SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarter ended April 1, 1995.
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________ to ___________.
Commission file number 0-14742
CANDELA LASER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2477008
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
530 Boston Post Road, Wayland, Massachusetts 01778
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (508) 358-7400
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Class Outstanding at May 10, 1995
Common Stock, $.01 par value 5,233,086
<PAGE>
CANDELA LASER CORPORATION
Index
Page(s)
-------
Part I. Financial Information:
Item 1. Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
Part II. Other Information:
Item 1. Legal Proceedings 9
Item 6. Exhibits and Reports on Form 8-K 9
<PAGE>
<TABLE>
CANDELA LASER CORPORATION
Condensed Consolidated Balance Sheets
(in thousands)
<CAPTION>
April 1, July 2,
1995 1994
(unaudited) (1)
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 2,213 $ 3,782
Accounts receivable 4,862 7,563
Notes receivable 1,032 1,392
Inventory 6,053 5,401
Other current assets 879 596
------- -------
Total current assets 15,039 18,734
Property and equipment, net 880 1,002
Other assets 428 288
------- -------
$16,347 $20,024
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligations $ 114 $ 102
Deferred income 1,442 1,879
Accounts payable 2,883 3,992
Accrued payroll and related expenses 737 916
Accrued warranty costs 703 796
Other accrued liabilities 1,509 1,611
------- -------
Total current liabilities 7,388 9,296
Capital lease obligations 151 203
Stockholders' equity:
Common stock 54 54
Additional paid-in capital 18,340 18,326
Treasury stock (1,574) (1,574)
Accumulated deficit (8,705) (6,756)
Accumulated translation adjustment 693 475
------- -------
Total stockholders' equity 8,808 10,525
------- -------
$16,347 $20,024
======= =======
(1) Derived from audited financial statements
The accompanying notes are an integral part of the consolidated financial
statements.
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</TABLE>
<PAGE>
<TABLE>
CANDELA LASER CORPORATION
Consolidated Statements of Operations
(in thousands, except per share data)
<CAPTION>
For the three months For the nine months
ended (unaudited): ended (unaudited):
-------------------- -------------------
April 1, April 2, April 1, April 2,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue $ 7,103 $ 7,620 $19,060 $21,452
Cost of sales 3,464 4,131 10,818 11,444
-------- -------- -------- --------
Gross profit 3,639 3,489 8,242 10,008
Operating expenses:
Research and development 1,289 957 3,190 2,859
Selling, general and administrative 2,348 2,301 7,101 6,721
-------- -------- -------- --------
Total operating expenses 3,637 3,258 10,291 9,580
-------- -------- -------- --------
Income (loss) from operations 2 231 (2,049) 428
Other income (expense):
Interest income 12 18 47 69
Interest expense (11) (14) (28) (33)
Other 108 74 181 89
-------- -------- -------- --------
Total other income (expense) 109 78 200 125
-------- -------- -------- --------
Income (loss) before income taxes 111 309 (1,849) 553
Provision for income taxes 100 120 100 220
-------- -------- -------- --------
Net income (loss) $ 11 $ 189 $(1,949) $ 333
======== ======== ======== ========
Net income (loss) per share $ 0.00 $ 0.04 $ (0.37) $ 0.06
======== ======== ======== ========
Weighted average number of common and
common equivalent shares outstanding 5,232 5,225 5,227 5,206
======== ======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements.
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</TABLE>
<PAGE>
<TABLE>
CANDELA LASER CORPORATION
Consolidated Statements of Cash Flows
(in thousands)
<CAPTION>
For the nine months ended:
(unaudited)
-------------------------
April 1, April 2,
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(1,949) $ 333
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Depreciation and amortization 455 445
Change in assets and liabilities:
Accounts receivable 2,701 (320)
Notes receivable 360 928
Inventory (760) 349
Refundable income taxes --- 1,359
Other current assets (283) 140
Other assets (140) 21
Accounts payable (1,109) 796
Accrued payroll and related expenses (179) (131)
Deferred income (437) (241)
Accrued warranty costs (93) (471)
Other accrued liabilities (102) (1,301)
-------- -------
Total adjustments 413 1,574
-------- -------
Net cash provided by (used for) operating activities (1,536) 1,907
Cash flows from investing activities:
Payments for additions to property and equipment (192) (166)
-------- -------
Net cash used for investing activities (192) (166)
Cash flows from financing activities:
Payments of capital lease obligations (73) (85)
Proceeds from issuance of common stock, net 14 42
-------- -------
Net cash used for financing activities (59) (43)
Accumulated translation adjustment 218 25
-------- -------
Net increase (decrease) in cash and equivalents (1,569) 1,723
Cash and equivalents at beginning of period 3,782 2,472
-------- -------
Cash and equivalents at end of period $ 2,213 $4,195
======== =======
The accompanying notes are an integral part of the consolidated financial
statements.
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</TABLE>
<PAGE>
CANDELA LASER CORPORATION
Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying financial statements and notes do not include all of the
disclosures made in the Company's Annual Report on Form 10-K for fiscal
1994, which should be read in conjunction with these statements. The
financial information included herein, with the exception of the
consolidated balance sheet at July 2, 1994, has not been audited. However,
in the opinion of Management, the statements include all adjustments
necessary for a fair presentation of the quarterly results. All adjustments
made to these financial statements were considered to be of a normal and
recurring nature. The results for the three and nine month periods ended
April 1, 1995 are not necessarily indicative of the results to be expected
for the full year.
2. Inventory
Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
April 1, July 2,
1995 1994
(unaudited) (1)
------- -------
<S> <C> <C>
Raw materials $ 2,393 $ 1,907
Work in process 2,074 1,169
Finished goods 1,586 2,325
------- -------
$ 6,053 $ 5,401
======= =======
</TABLE>
3. Property and Equipment
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
April 1, July 2,
1995 1994
(unaudited) (1)
------- -------
<S> <C> <C>
Leasehold improvements $ 190 $ 187
Office furniture & equipment 622 614
Laser systems 483 454
Equipment 2,773 2,586
------- -------
Total $ 4,068 $ 3,841
Less accumulated depreciation and amortization 3,188 2,839
------- -------
$ 880 $ 1,002
======= =======
(1) Derived from audited financial statements
-5-
</TABLE>
<PAGE>
CANDELA LASER CORPORATION
Notes to Consolidated Financial Statements
(Continued)
4. Net Income Per Common and Common Equivalent Share
Net income per share is computed by dividing net income by the weighted
average number of shares of common stock and, if dilutive, common stock
equivalents outstanding. Common stock equivalents include shares issuable
upon the exercise of stock options or warrants, net of shares assumed to
have been purchased with the proceeds.
-6-
<PAGE>
CANDELA LASER CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents at April 1, 1995 decreased to $2,213,000 from $3,782,000 at
July 2, 1994. Cash used for operating activities of $1,536,000 resulted
primarily from a net loss of $1,949,000 and payments of approximately $1,700,000
related to accounts payable and technology license and regulatory rights
acquisitions during the nine month period. These uses of net cash were
partially offset by an increase in collection of accounts receivable of
$2,701,000.
The Company believes its existing funds are sufficient to meet the operating
requirements of the Company for the foreseeable future.
RESULTS OF OPERATIONS
Revenue for the three and nine months ended April 1, 1995 was $7,103,000 and
$19,060,000, respectively, a decrease of 7% and 11% from revenue of $7,620,000
and $21,452,000 in the comparable periods of fiscal 1994. These decreases
result primarily from volume reductions in certain markets as well as changes in
product mix toward lower priced products.
Gross margin increased to 51% in the three months ended April 1, 1995 from 46%
for the same period of fiscal 1994. In the nine months ended April 1, 1995,
gross margin decreased to 43% from 47% for the same period of fiscal 1994.
Although gross margin improved in the third quarter of fiscal 1995 as a result
of a change in the product mix toward higher margin products, gross margin for
the nine months remained unfavorable due to a the change in the product mix
toward lower margin products during the first six months of fiscal 1995, as well
as lower overall product prices.
Research and development spending of $1,289,000 and $3,190,000 for the three and
nine month periods ended April 1, 1995 increased 35% and 12% from spending of
$957,000 and $2,859,000 in the same periods in fiscal 1994. The increases are
primarily a result of increased spending on project materials for new product
development as well as labor and related expenses resulting from a reduction in
force during the third quarter of fiscal 1995. As a result of both increased
spending and lower revenue, research and development expenses as a percentage of
revenue increased to 18% and 17% in the three and nine months ended April 1,
1995 from 13% for the comparable periods of fiscal 1994.
Selling, general and administrative spending of $2,348,000 for the three months
ended April 1, 1995 was consistent with spending of $2,301,000 for the same
period of fiscal 1994. For the nine month period, selling, general and
administrative spending increased 6% to $7,101,000 in fiscal 1995 from
$6,721,000 in fiscal 1994. This increase is primarily attributable to higher
worldwide selling expenses. As a percentage of revenue, selling, general and
administrative expenses increased to 33% and 37% for the three and nine month
periods of fiscal 1995 from 30% and 31% for the same periods of fiscal 1994,
principally due to the decrease in revenue.
-7-
<PAGE>
CANDELA LASER CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(continued)
Interest income decreased 33% and 32% for the comparative three and nine month
periods, respectively. This decrease resulted from lower average cash balances
during the periods, as well as interest on tax refunds received during fiscal
1994. Other income (expense) results primarily from foreign currency
transactions.
OTHER MATTERS
The Company is currently under investigation by the Federal Aviation
Administration (FAA) regarding a potential violation of Federal hazardous
materials transportation laws. The incident under investigation occurred on
March 31, 1995 and involved the packaging and labeling procedures of a substance
included in certain of the Company's dye products. The investigation is in
process and management has not determined the amount of any potential penalties.
See Legal Proceedings.
-8-
<PAGE>
CANDELA LASER CORPORATION
Part II Other Information
Item 1 Legal Proceedings
In April 1995, the Company received notification from the Federal
Aviation Administration (FAA) that it is conducting an investigation into
the circumstances surrounding a potential violation by the Company of
Federal hazardous materials transportation laws which occurred on
March 31, 1995. The investigation relates to the shipment of a substance
contained in certain of the Company's dye products which, when
transported in air commerce, is required to be declared as a hazardous
material and is also subject to certain shipping, packaging and
labeling procedures. The purpose of the investigation is to determine
if the Company violated Federal Regulations regarding the packaging and
labeling of such material. Under provisions of the law, the Company
could be subject to civil penalties. The investigation is ongoing and
the amount of any potential penalties has not been determined.
There have been no other material developments in the legal proceedings
previously reported by the Company.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
April 1, 1995.
-9-
<PAGE>
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.
CANDELA LASER CORPORATION
Registrant
Date: May 11, 1995 Kenneth D. Roberts
------------------
By: Kenneth D. Roberts
Chairman of the Board
Date: May 11, 1995 Michael J. Giarratano
---------------------
By: Michael J. Giarratano
Vice President Finance, Chief
Financial Officer and Treasurer
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC
FORM 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-01-1995
<PERIOD-END> APR-01-1995
<CASH> 2,213
<SECURITIES> 0
<RECEIVABLES> 5,894
<ALLOWANCES> 0
<INVENTORY> 6,053
<CURRENT-ASSETS> 15,039
<PP&E> 4,068
<DEPRECIATION> 3,188
<TOTAL-ASSETS> 16,347
<CURRENT-LIABILITIES> 7,388
<BONDS> 0
<COMMON> 54
0
0
<OTHER-SE> 8,754
<TOTAL-LIABILITY-AND-EQUITY> 16,347
<SALES> 19,060
<TOTAL-REVENUES> 19,288
<CGS> 10,818
<TOTAL-COSTS> 10,818
<OTHER-EXPENSES> 10,291
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28
<INCOME-PRETAX> (1,849)
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<CHANGES> 0
<NET-INCOME> (1,949)
<EPS-PRIMARY> (0.37)
<EPS-DILUTED> (0.37)
</TABLE>
