**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,DC 20549**

 

----

 

**FORM 10-Q**

 

**Quarterlyreport pursuant to Section 13 or 15(d) of the Securities Exchange Act of1934**

 

**For the quarterly period endedSeptember 27, 2003.**

 

**Commissionfile number 000-14742**

** **

**CANDELA CORPORATION**

(Exact name of registrantas specified in its charter)

 

| **Delaware**                                                                       |   | **04-2477008**                        |
|------------------------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction  of incorporation or organization)                   |   | (I.R.S. Employer  Identification No.) |
|                                                                               |   |                                  |
| **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 reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Actof 1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

Yes  ý  No  o

 

Indicate by check mark whether the registrant is an accelerated filer(as defined by Rule 12b-2 of the Securities Exchange Act of 1934).

Yes  o  No  ý

 

Indicate the number of shares outstanding of each of the issuer’sclasses of common stock, as of the latest practicable date.

 

| **Class**                     |   | **Outstanding at November 10, 2003** |
|-------------------------------|--------|-------------------------------------------|
| Common Stock, $.01 par  value |   | 10,898,914                                |

 

 

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**CANDELACORPORATION**

**Index**

 
| Part  I.  | Financial  Information: |
|-----------|-------------------------|
|      |                    |
|      | Item  1.                | Unaudited  Condensed Consolidated Balance Sheets as of September 27, 2003 and  June 28, 2003 |
|      |                    |   |
|      |                    | Unaudited  Condensed Consolidated Statements of Operations for the three-month periods  ended September 27, 2003 and September 28, 2002 |
|      |                    |   |
|      |                    | Unaudited  Condensed Consolidated Statements of Cash Flows for the three-month periods  ended September 27, 2003 and September 28, 2002 |
|      |                    |   |
|      |                    | Notes to  Unaudited Condensed Consolidated Financial Statements |
|      |                    |   |
|      | Item  2.                | Management’s Discussion and Analysis of  Financial Condition and Results of Operations |
|      |                    |   |
|      |                    | Cautionary Statements |
|      |                    |   |
|      | Item  3.                | Quantitative  and Qualitative Disclosure about Market Risk |
|      |                    |   |
|      | Item  4.                | Controls  and Procedures |
|      |                    |   |
| Part  II. | Other  Information:     |
|      |                    |
|      | Item  1.                | Legal  Proceedings |
|      |                    |   |
|      | Item  6.                | Exhibits  and Reports on Form 8-K |

 

2

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**Part I****.  Financial Information**

**Item 1 -Financial Statements**

 

**CANDELACORPORATION**

**Condensed Consolidated BalanceSheets**

(in thousands)

(unaudited)

 
|                                                  |   | **September 27,  2003** |       | **June 28,  2003** |       |
|-------------------------------------------------------|--------|------------------------------|------------|-------------------------|------------|
|                                                  |   |                         |       | **(Restated)**          |       |
| **Assets**                                            |   |                         |       |                    |       |
|                                                  |   |                         |       |                    |       |
| **Current  assets:**                                  |   |                         |       |                    |       |
| **Cash  and cash equivalents**                        |   | **$**                        | **30,146** | ** **              | **$**      | **31,870** | ** ** |
| **Accounts  receivable, net**                         |   | **26,065**                   | ** ** | **26,572**              | ** ** |
| **Notes  receivable**                                 |   | **1,198**                    | ** ** | **1,086**               | ** ** |
| **Inventories,  net**                                 |   | **12,033**                   | ** ** | **10,834**              | ** ** |
| **Other  current assets**                             |   | **947**                      | ** ** | **658**                 | ** ** |
| **Total  current assets**                             |   | **70,389**                   | ** ** | **71,020**              | ** ** |
| **Property  and equipment, net**                      |   | **3,170**                    | ** ** | **3,327**               | ** ** |
| **Deferred  tax assets**                              |   | **5,032**                    | ** ** | **4,760**               | ** ** |
| **Prepaid  licenses**                                 |   | **1,184**                    | ** ** | **1,228**               | ** ** |
| **Other  assets**                                     |   | **172**                      | ** ** | **166**                 | ** ** |
| **Total  assets**                                     |   | **$**                        | **79,947** | ** **              | **$**      | **80,501** | ** ** |
|                                                  |   |                         |       |                    |       |
| **Liabilities  and Stockholders’ Equity**        |   |                         |       |                    |       |
| **Current  liabilities:**                             |   |                         |       |                    |       |
| **Accounts  payable**                                 |   | **$**                        | **5,185**  | ** **              | **$**      | **5,271** | ** ** |
| **Accrued  payroll and related expenses**             |   | **2,762**                    | ** ** | **4,656**               | ** ** |
| **Accrued  warranty costs**                           |   | **4,022**                    | ** ** | **3,628**               | ** ** |
| **Income  taxes payable**                             |   | **1,746**                    | ** ** | **3,528**               | ** ** |
| **Other  accrued liabilities**                        |   | **3,141**                    | ** ** | **2,755**               | ** ** |
| **Deferred  income**                                  |   | **2,866**                    | ** ** | **2,779**               | ** ** |
| **Current  liabilities of discontinued operations**   |   | **1,975**                    | ** ** | **1,095**               | ** ** |
| **Total  current liabilities**                        |   | **21,697**                   | ** ** | **23,712**              | ** ** |
| **Other  long-term liabilities**                      |   | **2,593**                    | ** ** | **3,393**               | ** ** |
| **Long-term  liabilities of discontinued operations** |   | **2,536**                    | ** ** | **48**                  | ** ** |
| **Total  liabilities**                                |   | **26,826**                   | ** ** | **27,153**              | ** ** |
|                                                  |   |                         | ** ** |                    | ** ** |
| **Stockholders’  equity:**                       |   |                         |       |                    |       |
| **Common  stock**                                     |   | **130**                      | ** ** | **129**                 | ** ** |
| **Additional  paid-in capital**                       |   | **49,008**                   | ** ** | **48,479**              | ** ** |
| **Accumulated  earnings**                             |   | **17,300**                   | ** ** | **17,904**              | ** ** |
| **Treasury  stock, at cost**                          |   | **(12,997**                  | **)**      | **(12,997**             | **)**      |
| **Accumulated  other comprehensive loss**             |   | **(320**                     | **)**      | **(167**                | **)**      |
| **Total  stockholders’ equity**                  |   | **53,121**                   | ** ** | **53,348**              | ** ** |
| **Total  liabilities and stockholders’ equity**  |   | **$**                        | **79,947** | ** **              | **$**      | **80,501** | ** ** |

 

***The accompanyingnotes are an integral part of the unaudited condensed consolidated financialstatements.***

 

3

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**CANDELACORPORATION**

**Condensed Consolidated Statementsof Operations**

(in thousands, except pershare data)

(unaudited)

 
|                                                                                                                              |   | **For the three months ended:** |       |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|------------|
|                                                                                                                              |   | **September  27,  2003**        |       | **September  28,  2002** |   |
|                                                                                                                              |   |                            |       | **(Restated)** |   |
| **Revenue**                                                                                                                       |   |                            | ** ** |   | ** ** |
| **Lasers  and other products**                                                                                                    |   | **$**                           | **15,357** | ** ** | **$** | **10,488** | ** ** |
| **Product-related  service**                                                                                                      |   | **3,329**                       | ** ** | **2,757** | ** ** |
| **Total  revenue**                                                                                                                |   | **18,686**                      | ** ** | **13,245** | ** ** |
|                                                                                                                              |   |                            | ** ** |   | ** ** |
| **Cost  of sales**                                                                                                                |   |                            | ** ** |   | ** ** |
| **Lasers  and other products**                                                                                                    |   | **7,630**                       | ** ** | **4,605** | ** ** |
| **Product-related  service**                                                                                                      |   | **1,743**                       | ** ** | **1,996** | ** ** |
| **Total  cost of sales**                                                                                                          |   | **9,373**                       | ** ** | **6,601** | ** ** |
|                                                                                                                              |   |                            | ** ** |   | ** ** |
| **Gross  profit**                                                                                                                 |   | **9,313**                       | ** ** | **6,644** | ** ** |
|                                                                                                                              |   |                            | ** ** |   | ** ** |
| **Operating  expenses:**                                                                                                          |   |                            | ** ** |   | ** ** |
| **Selling,  general and administrative**                                                                                          |   | **5,403**                       | ** ** | **4,610** | ** ** |
| **Research  and development**                                                                                                     |   | **1,076**                       | ** ** | **866** | ** ** |
| **Total  operating expenses**                                                                                                     |   | **6,479**                       | ** ** | **5,476** | ** ** |
|                                                                                                                              |   |                            | ** ** |   | ** ** |
| **Income  from operations**                                                                                                       |   | **2,834**                       | ** ** | **1,168** | ** ** |
|                                                                                                                              |   |                            | ** ** |   | ** ** |
| **Other  income (expense):**                                                                                                      |   |                            | ** ** |   | ** ** |
| **Interest  income**                                                                                                              |   | **79**                          | ** ** | **75** | ** ** |
| **Interest  expense**                                                                                                             |   | **(4**                          | **)**      | **(106** | **)** |
| **Other  income ,net**                                                                                                            |   | **32**                          | ** ** | **342** | ** ** |
| **Total  other income, net**                                                                                                      |   | **107**                         | ** ** | **311** | ** ** |
|                                                                                                                              |   |                            | ** ** |   | ** ** |
| **Income  from continuing operations before income taxes**                                                                        |   | **2,941**                       | ** ** | **1,479** | ** ** |
|                                                                                                                              |   |                            | ** ** |   | ** ** |
| **Provision  for income taxes**                                                                                                   |   | **1,152**                       | ** ** | **532** | ** ** |
|                                                                                                                              |   |                            | ** ** |   | ** ** |
| **Income  from continuing operations**                                                                                            |   | **1,789**                       | ** ** | **947** | ** ** |
|                                                                                                                              |   |                            | ** ** |   | ** ** |
| **Discontinued  operations:**                                                                                                     |   |                            | ** ** |   | ** ** |
| **Loss  from discontinued Skin Care Center operations of $473 and $331, less income  tax benefit of $175 and $119, respectively** |   | **(298**                        | **)**      | **(212** | **)** |
| **Loss  on closure of Skin Care Center, of $3,348 less income tax benefit of $1,253**                                             |   | **(2,095**                      | **)**      | **—** | ** ** |
|                                                                                                                              |   | **(2,393**                      | **)**      | **(212** | **)** |
|                                                                                                                              |   |                            | ** ** |   | ** ** |
| **Net  (loss) income**                                                                                                            |   | **$**                           | **(604**   | **)** | **$** | **735** | ** ** |
| **Net  income (loss) per share of common stock:**                                                                                 |   |                            | ** ** |   | ** ** |
| **Basic:**                                                                                                                        |   |                            | ** ** |   | ** ** |
| **Income  from continuing operations**                                                                                            |   | **$**                           | **0.17**   | ** ** | **$** | **0.10** | ** ** |
| **Loss  from discontinued operations**                                                                                            |   | **(0.23**                       | **)**      | **(0.02** | **)** |
| **Net  (loss) income**                                                                                                            |   | **$**                           | **(0.06**  | **)** | **$** | **0.08** | ** ** |
| **Diluted:**                                                                                                                      |   |                            | ** ** |   | ** ** |
| **Income  from continuing operations**                                                                                            |   | **$**                           | **0.16**   | ** ** | **$** | **0.10** | ** ** |
| **Loss  from discontinued operations**                                                                                            |   | **(0.21**                       | **)**      | **(0.02** | **)** |
| **Net  (loss) income**                                                                                                            |   | **$**                           | **(0.05**  | **)** | **$** | **0.08** | ** ** |
|                                                                                                                              |   |                            | ** ** |   | ** ** |
| **Weighted  average shares outstanding**                                                                                          |   | **10,694**                      | ** ** | **9,644** | ** ** |
| **Adjusted  weighted average shares outstanding**                                                                                 |   | **11,094**                      | ** ** | **9,782** | ** ** |

 

***The accompanyingnotes are an integral part of the unaudited condensed consolidated financialstatements****.*

 

4

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**CANDELACORPORATION**

**Condensed Consolidated Statementsof Cash Flows**

(in thousands)

(unaudited)

 
|                                                                                         |   | **For the three months ended:** |       |
|----------------------------------------------------------------------------------------------|--------|---------------------------------|------------|
|                                                                                         |   | **September 27,  2003**    |       | **September 28,  2002** |   |
|                                                                                         |   |                            |       | **(Restated)** |   |
| **Cash  flows from operating activities:**                                                   |   |                            | ** ** |   | ** ** |
| **Net  (loss) income**                                                                       |   | **$**                           | **(604**   | **)** | **$** | **735** | ** ** |
| **Adjustments  to reconcile net income (loss) to net cash  used for operating activities:**  |   |                            | ** ** |   | ** ** |
| **Provision  for the disposal of discontinued operations**                                   |   | **2,095**                       | ** ** | **—** | ** ** |
| **Depreciation  and amortization**                                                           |   | **159**                         | ** ** | **201** | ** ** |
| **Provision  for bad debts**                                                                 |   | **(28**                         | **)**      | **26** | ** ** |
| **Effect  of exchange rate changes on foreign currency denominated assets and  liabilities** |   | **9**                           | ** ** | **(32** | **)** |
| **Accretion  of debt discount**                                                              |   | **—**                      | ** ** | **(5** | **)** |
| **Increase  (decrease) in cash from working capital:**                                       |   |                            | ** ** |   | ** ** |
| **Accounts  receivable**                                                                     |   | **(21**                         | **)**      | **2,974** | ** ** |
| **Notes  receivable**                                                                        |   | **(16**                         | **)**      | **599** | ** ** |
| **Inventories**                                                                              |   | **(1,027**                      | **)**      | **(1,287** | **)** |
| **Other  current assets**                                                                    |   | **(272**                        | **)**      | **(510** | **)** |
| **Other  assets**                                                                            |   | **62**                          | ** ** | **42** | ** ** |
| **Accounts  payable**                                                                        |   | **60**                          | ** ** | **(2,566** | **)** |
| **Accrued  payroll and related expenses**                                                    |   | **(1,935**                      | **)**      | **(759** | **)** |
| **Deferred  revenue**                                                                        |   | **42**                          | ** ** | **(758** | **)** |
| **Accrued  warranty costs**                                                                  |   | **392**                         | ** ** | **(130** | **)** |
| **Income  taxes payable**                                                                    |   | **(711**                        | **)**      | **509** | ** ** |
| **Long-term  portion of deferred revenue**                                                   |   | **(795**                        | **)**      | **(4** | **)** |
| **Loss  from discontinued operations**                                                       |   | **298**                         |       | **212** |   |
| **Other  accrued liabilities**                                                               |   | **324**                         | ** ** | **(378** | **)** |
| **Net  cash used for operating activities**                                                  |   | **(1,968**                      | **)**      | **(1,131** | **)** |
|                                                                                         |   |                            | ** ** |   | ** ** |
| **Cash  flows from investing activities:**                                                   |   |                            | ** ** |   | ** ** |
| **Purchases  of property and equipment**                                                     |   | **(17**                         | **)**      | **(55** | **)** |
| **Net  cash used for investing activities**                                                  |   | **(17**                         | **)**      | **(55** | **)** |
|                                                                                         |   |                            | ** ** |   | ** ** |
| **Cash  flows from financing activities:**                                                   |   |                            | ** ** |   | ** ** |
| **Principal  payments of long-term debt**                                                    |   | **—**                      | ** ** | **(185** | **)** |
| **Proceeds  from the issuance of common stock**                                              |   | **531**                         | ** ** | **70** | ** ** |
| **Net  cash provided by (used for) financing activities**                                    |   | **531**                         | ** ** | **(115** | **)** |
|                                                                                         |   |                            | ** ** |   | ** ** |
| **Effect  of exchange rates on cash and cash equivalents**                                   |   | **(270**                        | **)**      | **72** | ** ** |
|                                                                                         |   |                            | ** ** |   | ** ** |
| **Net  decrease in cash and cash equivalents**                                               |   | **(1,724**                      | **)**      | **(1,229** | **)** |
| **Cash  and cash equivalents at beginning of period**                                        |   | **31,870**                      | ** ** | **19,657** | ** ** |
| **Cash  and cash equivalents at end of period**                                              |   | **$**                           | **30,146** | ** ** | **$** | **18,428** | ** ** |

 

***The accompanying notes are an integral part of the unauditedcondensed consolidated financial statements****.*

 

5

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**1.****                   Basis ofPresentation**

 

The accompanying unaudited condensed consolidatedfinancial statements and notes do not include all of the disclosures made inthe Annual Report on Form 10-K of Candela Corporation (the “Company”) forfiscal year 2003, which should be read in conjunction with these financialstatements.  The financial informationincluded herein is unaudited, with the exception of the condensed consolidatedbalance sheet as of June 28, 2003, which was derived from the auditedconsolidated balance sheet dated June 28, 2003.  However, in the opinion of management, the statements include allnecessary adjustments, consisting of normal recurring accruals, for a fairpresentation of the quarterly results and are prepared and presented in amanner consistent with the Company’s Annual Report on Form 10-K. The resultsfor the three month period ended September 27, 2003 are not necessarilyindicative of the results to be expected for the full year.

 

**2.****                   DiscontinuedOperations**

 

On September 27,2003 management initiated a plan to close its only remaining skin care center.The closure is accounted for as a discontinued operation in accordance withSFAS 144 “*Accounting for the Impairment orDisposal of Long-Lived Assets*” and SFAS 146 “*Accounting for Costs Associated with Exit or DisposalActivities*”. As a result, in the fiscal quarter endedSeptember 27, 2003 the Company has recorded a $2,095 charge for theaccrual of $3,000 of future occupancy costs, primarily relating to future leasepayments for the Boston facility, and $348 of severance obligations and otherrelated costs of closure, net of anticipated tax benefits of $1,253.Approximately 45 positions have been eliminated as a result of thisrestructuring plan, of which 43 employees have been terminated as of September 27,2003. In addition, all prior period financial statements have been restated toreflect skin care centers operations as discontinued.

 

Prior to fiscal 2002, the Company recorded combinedrestructuring charges of $3,721 resulting from management’s decision to closethe skin care center located in Scottsdale, Arizona. During the threemonth-period ended December 29, 2001, the Company secured a sublease forthe Scottsdale facility.  The sublesseecommenced making payments to the landlord on behalf of the Company onApril 1, 2002.

 

As a result of the sublease, the Company revised theestimate of future costs associated with the Scottsdale facility and, in thequarter ended March 30, 2002, reversed $693,000 of the restructuringreserve which represents primarily the amount of future contractual subleasepayments as well as revisions to the net realizable value of certain leaseholdimprovements.

 

The following table reflects the combinedrestructuring charges incurred in the most recent quarter (in thousands):

 
| **(in thousands)**                                                  |   | **Payroll and  Severance** |       | **Leasehold  Improvements  and Fixed  Assets** |       | **Facility  Costs** |       | **Total** |       |
|---------------------------------------------------------------------|--------|----------------------------|------------|------------------------------------------------|------------|---------------------|------------|-----------|------------|
| **Balance  at June 28, 2003**                                  |   | **$**                      | **50**     | ** **                                     | **$**      | **304**             | ** ** | **$**     | **25**     | ** ** | **$** | **379** | ** ** |
| **Reduction  of reserve due to cash payments**                      |   | **(19**                    | **)**      |                                           |       |                | ** ** | **(19**   | **)**      |
| **Non-cash  amortization relating to the Scottsdale reserve**       |   | **(17**                    | **)**      | **(26**                                        | **)**      |                |       | **(43**   | **)**      |
| **Additions  to reserve due to the closure of the Boston Facility** |   | **139**                    | ** ** | **124**                                        | ** ** | **3,085**           | ** ** | **3,348** | ** ** |
| **Balance  at September 27, 2003**                             |   | **$**                      | **153**    | ** **                                     | **$**      | **402**             | ** ** | **$**     | **3,110**  | ** ** | **$** | **3,665** | ** ** |

 

For the quarter endedSeptember 27, 2003, the Company accrued $3,348 of costs anticipated forthe closing of the remaining spa center. Additionally, the reserve was reducedby $62 in costs associated with the Scottsdale facility.

 

6

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**2.****                   DiscontinuedOperations, continued**

 

Revenue for discontinuedoperations for the three months ended September 27, 2003 andSeptember 28, 2002, was $415, and $558, respectively. The net liability atSeptember 27, 2003 of $4,511 consists primarily of the restructuring reserveof $3,665, and deferred gift certificate revenue of $1,169. The net liabilityat June 28, 2003 of $1,143 consists primarily of deferred gift certificaterevenue of $1,201, and the restructuring reserve of $379, partially offset bycash deposits of $96 and inventory of $93.

 

**3.****                   Stock-basedCompensation**

 

In December 2002,the FASB issued SFAS No. 148, “*Accountingfor Stock-Based Compensation—Transition and Disclosure*.” SFAS No.148 requires the disclosure of the effects of a company’s accounting policy withrespect to stock-based employee compensation on reported net income andearnings per share in annual and interim financial statements. SFAS No. 148amends SFAS No. 123, “*Accounting forStock-Based Compensation*” by providing alternative methods of transitionto the fair-value method of accounting for stock-based employee compensationunder SFAS No. 123. SFAS No. 148 also amends the disclosure provisions of SFASNo. 123 and APB Opinion No. 28, “*InterimFinancial Reporting*” to require disclosure of the effects of acompany’s accounting policy with respect to stock-based employee compensationon reported net income and earnings per share in annual and interim financialstatements. In accordance with SFAS No. 148, the Company has adopted thedisclosure-only provision of SFAS No. 123 and the enhanced disclosures asrequired by SFAS No. 148.

 

Had compensation cost forthe Company’s stock plans been determined consistent with SFAS No. 123, theCompany’s net gain (loss) would have been as follows: 

 
|                                                                                                                                                    |   | **For the three months ended:** |       |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|------------|
| **(in thousands, except share and per share data)**                                                                                                     |   | **September 27,  2003**    |       | **September 28,  2002** |   |
|                                                                                                                                                    |   |                            | ** ** |   | ** ** |
| **Net  (loss) income, as reported**                                                                                                                     |   | **$**                           | **(604**   | **)** | **$** | **735** | ** ** |
|                                                                                                                                                    |   |                            | ** ** |   | ** ** |
| **Add:  Stock-based employee compensation expense included in reported net income,  net of related tax effects**                                        |   | **—**                      | ** ** | **—** | ** ** |
|                                                                                                                                                    |   |                            |       |   |   |
| **Deduct:  Total stock-based employee compensation expense determined under fair value  based method for all awards, net of tax effects Stock options** |   | **(363**                        | **)**      | **(332** | **)** |
|                                                                                                                                                    |   |                            |       |   |   |
| **Pro  forma net income (loss)**                                                                                                                        |   | **$**                           | **(967**   | **)** | **403** | ** ** |
| **Earnings  (loss) per share:**                                                                                                                         |   |                            | ** ** |   | ** ** |   |
| **Basic—as  reported**                                                                                                                             |   | **$**                           | **(0.06**  | **)** | **$** | **0.08** | ** ** |
| **Basic—pro  forma**                                                                                                                               |   | **$**                           | **(0.09**  | **)** | **$** | **0.04** | ** ** |
| **Diluted—as  reported**                                                                                                                           |   | **$**                           | **(0.05**  | **)** | **$** | **0.08** | ** ** |
| **Diluted—pro  forma**                                                                                                                             |   | **$**                           | **(0.09**  | **)** | **$** | **0.04** | ** ** |

 

In computing thispro-forma amount the Company has used the Black-Scholes pricing model using thefollowing assumptions for options granted in fiscal years 2004 and 2003:

 
|                                             |   | **2004**   |       | **2003**   |       |
|--------------------------------------------------|--------|------------|------------|------------|------------|
| **Risk-free  interest rate**                     |   | **4.25**   | **%**      | **4.25**   | **%**      |
| **Estimated  volatility**                        |   | **76**     | **%**      | **78**     | **%**      |
| **Expected  life for stock options (yrs)**       |   | **2.99**   | ** ** | **3.65**   | ** ** |
| **Expected  life for stock purchase plan (yrs)** |   | **0.5**    | ** ** | **0.5**    | ** ** |
| **Expected  dividends**                          |   | **—** | ** ** | **—** | ** ** |

 

7

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**4.****                   Earnings PerShare**

 

Basic earnings per share is computed by dividing netincome by the weighted average number of shares of common stock outstanding forthe period and, if there are dilutive securities, diluted earnings per share iscomputed by including common stock equivalents outstanding for the period inthe denominator.

 

Common stock equivalents include shares issuable uponthe exercise of stock options or warrants, net of shares assumed to have beenpurchased with the proceeds, using the treasury stock method.

 
|                                                                              |   | **For the three months ended:** |       |
|-----------------------------------------------------------------------------------|--------|---------------------------------|------------|
| **(in thousands, except share and per share data)**                               |   | **September 27,  2003**    |       | **September 28,  2002** |   |
|                                                                              |   |                            |       |   |   |
| **Basic  shares used in the calculation of earnings per share**                   |   | **10,694**                      | ** ** | **9,644** | ** ** |
|                                                                              |   |                            | ** ** |   | ** ** |
| **Effect  of dilutive securities:**                                               |   |                            | ** ** |   | ** ** |
| **Stock  options**                                                                |   | **375**                         | ** ** | **68** | ** ** |
| **Stock  warrants**                                                               |   | **25**                          | ** ** | **70** | ** ** |
|                                                                              |   |                            | ** ** |   | ** ** |
| **Diluted  shares used in the calculation of earnings per share**                 |   | **11,094**                      | ** ** | **9,782** | ** ** |
|                                                                              |   |                            | ** ** |   | ** ** |
| **Per  share effect of dilutive securities on income from continuing operations** |   | **$**                           | **0.01**   | ** ** | **$** | **0.0** | ** ** |
|                                                                              |   |                            | ** ** |   | ** ** |
| **Per  share effect of dilutive securities on net income**                        |   | **$**                           | **0.01**   | ** ** | **$** | **0.0** | ** ** |

 

During the three month period ended September 27,2003 all options to purchase shares of common stock were included in thecomputation of diluted earnings per share. During the three month period endedSeptember 28, 2002, 381,264 options to purchase shares of common stock wereexcluded from the calculation of diluted earnings per share because theexercise price of such options was greater than the average market price of thecommon stock for the period.

 

**5.****                   ComprehensiveIncome (Loss)**

 

Components ofcomprehensive income (loss) include net income (loss) and certain transactionsthat have generally been reported in the consolidated statement ofstockholders’ equity.

 
|                                         |   | **For the three months ended:** |     |
|----------------------------------------------|--------|---------------------------------|----------|
| **(in thousands)**                           |   | **September 27,  2003**    |     | **September 28,  2002** |   |
|                                         |   |                            |     |   |   |
| **Net  (loss) income**                       |   | **$**                           | **(604** | **)** | **$** | **735** | ** ** |
| **Foreign  currency translation adjustment** |   | **(153**                        | **)**    | **8** | ** ** |
| **Total  comprehensive (loss) income**       |   | **$**                           | **(757** | **)** | **$** | **743** | ** ** |

 

8

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**6.****                   Inventories**

 
| **(in thousands)**   |   | **September 27,  2003** |       | **June 28,  2003** |       |
|----------------------|--------|------------------------------|------------|-------------------------|------------|
|                 |   |                         |       | **(restated)**          |       |
|                 |   |                         | ** ** |                    | ** ** |
| **Raw  materials**   |   | **$**                        | **4,284**  | ** **              | **$**      | **4,123** | ** ** |
| **Work  in process** |   | **533**                      | ** ** | **469**                 | ** ** |
| **Finished  goods**  |   | **7,216**                    | ** ** | **6,242**               | ** ** |
|                 |   | **$**                        | **12,033** |                    | **$**      | **10,834** | ** ** |

 

**7.****                   SegmentInformation**

 

The Company operatesprincipally in one industry segment: the design, manufacture, sale, and serviceof medical devices and related equipment. The results in this segment have beenpresented in the Consolidated Statements of Operations for the appropriateperiods.

 

**8.****                   Guarantees**

 

The Company’s products generally carry a standardone-year warranty, except for Vbeam products which typically carry a three-yearwarranty. The Company sets aside a reserve based on anticipated warranty claimsat the time product revenue is recognized. In anticipation of actual warrantyclaims, the Company amortizes the reserve ratably over the life of thewarranty, thereby offsetting actual warranty claims incurred. Actual warrantyclaims incurred and charged to product costs of sales during an interim periodmay be more or less than the amount of amortized warranty reserve allocatedagainst them. Factors that affect the Company’s product warranty liabilityinclude the number of installed units, the anticipated cost of warranty repairsand historical and anticipated rates of warranty claims.

 

The following table reflects changes in the Company’saccrued warranty account during the three-month period ended September 27,2003:

 
| **(in thousands)**                              |   |       |       |
|-------------------------------------------------|--------|------------|------------|
| **Beginning  Balance June 28, 2003**       |   | **$**      | **6,666**  | ** ** |
| **Plus  accruals related to new sales**         |   | **1,226**  | ** ** |
| **Less  amortization of prior period accruals** |   | **(1,271** | **)**      |
| **Ending  Balance on September 27, 2003**  |   | **$**      | **6,621**  | ** ** |

 

The Company also offers extended service contractsthat may be purchased after a standard warranty has expired. Service contractsmay be purchased for periods from one to five years. The Company recognizesservice contract revenue ratably over the life of the contract. Actual servicecontract expenses incurred and charged to service costs of sales during aninterim period may be more or less than the amount of amortized servicecontract revenue recognized in that period.

 

9

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The following table reflects changes in the Company’sdeferred revenue account during the three-month period ended September 27,2003:

 
| **(in thousands)**                               |   |       |       |
|--------------------------------------------------|--------|------------|------------|
| **Beginning  balance June 28, 2003**        |   | **$**      | **3,086**  | ** ** |
| **Plus  deferral of new service contract sales** |   | **1,558**  | ** ** |
| **Less  recognition of deferred revenue**        |   | **(1,778** | **)**      |
| **Ending  balance on September 27, 2003**   |   | **$**      | **2,866**  | ** ** |

 

The Company has an agreement (the “Agreement”) with anindependent leasing company whereby the Company will purchase delinquent leases(the “UNL Provision”) relating to Company products purchased by customers andfinanced through the leasing company. The Company is required to honor the UNL Provision when the leasingcompany’s aggregate losses reach levels specified in the Agreement.  The UNL Provision of the Agreement wasrecently eliminated for any lease initiated after December 31, 2002.  Since the inception of the Agreement, thecumulative amounts paid to the leasing company under the UNL Provision have notbeen significant.

 

**9.****                   AssetAcquisition**

 

On January 8, 2003, the Company acquiredsubstantially all of the assets of Applied Optronics, the diode division ofSchwartz Electro-Optics, Inc., for approximately $1,200 in cash. AppliedOptronics was a leading manufacturer of high-powered, pulsed and CW lasers, andwas a component supplier to the OEM market that serves a variety of industriesincluding the military, medical, industrial, research and robotics fields.Applied Optronics was the lead supplier of the diodes for the Company’sSmoothbeamTM diode laser system. In accordance with SFAS No. 141 “*Business Combinations*,” the Companyrecords acquisitions under the purchase method of accounting. Accordingly, thepurchase price is allocated to the tangible assets and liabilities andintangible assets acquired, based on their estimated fair values.

 

The asset acquisition consisted primarily of fixedassets, including production and office equipment, and inventory located at thedivision’s facility in New Jersey. The acquisition increased the Company’s netProperty and Equipment by approximately $800 and Inventory by approximately$400. For the period from June 29, 2003 to September 27, 2003, theApplied Optronics operation generated approximately $145 in revenue from diodesales to third-party customers.

 

10

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**CANDELACORPORATION**

 

**Item2****-****Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

 

**Overview**

 

We research, develop, manufacture, market and service lasers used toperform aesthetic and cosmetic procedures. We sell our lasers principally tomedical practitioners.  We market ourproducts directly and through a network of distributors to end-users. Ourtraditional customer base includes plastic and cosmetic surgeons anddermatologists. More recently we have expanded our sales to a broader group ofpractitioners consisting of general practitioners and certain specialistsincluding obstetricians, gynecologists and general and vascular surgeons.   We derive our revenue from:  the sales of lasers and other products; theprovision of product-related services; and the sale of diodes to other manufacturers.  Over half of our revenue in recent periodshas come from international sales.

 

**Critical Accounting Policies**

 

The discussion and analysis of our financial condition and results ofoperations are based upon our consolidated financial statements, which havebeen prepared in accordance with accounting principles generally accepted inthe United States. The preparation of these financial statements requires us tomake estimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses, and related disclosure of contingent assetsand liabilities. On an on-going basis, we evaluate our estimates, includingthose related to revenue recognition, bad debts, inventories, warrantyobligations, contingencies, restructurings and income taxes. We base ourestimates on historical experience and on various other assumptions that arebelieved to be reasonable under the circumstances, the results of which formthe basis for making judgments about the carrying value of assets andliabilities that are not readily apparent from other sources. Actual resultsmay differ from these estimates under different assumptions or conditions. Adiscussion of our critical accounting policies and the related judgments andestimates affecting the preparation of our consolidated financial statements isincluded in the Annual Report on Form 10-K of the Company for fiscal year 2003.

 

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**Results of Operations**

 

***Revenue.***

 

Revenue source by geography is reflected in the following table:

 
|                 |   | **Three months ended:**      |       |                         |       |       |       |
|----------------------|--------|------------------------------|------------|------------------------------|------------|------------|------------|
| **(in thousands)**   |   | **September 27,  2003** |       | **September 28,  2002** |       | **Change** |       |
|                 |   |                         | ** ** |                         | ** ** |       | ** ** |   | ** ** |   | ** ** |   | ** ** |
| **US  revenue**      |   | **$**                        | **7,852**  | ** **                   | **42**     | **%**      | **$**      | **5,556** | ** ** | **42** | **%** | **$** | **2,296** | ** ** | **41** | **%** |
| **Foreign  revenue** |   | **10,834**                   | ** ** | **58**                       | **%**      | **7,689**  | ** ** | **58** | **%** | **3,145** | ** ** | **41** | **%** |
|                 |   |                         | ** ** |                         | ** ** |       | ** ** |   | ** ** |   | ** ** |   | ** ** |
| **Total  revenue**   |   | **$**                        | **18,686** | ** **                   | **100**    | **%**      | **$**      | **13,245** | ** ** | **100** | **%** | **$** | **5,441** | ** ** | **41** | **%** |

 

Revenue increased by $5,441, or 41% during the three month period endedSeptember 27, 2003, compared to the three month period endedSeptember 28, 2002, due primarily to an increase in the worldwide demandfor the Company’s technology related to the volume increase in our GentleLaseof $3,012, smoothbeam of $872 and service related revenue of $572. US revenueincreased $2,296, or 41%, while overseas revenue increased $3,145, or 41%.

 

Revenue source by type is reflected in the following table:

 
|                           |   | **Three months ended**         |       |                         |       |       |       |
|--------------------------------|--------|--------------------------------|------------|------------------------------|------------|------------|------------|
| **(in thousands)**             |   | **September 27,****2003** |       | **September 28,  2002** |       | **Change** |       |
| **Revenue**                    |   |                           | ** ** |                         | ** ** |       | ** ** |   | ** ** |   | ** ** |   | ** ** |
| **Lasers  and other products** |   | **$**                          | **15,357** | ** **                   | **82**     | **%**      | **$**      | **10,488** | ** ** | **79** | **%** | **$** | **4,869** | ** ** | **46** | **%** |
| **Product-related  service**   |   | **3,329**                      | ** ** | **18**                       | **%**      | **2,757**  | ** ** | **21** | **%** | **572** | ** ** | **21** | **%** |
|                           |   |                           | ** ** |                         | ** ** |       | ** ** |   | ** ** |   | ** ** |   | ** ** |
| **Total  revenue**             |   | **$**                          | **18,686** | ** **                   | **100**    | **%**      | **$**      | **13,245** | ** ** | **100** | **%** | **$** | **5,441** | ** ** | **41** | **%** |

 

The increase in laser product revenue for the three month period endedSeptember 27, 2003, compared to the three month period endedSeptember 28, 2002, resulted from an increase in the sales volume of bothour GentleLaseTM and SmoothbeamTM product lines. The GentleLaseTM contributedapproximately $3,012, and the SmoothbeamTM contributed approximately $872 tothis increase in revenue. Product related service increased $572 during thequarter due to more service related contracts.

 

***Gross Profit. ***Gross profit was$9,313 or 50% of revenues for the three month period ended September 27,2003, compared to gross profit of $6,644 or 50% for the same period one yearearlier. This increase in gross profit results principally from the increase insales volume of both our GentleLaseTM and SmoothbeamTM product lines.

 

***Selling, Generaland Administrative Expense. ***Selling,general and administrative expenses increased from $4,610 in the three monthperiod September 28, 2002, to $5,403 for the three month period endingSeptember 27, 2003. This increase was primarily due to increased legal andaccounting fees of approximately $300, and higher commission payments andemployee-related expenses of $360 as compared to the year-earlier figures.

 

***Research andDevelopment Expense.   ***Research anddevelopment spending increased from $866 for the three-month period endedSeptember 28, 2002 to $1,076 for the three-month period endedSeptember 27, 2003 due primarily to an increased number of activeprograms.

 

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***OtherIncome/Expense. ***Netother income was $107 for the three months ended September 27, 2003,compared to income of $311 for the three months ended September 28,2002.  This decrease in other incomeresulted from the absence of a Q1, 2003 royalty payment of $322 offset by adecrease in interest expense of approximately $100.  The royalty payment related to royalties earned sinceAugust 2000 from the Company’s August 11, 2000 settlement agreementwith the Regents of the University of California and New Star Technology,Inc.  No further receipts are due underthis agreement at the present time.

 

***Income Taxes.***The provision for income taxes results from a combination of activities of boththe domestic and foreign subsidiaries of the Company.  We recorded a 31.5% tax benefit for the period endedSeptember 27, 2003, compared to the three month period ended September 28,2002, in which we recorded a 36% tax rate.   The provision for income taxes for the three months endedSeptember 27, 2003, differs from the U.S. statutory rate as a result of atax provision calculated for income generated in Japan and Spain at rates inexcess of the U.S. statutory rate and a benefit for the deduction related tothe extraterritorial income exclusion. The provision for income taxes at a 31.5% rate for the three monthperiod ending September 27, 2003, differs from the provision for incometaxes at a 36% rate for the three month period ended September 28, 2002,primarily due to an increase in net income derived from European operations anda net decrease in income derived from operations in Japan.

 

**Discontinued Operations**

 

During the quarter, the Company permanently closed its only remainingskin care center, which was located in Boston. The closure of the Boston spa,together with the earlier closing of the Company’s Scottsdale, Arizona spa, andthe associated cessation of this line of business, is accounted for asdiscontinued operations. As a result of the closure of the Boston Skin carecenter, in the fiscal quarter ended September 27, 2003, the Companyrecorded a $2,095 charge for the accrual of $3,000 of future occupancy costsand $348 of severance obligations and other related costs of closure, net ofanticipated tax benefits of $1,253. In addition, both the financial statementsfor the three months ended September 27, 2003 and all prior financialstatements have been restated to reflect skin care center operations as discontinued.While the building landlord has given the Company written notice that itbelieves the Company is in default under the lease, the Company has indicatedthat it plans to honor all of its obligations under the lease. The Companybelieves that the size of the accrual that it has established is sufficient tocover all future leasehold expenses for the remainder of the lease term.Leasehold expenses could potentially be mitigated if the landlord elects torelet or sublease the property.

 

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**Liquidity and Capital Resources**

 

Cash used by operating activities amounted to $1,968 for the threemonths ended September 27, 2003, in comparison to cash used by operatingactivities in the amount of $1,131 for the same period one year earlier. Thisincrease in cash used for the three-month period ended September 27, 2003compared to the same period a year earlier primarily reflects the payment ofincome taxes during the current year. Cash used by investing activities totaled $17 for the three months endedSeptember 27, 2003, compared to $55 for the same period in the prioryear.  This change reflects less cashused to support the Oracle software implementation. Cash provided by forfinancing activities amounted to $531 in comparison to cash used of $115 forthe same period a year earlier.  Thechange in cash provided by financing primarily reflects net proceeds from theissuance of stock coupled with the absence of long-term debt during the currentyear.

 

On November 8, 2002, we paid in full the outstanding principal andaccrued interest of our 9.75% subordinated notes (the “Notes”) totaling$2,990,463 plus an early redemption premium of $236,800. As a result of thepayment, the Company will have no future principal or interest paymentsrelating to the Notes.

 

Outstanding contractual obligations of the Company are reflected in thefollowing table:

 

(in thousands)

 
|                 |   | **Total** |      | **Year 1** |   | **Year 2** |       | **Year 3** |      | **Thereafter** |   |
|----------------------|--------|-----------|-----------|------------|--------|------------|------------|------------|-----------|----------------|--------|
| **Operating leases** |   | **$**     | **4,988** | ** ** | **$**  | **1,214**  | ** ** | **$**      | **1,054** | ** **     | **$**  | **915** | ** ** | **$** | **1,805** | ** ** |
|                      |        |           |           |            |        |            |            |            |           |                |        |  |  |  |  |  |

 

We also maintain a renewable$10,000,000 revolving credit agreement with a major bank with interest at thebank’s base rate, or LIBOR plus 2.25%. Any borrowings outstanding under the line of credit are due on demand oraccording to a payment schedule established at the time funds areborrowed.  The line of credit isunsecured.  The agreement containsrestrictive covenants limiting the establishment of new liens, and the purchaseof margin stock.  No amounts wereoutstanding under the line of credit as of September 27, 2003.

 

We believe that cashbalances will be sufficient to meet anticipated cash requirements for the nexttwelve months.  However, we cannot besure that we will not require additional capital beyond the amounts currentlyforecasted by us, or that any such required additional capital will beavailable on reasonable terms, if at all, when such capital becomes required.

 

#### **Cautionary Statements**

 

This Quarterly Report onForm 10-Q contains forward-looking statements including, without limitation,statements concerning the future of the industry, product development, businessstrategy (including the possibility of future acquisitions), anticipatedoperational and capital expenditure levels, continued acceptance and growth ofour products, and dependence on significant customers and suppliers.  This Quarterly Report on Form 10-Q containsforward-looking statements that we have made based on our current expectations,estimates and projections about our industry, operations, and prospects, nothistorical facts. We have made these forward-looking statements pursuant to theprovisions of the Private Securities Litigation Reform Act of 1995.  These statements can be identified by theuse of forward-looking terminology such as “may,” “will,” “believe,” “expect,”“anticipate,” “estimate,” “intend”, “continue” or other similarexpressions.  These statements discussfuture expectations, and may contain projections of results of operations or offinancial condition or state other forward-looking information.  These forward-looking statements are subjectto business and economic risks and uncertainties, and our actual results ofoperations may differ materially from those contained in the forward-lookingstatements.  Factors that could cause orcontribute to such differences include, but are not limited to, those discussedin “Cautionary Statements” in our annual report filed on Form 10-K datedJune 28, 2003, as well as other risks and uncertainties referenced in thisQuarterly Report.  These risks include,but are not limited to, the following:

 

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•                  Because we typically derivemore than half of our revenue from international sales, we are susceptible tocurrency fluctuations, negative economic changes taking place in foreignmarketplaces, and other risks associated with conducting business overseas.

 

•                  The failure to obtainalexandrite rods for certain laser systems from our sole supplier would impairour ability to manufacture and sell these laser systems, which has accountedfor a substantial portion of our revenue in certain recent periods.

 

•                  The cost of closing ourremaining skin care center may be higher than management has estimated to date,and higher actual costs would negatively impact our operating results.

 

•                  Our failure to respond torapid changes in technology and intense competition in the laser industry couldmake our lasers obsolete.

 

•                  Like other companies in ourindustry, we are subject to a regulatory review process and our failure toreceive necessary government clearances or approvals could affect our abilityto sell our products and remain competitive.

 

•                  We have modified some of ourproducts without FDA clearance. The FDA could retroactively decide themodifications were improper and require us to cease marketing and/or recall themodified products.

 

•                  Achieving completecompliance with FDA regulations is difficult, and if we fail to comply, wecould be subject to FDA enforcement action.

 

•                  Claims by others that ourproducts infringe their patents or other intellectual property rights, or thatthe patents which we own or have licensed rights to are invalid, could preventus from manufacturing and selling some of our products or require us to incursubstantial costs from litigation or development of non-infringing technology.

 

•                  We could incur substantialcosts as a result of product liability claims.

 

•                  We may be unable to attractand retain management and other personnel we need to succeed.

 

•                  Our failure to manageacquisitions and joint ventures effectively may divert management attentionfrom our core business and cause us to incur additional debt, liabilities orcosts.

 

**Item 3****-Quantitative and Qualitative Disclosures About Market Risk**

 

As of September 27,2003, our cash balances are exposed to interest rate risk.  We are exposed to foreign currency risk dueto accounts receivable from our foreign subsidiaries.

 

We have cash equivalentsthat primarily consist of commercial paper, overnight repurchase agreements andmoney market accounts.  We believe thatany near term changes in interest rates will be immaterial to any potentiallosses in future earnings, cash flow and fair values.

 

Candela has foreignsubsidiaries in Japan, Spain, France and Germany and is exposed to movements inthe exchange rate between the Euro, Japanese Yen and the U.S. Dollar.  Sales from the United States direct tocustomers or distributors in foreign countries are invoiced in U.S. dollars andare not exposed to foreign currency risk. From time to time, we enter into foreign currency exchange and optioncontracts to reduce the exposure associated with current transactions andanticipated transactions denominated in foreign currencies.  However, we do not engage in foreigncurrency speculation.  On September 27,2003, we did not hold any open foreign currency contracts.

 

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**Item 4****- Controls and Procedures**

 

(a) Evaluation of disclosurecontrols and procedures. An evaluation was performed under the supervision andwith the participation of members of our management, including our ChiefExecutive Officer and our Chief Financial Officer, of the effectiveness of thedesign and operation of our “disclosure controls and procedures” (as defined inthe Securities Exchange Act of 1934 Rule 13a-15(e)) as of September 27, 2003(the “Evaluation Date”).  Based on thatevaluation, members of our management, including our Chief Executive Officerand our Chief Financial Officer, have concluded that, as of the EvaluationDate, our disclosure controls and procedures were effective in enabling us torecord, process, summarize and report the information required to be includedin this quarterly report within the required time period.

 

Management has taken notice,however, of certain complications we encountered in the process of enteringdata while implementing a new accounting software system during calendar year2003 and transitioning from the Company’s prior accounting system. Managementhas discussed the implementation complications with both the Audit Committee ofthe Board of Directors of the Company as well as the Company’s independentauditors. The Company’s independent auditors have concluded that thecomplications encountered with the implementation indicate the existence of amaterial weakness in internal control. Nevertheless, management believes thatdespite these implementation issues and the related weakness in internalcontrol, our financial statements and related disclosures, as filed to date,present fairly, in all material respects, our financial condition and resultsof operations for the respective periods. We also believe that this weaknesshas not adversely affected our ability to report, in a timely manner, materialinformation required to be included in our periodic filings with the Securitiesand Exchange Commission. We believe as well that we have taken the stepsnecessary to prevent such data entry issues from occurring in the future.

 

(b) Changes in internalcontrols. Except for implementing additional controls to address the data entryimplementation complications discussed above, there have been no changes in ourinternal controls during our first fiscal quarter that have materiallyaffected, or are reasonably likely to affect, our internal controls.

 

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**CANDELA CORPORATION**

 

**Part II****. Other Information**

 

# **Item 1****- LegalProceedings**

 

From time to time, we are aparty to various legal proceedings incidental to our business. We believe thatnone of the legal proceedings which are presently pending will have a materialadverse effect upon our financial position, results of operations, orliquidity.

 

# **ITEM 6****- Exhibitsand Reports on Form 8-K**

 

(a)                                  Exhibits

 
| Exhibit  31.1 |   | Rule  13A-14(a)/15d-14(a) Certification of the Chief Executive Officer                                                                                            |
|---------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |   |                                                                                                                                                              |
| Exhibit  31.2 |   | Rule  13A-14(a)/15d-14(a) Certification of the Chief Financial Officer                                                                                            |
|          |   |                                                                                                                                                              |
| Exhibit  32.1 |   | Certification  of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|          |   |                                                                                                                                                              |
| Exhibit  32.2 |   | Certification  of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

 

(b)                                 Reports on Form 8-K

 

On October 28, 2003, Candela Corporation announced itsfinancial results for the first quarter 2004. A copy of Candela Corporation’s first quarter results are attached tothe filing as Exhibit 99.1.

 

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**SIGNATURES**

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.

 

 
|   | CANDELA  CORPORATION                                                              |
|--------|-----------------------------------------------------------------------------------|
|   | Registrant                                                                        |
|   |                                                                              |
|   |                                                                              |
| Date:  | November 10,  2003                                                           |   | /s/  Gerard E. Puorro |   |
|   | Gerard E.  Puorro                                                                 |
|   | (President  and Chief Executive Officer)                                          |
|   |                                                                              |
|   |                                                                              |
| Date:  | November 10,  2003                                                           |   | /s/ F.  Paul Broyer |   |
|   | F. Paul  Broyer                                                                   |
|   | (Senior  Vice President, Finance and Administration  and Chief Financial Officer) |
|        |                                                                                   |  |  |  |  |  |

 

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