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, 2003
[ ] 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 September 30, 2003
$.05 Par Value Common Stock
10,464,905 Shares
Transitional Small Business
Disclosure Format (Check One): Yes; NoX
TSI, INC.
INDEX
SEPTEMBER 30, 2003
Page Number
PART I
Condensed Consolidated Financial Statements:
Balance Sheet
September 30, 2003 2
Statements of Income and
Comprehensive Income -
Three Months and Nine
Months Ended
September 30, 2003 and 2002 3
Statements of Cash Flows -
Nine Months Ended
September 30, 2003 and 2002 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
TSI, INC.
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2003
ASSETS
Current Assets
Cash $ 23,046,619
Marketable Securities, at Fair Value 1,860,600
Receivables, Net 1,500
Deferred Taxes, Current 148,012
Prepaid Expenses 6,737
Total Current Assets 25,063,468
Other Assets
Noncurrent Investments, at Fair Value 861,243
Other Assets 2,755
Property, Plant and Equipment, Net 665,788
Total Assets $ 26,593,254
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities $ 213,816
Income Taxes Payable 121,935
Due To Parent Company 470,838
Deferred Income Taxes 3,803
Total Current Liabilities 810,392
Provision for Estimated Title and Escrow Losses 792,727
Minority Interests 394,325
Deferred Income Taxes 240,344
Excess of Fair Value of Net
Assets Acquired Over Cost 9,590
Total Liabilities 2,247,378
Stockholders' Equity
Common Stock, $.05 Par Value,
30,000,000 shares authorized,
10,483,142 shares issued 524,157
Additional Paid-In Capital 22,165,957
Retained Earnings 1,248,445
Accumulated Other Comprehensive Income 437,951
Treasury Stock, at cost (30,634)
Total Stockholders' Equity 24,345,876
Total Liabilities and Stockholders' Equity $ 26,593,254
See Notes to Consolidated Financial Statements.
2
TSI, INC.
CONSOLIDATED STATEMENTS OF INCOME and COMPREHENSIVE INCOME
For The Three Months For The Nine Months
Ended Ended
September 30, September 30,
2003 2002 2003 2002
Operating Revenues $742,451 $601,918 $2,188,093 $1,712,953
Operating Expenses
Salaries and
Payroll Costs 324,714 358,184 947,806 712,647
Depreciation 19,024 19,746 55,837 53,747
Administration 33,000 33,000 99,000 99,000
Other Expenses 212,344 187,231 635,422 501,423
Total Expenses 589,082 598,161 1,738,065 1,366,817
153,369 3,757 450,028 346,136
Amortization of
Deferred Credit 2,055 2,055 6,165 6,165
Minority Portion
Of (Income) Loss (431) 901 (2,569) (2,874)
154,993 6,713 453,624 349,427
Income Tax Expense (27,116) 15,700 (74,171) (87,900)
Net Income 127,877 22,413 379,453 261,527
Other Comprehensive Income (Loss)
Increase (Decrease) in
Unrealized Holding Gains,
Net of Income Taxes 111,072 (149,207) 271,628 (112,147)
Comprehensive
Income (Loss) $ 238,949 $ (126,794) $ 651,081 $ 149,380
See Notes to Consolidated Financial Statements.
3
TSI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Nine Months
Ended
September 30,
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net Cash From Operations $ 429,415 $ 719,397
Income Taxes Paid (3,650) (147,150)
Net Cash From Operating Activities $ 425,765 $ 572,247
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Received on Sales and Redemptions
of Property, Plant and Equipment 10,250 -
Capital Expenditures Paid in Cash (46,025) (42,733)
Cash Used For Purchases of Marketable
Securities Available For Sale (1,053,645) (361,962)
Cash Received on Dispositions of Marketable
Securities Available For Sale 118,893 1,050,336
Net Cash Provided By
Investing Activities (970,527) 645,641
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Advances From (To) Parent Company 264,074 (195,859)
Cash Purchases of Treasury Stock (9,842) (6,198)
Net Cash Provided By
Financing Activities 254,232 (202,057)
NET INCREASE IN CASH (290,530) 1,015,831
CASH - BEGINNING OF PERIOD 23,337,149 22,140,919
CASH - END OF PERIOD $ 23,046,619 $ 23,156,750
See Notes to Consolidated Financial Statements.
4
TSI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2003
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, 2003
and the results of the Company's operations for the
three months and nine months ended September 30, 2003
and 2002 and cash flows for the nine months ended
September 30, 2003 and 2002.
The results of operations for the three months and nine
months ended September 30, 2003 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.
In accordance with SFAS No. 115 the Company's
portfolios, current and noncurrent, are carried at
fair value in the Company's balance sheet at September
30, 2003. The net unrealized holding gain at September
30, 2003, 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, 2003 in accordance with the
provisions of Financial Accounting Standards No. 130.
Sales to outside concerns, interest revenues and
segment operating profit for the Company's reportable
segments were as follows for the period ended
September 30, 2003:
COMPARISON OF
Sales To Segment
Outside Interest Operating
Concerns Revenues Profit
Financial Holding Company $ 2,235 $ 15,483 $ (44,388)
Title Insurance Operations 604,959 11,550 227,979
Rental Properties 107,612 612 (30,222)
Consolidated $714,806 $ 27,645 $ 153,369
5
TSI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE INCOME STATEMENT
SEPTEMBER 30, 2003
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,
2003 AND 2002 2003 AND 2002
INCREASES (DECREASES)
Revenues $ 140,534 23.3% $ 475,141 27.7%
Expenses (9,078) (1.5%) 371,249 27.2%
Net Income 105,464 470.8% 117,926 45.1%
Revenues increased $475,141 for the first nine months of 2003
($140,534 in the third quarter of 2003) as compared to this time
frame in 2002. This increase is primarily due to an increase in
title income of $561,477 (46.9%). Other factors for the change
in revenues include: an increase in rent of $18,932 (6.7%), a
decrease in interest and dividend revenue of $84,927 (37%), and
a decrease of 536.5% on security sales gains. Operating expenses
increased $103,892 (30%) in the first nine months of 2003 compared
to this time frame in 2002. This is due to the decrease in
depreciation of $2,090 (3.9%), and an increase in other expenses of
$133,999 (26.7%), and an increase in payroll costs of $235,159 (33%).
The provision for income tax expense decreased by $13,729 (15.6%) in
the first nine months of 2003 (an increase of $42,816 in the third
quarter of 2003) as compared to this time frame in 2002.
6
TSI, INC.
PART II
OTHER INFORMATION
SEPTEMBER 30, 2003
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
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 14, 2003 s/Angela Semenza
A. Semenza,
Assistant Secretary-Treasurer
Date: October 14, 2003 s/D. Mellinger
D. Mellinger,
Accountant
8
CERTIFICATION
I, Paul J. McCann, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of TSI, Inc.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in the quarterly report, fairly present in
all material respects the financial condition, results of operations
and cash flows of TSI, Inc. as of, and for, the
periods presented in this report.
4. TSI, Inc.'s other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for TSI, Inc.
We have:
a. designed such disclosure controls and procedures to ensure that material
information relating to TSI, Inc. is made known to us
by others within those entities, particularly during the period in which
this quarterly report is being prepared.
b. evaluated the effectiveness of TSI, Inc. disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. TSI, Inc.'s other certifying officers and I have disclosed,
based on our most recent evaluation, to TSI, Inc. auditors
and the audit committee of TSI, Inc. board of directors
(or persons performing the equivalent functions):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect TSI, Inc.'s
ability to record, process, summarize and report financial data, and
I have identified for TSI, Inc.'s auditors any
material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in TSI, Inc.'s
internal control; and
9
6. TSI, Inc.'s other certifying officers and I have indicated
in this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: October 14, 2003 s/Paul J. McCann
Paul J. McCann
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED UPRSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of TSI, Inc. on Form
10-QSB for the period ending September 30, 2003 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Paul J. McCann,
Representative of TSI, Inc., certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Subanes-
Oxley Act of 2002, that:
1. The report fully complies with the requirement of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of TSI, Inc.
Date: October 14, 2003 s/Paul J. McCann
Paul J. McCann,
Representative
10