-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EISl1kH2la5e+qMewtgb3NCPWix5E5W+nBzO+mSCik/xWP5FKk0dFIaAq+1SI7FR 3rPB8AHxFJYCx/53WnQ0UA== 0000897101-96-000975.txt : 19961115 0000897101-96-000975.hdr.sgml : 19961115 ACCESSION NUMBER: 0000897101-96-000975 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TSI INC /MN/ CENTRAL INDEX KEY: 0000100063 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 410843524 STATE OF INCORPORATION: MN FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02958 FILM NUMBER: 96661662 BUSINESS ADDRESS: STREET 1: 500 CARDIGAN ROAD CITY: SHOREVIEW STATE: MN ZIP: 55126 BUSINESS PHONE: 6124830900 MAIL ADDRESS: STREET 1: 500 CARDIGAN ROAD STREET 2: D CITY: ST PAUL STATE: MN ZIP: 55126-3996 10-Q 1 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, 1996. 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 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 practical date. Date: November 8, 1996 Number of Common Shares Outstanding: 11,279,442 ----------------- ----------- TSI INCORPORATED FORM 10-Q For the Quarter Ended September 30, 1996 Page ---- PART I. FINANCIAL INFORMATION 2 Item 1. Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Cash Flows 4 Consolidated Statements of Earnings 5 Note to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 7 - 8 PART II. OTHER INFORMATION 9 EXHIBIT 11 Computation of Per Share Earnings
CONSOLIDATED BALANCE SHEETS SEPT. 30 March 31 Sept. 30 1996 1996 1995 (UNAUDITED) (unaudited) ----------- ----------- ----------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 4,761,585 $ 688,055 $ 1,094,300 Accounts receivable 12,181,593 15,533,541 9,567,715 Prepaid expenses 559,830 310,483 412,937 Inventories Finished products 2,817,891 2,462,381 2,179,427 Work-in-process 2,500,940 1,782,462 2,314,136 Materials and supplies 7,067,545 6,635,571 5,055,945 ----------- ----------- ----------- 12,386,376 10,880,414 9,549,508 ----------- ----------- ----------- TOTAL CURRENT ASSETS 29,889,384 27,412,493 20,624,460 INTANGIBLES AND OTHER ASSETS Goodwill 2,801,257 2,991,222 2,611,461 Note receivable 610,000 610,000 610,000 Deferred income tax benefit 721,020 721,020 289,073 Other assets 2,231,990 2,377,558 2,270,614 ----------- ----------- ----------- 6,364,267 6,699,800 5,781,148 PROPERTY, PLANT AND EQUIPMENT Land 128,503 128,503 128,503 Buildings 3,564,863 3,564,863 1,039,070 Construction in progress 567,325 236,747 3,500,027 Machinery and equipment 17,301,013 16,301,710 13,724,044 ----------- ----------- ----------- 21,561,704 20,231,823 18,391,644 Less allowance for depreciation 12,696,454 11,831,980 10,805,132 ----------- ----------- ----------- 8,865,250 8,399,843 7,586,512 ----------- ----------- ----------- TOTAL ASSETS $45,118,901 $42,512,136 $33,992,120 =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $ 4,297,368 $ 4,863,403 $ 3,718,892 Notes payable -- -- 160,936 Employee compensation 3,285,967 3,118,417 2,338,085 Taxes, other than income taxes 309,420 306,227 178,027 Income taxes payable 349,698 626,139 -- ----------- ----------- ----------- TOTAL CURRENT LIABILITIES 8,242,453 8,914,186 6,395,940 ----------- ----------- ----------- TOTAL LIABILITIES 8,242,453 8,914,186 6,395,940 SHAREHOLDERS' EQUITY Common shares, $.10 par value 1,125,287 559,083 526,878 Additional paid-in capital 8,454,374 8,800,846 6,286,979 Retained earnings 27,235,049 24,202,036 20,625,728 Equity adjustment from translation 61,738 35,985 156,595 ----------- ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 36,876,448 33,597,950 27,596,180 ----------- ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $45,118,901 $42,512,136 $33,992,120 =========== =========== =========== See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) SIX MONTHS ENDED SEPTEMBER 30 1996 1995 ----------- ----------- OPERATING ACTIVITIES Net earnings $ 3,482,246 $ 1,494,946 Adjustments to reconcile net earnings to net cash provided by operating activities: Provision for losses on accounts receivable 994 14,204 Depreciation and amortization of property, plant and equipment 903,903 638,534 Amortization of goodwill 189,965 69,999 Loss on sale of assets -- 235 Changes in operating assets and liabilities: Accounts receivable 3,350,954 (1,192,364) Prepaid expenses (249,347) (108,851) Inventories (1,505,962) (2,132,869) Other assets 145,568 368,515 Accounts payable and accrued expenses (566,035) (274,296) Employee compensation payable 167,550 (167,188) Taxes, other than income taxes 3,193 (94,930) Current income taxes payable (276,441) (179,998) Foreign currency translation gain (loss) 5,200 (183,519) ----------- ----------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 5,651,788 (1,747,582) ----------- ----------- INVESTING ACTIVITIES Additions to property, plant and equipment (1,375,819) (2,341,344) Purchase of companies, net of cash acquired -- (4,510,850) ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (1,375,819) (6,852,194) ----------- ----------- FINANCING ACTIVITIES Proceeds from note -- 160,936 Proceeds from stock options exercised 219,732 289,879 Dividends paid (449,233) (312,799) ----------- ----------- NET CASH USED IN FINANCING ACTIVITIES (229,501) 138,016 ----------- ----------- Effect of exchange rate changes on cash and cash equivalents 27,062 4,508 ----------- ----------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,073,530 (8,457,252) ----------- ----------- Cash and cash equivalents at beginning of year 688,055 9,551,552 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF SIX MONTH PERIOD $ 4,761,585 $ 1,094,300 =========== =========== See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Net sales $19,314,726 $14,573,940 $38,811,844 $28,343,858 Cost of products sold 8,474,322 6,317,574 16,987,911 12,167,414 ----------- ----------- ----------- ----------- GROSS PROFIT 10,840,404 8,256,366 21,823,933 16,176,444 Operating expenses Research and product development 2,787,799 2,116,825 5,277,786 4,200,406 Selling 4,197,664 3,738,835 8,461,051 7,374,847 Administrative 1,486,520 1,289,835 2,900,937 2,449,382 ----------- ----------- ----------- ----------- 8,471,983 7,145,495 16,639,774 14,024,635 ----------- ----------- ----------- ----------- OPERATING INCOME 2,368,421 1,110,871 5,184,159 2,151,809 Other income 107,879 43,973 173,087 148,137 ----------- ----------- ----------- ----------- EARNINGS BEFORE INCOME TAXES 2,476,300 1,154,844 5,357,246 2,299,946 Provision for income taxes 867,000 404,000 1,875,000 805,000 ----------- ----------- ----------- ----------- NET EARNINGS $ 1,609,300 $ 750,844 $ 3,482,246 $ 1,494,946 =========== =========== =========== =========== EARNINGS PER COMMON SHARE $ .14 $ .07 $ .30 $ .14 =========== =========== =========== =========== Weighted average number of shares for computation of earnings per common share 11,806,557 10,886,712 11,673,955 10,825,864
See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1996 (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 12 of this document. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net sales for the three month period ended September 30, 1996, were $19,315,000, which represents an increase of 33 percent from $14,574,000 for the same period last year. For the first six months of fiscal 1997, the Company's net sales were $38,812,000, up 37 percent from $28,344,000, for the same six-month period a year ago. Sales of products for the Safety, Comfort and Health of People increased 39 percent and accounted for 72 percent of the Company's total business during the second quarter, compared to 68 percent for the same quarter a year ago. For the six months ended September 30, 1996, sales of Safety, Comfort and Health products increased 41 percent and represented 69 percent of total sales compared with 67 percent for last year's first half. This area accounted for 66 percent of the Company's business in fiscal 1996, ended March 31, 1996. Contributing to this growth was shipments of about $6.8 million under contracts with the U.S. Army and German army to furnish Portacount(R) respirator fit testers for bio-hazard protection. Sales of products for Productivity and Quality Improvement increased 19 percent and were at 28 percent of total sales for the fiscal 1997 second quarter compared with 32 percent a year ago. For the six months ended September 30, 1996, sales of Productivity and Quality Improvement products increased 29 percent, making up 31 percent of total sales compared with 33 percent for last year's first half. For fiscal 1996, ended March 31, 1996, this category accounted for 34 percent of the Company's business. The sales increase in this category came from the October, 1996 acquisition of Aerometrics, Inc., partially offset by a decrease in sales of other productivity and quality measuring instruments. This decrease resulted from year-to-year differences in shipments of larger orders and some weakness in sales bookings during the summer months which is not considered to represent any downward trend. Sales to U.S. and state government agencies including defense, comprised about 26 percent of the Company's net sales for the quarter as compared to 22 percent for the same quarter last year. For the six months ended September 30, 1996 and 1995, sales to the U.S. and state government agencies were at 23 percent and 20 percent, respectively. A higher percentage of governmental sales was experienced during the first six months of fiscal 1997, mostly because of shipments on the U.S. military contract referred to above and there were not such shipments during the first half of fiscal 1996. The second half of fiscal 1997 should show governmental sales to be at a percentage similar to the first six months. Since sales to government agencies represent a significant portion of the Company's sales, it is important to consider the potential effects of changes in government spending. Due to the Company's diverse line of products, sales usually occur in a wide range of U.S. and state government agencies, so total government sales during the past several years have been quite stable as a percentage of total sales. However, shifts have occurred because of changes from quarter-to-quarter and year-to-year in shipments under contracts with the U.S. military agencies for the Company's Portacount(R) respirator fit testers and the typical percentage was lowered due to a normally lower percentage of sales to government agencies for the two acquisitions made during fiscal 1996. During the second quarter, backlog of orders increased from $25.3 million at June 30, 1996 to $25.9 million at September 30, 1996, and compared to backlog of $22.5 million at September 30, 1996. Order bookings were stronger at $19.9 million in the second quarter ended September 30, 1996 compared to the $15.0 million in the first quarter ended June 30, 1996. The largest single order during the second quarter was $1.3 million for additional Portacount respirator fit testers to be used by the U.S. Air Force. Other orders reflected increased sales bookings across most of the Company's product lines without any dominant factors. Gross profit margin for the second quarter ended September 30, 1996 was 56.1 percent of net sales compared with the 56.7 percent gross profit margin in the second quarter last year. Six-month gross profit margin were 56.2 percent this year compared to 57.1 percent a year ago. The lower gross profit percentage for the first six months this year was due to the effect of normally lower gross profit margins at the companies acquired in fiscal 1996. Research and product development expenses as a percentage of net sales were 14.4 percent for the second quarter and 13.6 percent for the six month period ended September 30, 1996, compared to 14.5 percent and 14.8 percent of net sales, respectively, for the same periods last year. Actual research and product development spending was up about 26 percent in the first six months and, of that, about 40 percent was due to the fiscal 1996 acquisitions. The Company continues its commitment to growth through development of new technologies and products. For all of fiscal 1997, research and development expenses are expected to continue near the Company's historical range of 12 to 14 percent of sales. Selling expenses were 21.7 percent of net sales for the second quarter compared to 25.7 percent for the year earlier period. For the first six months of fiscal 1997, selling expenses were 21.8 percent compared with 26.0 percent for the same period in fiscal 1996. Selling expenses for the first six months were up about 15 percent compared to the same period a year ago and about 45 percent of the increase was due to the fiscal 1996 acquisitions. The decrease in selling expenses as a percentage of net sales corresponded to higher sales volume in this year's first half. Administrative expenses were 7.7 percent and 7.5 percent of net sales for the three and six-month periods ended September 30, 1996, respectively. For the same periods ended September 30, 1995, administrative expenses were 8.9 and 8.6 percent of net sales. 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 1997. Other income was $108,000 in the second quarter and $173,000 in the first six months of fiscal 1997 compared with $44,000 and $148,000, respectively, for the same periods in fiscal 1996. The increase for the second quarter of the current fiscal year is due to higher interest income due to higher cash balances along with fluctuations due to foreign currency transactions. The provision for income taxes was at the rate of 35 percent of pre-tax earnings for the second quarters and six month periods of both fiscal 1997 and 1996. Liquidity and Capital Resources Cash, cash equivalents and investments increased by $4,074,000 to $4,762,000 at September 30, 1996 from $688,000 at March 31, 1996. The increase is mainly attributable to increased net earnings and decreased accounts receivable, partially offset by increases in inventory and property, plant and equipment. The ratio of current assets to current liabilities was 3.6 as of September 30, 1996, compared to 3.1 as of March 31, 1996. Working capital increased $3,149,000 to $21,647,000 at the end of the second quarter of fiscal 1997, compared to $18,498,000 at the end of fiscal 1996. Management believes internally-generated funds and short-term borrowings on existing credit lines will provide adequate resources for supporting operations during the remainder of fiscal 1997. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 11 - Computation of Per Share Earnings Exhibit 27 - Financial Data Schedule filed electronically (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. 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 13, 1996 By:__________________ /s/James E. Doubles President & COO Date: November 13, 1996 By:____________________ /s/Lowell D. Nystrom Vice President & CFO EX-11 2 COMPUTATION OF PER SHARE EARNINGS
EXHIBIT 11 TSI Incorporated Computation of Per Share Earnings Three Months Ended Sept. 30, Six Months Ended Sept. 30 ----------------------------- ------------------------- 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Primary Average shares outstanding 11,372,186 10,496,760 11,229,319 10,464,908 Net effect of dilutive stock options, based on the treasury stock method using average market price 434,371 389,952 444,637 360,956 ----------- ----------- ----------- ----------- Total 11,806,557 10,886,712 11,673,956 10,825,864 Net Earnings $ 1,609,300 $ 750,844 $ 3,482,246 1,494,946 Primary per share amounts $ .14 $ .07 $ .30 $ .14 Fully Diluted Average shares 11,372,186 10,496,760 11,229,319 10,464,908 Net effect of dilutive stock options, based on the treasury stock method using the period-end market price, if higher than the average market price 438,053 448,450 446,748 465,478 ----------- ----------- ----------- ----------- Total 11,810,239 10,945,210 11,676,067 10,930,386 Net Earnings $ 1,609,300 $ 750,844 $ 3,482,246 $ 1,494,946 Fully diluted per share amounts $ .14 $ .07 $ .30 $ .14
EX-27 3 FINANCIAL DATA SCHEDULE
5 6-MOS MAR-31-1997 SEP-30-1996 4,761,585 0 12,446,926 265,333 12,386,376 29,889,384 21,561,703 12,696,454 45,118,901 8,242,453 0 0 0 1,125,287 36,876,448 45,118,901 38,811,844 38,811,844 16,987,911 16,639,774 (173,087) 0 0 5,357,246 1,875,000 3,482,246 0 0 0 3,482,246 .30 .30
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