As filed with the Securities & Exchange Commission on December 31, 1996
Registration No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TSI INCORPORATED
(Exact name of issuer as specified in its charter)
MINNESOTA 41-0823900
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
500 CARDIGAN ROAD
SHOREVIEW, MINNESOTA 55126
(612) 483-0900
(Address and telephone number of principal executive offices)
LOWELL D. NYSTROM
500 CARDIGAN ROAD
SHOREVIEW, MINNESOTA 55126
(612) 483-0900
(Name, address and telephone number of agent for service)
COPY TO:
Nancy Roetman Menzel
Gray Plant Mooty
33 South Sixth Street
3400 City Center
Minneapolis, MN 55402
(612) 343-2800
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If the only securities being registered on this form are being offered pursuant
to dividend or reinvestment plans, please check the following box. |_|
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
<TABLE>
<CAPTION>
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Calculation of Registration Fee
- ------------------------ ---------------------- ---------------------- ----------------------- -------------------
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Per Aggregate Offering Amount of
Securities Registered (1) Share Price Registration Fee
- ------------------------ ---------------------- ---------------------- ----------------------- -------------------
<S> <C> <C> <C> <C>
Common Stock, $.10 par 100,000 $11.0625(2) $1,106,250(2) $335.23
value
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(1) Shares are currently issued and outstanding and are being issued for
resale by certain Selling Shareholders.
(2) Estimated solely for purposes of calculating the registration fee. In
accordance with Rule 457(c) of Regulation C, the estimated price is
based on the average of the high and low reported prices on the Nasdaq
National Market on December 26, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
Cross-Reference Sheet Showing Location in Prospectus of
Information Required by Items in Part I of Form S-3
Item Location in Prospectus
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus ............ Cover of the Registration
Statement; Outside front
cover page of the Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus ........... Inside front cover page of the
Prospectus and Outside Back
Cover Pages of Prospectus
3. Summary Information, Risk
Factors and Ratio of Earnings to
Fixed Charges ....................... The Company and Recent Developments;
Risk Factors
4. Use of Proceeds ..................... Inapplicable
5. Determination of Offering Price ..... Inapplicable
6. Dilution ............................ Inapplicable
7. Selling Security Holders ............ Selling Stockholders
8. Plan of Distribution ................ Plan of Distribution
9. Description of Securities to be
Registered .......................... Information Incorporated by
Reference
10. Interests of Named Experts and
Counsel ............................. Legal Matters; Independent Auditors
11. Material Change ..................... The Company and Recent Developments,
Information Incorporated by
Reference
12. Incorporation of Certain
Information by Reference ............ Incorporation of Certain Documents
by Reference
13. Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities .......... Indemnification
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION. DATED DECEMBER 31, 1996
100,000 Shares
TSI INCORPORATED
Common Stock
The shares offered hereby are 100,000 issued and outstanding shares
(the "Shares") of Common Stock, $.10 par value ("Common Stock"), of TSI
Incorporated (the "Company") owned by William D. Bachalo ("Selling
Shareholder"), which may be sold from time to time by the Selling Shareholder
for his own account. The Company has been advised that the Selling Shareholder
may from time to time sell the Shares to or through brokers or dealers in one or
more transactions, on the Nasdaq National Market or otherwise, at market prices
prevailing at the time of sale, at prices relating to such prevailing market
prices, or at negotiated prices.
The Company's Common Stock is listed on the Nasdaq National Market
under the symbol TSII. On December 26, 1996, the last reported sale price of
Common Stock, as reported on the Nasdaq National Market, was $11.00 per share.
-------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SHOULD
BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION NOR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Since the Common Stock registered hereunder is being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Act"), the Company cannot include herein information
about the price to the public of the Common Stock or the proceeds to the Selling
Shareholder. The Company will receive no proceeds from any sales of Common Stock
by the Selling Shareholder, and the Company is obligated to pay one half the
expenses of this offering, which are estimated at $2,500. The Selling
Shareholder will pay his own expenses in connection with sales of the Common
Stock. The Selling Shareholder and any brokers or dealers executing selling
orders on his behalf may be deemed "underwriters" within the meaning of the Act,
in which event the usual and customary selling commissions which may be paid to
the brokers or dealers may be deemed to be underwriting commissions under the
Act. There can be no assurance that any or all of the Shares registered
hereunder will be sold. See "PLAN OF DISTRIBUTION."
The date of this Prospectus is _________, 1997.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company with the Commission may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street N.W., Washington,
D.C. 20549, and inspected at the Commission's regional offices at Suite 1400,
500 West Madison Street, Chicago, Illinois 60661. Copies of such material can
also be obtained from the Public Reference Section of the Commission, 450 Fifth
Street N.W., Washington, D.C. 20549, at prescribed rates.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act of 1933, as amended (the "Act"), with respect
to the securities offered hereby. This Prospectus omits certain information
included in such Registration Statement. For further information about the
Company and its securities, reference is made to such Registration Statement and
to the exhibits filed as part thereof or otherwise incorporated therein. Each
summary in this Prospectus of information included in the Registration Statement
or any exhibit thereto is qualified in its entirety by this reference to such
information or exhibit.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company is subject to the information requirements of the Exchange
Act and, in accordance therewith, files reports and other information with the
Commission. The following documents, which have been filed by the Company with
the Commission pursuant to the Exchange Act (File No. 0-2958), are incorporated
by reference in this registration statement:
(a) The Company's Annual Report on Form 10-K for the year
ended March 31, 1996.
(b) The Company's Quarterly Reports on Form 10-Q for the
quarters ended June 30 and September 30, 1996.
(c) The Company's definitive Proxy Statement for the 1996
Annual Meeting of Shareholders held on July 18, 1996.
(d) The description of the Company's Common Stock contained in
the Company's Registration Statement on Form 10 filed under the
Exchange Act on December 3, 1979.
All documents subsequently filed by the Company with the Commission
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment that indicates that all securities
offered have been sold or that deregisters all securities then remaining unsold,
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of filing such documents.
Any statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein, or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein, modifies or supersedes such
document. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company undertakes to provide without charge to each person,
including any beneficial owner, to whom a Prospectus is delivered, upon written
or oral request of such person, a copy of any and all of the information that
has been incorporated by reference in this Prospectus. Requests may be directed
to Lowell D. Nystrom, Chief Financial Officer, 500 Cardigan Road, Shoreview,
Minnesota 55126, (612) 483-0900
THE COMPANY AND RECENT DEVELOPMENTS
DEVELOPMENT OF THE BUSINESS
The Company was founded in 1961 as a manufacturer of scientific
measuring instruments for research applications. In 1968, the Company went
public under the name Thermo-Systems Inc. and in 1976 became TSI Incorporated.
In recent years, the Company has applied its research instrumentation technology
to industrial applications in order to address the needs of a variety of market
niches and became a diversified, precision instrumentation company.
RECENT CORPORATE DEVELOPMENTS
On May 1, 1995, the Company acquired Alnor Instrument Company in the
Chicago area, an $8.5 million manufacturer of instruments for air flow and
indoor air quality monitoring. This firm is synergetic with the Company's flow
measuring instruments, especially for measurements of velocity and other comfort
factors in building spaces for heating, ventilation and air conditioning
performance.
On October 1, 1995, the Company acquired Aerometrics, Inc. of
Sunnyvale, Ca., a $7 million manufacturer of instruments for fluid mechanics and
particle measurements in sprays. This addition enhances the capabilities of the
Company by adding product lines in both flow measuring and particle measuring
instruments.
PRODUCTS
The Company develops, manufactures and markets two classes of measuring
instruments for a variety of market applications. The first involves the
measurements of fluid flow characteristics of gases and liquids and surface
motion of solid materials. The second involves measuring the presence of and
certain characteristics of small particles and/or gases in fluids or fluid
flows, such as those found in air pollution studies, workplace environments,
clean rooms or industrial processes. The Company's business is characterized by
many "niche" markets, wherein the utilization of a few basic measuring
technologies can satisfy the measurement needs in many different industrial and
research applications.
The applications for the Company's products can also be described by
considering two general market areas or drivers. These are the safety, comfort
and health of people (the working environment) and productivity and quality
improvements (industrial processes). Both of these cross numerous industries.
Flow Measuring and Surface Motion Instruments
PRODUCT TECHNOLOGIES
The Company's flow and surface motion measuring instruments utilize
several measurement techniques, including thermal anemometry, laser-Doppler
velocimetry, particle-image velocimetry and several other techniques used in
certain types of products.
Thermal technology has been used in the Company's flow measuring
instruments since its earliest products were developed. A probe containing a
small electrically heated element is exposed to a flow. The cooling effect of
the flow on the element provides a measure of the velocity and/or flow rate in
gas or liquid. The instrument can then portray the flow rate in an analog
display or convert it into a digital signal for further processing by a
computer. The output signal can be used to monitor, analyze or control the flow
or velocity within a flow channel or process. The Company maintains an ongoing
development program to further enhance this technology and add companion
products and software for convenient signal analysis and data interpretation.
For over 20 years, the Company has been developing and producing
various flow measuring and surface motion measuring instruments which utilize a
laser based technology, generally called laser-Doppler velocimetry (using lasers
manufactured by others). These instruments use a laser beam and optical
measurement technique to measure velocity and movement, rather than a probe as
used with the thermal instruments. The laser instruments are used to obtain
measurements in locations where a probe would be destroyed or is undesirable
because it would disturb the flow of the liquid or gas being measured. This
technology continues to be enhanced in a variety of ways to meet new
applications. Reducing the size, increasing the ruggedness of instruments,
improving accuracy, improving signal processing techniques and allowing for more
than one measurement to be taken at a point in time are some of these
enhancements. Also, the Company has developed and is selling a variety of
user-friendly software packages to expand and enhance the application of these
instruments.
Through engineering development work, licensing and acquisition of
product lines, the Company has added the capability of providing instruments and
software packages that measure or map flow patterns over an area of flow around
objects, etc., by visual means. This area is referred to as particle-image
velocimetry because the technique is based on the simultaneous tracking of the
movement of numerous particles in the flow stream. Optical techniques are used
to show images of the flow patterns. This area has been emerging as an important
addition to flow measuring and analysis capability which the Company expects to
continue growing over the next few years.
With the acquisition in 1986 of Handar, in Sunnyvale, California, other
measurement techniques were added to the Company's capabilities, including "cup
and vane" and propeller-type wind speed measuring devices, for measuring the
characteristics of air and air flow. In fiscal 1996, a major new flow sensing
technology was introduced to improve on the widely-used cup-and-vane anemometer
for measuring wind speed and direction in outdoor environments. This patented
sensor utilizes ultrasonic technologies, involves no moving parts and can be
heated to prevent ice buildup when used at low temperatures.
The fiscal 1996 acquisition of Alnor Instrument Company added to the
Company's measurement technologies in the area of velocity using small
propellers and pressure differentials, temperature with thermocouple and
pyrometers, dew-point with condensation detectors and micromanometers for
pressure measurement.
PRODUCT APPLICATIONS
Research applications for the Company's instruments tend to cover many
different industries and are usually the earliest application of any new
measuring technique. This research aspect of the Company's business continues to
point toward more specific industrial applications that become larger market
niches. Several industrially oriented flow measuring and surface motion market
niches have been pursued by the Company over the years using the Company's
developed and acquired basic technologies. These products and niches are
changing with time as continuing product improvements and new applications are
found.
Productivity and quality improvement applications of flow measuring and
surface motion instruments include:
* The Company's line of research and analytical instruments for
fluid mechanics, including thermal anemometers, laser-Doppler
velocimeters and particle image velocimeters are mostly used for
productivity and quality improvement of customers' products and
processes, such as imaging of velocity and turbulence in wind
tunnels, ducts and pipes and measurements and imaging in gas
turbine engines and automotive exhaust gases to improve
efficiency or lower pollution and noise.
* A major industrial application is an instrument line using laser
and optical techniques to measure surface speed and length of
aluminum, steel and similar materials for industrial process
control. This product line is performing well for measurements in
rolling mills and similar metals forming operations. Applications
to other materials processing have also been developed including
measurement of speed, length and diameter in textile, fiber,
paper and similar manufacturing. Additional engineering work has
been done during the past year to adapt these instruments to
measurement of speed and length for wire and cable manufacturing.
Safety, comfort and health applications of flow measuring and surface
motion instruments include measurements of air speed or flow in building spaces
for heating, ventilation and air conditioning work; and measurement of air
movement and other parameters in the atmosphere. An outline of product lines and
niches for safety, comfort and health applications include the following:
* A line of portable air velocity instruments to monitor air flow
and air movement in offices and industrial spaces. Ongoing
development work has added accuracy and convenience to these
products and in fiscal 1996 the Alnor acquisition added more
products to this line of instruments, making the Company more
globally competitive for a wider range of applications and
prices.
* Air flow sensors using thermal sensing techniques to monitor
and/or control air flow through laboratory fume hoods. A similar
device measures and controls static pressure in laboratories and
other controlled rooms like hospital isolation rooms by
controlling the air flow through the space. Engineering
development work has continued during the past year in order to
improve performance of energy saving and safety enhancement
devices for hospital isolation rooms as well as laboratories.
These product lines were also broadened by the addition of room
pressure monitors manufactured by Alnor Instrument Company.
* A new generation data collection platform used to collect and
transmit meteorological and environmental data was introduced
during fiscal This platform is used in conjunction with the
Company's meteorology and related monitoring systems for outdoor
environmental measurements. During the past year additional
software capability has been added to enhance performance and to
broaden applications to other than meteorological and
hydrological data collections.
* Instruments that determine cloud height and visibility in moving
air masses using laser and optical techniques. These products are
used for meteorological applications at airports and other open
areas. While these products have been manufactured and sold for a
number of years, additional engineering work to enhance
performance and broaden applicability continued during fiscal
1996.
Particle and Gas Measuring Instruments
PRODUCT TECHNOLOGIES
The Company's particle and gas measuring instruments utilize a number
of different techniques to analyze various characteristics of small particles in
gases and liquids as well as the presence and amount of various gases in air. A
variety of instruments are offered to detect, measure, sample, generate and
count small particles and to detect and measure other gases in air.
With the acquisition of Transducer Research, Incorporated in fiscal
1993, the Company added to its particle measuring product lines the capability
for detection of gases that are important in measuring indoor air quality and
various toxic or polluting gases in outdoor environments.
In fiscal 1994, the Company's product lines for monitoring
contamination levels in clean rooms were sold to Particle Measuring Systems,
Inc. (PMS) of Boulder, Colorado. The Company is continuing, until December, 1998
or longer, subject to options, to manufacture some of the products for PMS on an
Original Equipment Manufacturer (OEM) basis.
During fiscal 1994, based on licensed technology, a new analytical
instrument, called a nephelometer, was introduced for measuring the presence of
particles in the atmosphere that affect the penetration of the sun's rays,
related to global warming research.
During fiscal 1995 and 1996, the Company received contracts to produce
its Aerodynamic Particle Size (APS) for the U.S. Army and U.S. Navy to be used
as an early detection device for sensing the presence of bio-hazard material in
the air. These contracts have continued during fiscal 1996 and included funding
for development work to further enhance the capabilities of the APS for these
applications.
During fiscal 1996 the Company acquired Aerometrics, Inc. which added
significant capability in the area of measuring characteristics of droplets such
as in fuel sprays, inhalants, water sprays, etc. The technology used is referred
to as phase-Doppler particle analysis.
PRODUCT APPLICATIONS
Applications for particle and gas measuring instruments include a
variety of industrial and analytical instruments designed to monitor
contamination levels, to make measurements in aerosol generation studies, to
measure air pollution levels in buildings or in outside air, to measure the size
distribution of various powders, to measure toxic gases at waste sites, to
measure indoor air quality and to test for leaks in filters and similar media.
Many of the Company's particle and gas measuring instruments are used in
conjunction with computers (manufactured by others) which compile and interpret
the data obtained. Also, the Company has continued to develop and sell a variety
of user-friendly software packages to expand and enhance the applications of
these instruments.
Like the flow measuring and surface motion instruments, the Company has
expanded on research and analytical applications of its particle and gas
measuring instruments by pursuing industrially oriented niches over the past
several years.
An outline of these product lines and niches which apply to the area of
safety, comfort and health of people include the following:
* An instrument that uses particle sensing techniques to measure
for leaks in face masks and respirators that result from
inadequate fit, called the PORTACOUNT(R) fit tester. The products
are used in industrial hygiene applications where people may be
at risk from exposure to hazardous environments. This product has
been fully developed and successfully marketed commercially.
During fiscal 1993, the product was packaged for military use by
the U.S. Army and U.S. Marines for fit testing of their gas masks
and starting with fiscal production of the military version has
continued through fiscal 1996. Shipments for fiscal 1997 are
continuing under additional contracts from German and U.S.
defense agencies and additional contracts are expected for
periods beyond fiscal 1997.
* A portable instrument has been added for indoor air quality
measurements to collect data on airborne particles (dust) in
industrial settings where people work.
* With the addition of gas detecting sensors and instruments to
this product classification through the acquisition of Transducer
Research, Inc. in fiscal 1993, potential applications have
expanded. During fiscal 1995 and 1996, portable instruments were
introduced to measure various indoor air quality parameters
including levels of carbon dioxide to indicate the "sick building
syndrome" levels; and to also measure carbon monoxide. In fiscal
1996 instruments were added to measure higher concentrations of
carbon dioxide encountered in food and beverage industries.
Development work is continuing to add other gas detecting
instruments to these product lines.
For industrial applications where the Company's instruments are used
mainly for productivity and quality improvement:
* Instruments that determine the efficiencies of filters and media
using particle sensing techniques to measure for leaks. This
product line is used for quality control by filter manufacturers
and has been manufactured and marketed for several years.
Additional development work occurred in fiscal 1996 to enhance
and broaden the filter product testing line.
* Manufacturing, as an OEM supplier, instruments for monitoring the
particle contamination levels in air and other gases in
industrial clean room applications and residue in ultra-clean
water, using particle sensors that incorporate light scattering
optical techniques. These instruments are used by manufacturers
of semiconductor devices, pharmaceutical products and other
products which require very low contamination levels during
critical manufacturing processes. Continued engineering
development in fiscal 1996 added to performance capabilities of
these instrument lines.
* Instruments added with the Aerometrics acquisition measure the
size, speed and concentration of droplets in industrial sprays to
assure uniform quality of devices such as fuel injectors.
Raw Materials and Parts
The Company purchases most of its electronic components and materials
from suppliers in the United States and, generally, has not experienced problems
with availability. Some materials such as laser diodes and fibers for fiber
optics are imported. Import restrictions could impair availability of some of
these materials. Engineering design of the Company's products does not require
exotic parts or materials and the selection of readily available materials has
been an important design goal. The Company utilizes a vendor certification
program to help maintain the quality and timeliness on incoming parts. The
Company continues to seek and maintain alternative vendors and has generally
been able to locate alternative sources for materials during past periods of
short supply. A severe shortage of electronic parts could impair the Company's
ability to produce certain products but a broad and diversified product line
helps to alleviate this risk.
Customers
The Company sells to a broad range of customers throughout the world.
These customers include many industrial companies, educational institutions,
research organizations and agencies of the United States and foreign
governments.
Sales to defense customers accounted for about 10 percent of total net
sales in fiscal 1996, 15 percent in fiscal 1995 and 12 percent in fiscal 1994,
but accounted for no more than 10 percent of total sales for each of the prior
eight years. The increase in fiscal 1995 and fiscal 1994 were mainly due to
sales of PortaCount fit testers under the aforementioned U.S. military
contracts. The decrease in fiscal 1996 was due to a significantly lower level of
defense sales in the two companies acquired during fiscal 1996 and a lower level
of sales of the PortaCount fit testers to military customers.
Reduction or changes in federal spending may adversely affect the
Company's governmental and, to some extend, education sales. United States
governmental sales may be canceled at the government's convenience
Approximately 64 percent of the Company's sales during fiscal 1995 were
to domestic customers, with the balance of 36 percent to international
customers, mainly in Europe and the Pacific basin. Sales to international
customers consist principally of products manufactured in the United States.
Overall, the Company's fiscal 1996 international net sales increased
about 65 percent compared to fiscal 1995 and international sales of both product
classes increased at similar rates. From fiscal 1994 to fiscal 1995,
international sales increased about 6 percent and at similar rates for both
classes of products. The Company's fiscal 1996 export sales increased in part
from the two acquisitions previously referenced.
Marketing
The Company markets its products through Company-employed sales
engineers who operate out of offices located in the United States and
international sales offices located in Europe. In addition, independent sales
representatives and distributors represent the Company in other domestic and
international markets. The Company uses promotional catalogs, technical
bulletins, seminars, displays, trade shows, insertions in catalogs of others and
advertising in trade journals to promote its products. The Company's sales
consist primarily of standard products as listed in its catalogs, although the
Company also sells specialized products designed to meet specific customer
requirements.
The nature of the Company's products requires a marketing approach that
is customer application oriented. Accordingly, sales engineers and independent
representatives are technically competent in a variety of engineering and
scientific disciplines as well as trained in the market niches and product lines
on which they concentrate. The sales force provides the Company with information
for development of new products and identification of new markets. In addition
to direct sales efforts and after-sales servicing, the Company provides its
customers with technical support, advice, training and application information
related to the Company's products.
At March 31, 1996, the Company's backlog of orders was approximately
$30,007,000 compared to $11,364,000 at March 31, 1995 and $12,514,000 at March
31, 1994. The Company estimates that over 90% of the 1996 backlog will be
shipped by March 31, 1997.
As of March 31, 1996, about $12 million of the Company's backlog was
due to the aforementioned military contracts for PortaCount fit testers.
Competition
The Company's products compete with products utilizing different
technologies as well as directly competitive products. For example, the
Company's fluid flow measuring instruments which use thermal measurement
techniques compete with instruments utilizing differential pressure or other
measurement techniques. New products could be introduced by competitors that
would make existing Company products obsolete. The Company's ability to compete
is dependent upon its ability to develop or license products in a changing
technological environment. The Company's competitive strength often comes from
its ability to fit instruments to new applications on an ongoing basis such that
new applications or market niches replace those where needs have changed, as
well as its ability to grow by adding more niches.
Competitive forces vary in accordance with the various market niches
into which the Company sells products. Competition can best be described by
starting with the two product classes and further categorizing product types in
each class, as shown in the table that follows. In the table, when "significant
market share" is indicated, it is due to the Company's long term presence in a
niche or because the product is so unique that it may, essentially, be the only
product available to make the measurement required, thus creating its own niche.
The exact number of international competitors is not always known, particularly
in cases where the Company does not have international experience with that
product type. The Company typically confronts the same group of competitors in
about 20% of its total sales.
Research and Product Development
The Company is engaged in research and development activities
principally for the development of proprietary products. These activities, which
occur in all aspects of the Company's business, generally consist of the
development, design and testing of potential new products with emphasis on
applied (as distinct from basic) research. Approximately 75% of the Company's
engineering and technical staff are engaged in research and development
activities on a full-time basis. The Company also engages in some contract
research work for others that varies from time to time. This type of contract
work generally relates to the development of a future instrument or product
enhancements to better meet market needs and applications. In addition, the
Company utilizes various outside consultants in the research and development
area. In fiscal year 1996, the Company spent approximately $8,993,000 (13.0% of
net sales) in research and product development activities, compared to
$7,196,000 (14.7% of net sales) and $6,360,000 (14.5% of net sales) in fiscal
1995 and 1994, respectively.
Patents and Licenses
One or more aspects of several products currently marketed by the
Company are covered by patents owned by the Company or licensed to the Company
by outside inventors. While the Company believes that patent protection is
important to its business, it does not believe that the expiration or
invalidation of any particular patent would have a materially adverse effect
upon its business. All licenses held with respect to technology used by the
Company are believed to be fully enforceable. The loss of any one of several
licenses held by the Company would probably not have significant adverse effect
upon the Company.
Employees
As of March 31, 1996, the Company had 510 employees. The Company's
employees are not represented by a union, except at Alnor Instrument Company, a
wholly owned subsidiary acquired in fiscal 1996, where about 35 production
employees are represented by an in-house union. There has never been a work
stoppage due to labor difficulties and the Company considers its relations with
employees to be satisfactory at all locations.
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following risk factors in
evaluating the Company and its business before purchasing the Shares offered
hereby.
Government Contracts
The Company estimates that contracts with the United States and state
governments represented approximately 21%, 32%, and 29% of the Company's total
revenue in fiscal years 1996, 1995, and 1994, respectively. Generally, the
Company's contracts with the U.S. government contain provisions to the effect
that the contracts may be terminated at the convenience of the customer, and
that in the event of such termination, the Company would be entitled to receive
payment based on the cost incurred and the anticipated profit on the work
completed prior to termination.
International Sales
The Company's international revenues constituted 36%, 31%, and 31% of
the Company's total revenues in 1996, 1995, and 1994, respectively. The Company
expects that international sales will continue to represent a significant
portion of its revenues in the future. The Company will continue to be subject
to the normal risks of conducting business internationally, including political
instability, unexpected changes in regulatory requirements, fluctuating exchange
rates, tariffs and other barriers, difficulties in staffing and managing foreign
subsidiary operations and longer payment cycles. Although the Company has
operated under these conditions for may years, there can be no assurance that
these factors will not at some point in the future have a material impact on the
operating results of the Company in any given financial period.
Ability to Hire and Retain Technical Resources
As the Company continues to expand, it will need to be able to hire and
retain, in sufficient numbers, personnel with appropriate technical and
manufacturing skills. There can be no assurance that the Company will be able to
acquire or retain these resources as they are required or at competitive rates.
If unsuccessful, Company's potential growth may be negatively impacted.
SELLING SHAREHOLDER
William D. Bachalo (the "Selling Shareholder") acquired his shares from the
Company effective October 1, 1995, pursuant to the Agreement and Plan of Merger
pursuant to which Aerometrics, Inc. became a wholly-owned subsidiary of the
Company. Mr. Bachalo is currently president of Aerometrics.
The following table sets forth certain information with respect to the
offering and the ownership of Common Stock by the Selling Shareholder as of
October 31, 1996.
<TABLE>
<CAPTION>
- ---------------------- ------------------- ---------------- ------------------- --------------------------------
Shares of Common
Stock Owned Shares of Common Percentage of
Beneficially Stock Owned Common Stock
Name of Selling Before Offering Shares Offered Beneficially Owned Beneficially
Shareholder Hereby After Offering ------------------------------
Before Offering/After Offering
- ---------------------- ------------------- ---------------- ------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
William D. Bachalo 293,578 100,000 193,578 2.6% 1.7%
</TABLE>
PLAN OF DISTRIBUTION
The Company has been advised that the Shares may be sold from time to
time by the Selling Shareholder or by pledgees, donees, transferees, or other
successors in interest. Such sales may be made in the over-the-counter market or
otherwise at prices and at terms then prevailing or at prices related to the
then current market price or in negotiated transactions. The Shares may be sold
by one or more of the following: (a) a block trade in which the broker or dealer
so engaged will attempt to sell Shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction; (b) purchases
by a broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; and (d) in privately
negotiated transactions not involving a broker or dealer. In effecting sales,
brokers or dealers engaged to sell Shares may arrange for other brokers or
dealers to participate. Brokers or dealers engaged to sell Shares will receive
compensation in the form of commissions or discounts in amounts to be negotiated
immediately prior to each sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended, in connection with such
sales. The Company will receive no proceeds from any sales of Common Stock by
the Selling Shareholder, and it is anticipated that the brokers or dealers, if
any, participating in the sales of such securities will receive the usual and
customary selling commissions.
LEGAL MATTERS
The legality of the Common Stock will be passed upon for the Company by
the firm of Gray, Plant, Mooty, Mooty & Bennett, P.A. Richard N. Flint, a
principal in that firm, owns 63,666 shares of the Common Stock of the Company.
INDEPENDENT AUDITORS
The audited financial statements of the Company as of March 31, 1996
and 1995, and for each of the years in the three-year period ended March 31,
1996, which are incorporated by reference herein, have been examined and
reported on by KMPG Peat Marwick LLP, as indicated in their report with respect
thereto, which is incorporated herein by reference, in reliance upon the
authority of said firm as experts in accounting and auditing.
INDEMNIFICATION
The Company's Articles of Incorporation eliminate or limit certain
liabilities of its directors and Minnesota law provides for indemnification of
directors, officers and employees of the Company in certain instances. Insofar
as exculpation from, or indemnification for, liabilities arising under the
Securities Act of 1933 may be allowed to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that in the opinion of the Securities and Exchange Commission such
exculpation or indemnification is against public policy as expressed in the Act
and is therefore unenforceable.
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE HEREBY. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE SELLING SHAREHOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH OFFER TO SELL OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. THE DELIVERY
OF THIS PROSPECTUS AT ANY TIME OR ANY SALE MADE HEREUNDER DOES NOT IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF
--------------------
TABLE OF CONTENTS
Available Information....................................2
Incorporation of Documents by Reference..................2
The Company and Recent Developments......................3
Risk Factors............................................12
Selling Shareholder.....................................13
Plan of Distribution....................................14
Legal Matters...........................................14
Independent Auditors....................................14
Indemnification.........................................14
--------------------
100,000 SHARES
TSI INCORPORATED
-----------------------------------------
COMMON STOCK
($.10 PAR VALUE)
-----------------------------------------
PROSPECTUS
DATED _________, 1997
PART II
INFORMATION NOT REQUIRED TO BE IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses of the Company in
connection with the sale and distribution of the Common Stock being registered.
All of the amounts shown are estimates, except for the Securities and Exchange
Commission registration fee.
Securities and Exchange Commission fee $ 335
Accounting fees and expenses 1,000
Legal fees and expenses 1,000
Miscellaneous 165
-------
TOTAL $ 2,500
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Minnesota Statutes Section 302A.521 provides that a Minnesota business
corporation shall indemnify any director, officer, or employee of the
corporation made or threatened to be made a party to a proceeding, by reason of
the former or present official capacity (as defined) of the person, against
judgments, penalties, fines, settlements, and reasonable expenses incurred by
the person in connection with the proceeding if certain statutory standards are
met. "Proceeding" means a threatened, pending or completed civil, criminal,
administrative, arbitration, or investigative proceeding, including one by or in
the right of the corporation. Section 302A.521 contains detailed terms regarding
such right of indemnification and reference is made thereto for a complete
statement of such indemnification rights. Article VI of the by-laws of the
Company provides for the indemnification of directors, officers, and employees
of the Company pursuant to such Section 521 and permits the Company to purchase
insurance against any liability asserted against certain agents of the Company.
In addition, Article XII of the Company's Articles of Incorporation eliminates
certain personal liability of the directors of the Company for monetary damages
for certain breaches of directors' fiduciary duties. Article XII has no effect
on a director's liability for (1) breach of the director's duty of loyalty; (2)
acts or omissions not in good faith or involving intentional misconduct for
known violations of law; and (3) approval of any transactions from which the
director derives an improper personal benefit.
"Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be
permitted to directors, officers or persons
controlling the registrant pursuant to the
foregoing provisions, the registrant has been
informed that in the opinion of the Securities
and Exchange Commission such indemnification is
against public policy as expressed in the Act
and is therefor unenforceable."
ITEM 16. EXHIBITS
4.1 Specimen Certificate of Common Stock(1)
5.1 Opinion of Gray, Plant, Mooty, Mooty & Bennett, P.A. - filed
herewith.
23.1 Consent of KMPG Peat Marwick LLP. -- filed herewith.
23.2 Consent of Gray, Plant, Mooty, Mooty & Bennett, P.A. (see
Exhibit 5.1).
24.1 Power of Attorney (included on page II-3 of the Registration
Statement).
- ---------------------
(1) Incorporated by reference to the Company's Registration Statement on Form 10
file with the Commission on December 3, 1979.
ITEM 17. UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the termination of
the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of the registrant as discussed above, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Shoreview, State of Minnesota, on
December 30, 1996.
TSI INCORPORATED
By /s/ Leroy M. Fingerson
------------------------------------
Leroy M. Fingerson
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Leroy M. Fingerson and Lowell D. Nystrom,
and each of them, his/her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution for him/her and in his/her name,
place, and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full powers and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he/she might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their or his/her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below, by the following persons in the
capacities indicated:
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
/s/ Leroy M. Fingerson Director (Principal Executive December 30, 1996
- ------------------------------ Officer)
Leroy M. Fingerson
/s/ Lowell D. Nystrom Vice President, Treasurer, and December 30, 1996
- ------------------------------ Director(Principal Financial
Lowell D. Nystrom and Accounting Officer)
/s/ James E. Doubles Director December 30, 1996
- ------------------------------
James E. Doubles
/s/ Frank D. Dorman Director December 30, 1996
- ------------------------------
Frank D. Dorman
- ------------------------------ Director
John F. Carlson
/s/ Kenneth J. Roering Director December 30, 1996
- ------------------------------
Kenneth J. Roering
/s/ Donald M. Sullivan Director December 30, 1996
- ------------------------------
Donald M. Sullivan
- ------------------------------ Director
Lawrence J. Whalen
</TABLE>
INDEX TO EXHIBITS
EXHIBIT PAGE
- ------- ----
4.1 Specimen Form of Common Stock Certificate* --
5.1 Opinion of Gray, Plant, Mooty, Mooty
& Bennett, P.A.
23.1 Consent of KMPG Peat Marwick LLP
23.2 Consent of Gray, Plant, Mooty, Mooty
& Bennett, P.A. (Exhibit 5.1 to
this Registration Statement) --
24.1 Power of Attorney (included on page II-3 of this
Registration Statement) --
- ------------------------
* Incorporated by reference to the Company's Registration Statement on
Form 10 filed with the Commission on December 3, 1979.
EXHIBIT 5.1
December 30, 1996
TSI Incorporated
500 Cardigan Road
Shoreview, MN 55126
Re: EXHIBIT 5.1 to Registration Statement on Form S-3
Ladies/Gentlemen:
We are acting as corporate counsel to TSI Incorporated (the "Company")
in connection with the preparation and filing of a Registration Statement on
Form S-3 (the "Registration Statement") relating to the registration under the
Securities Act of 1933, as amended (the "Act") of 100,000 shares of the
Company's Common Stock (the "Shares") which may be offered for sale by a certain
shareholder (the "Selling Shareholder") who acquired the Shares in connection
with the Company's acquisition of Aerometrics, Inc. in October 1995.
In acting as such counsel for the purpose of rendering this opinion, we
have reviewed copies of the following, as presented to us by the Company:
1. The Company's Restated Articles of Incorporation, as amended.
2. The Company's Restated Bylaws.
3. Certain corporate resolutions of the Company's Board of Directors
pertaining to the issuance by the Company of the Shares.
4. The Registration Statement.
Based on, and subject to, the foregoing and upon representations and
information provided by the Company or its officers or directors, it is our
opinion as of this date that:
1. The Shares are validly authorized by the Company's Articles of
Incorporation.
2. The Shares are fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement.
Very truly yours,
GRAY, PLANT, MOOTY,
MOOTY & BENNETT, P.A.
By _______________________________
Nancy Roetman Menzel
NRM/ktm
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
TSI Incorporated:
We consent to the use of our report incorporated herein by reference
and to the reference to our firm under the heading "INDEPENDENT AUDITORS" in the
prospectus.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
December 30, 1996
