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, 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 August 9, 1996:
5,242,412.
-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 June 30, 1996, the
consolidated statements of operations and retained
earnings and the consolidated statements of cash flows for
the six months ended June 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)
June 30, December 31,
1996 1995
Assets:
Cash and cash equivalents $56,847 $ 87,969
Marketable securities 4,838 4,838
Construction receivables:
Due on contracts including 473,567 404,098
retainage
Estimated unbilled construction 109,008 94,186
costs and related earnings
Real estate 89,772 90,939
Property and equipment, net 21,548 22,161
Prepaid pension cost 64,094 63,444
Other assets 28,821 25,296
Total assets $848,495 $792,931
Liabilities:
Construction accounts payable:
Trade $350,797 $318,908
Due on completion of contracts 146,927 134,954
Accrued estimated work completed 103,558 89,476
Notes payable and convertible 93,377 94,790
debenture
Deferred income taxes 11,837 12,257
Other liabilities 81,299 81,250
Total liabilities 787,795 731,635
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 (155) (58)
securities
Retained earnings 24,749 26,102
69,175 70,477
Less: Loan to Employee stock (8,016) (8,673)
ownership plan
Treasury stock, at cost (459) (508)
Total stockholders' equity 60,700 61,296
Total liabilities and stockholders' $848,495 $792,931
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)
Six Months Ended Three Months Ended
June 30 June 30,
1996 1995 1996 1995
Value of construction completed $1,536,353 $1,528,670 $802,978 $819,842
(Note 1)
Revenue from construction $1,301,692 $1,294,646 $708,141 $685,151
contracts
Cost of construction contracts
1,270,681 1,260,074 694,942 666,977
Earnings from construction
contracts 31,011 34,572 13,199 18,174
Construction operating expenses 24,645 20,909 12,383 11,185
General & administrative expenses 3,745 5,547 1,893 2,967
Income (loss) from construction 2,621 8,116 (1,077) 4,022
operations
Income (loss) from real estate (257) (98) (99) 129
operations (Note 2)
Interest expense (3,967) (4,612) (1,992) (2,266)
Other income 805 516 396 311
Income (loss) before income (798) 3,922 (2,772) 2,196
taxes
Income tax provision (benefit) (359) 1,765 (1,247) 1,045
Net income (loss) (439) 2,157 (1,525) 1,151
Dividends on preferred stock (914) (914) (457) (457)
Net income (loss) available for (1,353) 1,243 (1,982) 694
common shareholders
Retained earnings, beginning of 26,102 26,656 26,731 27,205
period
Retained earnings, end of $24,749 $27,899 $24,749 $27,899
period
Net income (loss) per common
share:
Primary ($0.25) $0.24 ($0.37) $0.13
Fully diluted (a) $0.20 (a) $0.11
Weighted average common and
common equivalent shares outstanding
Primary 5,311,250 5,270,936 5,333,668 5,277,510
Fully diluted (a) 6,119,496 (a) 6,126,070
(a) Antidilutive
See Notes to Consolidated Financial Statements
-5-
THE TURNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
June 30,
1996 1995
Cash flows from operating activities:
Net income (loss) (439) 2,157
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 6,098 3,929
Net periodic pension (credit) charge (650) 401
Changes in operating assets and liabilities:
Increase in construction receivables (84,291) (33,597)
Increase in construction payables 57,944 10,016
Decrease in restructuring reserve - (711)
Increase in other assets (5,172) (1,793)
Increase in other liabilities 32 26,568
Net cash (used in) provided by operating
activities (26,478) 6,970
Cash flows from investing activities:
Purchases of marketable securities (140) (131)
Distributions from joint ventures 845 3,407
Proceeds from sale of real estate, net 54 2,406
Increase in real estate (1,600) (1,249)
Purchases of property & equipment (3,229) (2,279)
Proceeds from sale of property & equipment 150 154
Repayments on notes receivable 1,134 1,301
Net cash (used in) provided by investing
activities (2,786) 3,609
Cash flows from financing activities:
Common stock issued 148 488
Cash dividends to preferred shareholders (1,299) (1,299)
Repayments from loan to Employee Stock Ownership
Plan 657 573
Principal payments under capital lease obligations (1,469) -
Proceeds from issuance of treasury stock 49 -
Proceeds from borrowing 5,407 22,325
Payments on borrowing (5,351) (30,021)
Net cash used in financing activities (1,858) (7,934)
Net (decrease) increase in cash and cash equivalents (31,122) 2,645
Cash and cash equivalents at beginning of period 87,969 56,250
Cash and cash equivalents at end of period 56,847 58,895
Noncash investing activities:
Net unrealized (loss) gain on marketable securities (103) 134
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:
Six Months Ended June 30,
1996 1995
Revenue from construction contracts 1,301,692 1,294,646
Construction costs incurred by owners in
connection with work under construction
management and similar contracts 234,661 234,024
Value of construction completed 1,536,353 1,528,670
Three Months Ended June 30,
1996 1995
Revenue from construction contracts 708,141 685,151
Construction costs incurred by owners in
connection with work under construction
management and similar contracts 94,837 134,691
Value of construction completed 802,978 819,842
2.Income (loss) from real estate operations
consist of revenues and related costs
as follows:
Six Months Ended June 30,
1996 1995
Real estate sales 54 2,496
Costs of sales (54) (2,215)
Rental & other income 4,055 4,646
Cost of operations (2,361) (3,016)
Depreciation and amortization expense (1,951) (2,009)
Losses from real estate operations (257) (98)
Three Months Ended June 30,
1996 1995
Real estate sales - 2,321
Costs of sales - (2,040)
Rental & other income 2,068 2,177
Cost of operations (1,170) (1,380)
Depreciation and amortization expense (997) (949)
Income (loss) from real estate operations (99) 129
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 six months ended June 30,
1996 produced a net loss of $439,000 compared to net
income of $2.2 million from the corresponding period of
1995. The results of the quarter include the impact of a
$5 million reserve relating to a construction project in
Minneapolis.
Value of construction completed for the six months ended
June 30, 1996 increased 1% to $1.54 billion from the level
recorded during the corresponding period in 1995.
Earnings from construction contracts decreased 10% from
the prior year level to $31 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 six months
ended June 30, 1996 increased $159,000 to $257,000 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 six months ended June 30, 1996 increased 7% to $28.4
million from the corresponding period of 1995, primarily
due to the increase in construction activity.
Interest expense for the first six months of 1996
decreased 14% to $3.97 million from the corresponding
period in 1995 due to lower debt levels.
Other income for the six months ended June 30, 1996
increased 56% to $805,000 from the corresponding period of
1995. This is primarily due to increased interest income
attributable to higher investment balances maintained by
the Company.
At June 30, 1996, the company's backlog of value of
construction to be completed was $4.22 billion and
anticipated earnings associated with backlog from
construction contracts was $98.6 million, compared to
$3.99 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 six months ended June 30,
1996 resulted in a net decrease of funds of $31.1 million.
Cash flows used in operating activities amounted to $26.5
million due primarily to the payment of accrued
liabilities and other payables. Cash flows used in
investing activities amounted to $2.8 million which is
principally due to purchases of property and equipment.
Cash flows used in financing activities amounted to $1.9
million primarily due to principal payments under capital
lease obligations. The company's management believes that
the company's financial condition and available credit
facilities at June 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 six months ended June 30, 1996 and 1995.
(b)During the six months ended June 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: August 13, 1996
(Signature)
H.J. Parmelee
President
Date: August 13, 1996
(Signature)
D.J. Smith
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)
Six Months Ended
June 30,
1996 1995
PRIMARY
Weighted average common shares outstanding 5,234 5,174
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 77 97
Weighted average common and common equivalent shares
outstanding 5,311 5,271
Earnings (loss) available to common shareholders less
dividends on preferred stock, net of tax ($1,353) $1,243
Primary earnings (loss) per common share ($0.25) $0.24
FULLY DILUTED
Weighted average shares outstanding used in the
computation of primary earnings (loss) per share 5,234 5,174
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 77 97
Conversion of convertible preferred stock to common
stock 848 849
Stock option equivalent shares 54 -
Weighted average common and common equivalent shares
outstanding 6,213 6,120
Earnings (loss) available for common shareholders less
preferred dividend differential, net of tax ($1,353) $1,243
Fully diluted earnings (loss) per common share (0.22) $0.20
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The schedule contains certain summary financial information extracted from the
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The schedule contains certain summary financial information extracted from the
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