U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-2054
TSI, INC.
(Exact name of small business issuer as specified in its charter)
Montana
(State or other jurisdiction of incorporation or organization)
81-0267738
(IRS Employer Identification No.)
128 Second Street South, Great Falls, Montana 59405
(Address of principal executive offices)
(406) 727-2600
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Class Outstanding at September 30, 1998
$.05 Par Value Common Stock 10,483,142 Shares
Transitional Small Business Disclosure Format (Check One): Yes ; No X
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TSI, INC.
INDEX
SEPTEMBER 30, 1998
Page Number
PART I
Condensed Consolidated Financial Statements:
Balance Sheet
September 30, 1998 2
Statements of Income and Comprehensive Income -
Three Months and Nine Months Ended
September 30, 1998 and 1997 3
Statements of Cash Flows -
Nine Months Ended September 30, 1998 and 1997 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of the
Statements of Income 6
PART II
Other Information 7
Signatures 8
1
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TSI, INC.
BALANCE SHEET
AS OF SEPTEMBER 30, 1998
ASSETS
Current Assets
Cash $ 14,551,345
Marketable Securities, at Fair Value 1,815,400
Receivables - Net 151,475
Total Current Assets 16,518,220
Other Assets
Noncurrent Investments 6,242,847
Other Assets 2,238
Property, Plant and Equipment, Net 902,375
TOTAL ASSETS $ 23,665,680
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities $ 210,258
Income Taxes Payable 48,947
Due To Parent Company 109,100
Deferred Income Taxes 41,900
Total Current Liabilities 410,205
Provision For Estimated Title and Escrow Losses 993,928
Minority Interests 375,390
Excess Of Fair Value Of Net Assets Acquired Over Cost 50,690
Deferred Income Taxes 1,164,600
Stockholder's Equity
Common Stock, $.05 Par Value,
(30,000,000 shares authorized,
10,483,142 shares outstanding 524,157
Additional Paid-In Capital 8,665,957
Retained Earnings 9,530,641
Accumulated Other Comprehensive Income 1,950,112
Total Stockholders' Equity 20,670,867
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 23,665,680
See Notes to Consolidated Financial Statements
2
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<TABLE>
TSI, INC.
<CAPTION>
STATEMENTS OF INCOME
For The Three For The Nine
Months Ended Months Ended
September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Operating Revenues $1,346,983 $ 844,467 $3,640,632 $8,096,103
Operating Expenses
Salaries and Payroll
Costs 249,086 210,246 685,585 591,450
Depreciation 27,848 28,095 71,805 84,286
Other Expenses 200,285 179,210 1,106,303 1,097,800
Total Expenses 477,219 417,551 1,863,693 1,773,536
869,764 426,916 1,776,939 6,322,567
Amortization of
Deferred Credit 2,055 2,055 6,165 6,165
Minority Portion of
(Income) (6,546) (7,828) (34,585) (30,377)
865,273 421,143 1,748,519 6,298,355
Income Tax Expense (338,000) (305,000) (500,000) (2,355,000)
Net Income 527,273 116,143 1,248,519 3,943,355
Other Comprehnesive Income (Loss)
Increase (Decrease) in
Unrealized Holding Gains,
Net of Income Taxes (1,035,485) 40,165 (1,247,347) (2,494,800)
Comprehensive Income
(Loss) $ (508,212) $ 156,308 $ 1,172 $1,448,555
</TABLE>
See Notes To Consolidated Financial Statements
3
<PAGE>
TSI, INC.
STATEMENTS OF CASH FLOWS
For The Nine
Months Ended
September 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Cash Provided By Operating
Activities $ 933,308 $ 82,715
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds From Sales of Property,
Plant and Equipment 8,695 6,994
Capital Expenditures Paid in Cash (62,769) (31,784)
Cash Purchases of Minority Interests (681) (304)
Cash Used for Purchases of Marketable
Securities Available For Sale (76,462) (521,953)
Cash Received on Dispositions of Marketable
Securities Available For Sale 592,148 5,383,074
Net Cash Provided By Investing
Activities 460,931 4,836,027
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Advances From (To) Parent Company 72,170 (1,033,600)
Issuance of Stock For Cash - 636,000
Net Cash Provided (Used) By
Financing Activities 72,170 (397,600)
NET INCREASE IN CASH 1,466,409 4,521,142
CASH - BEGINNING OF PERIOD 13,084,936 8,525,699
CASH - END OF PERIOD $14,551,345 $13,046,841
See Notes to Consolidated Financial Statements
4
<PAGE>
TSI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
In the opinion of management, all adjustments necessary (consisting
of only normal recurring accruals) have been made to the unaudited financial
statements to present fairly the financial position as of September 30, 1998
and the results of the Company's operations for the three months and nine
months ended September 30, 1998 and 1997 and cash flows for the nine months
ended September 30, 1998 and 1997.
The results of operations for the three months and nine months ended
September 30, 1998 and 1997 are not indicative of the results to be expected
for the full year.
The consolidated financial statements include the accounts of the
company, its wholly owned subsidiaries and its majority owned subsidiaries.
All significant intercompany transactions and balances have been eliminated
in consolidation.
M Corp owns approximately 92% of the Company's issued and outstanding
common stock.
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities (SFAS No. 115) effective January 1, 1994. The Company has
classified its investments, both current and noncurrent, in debt and equity
securities as Available-For-Sale, in accordance with the various
classifications of securities contained in SFAS No. 115.
In accordance with SFAS No. 115, the Company's portfolios, current and
noncurrent, of Available-For-Sale investments are carried at fair value in
the Company's balance sheet at September 30, 1998.
The net unrealized holding gain at September 30, 1998, net of the estimated
income tax effects and minority interests in the unrealized holding gains,
is included in Accumulated Other Comprehensive Income at September 30, 1998
in accordance with the provisions of Financial Accounting Standards No. 130.
5
<PAGE>
TSI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE INCOME STATEMENT
SEPTEMBER 30, 1998
A summary of the period to period changes in items included
in the statements of income is shown below.
COMPARISON OF
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 AND 1997 1998 AND 1997
INCREASES (DECREASES)
Revenues $ 502,516 59.5% $(4,455,471) (55.0%)
Expenses 59,668 14.3% 90,157 5.1%
Net Income 411,130 354.0% (2,694,836) (68.3%)
Revenues decreased $4,455,471 in the first nine months of 1998 as compared
with the first nine months of 1997 due primarily to the gain recognized by
the Company on the merger of Security Bancorp with and into WesterFed
Financial Corporation which was completed during the first quarter of 1997.
The Company recognized a gain on the merger during 1997 in the pretax amount
of approximately $5,351,000. During the first nine months of 1998 the
Company recognized gains on the disposition of investments in the pretax
amount of $368,939. During the first nine months of 1998 the Company
recognized a gain on the contribution of assets in kind to a charitable
organization in the amount of $417,420 as compared with a similar gain in
the amount of $408,000 recognized during the first nine months of 1997.
The gains recognized during the first nine months of 1997 were the primary
reason for the decrease in revenues and the decrease in net income in the
first nine months of 1998 as compared with the first nine months of 1997.
Operating expenses increased $90,157 (5.1%) in the first nine months of 1998
as compared with the first nine months of 1997 due primarily to increases in
payroll and payroll costs associated with the Company's title insurance
agency business. The provision for income tax expense decreased $1,855,000
(78.7%) in the first nine months of 1998 as compared with the first nine
months of 1997 due to the decrease in pretax income.
6
<PAGE>
TSI, INC.
PART II
OTHER INFORMATION
SEPTEMBER 30, 1998
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 10, 1998 a meeting of shareholders was held at which
the Company's entire Board of Directors was elected. Directors
elected to the Board were G.Robert Crotty, Jr., Paul J. McCann, Jr.
and Miriam Arneson. The Company's shareholders also authorized the
Board of Directors to select an independent certified public
accounting firm to audit the Company's financial statements
for 1998.
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
None
7
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TSI INC.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
TSI, INC.
Registrant
Date: October 30, 1998 s/K. King
K. King
Assistant Secretary-Treasurer
Date: October 30, 1998 s/Jerry K. Mohland
Jerry K. Mohland,
Accountant
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the unaudited financial statements contained in the Company's Form
10-QSB and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 14,551,345
<SECURITIES> 1,815,400
<RECEIVABLES> 151,475
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,518,220
<PP&E> 902,375
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,665,680
<CURRENT-LIABILITIES> 410,205
<BONDS> 0
<COMMON> 524,157
0
0
<OTHER-SE> 20,146,710
<TOTAL-LIABILITY-AND-EQUITY> 23,665,680
<SALES> 0
<TOTAL-REVENUES> 3,640,632
<CGS> 0
<TOTAL-COSTS> 1,863,693
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,748,519
<INCOME-TAX> 500,000
<INCOME-CONTINUING> 1,248,519
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,248,519
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
