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, 1998 Commission File No. 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 Identification No.)
incorporation or organization)
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
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of May 6, 1998: 5,379,506
-2-
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER
THE SECURITIES LITIGATION REFORM ACT OF 1995
Except for historical information contained herein, this Form 10-Q
contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 which involve
certain risks and uncertainties. The Company's actual results or
outcomes may differ materially from those anticipated. Important
factors that the Company believes might cause such differences are
discussed in the cautionary statements accompanying the forward-
looking statements on this Form 10-Q. In assessing forward-looking
statements contained herein, readers are urged to carefully read
those statements. When used on this Form 10-Q, the words
"estimate," "anticipate," "expect," "believe," and similar
expressions are intended to identify forward-looking statements.
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, 1998, the
consolidated statements of operations, the consolidated statement
of changes in stockholders' equity and the consolidated statements
of cash flows for the three months ended March 31, 1998 and 1997
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)
<TABLE>
<CAPTION>
(unaudited)
March 31, December 31,
1998 1997
<S> <C> <C>
Assets:
Cash and cash equivalents $ 162,961 $153,241
Marketable securities 18,977 18,902
Construction receivables:
Due on contracts 374,592 334,802
Retainage 185,432 180,329
Unbilled construction costs and related
earnings 120,173 139,969
Real estate 43,986 44,378
Property and equipment, net 23,207 23,241
Prepaid pension cost 62,504 62,854
Other assets 14,549 14,971
__________ ________
Total assets $1,006,381 $972,687
__________ ________
Liabilities:
Construction accounts payable and
accrued expenses:
Trade $ 463,786 $469,734
Retainage 195,061 189,480
Billings in excess of construction
costs and related earnings 128,461 105,021
Notes payable 21,683 21,719
Deferred income taxes 14,630 14,615
Other liabilities 105,413 95,982
__________ ________
Total liabilities 929,034 896,551
__________ ________
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 6
Series B cumulative convertible preferred
stock, $1 par value 843 845
Common stock, $1 par value 5,514 5,441
Paid in capital 49,122 50,250
Accumulated other comprehensive income 15 -
Retained earnings 29,427 26,436
__________ ________
84,936 82,987
Less: Loan to Employee Stock
Ownership Plan (3,969) (4,349)
Treasury stock, at cost (3,620) (2,502)
__________ ________
Total stockholders' equity 77,347 76,136
__________ ________
Total liabilities and stockholders'
equity $1,006,381 $972,687
__________ ________
</TABLE>
See Notes to Consolidated Financial Statements.
-4-
The Turner Corporation and Subsidiaries
Consolidated Statements of Operations
(in thousands, except share amounts)
<TABLE>
<CAPTION>
(unaudited)
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Value of construction completed (see below) $ 906,438 $ 792,338
_________ _________
Revenue from construction contracts $ 814,435 $ 700,072
Cost of construction contracts 792,859 681,857
_________ _________
Earnings from construction contracts 21,576 18,215
Construction operating expenses 13,671 12,014
General & administrative expenses 2,583 2,761
_________ _________
Income from construction operations 5,322 3,440
Losses from real estate operations (see below) (179) (179)
Interest expense (218) (1,747)
Other income 1,574 743
_________ _________
Income before income taxes 6,499 2,257
Income tax provision 2,925 1,016
_________ _________
Net income $ 3,574 $ 1,241
Earnings per common share:
Basic $0.56 $0.15
Diluted $0.40 $0.13
Weighted average common shares outstanding 5,329,684 5,258,978
Weighted average common and common equivalent
shares outstanding 8,243,685 6,830,701
Value of construction completed consists of
the following:
Revenue from construction contracts $814,435 $700,072
Construction costs incurred by owners in
connection with work under construction
management and similar contracts 92,003 92,266
________ ________
Value of construction completed $906,438 $792,338
________ ________
Real estate operations consist of the
following:
Real estate sales $ - $ 160
Cost of sales - (160)
Rental & other income 458 1,349
Cost of operations (260) (840)
Depreciation and amortization expense (377) (688)
________ ________
Losses from real estate operations $ (179) $ (179)
________ ________
</TABLE>
See Notes to Consolidated Financial Statements.
-5-
The Turner Corporation and Subsidiaries
Consolidated Statement of Changes in Stockholders' Equity
(in thousands, except share amounts)
For the three months ended March 31, 1998
<TABLE>
<CAPTION>
Comprehensive
Total Income
<S> <C> <C>
Retained earnings
Balance at January 1 $26,436
Net income 3,574 $3,574
Cash dividends on Series C preferred stock (191)
Cash dividends on Series D preferred stock (128)
Cash dividends on Series B preferred stock (456)
Tax benefits on Series B preferred stock
dividends 192
______
Balance at March 31 29,427
______
Accumulated other comprehensive income,
net of tax
Balance at January 1 -
Net unrealized gains on marketable securities 15
______
Other comprehensive income 15
______
Comprehensive income $3,589
______
Balance at March 31 15
______
Convertible preferred stock, Series C
Balance at January 1 and March 31 9
______
Convertible preferred stock, Series D
Balance at January 1 and March 31 6
______
Convertible preferred stock, Series B
Balance at January 1 845
Preferred stock retired (2)
_______
Balance at March 31 843
_______
Common stock
Balance at January 1 5,441
Common stock issued 73
________
Balance at March 31 5,514
________
Paid in capital
Balance at January 1 50,250
Excess of proceeds over par value of common
stock issued 909
Income tax benefit from stock options
exercised 21
Retirement of shares (31)
Exercise of stock awards (2,027)
________
Balance at March 31 49,122
________
Loan to Employee Stock Ownership Plan (ESOP)
Balance at January 1 (4,349)
Repayment from loan to ESOP 380
________
Balance at March 31 (3,969)
________
Treasury stock
Balance at January 1 (2,502)
Purchases of treasury stock (1,987)
Treasury stock issued 869
_________
Balance at March 31 (3,620)
_________
Total stockholders' equity $77,347
_________
</TABLE>
See Notes to Consolidated Financial Statements.
-6-
The Turner Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
(unaudited)
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,574 $ 1,241
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,244 2,738
Net periodic pension charge 350 350
Changes in operating assets and liabilities:
Increase in construction receivables (25,097) (30,643)
Increase in construction accounts
payable and accrued expenses 23,073 5,907
Decrease (increase) in other assets (1,471) 2,935
Increase in other liabilities 9,897 5,024
______________________________________________________________________
Net cash provided by (used in) operating
activities 12,570 (12,448)
______________________________________________________________________
Cash flows from investing activities:
Purchases of marketable securities (11,865) -
Proceeds from sale of marketable securities 11,817 -
Distributions from joint ventures 18 -
Proceeds from sale of real estate, net - 140
Increase in real estate - (113)
Purchases of property & equipment (1,259) (1,876)
Proceeds from sale of property & equipment 5 47
Repayments on notes receivable 325 629
______________________________________________________________________
Net cash used in investing activities (959) (1,173)
______________________________________________________________________
Cash flows from financing activities:
Common stock issued 982 282
Cash dividends to preferred stockholders (775) (649)
Repayments from loan to ESOP 380 356
Principal payments under capital lease
obligations (491) (570)
Purchases of treasury stock (1,987) (188)
Payments on borrowings - (87)
______________________________________________________________________
Net cash used in financing activities (1,891) (856)
______________________________________________________________________
Net increase (decrease) in cash and cash
equivalents 9,720 (14,477)
Cash and cash equivalents at beginning of
period 153,241 121,981
______________________________________________________________________
Cash and cash equivalents at end of period $162,961 $107,504
______________________________________________________________________
Noncash investing activities:
Note receivable from sale of net assets of
construction affiliate $ 1,200 $ -
Change in unrealized gain on marketable
securities 15 -
Noncash financing activities:
Treasury stock issued under stock-based
compensation plans 869 -
Capital lease obligations incurred by the
Company 455 486
______________________________________________________________________
</TABLE>
See Notes to Consolidated Financial Statements.
-7-
The Turner Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share amounts)
<TABLE>
<CAPTION>
1. The following table reconciles the components of basic and
diluted earnings per share:
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
____________________________________________________________________
Numerator:
Net income $3,574 $1,241
Preferred stock dividends, net of tax
benefits (583) (457)
______ ______
Basic earnings per common share - income
available for common stockholders 2,991 784
______ ______
Effect of dilutive securities:
Series C preferred stock dividends 191 -
Series D preferred stock dividends 128 -
Series B preferred stock dividends,
net of tax benefits 264 266
Series B preferred stock dividend
differential (264) (266)
Interest expense on convertible debenture,
net of tax - 74
______ ______
319 74
______ ______
Diluted earnings per common share - income
available for common stockholders $3,310 $ 858
______ ______
Denominator:
Basic earnings per common share - Weighted
average common shares outstanding 5,329,684 5,258,978
_________ _________
Effect of dilutive securities:
Stock-based compensation plans 469,413 123,798
Convertible preferred stock, Series C 1,000,000 -
Convertible preferred stock, Series D 600,000 -
Convertible debenture - 600,000
Convertible preferred stock, Series B 844,588 847,925
_________ _________
2,914,001 1,571,723
Diluted earnings per common share-
weighted average common and common
equivalent shares outstanding 8,243,685 6,830,701
_________ _________
Basic earnings per common share $0.56 $0.15
Diluted earnings per common share $0.40 $0.13
</TABLE>
-8-
2. Accounting Pronouncements
In February 1998, the Financial Accounting Standards Board (the
"FASB") issued Statement of Financial Accounting Standards ("SFAS")
No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits." This statement revises employers'
disclosures about pension and other postretirement benefit plans.
The Statement does not change the measurement or recognition of
those plans. The Statement standardizes the disclosure
requirements for pensions and other postretirement benefits to the
extent practicable, requires additional information on changes in
the benefit obligations and fair value of plan assets that will
facilitate financial analysis, and eliminates certain disclosures.
The disclosure requirements for this statement are effective for
fiscal years beginning after December 15, 1997. The company will
conform with the new standard as of December 31, 1998.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This statement
requires that the company report financial and descriptive
information about its reportable operating segments in financial
statements issued to shareholders for interim and annual periods.
The Statement also establishes standards for related disclosures
about products and services, geographic areas and major customers.
Under this Statement, operating segments are components of an
enterprise about which separate financial information is available
that is regularly evaluated by the enterprise's chief operational
decision-maker in deciding how to allocate resources and in
assessing performance. This statement is effective for fiscal
years beginning after December 15, 1997. The company will conform
with the new standard as of December 31, 1998.
In July 1996, the Emerging Issues Task Force reached a consensus,
on Issue 96-14, "Accounting for the Costs Associated with
Modifying Computer Software for the Year 2000," which requires that
costs associated with modifying computer software for the year 2000
be expensed as incurred. Management has evaluated the impact of
Year 2000 issues on the Company's business and operations. The
Company believes, based upon its internal reviews and other
factors, that future external and internal costs to be incurred
relating to the modification of internal-use software for the year
2000 will not have a material effect on the Company's results of
operations or financial position.
-9-
Item 2 Management's Discussion & Analysis of Financial Condition
and Results of Operations
The company reported net income of $3.6 million or $0.56 basic
and $0.40 diluted earnings per share for the quarter ended March
31, 1998. This compares to net income of $1.2 million, or $0.15
basic and $0.13 diluted earnings per share for the first quarter of
1997.
Value of construction completed, which includes in addition to
revenue, construction costs incurred by owners on construction
management and similar projects, increased 14% in the first quarter
of 1998 to $906 million, up $114 million over the first quarter of
1997. Revenue from construction contracts increased 16% in the
first quarter of 1998 to $814 million, also up $114 million over
the same period in 1997. This growth reflects the continuation of
a strong market across the country in non-residential construction.
Earnings from construction contracts improved in the first
quarter of 1998 to $21.6 million compared to $18.2 million in the
first quarter of 1997. As a percentage of revenue, earnings from
construction contracts increased from 2.60% to 2.65%. These
results reflect not only the growth in construction revenue but
also an improvement in margins for new contracts secured over the
past several years.
Construction operating expenses, which are costs incurred by the
company's construction operating units and subsidiaries that are
not directly attributable and charged to construction contracts,
increased 14% from the first quarter of 1997 to $13.7 million in
the first quarter of 1998. This increase was primarily
attributable to increased levels of construction activity.
General and administrative expenses, representing corporate
overhead expenses, decreased 6% in the first quarter of 1998 to
$2.6 million, down $178,000 from the first quarter of 1998.
Losses from real estate operations were $179,000 for the first
quarter of 1998, unchanged from a year ago. Rental and other
income and the cost of operations for the first quarter of 1998,
declined 66% and 69%, respectively, as a result of real estate
sales over the past twelve months.
Interest expense decreased 88% in the first quarter of 1998 to
$218,000, down $1.5 million from the first quarter of 1997. This
decrease was due primarily to lower debt levels in 1998. In
December 1997, the Company repaid its $39.5 million 11.74% Senior
Notes.
Other income increased 112% in the first quarter of 1998 to $1.6
million, up $831,000 over the first quarter of 1997. Increased
other income is due to increased interest income attributable to
higher investment balances maintained by the Company.
At March 31, 1998, the company's backlog of value of construction
to be completed was $4.15 billion and anticipated earnings
associated with backlog from construction contracts was $105.5
million, compared to $4.01 billion and $104.7 million,
respectively, at December 31, 1997. Estimated earnings from
construction contracts cannot and should not be used as the basis
of predictions with respect to future net income.
-10-
Item 2 Management's Discussion & Analysis of Financial Condition
and Results of Operations (continued)
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.
Cash flows for the first quarter of 1998, resulted in a net
increase of funds of $9.7 million. Cash flows provided by
operating activities amounted to $12.6 million due primarily to an
increase in construction activity. Cash flows used in investing
activities amounted to $959,000 which is principally due to
purchases of property and equipment. Cash flows used in financing
activities amounted to $1.9 million due primarily to the purchases
of treasury stock. In November 1997, the Company announced the
adoption of a stock repurchase program under which up to 5 percent
of the Company's common stock may be repurchased. Repurchases may
be made from time to time in the open market or in negotiated
transactions as market and economic conditions warrant and may be
discontinued at any time. The company will fund repurchases
through internally generated funds. The company's management
believes that the company's financial condition and available
credit facilities at March 31, 1998 are sufficient to support the
present and prospective levels of the company's operations.
-11-
Part II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibit 11 -Incorporated herein by reference to Note 1
to the Company's Consolidated Financial Statements.
(b) During the three months ended March 31, 1998 no
Form 8-K was required to be filed.
SIGNATURES
Pursuant to the requirements of the Securities exchange act of
1934, the registratnt has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized:
THE TURNER CORPORATION
(Registrant)
Date: May 07, 1998 /s/ H. J. Parmelee
(Signature)
H. J. Parmelee
President
Date: May 07, 1998 /s/ D. G. Sleeman
(Signature)
D. G. Sleeman
Senior Vice President,
Chief Financial Officer and
Chief Accounting Officer
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 162,961
<SECURITIES> 18,977
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 64,770
<DEPRECIATION> 41,563
<TOTAL-ASSETS> 1,006,381
<CURRENT-LIABILITIES> 0
<BONDS> 21,683
0
858
<COMMON> 5,514
<OTHER-SE> 70,975
<TOTAL-LIABILITY-AND-EQUITY> 1,006,381
<SALES> 0
<TOTAL-REVENUES> 814,893
<CGS> 0
<TOTAL-COSTS> 793,496
<OTHER-EXPENSES> 16,254
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 218
<INCOME-PRETAX> 6,499
<INCOME-TAX> 2,925
<INCOME-CONTINUING> 3,574
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,574
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0.40
</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> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 107,504
<SECURITIES> 0
<RECEIVABLES> 627,046
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 63,121
<DEPRECIATION> 39,380
<TOTAL-ASSETS> 906,398
<CURRENT-LIABILITIES> 0
<BONDS> 81,634
0
857
<COMMON> 5,325
<OTHER-SE> 55,182
<TOTAL-LIABILITY-AND-EQUITY> 906,398
<SALES> 0
<TOTAL-REVENUES> 701,581
<CGS> 0
<TOTAL-COSTS> 683,545
<OTHER-EXPENSES> 14,775
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,747
<INCOME-PRETAX> 2,257
<INCOME-TAX> 1,016
<INCOME-CONTINUING> 1,241
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,241
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.13
</TABLE>
