MSS Merrill Lynch Merrill Lynch Strategic Return Notes Linked TO The Select 10 Index Structured Product

Measurement Specialties Announces Third Quarter Results FAIRFIELD, N.J., Feb. 8 /PRNewswire-FirstCall/ -- Measurement Specialties, Inc. (AMEX:MSS), a designer and manufacturer of sensors and sensor-based consumer products, today reported financial results for the three and nine months ended December 31, 2004. The Company reported income from continuing operations for the three months ended December 31, 2004 of $3.6 million, or $0.25 per diluted share, as compared to $0.9 million, or $0.06 per diluted share for the same period last year. Proforma Non-GAAP income from continuing operations for the three months ended December 31, 2003 (which excludes a charge for non-cash equity based compensation, litigation expense, restructuring costs and includes an adjustment to the income tax provision to present the income on a fully taxed basis) was $3.7 million, or $0.26 per diluted share. For the nine months ended December 31, 2004, the Company reported income from continuing operations of $11.0 million, or $0.78 per diluted share, as compared to $6.3 million, or $0.45 per diluted share for the same period last year. Proforma Non-GAAP income from continuing operations for the nine months period ended December 31, 2003 was $9.3 million, or $0.66 per diluted share. Please refer to the notes and reconciliation regarding Non-GAAP financial measures contained in this release. Mr. Frank Guidone, Company CEO commented, "We've made tremendous progress in the sensor division this quarter, both in terms of integration of previous acquisitions and new transactions. With the recent acquisitions of Humirel, MWS Sensorik and the Polaron pressure business, we have expanded our footprint in Europe and enhanced our technology portfolio. Equally important, we have built our management bench strength by rounding out our leadership team with a number of talented industry veterans. Looking forward, our attention has turned from acquisition to integration of the new companies, specifically in the areas of accounting/IT, operations and sales/marketing." Mr. Guidone continued, "For the fiscal year, we anticipate sales of approximately $140 million: $92 million in the Sensor Division and $48 million from the Consumer Division. On a consolidated basis, we expect earnings to be approximately $1.05 per diluted share for FY05. Strong growth in sensor sales, given the full year effect of the acquisitions and synergies from integration, should drive earnings growth of 35% in FY06." Three months Ended December 31, 2004 For the three months ended December 31, 2004, net sales increased 13.0% to $36.0 million, as compared to $31.9 million for the three months ended December 31, 2003. For the three months ended December 31, 2004, net sales in the Sensor division increased 55.5% to $23.0 million, as compared to $14.8 million for the three months ended December 31, 2003, while net sales in the Consumer Products division decreased 23.7% to $13.1 million for the current fiscal quarter, as compared to $17.1 million for the three months ended December 31, 2003. Excluding sales from recent acquisitions, net sales increased $2.4 million or 16.3%. For the three months ended December 31, 2004, gross profit increased $1.1 million to $15.1 million from $14.0 million for the three months ended December 31, 2003. For the three months ended December 31, 2004, the Company reported consolidated gross margin of 42.0%, as compared to 44.1% for the same period last year. The decrease in gross margin occurred as a result of an overall mix shift to lower margin business, both in terms of the organic growth (automotive and non-automotive business) as well as growth through acquisitions (some of the acquired businesses operate at gross margins lower than the historical base sensor business). For Consumer Products division, lower tire gauge sales, which contribute a higher margin than the scale business, has also contributed to the decrease in gross margin. Additionally, as a result of the Conair transaction, the entire scale business is now realizing OEM margins, which are historically lower than retail margins. Also contributing to the lower margins was the effect of lower pricing and higher cost of sales in certain of our bath scale lines. Operating expenses were $9.9 million for the three months ended December 31, 2004, as compared to $12.9 million for the three months ended December 31, 2003. Operating expenses for the current period reflect additional expenses associated with the recent acquisitions as well as additional costs associated with the implementation of Sarbanes-Oxley, deferred financing costs and early loan termination fees. Included in the operating expense for the three months ended December 31, 2003 is a $3.0 million charge for non-cash equity compensation, $0.4 million for litigation expense and $0.5 million for restructuring costs. Please refer to the notes and reconciliation's relating to non-GAAP financial measures contained in this press release for further discussion of these items. The current quarter also includes a decrease in accruals associated with the employee profit sharing plan. Nine months Ended December 31, 2004 For the nine months ended December 31, 2004, net sales increased 15.9% to $100.2 million, as compared to $86.5 million for the nine months ended December 31, 2003. For the nine months ended December 31, 2004, net sales in the Sensor division increased 45.4% to $63.6 million, as compared to $43.8 million for the nine months ended December 31, 2003, while net sales in the Consumer Products division decreased 14.3% to $36.6 million, as compared to $42.7 million for the nine months ended December 31, 2003. Excluding sales from recent acquisitions, net sales increased $9.4 million or 21.5% for the period. For the nine months ended December 31, 2004, gross profit increased $3.9 million to $42.8 million from $38.9 million for the nine months ended December 31, 2003. For the nine months ended December 31, 2004, the Company reported consolidated gross margin of 42.7%, as compared to 45.0% for the same period last year. The decrease in current year-to-date gross margin compared to the same period last year is largely due to the same reasons noted in the three months discussion above. After considering the Proforma Non-GAAP adjustments to the prior year detailed below, income from continued operations increased $1.7 million to $11.0 million. Operating expenses were $27.1 million for the nine months ended December 31, 2004, as compared to $31.5 million for the nine months ended December 31, 2003. Included in the operating expense for the nine months ended December 31, 2003 is a $5.0 million charge for non-cash equity compensation, $0.4 million for litigation expense and $0.5 million for restructuring costs. The Company will host an investor conference call on Wednesday, February 9, 2005 beginning at 11:00 AM EST to answer questions regarding the quarterly results reported in our Form 10Q for the three and nine months ended December 31, 2004. To participate, please dial 800-762-4758 prior to the start time. International callers should dial (480) 629-9035. A recording of the call will be available for 90 days by dialing (800) 475-6701 and entering access code 769837. The call will be simultaneously broadcast over the Internet and available for 90 days thereafter at http://www.vcall.com/ and on the Company's website at http://www.msiusa.com/. COMPANY CONTACT: FRANK GUIDONE, CEO - 757-766-4400 INVESTOR/MEDIA CONTACT: AIMEE BOUTCHER - 973 239-2878 About MSI Measurement Specialties, Inc. designs and manufactures sensors and sensor- based consumer products. The Sensor division, also known as MSI Sensors, produces a wide variety of sensors and transducers to measure precise ranges of physical characteristics such as pressure, force, vibration, position, tilt, flow and humidity. MSI Sensors uses multiple advanced technologies - including piezoresistive, electro-optic, electro-magnetic, capacitive, application specific integrated circuits (ASICs), micro-electromechanical systems (MEMS), piezoelectric polymers and strain gauges -- to engineer sensors that operate precisely and cost effectively. The Consumer division produces OEM bathroom scales, Accutire(R) brand tire pressure gauges and other products. Regulation G, "Conditions for Use of Non-GAAP Financial Measures", promulgated under the Securities and Exchange Act of 1934, as amended, define and prescribe the conditions for use of certain non-GAAP financial information. We believe that certain of our financial measures which meet the definition of a non-GAAP financial measure are important supplemental information to investors. The Company uses pro forma measures of operating income, net income, and basic and diluted earnings per share. Typically, these pro forma measures exclude non-cash equity based compensation from the Company's statement of operations, as well as non-ordinary items relating to litigation matters and restructuring charges, and an adjustment to tax each period on a fully taxed basis. The non-cash equity based compensation results from warrants issued to Four Corners Capital Partners LP, a limited partnership of which Mr. Guidone, our Chief Executive Officer, is a principal. Excluding these items is useful for illustrating and explaining operating results and comparisons to prior periods. These items are excluded from our internal operating plans and measurement of financial performance, and we believe this is an important measure for investors to consider in order to better understand the trends in our operating results. The warrants that comprise the non-cash compensation have the same basic attributes of an incentive stock option, for which the Company uses the intrinsic value method allowed for under Financial Accounting Standards Board Statement No. 148. Under the intrinsic value method, there is no charge to the statement of operations for incentive stock options. Because of the structure of the arrangement with Mr. Guidone, the Company was not able to issue incentive stock options and, therefore, issued warrants to Four Corners Capital Partners LP. Although the basic attributes of the warrants issued are similar to those of incentive stock options, the intrinsic value method is not acceptable under generally accepted accounting principles for valuing warrants, therefore resulting in the non-cash equity based compensation charge. These non-GAAP financial measures are used in addition to and in conjunction with the results presented in accordance with GAAP. These non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures. These non-GAAP financial measures provide an additional way of viewing aspects of our operation that, when viewed with our GAAP results and the accompanying reconciliation's to the corresponding GAAP financial measures, provide an understanding of certain factors and trends relating to our business. The company strongly encourages investors to review our financial statements and publicly filed reports in their entirety and to not rely on any single financial measure. This release includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, including but not limited to, statements regarding non-recurring expenses, and resolution of pending litigation. Forward looking statements may be identified by such words or phases "should," "intends," "expects," "will," "continue," "anticipate," "estimated," "projected," "may," "we believe," "we remain confident," "future prospects," or similar expressions. The forward-looking statements above involve a number of risks and uncertainties. Factors that might cause actual results to differ include, but are not limited to, success of any reorganization; ability to raise additional funds; 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, and warranty performance of new products; success in integrating prior acquisitions; changes in product mix, costs and yields, fluctuations in foreign currency exchange rates; uncertainties related to doing business in Hong Kong and China; and the risk factors listed from time to time in the Company's SEC reports. The Company from time-to-time considers acquiring or disposing of business or product lines. Forward-looking statements do not include the impact of acquisitions or dispositions of assets, which could affect results in the near term. Actual results may differ materially. The Company assumes no obligation to update the information in this issue. MEASUREMENT SPECIALTIES, INC CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED) For The Three Months For The Nine Months Ended December 31, Ended December 31, 2004 2003 2004 2003 Net sales $36,016 $31,869 $100,247 $86,469 Cost of goods sold 20,898 17,823 57,424 47,527 Gross profit 15,118 14,046 42,823 38,942 Operating expenses (income): Selling, general and administrative 9,037 8,018 24,785 23,019 Litigation expense -- 400 -- 400 Non-cash equity based compensation -- 3,046 -- 4,954 Research and development 919 850 2,576 2,610 Customer funded development (80) -- (218) -- Restructuring costs and other costs -- 545 -- 545 Total operating expenses 9,876 12,859 27,143 31,528 Operating income 5,242 1,187 15,680 7,414 Interest expense, net 148 22 245 322 Other expense (income) 78 51 144 46 Income from continuing operations before income tax 5,016 1,114 15,291 7,046 Income tax 1,429 226 4,358 772 Income from continuing operations 3,587 888 10,933 6,274 Discontinued operations: Income from discontinued units -- -- -- 112 Net income $ 3,587 $888 $10,933 $6,386 Income per common share - Basic Income from continuing operations $0.27 $0.07 $0.82 $0.51 Income from discontinued units -- -- -- 0.01 Net income $0.27 $0.07 $0.82 $0.52 Income per common share - Diluted Income from continuing operations $0.25 $0.06 $0.78 $0.45 Income from discontinued units -- -- -- 0.01 Net income $0.25 $0.06 $0.78 $0.46 Weighted average shares outstanding - Basic 13,439,320 12,402,445 13,344,886 12,234,849 Weighted average shares outstanding - Diluted 14,204,853 14,004,490 14,089,032 13,905,942 MEASUREMENT SPECIALTIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS) (UNAUDITED) December 31, March 31, 2004 2004 ASSETS Current assets: Cash and cash equivalents $7,480 $19,274 Accounts receivable, trade, net of allowance for doubtful accounts of $1,104 and $327, respectively 19,671 14,010 Inventories, net 21,296 10,170 Deferred income taxes - current 6,728 6,317 Prepaid expenses and other current assets 2,267 3,267 Total current assets 57,442 53,038 Property and equipment, net 14,254 10,628 Other assets: Goodwill 40,998 4,191 Intangibles 5,082 -- Deferred income taxes - long term 5,195 8,486 Other assets 1,846 657 53,121 13,334 Total assets $124,817 $77,000 MEASUREMENT SPECIALTIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED) December 31, March 31, 2004 2004 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of promissory notes payable $1,000 $-- Current portion of deferred acquisition payments 1,400 -- Short-term debt 649 -- Current portion of long-term debt 2,000 -- Accounts payable 15,985 7,919 Accrued compensation 2,751 3,224 Accrued expenses and other current liabilities 4,340 1,886 Accrued litigation expense -Shareholders' Class Action -- 2,800 Accrued litigation expenses-SEC -- 2,100 Deferred gain on sale of assets, current 2,925 2,830 Income taxes payable 787 -- Total current liabilities 31,837 20,759 Other liabilities: Deferred gain on sale of assets, net of current portion 1,722 3,914 Promissory notes payable 1,750 -- Long-term debt, net of current portion 19,914 -- Deferred acquisition payments 4,264 -- Other liabilities 1,210 1,487 Total liabilities 60,697 26,160 Shareholders' equity Serial preferred stock; 221,756 shares authorized; none outstanding Common stock, no par; 20,000,000 shares authorized; 13,533,044 and 12,466,950 shares issued and outstanding, respectively 5,502 5,502 Additional paid-in capital 55,106 53,509 Retained earnings (Accumulated deficit) 2,836 (8,097) Accumulated other comprehensive income (loss) 676 (74) Total shareholders' equity 64,120 50,840 Total Liabilities and Shareholders' Equity $124,817 $77,000 The following table shows the company's non-GAAP results reconciled to the Generally Accepted Accounting Principles ("GAAP") Consolidated Statements of Operations. The Company's non-GAAP results do not include non-cash compensation (please refer to the note titled "Non-Cash compensation" under the Critical Accounting Policies Sections of the Management Discussion and Analysis). For The Three Months For The Nine Months Ended December 31, Ended December 31, Non-GAAP Income: 2004 2003 2004 2003 Reported Income (loss) from continuing operations $3,587 $888 $10,933 $6,274 Non-GAAP Adjustments: Non-cash equity-based compensation 3,046 4,954 Litigation expense 400 400 Restructuring costs 545 545 Tax provision adjustment (1) (1,229) (2,917) Non-GAAP Income from continuing operations 3,587 3,650 10,933 9,256 Income from discontinued units 112 Non-GAAP net income $3,587 $3,650 $ 10,933 $9,368 Non-GAAP Income(loss) per common share-Basic: Non-GAAP Income (loss) from continuing operations $0.27 $0.29 $0.82 $0.76 Income from discontinued units 0.01 Non-GAAP net income (loss) $0.27 $0.29 $0.82 $0.77 Non-GAAP Income (loss) per common share-Diluted: Non-GAAP Income (loss) from continuing operations $0.25 $0.26 $0.78 $0.66 Income (loss) from discontinued units 0.01 Non-GAAP net income (loss) $0.25 $0.26 $0.78 $0.67 Weighted average shares outstanding - Basic 13,439,320 12,402,445 13,344,886 12,234,849 Weighted average shares outstanding - Diluted 14,204,853 14,004,490 14,089,032 13,905,942 DATASOURCE: Measurement Specialties, Inc. CONTACT: Frank Guidone, CEO of Measurement Specialties, Inc., +1-757-766-4400, or Aimee Boutcher of Boutcher & Boutcher Investor Relations, +1-973-239-2878, for Measurement Specialties, Inc. Web site: http://www.msiusa.com/ http://www.vcall.com/

Copyright