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FORM 10-K
MEASUREMENT SPECIALTIES, INC.
80 Little Falls Road,
Fairfield, New Jersey 07004
PART I
Item 1. Business
Certain statements in this report, which discuss the Company's expectations, intentions and
strategies for the future, are "forward looking statements" within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
statements are based on information available to the Company on the date of this report and
the Company assumes no obligation to update them. Actual results could differ materially from
the forward looking statements. Among the important factors that could cause actual results
to differ 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, uncertainties of doing
business in China and Hong Kong and such additional risks and uncertainties as are detailed
from time to time in the Company's reports and filings with the Securities and Exchange
Commission (the "SEC").
Measurement Specialties, Inc. ("MSI") and its wholly owned subsidiaries, Measurement Limited
("ML") and Jingliang Electronics (Shenzhen) Co. Ltd. ("JL"), collectively referred to as the
"Company," design, develop, produce and sell digital electronic measurement products. The
Company, founded in 1981, has been manufacturing products of its own design since 1986. These
products employ a robust, core technology based on micromachining (the three-dimensional
sculpting of silicon), which permits accurate and efficient measurement, resolution and
display of ranges of distance, motion, force, pressure or temperature. The Company targets
high volume, low cost product opportunities in two principal business segments: consumer and
industrial.
The Company's consumer products segment, accounting for more than 90 percent of revenues,
comprises bath scales, kitchen scales, tire pressure gauges and distance measuring devices
which are sold, directly and through manufacturers' representatives, to United States and
European retail merchandisers and distributors. These products feature contemporary designs,
high-contrast liquid crystal displays and factory-installed lithium batteries which are
intended to last for the lives of the products. The Company was one of the first to utilize
"life-time" lithium batteries in its area of consumer products. This feature is highly valued
by consumers as it provides both lower cost and greater reliability over the life of the
products. The Company markets several bath scale models under its "Thinner" (TM) brand, kitchen
scales under its "Portion Power" (TM) brand, postal scales under its "Postal Power" (TM) brand,
tire pressure gauges under its "AccuTire" (TM) brand and distance measuring devices under its
"AccuTape" (TM) brand. Products also are sold under private labels. During the latter part
of 1995, the Company released a new bath scale model, designed with a tempered glass platform
and employing its "Sensor Disc" (TM) technological advance, which eliminated the levers and
other metal parts typically employed in consumer scales. The glass scale and other "Sensor
Disc" line extensions have become the Company's leading products.
The Company's industrial products are sold, directly and through manufacturers'
representatives, principally to industrial customers for pressure instrumentation and process
control applications. The Company produces a line of low cost, high output stainless steel
isolated pressure transducers using its silicon strain gauge sensors. These compact pressure
gauges, which transmit measurements to remote monitoring systems by wire, are housed in one-
piece stainless steel castings, making them well-suited for demanding environments, including
pumps and compressors, hydraulic and pneumatic systems, energy and water management.
Revenues are concentrated in United States and European distributors and retailers of consumer
products. Korona Haushaltswaren GmbH, a German distributor, accounted for 31 percent, 36
percent and 32 percent of net sales for the years ended March 31, 1998, 1997 and 1996,
respectively, and 17 percent of accounts receivable at March 31, 1998. Signature Brands USA,
Inc. (formerly Health o meter Products, Inc.), now owned by Sunbeam, a United States
manufacturer and distributor of electric housewares, accounted for 18 percent of net sales for
the year ended March 31, 1998 and 14 percent of accounts receivable at that date. To limit
credit risk, the Company evaluates the financial condition of customers to whom credit is
extended. The Company generally does not require customers to furnish collateral, though
certain foreign customers furnish letters of credit.
Orders for consumer products are characterized by short lead times, seasonal effects on
volume, and fluctuations due to retail demand and timing of promotions. Additionally,
production generally slows in February, when ML, JL, and suppliers suspend operations in China
and Hong Kong for the Lunar New Year holiday. Accordingly, the Company's backlog and revenues
ordinarily fluctuate during the year. Backlog, which consists only of orders believed to be
firm, approximated $4,422,000 at March 31, 1998 and $5,500,00 at March 31, 1997.
Substantially all the backlog at March 31, 1998 is expected to be filled within the fiscal
year ending March 31, 1999, although no assurance can be given. The dollar amount of backlog
orders is not necessarily indicative of the results that may be expected for an ensuing fiscal
period.
Consumer products 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 susceptible to changes in the near term based on
introductions of new products, product quality improvements and changes in end user behavior.
JL has received certification of its conformity with the International Standards Organization
("ISO") 9002 Quality System Standard.
The markets for the Company's products are characterized by frequent introductions of
competitive products and pricing pressures. Many of the Company's competitors are larger than
the Company and have achieved market acceptance of their product lines. The Company has
competed successfully on the basis of its product designs, features and value. Accordingly,
reliance is placed on research and development of new products, line extensions and
technological, quality and other continuous product improvements. There can be no assurance
that the Company will enjoy continued success in these efforts. Research and development
expenses, net of customer funding, aggregated $1,964,000 for 1998, $1,746,000 for 1997 and
$1,238,000 for 1996.
The Company's core technology employs specialized electronic components known as
micromechanical transducers and application specific integrated circuits ("ASICs").
Transducers transform measurable phenomena into analog electronic signals which the ASICs
convert to digital signals, for processing in proprietary circuitry. Calibration is achieved
using specialized equipment and software developed by the Company. The Company holds patents
for certain applications of its core technology in the measurement of force, pressure,
distance, and temperature. Additionally, pursuant to an agreement with the fabricator of its
ASICs, the Company holds an irrevocable license to the fabricator's related proprietary
software under the Semiconductor Chip Protection Act of 1984. However, the Company has not
obtained patents for all its innovations, nor does it plan to do so.
One of the Company's manufacturing processes requires the use of minute quantities of
chemicals identified by the Environment 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.
The Company manufactures substantially all its industrial products, and substantially all its
sensor subassemblies used in its consumer products, in leased premises located in China.
Additionally, certain key sales and support activities are conducted at leased premises in
Hong Kong. Substaintially all the Company's consumer products are assembled in China by a
single supplier, River Display, Ltd. ("RDL"), whose principal shareholder is a former Director
of the Company. There are no agreements which would require the Company to make minimum
payments to RDL, nor is RDL obligated to maintain capacity available for the Company's
benefit, though the Company accounts for a significant portion of RDL's revenues.
Additionally, most of the Company's products contain key components now obtained from a
limited number of sources. These concentrations in external and foreign sources of supply
present risks of interruption for reasons beyond the Company's control, including political
and other uncertainties regarding Hong Kong and China.
From time to time, JL's operations have experienced interruptions of electric power and
telecommunication. China's infrastructure continues to evolve, as does its regulation of
foreign investment. Although the Chinese government has pursued economic reforms hospitable
to foreign investment and free enterprise, the continuation and success of these efforts is
not assured. The Company's operations could be adversely affected by changes in Chinese laws
and regulations, including those relating to taxation and currency exchange controls, by the
imposition of economic austerity measures intended to reduce inflation and by social and
political unrest, such as the 1989 student demonstrations in Tiananmen Square. The United
States has considered revoking China's most favored nation ("MFN") tariff status in connection
with controversies over the protection of human rights and intellectual property rights, among
other things. The loss of MFN could adversely affect the cost of goods imported into the
United States. Additionally, if China does not join the World Trade Organization ("WTO"), the
Company may not benefit from the lower tariffs and other privileges enjoyed by competitors
located in countries which are members of the WTO.
Sovereignty over Hong Kong reverted to China on July 1, 1997. The 1984 Sino-British Joint
Declaration, the 1990 Basic Law of Hong Kong, the 1992 United States-Hong Kong Policy Act and
other agreements provide some indication of the business climate the Company believes will
exist in Hong Kong after this change in sovereignty. Hong Kong became a Special
Administrative Region ("SAR") of China, with certain autonomies from the Chinese government.
Hong Kong will remain a full member of the WTO. It will be a separate customs territory from
China, with separate tariff rates and export control procedures. It will have a separate
intellectual property registration system. The Hong Kong dollar will continue to be legal
tender in the SAR, freely convertible and not subject to foreign currency exchange controls.
The SAR government will have sole responsibility for tax policies, though the Chinese
government must approve the SAR's budgets. Notwithstanding the provisions of these
international agreements, the continued stability of political, legal, economic or other
conditions in Hong Kong cannot be assured.
No treaty exists between Hong Kong and the United States providing for the reciprocal
enforcement of foreign judgments. Accordingly, Hong Kong courts might not enforce judgments
predicated on the federal securities laws of the United States, whether arising from actions
brought in the United States or, if permitted, in Hong Kong.
Generally, the Company's revenues are priced in United States dollars and its costs and
expenses are priced in United States dollars, Hong Kong dollars and Chinese renminbi.
Accordingly, the Company's revenues may be affected by the performance of the United States
dollar compared with that of its foreign customers' currencies. Foreign sales comprised 44
percent, 51 percent and 55 percent percent of revenues for the years ended March 31, 1998,
1997 and 1996, respectively. Additionally, the Company is exposed to foreign currency
transaction and translation losses which might result from adverse fluctuations in the values
of the Hong Kong dollar and the renminbi. At March 31, 1998, the Company had net liabilities
of $598,000 subject to fluctuations in the value of the Hong Kong dollar and net assets of
$716,000 subject to fluctuations in the value of the renminbi. Fluctuations in the value of
the Hong Kong dollar have not been significant since October 17, 1983, when the Hong Kong
government pegged the value of the Hong Kong dollar to that of the United States dollar.
However, there can be no assurance that the value of the Hong Kong dollar will continue to be
tied to that of the United States dollar. China adopted a floating currency system on January
1, 1994, unifying the market and official rates of foreign exchange. China approved current
account convertibility of the renminbi on July 1, 1996, followed by formal acceptance of the
International Monetary Fund's Articles of Agreement on December 1, 1996. These regulations
eliminated the requirement for prior government approval to buy foreign exchange for ordinary
trade transactions, though approval is still required to repatriate equity or debt, including
interest thereon. As a result of these actions, the net inflow of capital into China and
government steps to restrict credit for the purpose of controlling inflation, the value of the
renminbi has been fairly stable, although inflation has persisted. However, there can be no
assurance that these currencies will remain stable or will fluctuate to the Company's benefit.
Though to date it has not, in order to manage its exposure to these risks, the company may in
the future purchase currency exchange forward contracts, currency options or other derivative
instruments, provided such instruments can be obtained at suitable prices.
At March 31, 1998, the Company employed 289 persons, compared with 235 persons at March 31,
1997: 46 employees in the United States (41 for 1997), 20 employees in Hong Kong (30 for 1997)
and 223 employees in China (164 for 1997). Employees are not represented by collective
bargaining. The Company considers its global labor practices and employee relations to be
good.
Item 2. Properties
MSI's headquarters, United States sales office and distribution warehouse and certain design
engineering facilities are located in a 19,000 square foot facility in Fairfield, New Jersey,
under an operating lease expiring on June 30, 2000. Additional design engineering, related to
the Company's industrial pressure sensor products, is conducted in a 3,000 square foot
facility in Newport News, Virginia under an operating lease expiring on November 30, 2001.
JL occupies a 23,000 square foot facility in Shenzhen, the Special Economic Zone in China's
Guangdong Province, under an operating lease expiring in February, 2000. This location
contains the Company's China facilities for production engineering, quality assurance and
certain manufacturing operations. Land in China is owned by the government, which may sell
the right to use the land for a specified period of time.
ML occupies a 1,500 square foot facility in Tsimshatsui, in Hong Kong's New Territories, under
an operating lease expiring in February, 2000. This location contains the Company's Hong Kong
sales office and facilities for sale and certain manufacturing support activities.
These premises are suitable and adequate for the Company's present operations.
Item 3. Legal Proceedings
On November 10, 1997, the Company received civil court approval of a mediated settlement, with
a licensee of the Company's technology, of a dispute over a 1991 agreement to produce and
market industrial pressure sensors. The settlement, terms of which are confidential, did not
require a provision for liability to be made in the accompanying financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fiscal quarter ended March
31, 1998.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's common stock, no par value, is traded on the American Stock Exchange (ticker
symbol MSS). At June 24, 1998, the Company's transfer agent reported that there were 141
record holders of common shares, excluding beneficial owners whose shares are held in the
names of various dealers and clearing agencies. The Company does not know the number of
beneficial holders of its common shares.
High and low sales prices for the last two fiscal years were:
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Fiscal Quarter Ended High Low
June 30, 1996 4.63 3.81
September 30, 1996 4.19 3.13
December 31, 1996 3.63 2.50
March 31, 1997 4.63 2.75
June 30, 1997 4.75 3.63
September 30, 1997 4.50 3.38
December 31, 1997 4.50 3.69
March 31, 1998 4.00 3.25
The Company has not declared cash dividends on its common equity. Management expects that
earnings which may be generated from the Company's near-term operations will be reinvested and
that, accordingly, dividends will not be paid to common shareholders in the future.
Additionally, the payment of dividends is subject to the consent of a bank with which the
Company has a revolving credit agreement.
At present, there are no material restrictions on ML's ability to transfer funds to MSI in the
form of cash dividends, loans, advances or purchases of materials, products or services. JL's
distribution and repatriation of dividends to ML or MSI are restricted by Chinese laws and
regulations.
Item 6. Selected Financial Data
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Years Ended March 31, 1998 1997 1996 1995 1994
Net sales $29,277,520 $25,004,499 $23,059,539 $17,038,659 $10,589,436
Results of operations:
Income (loss) from
continuing operations 776,863 1,174,844 987,031 333,856 (964,879)
Cumulative effect of a
new accounting
principle (1) (97,917)
----------- ----------- ----------- ----------- ------------
Net income (loss) 776,863 1,174,844 987,031 333,856 (1,062,796)
Net cash provided by (used in):
Operating activities 1,722,427 (531,186) 880,325 416,952 (587,152)
Investing activities (1,036,085) (756,892) (828,602) (443,770) (360,942)
Financing activities (611,828) 768,000 (4,792) 22,000 1,295,569
Basic earnings (net loss) per common share: (3)
Income (loss) from
continuing operations 0.22 0.33 0.28 0.09 (0.28)
Cumulative effect of a
new accounting
principle (1) (0.03)
----------- ----------- ----------- ----------- ------------
Net income (loss) 0.22 0.33 0.28 0.09 (0.31)
Diluted earning (net loss) per common share: (3)
Income (loss) from
continuing operations 0.21 0.33 0.27 0.09 (0.28)
Cumulative effect of a
new accounting principle (1) (0.03)
----------- ----------- ----------- ----------- ------------
Net income (loss) 0.21 0.33 0.27 0.09 (0.31)
Cash dividends declared per
common share none none none none none
As of March 31,
Total assets $10,217,291 $9,234,184 $6,919,566 $5,623,189 $3,775,109
Long-term debt, net of
current maturities 21,000 778,000 none none none
(1) Effect of adoption, on April 1, 1993, of Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits."
(2) Long-term obligations consist solely of borrowings under a revolving line of credit agreement
extended by a bank.
(3) All amounts have been recalculated to conform to the requirements of SFAS No. 128 "Earnings
per Share"
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations
RESULTS OF OPERATIONS
The Company's revenues and profits increased year-over-year for both 1998 and 1997, with
record sales achieved for 1998. Net sales for 1998, 1997 and 1996 were $29,278,000,
$25,004,000 and $23,060,000, respectively. Net income for 1998, 1997 and 1996 was $777,000
($0.21 per share diluted), $1,175,000 ($0.33 per share diluted) and $987,000 ($0.27 per share
diluted) respectively.
Substantially all the revenue growth for these years was derived from new product
introductions. It is not practicable to determine the extent to which revenues from
continuing products were affected by changes in prices or unit volumes for these years. Each
year includes increases in revenues in sales of consumer bath scales, the Company's principal
product category, accounting for revenues of $18,224,000, $17,820,000, and $15,289,000 for
1998, 1997, and 1996, respectively. The Company introduced a tempered glass platform scale
employing its "Sensor Disc" (TM) technological advance in late 1995, and line extensions
employing this technology were introduced thereafter.
Sales performance of other consumer products generally improved in 1998. Sales of tire
pressure gauges, which are affected by the timing of promotional sales campaigns, increased
substantially in 1998 to $4,595,000 in 1998 compared with $1,792,000 and $2,258,000 for 1997
and 1996, respectively. Kitchen and postal scales accounted for $2,606,000, $1,841,000, and
$2,314,000 of 1998, 1997, and 1996 sales, respectively. The Company expanded the number of
models in each category's line in 1998, which broadened the price ranges offered and included
a "Sensor Disc" (TM) kitchen scale and various mechanical measurement products.
Sales of the Company's principal industrial product category, industrial pressure transducers,
grew to $1,897,000 for 1998, compared with $1,218,000 for 1997 and $551,000 for 1996. This is
a relatively new product category for the Company, but one which the Company believes has
significant potential. The Company's strategy for this product category depends upon further
investment, including potential acquisitions, to realize substantial growth. In connection
with the plan to expand the Company's industrial products, in May, 1998, it announced that it
had signed a nonbinding letter of intent to acquire the Sensors Division of AMP Incorporated.
The letter of intent is subject to final due diligence and execution of a definitive contract.
The transaction is expected to close early during the second fiscal quarter ending September,
1998. The Sensors Division, with unaudited calendar 1997 sales of approximately $8 million,
is the leader in designing, manufacturing and marketing piezoelectric polymer sensors. The
sensors are marketed for industrial, consumer and instrumentation applications.
The Company continues to benefit from the expansion of its business with two principal
consumer products customers. Signature Brands USA, Inc. (formerly Health o meter Products,
Inc.), now owned by Sunbeam, a United States manufacturer and distributor of electric
housewares, accounted for 18 percent of net sales for 1998 compared with 16 percent in 1997
and less than 10 percent in 1996. Korona Haushaltswaren GmbH, a German distributor of
diversified housewares, accounted for 31 percent, 36 percent, and 32 percent of net sales for
1998, 1997, and 1996 , respectively. Foreign customers accounted for approximately 44
percent, 51 percent, and 55 percent of revenues for 1998, 1997, and 1996, respectively.
Substantially all revenues are priced in United States dollars. Accordingly, the Company's
revenues may be affected by the performance of the United States dollar compared with that of
its foreign customers' currencies.
Gross profit increased each year, and the gross profit percentage increased in 1998 versus
1997 after a decline in 1997 versus 1996. Gross profit was $10,381,000 (35.5 percent of net
sales) for 1998, $8,611,000 (34.4 percent of net sales) for 1997, and $8,098,000 (35.1
percent) for 1996. These changes in 1998 were affected primarily by increased volume, changes
in product mix, and manufacturing cost reductions. The percentage decline in 1997 versus 1996
was a result of shifts in the product mix, which became increasingly weighted in favor of
bath scales which yield lower gross profit margins than other consumer products.
Selling, general and administrative ("S,G&A") expenses increased in 1998 compared to 1997,
which was flat as compared to 1996. These expenses were $7,420,000 (25.3 percent of net
sales) for 1998, $5,983,000 (23.9 percent of net sales) for 1997, and $5,963,000 (25.9
percent) for 1996. In 1998, S,G&A expenses increased from 1997 due to increased U.S. sales
which carry higher freight and commission costs, expansion of the sales and marketing group
(primarily in the industrial area) and investments in infrastructure (both people and
information technology related) to support the continued growth. From 1996 to 1997, variable
S,G&A expenses declined slightly as a percentage of net sales, benefiting from the
concentration in the customer mix which resulted in proportionately lower costs for shipping
and sales commissions. Additionally, in 1997 versus 1996, provision for estimated product
warranty obligations declined, as a percentage of net sales, as the Company revised its
estimate reflect its more recent warranty claims experience, which benefited from product
quality improvements. JL has received certification of its conformity with the ISO 9002
Quality System Standard. The estimate of product warranty obligations is particularly
susceptible to changes in the near term based on introductions of new products, product
quality improvements and changes in end user behavior. Consumer products are marketed under
warranties to end users of up to ten years.
Total fixed S,G&A expenses remained flat from 1996 to 1997. During 1997, S,G&A expenses
contained substantial increases in advertising and promotion expenses, particularly for
packaging and sales literature developed for new consumer product offerings, and for marketing
of the industrial product segment. These expenses remained significant, since new product
introductions are key to the Company's growth plans. These increases were offset by a lower
provision for estimated bonus awards for 1997. Further increases to the staff and further
capital expenditures are likely as the Company grows.
The provision for doubtful accounts was $93,000 in 1998 and $74,000 in 1997, after being low
in 1996. Write-off's in 1998 and 1997 were in connection with two former customer's
bankruptcy. To limit credit risk, the Company evaluates the financial condition of customers
to whom credit is extended. The Company generally does not require customers to furnish
collateral, though certain foreign customers furnish letters of credit.
Research and development expenses were $1,964,000 (6.7 percent of net sales) for 1998,
$1,746,000 (7.0 percent of net sales) for 1997, and $1,238,000 (5.4 percent) for 1996.
The Company's revenue growth is likely to continue to rely on, expansion of its product lines.
Accordingly, research and development expenses will continue to be significant, although, it
is anticipated these expenses as a percentage of net sales will continue to decline. The
Company established a transducer engineering center in Virginia to develop industrial pressure
control products. Increased engineering resources were used to develop innovative designs and
new technologies to expand the number of product offerings, improve products' performance,
appeal and profitability. A significant innovation was the development of the "Sensor Disc"
(TM) technology, introduced in the Company's tempered glass bath scale and more recent line
extensions. In 1998, the Company launched further line extensions and developed a lower cost
"frame" scale incorporating "Sensor Disc" (TM) technology in a one-piece frame. The initial
customer reaction to this product has been favorable, and the Company expects that its "frame"
scale will result in a lower cost product with a shorter production cycle time. The Company
also plans to develop a new ASIC to reduce the cost in substantially all products.
In 1998, the Company's effective tax rate was 11.6% primarily as a result of lower effective
tax rates on foreign earnings as well as a $47,000 reduction in the valuation reserve related
to the alternative minimum tax credit carryforward. For 1997 and 1996, the Company reported
substantial reductions of income tax expense, which mainly reflect reductions in the
previously-established valuation allowance for deferred tax assets. These reductions were
based on management's annual assessments of the extent to which the benefits of unused net
operating loss carryforwards and alternative minimum tax credit carryforwards were more likely
than not to be realized. At March 31, 1998, the Company's unused federal net operating loss
carryforward approximated $670,000. While substantially all deferred tax benefits at March
31, 1998 are expected to be realized, the amounts realizable could be reduced in the near term
if future taxable income is lower than estimated or if there are differences in the timing or
amount of future reversals of taxable temporary differences. Additionally, provisions of the
Tax Reform Act of 1986 may limit the carryforward's future use. The use of loss carryforwards
for 1998, 1997, and 1996 resulted in tax benefits of $69,000, $73,000, and $233,000,
respectively.
The income tax credits also reflect lower rates of tax in the jurisdictions in which the
Subsidiaries operate. Deferred income taxes are not provided on the Subsidiaries'
undistributed earnings, which approximated $808,000 at March 31, 1998, because those earnings
are expected to be permanently reinvested. Distribution, in the form of dividends or
otherwise, would subject the Subsidiaries' earnings to United States income taxes, subject to
an adjustment for foreign tax credits. Determination of the amount of unrecognized deferred
United States income tax liability is not practicable because of the complexities associated
with its hypothetical calculation. Pursuant to current Chinese tax policies, JL qualifies for
a special state corporate tax rate of 15 percent. However, because JL has agreed to operate
in China for a minimum of ten years, a full tax holiday (which expired on March 31, 1998) was
available for two years, , and a 50 percent tax rate reduction to 7.5 percent is available
through March 31, 2001. After the expiration of the tax holiday, JL is expected to qualify
for a reduction of the tax rate to 10 percent, provided it exports a minimum of 70 percent of
its production. The Hong Kong corporate tax rate, at which ML's earnings are taxed, is 16.5
percent. The continuation of favorable tax rates in China and Hong Kong cannot be assured.
The Company has adopted Statement of Financial Accounting Standards No. 128, "Earnings per
Share," which requires presentation of basic and diluted per share information and eliminates
the modified treasury stock method of computing potentially dilutive common shares. Prior
year accounts have been restated to reflect this change. Basic per share information is
computed based on the weighted average common shares outstanding during each period. Diluted
per share information additionally considers the shares that may be issued upon exercise or
conversion of stock options, warrants and convertible securities less the shares that may be
repurchased with the funds received from their exercise.
The Company manufactures all its industrial products, and all its proprietary subassemblies
used in its consumer products, in leased premises located in China. Substantially all its
consumer products are assembled by a single source, River Display Ltd. ("RDL"), also operating
in China. Additionally, most of the Company's products contain key components now obtained
from a limited number of suppliers. These concentrations in the current sources of supply
present risks of interruption for reasons beyond the Company's control, including, with
respect to China, political, economic and legal uncertainties.
From time to time, JL's operations have experienced interruptions of electric power and
telecommunication. China's infrastructure continues to evolve, as does its regulation of
foreign investment. Although the Chinese government has pursued economic reforms hospitable
to foreign investment and free enterprise, the continuation and success of these efforts is
not assured. The Company's operations could be adversely affected by changes in Chinese laws
and regulations, including those relating to taxation and currency exchange controls, by the
imposition of economic austerity measures intended to reduce inflation and by social and
political unrest. Revocation by the United States of China's most favored nation tariff
status could adversely affect the cost of goods imported into the United States.
Additionally, if China does not join the World Trade Organization ("WTO"), the Company may not
benefit from the lower tariffs and other privileges enjoyed by competitors.
During 1998, the Company significantly reduced the workforce in Hong Kong and converted the
operation from a manufacturing and engineering entity to one focused on sales, marketing and
control of subcontractors. Sovereignty over Hong Kong reverted to China on July 1, 1997.
The 1984 Sino-British Joint Declaration, the 1990 Basic Law of Hong Kong, the 1992 United
States-Hong Kong Policy Act and other agreements provide some indication of the business
climate the Company believes will exist in Hong Kong in the future. Hong Kong became a Special
Administrative Region ("SAR") of China, with certain autonomies relating to international
trade, intellectual and other property rights, foreign currency exchange and taxation.
Notwithstanding the provisions of these international agreements, the continued stability of
political, legal, economic or other conditions in Hong Kong cannot be assured.
The Company's costs and expenses are priced in United States dollars, Hong Kong dollars and
Chinese renminbi. Accordingly, the Company is exposed to foreign currency transaction and
translation losses which might result from adverse fluctuations in the values of the Hong Kong
dollar and the renminbi. At March 31, 1998, the Company had net liabilities of $514,000
subject to fluctuations in the value of the Hong Kong dollar and net assets of $294,000
subject to fluctuations in the value of the renminbi. Past fluctuations in the values of
these foreign currencies have not had a material effect on the Company's business. However,
there can be no assurance that these currencies will remain stable or will fluctuate to the
Company's benefit. To manage its exposure to these risks, the Company may, though to date it
has not, purchase currency exchange forward contracts, currency options or other derivative
instruments, provided such instruments can be obtained at suitable prices.
The Company believes that inflation has not had a material effect on its business. The
Company competes on the basis of its product designs, features and value. Accordingly, its
revenues generally have kept pace with inflation, notwithstanding that inflation in the
Subsidiaries' locations have been consistently higher than that in the United States.
Increases in labor costs have not had a significant impact on the Company's business because
most of the Company's employees are in China, where prevailing labor costs are low.
Additionally, the Company believes that any significant increases in materials costs are
likely to affect the entire electronics industry and, accordingly, may not have a significant
adverse effect on the Company's competitive position.
LIQUIDITY AND CAPITAL RESOURCES
The Company continued to have adequate resources for its financing requirements, which have
been concentrated in the working capital needs of its operations, including significant
research and development, as well as capital expenditures. For 1998, cash increased by
$64,000, as operating activities generated $1,722,000 and investing activities used
$1,036,000. Financing activities, principally borrowings under the Company's bank line of
credit, net of repayments, and proceeds form exercise of stock options, used $612,000 for
that year. For 1997, cash declined by $532,000 primarily to finance increased working capital
and capital expenditures.
The Company's working capital needs were flat in 1998, reflecting considerable growth in the
volume of business offset by faster receivable collections and inventory control programs.
Backlog approximated $4,422,000 at March 31, 1998, compared with $5,500,000 a year earlier.
The dollar amount of backlog orders is not necessarily indicative of the results that may be
expected for an ensuing fiscal period. Orders for consumer products are characterized by
short lead times and, accordingly, revenues and backlog will continue to fluctuate.
Additionally, as a result of timing of customer orders, the Company expects sales to decline
in the first quarter of Fiscal 1999.
Capital expenditures for 1998 continued to be driven mainly by new product introductions and
technologies as well as investments in computer hardware and software. Production equipment
was installed at MSI's engineering center in Virginia and at JL, to expand their capabilities
for development and production of industrial pressure transducers and consumer product
subassemblies. JL also further improved its leasehold. The growth of consumer product line
extensions resulted in additional spending, in Hong Kong, on new product tooling. MSI and JL
purchased computer hardware and software to improve engineering and office productivity. The
Company expects such capital spending to continue, in line with expansions of its product
lines and staff size. Additionally, the future success of the Company's industrial products
segment could necessitate significantly larger expenditures for production equipment,
especially in China. There were no material commitments for capital expenditures at March 31,
1998.
During the year, the Company financed its requirements with accounts payable and bank
borrowings. RDL, the Company's principal supplier, assembles substantially all the Company's
consumer products. While the Company furnishes RDL with the proprietary subassemblies
required in its products, RDL purchases many other components from third parties on the
Company's behalf, reducing the Company's need to finance certain raw materials through their
conversion to finished inventories. RDL is not required to maintain capacity available for
the Company's benefit, nor is the Company obligated to make minimum payments to RDL.
On December 19, 1997 the Company amended its revolving line of credit agreement to increase
the maximum borrowings to $3.3 million. The line, extended by a United States bank, requires
advances to be repaid by September 30, 1999, the date of the agreement's expiration, and is
collateralized by a senior security interest in substantially all assets. Borrowings bear
interest at 0.125 percent above the bank's prime rate (aggregating 8.625 percent at March 31,
1998) or at 2.25 percent above London interbank offered rates for certain maturities, at the
Company's option. The agreement requires the Company to maintain certain levels of working
capital and net worth, limits the Company's capital expenditures and advances to its
Subsidiaries and requires the bank's consent for the payment of dividends. Additionally, the
agreement requires payment of a non-usage fee.
In May, 1998, the Company announced it had signed a nonbinding letter of intent to acquire the
Sensors Division of AMP Incorporated. The letter of intent is subject to final due diligence
and execution of a definitive contract. The transaction is expected to close early during the
second fiscal quarter ending September, 1998. The acquisition is expected to be financed with
debt raised as an extension of the Company's existing banking relationship.
From time to time, export letters of credit received from foreign customers are discounted,
with recourse, with ML's banks in Hong Kong. At March 31, 1998, ML was not contingently liable
for any under discounted letters of credit pending collection by the banks.
Significant expansion of the Company's operations may require additional resources. The
Company believes that suitable resources for expansion of its working capital requirements
would be available, though no assurance can be given. Additionally, if the Company were to
pursue potential acquisitions, it would likely require other forms of financing.
The Company has not declared cash dividends on its common equity. Management expects that
earnings which may be generated from the Company's near-term operations will be reinvested and
that, accordingly, dividends will not be paid to common shareholders in the future.
Additionally, the payment of dividends is subject to the consent of a bank with which the
Company has a revolving credit agreement.
At present, there are no material restrictions on ML's ability to transfer funds to MSI in the
form of cash dividends, loans, advances or purchases of materials, products or services. JL's
distribution and repatriation of dividends to ML or MSI are restricted by Chinese laws and
regulations, including currency exchange controls. At March 31, 1998, JL's restricted net
assets approximated $1,589,000.
In June, 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 130 (FAS 130), "Comprehensive Income," which requires companies to
present comprehensive income. Comprehensive income consists of net income or loss for the
current period and other comprehensive income - income, expenses, gains, and losses that
bypass the income statement and are reported directly in a separate component of equity. The
Statement (which is effective for fiscal years beginning after December 15, 1997) is not
expected to have a material impact. Also, in June, 1997, the FASB issued Statement of
Financial Accounting Standards No. 131 (FAS 131), "Disclosures about Segments of an Enterprise
and Related Information." FAS 131 requires disclosure of certain information regarding
operating segments, products and services, geographic areas of operation and major operations.
Adoption of FAS 131, which is effective for fiscal periods beginning after December 15, 1997,
is not expected to require additional material disclosures.
The Year 2000 Issue
The Company has conducted a review of its computer systems to identify the systems that could
be affected by the "Year 2000" issue and has developed an implementation plan to resolve the
issue. The Year 2000 problem is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's programs that
have time-sensitive software may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a major system failure or miscalculations. The Company
believes that, with conversion to new software for certain applications, the Year 2000 problem
will not pose significant operational problems for the Company's computer systems. The cost
of these new systems is not material. However, if such conversions are not completed timely,
the Year 2000 problem may have a material impact on the operations of the Company. Also,
there can be no assurance that the systems of other companies on which the Company's systems
rely also will be timely converted or that any such failure to convert by another company
would not have an adverse effect on the Company's systems or operations.
Forward-Looking Statements
This report contains forward-looking statements within the meaning of The Private Securities
Litigation Reform Act of 1995. The statements are made a number of times throughout the
document and may be identified by forward-looking terminology as "expect," "believe," "may,"
"will," "intend" or similar statements or variations of such terms. Such forward looking
statements involve certain risks and uncertainties including conditions in the general economy
and in the markets served by the company; competitive factors, such as price pressures and the
potential emergence of rival technologies; interruptions of suppliers' operations affecting
availability of component materials at reasonable prices; timely development and market
acceptance of new products; success in identifying, financing and integrating acquisition
candidates; changes in product mix, costs and yields, fluctuations in foreign currency
exchange rates; uncertainties related to doing business in Hong Kong and China. These and
other factors may cause actual results to differ materially from such forward-looking
statements included in this report. The Company assumes no obligation for updating any such
forward-looking statements.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data, together with the report thereon by the
Company's Independent Certified Public Accountants, are listed below in Item 14. Exhibits,
Financial Statement Schedules and Reports on Form 8-K.
Item 9. Changes in and disagreements with Accountants on Accounting and Financial
Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item is incorporated by reference from the information under
the caption "Management" contained in the Company's definitive Proxy Statement which will be
filed on or before August 29, 1998 with the Securities and Exchange Commission in connection
with Registrant's 1998 annual meeting of stockholders.
Item 11. Executive Compensation
The information required by this item is incorporated by reference from the information under
the caption "Executive Compensation" contained in the Company's definitive Proxy Statement
which will be filed on or before August 29, 1998 with the Securities and Exchange Commission
in connection with Registrant's 1998 annual meeting of stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated by reference from the information under
the caption "Security ownership of Certain Beneficial Owners and Management" contained in the
Company's definitive Proxy Statement which will be filed on or before August 29, 1998 with the
Securities and Exchange Commission in connection with Registrant's 1998 annual meeting of
stockholders.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated by reference from the information under
the caption "Certain Relationships and Related Transactions" contained in the Company's
definitive Proxy Statement which will be filed on or before August 29, 1998 with the
Securities and Exchange Commission in connection with Registrant's 1998 annual meeting of
stockholders.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the accompanying consolidated balance sheets of Measurement Specialties, Inc.
and Subsidiaries as of March 31, 1998 and 1997, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the three years in the period ended
March 31, 1998. These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Measurement Specialties, Inc. and
Subsidiaries as of March 31, 1998 and 1997, and the consolidated results of their operations
and their consolidated cash flows for each of the three years in the period ended March 31,
1998, in conformity with generally accepted accounting principles.
We have also audited Schedule II for each of the years ended March 31, 1998, 1997, and 1996.
In our opinion, this schedule presents fairly, in all material respects, the information
required to be set forth therein.
GRANT THORNTON LLP
Parsippany, New Jersey
June 18, 1998
CONSOLIDATED BALANCE SHEETS
ASSETS
<S> <C> <C>
March 31, March 31,
1998 1997
Current assets:
Cash and cash equivalents $302,969 $238,787
Accounts receivable, trade, net of
allowance for doubtful accounts
of $130,000 (1998) and $32,000 (1997) 3,123,636 2,811,756
Inventories 3,815,024 3,675,870
Deferred income taxes 213,174 159,190
Prepaid expenses and other current
assets 173,594 239,566
--------- ---------
Total current assets 7,628,397 7,125,169
Property and equipment 3,934,428 3,030,387
Less accumulated depreciation and
amortization 2,171,422 1,643,976
--------- ---------
1,763,006 1,386,411
Other assets:
Intangible assets, net of accumulated
amortization of $165,000 (1998) and
$101,000 (1997) 154,579 108,316
Deferred income taxes 372,184 385,071
Other assets 299,125 229,217
--------- ---------
825,888 722,604
--------- ---------
--------- ---------
$10,217,291 $9,234,184
See notes to consolidated financial statements.
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
March 31, March 31,
1998 1997
Current liabilities:
Accounts payable $ 3,122,686 $2,319,840
Customers' advances 4,674 194,143
Accrued payroll and fringe benefits 383,953 337,787
Current portion of product warranty
obligations 260,933 218,000
Income taxes payable 63,032 641
Deferred income taxes 0 10,953
Accrued expenses and other current
liabilities 457,586 339,285
--------- ---------
Total current liabilities 4,292,864 3,420,649
Other liabilities:
Borrowings under bank line of credit
agreement 21,000 778,000
Product warranty obligations, net of
current portion 211,530 278,000
Other liabilities, including deferred
income taxes 112,074 114,195
--------- ---------
344,604 1,170,195
--------- ---------
Total liabilities 4,637,468 4,590,844
Commitments and contingencies
Shareholders' equity
Serial preferred stock; 221,756 shares
authorized; none outstanding
Common stock, no par; 20,000,000 shares
authorized; shares issued and
outstanding: 3,582,287(1998) and
3,531,987 (1997) 5,501,931 5,384,950
Additional paid-in capital 75,332 47,141
Retained earnings (accumulated deficit) 3,754 (773,109)
Currency translation and other
adjustments (1,194) (15,642)
--------- ---------
Total shareholders' equity 5,579,823 4,643,340
--------- ---------
--------- ---------
$10,217,291 $9,234,184
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
<S> <C> <C> <C>
For the year ended March 31,
1998 1997 1996
Net sales $29,277,520 $25,004,499 $23,059,539
Cost of goods sold 18,896,081 16,393,526 14,961,506
----------- ----------- -----------
Gross profit 10,381,439 8,610,973 8,098,033
Other expenses (income):
Selling, general and administrative 7,420,112 5,983,449 5,962,776
Provision for doubtful accounts 92,870 73,639 18,010
Research and development, net of customer
funding of $15,000 for 1998, $54,000 for
1997 and $95,000 for 1996 1,963,952 1,746,293 1,237,596
Interest expense 80,083 19,292 19,153
Interest and other income (54,441) (36,199) (41,552)
----------- ----------- -----------
9,502,576 7,786,474 7,195,983
Income before income taxes 878,863 824,499 902,050
Income tax provision (benefit) 102,000 (350,345) (84,981)
----------- ----------- -----------
Net income $776,863 $1,174,844 $987,031
Earnings per common share
Basic $0.22 $0.33 $0.28
Diluted $0.21 $0.33 $0.27
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended March 31, 1998, 1997 and 1996
<S> <C> <C> <C> <C> <C>
Currency
Additional translation
Common paid-in and other
stock capital Deficit adjustments Total
Balance, April 1, 1995 $5,337,200 $25,000 ($2,934,984) $4,896 $2,432,112
13,500 common shares issued
upon exercise of warrants 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 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 income for the year ended
March 31, 1997 1,174,844 1,174,844
Currency translation adjustment
and unrealized holding gains
and losses on available-for-
sale marketable securities (13,034) (13,034)
---------- ------- ------------ ------- -----------
Balance, March 31, 1997 5,384,950 47,141 (773,109) (15,642) 4,643,340
50,900 common shares issued upon
exercise of options 116,981 28,191 145,172
Net income for the year ended
March 31, 1998 776,863 776,863
Currency translation adjustment 14,448 14,448
---------- ------- ------------ ------- -----------
Balance, March 31, 1998 $5,501,931 $75,332 $3,754 ($1,194) $5,579,823
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<S> <C> <C> <C>
For the year ended March 31,
1998 1997 1996
Cash flows from operating activities:
Net income $776,863 $1,174,844 $987,031
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization of property and equipment 530,120 343,836 368,496
Amortization of intangible assets 63,951 70,636 57,596
Provision for doubtful accounts 92,870 73,639 18,010
Deferred income taxes (16,691) (344,690) (161,137)
Fair value of nonemployee common stock purchase warrants
and nonemployee options issued for services - 22,141 -
Other adjustments (4,876) 8,972 10,716
Net changes in operating assets and liabilities:
Accounts receivable, trade (404,750) (868,491) (481,038)
Inventories (139,154) (1,175,392) (221,776)
Prepaid expenses and other current assets 65,972 (74,300) (19,844)
Other assets (69,908) (98,321) 67,894
Accounts payable 802,846 1,286,882 (370,465)
Income taxes payable 62,391 (73,873) 78,654
Severance benefit payable to former officer - (194,833) -
Accrued expenses and other current liabilities 118,301 (669,385) 658,315
Other liabilities (155,508) (12,851) 82,706
--------- ---------- --------
Net cash provided by (used in) operating activities 1,722,427 (531,186) 880,325
Cash flows from investing activities:
Purchases of property and equipment (907,831) (658,754) (802,345)
Purchases of intangible assets (128,254) (98,138) (26,257)
--------- ---------- --------
Net cash used in investing activities (1,036,085) (756,892) (828,602)
Cash flows from financing activities:
Borrowings under bank line of credit agreement 12,669,000 6,026,360 979,661
Repayments under bank line of credit agreement (13,426,000) (5,248,360) (979,661)
Payment of deferred financing costs - (10,000) (52,542)
Proceeds from exercise of options and warrants 145,172 - 47,750
--------- ---------- --------
Net cash provided by (used in) financing activities (611,828) 768,000 (4,792)
Effect of exchange rate changes on cash and cash equivalents (10,332) (12,151) (13,724)
Net change in cash and cash equivalents 64,182 (532,229) 33,207
Cash and cash equivalents, beginning of year 238,787 771,016 737,809
--------- ---------- --------
Cash and cash equivalents, end of year $302,969 $238,787 $771,016
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies and description of business:
Description of business:
Measurement Specialties, Inc. ("MSI") designs, develops, produces and sells low cost
electronic products which measure and display distance, motion, force, pressure and
temperature. Substantially all revenues for 1998, 1997 and 1996 were derived from sales of
consumer products, mainly bathroom scales, marketed in North America, Europe and Asia.
Principles of consolidation:
The consolidated financial statements include the accounts of MSI and its wholly owned
subsidiaries (the "Subsidiaries") - Measurement Limited, organized in Hong Kong on August 8,
1986 ("ML"), and Jingliang Electronics (Shenzhen) Co. Ltd., organized in the People's
Republic of China ("China") on January 12, 1995 ("JL") - collectively, referred to as the
"Company." Significant intercompany balances and transactions have been eliminated.
Use of estimates:
The preparation of the consolidated financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions which affect the
reported amounts assets and liabilities and the disclosure of the contingent assets and
liabilities at the date of the financial statements and revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash equivalents:
The Company considers highly liquid investments with maturities of up to three months, when
purchased, to be cash equivalents.
Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or market.
Property and equipment:
Property and equipment are stated at cost. Depreciation is computed by the straight-line
method over the estimated useful lives of the assets, generally three to ten years. Leasehold
improvements are amortized over the shorter of the lease terms or the estimated useful lives
of the assets.
Income taxes:
Deferred income taxes, computed using the liability method, are provided on temporary
differences between the income tax bases of assets and liabilities and their values reported
in the financial statements, resulting in taxable or deductible amounts in future years.
Foreign currency translation and transactions:
ML's functional currency is the Hong Kong dollar and JL's functional currency is the Chinese
renminbi. The Subsidiaries' assets and liabilities are translated into United States dollars
using exchange rates in effect at the balance sheet date and their operations are translated
using weighted average exchange rates for the year then ended. Translation adjustments
resulting from the changes in exchange rates from year to year are accumulated as a separate
component of shareholders' equity. Foreign currency transaction gains and losses are included
in operations.
Intangible assets
The estimated amortization periods for intangible assets is 3 to 5 years.
Whenever events or circumstances indicate that the carrying amount of an asset may not be
recoverable, management assesses the recoverability of the asset. It is possible that the
actual cash flows that result will be insufficient to recover the carrying amount of certain
of these intangibles. No impairment loss was required for 1998 and 1997.
Research and development:
Research and development expenditures are expensed as incurred. Customer funding is
recognized as earned.
Advertising:
Advertising expenditures are expensed as incurred.
Reclassifications:
Certain reclassifications have been made to prior year financial statements to conform to
current presentation.
2. Impact of recently issued accounting standard:
In June, 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 130 (FAS 130), "Comprehensive Income," which requires companies to
present comprehensive income. Comprehensive income consists of net income or loss for the
current period and other comprehensive income - income, expenses, gains, and losses that
bypass the income statement and are reported directly in a separate component of equity. The
Statement (which is effective for fiscal years beginning after December 15, 1997) is not
expected to have a material impact. Also, in June, 1997, the FASB issued Statement of
Financial Accounting Standards No. 131 (FAS 131), "Disclosures about Segments of an Enterprise
and Related Information." FAS 131 requires disclosure of certain information regarding
operating segments, products and services, geographic areas of operation and major operations.
Adoption of FAS 131, which is effective for fiscal periods beginning after December 15, 1997,
is not expected to require additional material disclosures.
3. Inventories:
Inventories are summarized as follows:
<S> <C> <C>
1998 1997
Raw materials $ 730,985 $584,970
Work-in-process 475,052 734,010
Finished goods 2,608,987 2,356,890
---------- ----------
$3,815,024 $3,675,870
4. Property and equipment:
Property and equipment are summarized as follows:
<S> <C> <C>
1998 1997
Production machinery and equipment $ 1,408,919 $ 1,295,930
Tooling costs 1,244,076 973,384
Furniture and equipment 919,217 539,637
Leasehold improvements 362,216 221,436
----------- -----------
$ 3,934,428 $ 3,030,387
5. Borrowings under bank line of credit agreement:
At March 31, 1998, $21,000 was outstanding under a $3.3 million revolving line of credit
agreement, extended by a domestic bank. Advances are payable by September 30, 1999, the date
of the agreement's expiration, and collateralized by a senior security interest in
substantially all assets. Borrowings bear interest at 0.125 percent above the bank's prime
rate (aggregating 8.625 percent at March 31, 1998) or at 2.25 percent above London interbank
offered rates for certain maturities, at the Company's option. The agreement requires the
Company to maintain certain levels of working capital and net worth, limits the Company's
capital expenditures and advances to its Subsidiaries and requires the bank's consent for the
payment of dividends. Additionally, the agreement requires payment of a non-usage fee. The
carrying amount of outstanding indebtedness approximates its fair value because, in the
opinion of management, the borrowing rate approximates market.
6. 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. The Board of Directors (the "Board") has not designated 978,244 authorized
shares.
JL is subject to certain China government regulations, including currency exchange controls,
which limit cash dividends and loans to ML and MSI. At March 31, 1998, JL's restricted net
assets approximated $294,000.
7. Common stock purchase warrants:
<S> <C> <C> <C>
Number of Average price per share
shares exercise market
Outstanding at March 31, 1995 331,000 $4.95 $4.63
Exercised ( 8,500) 4.00 5.05
Outstanding at March 31, 1996 322,500 4.97 4.00
Expired (119,500) 6.63 N/A
Outstanding at March 31, 1997 203,000 4.00 3.69
Expired (203,000) 4.00 3.69
Outstanding at March 31, 1998 - - -
As of March 31, 1998 there were no common stock purchase warrants outstanding.
8. Stock option plans:
Options to purchase up to 914,100 common shares may be granted under MSI's 1995 Stock Option
Plan and its predecessor plan (the "1995 Plan"), until its expiration on September 8, 2005.
Shares issuable under 1995 Plan grants which expire or otherwise terminate without being
exercised become available for later issuance. The aggregate numbers of shares available for
grants of options under the plans were 65,500 at March 31, 1998, 196,000 at March 31, 1997
and 251,000 at March 31, 1996.
Options generally vest over service periods of up to five years and expire no later than ten
years from the date of grant. Options may, but need not, qualify as "incentive stock options"
under section 422 of the Internal Revenue Code. Tax benefits are recognized upon nonqualified
exercises and disqualifying dispositions of shares acquired by qualified exercises. There
were no changes in the exercise prices of outstanding options, through cancellation and
reissuance or otherwise, for 1998, 1997, or 1996.
<S> <C> <C> <C> <C>
Number of shares Average price per share
outstanding exercisable exercise market
March 31, 1995 460,000 290,000 $ 3.30 $ 3.22
Granted at market 284,000 4.80 4.80
Granted above market 15,000 5.64 5.13
Exercised ( 5,000) 2.75 4.25
Expired ( 5,000) 4.88 N/A
March 31, 1996 749,000 338,000 3.91 3.85
Granted at market 50,000 3.79 3.79
Forfeited ( 25,000) 3.88 N/A
March 31, 1997 774,000 495,000 3.89 3.87
Granted at market 135,500 3.80 3.80
Forfeited ( 10,000) 4.44 N/A
Exercised ( 50,900) 2.30 4.20
March 31, 1998 848,600 527,100 3.97 3.94
Summarized information about stock options outstanding at March 31, 1998 follows:
<S> <C> <C> <C> <C> <C>
Number of underlying shares Exercise Average exercise price Average remaining
outstanding exercisable price range outstanding exercisable contractual life (years)
391,600 295,600 $2.69 - $3.50 $3.09 $2.96 3.5
352,000 147,500 3.63 - 4.88 4.47 4.54 5.2
65,000 44,000 5.00 - 5.64 5.18 5.26 4.6
40,000 40,000 6.19 - 6.19 6.19 6.19 0.5
- ------- -------
848,600 527,100
The Company accounts for transactions in which employees receive equity instruments of the
employer using the intrinsic value based method. Accordingly, no compensation cost has been
recognized for employee stock option grants. Had the Company adopted the fair value based
method for employee stock option grants on April 1, 1995, the Company's net income for 1998,
1997 and 1996 would have been reduced to $670,393 ($0.18 per share diluted), $1,136,621 ($0.31
per share diluted) and $830,875 ($0.22 per share diluted), respectively. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes option pricing
model (single grant assumption with straight-line amortization) with the following weighted
average assumptions:
<S> <C> <C> <C>
1998 1997 1996
Expected volatility 58% 41% 41%
Risk free interest 5.8% 6.3% 6.3%
Dividend yield - - -
Expected life years 5 5 5
9. Defined contribution plan:
MSI has a defined contribution plan under section 401(k) of the Internal Revenue Code.
Substantially all its employees are eligible to participate after completing three months of
service. Participants may elect to contribute a portion of their compensation to the plan.
MSI matches a portion of participants' contributions and, at the discretion of the Board, may
make profit sharing contributions. Matching participants' contributions cost $ 49,000 for
1998, $39,000 for 1997 and $15,000 for 1996. No profit sharing contributions were made for
1998, 1997 or 1996.
10. Foreign operations:
At March 31, 1998, the Subsidiaries' total assets aggregated $4,088,000, of which $2,608,000
were in Hong Kong and $1,480,000 were in China. The Company is potentially subject to the
risks of foreign currency transaction and translation losses which might result from
fluctuations in the values of the Hong Kong dollar and the Chinese renminbi. At March 31,
1998, the Subsidiaries had net liabilities of $514,000 subject to fluctuation in the value of
the Hong Kong dollar and net assets of $294,000 subject to fluctuation in the value of the
Chinese renminbi.
The Subsidiaries' operations reflect intercompany transfers of costs and expenses, including
interest on intercompany trade receivables, at amounts established by the Company.
<S> <C> <C> <C>
1998 1997 1996
Subsidiaries' net sales:
To unaffiliated customers $20,213,000 $16,640,000 $14,829,000
To consolidated affiliates 3,304,000 4,245,000 921,000
Subsidiaries' net income 809,000 562,000 207,000
11. Foreign and major customers:
A United States manufacturer and distributor of electric housewares accounted for 18 percent
and 16 percent of net sales for 1998 and 1997, respectively. A German distributor of
diversified housewares accounted for 31 percent, 36 percent and 32 percent of net sales for
1998, 1997 and 1996, respectively. The percentages of net sales derived from all foreign
customers for those years were:
<S> <C> <C> <C>
1998 1997 1996
German 36% 39% 36%
Other Europe 6 9 14
Other 2 3 5
---- ---- ----
44% 51% 55%
Substantially all the Company's revenues are priced in United States dollars.
12. Income taxes:
Earnings (loss) before income taxes were:
<S> <C> <C> <C>
1998 1997 1996
Domestic $ (30,222) $ 259,140 $ 601,517
Foreign 909,085 565,359 300,533
--------- --------- ---------
$ 878,863 $ 824,499 $ 902,050
The income tax provision (benefit) consisted of:
<S> <C> <C> <C>
1998 1997 1996
Current Federal $20,000 $2,897 $1,036
Foreign 97,691 (10,601) 78,025
State 1,000 691 137
Total current 118,691 (7,013) 79,198
Deferred:
Federal (19,795) (307,418) (155,000)
Foreign (4,666) 13,496 15,821
State 7,770 (49,410) (25,000)
Total deferred (16,691) (343,332) (164,179)
---------- ---------- ---------
$ 102,000 ($ 350,345) ($ 84,981)
Differences between the federal statutory income tax rate and the effective tax rates in those
years were:
<S> <C> <C> <C>
1998 1997 1996
Statutory tax rate 34.0 % 34.0 % 34.0 %
Reduction in valuation allowance
for deferred tax assets ( 5.4) (65.3) (20.0)
Lower tax on foreign earnings (23.6) (15.6) (12.3)
Operating loss carryforwards - ( 8.9) (25.8)
Other 6.6 13.3 14.7
------- -------- --------
11.6 % (42.5 %) ( 9.4 %)
Income taxes for 1998, 1997 and 1996 reflect reductions in the valuation allowance for
deferred taxes of $47,000, $539,000 and $180,000, respectively. These reductions, reflected
in operating results for the quarters ended March 31, 1998, 1997 and 1996, respectively, were
based on management's annual assessments of the extent to which the benefits of federal net
operating loss carryforwards and, in 1998, the amount for alternative minimum tax credit
carryforward were more likely than not to be realized. The amounts realizable, however, could
be reduced in the near term if future taxable income is lower than estimated or if there are
differences in the timing or amount of future reversals of existing taxable temporary
differences.
At March 31, 1998, the Company had a net operating loss carryforward for income tax reporting
purposes of $670,000 (principally expiring on March 31, 2009) available to reduce future
domestic taxable income. Use of this carryforward may be limited by provisions of the Tax
Reform Act of 1986.
Income taxes for 1997 reflect federal tax benefits of $69,000 from the use of net operating
loss carryforwards of $204,000. Income taxes for 1996 reflect federal and Hong Kong tax
benefits of $201,000 and $32,000, respectively, from the use of net operating loss
carryforwards aggregating $785,000. Income taxes for 1995 reflect federal and Hong Kong tax
benefits of $99,000 and $5,000, respectively, from the use of net operating loss carryforwards
aggregating $319,000.
Deferred income taxes are not provided on the Subsidiaries' undistributed earnings, which
approximated $808,000 at March 31, 1998. Because those earnings are expected to be
permanently reinvested, no provision for federal and state income taxes on those earnings was
provided. Upon distribution of those earnings in the form of dividends or otherwise, the
Company would be subject to United States income taxes, subject to an adjustment for foreign
tax credits. Determination of the amount of unrecognized deferred United States income tax
liability is not practicable because of the complexities associated with its hypothetical
calculation.
Pursuant to current Chinese tax policies, JL qualifies for a special state corporate tax rate
of 15 percent. Additionally, because JL has agreed to operate in China for a minimum of ten
years, a full tax holiday (which expired on March 31, 1998) is available for two years,
beginning with JL's first profit-making year, and a 50 percent tax rate reduction to 7.5
percent (expected to expire on March 31, 2001) is available for the three years thereafter.
After the expiration of the tax holiday, JL is expected to qualify for a reduction of the tax
rate to 10 percent, provided it exports a minimum of 70 percent of its production.
Furthermore, if JL's profits are reinvested in qualified activities in China for a minimum of
five years, it may obtain a rebate of 40 percent of the taxes paid on the reinvested profits.
Although JL's undistributed earnings are expected to be permanently reinvested, the Company
does not intend to recognize the potential rebate until it is realized. The Hong Kong
corporate tax rate, at which ML's earnings are taxed, is 16.5 percent.
The estimated tax effects of temporary differences and carryforwards were:
<S> <C> <C>
1998 1997
Deferred tax assets:
Accrued expenses and other
current liabilities $ 121,708 $ 108,140
Net operating loss carryforwards 271,413 380,039
Other, net 192,237 56,082
---------- -----------
Total deferred tax assets 585,358 544,261
<S> <C> <C>
Deferred tax liabilities:
Depreciation and amortization of
property and equipment ($ 61,326) ($ 35,322)
Other, net 0 ( 268)
---------- -----------
Total deferred tax liabilities ($ 61,326) ($ 35,590)
Net current deferred tax assets aggregated $213,174 and $159,190 at March 31, 1998 and 1997,
respectively. Net noncurrent deferred tax assets aggregated $372,184 and $385,071, at March
31, 1998 and 1997, respectively. Current deferred tax liabilities aggregated $0 at March 31,
1998 and $10,953 at March 31, 1997. Noncurrent deferred tax liabilities aggregated $61,326
and $24,637 at March 31, 1998 and 1997, respectively.
13. Per share information:
The Company has adopted Statement of Financial Accounting Standards No. 128, "Earnings per
Share," which requires presentation of basic and diluted per share information and eliminates
the modified treasury stock method of computing potentially dilutive common shares. Prior
year accounts have been restated to reflect this change. Basic per share information is
computed based on the weighted average common shares outstanding during each period. Diluted
per share information additionally considers the shares that may be issued upon exercise or
conversion of stock options, warrants and convertible securities less the shares that may be
repurchased with the funds received from their exercise. The modified treasury stock method,
pursuant to which the Company previously computed potentially dilutive common shares, had
assumed investment of a portion of the exercise proceeds.
The weighted average options to purchase common stock of 405,899, 582,192 and 73,992 were
outstanding as of March 31, 1998, 1997 and 1996 respectively, but were not included in the
computation of diluted earnings per share since the options exercise price was greater than
the average market price of the common shares creating an antidilutive effect.
The following is a reconciliation of the numerators and denominators of basic and diluted EPS
computations:
<S> <C> <C> <C>
Income Shares Per Share
(Numerator) (Denominator) Amount
March 31, 1998
Basic per share information $ 776,863 3,561,001 $0.22
Effect of dilutive securities 88,309
Diluted per share information$ 776,863 3,649,310 $0.21
March 31, 1997
Basic per share information $1,174,884 3,531,987 $0.33
Effect of dilutive securities 76,775
Diluted per share information $1,174,884 3,608,762 $0.33
March 31, 1996
Basic per share information $ 987,031 3,531,987 $0.28
Effect of dilutive securities 192,001
Diluted per share information $ 987,031 3,723,988 $0.27
14. Supplemental disclosures of cash flow information:
For 1998, payments of interest expense were $ 76,000 and payments of income taxes approximated
$35,000. For 1997, payments of interest expense approximated $11,000 and payments of income
taxes approximated $105,000. For 1996, payments of interest expense approximated $19,000 and
payments of income taxes approximated $14,000.
15. Commitments and contingencies:
The Company leases certain property and equipment under noncancellable operating leases
expiring on various dates through November, 2001. Rent expense, including real estate taxes,
insurance and maintenance expenses associated with net operating leases, approximated $350,000
for 1998, $282,000 for 1997 and $375,000 for 1996. At March 31, 1998, total minimum rentals
under operating leases with initial or remaining noncancellable lease terms of more than one
year were:
<S> <C>
Year ending March 31,
1999 $292,000
2000 286,000
2001 133,000
2002 20,000
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, product quality improvements and changes in
end user behavior.
One of the Company's manufacturing processes requires the use of minute quantities of
chemicals identified by the Environment 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.
The Company manufactures all its industrial products, and all its proprietary intermediate
goods used in its consumer products, in leased premises located in China. Substantially all
its consumer products are assembled by a single source also operating in China. Additionally,
most of the Company's products contain key components now obtained from a limited number of
suppliers. These concentrations in the current sources of supply present risks of
interruption for reasons beyond the Company's control, including, with respect to China,
political, economic and legal uncertainties.
16. Financial instruments with concentrations of credit risk or off-balance sheet risk:
Financial instruments which potentially subject the Company to significant concentrations of
credit risk principally are cash investments and trade accounts receivable.
The Company generally maintains its cash and cash equivalents at major financial institutions
in the United States, Hong Kong and China. Cash held in foreign institutions amounted to
$182,000 and $203,000 at March 31, 1998 and 1997 respectively. The Company periodically
evaluates the relative credit standing of financial institutions considered in its cash
investment strategy.
Accounts receivable are concentrated in United States and European distributors and retailers
of consumer products. At March 31, 1998, a German distributor of diversified housewares, a
United States manufacturer and distributor of electric housewares and a United States retail
merchandiser of jewelry and hard goods accounted for 17 percent, 14 and 8 percent of accounts
receivable, respectively. To limit credit risk, the Company evaluates the financial condition
and trade payment experience of customers to whom credit is extended. The Company generally
does not require customers to furnish collateral, though certain foreign customers furnish
letters of credit.
17. Quarterly results of operations (unaudited):
<S> <C> <C> <C> <C>
First fiscal Second fiscal Third fiscal Fourth fiscal
quarter ended quarter ended quarter ended quarter ended
June 30 September 30 December 31 March 31
Year ended March 31, 1998
Net sales $6,600,383 $7,345,339 $9,235,130 $6,096,668
Gross profit 2,128,061 3,039,154 3,256,819 1,957,405
Net income (loss) (55,108) 278,874 627,568 (74,471)
Earnings (loss) per share diluted $(0.02) $0.08 $0.18 $(0.02)
Year ended March 31,1997
Net sales $4,701,404 $4,878,375 $8,810,193 $6,614,527
Gross profit 1,616,701 1,700,310 3,168,912 2,125,050
Net income (loss) (212,168) (160,085) 1,145,073 402,024
Earnings (loss) per share diluted (0.06) (0.05) 0.30 0.11
Year ended March 31, 1996
Net sales $5,123,541 $7,121,852 $5,767,915 $5,046,231
Gross profit 1,717,779 2,303,541 2,248,335 1,828,378
Net income 13,531 347,363 471,427 154,710
Earnings per share diluted 0.00 0.09 0.12 0.05
18. Subsequent events:
On May 21, 1998, the Company signed a nonbinding letter of intent to acquire the Sensors
Division of AMP Incorporated. The letter of intent is subject to final due diligence and
execution of a definitive contract. The transaction is expected to close during the second
fiscal quarter ending September, 1998. The Sensors Division, with unaudited calendar 1997
sales of approximately $8 million, is in the business of designing, manufacturing and
marketing piezoelectric polymer sensors. These sensors are marketed for industrial, consumer
and instrumentation applications. The transaction is expected to be financed with debt raised
as an extension of the Company's existing banking relationship.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<S> <C> <C> <C> <C>
Additions
Balance at Charged to
Beginning Costs and Deductions -- Balance at
of Period Expenses Describe End of Period
Year ended March 31, 1998:
Deducted from asset accounts:
Allowance for doubtful accounts $32,000 $92,870 ($4,924) (a) $129,794
Write-downs of inventories 236,080 430,284 281,232 (b) 385,132
-------- -------- --------- --------
Totals $268,080 $523,154 $276,308 $514,926
Product warranty obligations $496,000 $548,864 $572,401 (c) $472,463
Year ended March 31, 1997:
Deducted from asset accounts:
Allowance for doubtful accounts $22,004 $73,639 $63,643 (a) $32,000
Write-downs of inventories 323,717 130,983 218,620 (b) 236,080
Totals $345,721 $204,622 $282,263 $268,080
-------- -------- --------- --------
Product warranty obligations $497,590 $496,944 $498,534 (c) $496,000
Year ended March 31, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts $22,330 $18,010 $18,336 (a) $22,004
Write-downs of inventories 147,696 185,482 9,461 (b) 323,717
-------- -------- --------- --------
Totals $170,026 $203,492 $27,797 $345,721
Product warranty obligations $364,779 $485,252 $352,441 (c) $497,590
(a) Bad debts written-off, net of recoveries
(b) Cost of inventories scrapped
(c) Cost of warranty claims
EXHIBITS
Exhibits listed below marked with an asterisk (*) are included herein. Other listed exhibits,
incorporated by reference, were previously filed with the SEC as indicated. Other exhibits
are omitted because they are not required, not applicable or the required information is shown
in the consolidated financial statements or notes thereto.
(3)(i) Articles of incorporation
Certificate of Incorporation and Amendments thereto, incorporated by reference to Exhibit
3(a).1 to Annual Report on Form 10-K for the year ended March 31, 1992
Second Restated Certificate of Incorporation
(3)(ii) By-laws
Bylaws, as amended, incorporated by reference to Exhibit (3)(ii) to Annual Report on Form 10-
KSB for the year ended March 31, 1994
(4) Instruments defining the rights of security holders, including indentures
Form of Common Stock Certificate, incorporated by reference to Exhibit 4(a) to Registration
Statement on Form S-18 (File No. 33-3530-NY)
Consulting Agreement, dated April 1, 1993, and Common Stock Purchase Warrant, executed on or
about May 26, 1993, with Sherleigh Associates, Inc., incorporated by reference to Exhibit
10.36 to Annual Report on Form 10-KSB for the year ended March 31, 1993
Private Offering Memorandum to Accredited Investors Only, dated March 24, 1993, incorporated
by reference to Exhibit (4) to Annual Report on Form 10-KSB for the year ended March 31, 1994
Revolving Loan and Security Agreement between Midlantic Bank, N.A. and Measurement Specialties
Inc., executed on or about July 17, 1995, incorporated by reference to Exhibit 10 to Quarterly
Report on Form 10-QSB for the quarterly period ended September 30, 1995
First Amendment to Revolving Loan and Security Agreement by and between Measurement
Specialties, Inc. and PNC Bank, National Association, successor by merger to Midlantic Bank,
N.A., dated November 11, 1996
Second Amendment to Revolving Loan and Security Agreement with PNC Bank, N.A.
(10) Material contracts
Addendum to Lease with CMEP I
Supply and Distribution Agreement with Korona GmbH & Company, KG
Form of Employment Agreement with Damon Germanton effective July 1, 1988, as amended,
incorporated by reference to Exhibit 10(a).2 to Annual Report on Form 10-KSB for the year
ended March 31, 1993
Restated Measurement Specialties, Inc. Stock Option Plan (1985), as amended pursuant to Annual
Meeting of Shareholders on January 31, 1990, incorporated by reference to Exhibit 10(i).1 to
Annual Report on Form 10-K for the year ended March 31, 1992
Measurement Specialties, Inc. 1995 Stock Option Plan, incorporated by reference to Exhibit A
to Proxy Statement for Annual Meeting of Shareholders To Be Held on October 30, 1995
Lease Agreement, executed on May 20, 1996, by and between CMI, Inc. and Measurement
Specialties, Inc., incorporated by reference to Exhibit (10) to Annual Report on Form 10-KSB
for the year ended March 31, 1996
Tenancy Agreement in respect of All Those Units A to B on the 12th Floor of Wo Kee Hong
Building Kwai Chung New Territories for a term of Two Years, Dated the 3rd day of June, 1996,
by and between Stoneycroft Estates Limited and Measurement Limited
Building Lease by and between Beijing Qinglian Leather Group Company and Jingliang
Electronics (Shenzhen) Co., Ltd., dated January 17, 1997
First Amendment to Lease by and between Transcube Associates and Measurement Specialties,
Inc., dated February 24, 1997
Building Lease by and between Shenzhen Dongming Technology Co., Ltd. and Jingliang
Electronics (Shenzhen) Co., Ltd., as amended March 18, 1997
*(21) Subsidiaries of the registrant: The registrant has two subsidiaries, Measurement
Limited, organized in Hong Kong, is a wholly owned subsidiary of the Company. Jingliang
Electronics (Shenzhen) Co. Ltd., is a wholly owned subsidiary of Measurement Limited.
*(27) Financial Data Schedule
Reports on Form 8-K
During the three months ended March 31, 1998, the Company did not file any reports on Form 8-
K.
The SEC maintains a site on the world wide web, at <http://www.sec.gov>, which contains
reports, proxy and information statements and other information regarding registrants which
file electronically with the SEC, pursuant to its Electronic Data Gathering And Retrieval
("EDGAR") program. EDGAR filings generally are made available within 24 hours of filing. The
Company's electronic filings may be found at <http://www.sec.gov/cgi-bin/srch-
edgar?0000778734>.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MEASUREMENT SPECIALTIES, INC.
By: s/ Joseph R. Mallon, Jr. June 29, 1998
Chief Executive Officer and Chairman
of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
s/ Joseph R. Mallon, Jr. June 29, 1998
Joseph R. Mallon, Jr., principal executive officer
s/ Kirk J. Dischino June 29, 1998
Kirk J. Dischino, principal financial and accounting officer
A majority of the Board of Directors:
s/ Joseph R. Mallon, Jr. June 29, 1998
Joseph R. Mallon, Jr., Chairman
s/ John D. Arnold June 29, 1998
John D. Arnold, Director
s/ Richard S. Betts June 29, 1998
Richard S. Betts, Director
s/ Theodore J. Coburn June 29, 1998
Theodore J. Coburn, Director
s/ Damon Germanton June 29, 1998
Damon Germanton, Director
s/ Steven P. Petrucelli June 29, 1998
Steven P. Petrucelli, Director
s/ Dan J. Samuel June 29, 1998
The Hon. Dan J. Samuel, Director
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF MEASUREMENT SPECIALTIES, INC. AND
SUBSIDIARIES AS OF MARCH 31, 1998, AND THE RELATED CONSOLIDATED STATEMENTS
OF OPERATIONS, SHAREHOLDERS' EQUITY AND CASH FLOWS FOR THE YEAR 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> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-1-1997
<PERIOD-END> MAR-31-1998
<CASH> 303
<SECURITIES> 0
<RECEIVABLES> 3254
<ALLOWANCES> (130)
<INVENTORY> 3815
<CURRENT-ASSETS> 7628
<PP&E> 3934
<DEPRECIATION> (2171)
<TOTAL-ASSETS> 10217
<CURRENT-LIABILITIES> 4293
<BONDS> 0
<COMMON> 5502
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10217
<SALES> 29278
<TOTAL-REVENUES> 29278
<CGS> 18897
<TOTAL-COSTS> 18897
<OTHER-EXPENSES> 9329
<LOSS-PROVISION> 93
<INTEREST-EXPENSE> 80
<INCOME-PRETAX> 879
<INCOME-TAX> 102
<INCOME-CONTINUING> 777
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 777
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.21
</TABLE>
