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 period ended June 30, 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 I.R.S. 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 June 30, 2003
$.05 Par Value Common Stock 10,465,505 Shares
Transitional Small Business Disclosure Format (Check One): Yes ; No X
TSI, INC.
INDEX
JUNE 30, 2003
Page Number
PART I
Condensed Financial Statements:
Balance Sheet -
March 31, 2003 2
Statements of Income and Comprehensive Income -
Three Months and Six Months Ended June 30, 2003 and 2002 3
Statements of Cash Flows -
Six Months Ended June 30, 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 9-10
1
TSI, INC.
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2003
ASSETS
Current Assets
Cash $ 22,857,815
Marketable Securities, at Fair Value 1,860,411
Receivables, Net 37,947
Deferred Tax Asset 116,226
Prepaid Expenses 7,965
Total Current Assets 25,046,808
Other Assets
Noncurrent Investments, at Fair Value 705,443
Other Assets 200
Property, Plant and Equipment, Net 671,396
Total Assets $ 26,257,403
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities $ 179,227
Income Taxes Payable 97,895
Due to Parent Company 489,679
Total Current Liabilities 766,801
Provision for Estimated Title and Escrow Losses 800,156
Minority Interests 393,820
Deferred Income Taxes 176,855
Excess of Fair Value of Net
Assets Acquired Over Cost 11,645
Stockholders' Equity
Common Stock, $.05 Par Value,
30,000,000 shares authorized,
10,483,142 shares issued 524,157
Additional Paid-In Capital 22,165,957
Retained Earnings 1,120,567
Accumulated Other Comprehensive Income 326,879
Treasury Stock, at Cost (29,434)
Total Stockholders' Equity 24,108,126
Total Liabilities and Stockholders' Equity $26,257,403
See Notes to Consolidated Financial Statements.
2
TSI, INC.
CONSOLIDATED STATEMENTS OF INCOME and COMPREHENSIVE INCOME
For The Three Months For The Six Months
Ended Ended
June 30, June 30,
2003 2002 2003 2002
Operating Revenues 790,671 $ 554,053 $ 1,445,642 $ 1,111,035
Operating Expenses
Salaries and
Payroll Costs 392,086 148,114 623,092 354,463
Depreciation 19,024 13,103 36,813 34,001
Other Expenses 168,711 191,410 423,078 314,192
Administrative 33,000 33,000 66,000 66,000
Total Expenses 612,821 385,627 1,148,983 768,656
Operating Income 177,850 168,426 296,659 342,379
Amortization of
Deferred Credit 2,055 2,055 4,110 4,110
Minority Portion
Of Income (298) (1,563) (2,138) (3,775)
179,607 168,918 298,631 342,714
Income Tax Expense (33,925) (47,300) (47,055) (103,000)
Net Income 145,682 121,618 251,576 239,714
Other Comprehensive Income
Increase (Decrease) in
Unrealized Holding Gains,
Net of Income Taxes 143,226 43,470 160,556 43,470
Comprehensive Income $ 288,908 $165,088 $412,132 $283,184
See Notes to Consolidated Financial Statements.
3
TSI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Six Months
Ended
June 30,
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net Cash Provided By
Operating Activities $ 142,445 $ 135,054
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Purchases of Furniture and Equipment (18,403) (5,351)
Cash Used For Purchases of Marketable
Securities Available For Sale (1,040,528) (339,828)
Cash Received on Dispositions of Marketable
Securities Available For Sale 177,701 645,592
Net Cash Provided (Used) By
Investing Activities (881,230) 300,413
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Purchases of Treasury Stock (8,642) (1,941)
Cash Provided From Parent Company 268,093 151,150
Net Cash Provided By
Financing Activities 259,451 149,209
NET INCREASE IN CASH (479,334) 584,676
CASH - BEGINNING OF PERIOD 23,337,149 22,140,919
CASH - END OF PERIOD $ 22,857,815 $ 22,725,595
See Notes to Consolidated Financial Statements.
4
TSI, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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 June 30, 2003 and the results of the Company's operations and
cash flows for the six months ended June 30, 2003 and 2002.
The results of operations for the six months ended June 30,2003
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 June 30, 2003. The net unrealized holding gain at June 30, 2003,
net of the estimated income tax effects and minority interests in the
unrealized holding gains, is included in Accumulated Other
Comprehensive Income at June 30, 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 June 30, 2003:
TSI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 financial position as of June 30, 2003
and the results of the Company's operations for the three months and six
months ended June 30, 2003 and 2002 and cash flows for the six months
ended June 30, 2003 and 2002. The results of operations for the three
months and six months ended June 30, 2003 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 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 June 30, 2003. The net unrealized holding gain at June 30,
2003, net of the estimated income tax effects and minority interests in
the unrealized holding gains, is included in Accumulated Other Comprehensive
Income at June 30, 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 quarter ended
June 30, 2003:
Sales To Segment
Outside Interest Operating
Concerns Revenues Profit
Financial Holding Company $ 1,640 $ 24,855 $ (47,871)
Title Insurance Operations 618,098 19,441 264,277
Rental Properties 123,130 3,507 (38,555)
Consolidated $ 742,868 $ 47,803 $ 177,851
5
TSI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE INCOME STATEMENT
JUNE 30, 2003
A summary of the period to period changes in items included in the statements
of income is shown below.
COMPARISON OF
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
2003 AND 2002 2003 AND 2002
INCREASES (DECREASES)
Revenues $ 236,618 42.7% $ 334,607 30.1%
Expenses 227,193 58.9% 380,327 49.5%
Net Income 24,064 19.8% 11,862 4.9%
Revenues increased $334,607 for the first six months of 2003 ($236,618
for the second quarter of 2003) as compared to this time frame in 2002. This
increase is due to a 53.8% increase in title revenue ($407,609, and increase
in rent of $10,393 (5.5%) a decrease in interest and dividend revenues
decreased by $54,751 (34.8%), and a loss on sale of investments of $36,431
(107.3%) as compared to this time frame in 2002. Operating expenses increased
$380,327 (49.5%) in the first six months of 2003 ($227,193 in the second
quarter) compared to this time frame in 2002. This is due to an increase in
payroll of $268,629 (75.8%), an increase in depreciation of $2,812 (8.3%) and
an increase in other expenses of $108,885 (34.7%). The provision for income
tax expense decreased by $55,945 (54.3%) in the first six months of 2003
($13,375 in the second quarter of 2003) as compared to this time frame in
2002.
6
TSI, INC.
PART II
OTHER INFORMATION
JUNE 30, 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: August 18, 2003 s/Angela Semenza
Angela Semenza,
Assistant Secretary-Treasurer
Date: August 18, 2003 s/D. Mellinger
D. Mellinger,
Accountant
8
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
information 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 annual report.
4. TSI, Inc.'s other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange 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. 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 of 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;
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
9
6. TSI, Inc.'s other certifying officers and I have indicated
in this annual 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.
Date: August 18, 2003 s/Paul J. McCann
Paul J. McCann
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 June 30, 2003 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Paul J. McCann,
Representative of TSI, Inc., certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Subanes-
Oxley Act of 2002, that:
1. The report fully compiles with the requirement 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: August 18, 2003 s/Paul J. McCann
Paul J. McCann,
Representative
10