StockerYale Announces Q4, Full Year

SALEM, N.H. -- StockerYale, Inc., (NASDAQ: STKR), a leading independent provider of photonics-based products today announced its financial results for its fourth quarter and fiscal year ended December 31, 2002. Net revenue for the quarter ended December 31, 2002 was $3.1 million and the operating loss, excluding charges for asset impairment, was $2.9 million, half of the loss reported in the fourth quarter 2001. During the fourth quarter negative cash flow decreased to $1.7 million from $5.1 million in 2001 as cost reductions implemented in the second half of 2002 reduced operating losses. "While 2002 was a challenging year, we took the necessary steps to reposition the Company for success in 2003," said Mark W. Blodgett, StockerYale's chief executive officer. "We are employing a more diversified optics strategy, targeting our lasers into the defense, transportation, lumber and automotive industries, LEDs for inspection and security systems and specialty optical fiber for amplifier, sensor and gyroscope markets. Last year we cut our costs 40% by sharpening our focus; this lower cost structure will be fully reflected in the 2003 first quarter results." Blodgett outlined a number of these accomplishments, including:

FOURTH QUARTER OPERATING RESULTS Net revenues for the quarter ended December 31, 2002 were $3.1 million versus $3.4 million in the fourth quarter of 2001. While illumination revenues increased 25% or $0.6 million compared to last year, they were offset by a decline in phase mask sales and the transfer of our discontinued recorder business to an independent distributor during the quarter. Illumination and optical revenues were level with the third quarter of 2002. The fourth quarter 2002 operating loss, excluding an asset impairment charge of $1.6 million, was $2.9 million - 50% less than the $6.0 million reported in 2001. An improved gross margin and significantly lower operating expenses were responsible for the improved performance. Research and development expenses were $1.0 million versus $2.5 million, a 60% reduction, general administrative costs were $1.2 million versus $1.7 million, a 30% decrease, and selling costs were $0.8 million versus $1.5 million, a 40% drop. While treating severance costs as a normal expense, not an extraordinary charge, employee related costs nonetheless declined approximately $1.3 million from $3.4 million in 2001 to $2.1 million in 2002. The asset impairment charge of $1.6 million primarily relates to a reduction in the carrying value of internal and joint venture research and development projects. In December the Company closed a new three-year $5 million credit facility secured by our Salem building. We are currently arranging a new credit facility with a major Canadian bank, which will pay off the balance of our Canadian subsidiary facility and enhance our overall working capital position. Capital expenditures in the fourth quarter of 2002 remained low at $0.1 million versus $5.6 million in 2001. Negative cash flow decreased from $5.1 million in the fourth quarter 2001 to $1.7 million last quarter. ANNUAL RESULTS Net revenues of $13 million for fiscal 2002 declined $2.5 million or 17% below 2001 due principally to a $2.6 million reduction in optical phase mask shipments to the telecommunications market. Illumination and optical fiber revenues in 2002 registered modest gains compared to 2001. The 2002 operating loss, excluding asset impairment, declined $0.5 million or 3% compared to 2001 as a $2.9 million reduction in operating expenses offset a $2.4 million decline in gross margin. Capital expenditures were $1.6 million in 2002 versus $18.9 million the prior year as the company completed its infrastructure build-out in early 2002. Frank O'Brien, StockerYale's executive vice president and chief financial officer stated, "We have reduced our cost structure for 2003 by $10 million or 40% compared to our annualized run rate in the first quarter of 2002. These savings, coupled with a revenue plan based upon continued growth in the illumination business and a reasonable expectation of optical fiber sales, are expected to result in cash flow breakeven during the second half of 2003." StockerYale Inc.