StockerYale purchase misses expectations

StockerYale’s purchase of Photonic Products last October expanded the company but did not double its size, as the company said it expected at the time, according to financial statements filed Tuesday with the Securities and Exchange Commission.

At the time of the filing, StockerYale CEO Mark Blodgett said that the acquisiton would result in a doubling of the firm’s size. Instead, the acquisition might result in even more losses to the company, at least at first, according to the statements.

The Salem-based provider of photonics-based products bought the decade-old privately held British firm for $9.4 million, roughly the amount of Photonic Products’ annual revenue, StockerYale officials said at the time.

According to an audited statement, Photonic produced some $7.6 million in revenue in 2005, compared to StockerYale’s $16.2 million. (StockerYale’s figures are not audited.) The combined companies would have reported $23.8 million in revenue, according to the filing, noting that the combined figures are also unaudited.

In the first nine months of the 2006 fiscal year, Photonic produced $7 million of revenue, on the way to reaching $9.5 million by the end of the year, but short of the $13.6 million that StockerYale generated during the first nine months. The combined companies would have reported $20.4 million in revenue in the first three quarters of last year, according to the filing.

The company also would not have doubled in terms of assets. Photonic’s total assets of $3.8 million is less than a fifth of StockerYale’s $22.2 million. Even if you throw in another $10 million for goodwill and intangible assets as a result of the merger (as was assumed in the unaudited filing) the combined assets of the two companies still falls short by more than $8 million from doubling StockerYale’s assets.

Photonics made a profit, but it was not enough to offset StockerYale’s losses. Indeed, because of various consolidation-related costs, the losses would have been even greater.

In 2005, the company lost $11.9 million, while Photonic earned $916,000, but thanks to various adjustments, the combined loss would have amounted to $12.2 million. Similarly, in the first nine months of 2006 Photonics’ $506,000 profit would not have made much of a dent in StockerYale’s $3.5 million net loss, and with adjustments, the combined loss would have been nearly $4 million.

Calls to StockerYale about the statements were not returned by deadline. – BOB SANDERS