            0.42
            
            
            $
            0.90
            
            
            $
            0.82








12.           COMMITMENTS
AND CONTINGENCIES:





In
certain circumstances, the Company provides recourse for loans for equipment
purchases by customers.  Certain banks require the Company to provide
recourse to finance equipment for new dentists and other customers with credit
histories that are not consistent with the banks' lending criteria.   In
the event that a bank requires recourse on a given loan, the Company would
assume the bank’s security interest in the equipment securing the
loan.  As of June 30, 2010 and December 31, 2009, respectively,
approximately $494 and $579, of the equipment financed with various lenders was
subject to such recourse.  Recourse on a given loan is generally for
the life of the loan.  Based on the Company's past experience with
respect to these arrangements, it is the opinion of management that the fair
value of the recourse provided is minimal and not material to the results of
operations or financial position of the Company.





The
Company and its subsidiaries, from time to time, are parties to various legal
proceedings arising in the normal course of business.  Management
believes that none of these proceedings, if determined adversely, would have a
material adverse effect on the Company’s financial position, results of
operations or liquidity.





The
policy with respect to sales returns generally provides that a customer may not
return inventory except at the Company’s option.  The Company
generally warrants its products against defects, and its most generous policy
provides a two-year parts and labor warranty on X-ray machines.  The
accrual for warranty costs was $284 and $311 at June 30, 2010 and 2009,
respectively.  The following is a rollforward of the Company’s
warranty accrual:








13


























Six
      Months Ended
              June
      30,2010
            
            
            2009Balance,
      December 31
            
            $
            292
            
            
            $
            309Accruals
      for warranties issued during the period
            
            
            87
            
            
            
            105Warranty
      settlements made during the period
            
            
            (95
            )
            
            
            (103
            )Balance,
      June 30, 2010
            
            $
            284
            
            
            $
            311





13.           SUBSEQUENT
EVENTS:








On July
20, 2010, the Board declared a quarterly dividend of $0.04 per share, payable
September 15, 2010 to shareholders of record on August 13, 2010.





Additionally,
on July 20, 2010, the Board announced a share repurchase program authorizing the
purchase of up to 500 shares which will expire July 31, 2011.

















14























Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations.





Critical
Accounting Policies





The SEC
has requested that all registrants include in their MD&A a description of
their most critical accounting policies, the judgments and uncertainties
affecting the application of those policies, and the likelihood that materially
different amounts would be reported under different conditions using different
assumptions.  The SEC indicated that a “critical accounting policy” is
one which is both important to the portrayal of the company’s financial
condition and results and requires management’s most difficult, subjective or
complex judgments, often as a result of the need to make estimates about the
effect of matters that are inherently uncertain.  The Company believes
that the following accounting policies fit this definition:





Allowance for doubtful
accounts –Accounts receivable balances are subject to credit
risk.  Management has reserved for expected credit losses, sales
returns and allowances, and discounts based upon past experience, as well as
knowledge of current customer information.  The Company believes that
its reserves are adequate.  It is possible, however, that the accuracy
of our estimation process could be impacted by unforeseen
circumstances.  The Company continuously reviews its reserve balance
and refines the estimates to reflect any changes in circumstances.





Inventory – The Company
values inventory at the lower of cost or market on a first-in, first-out (FIFO)
basis.  Inventory values are based upon standard costs, which
approximate actual costs.  Management regularly reviews inventory
quantities on hand and records a write-down for excess or obsolete inventory
based primarily on estimated product demand and other information related to the
inventory, including planned introduction of new products and changes in
technology.  If demand for the Company’s products is significantly
different than management’s expectations, the value of inventory could be
materially impacted.  Inventory write-downs are included in cost of
goods sold.





Goodwill and other intangible
assets – In accordance with Accounting Standards Codification
(“ASC”)  Topic 350, “Intangibles- Goodwill and Other,” goodwill and
other intangible assets with indefinite useful lives are reviewed by management
for impairment at least annually, or whenever events or changes in circumstances
indicate the carrying amount may not be recoverable.  If indicators of
impairment are present, the determination of the amount of impairment would be
based on management’s judgment as to the future operating cash flows to be
generated from the assets.  ASC Topic 350 also requires that
intangible assets with estimable useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with ASC Topic 360, “Property, Plant, and
Equipment.”





Revenue Recognition - Revenue
from the sale of products is recorded at the time title passes, generally when
the products are shipped, as the Company’s shipping terms are customarily FOB
shipping point.  The Company generally requires payment within 30 days from
the date of invoice and offers cash discounts for early payment.  For
certain acquired businesses that offer different terms, the Company migrates
these customers to the terms referred above over time.





The
Company offers discounts to its distributors if certain conditions are
met.  Customer allowances, volume discounts and rebates, and other
short-term incentive programs are recorded as a reduction in reported revenues
at the time of sale.  The Company reduces product revenue for the estimated
redemption of annual rebates on certain current product sales. Customer
allowances and rebates are estimated based on historical experience and known
trends.





The
policy with respect to sales returns generally provides that a customer may not
return inventory except at the Company’s option.  The Company
generally warrants its products against defects, and its most generous policy
provides a two-year parts and labor warranty on X-ray machines.  The
Company owns X-ray equipment rented on a month-to-month basis to
customers.  A liability for the removal costs of the rented X-ray machines
is capitalized and amortized over four years.





Stock compensation - In
accordance with ASC Topic 718, “Stock Compensation,” compensation cost is
recognized within the financial statements at the grant date based on the
award’s fair-value.  Stock option fair value is








15























calculated
by an option pricing model, and is recognized as expense ratably over the
requisite service period. The option pricing models require judgmental
assumptions including: volatility, forfeiture rates, and expected option life.
If any of the assumptions used in the model change significantly, share-based
compensation expense may differ in the future from that recorded in the current
period.  The Company uses the Black-Scholes option pricing
model.  Compensation expense is also recognized for restricted stock
using the fair market value of our Common Stock at the date of
grant.





Assets Acquired and Liabilities
Assumed in Business Combinations – The Company periodically acquires
businesses.  All business acquisitions completed subsequent to January
1, 2009 are accounted for under the provisions of ASC Topic 805, “Business
Combinations,” which requires an entity to recognize the assets acquired,
liabilities assumed, contractual contingencies, and contingent consideration at
their fair value on the acquisition date.  It further requires that
acquisition-related costs be recognized separately from the acquisition and
expensed as incurred, restructuring costs generally be expensed in the periods
subsequent to the acquisition date, and changes in accounting for deferred tax
asset valuation allowances and acquired income tax uncertainties after the
measurement period be recorded as income tax expense.  The changes
related to income taxes also impact the accounting for acquisitions completed
prior to the effective date of ASC 805.  In addition, acquired
in-process research and development is capitalized as an intangible asset and
amortized over its estimated useful life.  Acquisitions completed
prior to this adoption were made using the purchase method.  Future
acquisitions will be impacted using the provisions of the new accounting
standard.





RESULTS
OF OPERATIONS (In thousands, except per share data)





Three
Months Ended June 30, 2010 Compared to Three Months Ended June 30,
2009





Net
Sales


Net sales
increased $1,141 or 4.6% to $25,778 in the second quarter of 2010 from $24,637
in the second quarter of 2009.  Sales growth in the quarter was
attributable to increases in sales of consumable products and diagnostic
equipment.  Consumable products include preventive, infection control,
endodontic, micro-applicators and home care product lines.  The
increase in diagnostic sales reflects a more focused marketing effort in tandem
with improved market conditions for capital equipment.  A stronger
U.S. dollar negatively impacted international sales by approximately $100 due to
foreign currency exposure.





Gross
Profit


Gross
profit increased $912 or 6.7% to $14,596 in the second quarter of 2010 compared
to $13,684 in the second quarter of 2009.  Gross margin percentage
increased to 56.6% in 2010 from 55.5% in 2009.  The increase in margin
percentage is primarily attributable to increases in sales volume of units sold
as well as the mix of those products when compared to the 2009.





Selling,
General, and Administrative Expenses


SG&A
expenses increased $617 or 7.4% to $8,903 in the second quarter of 2010
primarily due to personnel-related costs.  As a percent of net sales,
SG&A expenses increased modestly to 34.5% in the second quarter of 2010
compared to 33.6% in the second quarter of 2009 primarily due to sales
increasing faster than expenses.





Income
from Operations


Income
from operations increased $295 or 5.5% to $5,693 in the second quarter of 2010
compared to $5,398 in the second quarter of 2009.  The change was a
result of the factors described above.





Interest
Expense, net


Interest
expense, net decreased $98 to $82 in the second quarter of 2010 from $180 in the
second quarter of 2009.  The decrease was primarily attributable to
lower interest rates and lower borrowings under the Company's credit
facility.








16


























Other
(Income) Expense, net


Other
(income,) net changed $120 to ($65) in the second quarter of 2010 from $55 in
the second quarter of 2009.  The increase was primarily attributable
to a foreign exchange impact on inventory purchases by the Company’s Irish
subsidiary.





Provision
for Income Taxes


Provision
for income taxes increased $143 for the second quarter of 2010 to $1,975 from
$1,832 in the second quarter of 2009 as a result of higher pre-tax income offset
partially by a decrease in the effective tax rate.  The effective tax
rate in the second quarter of 2010 was 34.8% compared to 35.5% in the second
quarter of 2009.  The decrease in rate was primarily due to an
increase in the allowance rates for the Section 199 manufacturing
deduction.








Six
Months Ended June 30, 2010 Compared to Six Months Ended June 30,
2009





Net
Sales


Net sales
increased $2,158 or 4.5% to $50,559 in the first six months of 2010 from $48,401
in the first six months of 2009. Sales growth for the first six months was
attributed to an increase in sales of consumable products and diagnostic
equipment.  Consumable products include preventive, infection control,
endodontic, micro-applicators and home care product lines.  The
increase in diagnostic sales reflects a more focused marketing effort in tandem
with improved market conditions for capital equipment.  The foreign
currency impact was insignificant for the six months ended as the U.S. dollar
strengthened for the three months ended June 30, 2010 after initially weakening
during the first quarter ended March 31, 2010.





Gross
Profit


Gross
profit increased $1,404 or 5.2% to $28,398 in the first six months of 2010
compared to $26,994 in the first six months of 2009. Gross margin increased to
56.2% of net sales in the first six months of 2010 compared to 55.8% in the
first six months of 2009.  The increase in margin percentage is
primarily attributable to increases in sales volume of units sold as well as the
mix of those products when compared to the first six months of 2009





Selling,
General, and Administrative Expenses


SG&A
expenses increased $697 or 4.2% to $17,298 in the first six months of 2010 from
$16,601 in the first six months of 2009 primarily attributable to
personnel-related costs.  As a percent of net sales, SG&A expenses
were relatively flat at 34.2% in the first six months of 2010 compared to 34.3%
in the first six months of 2009 due to sales increasing faster than
expenses.





Income
from Operations


Income
from operations increased $707 or 6.8% to $11,100 in the first six months of
2010 compared to $10,393 in the first six months of 2009.  The change
was a result of the items explained above.





Interest Expense,
net


Interest
expense, net decreased $151 to $183 in the first six months of 2010 from $334 in
the first six months of 2009. The decrease was primarily attributable to reduced
interest expense resulting from lower interest rates and lower borrowings under
the Company's credit facility





Other (Income)
Expense, net


Other
expense (income), net changed $190 to ($148) in the first six months of 2010
from $42 in the first six months of 2009.   The increase was
primarily attributable to foreign exchange impact on inventory purchases by the
Company’s Irish subsidiary.





Provision
for Income Taxes


Provision
for income taxes increased $276 in the first six months of 2010 to $3,807 from
$3,531 in the first six months of 2009 as a result of higher pre-tax income
offset by a decrease in the effective tax rate. The effective tax rate in the
first six months of 2010 was 34.4% compared to 35.2% in the first six months of
2009 due to an increase in the allowance rates for the Section 199 manufacturing
deduction and a change in measurement of a prior period uncertain tax
position.





Liquidity
and Capital Resources





Historically,
the Company has financed its operations primarily through cash flow from
operating activities and, to a lesser extent, through borrowings under its
credit facility.  Net cash flow from operating activities was $11,430
and $10,493 for the first six `months of 2010 and 2009,
respectively.  Net capital expenditures for property, plant and
equipment were $1,832 and $2,308 for the six months of 2010 and 2009,
respectively.  Operating cash flow in 2010 improved due to increased
net income and the reduction in inventories due to timing of product
sales.





The
Company maintains a credit agreement with a borrowing capacity of $60,000, which
expires in July 2012.  Borrowings under the agreement bear interest at
rates ranging from LIBOR + 2.0% to LIBOR + 2.5%, or Prime, depending on the
Company’s level of indebtedness.  Commitment fees for this agreement
range from .25% to .5% of the unused balance. The agreement is unsecured and
contains various financial and other covenants.  As of June 30, 2010,
the Company was in compliance with all of these covenants.  During the
six months ended June 30, 2010, the Company borrowed under the credit facility
to finance investments in facilities and for working capital
needs.  At June 30, 2010, the Company had $5,942 in outstanding
borrowings under this agreement and $54,058 available for borrowing. Management
believes through its operating cash flows as well as borrowing capabilities, the
Company has adequate liquidity and capital resources to meet its needs on a
short and long-term basis.








Forward-Looking
Statements





Investors
are cautioned that this report as well as other reports and oral statements by
Company officials may contain certain forward-looking statements as defined in
the Private Securities Litigation and Reform Act of 1995. Forward-looking
statements include statements which are predictive in nature, which depend upon
or refer to future events or conditions and which include words such as
“expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates” or similar
expressions. These statements are not guaranties of future performance and the
Company makes no commitment to update or disclose any revisions to
forward-looking statements, or any facts, events or circumstances after the date
hereof that may bear upon forward-looking statements. Because such statements
involve risks and uncertainties, actual actions and strategies and the timing
and expected results thereof may differ materially from those expressed or
implied by such forward-looking statements. These risks and uncertainties
include, but are not limited to, those disclosed in the Company's Annual Report
on Form 10-K and other reports filed with the SEC.





Item
3.                      Quantitative
and Qualitative Disclosures About Market Risk.





Market
risks relating to the Company’s operations result primarily from changes in
interest rates and changes in foreign exchange rates.  From time to
time, the Company finances acquisitions, capital expenditures and its working
capital needs with borrowings under a revolving credit facility.  Due
to the variable interest rate feature on the debt,








17























the
Company is exposed to interest rate risk.  A theoretical 100 basis
point increase in interest rates would have resulted in approximately $72 and
$264 of additional interest expense in the three month periods ended June 30,
2010 and 2009, and $100 and $265 for the six months ended June 30, 2010
respectively.  Alternatively, a 100 basis point decrease in interest
rates would have reduced interest expense by approximately $72 and $264 in the
three month periods ended June 30, 2010 and 2009, and $100 and $265 for the six
months ended June 30, 2010, and 2009, respectively.





Sales of
the Company’s products in a given foreign country can be affected by
fluctuations in the exchange rate.  For the six months ended June 30,
2010, the Company sold less than 20% of its products outside of the United
States.  Of these foreign sales, 40% were denominated in Euros and 4%
in Canadian dollars.  The Company does not feel that foreign currency
movements have a material impact on its financial statements.





The
Company does not use derivatives to manage its interest rate or foreign exchange
rate risks.





Item
4.                      Controls
and Procedures.





Evaluation
of Disclosure Controls and Procedures


The
Company’s Chief Executive Officer and Chief Financial Officer have concluded,
based on their evaluation as of the end of the period covered by this report,
that our disclosure controls and procedures are effective to ensure that
information required to be disclosed in the reports that we file or submit under
the Securities Exchange Act of 1934, as amended, is accumulated and communicated
to our management, including our Chief Executive Officer and Chief Financial
Officer, to allow timely decisions regarding required disclosure and that the
information is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms.





Changes
in Internal Control Over Financial Reporting


There
have been no changes in our internal controls over financial reporting that
occurred during the quarterly period ended June 30, 2010 that have materially
affected, or that are reasonably likely to materially affect, our internal
control over financial reporting.








18























PART
II


OTHER
INFORMATION








Item
      2.
            Unregistered
      Sales of Equity Securities and Use of
Proceeds.











ISSUER
      PURCHASES OF EQUITY SECURITIES (in thousands, except per share data)
      (1)








Period
            
            Total
      Number of Shares Purchased
            
            
            Average
      Price Paid per Share
            
            
            Total
      Number of Shares Purchased as Part of Publicly Announced
      Program
            
            
            Maximum
      Number of Shares that May Yet Be Purchased Under the
    ProgramApril
      2010
            
            
            9
            
            
            $
            24.98
            
            
            
            9
            
            
            
            491May
      2010
            
            
            22
            
            
            $
            24.18
            
            
            
            22
            
            
            
            469June
      2010
            
            
            35
            
            
            $
            24.23
            
            
            
            35
            
            
            
            434Total
      Second Quarter 2010
            
            
            66
            
            
            $
            24.32
            
            
            
            66
            
            
            
            434








(1)
            The
      Board of Directors announced July 20, 2010 a share repurchase program
      authorizing the purchase of up to 500 shares.  This program
      replaces an existing authorization that was set to expire July 31,
      2010.  This new  authorization will expire July 31,
      2011.











Item
      6.
            Exhibits.








Exhibits.





31.1  Certification
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to


Section
302 of the Sarbanes-Oxley Act of 2002.





31.2  Certification
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to


Section
302 of the Sarbanes-Oxley Act of 2002.





32.1  Certification
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to


Section
906 of the Sarbanes-Oxley Act of 2002.























19


























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.





YOUNG
INNOVATIONS, INC.





August 6,
2010                                                                                                   
/s/     Alfred
E. Brennan, Jr.


----------------------                                                                                                ------------------------------------------------------------


Date                                                                                                  Alfred E. Brennan, Jr.


Chief Executive Officer





/s/     Arthur L. Herbst, Jr.


------------------------------------------------------------


Arthur
L. Herbst, Jr.


President and
Chief Financial Officer














20