SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED SEPTEMBER 30,
1995.
Commission File Number 0-2958
TSI INCORPORATED
(Exact name of registrant as specified in its charter)
Minnesota 41-0843524
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 Cardigan Road, Shoreview, Minnesota 55126
(Address of principal executive offices)
612/483-0900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the proceeding 20 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__
Indicate number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Date: November 3, 1995
Number of Common Shares Outstanding: 5,419,815
TSI Incorporated
Form 10-Q
For the Quarter Ended September 30, 1995
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Earnings
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
PART II. OTHER INFORMATION
EXHIBIT 11 Computation of Per Share Earnings
EXHIBIT 27 Financial Data Schedule
TSI Incorporated and Subsidiaries
Consolidated Statements of Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30 September 30
1995 1994 1995 1994
_______________________________ ______________________________________________________
<S> <C> <C> <C> <C>
Net sales $14,573,940 $12,159,348 $28,343,858 $24,142,368
Cost of products sold 6,317,574 4,935,064 12,167,414 9,621,065
_______________________________ ____________ ____________ ____________ ____________
Gross Profit 8,256,366 7,224,284 16,176,444 14,521,303
Operating expenses:
Research & product development 2,116,825 1,739,302 4,200,406 3,481,770
Selling 3,738,835 3,242,850 7,374,847 6,477,262
Administrative 1,289,835 957,918 2,449,382 1,921,819
_______________________________ ____________ ____________ ____________ ____________
7,145,495 5,940,070 14,024,635 11,880,851
_______________________________ ____________ ____________ ____________ ____________
Operating Income 1,110,871 1,284,214 2,151,809 2,640,452
Other income 43,973 118,963 148,137 159,740
_______________________________ ____________ ____________ ____________ ____________
Earnings Before Income Taxes 1,154,844 1,403,177 2,299,946 2,800,192
Provision for income taxes 404,000 461,000 805,000 922,000
____________ ____________ ____________ ____________
Net Earnings $750,844 $942,177 $1,494,946 $1,878,192
============ ============ ============ ============
Net earnings per common share $0.14 $0.18 $0.28 $0.36
============ ============ ============ ============
Weighted average number of shares
computation of earnings per
common share $5,443,356 $5,306,185 $5,412,932 $5,290,754
============ ============ ============ ============
See accompanying Notes to Consolidated Financial Statements
</TABLE>
TSI Incorporated and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION> Sept 30 March 31 Sept 30
1995 1995 1994
(unaudited) (unaudited)
____________ ____________ ____________
<S> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $1,094,300 $9,551,552 $6,330,385
Investments -- -- 489,145
Accounts receivable 9,567,715 6,732,602 8,971,139
Prepaid expenses 412,937 222,629 388,718
Inventories:
Finished products 2,179,427 1,699,460 1,670,526
Work in process 2,314,136 1,124,753 1,484,004
Materials and supplies 5,055,945 3,349,073 3,149,859
________________________________________ ____________ ____________ ____________
9,549,508 6,173,286 6,304,389
________________________________________ ____________ ____________ ____________
Total Current Assets 20,624,460 22,680,069 22,483,776
Intangibles and Other Assets
Goodwill 2,611,461 1,726,915 1,785,044
Note receivable 610,000 610,000 --
Deferred income tax benefit 289,073 289,073 119,130
Other assets 2,270,614 1,389,129 955,554
________________________________________ ____________ ____________ ____________
5,781,148 4,015,117 2,859,728
Property, Plant and Equipment
Land 128,503 128,503 438,983
Building 1,039,070 1,039,070 1,039,070
Construction in Progress 3,500,027 1,819,482 183,771
Machinery and equipment 13,724,044 12,310,360 12,330,180
________________________________________ ____________ ____________ ___________
18,391,644 15,297,415 13,992,004
Less allowances for depreciation 10,805,132 9,825,402 9,326,819
________________________________________ ____________ ____________ ____________
7,586,512 5,472,013 4,665,185
________________________________________ ____________ ____________ ____________
Total Assets $33,992,120 $32,167,199 $30,008,689
============ ============= ============
Liabilities & Shareholders' Equity
Current Liabilities
Accounts payable & accrued expenses $3,718,892 $2,867,214 $2,606,049
Notes payable 160,936 -- --
Employee compensation 2,338,085 2,505,273 2,063,542
Taxes, other than income taxes 178,027 272,957 227,839
Income taxes payable -- 179,998 521,884
________________________________________ ____________ ____________ ____________
Total Current Liablilites 6,395,940 5,825,442 5,419,314
Deferred Income Taxes -- -- --
________________________________________ ____________ ____________ ____________
Total Liabilities 6,395,940 5,825,442 5,419,314
Shareholders' Equity
Common Shares, $.10 par value 526,878 521,206 514,215
Additional paid-in capital 6,286,979 6,002,771 5,557,410
Retained Earnings 20,625,728 19,471,422 18,228,066
Equity adjustment from translation 156,595 346,358 289,684
________________________________________ ____________ ____________ ____________
Total Shareholders' Equity 27,596,180 26,341,757 24,589,375
________________________________________ ____________ ____________ ____________
Total Liabilities & Shareholders' Equity $33,992,120 $32,167,199 $30,008,689
============ ============ ============
See accompanying notes to consolidated Financial Statements
</TABLE>
TSI Incorporated and Subsidiaries
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Sept 30 1995 1994
________________________________________________________ _____________ ____________
<S> <C> <C>
Operating Activities:
Net earnings $1,494,946 $1,878,192
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Provision for losses on accounts receivable 14,204 18,216
Depreciation and amortization of property, plant
and equipment 638,534 526,203
Amortization of goodwill 69,999 58,128
(Gain) loss on sale of assets 235 (588)
Changes in operating assets & liabilities:
Accounts receivable (1,192,364) (699,282)
Prepaid expenses (108,851) (129,809)
Inventories (2,132,869) (282,410)
Other assets 368,515 46,223
Accounts payable and accrued expenses (274,296) (103,947)
Employee compensation payable (167,188) 21,112
Taxes, other than income taxes (94,930) (96,576)
Current income taxes payable (179,998) (12,138)
Foreign currency transaction (gain) loss (183,519) (20,750)
________________________________________________________ _____________ ____________
Net Cash Provided by Operating Activities (1,747,582) 1,202,574
Investing Activities:
Increase in current investments -- 1,129,626
Additions to property, plant and equipment (2,341,344) (1,086,444)
Proceeds from disposal of property, plant and equipment -- 7,944
Purchase of Alnor,net of cash acquired (4,510,850) --
________________________________________________________ _____________ ____________
Net Cash Used in Investing Activities (6,852,194) 51,126
Financing Activities:
Proceeds from note 160,936 --
Proceeds from stock options exercised 289,879 153,025
Dividends paid (312,799) (291,719)
________________________________________________________ _____________ ____________
Net Cash Used in Financing Activities 138,016 (138,694)
Effect of exchange rate change on cash and
cash equivalents 4,508 10,878
________________________________________________________ _____________ ____________
Increase in Cash and Cash Equivalents (8,457,252) 1,125,884
________________________________________________________ _____________ ____________
Cash and cash equivalents at beginning of year 9,551,552 5,204,501
________________________________________________________ _____________ ____________
Cash and Cash Equivalents at End of Six Month Period $1,094,300 $6,330,385
============= ============
See Notes to Consolidated Financial Statements
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
(Unaudited)
Note 1. Basis of Presentation
The information included in the accompanying interim financial
statements is unaudited. In the opinion of management, all
adjustments, consisting of normal recurring accruals necessary
for a fair presentation of the results of operations, financial
position and cash flows for the interim periods presented have been
reflected herein. The results of operations for the interim periods
are not necessarily indicative of the results to be expected for
the entire year.
Note 2. Earnings Per Share
See Exhibit 11, Computation of per Share Earnings, on page 12 of
this document.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the three months period ended September 30, 1995, were
$14,574,000, which represents an increase of 20 percent over the same period
a year ago.
For the first six months of fiscal 1996, the Company's net sales
were $28,344,000, up 17 percent from $24,142,000, for the same six-month
period a year ago.
The Environmental Instrumentation market area, which accounted for 59 percent
of the Company's business in fiscal 1995, increased about 21 percent from the
same quarter a year ago and was up about 19 percent for the six-month
comparison. While sales have continued to increase year-to-year on the
commercial product lines in this market area, significant events have occurred
which affect year-to-year comparisons. Increased sales this year in the
second quarter of about $2.2 million and for the six month period of about
$4.1 million were due to the May, 1995 acquisition of Alnor Instrument Company
(Alnor). These sales increases were largely offset compared to last year's
second quarter and six month periods when sales of $1.3 million and
$3.2 million, respectively, occurred under an $8.6 million U.S. Army contract
for TSI's Portacount(R) respirator fit testers for bio-hazard protection.
(Shipments under a new $2.5 million U.S. Army contract for the same product are
scheduled to begin in the third quarter of fiscal 1996 and continue through
March, 1996.)
The Research and Analytical Instrumentation market niches, which accounted
for about 30 percent of fiscal 1995 net sales, increased about 12 percent in
the second quarter this year and increased 14 percent for the six months this
year compared with last year, mainly reflecting higher sales of particle
instruments. Process Instrumentation, representing about 11 percent of fiscal
1995 net sales, showed an increase in net sales of approximately 43 percent
for the second quarter comparison and an increase of about 20 percent for the
six-month comparison. Sales for the second quarter this year of the
LaserSpeed(R) non-contact, speed and length measuring instruments for
materials processes were up generally and not due to any single large contract.
Sales to U.S. and state government agencies including defense, comprised about
22 percent of the Company's net sales for the quarter as compared to 37 percent
for the same quarter last year. For the six months ended September 30, 1995
and 1994, sales to the U.S. and state government agencies were at 20 percent
and 34 percent, respectively. A higher percentage of governmental sales was
experienced during fiscal 1995, mostly because of shipments on the
$8.6 million military contract referred to above. Because of the new
$2.5 million U.S. Army contract, also referred to above, the second half of
fiscal 1996 should show governmental sales to be at a higher percentage than
during the first six months. However, the acquisition of Alnor lowers the
overall percentage of sales to governmental customers because about 2% of
Alnor sales are to governmental customers. Since sales to government agencies
represent a significant portion of the Company's sales, it is important to
consider the potential effects of changes in government spending. Due to the
Company's diverse line of products, sales occur in a wide range of U.S. and
state government agencies, so total government sales during the past several
years have been quite stable as a percentage of total sales, with the
exceptions due to specific, larger contracts or acquisitions.
At September 30, 1995, backlog of orders was $22.4 million compared to
$10.9 million at September 30, 1994 and $11.4 million as of March 31, 1995.
About $3 million of backlog was added from the Alnor acquisition. New order
bookings in the second quarter this year were $18.3 million, up from
$12.3 million booked in the second quarter a year ago and also up from the
$17.5 million booked in the Company's first quarter ended June 30, 1995.
Gross profit margin for the second quarter ended September 30, 1995 was
56.7 percent of net sales, down from the 59.4 percent gross profit margin in
the second quarter last year. Historically, TSI's gross profit percentage
range has been from 57 to 60 percent. Six-month gross profit margins were in
that range at 57.1 percent this year compared to 60.1 percent a year ago.
The lower margin this year was mostly due to product mix changes and the
effect of the Alnor acquisition. Gross profit margins at Alnor have been
lower than the Company's historical range.
Research and product development expenses as a percentage of net sales were
14.5 percent for the second quarter and 14.8 percent for the six month period
ended September 30, 1995, compared to 14.3 percent and 14.4 percent of net
sales, respectively, for the same periods last year. Actual research and
product development spending was up about 21 percent in the first six months
and, of that, about half due to the Alnor acquisition. The Company continues
its commitment to growth through development of new technologies and products.
For all of fiscal 1996 research and development expenses are expected to
continue near the Company's historical range of 12 to 14 percent of sales.
Selling expenses were 25.7 percent of net sales for the second quarter compared
to 26.7 percent for the year earlier period. For the first six months of
fiscal 1996, selling expenses were 26.0 percent compared with 26.8 for the
same period in fiscal 1995. Selling expenses for the first six months were
up about 14 percent compared to the same period a year ago and about
two-thirds of the increase was due to the addition of Alnor.
Administrative expenses were 8.9 percent and 8.6 percent of net sales for the
three and six-month periods ended September 30, 1995, respectively. For the
same periods ended September 30, 1994, administrative expenses were 7.9 and
8.0 percent of net sales. The Company expects administrative costs to
continue in a normal operating range of 7 to 9 percent of net sales through
the remainder of fiscal 1996.
Other income was $44,000 in the second quarter and $148,000 in the first six
months of fiscal 1996 compared with $119,000 and $160,000, respectively, for
the same periods in fiscal 1995. The decrease for the second quarter of the
current fiscal year is due to lower interest income due to lower cash balances
following the Alnor acquisition.
The provision for income taxes was based on an estimated rate of 35 percent of
pre-tax earnings for the second quarter and the six-month period of fiscal
1996 compared with the actual rate of 33 percent for the second quarter and
first six months of fiscal 1995.
Liquidity and Capital Resources
Cash, cash equivalents and investments decreased by $8,457,000 to $1,094,000
at September 30, 1995, from $9,552,000 at March 31, 1995. The decrease is
mainly attributable to the Alnor acqusition and the building addition at the
Shoreview headquarters facility plus increases in accounts receivable and
inventories.
The ratio of current assets to current liabilities was 3.2 as of
September 30, 1995 compared to 3.9 as of March 31, 1995. Working capital
decreased $2,626,000 to $14,229,000 at the end of the second quarter of fiscal
1996, compared to $16,855,000 at the end of fiscal 1995, due mainly to the
Alnor acquisition and purchases of property, plant and equipment.
Management believes internally-generated funds and short-term borrowings on
existing credit lines will provide adequate resources for supporting projected
growth during the remainder of fiscal 1996.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11 - Computation of per Share Earnings.
(b) On May 14, 1995 an 8-K report was filed pursuant to
Item 2 of form 8-K reporting the acquisition of Alnor
Instrument Company. An amendment to this report was
filed on July 14, 1995.
On October 18, 1995 an 8-K report was filed pursuant
to Item 2 of form 8-K reporting the acquisition of
Aerometrics, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly
caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Registrant: TSI Incorporated
Date: November 14, 1995 By:/s/Leroy M. Fingerson
Leroy M. Fingerson
Chairman of the Board
& Chief Executive Officer
Date: November 14, 1995
By:/s/Lowell D. Nystrom
Lowell D. Nystrom
Vice President &
Chief Financial Officer
EXHIBIT 11
TSI Incorporated and Subsidiaries
Computation of Per Share Earnings
<TABLE>
<CAPTION>
Three Months Six Months
Ended September 30 Ended September 30
1995 1994 1995 1994
____________ ____________ ____________ ____________
<S> <C> <C> <C> <C>
Primary
Average shares outstanding $5,248,380 $5,130,947 $5,232,454 $5,121,046
Net effect of dilutive stock
options, based on the
treasury stock method
using average market price
194,976 175,238 180,478 169,708
____________ ____________ ____________ ____________
Total $5,443,356 $5,306,185 $5,412,932 $5,290,754
Net Earnings $750,844 $942,177 $1,494,946 $1,878,192
Primary per share amounts $.14 $.18 $.28 $.36
Fully Diluted
Average shares $5,248,380 $5,130,947 $5,232,454 $5,121,046
Net effect of dilutive stock
options, based on the
treasury stock method
using the period-end market
price, if higher than the
average market price 224,225 177,000 232,739 180,557
____________ ____________ ____________ ____________
Total $5,472,605 $5,307,947 $5,465,193 $5,301,603
Net Earnings $750,844 $942,177 1,494,946 $1,878,192
Fully diluted per share
amounts $.14 $.18 $.27 $.35
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Mar-31-1996
<PERIOD-START> Apr-01-1995
<PERIOD-END> Sep-30-1995
<CASH> 1,094,300
<SECURITIES> 0
<RECEIVABLES> 9,789,459
<ALLOWANCES> 221,744
<INVENTORY> 9,549,508
<CURRENT-ASSETS> 20,624,460
<PP&E> 18,391,644
<DEPRECIATION> 10,805,132
<TOTAL-ASSETS> 33,992,120
<CURRENT-LIABILITIES> 6,395,940
<BONDS> 0
<COMMON> 526,878
0
0
<OTHER-SE> 27,069,302
<TOTAL-LIABILITY-AND-EQUITY> 33,992,120
<SALES> 28,343,858
<TOTAL-REVENUES> 28,343,858
<CGS> 12,167,414
<TOTAL-COSTS> 14,024,635
<OTHER-EXPENSES> (148,137)
<LOSS-PROVISION> 18,563
<INTEREST-EXPENSE> 13,005
<INCOME-PRETAX> 2,299,946
<INCOME-TAX> 805,000
<INCOME-CONTINUING> 1,494,946
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,494,946
<EPS-PRIMARY> .28
<EPS-DILUTED> .27
</TABLE>
