SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1997 Commission File Number 1-8719
THE TURNER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3209884
(State or other jurisdiction of (I.R.S. Employer Id. No.)
incorporation or organization)
375 Hudson Street New York, New York 10014
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (212) 229-6000
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12
months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of August 8, 1997: 5,289,773.
-2-
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Company or group of companies for which report is filed:
THE TURNER CORPORATION AND CONSOLIDATED SUBSIDIARIES
The consolidated balance sheet as of June 30, 1997, the
consolidated statements of operations and retained
earnings and the consolidated statements of cash flows
for the six months ended June 30, 1997 and 1996 are
unaudited, but in the opinion of the company's
management reflect all adjustments, consisting only of
normal recurring adjustments, which are necessary to
present fairly the financial condition and results of
operations at those dates and for those periods. The
results of operations for any six month period is not
necessarily indicative of results for a full year. It
is suggested that these financial statements be read in
conjunction with the audited financial statements and
notes thereto included in the company's latest annual
report.
<TABLE>
<S> <C> <C>
-3-
THE TURNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
June 30 December 31,
1997 1996
Assets:
Cash and cash equivalents $116,191 $121,981
Construction receivables:
Due on contracts 333,915 306,109
Retainage 156,540 147,640
Unbilled construction costs and 153,153 142,654
related earnings
Real estate 66,127 69,760
Property and equipment, net 24,265 23,225
Prepaid pension cost 62,771 63,471
Other assets 14,892 19,756
Total assets $927,854 $894,596
Liabilities:
Construction accounts payable and accrued
expenses:
Trade $416,699 $410,304
Retainage 171,090 165,049
Billings in excess of construction 94,817 84,367
costs and related earnings
Notes payable and convertible debenture 75,497 81,805
Deferred income taxes 11,143 11,526
Other liabilities 89,611 81,415
Total liabilities 858,857 834,466
Stockholders' Equity:
Series C, 8.5% cumulative convertible
preferred stock, $1 par value 9 9
Series D, 8.5% cumulative convertible
preferred stock, $1 par value 6 -
Series B, cumulative convertible
preferred stock, $1 par value 845 848
Common stock, $1 par value 5,345 5,291
Paid in capital 44,674 38,388
Retained earnings 24,523 22,580
75,402 67,116
Less: Loan to Employee Stock Ownership (5,884) (6,595)
Plan
Treasury stock, at cost (521) (391)
Total stockholders' equity 68,997 60,130
Total liabilities and stockholders'
equity $927,854 $894,596
See Notes to Consolidated Financial Statements
-4-
THE TURNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(in thousands, except share amounts)
(unaudited) (unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
1997 1996 1997 1996
Value of construction
completed (Note 1) $1,681,624 $1,536,353 $889,286 $802,978
Revenue from construction
contracts $1,470,348 $1,301,692 $770,276 $708,141
Cost of construction contracts 1,433,130 1,270,681 751,273 694,942
Earnings from construction
contracts 37,218 31,011 19,003 13,199
Construction operating expenses 24,420 23,145 12,406 11,739
General & administrative
expenses 5,398 5,245 2,637 2,537
Income (loss) from construction
operations 7,400 2,621 3,960 (1,077)
Losses from real estate
operations (Note 2) (320) (257) (141) (99)
Interest expense (3,569) (3,967) (1,822) (1,992)
Other income 1,683 805 940 396
Income (loss) before income taxes 5,194 (798) 2,937 (2,772)
Income tax provision (benefit) 2,338 (359) 1,322 (1,247)
Net income (loss) 2,856 (439) 1,615 (1,525)
Dividends on preferred stock (913) (914) (456) (457)
Net income (loss) available for
common shareholders 1,943 (1,353) 1,159 (1,982)
Retained earnings,beginning of period 22,580 26,102 23,364 26,731
Retained earnings, end of period $24,523 $24,749 $24,523 $24,749
Net income (loss) per common share:
Primary $0.36 ($0.25) $0.21 ($0.37)
Fully diluted $0.30 (a) $0.18 (a)
Weighted average common and
common equivalent
shares outstanding:
Primary 5,443,396 5,311,250 5,474,263 5,333,668
Fully diluted 6,954,525 6,213,183 6,959,973 6,218,529
(a) Antidilutive
See Notes to Consolidated Financial Statements
-5-
THE TURNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Six Months Ended
June 30,
1997 1996
Cash flows from operating activities:
Net income (loss) $2,856 ($439)
Adjustments to reconcile net income
(loss) to net cash used in
operating activities:
Depreciation and amortization 5,388 6,098
Net periodic pension charge (credit) 700 (650)
Changes in operating assets and liabilities:
Increase in construction receivables (47,205) (74,088)
Increase in construction accounts payable
and accrued expenses 22,886 47,741
Decrease (increase) in other assets 3,640 (5,172)
Increase in other liabilities 8,287 32
Net cash used in operating activities (3,448) (26,478)
Cash flows from investing activities:
Purchases of marketable securities - (140)
Distributions from joint ventures - 845
Proceeds from sale of real estate,net 2,514 54
Increase in real estate (266) (1,600)
Purchases of property & equipment (3,888) (3,229)
Proceeds from sale of property & equipment 125 150
Repayments on notes receivable 891 1,134
Net cash used in investing activities (624) (2,786)
Cash flows from financing activities:
Common stock issued 352 148
Cash dividends to preferred stockholders (1,296) (1,299)
Repayments from loan to ESOP 711 657
Principal payments under capital lease
obligations (1,122) (1,469)
Proceeds from issuance of treasury stock - 49
Purchase of treasury stock (188) -
Proceeds from borrowings - 5,407
Payments on borrowings (175) (5,351)
Net cash used in financing activities (1,718) (1,858)
Net decrease in cash and cash equivalents (5,790) (31,122)
Cash and cash equivalents at beginning of period 121,981 87,969
Cash and cash equivalents at end of period $116,191 $56,847
Noncash investing activities:
Change in unrealized loss on marketable
securities - ($103)
Noncash financing activities:
Conversion of debenture to Series D
convertible preferred stock $6,000 -
Capital lease obligations incurred by
the Company 989 -
See Notes to Consolidated Financial Statements
-6-
THE TURNER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
1. Value of construction completed represents construction costs incurred
and earnings during the period as follows:
Six Months Ended
June 30,
1997 1996
Revenue from construction contracts $1,470,348 $1,301,692
Construction costs incurred by owners in
connection with work under construction
management and similar contracts 211,276 234,661
Value of construction completed $1,681,624 $1,536,353
Three Months Ended
June 30,
1997 1996
Revenue from construction contracts $ 770,276 $ 708,141
Construction costs incurred by owners in
connection with work under construction
management and similar contracts 119,010 94,837
Value of construction completed $ 889,286 $ 802,978
2. Losses from real estate operations consist of revenues and related costs
as follows:
Six Months Ended
June 30,
1997 1996
Real estate sales $2,576 $54
Costs of sales (2,576) (54)
Rental & other income 2,692 4,055
Cost of operations (1,646) (2,361)
Depreciation and amortization expense (1,366) (1,951)
Losses from real estate operations $(320) $(257)
Three Months Ended
June 30,
1997 1996
Real estate sales $2,416 $ -
Costs of sales (2,416) -
Rental & other income 1,343 2,068
Cost of operations (806) (1,170)
Depreciation and amortization expense (678) (997)
Losses from real estate operations $(141) $(99)
3. On March 3, 1997, the Financial Accounting Standards Board
(the "FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share", which will eliminate the
presentation of primary and fully diluted earnings per share
("EPS") and will require presentation of basic and diluted EPS.
The principal change is that common stock equivalents are not
considered in the computation of basic EPS. In addition, the
FASB issued SFAS No. 129, "Disclosure of Information About
Capital Structure" which will establish new standards for
disclosing information about an entity's capital structure.
These statements are effective for years ending after December
15, 1997, early adoption of SFAS No. 128 is not permitted. The
Company will conform with the new standards as of December 31,
1997 which will require the restatement of prior years' EPS.
Management believes that the impact upon adoption will not be
material to the financial statements. The proforma basic EPS
would have been $0.37 and $0.22 and diluted EPS would have been
$0.30 and $0.18 for the six months and three months ended June
30, 1997, respectively, had early adoption been permitted.
-7-
Item 2. Management's Discussion & Analysis of Financial
Condition and Results of Operations
The company reported net income of $1.6 million or $0.21
per common share for the second quarter of 1997, up $3.1
million over the second quarter of 1996. For the first six
months, net income of $2.9 million or $0.36 per common
share was $3.3 million higher than the same period in 1996.
Value of construction completed, which includes in addition
to revenue, construction costs incurred by owners on
construction management and similar projects, increased 11%
in the second quarter of 1997 to $889 million, up $86
million over the second quarter of 1996. For the first six
months, value of construction completed of $1.7 billion was
$145 million, or 9% higher than the same period in 1996.
Revenue from construction contracts increased 9% in the
second quarter of 1997 to $770 million, up $62 million over
the same period in 1996. For the first six months, revenue
from construction contracts of $1.5 billion was $169
million, or 13% higher than the same period in 1996. These
results continue to reflect the growth of the company's non-
residential construction market.
Earnings from construction contracts increased 44% in the
second quarter of 1997 to $19.0 million, up $5.8 million
over the second quarter of 1996. Results for the second
quarter of 1996 include the impact of a $5.0 million loss
relating to a construction project in Minneapolis. For the
first six months, earnings from construction contracts of
$37.2 million were $6.2 million, or 20% higher than the
same period in 1996. The Company's improved earnings
performance continues to reflect improved profitability of
work secured over the past year.
Operating and general and administrative expenses increased
5% in the second quarter of 1997 to $15.0 million, up
$767,000 over the second quarter of 1996. For the first
six months, expenses of $29.8 million were $1.4 million, or
5% higher than the same period in 1996. Due to increased
revenue from construction contracts, expenses as a
percentage of revenue has decreased from 2.18% to 2.03% for
the six months ended June 30, 1997.
Losses from real estate operations were $141,000 and
$320,000 for the three and six month periods ended June 30,
1997, respectively. Rental and other income and the cost
of operations for the six months ended declined 34% and
30%, respectively, as a result of real estate sales in
1996. In the second quarter of 1997, the Company sold its
partnership interest in an office building located in
Bellevue, Washington for $2.4 million.
Interest expense decreased 9% in the second quarter of 1997
to $1.8 million, down $170,000 over the second quarter of
1996. For the first six months, interest expense of $3.6
million was $398,000, or 10% lower than the same period in
1996. Decreased interest expense is due to lower debt
levels in 1997.
Other income increased 137% in the second quarter of 1997
to $940,000, up $544,000 over the second quarter of 1996.
For the first six months, other income of $1.7 million was
$878,000, or 109% higher than the same period in 1996.
Increased other income is due to increased interest income
attributable to higher investment balances maintained by
the Company.
At June 30, 1997, the company's backlog of value of
construction to be completed was $3.96 billion and
anticipated earnings associated with backlog from
construction contracts was $101.8 million, compared to
$4.08 billion and $99.5 million, respectively, at December
31, 1996. Estimated earnings from construction contracts
cannot and should not be used as the basis of predictions
with respect to future net income.
Because of the varying proportion of construction,
construction management and construction consulting
contracts, the relationship of value of work completed and
earnings from construction contracts is not necessarily
meaningful in the short run.
-8-
Cash flows for the six months ended June 30, 1997, resulted
in a net decrease of funds of $5.8 million. Cash flows
used in operating activities amounted to $3.4 million due
primarily to an increase in construction receivables. Cash
flows used in investing activities amounted to $624,000
which is principally due to purchases of property and
equipment. This is partially offset by the sale of the
Company's partnership interest in the aforementioned office
building. Cash flows used in financing activities amounted
to $1.7 million due primarily to principal payments under
capital lease obligations and dividends paid to preferred
stockholders. The company's management believes that the
company's financial condition and available credit
facilities at June 30, 1997 are sufficient to support the
present and prospective levels of the company's operations.
-9-
Part II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibit 11 - Computation of Earnings Per Share
for the six months ended
June 30, 1997 and 1996.
(b)During the six months ended June 30, 1997 no Form
8-K was required to be filed reporting any material
or unusual charges or credits to income, or any
change in independent accountants.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized:
THE TURNER CORPORATION
(Registrant)
Date: August 08, 1997 /s/ H. J. Parmelee
(Signature)
H. J. Parmelee
President
Date: August 08, 1997 /s/ D. G. Sleeman
(Signature)
D. G. Sleeman
Senior Vice President,
Chief Financial Officer
and
Chief Accounting Officer
</TABLE>
Exhibit 11
THE TURNER CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
(unaudited)
Six Months Ended
June 30,
1997 1996
PRIMARY
Weighted average common shares outstanding 5,267 5,234
Common stock equivalents (assuming the use of the
proceeds from their exercise or issuance to acquire
treasury stock using the average quarterly market
price) granted under employee stock option and stock
purchase plans 176 77
Weighted average common and common equivalent shares
outstanding 5,443 5,311
Net income (loss) available to common stockholders
- primary $1,943 ($1,353)
Primary earnings (loss) per common share $0.36 ($0.25)
FULLY DILUTED
Weighted average shares outstanding used in the
computation of primary earnings per share 5,267 5,234
Common stock equivalents (assuming the use of the
proceeds from their exercise or issuance to
acquire treasury stock using the closing market
price) granted under employee stock option and
stock purchase plans 241 131
Conversion of Series D convertible preferred
stock to common stock 600 -
Conversion of Series B convertible preferred stock
to common stock 847 848
Weighted average common and common equivalent shares
outstanding 6,955 6,213
Net income (loss) available to common stockholders
less Series B preferred dividend differential,
net of tax $1,943 ($1,353)
Interest expense on Series D convertible debenture,
net of tax 148 -
Net income (loss) available to common stockholders
- fully diluted $2,091 ($1,353)
Fully diluted earnings (loss) per common share $0.30 (0.22)
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 116,191
<SECURITIES> 0
<RECEIVABLES> 490,455
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 63,477
<DEPRECIATION> 39,212
<TOTAL-ASSETS> 927,854
<CURRENT-LIABILITIES> 0
<BONDS> 75,497
<COMMON> 5,345
0
860
<OTHER-SE> 62,792
<TOTAL-LIABILITY-AND-EQUITY> 906,398
<SALES> 0
<TOTAL-REVENUES> 1,475,616
<CGS> 0
<TOTAL-COSTS> 1,438,718
<OTHER-EXPENSES> 29,818
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,569
<INCOME-PRETAX> 5,194
<INCOME-TAX> 2,338
<INCOME-CONTINUING> 2,856
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,856
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.30
</TABLE>
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 56,847
<SECURITIES> 4,838
<RECEIVABLES> 473,567
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 60,416
<DEPRECIATION> 38,868
<TOTAL-ASSETS> 869,324
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 5,288
0
857
<OTHER-SE> 54,555
<TOTAL-LIABILITY-AND-EQUITY> 869,324
<SALES> 0
<TOTAL-REVENUES> 1,305,801
<CGS> 0
<TOTAL-COSTS> 1,275,047
<OTHER-EXPENSES> 28,390
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,967
<INCOME-PRETAX> (798)
<INCOME-TAX> (359)
<INCOME-CONTINUING> (439)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (439)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> (0.22)
</TABLE>
