Candela Corporation

Compose a 500- to 750-word paper responding to questions 1 and 2 of the Candela Corporation Case on p. 146 (Ch. 4).
Format your paper according to APA standards.
146 CHAPTER 4 Statement of Cash Flows
Excerpts from the Candela Corporation’s
Form 10-K are on pages 146-147.
Required
1. Using the Consolidated Statements of Cash Flows, prepare a summary analysis for the years ended July 3,
2004, Jun 28, 2003, and June 29, 2002. Analyze the cash flows for Candela Corporation, Inc. for all
three years.
2. Explain what information you gain
from the statement of cash flows that
cannot be found directly from the
balance sheet or income statement.
Item 1. Business.
Candela Corporation is a pioneer in the development and commercialization of advanced aesthetic laser systems that allow physicians and personal care practitioners
to treat a wide variety of cosmetic and medical
conditions including:
Vascular lesion treatment of rosacea, facial spider veins, leg veins, scars, stretch marks, warts, port wine stains and hemangiomas
Hair removal
Removal of benign pigmented lesions such as age spots,   freckles and tattoos
Skin rejuvenation and wrinkles
Acne and acne scars
Psoriasis
Other skin treatments
Since our founding 34 years ago, we have continuously developed and enhanced applications of laser technology. In the mid-1980s we began developing laser technology for medical applications, and since that time have shipped approximately 7,000 lasers to over 60 countries. Since the early 1990s we have focused our organizational resources on
developing laser technology for use solely in the aesthetic and cosmetic laser industry. Our introduction of new dermatology/plastic surgery laser systems during the mid-1990s allowed us to expand rapidly in this area.
Candela’s current product line offers comprehensive
and technologically sophisticated aesthetic and medical laser systems used by dermatologists, plastic surgeons and various
other medical and personal care practitioners. The discretionary income of aging baby boomers continues to rise which creates new opportunities for Candela. This market segment places a premium on good health and personal appearance, and has demonstrated a willingness to pay for health and cosmetic products and services.The growing popularity of laser treatments among the general population
is also spurring demand for Candela’s products. Last year, Americans spent an estimated $8.3 billion on cosmetic procedures. Increasingly, lasers are proving an attractive
alternative for eliminating unwanted hair.
The laser hair removal market has experienced
significant growth over the last several years.
The Company is dedicated to developing safe and effective products. Our aesthetic laser systems are further distinguished by being among the fastest, smallest and most
affordable in their respective markets. We believe that we have increasingly captured significant market share because of these product attributes and we are committed to
continual innovation to meet the needs of our markets.
Case 4.2 Candela Corporation
Understanding Financial Statements,Eighth Edition, by Lyn M. Fraser and Aileen Ormiston. Published by Prentice Hall. Copyright © 2007 by Pearson Education, Inc.
ISBN: 0-536-48044-3
CANDELA CORPORATION AND SUSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended July 3, 2004, June 28, 2003 and June 29, 2002
(in thousands)
2004 2003 2002
(Restated) (Restated)
Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,119 $ 6,814 $ (2,154)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Provision for the disposal of discontinued operations . . . . 2,095 – –
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . 298 1,013 743
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 668 582 355
Accretion of imputted interest on stock warrants . . . . . . . – 475 102
Provision for bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520 (13) 116
Provision for deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . 955 (682) (115)
Tax benefit from exercised stock options . . . . . . . . . . . . . . . (1,223) (505) (6)
Effect of exchange rate changes on foreign currency
denominated assets and liabilities . . . . . . . . . . . . . . . . . . . 26 36 (305)
Changes in assets and liabilities:
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (200) (57) –
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,663) (2,417) (3,525)
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 179 (54)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,134) 1,761 (1,661)
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,550) 225 175
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (236) 157 305
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (91) (1,409) (3,069)
Accrued payroll and related expenses . . . . . . . . . . . . . . . 707 1,622 1,139
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 548 574 24
Accrued warranty costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,776 (921) 830
Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,312) 4,168 (784)
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 767 53 813
Net cash provided by (used in) operating activities . . . . . . . . . . 1,132 11,655 (7,071)
Cash flows from investing activities:
Purchase of property, plant and equipment . . . . . . . . . . . . . (685) (1,227) (1,058)
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . (685) (1,227) (1,058)
Cash flows from financing activities:
Proceeds from issuance of common stock . . . . . . . . . . . . . . 4,707 4,620 394
Repurchases of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . – – (5,215)
Principal payments of long-term debt . . . . . . . . . . . . . . . . . – (3,330) (370)
Net borrowings (repayments) on line of credit . . . . . . . . . . – (1,114) 50
Net cash provided by (used in) financing activities . . . . . . . . . . 4,707 176 (5,141)
Effect of exchange rate changes on cash and
cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 1,552 890
Net increase (decrease) on cash and cash equivalents . . . . . . . . 5,326 12,156 (12,380)
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . 31,813 19,657 32,037
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . $ 37,139 $ 31,813 $ 19,657
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15 $ 235 $ 347
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,265 $ 751 $ (68)
The accompanying notes are an integral part of the financial statements.