e10vq

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2006


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

Commission File Number 0-11250

DIONEX CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		94-2647429

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

1228 Titan Way, Sunnyvale, California		94085

(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (408) 737-0700

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

YES þ NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act). (Check One)

Large accelerated filer þ Accelerated Filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

YES o NO þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of November 8, 2006:


CLASS		NUMBER OF SHARES
Common Stock		19,225,192

Part I. Financial Information

Item 1. Financial Statements

DIONEX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)


	September 30,		June 30,
	2006		2006
ASSETS
Current assets:
Cash and cash equivalents	$	43,065	$	43,524
Short-term investments		502		7,490
Accounts receivable (net of allowance for doubtful accounts of $674 at September 30, 2006 and June 30, 2006)		61,562		63,008
Inventories		28,001		27,702
Deferred taxes		9,941		9,915
Prepaid expenses and other		5,698		5,791

Total current assets		148,769		157,430
Property, plant and equipment, net		61,392		58,700
Goodwill		24,940		24,982
Intangible assets, net		4,623		4,522
Other assets		4,070		4,768

	$	243,794	$	250,402

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable	$	3,066	$	—
Accounts payable		10,064		9,395
Accrued liabilities		37,939		39,673
Income taxes payable		9,466		7,100
Accrued product warranty		3,229		3,493

Total current liabilities		63,764		59,661
Deferred taxes		3,771		3,952
Other long-term liabilities		1,500		1,407
Stockholders’ equity:
Preferred stock (par value $.001 per share; 1,000,000 shares authorized; none outstanding)		—		—
Common stock (par value $.001 per share; 80,000,000 shares authorized; issued and outstanding: 19,221,718 shares at September 30, 2006 and 19,624,839 shares at June 30, 2006)		147,612		148,214
Retained earnings		19,016		28,589
Accumulated other comprehensive income		8,131		8,579

Total stockholders’ equity		174,759		185,382

	$	243,794	$	250,402

See notes to condensed consolidated financial statements.

DIONEX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)


	Three Months Ended
	September 30,
	2006			2005
Cash flows from operating activities:
Net income	$	8,671		$	9,014
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,635			1,702
Stock based compensation		1,230			1,677
Loss on disposal of fixed assets		74			—
Excess tax benefit related to stock option plans		(109	)		(1,927	)
Deferred income taxes		(33	)		2,734
Changes in assets and liabilities:
Accounts receivable		1,088			2,126
Inventories		(488	)		(59	)
Prepaid expenses and other assets		623			(1,982	)
Accounts payable		(206	)		(1,961	)
Accrued liabilities		(2,502	)		(2,360	)
Income taxes payable		2,430			1,649
Accrued product warranty		(238	)		(162	)

Net cash provided by operating activities		12,175			10,451


Cash flows from investing activities:
Proceeds from sale of marketable securities		9,700			12,141
Purchase of marketable securities		(2,600	)		(9,614	)
Purchase of property, plant and equipment		(2,471	)		(3,051	)
Purchase of intangible assets		(423	)		(3,056	)
Other		—			29

Net cash provided by (used for) investing activities		4,206			(3,551	)


Cash flows from financing activities:
Net change in revolving line of credit		3,066			711
Proceeds from issuance of common stock		1,302			6,856
Excess tax benefit related to stock option plans		109			1,927
Repurchase of common stock		(21,491	)		(18,769	)

Net cash used for financing activities		(17,014	)		(9,275	)


Effect of exchange rate changes on cash		174			(1,017	)


Net decrease in cash and cash equivalents		(459	)		(3,392	)
Cash and cash equivalents, beginning of period		43,524			42,679

Cash and cash equivalents, end of period	$	43,065		$	39,287


Supplemental disclosures of cash flow information:
Income taxes paid		56			3,769
Interest expense paid		3			13

Other non-cash activities:
Property and equipment purchased (but not paid for)		1,891			5

See notes to condensed consolidated financial statements

DIONEX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by Dionex Corporation (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. It is suggested that these condensed consolidated financial statements be read in conjunction with the condensed consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2006.

The unaudited condensed consolidated financial statements included herein reflect all adjustments (which include only normal, recurring adjustments) that are, in the opinion of management, necessary to state fairly the results for the periods presented. The results for such periods are not necessarily indicative of the results to be expected for the entire fiscal year ending June 30, 2007.

2. New Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income Taxes”, effective for fiscal years beginning after December 15, 2006. FIN-48 clarifies the accounting for uncertainty in income taxes by prescribing rules for recognition, measurement, classification and disclosure in the Company’s financial statements of tax positions taken or expected to be taken in a tax return. The Company is currently evaluating the provisions in FIN 48, and has not yet determined its expected impact. The Company plans to adopt this new standard on July 1, 2007.

In February 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 155, “Accounting for Certain Hybrid Financial Instruments – an amendment of FASB Statements No. 133 and 140”. This standard permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation; clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133; requires evaluation of interests in securitized financial assets; clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and eliminates the prohibition of a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest of another derivative financial instrument. This standard is effective for all financial instruments acquired or issued after fiscal years beginning after September 15, 2006. The Company does not believe that adoption of SFAS No. 155 will have a material effect on its financial position, results of operations or cash flows.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”). SAB 108 provides interpretive guidance on how the effects of prior-year uncorrected misstatements should be considered when quantifying misstatements in the current year financial statements. SAB 108 requires registrants to quantify misstatements using both an income statement (“rollover”) and balance sheet (“iron curtain”) approach and evaluate whether either approach results in a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. If prior year’s errors that had been previously considered immaterial now are considered material based on either approach, no restatement is required so long as management properly applied its previous approach and all relevant facts and circumstances were considered. If prior years are not restated, the cumulative effect adjustment is recorded in opening accumulated earnings as of the beginning of the fiscal year of adoption. SAB 108 is effective for fiscal years ending after November 15, 2006. The Company does not believe that the adoption of the provisions of SAB108 will materially impact its financial position and results of operations.

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements. SFAS No. 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. The changes to current practice resulting from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. The Statement is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company does not believe that the adoption of the provisions of SFAS No. 157 will materially impact its financial position and results of operations.

3. Stock-Based Compensation

The Company accounts for its stock plans as required by SFAS No. 123(R) “Share-Based Payment”. SFAS 123R requires companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The Company has a stock-based employee compensation plan (Option Plan) and an employee stock purchase plan (ESPP). Generally, stock options granted to employees fully vest four years from the grant date and have a term of ten years. The Company recognizes stock-based compensation expense over the requisite service period of the individual grants, generally, equal to the vesting period.

The effect of recording stock-based compensation for the three months ended September 30, 2006 and 2005 was as follows (in thousands):


	Three Months Ended
	September 30,
	2006			2005
Cost of sales	$	86		$	55
Selling, general and administrative expenses		849			1,198
Research and development expenses		295			424

Total stock-based compensation expenses		1,230			1,677
Tax effect on stock-based compensation		(354	)		(388	)

Net effect on net income	$	876		$	1,289


Excess tax benefit related to stock option plans:
Cash flows from operations		(109	)		(1,927	)
Cash flows from financing activities		109			1,927

Effects on earnings per share:
Basic	$	0.05		$	0.06
Diluted	$	0.04		$	0.06

The fair value of each option on the date of grant is estimated using the Black-Scholes option-pricing model using a single option approach for options granted after June 30, 2005, with the following weighted-average assumptions:


	Three Months Ended
	September 30,
	2006			2005
Volatility for options		29	%		40	%
Volatility for employee stock purchase plan		28	%		29	%
Risk-free interest rate for options		4.9	%		4.0	%
Risk-free interest rate for employee stock purchase plan		4.9	%		3.6	%
Expected life of options	4.75 years			4.75 years
Expected life of employee stock purchase plan	6 months			6 months
Expected dividend	$	0.00		$	0.00

During the three months ended September 30, 2006, the Company granted 300,250 stock options with an estimated total grant date fair value of $4.8 million after estimated forfeitures.

As of September 30, 2006, the unrecorded deferred stock-based compensation balance related to stock options was $11.3 million after estimated forfeitures and will be recognized over an estimated weighted average amortization period of 2.2 years.

Approximately $42,000 and $38,000 of stock-based compensation was capitalized as inventory at September 30, 2006 and June 30, 2006, respectively.

Determining Fair Value

Valuation and amortization method – The Company estimates the fair value of stock options granted using the Black-Scholes-Merton option–pricing formula and a single option award approach. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.

Expected Term – The expected term represents the period that the Company’s stock-based awards are expected to be outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based awards.

Expected Volatility – Expected volatilities for the three months ended September 30, 2006 and 2005 were based mainly on the historical volatility of the Company’s stock price.

Risk-Free Interest Rate – The risk-free interest rate used in the Black-Scholes-Merton valuation method is based on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term.

Expected Dividend – The expected dividend assumption is based on the Company current expectations about the Company’s anticipated dividend policy.

Stock option activity under the Company plans during the three months ended September 30, 2006 was as follows:


						Weighted
						Average		Aggregate
				Weighted		Remaining		Intrinsic
	Options			Average		Contractual		Value
	Outstanding			Exercise Price		Term (Years)		(in 000’s )
Balance at June 30, 2006		1,736,593		$	37.43
Options granted		300,250			53.38
Options exercised		(16,471	)		28.05
Options forfeited/cancelled/expired		(6,316	)		45.08

Balance at September 30, 2006		2,014,056		$	39.86		6.90	$	23,109


Exercisable at September 30, 2006		1,174,427		$	33.58		5.64	$	20,402

In August 2006, the Board of Directors approved an amendment to the Company’s Option Plan to increase the number of shares authorized for issuance by 1,500,000 shares. The amendment was approved by the Company’s stockholders at the Annual Meeting of Stockholders.

The aggregate intrinsic values in the table above represents the total pretax intrinsic values based on the Company’s closing stock price of $50.94 at September 30, 2006, which would have been received by the option holders had all option holders exercised their options as of that date.

The total pre-tax intrinsic value of options exercised were $353,000 during the three months ended September 30, 2006.

4. Inventories

Inventories consist of (in thousands):


	September 30,		June 30,
	2006		2006
Finished goods	$	15,788	$	13,962
Work in process		1,568		1,840
Raw materials		10,645		11,900

	$	28,001	$	27,702

5. Short-term Investments

The Company holds highly liquid debt instruments with maturities of less than one year. These securities are currently classified as “available-for-sale” securities and recorded at their fair value. The difference between the fair value and the amortized cost of the securities was recorded in other comprehensive income, net of deferred taxes.

The aggregate market value, cost basis, and gross unrealized gains and losses of short-term investments by major security type are
as follows (in thousands):


			Gross
	Cost		Unrealized Losses			Fair Value
September 30, 2006
Corporate debt securities⁽¹⁾	$	527	$	(25	)	$	502

	$	527	$	(25	)	$	502


June 30, 2006
Auction rate securities	$	7,100	$	—		$	7,100
Corporate debt securities ⁽¹⁾		415		(25	)		390

	$	7,515	$	(25	)	$	7,490


(1)		These short-term investments have been in a loss position for greater than 12 months.

6. Comprehensive Income

Comprehensive income is the change in stockholders’ equity arising from transactions other than investments by owners and distributions to owners. For the Company, the significant components of comprehensive income, other than net income, are foreign currency translation adjustments and net unrealized gains or losses on securities available for sale. The components of accumulated other comprehensive income is summarized as follows (in thousands):


	Three Months Ended
	September 30,
	2006			2005
Net income, as reported	$	8,671		$	9,014
Foreign currency translation adjustments, net of taxes		(448	)		(508	)
Unrealized gain/(loss) on securities available for sale, net of taxes		—			13

Comprehensive income	$	8,223		$	8,519

7. Common Stock Repurchases

During the three months ended September 30, 2006, the Company repurchased 437,000 shares of its common stock on the open market for approximately $21.5 million (at an average repurchase price of $49.20 per share), compared with 385,900 shares repurchased for approximately $18.8 million (at an average repurchase price of $48.64 per share) in the same period in the prior fiscal year.

During all of fiscal 2006, the Company repurchased a total of 1,409,577 shares of its common stock on the open market for approximately $73.9 million (at an average repurchase price of $52.41 per share).

8. Earnings Per Share

Basic earnings per share are determined by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined by dividing net income by the weighted average number of common shares used in the basic earnings per share calculation, plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding under the treasury stock method.

The following table is a reconciliation of the numerators and denominators used in computing basic and diluted earnings per share
(in thousands, except per share data):


	Three Months Ended
	September 30,
	2006		2005
Numerator:
Net income	$	8,671	$	9,014

Denominator:
Weighted average shares used to compute net income per common share — basic		19,441		20,114
Effect of dilutive stock options		414		573

Weighted average shares used to compute net income per common share — diluted		19,855		20,687

Basic earnings per share	$	0.45	$	0.45

Diluted earnings per share	$	0.44	$	0.44

Antidilutive common equivalent shares related to stock options excluded from the calculation of diluted shares were 669,611 and 499,143 shares for the three months ended September 30, 2006 and 2005, respectively.

9. Goodwill and Other Intangible Assets

Information regarding the Company’s goodwill and other intangible assets reflects current foreign exchange rates.

Change in the carrying amount of goodwill for the three months ended September 30, 2006 is as follows (in thousands):


	Total
Balance as of June 30, 2006	$	24,982
Translation adjustments		(42	)

Balance as of September 30, 2006	$	24,940

The Company performed an annual impairment test of goodwill in April 2006 and determined that goodwill was not impaired.

Information regarding the Company’s other intangible assets follows (in thousands):


	As of September 30, 2006							As of June 30, 2006
	Carrying		Accumulated					Carrying		Accumulated
	Amount		Amortization			Net		Amount		Amortization			Net
Patents and trademarks	$	2,958	$	(462	)	$	2,496	$	3,337	$	(735	)	$	2,602
Developed technology		9,680		(8,936	)		744		9,695		(8,773	)		922
Other		1,839		(456	)		1,383		1,411		(413	)		998

Total	$	14,477	$	(9,854	)	$	4,623	$	14,443	$	(9,921	)	$	4,522

The Company amortizes patents and trademarks over a period of seven years and the remaining weighted average amortization period for this category is approximately six years. The Company amortizes developed technology over a period of three to seven years and the remaining weighted average amortization period for this category is approximately one year. The Company amortizes other intangibles over a period of five to ten years and the remaining weighted average amortization period for this category is approximately six years.

Amortization expense related to intangible assets was $325,000 and $450,000, in the three months ended September 30, 2006 and 2005, respectively. The remaining estimated amortization for each of the five fiscal years subsequent to September 30, 2006 is as follows (in thousands):


	Remaining
Year Ending	Amortization
June 30,	Expense
2007 (remaining nine months)	$	1,005
2008		835
2009		625
2010		585
2011		585
Thereafter		988

Total	$	4,623

10. Warranty

Product warranties are recorded at the time revenue is recognized for certain product shipments. Warranty expense is affected by product failure rates, material usage and service costs incurred in correcting a product failure. Should actual product failure rates, material usage or service costs differ from the Company’s estimates, revisions to the warranty liability would be required.

Details of the change in accrued product warranty for the three months ended September 30, 2006 and 2005 were as follows (in thousands):


	Balance				Credited			Actual			Balance
	Beginning		Provision		to Other			Warranty			End of
	of Period		For Warranties		Accounts(1)			Costs Incurred			Period
Accrued Product Warranty
Three Months Ended:

September 30, 2006	$	3,493	$	684	$	(13	)	$	(935	)	$	3,229


September 30, 2005	$	3,514	$	1,137	$	(18	)	$	(1,297	)	$	3,336


(1)		Effects of exchange rate changes

11. Commitments

Revenue generated from international operations is generally denominated in foreign currencies. The Company enters into forward foreign exchange contracts to hedge against fluctuations of intercompany account balances. Market values gains and losses on these hedge contracts are substantially offset by fluctuations in the underlying balances being hedged, and the net financial impact is not expected to be material in future periods. The Company had forward exchange contracts to sell foreign currencies totaling $11.8 million and $18.4 million at September 30, 2006 and 2005, respectively.

One of the Company’s foreign subsidiaries periodically discounts trade notes receivable with banks. There was no uncollected balances of notes receivable due to the discounting banks at September 30, 2006. The uncollected balances of notes receivable due to the discounting banks were $1.3 million at June 30, 2006.

The Company enters into standard indemnification agreements with many of its customers and certain other business partners in the ordinary course of business. These agreements include provisions for indemnifying the customer against any claim brought by a third party to the extent any such claim alleges that the Company product infringes a patent, copyright or trademark, or violates any other proprietary rights of that third party. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is not estimable however, the Company has not incurred any costs to defend lawsuits or settle claims related to these indemnification agreements. To date, no material claims for such indemnifications are outstanding as of September 30, 2006. The Company has not recorded any liabilities for these indemnification agreements at September 30, 2006 and June 30, 2006.

12. Business Segment Information

SFAS No. 131 “Disclosures about Segments of an Enterprise and Related Information” establishes standards for reporting information about operating segments in annual and interim financial statements of public business enterprises. It also establishes standards for related disclosure about products and service, geographic areas and major customers.

The Company has two operating segments, the Chemical Analysis Business Unit (“CABU”) and the Life Sciences Business Unit (“LSBU”). CABU sells ion chromatography and accelerated solvent extraction products, services and related consumables. LSBU sells high performance liquid chromatography products, services and related consumables. These two operating segments are aggregated into one reportable segment for financial statement purposes.

The Company’s sales of products, installation and training services and maintenance within this reportable segment, are detailed as follows (in thousands):


	Three Months Ended
	September 30,
	2006		2005
Products	$	64,210	$	59,941
Installation and Training Services		1,917		1,972
Maintenance		6,730		6,187

	$	72,857	$	68,100

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Statements

Except for historical information contained herein, the discussion below and in the footnotes to the Company’s financial statements contained in this Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, and are made under the safe harbor provisions thereof. Such statements are subject to certain risks, uncertainties and other factors that may cause actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements, or industry results, expressed or implied by such forward-looking statements. Such risks and uncertainties include, among other things: general economic conditions, foreign currency fluctuations, fluctuations in worldwide demand for analytical instrumentation, fluctuations in quarterly operating results, competition from other products, existing product obsolescence, new product development, including market receptiveness, the ability to manufacture products on an efficient and timely basis and at a reasonable cost and in sufficient volume, the ability to attract and retain talented employees and other risks as described in more detail below under the heading “Risk Factors.” Readers are cautioned not to place undue reliance on these forward-looking statements that reflect management’s analysis only as of the date hereof. The Company undertakes no obligation to update these forward-looking statements.

The Company

Dionex (the “Company”) designs, manufactures, markets and services analytical instrumentation and related accessories and chemicals. The Company’s products are used to analyze chemical substances in the environment and in a broad range of industrial and scientific applications. The Company’s systems are used in environmental analysis and by the pharmaceutical, life sciences, chemical, petrochemical, power generation, and food and electronics industries in a variety of applications. The Company sells into six markets which are Life Sciences, Chemicals, Food Beverage, Electronics, Power and Environmental.

The Company’s chromatography systems are currently focused in several product areas: ion chromatography (IC), high performance liquid chromatography (HPLC) and capillary-/nano-liquid chromatography (capillary-/nano-LC). The Company also offers a mass spectrometer coupled with either an IC or HPLC system. For sample preparation, the Company provides automated solvent extraction systems. In addition, the Company develops and manufactures columns, detectors, data collection and analysis systems for use in or with liquid chromatographs.

Geographically, the Company currently markets and distributes its products and services through its own sales force in Austria, Australia, Canada, China, Denmark, France, Germany, India, Italy, Japan, Korea, Netherlands, Switzerland, United Kingdom, and the United States. In each of these countries, the Company maintains one or more local sales offices in order to support and service the Company customers in the regions. The Company manufactures its products based upon its forecast of customer demand and maintains adequate inventories of completed modules or finished goods in advance of receipt of firm orders. System or instrument orders are generally placed by the customer on an as-needed basis, and instruments are usually shipped within four to six weeks after receipt of an order.

The Company reported the highest first quarter sales in its history with $72.9 million which is a growth of 7% compared with $68.1 million in the same period last year. Diluted earnings per share were $0.44 for the first quarter, compared to $0.44 reported in the same period last year. Net income in the first quarter this year included costs of approximately $650,000, net of tax, or $0.03 per share, related to the company initiative to centralize some of its field related technical, administrative and support functions in North America and Europe. Net income in the first quarter of fiscal 2006 included other income of $1.0 million, net of tax, or $0.05 per share, related primarily to a one-time gain from the favorable settlement of a patent litigation. Cash flow from operations during the quarter was strong at $12 million. The Company’s gross profit margin for the quarter as $65.8% compared to 65.1% reported in the same period last year. SG&A expenses were 39.0% of sales, compared with 39.2% reported in the same period last year. R&D expenses for the quarter were 7.9% of sales, down compared with 8.1% reported in the same period last year.

In the three months ended September 30, 2006, approximately 74% of total net sales were from IC/ASE products and 26% were from HPLC/Nano products. The Company is recognized as an innovation leader in the global LC market.

Results of Operations – Three Months Ended September 30, 2006 and 2005

Net sales for the first quarter of fiscal 2007 were $72.9 million, compared with $68.1 million reported for the same period in the prior year. The Company is subject to the effects of foreign currency fluctuations that have an impact on net sales and gross profit and operating expense. Overall, currency fluctuations increased reported net sales by approximately 2% for the three months ended September 30, 2006 compared to an increase of 1% for the same period in the prior year.

Percentage change in net sales over the prior year as indicated in the table below:


		Three Months
		Ended
		September 30, 2006
Percentage change in net sales
Total:		7%
By geographic region:
North America		2%
Europe		13%
Asia/Pacific		4%

Percentage of change in net sales excluding currency fluctuations


		Three Months
		Ended
		September 30, 2006
Percentage change in net sales excluding currency fluctuations
Total:		5%
By geographic region:
North America		1%
Europe		9%
Asia/Pacific		5%

Net sales in North America increased slightly reflecting the still challenging business conditions in certain regions of the country, predominantly regions with large pharmaceutical customers. Net sales in Europe increased double-digits due to good sales growth in all countries particularly in France and Germany. Net sales in the Asia/Pacific region continued to increase primarily due to strong growth in China and Japan.

Gross margin for the first quarter of fiscal 2007 was 65.7% compared to 65.1% in the first quarter last year. The improvement in gross margin was primarily due to higher growth in consumable products which generally have higher margins than our instrumentation, lower production costs for our ICS-3000 systems, offset by slightly higher cost associated with the Company’s new UltiMate 3000 product. The Company has initiated a series of cost reduction projects related to the UltiMate 3000 systems. The Company believes that these projects will allow the margin to improve sequentially throughout the course of the year.

Operating expenses of $34.2 million for the first quarter of fiscal 2007 increased $2.0 million, or 6% from the $32.2 million reported in the same quarter last year. As a percentage of sales, operating expenses remained constant at 47% in the first quarter of fiscal 2007 compared to the same period last year.

Selling, general and administrative (SG&A) expenses increased $1.7 million or 7% to $28.4 million in the first quarter of fiscal 2007 compared to $26.7 million for the same quarter last year. The increase in SG&A expenses was due primarily to the incremental costs of approximately $1.0 million related to the Company’s centralization initiatives in North America and Europe and higher selling and marketing costs of approximately $1.0 million. The increase was partially offset by a decrease of $350,000 in stock based compensation primarily due to a sequential decrease in stock-based compensation expense related to options granted prior to adoption of SFAS 123R. As a percentage of net sales SG&A expenses remained constant at 37% in the first quarter of 2007 compared to the same period last year.

Research and Product development (R&D) expenses of $5.7 million for the first quarter of fiscal 2007 increased $214,000 or 4% from the $5.5 million reported in the same period last year. As a percentage of net sales, R&D expenses remained constant at 8% in the first quarter of both fiscal 2007 and 2006.

Other expense was $331,000 in the first quarter of fiscal 2007 compared to income of $1.5 million for the same period in the prior year. Other expenses in the first quarter of fiscal 2007 were primarily due to the losses on the Company’s hedging activities. Other income in the first quarter of fiscal 2006 resulted primarily from a gain on a settlement of a patent litigation.

The effective tax rate in the first quarter of fiscal 2007 was 36.7%, compared to 35.1% reflected in the same period last year. The increase in the Company’s tax rate was due to the expiration of research tax credits for federal income tax purposes and the phase out of Extra Territorial Income Deductions. If, as expected, legislation extending the research tax credits is passed by congress and signed into law, the Company will recognize the benefits in its tax rate. The Company anticipates its tax rate will be in the range of 36-37% for the rest of fiscal year 2007 including the effects of stock-based compensation.

Net income in the first quarter of fiscal 2007 decreased 4% to $8.7 million compared with $9.0 million reported for the same period last year. Basic and diluted earnings per share where $0.45 and $0.44 in the first quarter of both fiscal years 2007 and 2006, respectively.

Liquidity and Capital Resources

At September 30, 2006, the Company had cash and cash equivalents and short-term investments of $43.6 million. The Company’s working capital was $85.0 million, a decrease of $12.8 million from the $97.8 million reported at June 30, 2006. The decrease was primarily attributable to the Company’s repurchases of common stock offset partially by cash generated from operating activities. Cash generated by operating activities for the three months ended September 30, 2006 was $12.2 million compared with $10.5 million for the same period last year. The increase in operating cash flow was primarily due to lower amounts of payments made for tax payments during the quarter.

Cash provided by investing activities was $4.2 million in the first quarter of fiscal 2007 compared to cash used for investing activities of $3.6 million in the first quarter of fiscal 2006. The net proceeds of $7.1 million from the sale of marketable securities were partially offset by approximately $2.9 million of capital expenditures and intangibles in fiscal 2007. Capital expenditures in fiscal 2007 included additional molded parts, information technology expansion costs and purchases related to the general operation of the Company.

Cash used for financing activities was $17.0 million and $9.3 million in the first quarter of fiscal 2007 and 2006, respectively. The increase was primarily attributable to the repurchase of 437,000 shares of the Company’s common stock for $21.5 million in fiscal 2007 compared with 385,900 shares for $18.8 million in fiscal 2006 and reduced proceeds from issuance of common stock ($1.3 million for fiscal 2007 compared to $6.9 million for fiscal 2006). The increase was partially offset by net proceeds of $3.1 million received from short term borrowings in fiscal 2007 as compared to $711,000 in fiscal 2006. The increase in short-term borrowings was due to the Company’s repurchases of common stock activities.

At September 30, 2006, the Company had utilized $3.1 million in committed bank lines of credit. The Company believes that its cash flow from operations, current cash and cash investments and the remainder of its bank lines of credit will be adequate to meet its cash requirements for at least the next twelve months.

The following table summarizes the Company’s contractual obligations at June 30, 2006, and the effect such obligations are expected to have on its liquidity and cash flows in future periods (in thousands):


	Payments Due by Period
			Less
			Than 1		1-3		4-5		After 5
Contractual Obligations	Total		Year		Years		Years		Years
Operating Lease Obligations	$	17,717	$	4,505	$	6,304	$	4,054	$	2,854

There have been no material changes to the Company’s contractual obligations outside ordinary business activities since June 30, 2006, except the change described above related to outstanding borrowings.

New Accounting Pronouncements

In June 2006, the FASB issued Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income Taxes”, effective for fiscal years beginning after December 15, 2006. FIN-48 clarifies the accounting for uncertainty in income taxes by prescribing rules for recognition, measurement, classification and disclosure in the Company’s financial statements of tax positions taken or expected to be taken in a tax return. The Company is currently evaluating the provisions in FIN 48, and has not yet determined its expected impact. The Company plans to adopt this new standard on July 1, 2007.

Summary

The preparation of consolidated financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company evaluates its estimates on an ongoing basis, including those related to product returns and allowances, bad debts, inventory valuation, goodwill and intangible assets, income taxes, warranty provisions, and contingencies.

The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Revenue Recognition Policy

The Company derives revenues from the sale of products, the delivery of services to its customers, including installation and training, and from maintenance, which includes product repair obligations under extended warranty, unspecified software upgrades, telephone support and time and material repairs.

The Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104 “Revenue Recognition” and Statement of Position 97-2, “Software Revenue Recognition,” as amended, when persuasive evidence of an arrangement exists, the product has been delivered, or service performed, the price is fixed or determinable, collection is probable and vendor specific objective evidence exists to allocate revenue to the various elements of the arrangement. In all cases, the portion of revenue allocated to the undelivered elements is deferred until those items are delivered to the customer or the services are performed. Delivery of the product is generally considered to have occurred when shipped. Undelivered elements in the Company’s sales arrangements, which are not considered to be essential to the functionality of a product, generally include product accessories; installation services and/or training that are delivered after the related products have been delivered. Installation consists of system set-up, calibration and basic functionality training and generally requires one to three days depending on the product. Vendor specific objective evidence of fair value for product, product accessories and training services is based on the price charged when an element is sold separately or, if not sold separately, when the price is established by authorized management. The fair value of installation services is calculated by applying standard service billing rates to the estimate of the number of hours to install a specific product based on historical experience. These estimated hours for installation have historically been accurate and consistent from product to product. However, to the extent these estimates were to reflect unfavorable variability, the Company’s ability to maintain objective reliable evidence of fair value for such element could be impacted which in turn could delay the recognition of the revenue currently allocated to the delivered elements.

The Company recognizes revenue under extended warranty arrangements (maintenance fees) ratably over the period of the related maintenance contract and cost of the time and material repairs when incurred. Maintenance consists of product repair obligations under extended warranty, unspecified software upgrades, telephone support and time and material repairs. The Company’s equipment typically includes a one-year warranty. The estimated cost of product warranty claims is accrued at the time the sale is recognized, based on historical experience. While the Company believes its historical experience provides a reliable basis for estimating such warranty cost, unforeseen quality issues or component failure rates could result in future costs in excess of such estimates, or alternatively, improved quality and reliability in its products could result in actual expenses that are below those currently estimated.

The Company’s sales are typically not subject to rights of return and, historically, actual sales returns have not been significant.

Loss Provisions on Accounts Receivable and Inventory

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company assesses collectibility based on a number of factors including, but not limited to, past transaction history with the customer, the credit-worthiness of the customer, independent credit reports, industry trends and the macro-economic environment. Sales returns and allowances are estimates of future product returns related to current period revenue. Material differences may result in the amount and timing of the Company’s revenue for any period. Historically, the Company has not experienced significant sales returns or bad debt losses.

The Company values its inventory at the lower of standard cost (which approximates cost on a first-in, first-out basis) or market. The Company estimates revisions to inventory valuations based on technical obsolescence, historical demand, and projections of future demand and industry and market conditions. If actual future demand or market conditions are less favorable than those projected by management, additional valuation provisions may be required. If demand or market conditions are more favorable than projected, higher margins could be realized to the extent inventory is sold which had previously been written down.

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

The Company assesses the impairment of long-lived assets, intangible assets with finite lives and goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In addition, the Company assesses goodwill for impairment at least annually. Factors the Company considers important that could trigger an impairment review include but are not limited to the following:

	•		significant underperformance relative to historical or projected future operating results;

	•		significant negative industry or economic trends; and

	•		significant changes or developments in strategic technology.

When the Company determines that the carrying value of long-lived assets or intangible assets with finite lives may not be recoverable based upon the existence of one or more of the above or other indicators, it measures any impairment based on a projected discounted cash flow method using a discount rate determined by the Company’s management to be commensurate with the risk inherent in the Company’s current business model. Goodwill is tested for impairment by comparing the fair values of related reporting units to their carrying values. The Company completed its annual review in April 2006 and no impairment was necessary.

Warranty

Product warranties are recorded at the time revenue is recognized for certain product shipments based on historical experience. While the Company engages in extensive product quality programs and processes, its warranty obligation is affected by product failure rates, material usage and service costs incurred in correcting a product failure. Should actual product failure rates, material usage or service costs differ from the Company’s previous estimates, revisions to the estimated warranty liability would be required.

Income Taxes

As part of the process of preparing the consolidated financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which it operates. This process involves the Company’s estimate of its actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as depreciation, amortization and inventory reserves for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the Company’s consolidated balance sheets.

The Company must then assess the likelihood that its deferred tax assets will be recovered from future taxable income and to the extent the Company believes that recovery is not likely, it must establish a valuation allowance. In the event that actual results differ from these estimates, the Company may need to establish a valuation allowance that could materially impact its financial position and results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The Company is exposed to financial market risks, including changes in foreign currency rates, interest rates and marketable equity securities, as well as debt and interest expense.

Foreign Currency Exchange Revenues generated from international operations are generally denominated in foreign currencies. The Company enters into forward foreign exchange contracts to hedge against fluctuations of intercompany account balances. Market value gains and losses on these hedge contracts are substantially offset by fluctuations in the underlying balances being hedged, and the net financial impact is not expected to be material in future periods. At September 30, 2006, the Company had forward exchange contracts to sell foreign currencies totaling $11.8 million, including approximately $5.6 million in Euros, $4.1 million in Japanese yen and $1.2 million in Canadian dollars and $900,000 in Australian dollars. The foreign exchange contracts at the end of each fiscal quarter mature within the following quarter. Additionally, contract values and fair market values are the same. A sensitivity analysis assuming a hypothetical 10% movement in foreign currency exchange rates applied to hedging contracts and underlying balances being hedged at September 30, 2006 indicated that these market movements would not have a material effect on the Company’s business, operating results or financial condition.

Foreign currency rate fluctuations can impact the U.S. dollar translation of the Company’s foreign operations in its consolidated financial statements. Currency fluctuations increased reported sales by 2% for the quarter ended September 30, 2006 compared to an increase in reported net sales of 1% for the quarter ended September 30, 2005.

Debt and Interest Expense A sensitivity analysis assuming a hypothetical 10% movement in interest rates applied to the Company’s outstanding debt balance at September 30, 2006, indicated that such market movement would not have a material effect on its business, operating results or financial condition. Actual gains or losses in the future may differ materially from this analysis, depending on the level of the Company’s outstanding debt and changes in the timing and amount of interest rate movements.

ITEM 4. CONTROLS AND PROCEDURES

The Company carried out an evaluation, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s “disclosure controls and procedures” (as defined in rules promulgated under the Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures as of September 30, 2006 were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosures.

There were no changes in the Company’s internal control over financial reporting during (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the period covered by this quarterly report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

You should consider carefully the following risk factors as well as other information in this report before investing in any of our securities. If any of the following risks actually occur, our business operating results and financial condition could be adversely affected. This could cause the market price for our common stock to decline, and you may lose all or part of your investment.

The continuation or spread of the current economic uncertainty in key markets would likely harm the Company’s operating results.

The Company sells its products in many geographical regions throughout the world. If economic conditions in any of these regions decline or continue to decline, the demand for the Company’s products is likely to be reduced. An economic downturn in any of the Company’s major markets would likely harm the Company’s results of operations.

Foreign currency fluctuations and other risks related to international operations may adversely affect the Company’s operating results.

The Company derived approximately 73% of its net sales from outside the United States in the first quarter ended September 30, 2006 and expects to continue to derive the majority of net sales from outside the United States for the foreseeable future. Most of the Company’s sales outside the United States are denominated in the local currency of its customers. As a result, the U.S. dollar value of the Company’s net sales varies with currency rate fluctuations. Significant changes in the value of the U.S. dollar relative to certain foreign currencies could have a material adverse effect on the Company’s results of operations. In recent periods, the Company’s results of operations have been negatively affected from the appreciation of the U.S. dollar against the Euro, the Japanese yen and other foreign currencies. Tariffs and other trade barriers, difficulties in staffing and managing foreign operations, changes in political environments, interruptions in overseas shipments and changes in tax laws may also impact international sales negatively.

Fluctuations in worldwide demand for analytical instrumentation could affect the Company’s operating results.

The demand for analytical instrumentation products can fluctuate depending upon capital expenditure cycles. Most companies consider the Company’s instrumentation products capital equipment and some customers may be unable to secure the necessary capital expenditure approvals due to general economic or customer specific conditions. Significant fluctuations in demand could harm the Company’s results of operations.

Fluctuations in the Company’s quarterly operating results may cause the Company’s stock price to decline.

A high proportion of the Company’s costs are fixed due in part to the Company’s significant sales, research and product development and manufacturing costs. Declines in revenue caused by fluctuations in currency rates, worldwide demand for analytical instrumentation or other factors could disproportionately affect the Company’s quarterly operating results, which may in turn cause the Company’s stock price to decline.

The Company’s results of operations and financial condition will suffer if the Company does not introduce new products that are attractive to its customers on a timely basis.

The Company’s products are highly technical in nature. As a result, many of the Company’s products must be developed months or even years in advance of the potential need by a customer. If the Company fails to introduce new products and enhancements as demand arises or in advance of the competition, the Company’s products are likely to become obsolete over time, which would harm operating results. Also, if the market is not receptive to the Company’s newly developed products, the Company may be unable to recover costs of research and product development and marketing, and may fail to achieve material components of its business plan.

The analytical instrument market is highly competitive, and the Company’s inability to compete effectively in this market would adversely affect its results of operations and financial condition.

The analytical instrumentation market is highly competitive and the Company competes with many companies on a local and international level that are significantly larger than Dionex and have greater resources, including larger sales forces and technical staff. Competitors may introduce more effective and less costly products and, in doing so, may make it difficult for the Company to acquire and retain customers. If this occurs, the Company’s market share may decline and operating results could suffer.

The Company may experience difficulties with obtaining components from sole- or limited-source suppliers, or manufacturing delays, either of which could adversely affect its results of operations.

Most raw materials, components and supplies that the Company purchases are available from many suppliers. However, certain items are purchased from sole or limited-source suppliers and a disruption of these sources could adversely affect the Company’s ability to ship products as needed. A prolonged inability to obtain certain materials or components would likely reduce product inventory, hinder sales and harm the Company’s reputation with customers. Worldwide demand for certain components may cause the cost of such components to rise or limit the availability of these components, which could have an adverse affect on the Company’s results of operations.

The Company manufactures products in its facilities in Germany, the Netherlands and the United States. Any prolonged disruption to the operations at these facilities, whether due to labor unrest, supplier issues, damage to the physical plants or equipment or other reasons, could also adversely affect the Company’s results of operations.

The Company’s executive officers and other key employees are critical to the Company’s business, they may not remain with the Company, in the future and finding talented replacements would be difficult.

The operations of Dionex require managerial and technical expertise. Each of the executive officers and key employees located in the United States is employed “at will” and may leave the employment of the Company at any time. In addition, the Company operates in a variety of locations around the world where the demand for qualified personnel may be extremely high and is likely to remain so for the foreseeable future. As a result, competition for personnel can be intense and the turnover rate for qualified personnel may be high. The loss of any of the Company’s executive officers or key employees could cause the Company to incur increased operating expenses and divert senior management resources in searching for replacements. An inability to hire, train and retain sufficient numbers of qualified employees would seriously affect the Company’s ability to conduct its business.

The success of Dionex’s business is dependent in part on protection of proprietary information and inventions. Obtaining and protecting the Company’s proprietary products, processes and technologies can be difficult and expensive.

Patent and trade secret protection is important to the Company because developing new technologies and products is time-consuming and expensive. The Company owns many U.S. and foreign patents and intends to apply for additional patents to cover its technology and products. The Company may be unable to obtain issued patents from any pending or future patent applications that it owns. The claims allowed under any issued patents may not be sufficiently broad to protect the Company’s technology. Third parties may seek to challenge, circumvent or invalidate issued patents that the Company owns.

In addition to patents, the Company has unpatented proprietary products and know-how. The measures employed by the Company to protect this technology, such as maintaining the confidentiality of proprietary information and relying on trade secret laws, may be inadequate.

The Company may incur significant expense in any legal proceedings to protect its proprietary rights.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company repurchases shares of its common stock under a systematic program to manage the dilution created by shares issued under employee stock plans and for other purposes. This program authorizes repurchases in the open market or in private transactions. The Company started a series of repurchase programs in 1989 with the Board of Directors authorizing future repurchases of an additional 1.5 million shares of common stock in August 2006 as well as authorizing the repurchase of additional shares of common stock equal to the number of shares of common stock issued pursuant to the Company’s employee stock plans.

The following table indicates common shares repurchased and additional shares added to the repurchase program during the three months ended September 30, 2006:

ISSUER PURCHASES OF EQUITY SECURITIES

Total

Maximum

Shares

Number of

Purchased

Additional

Shares that

Total

as Part of

Shares

May Yet Be

Number

Avg.

Publicly

Authorized

Purchased

of Shares

Price Paid

Announced

for

Under the

Period

Purchased

per Share

Program(1)

Purchase (1)

Program (1)

July 1 — July 31, 2006

—

4,909,277

506,207

August 1 — August 31, 2006

397,000

49.11

5,306,277

1,530,817

1,640,024

September 1 — September 30, 2006

40,000

50.16

5,346,277

3,062

1,603,086


(1)		The current repurchase of 1.5 million shares of common stock plus that number of shares of common stock equal to the number of shares issued pursuant to employee stock plans subsequent to that date.

EXHIBIT INDEX

Item 6. EXHIBITS


Exhibit
Number	Description	Reference
3.1	Restated Certificate of Incorporation, filed November 6, 1996		(2	)

3.2	Bylaws, as amended on July 29, 2002		(5	)

4.1	Stockholder Rights Agreement dated January 21, 1999, between the Company and Bank Boston N.A.		(3	)

10.1	Medical Care Reimbursement Plan (Exhibit 10.17)		(1	)

10.2	Credit Agreement dated November 13, 2000 between Wells Fargo Bank and the Company (Exhibit 10.15)		(4	)

10.3	First amendment to Credit Agreement dated November 13, 2000 between Wells Fargo Bank and the Company		(6	)

10.4	Dionex Corporation 2004 Equity Incentive Plan (Exhibit 99.1)		(8	)

10.5	Form of Stock Option Agreement for non-employee directors (Exhibit 99.2)		(8	)

10.6	Form of Stock Option Agreement for other than non-employee directors (Exhibit 99.3)		(8	)

10.7	Employee Stock Participation Plan (Exhibit 10.13)		(7	)

10.8	Second amendment to Credit Agreement dated November 13, 2000 between Wells Fargo Bank and the Company (Exhibit 10.1)		(9	)

10.9	Change in Control Severance Benefit Plan (Exhibit 10.15)		(10	)

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


(1)		Incorporated by reference to the indicated exhibit in Amendment No. 1 of the Company’s Registration Statement on Form S-1 filed December 7, 1982.

(2)		Incorporated by reference to the corresponding exhibit in the Company’s Annual Report on Form 10-Q filed February 13, 1997.

(3)		Incorporated by reference to the corresponding exhibit in the Company’s Quarterly Report on Form 10-Q filed February 16, 1999.

(4)		Incorporated by reference to the indicated exhibit in the Company’s Quarterly Report on Form 10-Q filed February 14, 2001.

(5)		Incorporated by reference to the indicated Exhibit 10.17 in the Company’s Annual Report on Form 10-K filed August 28, 2002.

(6)		Incorporated by reference to the indicated Exhibit in the Company’s Annual Report on Form 10-K filed September 24, 2003.

(7)		Incorporated by reference to the indicated exhibit in the Company’s Annual Report on Form 10-K filed September 10, 2004.

(8)		Incorporated by reference to the Company’s Registration Statement on Form S-8 filed December 8, 2004.

(9)		Incorporated by reference to the indicated exhibit in the Company’s current Report on Form 8-K filed December 22, 2004.

(10)		Incorporated by reference to the indicated exhibit in the Company’s Quarterly Report on Form 10-Q filed May 10, 2005.


	Three Months Ended
	September 30,
	2006			2005
Net sales	$	72,857		$	68,100
Cost of sales		24,959			23,770

Gross profit		47,898			44,330

Operating expenses:
Selling, general and administrative		28,429			26,680
Research and product development		5,748			5,534

Total operating expenses		34,177			32,214

Operating income		13,721			12,116
Interest income		339			311
Interest expense		(30	)		(53	)
Other income (expense), net		(331	)		1,473

Income before taxes		13,699			13,847
Taxes on income		5,028			4,833

Net income	$	8,671		$	9,014

Basic earnings per share	$	0.45		$	0.45

Diluted earnings per share	$	0.44		$	0.44

Shares used in computing per share amounts:
Basic		19,441			20,114

Diluted		19,855			20,687


	DIONEX CORPORATION (Registrant)
Date: November 9, 2006	By:	/s/ Lukas Braunschweiler
		Lukas Braunschweiler
		President, Chief Executive Officer And Director

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report. Our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially effect, the registrant’s internal control over financial reporting; and

	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: November 9, 2006

/s/ Lukas Braunschweiler

Lukas Braunschweiler
President, Chief Executive Officer and Director

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		Page
	PART I. FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS

	CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2006 and June 30, 2006		3

	CONDENSED CONSOLIDATED STATEMENTS OF INCOME Three Months Ended September 30, 2006 and 2005		4

	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended September 30, 2006 and 2005		5

	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS		6-12

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		13-18

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS		19

ITEM 4.	CONTROLS AND PROCEDURES		19

	PART II. OTHER INFORMATION

ITEM 1A.	RISK FACTORS		20-21

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		22

ITEM 6.	EXHIBITS		23

SIGNATURES			24

EXHIBITS
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2


		By:		/s/ Craig A. McCollam Craig A. McCollam
				Vice President, and Chief Financial Officer

1.		I have reviewed this Quarterly Report on Form 10-Q of Dionex Corporation;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


Date: November 9, 2006

/s/ Craig A. McCollam
Craig A. McCollam
Vice President and Chief Financial Officer

	1.		The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2006, and to which this Certification is attached (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

	2.		The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


By:		/s/ Lukas Braunschweiler
Name:		Lukas Braunschweiler
Title:		President, Chief Executive Officer and Director
Date:		November 9, 2006