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Measurement Specialties Announces Second Quarter Results; Posts Record Net Income of $4.1 Million FAIRFIELD, N.J., Nov. 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 six months ended September 30, 2004. The Company reported income from continuing operations for the three months ended September 30, 2004 of $4.1 million, or $0.29 per diluted share, as compared to $1.7 million, or $0.12 per diluted share for the same period last year. Proforma Non-GAAP income from continuing operations for the three months ended September 30, 2003 (which excludes a charge for non-cash equity based compensation and includes an adjustment to the income tax provision to present the income on a fully taxed basis) was $2.7 million, or $0.20 per diluted share. For the six months ended September 30, 2004, the Company reported income from continuing operations of $7.3 million, or $0.52 per diluted share, as compared to $5.4 million, or $0.39 per diluted share for the same period last year. Proforma Non-GAAP income from continuing operations for the six month period ended September 30, 2003 was $5.6 million, or $0.41 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, "our consolidated results were in line with expectations, and I am pleased to report we are exceeding our growth plan in the Sensor business. Our Consumer division, however, continues to perform below our budgeted expectations. The Sensor division posted net sales of $23.6 million - a record quarter for the division - exceeding the same period last year and last quarter by 66% and 37%, respectively. Excluding the effect of recent acquisitions, the Sensor division posted net sales of $19 million, representing 34% growth over the same period last year and 11% over last quarter (our previous net sales record). For the fiscal year, we anticipate the Sensor division to deliver net sales in the range of $88 to $90 million, representing approximately 50% growth over last year. Excluding the effect of acquisitions, we expect the Sensor division to grow nearly 20% organically." Mr. Guidone continued: "On the Consumer side, the combination of lower than budgeted sales for our digital tire pressure gauges, along with continued margin pressure in OEM scales, will result in the Consumer division falling short of budgeted expectations, offsetting the performance in the Sensor division. Accordingly, on a consolidated basis, we expect fiscal 2005 earnings per share to be between $1.06 and $1.09, representing approximately 30% growth over fiscal 2004 proforma earnings per share of $0.83. Consumer division challenges notwithstanding, we remain highly confident in the overall strategy and growth plan that we established last year, and anticipate the combination of fixed cost leverage through sales growth (organic and through acquisition) and post-close integration cost synergies to drive equally strong earnings growth next fiscal year." Three months Ended September 30, 2004 For the three months ended September 30, 2004, net sales increased 26.8% to $36.2 million, as compared to $28.6 million for the three months ended September 30, 2003. For the three months ended September 30, 2004, net sales in the Sensor division increased 65.6% to $23.6 million, as compared to $14.2 million for the three months ended September 30, 2003, while net sales in the Consumer Products division decreased 11.7% to $12.7 million for the current fiscal quarter, as compared to $14.3 million for the three months ended September 30, 2003. For the three months ended September 30, 2004, gross profit increased $2.8 million to $15.1 million from $12.3 million for the three months ended September 30, 2003. For the three months ended September 30, 2004, the Company reported consolidated gross margin of 41.8%, as compared to 43.1% 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 (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 $9.3 million for the three months ended September 30, 2004, as compared to $10.2 million for the three months ended September 30, 2003. Operating expenses for the current period reflect additional expenses associated with the recent acquisitions. Included in the operating expense for the three months ended September 30, 2003 is a $1.8 million charge for non-cash equity compensation. 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 as a result of the Company's financial performance in the quarter falling short of plan. Six months Ended September 30, 2004 For the six months ended September 30, 2004, net sales increased 17.6% to $64.2 million, as compared to $54.6 million for the six months ended September 30, 2003. For the six months ended September 30, 2004, net sales in the Sensor division increased 40.3% to $40.7 million, as compared to $29.0 million for the six months ended September 30, 2003, while net sales in the Consumer Products division decreased 8.0% to $23.5 million, as compared to $25.6 million for the six months ended September 30, 2003. For the six months ended September 30, 2004, gross profit increased $2.8 million to $27.7 million from $24.9 million for the six months ended September 30, 2003. For the six months ended September 30, 2004, the Company reported consolidated gross margin of 43.1%, as compared to 45.6% 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. Operating expenses were $17.3 million for the six months ended September 30, 2004, as compared to $18.7 million for the six months ended September 30, 2003. Included in the operating expense for the six months ended September 30, 2003 is a $1.9 million charge for non-cash equity compensation. The Company will host an investor conference call on Tuesday, November 9, 2004 beginning at 11:00 AM EST to answer questions regarding the quarterly results reported in our Form 10Q for the three and six months ended September 30, 2004. To participate, please dial (888) 428-4478 prior to the start time. International callers should dial (612) 332-0634. A recording of the call will be available for 90 days by dialing (800) 475-6701 and entering access code 754328. 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 - 973 808-3020 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, motion, force, displacement, tilt, flow and distance. 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 Six Months Ended September 30, Ended September 30, 2004 2003 2004 2003 Net sales $36,211 $28,559 $64,231 $54,600 Cost of goods sold 21,082 16,252 36,525 29,704 Gross profit 15,129 12,307 27,706 24,896 Operating expenses (income): Selling, general and administrative 8,474 7,508 15,748 15,002 Non-cash equity based compensation -- 1,835 -- 1,908 Research and development 848 854 1,657 1,760 Customer funded development (43) -- (138) -- Total operating expenses 9,279 10,197 17,267 18,670 Operating income 5,850 2,110 10,439 6,226 Interest expense, net 108 135 97 300 Other (income) 75 2 66 (6) Income from continuing operations before income tax 5,667 1,973 10,276 5,932 Income tax 1,613 258 2,927 546 Income from continuing operations 4,054 1,715 7,349 5,386 Discontinued operations: Income from discontinued units -- -- -- 112 Net income $4,054 $1,715 $7,349 $5,498 Income per common share - Basic Income from continuing operations $0.30 $0.14 $0.55 $0.44 Income from discontinued units -- -- -- 0.01 Net income $0.30 $0.14 $0.55 $0.45 Income per common share - Diluted Income from continuing operations $0.29 $0.12 $0.52 $0.39 Income from discontinued units -- -- -- 0.01 Net income $0.29 $0.12 $0.52 $0.40 Weighted average shares outstanding - Basic 13,326,843 12,349,546 13,297,197 12,151,050 Weighted average shares outstanding - Diluted 14,188,500 13,844,523 14,168,655 13,587,597 MEASUREMENT SPECIALTIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS) (UNAUDITED) September 30, March 31, 2004 2004 ASSETS Current assets: Cash and cash equivalents $ 10,359 $ 19,274 Accounts receivable, trade, net of allowance for doubtful accounts of $858 and $413 respectively 19,190 14,010 Inventories 17,371 10,170 Deferred income taxes - current 6,743 12,589 Prepaid expenses and other current assets 2,255 3,267 Total current assets 55,918 59,310 Property and equipment, net 11,518 10,628 Other assets: Goodwill 18,976 4,191 Acquired and other intangibles 4,146 -- Deferred income tax 6,283 2,214 Other assets 1,063 657 30,468 7,062 Total assets $ 97,904 $ 77,000 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of notes payable $ 1,000 $ -- Current portion of deferred acquisition payment 1,400 -- Short-term debt 5,682 -- Accounts payable 11,788 7,919 Accrued compensation 2,335 3,224 Accrued expenses and other current liabilities 5,870 4,686 Accrued litigation expenses -- 2,100 Total current liabilities 28,075 17,929 Other liabilities: Deferred gain on sale of assets 5,290 6,744 Notes payable 2,000 -- Deferred acquisition payments 2,254 Other liabilities 1,251 1,487 Total liabilities 38,870 26,160 Shareholders' equity Serial preferred stock; 221,756 shares authorized; none outstanding Common stock, no par; 20,000,000 shares authorized; 13,257,084 and 13,282,874 shares issued and outstanding, respectively 5,502 5,502 Additional paid-in capital 54,361 53,509 Accumulated deficit (748) (8,097) Accumulated other comprehensive loss (81) (74) Total shareholders' equity 59,034 50,840 $ 97,904 $ 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 Section of the Management Discussion and Analysis). For The Three Months For The Six Months Ended September 30, Ended September 30, Non-GAAP Income: 2004 2003 2004 2003 Income (loss) from continuing operations $4,054 $1,715 $7,349 $5,386 Non-GAAP Adjustments: Non-cash compensation -- 1,835 -- 1,908 Tax provision adjustment (1) (827) (1,689) Non-GAAP Income from continuing operations 4,054 2,723 7,349 5,605 Income from discontinued units -- -- -- 112 Non-GAAP net income $4,054 $2,723 $7,349 $5,717 Non-GAAP Income (loss) per common share - Basic Non-GAAP Income (loss) from continuing operations $ 0.30 $ 0.22 $ 0.55 $0.46 Income (loss) from discontinued units -- -- -- 0.01 Non-GAAP Net income (loss) $ 0.30 $ 0.22 $ 0.55 $0.47 Non-GAAP Income (loss) per common share - Diluted Non-GAAP Income (loss) from continuing operations $ 0.29 $ 0.20 $ 0.52 $0.41 Income (loss) from discontinued units -- -- -- 0.01 Non-GAAP Net income (loss) $ 0.29 $ 0.20 $ 0.52 $0.42 Weighted average shares outstanding - Basic 13,326,843 12,349,546 13,297,197 12,151,050 Weighted average shares outstanding - Diluted 14,188,500 13,844,523 14,168,655 13,587,597 (1) This non-GAAP measure adjusts the Company's as reported tax provisions for three months ended June 30, 2003 to provide for taxes at the expected effective tax rate of 28.5%. Contact: Frank Guidone, CEO (973) 808-3020 Boutcher & Boutcher Investor Relations Aimee Boutcher (973) 239-2878 DATASOURCE: Measurement Specialties, Inc. CONTACT: Frank Guidone, CEO of Measurement Specialties, Inc., +1-973-808-3020; or Aimee Boutcher of Boutcher & Boutcher Investor Relations, +1-973-239-2878, for Measurement Specialties, Inc. Web site: http://www.msiusa.com/

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