<TABLE>
PART I. FINANCIAL INFORMATION
ASSETS
<S> <C> <C>
September 30, March 31,
1996 1996
(unaudited)
Current assets:
Cash and cash equivalents $606,817 $771,016
Accounts receivable, trade, net of allowance for doubtful
accounts of $18,000 (September) and $22,000 (March) 1,213,424 2,019,281
Inventories (Note 3) 2,069,144 2,500,478
Deferred income taxes 56,844 56,842
Prepaid expenses and other current assets 232,212 186,582
--------- ---------
Total current assets 4,178,441 5,534,199
Property and equipment 2,808,173 2,431,526
Less accumulated depreciation and amortization 1,498,790 1,352,642
--------- ---------
1,309,383 1,078,884
Other assets:
Intangible assets, net of accumulated amortization of
$78,000 (September) and $62,000 (March) 85,805 49,587
Deferred income taxes 126,000 126,000
Other assets 119,061 130,896
--------- ---------
330,866 306,483
--------- ---------
--------- ---------
$5,818,690 $6,919,566
See notes to consolidated financial statements.
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
September 30, March 31,
1996 1996
(unaudited)
Current liabilities:
Accounts payable, trade $1,012,886 $1,032,958
Income taxes 73,121 74,514
Customers' advances 400,080 1,019,424
Accrued payrolls and fringe benefits 312,118 512,050
Accrued expenses and other current liabilities 667,404 421,959
--------- ---------
Total current liabilities 2,465,609 3,060,905
Other liabilities:
Deferred income taxes 18,878 18,863
Other liabilities 226,571 380,409
--------- ---------
245,449 399,272
--------- ---------
--------- ---------
Total liabilities 2,711,058 3,460,177
Contingencies (Note 7)
Shareholders' equity (Note 4):
Serial preferred stock; 221,756 shares authorized and
issued; none outstanding
Common stock, no par; 20,000,000 shares authorized;
3,531,987 shares issued and outstanding 5,384,950 5,384,950
Additional paid-in capital 47,141 25,000
Deficit (2,320,206) (1,947,953)
Currency translation and other adjustments (4,253) (2,608)
--------- ---------
Total shareholders' equity 3,107,632 3,459,389
--------- ---------
--------- ---------
$5,818,690 $6,919,566
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<S> <C> <C>
For the six months ended September 30,
1996 1995
Net sales $9,579,779 $12,245,393
Cost of goods sold 6,262,768 8,303,235
--------- ---------
Gross profit 3,317,011 3,942,158
Other expenses (income):
Selling, general and administrative 2,922,920 2,907,128
Provision for doubtful accounts 58,568 6,346
Research and development, net of customer funding of
$2,000 for 1996 and $69,000 for 1995 722,689 661,626
Interest expense 15,406
Interest and other income (14,913) (12,242)
--------- ---------
3,689,264 3,578,264
Income (loss) before income taxes (372,253) 363,894
Income taxes 3,000
--------- ---------
Net income (loss) ($372,253) $360,894
Earnings (net loss) per common share (Note 5) ($0.11) $0.10
See notes to consolidated financial statements.
<S> <C> <C>
For the three months ended September 30,
1996 1995
Net sales $4,878,375 $7,121,852
Cost of goods sold 3,178,065 4,969,742
--------- ---------
Gross profit 1,700,310 2,152,110
Other expenses (income):
Selling, general and administrative 1,412,745 1,441,787
Provision for doubtful accounts 58,000 4,625
Research and development, net of customer funding of
$2,000 for 1996 and $43,000 for 1995 401,411 345,738
Interest expense 15,406
Interest and other income (11,761) (5,809)
--------- ---------
1,860,395 1,801,747
Income (loss) before income taxes (160,085) 350,363
Income taxes 3,000
--------- ---------
Net income (loss) ($160,085) $347,363
Earnings (net loss) per common share (Note 5) ($0.05) $0.09
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the year ended March 31, 1996
and the six months ended September 30, 1996 (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Common Stock Currency
------------ Additional translation
Number paid-in and other
of shares Cash Value capital Deficit adjustments Total
Balance, April 1, 1995 3,518,487 $5,337,200 $25,000 ($2,934,984) $4,896 $2,432,112
Common shares issued upon exercise of
options and warrants 13,500 47,750 47,750
Net income for the year ended
March 31, 1996 987,031 987,031
Currency translation adjustment and
unrealized holding gains and losses
on available-for-sale marketable
securities (7,504) (7,504)
--------- ---------- ------- ------------ ------- ----------
Balance, March 31, 1996 3,531,987 $5,384,950 $25,000 ($1,947,953) ($2,608) $3,459,389
Fair value of nonemployee common stock
purchase warrants and nonemployee
options issued for services 22,141 22,141
Net loss for the six months ended
September 30, 1996 (372,253) (372,253)
Currency translation adjustment and
unrealized holding gains and losses
on available-for-sale marketable
securities (1,645) (1,645)
--------- ---------- ------- ------------ ------- ----------
Balance, September 30, 1996 3,531,987 $5,384,950 $47,141 ($2,320,206) ($4,253) $3,107,632
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 6)
(Unaudited)
<S> <C> <C>
For the six months ended September 30,
1996 1995
Cash flows from operating activities:
Net income (loss) ($372,253) $360,894
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization of property and equipment 198,829 174,922
Amortization of intangible assets and deferred financing 31,598 25,905
Provision for doubtful accounts 58,568 6,346
Fair value of nonemployee common stock purchase warrants
and nonemployee options issued for services 22,141
Other adjustments 6,374
Net changes in operating assets and liabilities:
Accounts receivable, trade 747,512 (1,283,591)
Inventories 431,334 61,866
Prepaid expenses and other current assets (51,299) (55,294)
Other assets 11,835 102,257
Accounts payable, trade (20,072) 855,632
Income taxes (1,393)
Accrued expenses and other current liabilities (573,831) (146,008)
Other liabilities (153,838) 147,923
--------- --------
Net cash provided by (used in) operating activities 335,505 250,852
Cash flows from investing activities:
Purchases of property and equipment (435,101) (465,352)
Purchases of intangible assets (52,153) (12,147)
Proceeds from sale of property and equipment 129
--------- --------
Net cash used in investing activities (487,125) (477,499)
Cash flows from financing activities:
Borrowings under bank line of credit agreement 829,661
Repayments under bank line of credit agreement (200,000)
Payment of deferred financing costs (10,000) (52,542)
Proceeds from exercise of options and warrants 47,750
--------- --------
Net cash provided by financing activities (10,000) 624,869
Effect of exchange rate changes on cash and cash equivalents (2,579) (9,268)
--------- --------
--------- --------
Net change in cash and cash equivalents (164,199) 388,954
Cash and cash equivalents, beginning of period 771,016 737,809
--------- --------
Cash and cash equivalents, end of period $606,817 $1,126,763
See notes to consolidated financial statements.
ITEM 1. Financial Statements
Notes to Consolidated Financial Statements
1. Basis of presentation:
Interim financial statements:
These unaudited consolidated interim financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information and with
the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, while they
have been prepared in conformity with the measurement and classification provisions of
generally accepted accounting principles, they do not include the footnote information
required by generally accepted accounting principles for complete financial statements.
Additionally, these interim financial statements are subject to adjustments that might
result from the independent audit of the Company's consolidated financial statements for
the year ending March 31, 1997. In the opinion of management, all adjustments and
disclosures necessary to make these interim financial statements not misleading have been
included. Nevertheless, reference is made to the consolidated annual financial statements
included in the Company's Annual Report on Form 10-KSB for the year ended March 31, 1996.
Operating results for the six months ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending March 31, 1996.
Use of estimates:
The preparation of these unaudited consolidated interim financial statements in accordance
with generally accepted accounting principles requires management to make estimates and
assumptions which affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or market. Cost
generally has been estimated using standard cost.
Stock based compensation:
The Company accounts for employee stock option grants using the intrinsic value based
method.
Income taxes:
Income taxes are provided based on the estimated effective annual tax rate. The estimate
gives effect to net operating loss carryforwards and undistributed earnings of the
Company's wholly owned subsidiaries on which deferred income taxes are not provided.
Reclassifications:
The Company reclassified certain amounts on April 1, 1996. Prior period amounts were
reclassified to conform with the 1996 classifications. Neither period's net operating
results were affected by these reclassifications.
2. Change in accounting principle:
On April 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." The effect of this new accounting principle on the consolidated financial
statements is not material.
3. Inventories:
<S> <C> <C>
September March
Raw materials $ 837,624 $ 669,576
Work-in-process 295,966 371,112
Finished goods 935,554 1,459,790
---------- ----------
$2,069,144 $2,500,478
4. Shareholders' equity:
The Company is authorized to issue 21,200,000 shares of capital stock, of which 221,756
shares have been designated as serial preferred stock and 20,000,000 shares have been
designated as common stock. No serial preferred stock was outstanding at September 30,
1996. The Board of Directors has not designated 978,244 authorized shares.
5. Per share information:
Primary per share information is computed based on the weighted average common and dilutive
common equivalent shares outstanding during each period, after deducting preferred dividend
requirements from net income and considering the shares that may be issued upon exercise of
stock options and warrants, reduced by the shares that may be repurchased with the funds
received from their exercise. Fully diluted per share information is computed as above and
assumes conversion of dilutive convertible preferred shares, if any, after adding preferred
dividend requirements back to net income. Fully diluted per share information has not been
presented because there would be no dilutive effect. The weighted average numbers of
shares used were:
<S> <C> <C> <C> <C>
For the six months For the three months
ended September 30, ended September 30,
1996 1995 1996 1995
3,531,987 3,734,886 3,531,987 3,764,074
6. Supplemental disclosures of cash flow information:
For the six months ended September 30, 1996, the Company issued nonemployee common stock
purchase warrants and nonemployee options in consideration for services with a fair value
of $22,141. For the six months ended September 30, 1995, payments of interest expense
approximated $9,000 and payments of income taxes approximated $2,000.
7. Contingencies:
Consumer products generally are marketed under warranties to end users of up to ten years.
The Company provides for estimated product warranty obligations at the time of sale, based
on its warranty claims experience. This estimate is particularly susceptible to changes
in the near term based on introductions of new products and changes in end user behavior.
Certain compensation of substantially all employees is contingent upon various performance
criteria. Approximately $76,000 and $145,000 were provided for estimated contingent
payments earned for the six months ended September 30, 1996 and 1995, respectively.
One of the Company's manufacturing processes requires the use of minute quantities of
chemicals identified by the Environmental Protection Agency as hazardous. The Company uses
its best efforts to handle, store and dispose of these materials in a safe and
environmentally sound manner, in accordance with federal, state and local regulations.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Certain factors could cause results to materially differ from those in the forward-looking
statements contained in the following discussion. Among such important factors are the
timely development, market acceptance and warranty performance of new products, the impact
of competitive products and pricing, the continuity of bookings trends, customers'
financial condition, the absence of supply interruptions, the uncertainty of doing business
in China and such risks and uncertainties as are detailed from time to time in the
Company's SEC reports and filings, including this Form 10-QSB for the six months ended
September 30, 1996.
RESULTS OF OPERATIONS
For the six months ended September 30, 1996, net sales declined by 22 percent, compared
with the same period in 1995. The Company believes that the decline, mainly attributable
to decreased sales of consumer bath scales, largely resulted from changes in customers'
ordering patterns. Customers have placed increased emphasis on "just-in-time" deliveries,
driven by weakness in certain European economies.
The Company also believes that certain large customers deferred their bath scale orders in
anticipation of the release of newly designed models. In response to the success of its glass
bath scale, the Company has continued to focus on developing new consumer products. A record
number of new consumer products now are being introduced. Recently, the Company began shipping
several new products, including a new line of metal-based scales. Orders for consumer products
increased sharply after September 30, 1996, resulting in strong shipments and backlog in the
third fiscal quarter.
Additionally, the Company has taken steps to enhance its prospects for industrial products sales
growth. Industrial market development activities, including sampling, trade show participation
and publicity, have been intensified. Additionally, the Company has developed the capability
to quickly respond to target customers' requirements for short production runs, by opening its
Virginia Transducer Engineering Center. Although no assurance can be given, the Company believes
that these factors will contribute to increased revenues and improved profitability over the next
several fiscal quarters.
The gross profit margin for the six months ended September 30, 1996 approximated 34.6
percent of sales, compared with 32.2 percent for the same period in 1995, benefiting from
changes in the product mix and the greater proportion of United States distribution in the
latter period's sales.
Selling, general and administrative expenses for the six months ended September 30, 1996
were flat, compared with the same period in 1995, though there were significant changes
among its components. Compensation expenses decreased, primarily as a result of a lower
provision for incentive compensation, in view of the Company's recent operating results.
This reduction was partially offset by higher employee relocation costs. Marketing costs
rose, mainly for sales materials and publicity for the Company's line of industrial
pressure transducers. Increased costs also were incurred for new packaging, for additions
to the consumer scale lines, and for investor relations. The provision for product
warranty obligations was increased as a result of recent claims experience. Additionally,
the Company incurred certain professional fees and other costs for potential acquisition
investigation.
The provision for doubtful accounts for 1996 increased, compared with 1995, as a result of
the write-off of an estimated uncollectable amount due from a bankrupt former customer.
No interest expense was incurred for 1996, because the Company has not required borrowings
through September 30, 1996.
Research and development expenses increased by $61,000, compared with 1995, mainly as a
result of a shift toward Company-funded projects in 1996. This shift has been driven by
the Company's focus on its industrial pressure transducer applications and line extensions
of its successful consumer products designs. Costs increased slightly, following the
Company's June 1996 launch of its Virginia Transducer Engineering Center in June 1996, net
of a reduction in costs effected by the increased proportion of engineers operating in
China.
Income taxes were not provided in 1996, as a result of the net loss. The small income tax
provision for 1995 reflected the availability of net operating loss carryforwards to
offset that period's pretax income.
The Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" in 1996.
The effect of this new accounting principle is not material.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities provided $336,000 of net cash flows for the six months ended
September 30, 1996. The impact of that period's net loss was offset primarily by
collections of trade receivables.
The Company purchased $435,000 of property and equipment, mainly for the facilities in
China and Virginia, and for new product tooling. The Company plans to expand its
capabilities in Virginia and incur tooling costs for new products. However, there were no
material commitments for capital expenditures at September 30, 1996.
At that date, the Company had a current ratio of 1.7 to 1. The Company has a $2 million
bank line of credit for domestic working capital requirements. No borrowings were
outstanding at September 30, 1996. Additionally, the Company benefits from its principal
supplier's terms of sale, pursuant to which the supplier purchases certain raw materials
which otherwise might require financing by the Company.
Management believes that these resources and cash flows from expected operating activities
will continue to be adequate for the Company's existing business and planned growth.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
(11) Statement regarding computation of per share earnings for 1996 and 1995
(27) Financial Data Schedule
The Company did not file any reports on Form 8-K during the three months ended September
30, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
MEASUREMENT SPECIALTIES, INC.
(Registrant)
/s/ Joseph R. Mallon Jr.
Date: November 14, 1996 President, Chief Executive Officer and
Chairman of the Board of Directors
/s/ Mark A. Shornick
Date: November 14, 1996 Chief Financial Officer, Treasurer and
Assistant Secretary
</TABLE>
<TABLE>
MEASUREMENT SPECIALTIES, INC.
September 30, 1996
EXHIBIT 11 -- STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<S> <C> <C>
For the six months ended September 30,
1996 1995
Primary net income (loss) per common share:
Net income (loss) ($372,253) $360,894
Assumed interest income net of tax effect under modified
treasury stock method (a) 0
---------- ----------
Net income (loss) available to common shareholder ($372,253) $360,894
Weighted average common shares outstanding 3,531,987 3,527,678
Net effect of dilutive common equivalent shares based on
the treasury stock method using average market price
(modified treasury stock method for 1996) (a) 0 207,208
---------- ----------
Total 3,531,987 3,734,886
---------- ----------
---------- ----------
Primary net income (loss) per common share ($0.11) $0.10
Fully diluted net income (loss) per common share:
Net income (loss) ($372,253) $360,894
Assumed interest income net of tax effect under modified
treasury stock method (a) 0
---------- ----------
Net income (loss) available to common shareholder ($372,253) $360,894
Weighted average common shares outstanding 3,531,987 3,527,678
Net effect of dilutive common equivalent shares based on
the treasury stock method using period-end market price,
if higher than average market price (modified treasury
stock method for 1996) (a) 0 212,109
---------- ----------
Total 3,531,987 3,739,787
---------- ----------
---------- ----------
Fully diluted net income (loss) per common s ($0.11) $0.10
(a) Improvements of earnings per common share have not been taken into account
<S> <C> <C>
For the three months ended September 30,
1996 1995
Primary net income (loss) per common share:
Net income (loss) ($160,085) $347,363
Assumed interest income net of tax effect under modified
treasury stock method (a) 0
---------- ----------
Net income (loss) available to common shareholder ($160,085) $347,363
Weighted average common shares outstanding 3,531,987 3,531,204
Net effect of dilutive common equivalent shares based on
the treasury stock method using average market price
(modified treasury stock method for 1996) (a) 0 232,870
---------- ----------
Total 3,531,987 3,764,074
---------- ----------
---------- ----------
Primary net income (loss) per common share ($0.05) $0.09
Fully diluted net income (loss) per common share:
Net income (loss) ($160,085) $347,363
Assumed interest income net of tax effect under modified
treasury stock method (a) 0
---------- ----------
Net income (loss) available to common shareholder ($160,085) $347,363
Weighted average common shares outstanding 3,531,987 3,531,204
Net effect of dilutive common equivalent shares based on
the treasury stock method using period-end market price,
if higher than average market price (modified treasury
stock method for 1996) (a) 0 232,870
---------- ----------
Total 3,531,987 3,764,074
---------- ----------
---------- ----------
Fully diluted net income (loss) per common s ($0.05) $0.09
(a) Improvements of earnings per common share have not been taken into account
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the small
business issuer's unaudited consolidated interim financial statements as of
September 30, 1996 and for the three-month period then ended and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000778734
<NAME> MEASUREMENT SPECIALTIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-1-1996
<PERIOD-END> SEP-30-1996
<CASH> 607
<SECURITIES> 0
<RECEIVABLES> 1231
<ALLOWANCES> (18)
<INVENTORY> 2069
<CURRENT-ASSETS> 4178
<PP&E> 2808
<DEPRECIATION> (1499)
<TOTAL-ASSETS> 5819
<CURRENT-LIABILITIES> 2465
<BONDS> 0
<COMMON> 5385
0
0
<OTHER-SE> 43
<TOTAL-LIABILITY-AND-EQUITY> 5819
<SALES> 9580
<TOTAL-REVENUES> 9580
<CGS> 6263
<TOTAL-COSTS> 6263
<OTHER-EXPENSES> 3631
<LOSS-PROVISION> 58
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<INCOME-PRETAX> (372)
<INCOME-TAX> 0
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<NET-INCOME> (372)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
