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 March 31, 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 May 8,
1997: 5,275,973.
-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 March 31, 1997, the
consolidated statements of operations and retained
earnings and the consolidated statements of cash flows
for the three months ended March 31, 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 three month period is not
necessarily indicative of results for a full year. It
is suggested that these financial statements be read in
conjunction with the audited financial statements and
notes thereto included in the company's latest annual
report.
-3-
THE TURNER CORPORATION AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
March December
31, 31,
1997 1996
Assets:
Cash and cash equivalents $107,504 $121,981
Construction receivables:
Due on contracts 308,232 306,109
Retainage 153,864 147,640
Unbilled construction costs and
related earnings 164,950 142,654
Real estate 69,061 69,760
Property and equipment, net 23,741 23,225
Prepaid pension cost 63,121 63,471
Other assets 15,925 19,756
Total assets $906,398 $894,596
Liabilities:
Construction accounts payable and
accrued expenses:
Trade $394,167 $410,304
Retainage 173,937 165,049
Billings in excess of construction
costs and related earnings 97,523 84,367
Notes payable and convertible
debenture 81,634 81,805
Deferred income taxes 11,334 11,526
Other liabilities 86,439 81,415
Total liabilities 845,034 834,466
Stockholders' Equity:
Series C, 8.5% cumulative convertible
preferred stock, $1 par value 9 9
Series B, cumulative convertible,
preferred stock, $1 par value 848 848
Common stock, $1 par value 5,325 5,291
Paid in capital 38,636 38,388
Retained earnings 23,364 22,580
68,182 67,116
Less: Loan to Employee Stock (6,239) (6,595)
Ownership Plan
Treasury stock, at cost (579) (391)
Total stockholders' equity 61,364 60,130
Total liabilities and stockholders'
equity $906,398 $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)
Three Months Ended
March 31,
1997 1996
Value of construction completed (Note 1) $792,338 $733,375
Revenue from construction contracts $700,072 $593,551
Cost of construction contracts 681,857 575,739
Earnings from construction contracts 18,215 17,812
Construction operating expenses 12,014 11,406
General & administrative expenses 2,761 2,708
Income from construction operations 3,440 3,698
Losses from real estate operations (Note 2) (179) (158)
Interest expense (1,747) (1,975)
Other income 743 409
Income before income taxes 2,257 1,974
Income tax provision 1,016 888
Net income 1,241 1,086
Dividends on preferred stock (457) (457)
Net income available for common stockholders 784 629
Retained earnings, beginning of period 22,580 26,102
Retained earnings, end of period $23,364 $26,731
Earnings per common share:
Primary $0.15 $0.12
Fully diluted $0.13 $0.10
Weighted average common and common equivalent
shares outstanding
Primary 5,388,447 5,293,757
Fully diluted 6,836,372 6,167,462
-5-
THE TURNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Ended
March 31,
1997 1996
Cash flows from operating activities:
Net income $1,241 $1,086
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 2,738 2,929
Net periodic pension charge (credit) 350 (325)
Changes in operating assets and
liabilities:
Decrease (increase) in construction
receivables (30,643) 9,339
Increase (decrease) in construction
accounts payable and accrued
expenses 5,907 (9,920)
Decrease (increase) in other
assets 2,935 (4,226)
Increase (decrease) in other
liabilities 5,024 (176)
Net cash used in operating
activities (12,448) (1,293)
Cash flows from investing activities:
Purchases of marketable securities - (69)
Proceeds from sale of real estate, net 140 54
Increase in real estate (113) (538)
Purchases of property & equipment (1,876) (2,023)
Proceeds from sale of property &
equipment 47 6
Repayments on notes receivable 629 1,092
Net cash used in investing activities (1,173) (1,478)
Cash flows from financing activities:
Common stock issued 282 52
Cash dividends to preferred stockholders (649) (650)
Repayments from loan to ESOP 356 326
Principal payments under capital lease
obligations (570) (726)
Proceeds from issuance of treasury stock - 49
Purchase of treasury stock (188) -
Proceeds from borrowings - 165
Payments on borrowings (87) (129)
Net cash used in financing activities (856) (913)
Net decrease in cash and cash equivalents (14,477) (3,684)
Cash and cash equivalents at beginning of period 121,981 87,969
Cash and cash equivalents at end of period $107,504 $84,285
Noncash investing activities:
Change in unrealized loss on marketable
securities - (82)
Noncash financing activities:
Capital lease obligations incurred by
the Company $486 -
See Notes to Consolidated Financial Statements
-6-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands,except share amounts)
1. Value of construction completed represents construction
costs incurred and earnings during the period as
follows:
Three Months Ended
March 31,
1997 1996
Revenue from construction contracts $700,072 $593,551
Construction costs incurred by owners
in connection with work under construction
management and similar contracts 92,266 139,824
Value of construction complete $792,338 $733,375
2. Losses from real estate operations consist
of revenues and related costs as follows:
Three Months Ended
March 31,
1997 1996
Real estate sales $160 $54
Costs of sales (160) (54)
Rental & other income 1,349 1,987
Cost of operations (840) (1,191)
Depreciation and amortization (688) (954)
Losses from real estate operations ($179) ($158)
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 $0.15 and diluted EPS would
have been $0.13 for the quarter ended March 31, 1997
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 $1.2 million or $0.15
per common share for the three months ended March 31,
1997 compared to net income of $1.1 million or $0.12 per
common share for the corresponding period of 1996.
Value of construction completed, which includes in
addition to revenue, construction costs incurred by
owners on construction management and similar projects,
was $792 million in the first quarter of 1997, an 8%
increase over the first quarter of 1996. The company's
revenue from construction contracts and costs of
construction contracts both increased 18% compared to
the first quarter of 1996 to $700 million and $682
million, respectively. Work under construction
management contracts as a percentage of value of
construction completed continued to decline, from 19% in
the first quarter of 1996 to 12% in the first quarter of
1997. This trend away from construction management
contracts to other types of contracts caused revenue
from construction contracts to increase at a higher rate
than value of construction completed. Earnings from
construction contracts improved to $18.2 million in the
first quarter of 1997 compared to $17.8 million in the
first quarter of 1996. These results reflect the
continued growth of the company's non-residential
construction market.
Operating and general and administrative expenses were
$14.8 million in the first quarter of 1997 compared to
$14.1 million in the first quarter of 1996. This
increase was primarily attributable to increased levels
of construction activity.
Losses from real estate operations for the first quarter
of 1997 increased $21,000 to $179,000 compared to the
first quarter of 1996. Rental and other income and the
cost of operations declined 32% and 29%, respectively,
as a result of real estate sales in 1996.
Interest expense for the first quarter of 1997 decreased
12% to $1.7 million compared to the first quarter of
1996. This decrease is due to lower debt levels in the
first quarter of 1997.
Other income for the first quarter of 1997 amounted to
$743,000 compared to $409,000 realized in the first
quarter of 1996. This is due primarily to increased
interest income attributable to higher investment
balances maintained by the company.
At March 31, 1997, the company's backlog of value of
construction to be completed was $4.12 billion and
anticipated earnings associated with backlog from
construction contracts was $102.1 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.
The company's cash flow for the three months ended March
31, 1997 resulted in a net decrease of funds of $14.5
million. Cash flows used in operating activities
amounted to $12.4 million due primarily to an increase
in construction receivables. Cash flows used in
investing activities amounted to $1.2 million
principally due to purchases of property and equipment.
Cash flows used in financing activities amounted to
$856,000 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 March 31, 1997 are
sufficient to support the present and prospective levels
of the company's operations.
-8-
Part II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibit 11 - Computation of Earnings Per Share
for the three months ended
March 31, 1997 and 1996.
(b)During the three months ended March 31, 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: May 12, 1997 /s/
(Signature)
H. J. Parmelee
President
Date: May 12, 1997 /s/
(Signature)
D. G. Sleeman
Senior Vice President,
Chief Financial Officer
and Chief Accounting Officer
Exhibit 11
THE TURNER CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31,
1997 1996
PRIMARY
Weighted average common shares outstanding 5,259 5,227
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 129 67
Weighted average common and common equivalent shares
outstanding 5,388 5,294
Net income available to common stockholders-primary $784 $629
Primary earnings per common share $0.15 $0.12
FULLY DILUTED
Weighted average shares outstanding used in the
computation of primary earnings per share 5,259 5,227
Common stock equivalents (assuming the use of the
proceeds from their exercise or issuance to acquire
treasury stock using the average market price for
the quarter ended 3/31/97 and the closing market
price for the quarter ended 3/31/96) granted under
employee stock option and stock purchase plans 129 92
Conversion of Series B convertible preferred stock
to common stock 848 849
Conversion of Series D convertible debentures to
common stock 600 -
Weighted average common and common equivalent
shares outstanding 6,836 6,168
Net income available to common stockholders
less Series B preferred dividend differential,
net of tax $784 $629
Interest expense on Series D convertible
debentures, net of tax 74 -
Net income available to common stockholders -
fully diluted $858 $629
Fully diluted earnings per common share $0.13 $0.10
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