##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 _______________
 FORM 10-Q
 (Mark one)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2008
 o
    
    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: 001-33027
 HOME DIAGNOSTICS, INC.
  DELAWARE
    
    22-2594392(State or other jurisdiction 
of incorporation or organization)
    
    (I.R.S. Employer
Identification Number)
 2400 NW 55thCourtFort Lauderdale, Florida
    
    33309(Address of principal executive offices)
    
    (Zip Code)
 954-677-9201
 Title of Each Class
    
    Name of Exchange on Which RegisteredCommon Stock, $0.01 par value
    
    The NASDAQ Stock Market LLC
 None
 þ o
  Large accelerated filer o
    
    Accelerated filer þNon-accelerated filer o
(Do not check if smaller reporting company)
    
    Smaller reporting company o
 o þ




---



##### 



HOME DIAGNOSTICS, INC.
INDEX
 PagePart I
    
    FINANCIAL SUMMARY
    
    
    3Item 1.
    
    Financial Statements
    
    
    3Condensed Consolidated Balance Sheets as of December 31, 2007 and September 30, 2008 (Unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2007 and 2008 (Unaudited)
    
    
    4Condensed Consolidated Statement of Changes in Stockholders Equity for the Nine Months Ended September 30, 2008 (Unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2008 (Unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4.
    
    Controls and Procedures
    
    
    24Part II
    
    OTHER INFORMATION
    
    
    24Item 1A.
    
    Risk Factors
    
    
    24Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 6.
    
    Exhibits
    
    
    26SIGNATURES
    
    
    27EXHIBIT INDEX
    
    
    28CERTIFICATIONSEX-31.1EX-31.2EX-32.1EX-32.2
  2




---



##### Table of Contents



Part I  FINANCIAL INFORMATION
 
 Item 1  Financial Statements
 
 HOME DIAGNOSTICS, INC. AND SUBSIDIARIES
 (Unaudited)December 31,
    
    
    September 30,2007
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    32,695,803
    
    
    $
    34,180,268Accounts receivable, net
    
    
    18,313,519
    
    
    
    26,444,911Inventory
    
    
    12,379,668
    
    
    
    16,126,369Prepaid expenses and other current assets
    
    
    1,013,025
    
    
    
    1,714,585Income taxes receivable
    
    
    1,241,171
    
    
    
    Deferred tax asset
    
    
    4,669,774
    
    
    
    4,798,017Total current assets
    
    
    70,312,960
    
    
    
    83,264,150Property and equipment, net
    
    
    22,560,335
    
    
    
    23,789,788Goodwill
    
    
    35,573,462
    
    
    
    35,573,462Other intangible assets, net
    
    
    660,776
    
    
    
    415,730Deferred tax asset
    
    
    1,004,638
    
    
    
    776,387Other assets, net
    
    
    138,866
    
    
    
    141,942Total assets
    
    $
    130,251,037
    
    
    $
    143,961,459Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    6,103,535
    
    
    $
    8,952,697Accrued liabilities
    
    
    18,048,079
    
    
    
    22,112,376Income taxes payable
    
    
    
    
    
    
    1,464,975Total current liabilities
    
    
    24,151,614
    
    
    
    32,530,048Contingencies (Note 11)
    
    
    
    
    
    
    Stockholders equity:Common stock, $.01 par value; 60,000,000 shares authorized; 17,878,691 and
17,515,249 shares issued and outstanding at December 31, 2007 and September
30, 2008, respectively
    
    
    178,787
    
    
    
    175,153Additional paid-in capital
    
    
    95,017,973
    
    
    
    94,329,081Retained earnings
    
    
    10,858,415
    
    
    
    17,027,039Accumulated other comprehensive income (loss)
    
    
    44,248
    
    
    
    (99,862
    )Total stockholders equity
    
    
    106,099,423
    
    
    
    111,431,411Total liabilities and stockholders equity
    
    $
    130,251,037
    
    
    $
    143,961,459
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 3




---



##### Table of Contents



HOME DIAGNOSTICS, INC. AND SUBSIDIARIES
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2008
    
    
    2007
    
    
    2008Net sales
    
    $
    31,684,101
    
    
    $
    35,564,663
    
    
    $
    87,834,473
    
    
    $
    94,040,784Cost of sales
    
    
    11,025,302
    
    
    
    13,935,429
    
    
    
    34,180,896
    
    
    
    37,936,438Gross profit
    
    
    20,658,799
    
    
    
    21,629,234
    
    
    
    53,653,577
    
    
    
    56,104,346Operating expensesSelling, general and administrative
(including stock-based compensation
expense of $149,525 and $665,350 and
$889,490 and $1,408,676 for the three and
nine months ended September 30, 2007 and
2008, respectively)
    
    
    12,028,896
    
    
    
    13,399,365
    
    
    
    35,136,687
    
    
    
    38,968,796Research and development
    
    
    2,231,292
    
    
    
    2,035,687
    
    
    
    6,500,479
    
    
    
    6,819,201Insurance settlement
    
    
    (450,000
    )
    
    
    
    
    
    
    (450,000
    )
    
    
    Total operating expenses
    
    
    13,810,188
    
    
    
    15,435,052
    
    
    
    41,187,166
    
    
    
    45,787,997Income from operations
    
    
    6,848,611
    
    
    
    6,194,182
    
    
    
    12,466,411
    
    
    
    10,316,349Other income (expense)Interest income, net
    
    
    447,763
    
    
    
    231,775
    
    
    
    1,218,044
    
    
    
    773,362Other, net
    
    
    12,579
    
    
    
    (82,923
    )
    
    
    64,186
    
    
    
    (503,512
    )Total other income
    
    
    460,342
    
    
    
    148,852
    
    
    
    1,282,230
    
    
    
    269,850Income before provision for income taxes
    
    
    7,308,953
    
    
    
    6,343,034
    
    
    
    13,748,641
    
    
    
    10,586,199Provision for income taxes
    
    
    2,104,805
    
    
    
    1,808,650
    
    
    
    4,229,903
    
    
    
    2,646,190Net income
    
    $
    5,204,148
    
    
    $
    4,534,384
    
    
    $
    9,518,738
    
    
    $
    7,940,009Earnings per common share:Basic
    
    $
    0.29
    
    
    $
    0.26
    
    
    $
    0.53
    
    
    $
    0.45Diluted
    
    $
    0.27
    
    
    $
    0.24
    
    
    $
    0.48
    
    
    $
    0.42Weighted average shares used in computing
earnings per common share:Basic
    
    
    18,115,897
    
    
    
    17,610,214
    
    
    
    17,953,529
    
    
    
    17,782,770Diluted
    
    
    19,559,220
    
    
    
    18,791,817
    
    
    
    19,706,031
    
    
    
    18,901,528
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 4




---



##### Table of Contents



HOME DIAGNOSTICS, INC. AND SUBSIDIARIES
 Common Stock
    
    
    
    
    
    
    
    
    
    
    AccumulatedAdditional
    
    
    
    
    
    
    other
    
    
    TotalNumber of
    
    
    
    
    
    
    paid-in
    
    
    Retained
    
    
    comprehensive
    
    
    stockholdersshares
    
    
    Amount
    
    
    capital
    
    
    earnings
    
    
    Income
    
    
    equityBalance at December 31, 2007
    
    
    17,878,691
    
    
    $
    178,787
    
    
    $
    95,017,973
    
    
    $
    10,858,415
    
    
    $
    44,248
    
    
    $
    106,099,423Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    1,408,676
    
    
    
    
    
    
    
    
    
    
    
    1,408,676Stock options exercised, including tax
benefit of $273,865
    
    
    259,083
    
    
    
    2,591
    
    
    
    1,254,272
    
    
    
    
    
    
    
    
    
    
    
    1,256,863Repurchased common stock
    
    
    (622,525
    )
    
    
    (6,225
    )
    
    
    (3,351,840
    )
    
    
    (1,771,385
    )
    
    
    
    
    
    
    (5,129,450
    )Comprehensive income:Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (144,110
    )
    
    
    (144,110
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,940,009
    
    
    
    
    
    
    
    7,940,009Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,940,009
    
    
    
    (144,110
    )
    
    
    7,795,899Balance at September 30, 2008
    
    
    17,515,249
    
    
    $
    175,153
    
    
    $
    94,329,081
    
    
    $
    17,027,039
    
    
    $
    (99,862
    )
    
    $
    111,431,411
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 5




---



##### Table of Contents



HOME DIAGNOSTICS, INC. AND SUBSIDIARIES
 Nine Months EndedSeptember 30,2007
    
    
    2008Cash flows from operating activities:Net income
    
    $
    9,518,738
    
    
    $
    7,940,009Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    2,900,746
    
    
    
    2,917,001Amortization of deferred financing and debt issuance costs
    
    
    6,763
    
    
    
    Loss on asset disposal
    
    
    33,098
    
    
    
    110,101Bad debt expense
    
    
    37,489
    
    
    
    30,000Non-cash impact of insurance proceeds
    
    
    (300,000
    )
    
    
    Deferred income taxes
    
    
    (665,545
    )
    
    
    100,008Stock-based compensation expense
    
    
    889,490
    
    
    
    1,408,676Changes in assets and liabilities:Accounts receivable
    
    
    (4,190,521
    )
    
    
    (8,161,392
    )Inventories
    
    
    (1,971,755
    )
    
    
    (3,776,542
    )Prepaid expenses and other current and non-current assets
    
    
    (356,135
    )
    
    
    (707,556
    )Income taxes receivable and income taxes payable
    
    
    2,629,135
    
    
    
    2,706,146Accounts payable
    
    
    3,825,929
    
    
    
    2,849,162Accrued liabilities
    
    
    1,543,824
    
    
    
    3,922,518Net cash provided by operating activities
    
    
    13,901,256
    
    
    
    9,338,131Cash flows from investing activities:Capital expenditures
    
    
    (6,550,868
    )
    
    
    (3,925,491
    )Net cash used in investing activities
    
    
    (6,550,868
    )
    
    
    (3,925,491
    )Cash flows from financing activities:Payment of debt financing costs
    
    
    (4,314
    )
    
    
    Proceeds from exercise of stock options
    
    
    1,946,068
    
    
    
    982,998Excess tax benefits from stock-based compensation expense
    
    
    820,719
    
    
    
    273,865Repurchases of common stock
    
    
    (3,390,611
    )
    
    
    (5,129,450
    )Net cash used in financing activities
    
    
    (628,138
    )
    
    
    (3,872,587
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    18,189
    
    
    
    (105,588
    )Net increase (decrease) in cash and
cash equivalents
    
    
    6,740,439
    
    
    
    1,484,465Cash and cash equivalentsBeginning of period
    
    
    26,487,163
    
    
    
    32,695,803End of period
    
    $
    33,227,602
    
    
    $
    34,180,268Supplemental cash flows disclosures:Cash paid during the period for:Income taxes
    
    $
    1,587,778
    
    
    $
    2,004,549Non-cash supplemental information:Deemed capital distribution to stockholders
    
    $
    (300,000
    )
    
    $
    
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 6




---



##### Table of Contents



HOME DIAGNOSTICS, INC. AND SUBSIDIARIES
 1. Basis of presentation
    Use of estimates
  Property and equipment
  Category
    
    Useful livesMachinery and equipment
    
    1-8 yearsFurniture, fixtures and office equipment
    
    1-8 yearsComputer software
    
    3 years
  7




---



##### Table of Contents



Recent accounting pronouncements
    8




---



##### Table of Contents



2. Stock option plans and warrants
     WeightedRange of
    
    
    averageNumber of
    
    
    exercise
    
    
    Exerciseoptions
    
    
    prices
    
    
    PricesOutstanding at December 31, 2007
    
    
    3,010,407
    
    
    $
    2.99  12.00
    
    
    $
    5.53Granted
    
    
    15,000
    
    
    $
    6.85
    
    
    $
    6.85Exercised
    
    
    (27,600
    )
    
    $
    2.99  4.27
    
    
    $
    3.71Forfeited/ Cancelled
    
    
    (650
    )
    
    $
    12.00
    
    
    $
    12.00Outstanding at March 31, 2008
    
    
    2,997,157
    
    
    $
    2.99  12.00
    
    
    $
    5.55Granted
    
    
    428,000
    
    
    $
    7.88
    
    
    $
    7.88Exercised
    
    
    (158,640
    )
    
    $
    2.99  4.27
    
    
    $
    4.12Forfeited/ Cancelled
    
    
    (1,176
    )
    
    $
    3.85  12.00
    
    
    $
    10.78Outstanding at June 30, 2008
    
    
    3,265,341
    
    
    $
    2.99  12.00
    
    
    $
    5.92Exercised
    
    
    (74,952
    )
    
    $
    2.99  3.85
    
    
    $
    3.11Forfeited/ Cancelled
    
    
    (23,875
    )
    
    $
    7.88  11.20
    
    
    $
    10.27Outstanding at September 30, 2008
    
    
    3,166,514
    
    
    $
    2.99  12.00
    
    
    $
    5.95Exercisable at September 30, 2008
    
    
    2,379,133
    
    
    $
    2.99  12.00
    
    
    $
    4.85
  Nine Months EndedSeptember 30, 2007
    
    September 30, 2008Weighted average expected term of options (using the
simplified method in years)
    
    
    4.58
    
    
    
    4.45Expected volatility factor (based on peer group volatility)
    
    
    30
    %
    
    
    36
    %Expected dividend yield
    
    none
    
    noneWeighted average risk-free interest rate (based on
applicable U.S. Treasury rates)
    
    
    4.86
    %
    
    
    3.22
    %
  9




---



##### Table of Contents



3. Inventories, net
  December 31,
    
    
    September 30,2007
    
    
    2008Raw materials
    
    $
    7,589,107
    
    
    $
    8,770,506Work-in-process
    
    
    2,780,096
    
    
    
    5,569,241Finished goods
    
    
    2,010,465
    
    
    
    1,786,622$
    12,379,668
    
    
    $
    16,126,369
 10




---



##### Table of Contents



4. Property and equipment, net
  December 31,
    
    
    
    September 30,2007
    
    
    2008Machinery and equipment
    
    $
    15,931,806
    
    
    $
    31,529,733Leasehold improvements
    
    
    4,061,227
    
    
    
    4,972,441Furniture, fixtures, and office equipment
    
    
    3,136,451
    
    
    
    4,283,244Computer software
    
    
    1,912,733
    
    
    
    2,037,746Equipment not yet placed in service
    
    
    15,272,616
    
    
    
    1,190,10740,314,833
    
    
    
    44,013,271Less: Accumulated depreciation and amortization
    
    
    (17,754,498
    )
    
    
    (20,223,483
    )$
    22,560,335
    
    
    $
    23,789,788
    5. Accrued liabilities
  December 31,
    
    
    
    September 30,2007
    
    
    2008Accrued salaries and benefits
    
    $
    3,975,898
    
    
    $
    4,916,401Sales returns reserve
    
    
    5,385,361
    
    
    
    5,332,823Accrued customer liabilities
    
    
    4,030,499
    
    
    
    7,128,390Product warranty and managed care rebates
    
    
    2,570,495
    
    
    
    2,606,609Other accrued liabilities
    
    
    2,085,826
    
    
    
    2,128,153$
    18,048,079
    
    
    $
    22,112,376
 11




---



##### Table of Contents



6. Credit facility and long-term debt
  7. Income taxes
   8. Earnings per common share
  12




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2008
    
    
    2007
    
    
    2008Weighted average
number of common
shares outstanding
for basic earnings
per share
    
    
    18,115,897
    
    
    
    17,610,214
    
    
    
    17,953,529
    
    
    
    17,782,770Effect of dilutive
securities: stock
options and
warrants
    
    
    1,443,323
    
    
    
    1,181,603
    
    
    
    1,752,502
    
    
    
    1,118,758Weighted average
number of common
and common
equivalent shares
outstanding
    
    
    19,559,220
    
    
    
    18,791,817
    
    
    
    19,706,031
    
    
    
    18,901,528
   9. Common stock repurchase program
   10. Fair Value Measurements
  13




---



##### Table of Contents



Level 1
 Level 2
 Level 3
    11. Contingencies
 Litigation
 Roche Litigation
 14




---



##### Table of Contents



Brandt Litigation
  15




---



##### Table of Contents



Item 2. Managements discussion and analysis of financial condition and results of operations
  Company overview
     
    
    Retail  the retail channel generates the majority of sales of blood
glucose monitoring products in the United States and includes chain
drug stores, food stores and mass merchandisers. We sell our products
into the retail channel on a direct basis or through domestic
distributors. Our retail net sales include products we sell directly
into the retail channel for the larger food and drug retailers.
    
    Domestic distribution  the domestic distribution channel includes
sales to domestic wholesalers, including AmerisourceBergen, Cardinal
Health, McKesson, and Invacare, who sell products to independent and
chain food and drug retailers, primary and long-term care providers,
durable medical equipment suppliers and mail service providers.
 16




---



##### Table of Contents




    
    Mail service  the mail service channel includes sales to leading
mail service providers, who market their products primarily to the
Medicare population.
    
    International  the international channel consists of sales on a
direct basis in the United Kingdom and Canada and through distributors
in Latin America, Europe, Australia, and China.
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007 (1)
    
    
    2008
    
    
    2007 (1)
    
    
    2008Net sales by channel:Retail
    
    $
    5,761,852
    
    
    
    18.2
    %
    
    $
    7,981,132
    
    
    
    22.4
    %
    
    
    18,512,802
    
    
    
    21.1
    %
    
    $
    20,536,331
    
    
    
    21.8
    %Domestic distribution
    
    
    18,727,972
    
    
    
    59.1
    %
    
    
    18,802,290
    
    
    
    52.9
    %
    
    
    46,446,718
    
    
    
    52.9
    %
    
    
    48,009,589
    
    
    
    51.1
    %Mail service
    
    
    3,727,131
    
    
    
    11.8
    %
    
    
    5,306,346
    
    
    
    14.9
    %
    
    
    12,427,571
    
    
    
    14.1
    %
    
    
    14,897,250
    
    
    
    15.8
    %International
    
    
    3,467,146
    
    
    
    10.9
    %
    
    
    3,474,895
    
    
    
    9.8
    %
    
    
    10,447,382
    
    
    
    11.9
    %
    
    
    10,597,614
    
    
    
    11.3
    %Net sales
    
    $
    31,684,101
    
    
    
    100.0
    %
    
    $
    35,564,663
    
    
    
    100.0
    %
    
    $
    87,834,473
    
    
    
    100.0
    %
    
    $
    94,040,784
    
    
    
    100.0
    %
 
 (1)
    
    Certain prior year amounts have been reclassified to conform with current year presentation.    17




---



##### Table of Contents



Results of operations
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    
    
    
    
    2008
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    2008Net sales
    
    $
    31,684,101
    
    
    
    100.0
    %
    
    $
    35,564,663
    
    
    
    100.0
    %
    
    $
    87,834,473
    
    
    
    100.0
    %
    
    $
    94,040,784
    
    
    
    100.0
    %Cost of sales
    
    
    11,025,302
    
    
    
    34.8
    %
    
    
    13,935,429
    
    
    
    39.2
    %
    
    
    34,180,896
    
    
    
    38.9
    %
    
    
    37,936,438
    
    
    
    40.3
    %Gross profit
    
    
    20,658,799
    
    
    
    65.2
    %
    
    
    21,629,234
    
    
    
    60.8
    %
    
    
    53,653,577
    
    
    
    61.1
    %
    
    
    56,104,346
    
    
    
    59.7
    %Operating Expenses:Selling, general and administrative
    
    
    12,028,896
    
    
    
    38.0
    %
    
    
    13,399,365
    
    
    
    37.7
    %
    
    
    35,136,687
    
    
    
    40.0
    %
    
    
    38,968,796
    
    
    
    41.4
    %Research and development
    
    
    2,231,292
    
    
    
    7.0
    %
    
    
    2,035,687
    
    
    
    5.7
    %
    
    
    6,500,479
    
    
    
    7.4
    %
    
    
    6,819,201
    
    
    
    7.3
    %Insurance settlement
    
    
    (450,000
    )
    
    
    (1.4
    )%
    
    
    
    
    
    
    0.0
    %
    
    
    (450,000
    )
    
    
    (0.5
    )%
    
    
    
    
    
    
    0.0
    %Total operating expenses
    
    
    13,810,188
    
    
    
    43.6
    %
    
    
    15,435,052
    
    
    
    43.4
    %
    
    
    41,187,166
    
    
    
    46.9
    %
    
    
    45,787,997
    
    
    
    48.7
    %Income from operations
    
    
    6,848,611
    
    
    
    21.6
    %
    
    
    6,194,182
    
    
    
    17.4
    %
    
    
    12,466,411
    
    
    
    14.2
    %
    
    
    10,316,349
    
    
    
    11.0
    %Interest income
    
    
    447,763
    
    
    
    1.5
    %
    
    
    231,775
    
    
    
    0.7
    %
    
    
    1,218,044
    
    
    
    1.4
    %
    
    
    773,362
    
    
    
    0.8
    %Other, net
    
    
    12,579
    
    
    
    (0.0
    %)
    
    
    (82,923
    )
    
    
    (0.2
    %)
    
    
    64,186
    
    
    
    0.1
    %
    
    
    (503,512
    )
    
    
    (0.5
    %)Income before income taxes
    
    
    7,308,953
    
    
    
    23.1
    %
    
    
    6,343,034
    
    
    
    17.9
    %
    
    
    13,748,641
    
    
    
    15.7
    %
    
    
    10,586,199
    
    
    
    11.3
    %Provision for income taxes
    
    
    2,104,805
    
    
    
    6.7
    %
    
    
    1,808,650
    
    
    
    5.1
    %
    
    
    4,229,903
    
    
    
    4.9
    %
    
    
    2,646,190
    
    
    
    2.8
    %Net income
    
    $
    5,204,148
    
    
    
    16.4
    %
    
    $
    4,534,384
    
    
    
    12.8
    %
    
    $
    9,518,738
    
    
    
    10.8
    %
    
    $
    7,940,009
    
    
    
    8.5
    %
 Three months ended September 30, 2007 as compared to three months ended September 30, 2008
    18




---



##### Table of Contents



19




---



##### Table of Contents



Nine months ended September 30, 2007 as compared to Nine months ended September 30, 2008
       20




---



##### Table of Contents



Liquidity and capital resources
    21




---



##### Table of Contents



Recent accounting pronouncements
   22




---



##### Table of Contents



Caution concerning forward-looking statements
  
 Item 3. Quantitative and qualitative disclosures about market risk
   23




---



##### Table of Contents



Item 4. Controls and procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  
 Part II  OTHER INFORMATION
 
 Item 1A. Risk Factors
  Competitive bidding for durable medical equipment suppliers could negatively affect our business
  24




---



##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Use of Proceeds from Sales of Registered Securities
   
    
    $10.4 million to redeem all outstanding shares of our Series F Preferred Stock;
    
    $2.0 million to repay outstanding indebtedness to Wachovia Bank N.A.; and
    
    $4.8 million for manufacturing equipment for new product development ($0.3 million and
$1.2 million during the three and nine months ended September 30, 2008, respectively).
  Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  ISSUER PURCHASES OF EQUITY SECURITIES
 Appropriate DollarTotal Number of
    
    
    Value of SharesShares Purchased as
    
    
    That May Yet BeTotal Number of
    
    
    Average Price Paid
    
    
    Part of the
    
    
    Purchased Under thePeriod
    
    Shares purchased
    
    
    Per Share
    
    
    Repurchase Program
    
    
    Repurchase ProgramJuly 1, 2008
to
July 31, 2008
    
    
    149,819
    
    
    
    $8.28
    
    
    
    149,819
    
    
    
    $1,926,713August 1, 2008
to
August 31, 2008
    
    
    129,650
    
    
    
    $8.98
    
    
    
    129,650
    
    
    
    $758,006September 1, 2008
to
September 30, 2008
    
    
    41,864
    
    
    
    $9.38
    
    
    
    41,864
    
    
    
    $363,984Total at September 30, 2008
    
    
    321,333
    
    
    
    $8.71
    
    
    
    321,333
 25




---



##### Table of Contents



Item 6. Exhibits
  26




---



##### Table of Contents



SIGNATURES
  HOME DIAGNOSTICS, INC.Date: November 7, 2008
    By:
    /s/ J. RICHARD DAMRON, JR.J. Richard Damron, Jr.President and Chief Executive Officer
(principal executive officer) and DirectorDate: November 7, 2008
    By:
    /s/ RONALD L. RUBINRonald L. RubinSenior Vice President and Chief Financial Officer
(principal financial and accounting officer) 27




---



##### Table of Contents



Exhibit Index
 ExhibitNumber
    
    
    
    Description31.1
    
    
    
    
    Certification of Chief Executive Officer pursuant to
Rule 13a-14(a) under the Securities Exchange Act of
1934.31.2
    
    
    
    
    Certification of Chief Financial Officer pursuant to
Rule 13a-14(a) under the Securities Exchange Act of
1934.32.1
    
    
    
    
    Certification of Chief Executive Officer, pursuant to 18
U.S.C. Section 1350.32.2
    
    
    
    
    Certification of Chief Financial Officer, pursuant to 18
U.S.C. Section 1350.
 28