Candela Reports Second Fiscal Quarter Earnings

Candela Corporation (NASDAQ: CLZR) announced today that revenues for its second fiscal quarter, ended December 30, 2006, were $37.4 million versus $37.7 million for the same quarter a year earlier. For the six-month period ended December 30, 2006, revenues were $70.9 million versus $65.8 million for the same period a year earlier.

Net income for the quarter was $1.0 million or $0.04 cents per share versus $4.5 million or $0.19 cents per share for the same quarter a year earlier. For the six-month period, the Company reported net income of $5.4 million or $0.23 cents per share versus $7.5 million or $0.32 cents per share for the same period last year.

Gerard E. Puorro, Candela's President and Chief Executive Officer, said: "These results did not meet any of our expectations. The revenue shortfall forces us to recalibrate those expectations. We previously felt a 15% to 18% growth at the top line for the fiscal year was achievable. That clearly is no longer the case, and now appears to be more in the 7% to 9% range. Puorro continued: "As previously stated, and as evidenced by our increased R&D spending, we have begun to launch a series of new products that will be on display at the upcoming 65^th Annual American Academy of Dermatology Conference in Washington, D.C. on February 3-5, 2007. Puorro added: "We obviously need to closely monitor the acceptance of these products for the remainder of our fiscal year to see if they are getting sufficient traction to get us back on a growth track more suitable to this industry and these markets.

About CANDELA: Candela Corporation manufactures, and distributes innovative clinical solutions that enable physicians, surgeons, and personal care practitioners to treat selected cosmetic and medical conditions using lasers, aesthetic laser systems, and other advanced technologies. Founded near Boston in 1970, the company markets and services its products in over 70 countries from offices and distributors in the United States, Europe, Japan, China and other Asian locations. Candela established the aesthetic laser market 18 years ago, and currently has an installed base of 10,000 lasers worldwide. Candela is an Equal Opportunity and Affirmative Action Employer (Male/Female/Handicapped/Veteran). Visit Candela on the Web at http://www.candelalaser.com.

Safe Harbor Statement: Except for the historical information contained herein, this news release contains forward-looking statements that constitute Candela's current intentions, hopes, beliefs, expectations or predictions of the future, which are therefore inherently subject to risks and uncertainties. Such statements may relate to, among other things, our future revenue, gross margin, expense levels and earnings, our growth prospects, market acceptance of our products, the strength of our distribution channels, our ability to add new products, our ability to expand regulatory approvals and the liquidity of our common stock. The risks and uncertainties that may affect forward-looking statements include, among others: the cancellation or deferral of customer orders, the risk of an adverse judgment in the patent litigation with Palomar Medical Technologies, Inc., (PMTI), dependence on a small number of strategic distribution relationships, difficulties in the timely development and market acceptance of new products, unanticipated increases in expenses, market developments that vary from the current public expectations concerning the growth of the laser industry, increased competitive pressures, changes in economic conditions, or difficulties in obtaining timely regulatory approvals. Further information on factors that could affect Candela's performance is included in Candela's periodic reports filed with the SEC, including but not limited to, Candela's Annual Report on Form 10-K for the year ended July 1, 2006, and subsequent Quarterly Reports on Form 10-Q. Candela cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Candela expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any such statements to reflect any change in Candela's expectations or any change in events, conditions or circumstances on which any such statement is based.

CANDELA CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
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			December 30,			July 1,
			Â	2006		Â	2006
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Assets
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Current assets:
	Cash and cash equivalents		$	39,017		$	40,360
	Marketable securities			15,854			27,332
	Accounts receivable, net			32,168			34,273
	Notes receivable			745			1,611
	Inventories, net			18,047			16,666
	Other current assets		Â	3,785		Â	1,756
						Â
Total current assets				109,616			121,998
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Property and equipment, net				3,308			3,302
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Long-term investments				13,332			11,953
Other assets			Â	14,651		Â	11,923
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Total assets			$	140,907		$	149,176
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Liabilities and Stockholders' Equity
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Current liabilities:
	Accounts payable		$	11,583		$	15,968
	Accrued payroll and related expenses			3,274			5,728
	Accrued warranty			5,823			5,868
	Income taxes payable			-			933
	Other accrued liabilities			5,880			5,290
	Current liabilities of discontinued operations			446			1,287
	Deferred income		Â	8,914		Â	8,342
Total current liabilities				35,920			43,416
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Other long-term liabilities				5,672			5,748
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Stockholders' equity
	Common stock			259			259
	Less: Treasury stock			(21,267)			(12,997)
	Additional paid-in capital			66,581			64,234
	Accumulated earnings			53,722			48,280
	Accumulated other comprehensive income		Â	20		Â	236
Total stockholders' equity			Â	99,315		Â	100,012
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Total liabilities and stockholders' equity			$	140,907		$	149,176

CANDELA CORPORATION (Nasdaq: CLZR)
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
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			For the three months ended:						For the six months ended:
			December 30,			December 31,			December 30,			December 31,
			Â	2006		Â	2005		Â	2006		Â	2005
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Revenue			$	37,406		$	37,720		$	70,880		$	65,807
Cost of sales			Â	19,629		Â	18,745		Â	35,677		Â	32,279
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Gross profit				17,777			18,975			35,203			33,528
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Operating expenses:
	Research and development			4,586			1,800			8,186			3,442
	Selling, general and administrative		Â	12,568		Â	10,537		Â	23,648		Â	19,255
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Total operating expenses			Â	17,154		Â	12,337		Â	31,834		Â	22,697
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Income from operations				623			6,638			3,369			10,831
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Other income (expense):
	Interest income			752			262			1,515			510
	Other income (expense)		Â	135		Â	(65)		Â	3,641		Â	(3)
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	Total other income		Â	887		Â	197		Â	5,156		Â	507
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Income before income taxes				1,510			6,835			8,525			11,338
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Provision for income taxes			Â	487		Â	2,325		Â	3,083		Â	3,811
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Net income			$	1,023		$	4,510		$	5,442		$	7,527
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Net income per share of common stock:
	Basic		$	0.04		$	0.20		$	0.23		$	0.33
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	Diluted		$	0.04		$	0.19		$	0.23		$	0.32
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Weighted average shares outstanding:
	Basic		Â	22,910		Â	22,680		Â	23,220		Â	22,598
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	Diluted		Â	23,403		Â	23,498		Â	23,725		Â	23,366