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 June 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 81-0267738
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
128 Second Street South, Great Falls, Montana 59405
(Address of principal executive offices)
(406) 727-2600
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Class Outstanding at June 30, 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
JUNE 30, 1998
Page Number
PART I
Condensed Consolidated Financial Statements:
Balance Sheet
June 30, 1998 2
Statements of Income and Comprehensive Income -
Six Months and Three Months Ended June 30, 1998 and 1997 3
Statements of Cash Flows -
Six Months Ended June 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.
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
ASSETS
Current Assets
Cash $ 13,732,860
Marketable & Government Securities,
at Fair Value 1,953,159
Receivables - Net 109,220
Total Current Assets 15,795,239
Other Assets
Noncurrent Investments, at Fair Value 8,094,034
Other Assets 2,238
Property, Plant and Equipment, Net 899,859
TOTAL ASSETS $ 24,791,370
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities $ 184,524
Deferred Income Taxes 88,100
Due to Parent Company 99,731
Total Current Liabilities 372,355
Provison For Estimated Title and Escrow Losses 1,008,655
Minority Interests 332,836
Excess of Fair Value of Net Assets Acquired Over Cost 52,745
Deferred Income Taxes 1,805,700
Stockholders' 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 9,003,368
Accumulated Other Comprehensive Income 2,985,597
Total Stockholders' Equity 21,179,079
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 24,791,370
See Notes to Consolidated Financial Statements
2
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TSI, INC.
STATEMENTS OF INCOME
For The Three Months For The Six Months
Ended Ended
June 30, June 30,
1998 1997 1998 1997
Operating Revenues $1,401,124 $ 816,154 $2,293,649 $7,251,636
Operating Expenses
Salaries and Payroll
Costs 223,398 190,371 436,499 381,204
Depreciation 23,485 30,559 43,957 56,191
Other Expenses 731,987 225,150 906,018 918,590
Total Expenses 978,870 446,080 1,386,474 1,355,985
422,254 370,074 907,175 5,895,651
Amortization of
Deferred Credit 2,055 2,055 4,110 4,110
Minority Portion of
(Income) (19,308) (10,338) (28,039) (22,549)
Income Tax Expense 18,000 180,000 (162,000) (2,050,000)
Net Income 423,001 541,791 721,246 3,827,212
Other Comprehensive Income
Increase (Decrease) in
Unrealized Holding Gains,
Net of Income Taxes (508,706) 226,236 (211,862) (2,534,965)
Comprehensive Income $ (85,705) $ 768,027 $ 509,384 $1,292,247
See Notes to Consolidated Financial Statements
3
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TSI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Six Months Ended
June 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Cash Provided (Used) By Operating
Activities $ 591,211 $ (197,506)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures Paid In Cash (23,710) (23,650)
Proceeds From Sales and Redemptions
of Property, Plant and Equipment - 6,994
Cash Purchases of Minority Interests (343) (150)
Cash Used for Purchases of Marketable &
Government Securities Available For Sale (27,272) (515,694)
Cash Received Upon Dispositions of Marketable
Securities Available For Sale 45,237 5,383,074
Net Cash Provided (Used)
By Investing Activities (6,088) 4,850,574
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Provided From Parent Company 62,801 75,600
Net Cash Provided By Financing
Activities 62,801 75,600
NET INCREASE IN CASH 647,924 4,728,668
CASH - BEGINNING OF PERIOD 13,084,936 8,525,699
CASH - END OF PERIOD $13,732,860 $13,254,367
See Notes to Consolidated Financial Statements
4
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TSI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 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 June 30, 1998 and
the results of the Company's operations for the six months and three months
ended June 30, 1998 and 1997 and cash flows for the six months ended June 30,
1998 and 1997.
The results of operations for the six months and three months ended June 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 June 30, 1998.
The net unrealized holding gains at June 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 June 30, 1998
in accordance with the provisions of Financial Accounting Standards N0. 130.
5
<PAGE>
TSI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE INCOME STATEMENT
JUNE 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 SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1998 AND 1997 1998 AND 1997
INCREASES (DECREASES)
Revenues $584,970 71.7% $(4,957,987) (68.3%)
Expenses 532,790 119.4% 30,489 2.2%
Net Income (118,790) (21.9%) (3,105,966) (81.1%)
Revenues decreased $4,957,987 in the first six months of 1998 as compared
with the first six months of 1997 due 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. During
1997, the Company recognized a gain on the merger in the pretax amount of
approximately $5,351,000. No such gain was recognized during the first six
months of 1998. During the first six months of 1998 the Company recognized a
gain on the contribution of assets in kind to a charitable organization in
the amount of approximately $417,000 as compared with a similar gain
in the amount of $408,000 recognized during the first six months of 1997.
The gains recognized during the first six months of 1997 were the primary
reason for the decrease in revenues and the decrease in net income in
the first six months of 1998 as compared with the first six months of 1997.
The provision for income tax expense decreased $1,888,000 (92.1%) in the
first six months of 1998 as compared with the first six months of 1997 due
to the decrease in pretax income.
6
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TSI, INC.
PART II
OTHER INFORMATION
JUNE 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
None
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
None
7
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
TSI, INC.
Registrant
Date: August 7, 1998 s/K. King
K. King
Assistant Secretary-Treasurer
Date: August 7, 1998 s/Jerry K. Mohland
Jerry K. Mohland,
Accountant
8
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<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 13,732,860
<SECURITIES> 1,953,159
<RECEIVABLES> 109,220
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,795,239
<PP&E> 899,859
<DEPRECIATION> 0
<TOTAL-ASSETS> 24,791,370
<CURRENT-LIABILITIES> 372,355
<BONDS> 0
<COMMON> 524,157
0
0
<OTHER-SE> 20,654,922
<TOTAL-LIABILITY-AND-EQUITY> 24,791,370
<SALES> 0
<TOTAL-REVENUES> 2,293,649
<CGS> 0
<TOTAL-COSTS> 1,386,474
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 883,246
<INCOME-TAX> 162,000
<INCOME-CONTINUING> 721,246
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 721,246
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
