Measurement Specialties, Inc. (the "Company"), a global designer and manufacturer of sensors and sensor-based systems, announced that it entered into a long term supply agreement and license agreement with Sensata on March 14, 2013.
The long term supply agreement guarantees the Company certain volumes and associated margin through 2017. The license agreement provides the Company with $11 million in royalties through 2019.
The Company has been working cooperatively with Sensata, its largest customer, on a long term plan to enable Sensata to in-source the majority of the production from MEAS. The long term supply agreement provides for an orderly step down of MEAS production over a 5 year period, allowing both companies to plan for the transition in a controlled fashion. Additionally, the Company will receive quarterly royalty payments tied to a license of certain intellectual property to Sensata.
Frank Guidone, Company CEO commented, "Our 15 year relationship with Sensata (and its predecessor Texas Instruments) has been extremely successful and beneficial for both companies. These agreements create long term clarity for both companies as we migrate production from MEAS to Sensata over the next 5 years. The impact to MEAS in FY14 will be a reduction of approximately $5 million in sales, although margin on the Sensata business will improve as a result of the increased royalty. The benefit of the improved margin on the Sensata business, as well as the overall mix shift to non-Sensata sales, should result in an increase to gross margin of 100 to 200 basis points over the next 2-3 years."