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Thursday January 15, 4:28 pm Eastern Time

Company Press Release

Candela Reports $4.4 Million Net Loss For Fiscal 2nd Quarter

Takes $2.6 Million Charge To Close Arizona Skin Care Center

WAYLAND, Mass.--(BW HealthWire)--Jan. 15, 1997-- Lower-than-expected sales of medical laser devices and a decision to close its Scottsdale, AZ, skin care location resulted in Candela Corporation (NASDAQ:CLZR - news) posting a fiscal 1998 second-quarter net loss of $4,441,000, or 78 cents per share. During the same period of fiscal 1997, the company had net income of $736,000, or 13 cents per share.

The company said that the medical device business accounted for approximately $232,000, or 4 cents of the loss, before the charges described below. The largest portion of the total net loss reflects operating losses from the skin care centers of $1,053,000 and a restructuring charge of $2,610,000 primarily for closing Scottsdale. A charge against earnings also includes $550,000 mostly to cover receivables from one of Candela's outside distributors of medical devices.

Candela's total sales for the quarter ended December 27, 1997, were $8,522,000, compared with $9,406,000 during the prior year. The current year's sales were below expectations for both medical and aesthetic laser devices, including a significant decline in orders from South Korea and elsewhere in the Far East. Candela normally derives about half of its revenues from outside the United States. In fiscal 1997, second-quarter sales included an larger-than-expected increase in demand for the company's MDL 3000 LaserTripter(a) device, which fragments urinary and biliary stones.

For the first half of fiscal 1998, Candela reported sales of $16,345,000 and a net loss of $5,293,000, or 94 cents per share. In 1997, sales were $17,045,000 for the first six months, with net income of $1,245,000, or 22 cents per share.

In announcing the company's results today, Gerard E. Puorro, president and chief executive officer said: ``We have been monitoring developments at our two U.S. spa locations very closely. And while we remain convinced that they have the potential to become winners someday, what we encountered became a much-too-large drain on our capital and more of a distraction than an opportunity. Clearly, Candela will have a much brighter future if we focus most of our resources and efforts on our core business.

``For nearly three decades,'' Mr. Puorro continued, ``we have been quite successful at developing, marketing and producing leading-edge medical and cosmetic laser devices, and we stand to regain our sales and earnings momentum quickest by focusing on what we do best as we work to rebuild shareholder value.

``Accordingly, we closed our location in Scottsdale effective today,'' Mr. Puorro stated, ``but our Boston facility will conduct business as usual as we work to continue to improve its financial performance and evaluate alternative strategies to maximize its value. This Candela LaserSpa(TM) Skin Care Center is located in one of Boston's best residential/ commercial neighborhoods, and -- unlike Scottsdale -- it has an established clientele.''

Commenting on Candela's outlook, Mr. Puorro said: ``We believe that the recent quarter's disappointing sales results were an aberration, masking the significant progress we are making in developing new products and serving growing markets for our medical and cosmetic lasers.'' Mr. Puorro cited as one example the recent introduction of a high-performance, low-cost Erbium:YAG laser for improving the aesthetic appearance of a person's face. Candela's technological advances enable the product to be manufactured and sold at a breakthrough price of under $50,000.

During December, Candela's GentleLASE long-pulse alexandrite laser, with the company's unique Dynamic Cooling Device -- which the U.S. Food and Drug Administration had already cleared for use in treating facial veins -- was submitted to the FDA for permission to be marketed for hair removal. ``The price/performance of GentleLASE is extremely attractive,'' Mr. Puorro added, ``and we are seeing a great deal of interest in this product.''

The Candela CEO concluded his remarks: ``By taking these difficult restructuring steps today, Candela's outlook has been greatly strengthened as we focus on our core business. We know we have the technologies, the products, the people, the market potential and a fundamentally healthy financial position. Working together, we are committed to resuming profitable growth at the earliest possible time.''

About Candela

Candela Corporation develops, manufactures, and distributes innovative clinical solutions that enable physicians, surgeons and personal care practitioners to treat selected cosmetic and medical conditions using lasers, cryosurgery and other proven technologies. In addition, the company is applying its capabilities and experience with skin care and related problems to develop a network of company-owned skin care centers and spas. Founded near Boston in 1970 as Candela Laser Corporation, Candela markets and services its products in over 40 countries from offices in the United States, Europe and Asia. For more information about Candela Corporation, visit the company's Web site at . For more information about Candela's LaserSpas, visit the web site at http:/


This press release includes certain forward-looking statements. Any such statements are subject to risks that could cause the actual results to vary materially, including negative developments relating to unforeseen order cancellations or push-outs, Candela's strategic relationships, the impact of intense competition, and changes in the laser industry.

                            (Nasdaq: CLZR - news; in thousands except per share data)

                                 For the three months ended:
                        December 27, 1997          December 28, 1996

Revenue Cost               $  8,522                     $  9,406
Cost of sales                 4,824                        4,750
Gross profit                  3,698                        4,656

 Research and development       742                          555
 Selling, general
  and administrative          4,694                        3,031
 Restructuring charge         2,610                            0
Total operating expenses      8,046                        3,586
(Loss)Income from            (4,348)                       1,070

Other income (expense):
 Interest income                  9                           16
 Interest expense               (69)                         (15)
 Other income (expense)         (33)                         (20)
Total other income (expense)    (93)                         (19)
(Loss)Income before
  income taxes               (4,441)                       1,051

Provision for
 income taxes                     0                          315
Net (loss) income          $ (4,441)                       $ 736
Net (loss) income
 per share                 $  (0.78)                      $ 0.13
Weighted average number
 of common and common
 equivalent shares
 outstanding                  5,659                        5,658


                   CANDELA CORPORATION (Nasdaq: CLZR - news)
                  (in thousands except per share data)

                                For the six months ended:
                        December 27, 1997          December 28, 1996

Revenue                      16,345                     $ 17,045
Cost of sales                 9,326                        8,635

Gross profit                  7,019                        8,410

Operating expenses:
    Research and development  1,320                        1,127
    Selling, general and
     administrative           8,090                        5,537
    Restructuring charge      2,610                            0

Total operating expenses     12,020                        6,664

(Loss)Income from operations (5,001)                       1,746

Other income (expense):
    Interest income              17                           31
    Interest expense           (135)                         (31)
    Other income (expense)      (96)                          33

    Total other income
     (expense)                 (214)                          33

(Loss)Income before income
  taxes                      (5,215)                       1,779

Provision for income taxes       78                          534

Net (loss) income          $ (5,293)                     $ 1,245

Net (loss) income per
  share                     $ (0.94)                      $ 0.22

Weighted average number
  of common
  and common equivalent
  shares outstanding          5,659                        5,669


                          CANDELA CORPORATION
                            (In thousands)

                           December 27,                  June 28,
                              1997                         1997


Current assets:
    Cash                    $ 1,727                      $ 2,674
      receivable              5,228                        8,848
    Notes receivable          1,345                        1,284
    Inventory                 7,550                        6,776
    Other current assets        486                          522

Total current assets         16,336                       20,104

Property and
  equipment, net              3,380                        3,523

Other assets                    863                        1,210

                           $ 20,579                     $ 24,837

Liabilities and Stockholders' Equity

Current liabilities:
    Current portion
      of long-term debt     $ 2,666                      $ 1,827
    Deferred income           1,743                        2,071
    Accounts payable          4,149                        5,879
    Accrued payroll
      and related
        expenses                739                          833
    Accrued warranty          1,239                        1,338
    Accrued income
      taxes                     358                          516
    Other accrued
      liabilities             1,154                          608
    Reserve for
      restructuring           2,610                            0
Total current
  liabilities                14,658                       13,072

Long-term debt                1,227                        1,519

Stockholders' equity
    Common stock                 54                           54
    Additional paid-in
      capital                17,300                       17,223
    Retained deficit        (12,178)                      (6,885)
      adjustment               (482)                        (146)
Total stockholders'
  equity                      4,694                       10,246

                             20,579                     $ 24,837

     Candela Corporation
     F. Paul Broyer, 508/358-7400 x435
     Phase Two Strategies
     Stuart Pearlman, 212/716-3400

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