SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1994 Commission File
Number 1-8719
THE TURNER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3209884
(State or other jurisdiction of (I.R.S. Employer Id. No.)
incorporation or organization)
375 Hudson Street, New York, New York 10014
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code
(212) 229-6000
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 12 months, and (2) has been subject to
such filing requirements for the past 90 days. Yes X
No .
Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of November 7,
1994: 5,142,986.
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Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Company or group of companies for which report is
filed:
THE TURNER CORPORATION AND CONSOLIDATED SUBSIDIARIES
The consolidated balance sheet as of September 30,
1994, the consolidated statements of operations and
retained earnings and the consolidated statements of
cash flows for the nine months ended September 30, 1994
and 1993 are unaudited, but, in the opinion of the
company's management reflect all adjustments,
consisting only of normal recurring adjustments, which
are necessary to present fairly the financial condition
and results of operations at those dates and for those
periods. The results of operations for any three month
period is not necessarily indicative of results for a
full year. It is suggested that these financial
statements be read in conjunction with the audited
financial statements and notes thereto included in the
company's latest annual report.
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THE TURNER CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEET
SEPTEMBER 30, 1994
WITH COMPARATIVE FIGURES
FOR DECEMBER 31, 1993
(in thousands except
share amounts)
<TABLE>
(unaudited) (unaudited)
September December September December
30, 31, 30, 31,
Assets 1994 1993 Liabilities & 1994 1993
Stockholder's Equity
<S> <C> <C> <S> <C> <C>
Cash and cash equivalents $34,354 $25,485 Liabilities:
Marketable Securities 4,298 13,046 Construction accounts
payable:
Trade $267,587 $239,156
Construction receivables: Due on completion of 117,150 117,647
contracts
Due on contracts 363,550 315,741 Accrued estimated work 57,077 78,495
including retainage completed
Estimated unbilled
construction costs
and related earnings 60,081 83,135 Notes payable and 116,271 102,365
convertible debenture
Real Estate 107,603 117,275 Deferred income taxes 11,102 13,708
Property and equipment, 16,888 17,725 Other liabilities 50,112 58,152
net
Total liabilities 619,299 609,523
Prepaid pension cost 64,380 63,207
Stockholders' Equity:
Other assets 26,016 28,592 Series C, 8-1/2%
cumulative convertible
preferred stock, $1 par 9 9
value
Total assets $677,170 $664,206 Series B, cumulative
convertible,
preferred stock, $1 par 849 849
value
Common stock, $1 par value 5,190 5,135
Paid in capital 37,704 37,280
Net unrealized loss on (191) --
marketable securities
Cumulative foreign (787) (787)
translation adjustment
Retained earnings 26,414 24,834
69,188 67,320
Less: Loan to Employee (10,783) (12,105)
stock ownership plan
Treasury (534) (532)
stock, at cost
Total stockholders' equity 57,871 54,683
Total liabilities and $677,170 $664,206
stockholders' equity
See Notes to Consolidated
Financial Statements
-4-
THE TURNER CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS of
OPERATIONS AND RETAINED EARNINGS
(in thousands, except share
amounts)
(unaudited) (unaudited)
Nine Three
Months Months
Ended Ended
September September
30, 30,
1994 1993 1994 1993
Value of construction completed $1,927,868 $2,053,244 $658,849 $735,223
Earnings from construction $41,012 $51,212 $11,809 $18,564
contracts
Losses from real estate (322) (3,566) (1,057) (1,612)
operations
Gross earnings 40,690 47,646 10,752 16,952
Operating expenses - 27,390 29,698 8,458 10,375
construction
Operating expenses - real estate 1,929 2,197 467 731
& other
General & administrative 9,714 11,191 3,372 4,405
expenses
39,033 43,086 12,297 15,511
Other income (loss), net (721) 240 (292) 375
Income before income taxes 936 4,800 (1,837) 1,816
Income tax (benefit), provision (2,016) 2,034 (2,733) 905
Net income 2,952 2,766 896 911
Dividends on preferred stock (1,372) (1,372) (458) (445)
Net income available for common 1,580 1,394 438 466
stockholders
Retained earnings, beginning of 24,834 32,869 25,976 33,797
period
Less common dividends paid - - - -
Retained earnings, end of period $26,414 $34,263 $26,414 $34,263
Earnings per common share:
Primary $0.30 $0.27 $0.08 $0.09
Fully diluted $0.26 $0.23 $0.07 $0.07
Weighted average common and
common equivalent
shares outstanding
Primary 5,189,749 5,184,288 5,232,535 5,213,291
Fully diluted 6,038,705 6,033,299 6,081,491 6,062,302
See Notes to Consolidated
Financial Statements
-5-
THE TURNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands, except share amounts)
(Unaudited)
Nine
Months
Ended
September 30,
1994 1993
Cash flows from operating activities:
Net income $2,952 $2,766
Adjustments to reconcile net income
to net cash flows
from operating activities:
Equity in affiliates' net loss 1,272 2,255
Depreciation and amortization 7,154 7,361
Pension credit -1,173 -7,536
Loss on sale of marketable 79 --
securities
Provision (benefit) for deferred -2,606 1,017
income taxes
Changes in operating assets and
liabilities:
Decrease (increase) in -24,681 5,667
construction receivables
Increase (decrease) in 6,407 -25,548
construction payables
Decrease in restructuring -4,239 --
reserve
Decrease in pension liability -3,285 -1,178
Decrease (increase) in other 306 1,037
assets and liabilities, net
Net cash used in operating -17,814 -14,159
activities
Cash flows from investing activities:
Sale of marketable securities 8,565 --
Investment in joint venture 349 -6,000
Proceeds from real estate sales 6,460 14,820
Increase in real estate -2,177 -643
Purchases of property & equipment -1,991 -3,651
Proceeds from sale of property & 1,720 898
equipment
Net cash provided by investing 12,926 5,424
activities
Cash flows from financing activities:
Common stock issued 479 489
Cash dividends to preferred -1,950 -1,949
shareholders
Repayments from loan to Employee 1,322 1,543
Stock Ownership Plan
Proceeds from borrowing 41,450 47,982
Payments on borrowing -27,544 -45,019
Proceeds from issuance of treasury -- 33
stock
Net cash provided by financing 13,757 3,079
activities
Net increase (decrease) in cash and cash 8,869 -5,656
equivalents
Cash and cash equivalents at beginning of 25,485 38,305
period
Cash and cash equivalents at end of $34,354 $32,649
period
Noncash investing activities:
Net unrealized loss on marketable $191 --
securities
Notes provided upon the sale of real $447 --
estate
-6-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
1. Value of construction completed represents
construction costs incurred and earnings during the
period as follows:
Nine Months Ending
September 30,
1994 1993
Revenue from construction contracts:
Construction costs incurred by the company $ 1,337,243 $ 1,387,313
Company's share of joint venture
construction costs 161,317 119,073
Earnings from construction contracts 41,012 51,212
Total revenue from construction contracts 1,539,572 1,557,598
Construction costs incurred by owners in
connection with work under construction
management and similar contracts 388,296 495,646
Value of construction completed $ 1,927,868 $ 2,053,244
Three Months Ending
September 30,
1994 1993
Revenue from construction contracts:
Construction costs incurred by the company $ 474,767 $ 489,028
Company's share of joint venture
construction costs 76,334 41,537
Earnings from construction contracts 11,809 18,564
Total revenue from construction contracts 562,910 549,129
Construction costs incurred by owners in
connection with work under construction
management and similar contracts 95,939 186,094
Value of construction completed $ 658,849 $ 735,223
2. Earnings/(losses) from real estate operations
consist of revenues and related costs as
follows:
Nine Months Ending
September 30,
1994 1993
Real estate sales $ 7,648 $ 14,820
Costs of sales (7,403) (14,820)
Rental & other income 10,898 10,252
Direct cost of real
estate operations (11,465) (13,818)
Earnings/(losses) from real estate operations$ (322) $ (3,566)
-7-
Three Months Ending
September 30,
1994 1993
Real estate sales $ 6,439 $ 183
Costs of sales (6,571) (183)
Rental income 3,008 3,127
Direct cost of real
estate operations (3,933) (4,739)
Earnings/(losses) from real estate operations $ (1,057) $ (1,612)
3.Interest costs incurred and expensed for the
nine months and three months ended September 30,
1994 were $5,668 and $1,920, respectively.
Interest costs incurred and expensed for the nine
months and three months ended September 30, 1993
were $5,730 and $1,921, respectively.
4.Effective January 1, 1994, the company adopted
Statement of Financial Accounting Standards (SFAS)
No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Under SFAS No. 115,
debt and equity securities not classified as either
held-to-maturity securities or trading securities
are classified as available-for-sale securities and
reported at fair value, with unrealized gains and
losses excluded from earnings and reported as a
separate component of Stockholders' equity.
During the first nine months of 1994, the company
charged $191 of unrealized losses to Stockholders'
equity.
5.Effective January 1, 1994, the company adopted
Statement of Financial Accounting Standards (SFAS)
No. 112 "Employers Accounting for Postemployment
Benefits." Under SFAS No. 112 an accrual must be
made for all types of postemployment benefits
provided to former or inactive employees, their
beneficiaries and covered dependents after
employment, but before retirement. The impact of
the adoption of SFAS has not been material to the
consolidated financial statements.
-8-
Item 2. Management's Discussion & Analysis of
Financial Condition and Results of Operations
The Company reported net income for the nine
months ended September 30, 1994 of $3.0 million
compared to net income of $2.8 million for the
corresponding period of 1993, and reported net
income for the three months ended September 30, 1994
of $896 thousand compared with net income of $911
thousand for the same period of 1993. Pre-tax
income for the nine months ended September 30, 1994
was significantly lower than during the same period
of 1993, and the Company had a pre-tax loss for the
three months ended on September 30, 1994. However,
net income for the 1994 periods was almost the same
as for the 1993 periods because of excess tax
reserves which were taken into income in the three
months ended September 30, 1994.
Value of construction completed for the nine
months ended September 30, 1994 decreased by 6% from
the level recorded during the corresponding period
in 1993 to $1.9 billion. Because of this, earnings
from construction contracts decreased 20% from the
prior year level to $41.0 million. Construction
earnings for the nine and three month periods ended
September 30, 1994 were also affected by $5.2
million of losses resulting from re-evaluation of
construction contracts entered into by the Company
in Puerto Rico.
Losses from real estate operations for the nine
months ended September 30, 1994 decreased 91% to
$322,000 from the corresponding period in 1993.
This decrease is due primarily to a gain recorded on
the sale of lease rights of the Company's
Rickenbacker facility and the continued reduction in
operating costs due to the reduction of the
Company's real estate portfolio.
Operating and general and administrative
expenses during the nine months ended September 30,
1994, decreased overall by 9% from the corresponding
period of 1994 to $39.0 million due to the company's
continued overhead reduction program which was begun
in prior years. In addition, the company reduced
expenses by approximately $3.4 million from the same
period of the prior year as a result of a
restructuring program that was reserved for in 1993.
The cost charged to the restructuring reserve
consisted primarily of salary and benefit
continuation costs, out placement, and relocation
costs.
Other income for the six months ended September
30, 1994 amounted to a loss of $721,000 mostly due
to losses in overseas operations as a result of soft
market conditions.
The decline in value of construction completed
during the nine months ended September 30, 1994
compared with the same period of the prior year
reflects the effects of a virtual cessation of
commercial and multifamily residential construction
starts in the early part of the 1990's. However,
sales of new construction during the first nine
months of 1994 were 15% higher than during the same
period of 1993, reflecting both a shift in the
Company's emphasis from commercial and residential
construction to governmental and institutional
construction, and the beginning of a recovery in
commercial and multifamily residential construction.
-9-
At September 30, 1994, the company's backlog of
value of construction to be completed was $4.94
billion and anticipated earnings associated with
backlog from construction contracts was $101.2
million, compared to $4.66 billion and $91.8 million
respectively, as of December 31, 1993. Estimated
earnings from construction contracts cannot and
should not be used as the basis of predictions with
respect to future net income.
Because of the constantly changing proportion
of construction management contracts, consulting
work, construction contract types (cost plus
percentage fee, cost plus fixed fee, guaranteed
total and lump sum), and other factors, the
relationship of value of work completed and earnings
from construction contracts is not necessarily
meaningful in the short run.
The company's cash flow for the nine months ended
September 30, 1994 resulted in a net increase of
funds of $8.9 million. Cash flows used in operating
activities amounted to $17.8 million due primarily
to the slow down in collection of construction
receivables. Cash flows from investing activities
amounted to $12.9 million which is principally the
result of the sale of marketable securities and real
estate sales. Cash flows provided by financing
activities amounted to $13.8 million primarily due
to borrowings on existing credit facilities. The
company's management believes that the company's
financial condition and available credit facilities
at September 30, 1994 are sufficient to support the
present and prospective levels of the company's
operations.
-10-
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibit 11 - Computation of Earnings Per
Share for the nine months ended
September 30, 1994 and 1993.
(b) During the nine months ended September 30,
1994 no Form 8-K was required to be filed
reporting any material or unusual charges or
credits to income, or any change in
independent accountants.
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:
THE TURNER CORPORATION
(Registrant)
Date: November 14, 1994 H. J. Parmelee
(Signature)
H. J. Parmelee
President
Date: November 14, 1994 D.J. Smith
(Signature)
D.J. Smith
Senior Vice President
and
Chief Financial Officer
</TABLE>
THE TURNER CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
(Unaudited)
Nine Months Ended September 30,
1994 1993
PRIMARY
Weighted average common shares outstanding 5,103 5,066
Common stock equivalents (assuming the use
of the proceeds from their exercise or
issuance to acquire treasury stock using
the average quarterly market price) granted
under employee stock option and stock
purchase plans 87 118
Weighted average common and common equivalent
shares outstanding 5,190 5,184
Earnings available to common shareholders
less dividends on preferred stock, net of tax $1,580 $1,394
Earnings per common share $0.30 $0.27
FULLY DILUTED
Weighted average shares outstanding used
in the computation of primary
earnings per share 5,103 5,066
Common stock equivalents (assuming the use
of the proceeds from their exercise or
issuance to acquire treasury stock using
the quarter ended market price) granted
under employee stock option and stock
purchase plans 87 118
Conversion of convertible preferred stock
to common stock 849 849
Stock option equivalent shares - -
Weighted average common and common
equivalent shares outstanding 6,039 6,033
Earnings available for common shareholders less
preferred dividend differential $1,580 $1,394
Fully diluted earnings per common share:
Earnings per share $0.26 $0.23
