SECURITIES AND EXCHANGE COMMISSION Washington, DC 10549 Form 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED SEPTEMBER 30, 1999. 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 Identification Number) incorporation or organization) 500 Cardigan Road, Shoreview, Minnesota 55126 - --------------------------------------------- (Address of principal executive offices) 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 proceeding 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 practical date. Date: October 28, 1999 Number of Common Shares Outstanding: 11,339,322 -1- TSI INCORPORATED FORM 10-Q For the Quarter Ended September 30, 1999 Page ---- PART I FINANCIAL INFORMATION 2 Item 1 Financial Statements Consolidated Statements of Earnings 3 Consolidated Balance Sheets 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6-8 Item 2 Management's Discussion and Analysis of Results of Operations and Financial Condition 9-11 PART II OTHER INFORMATION 13 EXHIBIT 11 Computation of Per Share Earnings 15 EXHIBIT 99 Stay-in-Place Agreements 16-30 -2- CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 1999 1998 1999 1998 - ------------------------------------------------------ ------------ ------------ ------------ ------------ Net sales $ 28,680,358 $ 22,945,742 $ 52,380,394 $ 41,528,814 Cost of products sold 13,684,477 10,411,788 24,268,119 18,641,018 - ------------------------------------------------------ ------------ ------------ ------------ ------------ GROSS PROFIT 14,995,881 12,533,954 28,112,275 22,887,796 Operating expenses Research and product development 2,893,977 2,635,685 5,712,135 5,441,986 Selling 5,305,825 4,703,280 10,209,620 9,252,373 Administrative 2,294,505 1,779,186 4,195,825 3,261,692 - ------------------------------------------------------ ------------ ------------ ------------ ------------ 10,494,307 9,118,151 20,117,580 17,956,051 - ------------------------------------------------------ ------------ ------------ ------------ ------------ OPERATING INCOME 4,501,574 3,415,803 7,994,695 4,931,745 Other income (expense) (42,004) 100,254 150,131 259,262 Proxy contest and related costs (344,977) 0 (436,088) 0 - ------------------------------------------------------ ------------ ------------ ------------ ------------ EARNINGS BEFORE INCOME TAXES 4,114,593 3,516,057 7,708,738 5,191,007 Provision for income taxes 1,439,000 1,160,000 2,697,000 1,713,000 - ------------------------------------------------------ ------------ ------------ ------------ ------------ NET EARNINGS $ 2,675,593 $ 2,356,057 $ 5,011,738 $ 3,478,007 ============ ============ ============ ============ BASIC EARNINGS PER COMMON SHARE $ .24 $ .21 $ .45 $ .31 - ------------------------------------------------------ ============ ============ ============ ============ DILUTIVE EARNINGS PER COMMON SHARE $ .23 $ .20 $ .44 $ .30 - ------------------------------------------------------ ============ ============ ============ ============ Weighted average common shares outstanding 11,293,630 11,385,894 11,238,138 11,398,859 Dilutive effect of employee stock options and purchase awards 337,796 167,081 281,864 175,093 ------------ ------------ ------------ ------------ Weighted average common shares outstanding and dilutive shares 11,631,426 11,552,975 11,520,002 11,573,952 ============ ============ ============ ============ See notes to consolidated financial statements. -3- CONSOLIDATED BALANCE SHEETS (Unaudited) SEPTEMBER 30 March 31 September 30 1999 1999 1998 - -------------------------------------------- ------------ ------------ ------------ ASSETS CURRENT ASSETS Cash and cash equivalents $ 3,437,804 $ 13,437,396 $ 7,530,169 Accounts receivable 23,313,430 14,461,708 18,111,779 Net assets held for sale 3,878,506 0 0 Recoverable income taxes 2,617,009 0 0 Prepaid expenses 675,997 307,852 335,794 Inventories Finished products 2,924,708 3,309,948 2,980,320 Work-in-process 3,198,985 2,530,098 3,148,620 Materials and supplies 9,628,186 9,698,650 9,638,030 - -------------------------------------------- ------------ ------------ ------------ 15,751,879 15,538,696 15,766,970 - -------------------------------------------- ------------ ------------ ------------ TOTAL CURRENT ASSETS 49,674,625 43,745,652 41,744,712 INTANGIBLES AND OTHER ASSETS Goodwill 16,707,385 4,438,845 3,714,339 Note receivable 464,752 451,981 583,323 Deferred income tax benefit 127,661 1,225,246 528,180 Other assets 4,209,472 3,085,388 2,716,289 - -------------------------------------------- ------------ ------------ ------------ 21,509,270 9,201,460 7,542,131 PROPERTY, PLANT AND EQUIPMENT Land 779,278 128,503 128,503 Buildings 6,999,041 3,713,160 3,713,160 Construction in progress 434,014 70,396 43,422 Machinery and equipment 23,651,342 20,444,388 20,355,763 - -------------------------------------------- ------------ ------------ ------------ 31,863,675 24,356,447 24,240,848 Less allowance for depreciation 18,432,001 16,335,860 16,165,788 - -------------------------------------------- ------------ ------------ ------------ 13,431,674 8,020,587 8,075,060 - -------------------------------------------- ------------ ------------ ------------ TOTAL ASSETS $ 84,615,569 $ 60,967,699 $ 57,361,903 ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 10,000,000 $ 0 $ 0 Accounts payable and accrued expenses 12,172,150 5,338,538 4,976,859 Employee compensation 3,751,379 4,411,871 3,297,689 Taxes, other than income taxes 842,114 472,982 467,266 Income taxes payable 927,724 1,349,827 960,411 Current portion of long-term debt 153,333 0 0 - -------------------------------------------- ------------ ------------ ------------ TOTAL CURRENT LIABILITIES 27,846,700 11,573,218 9,702,225 Long-term debt, less current portion 2,004,465 0 0 - -------------------------------------------- ------------ ------------ ------------ TOTAL LIABILITIES 29,851,165 11,573,218 9,702,225 SHAREHOLDERS' EQUITY Common shares, $.10 par value 1,132,613 1,115,179 1,134,931 Additional paid-in capital 12,472,186 11,408,516 11,372,407 Retained earnings 41,431,848 37,094,220 35,223,537 Equity adjustment from translation (272,243) (223,434) (71,197) - -------------------------------------------- ------------ ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 54,764,404 49,394,481 47,659,678 - -------------------------------------------- ------------ ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 84,615,569 $ 60,967,699 $ 57,361,903 ============ ============ ============ See notes to consolidated financial statements. -4- CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) SIX MONTHS ENDED SEPTEMBER 30 1999 1998 - ---------------------------------------------------------------- ------------ ------------ OPERATING ACTIVITIES Net earnings $ 5,011,738 $ 3,478,007 Adjustments to reconcile net earnings to net cash provided by operating activities: Provision for losses on accounts receivable (95,732) 29,923 Depreciation and amortization of property, plant & equipment 1,143,239 935,161 Amortization of intangibles 337,243 279,253 Amortization of goodwill 374,489 120,564 Gain on sale of assets 19,607 1,514 Provision for deferred income tax 2,600,308 (72,011) Changes in operating assets and liabilities: Accounts receivable (1,868,578) (1,633,342) Recoverable income taxes (2,617,009) 0 Prepaid expenses (122,437) (112,081) Inventories (892,461) (250,688) Other assets (74,454) (67,977) Accounts payable and accrued expenses 1,452,900 52,379 Employee compensation payable (498,156) (620,921) Taxes, other than income taxes 223,113 (52,019) Current income taxes payable (209,492) (68,246) Foreign currency translation gain (loss) (33,041) 225,453 - ---------------------------------------------------------------- ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 4,751,277 2,244,969 - ---------------------------------------------------------------- ------------ ------------ INVESTING ACTIVITIES Additions to property, plant and equipment (912,138) (572,155) Proceeds from disposal of property, plant and equipment 6,267 213 Purchase of companies, net of cash acquired (23,661,105) 0 - ---------------------------------------------------------------- ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (24,566,976) (571,942) - ---------------------------------------------------------------- ------------ ------------ FINANCING ACTIVITIES Net proceeds from short-term notes 9,462,317 0 Payment on long-term note (38,334) 0 Proceeds from stock options exercised 601,053 96,544 Proceeds from employee stock purchases 480,051 0 Dividends paid (674,109) (684,570) Purchases of common stock 0 (2,886,875) - ---------------------------------------------------------------- ------------ ------------ NET CASH PROVIDED BY AND USED IN FINANCING ACTIVITIES 9,830,978 (3,474,901) - ---------------------------------------------------------------- ------------ ------------ Effect of exchange rate changes on cash and cash equivalents (14,871) (53,466) - ---------------------------------------------------------------- ------------ ------------ DECREASE IN CASH AND CASH EQUIVALENTS (9,999,592) (1,855,340) - ---------------------------------------------------------------- ------------ ------------ Cash and cash equivalents at beginning of year 13,437,396 9,385,509 - ---------------------------------------------------------------- ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF SIX MONTH PERIOD $ 3,437,804 $ 7,530,169 ============ ============ See notes to consolidated financial statements. -5- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1999 (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 15 of this document. Note 3. Comprehensive Income Effective fiscal 1999, the Company has adopted Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income". This statement requires companies to classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in-capital in the equity section of the balance sheet, and is effective for the Company's fiscal year ending March 31, 1999. The Company's only item of other comprehensive income is foreign currency translation adjustments. This item is separately displayed in the equity section of the balance sheet. At September 30, comprehensive income, net of tax, differs from net income by the following: Increase (Decrease) ------------------- 1999 1998 ---- ---- Quarter Ended (110,290) 163,088 ======== ======== Six Months Ended 48,809 (213,282) ======== ======== Note 4. Segment Information The Company develops, manufactures, and markets measuring and control instruments for a variety of applications. The Company's products can best be divided into two market segments. These are the Safety, Comfort, and Health segment and the Productivity and Quality Improvement segment. The Safety, Comfort, and Health segment consists of instruments that monitor and control the environment in which people work and live. These include analytical and research instruments used to characterize very small particles, products that monitor indoor air quality, and products that help to protect people from toxic airborne substances. The Productivity and Quality Improvement -6- segment produces instruments that help customers enhance their industrial processes and improve their products. These include flow-related measuring instruments, noncontact measuring devices for manufacturers of metals and wire, filter testers, and instruments for measuring the speed and concentration of droplets in industrial sprays. The Company evaluates performance based on operating profit or loss before other income, interest, and taxes. Revenue from sales between the segments is not material. Three Months Ended September 30, 1999 1998 ---- ---- Net Sales Safety, Comfort, and Health $ 22,918,000 $ 17,129,000 Productivity and Quality Improvement $ 5,762,000 $ 5,817,000 ------------ ------------ $ 28,680,000 $ 22,946,000 ============ ============ Operating Income (Loss) Safety, Comfort, and Health $ 4,215,000 $ 4,631,000 Productivity and Quality Improvement $ 287,000 $ (1,215,000) ------------ ------------ $ 4,502,000 $ 3,416,000 ============ ============ Six Months Ended September 30, 1999 1998 ---- ---- Net Sales Safety, Comfort, and Health $ 41,815,000 $ 30,831,000 Productivity and Quality Improvement $ 10,565,000 $ 10,698,000 ------------ ------------ $ 52,380,000 $ 41,529,000 ============ ============ Operating Income (Loss) Safety, Comfort, and Health $ 7,718,000 $ 7,243,000 Productivity and Quality Improvement $ 277,000 $ (2,311,000) ------------ ------------ $ 7,995,000 $ 4,932,000 ============ ============ Note 5. Proxy Contest and Related Expenses A shareholder made an unsolicited bid for the Company that was rejected by the Company's Board of Directors. The shareholder then initiated a proxy contest to elect an alternate slate to the Company's Board of Directors rather than the incumbents up for re-election as recommended by the Company. In addition, the shareholder's proxy sought changes to the Company's articles and bylaws making it easier for a change of control to occur without the approval of the Company's Board. The Company hired public relations professionals, attorneys, investment bankers, and a proxy solicitor to assist it in its efforts to oppose the shareholder's proxy, which was ultimately defeated. In addition, the Company continues to use these advisors to help review strategic alternatives, including seeking offers of higher value. Costs associated with these advisors have been recorded as incurred and have been reported as a separate line on the consolidated statement of earnings. -7- Note 6. Acquisition of Environmental Systems Corporation Effective June 1, 1999, the Company acquired the stock of Environmental Systems Corporation of Knoxville, Tennessee. Environmental Systems Corporation specializes in technology-based products and services relating to environmental monitoring, power production and waste management. The acquisition was accounted for by the purchase method of accounting. The acquisition price of $25 million was paid in cash. To finance the acquisition, the Company used its existing cash along with bank financing of $15 million made available under its line of credit. The initial debt is short-term with the ability to extend the term for periods not to exceed five years. The debt was paid off on October 1, 1999 using cash from operations and the proceeds from the Handar sale (see Note 7). The Company filed a Form 8-K with pro forma fiscal 1999 financial statements reflecting the acquisition. Note 7. Subsequent Event Effective October 1, 1999, the Company sold the net assets of its wholly owned subsidiary, Handar to an independent third party for $12,469,000. Of the total, $11,200,000 was paid in cash, with the remaining $1,269,000 held in escrow to be paid in two installments of $634,500 on the first two anniversaries of the sale. The Company will record a pre-tax gain on the sale of $8,590,000 in the quarter ended December 31, 1999. -8- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Statements From time to time, in written and oral statements, TSI Incorporated discusses expectations regarding its future performance, including such things as sales and expense trends, global economic issues, future order potentials and Year 2000 risks. These "forward-looking statements" are based on currently available competitive, financial and economic data and the Company's operating plans. They are inherently uncertain, and investors must recognize that events could turn out to be significantly different from expectations. Acquisition of Environmental Systems Corporation Effective June 1, 1999, the Company acquired Environmental Systems Corporation (ESC) of Knoxville, Tennessee for approximately $25 million in cash. Since ESC's operations represent approximately 20 to 25 percent of the Company's total business, ESC's impact, where significant, has been noted below in order to present a more meaningful comparison between periods. Results of Operations Following is a quarterly sales breakdown by segment: Second Quarter -------------- Percent 1999 1998 Change ---- ---- ------ Safety, Comfort, and Health $22,918,000 $17,129,000 34% Productivity and Quality Improvement 5,762,000 5,817,000 (1) ----------- ----------- --- 28,680,000 22,946,000 25 =========== =========== === The increase in sales was due to the June 1, 1999 acquisition of Environmental Systems Corporation (ESC). For the quarter, excluding ESC, sales were essentially flat with the prior year. Year-to-date sales have increased $10,852,000 or 26%. Excluding ESC, year-to-date sales have increased 6.8%. This increase is mostly attributable to increased demand for particle research instruments. Sales to U.S. and state government agencies, including defense, shown as a percent of total sales, were: September 30, 1999 1998 ---- ---- Quarter 21% 25% Year-to-date 23% 23% While the government percentage to total sales is high, the Company sells many different products to a very diverse range of government agencies. Consequently, government sales during the past several years have been quite stable as a percentage of total sales. We consider the current percentages to be within the normal range. -9- International sales rose $1,173,000 or 18 percent for the quarter compared with last year. ESC accounted for $925,000 of the increase with the remainder attributable to various other safety, comfort, and health products. Year-to-date international sales were $3,807,000 above the prior year. This was primarily due to three factors: (1) the addition of ESC, (2) strong sales of particle research products, and (3) sales of process instruments to the metals industry. Order bookings were as follows: Second Quarter Percent -------------- ------- 1999 1998 Change ---- ---- ------ Quarter $30,604,000 $21,651,000 41% Year-to-date $51,488,000 $39,271,000 31% Excluding ESC and Handar (which was sold October 1, 1999) we saw a 12% increase in incoming orders for the quarter and 14% year-to-date. Orders were particularly strong for (1) particle research instruments, and (2) flowmeters sold to the medical industry. Both are within our safety, comfort, and health area. For the six-months ended September 30, 1999 and 1998, Handar had sales of $3,885,000 and $4,278,000, respectively. For the same six-month periods, Handar had bookings of $4,122,000 and $5,127,000 in 1999 and 1998, respectively. These are included in the Company's consolidated financial results. For all of fiscal year 1999, Handar had sales of $9,186,000 and bookings of $7,992,000. Gross profit has ranged between 55.6% and 56.0% over the last three fiscal years. For the quarter it was 52.3%, and 53.7% for the six-months. The lower percentages are due to the acquisition of ESC. ESC's business includes air monitoring systems with a heavy buy/resell component. In addition, ESC does environmental consulting which is more labor intensive than the Company's traditional instrument sales. Consequently, we anticipate the Company's gross margin for the remainder of the current year will be closer to the current quarter's level than historical levels. This will, however, be somewhat dependent on product mix. Research and development costs dropped to 10.1% of sales for the quarter, bringing the year-to-date costs to 10.9% of sales. The Company continues its commitment to growth through development of new technologies and products. Again, these percentages are impacted by the ESC business, which is not as reliant on research and product development spending. Excluding ESC, research and development expenses were near the low end of the historical range. For all of fiscal 2000, research and development expenses are expected to be between 10% and 11% of sales. For the last three years, selling expenses have ranged between 21.6% and 23.3% of sales. Selling expenses were 18.5% of net sales for the second quarter compared to 20.5% last year. For the first six months of fiscal 2000, selling expenses were 19.5% compared to 22.3% a year ago. Excluding ESC, selling expenses were near the low end of the historical range. For all of fiscal 2000, we would expect selling expenses to be between 18.5% and 20% of sales. Administrative expenses were 8.0% of sales for the quarter compared to 7.8% last year. For the first six months of fiscal 2000, administrative expenses were 8.0% compared to 7.9% in fiscal 1999. The -10- Company expects administrative costs to continue within our normal operating range between 7 and 8 percent for the rest of the year. Other income varies depending on foreign currency fluctuations, interest rates and invested cash balances and borrowing levels. The first half of fiscal 2000 included significant interest expense related to borrowings made to acquire ESC. Fiscal 1999 did not include any borrowings. Income taxes represent 35% of pre-tax income this year compared to 33% last year. The increase in the fiscal 2000 tax rate is primarily due to the intangible assets from the ESC acquisition. The intangibles are permanent differences and not deductible for tax purposes. We would expect the rate for the rest of the year to be 34% to 36% exclusive of the Handar gain, depending on our international sales level and the benefit the Company receives from its foreign tax credit. We expect to recognize an effective tax rate of between 41 and 43 percent on the Handar gain. Liquidity and Capital Resources TSI's cash decreased $10,000,000 since March 31, 1999. As shown on the statement of cash flows, the Company generated $4,751,000 of cash from operating activities offset primarily by $912,000 in capital expenditures, and $674,000 in dividends, and cash paid to acquire ESC. The Company had net short-term borrowings of $9,462,000 primarily used to fund the ESC acquisition. At September 30, 1999, the Company had $3,438,000 cash on hand and believes operations will continue to generate sufficient cash to fund current operating needs. Additionally, on October 1, 1999 the Company used the proceeds from the sale of the net assets of its Handar subsidiary to pay-off its bank line of credit. The Company believes it has sufficient borrowing capacity should the need arise. Year 2000 Conversion The Company has reviewed and modified critical information technology ("IT") business systems and believe these systems are Year 2000 compliant. We have tested all major systems and they are compliant. While there may be some unidentified problems, we do not expect any issues that would represent significant business risk. The Company has also identified all non-IT systems and tested systems considered to be critical to the business. Certain of these systems required updating and the Company has made substantially all the updates. An initial list of key third party providers was made and direct discussions have been held in order to determine their state of Year 2000 readiness. Most critical vendors have indicated they will be Year 2000 compliant at various points during calendar 1999 and we will not have a stoppage in the flow of critical goods or services. The Company has extended the number of vendors identified to insure vendors significant to our business were identified and contacted. No problems have been found that we believe represent significant business risk. We believe alternative suppliers can be identified should our current suppliers fail to become Year 2000 compliant. A committee was formed to study current product lines to determine if hardware and software are Year 2000 compliant. We have conducted reviews, using both internal staff and external consultants, to assess our state of Year 2000 readiness. The reviews included reviewing Year 2000 instrumentation -11- testing, critical vendor correspondence, a facility tour, and a questionnaire assessing each operation's readiness. These reviews were completed in July 1999. The Company's products fall into the following categories: YEAR 2000 COMPLIANT - the Company has identified several products and made them Year 2000 compliant. We have responded to customers' requests to provide these upgrades and, in some cases, customers can download updated software from our internet web site to make the products Year 2000 compliant. NON-COMPLIANT INSTRUMENTS OR INSTRUMENTS NOT RELYING ON DATE INFORMATION - the Company has identified several instruments that do not rely on any internal or external date coding. It is anticipated no modification will be required to these instruments. In addition, the Company has fielded several instruments in the past using date information that the Company does not intend making Year 2000 compliant. The Company is responding to specific customer requests on these instruments as well as providing information on our Internet web site. OTHER - there are still some products where the Year 2000 review has not been completed. It is expected the remaining reviews will be completed before the end of calendar 1999. It is anticipated any products not tested to this point will not be made Year 2000 compliant. However, we do not feel this will be a deterrent from the customer purchasing these instruments because it will only affect the dating information and not the performance of the instrument. There can be no assurance regarding the customers' response to any Year 2000 issues we have yet to identify. Our Year 2000 compliance program is being carried out with internal staff without significant additional outside expenditures. However, Year 2000 issues have accelerated approximately 10 to 15 percent of our capital purchases by one to two years. For example, during the third quarter of fiscal 1999, the Company replaced the main IBM AS400 computer system at corporate headquarters with one meeting the requirements of Year 2000. Additionally, the Company made similar replacements at its domestic subsidiaries during the fourth quarter of fiscal 1999. Foreign subsidiary systems comprise a small portion of the overall system and their systems are currently under review. It is expected this review will be completed by early December 1999. The Company estimates that historical and future costs associated with its Year 2000 program will not exceed $200,000 annually for fiscal years 1998 through 2000. Such costs are expensed as incurred. Management does not believe the focus on Year 2000 compliance has caused us to ignore other types of upgrades to any critical systems. Failure to complete upgrades to existing systems, or third party providers being unable to supply us with inventory, could result in the company being unable to ship certain products. However, management believes the remaining system changes required can be readily implemented well before January 1, 2000 and, therefore, will not subject the Company to significant business risks. The Company has developed a corporate contingency plan to mitigate possible disruptions in services or business operations. Additional contingency plans will be developed within the operating units during the remainder of calendar 1999 and the company will monitor the need for implementing such plans. -12- PART II. OTHER INFORMATION Item 6. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 11 - Computation of Per Share Earnings Exhibit 27 - Financial Data Schedule Exhibit 99 - Stay-in-Place Agreements (b) Reports on Form 8-K: No reports on Form 8-K have been filed by the Registrant during the quarter for which this report is being filed. -13- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigned thereunto duly authorized. Registrant: TSI Incorporated Date: November 15, 1999 By: /s/ James E. Doubles ------------------------- James E. Doubles President & CEO Date: November 15, 1999 By: /s/ Robert F. Gallagher ------------------------- Robert F. Gallagher Vice President & CFO -14-