SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 8-K/A
AMENDMENT TO APPLICATION OR REPORT
Filed pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
TSI INCORPORATED
(Exact name of registrant as specified in its charter)
Minnesota 0-2958 41-0843524
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
500 Cardigan Road, St. Paul, Minnesota 55164
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 483-0900
AMENDMENT NO. 1 TO FORM 8-K
The Registrant hereby amends Item 7 of its Current Report dated May 1, 1995 on
Form 8-K as set forth in the pages attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
TSI INCORPORATED
By /s/ Lowell D. Nystrom
Lowell D. Nystrom
Vice President & CFO
Dated: July 13, 1995
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
The following financials are filed as part of this report:
(a) Audited financial statement of the business acquired, Alnor
Instrument Company, a Delaware Corporation, pursuant to Rule 3.05
of Regulation S-X: Independent Auditor's Report; Balance Sheet as
of December 31, 1994; Statement of Earnings and Retained Earnings
for the year ended December 31, 1994; Statement of Cash Flows for
the year ended December 31, 1994; and Notes to Financial
Statements.
(b) Pro Forma financial information required pursuant to Article 11
of Regulation S-X: Unaudited Pro Forma Condensed Combined
Statement of Earnings for the year ended March 31, 1995;
Unaudited Pro Forma Condensed Combined Balance Sheet as of
March 31, 1995; and Notes to Pro Forma Statements.
(c) Exhibit in accordance with the provisions of Item 601 of
Regulation S-K: Exhibit 23 - Consent of Independent Certified
Public Accountants.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Alnor Instrument Company
We have audited the accompanying Balance Sheet of Alnor Instrument
Company as of December 31, 1994 and the related Statements of
Earnings and Retained Earnings, and Cash Flows for the year then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based upon our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as, evaluating
the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Alnor
Instrument Company as of December 31, 1994 and the results of its
operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles.
/s/ Gilson Labus & Silverman
June 26, 1995
<TABLE>
<CAPTION>
ALNOR INSTRUMENT COMPANY
BALANCE SHEET
DECEMBER 31, 1994
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 981,108
Accounts receivable, less allowance for
doubtful accounts of $115,772 1,194,633
Inventories 1,013,459
Due from related parties 1,010,393
Deferred income taxes 326,303
Other 77,895
Total current assets 4,603,791
PROPERTY AND EQUIPMENT
Cost 1,071,144
Accumulated depreciation and amortization 749,247
Total property and equipment 321,897
OTHER ASSETS 63,344
TOTAL ASSETS $ 4,989,032
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 166,257
Due to related parties 131,629
Accrued compensation 249,309
Due to profit sharing trust 88,932
Accrued restructuring costs 81,876
Other 90,438
Total current liabilities 808,441
DEFERRED INCOME TAXES 45,875
STOCKHOLDER'S EQUITY
Common stock, no par value,
authorized 20,000 shares,
outstanding 16,000 shares 1,600,000
Paid-in capital 2,000,000
Retained earnings 534,716
Total stockholder's equity 4,134,716
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 4,989,032
</TABLE>
<TABLE>
<CAPTION>
ALNOR INSTRUMENT COMPANY
STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31 1994
<S> <C>
SALES $ 8,474,624
COST OF SALES 5,118,975
GROSS PROFIT 3,355,649
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling 1,162,287
General and administrative 1,754,138
Total selling, general and
administrative expenses 2,916,425
EARNINGS FROM OPERATIONS 439,224
OTHER INCOME, NET 68,451
NET EARNINGS BEFORE PROVISION FOR
INCOME TAXES 507,675
PROVISION FOR INCOME TAXES - DEFERRED 198,958
NET EARNINGS $ 308,717
</TABLE>
<TABLE>
<CAPTION>
ALNOR INSTRUMENT COMPANY
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1994
<S> <C>
BALANCE, BEGINNING OF YEAR $ 1,809,268
DIVIDENDS PAID (1,583,269)
NET EARNINGS 308,717
BALANCE, END OF YEAR $ 534,716
</TABLE>
<TABLE>
<CAPTION>
ALNOR INSTRUMENT COMPANY
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31 1994
<S> <C>
OPERATING ACTIVITIES
Net earnings $ 308,717
Adjustments to arrive at net cash flows
Depreciation and amortization 111,939
Provision for uncollectible receivables 60,411
Deferred income taxes 198,958
Increase (decrease) in
Accounts payable (55,054)
Due to related parties (231,223)
Accrued compensation 80,422
Due to profit sharing trust (6,568)
Accrued restructuring costs (115,124)
Decrease (increase) in
Accounts receivable (158,222)
Inventories 179,280
Due from related parties 1,969,877
Other 12,753
Net cash flows from operating activities 2,356,166
INVESTING ACTIVITIES
Purchase of property and equipment (57,072)
Advances to related parties (100,000)
Net cash flows (for) investing activities (157,072)
FINANCING ACTIVITIES
Dividends paid (1,583,269)
Net cash flows (for) financing activities (1,583,269)
NET INCREASE IN CASH AND CASH EQUIVALENTS 615,825
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 365,283
CASH AND CASH EQUIVALENTS, END OF YEAR $ 981,108
</TABLE>
The accompanying notes are an integral part of this statement.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRIMARY FINANCIAL STATEMENTS
The Company is included in the consolidated financial statements
of Alnor, Inc. and Subsidiary as of December 31, 1994 and for the
year then ended, and those consolidated financial statements,
issued under separate cover, are the primary financial statements
of the companies included therein.
CASH EQUIVALENTS
All highly liquid debt securities that mature on or before three
months from the date they are acquired or are due on demand, and
money market fund equity shares are considered cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost, on a first-in, first-
out basis or market.
PROPERTY AND EQUIPMENT, DEPRECIATION AND AMORTIZATION
Property and equipment is stated at cost. Depreciation is based
upon the straight-line method and the estimated useful lives of
the property and equipment. Amortization of leasehold
improvements is based upon the straight-line method and the term
of the lease.
PATENTS
Patents are recorded at cost and amortized over their seventeen
year life based upon the straight-line method. Patents are
included in other assets.
INCOME TAXES
The taxable income of the Company is included in the consolidated
income tax return of its parent company. In accordance with the
accounting policies of the parent, the consolidated tax or tax
benefit is allocated among the companies included in the
consolidated tax return.
Deferred income taxes are provided for temporary differences
between financial statement and tax bases of assets and
liabilities. Deferred taxes are classified as current or
noncurrent, depending on the classification of the assets and
liabilities to which they relate. The principal sources of
temporary differences are inventory, property and equipment,
accrued expenses and reserves, and the income tax effect of
net operating losses.
FOREIGN CURRENCY TRANSACTIONS
Certain receivables and payables including related party balances
are denominated in foreign currencies (Swedish Krona, Finnish
Markka or French Francs). They are translated into U.S. dollars
at the rates of exchange on the date of each balance sheet.
Changes in the relative values of U.S. and each of the foreign
currencies are reflected in operations each year as foreign
exchange gains or losses. Exchange gains or losses are recognized
for income tax purposes only when funds are transferred.
ADDITIONAL CASH FLOW INFORMATION
There were no payments of interest or income taxes for the year
ended December 31, 1994.
ACCOUNTS RECEIVABLE, CONCENTRATION OF CREDIT RISK
The Company designs and manufactures instruments that measure
temperature, velocity, pressure, dewpoint and humidity. Sales are
made primarily through distributors who are located in major U.S.
and Canadian cities and in Australia and Europe. Most of the
distributors purchase and maintain inventories of the products for
resale. Some sales are made directly to large original equipment
manufacturing companies in the U.S. and to U.S. export companies.
The Company grants credit to all of its customers. See Subsequent
Event, below.
INVENTORIES
Inventories consist of the following:
Raw materials $ 916,000
Work in process 27,706
Finished products 69,753
Total $ 1,013,459
RELATED PARTY TRANSACTIONS
A loan of $30,000 was made to the president of the Company in
1992; the unpaid balance at December 31, 1994 is $30,000 and is
included in other assets. The loan has been extended to meet the
same terms of the president's renewed employment contract and is
due December 31, 1995. The note is non-interest bearing unless
not paid in a timely manner, upon which time it will begin
accruing interest at the rate of 1% over prime.
An additional loan of $100,000 was made to a related company in
1994; the unpaid balance at December 31, 1994 is $800,000 and is
due July 24, 1995 together with any unpaid interest accrued at
7.075% for 1994. Interest income was $43,830 for the year ended
December 31, 1994.
An advance of 2,000,000 French Francs, $340,800 at the exchange
rate in effect on the date of receipt, was received from the
parent of the Company's parent, Studsvik AB, as an advance on the
guarantee of a receivable from another foreign related company.
That foreign related company was dissolved, and this debt is
guaranteed by Studsvik AB. Studsvik AB has not applied this
payment to the guarantee so it is treated as both a receivable
from the foreign related company and a payable to Studsvik AB.
There were the following transactions with United States companies:
Related companies
Loan made to related company
(see above) $ 100,000
Interest income $ 43,830
Various other services expense $ 18,000
There were also the following transactions with Studsvik AB (the
parent of the Company's parent) and with various related party
foreign companies owned directly or indirectly by Studsvik AB:
Products sold $ 474,981
Due from related parties consists of the following:
Other related
companies $ 840,460
Foreign companies 169,933
$ 1,010,393
Due to related parties as of December 31, 1994 is primarily for
purchases from a foreign related party.
PROPERTY AND EQUIPMENT, DEPRECIATION AND AMORTIZATION
Property and equipment consists of the following:
Machinery and equipment $ 946,448
Computer software 72,822
Automobiles 28,720
Leasehold improvements 23,154
Total $ 1,071,144
Depreciation and amortization expense was $111,939 for the year
ended December 31, 1994.
ENGINEERING AND NEW PRODUCT DEVELOPMENT COSTS
Engineering costs were $331,847 for the year ended December 31,
1994 and is included in cost of sales. New product development
costs were $480,479 for 1994 and is included in general and
administrative expenses.
PROFIT SHARING PLAN
The Company maintains a profit sharing plan for all of its full
time employees who meet certain eligibility requirements. The
plan permits annual contributions by participants of a minimum of
one percent and a maximum of 15 percent of their individual
compensation and requires the employer to make annual
contributions equal to 25 percent of each participant's
contribution, with certain limits. Additional contributions are at
the discretion of the Company's Board of Directors. The Company's
contribution for 1994 was $107,483 and is included in general and
administrative expenses.
OTHER INCOME AND EXPENSES
Other income and expenses is summarized as follows:
Interest income $ 53,087
Gain on foreign exchange 1,912
Other income (expense), net 13,452
Other income, net $ 68,451
INCOME TAXES
Deferred income taxes are comprised of the following:
<TABLE>
<CAPTION>
Deferred tax Asset (Liability) Net
<S> <C> <C> <C>
Tax effect of temporary
differences $ 259,974 $(45,875) $ 214,099
Tax effect of loss
carryforward 66,329 66,329
Total $ 326,303 $(45,875) $ 280,428
</TABLE>
Deferred income taxes are included on the balance sheet as
follows:
Assets (Liabilities)
Current $ 326,303
Noncurrent (45,875)
Total $ 280,428
The Company has available, at December 31, 1994, unused net
operating loss carryforwards of approximately $170,000 which may
be applied against future taxable income not later than December
31, 2007.
CONTINGENT LIABILITIES
A distributor of the Company's products in Europe is obligated to
make annual payments to a former distributor until such payments
aggregate 1,000,000 Swedish Krona. Each annual payment is the
greater of ten percent of the distributor's sales of the Company's
products or 200,000 Swedish Krona. The Company has guaranteed
these payments to the former distributor. As of December 31,
1994, the Company is contingently liable for 89,417 Swedish Krona,
$12,027 at the exchange rate in effect at that date.
OPERATING LEASE COMMITMENT
The Company rents its premises. The lease was assumed by the
purchaser of the Company's assets. See Subsequent Event, below.
The lease expires June 30, 1997.
Rent expense was as follows:
Included in
Cost of sales $ 196,746
Selling expenses 24,607
General and administrative expenses 24,607
Total $ 245,960
SUBSEQUENT EVENT
On May 1, 1995, the Company sold substantially all of its
operating assets, net of certain liabilities, and its operations
for $4,328,000 which was paid in cash. In connection with the
sale, the Company signed a covenant not to compete for a period of
five years from the closing date. The consideration for the
covenant was paid; $200,000 to the Company and $300,000 to
Studsvik AB. The purchaser assumed the lease for the Company's
premises. The Company realized a gain of approximately $1,382,559
(unaudited) on the sale.
Information regarding the net assets sold (unaudited) is as
follows:
Cash and cash equivalents $ 509,779
Accounts receivable 1,509,674
Inventories 1,170,192
Property and equipment, net
of depreciation and amortization 373,966
Accounts payable (273,327)
Accrued expenses (265,936)
Reserves and other (78,907)
Net assets sold $ 2,945,441
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
Twelve Months Ended March 31, 1995
(Unaudited)
The following pro forma condensed combined statement of earnings represents
the results of operations of TSI Incorporated and Subsidiaries as if
Alnor Instrument Company had been acquired April 1, 1994, on a purchase
accounting basis. This information should be read in conjunction with
the financial statements of the Company and Alnor Instrument Company
and the related notes incorporated herein and incorporated by reference
(all amounts in thousands).
<TABLE>
<CAPTION>
Historical
Alnor Pro Forma Pro Forma
TSI Instrument Adjustments Combined
Incorporated Company Debit (Credit) Total
<S> <C> <C> <C> <C>
Net sales 48,903 8,653 57,556
Cost of sales 20,336 5,171 25,507
Operating expenses 23,853 3,063 (104)(1) 26,812
Operating income 4,714 419 5,237
Other income (expenses) 409 (19) 133 (2) 257
Earnings before income taxes 5,123 400 5,494
Provision for income taxes 1,691 152 (26)(3) 1,817
Net earnings 3,432 248 3,677
Earnings per common share $.65 $.69
Weighted average number of shares
for computation of earnings per
common share 5,308 5,308
</TABLE>
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
The accompanying pro forma financial information is based on the Company's
preliminary review and does not give effect to all adjustments ultimately
required to allocate the purchase price. The pro forma financial
information is not intended to reflect actual results of operations had
the purchase of Alnor been effective on the date indicated, and is not
intended to be indicative of future results. The following describe the
adjustments to the historical information of the Company and Alnor
Instrument Company (Alnor) to give pro forma effect to the purchase of Alnor.
(1) Reflects decrease in Alnor operating expenses related to selling the
business estimated at $250,000 net of amortization of estimated
intangible assets and covenants not to compete estimated to be $146,000.
(2) Reflects a decrease in the Company's interest income estimated at
$237,000, net of a $104,000 decrease in Alnor interest expense.
(3) Adjusts the effective tax rate of the combined entity to the
Company's effective tax rate.
PRO FORMA CONDENSED COMBINED BALANCE SHEET (in thousands)
March 31, 1995
<TABLE>
<CAPTION>
Historical
Alnor Pro Forma Pro Forma
TSI Instrument Adjustments Combined
Incorporated Company Debit (Credit) Total
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents 9,552 510 (4,928)(1) 5,134
Accounts receivable, net 6,732 1,481 8,213
Prepaid expenses 223 78 301
Inventories 6,173 1,085 7,258
Intangible and other assets 4,015 37 2,053 (2) 6,105
Property plant and equipment, net 5,472 302 5,774
Total Assets 32,167 3,493 32,785
Liabilities and Stockholders' Equity
Accounts payable and accrued exp. 2,867 273 3,140
Employee compensation 2,505 345 2,850
Taxes, other than income taxes 273 273
Income taxes payable 180 180
Total liabilities 5,825 6,443
Shareholders' Equity
Common shares 521 521
Additional paid in capital 6,003 6,003
Retained earnings 19,472 19,472
Equity adjustment from translation 346 346
Total Shareholders' Equity 26,342 26,342
Total Liabilities and Shareholders' Equity 32,167 32,785
</TABLE>
NOTES TO PRO FORMA BALANCE SHEET
The accompanying pro forma financial information is based on the Company's
preliminary review and does not give effect to all adjustments ultimately
required to allocate the purchase price.
The following describe the adjustments to the historical information of
the Company and Alnor Instrument Company (Alnor) to give pro forma effect
to the purchase of Alnor:
(1) Reflect the cash paid including covenants not to compete and consulting
agreement.
(2) Reflect the excess of the purchase price over the net assets acquired.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the incorporation by reference in the amendment to the
May 15, 1995 Registration Statement of TSI Incorporated on Form 8-K of our
report dated June 26, 1995 on the financial statements of Alnor Instrument
Company for the year ended December 31, 1994.
/s/ Gilson Labus & Silverman
Chicago, Illinois
July 10, 1995
