<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 December 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 ___________.
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 February 9, 1996
--------------- -------------------------------
Common Stock, $.01 par value 5,263,174
____________________________________________________________________________
__________________________________________________________________
<PAGE>
CANDELA CORPORATION
INDEX
<TABLE>
<CAPTION>
Page(s)
-------
<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 4. Submission of Matters to a Vote of
Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
<PAGE>
CANDELA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 30, July 1,
1995 1995
ASSETS (unaudited) (1)
- ----------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and equivalents $ 2,460 $ 2,532
Accounts receivable 6,164 5,037
Notes receivable 1,052 1,853
Inventory 4,623 5,314
Other current assets 515 479
- ----------------------------------------------------------------------------
Total current assets 14,814 15,215
- ----------------------------------------------------------------------------
Property and equipment, net 799 750
Other assets 281 360
- ----------------------------------------------------------------------------
$ 15,894 $ 16,325
============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------
Current liabilities:
Current portion of long-term debt $ 398 $ 470
Deferred income 1,663 1,377
Accounts payable 2,399 2,160
Accrued payroll and related expenses 598 624
Accrued warranty costs 497 648
Income taxes payable 420 677
Other accrued liabilities 831 846
- ----------------------------------------------------------------------------
Total current liabilities 6,806 6,802
- ----------------------------------------------------------------------------
Long-term debt 218 476
- ----------------------------------------------------------------------------
Stockholders' equity:
Common stock 54 54
Additional paid-in capital 18,361 18,349
Treasury stock (1,574) (1,574)
Retained deficit (8,045) (8,333)
Accumulated translation adjustment 74 551
- ----------------------------------------------------------------------------
Total stockholders' equity 8,870 9,047
- ----------------------------------------------------------------------------
$ 15,894 $ 16,325
============================================================================
</TABLE>
(1) Derived from audited financial statements
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
CANDELA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the three months ended: For the six months ended:
December 30, December 31, December 30, December 31,
1995 1994 1995 1994
(unaudited) (unaudited)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 7,261 $ 6,487 $ 12,836 $ 11,957
Cost of sales 3,946 3,896 7,275 7,354
- -------------------------------------------------------------------------------------------------------------------
Gross profit 3,315 2,591 5,561 4,603
Operating expenses:
Research and development 373 897 747 1,901
Selling, general and administrative 2,293 2,399 4,154 4,753
- -------------------------------------------------------------------------------------------------------------------
Total operating expenses 2,666 3,296 4,901 6,654
- -------------------------------------------------------------------------------------------------------------------
Income (loss) from operations 649 (705) 660 (2,051)
Other income (expense):
Interest income 21 15 49 35
Interest expense (9) (9) (20) (17)
Other (30) 19 (151) 73
- -------------------------------------------------------------------------------------------------------------------
Total other income (expense) (18) 25 (122) 91
- -------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 631 (680) 538 (1,960)
Provision for income taxes 250 --- 250 ---
- -------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 381 $ (680) $ 288 $ (1,960)
===================================================================================================================
Net income (loss) per share $ 0.07 $ (0.13) $ 0.05 $ (0.38)
===================================================================================================================
Weighted average number of common and
common equivalent shares outstanding 5,435 5,224 5,372 5,224
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
CANDELA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the six months ended:
December 30, December 31,
1995 1994
(unaudited)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 288 $ (1,960)
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Depreciation and amortization 226 312
Change in assets and liabilities:
Accounts receivable (1,127) 2,662
Notes receivable 801 246
Inventory 674 (732)
Other current assets (4) (175)
Other assets 79 (175)
Accounts payable 239 (379)
Accrued payroll and related expenses (26) (159)
Deferred income 286 (167)
Accrued warranty costs (151) (25)
Income taxes payable (257) (103)
Other accrued liabilities (15) (303)
- ------------------------------------------------------------------------------------------
Total adjustments 725 1,002
- ------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities 1,013 (958)
- ------------------------------------------------------------------------------------------
Cash flows from investing activities:
Payment for additions to property and equipment (290) (107)
- ------------------------------------------------------------------------------------------
Net cash used for investing activities (290) (107)
- ------------------------------------------------------------------------------------------
Cash flows from financing activities:
Payments of long-term debt (330) (48)
Proceeds from the issuance of common stock 12 ---
- ------------------------------------------------------------------------------------------
Net cash used for financing activities (318) (48)
- ------------------------------------------------------------------------------------------
Accumulated translation adjustment (477) (23)
- ------------------------------------------------------------------------------------------
Net decrease in cash and equivalents (72) (1,136)
- ------------------------------------------------------------------------------------------
Cash and equivalents at beginning of period 2,532 3,782
- ------------------------------------------------------------------------------------------
Cash and equivalents at end of period $ 2,460 $ 2,646
==========================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<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 six month periods ended
December 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>
December 30, 1995 July 1, 1995
----------------- ------------
(unaudited) /(1)/
<S> <C> <C>
Raw materials $ 2,128 $ 2,126
Work in process 1,070 1,699
Finished goods 1,425 1,489
------- -------
$ 4,623 $ 5,314
======= =======
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
December 30, 1995 July 1, 1995
----------------- ------------
(unaudited) /(1)/
<S> <C> <C>
Leasehold improvements $ 249 $ 190
Office furniture & equipment 582 621
Laser systems 610 483
Equipment 2,764 2,756
------ ------
Total $4,205 $4,050
Less accumulated depreciation
and amortization 3,406 3,300
------ ------
$ 799 $ 750
====== ======
</TABLE>
/(1)/ Derived from audited financial statements
<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.
<PAGE>
CANDELA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash and equivalents at December 30, 1995 decreased to $2,460,000 from
$2,532,000 at July 1, 1995. Uses of cash for tax payments of $507,000 and debt
payments of $330,000 were partially offset by net income for the period as well
as increases in trade payables.
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
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.
RESULTS OF OPERATIONS
- ---------------------
Revenue for the three and six months ended December 30, 1995 was $7,261,000
and $12,836,000, respectively, an increase of 12% and 7% from revenue of
$6,487,000 and $11,957,000 in the comparable periods of fiscal 1995. These
increases result primarily from increased volume of sales from the Company's
medical devices, especially in its international markets.
Gross margin increased to 46% and 43% in the three and six months ended
December 30, 1995 from 40% and 38% for the same period of fiscal 1995. The
improvement in gross margin during the three and six month periods resulted
primarily from an increase in volume as well as higher selling prices for the
Company's medical systems.
Research and development spending of $373,000 and $747,000 for the three and
six month periods ended December 30, 1995 decreased 58% and 61%, respectively,
from spending of $897,000 and $1,901,000 in the same periods in fiscal 1995.
Research and development expenses as a percentage of revenue decreased to 5% and
6% in the three and six months ended December 30, 1995 from 14% and 16% for the
comparable periods of fiscal 1995. These decreases are primarily the 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 spending of $2,293,000 and $4,154,000
for the three and six month periods ended December 30, 1995 decreased 4% and
13%, respectively, from spending of $2,399,000 and $4,753,000 for the same
periods of fiscal 1995. Although the amounts for fiscal 1996 include start-up
and operating expenses related to the new laser cosmetic center, efforts by
management to reduce spending in other areas of the Company more than offset
these additional expenses. As a percentage of revenue, selling, general and
administrative expenses decreased to 32% for the three and six month periods of
fiscal 1996 from 37% and 40% for the same periods of fiscal 1995, principally
due to the increase in revenue as well as lower spending levels.
<PAGE>
CANDELA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Interest income increased 40% for each of the comparative three and six
month periods. Interest income results from the Company's investments, as well
as interest charged on outstanding trade receivables. Other income (expense)
results primarily from foreign currency transactions.
Provision for income taxes of the three and six months ended December 30,
1995 reflect effective tax rates of 40% and 46%, respectively. The provision for
income taxes related to the taxable income in the Company's subsidiary in Japan.
<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 4 Submission of Matters to a Vote of Security Holders
On November 16, 1995, the Company held its Annual Shareholder meeting.
At the meeting, the Shareholders acted upon the following proposals:
(i) election of directors; (ii) increase the number of shares available
for grant under the Company's 1989 Stock Option Plan; (iii) amend the
Company's Certificate of Incorporation to increase the authorized
shares of common stock; (iv) amend the Company's Certificate of
Incorporation to change the name of the Company from Candela Laser
Corporation to Candela Corporation; and (v) ratification of the firm of
Coopers & Lybrand, L.L.P. as independent auditors for the fiscal year
ending June 29, 1996. All of the above matters were approved by the
Shareholders.
Votes "For" represent affirmative votes and do not include abstentions
or broker non-votes. In cases where a signed proxy was submitted
without direction, the shares represented by the proxy were voted "For"
each proposal in the manner disclosed in the Proxy Statement and Proxy.
Voting results were as follows:
<TABLE>
<CAPTION>
Broker
Matter For Against Withheld Abstain Non-Votes
------ --- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
I. Election of Directors:
---------------------
Gerard E. Puorro 3,980,675 N/A 88,562 N/A -0-
Theodore G. Johnson 3,986,818 N/A 82,419 N/A -0-
Kenneth D. Roberts 3,986,818 N/A 82,419 N/A -0-
Douglas W. Scott 3,987,818 N/A 81,419 N/A -0-
Richard J. Cleveland, M.D. 4,006,318 N/A 62,919 N/A -0-
Robert E. Dornbush 4,006,488 N/A 62,749 N/A -0-
II. 1989 Employee Stock Option Plan:
-------------------------------
3,328,768 705,999 N/A 34,470 -0-
III. Increase Authorized Shares:
--------------------------
3,825,796 230,051 N/A 13,390 -0-
IV. Change Company Name:
-------------------
4,035,732 23,638 N/A 9,867 -0-
V. Ratification of Independent Auditors:
------------------------------------
4,039,087 22,390 N/A 7,760 -0-
</TABLE>
<PAGE>
CANDELA CORPORATION
PART II OTHER INFORMATION
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 December 30,
1995.
<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: February 12, 1996 /s/ Gerard E. Puorro
------------------- --------------------------------------
Gerard E. Puorro
(President and Chief Executive Officer)
Date: February 12, 1996 /s/ Diane M. Marcou
------------------- --------------------------------------
Diane M. Marcou
(Corporate Controller & Treasurer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM SEC FORM 10-Q 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 6-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUL-01-1995 JUN-30-1996 JUL-01-1995
<PERIOD-END> DEC-30-1995 DEC-31-1994 DEC-30-1995 DEC-31-1994
<CASH> 2,460 2,646 2,460 2,646
<SECURITIES> 0 0 0 0
<RECEIVABLES> 7,216 6,047 7,216 6,047
<ALLOWANCES> 0 0 0 0
<INVENTORY> 4,623 6,050 4,623 6,050
<CURRENT-ASSETS> 14,814 15,495 14,814 15,495
<PP&E> 4,205 3,967 4,205 3,967
<DEPRECIATION> 3,406 3,068 3,406 3,068
<TOTAL-ASSETS> 15,894 16,857 15,894 16,857
<CURRENT-LIABILITIES> 6,806 8,164 6,806 8,164
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 54 54 54 54
<OTHER-SE> 8,816 8,488 8,816 8,488
<TOTAL-LIABILITY-AND-EQUITY> 15,894 16,857 15,894 16,857
<SALES> 7,261 6,487 12,836 11,957
<TOTAL-REVENUES> 7,282 6,502 12,885 11,992
<CGS> 3,946 3,896 7,275 7,354
<TOTAL-COSTS> 3,946 3,896 7,275 7,354
<OTHER-EXPENSES> 2,696 3,277 5,052 6,581
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 9 9 20 17
<INCOME-PRETAX> 631 (680) 538 (1,960)
<INCOME-TAX> 250 0 250 0
<INCOME-CONTINUING> 381 (680) 288 (1,960)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 381 (680) 288 (1,960)
<EPS-PRIMARY> 0.07 (0.13) 0.05 (0.38)
<EPS-DILUTED> 0.07 (0.13) 0.05 (0.38)
</TABLE>
