<PAGE>
________________________________________________________________________________
________________________________________________________________________________
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 March 30, 1996.
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 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, 1996
--------------- ---------------------------
Common Stock, $.01 par value 5,297,768
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
CANDELA CORPORATION
Index
Page(s)
-------
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
<PAGE>
CANDELA CORPORATION
Condensed Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
March 30, July 1,
1996 1995
Assets (unaudited) (1)
<S> <C> <C>
- -------------------------------------------------------------------------------
Current assets:
Cash and equivalents $ 2,118 $ 2,532
Accounts receivable 7,346 5,037
Notes receivable 1,191 1,853
Inventory 5,301 5,314
Other current assets 619 479
- -------------------------------------------------------------------------------
Total current assets 16,575 15,215
- -------------------------------------------------------------------------------
Property and equipment, net 746 750
Other assets 335 360
- -------------------------------------------------------------------------------
$17,656 $16,325
===============================================================================
Liabilities and Stockholders' Equity
- -------------------------------------------------------------------------------
Current liabilities:
Current portion of long-term debt $ 649 $ 470
Deferred income 1,685 1,377
Accounts payable 3,181 2,160
Accrued payroll and related expenses 678 624
Accrued warranty costs 715 648
Income taxes payable 164 677
Other accrued liabilities 988 846
- -------------------------------------------------------------------------------
Total current liabilities 8,060 6,802
- -------------------------------------------------------------------------------
Long-term debt 408 476
- -------------------------------------------------------------------------------
Stockholders' equity:
Common stock 55 54
Additional paid-in capital 18,496 18,349
Treasury stock (1,574) (1,574)
Retained deficit (7,791) (8,333)
Accumulated translation adjustment 2 551
- -------------------------------------------------------------------------------
Total stockholders' equity 9,188 9,047
- -------------------------------------------------------------------------------
$17,656 $16,325
===============================================================================
</TABLE>
(1) Derived from audited financial statements
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
CANDELA CORPORATION
Consolidated Statements of Operations
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the three months ended: For the nine months ended:
March 30, April 1, March 30, April 1,
1996 1995 1996 1995
(unaudited) (unaudited)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $7,002 $7,103 $19,839 $19,060
Cost of sales 3,907 3,464 11,182 10,818
- -----------------------------------------------------------------------------------------------------------------------------
Gross profit 3,095 3,639 8,657 8,242
Operating expenses:
Research and development 390 1,289 1,137 3,190
Selling, general and administrative 2,396 2,348 6,550 7,101
- -----------------------------------------------------------------------------------------------------------------------------
Total operating expenses 2,786 3,637 7,687 10,291
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations 309 2 970 (2,049)
Other income (expense):
Interest income 17 12 65 47
Interest expense (8) (11) (28) (28)
Other 6 108 (145) 181
- -----------------------------------------------------------------------------------------------------------------------------
Total other income (expense) 15 109 (108) 200
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 324 111 862 (1,849)
Provision for income taxes 70 100 320 100
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 254 $ 11 $ 542 $(1,949)
=============================================================================================================================
Net income (loss) per share $ 0.05 $ 0.00 $ 0.10 $ (0.37)
=============================================================================================================================
Weighted average number of common and
common equivalent shares outstanding 5,578 5,232 5,460 5,227
=============================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
CANDELA CORPORATION
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
For the nine months ended:
March 30, April 1,
1996 1995
(unaudited)
- ------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 542 $ (1,949)
Adjustments to reconcile net income
(loss) to net cash provided by
(used for) operating activities:
Depreciation and amortization 331 455
Change in assets and liabilities:
Accounts receivable (2,309) 2,701
Notes receivable 662 360
Inventory 10 (760)
Other current assets (106) 0
Other assets 25 (283)
Accounts payable 1,021 (140)
Accrued payroll and related expenses 54 (1,109)
Deferred income 308 (179)
Accrued warranty costs 67 (437)
Income taxes payable (513) (93)
Other accrued liabilities 142 (102)
- ------------------------------------------------------------------------------
Total adjustments (308) 413
- ------------------------------------------------------------------------------
Net cash provided by (used for) operating activities 234 (1,536)
- ------------------------------------------------------------------------------
Cash flows from investing activities:
Payment for additions to property and equipment (358) (192)
- ------------------------------------------------------------------------------
Net cash used for investing activities (358) (192)
- ------------------------------------------------------------------------------
Cash flows from financing activities:
Issuance (payment) of long-term debt 111 (73)
Proceeds from the issuance of common stock 148 14
- ------------------------------------------------------------------------------
Net cash used for financing activities 259 (59)
- ------------------------------------------------------------------------------
Accumulated translation adjustment (549) 218
- ------------------------------------------------------------------------------
Net decrease in cash and equivalents (414) (1,569)
- ------------------------------------------------------------------------------
Cash and equivalents at beginning of period 2,532 3,782
- ------------------------------------------------------------------------------
Cash and equivalents at end of period $ 2,118 $ 2,213
==============================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
CANDELA 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 and nine month periods ended
March 30, 1996 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>
March 30, 1996 July 1, 1995
--------------- -------------
<S> <C> <C>
(unaudited) (1)
Raw materials $2,942 $2,126
Work in process 991 1,699
Finished goods 1,368 1,489
------ ------
$5,301 $5,314
====== ======
</TABLE>
3. Property and Equipment
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
March 30, 1996 July 1, 1995
--------------- -------------
<S> <C> <C>
(unaudited) (1)
Leasehold improvements $ 293 $ 190
Office furniture & equipment 585 621
Laser systems 544 483
Equipment 2,835 2,756
------ ------
Total $4,257 $4,050
Less accumulated depreciation
and amortization 3,511 3,300
------ ------
$ 746 $ 750
====== ======
</TABLE>
(1) Derived from audited financial statements
5
<PAGE>
CANDELA 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.
5. Accounting for Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123 (SFAS 123), "Accounting for Stock-Based Compensation," which will be
effective for fiscal 1997. SFAS 123 encourages, but does not require,
companies to recognize compensation costs for all stock-based compensation
arrangements using a fair value method of accounting. The Company has not
yet decided if it will adopt the recognition principles of SFAS 123, nor has
it determined the impact of such adoption on the Company's consolidated
results of operations or its financial statement disclosures. The adoption
of SFAS 123 will have no cash flow impact on the Company.
6
<PAGE>
CANDELA CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash and equivalents at March 30, 1996 decreased to $2,118,000 from
$2,532,000 at July 1, 1995.
In October 1995, the Company opened its first laser cosmetic skin care
center. The funds used by the Company for the initial investment costs and
on going operating expenses of the laser center were partially offset by cash
received under equipment financing arrangements. In support of the continued
growth of this and other laser centers, the Company may acquire additional
capital through similar equipment financing arrangements or other means.
The Company is in negotiation with various banks to establish a credit line
should additional capital be needed for on-going operations.
RESULTS OF OPERATIONS
- ---------------------
Revenue for the three and nine months ended March 30, 1996 was $7,002,000 and
$19,839,000 respectively. For the three month period ended March 30, 1996
revenues decreased 1% versus the same period a year earlier. For the nine
month period ended March 30, 1996 the revenues increased 4% versus the same
period last year. The increase for the nine months year to date reflect the
initial shipments of the company's new leg vein device; the Sclerolaser.
Gross margins were 44% for both the three and nine month periods ending March
30, 1996. Gross margins were 51% and 43% for the three and nine month periods a
year earlier. The company believes that the nine month gross margins of 44% for
the period ending March 30, 1996 and 43% for the same period a year earlier are
more reflective of the company's more typical trends in margins at the current
volumes.
Research and development spending has decreased substantially to $390,000 for
the three months and to $1,137,000 for the nine months ended March 30, 1996.
These amounts reflect decreases of 70% and 64% for the same three and nine month
periods the year before. Such decreases are intended to focus the company's R&D
efforts to a limited number of projects which can be commercialized quickly and
efficiently.
Selling, general and administrative spending for the three and nine month
period ending March 30, 1996 was $2,396,000 and $6,550,000 respectively. For
the three month period ended March 30, 1996 the change versus the same period a
year earlier was not significant. For the nine month period ended March 30, 1996
spending is down 8% versus the same nine month period a year earlier. This
decrease is net of increased spending related to the companies entry into the
clinic market offset by spending reductions in other areas of the company.
7
<PAGE>
CANDELA CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Continued)
Net interest income and expense for the three month and nine month period
ended March 30, 1996 is essentially unchanged. For the three month period ended
March 30, 1996 and the nine month period ended March 30, 1996, other income was
$6,000 and other expense was $145,000 respectively, versus other income of
$108,000 and $181,000 for the same periods one year earlier.
Profit from operations of $324,000 for the three months ended March 30, 1996
and $862,000 for the nine months ended March 30, 1996 include losses from the
Company's clinic operations of ($142,000) and ($394,000) for the three and nine
months respectively.
Provision for income taxes of the three and nine months ended March 30, 1996
reflect effective tax rates of 22% and 37%, respectively. The provision for
income taxes related to the taxable income in the Company's subsidiary in Japan.
8
<PAGE>
CANDELA 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
None.
(b) Reports on Form 8-K
During the quarter ended March 30, 1996 the Company filed one Current
Report on Form 8-K, dated March 25, 1996 to report the adoption of
amendments to the Company's Stockholder Rights Plan which was originally
approved in September, 1992.
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 CORPORATION
Registrant
Date: May 13, 1996 /s/ Gerard E. Puorro
-------------- ------------------------------------
Gerard E. Puorro
(President, Chief Executive Officer
and Acting Chief Financial Officer)
10
<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> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 9-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUL-01-1995 JUN-30-1996 JUL-01-1995
<PERIOD-END> MAR-30-1996 APR-01-1995 MAR-30-1996 APR-01-1994
<CASH> 2,118 2,213 2,118 2,213
<SECURITIES> 0 0 0 0
<RECEIVABLES> 8,537 5,894 8,537 5,894
<ALLOWANCES> 0 0 0 0
<INVENTORY> 5,301 6,053 5,301 6,053
<CURRENT-ASSETS> 16,575 15,039 16,575 15,039
<PP&E> 4,257 4,068 4,257 4,068
<DEPRECIATION> 3,511 3,188 3,511 3,188
<TOTAL-ASSETS> 17,656 16,347 17,656 16,347
<CURRENT-LIABILITIES> 8,060 7,388 8,060 7,388
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 55 54 55 54
<OTHER-SE> 9,133 8,754 9,134 8,754
<TOTAL-LIABILITY-AND-EQUITY> 17,656 16,347 17,656 16,347
<SALES> 7,002 7,103 19,839 19,060
<TOTAL-REVENUES> 7,019 7,115 19,904 19,107
<CGS> 3,907 3,464 11,182 10,818
<TOTAL-COSTS> 3,907 3,464 11,182 10,818
<OTHER-EXPENSES> 2,780 3,529 7,832 10,110
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 8 11 28 47
<INCOME-PRETAX> 324 111 862 (1,849)
<INCOME-TAX> 70 100 320 100
<INCOME-CONTINUING> 254 11 542 (1,949)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 254 11 542 (1,949)
<EPS-PRIMARY> 0.05 0.00 0.10 (0.37)
<EPS-DILUTED> 0.05 0.00 0.10 (0.37)
</TABLE>
