U.S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-2054
TSI, Inc.
(Exact name of small business issuer as specified in its charter)
Montana 81-0267738
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
128 Second Street South, Great Falls, Montana 59405
(Address of principal executive offices)
(406) 727-2600
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
Class Outstanding at March 31, 2003
$.05 Par Value Common Stock 10,468,976 Shares
Transitional Small Business Disclosure Format (Check One): Yes ; No X
TSI, INC.
INDEX
MARCH 31, 2003
Page Number
PART I
Condensed Financial Statements:
Balance Sheet -
March 31, 2003 2
Statements of Income and Comprehensive Income -
Three Months Ended March 31, 2003 and 2002 3
Statements of Cash Flows -
Three Months Ended March 31, 2003 and 2002 4
Notes to Financial Statements 5
Management's Discussion and Analysis of the
Statements of Income 6
PART II
Other Information 7
Signatures 8
Certifications 9-11
1
TSI, INC.
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2003
ASSETS
Current Assets
Cash $22,689,834
Marketable Securities, at Fair Value 1,830,127
Receivables, Net 118,859
Deferred Income Tax Asset 20,675
Total Current Assets $24,659,495
Other Assets
Noncurrent Investments, at Fair Value 630,360
Other Assets 2,238
Property, Plant and Equipment, Net 676,150
Total Assets $25,968,243
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities $ 265,009
Income Taxes Payable 68,445
Due to Parent Company 447,750
Total Current Liabilities 781,204
Provision for Estimated Title and Escrow Losses 807,584
Minority Interests 393,337
Deferred Income Taxes 146,259
Excess of Fair Value of Net
Assets Acquired Over Cost 13,700
Stockholders' Equity
Common Stock, $.05 Par Value,
30,000,000 shares authorized,
10,468,976 shares isssued 524,157
Additional Paid-In Capital 22,165,957
Retained Earnings 974,884
Accumulated Other Comprehensive Income 183,653
Treasury Stock, at Cost (22,492)
Total Stockholders' Equity 23,826,159
Total Liabilities and Stockholders' Equity $25,968,243
See Notes to Consolidated Financial Statements.
2
TSI, INC.
CONSOLIDATED STATEMENTS OF INCOME and COMPREHENSIVE INCOME
For The Three Months
Ended
March 31, 2003 and 2002
Operating Revenues $654,971 $556,982
Operating Expenses
Salaries and
Payroll Costs 231,006 $206,348
Depreciation 17,790 20,898
Other Expenses 287,367 155,783
Total Expenses 536,163 383,029
Amortization of
Deferred Credit 2,055 2,055
Minority Portion
Of (Income) Loss (1,839) (2,213)
119,024 173,795
Income Tax Expense (13,130) (55,700)
Net Income 105,894 118,095
Other Comprehensive Income (Loss)
Increase(Decrease) in Unrealized
Holding Gains,
Net of Income Taxes 17,330 43,470
Comprehensive
Income (Loss) $123,224 $161,565
See Notes to Consolidated Financial Statements.
3
TSI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended
March 31, 2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net Cash Provided By
Operating Activities
$157,562 $135,054
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Received on Sales and
Redemptions of Property
and Equipment -- --
Cash Purchases of
Furniture and Equipment (14,206) (5,351)
Cash Used For Purchases of
Marketable Securities
Available For Sale (1,012,610) (339,828)
Cash Received on
Dispositions of
Marketable Securities
Available for Sale 117,782 645,592
Net Cash Provided (Used) By
Investing Activities (909,834) 300,413
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Purchases of
Treasury Stock (1,700) (1,941)
Cash Provided From
Parent Company 105,857 151,150
Net Cash Provided (Used) By
Financing Activities 104,157 149,209
NET INCREASE IN CASH (647,315) 584,676
CASH - BEGINNING OF PERIOD 23,337,149 22,140,919
CASH - END OF PERIOD 22,689,834 22,725,595
See Notes to Consolidated Financial Statements.
4
TSI, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2003
In the opinion of management, all adjustments necessary (consisting
of only normal recurring accruals) have been made to the unaudited
financial statements to present fairly the Company's financial
position as of March 31, 2003 and the results of the Company's
operations and cash flows for the three months ended March 31, 2003
and 2002.
The results of operations for the three months ended March 31, 2003
and 2002 are not indicative of the results to be expected for the
full year.
The consolidated financial statements include the accounts of the
company, its wholly owned subsidiaries and its majority owned
subsidiaries. All significant intercompany transactions and balances
have been eliminated in consolidation.
M Corp, Great Falls, Montana, owns approximately 92% of the
Company's issued and outstanding common stock.
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments
in Debt and Equity Securities (SFAS No. 115) effective January 1, 1994.
In accordance with SFAS No. 115 the Company's portfolios, current
and noncurrent, are carried at fair value in the Company's balance
sheet at March 31, 2003. The net unrealized holding gain at
March 31, 2003, net of the estimated income tax effects and
minority interests in the unrealized holding gains, is included
in Accumulated Other Comprehensive Income at March 31, 2003 in
accordance with the provisions of Financial Accounting Standards
No. 130.
Sales to outside concerns, interest revenues and segment operating
profit for the Company's reportable segments were as follows for
the period ended March 31, 2003:
Sales To Segment
Outside Interest Operating
Concerns Revenues Profit
Financial Holding
Company $ 10,905 $ 11,748 $(24,445)
Title Insurance
Operations 519,782 18,806 166,713
Rental Properties 93,370 -- (23,460)
Consolidated $ 624,417 $ 30,554 $ 118,808
5
TSI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE STATEMENTS OF INCOME
MARCH 31, 2003
A summary of the period to period changes in items included in the
statements of income is shown below.
COMPARISON OF
Three Months
Ended
March 31,
2003 and 2002
Increases
(Decreases)
Revenues $ 97,989 17.6%
Operating Expenses $ 153,134 39.9%
Net Income $ (12,202) (10.3%)
Revenues increased $97,989 in the first quarter of 2003 as
compared with the first quarter of 2002 due primarily to an increase
in title revenue of $188,527 (51.5%) and losses in security sales
of $61,286 during first quarter 2003. Other factors include:
decrease in rent of $8,121 (7.9%), a decrease in interest and
dividends of $34,871 (40.9%), and an increase in other revenues of
$13,740 (3.2%). Operating expenses increased $153,134 during the
first quarter 2003 as compared with the first quarter of 2002, due
to an increase in salaries of $24,658 (11.9%), a decrease in
depreciation of $3,108 (14.9%),and an increase in other expenses
by $131,584 (107%). The provision for income tax expense decreased
by $42,569 (76.4%) in the first quarter of 2003 as compared with the
first quarter of 2002.
6
TSI, INC.
PART II
OTHER INFORMATION
MARCH 31, 2003
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
None
7
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
TSI, INC.
Registrant
Date: May 30, 2003 s/Angela Semenza
Angela Semenza
Assistant Secretary-Treasurer
Date: May 30, 2003 s/D. Mellinger
D. Mellinger,
Accountant
8
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED UPRSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of TSI, Inc. on Form
10-QSB for the period ending March 31, 2003 as filed with the Securites
and Exchange Commission on the date hereof (the "Report"), I, Paul J. McCann,
Representative of Diversified Realty, Inc., certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Subanes-
Oxley Act of 2002, to the best of my knowledge and belief, that;
1. The report fully compiles with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of TSI, Inc.
Date: May 30, 2003 s/Paul J. McCann
Paul J. McCann,
Representative
9
CERTIFICATION
I, Paul J. McCann, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
TSI, Inc.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
inforamtion included in the quarterly report, fairly present in
all material respects the financial condition, results of operations
and cash flows of TSI, Inc., as of, and for, the periods presented
in this quarterly report.
4. TSI, Inc.'s other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Eschange Act Rules 13a-14 and 15d-14) for TSI, Inc. We have:
a. designed such disclosure controls and procedures to ensure that
material information relating to TSI, Inc., including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared.
b. evaluated the effectiveness TSI, Inc. disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
10
CERTIFICATION - continued
5. TSI Inc.'s other certifying officers and I have disclosed,
based on our most recent evaluation, to TSI, Inc. auditors
and the audit committee of TSI, Inc. board of directors
(or persons performing the equivalent functions):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect TSI Inc.'s
ability to record, process, summarize and report financial data, and
I have identified for TSI, Inc.'s auditors any material weaknesses
in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in TSI Inc.'s
internal control; and
6. TSI, Inc.'s other certifying officers and I have indicated
in this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Based on my knowledge all of the above is true and correct to the best of my
belief, especially paragraph 3 above. I am not familiar with all SEC rules
and procedures and have relied and am relying on our staff and accountants
in that regard.
Date: May 30, 2003 s/Paul J. McCann
Paul J. McCann
11