UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

OR

DIONEX CORPORATION

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.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of February 4, 2005:

DIONEX CORPORATION
INDEX

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DIONEX CORPORATION

See notes to condensed consolidated financial statements.

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DIONEX CORPORATION

See notes to condensed consolidated financial statements.

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DIONEX CORPORATION

See notes to condensed consolidated financial statements.

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DIONEX CORPORATION

See notes to condensed consolidated financial statements.

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DIONEX CORPORATION

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 consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2004.

     The unaudited condensed consolidated financial statements included herein reflect all adjustments (which include only normal, recurring adjustments) that are, in the opinion of management, necessary to state fairly the results for the periods presented. The results for such periods are not necessarily indicative of the results to be expected for the entire fiscal year ending June 30, 2005.

2. New Accounting Pronouncements

     In September 2004, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) Emerging Issues Task Force (EITF) Issue 03-1-1, Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”, which delays the effective date for the recognition and measurement guidance in EITF Issue No. 03-1. In addition, the FASB has issued a proposed FSP to consider whether further application guidance is necessary for securities analyzed for impairment under EITF Issue No. 03-1. The Company continues to assess the potential impact the adoption of the proposed FSP could have on the Company’s consolidated financial statements.

     In November 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 151, “Inventory Costs” (SFAS No. 151) which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. SFAS No. 151 will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company continues to assess the potential impact the adoption of SFAS No. 151 could have on the Company’s consolidated financial statements.

     In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment” (SFAS 123R), which eliminates the alternative of applying the intrinsic value measurement to stock compensation awards issued to employees. Rather, the new standard requires enterprises to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. That cost will be recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

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DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

     The Company has not yet quantified the effects of the adoption SFAS 123R, but it is expected that the new standard may result in significant stock-based compensation expense. The pro forma effects on net income and earnings per share if the Company had applied the fair value recognition provisions of original SFAS 123 on stock compensation awards are disclosed in Note 11. Although such pro forma effects of applying original SFAS 123 may be indicative of the effects of adopting SFAS 123R, the provisions of these two statements differ in some important respects. The actual effect of adopting SFAS 123R will be dependent on numerous factors including, but not limited to, the valuation model chosen by the Company to value stock-based awards; the assumed award forfeiture rate; the accounting policies adopted concerning the method of recognizing the fair value of awards over the requisite service period; and the transition method (as described below) chosen for adopting SFAS 123R.

     SFAS 123R will be effective for the Company’s fiscal quarter beginning July 1, 2005, and requires the use of the Modified Prospective Application Method. Under this method SFAS 123R applied to new awards and to awards modified, repurchased, or cancelled after the effective date. Additionally, compensation cost for the portion of awards for which the requisite service has not been rendered (such as unvested options) that are outstanding as of the date of adoption shall be recognized as the remaining requisite services are rendered. The compensation cost relating to unvested awards at the date of adoption shall be based on the grant-date fair value of those awards as calculated for pro forma disclosures under the original SFAS 123. In addition, companies may use the Modified Retrospective Application Method. This method may be applied to all prior years for which the original SFAS 123 was effective or only to prior interim periods in the year of initial adoption. If the Modified Retrospective Application Method is applied, financial statements for prior periods shall be adjusted to give effect to the fair-value-based method of accounting for awards on a consistent basis with the pro forma disclosures required for those periods under the original SFAS 123.

     In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29” (SFAS No. 153) which eliminates the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS No. 153 will be effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company expects that the adoption of SFAS No. 153 will not have any impact on the Company’s consolidated financial statements.

3. Marketable Securities

     During the year ended June 30, 2004, the Company acquired debt instruments with maturities of more than one year. These securities are classified as “held-to-maturity” securities. At December 31, 2004, the aggregate unamortized value of these securities was

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DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

approximately $4.6 million, of which approximately $980,000 and $3.6 million are classified on the balance sheet as “short-term investments” and “other assets”, respectively. The aggregate amount of unrealized losses for these securities was approximately $61,000 at December 31, 2004, all of which had been in a loss position for less than 12 months.

4. Inventories

     Inventories consist of (in thousands):

5. 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 are as follows (in thousands):

6. Common Stock Repurchases

     During the three months ended December 31, 2004, the Company repurchased 219,900 shares of its common stock on the open market for approximately $12.5 million (at an average repurchase price of $56.69 per share), compared with 53,900 shares repurchased for approximately $2.5 million (at an average repurchase price of $45.62 per share) in the same period in the previous fiscal year.

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DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

     During the six months ended December 31, 2004, the Company repurchased 521,200 shares of its common stock on the open market, for approximately $26.2 million (at an average repurchase price of $50.25 per share) compared with 336,000 shares repurchased for approximately $13.6 million(at an average repurchase price of $40.39 per share), in the same period in the prior year.

     During the year ended June 30, 2004, the Company repurchased a total of 1,116,300 shares of its common stock on the open market for approximately $53.7 million (at an average repurchase price of $48.11 per share).

7. Earnings Per Share

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

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

     Antidilutive common equivalent shares related to stock options are excluded from the calculation of diluted shares. At December 31, 2004 all stock options were included in the diluted earnings per share calculation; however, at December 31, 2003 approximately 12,000 shares were excluded from the computation because they were anti-dilutive.

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DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

8. Goodwill and Other Intangible Assets

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

     Changes in the carrying amount of goodwill for the six months ended December 31, 2004 are as follows (in thousands):

     The Company performed an annual impairment test of goodwill as of April 2004 and determined that goodwill was not impaired.

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

     The Company amortizes developed technology over a period of three to seven years; the remaining weighted average amortization period for this category approximates two years. The Company amortizes other intangibles over a period of five to ten years; the remaining weighted average amortization period for this category approximates eight years.

     Amortization expense related to intangible assets was $423,000 and $814,000, respectively, for the three months and six months ended December 31, 2004 as compared to $368,000 and $713,000, respectively, for the three months and six months ended December 31, 2003. The estimated amortization for each of the five fiscal years subsequent to June 30, 2004 is as follows:

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DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

9. Warranty

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

     Details of the change in accrued product warranty for the six months ended December 31, 2004 and 2003 are as follows (in thousands):

10. Commitments

     One of the Company’s foreign subsidiaries discounts trade notes receivable with banks. The uncollected balances of notes receivable due to the discounting banks at December 31, 2004 and June 30, 2004 were $3.0 million and $7.4 million, respectively. The Company is contingently liable for these unpaid balances to the extent the amounts are not paid to the bank by the end customer. The Company has determined that the carrying amount of its contingent liability under this guarantee was insignificant at December 31, 2004 and June 30, 2004 based on its past experience of discounting trade notes receivable.

11. Stock-Based Compensation

     The Company applies Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB No. 25) and related interpretations in accounting for its stock-based compensation plans. Accordingly, no accounting recognition is given to stock options granted at fair market value until they are exercised. Upon exercise, net proceeds, including tax benefits realized, are credited to equity.

     Statement of Financial Accounting Standard No. 123, “Accounting for Stock-Based Compensation” (SFAS No. 123) sets forth a fair-value

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DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

based method of recognizing stock-based compensation expense. As permitted by SFAS No. 123, the Company has elected to continue to apply APB No. 25 to account for its stock-based compensation plans. Had compensation costs under the Company’s stock-based compensation plans been determined based on the fair value at the grant dates consistent with the method set forth under SFAS No. 123, the effect on the Company’s net income and earnings per share would have been as follows:

     The resulting pro forma compensation expense may not be representative of the amount to be expected for the year ending June 30, 2005. Pro forma compensation expense may be greater as additional options are granted.

     The fair value of each option on the date of grant is estimated using the Black-Scholes option-pricing model with a volatility of 47% for 2005 and 49% for 2004, expected life of options of 5.6 years for 2005 and 5.9 years for 2004, risk free interest rate of approximately 3.56% in 2005 and 3.30% in 2004 and a dividend yield of 0% for fiscal years 2005 and 2004, respectively.

     The Black-Scholes option-pricing model was developed for estimating the fair value of publicly traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective

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DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

assumptions, including expected stock price volatility. The Company’s employee stock options have characteristics significantly different from publicly traded options, and changes in the subjective input assumptions can materially affect the fair value estimate.

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DIONEX CORPORATION

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

Cautionary Statement Regarding Forward-Looking Statements

     Except for historical information contained herein, the discussion below 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: general economic conditions, foreign currency fluctuations, fluctuations in worldwide demand for analytical instrumentation, fluctuations in quarterly operating results, competition from other products, existing product obsolescence, new product development, including market receptiveness, the ability to manufacture products on an efficient and timely basis and at a reasonable cost and in sufficient volume, the ability to attract and retain talented employees and other risks as described in more detail below under the heading “Risks and Uncertainties.” Readers are cautioned not to place undue reliance on these forward-looking statements that reflect management’s analysis only as of the date hereof. Dionex undertakes no obligation to update these forward-looking statements.

The Company

     Dionex Corporation (the “Company”) is a leading manufacturer and marketer of chromatography systems for chemical analysis. The Company’s systems are used in environmental analysis and by the pharmaceutical, life sciences, chemical, petrochemical, power generation, food and electronic industries in a variety of applications.

Results of Operations – Three Months Ended December 31, 2004 and 2003

     Net sales for the second quarter of fiscal 2005 were $74.2 million, an increase of 13% compared with $65.5 million reported for the same period in the prior year. The Company is subject to the effects of foreign currency fluctuations that have an impact on net sales and gross profit. Overall, currency fluctuations increased reported net sales by approximately 5% for the three months ended December 31, 2004 compared to 9% for the same period in the prior year.

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     Net sales increased over the prior year in all geographic markets as indicated in the table below:

     Net sales in North America increased primarily due to the economic recovery over the previous year in the United States and Canada. Net sales in Europe continued to increase primarily due to good growth in several countries, including Germany which reported good growth after several quarters of weaker results. Net sales in the Asia/Pacific region continued to increase primarily due to continued growth in China, Korea and Australia, partially offset by flat net sales in Japan compared to an unusually strong net sales performance in the second quarter last year.

     Gross margin for the second quarter ended December 31, 2004 was 66.7%, consistent with the gross margin reported for the same period last year. Gross margin can be affected by currency fluctuations as well as changes in product mix. The Company anticipates gross margin to be approximately 65-66% for the third and fourth quarters of fiscal 2005.

     Operating expenses of $30.8 million for the second quarter of fiscal 2005 increased $2.9 million, or 10%, from the $27.9 million reported in the same quarter last year. As a percentage of sales,

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operating expenses decreased to 42% for the three months ended December 31, 2004 compared to 43% for the same quarter last year. Currency fluctuations increased operating expenses by 4% for the quarter.

     Selling, general and administrative (SG&A) expenses increased $2.5 million or 11%, to $25.4 million in the three months ended December 31, 2004 as compared to $22.9 million for the same quarter last year. However, as a percentage of sales, SG&A expenses decreased to 34.3% for the second quarter of fiscal 2005 compared to 34.9% for the same quarter last year. The increase in SG&A expenses was due to currency fluctuations, costs associated with Sarbanes-Oxley Section 404 compliance activities and the Company’s expansion efforts in Asia that relate primarily to additional headcount and associated travel expenses, including the addition of nine full-time employees to open a direct sales and marketing subsidiary in Australia on May 11, 2004.

     Research and product development (R&D) costs of $5.4 million for the three months ended December 31, 2004 increased $370,000, or 7%, from the $5.0 million reported in the same period last year. Increased spending in the three months ending December 31, 2004 is primarily due to currency fluctuations and higher costs associated with continued development of new products in both the Company’s IC and HPLC lines. Overall, the level of R&D spending varies depending on both the breadth of the Company’s R&D efforts and the stage of specific product development.

     Other expense was $142,000 in the three months ended December 31, 2004 compared to income of $4,000 for the same period in the prior year. Other expense in fiscal 2005 resulted primarily from foreign exchange losses on currency hedging activities.

     The effective tax rate for the three months ended December 31, 2004 was 32.2%, down from 32.5% reflected in the same period last year. The lower tax rate was due to the recognition of certain U.S. research tax credits which were not allowed to be recognized in the three months ended September 30, 2004; this impact approximated 1.3 percentage points. Legislation enacted during the three months ended December 31, 2004 reinstated the research tax credit retroactive to July 1, 2004. Additionally, the Company’s tax rate reflects fluctuations in the Company’s geographical mix of business.

     Net income in the three months ended December 31, 2004 increased 18% to $12.7 million compared with $10.8 million reported for the same period last year. Diluted earnings per share for the three months ended December 31, 2004 were $.59, an increase of 20% over the $.49, reported for the same period last year.

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Results of Operations – Six Months Ended December 31, 2004 and 2003

     Net sales for the six months ended December 31, 2004 were $137.4 million, an increase of approximately 16% over the $118.8 million reported for the same period last year. The Company is subject to the effects of foreign currency fluctuations that have an impact on net sales and gross profit. Overall, currency fluctuations increased net sales by approximately 5% for the first six months of fiscal 2005 and by approximately 7% for the same period last year.

     Net sales increased over the prior year period in all geographic markets as indicated in the table below:

     Net sales in North America increased primarily due to improvements in economic conditions. Net sales in Europe increased primarily due to strong growth in certain countries and the return to growth in Germany in the second quarter. Net sales in the Asia/Pacific region increased primarily due to strong growth throughout the region.

     Gross margin for the first six months of fiscal 2005 was 66.3%, a slight decrease from the 66.5% reported for the same period last year. Gross margin was lower due to product mix.

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     Operating expenses of $58.1 million for the first six months of fiscal 2005 increased $6.5 million, or 13%, from the $51.7 million reported for the same period last year. As a percentage of sales, operating expenses in the first six months of fiscal year 2005 were 42%, compared with 43% in the same period last year.

     SG&A expenses were $47.8 million for the first six months of fiscal 2005, an increase of 14% compared with the $42.1 million reported in the same period last year. The increase in SG&A expenses was due to currency fluctuations, costs associated with Sarbanes-Oxley Section 404 compliance activities, and the Company’s expansion efforts internationally in Europe and Asia that relate primarily to additional headcount and associated travel expenses, as previously discussed.

     R&D costs for the first six months of fiscal 2005 were $10.3 million, an increase of 8% compared with the $9.6 million reported in the same period last year. However, as a percentage of sales, R&D costs were 8% in both fiscal years. R&D costs in the first half of fiscal 2005 increased due to the Company’s higher spending to develop the Company’s IC and HPLC products and the effects of currency fluctuations. The level of R&D spending varies depending on both the breadth of the Company’s R&D efforts and the stage of specific product development.

     Other income was $313,000 for the first six months of fiscal 2005 primarily due to a gain on the sale of marketable equity securities partially offset by losses on the Company’s currency hedging activities. Other expense was $328,000 for the first six months of fiscal 2004, resulting from losses incurred in the Company’s hedging activities.

     The effective tax rate for the first six months of fiscal 2005 was 33.5%, up from 32.5% for the same period last year. The increase was attributable to a higher portion of foreign-sourced income in the current fiscal year. The Company’s tax rate is subject to fluctuation due to changes in tax regulations in the jurisdictions in which the Company does business.

     Net income for the first six months of fiscal 2005 was $22.4 million, an increase of 22% compared with $18.4 million reported for the same period last year. Diluted earnings per share for the first six months of fiscal 2005 were $1.04, an increase of 24% over the $.84 reported for the same period last year.

Liquidity and Capital Resources

     At December 31, 2004, the Company had cash and cash equivalents of $73.5 million. The Company’s working capital was $121.2 million, an increase of $17.5 million from the $103.7 million reported at June 30, 2004. Cash generated by operating activities for the six months ended December 31, 2004 was $27.8 million compared with $23.0 million for the same period last year. The increase in operating cash flow was primarily due to increases in net income, accounts payable and accrued expenses and a smaller increase in income taxes payable, partially offset by a gain on the sale of marketable securities and an increase in accounts receivable and prepaid expenses and other assets.

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     Cash used for investing activities was $2.7 million and $3.2 million in the six months ended December 31, 2004 and 2003, respectively. Capital expenditures for the six months of fiscal 2005 were $3.7 million and include an offset of proceeds from the sale of marketable securities of $960,000. Capital expenditures for the first six months of fiscal 2005 include costs to implement several information technology and business-related strategic initiatives. For the first six months of fiscal 2004 investing activities included capital expenditures of $2.3 million and the acquisition of intangibles related to the acquisition of our Korean subsidiary totaling $975,000. Capital expenditures in fiscal 2004 included building improvements at the corporate headquarters and computer hardware and software spending in connection with the Company’s website.

     Cash used for financing activities was $13.7 million and $1.8 million in the first six months of fiscal 2005 and 2004, respectively. The increase is primarily attributable to the repurchase of 521,200 shares of the Company’s common stock for $26.2 million in fiscal 2005 (at an average repurchase price of $50.25 per share) compared with 336,000 shares for $13.6 million in fiscal 2004 (at an average repurchase price of $40.39 per share), partially offset by proceeds received from the issuance of common stock for the exercise of employee stock options and from the employee stock purchase plan of $12.8 million in fiscal 2005 and $11.7 million in fiscal 2004.

     At December 31, 2004, the Company had utilized $1.3 million of its $35.3 million in committed bank lines of credit, mainly due to borrowings related to the Company’s Japanese operations. The Company believes that its cash flow from operations, current cash and cash investments and the remainder of its bank lines of credit will be adequate to meet its cash requirements for fiscal 2005 and the foreseeable future, and at least the next twelve months.

     The following table summarizes the Company’s contractual obligations at June 30, 2004, and the effect such obligations are expected to have on its liquidity and cash flows in future periods (in thousands):

     At June 30, 2004, the Company had recorded $3.5 million of Other Obligations in its consolidated financial statements. Other Obligations relate to the earn-out from the acquisition of LC

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Packings in fiscal 2000 and recorded within “Accrued Liabilities”. This earn-out payment in “other obligations” was made in January 2005.

     There have been no material changes to the Company’s contractual obligations outside ordinary business activities since June 30, 2004.

New Accounting Pronouncements

     In September 2004, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) Emerging Issues Task Force (EITF) Issue 03-1-1, Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”, which delays the effective date for the recognition and measurement guidance in EITF Issue No. 03-1. In addition, the FASB has issued a proposed FSP to consider whether further application guidance is necessary for securities analyzed for impairment under EITF Issue No. 03-1. The Company continues to assess the potential impact the adoption of the proposed FSP could have on the Company’s consolidated financial statements.

     In November 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 151, “Inventory Costs “ (SFAS No. 151) which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. SFAS No. 151 will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company continues to assess the potential impact the adoption of SFAS No. 151 could have on the Company’s consolidated financial statements.

     In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment” (SFAS 123R), which eliminates the alternative of applying the intrinsic value measurement to stock compensation awards issued to employees. Rather, the new standard requires enterprises to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. That cost will be recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

     The Company has not yet quantified the effects of the adoption SFAS 123R, but it is expected that the new standard may result in significant stock-based compensation expense. The pro forma effects on net income and earnings per share if the Company had applied the fair value recognition provisions of original SFAS 123 on stock compensation awards are disclosed in Note 12. Although such pro forma effects of applying original SFAS 123 may be indicative of the effects of adopting SFAS 123R, the provisions of these two statements differ in some important respects. The actual effect of adopting SFAS 123R will be dependent on numerous factors including, but not limited to, the valuation model chosen by the Company to value stock-based awards; the assumed award forfeiture rate; the accounting policies adopted concerning the method of recognizing the fair value of awards over the requisite service period; and the transition method (as described below) chosen for adopting SFAS 123R.

     SFAS 123R will be effective for the Company’s fiscal quarter beginning July 1, 2005, and requires the use of the Modified

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Prospective Application Method. Under this method SFAS 123R applied to new awards and to awards modified, repurchased, or cancelled after the effective date. Additionally, compensation cost for the portion of awards for which the requisite service has not been rendered (such as unvested options) that are outstanding as of the date of adoption shall be recognized as the remaining requisite services are rendered. The compensation cost relating to unvested awards at the date of adoption shall be based on the grant-date fair value of those awards as calculated for pro forma disclosures under the original SFAS 123. In addition, companies may use the Modified Retrospective Application Method. This method may be applied to all prior years for which the original SFAS 123 was effective or only to prior interim periods in the year of initial adoption. If the Modified Retrospective Application Method is applied, financial statements for prior periods shall be adjusted to give effect to the fair-value-based method of accounting for awards on a consistent basis with the pro forma disclosures required for those periods under the original SFAS 123.

     In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29” (SFAS No. 153) which eliminates the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS No. 153 will be effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company expects that the adoption of SFAS No. 153 will not have any impact on the Company’s consolidated financial statements.

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Critical Accounting Policies and Estimates

Summary:

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

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

Revenue Recognition Policy

     The Company derives revenues from the sale of products and from services rendered to its customers including installation, training and maintenance. Generally, the Company’s products contain embedded software that is essential to their functionality.

     The Company recognizes revenues in accordance with Staff Accounting Bulletin No. 104 “Revenue Recognition” and Statement of Position 97-2, “Software Revenue Recognition,” when persuasive evidence of an arrangement exists, the product or service has been delivered, the price is fixed or determinable, collection is probable and vendor specific objective evidence exists to allocate revenue to the various elements of the arrangement. Vendor specific objective evidence is based on the price charged when an element is sold separately or, if not yet sold separately, when the price is established by authorized management. Delivery is generally considered to have occurred when shipped.

     The Company sells its equipment through its direct sales force and through distributors and resellers. Sales through distributors and resellers are recognized as revenue upon sale to the distributor or reseller as these sales are considered to be final and no right of return or price protection exists. When the distributor is the primary obligor in the arrangement, has latitude in establishing prices and has credit risk, the Company records revenue based on amounts invoiced to the distributor (rather than the amount invoiced by the distributor to the end users). When the Company is the primary obligor in the arrangement, has latitude in establishing price and has credit risk, the Company records revenue based on amounts invoiced to the end customer (with the related commissions paid to the distributors reported as sales and marketing expense). Customer acceptance is generally limited to performance under the Company’s

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published product specifications. When additional customer acceptance conditions apply, all revenue related to the sale is deferred until acceptance is obtained. 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.

     Installation and training services are not considered to be essential to the functionality of the Company’s products, and revenue related to these items is recognized when the services are completed. The Company recognizes maintenance fees ratably over the period of the related maintenance contract. Maintenance consists of product repair services, unspecified software upgrades and telephone support.

Loss Provisions on Accounts Receivable and Inventory

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

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

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.

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     When the Company determines that the carrying value of long-lived assets, intangible assets with finite lives may not be recoverable based upon the existence of one or more of the above or other indicators, it measures any impairment based on a projected discounted cash flow method using a discount rate determined by the Company’s management to be commensurate with the risk inherent in the Company’s current business model. Goodwill is tested for impairment by comparing the fair values of related reporting units to their carrying values. The Company completed its annual review in April, 2004 and 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.

Risks and Uncertainties

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

     The Company sells products in many geographical regions throughout the world. If economic conditions in any of these regions decline or continue to decline, the demand for the Company’s products is likely to be reduced. Despite economic uncertainty in Europe, the Company showed continued growth in the European market; however, a continuation of an economic downturn in any of its major markets would likely harm its results of operations.

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

     The Company derived approximately 68% of its net sales from outside North America in the six months ended December 31, 2004 and expects to continue to derive the majority of net sales from outside North America for the foreseeable future. Most of the Company’s sales outside North America are denominated in the local currency of its customers. As a result, the U.S. dollar value of the Company’s net sales varies with currency rate fluctuations. Significant changes in the value of the U.S. dollar relative to certain foreign currencies could have a material adverse effect on the Company’s results of operations. Tariffs and other trade barriers, difficulties in staffing and managing foreign operations, changes in political environments, interruptions in overseas shipments and changes in tax laws may also impact international sales negatively.

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

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

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

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

If the Company does not introduce new products that are attractive to its customers on a timely basis, the Company’s products may become obsolete.

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

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The Company’s revenues depend on successfully competing for market share in a highly competitive market.

     The analytical instrumentation market is highly competitive and the Company competes with many competitors on a local and international level that are significantly larger than Dionex and have greater resources, including larger sales forces and technical staff.

     Competitors may introduce more effective and less costly products and, in doing so, may make it difficult to acquire and retain customers. If this occurs, the Company’s market share may decline and operating results could suffer.

The Company’s ability to maintain inventories and meet customer demand for its products is critical to its operating results.

     Most raw materials, components and supplies purchased by the Company are available from a number of suppliers. However, certain items are purchased from limited or sole source suppliers and a disruption of these sources could adversely affect the Company’s ability to ship products as needed. A prolonged inability to obtain certain materials or components would likely reduce product inventory, hinder sales and harm the Company’s reputation with customers.

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

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

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

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

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     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 its technology. Third parties may seek to challenge, circumvent or invalidate issued patents that the Company owns.

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

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

The Company’s failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on its stock price.

     The Company is in the process of documenting and testing its internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of the Company’s internal control over financial reporting and a report by the Company’s independent registered public accountants attesting to and reporting these assessments. During the course of the Company’s testing, the Company may identify deficiencies that cannot be remediated in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. In addition, if the Company fails to maintain the adequacy of its internal control over financial reporting, as such standards are modified, supplemented or amended from time to time, it may not be able to ensure that it can conclude in future periods that its has effective internal control over financial reporting in accordance with Section 404. If the Company cannot favorably assess, or its independent registered accountants are unable to provide an unqualified attestation report on the Company’s assessment of, the effectiveness of its internal control over financial reporting, investor confidence in the reliability of the Company’s financial reports may be adversely affected, which could have a material adverse effect on the Company’s stock price.

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

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

Foreign Currency Exchange Revenues generated from international operations are generally denominated in foreign currencies. The Company enters into forward foreign exchange contracts to hedge against fluctuations of intercompany account balances. Market value gains and losses on these hedge contracts are substantially offset by

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fluctuations in the underlying balances being hedged, and the net financial impact is not expected to be material in future periods. At December 31, 2004, the Company had forward exchange contracts to sell foreign currencies totaling $15.9 million dollars, including approximately $8.0 million in Euros, $7.1 million in Japanese yen and $800,000 in Canadian dollars. The foreign exchange contracts at the end of each fiscal quarter mature within the following quarter. Additionally, contract values and fair market values are the same. A sensitivity analysis assuming a hypothetical 10% movement in foreign currency exchange rates applied to hedging contracts and underlying balances being hedged at December 31, 2004 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 our consolidated financial statements. Currency fluctuations increased reported sales by 5% for both the quarter and for the six months ended December 31, 2004 compared to 9% for the quarter and 7% for the six months ended December 31, 2003.

Interest and Investment Income The Company’s interest and investment income is subject to changes in the general level of interest rates. Changes in interest rates affect the interest earned on our cash equivalents and short-term investments. A sensitivity analysis assuming a hypothetical 10% movement in interest rates applied to the Company’s investment balances at December 31 2004, indicated that such market movement would not have a material effect on the business, operating results or financial condition. Actual gains or losses in the future may differ materially from this analysis, depending upon actual balances and changes in the timing and amount of interest rate movements.

Marketable Equity Securities The Company is exposed to market price risks on its marketable equity securities. These investments are in publicly traded companies in the laboratory analytical instruments sector. The Company does not attempt to reduce or eliminate our market exposure on these securities. A 50% adverse change in the equity price would result in an approximate $571,000 decrease in the fair value of its marketable equity securities as of December 31, 2004.

Debt and Interest Expense A sensitivity analysis assuming a hypothetical 10% movement in interest rates applied to the Company’s outstanding debt balance at December 31, 2004, 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

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promulgated under the Exchange Act). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures as of December 31, 2004 were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

     There were no changes in the Company’s internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

     A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and the Chief Executive Officer and the Chief Financial Officer have concluded that these controls and procedures are effective at the “reasonable assurance” level.

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PART II. OTHER INFORMATION

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

     Dionex repurchases shares of its common stock under a systematic program to manage the dilution created by shares issued under employee stock plans and for other purposes. This program authorizes repurchases in the open market or in private transactions. Dionex started a series of repurchase programs in 1989 with the Board of Directors authorizing future repurchases of an aggregate of 1.5 million shares of common stock in April 2002 as well as authorizing the repurchase of additional shares of common stock equal to the number of common shares issued pursuant to the Company’s employee stock plans.

     The following table indicates common shares repurchased and additional shares added to the repurchase program during the three months ended December 31, 2004:

ISSUER PURCHASES OF EQUITY SECURITIES

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ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The 2004 Annual Meeting of Stockholders was held on October 22, 2004. The six persons name below were elected as proposed in the proxy statement pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, to serve as directors until the Company’s Annual Meeting of Stockholders in 2005 and until their successors are duly elected and qualified. There were 18,670,745 shares of the Company’s common stock entitled to vote at the Annual Meeting of Stockholders. The voting regarding each nominee was as follows:

     Other matters voted upon at the Annual Meeting and the results of the voting with respect to each such matter were as follows:

1. To approve the Dionex Corporate 2004 Equity Incentive Plan.

     2. To ratify the selection of Deloitte & Touche LLP as the independent auditors of the Company for the fiscal year ending June 30, 2005.

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Item 6. EXHIBITS

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SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.

	DIONEX CORPORATION (Registrant)
Date: February 9, 2005	By:	/s/ Lukas Braunschweiler
		Lukas Braunschweiler
		President, Chief Executive Officer And Director

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

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Exhibit Index

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.