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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarter ended September 30, 1995.
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to .
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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
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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
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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 November 9, 1995
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Common Stock, $.01 par value 5,238,807
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CANDELA LASER CORPORATION
Index
Page(s)
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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
Part II. Other Information:
Item 1. Legal Proceedings 8
Item 6. Exhibits and Reports on Form 8-K 8
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CANDELA LASER CORPORATION
Condensed Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
September 30, July 1,
1995 1995
Assets (unaudited) (1)
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<S> <C> <C>
Current assets:
Cash and equivalents $ 3,044 $ 2,532
Accounts receivable 4,598 5,037
Notes receivable 768 1,853
Inventory 5,090 5,314
Other current assets 572 479
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Total current assets 14,072 15,215
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Property and equipment, net 770 750
Other assets 321 360
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$15,163 $16,325
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Liabilities and Stockholders' Equity
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Current liabilities:
Current portion of long-term debt $ 415 $ 470
Deferred income 1,181 1,377
Accounts payable 2,650 2,160
Accrued payroll and related expenses 648 624
Accrued warranty costs 496 648
Income taxes payable 170 677
Other accrued liabilities 693 846
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Total current liabilities 6,253 6,802
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Long-term debt 321 476
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Stockholders' equity:
Common stock 54 54
Additional paid-in capital 18,349 18,349
Treasury stock (1,574) (1,574)
Retained deficit (8,426) (8,333)
Accumulated translation adjustment 186 551
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Total stockholders' equity 8,589 9,047
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$15,163 $16,325
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</TABLE>
(1) Derived from audited financial statements
The accompanying notes are an integral part of the consolidated financial
statements.
2
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CANDELA LASER CORPORATION
Consolidated Statements of Operations
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the three months ended:
September 30, October 1,
1995 1994
(unaudited)
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<S> <C> <C>
Revenue $ 5,575 $ 5,470
Cost of sales 3,329 3,458
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Gross profit 2,246 2,012
Operating expenses:
Research and development 374 1,004
Selling, general and administrative 1,862 2,354
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Total operating expenses 2,236 3,358
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Income (loss) from operations 10 (1,346)
Other income (expense):
Interest income 27 20
Interest expense (10) (8)
Other (120) 54
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Total other income (expense) (103) 66
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Loss before income taxes (93) (1,280)
Provision for income taxes -- --
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Net loss $ (93) $(1,280)
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Net loss per share $ (0.02) $ (0.25)
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Weighted average number of common and common equivalent
shares outstanding 5,239 5,224
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</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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CANDELA LASER CORPORATION
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
For the three months ended:
September 30, October 1,
1995 1994
(unaudited)
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (93) $ (1,280)
Adjustments to reconcile net loss to net
cash provided by (used for) operating activities:
Depreciation and amortization 110 164
Changes in assets and liabilities:
Accounts receivable 439 983
Notes receivable 1,085 749
Inventory 128 (296)
Other current assets (61) (154)
Other assets 39 (414)
Accounts payable 490 (254)
Accrued payroll and related expenses 24 (23)
Deferred income (196) 18
Accrued warranty costs (152) 16
Income taxes payable (507) (102)
Other accrued liabilities (153) (149)
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Total adjustments 1,246 538
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Net cash provided by (used for) operating activities 1,153 (742)
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Cash flows from investing activities:
Payment for additions to property and equipment (66) (96)
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Net cash used for investing activities (66) (96)
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Cash flows from financing activities:
Payments of long-term debt (210) (23)
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Net cash used for financing activities (210) (23)
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Accumulated translation adjustment (365) (65)
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Net increase (decrease) in cash and equivalents 512 (926)
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Cash and equivalents at beginning of period 2,532 3,782
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Cash and equivalents at end of period $ 3,044 $ 2,856
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</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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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 1995,
which should be read in conjunction with these statements. The financial
information included herein, with the exception of the consolidated balance
sheet at July 1, 1995, 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 month period ended September 30, 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>
September 30, 1995 July 1, 1995
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(unaudited) /(1)/
<S> <C> <C>
Raw materials $2,256 $2,126
Work in process 803 1,699
Finished goods 2,031 1,489
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$5,090 $5,314
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</TABLE>
3. Property and Equipment
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
September 30, 1995 July 1, 1995
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(unaudited) /(1)/
<S> <C> <C>
Leasehold improvements $ 212 $ 190
Office furniture & equipment 576 621
Laser systems 538 483
Equipment 2,738 2,756
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Total $4,064 $4,050
Less accumulated depreciation
and amortization 3,294 3,300
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$ 770 $ 750
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</TABLE>
/(1)/ Derived from audited financial statements
5
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CANDELA LASER CORPORATION
Notes to Consolidated Financial Statements
(Continued)
4. Net Income (Loss) Per Common and Common Equivalent Share
Net income (loss) per share is computed by dividing net income (loss) 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
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CANDELA LASER CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
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Cash and equivalents at September 30, 1995 increased to $3,044,000 from
$2,532,000 at July 1, 1995. This increase is primarily due to a $1,524,000
reduction in trade receivables and a $490,000 increase in trade payables
partially offset by tax payments of $507,000 and debt payments of $210,000.
The Company believes its existing funds are sufficient to meet the operating
requirements of the Company for the foreseeable future.
RESULTS OF OPERATIONS
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Revenue for the quarter ended September 30, 1995 was $5,575,000, an increase
of 2% from revenue of $5,470,000 in the comparable period of fiscal 1995. Gross
margin increased to 40% in the quarter ended September 30, 1995 from 37% for the
same period of fiscal 1995. This improvement in gross margin results primarily
from volume and price increases in the Company's dermatology products as well as
a higher concentration of revenue from system sales.
Research and development spending of $374,000 for the quarter ended
September 30, 1995 decreased 63% from spending of $1,004,000 in the same period
of fiscal 1995. As a percentage of revenue, research and development spending
decreased to 7% from 18% for the first quarter of fiscal 1995. This decrease is
a result of actions taken by the Company during the third quarter of fiscal 1995
to reduce operating expenses and focus efforts in research and development on a
limited number of projects which are in line with the current direction of the
Company.
Selling, general and administrative expenses decreased 21% to $1,862,000 from
$2,354,000 for the first quarter of fiscal 1995. As a percentage of revenue,
selling, general and administrative expenses decreased to 33% from 43% for the
first quarter of fiscal 1995. This decrease is primarily attributable to efforts
by management to reduce spending in all areas of the Company.
Interest income increased 35% for the comparative three month periods.
Interest income results from the Company's investments, as well as interest on
outstanding trade receivables. Other income (expense) results primarily from
foreign currency transactions.
7
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CANDELA LASER CORPORATION
Part II Other Information
Item 1 Legal Proceedings
There have been no material developments in the legal proceedings
previously reported by the Company.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amendment of Lease for premises at 530 Boston Post Road, Wayland,
Massachusetts, dated September 8, 1995.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1995.
8
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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.
CANDELA LASER CORPORATION
Registrant
Date: November 10, 1995 /s/ Gerard E. Puorro
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Gerard E. Puorro
(President and Chief Executive Officer)
Date: November 10, 1995 /s/ Diane M. Marcou
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Diane M. Marcou
(Corporate Controller and Treasurer)
9
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AMENDMENT OF LEASE
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THIS AMENDMENT, made this 8th day of September, 1995, by and between ROBERT
A. WATERS of Weston, Massachusetts, as he is TRUSTEE of WATERS WAYLAND REALTY
TRUST under Declaration of Trust dated January 1, 1994, duly recorded in
Middlesex (South District) Registry of Deeds in Book 24358 Page 298, as
successor in interest to Robert A. Waters, Individually, hereinafter referred to
as LESSOR, of the one part, and CANDELA LASER CORPORATION, a Massachusetts
corporation having its principal place of business in Wayland, Massachusetts,
hereinafter referred to as LESSEE, of the other part.
REFERENCE is hereby made to a certain lease of a building known as and
numbered 530 Boston Post Road in the Town of Wayland, County of Middlesex and
Commonwealth of Massachusetts, together with all rights appurtenant thereto,
which lease is dated February 22, 1993, by and between said Robert A. Waters,
Individually, as Lessor, and said Candela Laser Corporation, as LESSEE,
hereinafter referred to as the "Lease."
WITNESSETH
NOW, THEREFORE, in consideration of One Dollar and the promises hereinafter
set forth to be performed and observed by each of the parties and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by each the parties, the parties do hereby covenant and agree that
said Lease shall be, and it hereby is, amended as follows:
1. Paragraph 3 of said Lease is amended by adding thereto the following:
"The term of this Lease is hereby extended for a period of two (2) years,
commencing on April 1, 1996 and expiring at midnight on March 31, 1998."
2. Paragraph 4 of said Lease is amended by adding at the end thereof, the
following:
"ADDITIONAL RENT: Commencing on October 1, 1995 and continuing thereafter
during the balance of the original term and during all of the extended term
of this Lease, LESSEE shall pay to LESSOR as additional rent, for each tax
year of the term (and a proportionate share for any portion of a tax year
so included in the term) an amount equal to the real estate taxes assessed
against the entire Demised Premises. The amount payable hereunder shall be
payable by LESSEE to LESSOR within thirty days after receipt
1
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of an invoice for same from LESSOR which invoice shall be accompanied by a
copy of the tax bill upon which such additional rent is based, and a
calculation of the amount owed by LESSEE. If any mortgagee holding a first
mortgage on the Demised Premises shall require monthly payments of
estimated real estate taxes in advance, then in such event LESSEE shall pay
such monthly amount directly to LESSOR together with the monthly rent
provided for above."
3. Except as herein specifically modified and amended, said Lease is hereby
ratified and confirmed in all respects, and shall continue in full force and
effect.
4. LESSEE agrees to install 2 handicapped bathrooms (male/female).
IN WITNESS WHEREOF, the parties hereunto set their hands and seals,
intending this Amendment to take effect under seal, as of the date first set
forth above.
LESSOR:
/s/ Robert A. Waters
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Robert A. Waters, as Trustee
LESSEE:
CANDELA LASER CORPORATION
By: /s/ Gerard E. Puorro
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President and Chief Executive
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from SEC Form 10Q and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUL-01-1995
<PERIOD-END> SEP-30-1995 OCT-01-1994
<CASH> 3,044 2,856
<SECURITIES> 0 0
<RECEIVABLES> 5,366 7,223
<ALLOWANCES> 0 0
<INVENTORY> 5,090 5,645
<CURRENT-ASSETS> 14,072 16,476
<PP&E> 4,064 3,936
<DEPRECIATION> 3,294 2,952
<TOTAL-ASSETS> 15,163 18,162
<CURRENT-LIABILITIES> 6,253 8,802
<BONDS> 0 0
<COMMON> 54 54
0 0
0 0
<OTHER-SE> 8,535 9,126
<TOTAL-LIABILITY-AND-EQUITY> 15,163 18,162
<SALES> 5,575 5,470
<TOTAL-REVENUES> 5,602 5,544
<CGS> 3,329 3,458
<TOTAL-COSTS> 3,329 3,458
<OTHER-EXPENSES> 2,356 3,358
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 10 8
<INCOME-PRETAX> (93) (1,280)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (93) (1,280)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (93) (1,280)
<EPS-PRIMARY> (0.02) (0.25)
<EPS-DILUTED> (0.02) (0.25)
</TABLE>
