<TABLE>
MEASUREMENT SPECIALTIES
June 30, 1996
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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CONSOLIDATED BALANCE SHEETS
ASSETS
<S> <C> <C>
June 30, March 31,
1996 1996
(unaudited)
----------- ---------
Current assets:
Cash and cash equivalents $668,018 $771,016
Accounts receivable, trade, net of
allowance for doubtful accounts
of $18,000 (June) and
$22,000 (March) 1,507,427 2,019,281
Inventories (Note 3) 2,426,309 2,500,478
Deferred income taxes 56,840 56,842
Prepaid expenses and other
current assets 217,290 186,582
--------- ---------
Total current assets 4,875,884 5,534,199
Property and equipment 2,636,308 2,431,526
Less accumulated depreciation
and amortization 1,394,672 1,352,642
--------- ---------
1,241,636 1,078,884
Other assets:
Intangible assets, net of
accumulated amortization of
$69,000 (June) and $62,000 (March) 66,093 49,587
Deferred income taxes 126,000 126,000
Other assets 184,272 130,896
--------- ---------
376,365 306,483
--------- ---------
--------- ---------
$6,493,885 $6,919,566
See notes to consolidated financial statements.
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
June 30, March 31,
1996 1996
(unaudited)
----------- ---------
Current liabilities:
Accounts payable, trade $898,555 $1,032,958
Income taxes 73,009 74,514
Customers' advances 731,250 1,019,424
Accrued payrolls and fringe benefits 593,249 512,050
Accrued expenses and other current
liabilities 607,592 421,959
--------- ---------
Total current liabilities 2,903,655 3,060,905
Other liabilities:
Deferred income taxes 18,849 18,863
Other liabilities 305,983 380,409
--------- ---------
324,832 399,272
--------- ---------
Total liabilities 3,228,487 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 (2,160,121) (1,947,953)
Currency translation and other
adjustments (6,572) (2,608)
--------- ---------
Total shareholders' equity 3,265,398 3,459,389
--------- ---------
--------- ---------
$6,493,885 $6,919,566
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<S> <C> <C>
For the three months
ended June 30,
1996 1995
---------- ----------
Net sales $4,701,404 $5,123,541
Cost of goods sold 3,084,703 3,405,760
---------- ----------
Gross profit 1,616,701 1,717,781
Other expenses (income):
Selling, general and administrative 1,510,175 1,393,074
Provision for doubtful accounts 568 1,721
Research and development, net of customer
funding of $26,000 for 1995 321,278 315,888
Interest and other income (3,152) (6,433)
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1,828,869 1,704,250
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Net income (loss) ($212,168) $13,531
Earnings (net loss) per common share (Note 5) ($0.06) $0.00
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the year ended March 31, 1996 and the three months ended June 30, 1996
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Currency
Common stock Additional translation
Number paid-in and other
of shares $ 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 three months
ended June 30, 1996
(212,168) (212,168)
Currency translation adjustment
and unrealized holding gains and
losses on available-for-sale
marketable securities (3,964) (3,964)
--------- --------- ---------- --------- --------- ---------
Balance, June 30, 1996 3,531,987 $5,384,950 $47,141 ($2,160,121) ($6,572) $3,265,398
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 6)
(Unaudited)
<S> <C> <C>
For the three months
ended June 30,
1996 1995
---------- ---------
Cash flows from operating activities:
Net income (loss) ($212,168) $13,531
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization of
property and equipment 96,605 90,273
Amortization of intangible assets and
deferred financing costs 14,955 13,966
Provision for doubtful accounts 568 1,721
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 511,167 (975,563)
Inventories 74,169 (158,971)
Prepaid expenses and other current
assets (38,527) (52,569)
Other assets (53,376) (122,635)
Accounts payable, trade (134,403) 993,259
Income taxes (1,449)
Accrued expenses and other current
liabilities (21,342) (180,000)
Other liabilities (74,426) 58,517
------- -------
Net cash provided by (used in) operating
activities 190,288 (318,471)
Cash flows from investing activities:
Purchases of property and equipment (266,068) (187,228)
Purchases of intangible assets (23,652)
Proceeds from sale of property and equipment 129 3,553
------- -------
Net cash used in investing activities (289,591) (183,675)
Cash flows from financing activities:
Proceeds from exercise of options and
warrants 35,750
------
Net cash provided by financing activities 35,750
Effect of exchange rate changes on cash and
cash equivalents (3,695) 12,635
Net change in cash and cash equivalents (102,998) (453,761)
Cash and cash equivalents, beginning of period 771,016 737,809
------- -------
Cash and cash equivalents, end of period $668,018 $284,048
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information about interim periods is unaudited)
1. Interim financial statements:
Basis of presentation:
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 accordance
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 three months ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending March 31,
1996.
Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or market.
Cost generally has been estimated using adjusted 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 costs associated with manufacturing support
and product development activities, previously included in selling, general and
administrative expenses, to more clearly depict its results of operations for
1996. Amounts for 1995 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:
June March
Raw materials $ 916,885 $ 669,576
Work-in-process 359,498 371,112
Finished goods 1,149,926 1,459,790
--------- ----------
$2,426,309 $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 June 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 3,531,987 for 1996 and
3,695,345 for 1995.
6. Supplemental disclosures of cash flow information:
For 1996, the Company issued nonemployee common stock purchase warrants and
nonemployee options in consideration for services with a fair value of $22,141.
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.
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.
At June 30, 1996, the Company's Hong Kong subsidiary was contingently liable
for $70,000 under discounted letters of credit.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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RESULTS OF OPERATIONS
For the three months ended June 30, 1996, net sales of $4,701,000 decreased by
approximately 8 percent compared with net sales of $5,124,000 for the three
months ended June 30, 1995. Operations for the three months ended June 30,
1996 resulted in a net loss of $212,000 compared with net income of $14,000
for the same period in 1995.
Sales of bath scales approximated $2,800,000 for the three months ended June
30, 1996 compared with $3,542,000 for 1995, mainly as a result of cautious
ordering by certain European customers. This decrease was partially offset by
increased sales of other consumer and industrial products.
The gross profit margin for the three months ended June 30, 1996 approximated
34.4 percent of net sales, compared with 33.5 percent for the same period in
1995. The 1996 gross profit margin benefited from the products and the higher
proportion of United States distribution channels in the sales mix for that
period. These favorable effects were partially offset by increased
manufacturing costs at the Company's recently established China plant, which
is not yet manufacturing at full capacity. Annualized inventory turns were
5.0 times for the three months ended June 30, 1996, compared with 5.7 times
for the same period in 1995.
Selling, general and administrative expenses for the three months ended June
30, 1996 increased by $117,000, compared with the same period for 1995.
Employee compensation and relocation costs increased, primarily from additions
to marketing and financial staff. Additionally, the Company increased its
provision for product warranty obligations as a result of the quarter's claims
experience.
Research and development expenses increased slightly, from June 1996 launch of
the Virginia Transducer Engineering Center, net of a reduction in costs
effected by the increased proportion of engineers operating in China.
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" for 1996. The effect of this new accounting principle is
not material.
Income taxes were not provided for either three month period, as a result of
the net loss for 1996 and because net operating loss carryforwards were
available to offset net income for the three months ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended June 30, 1996, operating activities provided
$190,000 of net cash flows, compared with the same period for 1995, in which
$318,000 was used in operating activities. Reductions of trade accounts
receivable and inventories, partially offset by reduction of trade accounts
payable, offset the cash impact of the net loss for 1996. Quarter-end trade
accounts receivable comprised 34 days' sales at June 30, 1996, compared with
36 days' sales one year earlier.
The Company invested $266,000 in 1996 purchases of property and equipment,
mainly for the Company's facilities in China and its new Virginia Transducer
Engineering Center. The Company plans to expand its capabilities in Virginia
and continue investing in new product tooling. However, there were no
material commitments for capital expenditures at June 30, 1996.
At June 30, 1996, the Company had a current ratio of 1.7 to 1. The Company
has a $2 million bank line of credit, expiring in July 1997, for domestic
working capital requirements. No borrowings were outstanding at June 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
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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
June 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)
Date: August 15, 1996 /s/ Joseph R. Mallon Jr.
President, Chief Executive Officer and
Chairman of the Board of Directors
Date: August 15, 1996 /s/ Mark A. Shornick
Chief Financial Officer, Assistant
Secretary and Treasurer
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MEASUREMENT SPECIALTIES, INC.
June 30, 1996
EXHIBIT 11 -- STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<S> <C> <C>
For the three months
ended June 30,
1996 1995
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Primary net income (loss) per common share:
Weighted average common shares
outstanding 3,531,987 3,524,113
Net effect of dilutive common equivalent
shares based on the treasury stock method
using average market price 171,232
--------- ---------
Total 3,531,987 3,695,345
--------- ---------
Net income (loss) ($212,168) $13,531
--------- ---------
Primary net income (loss) per common share ($0.06) $0.00
Fully diluted net income (loss) per common share:
Weighted average common shares outstanding 3,531,987 3,524,113
Net effect of dilutive common equivalent
shares based on the treasury stock method
using period-end market price, if higher
than average market price 171,232
--------- ---------
Total 3,531,987 3,695,345
--------- ---------
Net income (loss) ($212,168) $13,531
--------- ---------
Fully diluted net income (loss) per
common share (a) ($0.06) $0.00
(a) Improvements of earnings per common share computed on the fully
diluted basis have not been taken into account
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the small
business issuer's unaudited consolidated interim financial statements as of
June 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>
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<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-1-1996
<PERIOD-END> JUN-30-1996
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<SECURITIES> 0
<RECEIVABLES> 1525
<ALLOWANCES> (18)
<INVENTORY> 2426
<CURRENT-ASSETS> 4876
<PP&E> 2636
<DEPRECIATION> (1395)
<TOTAL-ASSETS> 6494
<CURRENT-LIABILITIES> 2904
<BONDS> 0
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0
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</TABLE>
