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. YESþ NOo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YESo NOo

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of November 06, 2008:5, 2009:

Item 1. Financial Statements

The condensed consolidated financial statements included herein have been prepared by Dionex Corporation, 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. These condensed consolidated financial statements should be read in conjunction with the condensed consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2008.2009. Unless the context otherwise requires, the terms “Dionex,” “we,” “our” and “us” and words of similar import as used in these notes to condensed consolidated financial statements include Dionex Corporation and its consolidated subsidiaries.

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, 2009.2010. Separate line item disclosure of the change in prepaid income taxes has been provided in the condensed consolidated statement of cash flows for the three months ended September 30, 2008 to conform to the fiscal 2010 presentation. Net operating results have not been affected by this re-classification.

Recently Adopted Accounting Pronouncement.In September 2006,May 2009, the Financial Accounting Standards Board (“FASB”)(FASB) issued Statementan Accounting Standard Update related to subsequent events. This accounting standard is intended to establish general standards of Financialthe accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for selecting that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. The accounting standard is effective for interim or annual financial periods ending after June 15, 2009 and was adopted by us during the quarter ended June 30, 2009. Additional disclosures are provided in Note 17.

In April 2009, the FASB issued an Accounting Standards (“SFAS”) No. 157,Fair Value Measurements(“SFAS No. 157”). SFAS No. 157 establishesStandard Update related to the accounting for assets acquired and liabilities assumed in a framework for measuringbusiness combination that arise from contingencies, which amends the business combination accounting standard to require contingent assets acquired and liabilities assumed to be recognized at fair value and expands disclosures abouton the acquisition date if fair value measurements. The changescan be reasonably estimated during the measurement period. If fair value cannot be reasonably estimated during the measurement period, the contingent asset or liability would be recognized in accordance with the accounting standard related to current practice resultingcontingencies and the estimation of the amount of a loss. Further, this eliminated the specific subsequent accounting guidance for contingent assets and liabilities from the application of SFAS No. 157 relate to the definitionbusiness combination accounting standard. However, contingent consideration arrangements of fair value,an acquiree assumed by the methods used to measure fair value,acquirer in a business combination would still be initially and the expanded disclosures about fair value measurements. FASB Staff Position 157-2,Effective Date of FASB Statement No. 157,was further released in February 2008 to amend the effective date pertaining to nonfinancial assets and liabilities, except those that are recognized or disclosedsubsequently measured at fair value in the financial statements on a recurring basis (at least annually) until years beginning after November 15, 2008. Effective July 1, 2008, we adopted SFAS No. 157, except as it applies to the non-financial assets and non-financial liabilities subject to FASB Staff Position SFAS No. 157-2.

In March 2008,April 2009, the FASB issued SFAS No. 161,Disclosurestwo Accounting Standard Updates related to disclosures about Derivative Instrumentsthe fair value of financial instruments in interim period financial statements of publicly traded companies and Hedging Activities(“SFAS No. 161”). SFAS No. 161 enhancesin summarized financial disclosureinformation required by requiring that objectivesanother Accounting Standard Update. These updates are effective for using derivative instruments be described in terms of underlying riskinterim and annual reporting periods ending after June 15, 2009. Effective July 1, 2009, we adopted the accounting designation in the form of tabular presentation, requiring transparency with respectguidance related to the entity’sfair value disclosure of financial instruments.

liquidity from using derivatives,accounting and cross-referencing an entity’s derivative information within itsreporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary, which is sometimes referred to as a minority interest, is a third-party ownership interest in the consolidated entity that should be reported as a component of equity in the condensed consolidated financial footnotes. SFAS No. 161statements. Among other requirements, the new guidance requires the consolidated statement of income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. The new guidance also requires disclosure on the face of the consolidated statement of income of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. This accounting standard is effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning on or after NovemberDecember 15, 2008, which will be the Company’s fiscal year beginning2008. Effective July 1, 2009.2009, we adopted the accounting standard related to noncontrolling interests in subsidiaries. In addition, the presentation and disclosure requirements of the Accounting Standard Update have been applied retrospectively to our condensed consolidated balance sheet as of June 30, 2009, our condensed consolidated statements of income and cash flows, and our comprehensive income disclosure in Note 7 for the three months ended September 30, 2008.

In December 2007, the FASB issued SFAS No. 141 (revised 2007),Business Combinations (“SFAS No. 141(R)”). SFAS No. 141(R)a revision to a previous Accounting Standard Update related to business combinations. The revised accounting standard expands the definition of a business combination and requires the fair value of the purchase price of an acquisition, including the issuance of equity securities, to be determined on the acquisition date. SFAS No. 141(R)It also requires that all assets, liabilities, contingent consideration and contingencies of an acquired business be recorded at fair value at the acquisition date. In addition, SFAS No. 141(R)the revised accounting standard now requires that acquisition costs generally be expensed as incurred, restructuring costs generally be expensed in periods subsequent to the acquisition date, and changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period that impacts income tax expense. SFAS No. 141(R)The effect of this revision applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 (for Dionex, beginning with our fiscal 2010) with early adoption prohibited.prohibited, which began on July 1, 2009 for us. Effective July 1, 2009, we adopted the revised accounting standard related to business combinations.

In February 2007, the FASB issued SFAS No. 159,The Fair Value Optionan Accounting Standard Update related to the fair value option for Financial Assetsfinancial assets and Financial Liabilities(“SFAS No. 159”). SFAS No. 159financial liabilities. It permits entities to choose, at specified election dates, to measure eligible items at fair value (or “fair value option”) and to report in earnings unrealized gains and losses on those items for which the fair value option has been elected. SFAS No. 159The standard also requires entities to display the fair value of those assets and liabilities on the face of the balance sheet. SFAS No. 159sheet and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 isThe accounting standard was effective for us as of the first quarter of fiscal 2009. Currently, we have elected not to adopt the fair value option under this pronouncement.update.

We account for our stock plans as required by SFAS No. 123 (Revised 2004),Share-Based Payment (“SFAS No. 123R”). SFAS No. 123R requires companies to measuremeasuring the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. We have a stock-based compensation plan (Equity(“Equity Incentive Plan)Plan”) and an employee stock purchase plan (ESPP)(“ESPP”). Pursuant to the Equity Incentive Plan, we issue stock options and restricted stock units.

Generally, stock options granted to employees and non-employee directors fully vest four years from the grant date and have a term of ten years. We recognize stock-based compensation expense over the requisite service period of the individual grants, generally, equal to the vesting period.

Stock option activity under our plansEquity Incentive Plan during the three months ended September 30, 20082009 was as follows:

The aggregate intrinsic values in the table above represent the total pretax intrinsic values based on our closing stock price of $63.55$64.97 at September 30, 2008,2009, 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 was $0.6 million during the three months ended September 30, 2008.

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

As of September 30, 2008,2009, the unrecorded deferred stock-based compensation balance related to stock options was $14.1$9.6 million after estimated forfeitures and will be recognized over an estimated weighted average amortization period of 2.72.4 years. We did not issue any options under the Equity Incentive Plan during the first quarter of fiscal 2010.

Determining Fair Value

Valuation and amortization method — We estimate 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 our 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 our stock-based awards.

Short-term investments are recorded at their fair value. The difference between the fair value and amortized cost of short-term investments classified as “available-for-sale” securities is recorded in other comprehensive income, net of deferred taxes. We do not hold any auction-rate securities. As of September 30, 2008,2009, short-term investments included an equity indexed derivative totaling $652,000.$452,000.

The aggregate market value, cost basis, and gross unrealized gains and losses of short-term investments classified as “available-for-sale” securities were as follows (in thousands):

Comprehensive income is the change in stockholders’ equity arising from transactions other than investments by owners and

common shares outstanding during the period. Diluted earnings per share isattributable to Dionex Corporation are 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 attributable to Dionex Corporation (in thousands, except per share data):

The change in the carrying amount of goodwill for the three months ended September 30, 20082009 was as follows (in thousands):

Details of the change in accrued product warranty for the three months ended September, 30,2009 and 2008 and 2007 were as follows (in thousands):

Effective July 1, 2008, we adopted an Accounting Standard Update for fair value measurements for all financial assets and liabilities as required by SFAS No. 157,liabilities. Fair Value Measurements(“SFAS No. 157”). SFAS No. 157 defines fair value are defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing assets or liabilities. When determining the fair value measurements

for assets and liabilities required or permitted to be recorded at fair value, we consider the principal or most advantageous market in which these assets and liabilities would be transacted.

SFAS No. 157 fairFair value hierarchy prioritizes the inputs to fair value measurement into three levels:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity havehas the ability to access at the measurement date.

Level 2 inputs are those other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 inputs are unobservable inputs for the asset or liability.

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis in accordance with SFAS No. 157 as of September 30, 2008:2009 (in thousands):

Cautionary Statement Regarding Forward-Looking Statements

Except for historical information contained herein, the discussion below and in the footnotes to our 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, risks associated with international sales, credit risks, 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. We undertake no obligation to update these forward-looking statements.

Overview

Dionex Corporation designs, manufactures,During the last three quarters, we saw some decline in customer demand mainly driven by weaker economic conditions in some countries and/or specific end-user markets. We believe our second quarter will continue to be affected. Despite the weakness caused by the current economic conditions, we are very pleased with our results for the first quarter. We exceeded our internal expectations and guidance for both sales and earnings per share for the first quarter. Our gross margin was in line with our expectations and we closely managed our operating expenses. We were also able to complete the acquisition of certain HPLC products line from ESA Biosciences, Inc., which further strengthened our HPLC portfolio. We believe the acquisition expanded our life sciences market opportunities, particularly in clinical research applications. Looking at our end customers markets, and services analytical instrumentation and related accessories and chemicals. Our products are used to analyze chemical substancesnet sales in our life sciences market were up in the environment andfirst quarter compared to the first quarter of fiscal 2009, showing growth in a broad rangeall of industrial and scientific applications. Our systems are usedour major geographic regions. Net sales in our environmental analysis and by the pharmaceutical, life sciences, chemical, petrochemical, power generation, and food and electronics industriesbeverage markets were flat for the quarter compared to the first quarter of fiscal 2009, with mixed results on a geographic basis. Finally, net sales in a variety of applications. Unless the context otherwise requires, the terms “Dionex,” “we,” “our”our chemical/petrochemical and “us”our high purity water markets (electronics and words of similar import as used herein include Dionex Corporation and its consolidated subsidiaries.

Looking at sales by major geographic region, net sales in North America were down slightly for the quarter compared to the first quarter of fiscal 2009. We manufacturebelieve this performance in our products based uponNorth American business represents a forecaststabilization of customer demandour business in this region compared with the last two quarters. In Europe, first quarter sales declined in both reported dollars and we generally trylocal currency compared to maintain adequate inventoriesthe first quarter of completed modules or finished goodsfiscal 2009. We saw weakness in advanceall of receipt of firm orders. System or instrument orders are generally placed byour markets except life sciences which continued to grow. Our Asia Pacific region continued its strongest performance as sales in this region grew in both reported dollars and local currency for the customer on an as-needed basis and instruments are usually shipped within two to six weeks after receipt of an order.first quarter.

Results of Operations

Net sales for the first quarter of fiscal 20092010 were $93.4$90.7 million, compared with $82.4$93.4 million reported for the same period in the prior year, reflecting an increasea decrease of 13%3%. Operating income for the quarter was $19.5$16.5 million, an increasea decrease of 22%15.4% over operating income for the first quarter of fiscal 20082009 of $16.0$19.5 million. Cash flow from operating activities during the quarter was $8.7$22.9 million compared with $13.1$8.7 million for the first quarter of fiscal 2008,2009, reflecting a decreasean increase of 34%162%. Our gross profit margin for the quarter was 67.1%65.8%, a decrease compared to 65.2% reported in67.1% for the same period last year. Selling, general and administrative expenses were 38.7%39.7% of net sales during the quarter, compared to 37.8%38.7% reported in the same period last year. Research and product development expenses for the quarter were 7.5%7.9% of net sales, equal toup slightly from the 8.0%7.5% reported in the same period last year. Diluted earnings per share grew 21%decreased 10.9% to $0.64$0.57 for the first quarter, compared to $0.53$0.64 reported in the same period last year.

Net sales for the three months ended September 30, 2008 reflect increasing, broad-based demand for our instrumentation and consumables products. In the first quarter we achieved growthof fiscal 2010 were $90.7 million, compared with $93.4 million reported for the same period in eachthe prior year, reflecting a decrease of our end-user markets,3%, including life sciences, environmental and chemical/petrochemical. This increased demand had the effect of increasing our net sales, but also our

lower demand from our environmental and food and beverage customers. However, this performance showed stabilization in demand compared with the increased demand described above.previous two quarters. Net sales in Europe increaseddecreased by 15%12% to $39.9$35.1 million in the first quarter of fiscal 2009,2010, compared to $34.8$39.9 million during the same period in the prior year due to benefits fromthe challenging economic environment and adverse currency fluctuations of $1.4 million and growth in our ion chromatography products. Net$2.2 million. Excluding the impact of currency fluctuations, net sales in the Asia/Pacific region grewEurope decreased by 25%7% to $37.3 million in the first quarter of fiscal 20092010 due to $28.4 million,weaknesses in all of our markets except life sciences which continue to grow. The Asia/Pacific region continued its strong performance as it grew 8% in reported dollars and 6% in local currency for the first quarter compared to $22.7 million during the same periodfirst quarter of fiscal 2009. Sales growth was driven by a strong performance in China. We saw weaker sales results in Japan and Korea compared to previous quarters, though order flows improved in the prior year, driven by increased sales in Japan, China, India and Australia.last month of the quarter.

We are subject to the effects of foreign currency fluctuations that have an impact on net sales. Overall, currency fluctuations increaseddecreased reported net sales for the three months ended September 30, 20082009 by $4.9$1.9 million, or 6 percentage points2.0% compared to the same quarter last year.

Percentage changes in net sales over the corresponding period in the prior year were as indicated in the table below:

Percentage change in net sales excluding currency fluctuations over the corresponding period in the prior year were as indicated in the table below:

Gross margin

Gross margin for the first quarter of fiscal 20092010 was 67.1%65.8%, an increasea decrease from the 65.2%67.1% gross profit margin reported in the samefirst quarter last year, principallyyear. The difference was due to currency anda number of factors, including a change in the geographical mix with relatively strongera weaker performance in Europe, faster HPLC sales growth and Asia/Pacific.higher deferred revenue. We expect our gross margin to be in the range of 66% to 67% for the fiscal year 2010.

Operating expenses

Operating expenses of $43.2 million for the first quarter of fiscal 2009 increased by $5.52010 were $43.2 million, or 14.5%, from the $37.8 million reported inunchanged compared to the same quarter last year. As a percentage of net sales, operating expenses were 46.3%47.6% for the first quarter of fiscal 2009, a slight2010, an increase from the 45.8%46.3% of sales reported in the first quarter of fiscal 2008.2009. The effects of foreign currency fluctuations increaseddecreased total operating expenses by $1.8$1.4 million, or 5%3.2%, for the quarter ended September 30, 2008,2009, compared to 3%an increase of 5.0% during the same period in the prior year. The increase in operating expenses was attributable primarily to $1.5 million of additional expenses associated with expansion of our Asia/Pacific operations related to that market’s disproportionate growth and our new Sweden subsidiary, with the remainder of the increase related to a general increase in the personnel costs, travel and other costs.

or 6.5%2.0%, from $6.6$7.0 million reported in the first quarter of fiscal 2008.2009. As a percentage of net sales, R&D expenses decreasedincreased marginally to 7.9% in the first quarter of fiscal 2010 when compared to the 7.5% in the first quarter of fiscal 2009 when compared to the 8.0% in the first quarter of fiscal 2008.2009.

Income taxes

The effective tax rate in the first quarter of fiscal 20092010 was 38.0%36.6%, reflecting an increasea decrease from 35.3%38.0% reported for the first quarter of fiscal 2008.2009. The relative increasedecrease in our tax rate was primarily due to a one-time tax benefit in the first quarter of last year of $332,200 and a lower research tax credit thiscredits in last fiscal year, as the federal statute had expired as of December 31, 2007.expired. We anticipate that our tax rate for the rest of the fiscal year will be in the range of 35.0%34.0% to 36.0% for the remainder of fiscal year 2009.35.0%.

Net income attributable to Dionex Corporation in the first quarter of fiscal 2009 increased 16%2010 decreased 12.7% to $11.8$10.3 million, compared with $10.2$11.8 million reported for the same period last year.

At September 30, 2008,2009, we had cash and equivalents and short-term investments of $65.8$78.7 million. Our working capital was $117.2 million, an increase of $21.2 million from $96.0 million unchanged compared to that reported at September 30, 2007.2008.

Cash generated by operating activities for the three months ended September 30, 20082009 was $8.7$22.9 million, compared with $13.1$8.7 million for the same period last year. TheA lower level of prepaid income taxes due to a refund of the taxes, an increase in deferred revenues due to a higher level of uninstalled systems and software, a decrease in accounts receivable due to lower sales and higher income taxes payable due to lower tax payments contributed to higher operating cash was primarily attributableflows. These changes were partially offset by a decrease to the increased tax payments globally, increasedoperating cash from an increase in inventory as we ramp upprepared for higher shipments in the second quarter shipments, and a decrease in accrued liabilities of $3.1 million associated with payments of payroll related liabilities as of September 30, 2008.for employee compensation.

Cash used for investing activities was $8.2$23.6 million in the first three months of fiscal 2009.2010. Capital expenditures for the three months of fiscal 20092010 were $4.6$2.8 million which included purchases related to our general operations, expansion of our IT platform and refurbishment of a building in Sunnyvale. Additionally, $952,000$21.1 million was paid in connection with the acquisition of a Swedish company.the assets and liabilities of the LST and Laboratory Services business of ESA Biosciences Inc, of which approximately $3M was for the building in which they currently operate.

Cash used forprovided by financing activities was $8.3$7.3 million in the first three months of fiscal 2009.2010. The use of cash generated was primarily attributable to the repurchase of 201,584188,253 shares of our common stock for $13.3$11.2 million, offset by $1.7$3.3 million in proceeds from issuance of common stock, a tax benefitand $15.1 million in proceeds from increased borrowing related to equity incentive plansthe acquisition of $111,000the assets and net proceedsliabilities of $3.3 million received from short-term borrowings.the LST and Laboratory Services business of ESA Biosciences Inc.

At September 30, 2008,2009, we had utilized $25.1$15.1 million of our $28.9$29.1 million in committed bank lines of credit. The borrowings were used to repurchase shares offinance our common stock and other corporate activities.asset acquisition from ESA Biosciences, Inc.

We believe that our cash flow from operating activities, current cash, cash equivalents and short-term investments and the remainder of our bank lines of credit will be adequate to meet our cash requirements for at least the next twelve months.

Contractual Obligations and Commercial Commitments

There have been no material changes to our operating lease obligations outside ordinary business activities since June 30, 2008.2009. Our outstanding borrowings under our lines of credit increased to $25.0$15.1 million at September 30, 20082009 from $21.8$0.6 million at June 30, 2008.2009. These amounts are due in a period of less than one year.

The amounts above exclude liabilities recorded under FIN 48,the accounting provision related to income tax uncertainties, as we are unable to reasonably estimate the ultimate amount or timing of settlement.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncement.In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS No. 157”),Fair Value Measurements(“SFAS No. 157”). SFAS No. 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. The changesRefer to current practice resulting from the application of SFAS No. 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. FASB Staff Position 157-2,Effective Date of FASB Statement No. 157,was further released in February 2008 to amend the effective date pertaining to nonfinancial assets and liabilities, except those that are recognized or disclosed at fair valueNote 2 in the financial statements on a recurring basis (at least annually) until years beginning after November 15, 2008. Effective July 1, 2008, we adopted SFAS No. 157, except as it appliesNotes to the non-financial assetsCondensed Consolidated Financial Statements section.

Critical Accounting Policies and non-financial liabilities subject to FASB Staff Position SFAS No. 157-2.

Starting January 2008, we determined that this cross-currency swap qualified as a net investment hedge. This derivative instrument did not qualify for net investment hedge accounting and was deemed to be an ineffective hedge instrument because, at the inception of the hedge transaction, there was no formal documentation of the hedging relationship and our risk management objective and strategy for undertaking the hedge. Therefore, we marked to market the decrease in value of approximately $698,000 for the three months ended September 30, 2007 and this amount was recorded in other expense, net. StartingIn January 2008, we completed our formal documentation of the hedging relationship and determined that the cross-currency swap qualified as a net investment hedge. As a result, during the three months ended September 30, 2009 and 2008, we marked to market decreases in value of $901,000 and $110,000, respectively, in Other Comprehensive Income related toaccumulated other comprehensive income as part of the hedge.foreign currency translation adjustment.

Interest and Investment Income.Our interest and investment income is subject to changes in the general level of U.S. interest rates. Changes in U.S. 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 our investment balances at September 30, 20082009 and June 30, 20082009 indicated that such market movement would not have a material effect on our business, operating results or financial condition. Actual gains or losses in the future may differ materially from this analysis, depending on our actual balances and changes in the timing and amount of interest rate movements.

Debt and Interest Expense.At September 30, 2008,2009, we had notes payable of $25.1$15.1 million. A sensitivity analysis assuming a hypothetical 10% movement in interest rates applied to our outstanding debt balance at September 30, 2008,2009, indicated that such market movement would not have a material effect on our business, operating results or financial condition. Actual gains or losses in the future may differ materially from this analysis, depending on changes in the timing and amount of interest rate movements and the level of borrowings maintained by us.

We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our “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, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of September 30, 20082009 were effective to ensure that information required to be disclosed by us in reports that we file or submit 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 our management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and our Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective at the “reasonable assurance” level. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a Company have been detected.

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Securities 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 our internal control over financial reporting.

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. These

We derived approximately 71%over 70% of our net sales from outside the United States in the first quarter of each of 2008 and 2009fiscal 2010 and expect to continue to derive the majority of net sales from outside the United States for the foreseeable future. Most of our sales outside the United States are denominated in the local currency of our customers. As a result, the U.S. dollar value of our 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 our results of operations. In recent periods, our results of operations have been positively affected from the depreciation of the U.S. dollar against the Euro, the Japanese yen and several other foreign currencies, but there can be no assurance that this positive impact will continue. In the past, our results of operations have been negatively impacted by the appreciation of the U.S. dollar against other currencies. Subsequent to September 30, 2008, the U.S. dollar has appreciated significantly compared to the Euro and other foreign currencies, excluding the Japanese Yen.

Because we sell our products worldwide and have significant operations outside of the United States, our business is subject to risks associated with doing business internationally. We anticipate that revenue from international operations will continue to represent a majority of our total net sales. In addition, we expect that the proportion of our employees, contract manufacturers, suppliers, job functions and manufacturing facilities located outside the United States maywill increase. Accordingly, our future results could be harmed by a variety of factors, including: