operating expenses as we added personnel and expanded our operations to satisfy the increased demand.
Net sales
Net sales in North America increased by 0.9% in the first quarter of fiscal 2009 to $25.1 million, compared to $24.9 million during the same period in the prior year, because of higher sales of HPLC products as a result of the increased demand described above. Net sales in Europe increased by 15% to $39.9 million in the first quarter of fiscal 2009, compared to $34.8 million during the same period in the prior year due to benefits from currency fluctuations of $1.4 million and growth in our ion chromatography products. Net sales in the Asia/Pacific region grew by 25% in the first quarter of fiscal 2009 to $28.4 million, compared to $22.7 million during the same period in the prior year, driven by increased sales in Japan, China, India and Australia. We are subject to the effects of foreign currency fluctuations that have an impact on net sales. Overall, currency fluctuations increased reported net sales for the three months ended September 30, 2008 by $4.9 million, or 6 percentage points 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:

                                                    Three Months
                                                       Ended
                                                 September 30, 2008
               Percentage change in net sales
               Total:                                       13.4 %
               By geographic region:
               North America                                 0.9 %
               Europe                                       14.8 %
               Asia/Pacific                                 24.8 %

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

                                                                                Three Months
                                                                                   Ended
                                                                             September 30, 2008
Percentage change in net sales excluding currency fluctuations
Total:                                                                                   7.4 %
By geographic region:
North America                                                                            0.6 %
Europe                                                                                   4.0 %
Asia/Pacific                                                                            20.0 %


Gross margin
Gross margin for the first quarter of fiscal 2009 was 67.1%, an increase from
the 65.2% reported in the same quarter last year, principally due to currency
and change in the geographical mix with relatively stronger performance in
Europe and Asia/Pacific.
Operating expenses
Operating expenses of $43.2 million for the first quarter of fiscal 2009
increased by $5.5 million, or 14.5%, from the $37.8 million reported in the same
quarter last year. As a percentage of net sales, operating expenses were 46.3%
for the first quarter of fiscal 2009, a slight increase from the 45.8% of sales
reported in the first quarter of fiscal 2008. The effects of foreign currency
fluctuations increased total operating expenses by $1.8 million, or 5%, for the
quarter ended September 30, 2008, compared to 3% 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.

Selling, general and administrative (SG&A) expenses were $36.2 million for the first quarter of fiscal 2009, compared with $31.2 million for the same quarter of fiscal 2008. As a percentage of net sales, SG&A expenses were 38.7% in the first quarter of fiscal 2009, compared to 37.8% the same period in fiscal 2008. Effects of foreign currency fluctuations increased SG&A expenses by $1.6 million, or 5%, in the first quarter of fiscal 2009. SG&A expenses, excluding currency effects, grew by $3.6 million, or 11%, compared to the first quarter of fiscal 2008, due to the addition of our new subsidiary in Sweden, our continued expansion in the Asia/Pacific region, increases in salaries because of increased personnel and related expenses, and higher travel costs.
Research and product development (R&D) expenses were $7.0 million for the first quarter of fiscal 2009, an increase of $0.4 million, or 6.5%, from $6.6 million reported in the first quarter of fiscal 2008. As a percentage of net sales, R&D expenses decreased marginally to 7.5% in the first quarter of fiscal 2009 when compared to the 8.0% in the first quarter of fiscal 2008. Income taxes
The effective tax rate in the first quarter of fiscal 2009 was 38.0%, reflecting an increase from 35.3% reported for the first quarter of fiscal 2008. The relative increase in our tax rate was due to a one-time tax benefit in the first quarter of last year of $332,200 and a lower research tax credit this year, as the federal statute had expired as of December 31, 2007. We anticipate our tax rate will be in the range of 35.0% to 36.0% for the remainder of fiscal year 2009.
Net income
Net income in the first quarter of fiscal 2009 increased 16% to $11.8 million, compared with $10.2 million reported for the same period last year. Liquidity and Capital Resources
At September 30, 2008, we had cash and equivalents and short-term investments of $65.8 million. Our working capital was $96.0 million, unchanged compared to that reported at September 30, 2007.
Cash generated by operating activities for the three months ended September 30, 2008 was $8.7 million, compared with $13.1 million for the same period last year. The decrease in operating cash was primarily attributable to the increased tax payments globally, increased inventory as we ramp up for 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.
Cash used for investing activities was $8.2 million in the first three months of fiscal 2009. Capital expenditures for the three months of fiscal 2009 were $4.6 million which included purchases related to our general operations, expansion of our IT platform and refurbishment of a building in Sunnyvale. Additionally, $952,000 was paid in connection with the acquisition of a Swedish company.
Cash used for financing activities was $8.3 million in the first three months of fiscal 2009. The use of cash was primarily attributable to the repurchase of 201,584 shares of our common stock for $13.3 million, offset by $1.7 million in proceeds from issuance of common stock, a tax benefit related to equity incentive plans of $111,000 and net proceeds of $3.3 million received from short-term borrowings.
At September 30, 2008, we had utilized $25.1 million of our $28.9 million in committed bank lines of credit. The borrowings were used to repurchase shares of our common stock and other corporate activities.
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

The following table summarizes our contractual obligations at September 30, 2008, and the effect that such obligations are expected to have on our liquidity and cash flows in future periods (in thousands):

                                                     Payments Due by Period
                                                  Less
                                                 Than 1        1-3         4-5       After 5
     Contractual Obligations        Total         Year        Years       Years       Years
     Short-Term Borrowings         $ 25,074     $ 25,074     $     -     $     -     $      -
     Operating Lease Obligations     16,272        5,471       5,566       2,194        3,041

     Total                         $ 41,346     $ 30,545     $ 5,566     $ 2,194     $  3,041

There have been no material changes to our operating lease obligations outside ordinary business activities since June 30, 2008. Our outstanding borrowings under our lines of credit increased to $25.0 million at September 30, 2008 from $21.8 million at June 30, 2008. These amounts are due in a period of less than one year.
The amounts above exclude liabilities under FIN 48, 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 changes 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 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.
Recent Accounting Pronouncements Not Yet Adopted. In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles ("SFAS No. 162"). SFAS No. 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with accounting principles generally accepted in the United States of America for nongovernmental entities. SFAS No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. Any effect of applying the provisions of SFAS No. 162 is to be reported as a change in accounting principles in accordance with SFAS No. 154, Accounting Changes and Error Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3. The Company will adopt SFAS No. 162 once it is effective and we are currently evaluating the effect that the adoption will have on the Company's consolidated financial statements.
In April 2008, the FASB released FASB Staff Position 142-3, Determination of the Useful Life of Intangible Assets ("SFAS No. 142-3"), which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142"). The intent of the statement is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141 (revised 2007) and other U.S. generally accepted accounting principles. SFAS No. 142-3 is effective as of the beginning of an entity's fiscal year that begins after December 15, 2008, which will be the Company's fiscal year beginning July 1, 2009. We are currently evaluating the potential impact, if any, of the adoption of SFAS No. 142-3 on the Company's consolidated financial position, results of operations and cash flows.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities ("SFAS No. 161"). SFAS No. 161 enhances financial disclosure by requiring that objectives for using derivative instruments be described in terms of underlying risk and accounting designation in the form of tabular presentation, requiring transparency with respect to the entity's liquidity from using derivatives, and cross-referencing an entity's derivative information within its financial footnotes. SFAS No. 161

is effective for financial statements issued for fiscal years beginning after November 15, 2008, which will be the Company's fiscal year beginning July 1, 2009. We are currently evaluating the impact, if any, that SFAS No. 161 may have on the Company's financial position or cash flows.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations("SFAS No. 141(R)"). SFAS No. 141(R) 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) 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) 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) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period for fiscal years beginning on or after December 15, 2008 (for Dionex, beginning with our fiscal 2010) with early adoption prohibited. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS No. 159"). SFAS No. 159 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. 159 also requires entities to display the fair value of those assets and liabilities on the face of the balance sheet. SFAS No. 159 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 is 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. Summary
The preparation of consolidated financial statements requires us 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 net sales and expenses during the reporting period. We evaluate our estimates, including those related to product returns and allowances, bad debts, inventory valuation, goodwill and other intangible assets, income taxes, warranty and installation provisions, and contingencies on an ongoing basis.
We base our 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.
There have been no significant changes during the three months ended September 30, 2008 to the items that we disclosed as our critical accounting policies and estimates in the Management's Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the fiscal year ended June 30, 2008.