Page 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______ to_______
Commission File No. 1-8719
THE TURNER CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3209884
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
375 Hudson Street, New York, New York 10014
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 229-6000
Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange
Title of Class on which registered
Common Stock, $1 Par Value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:None
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 (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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
As of March 25, 1996, the aggregate market value on that date of the
common stock held by non-affiliates (based upon the last sale price for the
common stock on the American Stock Exchange) was $42,800,075.
As of March 25, 1996, 5,230,412 shares of the registrant's common stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of definitive proxy statement to be filed pursuant to Section
14(a) of the Securities Exchange Act of 1934 - Part III, Items 10-13.
PART I
Item 1. Business.
The Turner Corporation (the "Company") is a holding company that
is predominantly engaged together with its subsidiaries in general building
construction and construction management in the United States and abroad,
and also has limited real estate operations in the United States. The
Turner Corporation establishes general policy direction, coordination and
planning, and provides cash management, internal accounting control and
other management services for its operating subsidiaries.
As the various segments of the United States non-residential
construction market continue to shift, the Company responds to and
positions itself to take advantage of the stronger market segments. During
the last several years, the Company's construction subsidiaries increased
their focus on manufacturing, education, research and development,
healthcare, retail, public, justice and amusement (i.e., hospital, university,
aviation, aquariums, arenas and similar) projects. Approximately 72% in
dollar value of the contracts awarded to the construction subsidiaries in 1995
were in these areas. The remaining 28% of the contracts awarded were in the
Company's traditional commercial markets.
During 1993, plans were developed to significantly reduce the Company's
future operating costs and expenses and to improve productivity. This
restructuring program principally involved a reduction in the number of
staff, plus the consolidation of offices and facilities and the
reorganization of support functions. This program was implemented and
substantially completed in 1994, and its final phase was completed in
1995.
During the early 1980's, the Company acquired and developed a number of
real estate properties. In 1987, the Company decided to cease its new
development activities. Since that time, the Company's real estate
portfolio has been reduced from $200 million at the end of 1987 to $91
million at the end of 1995. The remainder of the real estate portfolio,
which is owned either directly or through joint venture interests,
includes commercial office properties, a mixed-use warehouse/service property,
residential properties, undeveloped land and certain buildings and hangars
located at an air industrial park.
During 1995, the Company sold one developed property with an adjacent
land parcel and a number of condominium units, all at their approximate
carrying value. While the Company continues to seek purchasers for its real
estate properties, it is unlikely it will be able to dispose of its
properties in their entirety until there are more stable market conditions in
the areas in which the Company's properties are located.
Financial information about the registrant's operations in its
construction and real estate segments appear in the Consolidated
Financial Statements and in footnote 15 on page 36 in Part II, Item 8 of
this report.
At December 31, 1995, The Turner Corporation and subsidiaries employed
approximately 2,600 staff employees, of which 1,500 held supervisory
positions and 1,100 held non-supervisory positions.
Construction Business
The Turner Corporation's construction business is conducted by a number
of construction subsidiaries (together, "Turner Construction"). Turner
Construction is engaged primarily in the construction of commercial and
multi-family residential buildings, manufacturing and research facilities,
hospitals, correctional facilities, stadiums and other entertainment
facilities, airports and other structures. It also has a division
which does interior work, such as building-out office space. Turner
Construction normally does not build roads, dams, or similar
infrastructure elements. Turner Construction primarily acts as a general
building contractor or as a construction manager. However, Turner Construction
also sometimes acts as a consultant to owners and others.
Although Turner Construction is a nationwide (and to a lesser extent,
worldwide) construction firm, Turner Construction attempts to compete
locally in major cities of the United States through essentially 28
self-contained regional offices and 12 partially self-contained branch
offices. Its objective is to be a major builder in each city or region in
which it has an office.
The Turner Corporation's principal construction subsidiary is Turner
Construction Company. Universal Construction Company, Inc., The Lathrop
Company Inc., and Turner Caribe Inc., wholly-owned subsidiary companies of
The Turner Corporation or Turner Construction Company, are also engaged in
construction activities in the United States principally in the Southeast,
Midwest and the Caribbean Islands.
When it acts as a general building contractor, Turner Construction
normally undertakes to construct a project and is paid the entire price for
the completed project. Most aspects of the construction, however, are
performed by subcontractors who are paid by Turner Construction. The functions
actually performed by Turner Construction are the planning and scheduling of
a construction project, the procurement of materials, the marshaling of the
manpower required for the project, the awarding of subcontracts and the
direction and management of the construction operation. During 1995, 1994
and 1993, general building contracting activities represented 83%, 81% and 75%,
respectively, of Turner Construction's value of work completed.
Turner Construction makes extensive use of specialty contractors
(such as structural steel contractors, electrical contractors and plumbing
contractors) as subcontractors in the performance of its construction
contracts. The extent to which work is performed by workmen on its own
payroll varies with the location of a particular project and is largely
dependent on the availability of experienced subcontractors in a particular
area. Work performed by Turner Construction is generally limited to temporary
facilities, foundation, concrete, masonry and carpentry work.
In its performance of construction management services, Turner Construction,
for a fee, monitors and coordinates the progress of the work done by
specialty contractors who are employed directly by the owner to build the
project. During 1995, 1994 and 1993, management construction services and
consulting represented 17%, 19% and 25%, respectively, of Turner Construction's
value of work completed. Construction management contracts involve less risk
than do projects in which Turner Construction is a general building contractor.
However, the profit from construction management contracts can be
substantially less than that which Turner Construction can earn when it acts
as a general building contractor.
Construction contracts include lump sum or fixed price contracts, cost-plus
fixed fee contracts and variations thereof including cost-plus guaranteed
total contracts. The majority of Turner Construction's business involves
negotiated contracts. The remainder of its contracts are secured by competitive
bidding.
The Company is a partner with Karl Steiner Holding AG ("Steiner") of
Switzerland in a joint venture by the name of Turner Steiner International SA,
which renders general building construction and construction consulting
services outside Turner Construction's and Steiner's respective home markets.
In South America, Turner Construction Company is a partner with Birmann SA
of Brazil in a joint venture by the name of Turner Birmann Construction
Management Do Brazil SA. The purpose of the joint venture is to provide
construction management and consulting services to clients in Brazil and
other South American markets.
The Company is also a partner with EMCON in a joint venture by the name of
ET Environmental Corporation which provides environmental engineering, general
building construction, and construction management services on environmental
projects throughout the United States.
The Company was involved in a number of major projects in 1995 including
the home of the new National Football League team, the Carolina Panthers, in
Charlotte North Carolina, the new Tennis Center for the United States Tennis
Association in New York City, major amusement attractions for Universal
Studios in Orlando, Florida and the Disney Institute in Florida. In
Cleveland, the Company completed the Rock & Roll Hall of Fame and Museum, and
in San Francisco, the Company is involved in several specialized seismic
upgrades to existing building including City Hall and the Civic Auditorium.
In total, the Company completed approximately 24 million square feet of
construction in 1995.
The United States building construction industry is intensely
competitive and Turner Construction Company and the other domestic construction
subsidiaries compete with other major contractors as well as with small
contractors. Competition in the industry takes on a number of forms, including
fee levels, quality of service and degree of risk assumption. Construction
companies can expand their operations rapidly and each large population center
generally has a number of medium-sized building contractors accustomed to
undertaking all but the largest and most complicated projects. Through
its organizational structure of permanently established decentralized branch
offices and subsidiaries, Turner Construction competes directly with those
locally based contractors. Year-to-year operations may be adversely affected
by general economic conditions which are unfavorable for business and industry.
Exact statistical data is not available for determining the relative size of
construction companies, however, based on the contract value of construction
contracts secured in 1995 and published industry data, Turner Construction
believes that it is one of the largest building contractors operating
principally within the United States.
A portion of the Company's construction activity is performed under payment
and performance bonds obtained through bonding capacity from its sureties.
Projects requiring surety bonds are usually either publicly funded or private
projects, which often require FHA-type mortgage insurance. While the Company's
sureties limit the amount of new payment and performance bonds available, this
limitation has not restricted the Company's ability to secure new work. There
could be certain circumstances, however, when this limitation could influence
the Company's selection of prospective projects to pursue.
At December 31,1995, the anticipated earnings associated with backlog
from work to be completed under construction, construction management and
construction consulting contracts and awards believed to be firm but not yet
confirmed by signed formal contracts was $92.1 million. The anticipated
earnings from work to be completed on contracts and awards at December 31,
1994 was $92.6 million. Approximately 40% of the December 31,1995 earnings
backlog from construction contracts relates to work expected to be performed
during 1997 and beyond. The backlog is important to long-range planning and
continuity of work for the Company's permanent staff. However, anticipated
earnings from construction contracts should not be used as the basis of
predictions with respect to future operating results.
The anticipated value of work associated with backlog from work to be
completed under construction, construction management and construction
consulting contracts and awards believed to be firm but not yet confirmed
by signed formal contracts was $3.99 billion at December 31, 1995.
The anticipated value of work to be completed on contracts and awards at
December 31, 1994 was $4.55 billion. Approximately 37% of the December 31,1995
construction backlog is expected to be completed during 1997 and beyond.
Value of construction completed represents the cost of work put in place
and materials fabricated during the year and related earnings pursuant to
construction and construction management contracts, together with fees and
reimbursed expenses from consulting contracts. It also includes costs directly
incurred by owners in connection with work under construction management and
similar contracts. It is essentially a measure of construction activity during
the year.
Because of the varying proportion of construction, construction management
and construction consulting work, the impact of inflation on the value of
construction completed, changes in anticipated earnings from construction
contracts and anticipated value of work completed will not necessarily be
correlative.
At December 31,1995, Turner Construction employed approximately 2,500 staff
employees,of whom about 1,400 were executives, project managers,
superintendents, engineers, purchasing agents, estimators, senior accountants
and other supervisory personnel. In addition, Turner Construction employs
foremen and building craftsmen for construction work which has not been
subcontracted to specialty contractors. During 1995, approximately 2,200
foremen and building craftsmen were employed at various times.
Real Estate
The Company's subsidiaries involved in real estate operations are
Rickenbacker Holdings, Inc. ("RHI"),and Turner Development Corporation and
subsidiaries ("TDC"). The Company also has certain other real estate holdings,
either directly or through joint venture interests, which are currently being
marketed. These holdings relate to residential condominium developments in
Boston and Puerto Rico.
From 1980 to 1987, TDC engaged in real estate development in the United States,
principally in Florida, Georgia, Illinois, Michigan and Virginia. TDC
developed and marketed office buildings and other commercial and residential
properties, principally in metropolitan suburban areas. These projects were
financed principally by construction and mortgage loans.
TDC essentially ceased new development activity in 1987 and is now seeking
purchasers for its real estate properties.
In connection with sales of projects, TDC may be required to guarantee levels
of occupancy and rentals for limited periods.
Turner Medical Building Services ("TMBS") is engaged in project consulting
and development services for ancillary medical and other health care facilities.
Its principal clients are hospitals, physician group practice clinics, nursing
home and life care sponsors. TMBS provides management of architectural and
construction services. TMBS subcontracts the design and construction of its
projects.
At December 31, 1995, TDC had 3 employees, who were management and
marketing personnel.
RHI owns and leases an air cargo distribution facility located at the
Rickenbacker Air Industrial Park in Columbus, Ohio. In 1994, the Company
sold its master lease and development rights to the 1600 acre air
industrial park adjacent to the distribution facility. In addition,
in 1995 the Company renegotiated a lease with the existing lessee extending
the maturity date from 1996 to 2010.
Item 2. Properties.
The Company's executive offices and offices
of subsidiary companies are located in leased
facilities in commercial office buildings, except
for Universal Construction Company, Inc., which
owns a small office building in which its offices
are located. The Company's corporate headquarters
and New York branch office occupy 100,000 square
feet of space which is leased until 2005. Rental
expense for this space during 1995 was $2.09
million. Each construction project has temporary
field offices.
Turner Construction operates two equipment
and storage yards, located in Newark, New Jersey
and Cincinnati, Ohio for the storage and repair of
its construction tools and equipment. Turner
Construction owns the Ohio storage and repair yard
and leases the New Jersey facility. Universal
Construction Company, Inc., owns a yard, while The
Lathrop Company, Inc., leases yards for the
storage and repair of construction equipment.
Turner Construction leases major construction
equipment such as hoists, cranes and personnel
lifts from equipment suppliers for use on
particular projects and generally owns only small
tools and other miscellaneous equipment; Universal
Construction Company, Inc., and The Lathrop
Company, Inc. each own construction equipment,
earth-moving equipment and small tools.
TDC holds as an investment a wholly-owned
apartment complex which it had previously
developed, located in Orlando, Florida (200
units). This property is encumbered by a mortgage
note payable.
RHI owns certain buildings and air cargo
handling equipment at the Rickenbacker Air
Industrial Park in Columbus, Ohio, which
collateralize related revenue bonds.
Item 3. Legal Proceedings.
Since 1990, the Company and a joint venture
including Prudential Insurance Company of America,
had been engaged in a litigation in the Circuit
Court of Cook County, Illinois in which the
Company was seeking an unpaid portion of the cost
of constructing the Prudential Plaza 2 Tower in
Chicago and Prudential was seeking damages for
alleged construction delays. The case was tried
in 1995. The jury found in favor of the Company
and the Company received the amount of its
receivable in the judgment.
The Company is a defendant in various
litigation incident to its business. In some
instances the amounts sought are very substantial,
including some which are proceeding to trial
involving substantial claims and counterclaims.
Although the outcome of litigation cannot be
predicted with certainty, in the opinion of
management based on the facts known at this time,
the resolution of such litigation is not
anticipated to have a material adverse effect on
the financial position or results of operations of
the Company.
Because of the risk associated with the
industry and the number of disputes that often
occur, each year the Company incurs substantial
legal expenses in pursuit of its claims or in
defense against actions taken against it.
Item 4. Submission of Matters to a Vote of
Security Holders.
None
PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder Matters.
The Turner Corporation common stock is listed
on the American Stock Exchange under the
symbol TUR.
Quarterly Stock Information
1995 High Low Close
First $9.375 $7.75 $8.00
Second 11.875 7.875 10.00
Third 10.875 9.625 10.00
Fourth 10.125 7.75 8.375
1994 High Low Close
First $9.50 $7.375 $8.375
Second 9.00 8.00 8.375
Third 9.625 8.375 8.75
Fourth 8.875 7.25 8.25
No dividends were declared or paid in 1995 or
1994. As of March 25, 1996, there were
approximately 3,370 record holders of the
registrant's common stock.
Item 6. Selected Financial Data
The Turner Corporation and Subsidiaries
Five-year Summary of Financial Information
(in thousands, except share amounts)
1995 1994 1993 1992 1991
Value of construction $3,281,495 $2,670,433 $2,790,371 $2,644,122 $2,672,475
completed
Revenue from $2,727,001 $2,174,836 $2,098,247 $2,200,475 $2,379,092
construction
contracts
Cost of construction 2,658,462 2,118,361 2,029,478 2,129,055 2,310,420
contracts
Earnings from
construction
contracts $ 68,539 $ 56,475 $ 68,769 $ 71,420 $ 68,672
Income (loss) from
construction
operations $ 11,285 $ 7,103(a)$ 2,422(b)$ 16,519 $ 6,362
Income (loss) from
real estate
operations (227) 1,312 (6,870) (5,218) (8,231)
Net income(loss) 1,274 3,650 (6,205) 4,000(c)11,342(d)
Net income (loss) per
common share-primary (0.11) 0.35 (1.55) 0.50 2.06
Dividends per Series B
preferred share 2.16 2.16 2.16 2.16 2.16
Dividends per Series C
preferred share 85.00 85.00 85.00 38.00 -
Dividends per common
share - - - - 0.50
Stockholders' equity $ 61,296 $ 59,216 $ 54,683 $ 60,721 $ 46,403
Weighted average
common shares
outstanding-primary 5,270,453 5,186,879 5,186,442 5,074,943 4,981,152
Total Assets $ 792,931 $ 715,329 $ 671,081 $ 729,988 $ 734,841
Notes payable due
after one year
convertible
debenture $ 88,610 $ 94,892 $ 69,545 $ 77,635 $ 103,420
(a) Includes restructuring credits of $1,145.
(b) Includes restructuring charges of $8,500.
(c) Includes extraordinary gain $316 and cumulative
effect of accounting change of $1,454.
(d) Includes a pretax pension curtailment gain of
$29,862.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
To be more consistent with industry practice, the Company
has changed its reporting format and now reports revenue
from construction contracts and cost of construction
contracts as well as earnings from construction contracts.
Revenue from construction contracts includes not only costs
incurred by the Company, its related earnings, and its
proportionate share of construction joint ventures, but also
its proportionate share of previously unconsolidated
construction affiliates. Results from unconsolidated
affiliates had previously been reported on the equity method
and included in other income.
Results of Operations 1995 vs. 1994
The Company reported 1995 net income of $1.3 million
compared to $3.7 million in 1994. After taking into
consideration the payment of dividends to preferred
shareholders, the Company reported a loss of $0.11 per
common share in 1995 compared to income of $0.35 per common
share in 1994. 1995's results were impacted by the
recognition of a significant loss on a major contract, and
the write-down of a long outstanding account receivable
associated with an overseas project which had been completed
in 1987. 1994's results were largely due to a net tax
benefit of $3.2 million primarily resulting from losses
incurred in Puerto Rico and the reversal of excess tax
reserves resulting from the planned liquidation of one of
the Company's inactive foreign subsidiaries.
On a pretax basis, the Company recognized income of $3.3
million in 1995 compared to $490,000 in 1994. Growth in
construction revenue as well as improvement in construction
margins on new work secured were the most significant
factors contributing to this change.
Operating and general and administrative expenses increased
as a result of the increase in construction activity and
heavier than usual legal costs, but continued to decline as
a percentage of construction revenue reflecting increased
staff productivity. In addition, 1994 included a pretax
restructuring credit of $1.1 million representing excess
restructuring reserves.
Real estate operations produced a $227,000 loss in 1995
compared to income of $1.3 million in 1994. Most of the
1994 results were attributable to a one-time gain from the
sale of lease rights at the Company's Rickenbacker facility.
While interest expense increased compared to 1994,
reflecting changes in the Company's borrowing rate, other
income increased as well, due to the Company's improved cash
position. 1995's results are more fully described in the
discussion that follows.
Construction
The value of construction completed, which includes, in
addition to revenue, construction costs incurred by owners
on construction management and similar projects increased
23% from $2.67 billion in 1994 to $3.28 billion in 1995.
Revenue from and costs of construction contracts both
increased by 25% from 1994 to $2.73 billion and $2.66
billion, respectively.
The increase in construction activity is a reflection of the
continued growth of the Company's traditional non-
residential construction markets as noted in 1994, as well
as the emphasis the Company placed on its marketing
activities. In addition, the average size of contracts
secured in 1994 and 1995 has declined when compared with
prior periods. This in turn has led to a more rapid
absorption of backlog as well as faster start-up of projects
sold in the current year.
The value of new contracts secured in 1995 was $2.79
billion, up 4% from the $2.69 billion secured in 1994. On
average, the margin on 1995 sales was up 9% over the margin
on sales secured in 1994. These factors reflect both the
growth of the market, and therefore, the opportunities to
improve fees.
The Company's sureties limit the annual amount of new
payment and performance bonds available to the Company.
Each year this limit has increased commensurate with the
Company's growth in revenues. While the limitation did not
restrict the Company's ability to secure new work in 1995,
and the Company had substantial unused capacity at the end
of 1995, there could be circumstances where the limitation
might influence the selection of prospective projects.
Earnings from construction contracts improved by 21.4% over
1994 from $56.5 million to $68.5 million, reflecting both
the growth in construction revenues as well as the improved
margins in the backlog from prior years and the new work
secured in 1995. As a percentage of revenue, earnings from
construction contracts showed a slight decline from 2.60% to
2.51% and below the margin level of 3.28% achieved in 1993.
1995's margins were depressed by the recognition of a $4.9
million loss on a contract in Minneapolis, and the write-
down of a $3.2 million account receivable with regard to a
project in Egypt that had been completed in 1987. This
write-down was the result of a ruling by a judge against the
Company in February 1996 in its effort to collect this
receivable. While the Company has not yet decided whether
to appeal the ruling, it has made provision to do so. In
1994, the margins were affected by $7.7 million of losses in
the Company's Caribbean operations. Work under construction
management contracts as a percentage of value of
construction completed continued to decline from 19% in 1994
to 17% in 1995. Construction management contracts normally
involve lower risk than other types of contracts; they also
typically carry lower fees. The trend away from less
profitable construction management work has therefore also
contributed to the improvement in construction margins.
At the end of 1995, the anticipated earnings associated with
backlog from work to be completed under contracts and awards
believed to be firm was $92.1 million, essentially unchanged
from 1994. The backlog of the value of construction to be
completed declined 12% from 1994 to $3.99 billion at the end
of 1995. The decline in backlog volume is primarily
attributable to the acceleration of when work under contract
commenced, as well as a change in the reporting of certain
construction management projects. The stability of the
earnings backlog against the reduction in the backlog of
construction to be completed represents a continuation of
the trend in the improvement in margins which had begun in
1993. This is also a reflection of the continued
improvement in fees on new work secured in 1995.
Approximately 40% of the earnings backlog and 37% of the
value of construction backlog relates to work to be
performed in 1997 and beyond. Estimated earnings from
construction backlog should not be used as a basis for
predicting future net income.
Operating and General and Administrative Expenses
Operating expenses directly in support of construction
operations increased 16% to $46.2 million in 1995 from $39.8
million in 1994. 1995 expenses included unusually heavy
legal costs in connection with the successful defense of a
major litigation. Because of the risk associated with the
industry and the number of disputes that often occur, each
year the Company incurs significant legal expenses.
Litigation backlog has, however, continued to decline
steadily over the last several years. Construction
operating expenses will vary with the level of construction
revenue and a significant portion of the increase in
construction operating expenses was related to the 25%
increase in construction revenue. As a percentage of
construction revenue, however, construction operating
expenses declined steadily from 2.12% in 1993 to 1.83% in
1994 to 1.69% in 1995. This improvement in efficiency was
in large part a result of the restructuring steps taken in
1994. General and administrative expenses, which includes
all of corporate overhead expenses, shows only a slight
increase of 3% over 1994 to $11.1 million from $10.7
million.
All of the outstanding balance of $897,000 of the accrued
liabilities associated with the restructuring reserve set up
in 1993 was absorbed by the end of 1995, in accordance with
the program previously established.
Real Estate
In 1995, the Company changed its presentation of real estate
operations in its Statements of Operations to a single item
described as "Income from real estate operations." The
components of this item are described below the
"Consolidated Statements of Operations." This change has
been made because of the less significant impact of real
estate operations on the Company's consolidated results of
operations. The Company has been able to dispose of
properties at essentially their carrying value over the past
few years, and income generated from the operating
properties are more than sufficient to offset operating
costs (exclusive of depreciation). From a liquidity
standpoint, real estate operations are slightly positive
even after taking into consideration interest expense
associated with real estate debt.
Losses from real estate operations amounted to $227,000 in
1995 compared to $1.3 million in income in 1994. The
majority of 1994's income from real estate operations came
from the sale of lease rights at the Company's Rickenbacker
facility. During 1995 the Company sold one developed
property with an adjacent land parcel and a number of
condominium units, all at their approximate carrying value.
Rental and other income and the cost of operations declined
by 28% and 24%, respectively, due to the sales of properties
in 1994 and 1995 and the renegotiated lease of certain
facilities at the Rickenbacker Air Industrial Park in 1995.
In 1995, the Company had a net loss from real estate
operations other than property sales of $509,000, compared
with a net loss of $367,000 in 1994. However, because
expenses included $3.94 million of depreciation and
amortization in 1995 and $5.60 million in 1994, there was
positive cash flow from real estate operations in each of
these years, even after payment of interest on real estate
debt.
The Company's real estate portfolio is carried at estimated
net realizable value or at cost, as applicable. Until
conditions in the real estate market improve to the point
that will permit the Company to readily conduct real estate
transactions, the Company will continue to review the asset
values of the properties in relation to prospective net
realizable value and make adjustments as necessary.
Management believes the timing of future sales for developed
properties may be accelerated as more stable market
conditions begin to prevail. For undeveloped land parcels,
however, a prolonged period of time will be required to
achieve reasonable values.
Interest Expense and Other Income
In 1995, the Company changed its presentation of interest
expense to a separate line item below "Income from
construction operations" and "Income from real estate
operations" in its Consolidated Statement of Operations.
Interest expense includes interest cost and related expense
associated with all the Company's borrowings including both
corporate and real estate debt.
In total, interest expense increased 17% to $9.3 million in
1995 from $7.9 million in 1994. The increase is almost
entirely due to the coupon rate of the Senior Notes sold in
the fourth quarter of 1994. Although the amount of the
Company's 1995 average borrowings declined when compared to
1994, the interest rates incurred averaged over 11% in 1995
compared to approximately 7% in 1994.
Interest expense associated with real estate debt declined
by 16% as a result of debt paydowns from the sale of
properties. Interest expense is further discussed in Notes
6 and 15 to the Consolidated Financial Statements.
In 1995, the Company changed its presentation of other
income. Other income now includes primarily interest and
investment income and certain other miscellaneous items.
Other income in 1995 amounted to $1.5 million compared to a
loss of $2,000 in 1994. In 1994 the Company charged to
other income the absorption on a pretax basis of the
cumulative foreign translation adjustment relating to the
planned liquidation of one of the Company's inactive foreign
subsidiaries. Cumulative translation adjustments, net of
tax, had previously been charged directly to stockholders'
equity. Exclusive of the cumulative foreign translation
adjustment other income would have amounted to $1.2 million.
Income Taxes
The provision for income taxes resulted in an effective tax
rate of 61% in 1995. The difference between this rate and
the 34% statutory rate is primarily attributable to state
income and other taxes and the non-deductibility of certain
operating costs.
In 1994, the Company realized a net tax benefit of $3.2
million due primarily to the benefits derived from losses
incurred in Puerto Rico as well as the reversal of excess
reserves resulting from the planned liquidation of one of
the Company's inactive foreign subsidiaries.
The Company has recorded $16.0 million of deferred tax
assets which resulted principally from net operating loss
and tax credit carryforwards. Management believes that no
valuation allowance is required for these assets due to the
future reversal of existing taxable temporary differences
primarily related to the Company's employee benefits plans.
Fourth Quarter 1995 Compared to Third Quarter 1995
Results for the fourth quarter of 1995 amounted to a net
loss of $2.0 million compared to net income of $1.2 million
for the third quarter. After taking into account dividends
on preferred shares, the net loss per common share amounted
to $0.47 in the fourth quarter, compared to net income of
$0.13 per common share in the third quarter. Construction
revenue was $692 million for the fourth quarter compared to
$741 million in the third quarter, and earnings from
construction contracts were $14.9 million and $19.0 million
for the same periods, respectively. The slight decline in
construction activity between the two periods is not unusual
and does not represent any significant trend in construction
activity. The significant change in the fourth quarter
results was due to the loss on the Minneapolis project, most
of which was recorded in the fourth quarter, and the write-
down of the account receivable from the Egyptian project
discussed above.
Fourth quarter operating and general and administrative
expenses amounted to $16.1 million compared to $14.7 million
in the third quarter. Much of this increase was
attributable to certain employee benefits which were
incurred in the fourth quarter.
Loss from real estate operations amounted to $128,000 in the
fourth quarter compared to essentially a third quarter break-
even. This change is the result of reduced rental income
from the sale of properties earlier in the year.
Interest expense and other income remained essentially
unchanged between the third and fourth quarters.
Results of Operations 1994 vs. 1993
The Company reported net income of $3.7 million in 1994 or
$0.35 per common share compared to a net loss of $6.2
million or $1.55 per common share in 1993.
Although revenue from construction contracts increased 4%
from 1993 to 1994, earnings from construction contracts
declined 18% from $68.8 million to $56.5 million for the
same period. This reduction was largely the result of a
significant loss incurred by the Company's Caribbean
operations in the U.S. Virgin Islands and Puerto Rico.
These losses stemmed from overruns on lump sum contracts
begun in prior years and substantially completed in 1994.
Total operating and general and administrative expenses
declined by 13% from 1993 to 1994. This decline is
primarily attributable to the restructuring steps taken in
1994 which included the downsizing of staff in shrinking
geographic markets and the reorganization of certain support
functions. In 1993 the Company recorded an $8.5 million
provision for restructuring. During 1994, the Company
charged $6.5 million of expenditures against the reserve
which included severance, benefits and other incentives
associated with staff reductions. An unused $1.1 million
remainder of the reserve was credited to income in 1994.
Income from real estate operations amounted to $1.3 million
in 1994 compared to a $6.9 million loss in 1993. In 1994,
the Company sold its lease rights at the Company's
Rickenbacker facility which accounted for most of the
income. Included in 1993's loss from real estate operations
was a $6.0 million valuation provision set up as additional
reserves against asset values in relation to their carrying
value. The decline in rental and other income and cost of
operations was due primarily to sales of properties in both
1993 and 1994.
Interest expense increased 7% from $7.4 million in 1993 to
$7.9 million in 1994 primarily due to higher interest rates
on the Company's corporate credit facilities.
Other income in 1994 amounted to a loss of $2,000 after
taking into consideration a $1.2 million charge for the
pretax absorption of the cumulative foreign translation
adjustment relating to the planned liquidation of one of the
Company's inactive foreign subsidiaries. Excluding the
charge for the cumulative translation adjustment, other
income, which primarily consists of interest and investment
income, amounted to $1.2 million. This represented a
decline of $900,000 from 1993 due in part to investment
income of $861,000 recognized in 1993.
Financial Condition
In total, the Company recorded an increase in cash and cash
equivalents in 1995 of $31.7 million.
Cash provided by operating activities amounted to $40.1
million, reflected in the Company's peak cash position at
December 31, 1995. Improved cash collection procedures
generated most of the significant year end cash, much of
which will be disbursed in the first quarter of 1996 to fund
outstanding trade accounts payable.
The increase in construction activity, and the continued
shift away from construction management contracts were also
factors contributing to the improved cash flows from
operating activities.
The remaining balance of $897,000 set up in prior years for
the Company's restructuring program was also expended in
1995.
Cash provided by investing activities amounted to $11.6
million primarily due to the sale of one developed real
estate property, and a number of units in a Boston
condominium project and a Puerto Rican condominium project.
In addition, the Company collected funds from the repayment
of note receivables from the sale of real estate properties
in prior periods.
Cash used in financing activities amounted to $20 million
and is primarily attributable to the excess of debt paydowns
over borrowings. Funds provided by the sale of real estate
properties were used to pay down associated debt. In
addition, the Company paid down the outstanding balances on
certain loans and lines of credit used for general operating
purposes.
Management believes the Company's cash flows from
construction backlog, its $40 million revolving credit
facility and amounts available from overnight credit
facilities, will be sufficient to support the Company's
operations. Debt maturing in 1996 will be paid from funds
generated from operations or will be refinanced prior to its
actual maturity date.
Inflation
Inflation and changing prices during the current fiscal year
have not significantly affected the major markets in which
the Company conducts its business. In view of the moderate
rate of inflation, its impact on the Company's business has
not been significant.
Impairment of Long-Lived Assets
In March 1995, the Financial Accounting Standards Board
issued 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 in an entity's operations be recognized as
impaired, whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. In addition, the statement requires that
certain long-lived assets to be disposed of be reported at
the lower of carrying amount or fair value less cost to
sell.
The statement is effective for fiscal years beginning after
December 15, 1995.
The Company will adopt the standard at the beginning of
1996, and management believes that the impact will not be
material to the financial statements.
Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123 "Accounting For Stock-Based
Compensation".
This statement defines a "fair value based method" of
accounting for an employee stock option and encourages the
adoption of that method for all employee stock compensation
plans. However, it also allows an entity to continue to
measure compensation cost for those plans using the
"intrinsic value based method" of accounting prescribed by
APB Opinion No. 25, "Accounting for Stock Issued To
Employees". Entities electing to remain with the accounting
in Opinion 25 must make certain pro forma disclosures, as if
the fair value based method of accounting had been applied.
The accounting requirements of this statement are effective
for transactions entered into in fiscal years that begin
after December 15, 1995. The disclosure requirements for
this statement are effective for financial statements for
fiscal years beginning after December 15, 1995.
The Company will elect to remain with the accounting method
in Opinion 25, and will conform with the pro forma
disclosure requirements beginning in 1996.
Item 8. Financial Statements and Supplementary Data.
INDEX TO FINANCIAL STATEMENTS
Page No.
Financial Statements:
Report of Independent Public Accountants 16
Consolidated Balance Sheets - as of
December 31, 1995 and 1994 17
Consolidated Statements of Operations -
for the years ended December 31, 1995,
1994 and 1993 18
Consolidated Statements of Stockholders' Equity
- for the years ended December 31, 1995, 1994
and 1993 19
Consolidated Statements of Cash Flows - for the years
ended December 31, 1995, 1994 and 1993 20
Notes to Consolidated Financial Statements 21-38
Responsibilities for Financial Reporting 39
Report of Independent Public Accountants
To The Turner Corporation:
We have audited the accompanying consolidated balance sheets
of The Turner Corporation (a Delaware corporation) and
Subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the
period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of The Turner Corporation and Subsidiaries as of
December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
New York, New York ARTHUR ANDERSEN LLP
March 1, 1996
The Turner Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share amounts)
As of December 31, 1995 1994
Assets
Cash and cash equivalents $ 87,969 $ 56,250
Marketable securities 4,838 4,251
Construction receivables: (Note 3)
Due on contracts including retainage 404,09 363,167
Estimated unbilled construction
costs and related earnings 94,186 74,063
Real estate (Note 4) 90,939 106,300
Property and equipment, net (Note 5) 22,161 17,490
Prepaid pension cost (Note 10) 63,444 64,259
Other assets 25,296 29,549
Total assets $ 792,931 $ 715,329
Liabilities
Construction accounts payable:
Trade $ 318,908 $ 280,396
Due on completion of contracts 134,954 121,117
Accrued estimated work completed 89,476 70,360
Notes payable and convertible debenture (Note 6) 94,790 106,879
Deferred income taxes (Note 7) 12,257 11,961
Other liabilities 81,250 65,400
Total liabilities 731,635 656,113
Commitments and contingencies (Note 13)
Stockholders' Equity (Note 12)
Preferred stock, $1 par value
(2,000,000 shares authorized):
Series C 8.5% cumulative convertible
(9,000 shares issued and outstanding;
$9,000 liquidation preference) 9 9
Series B cumulative convertible
(850,000 shares issued; 848,560
and 848,956 outstanding) 849 849
Common stock, $1 par value
(20,000,000 shares authorized;
5,270,040 and 5,199,941 issued) 5,270 5,200
Paid in capital 38,305 37,778
Net unrealized loss on marketable securities (58) (276)
Retained earnings 26,102 26,656
70,477 70,216
Less: Loan to Employee Stock Ownership (8,673) (10,468)
Plan (Note 11)
Treasury stock, at cost (51,090 and
53,489 common shares) (508) (532)
Total stockholders' equity 61,296 59,216
Total liabilities and stockholders' equity $792,931 $715,329
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
The Turner Corporation and Subsidiaries
Consolidated Statements of Operations
(in thousands, except share amounts)
For the years ended December 31,
1995 1994 1993
Value of construction completed (see below) $ 3,281,495 $ 2,670,433 $ 2,790,4331
Revenue from construction contracts $ 2,727,001 $ 2,174,836 $ 2,098,247
Cost of construction contracts 2,658,462 2,118,361 2,029,478
Earnings from construction contracts 68,539 56,475 68,769
Construction operating expenses 46,167 39,803 44,402
General and administrative expenses 11,087 10,714 13,445
Restructuring charges (credits) (Note 2) - (1,145) 8,500
Income from construction operations 11,285 7,103 2,422
Income (loss) from real estate operations
(see below) (227) 1,312 (6,870)
Interest expense (Note 15) (9,267) (7,923) (7,427)
Other income (loss), net (Note 14) 1,470 (2) 2,106
Income (loss) before income taxes 3,261 490 (9,769
Income tax provision (benefit): (Note 7)
Current 1,025 (2,329) 252
Deferred 962 (831) (3,816)
Total income tax provision (benefit) 1,987 (3,160) (3,564)
Net income (loss) $ 1,274 $ 3,650 $ (6,205)
Net income (loss) per common share:
Primary $ (0.11) $ 0.35 $ (1.55)
Fully diluted (a) $ 0.30 (a)
Weighted average common and common
equivalent shares outstanding:
Primary 5,270,453 5,186,879 5,186,442
Fully diluted (a) 6,035,835 (a)
Value of construction completed consists
of the following:
Revenue from construction contracts $ 2,727,001 $2,174,836 $2,098,247
Construction costs incurred by owners in
connection with work under construction
management and similar contracts 554,494 495,597 692,124
Value of construction completed $ 3,281,495 $2,670,433 $2,790,371
Real estate operations consist of the
following:
Real estate sales $ 9,007 $ 9,279 $ 23,537
Cost of sales (8,725) (7,600) (23,571)
Rental and other income 8,886 12,416 13,497
Cost of operations (5,455) (7,187) (8,855)
Depreciation and amortization expense (3,940) (5,596) (5,460)
Write-downs and reserves - - (6,018)
Income (loss) from real estate operations $ (227)$ 1,312 $ (6,870)
(a) Antidilutive
The accompanying Notes to Consolidated Financial
Statements are an integral part of these statements.
The Turner Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity
(in thousands, except share amounts)
For the years ended December 31,
1995 1994 1993
Shares Amount Shares Amount Shares Amount
Convertible preferred stock,
Series C
Balance at beginning and end 9,000 $ 9 9,000 $ 9 9,000 $ 9
Convertible preferred stock,
Series B
Balance at beginning of year 848,956 849 849,011 849 849,494 849
Preferred stock retired (396) - (55) - (483) -
Balance at end of year 848,560 849 848,956 849 849,011 849
Common stock
Balance at beginning 5,199,941 5,200 5,134,778 5,135 5,070,535 5,071
of year
Common stock issued 70,099 70 65,163 65 64,243 64
Balance at end of year 5,270,040 5,270 5,199,941 5,200 5,134,778 5,135
Paid in capital
Balance at beginning of year 37,778 37,280 36,699
Excess of proceeds over par
value of common stock issued 527 498 575
Excess of proceeds over cost
of treasury stock issued - - 6
Balance at end of year 38,305 37,778 37,280
Net unrealized loss on
marketable securities
Balance at beginning of year (276) - -
Net unrealized gain 218 (276) -
(loss) for the year
Balance at end of year (58) (276) -
Cumulative foreign translation
adjustment
Balance at beginning of year - (787) (783)
Change in cumulative translation
adjustment during the year - 787 (4)
Balance at end of year - - (787)
Retained earnings
Balance at beginning of year 26,656 24,834 32,869
Net income (loss) for the year 1,274 3,650 (6,205)
Cash dividends on Series C preferred
stock, $85.00 per share (765) (765) (765)
Cash dividends on Series B preferred (1,833) (1,833) (1,835)
stock, $2.16 per share
Tax benefits on Series B preferred 770 770 770
dividends
Balance at end of year 26,102 26,656 24,834
Loan to Employee Stock Ownership
Plan (ESOP)
Balance at beginning of year (10,468) (12,105) (13,668)
Repayment from loan to ESOP 1,795 1,637 1,563
Balance at end of year (8,673) (10,468) (12,105)
Treasury stock
Balance at beginning of year 53,489 (532) 53,489 (532) 22,647 (325)
Purchase of treasury stock 3,000 (26) - - 32,900 (240)
Treasury stock issued (5,399) 50 - - (2,058) 33
Balance at end of year 51,090 (508) 53,489 (532) 53,489 (532)
Total stockholders' equity $61,296 $59,216 $54,683
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
The Turner Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
For the years ended December 31, 1995 1994 1993
Cash flows from operating activities:
Net income (loss) 1,274 3,650 (6,205)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Restructuring charges (credits) - (1,145) 8,500
Loss (gain) on real estate sales (282) (1,679) 34
Cumulative foreign translation charge - 1,193 -
Write-downs and reserves - - 6,018
Depreciation and amortization 11,526 9,366 9,824
Net periodic pension credit (685) (1,052) (9,674)
Provision (benefit) for deferred income 962 (831) (3,816)
taxes
Changes in operating assets and liabilities
Decrease (increase) in construction
receivables (61,054) (35,071) 23,906
Increase (decrease) in construction
accounts payable 71,465 30,019 (28,784)
Decrease in restructuring reserve (897) (6,458) -
Decrease in other assets 6,729 2,157 8,216
Increase (decrease) in other liabilities 11,094 6,794 (2,487)
Net cash provided by operating 40,132 6,943 5,532
activities
Cash flows from investing activities:
Purchases of marketable securities (267) (255) (25,913)
Proceeds from sale of marketable - 8,644 26,480
securities
Distributions from joint ventures 5,628 5,000 -
Investments in joint ventures - - (6,547)
Purchases of property and equipment (4,556) (3,569) (4,610)
Proceeds from sale of property and
equipment 469 1,916 4,162
Proceeds from sale of real estate, net 8,581 7,049 17,465
Increase in real estate (2,064) (3,423) (3,911)
Repayments on notes receivable 3,807 2,888 416
Net cash provided by investing activities 11,598 18,250 7,542
Cash flows from financing activities:
Common stock issued 597 563 639
Cash dividends to preferred stockholders (2,598) (2,598) (2,600)
Repayments from loan to ESOP 1,795 1,637 1,563
Principal payments under capital lease (2,689) - -
obligations
Proceeds from borrowings 24,001 80,497 62,963
Payments on borrowings (41,141) (75,983) (89,217)
Proceeds from issuance of treasury stock 50 - 39
Purchase of treasury stock (26) - (240)
Net cash provided by (used in) (20,011) 4,116 (26,853)
financing activities
Net increase (decrease) in cash and cash 31,719 29,309 (13,779)
equivalents
Cash and cash equivalents at beginning of 56,250 26,941 40,720
year
Cash and cash equivalents at end of year $87,969 $56,250 $ 26,941
Noncash financing activities:
Mortgage note assumed by the buyer in
connection with the sale of real estate $ - $ - $ 4,426
Capital lease obligations incurred by
the Company 7,740 - -
Noncash investing activities:
Net unrealized gain (loss) on marketable
securities 218 (276) -
Note provided upon the sale of certain
assets and liabilities of a construction - - 1,577
subsidiary
Notes provided upon the sale of real estate - 1,849 1,185
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
The Turner Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share amounts)
The Turner Corporation and Subsidiaries (the Company) is a
multinational construction contractor, which also has
limited real estate operations in the United States. The
Company is predominantly engaged in general building
construction and construction management throughout the
United States. The construction operations primarily relate
to the construction of commercial, multifamily residential,
manufacturing, research and development, healthcare,
entertainment, education, justice and other building
structures. The Company also performs interior construction
work and construction consulting services. Specialty trade
contractors are used extensively by the Company as
subcontractors in the performance of its construction
contracts.
1. Summary of Significant Accounting Policies
Changes in Presentation: To be more consistent with
industry practice, in 1995 the Company changed its
presentation of reporting gross earnings to a format
reflecting construction revenue, cost of construction
revenue and operating and general and administrative
expenses. The Company now includes in its accounts its
proportionate interest in its previously unconsolidated
construction affiliates. In prior years, the investments in
these affiliates were accounted for on the equity method
with the change in equity included in "Other income, net".
In addition, for 1995 the Company is presenting interest
expense as a separate item on the Consolidated Statement of
Operations. This item represents all the interest expense
of the Company including interest on real estate as well as
general corporate debt. In prior years, interest expense
had been included in income from real estate operations and
in general and administrative expenses. Prior years
presented have been changed to conform to the current year
presentation, which had no effect on net income for any of
the periods presented.
Principles of Consolidation: The consolidated financial
statements include the accounts of the Company and its
proportionate interest in the accounts of construction
affiliates and construction joint ventures. The Company
also has investments in real estate joint ventures, which
are accounted for under the equity or cost method, as
appropriate. All significant intercompany transactions and
balances are eliminated. Certain prior year balances have
been reclassified in the consolidated financial statements
in order to provide a presentation consistent with the
current year.
Use of Estimates: The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of
revenues and expenses during the reporting period.
Management believes that the estimates utilized in preparing
the Company's financial statements are reasonable and
prudent, however, actual results could differ from those
estimates.
Construction Operations: The Company determines
construction earnings under the percentage of completion
method. Under this method, the Company recognizes as
earnings that portion of the total earnings anticipated from
a contract which the value of the work completed bears to
the estimated total value of the work covered by the
contract. As the Company's construction contracts generally
extend over more than one year, revisions in costs and
earnings estimates during the course of the work are
reflected in the year in which the facts which require the
revision become known. Due to uncertainties inherent in the
estimation process, it is reasonably possible that such
estimates will be revised over the next year. When a loss
is forecasted for a contract, the full amount of the
anticipated loss is recognized in the period in which it is
determined that a loss will occur. Claims are included in
earnings from construction contracts at an amount based on
the related contract costs when realization is probable and
the amount can be reliably estimated.
The Company continuously reviews estimated earnings from
construction contracts and makes necessary adjustments based
on current evaluations of the indicated outcome. In 1995,
1994 and 1993, the Company wrote down certain construction
receivables and claims deemed unrecoverable.
Under certain contracts, owners of buildings make payments
directly to suppliers and subcontractors for all or for
portions of work covered by the contract. The Company
considers such costs in determining contract percentage of
completion and reports such amounts in the value of
construction completed.
Real Estate Operations: Rental income, including fixed
minimum rents and additional rents, under operating leases
with tenants is generally recognized on a contractual basis.
Profit on sales of real estate is recognized in full when
the profit is determinable, an adequate down payment has
been received, collectability of the sales price is
reasonably assured and the earnings process is substantially
complete. If the sales transaction does not meet these
criteria, all profit or a portion thereof is deferred until
such criteria are met.
The real estate properties which are held for investment are
carried at cost less accumulated depreciation and are
assessed periodically for impairment based on the sum of
undiscounted estimated future cash flows. All other real
estate properties and investments in real estate joint
ventures are carried at the lower of cost or estimated net
realizable value (Note 4).
Depreciation and Amortization: The Company calculates
depreciation on property and equipment, and on real estate
primarily on the straight-line method. Estimated useful
lives are as follows: buildings and improvements, 20-40
years; office machines and furniture, 5-10 years; and
equipment, 10 years. Leasehold improvements (the Company as
lessee) to property used in Company operations are amortized
on a straight-line basis over the lease terms. Tenant
improvements (the Company as lessor) on real estate
properties are amortized on a straight-line basis over the
term of the lease. Maintenance and repairs are expensed
currently, except that expenditures for betterments are
capitalized.
Cash: The Company considers all investments purchased with
maturities of 90 days or less to be cash equivalents.
The Company's other liabilities include approximately
$50,900 and $36,800 net payable to banks for checks drawn
but not cleared as of December 31, 1995 and 1994,
respectively.
Marketable Securities: Marketable securities which consist
primarily of equity and bond mutual funds are classified as
available-for-sale and are reported at fair value.
Unrealized gains and losses are reported as a separate
component of stockholders' equity.
Income Taxes: Deferred income tax assets or liabilities are
computed based on the difference between the financial
reporting and income tax bases of assets and liabilities
using the enacted marginal tax rate. Deferred income tax
expenses or benefits are based on the changes in the asset
or liability from period to period.
The Company does not provide for U.S. Federal income taxes
on undistributed earnings of foreign subsidiaries since it
is the Company's intention to permanently reinvest those
earnings outside the United States.
Foreign Currency Translation: Assets and liabilities of
operations that represent an investment in a foreign country
are translated into U.S. dollars at exchange rates in effect
at year-end, while revenue and expenses are translated at
average exchange rates prevailing during the year. The
resulting translation gains and losses are accumulated as a
separate component of stockholders' equity. Foreign
currency transaction gains and losses are included in
results of operations during the periods in which they
arise.
Earnings Per Common Share: Primary earnings per common
share is based on net income less preferred stock dividends
(net of tax benefits relating to Series B preferred stock)
divided by the weighted average number of common and common
equivalent shares outstanding. Fully diluted earnings per
common share is further adjusted to reflect the assumed
conversion of convertible preferred stock and the
convertible debenture, and the elimination of the preferred
stock dividends and interest expense on the convertible
debenture, net of applicable income taxes, if such
conversions are dilutive.
Stock-Based Compensation: The Company accounts for its
stock-based employee compensation plans using the intrinsic
value based method, under which compensation cost is
measured as the excess of the stock's market price at the
grant date over the amount an employee must pay to acquire
the stock.
2. Restructuring Charges
During 1993, plans were developed to significantly reduce
the Company's future operating costs and expenses and to
improve productivity. This restructuring program
principally involved a reduction in the number of staff,
plus the consolidation of offices and facilities and the
reorganization of support functions. The results of
operations for 1993 included $8,500 of pretax charges
($5,600 net of tax benefits, or $1.08 per share) related to
this program. The charges included provisions for severance
pay, incentive programs relating to employee terminations,
costs related to the consolidation of offices and other
reorganization costs. This program was implemented in 1994
and was substantially completed by the end of the year.
During 1994, $6,458 was charged to the reserve and $897
remained in other liabilities at December 31, 1994. The
balance of the unused reserve of $1,145 was credited to
income in the fourth quarter of 1994. During 1995, the
final costs were incurred and the reserve was closed out
with no material impact to the results of operations.
3. Construction Receivables
Due on contracts included $135,619 of retainage at December
31, 1995. It is expected that approximately 89% of such
retainage will be collected by December 31, 1996. At
December 31, 1994, retainage was $116,856. Construction
receivables include estimated net claims. Claims made by
the Company involve negotiations and in some cases
litigation. The Company believes that it has established
legal bases for pursuing recovery of recorded claims and it
is management's intention to pursue these claims and
litigate, if necessary, until a decision or settlement is
reached. Claims involve the use of estimates and it is
reasonably possible that revisions to the estimated
recoverable amounts of recorded claims could be made within
the next year. The settlement of the claims depends on
individual circumstances, accordingly, the timing of the
collection will vary and may extend beyond one year. Those
claims, primarily due to owner-caused delays, incomplete
specifications or similar reasons, amounted to $8,200 and
$8,600 at December 31, 1995 and 1994, respectively.
4. Real Estate
The Company owns a portfolio of real estate, either directly
or through joint venture interests, that includes commercial
office properties, a mixed-use warehouse/service property,
residential properties, undeveloped land, and certain
buildings and hangars located at an air industrial park.
The properties are located throughout the United States, but
primarily in the Southeast and Great Lakes regions.
Accumulated depreciation at December 31, 1995 and 1994 was
$30,732 and $34,639, respectively.
Given the current real estate market, the Company intends to
presently hold its interests in commercial office, mixed-use
and residential condominium properties, and undeveloped land
parcels. The Company has determined that such real estate
properties will be available for sale as conditions in the
real estate market continue to improve to the point that
such properties can be sold for prices which the Company
believes reflect the reasonable value of the properties.
Management believes the timing of future sales of the
commercial office, mixed-use and residential condominium
properties may be accelerated as more stable market
conditions begin to prevail. Accordingly, the Company's
interests in certain developed properties are carried at
their estimated fair value. However, management anticipates
a prolonged period before land values recover. Due to the
relatively low holding costs of the Company's undeveloped
land parcels, the Company intends to and has the ability to
hold the properties for a prolonged period of time in order
to achieve reasonable prices upon disposition. The carrying
amounts of the Company's interests in these developed
properties were $33,641 and $45,934, and in the undeveloped
land parcels were $29,824 and $30,458 at December 31, 1995
and 1994, respectively. These real estate interests are
carried at the lower of cost or estimated net realizable
value. The net realizable values reflect the Company's
estimates of the net sales proceeds less anticipated capital
expenditures through the estimated date of sale and disposal
costs, which have not been discounted to net present value.
The Company estimates the net realizable values by
evaluating and making assumptions about future events with
respect to the property, market conditions and anticipated
investor rates of return. The net realizable values reflect
each disposition based on the Company's current intended
holding period, and do not represent liquidation values.
Judgments regarding future events are not subject to precise
quantification or verification and may change from time to
time as economic and market factors, and the Company's
evaluation of them, change and the effects of such changes
may be significant. Changes in assumptions and the
Company's evaluation of the market could cause these
estimates to change within the next year.
The Company actively monitors market conditions and reviews,
on a quarterly basis, the net realizable values of its real
estate interests and reduces carrying amounts when required.
On a periodic basis, generally not exceeding two to three
years, the Company has independent appraisals performed for
significant real estate interests for the purpose of
assisting management in determining their fair value and the
appropriate timing of disposition. In connection with the
Company's review of the carrying amounts of its real estate
interests, additional write-downs and reserves of $6,018
were recorded for the year ended December 31, 1993.
In March 1995, the Financial Accounting Standards Board
issued SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Dispose 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. The
statement is required to be adopted no later than January 1,
1996, although earlier implementation is permitted. 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 Company will adopt the standard effective January 1,
1996 relating to its real estate interests, which are to be
held and used by the Company. Management believes that the
impact upon adoption will not be material to the financial
statements.
5. Property and Equipment
Property and equipment as of December 31, 1995 and 1994
consisted of:
1995 1994
Buildings and improvements $ 13,725 $ 14,063
Office machines and furniture 22,733 17,000
Equipment 21,094 16,470
Total 57,552 47,533
Less: accumulated depreciation
and amortization (35,391) (30,043)
Net $ 22,161 $ 17,490
6. Notes Payable and Convertible Debenture
Notes payable and convertible debenture as of December 31,
1995 and 1994 consisted of the following:
1995 1994
Senior Notes $ 39,500 $ 39,500
Land and building mortgages 20,057 24,845
Revenue bonds 13,400 18,400
Employee Stock Ownership Plan 9,300 11,100
Convertible debenture 6,000 6,000
Other 6,533 7,034
Total $ 94,790 $106,879
Senior Notes: In December 1994, the Company sold $39,500 of
Senior Notes in a private placement to institutional
investors, including the Company's pension plan (Note 10).
Proceeds of the Notes were used to pay down short-term
borrowings under the revolving credit facility. The Notes
bear interest at a fixed rate of 11.74% and mature in even
principal amounts on the third through seventh anniversary
dates of the Notes. The Note Purchase Agreement contains
various covenants, the most restrictive of which is a fixed-
charge coverage requirement.
Land and Building Mortgages: Variable rate mortgages bear
interest at rates of LIBOR plus 2.25% or prime plus 0.5% and
mature in varying installments through 1998. The weighted
average interest rate for 1995 and 1994 was approximately
9.0% and 7.47%, respectively. In connection with a variable
rate building mortgage, in 1994, the Company entered into an
interest rate swap agreement with a bank for a notional
amount equal to the underlying mortgage ($9,322 at December
31, 1995). The swap agreement provides for a fixed interest
rate of 6.96% through February 5, 1998. Fixed rate
mortgages of $5,106 bear interest at 7% or 9.375% and are
due in varying installments through 2001.
Revenue Bonds: Adjustable rate revenue refunding bonds
collateralized by properties at the air industrial park
mature in varying installments through 2010. The bonds bear
interest at a weekly variable rate. The weighted average
interest rate for 1995 and 1994 was approximately 3.96% and
2.89%, respectively. The bonds are supported by a letter of
credit for which the Company pays 1.25% per annum. The
Company entered into an interest rate swap agreement with a
bank for a $15,000 notional amount providing for a fixed
interest rate of 4.13% through December 15, 1995.
Employee Stock Ownership Plan (ESOP): This loan was used to
fund the Company's loan to the ESOP and is payable in
varying installments through 1999. Interest is payable
quarterly at a variable rate equal to 83% of the prime rate
or a percentage of LIBOR, at the Company's option. The loan
is collateralized by first mortgages on certain real estate
properties and letters of credit. The loan allows for
collateral substitution and upon disposition of such
properties may require additional collateral to maintain
loan-to-value relationships. The weighted average interest
rate for 1995 and 1994 was approximately 6.08% and 4.56%,
respectively. The loan agreement contains various
covenants, including the maintenance of a minimum amount of
stockholders' equity and debt coverage ratio. At December
31, 1995, the minimum stockholders' equity required was
$58,000 and increases by $4,000 annually to $74,000 in 1999.
Revolving Credit Facility: The Company has an unsecured
$40,000 revolving credit facility maturing in December 1996,
the proceeds of which are used for general corporate
purposes. No borrowings were outstanding at December 31,
1995 and 1994. The current facility permits the Company to
choose between various interest rate options. The weighted
average interest rate for 1995 and 1994 was approximately
8.44% and 6.84%, respectively. The Company pays a
commitment fee at an annual rate of 0.5% on the unused
portion of the facility. The facility contains various
covenants, the most restrictive of which is a fixed-charge
coverage requirement.
Convertible Debenture: The Company has a $6,000 8.5%
convertible debenture which matures in 1997. The Company
may not prepay the principal balance prior to its maturity.
At the option of the holder, the debenture is convertible
into 6,000 shares of Series D 8.5% convertible preferred
stock of the Company. The holder must convert the full
debenture principal balance at the time of conversion. The
Series D stock is ultimately convertible into 600,000 shares
of the Company's common stock and carries terms similar to
the Series C stock of the Company, except as to the election
of directors (Note 12).
Other: The Company maintains overnight credit facilities
with various banks at varying rates. The Company had
available $10,000, none of which was drawn down at December
31, 1995 and $2,400 was outstanding at December 31, 1994.
The facilities are subject to periodic renewal from the
banks and certain facilities carry annual commitment fees
ranging from 0.375% to 0.5%. During 1995 and 1994, the
weighted average interest rates were 8.87% and 7.59%,
respectively.
The Company leases certain computer equipment and vehicles
under agreements which are classified as capital leases and
bear a weighted average implicit interest rate of 7.06%.
The leases have original terms ranging from three to five
years and payments under the leases are due in varying
installments through 2000. At December 31, 1995, $5,051 of
obligations under capital lease arrangements were
outstanding.
This amount included a bank loan for the purpose of
financing improvements to the Company's corporate offices
which was paid down in 1995 and had an outstanding balance
of $3,000 at December 31, 1994. The principal was payable
in semi-annual installments through July 1995. The loan
bore interest at LIBOR plus 0.25%. The weighted average
interest rate for 1995 and 1994, including associated letter
of credit fees, was approximately 9.51% and 7.74%,
respectively.
Aggregate maturities of notes due are as follows:
1996 1997 1998 1999 2000 Thereafter
$6,177 $24,374 $20,970 $12,229 $9,222 $21,818
Interest cost approximates amounts paid for the years ended
December 31, 1995, 1994 and 1993.
At December 31, 1995, the carrying value of the real estate
that was pledged as collateral for notes payable was
$59,747.
7. Income Taxes
The components of the income tax provision (benefit) are as
follows:
1995 1994 1993
Current:
Federal $ 131 $ (2,924) $ -
Foreign 300 59 145
State & Local 594 536 107
1,025 (2,329) 252
Deferred:
Federal 962 1,659 (4,027)
Foreign - (2,482) -
State & Local - (8) 211
962 (831) (3,816)
Total $1,987 $ (3,160) $(3,564)
The current Federal provision for the year ended December
31, 1995 reflects the benefit of the utilization of net
operating loss carryforwards of approximately $1,800.
Deferred income taxes result from temporary differences
between the financial reporting carrying amounts and the tax
bases of assets and liabilities. The source of these
differences and tax effect of each at December 31, 1995 and
1994 are as follows:
Deferred Income Tax
Liability (Asset)
1995 1994
Construction earnings $ 583 $ 656
Employee benefit plans 23,654 24,629
Depreciation 4,050 5,857
Real estate properties (1,787) (2,736)
Net operating loss benefits (9,778) (11,933)
Restructuring charges - (239)
Alternative minimum tax credit
carryforward (2,451) (2,451)
Jobs credit carryforward (75) (75)
Deferred compensation plan (511) (611)
Contributions carryover (1,278) (1,056)
Other (150) (80)
$ 12,257 $11,961
The Company has recorded $16,030 of deferred tax assets
having resulted principally from net operating loss and tax
credit carryforwards. Management believes that no valuation
allowance is required for these assets due to the future
reversals of existing taxable temporary differences
primarily related to the Company's employee benefit plans.
A comparison of the Federal statutory rate with the
Company's effective tax rate is as follows:
1995 1994 1993
Statutory Federal income tax rate (benefit) 34.0% 34.0% (34.0)%
State and local taxes, net of Federal benefit 12.0% 86.6% 2.2%
Effective foreign tax rate 6.1% (489.3)% (3.0)%
Reserve reversals - (355.2)% -
Other 8.9% 79.0% (1.7)%
Effective tax rate (benefit) 61.0% (644.9)% (36.5)%
Income taxes paid (refunded) were $(507), $(455) and $73 for
1995, 1994, and 1993, respectively.
For Federal income tax purposes, the Company has available
at December 31, 1995 a net operating loss carryforward of
$20,965 which is available to offset future taxable income
and expires from 2006 through 2009, and an alternative
minimum tax credit carryforward of $2,451 which can be
carried forward indefinitely.
The unrecognized deferred tax liability related to
cumulative undistributed earnings of foreign subsidiaries
which were permanently reinvested was $323 at December 31,
1995.
8. Incentive Compensation Plans
The Company sponsors the Executive Incentive Compensation
Plan (EICP) which authorizes payments of awards to executive
officers and other designated employees of the Company in
the form of cash and common stock of the Company. The award
may be deferred in part at the election of the recipient.
The committee that administers the plan determines the
particular recipients who are to receive awards and the
amounts of their respective awards. The amounts charged to
expense in 1995, 1994 and 1993 aggregated $33, $849 and $39,
respectively. No awards were made under the EICP in 1995.
The staff Incentive Compensation Plan (ICP), which
authorized payment of awards in the form of cash and common
stock of the Company to certain salaried employees who were
not participants in the Company's EICP, was liquidated
during the first quarter of 1995 with the issuance of 21,272
shares of the Company's common stock to the current
participants of the program. Each share was valued at
$7.919, which was the average market price of the Company's
common stock over the last 20 business days of December
1994. The total gross value of the liquidation was $282.
The amounts charged to expense in 1994 and 1993 aggregated
$134 and $116, respectively.
9. Stock Options
The Company has incentive stock option plans adopted in 1986
and 1992 which provide for the granting of options to
officers and designated employees of the Company to purchase
shares of the common stock of the Company at a price not
less than the market value of the common stock on the date
the option is granted. In addition, an incentive plan
adopted in 1981 has been terminated and no new options can
be granted under this plan, although unexercised options
remain outstanding.
Options are exercisable in whole or in part from one to ten
years from the date of the grant at the discretion of the
stock option committee. Options granted under each plan may
not exceed 400,000 shares. No charges to income arise in
connection with the plans.
Option plan transactions during 1995 and 1994 are summarized
in the following table:
Price Range
1995 1994 Per Share
Outstanding January 1 744,428 759,788 $7.75 - 27.50
Granted 69,300 99,000 7.875 -10.00
Exercised (9,000) - 7.75 - 8.50
Canceled (53,130) (114,360) 7.75 - 27.50
Outstanding December 31 751,598 744,428 7.75 - 25.50
Exercisable at December 31 745,453 617,449 7.75 - 25.50
Options available for grant at January 1 247,390 277,530
Options available for grant at December 31 206,020 247,390
10. Employee Benefit Plans
Defined Benefit Pension Plan: The Company has a
noncontributory defined benefit pension plan which covers
salaried employees who meet minimum age and length of
service requirements.
On March 31, 1991, the Company curtailed its defined benefit
pension plan such that benefits do not accrue to plan
participants for future years of service under the benefit
formula. Benefits earned prior to the curtailment were
based on members' years of service and averaged final
salary.
Effective January 1, 1994, the Company amended the defined
benefit pension plan to add a cash balance plan feature, to
provide benefits to plan participants that were previously
provided under the defined contribution retirement plan.
Past benefits earned by plan participants prior to
curtailment are not changed and benefits earned by
participants for future service are provided under a
different benefit formula. New participants earn benefits
only under the revised formula. The new benefit formula
provides for credits into notional individual account
balances based upon salary and years of service. Management
anticipates that the cash balance plan will significantly
reduce the net periodic pension credit recognized in future
years, and result in a reduction of the prepaid pension
asset.
The projected unit credit actuarial method is used to
determine the recognition of net periodic pension expense
and to determine funding requirements. The Company will
continue to fund the plan as required.
The Company amortizes unrecognized prior service costs
related to the curtailed benefits on a straight-line basis
over a period not exceeding the average life expectancy of
retirees.
The Company amortizes the full amount of the unrecognized
pension actuarial gains and losses for the year on a
straight-line basis over the average remaining service
period of employees.
Plan assets consist primarily of pooled equity, debt and
short-term investment funds, a pooled real estate equity
fund, 675,000 shares of the Company's common stock and
$9,500 of the Company's Senior Notes (Note 6).
The table below, which reflects the updated actuarial
measurement at June 30, 1995, sets forth the funded status
of the defined benefit pension plan and the amounts
recognized in the Company's financial statements at December
31, 1995 and 1994 and for the years then ended:
1995 1994
Actuarial present value of benefit
obligations:
Vested benefits $ 115,219 $ 100,201
Accumulated benefit obligation 119,256 104,602
Projected benefit obligation 119,256 104,602
Plan assets at fair value 187,382 154,918
Plan assets in excess of project
benefit obligation 68,126 50,316
Unrecognized prior service cost 8,054 8,832
Unrecognized net loss (gain) (9,213) 9,514
Remaining unrecognized net asset
being recognized over 15 years (3,523) (4,403)
Prepaid pension cost $ 63,444 $ 64,259
Components of net periodic pension
credit:
Service cost $ 6,444 $ 7,910
Interest cost on projected benefit
obligation 8,532 7,651
Actual return on plan assets (42,154) 1,370
Net amortization and deferral 26,493 (17,983)
Net periodic pension credit $ (685) $ (1,052)
The assumptions used in measuring the actuarial value of
projected benefit obligations and determining the net
periodic pension credit were:
1995 1994
Weighted average discount rate 7.50% 8.25%
Rate of compensation increase -
cash balance feature 4.25% 6.80%
Weighted average expected long-term
rate of return on plan assets 9.80% 9.96%
Defined Contribution Pension Plans: From April 1, 1991 to
December 31, 1993, the Company sponsored a defined
contribution retirement plan covering salaried employees who
met minimum age and length of service requirements.
Contributions were based on salaries and length of service.
The Company also sponsors a Section 401(k) tax deferred
savings plan which covers salaried employees who meet
minimum age and length of service requirements. Matching
contributions are based on employee contributions and are
limited to one-half of the first 3% of the employee's
compensation. Effective January 1, 1994, the defined
contribution retirement plan was merged into the Section
401(k) tax deferred savings plan. No additional
contributions will be made to the defined contribution
retirement plan. Benefits earned under the Section 401(k)
tax deferred savings plan remain unchanged. The aggregate
amount charged to expense for these plans was $1,578, $1,653
and $6,933 in 1995, 1994 and 1993, respectively.
Postretirement Benefit Plan: Employees retiring from the
Company and eligible for an immediate benefit from the
retirement plans (generally age 55 with 15 years of service)
are eligible to continue their current medical insurance
coverage into retirement. The medical benefits continue to
be subject to the deductibles, copayment provisions and
other limitations. Retirees pay for a portion of the total
cost of their medical insurance and starting with 1993
retirements, the portion of the total cost will be dependent
on the individual's total Company service at retirement.
The medical plans of the Company are funded on a pay-as-you-
go basis.
The following table sets forth the funded status of the plan
and the amounts recognized in the Company's financial
statements at December 31, 1995 and 1994 and for the years
then ended:
1995 1994
Actuarial present value of accumulated postretirement
benefit obligation:
Retirees $ 15,328 $14,023
Fully eligible active plan participants 1,882 1,569
Other active plan participants 4,954 3,590
Accumulated unfunded postretirement benefit
obligation 22,164 19,182
Remaining unrecognized transition obligation
being recognized over 20 years (16,838) (17,829)
Unrecognized net gain (loss) (17) 2,183
Accrued postretirement benefit obligation $ 5,309 $ 3,536
Net periodic postretirement benefit cost includes the
following components:
Service cost $ 293 $ 336
Interest cost 1,610 1,652
Amortization of unrecognized transition obligation 991 991
Amortization of unrecognized gain (21) -
Net periodic postretirement benefit cost $ 2,873 $ 2,979
Impact of one percent increase in healthcare trend rate:
Aggregate impact on annual service cost and
interest cost $ 147 $ 106
Increase in accumulated postretirement
benefit obligation $ 1,371 $ 1,186
The accumulated postretirement benefit obligation was
computed using an assumed weighted average discount rate of
7.5% in 1995 and 8.5% in 1994. The healthcare cost trend
rate was assumed to be 11% in 1995 decreasing by 1% a year
to 6% in 2000 and 5.5% in 2001 and beyond.
Employee benefit plan obligations are determined using
actuarial estimates. These estimates are based on
historical information along with certain assumptions about
future events. Changes in those assumptions as well as
changes in actual experience could cause these estimates to
change within the next year.
11. Employee Stock Ownership Plan
The Company has a leveraged Employee Stock Ownership Plan
(ESOP) for salaried employees who meet minimum age and
length of service requirements. To fund the ESOP, the
Company originally borrowed $18,092. Proceeds of this
borrowing were loaned to the ESOP, which purchased 850,000
shares of Series B convertible preferred stock.
Eligible employees are allocated the Series B stock over the
term of the ten-year ESOP loan as the loan is repaid. The
allocated shares vest after five years of service. At
December 31, 1995, the number of allocated and unallocated
shares were 425,551 and 423,009, respectively.
The Series B stock is callable, in whole or in part, at the
option of the Company at a price per share expressed as a
percentage of the issue price of $21.29. At the Company's
option, the call may be satisfied by common shares, cash or
a combination thereof. The call price was 112% in 1995 and
decreases to 100% by 1999. The trustee may, at any time,
convert each share of Series B stock into one share of
common stock.
Prior to the retirement of the ESOP debt, employees can only
redeem their vested preferred shares upon death or age 70
1/2. Once the debt is retired, shares can be redeemed at
retirement, termination or death. The redemption value is
established at the end of each year by an independent
appraiser. The latest appraised value, dated March 7, 1996,
was $18.50 per preferred share. At the Company's option,
redemption by an employee may be satisfied by common shares,
cash or a combination thereof.
The preferred stockholders are entitled to the same voting
rights as the holders of common shares.
The loan to the ESOP is on the same terms as the Company's
bank loan. The ESOP will repay the loan (plus interest)
with proceeds from the quarterly dividends paid on the
allocated and unallocated Series B stock and contributions
from the Company. All contributions to the ESOP in excess
of dividends are treated as compensation expense.
Compensation expense and interest income for the years ended
December 31, 1995, 1994 and 1993 were:
1995 1994 1993
Compensation expense $589 $412 $340
Interest income $622 $546 $509
The interest income earned by the Company on the ESOP loan
offsets the interest expense incurred on the original
borrowing, with no impact on the results of operations.
12. Stockholders' Equity
On July 20, 1992, the Company sold Karl Steiner Holding AG
(Steiner) 9,000 shares of Series C 8.5% convertible
preferred stock and 6,000 shares of Series D 8.5%
convertible preferred stock for a total of $15,000. On July
22, 1992, the Series D stock was exchanged for an 8.5%
convertible debenture due in 1997 in the principal amount of
$6,000 (Note 6).
The Series C stock is convertible into 1,000,000 shares of
common stock or can be exchanged for 9,000 shares of Series
E 8.5% convertible preferred stock (which is substantially
identical to the Series C stock, except as to
transferability and election of directors). The debenture
is convertible into 6,000 shares of Series D stock, which is
convertible into 600,000 shares of common stock. The Series
C stock has, and the Series D and Series E stock will have,
a liquidation preference of $1,000 per share and a
cumulative dividend preference of $85 per share per year.
At their option, the holders of the Series C, Series D and
Series E stock will have the right to convert either the
full amount or a partial percentage into common stock.
While the Series C stockholders own securities constituting
(on an as-converted basis) more than 10% of the Company's
outstanding common stock, on a fully diluted basis, the
Series C stockholders have the right to elect, as a class,
between one and three directors, depending on the percentage
of the outstanding stock owned. Holders of Series D and
Series E stock, and Series C stock (except when they are
entitled to elect at least one director as a class), vote on
an as-converted basis as though they held common stock.
Holders of Series C or Series D stock also have the right to
elect a director if the Company is six quarters or more in
arrears in paying dividends.
In connection with the purchase of the Company's securities
by Steiner, the Company executed an agreement providing the
Company and Steiner with certain rights, obligations and
options which terminate on June 30, 2002, unless extended.
Under this agreement, Steiner has the right of first refusal
in some instances with regard to sales by the Company of
more than five percent of its stock. In addition, if the
Company issues additional stock or convertible or
exchangeable securities, Steiner will have the option in
some instances to purchase similar securities to the extent
necessary to maintain its percentage ownership.
If the Company issues, in a transaction or related series of
transactions, common stock or convertible or exchangeable
securities totaling at least 15% of the Company's
outstanding common stock, on a fully diluted basis, the
Series C stock will be redeemable during a 30-day period at
its liquidation preference plus accrued or accumulated
dividends, unless the holders of two-thirds of the Series C
stock approve the transaction.
The Company has a right of first refusal with regard to
sales or transfers of the Company's securities owned by
Steiner constituting more than five percent of the Company's
outstanding common stock, on a fully diluted basis. In
addition, the Company has the option to repurchase the
Company's securities owned by Steiner, upon a change in
control in the ownership of Steiner.
If the price of the Company's common stock is below $7 for
at least 20 consecutive trading days (or if the agreement is
not extended), Steiner may require the Company either to
find a buyer (which may be the Company) for all of Steiner's
holdings (or all its holdings except the debenture or Series
D stock), or to sell Steiner additional common stock equal
to Steiner's existing holdings on an as-converted basis, at
a price selected by Steiner which is not higher than 115% of
the market price of the Company's common stock. The Company
will not decide until it knows the terms on which it is to
find a buyer for Steiner's holdings or to sell Steiner
additional common stock, which of the two options it would
elect.
13. Commitments and Contingencies
The Company (as lessee) leases office space under operating
leases having remaining non-cancelable lease terms in excess
of one year. Rental expense for the years ended December 31,
1995, 1994 and 1993 amounted to $9,438, $9,254 and $9,779,
respectively. Future minimum rental payments are as
follows:
1996 1997 1998 1999 2000 Thereafter
$7,936 $6,988 $6,260 $5,595 $5,108 $13,368
The Company (as lessor) has operating leases with tenants
that provide for fixed minimum rent and reimbursement of a
portion of operating costs. Additional rents for
reimbursements included in rental income amounted to $285,
$373, and $390 for 1995, 1994 and 1993, respectively.
Tenant leases on commercial office and mixed-use properties
have terms of up to ten years, and leases on residential
properties generally have terms of one year or less.
Minimum future rental revenue from non-cancelable leases in
effect at December 31, 1995 are as follows:
1996 1997 1998 1999 2000 Thereafter
$7,036 $5,401 $4,404 $3,546 $2,649 $15,676
The Company has jointly and severally guaranteed completion
of an $105,400 construction contract which was entered into
by Turner Steiner International SA, in which the Company has
a 50% interest. The Company has also guaranteed $2,750 of a
$5,000 letter of credit facility and $275 of a $500 line of
credit facility of Turner Steiner International SA.
In connection with the sale of certain assets and
liabilities of a construction subsidiary, the Company agreed
to guaranty or otherwise indemnify their surety up to
$15,000 in obtaining bonds in excess of $45,000 through
December 31, 1997.
The Company has also guaranteed up to $500 of a credit
facility of a supplier of materials to certain of its
contracts.
The Company owns certain buildings, hangars and equipment
and is the ground lessee on the underlying land located at
an air industrial park. The Company has leased the
buildings, hangars, equipment and land to a tenant for a
term of 15 years expiring in 2010. Rental income under this
lease represented 23%, 37% and 33% of total rental income
for 1995, 1994 and 1993, respectively.
The Company is a defendant in various litigation incident to
its business. In some instances the amounts sought are very
substantial, including some which are proceeding to trial
involving substantial claims and counterclaims. Although
the outcome of litigation cannot be predicted with
certainty, in the opinion of management based on the facts
known at this time, the resolution of such litigation is not
anticipated to have a material adverse effect on the
financial position or results of operations of the Company.
As these matters continue to proceed through the litigation
process to ultimate resolution, it is reasonably possible
that the Company's estimation of the effect of such matters
could change within the next year.
14. Other Income, net
The major components of Other Income, net are as follows:
1995 1994 1993
Interest and dividend income $ 1,260 $ 974 $ 1,157
Investment income (loss) - (79) 861
Cumulative foreign translation reversal - (1,193) -
Other 210 296 88
$ 1,470 $ (2) $ 2,106
15. Business Segments
The Consolidated Statements of Operations provide segment
information regarding revenues and operating expenses.
Certain other financial data of the Company's business
segments (construction and real estate) are presented below:
1995 1994 1993
Identifiable assets at
year end:
Construction $ 561,821 $ 503,302 $ 449,720
Real estate 95,221 116,007 128,597
General corporate 135,889 96,020 92,764
$ 792,931 $ 715,329 $ 671,081
Depreciation and
amortization
expense:
Construction $ 6,134 $ 2,522 $ 3,034
Real estate 3,940 5,596 5,460
General corporate 1,452 1,248 1,330
$ 11,526 $ 9,366 $ 9,824
Interest expense:
Construction $ 580 $ 82 $ 65
Real estate 3,011 3,586 4,252
General corporate 5,676 4,255 3,110
$ 9,267 $ 7,923 $ 7,427
16. Disclosures about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments:
Cash and Cash Equivalents: The carrying amount of cash and
cash equivalents approximates fair value due to the short-
term maturity of these amounts.
Marketable Securities: The fair value of marketable
securities is based on quoted market prices for such
investments. Marketable securities are reported at fair
value.
Construction Receivables and Construction Payables: The
carrying amount of construction receivables and construction
payables approximate fair value as these amounts generally
are due or payable within the Company's operating cycle.
Notes Payable: The fair value of notes payable secured by
real estate properties is estimated based on discounting the
future cash flows at the Company's year-end, risk-adjusted
incremental borrowing rate for a similar debt instrument,
given the underlying value of the loan collateral.
The fair value of unsecured notes payable is estimated based
on the Company's year-end, risk-adjusted incremental
borrowing rate for similar liabilities.
At December 31, 1995 and 1994, the fair value of notes
payable was $90,383 and $99,064, respectively.
Convertible Debenture: The fair value of the convertible
debenture is estimated based on the greater of the Company's
year-end, risk-adjusted incremental borrowing rate for a
similar debt instrument, or the value of the debt assuming
conversion at the year-end stock price, which would reflect
the probability of conversion by the debt holder. At
December 31, 1995 and 1994, the fair value was $6,193 and
$5,700, respectively.
ESOP Loan Receivable: The fair value of the loan receivable
from the ESOP is estimated based on the fair value of the
Company's borrowing to fund the ESOP. At December 31, 1995
and 1994, the fair value was $8,914 and $10,714,
respectively.
Interest Rate Swap Agreements: The Company uses unleveraged
interest rate swaps to provide fixed interest rates for
selected periods of time on certain outstanding loans (Note
6). Cash settlements on the swaps occur monthly and are
recorded as an adjustment to interest expense. The fair
value of the interest rate swap agreements is estimated
based on the discounted value of the difference between the
fixed payments on the swap and the payments that would be
required at current market fixed rates for a similar
financial instrument. The fair value of the interest rate
swap asset was $65 and $869 at December 31, 1995 and 1994,
respectively.
17. Quarterly Financial Information (Unaudited)
1995 Quarter Ended March 31 June 30 September 30 December 31
Value of construction
completed $ 708,828 $ 819,842 $ 889,978 $ 862,847
Revenue from construction
contracts 609,495 685,151 740,664 691,691
Earnings from construction
contracts 16,398 18,174 19,019 14,948
Income (loss) before income
taxes 1,726 2,196 2,459 (3,120)
Net income (loss) 1,006 1,151 1,161 (2,044)
Primary earnings (loss) per
common share (a) 0.11 0.13 0.13 (0.47)
Fully diluted earnings per
common share (a) $ 0.09 $ 0.11 $ 0.11 $ (b)
1994 Quarter Ended March 31 June 30 September 30 December 31
Value of construction
completed $ 597,354 $ 682,674 $ 666,917 $ 723,488
Revenue from construction
contracts 448,106 539,565 570,978 616,187
Earnings from construction
contracts 15,774 13,658 11,884 15,159
Income (loss) before income
taxes 1,122 1,651 (1,837) (446)(c)
Net income 1,059 997 896(d) 698(d)
Primary earnings per
common share (a) 0.12 0.10 0.08 0.05
Fully diluted earning per
common share (a) $ 0.10 $ 0.09 $ 0.07 $ 0.04
(a) The quarterly per share amounts are computed independently of annual
amounts.
(b) Antidilutive
(c) Includes restructuring credits of $1,145.
(d) Includes income tax benefits resulting from operations and excess tax
reserves.
Responsibilities for Financial Reporting:
The management of The Turner Corporation and
Subsidiaries has the responsibility for preparing
the accompanying consolidated financial statements
and for their integrity and objectivity. The
financial statements were prepared in accordance
with generally accepted accounting principles
applied on a consistent basis and are not
misstated due to material error or fraud. The
financial statements include amounts that are
based on management's best estimates and
judgments. Management also prepared the other
information in the annual report and is
responsible for its accuracy and consistency with
the financial statements.
The fair presentation of the Company's financial
position, results of operations and cash flows are
reported on by the independent public accountants,
Arthur Andersen LLP (see Report of Independent
Public Accountants) for each of the three years in
the period ended December 31, 1995. Management
has made available to Arthur Andersen LLP all of
the Company's financial records and related data,
as well as the minutes of stockholders' and
directors' meetings. Furthermore, management
believes that all representations made to Arthur
Andersen LLP during its audit were valid and
appropriate.
To fulfill the responsibility for the reporting of
financial results, management maintains a system
of accounting and internal controls. Management
has operational and financial personnel perform
procedures to provide assurance of compliance with
controls and policies. In addition, based upon
management's assessment of risk, operational,
financial and special reviews are performed by
contracted auditors to monitor the effectiveness
of selected controls. Management seeks to assure
the quality of financial reporting by careful
selection and training of supervisory and
management personnel, by organization structures
that provide an appropriate division of
responsibility, and by communication of accounting
and business policies and procedures throughout
the Company. Management believes the internal
accounting controls in use provide reasonable
assurance that the Company's assets are
safeguarded, that transactions are executed in
accordance with management's authorizations, and
that the financial records are reliable for the
purpose of preparing financial statements. In
addition, the Company has distributed a statement
of its policies for conducting business affairs in
a lawful and ethical manner and receives reports
of compliance annually.
The Board of Directors, through the Audit
Committee of the Board, meets separately and
jointly with management, the contracted auditors
and the independent public accountants on a
periodic basis to assure itself that each is
carrying out its responsibilities.
Item 9. Change in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information with respect to the
directors and nominees for directors which will
appear in the registrant's definitive proxy
statement to be filed with the Securities and
Exchange Commission prior to April 30, 1996, is
incorporated herein by reference.
Executive Officers of the Registrant.
Served as an Officer
in the Capacity
Name Age Office Indicated Since
Alfred T. McNeill 59 Chairman of the Board, Chairman since 3/1/89.
Chief Executive Officer
and Director
Harold J. Parmelee 58 President and Director President since 5/11/90.
David J. Smith 55 Senior Vice President and 1/1/94.
Chief Financial Officer
Ralph W. Johnson 59 Senior Vice President 6/11/93.
Donald R. Kerstette 65 Senior Vice President 6/11/93.
Richard H. Esau, Jr.61 Vice President 6/11/93.
Francis C. O'Conno 53 Vice President 11/1/92.
Sara J. Gozo 32 Vice President, Secretary
and Associate General
Counsel 10/24/94
Donald G. Sleeman 41 Vice President and
Treasurer Treasurer since 1/15/92.
Anthony C. Breu 48 Vice President and
Controller Controller since 6/1/88.
Each executive officer holds office at the
pleasure of the Board of Directors.
Each of the executive officers listed above
is an employee of The Turner Corporation or Turner
Construction Company and has been an employee of
these companies or other construction subsidiaries
in an executive, managerial or engineering
capacity for the past five years except for Mr.
Smith and Ms. Gozo. From 1983 to 1993, Mr. Smith
served as Vice President and Treasurer of Mack
Trucks, Inc., a subsidiary of Renault. From 1976
to 1983 Mr. Smith held various executive financial
positions within the Renault organization. From
1989 to 1993, Ms. Gozo practiced construction law
at Shea & Gould, and until October 1994, at
Thelen, Marrin, Johnson & Bridges.
Item 11. Executive Compensation.
The information which will appear under the
caption "Remuneration of Executive Officers" in
the registrant's definitive proxy statement to be
filed with the Securities and Exchange Commission
prior to April 30, 1996, is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial
Owners and Management.
The information under the caption "Election
of Directors" in the registrant's definitive proxy
statement to be filed with the Securities and
Exchange Commission prior to April 30, 1996 with
respect to the ownership by certain beneficial
owners and management of the registrant's stock is
incorporated herein by reference.
Item 13. Certain Relationships and Related
Transactions.
The information under the caption "Election
of Directors" in the registrant's definitive proxy
statement to be filed with the Securities and
Exchange Commission prior to April 30, 1996 with
respect to certain relationships and related
transactions is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K.
a)Documents filed as part of this report (including
documents incorporated herein by
reference):
1. Financial Statements:
Page No.
- Report of Independent Public Accountants 16
- Consolidated Balance Sheets - as of December 31,
1995 and 1994 17
- Consolidated Statements of Operations - for the
years ended December 31, 1995, 1994 and 1993 18
- Consolidated Statements of Stockholders' Equity -
for the years ended December 31, 1995, 1994 and
1993 19
- Consolidated Statements of Cash Flows - for the years
ended December 31, 1995, 1994 and 1993 20
- Notes to Consolidated Financial Statements 21-38
- Responsibilities for Financial Reporting 39
2.Consent of Independent Public Accountants 47
Individual financial statements of the
registrant and financial statement schedules not
included above are omitted since they are either
not required or not applicable or the information
has been presented in the notes to consolidated
financial statements.
3. Exhibits
Exhibit No. Description
3(a)(i) Certificate of Incorporated herein by
Incorporation, as reference to Exhibit 3 to the
amended to 7/10/89. Registration Statement on
Form S-14 of The Turner
Corporation, No. 2- 90235.
3(a)(ii) Amendment dated, 5/19/86 Incorporated herein
3(a)(iii) Amendment dated, 9/12/88 by reference to Exhibit 3(a)
3(a)(iv) Amendment dated, 7/10/89 to the Company's 1989 Annual
Report on Form 10-K.
Exhibit No. Description
3(b) By-Laws, as amended Incorporated herein by reference
to 6/11/93. to Exhibit 3(b) to the Company's
1993 Annual Report on Form 10-K
3(c)(i) Certificate of Designations Incorporated herein
relating to Series C 8-1/2% by reference to Exhibit
Convertible Preference Stock. 2 to the Company's Form 8-K
dated July 20, 1992.
3(c)(ii) Certificate of Designations Incorporated herein
relating to Series D 8-1/2% by reference to
Convertible Preference Stock. Exhibit 3 to the Company's
Form 8-K dated July 20, 1992.
3(c)(iii) Certificate of Designations Incorporated herein by
relating to Series E 8-1/2% reference to Exhibit 4 to
Convertible Preference Stock. the Company's Form 8-K
dated July 20, 1992.
4(a) Shareholders Rights Incorporated herein by
Agreement. reference to the Registration
Statement on Form 8-A
dated September 9, 1988.
4(b) Agreement regarding Security Incorporated herein
Holder's Rights, Obligations by reference to
and Options. Exhibit 5 to the Company's
Form 8-K dated July 20, 1992.
10(c)(i) The Company's Executive Incorporated herein
Incentive Compensation by reference to
Plan. Exhibit 10.3 to the Registration
Statement on Form S-14 of The
Turner Corporation, No. 2-90235.
10(c)(ii) The Company's 1981 Incorporated herein by reference to
Stock Option Plan, Exhibit 10(c)(v) to the Company's
as amended 1988 Annual Report on Form 10-K.
10(c)(iii) The Company's 1986 Incorporated herein by reference to
Stock Option Plan, Exhibit 10(c)(vii) to the as amended
as amended. Company's 1988 Annual Report on Form 10-K.
10(c)(iv) The Company's 1992 Incorporated herein by reference to the
Stock Option Plan. Registration Statement on Form S-8.
10(c)(v) The Company's Incentive Incorporated herein by reference to
Compensation Plan. Exhibit 10(c)(v) to the Company's 1983
Annual Report on Form 10-K.
Exhibit No. Description
10(c)(vi) The Company's Retirement Incorporated herein by reference to
Benefit Equalization Exhibit 10(c)(vi) to the Company's
Plan, amended and 1992 Annual Report on Form 10-K.
restated as of 1/22/92.
10(c)(vii) The Company's Defined Incorporated herein by reference to
Contribution Retirement Exhibit 10(c)(vii) to the Company's
Equalization Plan. 1992 Annual Report on Form 10-K.
10(c)(viii) The Company's Incorporated herein by reference to
Supplemental Executive Exhibit 10(c)(viii) to the Company's
Defined Benefit 1992 Annual Report on Form 10-K.
Retirement Plan.
10(c)(ix) The Company's Incorporated herein by reference to
Supplemental Executive Exhibit 10(c)(ix) to the Company's
Defined Contribution 1992 Annual Report on Form 10-K.
Retirement Plan.
10(c)(x) Tax Deferred Savings Incorporated herein by reference to
Income Plan amended and Exhibit 10(c)(ix) to the Company's
restated as of 1/1/89. 1991 Annual Report on Form 10-K.
10(c)(xi) Option Exchange and Incorporated herein by reference to
Stock Purchase Plan. Registration Statement on Form S-8,
File No. 33-33867.
10(c)(xii) Employees' Retirement Incorporated herein by reference to
Plan - Restated as of Exhibit 10(c)(vii) to the Company's
1/1/87. 1991 Annual Report on Form 10-K.
10(c)(xiii) Employees' Retirement Incorporated herein by reference to
Income Plan as of Exhibit 10(c)(viii) to the Company's
4/1/94. 1991 Annual Report on Form 10-K.
10(c)(xiv) Director's Retirement Incorporated herein by reference to
Plan. Exhibit 10(c)(xiv) to the Company's
1994 Annual Report on Form 10-K.
10(d) Asset Purchase Agreement Incorporated herein by reference to
dated 6/3/92, between Exhibit 10(d) to the Company's 1992
Turner Steiner Annual Report on Form 10-K.
International SA and
Turner International
Industries, Inc., and
Turner International
Industries (U.K.) Ltd.
10(e) Joint Venture and Incorporated herein by reference to
Shareholders Agreement Exhibit 10(e) to the Company's 1992
dated 6/3/92 between Report on Form 10-K.
The Turner Corporation
and Karl Steiner Holding
AG.
10(f) Purchase Agreement dated Incorporated herein by reference to
June 3, 1992 between to Exhibit 1 to the Company's
Karl Steiner Holding AG Form 8-K dated July 20, 1992.
and Turner Corporation.
Exhibit No. Description
10(g)(i) The Company's Revolving Incorporated herein by reference to
Credit Facility dated as Exhibit 10(g)(i) to the Company's
of 12/30/92. 1993 Annual Report on Form 10-K.
10(g)(ii) Amendment No. 1 to Incorporated herein by reference to
Credit Agreement dated Exhibit 10(g)(ii) to the Company's
as of 12/31/93. 1993 Annual Report on Form 10-K.
10(h) Form of Change of Incorporated herein by reference to
Control Agreement Exhibit 10(h) to the Company's 1993
between The Turner Annual Report on Form 10-K.
Corporation and Mssrs.
McNeill, Parmelee,
Smith and Vumbacco,
respectively, Chairman,
President, Chief
Financial Officer and
General Counsel dated
July 1, 1993.
10(i) Form of Change of Incorporated herein by reference to
Control Agreement with Exhibit 10(i) to the Company's 1993
56 other officers of Annual Report on Form 10-K.
parent or subsidiaries
dated July 1, 1993.
10(j) Note Purchase Agreement Incorporated herein by reference to
11.74% Senior Notes Due Exhibit 10(j) to the Company's
2001 dated as of 1994 Annual Report on Form 10-K.
December 1, 1994.
11 Computation of earnings
per share.
21 Subsidiaries of the
Registrant.
27(a) Financial Data Schedule-1995.
27(b) Financial Data Schedule-1994
Restated.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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: March 8, 1996 By: A. T. McNeill
A. T. McNeill
Chairman of the Board,
Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed by the following
persons on behalf of the registrant and in the capacities
and on the dates indicated.
Name Capacity Date
H. Baumann - Steiner Director March 8, 1996
(H. Baumann-Steiner)
W. G. Ehlers Director March 8, 1996
(W. G. Ehlers)
A. G. Fieger Director March 8, 1996
(A. G. Fieger)
E. T. Gravette, Jr. Director March 8, 1996
(E. T. Gravette, Jr.)
L. Lomo Director March 8, 1996
(L. Lomo)
A. T. McNeill Chairman of the Board, March 8, 1996
(A. T. McNeill) Chief Executive Officer
and Director
Name Capacity Date
C. H. Moore, Jr Director March 8, 1996
(C. H. Moore, Jr.)
H. J. Parmelee President and Director March 8, 1996
(H. J. Parmelee)
D. J. Smith Senior Vice President March 8, 1996
(D. J. Smith) and Chief Financial
Officer
P. K. Steiner Director March 8, 1996
(P. K. Steiner)
G. A. Walker Director March 8, 1996
(G. A. Walker)
J. O. Whitney Director March 8, 1996
(J. O. Whitney)
F. W. Zuckerman Director March 8, 1996
(F. W. Zuckerman)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to
the incorporation of our report dated March 1, 1996
included in this Form 10-K, into the Company's
previously filed Registration Statements on Form S-8
(File Nos. 2-64509 and 33-33867).
ARTHUR ANDERSEN LLP
New York, New York
March 29, 1996
EXHIBIT INDEX
Exhibit No. Description
3(a)(i) Certificate of Incorporated herein by
Incorporation, as reference to Exhibit 3 to the
amended to 7/10/89. Registration Statement on
Form S-14 of The Turner
Corporation, No. 2- 90235.
3(a)(ii) Amendment dated, 5/19/86 Incorporated herein
3(a)(iii) Amendment dated, 9/12/88 by reference to Exhibit 3(a)
3(a)(iv) Amendment dated, 7/10/89 to the Company's 1989 Annual
Report on Form 10-K.
3(b) By-Laws, as amended Incorporated herein by
to 6/11/93. reference to Exhibit 3(b) to
the Company's 1993 Annual
Report on Form 10-K.
3(c)(i) Certificate of Designations Incorporated herein
relating to Series C 8-1/2% by reference to Exhibit
Convertible Preference Stock. 2 to the Company's Form 8-K
dated July 20, 1992.
3(c)(ii) Certificate of Designations Incorporated herein
relating to Series D 8-1/2% by reference to
Convertible Preference Stock. Exhibit 3 to the
Company's Form 8-K
dated July 20, 1992.
3(c)(iii) Certificate of Designations Incorporated herein by
relating to Series E 8-1/2% reference to Exhibit 4 to
Convertible Preference Stock. the Company's Form 8-K
dated July 20, 1992.
4(a) Shareholders Rights Incorporated herein by
Agreement. reference to the Registration
Statement on Form 8-A
dated September 9, 1988.
4(b) Agreement regarding Security Incorporated herein
Holder's Rights, Obligations by reference to
and Options. Exhibit 5 to the
Company's Form 8-K
dated July 20, 1992.
10(c)(i) The Company's Executive Incorporated herein
Incentive Compensation by reference to
Plan. Exhibit 10.3 to the Registration
Statement on Form S-14 of The
Turner Corporation, No. 2-90235.
Exhibit No. Description
10(c)(ii) The Company's 1981 Incorporated herein by reference
Stock Option Plan, to Exhibit 10(c)(v) to the
as amended. Company's 1988 Annual Report on
Form 10-K.
10(c)(iii) The Company's 1986 Incorporated herein by
Stock Option Plan, reference to Exhibit 10(c)(vii)
as amended. to the Company's 1988 Annual
Report on Form 10-K.
10(c)(iv)The Company's 1992 Incorporated herein by reference to
Stock Option Plan. Registration Statement on Form S-8.
10(c)(v) The Company's Incentive Incorporated herein by reference to
Compensation Plan. Exhibit 10(c)(v) to the Company's
1983 Annual Report on Form 10-K.
10(c)(vi)The Company's Incorporated herein by reference to
Retirement Benefit Exhibit 10(c)(vi) to the Company's
Equalization Plan, 1992 Annual Report on Form 10-K.
amended and restated
as of 1/22/92.
10(c)(vii)The Company's Defined Incorporated herein by reference to
Contribution Retirement Exhibit 10(c)(vii) to the Company's
Equalization Plan. 1992 Annual Report on Form 10-K.
10(c)(viii)The Company's Incorporated herein by reference to
Supplemental Executive Exhibit 10(c)(viii) to the Company's
Defined Benefit 1992 Annual Report on Form 10-K.
Retirement Plan.
10(c)(ix)The Company's Incorporated herein by reference to
Supplemental Executive Exhibit 10(c)(ix) to the Company's
Defined Contribution 1992 Annual Report on Form 10-K.
Retirement Plan.
10(c)(x) Tax Deferred Savings Incorporated herein by reference to
Income Plan amended Exhibit 10(c)(ix) to the Company's
and restated as of 1991 Annual Report on Form 10-K.
1/1/89.
10(c)(xi)Option Exchange and Incorporated herein by reference to
Stock Purchase Plan. Registration Statement on Form S-8,
File No. 33-33867.
10(c)(xii)Employees' Retirement Incorporated herein by reference to
Plan - Restated as of Exhibit 10(c)(vii) to the Company's
1/1/87. 1991 Annual Report on Form 10-K.
10(c)(xiii)Employees' Retirement Incorporated herein by reference to
Income Plan as of Exhibit 10(c)(viii) to the Company's 1991
4/1/91. Annual Report on Form 10-K.
10(c)(xiv)Director's Retirement Incorporated herein by reference to
Plan. Exhibit 10(c)(xiv) to the Company's
1994 Annual Report on Form 10-K.
Exhibit No. Description
10(d) Asset Purchase Incorporated herein by reference to
Agreement dated 6/3/92, Exhibit 10(d) to the Company's 1992
between Turner Steiner Annual Report on Form 10-K.
International SA and
Turner International
Industries, Inc., and
Turner International
Industries (U.K.) Ltd.
10(e) Joint Venture and Incorporated herein by reference to
Shareholders Agreement Exhibit 10(e) to the Company's 1992
dated 6/3/92 between Annual Report on Form 10-K.
The Turner Corporation
and Karl Steiner Holding
AG.
10(f) Purchase Agreement Incorporated herein by reference to
dated June 3, 1992 Exhibit 1 to the Company's Form 8-K
between Karl Steiner dated July 20, 1992.
Holding AG and The
Turner Corporation.
10(g)(i) The Company's Revolving Incorporated herein by reference to
Credit Facility dated Exhibit 10(g)(i) to the Company's 1993
as of 12/30/92. Annual Report on Form 10-K.
10(g)(ii)Amendment No. 1 to Incorporated herein by reference to
Credit Agreement dated Exhibit 10(g)(ii) to the Company's 1993
as of 12/31/93. Annual Report on Form 10-K.
10(h) Form of Change of Incorporated herein by reference to
Control Agreement Exhibit 10(h) to the Company's 1993
between The Turner Annual Report on Form 10-K.
Corporation and Messrs.
McNeill, Parmelee,
Smith and Vumbacco,
respectively, Chairman,
President, Chief
Financial Officer and
General Counsel dated
July 1, 1993.
10(i) Form of Change of Incorporated herein by reference to
Control Agreement with Exhibit 10(i) to the Company's 1993
56 other officers of Annual Report on Form 10-K.
parent or subsidiaries
dated July 1, 1993.
10(j) Note Purchase Agreement Incorporated herein by reference to
11.74% Senior Notes Exhibit 10(j) to the Company's 1994
Due 2001 dated as of Annual Report on Form 10-K.
December 1, 1994.
11 Computation of earnings per share.
21 Subsidiaries of the Registrant.
27(a) Financial Data Schedule-1995.
27(b) Financial Data Schedule-1994 Restated.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains certain summary financial information extracted from the
Company's financial statements and notes thereto and is qualified in its
entirety by reference to such financial statements. The Company files an
unclassified balance sheet, certain line items are not applicable. All values
except share amounts are in thousands.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 87,969
<SECURITIES> 4,838
<RECEIVABLES> 404,098
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 57,552
<DEPRECIATION> 35,391
<TOTAL-ASSETS> 792,931
<CURRENT-LIABILITIES> 0
<BONDS> 94,790
<COMMON> 5,270
0
858
<OTHER-SE> 55,168
<TOTAL-LIABILITY-AND-EQUITY> 792,931
<SALES> 0
<TOTAL-REVENUES> 2,744,894
<CGS> 0
<TOTAL-COSTS> 2,676,582
<OTHER-EXPENSES> 57,254
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,267
<INCOME-PRETAX> 3,261
<INCOME-TAX> 1,987
<INCOME-CONTINUING> 1,274
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,274
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.09)
</TABLE>
EXHIBIT 11
The Turner Corporation and Subsidiaries
Computation of Earnings Per Share
PRIMARY 1995 1994 1993
Weighted average common and common
equivalent shares outstanding 5,270,453 5,186,879 5,186,442
dividends (net of tax) and Series C
preferred dividends $ (554,000) $ 1,822,000 $(8,035,000)
Primary earnings (loss) per common $(0.11) $0.35 $(1.55)
share
FULLY DILUTED
1995 1994 1993
Weighted average shares outstanding
used in the computation of primary
earnings per share 5,270,453 5,186,879 5,186,442
Conversion of Series B convertible
preferred stock to common stock 848,560 848,956 849,011
Weighted average common and common
equivalent shares outstanding 6,119,013 6,035,835 6,035,453
Income (loss) less Series C preferred
dividends and Series B preferred
dividend differential, net of tax $ (554,000) $ 1,822,000 $(8,035,000)
Fully diluted earnings (loss) per $(0.09) $0.30 $(1.33)
common share
Note: The Series C Convertible
Preferred Stock and the Convertible
Debenture are antidilutive.
Page 1
EXHIBIT 21
Subsidiaries Of The Registrant
Percentage
Jurisdiction of Voting Securities
Incorporation Held
Ameristone, Incorporated Delaware 100
Burwharf Corporation Delaware 100
Mideast Construction Services, Inc. Delaware 100
Turner Investment Corporation Delaware 100
Universal Construction Company, Inc. Delaware 100
Trans-Con of Delaware Inc. Delaware 100
TDC of Texas, Inc. Delaware 100
Turner Construction Company New York 100
Turner Construction Company of Texas Texas 100
The Lathrop Company, Inc. Delaware 100
Service Products Buildings, Inc. Ohio 100
Auburndale Company, Inc. Ohio 100
Turner Caribe, Inc. Delaware 100
Caribe Investment Corporation Delaware 100
Offshore Services, Inc. Delaware 100
Turner International (U.S.V.I.), Inc. Delaware 100
Turner Development Corporation Delaware 100
TDC Corp. of Florida Delaware 100
Turner International Industries, Inc. Delaware 100
Turner (East Asia) Pte. Limited Singapore 100
Turner International (UK) Limited England 100
Turner International Limited Bermuda 100
Turner International (Pakistan), Inc. Delaware 100
Rickenbacker Holdings, Inc. Delaware 100
Rickenbacker Development Corporation Delaware 100
Other subsidiaries of the company are omitted since such subsidiaries,
considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary. All of the foregoing subsidiaries are consolidated
in the financial statements.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains certain summary financial information extracted from the
Company's financial statements and notes thereto and is qualified in its
entirety by reference to such financial statements. The Company files an
unclassified balance sheet, certain line items are not applicable. All values
except share amounts are in thousands.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 56,250
<SECURITIES> 4,251
<RECEIVABLES> 363,167
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 47,533
<DEPRECIATION> 30,043
<TOTAL-ASSETS> 715,329
<CURRENT-LIABILITIES> 0
<BONDS> 106,879
<COMMON> 5,200
0
858
<OTHER-SE> 53,158
<TOTAL-LIABILITY-AND-EQUITY> 715,329
<SALES> 0
<TOTAL-REVENUES> 2,196,531
<CGS> 0
<TOTAL-COSTS> 2,138,744
<OTHER-EXPENSES> 50,517
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,923
<INCOME-PRETAX> 490
<INCOME-TAX> (3,160)
<INCOME-CONTINUING> 3,650
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,650
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.30
</TABLE>
