Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 9, 1994
JWP Inc.
Delaware 0-2315 11-2125338
(State of other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
Six International Drive, Rye Brook, New York 10573-1058
(Address of principal executive offices)
Registrant's Telephone number including area code:
(914) 935-4000
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ITEM 4. Changes in Registrant's Certifying Accountant.
The undersigned Registrant hereby reports (a) a
dismissal of its independent accountant at the
conclusion of their audit of the Registrant's financial
statements for the years ended December 31, 1992, 1991
and 1990 and (b) the engagement of a new independent
accountant.
(a) Dismissal of Independent Accountant.
1. On February 9, 1994, JWP Inc. (the
"Registrant"), informed Ernst & Young
("E & Y"), the independent accountant who was
previously engaged as the principal
accountant to audit the consolidated
financial statements of the Registrant and
its subsidiaries, that it will not be
reappointed auditors for the year ended
December 31, 1993. The Registrant continues
to engage E & Y to complete (a) an audit of
the Registrant's financial statements for the
year ended December 31, 1992 and (b) an audit
of the financial statements of the Registrant
for the years ended December 31, 1991 and
1990, as such financial statements are
expected to be restated.
2. E & Y has not yet completed its audit of the
Registrant's consolidated financial
statements for the year ended December 31,
1992. The Registrant expects that E & Y's
report on the financial statements for the
year ended December 31, 1992 will contain a
disclaimer of opinion because of
uncertainties as to the Registrant's ability
to continue as a going concern, the
Registrant's default under certain of its
debt obligations, a class action complaint
filed against the Registrant and certain of
its directors and officers in January 1993,
an investigation by the Securities and
Exchange Commission and its Chapter 11
bankruptcy proceeding described under Item 5.
In addition, the management of the Registrant
is reviewing and expects to restate its
financial statements for the years ended
December 31, 1991 and 1990 and E & Y will
audit such restatements, when they are
completed.
3. The decision to dismiss E & Y was recommended
by management and approved by both the
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Registrant's Audit Committee and Board of
Directors on February 9, 1994.
4. During the Registrant's fiscal years ended
December 31, 1992 and 1991 and the subsequent
period preceding the dismissal of E & Y,
there were no disagreements with E & Y on any
matter of accounting principles or practices,
financial statement disclosure, or auditing
scope or procedure, which disagreements, if
not resolved to the satisfaction of E & Y,
would have caused it to make a reference to
the subject matter of the disagreements in
connection with its report, except for the
following:
During 1993, the Registrant reviewed its
previously issued 1991 financial statements
for possible restatement. In conjunction
with that review, management formed a view
that a reserve for certain inventory at a
subsidiary was understated at December 31,
1991 by an amount within a range of
$4 million and $12 million. E & Y did not
believe that the available information
supported management's view that an error as
defined in APB Opinion No. 20 had occurred
pertaining to this item. The matter was
resolved to E & Y's satisfaction.
5. During 1993, in connection with its audit of
the Registrant's 1992 financial statements
E & Y informed the Registrant:
(A) of certain material weaknesses in the
internal control structure of two
subsidiaries of the Registrant and that
such internal controls were inadequate
to develop reliable financial
statements;
(B) of the need to expand significantly the
scope of its audit of the Registrant's
consolidated financial statements for
the year ended December 31, 1992; and
(C) of the need for the Registrant to review
its previously issued financial
statements for the years ended
December 31, 1991 and 1990 to determine
whether such financial statements needed
to be restated.
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Further, in connection with its audit of the
Registrant's consolidated financial
statements for the year ended December 31,
1992 and in consideration of whether the
Registrant's financial statements for the
years ended December 31, 1991 and 1990
required restatement, E & Y raised questions
about the representations of Registrant's
prior management. The matter was discussed
with the Audit Committee. E & Y is
continuing its audit of Registrant's
financial statements for the year ended
December 31, 1992, as well as its audit
of the Registrant's financial statements for
the years ended December 31, 1991 and 1990
which are expected to be restated. E & Y and
the Registrant's present management are
currently in discussion about the scope of
representations to be provided to E & Y
related to the Registrant's financial
statements for each of the years in the three
year period ended December 31, 1992.
6. The Registrant has authorized E & Y to
respond fully to the inquiries of the
successor accountant concerning the subject
matters described above.
(b) Engagement of New Independent Accountant.
7. On February 9, 1994, the Registrant engaged
Deloitte & Touche independent accountant
("D & T"), as the principal accountant to
audit the consolidated financial statements
of the Registrant and its subsidiaries, as of
and for the year ended December 31, 1993.
8. In 1992, at the request of the Board of
Directors of the Registrant, D & T consulted
on certain accounting issues.
Later in 1992, at the request of the Board of
Directors of the Registrant, D&T consulted on
the Registrant's accounting policies,
procedures and controls and on the
appropriate application of generally accepted
accounting principles to specific
transactions.
In 1993, at the request of the Registrant,
D & T provided consulting services with
respect to certain accounting matters as to
which management requested advice, in order
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to assist management in evaluating the impact
of such matters on its 1992 financial statements
and subsequently assisted management relative
to earlier periods.
In 1993, D & T performed certain review
procedures of the Registrant's interim
consolidated financial statements for the
quarters ended March 31, 1993, June 30, 1993
and September 30, 1993.
In 1993, at the request of the Jamaica Water
Supply Company, a subsidiary of the
Registrant, D & T conducted a special review
of such subsidiary's internal control
structure, in connection with a Public
Service Commission rate and regulatory
proceeding.
In 1993, at the request of the Registrant,
D & T performed audits of certain of the
Registrant's retirement and welfare plans.
ITEM 5. Other Events.
On February 14, 1994, the Registrant converted the
involuntary bankruptcy proceeding pending against
it in the United States Bankruptcy Court, Southern
District of New York, to a voluntary proceeding
under Chapter 11 of the United States Bankruptcy
Code, as described in the press release, attached
hereto as Exhibit 1.
On the same date, the Registrant announced the
planned resignation of Edward Kosnik as its Chief
Executive Officer, as described in Exhibit 1,
attached hereto.
ITEM 7. Financial Statements, Pro Forma Financial
Information, and Exhibits.
(b) Exhibits.
1. Press Release with respect to Chapter 11
Proceeding of Registrant and resignation of
its Chief Executive Officer.
2. Draft of report, dated September 30, 1992, by
D & T, as special consultant to the
Registrant, with respect to certain of the
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Registrant's accounting policies and
procedures. 1/
3. Report by D & T dated February 26, 1993, with
respect to the internal control structures of
the Jamaica Water Supply Company.
4. The Registrant has provided E & Y with draft
and final copies of this Form 8-K and has
requested that E & Y furnish the Registrant,
as promptly as possible, with a letter
addressed to the Commission stating whether
it agrees with the statements made herein by
the Registrant, and if not, stating the
respects in which it does not agree. Upon
receipt of E & Y's response the Registrant
will promptly file it as an exhibit to this
filing.
5. The Registrant has provided D & T with the
opportunity to provide the Commission with
any new information, clarify the Registrant's
expression of its views or disagree with any
statements made by the Registrant in response
to Item 304(a). Upon receipt of any response
from D & T, the Registrant will promptly file
it as an exhibit to the filing.
_________________________
1/ The Registrant has requested confidential treatment of
this report.
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SIGNATURE
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.
JWP Inc.
Date: February 22, 1994 By: /s/ Stephen H. Meyers
Name: Stephen H. Meyers
Title: Senior Vice
President - Finance
JWP News Release
__________________________________________________________________________
FOR IMMEDIATE RELEASE
Contact: Alys Reynders
JWP INC.
(914) 935-4065
JWP INC. REACHES AGREEMENT FOR $35 MILLION LINE
OF CREDIT AND FILES CORPORATE RESTRUCTURING PLAN
THE COMPANY ALSO ANNOUNCES THAT EDWARD F. KOSNIK,
CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF JWP INC. PLANS TO RESIGN
____________________________________________________
RYE BROOK, NEW YORK, February 14, 1994 - JWP INC. today announced
that to effectuate its previously announced restructuring plan the Company has
consented to the entry of an order for relief under Chapter 11 of the U.S.
Bankruptcy Code. This filing will convert the involuntary petition filed
against JWP on December 21, 1993 by three holders of the Company's 7-3/4%
Convertible Subordinated Debentures into a voluntary action. The filing
initiates a holding-company-only prearranged bankruptcy proceeding. The
obligation and operations of JWP's subsidiaries will be unaffected by the JWP
proceeding.
JWP also announced that it has reached agreement on the terms of a
credit facility for $35 million of debtor-in-possession financing with Belmont
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JWP INC. - Page 2 February 14, 1994
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Capital Partners II (L.P.). The general partner of Belmont Capital Partners
II is an affiliate of Fidelity Investments. This credit line will be extended
for the earlier of one year or confirmation of JWP's restructuring plan and is
subject to court approval and various conditions to draws under the line.
Commenting on the filing, Edward F. Kosnik, Chairman and Chief Executive
Officer of JWP INC. said, "We have worked closely with our lenders to finalize
the terms of the restructuring plan, and I am pleased that the plan has
proceeded as expected. The restructured JWP will be well positioned for the
future."
This plan contemplates that JWP's creditors will exchange approximately
$600 million of holding company claims and debt for approximately $110 million
of recourse debt, $50 million of non-recourse debt and 100% of the equity of
the Company. All of the new debt except for $40 million of term recourse debt
is expected to be paid from proceeds of assets sales. Holders of JWP's
subordinated debt, common and preferred stock, and warrants of participation
will have no equity in the restructured company, and they will receive no
recovery under the plan. The obligations of the Company's operating
subsidiaries will not be affected by the plan and all obligations of operating
subsidiaries will continue to be paid in the normal course of business.
JWP has filed its plan of reorganization and disclosure statement with
the court. JWP intends to seek court approval of the disclosure statement and
confirmation of the plan as expeditiously as possible in order to emerge from
Chapte 11 in the second quarter of 1994.
JWP also announced that Edward Kosnik has decided to resign from his
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JWP INC. - Page 3 February 14, 1994
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position as Chief Executive Officer of JWP INC. to pursue other personal and
business activities. Mr. Kosnik stated that, "JWP has dramatically narrowed
its focus to the mechanical/electrical services business. The Company has
resolved the litigation regarding its subsidiary, Jamaica Water Supply Company
and entered into letters of intent for the sale of most of its remaining
non-core businesses. The filing of the prearranged Chapter 11, which has the
support of JWP's principal creditors, is an appropriate time to bring on
board a new Chief Executive Officer to lead a reorganized JWP into the future."
Mr. Kosnik will continue as Chief Executive Officer for a transition period.
A search for his successor has been undertaken.
Jeffrey M. Levy, Senior Vice President of JWP INC., was named acting
Chief Operating Officer. Mr. Levy had previously been Chairman of JWP's
Eastern Region Mechanical/Electrical Services Unit.
JWP INC. is a worldwide leader in mechanical/electrical construction
and maintenance service.
####
Deloitte &
Touche
__________ _______________________________________________________
Two Jericho Plaza Telephone: (516) 935-9000
Jericho, New York 11753-1683 Facsimile: (516) 935-9056
February 26, 1993
Audit Committee of the Board of Directors
Jamaica Water Supply Company
410 Lakeville Road
Lake Success, NY 11042
Dear Members of the Audit Committee:
We have made a study and evaluation of the system of internal
accounting control of Jamaica Water Supply Company (the
"Company") in effect at December 31, 1992. Our study and
evaluation was conducted in accordance with standards
established by the American Institute of Certified Public
Accountants.
The management of the Company is responsible for establishing
and maintaining a system of internal accounting control. In
fulfilling this responsibility, estimates and judgements by
management are required to assess the expected benefits and
related costs of control procedures. The objectives of a
system are to provide management with reasonable, but not
absolute, assurance that assets are safeguarded against loss
from unauthorized use of disposition, and that transactions are
executed in accordance with management's authorization and
recorded properly to permit the preparation of financial
statements in accordance with generally accepted accounting
principles.
Because of inherent limitations in any system of internal
accounting control, errors or irregularities nevertheless may
occur and not be detected. Also, projection of any evaluation
of the system to future periods is subject to the risk that
procedures may become inadequate because of changes in
conditions or that the effectiveness of the design and
operation of policies and procedures may deteriorate.
In our opinion, the system of internal accounting control of
the Company in effect at December 31, 1992, taken as a whole,
was sufficient to meet the objectives stated above insofar as
those objectives pertain to the prevention or detection of
errors or irregularities in amounts that would be material in
relation to the financial statements.
_______________
Deloitte Touche
Tohmatsu
International
_______________
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Audit Committee of the Board of Directors
However, in connection with our study and evaluation of the
Company's system of internal accounting control, we noted
certain matters involving the internal control structure and
its operation that we consider to be a reportable condition
under standards established by the American Institute of
Certified Public Accountants. Reportable conditions involve
matters coming to our attention relating to significant
deficiencies in the design or operation of the internal control
structure that, in our judgement, could adversely affect the
Company's ability to record, process, summarize, and report
financial data consistent with the assertions of management in
the financial statements. Our observations and recommendations
concerning this reportable condition are set forth in this
report.
We have also submitted to management separately our comments
concerning certain observations and recommendations relating to
other accounting, administrative, and operating matters.
Yours truly,
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REPORTABLE CONDITION UNDER STANDARDS ESTABLISHED BY THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
_____________________________________________________________________
Observation: We reviewed general controls relating to the
information system function at the Company. Business systems are
supported by an internal systems group and an outside vendor.
Relations with the outside vendor and security and use of their
applications are supported by the accounting department. Our review
did not focus on the outside vendor applications. Our review focused
on the general controls surrounding the billing and receivables
applications supported by Company personnel.
Certain management control procedures have been established by the
information systems department. These controls address:
. Requests for program modifications
. Management of the program maintenance process
. Computer operations
. File management
. File backup
. Program libraries
The design of these controls appear to address many accounting control
objectives; however, the lack of a separation of duties within the
information systems department greatly reduces the effectiveness of
procedures and accounting controls. Such a lack of separation of
duties is not uncommon in information systems department of similar
size. However, the lack of an on-site department manager to monitor
and review operations and controls further expands the separation of
duties problem.
Recommendation: Enhance existing management control procedures to
address all information systems control objectives. Assign
information system management responsibilities to a Company
executive. Fill the vacant information manager positions at the
earliest possible date. Also enhance operational and accounting
controls over output.
