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 June 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 August 8,
1994: 5,132,752.
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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 June 30, 1994, the
consolidated statements of operations and retained
earnings and the consolidated statements of cash flows
for the six months ended June 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
JUNE 30, 1994
WITH COMPARATIVE FIGURES
FOR DECEMBER 31, 1993
(in thousands, except
share amounts)
<TABLE>
(unaudited) (unaudited
)
June 30, December June 30, December
31, 31,
Assets 1994 1993 Liabilities 1994 1993
Construction accounts payable
<S> <C> <C> <S> <C> <C>
Cash and cash equivalents $33,552 $25,485 Trade $239,468 $239,156
Marketable securities 4,296 13,046 Due on completion of 114,675 117,647
contracts
Accrued estimated work 65,098 78,495
completed
Construction receivables:
Due on contracts 342,753 315,741 Notes payable and 125,645 102,365
including retainage convertible debenture
Estimated unbilled
construction costs
and related earnings 68,525 83,135 Deferred income taxes 13,557 13,708
Real estate 114,993 117,275 Other liabilities 59,048 58,152
Property and equipment, 17,401 17,725 Total liabilities 617,491 609,523
net
Stockholders' Equity:
Prepaid pension cost 64,172 63,207 Series C, 8-1/2% cumulative
convertible
preferred stock, $1 par 9 9
value
Other assets 28,529 28,592 Series B, cumulative
convertible,
preferred stock, $1 par 849 849
value
Total assets $674,221 $664,206 Common stock, $1 par value 5,180 5,135
Paid in capital 37,617 37,280
Net unrealized loss on ( 151) -
marketable securities
Cumulative foreign ( 787) ( 787)
translation adjustment
Retained earnings 25,976 24,834
68,693 67,320
Less: Loan to Employee Stock 11,431 12,105
Ownership Plan
Treasury stock, 532 532
at cost
Total stockholders' equity 56,730 54,683
Total liabilities and $674,221 $664,206
stockholders' equity
See Notes to Consolidated
Financial Statements
</TABLE>
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THE TURNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS of OPERATIONS AND RETAINED EARNINGS
(in thousands, except share amounts)
(unaudited) (unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
1994 1993 1994 1993
Value of construction completed $1,269,019 $1,318,021 $676,629 $737,080
Earnings from construction $29,203 $32,648 $13,687 $15,988
contracts
Earnings/(loss) from real estate 735 (1,954) 1,522 (1,052)
operations
Gross earnings 29,938 30,694 15,209 14,936
Operating expenses - 18,932 19,323 9,574 9,337
construction
Operating expenses - real estate 1,462 1,466 638 684
& other
General & administrative 6,342 6,786 3,237 3,810
expenses
26,736 27,575 13,449 13,831
Other income (loss), net (429) (135) (109) 175
Income before income taxes 2,773 2,984 1,651 1,280
Provision for income taxes 717 1,129 654 371
Net income 2,056 1,855 997 909
Dividends on preferred stock (914) (927) (457) (462)
Net income available for common 1,142 928 540 447
stockholders
Retained earnings, beginning of 24,834 32,869 25,436 33,350
period
Less common dividends paid - - - -
Retained earnings, end of period $25,976 $33,797 $25,976 $33,797
Earnings per common share:
Primary $0.22 $0.18 $0.10 $0.09
Fully diluted $0.19 $0.16 $0.09 $0.08
Weighted average common and
common equivalent
shares outstanding
Primary 5,188,322 5,174,849 5,195,960 5,208,090
Fully diluted 6,037,278 6,027,903 6,044,916 6,061,144
See Notes to Consolidated
Financial Statements
-5-
The Turner Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands, except share amounts)
(Unaudited)
Six Months Ended June 30,
1994 1993
Cash flows from operating activities:
Net income $2,056 $1,855
Adjustments to reconcile net income
to net cash used in
operating activities:
Equity in affiliates' net loss 1,175 1,581
Depreciation and amortization 4,580 5,202
Net periodic pension credit (965) (5,146)
Loss on sale of marketable 79 -
securities
Provision (benefit) for deferred (151) 349
income taxes
Changes in operating assets and
liabilities:
Decrease in restructuring (2,017) -
reserve
Decrease (increase) in (12,402) 15,540
construction receivables
Decrease in construction (16,058) (14,259)
accounts payable
Decrease (increase) in other 1,223 (11,776)
assets and liabilities, net
Net cash used in operating (22,480) (6,654)
activities
Cash flows from investing activities:
Sale of marketable securities 8,565 -
Investment in joint ventures (650) (6,000)
Proceeds from sale of real estate, 682 14,638
net
Decrease (increase) in real estate (764) 414
Purchases of property and equipment (1,511) (2,548)
Proceeds from sale of property and 1,189 53
equipment
Net cash provided by investing 7,511 6,557
activities
Cash flows from financing activities:
Common stock issued 382 405
Cash dividends to preferred (1,300) (1,271)
stockholders
Repayments from loan to Employee 674 669
Stock Ownership Plan
Proceeds from borrowings 39,348 28,682
Payments on borrowings (16,068) (42,024)
Proceeds from issuance of treasury - 33
stock
Net cash provided by (used in) 23,036 (13,506)
financing activities
Net increase (decrease) in cash and cash 8,067 (13,603)
equivalents
Cash and cash equivalents at beginning of 25,485 38,305
period
Cash and cash equivalents at end of $33,552 $24,702
period
Noncash investing activities:
In 1994, the company recorded a net
unrealized loss on marketable
securities of $151.
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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:
Six Months Ending
June 30,
1994 1993
Revenue from construction contracts:
Construction costs incurred by the company $862,476 $898,285
Company's share of joint venture
construction costs 84,983 77,536
Earnings from construction contracts 29,203 32,648
Total revenue from construction contracts 976,662 1,008,469
Construction costs incurred by owners in
connection with work under construction
management and similar contracts 292,357 309,552
Value of construction completed $1,269,019 $1,318,021
Three Months Ending
June 30,
1994 1993
Revenue from construction contracts:
Construction costs incurred by the company $473,601 $508,837
Company's share of joint venture
construction costs 46,232 38,828
Earnings from construction contracts 13,687 15,988
Total revenue from construction contracts 533,520 563,653
Construction costs incurred by owners in
connection with work under construction
management and similar contracts 143,109 173,427
Value of construction completed $676,629 $737,080
2. Earnings/(losses) from real estate operations
consist of revenues and related costs as
follows:
Six Months Ending
June 30,
1994 1993
Real estate sales $ 3,009 $ 14,638
Costs of sales ( 832) (14,638)
Rental income 6,090 6,961
Direct cost of real
estate operations (7,532) (8,915)
Earnings/(losses) from real
estate operations $735 $ (1,954)
-7-
Three Months Ending
June 30,
1994 1993
Real estate sales $ 2,444 $ -0-
Costs of sales ( 267) -0-
Rental income 3,125 3,318
Direct cost of real
estate operations (3,780) (4,370)
Earnings/(losses) from real
estate operations $ 1,522 $ (1,052)
3. Interest costs incurred and expensed for the six
months and three months ended June 30, 1994 were
$3,748 and $1,913, respectively. Interest costs
incurred and expensed for the six months and three
months ended June 30, 1993 were $3,809 and $1,943,
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 six months of 1994, the company
charged $151 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
Results of operations in the six months ended June
30, 1994 produced net income of $2.1 million
compared to net income of $1.9 for the corresponding
period of 1993. This change in net income from the
prior year is discussed below.
Value of construction completed for the six
months ended June 30, 1994, decreased by 4% from the
level recorded during the corresponding period in
1993 to $1.27 billion. Earnings from construction
contracts decreased 11% from the prior year level to
$29.2 million.
Earnings from real estate operations for the
six months ended June 30, 1994 amounted to $735,000
which was due primarily to the sale of lease rights
at the company's Rickenbacker facility.
Operating and general and administrative
expenses during the six months ended June 30, 1994,
decreased overall by 3% from the corresponding
period of 1994 to $26.7 million due to the company's
continued overhead reduction program which was begun
in prior years. In addition, the company reduced
expenses by $600,000 from the same period last year
as a result of the restructuring program that was
reserved for in 1993. The reduction was reflected
in construction operations and in general and
administrative expense. The cost associated with
the restructuring actions taken in the first two
quarters were charged to the restructuring reserve
and consisted primarily of salary and benefit
continuation costs, outplacement, and relocation
costs.
Other income for the six months ended June 30,
1994 amounted to a loss of $429,000 mostly due to
losses in overseas operations as a result of soft
market conditions.
The construction industry in the United States
has continued to experience spotty economic
recovery. Additionally, the present soft economic
conditions in Western Europe have reduced
opportunities in that area for the company's Turner
Steiner venture. To moderate the impact of these
developments, the company is successfully increasing
its overall market share by acquiring increased new
business in construction sectors less affected by
the cyclical economic decline. The company is also
continuing its efforts to reduce expenses in all
phases of its operations.
-9-
At June 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 $100.1
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 six months ended
June 30, 1994 resulted in a net increase of funds of
$8.1 million. Cash flows used in operating
activities amounted to $22.5 million due primarily
to the payment of trade payables. Cash flows from
investing activities amounted to $7.5 million which
is principally the result of the sale of marketable
securities. Cash flows provided by financing
activities amounted to $23.0 million primarily due
to increased borrowings on existing credit
facilities. The company's management believes that
the company's financial condition and available
credit facilities at June 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 six months ended
June 30, 1994 and 1993.
(b) During the six months ended June 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: August 12, 1994 H. J. Parmelee
(Signature)
H. J. Parmelee
President
Date: August 12, 1994 D.J. Smith
(Signature)
D.J. Smith
Senior Vice President
and
Chief Financial Officer
THE TURNER CORPORATION
AND ITS SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
"(in thousands, except per share amounts)"
<TABLE>
June 30,
<S> 1994 1993
PRIMARY <C> <C>
Weighted average common shares outstanding 5,108 5,051
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 80 124
Weighted average common and common equivalent
shares outstanding 5,188 5,175
Earnings available to common shareholders less dividends
on preferred stock, net of tax $1,142 $928
Earnings per common share $0.22 $0.18
FULLY DILUTED
Weighted average shares outstanding used in the
computation of primary earnings per share 5,108 5,051
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 80 60
Conversion of convertible preferred stock to common stock 849 849
Stock option equivalent shares - 68
Weighted average common and common equivalent
shares outstanding 6,037 6,028
Earnings available for common shareholders less
preferred dividend differential $1,142 $940
Earnings per share $0.19 $0.16
</TABLE>
