<PAGE>
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, 1999 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 August 6, 1999: 9,178,156.
<PAGE>
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.
When used on this Form 10-Q, the words "estimate," "anticipate," "expect,"
"believe," and similar expressions are intended to identify forward-looking
statements. These forward-looking statements are subject to risks,
uncertainties and assumptions including, among other things, the following:
. the accuracy of our estimates as to future revenues from and future costs to
be incurred on construction projects;
. our dependence on construction activity in the markets we serve; and
. the impact of competition and economic conditions on our business.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this report might not occur.
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, 1999, the consolidated
statements of operations for the six months and three months ended June 30, 1999
and 1998, the consolidated statement of stockholders' equity for the six months
ended June 30, 1999 and the consolidated statements of cash flows for the six
months ended June 30, 1999 and 1998 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 and three month period are 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 Turner's latest annual report.
2
<PAGE>
The Turner Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
(unaudited)
June 30, December 31,
1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 245,378 $ 168,879
Marketable securities 127,965 112,766
Construction receivables:
Due on contracts 468,086 358,502
Retainage 215,641 188,148
Unbilled construction costs and related earnings 175,542 159,093
Real estate 39,686 40,494
Property and equipment, net 22,890 22,298
Prepaid pension cost 68,537 67,066
Other assets 13,880 11,817
---------------- ---------------
Total assets $1,377,605 $1,129,063
================ ===============
Liabilities
Construction accounts payable and accrued expenses:
Trade $ 628,182 $ 540,435
Retainage 251,526 216,077
Billings in excess of construction costs and related earnings 188,253 128,029
Notes payable 19,398 18,891
Deferred income taxes 18,237 18,417
Other liabilities 167,521 118,448
---------------- ---------------
Total liabilities 1,273,117 1,040,297
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 - 839
Common stock, $1 par value 9,717 8,383
Paid in capital 48,295 45,392
Retained earnings 58,921 44,113
---------------- ---------------
116,948 98,742
Less: Loan to Employee Stock Ownership Plan (859) (1,832)
Unearned compensation (2,606) -
Treasury stock, at cost (8,995) (8,144)
---------------- ---------------
Total stockholders' equity 104,488 88,766
---------------- ---------------
Total liabilities and stockholders' equity $1,377,605 $1,129,063
================ ===============
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
The Turner Corporation and Subsidiaries
Consolidated Statements of Operations
(in thousands, except share amounts)
<TABLE>
<CAPTION>
(unaudited) (unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Value of construction completed (see below) $2,215,178 $1,940,054 $1,287,166 $1,033,616
- ----------------------------------------------------------------------------------------------------------------
Revenue from construction contracts $2,111,792 $1,737,854 $1,237,656 $ 923,419
Cost of construction contracts 2,050,687 1,694,031 1,204,341 901,172
---------------- ------------ ------------ ------------
Earnings from construction contracts 61,105 43,823 33,315 22,247
Construction operating expenses 31,404 27,765 16,267 14,094
General and administrative expenses 7,204 5,213 3,632 2,630
---------------- ------------ ------------ ------------
Income from construction operations 22,497 10,845 13,416 5,523
Losses from real estate operations (see below) (376) (305) (228) (126)
Interest expense (411) (458) (217) (240)
Interest and other income, net 5,337 3,894 2,803 2,320
---------------- ------------ ------------ ------------
Income before income taxes 27,047 13,976 15,774 7,477
Income tax provision 11,630 6,289 6,783 3,364
---------------- ------------ ------------ ------------
Net income $ 15,417 $ 7,687 $ 8,991 $ 4,113
================ ============ ============ ============
Earnings per common share:
Basic $ 1.88 $ 0.81 $ 1.09 $ 0.44
Diluted $ 1.22 $ 0.58 $ 0.71 $ 0.31
Weighted average common shares outstanding 7,896,322 8,042,785 7,898,628 8,090,513
Weighted average common and common equivalent
shares outstanding 12,129,485 12,345,591 12,132,367 12,392,495
- ----------------------------------------------------------------------------------------------------------------
Value of construction completed consists
of the following:
Revenue from construction contracts $2,111,792 $1,737,854 $1,237,656 $ 923,419
Construction costs incurred by owners in
connection with work under construction
management and similar contracts 103,386 202,200 49,510 110,197
---------------- ------------ ------------ ------------
Value of construction completed $2,215,178 $1,940,054 $1,287,166 $1,033,616
================ ============ ============ ============
Real estate operations consist of the following:
Rental and other income $ 929 $ 952 $ 471 $ 494
Cost of operations (550) (503) (321) (243)
Depreciation and amortization expense (755) (754) (378) (377)
---------------- ------------ ------------ ------------
Losses from real estate operations $ (376) $ (305) $ (228) $ (126)
================ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
The Turner Corporation and Subsidiaries
Consolidated Statement of Stockholders' Equity
For the Six Months Ended June 30, 1999
(in thousands, except share amounts)
<TABLE>
<CAPTION>
(unaudited)
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Convertible preferred stock, Series C
Balance as of January 1 and June 30 9,000 $ 9
--------------- ----------------
Convertible preferred stock, Series D
Balance as of January 1 and June 30 6,000 6
--------------- ----------------
Convertible preferred stock, Series B
Balance as of January 1 838,731 839
Preferred stock retired (1,601) (2)
Conversion of Series B preferred stock to common stock (837,130) (837)
--------------- ----------------
Balance as of June 30 - -
--------------- ----------------
Common stock
Balance as of January 1 8,382,581 8,383
Common stock issued 78,320 78
Conversion of Series B preferred stock to common stock 1,255,695 1,256
--------------- ----------------
Balance as of June 30 9,716,596 9,717
--------------- ----------------
Paid in capital
Balance as of January 1 45,392
Excess of proceeds over par value of common stock issued 658
Conversion of Series B preferred stock to common stock (419)
Retirement of Series B preferred stock (43)
Tax benefits from stock options exercised 101
Issuance of stock awards 2,606
----------------
Balance as of June 30 48,295
----------------
Retained earnings
Balance as of January 1 44,113
Net income 15,417
Dividends on Series B preferred stock (1,050)
Tax benefits on Series B preferred stock dividends 441
----------------
Balance as of June 30 58,921
----------------
Loan to Employee Stock Ownership Plan (ESOP)
Balance as of January 1 (1,832)
Repayment from loan to ESOP 973
----------------
Balance as of June 30 (859)
----------------
Unearned compensation
Balance as of January 1 -
Issuance of stock awards (2,606)
----------------
Balance as of June 30 (2,606)
----------------
Treasury stock
Balance as of January 1 503,434 (8,144)
Purchases of treasury stock 55,932 (866)
Treasury stock issued (976) 15
--------------- ----------------
Balance as of June 30 558,390 (8,995)
--------------- ----------------
Total stockholders' equity $104,488
================
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
The Turner Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
(unaudited)
Six Months Ended
June 30,
1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 15,417 $ 7,687
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expense 4,527 4,635
Net periodic pension charge (credit) (1,471) 700
Changes in operating assets and liabilities:
Increase in construction receivables (153,526) (21,597)
Increase in construction accounts payable and accrued expenses 183,420 71,686
Increase in other assets (2,761) (2,772)
Increase in other liabilities 49,405 7,356
-------------- --------------
Net cash provided by operating activities 95,011 67,695
-------------- --------------
Cash flows from investing activities:
Purchases of marketable securities (55,230) (24,391)
Proceeds from sale of marketable securities 40,031 14,944
Distributions from real estate joint ventures - 18
Purchases of property & equipment (2,991) (2,204)
Proceeds from sale of property & equipment 297 27
Repayments on notes receivable 692 458
-------------- --------------
Net cash used in investing activities (17,201) (11,148)
-------------- --------------
Cash flows from financing activities:
Common stock issued 736 1,585
Cash dividends to preferred stockholders (1,050) (1,547)
Principal payments under capital lease obligations (1,104) (1,001)
Purchases of treasury stock (866) (2,014)
Repayments from loan to ESOP 973 762
-------------- --------------
Net cash used in financing activities (1,311) (2,215)
-------------- --------------
Net increase in cash and cash equivalents 76,499 54,332
Cash and cash equivalents at beginning of period 168,879 153,241
-------------- --------------
Cash and cash equivalents at end of period $245,378 $207,573
============== ==============
- ----------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 345 $ 378
Income taxes, net 12,116 6,982
Noncash investing activities:
Note receivable from sale of net assets of construction
affiliate - 1,200
Noncash financing activities:
Conversion of Series B convertible preferred stock to common
stock 1,256 -
Treasury stock issued under stock-based compensation plans - 869
Issuance of stock awards 2,606 -
Capital lease obligations incurred by the company 1,611 1,284
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE>
The Turner Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share amounts; unaudited)
1. Earnings Per Share
The following table reconciles the components of basic and diluted earnings per
common share for the six months ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
Numerator:
Net income $15,417 $7,687
Preferred stock dividends, net of tax benefits (609) (1,165)
--------------- ---------------
Income available to common stockholders - Basic 14,808 6,522
--------------- ---------------
Effect of dilutive securities:
Series C preferred stock dividends - 383
Series D preferred stock dividends - 255
Series B preferred stock dividends, net of tax benefits 609 527
Series B preferred stock dividend differential (609) (527)
--------------- ---------------
- 638
--------------- ---------------
Income available to common stockholders - Diluted $14,808 $7,160
=============== ===============
Denominator:
Weighted average common shares outstanding - Basic 7,896,322 8,042,785
--------------- ---------------
Effect of dilutive securities:
Stock-based compensation plans 582,898 638,538
Series C convertible preferred stock 1,500,000 1,500,000
Series D convertible preferred stock 900,000 900,000
Series B convertible preferred stock 1,250,265 1,264,268
--------------- ---------------
4,233,163 4,302,806
--------------- ---------------
Weighted average common and common equivalent shares
outstanding - Diluted 12,129,485 12,345,591
=============== ===============
Basic earnings per common share $ 1.88 $ 0.81
Diluted earnings per common share $ 1.22 $ 0.58
</TABLE>
2. Comprehensive Income
In 1998, Turner adopted SFAS No. 130, "Reporting Comprehensive Income." This
statement establishes standards for reporting and display of comprehensive
income and its components in a separate financial statement. Comprehensive
income includes net income plus other comprehensive income, which includes
unrealized gains and losses on marketable securities that are "available for
sale," changes in additional minimum pension liabilities and changes in foreign
currency translation adjustments. Turner has not presented statements of
comprehensive income, as other comprehensive income was not material.
7
<PAGE>
3. Operating Segment Information
Turner's one reportable operating segment is our construction segment;
however, information regarding the real estate segment is also presented. The
construction segment provides general contracting, construction management, and
consulting services.
The Consolidated Statements of Operations provides information regarding
segment profit/loss and segment revenues. The value of construction completed
related to Turner's products and services provided by our construction segment
was:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
------------- -------------
<S> <C> <C>
General contracting $2,096,529 $1,699,953
Construction management 105,285 230,236
Consulting 13,364 9,865
------------- -------------
Construction segment total $2,215,178 $1,940,054
============= =============
</TABLE>
Turner's revenue and assets predominantly relate to our United States
operations, with immaterial amounts related to foreign operations.
In 1998, Turner adopted Statement of Financial Accounting Standard ("SFAS")
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
which revised the disclosures about our operating segments. Turner has
presented quarterly information to conform to the new disclosure requirements.
4. Conversion of the Series B Preferred Stock
On June 30, 1999, the Series B convertible preferred stock, held by our ESOP,
was converted into common stock. The number of shares of common stock issued
was 1,255,695. The loan to fund the ESOP was repaid to Turner. Additionally,
Turner repaid the bank loan used to fund Turner's loan to the ESOP. Final
payments on both loans were made on July 7, 1999.
We plan to terminate the ESOP after all regulatory approvals have been
obtained. In connection with the termination, the plan will distribute to
plan participants the common stock to which they are entitled. We anticipate
that participants, in turn, will have the opportunity to roll-over their
distribution into our Section 401(k) tax deferred savings plan.
8
<PAGE>
Item 2 Management's Discussion & Analysis of Financial Condition
- ------ and Results of Operations
Results of Operations
The following table summarizes the consolidated results of operations and the
related percentages of revenues for the three months ended June 30, 1999 and
1998.
<TABLE>
<CAPTION>
1999 1998
------------------------------- -------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Revenue from construction contracts $1,237,656 100.00% $923,419 100.00%
Cost of construction contracts 1,204,341 97.31% 901,172 97.59%
------------------------------- -------------------------------
Earnings from construction contracts 33,315 2.69% 22,247 2.41%
Construction operating expenses 16,267 1.32% 14,094 1.53%
General and administrative expenses 3,632 0.29% 2,630 0.28%
------------------------------- -------------------------------
Income from construction operations 13,416 1.08% 5,523 0.60%
Losses from real estate operations (228) (0.02%) (126) (0.01%)
Interest expense (217) (0.02%) (240) (0.03%)
Interest and other income, net 2,803 0.23% 2,320 0.25%
------------------------------- -------------------------------
Income before income taxes 15,774 1.27% 7,477 0.81%
Income tax provision 6,783 0.54% 3,364 0.36%
------------------------------- -------------------------------
Net income $ 8,991 0.73% $ 4,113 0.45%
=============================== ===============================
</TABLE>
Revenue from construction contracts was $1.2 billion for the second quarter of
1999 versus $923 million for the same period in 1998, an increase of 34%. For
the first six months of 1999, revenue from construction contracts was $2.1
billion versus $1.7 billion for the first six months of 1998, an increase of
22%. These results not only reflect the continuation of a strong general
building construction market across the United States but also our efforts in
penetrating those regions and industry sectors which offer significant growth
potential. The value of construction completed was $2.2 billion for the first
six months of 1999 versus $1.9 billion for the first six months of 1998, an
increase of 14%.
Earnings from construction contracts were $33.3 million for the second quarter
of 1999 versus $22.2 million for the same period in 1998, an increase of 50%.
For the first six months of 1999, earnings from construction contracts were
$61.1 million versus $43.8 million for the first six months of 1998, an increase
of 39%. The increase in earnings reflects the current favorable market
conditions as well as the improvement in margins for new contracts secured over
the past several years. As a percentage of revenue, earnings from construction
contracts increased to 2.69% for the second quarter of 1999 from 2.41% for the
same period in 1998.
Construction operating expenses, which are costs incurred by Turner's
construction operating units and subsidiaries that are not directly attributable
and charged to construction contracts, were $16.3 million for the second quarter
of 1999 versus $14.1 million for the same period in 1998, an increase of 15%.
For the first six months of 1999, construction operating expenses were $31.4
million versus $27.8 million for the first six months of 1998, an increase of
13%. We attribute the increase primarily to an increase in expenses related to
Turner's incentive compensation plan as a result of improved earnings.
General and administrative expenses, representing corporate overhead expenses,
were $3.6 million for the second quarter of 1999 versus $2.6 million for the
same period in 1998, an increase of 38%. For the first six months of 1999,
general and administrative expenses were $7.2 million versus $5.2 million for
the first six months of 1998, an increase of 38%. The increase is also due
primarily to an increase in expenses related to Turner's incentive compensation
plan as a result of improved earnings.
Income from construction operations, reflecting the factors discussed above,
was $13.4 million for the second quarter of 1999 versus $5.5 million for the
same period in 1998, an increase of 143%. For the first six months of 1999,
income from construction operations was $22.5 million versus $10.8 million for
the first six months of 1998, an increase of 107%. As a percentage of earnings
from construction contracts, income from construction operations was 40% for the
second quarter of 1999 versus 25% for the same period in 1998.
9
<PAGE>
Losses from real estate operations were $0.2 million for the second quarter of
1999 versus $0.1 million for the same period in 1998. For the first six months
of 1999, losses from real estate operations were $0.4 million versus $0.3
million for the first six months of 1998. Losses from real estate operations
included depreciation and amortization expense of $0.4 million for the second
quarter of 1999 and the second quarter of 1998. Because these are non-cash
expenses, Turner's real estate operations generated positive cash flow after
payments of interest on real estate debt for each of these quarters.
Interest expense was $0.2 million for the second quarter of 1999 virtually
unchanged compared to the same period in 1998. For the first six months of
1999, interest expense was $0.4 million versus $0.5 million for the first six
months of 1998.
Interest and other income, net was $2.8 million for the second quarter of 1999
versus $2.3 million for the same period in 1998, an increase of 21%. For the
first six months of 1999, interest and other income, net was $5.3 million versus
$3.9 million for the first six months of 1998, an increase of 37%. This
increase is due to higher investment balances of cash and cash equivalents and
marketable securities. We have been able to maintain these higher investment
balances due to increased construction activity, higher levels of profitability
and cash management practices.
Net income was $9.0 million for the second quarter of 1999 versus $4.1 million
for the same period in 1998, an increase of 119%. For the first six months of
1999, net income was $15.4 million versus $7.7 million for the first six months
of 1998, an increase of 101%. Basic earnings per share were $1.09 for the
second quarter of 1999 versus $0.44 for the same period in 1998; both after
taking into account preferred stock dividends. Diluted earnings per share were
$0.71 for the second quarter of 1999 versus $0.31 for the same period in 1998.
Value of new contracts secured was $1.4 billion for the second quarter of 1999
versus $1.5 billion for the same period in 1998. New contracts secured in the
second quarter included the new Denver Broncos Stadium in Denver, Colorado; a
major fit-out assignment for the Metropolitan Transportation Authority at 2
Broadway in New York City; multiple biotech research projects for the Genzyme
Corporation at their Framingham, Massachusetts campus, and Wayne State
University Fitness Center in Detroit Michigan.
The backlog of value of construction to be completed was $5.0 billion as of
June 30, 1999 versus $4.5 billion as of December 31, 1998, an increase of 12%.
Anticipated earnings associated with backlog from construction contracts stood
at a record $128.1 million as of June 30, 1999 versus $113.2 million as of
December 31, 1998, an increase of 13%. We attribute the improvement to our
increased market penetration in various general building market sectors in which
we compete and our enhanced sales and marketing effort.
Estimated earnings from construction contracts, which represents the
anticipated earnings associated with the estimated value of construction to be
completed, cannot and should not be used as the basis for predicting future
operating results. In addition, because of the varying proportion of general
contracting, construction management, and construction consulting contracts, the
relationship of value of work completed and earnings from construction contracts
are not necessarily meaningful in the short run.
Financial Condition
As of June 30, 1999, Turner had cash, cash equivalents and marketable
securities of $373.3 million, compared with $281.6 million as of December 31,
1998 and $172.1 million as of December 31, 1997. Management believes Turner's
current cash position, in addition to cash flows from construction activities,
its $45.0 million revolving credit facility and amounts available from overnight
credit facilities, will be sufficient to support Turner's short-term and
foreseeable long-term requirements.
Cash flows for the six months ended June 30, 1999 resulted in a net increase
of funds of $76.5 million. Cash flows provided by operating activities amounted
to $95.0 million due primarily to an increase in construction activity and the
timing of associated receipts and disbursements. Cash flows used in investing
activities amounted to $17.2 million, principally due to purchases and sales of
marketable securities. Cash used in financing activities amounted to $1.3
million and was primarily attributable to principal payments under capital lease
obligations.
10
<PAGE>
Turner has a $45.0 million unsecured revolving credit facility that can be
used for borrowings for general corporate purposes. The facility matures in
2001 and contains two one-year extension options. Turner also maintains $8.5
million of overnight credit facilities with various banks. Turner had no
borrowings under these facilities during 1997, 1998 or the first six months of
1999.
Year 2000
The Year 2000 issue results from computer programs and circuitry that do not
differentiate between the year 1900 and the year 2000 because they are written
using two- rather than four-digit dates to define the applicable year. If not
corrected, many computer applications and date-sensitive devices could fail or
create erroneous results before, on or after January 1, 2000. The Year 2000
issue affects virtually all companies and organizations, including Turner.
Turner has developed, and is implementing a plan, the goal of which is to
assure that Turner will achieve Year 2000 readiness in time to avoid significant
Year 2000 failures. We are proceeding with our assessment of the Year 2000
readiness issues for our computer systems, business processes, facilities and
equipment to assure their continued functionality. We are also continuing our
assessment of the readiness of external entities, including subcontractors,
suppliers, vendors, and customers that interface with us. To that end, Turner
has taken the following actions:
. Computer Systems. Turner periodically upgrades its computer systems as its
needs require. We have substantially completed upgrading our software for
our financial, project management and human resources computer systems.
Vendors of our new computer systems certified them to be Year 2000
compliant. Turner's computer hardware is limited to stand-alone and
networked desk-top systems. Turner has assessed the Year 2000 readiness of
its computer hardware and potential risks to Turner's operations, and
intends to replace those systems that may pose a risk to Turner's
operations in 1999. With regard to computer equipment that is not Year
2000 compliant, but does not pose a risk to Turner, as, for example, a
desk-top computer used for word processing, Turner intends in 1999 to
replace that equipment as part of routine upgrading.
. Business Processes. Turner has and continues to assess the potential
impact of Year 2000 on its business processes. Internally, Turner has
prepared and distributed a memorandum outlining a plan of preparedness to
all of Turner's financial managers in our headquarters and business units.
The plan requires each manager to assess the risks of Year 2000 issues at
his or her business unit or department, and it describes Turner's policies
on testing, upgrading, and dealing with third parties as they relate to
Year 2000. Each manager is required to report back to headquarters on his
or her assessment of the unit's readiness. We have modified our contract
terms for any subcontractor hired to install or construct structures or
provide equipment that may be affected by Year 2000 issues. The contract
terms require the subcontractor or vendor to represent and warrant that the
work performed by the subcontractor or the equipment sold by the vendor is
Year 2000 compliant. The subcontractor or the vendor also must agree to
indemnify Turner and the owner of the building from any claims arising out
of the breach of such representation and warranty. Turner is in the
process of contacting its key suppliers and subcontractors regarding their
Year 2000 readiness.
. Facilities and Equipment. Turner does not actually own or operate
significant construction machinery, but we have implemented a policy of
inquiring as to the Year 2000 compliance of subcontractors' equipment. We
are also assessing computer related facilities and equipment in our New
York headquarters and other offices. The cost of our phone switch upgrade
was under $50,000. Although Turner has substantially completed upgrading
its e-mail and networking software and hardware, we will still be
vulnerable to any Year 2000 problems incurred by third-party
telecommunications companies.
The costs incurred for upgrading our computer systems are being funded with
cash flows from operations. The costs incurred principally relate to new
systems being implemented to improve business functionality rather than solely
to address Year 2000 issues. These costs have not been and are not expected to
be material in relation to Turner's overall results of operations or financial
position.
11
<PAGE>
Turner believes that its internal computer systems, facilities, and equipment
will be Year 2000 compliant. However, there is no assurance that all of the
planned upgrades will be completed in time or function as intended. As we have
no contingency plan other than to deal as expeditiously as possible with
situations if and when they arise, we may experience significant disruptions,
the cost of which we are unable to estimate at this time. We also believe that
disruptions in some of our subcontractors' operations will not significantly
affect our projects because we have relationships with other subcontractors with
similar expertise. We cannot assume, however, that an adequate supply of
subcontractors will be available.
12
<PAGE>
Part II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
- ------
(a) Exhibits:
<TABLE>
<CAPTION>
No. Description
-- -----------
<S> <C> <C>
10(d)(iii) Agreement, dated as of April 22,1999, Incorporated herin by reference to exhibits filed
among Karl Steiner Holding AG ("KSH"), with Amendment No. 4 to Schedule 13D, filed
EBS Holding AG, PSW Holding AG, July 6, 1999, by EBSPSW Holding AG and others.
EBSPSW Holding AG and Turner.
10(d)(iv) Letter Agreement, dated April 8, 1999, Incorporated herin by reference to exhibits filed
between KSH and Turner. with Amendment No. 4 to Schedule 13D, filed
July 6, 1999, by EBSPSW Holding AG and others.
11 Computation of earnings per share. Incorporated herein by reference to Note 1 to the
Company's Consolidated Financial Statements.
</TABLE>
(b) During the six months ended June 30, 1999, no Form 8-K was filed.
13
<PAGE>
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 10, 1999 /s/ R. E. Fee
-------------------------------
(Signature)
R. E. Fee
President and
Chief Operating Officer
Date: August 10, 1999 /s/ D. G. Sleeman
-------------------------------
(Signature)
D. G. Sleeman
Senior Vice President,
Chief Financial Officer and
Chief Accounting Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains certain summay 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-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 245,378
<SECURITIES> 127,965
<RECEIVABLES> 859,269
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 71,240
<DEPRECIATION> 48,350
<TOTAL-ASSETS> 1,377,605
<CURRENT-LIABILITIES> 0
<BONDS> 19,398
0
15
<COMMON> 9,717
<OTHER-SE> 94,756
<TOTAL-LIABILITY-AND-EQUITY> 1,377,605
<SALES> 0
<TOTAL-REVENUES> 2,112,721
<CGS> 0
<TOTAL-COSTS> 2,051,992
<OTHER-EXPENSES> 38,608
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 411
<INCOME-PRETAX> 27,047
<INCOME-TAX> 11,630
<INCOME-CONTINUING> 15,417
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,417
<EPS-BASIC> 1.88
<EPS-DILUTED> 1.22
</TABLE>
