UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED JUNE 30, 1995.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
___________ TO ______________.
Commission File Number 0-2958
TSI INCORPORATED
(Exact name of registrant as specified in its charter)
Minnesota 41-0843524
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 Cardigan Road, Shoreview, Minnesota 55126
(Address of principal executive offices)
(612) 483-0900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 20
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___
Indicate number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Date: July 31, 1995
Number of Common Shares Outstanding: 5,239,976
TSI Incorporated
FORM 10-Q
For the Quarter Ended June 30, 1995
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
PART II. OTHER INFORMATION
EXHIBIT 11 Computation of Per Share Earnings (Loss)
TSI Incorporated and Subsidiaries
Consolidated Statements of Earnings
(Unaudited)
Three Months Ended June 30 1995 1994
________________________________________________________________________
Net sales $13,769,918 $11,983,020
Cost of products sold 5,849,840 4,686,001
________________________________________ ___________ ___________
Gross Profit 7,920,078 7,297,019
Operating expenses:
Research & product development 2,083,581 1,742,468
Selling 3,636,012 3,234,412
Administrative 1,159,547 963,901
________________________________________ ___________ ___________
6,879,140 5,940,781
________________________________________ ___________ ___________
Operating Income 1,040,938 1,356,238
Other income 104,164 40,777
________________________________________ ___________ ___________
Earnings Before Income Taxes 1,145,102 1,397,015
Provision for income taxes 401,000 461,000
___________ ___________
Net Earnings $744,102 $936,015
=========== ===========
Net earnings per common share: $0.14 $0.18
=========== ===========
Weighted average number of shares
computation of earnings per
common share 5,369,461 5,275,865
=========== ===========
See accompanying Notes to Consolidated Financial Statements
CONSOLIDATED BALANCE SHEETS
June 30 March 31 June 30
1995 1995 1994
(unaudited) (unaudited)
Assets ___________ ___________ ___________
Current Assets
Cash and cash equivalents $1,813,934 $9,551,552 $3,917,154
Investments -- -- 2,076,216
Accounts receivable 9,805,537 6,732,602 9,345,119
Prepaid expenses 470,668 222,629 408,226
Inventories:
Finished products 2,043,771 1,699,460 1,538,912
Work in process 1,579,184 1,124,753 1,472,927
Materials and supplies 4,713,137 3,349,073 3,208,282
___________ ___________ ___________
8,336,092 6,173,286 6,220,121
___________ ___________ ___________
Total Current Assets 20,426,231 22,680,069 21,966,836
Intangibles and Other Assets
Goodwill 2,638,398 1,726,915 1,814,108
Note receivable 610,000 610,000 0
Deferred income tax benefit 289,073 289,073 119,130
Other assets 2,590,969 1,389,129 977,088
___________ ___________ ___________
6,128,440 4,015,117 2,910,326
Property, Plant and Equipment
Land 128,503 128,503 259,730
Building 1,039,070 1,039,070 1,039,070
Machinery and equipment 13,549,419 12,310,360 11,985,688
Construction in Progress 2,564,706 1,819,482 --
___________ ___________ ___________
17,281,698 15,297,415 13,284,488
Less allowances for depreciation 10,494,015 9,825,402 9,062,702
___________ ___________ ___________
6,787,683 5,472,013 4,221,786
___________ ___________ ___________
Total Assets $33,342,354 $32,167,199 $29,098,948
=========== =========== ===========
Liabilities & Shareholders' Equity
Current Liabilities
Accounts payable & accrued expenses $3,647,733 $2,867,214 $2,194,502
Employee compensation 1,926,276 2,505,273 2,047,710
Taxes, other than income taxes 347,601 272,957 249,130
Income taxes payable 548,336 179,998 964,034
Current maturities of long-term liab. -- -- --
___________ ___________ ___________
Total Current Liabilities 6,469,946 5,825,442 5,455,376
Long-Term Liab., less current maturities -- -- --
Deferred Income Taxes -- -- --
___________ ___________ ___________
Total Liabilities 6,469,946 5,825,442 5,455,376
Shareholders' Equity
Common Shares, $.10 par value 522,636 521,206 511,454
Additional paid-in capital 6,068,126 6,002,771 5,431,137
Retained Earnings 20,031,259 19,471,422 17,441,319
Equity adjustment from translation 250,387 346,358 259,662
___________ ___________ ___________
Total Shareholders' Equity 26,872,408 26,341,757 23,643,572
___________ ___________ ___________
Total Liabilities & Shareholders' Equity $33,342,354 $32,167,199 $29,098,948
=========== =========== ===========
See accompanying Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended June 30 1995 1994
----------------------------------------------------------------------------------------
Operating Activities:
Net earnings $744,102 $936,015
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Provision for losses on accounts receivable 14,170 5,011
Depreciation and amortization of property, plant
and equipment 302,698 252,370
Amortization of goodwill 29,062 29,064
(Gain) loss on sale of assets 235 (588)
Provision for deferred income taxes -- --
Income tax benefit from stock plans -- --
Changes in operating assets & liabilities:
Accounts receivable (1,430,152) (1,060,057)
Prepaid expenses (166,582) (149,317)
Income taxes receivable -- --
Inventories (919,453) (198,142)
Other assets 48,160 24,689
Accounts payable and accrued expenses (345,455) (515,494)
Employee compensation payable (578,997) 5,280
Taxes, other than income taxes 74,644 (75,285)
Current income taxes payable 368,338 430,012
Foreign currency transaction (gain) loss (96,756) (39,834)
------------------------------------------------------------ ----------- -----------
Net Cash Provided by Operating Activities (1,955,986) (356,276)
Investing Activities:
Increase in current investments -- (457,445)
Additions to property, plant and equipment (1,197,606) (375,642)
Proceeds from disposal of property, plant and equipment -- 7,944
Purchase of Alnor,net of cash acquired (4,496,850) --
------------------------------------------------------------ ----------- -----------
Net Cash Used in Investing Activities (5,694,456) (825,143)
Financing Activities:
Principal payments on long-term liabilities
Proceeds from stock options exercised 66,784 23,990
Proceeds from employee stock purchases -- --
Dividends paid (156,424) (136,289)
Purchases of common stock -- --
------------------------------------------------------------ ----------- -----------
Net Cash Used in Financing Activities (89,640) (112,299)
Effect of exchange rate change on cash and
cash equivalents 2,463 6,371
------------------------------------------------------------ ---------- -----------
Increase in Cash and Cash Equivalents (7,737,619) (1,287,347)
------------------------------------------------------------ ---------- -----------
Cash and cash equivalents at beginning of year 9,551,552 5,204,501
------------------------------------------------------------ ---------- -----------
Cash and Cash Equivalents at End of Three Month Period $1,813,933 $3,917,154
========== ===========
See accompanying Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
(Unaudited)
Note 1. Basis of Presentation
The information included in the accompanying interim financial
statements is unaudited. In the opinion of management, all
adjustments, consisting of normal recurring accruals necessary
for a fair presentation of the results of operations, financial
position and cash flows for the interim periods presented have been
reflected herein. The results of operations for the interim periods
are not necessarily indicative of the results to be expected for the
entire year.
Note 2. Earnings Per Share
See Exhibit 11, Computation of Per Share Earnings, on page 11 of this
document.
On July 21, 1994, the Board of Directors declared a three-for-two
stock dividend paid to shareholders of record August 1, 1994,
distributed August 17, 1994. For each share issued in connection
with the stock split, an amount equal to the par value of $.10 was
transferred to the common share amount from additional paid-in
capital, retroactive to June 30, 1994. All references in the
financial statements, related notes and accompanying exhibits to per
share information, stock options, weighted average number of shares,
as well as the number of common shares outstanding for all prior
periods presented, have been retroactively adjusted to reflect this
stock split.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the three month period ended June 30, 1995, were $13,770,000.
This represents an increase of 15 percent from $11,983,000 for the same
period a year ago. The increase was due to the added sales of $1.85 million
from the May 1, 1995 acquisition of Alnor Instrument Company ("Alnor").
The Environmental Instrumentation market area, which accounted for 59 percent
of the Company's business in fiscal 1995, experienced 17 percent growth in net
sales during the quarter compared to last year's first quarter, all from the
added sales of the Alnor acquisition. Included in last year's first quarter
sales was shipments of about $1,900,000 under a contracct for the U.S. Army
and Marines to furnish respirator fit testers for bio-hazard protection.
Sales of Research and Analytical Instrumentations, about 30 percent of
fiscal 1995 net sales, increased by about 17 percent, due mainly to higher
sales of particle instruments. The Process Instrumentation area, about 11
percent of fiscal 1995 net sales, showed a slight increase in net sales of
approximately 1 percent.
Sales to U.S. and state government agencies including defense, comprised
about 18 percent of the Company's net sales for the fiscal 1996 first
quarter, as compared to 31 percent for the same fiscal 1995 quarter. Sales
to government agencies represent a significant portion of the Company's
sales, so it is important to consider the potential effects of changes in
government spending. Due to the Company's diverse line of products, sales
normally occur to a wide range of U.S. and state government agencies,
usually making total government sales quite stable as a percentage of total
sales. A higher percentage of governmental sales was experienced during fiscal
1994 and fiscal 1995, mostly because of shipments on the $8.6 million military
contract referred to above. In July, 1995 the Company announced that it had
received a new $2,500,000 contract from the U.S. Army to furnish additional
respirator fit testers. Since this is expected to all be shipped in fiscal
1996, the percentage of government sales for fiscal 1996 are expected to
be at a higher level than typically experienced prior to fiscal 1994.
During the first quarter, backlog of orders increased from $11,400,000 at
March 31, 1995 to $18,500,000 at June 30, 1995, compared to backlog of
$10,800,000 at June 30, 1994. Besides backlog of about $3 million added
from the Alnor acquisition, backlog increased across all of the Company's
major product lines.
Gross profit for this quarter was 57.5 percent of net sales compared to
60.9 percent for the first quarter last year. Historically, the Company's
gross profit has been in a range of 57 to 60 percent of net sales. The
lower gross profit percentage for the first three months this year was due
to product mix changes and the effect of the Alnor acquisition. Gross
profit margins at Alnor have been lower than the Company's historical range.
Results of Operations (continued)
Research and product development expenses were 15.1 percent of net sales
for the three month period ended June 30, 1995, as compated to 14.5 percent
of net sales for the same period last year. Actual research and product
development spending was up about 20 percent in the quarter and, of that,
about half was due to the Alnor acquisition. The Company continues its
commitment to growth through development of new technologies and products.
For all of fiscal 1996 research and development expenses are expected to
continue near the Company's historical range of 12 to 14 percent of sales.
Selling expenses were 26 percent of net sales for the first three months of
fiscal 1996 compared to 27 percent of net sales for the same period in fiscal
1995. Actual expenses rose 12 percent with about one-half due to the addition
of Alnor.
Administrative expenses were 8.4 percent and 8.0 percent for the quarters
ending June 30, 1995 and 1994, respectively. The Company expects
administrative costs to continue in a normal operating range of 7 to 9 percent
of net sales through the remainder of fiscal 1996.
Other income was $104,000 in the first quarter of fiscal 1996 compared to
$41,000 in the first quarter of fiscal 1995. This increase was primarily due
to higher interest income this year combined with a small loss in foreign
currency transactions in last year's first quarter.
The provision for income taxes was based on an estimated rate of 35 percent
of pre-tax earnings for the first quarter of fiscal 1996 compared with the
actual rate of 33 percent for the first quarter of fiscal 1996.
Liquidity and Capital Resources
Cash, cash equivalents and investments decreased by $7,738,000 to $1,814,000
at June 30, 1995 from $9,552,000 at March 31, 1995. The decrease is mainly
attributable to the Alnor acquisition and the building addition at the
Shoreview headquarters facility plus increases in accounts receivable and
inventories.
The ratio of current assets to current liabilities was 3.2 as of June 30, 1995
compared to 4.0 as of March 31, 1995. Working capital decreased $2,898,000 to
$13,956,000 at the end of the first quarter of fiscal 1996, compared to
$16,855,000 at the end of fiscal 1995, mostly due to the Alnor acquisition.
Management believes internally-generated funds and short-term borrowings on
existing credit lines will provide adequate resources for supporting projected
growth during the remainder of fiscal 1996.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a vote of Security Holders
On July 20, 1995, the Company conducted its annual meeting of
stockholders. Of the 5,218,033 shares of the Company's common
stock entitled to vote at the meeting, 4,470,396 shares were
present at the meeting in person or by proxy.
The two people designated by the Company's Board of Directors as
nominees for director were elected, with voting as follows:
Nominee Total Votes For Total Votes Withheld
Leroy M.Fingerson 4,450,445 19,951
Donald M. Sullivan 4,450,445 19,951
Stockholders also voted to ratify the appointment of KPMG Peat
Marwick as the independent auditors for the Company for the fiscal
year ending March 31, 1996. There were 4,448,733 votes in favor
of ratification, 5,952 votes against ratification and 15,711 shares
specifically abstained from voting on the matter.
Item 6. Exhibits and Reports on FORM 8-K
(a) Exhibits:
Exhibit 11 - Computation of Per Share Earnings
(b) Reports on Form 8-K:
On May 14, 1995, an 8-K report was filed reporting an
acquisition pursuant to Item 2 of Form 8-K (an amount to such
report was filed on July 14, 1995.)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Registrant: TSI Incorporated
August 11, 1995 By:/s/ Leroy M. Fingerson
Date Leroy M. Fingerson
Chairman of the Board and
Chief Executive Officer
August 11, 1995 By:/s/ Lowell D. Nystrom
Date Lowell D. Nystrom
Vice President and
Chief Financial Officer