U.S. Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen,
We are transmitting herewith Form 10-QSB for the quarter ended September30,
2002 for TSI, Inc.
TSI, Inc.
s/Dawn Mellinger
Dawn Mellinger
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 September 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 X 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 10,471,844 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
September 30, 2002 2
Statements of Income and Comprehensive Income -
Nine Months and Three Months Ended September 30, 2002 and 2001 3
Statements of Cash Flows -
Nine Months Ended September 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 SEPTEMBER 30, 2002
ASSETS
Current Assets
Cash $ 23,156,750
Marketable Securities, at Fair Value 1,238,550
Receivables - Net 123,887
Deferred Taxes, Current 18,800
Total Current Assets 24,537,987
Other Assets
Noncurrent Investments, at Fair Value 580,809
Other Assets 2,238
Property, Plant and Equipment, Net 692,433
TOTAL ASSETS $ 25,813,467
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities $ 444,791
Income Taxes Payable 83,605
Due to Parent Company 299,577
Total Current Liabilities 827,973
Provison For Estimated Title and Escrow Losses 819,949
Minority Interests 390,041
Excess of Fair Value of Net Assets Acquired Over Cost 17,810
Deferred Income Taxes 126,100
Total Liabilities 2,181,873
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 3,801,720
Accumulated Other Comprehensive Income 157,176
Treasury Stock, at Cost (17,416)
Total Stockholders' Equity 23,631,594
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,813,467
See Notes to Consolidated Financial Statements
2
TSI, INC.
STATEMENTS OF INCOME
For The Three Months For The Nine Months
Ended Ended
September 30, September 30,
2002 2001 2002 2001
Operating Revenues $ 601,918 $ 705,665 $ 1,712,953 $5,047,865
Operating Expenses
Salaries and Payroll
Costs 358,184 225,340 712,647 700,617
Depreciation 19,746 21,463 53,747 64,388
Other Expenses 220,231 189,541 600,423 615,946
Total Expenses 598,161 436,344 1,366,817 1,380,951
3,757 269,321 346,136 3,666,914
Amortization of
Deferred Credit 2,055 2,055 6,165 6,165
Minority Portion of
(Income) 901 (1,779) (2,874) (11,141)
6,713 269,597 349,427 3,661,938
Income Tax Expense 15,700 95,000 (87,900) (1,450,000)
Net Income 22,413 364,597 261,527 2,211,938
Other Comprehensive Income (Loss)
Increase (Decrease) in
Unrealized Holding Gains,
Net of Income Taxes (149,207) (122,182) (112,147) (1,920,739)
Comprehensive Income $(126,794) $242,415 $ 149,380 $ 291,199
See Notes to Consolidated Financial Statements
3
TSI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Nine Months Ended
September 30,
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net Cash From Operations $ 719,397 $ 743,451
Income Taxes Paid (147,150) -
Net Cash Provided By
Operating Activities $ 572,247 $ 743,451
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures Paid In Cash (42,733) -
Cash Received on Sales and Redemptions
of Property and Equipment - (4,276)
Cash Used for Purchases of Marketable
Securities Available For Sale (361,962) (4,032,968)
Cash Received Upon Dispositions of Marketable
Securities Available For Sale 1,050,336 8,390,426
Cash Paid to Jefferson Management Company
(in error, which was later returned) - (452,262)
Net Cash Provided
Investing Activities 645,641 3,900,920
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Provided From (To) Parent Company (195,859) (923,800)
Cash Purchases of Treasury Stock (6,198) (9,388)
Net Cash Provided (Used) By
Financing Activities (202,057) (933,188)
NET INCREASE IN CASH 1,015,831 3,711,183
CASH - BEGINNING OF PERIOD 22,140,919 16,867,357
CASH - END OF PERIOD $23,156,750 $20,578,540
See Notes to Consolidated Financial Statements
4
TSI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 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 September 30, 2002
and the results of the Company's operations for the three months and nine
months ended September 30, 2002 and 2001 and cash flows for the nine months
ended September 30, 2002 and 2001.
The results of operations for the three months and nine months ended September
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 September 30, 2002. The net unrealized holding gains at September 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 September 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 September 30, 2002:
Sales to Segment
Outside Interest Operating
Concerns Revenues Profit
Financial Holding Company $ 17,725 $ 10,079 $ (95,787)
Title Insurance Operations 462,071 17,576 142,136
Rental Properties 94,467 - (42,592)
Consolidated $ 574,263 $ 27,655 $ 3,757
5
TSI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE INCOME STATEMENT
SEPTEMBER 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 NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2002 AND 2001 2002 AND 2001
INCREASES (DECREASES)
Revenues $ (103,746) (14.7%) $(3,334,911) (66.1%)
Expenses 161,817 37.1% (14,134) (1.0%)
Net Income (342,483) (93.9%) (1,950,410) (88.2%)
Revenues decreased $3,334,911 for the first nine months of 2002 ($103,746
decrease for the third quarter of 2002) as compared to this time frame in 2001.
This decrease is primarily due to a decrease n the security sales($2,881,718).
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 connection therewith. Other factors for the change
in revenues include: decrease in interest and dividend income of
$337,725(59.6%),
decrease in rent of $27,914 (8.9%), and a decrease in title revenues of
$64,700
(5.1%). Operating expenses decreased $14,133 in the first nine months of
2002
(1%) in the third quarter of 2002 , compared to this time frame in 2001.
This is
due mainly to the decrease in depreciation of $10,641 (16.5%) and a
reduction in
other expenses of $15,523 (3%). The provision for income tax expense
decreased by
$1,362,100 (93.9%) in the first nine months of 2002 as compared to this
time frame
in 2001. This change was primarily due to the substantial decrease in
income from
security sales.
6
TSI, INC.
PART II
OTHER INFORMATION
SEPTEMBER 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: November 15, 2002 s/Lori Olson
Lori Olson,
Assistant Secretary-Treasurer
Date: November 15, 2002 s/Dawn Mellinger
Dawn 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 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: November 15, 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 September 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: November 15, 2002 s/Paul J. McCann
Paul J. McCann,
Representative
10