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, 1996 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 11, 1996:
5,245,312.
-2-
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, 1996,
the consolidated statements of operations and retained
earnings and the consolidated statements of cash flows for
the nine months ended September 30, 1996 and 1995 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.
-3-
THE TURNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
September 30, December 31,
1996 1995
Assets:
Cash and cash equivalents $68,630 $87,969
Marketable securities 4,938 4,838
Construction receivables:
Due on contracts including 498,682 404,098
retainage
Estimated unbilled construction 124,999 94,186
costs and related earnings
Real estate 89,024 90,939
Property and equipment, net 21,092 22,161
Prepaid pension cost 64,419 63,444
Other assets 23,140 25,296
Total assets $894,924 $792,931
Liabilities:
Construction accounts payable:
Trade $384,712 $318,908
Due on completion of contracts 154,341 134,954
Accrued estimated work 118,749 89,476
completed
Notes payable and convertible 90,332 94,790
debenture
Deferred income taxes 11,652 12,257
Other liabilities 73,438 81,250
Total liabilities 833,224 731,635
Stockholders' Equity:
Series C, 8-1/2% cumulative convertible
preferred stock, $1 par value 9 9
Series B, cumulative convertible,
preferred stock, $1 par value 848 849
Common stock, $1 par value 5,288 5,270
Paid in capital 38,436 38,305
Net unrealized loss on marketable
securities (134) (58)
Retained earnings 24,667 26,102
69,114 70,477
Less: Loan to Employee stock ownership
plan (6,955) (8,673)
Treasury stock, at cost (459) (508)
Total stockholders' equity 61,700 61,296
Total liabilities and stockholders'
equity $894,924 $792,931
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 Months Ended Three Months Ended
September 30, September 30,
1996 1995 1996 1995
Value of construction completed
(Note 1) $2,448,486 $2,418,648 $912,133 $889,978
Revenue from construction
contracts $2,058,370 $2,035,310 $756,678 $749,664
Cost of construction contracts 2,006,158 1,981,719 735,477 721,645
Earnings from construction
contracts 52,212 53,591 21,201 19,019
Construction operating expenses 39,719 33,532 15,074 12,623
General & administrative expenses 7,619 7,671 3,874 2,124
Income from construction operations 4,874 12,388 2,253 4,272
Losses from real estate
operations (Note 2) (281) (99) (24) (1)
Interest expense (5,932) (6,731) (1,965) (2,119)
Other income 1,217 823 412 307
Income (loss) before income taxes (122) 6,381 676 2,459
Income tax provision (benefit) (58) 3,063 301 1,298
Net income (loss) (64) 3,318 375 1,161
Dividends on preferred stock (1,371) (1,371) (457) (457)
Net income (loss) available for
common shareholders (1,435) 1,947 (82) 704
Retained earnings, beginning of
period 26,102 26,656 24,749 27,899
Retained earnings, end of period $24,667 $28,603 $24,667 $28,603
Net income (loss) per common
share:
Primary ($0.27) $0.37 ($0.02) $0.13
Fully diluted (a) $0.32 (a) $0.11
Weighted average common and
common equivalent shares outstanding:
Primary 5,335,015 5,290,116 5,355,357 5,305,340
Fully diluted (a) 6,138,676 (a) 6,153,900
(a) Antidilutive
See Notes to Consolidated Financial Statements
-5-
THE TURNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities:
Net income (loss) (64) 3,318
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 9,375 6,569
Net periodic pension (credit) charge (975) 559
Changes in operating assets and liabilities:
Increase in construction receivables (125,397) (77,138)
Increase in construction payables 114,464 59,166
Decrease in restructuring reserve - (752)
Decrease (Increase) in other assets 120 (3,224)
(Decrease) Increase in other liabilities (7,830) 21,075
Net cash (used in) provided by operating
activities (10,307) 9,573
Cash flows from investing activities:
Purchases of marketable securities (211) (199)
Distributions from joint ventures 890 4,588
Proceeds from sale of real estate, net 54 3,339
Increase in real estate (1,877) (1,468)
Purchases of property & equipment (4,804) (3,406)
Proceeds from sale of property & equipment 207 52
Repayments on notes receivable 1,200 3,086
Net cash (used in) provided by investing
activities (4,541) 5,992
Cash flows from financing activities:
Common stock issued 148 567
Cash dividends to preferred shareholders (1,948) (1,949)
Repayments from loan to Employee Stock
Ownership Plan 1,718 1,474
Principal payments under capital lease
obligations (2,234) -
Proceeds from issuance of treasury stock 49 -
Proceeds from borrowings 5,507 24,001
Payments on borrowings (7,731) (35,660)
Net cash used in financing activities (4,491) (11,567)
Net (decrease) increase in cash and cash
equivalents (19,339) 3,998
Cash and cash equivalents at beginning of period 87,969 56,250
Cash and cash equivalents at end of period 68,630 60,248
Noncash investing activities:
Net unrealized (loss) gain on marketable
securities (82) 147
See Notes to Consolidated Financial Statements
-6-
THE TURNER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
1. Value of construction completed represents
construction costs incurred and earnings
during the period as follows:
Nine Months Ended
September 30,
1996 1995
Revenue from construction contracts 2,058,370 2,035,310
Construction costs incurred by owners in
connection with work under construction
management and similar contracts 390,116 383,338
Value of construction completed 2,448,486 2,418,648
Three Months Ended
September 30,
1996 1995
Revenue from construction contracts 756,678 740,664
Construction costs incurred by owners in
connection with work under construction
management and similar contracts 155,455 149,314
Value of construction completed 912,133 889,978
2. Losses from real estate operations consist
of revenues and related costs as follows:
Nine Months Ended
September 30,
1996 1995
Real estate sales 54 3,504
Costs of sales (54) (3,223)
Rental & other income 6,257 6,821
Cost of operations (3,588) (4,237)
Depreciation and amortization expense (2,950) (2,964)
Losses from real estate operations (281) (99)
Three Months Ended
September 30,
1996 1995
Real estate sales - 1,008
Costs of sales - (1,008)
Rental & other income 2,202 2,175
Cost of operations (1,227) (1,221)
Depreciation and amortization expense (999) (955)
Losses from real estate operations (24) (1)
3.Effective January 1, 1996,the Company adopted Statement of Financial
Accounting Standards (SFAS)No. 121"Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of".
This Statement requires that long-lived assets to be held and used by
an entity be recognized as impaired whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable, and when impaired to record an impairment
loss to state the asset at its fair value. In addition, the
Statement requires that long-lived assets to be disposed of be reported
at the lower of carrying amount or fair value less cost to sell.
SFAS No. 121 is required to be applied prospectively for assets to
be held and used, and as a cumulative effect of a
change in accounting principle upon initial application
for assets to be disposed of. The impact of the
adoption of SFAS No. 121 was not material to the
Consolidated Financial Statements.
-7-
Item 2. Management's Discussion & Analysis of Financial
Condition and Results of Operations
Results of operations for the nine months ended September
30, 1996 produced a net loss of $64,000 compared to net
income of $3.3 million from the corresponding period of
1995. The results include the impact of a $5 million
pretax reserve relating to a construction project in
Minneapolis.
Value of construction completed for the nine months ended
September 30, 1996 increased 1.2% to $2.4 billion from the
level recorded during the corresponding period in 1995.
Earnings from construction contracts decreased 2.6% from
the prior year level to $52.2 million. The decrease in
earnings is attributable to the reserve taken on the
Minneapolis project and reflects management's downward
revision of probable recoveries of claims which are
subject to dispute by the customer.
Losses from real estate operations for the nine months
ended September 30, 1996 increased $182,000 to $281,000
from the corresponding period in 1995. This increase is
primarily the result of income from real estate sales in
1995 which did not recur in 1996.
Operating and general and administrative expenses during
the nine months ended September 30, 1996 increased 14.9%
to $47.3 million from the corresponding period of 1995.
This increase is primarily due to changes in levels of
construction activities and $1.5 million of expenses
associated with third quarter managment changes.
Interest expense for the first nine months of 1996
decreased 11.9% to $5.9 million from the corresponding
period in 1995 due to lower debt levels.
Other income for the nine months ended September 30, 1996
increased 47.9% to $1.2 million from the corresponding
period of 1995. This is primarily due to increased
interest income attributable to higher investment balances
maintained by the Company.
At September 30, 1996, the company's backlog of value of
construction to be completed was $4.2 billion and
anticipated earnings associated with backlog from
construction contracts was $100.9 million, compared to
$4.0 billion and $92.1 million at December 31, 1995.
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, 1996 resulted in a net decrease of funds of
$19.3 million. Cash flows used in operating activities
amounted to $10.3 million due primarily to the payment of
accrued liabilities and other payables. Cash flows used
in investing activities amounted to $4.5 million which is
principally due to purchases of property and equipment.
Cash flows used in financing activities amounted to $4.5
million primarily due to principal payments under capital
lease obligations and the company's loan related to its
Employee Stock Ownership Plan. The company's management
believes that the company's financial condition and
available credit facilities at September 30, 1996 are
sufficient to support the present and prospective levels
of the company's operations.
-8-
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, 1996 and 1995.
(b)During the nine months ended September 30, 1996 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 12, 1996 /s/ H. J. Parmelee
(Signature)
H.J. Parmelee
President
Date: November 12, 1996 /s/ D. G. Sleeman
(Signature)
D.G. Sleeman
Senior Vice President and
Chief Financial Officer
Exhibit 11
THE TURNER CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
"(in thousands, except per share amounts)"
(unaudited)
Nine Months Ended
September 30,
1996 1995
PRIMARY
Weighted average common shares outstanding 5,237 5,186
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 98 104
Weighted average common and common equivalent
shares outstanding 5,335 5,290
Earnings (loss) available to common
shareholders less dividends on preferred stock,
net of tax ($1,435) $1,947
Primary earnings (loss) per common share ($0.27) $0.37
FULLY DILUTED
Weighted average shares outstanding used in
the computation of primary earnings (loss)
per common share 5,237 5,186
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 plan 98 104
Conversion of convertible preferred stock
to common stock 848 849
Stock option equivalent shares 22 -
Weighted average common and common equivalent
shares outstanding 6,205 6,139
Earnings (loss) available for common
shareholders less preferred dividend
differential, net of tax ($1,435) $1,947
Fully diluted earnings (loss) per common
share ($0.23) $0.32
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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