U.S. Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen,
We are transmitting herewith Form 10-QSB for the quarter ended June 30, 2002
for TSI, Inc.
TSI, Inc.
s/Lori Olson
Lori Olson
Accountant
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, 2002
[ ] 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 59401
(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, 2002
$.05 Par Value Common Stock 10,473,610 Shares
Transitional Small Business Disclosure Format (Check One): Yes ; No X
TSI, INC.
INDEX
JUNE 30, 2002
Page Number
PART I
Condensed Consolidated Financial Statements:
Balance Sheet
June 30, 2002 2
Statements of Income and Comprehensive Income -
Six Months and Three Months Ended June 30, 2002 and 2001 3
Statements of Cash Flows -
Six Months Ended June 30, 2002 and 2001 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
Certification 9-10
1
TSI, INC.
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2002
ASSETS
Current Assets
Cash $ 22,826,733
Marketable Securities, at Fair Value 1,660,195
Receivables - Net 111,232
Total Current Assets 24,598,160
Other Assets
Noncurrent Investments, at Fair Value 608,470
Other Assets 2,238
Property, Plant and Equipment, Net 692,598
TOTAL ASSETS $ 25,901,466
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities $ 318,045
Income Taxes Payable 98,588
Deferred Income Taxes 72,600
Due to Parent Company 272,319
Total Current Liabilities 761,552
Provison For Estimated Title and Escrow Losses 829,041
Minority Interests 391,090
Excess of Fair Value of Net Assets Acquired Over Cost 19,865
Deferred Income Taxes 137,400
Stockholders' Equity
Common Stock - $.05 Par Value,
30,000,000 shares authorized,
10,483,142 shares issued 524,157
Additional Paid-In Capital 19,165,957
Retained Earnings 3,779,905
Accumulated Other Comprehensive Income 306,383
Treasury Stock, at Cost (13,884)
Total Stockholders' Equity 23,762,518
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,901,466
See Notes to Consolidated Financial Statements
2
TSI, INC.
STATEMENTS OF INCOME
For The Three Months For The Six Months
Ended Ended
June 30, June 30,
2002 2001 2002 2001
Operating Revenues $ 554,053 $ 763,509 $1,111,035 $4,342,201
Operating Expenses
Salaries and Payroll
Costs 148,115 264,211 354,463 475,277
Depreciation 13,103 21,463 34,001 42,925
Other Expenses 224,410 230,336 380,192 426,405
Total Expenses 385,628 516,010 768,656 944,607
168,425 247,499 342,379 3,397,594
Amortization of
Deferred Credit 2,055 2,055 4,110 4,110
Minority Portion of
(Income) (1,563) (284) (3,775) (9,362)
168,917 249,270 342,714 3,392,342
Income Tax Expense (47,300) (80,000) (103,000) (1,355,000)
Net Income 121,617 169,270 239,714 2,037,342
Other Comprehensive Income (Loss)
Increase (Decrease) in
Unrealized Holding Gains,
Net of Income Taxes (6,409) 39,922 37,060 (1,798,556)
Comprehensive Income $ 115,208 $209,192 $ 276,774 $ 238,786
See Notes to Consolidated Financial Statements
3
TSI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Six Months Ended
June 30,
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net Cash From Operations $ 214,264 $ 510,471
Income Taxes Paid (147,150) -
Net Cash Provided By
Operating Activities $ 67,114 $ 510,471
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures Paid In Cash (22,033) -
Cash Received on Sales and Redemptions
of Property and Equipment - (4,276)
Cash Used for Purchases of Marketable
Securities Available For Sale (353,343) (3,091,061)
Cash Received Upon Dispositions of Marketable
Securities Available For Sale 845,592 6,530,426
Net Cash (Used)
By Investing Activities 470,216 2,982,827
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Provided From Parent Company 151,150 (955,200)
Cash Purchases of Treasury Stock (2,666) (5,863)
Net Cash Provided By
Financing Activities 148,484 (961,063)
NET INCREASE IN CASH 685,814 2,532,235
CASH - BEGINNING OF PERIOD 22,140,919 16,867,357
CASH - END OF PERIOD $22,826,733 $19,399,592
See Notes to Consolidated Financial Statements
4
TSI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002
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, 2002 and
the results of the Company's operations for the three months and six months
ended June 30, 2002 and 2001 and cash flows for the six months ended June 30,
2002 and 2001.
The results of operations for the three months and six months ended June 30,
2002 and 2001 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 June 30, 2002. The net unrealized holding gains at June 30, 2002,
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, 2002
in accordance with the provisions of Financial Accounting Standards N0. 130.
Sales to outside concerns, interest revenues and segment operating profit
for the Company's reportable segments were as follows for the quarter
ended June 30, 2002:
Sales to Segment
Outside Interest Operating
Concerns Revenues Profit
Financial Holding Company $ 28,601 $ 3,811 $ (16,608)
Title Insurance Operations 413,315 19,576 164,869
Rental Properties 88,750 - 20,164
Consolidated $ 530,666 $ 23,387 $ 168,425
5
TSI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE INCOME STATEMENT
JUNE 30, 2002
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,
2002 AND 2001 2002 AND 2001
INCREASES (DECREASES)
Revenues $ (209,456) (27.4%) $(3,231,166) (74.4%)
Expenses (130,382) (25.3%) (175,951) (18.6%)
Net Income (47,653) (28.2%) (1,797,628) (88.2%)
Revenues decreased $3,231,166 for the first six months of 2002 ($209,456
for the second quarter of 2002) as compared to this time frame in 2001.
This decrease is primarily due to a decrease n the security sales($2,872,823).
The majority of the decrease in security sales revenue came from the sale of
WesterFed. A commission fee of seven percent of gross proceeds from the
sales of WesterFed stock, in connection with a merger of WesterFed, was
paid to Paul J. McCann, a member of the controlling shareholders group, who
played an acitve part in conneciton therewith. Other factors for the change
in revenues include: decrease in rent of $26,799 (12.3%), decrease in
interest and dividend revenues of $271,047 (63.2%), and a decrease in title
revenues of $39,323 (4.9%). Operating expenses decreased $175,951 in the
first six months of 2002 ($130,382 in the second quarter) as compared
to this time frame in 2001. This is due to the decrease in depreciation
of $8,924 (20.8%) and a decrease in payroll of $120,814 (25.4%). The
provision for income tax expense decreased by $1,282,000 (918.8%) in the
first six montsh of 2002 ($32,700 in the second quarter of 2002) as
compared to this time frame in 2001. This change was primarily due
to the substantial decrease in income from the security sales.
6
TSI, INC.
PART II
OTHER INFORMATION
JUNE 30, 2002
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 4, 2002 s/D. Mellinger
D. Mellinger,
Assistant Secretary-Treasurer
Date: October 4, 2002 s/Lori Olson
Lori Olson,
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 circomstances
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
inforamtion included in quarterly annual 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 annual report.
4. TSI, Inc.'s other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Eschange 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., including its consolidated
subsidiaries, 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 TSI, Inc. disclosure controls
and prodecures as of a date with 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
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.
Based on my knowledge all of the above is true and correct.
Date: October 4, 2002 s/Paul J. McCann
Paul J. McCann
9
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 June 30, 2002 as filed with the Securites
and Exchange Commission on the date hereof (the "Report"), I, Paul J. McCann,
Representative of Diversified Realty, 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 compiles with the requirements 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 Diversified Realty, Inc.
Date: October 4, 2002 s/Paul J. McCann
Paul J. McCann,
Representative
10