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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 COMMISSION FILE NUMBER 0-2315
JWP INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 11-2125338
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
SIX INTERNATIONAL DRIVE,
RYE BROOK, NEW YORK 10573-1058
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
(914) 935-4000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, $.10 PAR VALUE NEW YORK STOCK EXCHANGE
(TITLE OF EACH CLASS) (NAME OF EACH EXCHANGE ON WHICH
REGISTERED)
Securities registered pursuant to Section 12(g) of the Act:
7 3/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2012
(TITLE OF CLASS)
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 NO X
The aggregate market value of the Registrant's voting stock held by non-
affiliates of the Registrant on August 31, 1994 was approximately $0.
Number of shares of Common Stock outstanding as of the close of business on
August 31, 1994: 41,357,697 shares.
Indicate by check mark if disclosure of delinquent filings pursuant to Item
405 Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
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TABLE OF CONTENTS
PART I
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PAGE
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Item 1. Business.................................................................... 3
General................................................................... 3
Mechanical/Electrical Services............................................ 4
Supply of Water........................................................... 6
Information Services...................................................... 7
Other..................................................................... 7
Item 2. Properties.................................................................. 8
Item 3. Legal Proceedings........................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders......................... 12
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholders Matters.. 13
Item 6. Selected Financial Data..................................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 15
Item 8. Financial Statements and Supplementary Data................................. 24
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure............................................................... 51
PART III
Item Directors and Executive Officers of the Registrant.......................... 53
10.
Item Executive Compensation...................................................... 55
11.
Item Security Ownership of Certain Beneficial Owners and Management.............. 63
12.
Item Certain Relationships and Related Transactions.............................. 64
13.
PART IV
Item Exhibits, Financial Statement Schedules, and Reports on Form 8-K............ 65
14.
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PART I
ITEM 1. BUSINESS
GENERAL
JWP INC. ("JWP" or the "Company") is a leader in mechanical/electrical
construction and maintenance services.
The Company also owns and operates Jamaica Water Supply Company, which is the
largest investor-owned water utility in New York State and which serves
portions of Queens County and Nassau County in New York State, and Sea Cliff
Water Company, a water utility which serves a small portion of Nassau County.
As discussed in more detail below under "Management's Discussion and Analysis
of Financial Condition and Results of Operations", JWP is seeking to reorganize
under Chapter 11 of the United States Bankruptcy Code. Since 1992, the Company
has experienced losses, and cash flow from operations continues to be
inadequate to fund its operations and service its debt and other obligations.
From August 1992 until February 1994, when it obtained debtor-in-possession
financing, JWP did not have available credit facilities and consequently had to
fund operations from working capital and from the proceeds of sales of
businesses and other assets.
JWP's subsidiaries are not a party to the Chapter 11 proceeding, which
affects only JWP INC., the parent holding company. With the exception of
certain subsidiaries of JWP that had been engaged in the information services
business, none of the Company's subsidiaries is a party to any insolvency or
similar proceeding. However, there has been significant deterioration in the
Company's mechanical and electrical services backlog of business. In addition,
a surety company that had been the primary source of surety bonds for certain
subsidiaries engaged in the Company's mechanical and electrical services
business (the "MES Companies"), which subsidiaries comprised approximately 20%
of the Company's 1993 revenues of those MES Companies which the Company
currently plans to retain, is no longer engaged in the business of issuing such
bonds. As a result these subsidiaries are currently not receiving such bonds.
However, the absence of available bonding for these subsidiaries has not
resulted in a material reduction in their backlog. The Company and these
subsidiaries are actively engaged in discussions with another surety company
which has undertaken due diligence for the purpose of entering into a new
surety bonding arrangement.However, there can be no assurance that such a
surety bonding arrangement will be entered into.
In the second half of 1992, JWP developed an asset disposition program to
sell certain of its businesses as part of a business restructuring plan. The
Company's business restructuring plan and its proposed plan of reorganization
under its Chapter 11 proceeding contemplates, among other things, the sale and
downsizing of certain of its mechanical and electrical business units in the
United States, as well as the sale of its non-core businesses. The business
restructuring plan has been implemented and as a consequence the broad range of
mechanical and electrical services offered by the Company and the Company's
broad geographical range in the United States has been reduced. The MES
Companies to be retained by the reorganized JWP generated revenues of
approximately $1.9 billion in 1993.
Under JWP's proposed plan of reorganization, creditors of the Company will
own all of the common stock of the reorganized JWP and holders of the Company's
common stock, preferred stock and warrants of participation will receive
warrants to purchase common stock of the reorganized JWP in exchange for their
existing equity interests. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
A class action lawsuit on behalf of the Company's common stockholders against
the Company and certain former officers and certain directors of the Company,
among others, has been pending since 1992. It seeks an unspecified amount of
damages from the defendants, including the Company. Under the proposed plan of
reorganization, members of the class in that litigation also will receive
warrants to purchase common stock of the reorganized JWP but will not be
entitled to receive any other recovery from the Company with respect to their
claims. Claims against defendants other than the Company will not be affected
by the proposed plan of reorganization. For further information regarding this
litigation see "Legal Proceedings--JWP Shareholder Litigation."
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The Company's continuation as a going concern is dependent upon its ability
to restructure its indebtedness as part of its plan of reorganization, obtain
sufficient bonding which is frequently required for the award of construction
contracts, return to profitability, obtain new credit facilities and otherwise
generate sufficient cash flow to meet its restructured and other obligations on
a timely basis. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
For several years prior to August 9, 1993, the Company, through its
information services group, also provided computer and system integration
services. On August 9, 1993 the Company sold substantially all its business
operations in that field which were located in the United States. In October
1993, the subsidiary that formerly conducted these operations in the United
States filed a voluntary petition under Chapter 7 of the United States
Bankruptcy Code.
Since the middle of 1992, the Company has sold a number of its non-core
business units. It intends to pursue the sale of the balance of its non-core
businesses, including its water supply business.
JWP is a Delaware corporation, formed in 1987 to continue the business of its
predecessor, a New York corporation with the same name.
MECHANICAL/ELECTRICAL SERVICES
JWP's MES Companies specialize in the design, distribution, integration,
installation and maintenance of complex mechanical and electrical systems.
Services are provided to a broad range of commercial, industrial and
institutional customers through 43 offices located in major markets throughout
the United States and more than 25 offices located in Canada, the United
Kingdom and the Middle East.
The MES Companies provide mechanical and electrical services, directly, by
designing, selling, integrating, installing and maintaining systems to and for
end-users (including corporations, municipalities and other governmental
entities, owner/developers and tenants of buildings) and, indirectly, by acting
as subcontractor for construction managers, general contractors and other
subcontractors.
The wide range of the Company's MES Companies are more particularly described
below.
RANGE OF MECHANICAL AND ELECTRICAL SERVICES. The MES Companies are primarily
involved in the design, integration, installation and maintenance of (i)
distribution systems for electrical power (including power cables, conduits,
distribution panels, transformers and generators), (ii) lighting systems and
(iii) heating, ventilating, air conditioning, plumbing, process and high purity
piping and clean air systems. JWP believes its mechanical and electrical
services business is the largest of its kind in the United States and Canada
and one of the largest in the United Kingdom.
Mechanical and electrical services are principally of three types: (l) large
installation projects, with contracts generally in the multi-million dollar
range, in connection with construction of industrial facilities, institutional
and public works projects, commercial buildings and large blocks of space
within commercial buildings, (2) smaller system installations involving
renovation and retrofit work and (3) maintenance and service.
The MES Companies' largest installation projects have included those (i) for
industrial and institutional use (such as manufacturing, pharmaceutical and
chemical plants, refineries, research facilities, water and wastewater
treatment facilities, hospitals, correctional facilities, schools, trading
floors, computer facilities and mass transit systems), (ii) for commercial use
(such as office buildings, convention centers, shopping malls, hotels and
resorts) and (iii) for electrical utilities. These can be multiyear projects
ranging in size up to, and occasionally in excess of, $50 million. The MES
Companies also install and maintain street, highway, bridge and tunnel
lighting, traffic signals, computerized traffic signal control systems and
signal control and communication systems for mass transit in several
metropolitan areas.
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Major projects are performed pursuant to contracts with owners, such as
corporations and municipalities and other governmental entities, general
contractors, construction managers, as agents for owners of construction
projects, owner-developers and tenants of commercial properties. Institutional
and public works projects are frequently long-term, complicated projects
requiring significant technical skills and financial strength to obtain the
performance bonds that are often a condition to the award of contracts for such
projects.
Smaller projects, which are generally completed in less than a year, involve
the provision of conventional mechanical and electrical services in industrial
plants, office buildings and commercial and retail space in which the MES
Companies install electrical fixtures, provide electrical and air conditioning
systems for computer facilities, and install smaller heating, air conditioning,
and plumbing systems for office and renovation projects. In this area, the MES
Companies are not necessarily dependent upon new construction; demands for
their services are frequently prompted by the expiration of leases, changes in
technology and changes in the customer's plant or office layout in the normal
course of business.
The MES Companies also perform maintenance and service work, under contract
or on an on-call basis, for exterior and interior lighting systems and for air
conditioning and heating systems in plants and other large facilities, office
buildings and commercial enterprises. The MES Companies also install
refrigeration systems for restaurants, office cafeterias and supermarkets.
Contracts for maintenance of mechanical and electrical systems range from one
to several years and are billed on a time and materials basis or a fixed fee
plus the cost of materials. In many of the buildings in which the MES Companies
maintain lighting systems, they also install fixtures, move outlets, rewire and
perform other routine electrical work. Maintenance and service operations often
require a number of employees to be permanently located at the building or
facility served.
In addition, the MES Companies operate fully equipped sheet metal fabrication
facilities in the United States, providing and installing sheet metal for both
their own mechanical services businesses and unrelated mechanical contractors;
they also maintain welding and piping fabrication shops for their own
mechanical operations.
BACKLOG. The MES Companies had a backlog, as of December 31, 1993, of
approximately $1.0 billion compared with a backlog of approximately $1.6
billion as of December 31, 1992. At March 31, 1994, the backlog of the MES
Companies was approximately $1.1 billion, of which approximately $1.0 billion
relates to mechanical and electrical subsidiaries which the Company currently
intends to retain. The MES Companies have experienced a reduction in their
backlog principally because of the Company's weakened financial condition,
which adversely affects their ability to obtain new contracts, and by reason of
the continuing recession in the United States and overseas construction
markets.
EMPLOYEES. The MES Companies presently employ approximately 14,000 people,
approximately 80% of whom are represented by various unions. The Company
believes that its employee relations are generally satisfactory.
COMPETITION. The business in which the MES Companies engage is extremely
competitive. They compete with national, regional and local companies. However,
the Company believes that, at present, it is the largest mechanical and
electrical services company in the United States and Canada and one of the
largest in the United Kingdom. The MES Companies compete on the basis of the
quality of service, price, performance and reliability. Their competitive
position has been adversely affected by the Company's weakened financial
condition, among other things, inasmuch as their surety companies have become
more selective in issuing new bonds, especially on larger, longer duration
projects and inasmuch as one company that had provided bonds for certain of the
Company's subsidiaries has withdrawn from that business. Surety bonds are
frequently a precondition to the awarding of a mechanical or electrical
services contract.
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SUPPLY OF WATER
OPERATIONS. Jamaica Water Supply Company ("JWS") (substantially all the
common stock of which is owned by the Company) and Sea Cliff Water Company
("Sea Cliff") (all the capital stock of which is owned by the Company)
(sometimes referred to herein collectively as the "Water Companies") are
regulated public utilities that own and operate water supply systems on Long
Island, New York. JWS, the largest investor-owned water utility in New York
State, supplies water to a densely populated residential area of approximately
40 square miles in the Borough of Queens in New York City and in southwestern
Nassau County, an area with an aggregate population of approximately 650,000.
Sea Cliff supplies water to a four square mile area on the north shore of
western Nassau County with a population of approximately 20,000. The business
of the Water Companies consists of the purification, distribution and sale of
water for residential, commercial and industrial purposes, providing backup
water for commercial customers' fire sprinkler systems and renting fire
hydrants for municipal fire protection.
The Company has decided to sell the Water Companies as part of its business
restructuring plan.
As of December 31, 1993, the Water Companies provided potable water to
approximately 122,000 water service accounts, substantially all of whom are
metered and billed for the amount of water actually used, and approximately
1,000 private fire protection accounts for sprinkler connections billed on a
flat rate basis.
The Water Companies' primary sources of water are ground water from wells
located in the New York counties of Queens and Nassau and surface water
obtained from the City of New York (the "City"). JWS has 93 wells on 60 well
sites, of which 67 wells are currently operable, and Sea Cliff has two wells on
two sites, both of which are currently operable. Where appropriate, JWS has
installed treatment facilities at well sites to remove volatile organic
compounds prior to the water entering the distribution system.
In an effort to reduce the cost of water to City residents, the City provides
JWS with an exemption from the City's real property taxes and makes direct
revenue support payments to JWS for water service. JWS also has an agreement
with the City to purchase up to 50 million gallons of water daily from the City
(to the extent available) at a cost of $1 per million gallons; however, JWS
expects to purchase only approximately 30 million gallons daily. The $1 per
million gallons rate is substantially less than both JWS' cost to pump and
treat water from its wells and the City's rate for commercial customers. The
agreement expires June 30, 1998, although it is cancellable by either party on
two years notice. The 30 million gallons of water JWS expects to purchase daily
from the City constitutes approximately 60 percent of the average daily amount
of water presently distributed by JWS to its customers in Queens County. JWS
customers in Nassau County are served entirely from wells owned and operated by
JWS.
The Water Companies are subject to regulation by the Public Service
Commission of the State of New York (the "Public Service Commission"). Since
the population of the areas served by the Water Companies has been relatively
stable, the amount of water consumed by their customers has not and is not
expected to increase in any significant respect. Consequently, cost increases
due to inflation or otherwise must be recovered through operating efficiencies
or increases in rates which are subject to approval of the Public Service
Commission. Until 1992, the Water Companies had traditionally filed for rate
increases on an annual basis and had received approvals of rate increases from
the Public Service Commission enabling them to maintain satisfactory operating
results. Pursuant to a settlement agreement with respect to the rate related
proceedings that became effective February 2, 1994, JWS has agreed that,
subject to limited specified exceptions, it will not seek to have a general
rate increase become effective prior to January 1, 1997. JWS is also a party to
certain condemnation proceedings. See "Legal Proceedings--Jamaica Water Supply
Company Rate Related Proceedings and Related Litigation" and "New York City
Condemnation Proceeding".
The Water Companies are also subject to regulation by various federal, state
and local agencies, including the Department of Environmental Conservation of
the State of New York, the New York State and New York City Departments of
Health, the New York City Department of Environmental Protection, the Nassau
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County Department of Health and the United States Environmental Protection
Agency. The Company believes that the Water Companies are in compliance with
all applicable Federal, state and local laws and regulations.
INFORMATION SERVICES
The Company's Information Services Group was principally engaged in providing
computer and systems integration services. It sold integrated multi-vendor
personal computer related products and services for medium and large sized
companies and other organizations. On August 9, 1993, the Company sold the
portion of this business that operated in the United States. During the period
April 1993 through January 1994, the Company sold, in separate transactions,
its information services businesses in Canada, the United Kingdom, Japan and
Germany. The Company also carried on similar information services businesses in
France and Belgium. In 1993, the French and Belgian businesses filed petitions
in their respective countries' courts seeking relief from their creditors.
These businesses are in the process of being liquidated.
OTHER
In addition to the sale of certain mechanical and electrical services
business units contemplated by its business restructuring plan, the Company
intends to dispose of the balance of its non-core businesses. The non-core
business units that continue to be held for sale are principally the Water
Companies, the Company's telephone systems business and its remaining energy
and environmental related businesses.
The Company's telephone systems business is engaged in the design, sale,
installation and servicing of telecommunication systems, including LEXAR PBX
telephone systems which the Company manufactures. These systems are used to
interconnect business and institutional users with telephone lines of the
regulatory telephone companies.
The Company's principal remaining energy and environmental related business
constructs, operates and maintains co-generation facilities for use in steam
enhanced oil recovery processes, industrial plants, hotels, universities,
hospitals and shopping centers. JWP, through its subsidiaries, has built 16 co-
generation facilities, operates 6 of them and owns, in whole or in part, 3 of
them. Where a JWP subsidiary owns a co-generation facility, it supplies utility
services to its customers under long-term contracts. Other energy and
environmental related business units manufacture fluidized bed combustion and
gasification systems for the waste-to-energy market to process solid wastes of
various types and collect methane gas at a landfill for conversion into
electrical energy which is sold to a utility.
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ITEM 2. PROPERTIES
The operations of the Company are conducted primarily in leased properties.
The following table lists the major facilities:
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SQUARE LEASE EXPIRATION
FEET DATE, UNLESS OWNED
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CORPORATE HEADQUARTERS
Six International Drive 78,000 (of 7/31/02
Rye Brook, New York which approximately
63,000 square feet
is presently
sublet)
MECHANICAL AND ELECTRICAL SERVICES
1200 North Sickles Road
Tempe, Arizona 29,000 Owned
3208 Landco Drive
Bakersfield, California 49,875 4/30/95
4462 Corporate Center Drive
Los Alamitos, California 41,400 12/31/00
4464 Alvarado Canyon Road
San Diego, California 53,800 7/31/95
9505 Chesapeake Drive
San Diego, California 44,000 1/30/96
345 Sheridan Boulevard
Lakewood, Colorado 63,000 Owned
5697 New Peachtree Road
Atlanta, Georgia 27,200 11/30/95
2100 South York Road
Chicago, Illinois 77,700 1/09/00
1300 Michigan Street
Gary, Indiana 27,600 Month to Month
2655 Garfield Road
Highland, Indiana 34,600 7/08/96
3555 W. Oquendo Road
Las Vegas, Nevada 90,000 11/30/98
46-01 20th Avenue
Long Island City, New York 33,000 12/31/95
19-49 42nd Street
Long Island City, New York 59,000 2/28/96
30 N. MacQuesten Parkway
Mount Vernon, New York 25,300 11/30/98
111 West 19th Street
New York, New York 27,200 5/31/98
Two Penn Plaza
New York, New York 57,200 6/30/06
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SQUARE LEASE EXPIRATION
FEET DATE, UNLESS OWNED
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165 Robertson Road
Ottawa, Ontario 35,400 Owned
11245 Indian Trail
Dallas, Texas 43,400 4/27/96
11261 Indian Trail
Dallas, Texas 32,800 8/27/96
5550 Airline Road
Houston, Texas 74,500 6/30/96
515 Norwood Road
Houston, Texas 29,700 Month to Month
Canary Wharf
One Canada Square
London, U.K. 27,800 1/01/01
Building D-3 Freeport
Center
Clearfield, Utah 120,000 12/31/99
1574 South West Temple
Salt Lake City, Utah 58,500 12/31/94
22930 Shaw Road
Sterling, Virginia 32,600 7/31/99
109-D Executive Drive
Sterling, Virginia 49,000 7/31/96
1420 Spring Hill Road
McLean, Virginia 13,100 4/07/00
SUPPLY OF WATER
410 Lakeville Road
Lake Success, New York 24,000 7/31/98
OTHER
770 Lawrence Street
Newbury Park, California 50,800 7/31/95
175 Louis Street
South Hackensack, New
Jersey 25,700 4/30/97
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JWS owns a waterworks system consisting of approximately 850 miles of water
mains, 32 storage tanks and 93 wells (67 of which are presently operable).
Water is drawn from these wells by electric motors housed in small brick or
concrete buildings. These facilities are located on parcels of land,
aggregating approximately 55 acres, owned by JWS scattered throughout the
territory it serves. Many of the parcels are subject to liens, encumbrances and
other restrictions. Sea Cliff owns approximately 56 miles of water mains and 4
parcels of land aggregating approximately 5 acres, on which a diesel pumping
station, 2 storage facilities and 2 operating wells are located.
The Company believes that all of its property, plant and equipment are well
maintained, in good operating condition and suitable for purposes for which
they are used.
See Note I to Consolidated Financial Statements for additional information
regarding lease costs. The Company believes there will be no difficulty either
in negotiating the renewal of its real property leases as they expire or in
finding other satisfactory space.
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ITEM 3. LEGAL PROCEEDINGS
JWP SHAREHOLDER LITIGATION. Since August 1992, nineteen purported class
action lawsuits have been filed against the Company arising out of the
restatements of earnings, write-offs and losses announced by the Company on
August 4, 1992 and October 2, 1992. The lawsuits named as defendants, among
others, the Company, certain of its former officers and certain directors, and
alleged federal securities law and state law violations. On November 2, 1992,
all of those actions were consolidated for pre-trial purposes before Judge
Charles L. Brieant in the White Plains division of the Southern District of New
York.
Pursuant to Stipulation and Court Order, on January 15, 1993, a single
consolidated amended class action complaint (the "Complaint") was filed against
the Company and Andrew T. Dwyer, a director of the Company and a former
Chairman of the Board, President and Chief Executive Officer of the Company,
Ernest W. Grendi, a former Chief Financial Officer of the Company, Joseph E.
Grendi, a former Chief Financial Officer of the Company's Mechanical/Electrical
Services Group, and three other current directors of the Company--Innis
O'Rourke, Jr., Craig C. Perry, and Edmund S. Twining, Jr.-- and George M. Duff,
Jr., a former director, each of whom were members of the Company's Audit
Committee for all or part of 1991, and Ernst & Young which served as the
Company's auditor for 1992 and 1991 and several prior years.
The Complaint alleges violations of Section 10(b) of the Securities and
Exchange Act of 1934, Rule 10b-5 promulgated thereunder and common law fraud
and deceit on the part of the Company and the other named defendants. Among
other things, the Company is alleged to have intentionally and materially
overstated its inventory, accounts receivable and earnings in various public
disseminations during the purported class period May 1, 1991 through October 1,
1992. The Complaint seeks an unspecified amount of damages. On March 30, 1993,
the Company filed an Answer which denies the material allegations in the
Complaint. The parties are now engaged in discovery proceedings. For
information regarding the anticipated affect of the Company's bankruptcy
proceeding on the claims asserted in this litigation, see "Business--General".
SECURITIES AND EXCHANGE COMMISSION INVESTIGATION. The Company has been
informed by the Securities and Exchange Commission (the "SEC") that it is
conducting a private investigation to determine whether there have been
violations of certain provisions of the federal securities laws and/or the
rules and regulations of the SEC in connection with the Company's financial
records, reports and public disclosures. The Company has been cooperating with
the SEC's staff and has voluntarily produced documents and information as
requested by the staff. On April 12, 1994, the SEC's staff informed the Company
of its intention to recommend that the SEC file a civil injunction action
against the Company. The Company is currently engaged in discussions with the
SEC's staff concerning a possible consensual resolution of the matter.
NEW YORK COUNTY DISTRICT ATTORNEY INVESTIGATION. In connection with an
investigation of the plumbing industry being conducted by the New York County
District Attorney's office, two subsidiaries of the Company engaged in the
plumbing business in New York City have received subpoenas for certain of their
books and records. The subsidiaries have complied with those subpoenas.
Additionally, certain employees of these subsidiaries have been subpoenaed to
testify as witnesses before a grand jury and those employees have complied with
the subpoenas.
JAMAICA WATER SUPPLY COMPANY RATE RELATED PROCEEDINGS AND RELATED
LITIGATION. Effective March, 1991, Jamaica Water Supply Company ("JWS") was
authorized by the Public Service Commission of the State of New York (the
"Public Service Commission") to increase its rates charged to customers by
amounts designed to increase annual revenues by $3,992,000. At that time the
Public Service Commission made $2,000,000 of that increase temporary and
subject to refund pending a further review by the Public Service Commission.
Upon completion of its review, in July 1992, the Public Service Commission
ordered JWS to refund to its customers all of the amounts collected under the
temporary portion of the rate increase during the period from March 1991
through June 1992. In addition, the Public Service Commission ordered JWS to
reduce its rates charged to customers by amounts designed to reduce annual
revenues by $1,400,000 effective July 1, 1992. During the third quarter of
1992, JWS, which had not recorded as revenue any of the amounts collected under
the temporary portion of the rate increase, made the required refund,
aggregating $2,900,000 including interest, by way of credits to customers'
bills.
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In January 1992, the Public Service Commission ordered its Staff to perform
an audit covering all aspects of JWS' operations. The report on that audit
alleged that mismanagement and imprudence on the part of JWS may have resulted
in excess charges to customers of up to $10,600,000. As a result of the audit
report, in June 1992, the Public Service Commission instituted a proceeding
requiring JWS to demonstrate that its rates charged to customers are not
excessive and to provide for an investigation of JWS' management practices. As
part of this proceeding, the Public Service Commission ordered that effective
August 6, 1992, $10,600,000 of JWS' annual revenues be made temporary and
subject to refund pending the completion of the investigation.
Between December 1992 and May 1993, prior to the commencement of the hearing,
each of JWS, the Public Service Commission Staff, the New York State Consumer
Protection Board, Waterbill Watchdogs, Inc., the County of Nassau, the Town of
Hempstead, the New York City Department of Environmental Protection and the New
York City Water Board submitted proposed testimony in the Public Service
Commission proceedings. On June 3, 1993, the Public Service Commission issued
an order suspending hearings and appointing two administrative law judges for
the purpose of effecting a settlement. Negotiations among the parties and
through the settlement judges were ongoing from that time.
In addition, in February 1993, the County of Nassau, State of New York,
commenced an action alleging violation of the Racketeer Influenced and Corrupt
Organizations Act ("RICO") and common law fraud based on allegations that JWS
intentionally filed false rate applications and, as a result, had earnings that
exceeded projections by $8,653,000. The complaint demanded treble damages and
punitive damages.
As a result of the negotiations ordered by the Public Service Commission, all
of the parties referred to above entered into a settlement agreement dated
December 22, 1993 ("Settlement Agreement"), which, following approval by the
Public Service Commission on February 2, 1994, settled all issues outstanding
before the Public Service Commission, various state courts and in the RICO
action. The Settlement Agreement provides, among other things, (i) that JWS
will use its best efforts to bring about the separation of Jamaica Water
Securities Corp., a subsidiary of JWP which owns substantially all of the
common stock of JWS, from JWP and will submit a plan to the Public Service
Commission on or before December 31, 1994 for the establishment of a separate
waterworks corporation to be incorporated under the New York Transportation
Corporations Law to provide water utility service to the Nassau County
customers served by JWS, (ii) a commitment by JWS that, subject to limited
specified exceptions, it will not seek to have a general rate increase become
effective prior to January 1, 1997, (iii) for refunds and other payments to
customers estimated to aggregate approximately $11.7 million over the 1994-1997
period, and (iv) a cap on earnings above which JWS will share with its
customers its return on equity.
NEW YORK CITY CONDEMNATION PROCEEDING. From time to time representatives of
New York City (the "City") and JWP have met to discuss a possible purchase by
the City of that portion of JWS's water distribution system, which is located
in the City. That system constitutes approximately 75% of JWS's water plant.
In September 1986, the State of New York enacted a law that requires the City
to acquire by condemnation all of the property of JWS "constituting or relating
to [its] water distribution system located in the City of New York" only in the
event of a decision by a Supreme Court of the State of New York that the amount
of compensation to be paid JWS for the water distribution system "shall be
determined solely by the income capitalization method of valuation, based on
the actual net income as allowed (to JWS) by the [New York State] public
service commission." In addition, the law provides that if any court determines
"that a method of compensation other than the income capitalization method be
utilized, or if the proposed award is more than the [JWS] rate base of the
[condemned] assets . . . as utilized by the public service commission in
setting rates," the City may withdraw the condemnation proceeding without
prejudice or costs. As of December 31, 1993, the rate base of those assets
located in the City was approximately $81,350,000 exclusive of water meters
currently under lease which may be required to be purchased in the event of
condemnation.
11
<PAGE>
In April 1988, the City instituted a proceeding in a Supreme Court of the
State of New York pursuant to the 1986 statute. The City sought, in the first
instance, an order providing that the income capitalization method of valuation
would be the sole method used to determine compensation for JWS's property,
and, on that basis, asked the Court to determine the value of the JWS property
to be condemned. Pursuant to the 1986 statute, if the Court determines
compensation that exceeds the rate base or determines compensation by a method
other than the income capitalization method, the City can withdraw the
condemnation proceeding. JWS argued, at trial and in its post-trial memorandum,
that the judicially recognized method for valuing public utility property is by
the method known as "Reproduction Cost New, Less Depreciation". JWS also sought
consequential and severance damages that would result from separating the JWS
Nassau County water supply system from that in the City. The aggregate
compensation sought by JWS as of December 31, 1987 was $923,966,341, consisting
of $846,625,285 for its tangible and intangible assets, $49,670,056 for
consequential and severance damages and $27,671,000 for the fair market value
of the land owned by JWS. The City submitted its income capitalization
valuation, as of December 31, 1987, at $62,500,000. The evidentiary hearings in
the proceedings were concluded and JWS reserved its right to contest the
constitutionality of the statute.
Subsequent to the trial, the Court requested that the parties address the
constitutionality of the statute. After a joint post-hearing submission from
JWS and the City contending that the statute was constitutional, the Supreme
Court, sua sponte, by decision dated June 21, 1993, dismissed the City's
petition and held, inter alia, that "insofar as the legislature has directed
this Court to make . . . a decision [on valuation only prior to any taking]
through the statute, that statute is unconstitutional" because such a decision
would be advisory. Aware that a constitutional challenge to a nearly identical
condemnation statute (the "Saratoga Statute") involving Saratoga County, was
pending in the appellate courts, neither JWS nor the City served a notice of
entry of the dismissal order that would commence the period within which an
appeal could be taken.
On February 24, 1994, the New York Court of Appeals held the Saratoga Statute
to be constitutional. On April 6, 1994, a conference was held with the Supreme
Court pursuant to the City's request that it reconsider its JWS decision in
light of the Court of Appeals February 24, 1994 decision. At the April 6, 1994
conference, the Court stated it would, as requested by the City, reconsider its
decision. The Court further stated that if it decided to withdraw its June 21,
1993 decision, it would then take the proceedings under further consideration.
The Company cannot predict whether the Court will withdraw its June 21, 1993
decision nor is it possible to predict what the decision of the Supreme Court
might be if it decides to value the JWS property or the effect of the pending
litigation on the proposed sale of JWS.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
12
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS
As of August 31, 1994, there were 6,618 holders of record of the Company's
common stock. Until October 11, 1993 the common stock of the Company was listed
for trading on the New York Stock Exchange. Because of the losses suffered by
the Company and its announcement that the Company intended to reorganize under
a Chapter 11 proceeding pursuant to a plan of reorganization that would not
permit holders of the Company's common stock to have any equity or debt
interest in the restructured Company, the New York Stock Exchange delisted the
Company's common stock from the Exchange.
The following table sets forth the high and low closing prices for the
Company's common stock from January 1, 1993 through October 11, 1993 as
indicated on the New York Stock Exchange and thereafter the high and low bid
prices of the Company's common stock in the over-the-counter market.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1993
Fourth Quarter............................................ 1 1/4 1/33
Third Quarter............................................. 1 3/4 1 1/8
Second Quarter............................................ 3 1/2 1 1/4
First Quarter............................................. 5 3 1/4
1992
Fourth Quarter............................................ 7 2 1/2
Third Quarter............................................. 12 5/8 6 1/8
Second Quarter............................................ 17 3/4 12 1/8
First Quarter............................................. 19 1/2 15 1/4
</TABLE>
The Company did not pay dividends on its common stock during 1993 or 1992 and
does not intend to pay dividends in the foreseeable future. See Note C to the
Consolidated Financial Statements regarding restrictions on the Company's
ability to pay dividends.
13
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected financial data should be read in conjunction with the
Consolidated Financial Statements, the related notes thereto and the
independent auditors' reports thereon, which includes disclaimers of opinion on
the 1993 and 1992 Consolidated Financial Statements, appearing elsewhere in
this report. See Note A to the Consolidated Financial Statements regarding the
uncertainty as to the Company's ability to continue as a going concern, the
class action shareholder lawsuit filed against the Company and debt in default.
Income Statement Data (a) (c)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues................ $2,194,735 $2,404,577 $2,318,112 $2,057,607 $1,547,618
Gross profit............ 151,177 243,854 344,551 331,400 271,960
(Loss) income from
continuing operations.. (113,991) (363,515) 4,712 28,649 32,206
(Loss) income from
discontinued
operations............. (9,087) (253,230) 24,263 21,600 14,403
Cumulative effect of
change in method of
accounting for income
taxes.................. -- 4,315 -- -- --
---------- ---------- ---------- ---------- ----------
Net (loss) income....... $ (123,078) $ (612,430) $ 28,975 $ 50,249 $ 46,609
========== ========== ========== ========== ==========
(Loss) income per share
(b):
Continuing operations... $ (2.84) $ (9.00) $ 0.10 $ 0.75 $ 0.91
Discontinued operations. (0.22) (6.24) 0.63 0.57 0.40
Cumulative effect of
change in method of
accounting for income
taxes.................. -- 0.11 -- -- --
---------- ---------- ---------- ---------- ----------
Net (loss) income per
share.................. $ (3.06) $ (15.13) $ 0.73 $ 1.32 $ 1.31
========== ========== ========== ========== ==========
Balance Sheet Data
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
AS OF DECEMBER 31, 1993 1992 1991 1990 1989
- - - - - - - - - ------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Shareholders' (deficit)
equity.................. $ (302,262) $ (175,979) $ 456,136 $ 370,513 $ 311,939
Total assets............ $ 806,442 $ 907,584 $2,233,827 $1,476,012 $1,242,503
Notes payable........... $ 172 $ 6,452 $ 110,600 $ 62,500 $ 77,700
Long-term debt,
including current
maturities............. $ 4,465 $ 6,040 $ 463,071 $ 381,323 $ 326,717
Debt in default......... $ 501,007 $ 501,007 $ -- $ -- $ --
Capital lease
obligations............. $ 2,561 $ 3,935 $ 26,995 $ 29,973 $ 28,444
Redeemable preferred
stock................... $ -- $ -- $ 5,242 $ 5,771 $ 5,967
</TABLE>
(a) Includes the results of purchased businesses from acquisition dates except
for the acquisition of Neeco, Inc. ("Neeco") on May 22, 1990. The
acquisition of Neeco was accounted for as a pooling of interests and,
accordingly, all financial data has been restated to include the accounts
of Neeco, which are included in discontinued operations.
(b) Adjusted to reflect a three-for-two stock split effected July 16, 1990 and
a three-for-two stock split effected June 12, 1989.
(c) Income statement data has been reclassified for all periods presented to
reflect the Company's information services and water utility supply
businesses as discontinued operations (See Note K to the Consolidated
Financial Statements).
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Revenues for the years ended December 31, 1993, 1992 and 1991 were $2.2
billion, $2.4 billion and $2.3 billion, respectively. Net loss for the years
ended December 31, 1993 and 1992 was $123.1 million or $3.06 per share and
$612.4 million or $15.13 per share, respectively, compared to net income of
$29.0 million or $0.73 per share in 1991. The Company's loss from continuing
operations for the years ended December 31, 1993 and 1992 was $114.0 million or
$2.84 per share and $363.5 million or $9.00 per share, respectively, compared
to net income of $4.7 million or $0.10 per share in 1991.
Net loss from continuing operations for the years ended December 31, 1993,
1992 and 1991 includes net interest expense of $50.2 million, $44.2 million and
$43.9 million, respectively. The increase in interest expense in 1993 primarily
reflects accruals for penalty interest on debt in default. Net loss from
continuing operations for the year ended December 31, 1993 includes a net gain
on businesses sold or held for sale of $1.0 million. Net loss from continuing
operations for the years ended December 31, 1992 and 1991 includes losses on
businesses sold and held for sale of $76.1 million and $6.6 million,
respectively.
Net loss from discontinued operations for the years ended December 31, 1993
and 1992 was $9.1 million or $0.22 per share and $253.2 million or $6.24 per
share, respectively, compared to net income of $24.3 million or $0.63 per share
in 1991. The loss from discontinued operations for the year ended December 31,
1993 reflects a charge of $8.1 million related to an adjustment in the carrying
value of liabilities as a result of the bankruptcy filing under Chapter 7 of
the U.S. Bankruptcy Code by the Company's subsidiary that formerly carried on
the Company's U.S. information services business. The loss from discontinued
operations in 1993 also includes a charge of $7.4 million to write down the net
assets of the water supply business to estimated net realizable value.
The net loss in 1992 reflects (i) a continuing slump in the Company's
mechanical and electrical services business, principally attributable to a
downturn in commercial construction; (ii) intense competition in the Company's
information services business; (iii) restructuring charges related to the
planned disposition and downsizing of (a) the information services business,
(b) non-core businesses and (c) certain mechanical/electrical operations; (iv)
significant provisions for losses on accounts receivable and inventories; (v) a
provision for losses on net assets held for sale; and (vi) expenses associated
with the shareholder litigation, the Company's efforts to restructure its debt
through a consensual arrangement and the restatement of the Company's financial
statements.
A significant portion of the 1992 loss, particularly with respect to losses
on accounts receivable and write down of inventories, arose as a result of
management's review conducted in connection with the preparation of the
Company's year end 1992 financial statements. As a result of such review, the
Company recorded significant write-offs and losses in 1992 for impairment of
goodwill and other intangibles, for the establishment of asset valuation and
restructuring reserves associated with net assets held for sale and as a result
of the decision to discontinue the information services business.
The net loss for 1993 reflects the continued impact of the recession and the
downturn in commercial real estate construction both in North America and the
United Kingdom. The net loss includes a $38.5 million provision for estimated
losses on uncompleted construction contracts and approximately $12 million of
legal, consulting and other professional fees arising from the shareholder
litigation and debt restructuring efforts. Additionally, the 1993 loss includes
one-time charges to discontinued operations, discussed above, in respect to the
writedown of the net assets of the Company's water supply business to estimated
net realizable value and the loss related to the bankruptcy filing of the
Company's subsidiary which formerly carried on its U.S. information services
business.
Selling, general and administrative expenses ("SG&A") were $216.7 million in
1993, $440.7 million in 1992 and $286.9 million in 1991. The higher amount of
SG&A expenses in 1992 includes a provision of $100.4
15
<PAGE>
million for losses on accounts and other receivables (See
"Mechanical/Electrical Services"), an increase in general corporate expenses of
$29.2 million and $13.6 million applicable to the write-off of goodwill.
General corporate expenses were $26.4 million in 1993 compared to $48.4 million
in 1992 and $19.2 million in 1991. (See "General Corporate and Other
Expenses"). A reduction of SG&A expenses was realized in 1993 as a result of
the implementation of the Company's downsizing and asset disposition plans.
On December 21, 1993, three holders of the Company's 7 3/4% Convertible
Subordinated Debentures filed an involuntary petition under Chapter 11 of the
U.S. Bankruptcy Code against the Company. The Company on February 14, 1994
consented to the entry of an order for relief under Chapter 11 of the
Bankruptcy Code. At that time the Company adopted a proposed plan of
reorganization which, as modified, has the support of the Official Unsecured
Creditors Committee and the Official Unsecured Junior Creditors and Interest
Holders Committee. The proposed plan of reorganization contemplates the
exchange of substantially all of the Company's indebtedness for new notes of
the reorganized Company, all of its common stock and warrants to purchase
common stock of the reorganized Company. Holders of the Company's common and
preferred stock and warrants of participation also will receive warrants to
purchase common stock of the reorganized Company in exchange for their equity
interests. The proposed plan also contemplates a business restructuring plan
which the Company initially developed in the third quarter of 1992 to divest
certain of its non-core businesses. There can be no assurance that the proposed
plan of reorganization will be consummated or, if so, its timing. However, a
hearing on the Company's proposed plan of reorganization is scheduled for
September 28, 1994. See "Liquidity and Capital Resources" below for additional
discussion with respect to the Company's business restructuring plan. Following
the Company's public announcement in October 1993 of its then proposed
reorganization plan, the New York Stock Exchange took action resulting in the
delisting of the Company's common stock.
As of December 31, 1993, the Company had negative net worth of $302.3 million
and a working capital deficit of $452.3 million after the reclassification of
debt in default aggregating $501.0 million. The Company is not in compliance
with certain covenants contained in its loan agreements. The Company continues
to fail to generate sufficient cash to fund its operations and service its
obligations. From September 1992 to February 1994, when the Company obtained
debtor-in-possession financing, the Company did not have available credit
facilities and, consequently, funded its operations from working capital and
proceeds from the sale of businesses and other assets.
The Company's surety companies are reviewing bid and performance bonding
requests on a case-by-case basis for large construction projects and those with
a duration of more than two years. Further, the Company is experiencing
significant constraints in its bonding line which has adversely affected its
operations. In addition, a surety company that had been the primary source of
surety bonds for certain subsidiaries, which together comprised approximately
20% of the Company's 1993 revenues of those mechanical and electrical companies
which the Company currently plans to retain, is no longer engaged in the
business of issuing such bonds. As a result these subsidiaries are currently
not receiving such bonds. However, the absence of available bonding for these
subsidiaries has not resulted in a material reduction in their backlog. The
Company and these subsidiaries are actively engaged in discussions with another
surety company which has undertaken due diligence for the purpose of entering
into a new surety bonding arrangement. However, there can be no assurance that
such a new surety bonding arrangement will be entered into. The failure to
obtain a new surety for these subsidiaries would materially adversely affect
the Company.
The accompanying financial statements have been prepared on a going concern
basis and do not include any adjustments relating to the recoverability and
classification of assets or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
The Company's continuation as a going concern is dependent upon its ability to
restructure its indebtedness in the Chapter 11 proceeding, obtain sufficient
bonding to guarantee its performance on construction contracts, return to
profitability, obtain new credit facilities and otherwise generate sufficient
cash flow to meet its restructured and other obligations on a timely basis. See
"Liquidity and Capital Resources."
As a result of the restatement of the Company's first and second quarter
earnings of 1992 and write-offs and losses announced by the Company on August
4, 1992 and on October 2, 1992, class action lawsuits were
16
<PAGE>
filed on behalf of shareholders against the Company and certain other
defendants. The class action lawsuits have been consolidated and the single
consolidated amended class action complaint alleges, among other things, that
the Company intentionally and materially overstated assets and earnings in
various public disseminations in violation of Section 10(b) of the Securities
and Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint
seeks an unspecified amount of damages. The Company has denied the material
allegations contained in the complaint. The parties are now engaged in
discovery proceedings. However, under the terms of the Company's proposed plan
of reorganization, claimants in the class action litigation will not be
entitled to recover damages, if any, from the Company, although they will
receive warrants to purchase common stock of the reorganized Company. See Note
S to Consolidated Financial Statements for additional discussion with respect
to the shareholder litigation.
The Company had been informed by the Securities and Exchange Commission (the
"SEC") that it is conducting a private investigation to determine whether there
have been violations of certain provisions of the federal securities laws
and/or the rules and regulations of the SEC in connection with the Company's
financial records, reports and public disclosures. The Company has been
cooperating with the SEC's staff and has voluntarily produced requested
documents and information. On April 12, 1994, the SEC's staff informed the
Company of its intention to recommend that the SEC file a civil injunction
action against the Company. The Company is currently engaged in discussions
with the SEC's staff concerning a possible consensual resolution of the matter.
MECHANICAL/ELECTRICAL SERVICES
Revenues of the mechanical/electrical services business units for the year
ended December 31, 1993 decreased 8.7% to $2.2 billion from $2.4 billion in
1992. Revenues in 1991 were $2.3 billion. Operating loss for the years ended
December 31, 1993 and 1992 was $39.1 million and $187.2 million, respectively,
compared to operating income of $76.9 million for the year ended December 31,
1991. In connection with the Company's business restructuring plan, certain
mechanical/electrical business units have been sold or identified for sale. The
operating results of such business units are included in the aforementioned
operating results. Revenues of the mechanical/electrical business units sold or
held for sale for the years ended December 31, 1993, 1992 and 1991 were $257.9
million, $526.9 million and $501.7 million, respectively. For the years ended
December 31, 1993 and 1992, such business units had operating losses of $11.8
million and $41.2 million, respectively, compared to operating income of $15.3
million in 1991.
The operating results in both 1993 and 1992 reflect, among other things, the
continued negative impact of the recession and oversupply in the commercial
real estate market which has caused intense competition for new commercial
work. As a result of the reduction of commercial work, many of the Company's
mechanical/electrical services business units have pursued noncommercial
projects, primarily governmental and municipal facilities, at lower margins
than historically available in the commercial marketplace. Certain of these
business units were not as experienced in performing noncommercial projects
and, as a result, incurred losses on certain long-term contracts. The operating
loss in 1993 includes $13.0 million of losses incurred by the Company's
business units in the midwest. Such losses primarily consist of job write-downs
and loss contingencies on certain completed large industrial and municipal
projects. In the fourth quarter of 1993, certain of the Company's mechanical
business units in the western region recorded charges of approximately $13.1
million for estimated losses on certain large uncompleted municipal projects.
The losses were primarily attributable to adverse weather conditions,
management turnover, inadequate estimating of job costs and labor problems.
Operating margins in 1993 were also adversely affected by approximately $7.6
million of losses in the United Kingdom and Canada. Such losses reflect, among
other things, the continuing recession in the United Kingdom and Canada,
downsizing costs in the United Kingdom and the inadequacy of available bonding
in Canada which has adversely affected the Canadian subsidiary from obtaining
new contracts. The operating loss for the year ended December 31, 1992 includes
a provision for losses on accounts and other receivables of $100.4 million, due
partially to the impact of the recession on the financial condition of
customers of the Company's mechanical/electrical services business units.
Additionally, the Company's financial condition and negative cash flow
negatively impacted its ability to settle claims and unapproved
17
<PAGE>
change orders on a favorable basis. The operating loss for the year ended
December 31, 1992 also includes restructuring charges of $38.7 million for the
downsizing of the Company's North American mechanical/electrical services
operations, $13.6 million applicable to the write-off of goodwill and a charge
of $15.6 million relating to the write-off of small tool inventory. Small tools
are located at numerous construction sites and generally have short lives. The
Company made the decision to write-off its small tool inventory because of the
difficulty and expense associated with taking periodic physical inventories
required to maintain the tools as an asset.
At December 31, 1993, the mechanical/electrical services business backlog was
$1.0 billion compared to $1.6 billion at December 31, 1992. The Company's
overall backlog in its North American regions and in the United Kingdom has
stabilized at approximately $1.0 billion through June 1994. Such backlog
included $954.2 million at December 31, 1993 and $1,263 million at December 31,
1992 relating to companies which the Company currently intends to retain. A
reduction in backlog was experienced in each of the North American regions and
in the United Kingdom and is attributable to the downsizing of the Company's
operations, the Company's weakened financial condition which adversely affects
its ability to obtain new surety bonds and contracts and the continuing
recession in the North American and overseas construction markets. Prospects
for a recovery in the commercial office building market in both North America
and the United Kingdom remain poor for the immediate future.
The Company's surety companies have become more selective in issuing new
bonds, especially on larger projects and those with a duration of more than two
years. Additionally, the surety companies will generally not bond new projects
for certain non-core businesses which the Company has identified for sale.
Surety bonds are frequently a precondition to the award of a mechanical or
electrical contract.
Included in the Consolidated Balance Sheet as of December 31, 1993 under the
caption "Excess of cost of acquired businesses over net assets, less
amortization" is $59.0 million of goodwill. Such goodwill relates to the
mechanical and electrical services business units which the Company currently
intends to retain. Management believes that such goodwill has not been
permanently impaired. However if the Company were to decide to divest these
units, write-offs of goodwill and other assets might be required depending upon
then existing market conditions and the future business prospects of the
retained business units.
DISCONTINUED OPERATIONS
In April 1992, the Company announced its intention to sell its water supply
business. However in July 1993, the Company's Board of Directors decided not to
proceed with the divestiture due to the then pending rate proceedings and
litigation. As described below, in December 1993, the Company's subsidiary,
Jamaica Water Supply Company ("JWS"), entered into an agreement that became
effective February 2, 1994 with respect to the rate related proceedings and
litigation (See Note S to the Consolidated Financial Statements and "Legal
Proceedings") thereby eliminating significant uncertainties relating to the
Company's water supply business. Accordingly, the Company reinstated its plan
of divestiture in the first quarter of 1994. In 1993, the Company recorded a
$7.4 million loss to write-down the net assets of the water supply business to
estimated net realizable value. The Consolidated Financial Statements reflect
the water supply business as a discontinued operation for all periods
presented. See Note S to the Consolidated Financial Statements and "Legal
Proceedings" regarding the status of a proceeding initiated in 1988 by the City
of New York with respect to the possible condemnation of the water distribution
system of JWS that is located in New York City.
For the years ended December 31, 1993, 1992 and 1991, revenues of the water
supply business were $66.8 million, $59.8 million and $63.1 million,
respectively. Operating income for the years ended December 31, 1993, 1992 and
1991 were $15.4 million, $4.8 million and $14.6 million, respectively.
Operating results for the year ended December 31, 1992 included a charge of
$7.0 million relating to the settlement of litigation and regulatory matters.
See Note S to the Consolidated Financial Statements and "Legal Proceedings" and
"Liquidity and Capital Resources."
18
<PAGE>
On January 1, 1994, upon expiration of the then existing collective
bargaining agreement, the local collective bargaining unit (Local 374 of the
Utility Workers Union of America) representing 212 employees of JWS commenced a
strike against JWS. On March 27, 1994, the membership of the local collective
bargaining unit ratified a new five year collective bargaining agreement
negotiated between JWS and union officials thereby ending the work stoppage.
In March 1993, the Company's Board of Directors approved the disposition of
the Company's U.S. information services business which was sold in August 1993.
The Board of Directors had previously decided to sell the Company's overseas
information services business. Accordingly, operating results reflect the
information services business as discontinued operations. See Notes K and L to
the Consolidated Financial Statements. Revenues of the information services
business were $876.7 million, $1.7 billion and $1.2 billion in 1993, 1992 and
1991, respectively. Operating income of the information services business in
1993 was $10.2 million compared to a loss from operations of $187.9 million in
1992 and operating income of $34.0 million in 1991. The loss in 1992 includes
one-time charges of $67.3 million which consist of the write-off of goodwill
and other intangible assets related to the U.S. information services business
and costs attributable to employee severance and facilities consolidation. The
1992 loss also reflects intense competition among personal computer resellers,
decreases in the prices of personal computers and the rapid introduction of new
technology. The difficulties encountered by the Company in successfully
integrating the back office operations and accounting systems of Businessland
Inc., which was acquired in August 1991, with the Company's preexisting
information services back office operations resulted in additional losses. In
1993, the Company sold substantially all the assets of its U.S. and
international information services subsidiaries. The transactions did not
result in a material gain or loss to the Company in 1993. See "Liquidity and
Capital Resources" below for additional information with respect to the
disposition of the U.S. information services subsidiary.
In connection with the plan to dispose of the Company's overseas information
services business and certain of its U.S. information services units, the
Company provided for losses aggregating $49.5 million in 1992. These charges
primarily represent the estimated losses to be realized upon the disposition of
such business units in 1993. Such amount is in addition to the aforementioned
loss from operations of $187.9 million and is included in the accompanying
Consolidated Statement of Operations under the caption "Loss from disposal of
businesses" in Discontinued Operations.
GENERAL CORPORATE AND OTHER EXPENSES
General corporate and other expenses for the years ended December 31, 1993,
1992 and 1991 were $26.4 million, $48.4 million and $19.1 million,
respectively. Corporate expenses for the year ended December 31, 1993 include
approximately $12.0 million of expenses related to legal, consulting and other
professional fees arising from the shareholder litigation and the proposed debt
restructuring. The higher amount of corporate expense for the year ended
December 31, 1992 was related primarily to (a) fees paid to lenders for
extensions of amendments to and waivers of the Company's revolving credit
agreement ($4.5 million), (b) the write-off of deferred debt expense in
connection with the Company's planned restructuring of its debt ($2.9 million),
(c) legal, consulting and other professional fees arising out of shareholder
litigation, defaults of covenants contained in loan agreements and associated
debt restructuring activities and the restatement of the Company's financial
statements ($9.6 million), (d) the accelerated vesting of deferred compensation
as a result of the termination of employment of certain officers ($5.6
million), (e) employee termination costs ($1.8 million) and (f) relocation of
the corporate headquarters, primarily the write-off of leasehold improvements
and abandonment of a lease ($4.2 million).
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 1993 and three months ended March 31, 1994,
the Company's operations used $44.5 million and $16.9 million, respectively, in
cash primarily due to operating losses and working capital requirements. From
September 1992 to February 1994, the Company had no available lines of credit
and experienced significant cash outflow as a result of operating losses,
coupled with adverse
19
<PAGE>
publicity associated with the restatement of its first and second quarter 1992
financial statements, defaults under its loan agreements and senior management
changes. In February 1994, the Company obtained a $35.0 million debtor-in-
possession credit facility ("DIP Loan") from Belmont Capital Partners II, L.P.,
an affiliate of Fidelity Investments ("Belmont"), which is described in greater
detail below.
The Company's consolidated cash balance decreased from $86.8 million at
December 31, 1992 to $39.5 million at December 31, 1993. The December 31, 1993
cash balance includes $3.0 million in foreign bank accounts. Such bank accounts
are not available to support the Company's domestic mechanical/electrical
services business or to pay corporate expenses. The negative operating cash
flow reflects continued pressure to accelerate payments of accounts payable and
to a delay on the part of customers in payment of accounts receivable caused by
the Company's weakened financial condition. Additionally, recurring operating
losses, restructuring costs and professional fees relating to debt
restructuring negotiations and shareholder litigation have adversely affected
cash flow. Cash deposits made to secure insurance obligations also negatively
impacted cash flow.
As described in Notes A and C to the Company's Consolidated Financial
Statements, the Company is in default of covenants contained in its loan
agreements under which approximately $501.0 million was outstanding at December
31, 1993 and 1992 including $484.4 million owed to senior lenders and $16.6
million owed to subordinated note holders. With respect to the defaulted senior
loan agreements, "standstill arrangements" were negotiated which covered the
period from mid-December of 1992 through April 30, 1993. Under the standstill
arrangements, the senior lenders agreed, in principle, to forebear the receipt
of principal and to accept payment of interest during such periods at reduced
rates ranging from 4% to 6.75%. Since April 30, 1993, no standstill arrangement
has been in place and the Company ceased making principal and interest
payments. However, interest continued to accrue under the terms of the
respective loan agreements which in certain circumstances include default rate
premiums of an additional 2% and in one case 4%. Interest ceased to accrue on
December 21, 1993, the date on which an involuntary bankruptcy petition was
filed against the Company. At December 31, 1993 and 1992, accrued interest on
defaulted debt was $43.3 million and $5.8 million, respectively. The Company
has pledged to the holders of its senior notes and bank indebtedness the common
stock of five subsidiaries held for sale and the proceeds from the sale of one
of these subsidiaries. The combined net book value of these subsidiaries was
$23.2 million at December 31, 1993.
The Company has not made scheduled semiannual interest payments since
September 1, 1993 with respect to its 7 3/4% Convertible Subordinated
Debentures. All interest payments on such debt was previously paid when due.
The outstanding principal balance of the debentures at December 31, 1993, in
the amount of approximately $7.0 million, has been included in "Debt in
default" in the accompanying Consolidated Balance Sheets.
As a consequence of the Company's financial difficulties, an asset
disposition program was initiated in the third quarter of 1992 with respect to
the Company's non-core businesses and certain other assets to raise cash for
working capital and to reduce debt. A total of $139.0 million of net cash
proceeds was realized from that program in 1992 including: $84.1 million from
the sale of five energy and environmental related businesses, $21.1 million
from the sale of the Company's computer lease portfolio, $18.4 million from the
sale of the Company's interest in a hospital's central utility plant and $8.8
million from the sale of a rental equipment business. The cash proceeds from
these asset dispositions in 1992 were used to reduce debt and for working
capital requirements. During 1993, the Company received net cash proceeds of
$43.4 million from the sale of certain overseas information services business
units, other non-core businesses and other assets. Such proceeds were used
primarily for working capital requirements.
In 1993, the Company's information services business and its Canadian
mechanical and electrical services subsidiary made net repayments of $13.1
million and $6.2 million, respectively, on notes payable to various lending
institutions.
20
<PAGE>
The DIP Loan agreement provides a credit facility to the Company of up to
$35.0 million at an interest rate of 12% per annum during the period of the
Company's Chapter 11 reorganization proceeding. Also, Belmont will receive, as
additional interest, a percentage of the securities to be issued under the
Company's plan of reorganization. The DIP Loan is secured by a first lien on
substantially all of the assets of the Company and most of its subsidiaries. As
of August 31, 1994, the Company had drawn down $25.0 million under the DIP
Loan.
The Company is in default of certain covenants of the DIP Loan. Pursuant to
written waivers of default, dated April 27, 1994, May 6, 1994 and August 2,
1994 the Company has been permitted by Belmont to draw on its line of credit.
Under the circumstances, any additional borrowings under the DIP Loan will
require further waivers of default.
The DIP Loan is intended to be repaid upon the effective date of the
Company's plan of reorganization. The Company is actively seeking a working
capital facility of approximately $40 million. The proceeds of this new
facility will be used to refinance the Company's borrowings under the DIP Loan
and to provide working capital to the reorganized Company. However, there can
be no assurance that the Company will be able to obtain a new working capital
facility or, if so, the amount of any such facility. Obtaining such a facility
is a condition to the confirmation of the Company's plan of reorganization.
The Company's proposed plan of reorganization contemplates that the creditors
of JWP INC. will exchange approximately $623 million of holding company debt
and other liabilities for approximately $139 million of recourse debt,
approximately $48 million of nonrecourse debt, 100% of the equity of the
Company and warrants to purchase common stock of the reorganized Company. All
of the new debt, except for approximately $67 million, is expected to be paid
from the proceeds of asset sales. As indicated previously under the proposed
plan of reorganization, holders of the Company's common and preferred stock and
warrants of participation also will receive warrants to purchase common stock
of the reorganized Company in exchange for their equity interests. However,
there can be no assurance that the proposed plan of reorganization will be
consummated or, if so, its timing.
JWP INC., the parent holding company, is the subject of the proceeding under
Chapter 11. The Company's mechanical/electrical, water supply and other
operating subsidiaries are not parties to this proceeding. All operating
subsidiary obligations have been paid in the ordinary courses of business.
See "Results of Operations" with respect to the Company's ability to continue
as a going concern.
The Company's business restructuring plan contemplates the sale of a number
of domestic mechanical and electrical services business units and the
reorganization of the Company principally around a smaller international
mechanical/electrical services business which had revenues of approximately
$1.9 billion in both 1993 and 1992.
In August 1993, the Company sold substantially all the assets of its U.S.
information services subsidiary to ENTEX Information Services, Inc. ("ENTEX"),
a newly organized company owned by a private investor and the management of the
U.S. information services subsidiary. As part of the consideration for its
sale, the Company received warrants to buy up to 10% of the purchaser's common
stock for a nominal amount. The Company has ascribed no value to these
warrants. Additionally, ENTEX assumed substantially all the debt and other
liabilities and obligations relating to the ongoing operations of the U.S.
information services subsidiary; that subsidiary retained certain lease
obligations and certain tax liabilities. The Company was also released from
approximately $210 million of its guarantees of indebtedness and similar
obligations of the subsidiary. In October 1993, that subsidiary filed a
voluntary petition under Chapter 7 of the U.S. Bankruptcy Code.
In December 1993, an involuntary petition under Chapter 11 of the U.S.
Bankruptcy Code was filed against JWP INC. by three holders of certain of the
Company's 7 3/4% Convertible Subordinated Debentures.
21
<PAGE>
On February 14, 1994, the Company consented to the entry of an order for relief
under Chapter 11 of the U.S. Bankruptcy Code.
See Note D with respect to the status of certain liabilities of the Company
which were in existence prior to February 14, 1994, the date that the Company
consented to the entry of the order for relief under Chapter 11 of the U.S.
Bankruptcy Code. Also, see Note D with respect to the recorded liabilities as
of December 31, 1993 which are subject to compromise under the Company's plan
of reorganization.
The Company's Canadian subsidiary, Comstock Canada, is negotiating with a
Canadian bank to obtain a Canadian $7.5 million (approximately $5.6 million)
secured demand loan facility. The new credit facility would include bank loans,
letters of credit and indemnity arrangements and would be secured by all the
assets of Comstock Canada and would be guaranteed by the Company. The new
credit facility would replace an expired demand secured facility, also
guaranteed by the Company, under which the lender has permitted Comstock Canada
to continue to borrow, subject to certain restrictive margin requirements. At
July 31, 1994, total outstanding bank loans were Canadian $0.4 million
(approximately U.S. $0.3 million). There can be no assurance that Comstock
Canada will obtain a new credit facility or, if so, the amount of any such
facility or whether the lender will continue to grant credit to Comstock Canada
without a new definitive credit agreement in place.
In June 1994, a number of the Company's U.K. subsidiaries entered into a
demand credit facility with a U.K. bank with an aggregate credit limit of
(Pounds)14.1 million (approximately U.S.$21.7 million). The credit facility
consists of the following components with the individual credit limits as
indicated: an overdraft line of up to (Pounds)7.0 million (approximately
U.S.$10.7 million), a facility for the issuance of guarantees, bonds and
indemnities of up to (Pounds)7.4 million (approximately U.S.$11.4 million) and
other credit facilities of up to (Pounds)0.75 million (approximately U.S.$1.2
million). The overdraft facility is secured by substantially all of the assets
of the Company's principal U.K. subsidiaries. The overdraft facility provides
for interest at the U.K. bank reference rate (5 1/2% as of June 1994 ) plus 3%.
This credit facility will expire in December 1994.
JWS, a subsidiary of the Company carried in "Net assets held for sale" in the
accompanying Consolidated Balance Sheets as of December 31, 1992, had two
revolving credit agreements each of which permitted unsecured borrowings of up
to $10.0 million with interest rates equal to the prime rate (7 1/4% at June
1994). Both agreements expired on April 30, 1994 and the borrowings thereunder
have been permitted by the lenders to remain outstanding. JWS is currently
negotiating new revolving credit agreements. As of December 31, 1993, JWS had
equal borrowings under each agreement aggregating $4.8 million. These
borrowings are reflected as current liabilities in the Condensed Balance Sheet
of "Net assets held for sale" which is presented in Note L to the Consolidated
Financial Statements.
The Company's mechanical/electrical services business does not require
significant commitments for capital expenditures. The Company's water supply
business anticipates making capital expenditures of approximately $53.0 million
for the utility plant over the five years ending December 31, 1998 including
approximately $9.0 million in 1994. These capital expenditures are expected to
be financed by internally generated funds from the water supply business with
any remaining long-term financing requirements during that period obtained from
the proceeds of newly issued first mortgage bonds and from bank loans. However,
the Company's financial difficulties are making it more difficult for the water
supply business to finance its capital programs.
On December 22, 1993, JWS, the New York State Consumer Protection Board,
Nassau County and certain other governmental bodies and a consumer advocate
group entered into an agreement that ended several regulatory and legal
proceedings involving JWS which are referred to above and in Note S to the
Consolidated Financial Statements. Subsequently, the agreement was approved by
the New York State Public Service Commission (the "PSC") on February 2, 1994.
The agreement provides for, among other things, a three year moratorium on
general rates charged by JWS, resolution of the economic issues raised by the
PSC arising from its 1992 audit of JWS, settlement of related litigation and
the dismissal of an action brought against JWS by Nassau County of the State of
New York alleging violations of the Racketeer Influenced and
22
<PAGE>
Corrupt Organizations Act and common law fraud. JWS also agreed, in
consideration of avoided litigation and other costs associated with the
proceedings, to make payments over the next three years totalling $11.7 million
to customers in Nassau and Queens Counties in the State of New York. The
agreement also provides that JWS will use its best efforts to bring about the
separation of Jamaica Water Securities Corp., a subsidiary of the Company which
holds substantially all the common stock of JWS, from the Company. See "Legal
Proceedings--Jamaica Water Supply Company Rate Related Proceedings and Related
Litigation".
At December 31, 1993, the Company and a wholly-owned captive insurance
subsidiary ("Defender") had letters of credit outstanding totalling $36.4
million which in effect secure their workers' compensation, automobile and
general liability insurance obligations. The letters of credit were intended to
serve as collateral for the obligations of Defender to reimburse the Company's
unrelated insurance carriers for claims paid in respect of certain years'
insurance programs. Such letters of credit expire in December 1994 ($34.9
million) and in February 1995 ($1.5 million). Since October 1992, neither the
Company nor Defender has been able to obtain additional letters of credit to
secure their insurance obligations and, as a result, have been required to make
cash collateral deposits to an unrelated insurance company to secure those
types of obligations. The deposits totalled $21.3 million and $7.7 million as
of December 31, 1993 and 1992, respectively, and are included under the caption
"Miscellaneous" in Other Assets in the accompanying Consolidated Balance
Sheets. Such deposits have increased to $29.7 million as of June 30, 1994. The
Company and Defender expect to be required to post additional cash collateral
insurance deposits until the Company completes its reorganization in the
Chapter 11 proceedings. The need to provide cash collateral has adversely
affected the Company's cash flow.
The Company's proposed plan of reorganization contemplates that the letters
of credit described above will be drawn upon by the unrelated insurance
carriers and the Company's obligations to Defender, which were pledged as
collateral to the banks issuing such letters of credit, will be impaired in the
Chapter 11 proceeding as well as any related Company obligations to those
banks. The Company's unrelated insurance carriers have commenced partial draw
downs against certain of the letters of credit. Approximately $5.0 million has
been drawn down against the letters of credit through June 1994.
In 1993, the Company's French and Belgian information services subsidiaries
filed petitions in their respective countries seeking relief from their
creditors. The French and Belgian subsidiaries have outstanding unsecured
credit facilities guaranteed by the Company which aggregate approximately $5.9
million. Such amount was provided for as a loss in 1992.
The Company has not paid dividends on its preferred stock since September
1992. Cumulative unpaid dividends through December 31, 1993 aggregate $2.3
million.
The Company has substantial net operating loss carryforwards ("NOL") for U.S.
Federal income tax purposes. If the Company exchanges its existing indebtedness
for newly issued equity and for debt as contemplated by the proposed plan of
reorganization, a significant portion of the NOL may not be available to reduce
future U.S. taxable income. Additionally, due to recent changes in the U.S.
Federal income tax laws, the timing of any such reorganization could further
impact and reduce the amount of the NOL (See Note F to the Consolidated
Financial Statements).
In September 1992, the PSC issued an order that resulted in the suspension of
dividend payments to the Company by JWS for the last two quarters of 1992 and
for the year ended December 31, 1993. Dividends paid by JWS in 1992 and 1991
amounted to $1.2 million and $2.0 million, respectively. As a result of the
settlement agreement described above (See "Discontinued of Operations"), JWS
recommenced dividend payments in 1994.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 112 "Employers' Accounting for Postemployment
Benefits" which will be effective beginning in 1994. This standard will not
have a material impact upon the Company's consolidated financial position or
its results of operations.
23
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JWP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1992
---------- ----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents............................ $ 39,534 $ 86,836
Accounts receivable, less allowance for doubtful
accounts of $31,170 and $42,630..................... 455,944 458,273
Costs and estimated earnings in excess of billings on 61,987 67,817
uncompleted contracts................................
Inventories.......................................... 5,221 6,618
Prepaid expenses and other........................... 13,240 9,746
Net assets held for sale............................. 20,454 32,894
---------- ----------
Total Current Assets................................... 596,380 662,184
---------- ----------
Net assets held for sale............................... 63,161 85,611
Investments, notes and other long-term receivables..... 19,737 22,440
Property, plant and equipment, net..................... 39,266 51,087
Other Assets
Excess of cost of acquired businesses over net 58,973 61,542
assets, less amortization............................
Miscellaneous........................................ 28,925 24,720
---------- ----------
87,898 86,262
---------- ----------
Total Assets........................................... $ 806,442 $ 907,584
========== ==========
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
Current Liabilities
Notes payable........................................ $ 172 $ 6,452
Current maturities of long-term debt and capital 2,327 2,634
lease obligations....................................
Debt in default...................................... 501,007 501,007
Accounts payable..................................... 209,867 224,840
Billings in excess of costs and estimated earnings on 115,179 125,764
uncompleted contracts................................
Accrued payroll and benefits......................... 37,939 45,665
Other accrued expenses and liabilities............... 182,213 120,733
---------- ----------
Total Current Liabilities.............................. 1,048,704 1,027,095
---------- ----------
Long-term debt......................................... 2,538 4,111
Other long-term obligations ........................... 57,462 52,357
Shareholders' (Deficit)
Preferred Stock, $1 par value, 25,000,000 shares
authorized, 425,000 shares of Series A issued and
outstanding......................................... 21,250 21,250
Common Stock, $.10 par value, 75,000,000 shares
authorized, 40,715,541 and 40,754,051 outstanding,
excluding 727,389 and 591,775 treasury shares in
1993 and 1992....................................... 4,072 4,075
Warrants of Participation............................ 576 576
Capital surplus...................................... 204,247 203,505
Cumulative translation adjustment.................... (6,068) (3,930)
(Deficit)............................................ (526,339) (401,455)
---------- ----------
Total Shareholders' (Deficit).......................... (302,262) (175,979)
---------- ----------
Total Liabilities and Shareholders' (Deficit).......... $ 806,442 $ 907,584
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
24
<PAGE>
JWP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS,
EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES................................... $2,194,735 $2,404,577 $2,318,112
---------- ---------- ----------
COSTS AND EXPENSES
Cost of sales............................ 2,043,558 2,160,723 1,973,561
Selling, general and administrative...... 216,709 440,725 286,900
Restructuring charges.................... -- 38,741 --
---------- ---------- ----------
2,260,267 2,640,189 2,260,461
---------- ---------- ----------
OPERATING (LOSS) INCOME.................... (65,532) (235,612) 57,651
Interest expense......................... (51,075) (45,894) (46,240)
Interest income.......................... 888 1,713 2,348
Net gain (loss) on businesses sold or
held for sale............................ 1,028 (76,078) (6,628)
---------- ---------- ----------
(LOSS) INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND CUMULATIVE EFFECT
OF ACCOUNTING CHANGE...................... (114,691) (355,871) 7,131
(Benefit) provision for income taxes..... (700) 7,644 2,419
---------- ---------- ----------
(LOSS) INCOME FROM CONTINUING OPERATIONS
BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE.................................... (113,991) (363,515) 4,712
---------- ---------- ----------
DISCONTINUED OPERATIONS
Income (loss) from operations, net of
income taxes............................. 11,263 (203,739) 24,263
(Loss) from disposal of businesses, net
of income taxes.......................... (20,350) (49,491) --
---------- ---------- ----------
(Loss) income from discontinued
operations............................... (9,087) (253,230) 24,263
---------- ---------- ----------
CUMULATIVE EFFECT OF CHANGE IN METHOD OF
ACCOUNTING
FOR INCOME TAXES.......................... -- 4,315 --
---------- ---------- ----------
NET (LOSS) INCOME.......................... $ (123,078) $ (612,430) $ 28,975
========== ========== ==========
(LOSS) INCOME PER SHARE
Continuing operations.................... $ (2.84) $ (9.00) $ 0.10
Discontinued operations
Income (loss) from operations.......... 0.28 (5.02) 0.63
(Loss) from disposal of businesses..... (0.50) (1.22) --
---------- ---------- ----------
(Loss) income from discontinued
operations............................. (0.22) (6.24) 0.63
---------- ---------- ----------
Cumulative effect of change in method of
accounting
for income taxes........................ -- 0.11 --
---------- ---------- ----------
Net (loss) income........................ $ (3.06) $ (15.13) $ 0.73
========== ========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements
25
<PAGE>
JWP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
NET (LOSS) INCOME............................. $(123,078) $(612,430) $ 28,975
ADJUSTMENTS TO RECONCILE NET (LOSS) INCOME TO
NET CASH
(USED IN) PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization............... 35,246 68,993 49,072
Restructuring charges applicable to continu-
ing operations............................. -- 38,741 --
Restructuring charges applicable to discon-
tinued operations.......................... -- 25,950 --
Net (gain) loss from businesses sold or held
for sale................................... (1,028) 76,078 6,628
Provision for losses on accounts and other
receivables................................ 13,663 113,903 16,241
Inventory valuation adjustments............. -- 59,787 5,300
Write-off of deferred debt issuance cost.... -- 2,876 --
Write-off of fixed assets and miscellaneous
assets..................................... -- 11,167 8,200
Write-off of goodwill and other intangibles. -- 54,873 --
Stock compensation.......................... 727 9,518 3,808
Deferred income taxes....................... 4,138 7,137 13,418
Loss from disposal of discontinued opera-
tions...................................... 20,350 49,491 --
Equity and other losses in unconsolidated
subsidiary................................. -- 5,690 --
Cumulative effect of accounting change for
income taxes............................... -- (4,315) --
Other, net.................................. 2,411 21,112 10,829
--------- --------- ---------
(47,571) (71,429) 142,471
Change in Operating Assets and Liabilities
Excluding Effect
of Businesses Disposed of and Acquired
Decrease (increase) in accounts receivable.. 41,286 73,379 (119,774)
Decrease (increase) in inventories and con-
tracts in progress......................... 35,292 123,884 (41,309)
(Decrease) increase in accounts payable and
accrued expenses........................... (73,563) (190,752) 114,595
Changes in other assets and liabilities..... 17 15,335 6,490
--------- --------- ---------
NET CASH (USED IN) PROVIDED BY OPERATIONS..... (44,539) (49,583) 102,473
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt................ 710 85,302 47,660
Payments of long-term debt and capital lease
obligations................................ (6,027) (68,514) (78,710)
Payments of Businessland 10 1/4% Senior
Notes...................................... -- -- (18,750)
Proceeds from issuance of common stock and
exercise
of stock options........................... -- 1,911 2,169
Payment of preferred dividends.............. -- (1,354) (711)
Redemption of preferred stock of subsidiary
company.................................... (500) -- --
Acquisition of common stock for the trea-
sury....................................... -- (8,130) (7,877)
(Decrease) increase in notes payable, net... (19,269) 30,258 89,544
--------- --------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING (25,086) 39,473 33,325
ACTIVITIES...................................
--------- --------- ---------
CASH FLOWS FROM INVESTMENT ACTIVITIES
Proceeds from sale of businesses and other
assets..................................... 43,400 138,971 10,066
Acquisition of businesses, net of cash ac-
quired..................................... -- (15,899) (62,600)
Purchase of property, plant and equipment... (17,329) (36,411) (56,000)
Purchase of environmental facilities........ -- (32,044) --
Net disbursements for other investments..... -- (9,695) (4,779)
Cash balance of businesses held for sale or
sold....................................... (3,748) (26,241) --
Other, net.................................. -- 1,672 (2,619)
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) INVESTMENT 22,323 20,353 (115,932)
ACTIVITIES...................................
--------- --------- ---------
(DECREASE) INCREASE IN CASH AND CASH (47,302) 10,243 19,866
EQUIVALENTS..................................
CASH AND CASH EQUIVALENTS AT BEGINNING OF 86,836 76,593 56,727
YEAR.........................................
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR...... $ 39,534 $ 86,836 $ 76,593
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
26
<PAGE>
JWP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DEFICIT) (IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE RETAINED
PREFERRED COMMON WARRANTS OF CAPITAL TRANSLATION EARNINGS SHAREHOLDERS'
STOCK STOCK PARTICIPATION SURPLUS ADJUSTMENTS (DEFICIT) EQUITY (DEFICIT)
--------- ------ ------------- -------- ----------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31,
1990................... $ -- $3,797 $576 $178,786 $ 2,836 $ 184,518 $ 370,513
Common stock issued
in connection with
acquisitions........... -- 190 -- 29,048 -- -- 29,238
Preferred stock issued
in exchange for
Businessland's 10 1/4%
senior notes........... 21,250 -- -- -- -- -- 21,250
Foreign currency
translation adjustment. -- -- -- -- 1,971 -- 1,971
Preferred stock
dividends.............. -- -- -- -- -- (711) (711)
Other, net.............. -- 31 -- 4,869 -- -- 4,900
Net income.............. -- -- -- -- -- 28,975 28,975
------- ------ ---- -------- ------- --------- ---------
BALANCE DECEMBER 31,
1991................... 21,250 4,018 576 212,703 4,807 212,782 456,136
Common stock issued
in connection with
acquisitions........... -- 10 -- 739 -- -- 749
Exercise of stock
options................ -- 14 -- 1,897 -- -- 1,911
Acquisition of common
stock for the treasury. -- (57) -- (8,073) -- -- (8,130)
Guaranteed future value
of stock issued to
acquire businesses..... -- -- -- (12,308) -- -- (12,308)
Deferred compensation
and officer bonus...... -- 55 -- 9,463 -- -- 9,518
Foreign currency
translation adjustment. -- -- -- -- (8,737) -- (8,737)
Preferred stock -- -- -- -- -- (1,807) (1,807)
dividends..............
Other, net.............. -- 35 -- (916) -- -- (881)
Net loss................ -- -- -- -- -- (612,430) (612,430)
------- ------ ---- -------- ------- --------- ---------
BALANCE DECEMBER 31,
1992................... 21,250 4,075 576 203,505 (3,930) (401,455) (175,979)
Deferred compensation... -- 9 -- 718 -- -- 727
Foreign currency
translation adjustment. -- -- -- -- (2,138) -- (2,138)
Preferred stock -- -- -- -- -- (1,806) (1,806)
dividends...............
Other, net.............. -- (12) -- 24 -- -- 12
Net loss................ -- -- -- -- -- (123,078) (123,078)
------- ------ ---- -------- ------- --------- ---------
BALANCE DECEMBER 31,
1993................... $21,250 $4,072 $576 $204,247 $(6,068) $(526,339) $(302,262)
======= ====== ==== ======== ======= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
27
<PAGE>
JWP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A BASIS OF PRESENTATION
The accompanying financial statements have been prepared assuming that JWP
INC. (the "Company") will continue as a going concern. The matters discussed
below raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments relating
to the recoverability and classification of assets or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company's continuation as a going
concern is dependent upon its ability to restructure its indebtedness in its
Chapter 11 proceedings, obtain sufficient bonding to guarantee its performance
on construction contracts, return to profitability, obtain new credit
facilities and generate sufficient cash flow to meet its restructured and other
obligations on a timely basis.
The Company has a working capital deficit of $452.3 million after the
reclassification of long-term debt in default and a shareholders' deficit of
$302.3 million at December 31, 1993. Many of the Company's mechanical and
electrical services contracts require surety bonds to guarantee the performance
of such contracts. The Company's surety companies are issuing new bonds but are
reviewing bonding requests on a case-by-case basis with special attention paid
to large construction projects and those with durations of more than two years.
Further, the Company is experiencing significant constraints in its bonding
line which has adversely affected its operations. In addition, a surety company
that has been the primary source of surety bonds for certain subsidiaries,
which together comprised approximately 20% of the Company's 1993 revenues of
those mechanical/electrical companies which the Company currently plans to
retain, is no longer engaged in the business of issuing such bonds. As a
result, these subsidiaries are currently not receiving such bonds. However, the
absence of available bonding for these subsidiaries has not resulted in a
material reduction in their backlog. The company and these subsidiaries are
actively engaged in discussions with another surety company which has
undertaken due diligence for the purpose of entering into a new surety bonding
arrangement. However, there can be no assurance that such a new surety bonding
arrangement will be entered into.
The Company is focused on returning to profitability and restructuring its
operations primarily around a smaller international mechanical/electrical
services business. The Company has formulated a business restructuring plan
which includes the sale of its information services business, water supply
business, several non-core businesses and certain mechanical/electrical
services operations and the closing or downsizing of unprofitable operations
(See Notes K and L). The proceeds from the sale of these businesses and other
assets to date have been used for working capital and to reduce debt. There is
no assurance that the Company will be able to consummate the remaining sales,
and if consummated, whether the Company will realize the proceeds contemplated
by the plan.
As described in Note C, the Company is in default of covenants contained in
its bank credit agreement, senior note agreements, 12% subordinated note
agreements and its 7 3/4% Convertible Subordinated Debentures and is presently
in a Chapter 11 proceeding. The outstanding amount of such debt in default at
December 31, 1993 is $501.0 million.
On December 21, 1993, three holders of the Company's 7 3/4% Convertible
Subordinated Debentures filed an involuntary petition under Chapter 11 of the
U.S. Bankruptcy Code against the Company. The Company on February 14, 1994
consented to the entry of an order of relief under Chapter 11 of the U.S.
Bankruptcy Code. At that time the Company adopted a proposed plan of
reorganization and its subsidiaries continue to operate in the normal course of
business. The proposed plan of reorganization which, as currently modified, has
the support of the Official Unsecured Creditors Committee and the Official
Unsecured Junior Creditors and Interest Holders Committee. The proposed plan of
reorganization contemplates that the Company's creditors will exchange
approximately $623 million of holding company debt and other liabilities for
approximately $139 million of recourse debt, approximately $48 million of
nonrecourse debt, 100% of the equity of the Company and warrants to purchase
common stock of the reorganized Company. All of the new debt, except for
approximately $67 million, is expected to be paid from the proceeds of asset
sales. Additionally, holders of the Company's common and preferred stock and
warrants of participation also will
28
<PAGE>
receive warrants to purchase common stock of the reorganized Company in
exchange for their equity interests.
The Company's mechanical/electrical services, water supply and other
operating subsidiaries are not parties to this Chapter 11 proceeding. All
operating subsidiary payments continue to be made in the ordinary course of
business. There can be no assurance that the proposed plan of reorganization
will be consummated or, if so, its timing.
In April 1992, the Company announced its intention to sell its water supply
business. However, in July 1993, the Company's Board of Directors decided not
to proceed with the divestiture due to uncertainties created by the then
pending rate related matters and litigation which are described in Note S. In
December 1993, the Company's subsidiary, Jamaica Water Supply Company ("JWS"),
entered into an agreement with respect to the rate related proceedings and
litigation thereby eliminating significant uncertainties relating to the water
supply business. Subsequently, this agreement was approved by the New York
State Public Service Commission on February 2, 1994. Accordingly, the Company
reinstated its plan of divestiture in the first quarter of 1994. In March 1993,
the Company's Board of Directors approved the disposition of the Company's U.S.
information services business. The Board of Directors had previously decided to
sell the Company's overseas information services subsidiaries. Accordingly,
operating results for all periods presented have been reclassified to reflect
the Company's information services business and water supply business as
discontinued operations (see Note K).
As described above and in Notes L and K, the Company has developed a business
restructuring plan which contemplates the sale of its information services
business, certain of its mechanical/electrical services business units, its
water supply business and certain other non-core businesses. As a result, the
net assets of businesses to be sold have been classified in the Consolidated
Balance Sheets as of December 31, 1993 and 1992 as "Net assets held for sale"
and carried as either current or long-term assets on the basis of their actual
or expected disposition dates.
As described in Note S, a consolidated class action lawsuit for unspecified
damages was filed against the Company, certain former officers and directors,
four current directors, a former subsidiary officer and the Company's then
auditors, Ernst & Young. The complaint alleges violations of Section 10(b) of
the Securities and Exchange Act of 1934, Rule 10b-5 promulgated thereunder and
common law fraud and deceit on the part of the Company and other named
defendants. The Company has denied the material allegations contained in the
complaint. The parties are now engaged in the discovery proceedings. However,
under the terms of the Company's proposed plan of reorganization, claimants in
the class action litigation will not be entitled to recover damages, if any,
from the Company, although they will receive warrants to purchase common stock
of the reorganized Company.
NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. Significant intercompany accounts and
transactions have been eliminated.
REVENUE RECOGNITION
Revenues on long-term contracts are recognized on the percentage-of-
completion method. Percentage-of-completion for the mechanical contracting
business is measured principally by the percentage of costs incurred and
accrued to date for each contract to estimated total costs for each contract at
completion ("cost to cost"). Certain of the Company's electrical contracting
business units measure percentage of completion by the percentage of labor
costs incurred and accrued to date for each contract to the estimated total
labor costs for such contract, while others are on the cost to cost method.
Provisions for estimated losses on uncompleted contracts are made in the period
in which such losses are determined. Changes in contract performance and
estimated profitability, including those arising from contract penalty
provisions and final contract settlements, may result in revisions to costs and
income and are recognized in the period in which the revisions are determined.
Profit incentives are included in revenue when their realization is reasonably
assured.
29
<PAGE>
Accounts receivable at December 31, 1993 and 1992 include $90.4 million and
$85.2 million, respectively, billed under retainage provisions included in
contracts. In accordance with industry practice, certain of these receivables
relate to contracts having production cycles longer than one year and,
therefore, a portion will not be realized within one year. Disputes involving
customers often arise in the normal course of the Company's business, primarily
on projects where the Company is a subcontractor and is contesting with general
contractors, owners or both, for additional funds because of events such as
delays or changes in contract specifications. Such disputes, whether for claims
or for unapproved change orders in process of negotiation, are recorded at
their estimated net realizable value only when realization is probable and can
be reliably estimated. Claims against the Company are recognized when a loss is
considered probable and amounts are reasonably determinable. Accounts
receivable and costs and estimated earnings in excess of billings on
uncompleted contracts at December 31, 1993 and 1992 include claims and change
orders in the process of negotiation which aggregate approximately $51.2
million and $46.6 million, respectively, net of valuation allowances. A portion
of these receivables may not be realized within one year.
Costs and estimated earnings on uncompleted contracts and related amounts
billed are as follows:
<TABLE>
<CAPTION>
1993 1992
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Costs incurred on uncompleted contracts................ $3,031,225 $2,796,376
Estimated earnings..................................... 238,869 259,393
---------- ----------
3,270,094 3,055,769
Less billings to date.................................. 3,323,286 3,113,716
---------- ----------
$ (53,192) $ (57,947)
========== ==========
Such amounts are included in the accompanying Consolidated Balance Sheets
under the following captions:
<CAPTION>
1993 1992
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Costs and estimated earnings in excess of billings on
uncompleted
contracts............................................. $ 61,987 $ 67,817
Billings in excess of costs and estimated earnings on
uncompleted
contracts............................................. (115,179) (125,764)
---------- ----------
$ (53,192) $ (57,947)
========== ==========
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Utility plant and equipment,
which is classified as net assets held for sale as of December 31, 1993 and
1992, includes, in addition to direct labor and materials, such costs as
related employee benefits, taxes, interest and other costs attributable to the
construction activity. The water supply business provides for depreciation on
the straight-line basis at amounts equivalent to a composite rate of
approximately 2% of the average depreciable plant. All other subsidiaries
provide for depreciation principally using the straight-line method over
estimated useful lives.
Property, plant and equipment consists of:
<CAPTION>
1993 1992
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Machinery and equipment................................ $ 55,640 $ 51,530
Furniture and fixtures................................. 16,146 25,344
Land, buildings and leasehold improvements............. 19,932 23,396
---------- ----------
91,718 100,270
Accumulated depreciation and amortization.............. 52,452 49,183
---------- ----------
$ 39,266 $ 51,087
========== ==========
</TABLE>
30
<PAGE>
INVENTORIES
Inventories which consist primarily of construction materials are stated at
the lower of cost or market. Cost is determined by principally using average
costs.
NET ASSETS HELD FOR SALE
Net assets held for sale are stated at the lower of cost or estimated net
realizable value.
COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired (goodwill) is amortized on a straight
line basis over 40 years. The amounts included in the accompanying Consolidated
Balance Sheets are net of cumulative amortization at December 31, 1993 and 1992
of $8.5 million and $6.9 million, respectively. The Company periodically
reviews whether new events and circumstances warrant the write-off of goodwill
or a revision to the estimated useful life.
The Company's Board of Directors has approved a plan to downsize the
Company's North American mechanical/electrical services business and to sell
non-core businesses and certain mechanical/electrical business units. In 1992,
the Company wrote-off goodwill of $48.5 million related to such businesses to
reflect the net realizable value of businesses held for sale and the permanent
impairment of goodwill.
NET (LOSS) INCOME PER SHARE
Net (loss) income per common share has been calculated based on the weighted
average number of common shares outstanding and common share equivalents
relating to warrants and stock options outstanding when the effect of such
equivalents are dilutive (40,816,783, 40,583,185 and 38,800,000 shares for the
years ended December 31, 1993, 1992 and 1991, respectively). Per share amounts
of (loss) income from continuing operations and net (loss) income reflects
amounts of dividends paid and accrued on the Company's preferred stock.
STATEMENTS OF CASH FLOWS
For purposes of the Consolidated Statements of Cash Flows, the Company
considers all highly liquid instruments with original maturities of three
months or less to be cash equivalents.
INCOME TAXES
Effective January 1, 1992, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). The adoption of SFAS 109 changed the Company's method of accounting for
income taxes from the deferred method (APB 11) to an asset and liability
approach. Previously, the Company deferred the tax effects of timing
differences between financial reporting and taxable income. The asset and
liability approach requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax
payable for the period and the change during the period in deferred tax assets
and liabilities. Prior years' financial statements have not been restated for
such accounting change.
At December 31, 1993 and 1992 (after giving effect to the adoption of SFAS
No. 109), the valuation allowance recorded against the deferred tax assets was
$170.1 million and $138.3 million, respectively. (See Note F).
31
<PAGE>
NOTE C DEBT IN DEFAULT
Debt in default at December 31, 1993 and 1992 consists of (in thousands):
<TABLE>
<S> <C>
Notes payable to banks under revolving credit facility at prime plus
3/4%................................................................. $155,795
Senior notes payable to insurance companies, 9.1% to 10.95%........... 328,572
--------
Total senior debt..................................................... 484,367
Subordinated notes payable to insurance companies, 12%................ 9,600
7 3/4% Convertible Subordinated Debentures............................ 7,040
--------
$501,007
========
</TABLE>
The Company failed to make principal payments and is in default of various
financial covenants contained in its senior notes and 12% subordinated notes
including minimum tangible net worth and minimum current ratio. The revolving
credit facility contains certain financial and other covenants, including
minimum tangible net worth and minimum current ratio, under which the Company
is also in default. As a result, the entire amount of such notes and bank
indebtedness has been classified in the accompanying Consolidated Balance
Sheets as "Debt in default". Additionally, the Company has not made scheduled
semiannual interest payments since September 1, 1993 with respect to its 7 3/4%
Convertible Subordinated Debentures and, accordingly, such debentures have been
classified as "Debt in default" in the accompanying Consolidated Balance
Sheets.
Effective April 1993, the Company ceased making payments of principal and
interest under its revolving credit facility and its senior and subordinated
notes. Interest continued to accrue in accordance with the provisions of these
loan documents which in certain circumstances included default rates of an
additional 2% and in one case 4%. Interest ceased to accrue on December 21,
1993, the date on which an involuntary bankruptcy petition was filed against
the Company. The Company has pledged to the holders of its senior notes and
bank indebtedness the common stock of five subsidiaries held for sale and the
proceeds from the sale of one of those subsidiaries which have a combined net
book value of $23.2 million as of December 31, 1993.
Certain of the Company's loan agreements contain covenants which restrict its
ability to pay dividends on its common stock. The Company does not meet the
financial ratio requirements under such covenants and consequently is
restricted from paying dividends on its common stock.
The Company's 7 3/4% Convertible Subordinated Debentures are convertible into
common stock at any time on or prior to September 1, 2012 at $30.11 per share
which is subject to change as defined in the indenture pursuant to which the
debentures were issued. The debentures are redeemable, at the Company's option,
on any date prior to maturity at redemption prices (expressed as percentages of
principal amount) ranging from 102.325% in 1994 to 100% in 1997 and thereafter,
plus accrued interest. In 1992, the Company purchased $8.7 million of its 7
3/4% debentures and realized a net gain of $1.8 million from early retirement
of such debt.
See Note A with respect to the contemplated exchange of the debt in default
for new debt and equity securities under the Company's proposed plan of
reorganization.
As of June 30, 1994, the estimated fair value of the Company's obligations
under its revolving credit facility approximates $50.0 million or approximately
30% of the amount of its pre-bankruptcy petition date principal and accrued
interest. The estimated fair value of the senior notes approximates $122.0
million or approximately 34% of the amount of its pre-bankruptcy petition date
principal and accrued interest. Such valuations were based upon recent private
transactions involving the purchase and sale of a limited number of such debt
instruments. However, the estimated values described above are not necessarily
indicative of their fair market value because these debt instruments are not
actively traded or exchanged. The estimated fair value of the defaulted 12%
subordinated notes and 7 3/4% Convertible Subordinated Debentures is nominal.
Such valuations were based upon comparison with similarly rated securities and
are not necessarily indicative of the current market value.
32
<PAGE>
NOTE D PRE-CONSENT DATE BANKRUPTCY CLAIMS SUBJECT TO COMPROMISE
As described in Note A, on February 14, 1994, the Company consented to the
entry of an order for relief under Chapter 11 of the U.S. Bankruptcy Code.
Under Chapter 11, certain claims against the Company in existence prior to the
date that an involuntary petition was filed against the Company, December 21,
1993, are stayed while the Company continues business as a debtor-in-
possession. These claims which total approximately $623.0 million are subject
to compromise under the Company's proposed reorganization plan.
As detailed in the following table, the Company's Consolidated Balance Sheet
as of December 31, 1993 includes certain liabilities which are subject to
compromise under the Company's reorganization plan.
<TABLE>
<CAPTION>
OTHER ACCRUED OTHER LONG-
ACCOUNTS DEBT IN EXPENSES AND TERM
PAYABLE DEFAULT LIABILITIES OBLIGATIONS TOTAL
-------- -------- ------------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Debt in default........... $-- $501,007 $ -- $ -- $501,007
Accrued interest.......... -- -- 43,315 -- 43,315
Amount due to JWP Informa-
tion Services, Inc....... -- -- 24,933 -- 24,933
Foreign debt guarantees... -- -- 6,037 -- 6,037
Stock price guarantees.... -- -- 5,118 -- 5,118
Preferred dividends in ar-
rears.................... -- -- 2,257 -- 2,257
Unexpired leases.......... -- -- -- 1,718 1,718
Unfunded directors' re-
tirement benefits........ -- -- -- 975 975
Insurance reserves........ -- -- 9,600 26,800 36,400
Other impaired claims..... 400 -- 699 -- 1,099
---- -------- ------- ------- --------
$400 $501,007 $91,959 $29,493 $622,859
==== ======== ======= ======= ========
</TABLE>
The Bankruptcy Court established April 8, 1994 as the bar date for filing of
claims and certain claims have been filed against the Company which are
contingent or in dispute. Additional claims may arise subsequent to the
petition date resulting from rejection by the Company of executory contracts,
including leases, and from determination by the Court or by agreement of the
parties in interest of allowed claims for contingent or disputed amounts.
The Company has received approval from the Bankruptcy Court to pay or
otherwise honor certain of its pre-consent date bankruptcy obligations
including employee wages and benefits, amounts due under its property,
casualty, workers' compensation and other insurance programs, and amounts
payable under a JWP employee stay bonus and severance plan.
NOTE E LONG-TERM DEBT
Long-term debt, excluding current maturities, totalling $2.5 million and $4.1
million as of December 31, 1993 and 1992, respectively, is owed by certain of
the Company's subsidiaries. The aggregate amount of long-term debt maturing
during the next five years is: $1.9 million in 1994 and $.3 million in each of
the next four years.
NOTE F INCOME TAXES
Effective January 1, 1992, the Company adopted SFAS 109. The cumulative
effect of adopting SFAS 109 was to record an income tax benefit of $4.3 million
or $0.11 per share as of January 1, 1992. Such amount has been reflected in the
Consolidated Statement of Operations under the caption "Cumulative effect of
change in method of accounting for income taxes."
The Company files a consolidated federal income tax return including all U.S.
subsidiaries. At December 31, 1993, the Company has a net operating loss carry-
forward ("NOL") for U.S. income tax purposes expiring in years through 2008
which approximates $500 million. The Company has provided a valuation allowance
for the full amount of such NOLs. As described in Note A, under the Company's
proposed plan of reorganization, newly issued equity and debt securities will
be exchanged for existing debt of the Company. If the Company effectuates its
proposed plan of reorganization, a substantial portion of the NOL may not be
33
<PAGE>
available to reduce future U.S. taxable income. Additionally, due to recent
changes in the U.S. Federal income tax laws, the timing of any such plan of
reorganization could further impact and reduce the amount of the NOL.
U.S. income and foreign withholding taxes have not been provided on
undistributed earnings of certain foreign subsidiaries. Such undistributed
earnings aggregated $8.0 million at December 31, 1993. The Company considers
these earnings to be permanently invested in the businesses and, under the tax
laws, not subject to such taxes until distributed as dividends.
The (benefit) provision for income taxes relating to continuing operations
consists of:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal............................................ $(4,138) $ -- $ 663
State and local..................................... 1,000 1,248 1,092
Foreign............................................. (1,700) 1,106 2,834
------- ------ -------
(4,838) 2,354 4,589
------- ------ -------
Deferred
Federal............................................ 4,138 4,487 (5,440)
State and local..................................... -- (56) (156)
Foreign............................................. -- 859 3,426
------- ------ -------
4,138 5,290 (2,170)
------- ------ -------
$ (700) $7,644 $ 2,419
======= ====== =======
The provision (benefit) for income taxes relating to discontinued operations
consists of:
<CAPTION>
1993 1992 1991
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal............................................ $ -- $ (237) $ (525)
State and local..................................... -- 7 (218)
------- ------ -------
-- (230) (743)
------- ------ -------
Deferred
Federal............................................ -- 983 13,287
State and local..................................... -- 864 2,301
------- ------ -------
-- 1,847 15,588
------- ------ -------
$ -- $1,617 $14,845
======= ====== =======
</TABLE>
Factors accounting for the variation from U.S. statutory income tax rates
relating to continuing operations are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- --------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal income taxes at the statutory rate......... $(40,142) $(120,996) $2,425
State and local income taxes, net of federal tax... 650 787 618
Amortization and write-off of intangibles.......... -- 29,791 (488)
Valuation allowance against deferred tax asset..... 38,792 96,849 --
Other.............................................. -- 1,213 (136)
-------- --------- ------
$ (700) $ 7,644 $2,419
======== ========= ======
</TABLE>
34
<PAGE>
Factors accounting for the variation from U.S. statutory income tax rates
relating to discontinued operations are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal income taxes at the statutory rate........... $(3,180) $(85,548) $13,296
State and local income taxes, net of federal tax..... -- 575 1,375
Amortization and write-off of intangibles............ -- 28,289 --
Valuation allowance against deferred tax asset....... 3,180 58,409 --
Other................................................ -- (108) 174
------- -------- -------
$ -- $ 1,617 $14,845
======= ======== =======
</TABLE>
The sources of significant timing differences for 1991 which gave rise to
deferred taxes and their effects were as follows:
<TABLE>
<CAPTION>
CONTINUING DISCONTINUED
OPERATIONS OPERATIONS
----------- ------------
1991 1991
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Difference between book and tax accruals, principally
contracts............................................ $(1,804) $ 261
Appraisal differences................................. 1,316 3,953
Depreciation.......................................... (258) 1,071
State and local deferred taxes, net of federal tax (103) 1,519
benefits..............................................
Acquisition adjustments............................... (382) --
Terminated leases and severance pay................... -- 7,616
Other, net............................................ (939) 1,168
------- -------
$(2,170) $15,588
======= =======
</TABLE>
The components of the net deferred income tax liability are as follows:
<TABLE>
<CAPTION>
1993 1992
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carry-forward...................... $ 177,654 $ 74,787
Excess of amounts expensed for financial statement
purposes over amounts deducted for income tax
purposes.............................................. 26,183 93,891
Other.................................................. 2,899 2,816
--------- ---------
Total deferred tax asset............................... 206,736 171,494
--------- ---------
Deferred tax liabilities:
Costs capitalized for financial statement purposes and
deducted for income tax purposes..................... 39,593 33,086
Foreign deferred tax liability......................... 2,695 1,635
--------- ---------
Total deferred tax liability........................... 42,288 34,721
--------- ---------
Net deferred tax asset before valuation allowance........ 164,448 136,773
Valuation allowance for net deferred tax asset........... (170,087) (138,274)
--------- ---------
Net deferred income tax liability........................ $ (5,639) $ (1,501)
========= =========
</TABLE>
35
<PAGE>
(Loss) income before income taxes from continuing operations consists of the
following:
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
United States............................... $(106,672) $(342,304) $(11,013)
Foreign..................................... (8,019) (13,567) 18,144
--------- --------- --------
$(114,691) $(355,871) $ 7,131
========= ========= ========
(Loss) income before income taxes from discontinued operations consists of
the following:
<CAPTION>
1993 1992 1991
--------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
United States............................... $ (6,270) $(228,754) $ 36,010
Foreign..................................... (2,817) (22,859) 3,098
--------- --------- --------
$ (9,087) $(251,613) $ 39,108
========= ========= ========
</TABLE>
The above amounts applicable to discontinued operations in 1993 and 1992
include a loss from disposal of businesses of $20.4 million and $49.5 million,
respectively.
NOTE G CAPITAL STOCK AND WARRANTS
In August 1991, the Company issued 425,000 shares of preferred stock in
connection with the acquisition of Businessland, Inc. (See Note J). The
preferred stock is convertible into common stock of the Company, at any time,
at the option of the holder at a conversion price of $20.00 per share, subject
to customary anti-dilution provisions and exchangeable for 8.5% Convertible
Subordinated Notes due 2006 of the Company in whole, but not in part, at the
option of the Company after July 31, 1993. The Company has had the option to
redeem the shares of preferred stock since July 31, 1993 at $50.00 per share.
Each share of preferred stock entitles the holder to receive cumulative cash
dividends at the annual rate of $4.25 per annum per share. The Company has not
paid dividends on its preferred stock since September 1992. Cumulative unpaid
dividends at December 31, 1993 and 1992 aggregate $2.3 million and $0.5
million, respectively.
In 1969, the Company distributed 1,152,649 warrants of participation to
holders of its common stock. The warrants of participation, which expire on
December 31, 1994, may entitle their holders to receive shares of common stock
of the Company in the event that JWS disposes of all or any significant portion
of its water distribution system or the Company disposes of any shares of JWS.
The number of shares of common stock to be issued, if any, will be determined
on the basis of a specified formula and will be distributed to warrant holders
on a pro rata basis.
As of December 31, 1993, 1992 and 1991, the Company had outstanding stock
options of approximately 2.3 million, 3.2 million and 1.2 million shares,
respectively, at option exercise prices, ranging from $3.00 to $21.05 per
share. The stock options were issued in connection with the Company's 1992 and
1991 Stock Option Plans, the 1986 Incentive Stock Option and Appreciation Plan
and in connection with the acquisition of NEECO, Inc. in 1990. During 1993,
options to purchase a total of 50,000 shares were granted at an exercise price
of $3.625 per share. No stock options were exercised in 1993.
As described in Note A, under the Company's proposed plan of reorganization,
the holders of the Company's existing preferred and common stock and warrants
of participation will receive warrants to purchase common stock of the
reorganized Company in exchange for their equity interests.
NOTE H RETIREMENT PLANS
A foreign subsidiary has a defined benefit pension plan covering
substantially all eligible employees. The benefits under the plan are based on
wages and years of service with the respective company. The Company's policy is
to fund the minimum amount required by law.
36
<PAGE>
Effective May 31, 1991, the Company terminated one of its U.S. pension plans
and replaced it with a defined contribution plan. The effect of the pension
termination and settlement of the benefit obligation was not material to the
operating results of the Company.
Net pension expense for the foreign defined benefit plan for 1993, 1992 and
1991 consists of the following components:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost--benefits earned........................ $ 1,479 $ 1,301 $ 1,484
Interest on projected benefit obligations............ 2,478 2,481 2,108
Actual return on plan assets......................... (7,955) (5,473) (3,428)
Net amortization and deferral........................ 5,129 2,452 838
------- ------- -------
Net pension expense.................................. $ 1,131 $ 761 $ 1,002
======= ======= =======
</TABLE>
The benefit obligations and funded status of the plan at December 31, 1993
and 1992 are as follows:
<TABLE>
<CAPTION>
1993 1992
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accumulated benefit obligations:
Vested................................................. $25,293 $21,214
Non-vested............................................. -- --
Impact of future salary increases........................ 4,049 3,393
------- -------
Projected benefit obligations............................ 29,342 24,607
Plan assets at market value.............................. 34,566 27,531
------- -------
Excess of plan assets over projected benefit obligations. 5,224 2,924
Unrecognized prior service cost.......................... 882 --
Unrecognized net (gain) from past experience different
from that assumed and effect of changes in assumptions.. (5,453) (1,670)
Unrecognized net (asset) from initial application of SFAS
No. 87.................................................. (795) (889)
------- -------
(Accrued) prepaid pension................................ $ (142) $ 365
======= =======
</TABLE>
The assumptions used as of December 31, 1993, 1992 and 1991 in determining
the pension cost and liability shown above were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Discount rate.................................................... 9% 10% 11%
Rate of salary progressions...................................... 7% 7% 7%
Rate of return on assets......................................... 10% 10% 11%
</TABLE>
The unrecognized net asset of the foreign plan is being amortized over 15
years. The plan assets are invested 80% in equity securities and 20% in fixed
income securities.
The Company contributes to various union pension funds based upon wages paid
to union employees of the mechanical/electrical business units. Such
contributions approximated $45.5 million, $41.6 million and $38.5 million in
1993, 1992 and 1991, respectively.
The Company has defined contribution retirement plans that cover its U.S.
non-union eligible employees. Contributions to these plans are based on a
percentage of the employee's base compensation. The expense recognized in 1993,
1992 and 1991 relating to continuing operations for the defined contribution
plans was $3.5 million, $4.7 million and $4.7 million, respectively.
37
<PAGE>
Effective January 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 106, "Accounting For Postretirement Benefits
Other Than Pensions" (SFAS 106). The estimated present value of the accumulated
postretirement benefit obligations under SFAS 106 approximated $7.0 million at
January 1, 1993. See Note T.
NOTE I LEASE COMMITMENTS
The Company and its subsidiaries lease land, buildings and equipment under
various non-cancellable lease agreements. The lease agreements frequently
include renewal options and require the Company to pay for utilities, taxes,
insurance and maintenance expense.
Future minimum payments, by year and in the aggregate, under capital leases,
non-cancellable operating leases and related subleases with initial or
remaining terms of one year or more relating to continuing operations at
December 31, 1993 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES SUBLEASES
------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
1994............................................... $ 961 $ 20,117 $ 2,121
1995............................................... 779 17,323 2,179
1996............................................... 634 14,038 2,158
1997............................................... 191 10,155 2,145
1998............................................... 120 7,867 1,636
Thereafter......................................... 630 39,394 4,732
------ -------- -------
Total minimum lease payments....................... 3,315 $108,894 $14,971
======== =======
Amounts representing interest...................... 754
------
Present value of net minimum lease payments
(includes current portion of $400)................. $2,561
======
</TABLE>
Future minimum payments under non-cancellable operating leases relating to
discontinued operations are as follows (in thousands): $1,214, $947, $664, $435
and $198 in 1994, 1995, 1996, 1997 and 1998, respectively.
"Other long-term obligations" at December 31, 1993 and 1992 include capital
lease obligations of $2.2 million and $3.2 million, respectively.
Rent expense relating to continuing operations for the years ended December
31, 1993, 1992 and 1991 was $21.5 million, $26.6 million and $22.8 million,
respectively. Rent expense in both 1993 and 1992 includes sublease rentals of
$0.8 million. Rent expense relating to discontinued operations for the years
ended December 31, 1993, 1992 and 1991 was $7.5 million, $20.7 million and
$10.0 million, respectively.
NOTE J BUSINESS COMBINATIONS
In the fourth quarter of 1991, the Company completed the acquisition of
Businessland, Inc. ("Businessland"). Pursuant to the acquisition, the Company
paid $17.0 million in cash and exchanged 1,108,195 shares of its common stock
for all the outstanding common stock of Businessland. The Company acquired
Businessland's 10 1/4% Senior Notes in the aggregate principal amount of $50.0
million for an aggregate of $18.75 million in cash and 425,000 shares of its
$4.25 Convertible Exchangeable Preferred Stock with a liquidation preference of
$50.00 per share. Businessland was combined with the Company's then existing
information services business. The acquisition of Businessland was accounted
for by the purchase method of accounting. The Company sold the rental
operations of Businessland in 1991 for $10.1 million in cash. The sale of the
rental operations did not result in a gain or loss to the Company.
38
<PAGE>
Including the acquisition of Businessland, the Company paid approximately
$15.4 million and $133.7 million in 1992 and 1991, respectively, in cash, notes
and common stock for its acquisitions. Net tangible assets acquired in 1992 and
1991 were approximately $7.0 million and $80.3 million, respectively.
The acquisitions in 1992 and 1991 were accounted for by the purchase method
of accounting and, accordingly, the consolidated results of operations include
the results of the acquired companies from acquisition dates. In 1991, pro
forma combined revenues, income and net income per share from continuing
operations and the acquired businesses would have been approximately $2.4
billion, $7.3 million and $0.14, respectively, if the acquisitions had taken
place on January 1, 1991. Pro forma amounts for the year ended December 31,
1992 are not materially different from the actual amounts.
NOTE K DISCONTINUED OPERATIONS
Discontinued operations includes the Company's information services business
and water supply business.
In March 1993, the Company's Board of Directors approved the disposition of
the Company's U.S. information services business. The Board of Directors had
previously decided to sell the Company's overseas information services
business. Accordingly, operating results of the information services business
have been classified as discontinued operations. In August 1993, the Company
sold substantially all of the assets of its U.S. information services business.
The Company did not realize a material gain or loss from the sale in 1993. The
assets of the U.S. information services business consisted primarily of
inventory held for resale and accounts receivable. Under the terms of the
agreement, the purchaser assumed the debt and other liabilities relating to the
ongoing operations of the business. The Company received warrants to buy up to
10% of the purchaser's common stock for a nominal amount.
In October 1993, the Company's subsidiary which formerly carried on a U.S.
information services business filed a voluntary petition under Chapter 7 of the
U.S. Bankruptcy Code. In connection with the bankruptcy filing, the Company
recorded a loss of $8.1 million. Such amount is included in "Loss from disposal
of businesses, net of income taxes" in the accompanying Consolidated Statements
of Operations. At December 31, 1993, the Company owed its bankrupt U.S.
information services subsidiary $24.9 million. Such amount is included in
"Other accrued expenses and liabilities" in the accompanying Consolidated
Balance Sheet.
The Company recorded a loss of $1.5 million in 1993 to further write-down the
net assets of one of its U.S. information services businesses to its estimated
net realizable value based upon current market conditions. Also, the Company
sold substantially all of the assets of its international information services
businesses in 1993. The sale of such businesses resulted in a loss of $3.3
million in 1993. Such amounts are included under the caption "Loss from
disposal of businesses, net of income taxes" in the accompanying Consolidated
Statement of Operations.
Revenues of the information services business in 1993, 1992 and 1991 were
$876.7 million, $1,692.4 million and $1,213.8 million, respectively. In 1993,
the information services business had operating income of $10.2 million
compared to an operating loss of $187.9 million in 1992 and operating income of
$34.0 million in 1991. The information services business' loss in 1992 includes
$41.3 million attributable to the write-off of goodwill and other intangibles
related to the U.S. information services business and $26.0 million primarily
relating to severance payments and facilities consolidation.
39
<PAGE>
In 1992 and 1991, the information services business operated primarily in the
United States, Europe and Canada. The following presents information about
operations in such geographical areas:
<TABLE>
<CAPTION>
OPERATING IDENTIFIABLE
REVENUES INCOME (LOSS) ASSETS
---------- ------------- ------------
<S> <C> <C> <C>
(IN THOUSANDS)
1992
United States........................... $1,418,350 $(144,743) $378,913
Europe.................................. 245,497 (37,727) 78,072
Canada.................................. 28,573 (5,469) 10,186
---------- --------- --------
$1,692,420 $(187,939) $467,171
========== ========= ========
1991
United States........................... $1,106,711 $ 32,987 $723,759
Europe.................................. 91,088 1,824 116,094
Canada.................................. 15,970 (775) 16,781
---------- --------- --------
$1,213,769 $ 34,036 $856,634
========== ========= ========
</TABLE>
In connection with the plan to dispose of the overseas information services
business and certain other of its U.S. information services business, the
Company provided for a loss of $49.5 million in 1992. This loss represents the
estimated loss to be realized upon the disposition of such businesses. Such
loss includes $32.1 million related to the write-off of goodwill and other
intangible assets and $17.4 million for estimated losses to be incurred up to
the expected disposal dates and the write-down of other assets to estimated net
realizable value.
In April 1992, the Company announced its intention to sell its water supply
business. However, in July 1993, the Company's Board of Directors decided not
to proceed with the divestiture due to uncertainties created by then pending
rate related proceedings and litigation. In December 1993, JWS entered into an
agreement with respect to the rate related proceedings and litigation.
Subsequently, this agreement was approved by the New York State Public Service
Commission on February 2, 1994. Accordingly, the Company reinstated its plan of
divestiture in the first quarter of 1994 and recorded a $7.4 million loss in
1993 to write-down the net assets of the water supply business to estimated net
realizable value. The financial statements for all periods presented reflect
the water supply business as discontinued operations.
See Note S with respect to the status of a proceeding initiated in 1988 by
the City of New York to acquire by condemnation all of the water distribution
system of JWS that is located in New York City.
The assets of the water supply business consist primarily of utility plant
and equipment which are located in Nassau and Queens Counties in the State of
New York. The net assets of the water supply business, which aggregate $60.0
million and $57.2 million at December 31, 1993 and 1992, respectively, are
classified as a long-term asset in the accompanying Consolidated Balance Sheets
under the caption "Net assets held for sale" because the disposition of the
water supply business will not take place until after 1994.
Revenues of the water supply business were $66.8 million, $59.8 million and
$63.1 million in 1993, 1992 and 1991, respectively. Operating income of the
water supply business was $15.4 million, $4.8 million and $14.6 million in
1993, 1992 and 1991, respectively. The 1992 results include a provision of $7.0
million related to the settlement of litigation referred to above.
40
<PAGE>
Combined operating results of discontinued operations including both the
information services and water supply businesses are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
-------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues.................................. $943,455 $1,752,171 $1,276,876
Costs and expenses........................ 917,872 1,935,349 1,228,281
-------- ---------- ----------
Operating income (loss)................... 25,583 (183,178) 48,595
Interest expense.......................... (14,320) (18,944) (9,487)
-------- ---------- ----------
Income (loss) before taxes................ 11,263 (202,122) 39,108
Provision for income taxes................ -- 1,617 14,845
-------- ---------- ----------
Income (loss) from discontinued opera-
tions.................................... $ 11,263 $ (203,739) $ 24,263
======== ========== ==========
</TABLE>
NOTE L OTHER BUSINESSES SOLD AND NET ASSETS HELD FOR SALE
In May 1993, the Company completed the sale of Software House, Inc., a
manufacturer of security systems, for cash proceeds of $12.6 million and
realized a net gain of approximately $2.7 million. In addition to Software
House and the U.S. information services business, the Company sold a number of
non-core businesses and other assets in 1993 for cash proceeds of approximately
$30.8 million. Additionally the Company received notes and other assets with an
aggregate carrying value of $10.9 million. The Company did not realize a
material gain or loss from these divestitures in 1993.
On October 16, 1992, the Company completed the sale of five environmental
businesses for which it received net cash proceeds of $84.1 million. The five
businesses sold were two air pollution control businesses, JWP Air
Technologies, Inc. and JWP Amcec Corp., two sludge pelletization projects,
located in New York City and Baltimore, Maryland and Enviro-Gro Technologies
Co., a sludge processing business. The Company realized a gain of approximately
$12.0 million from the sale of these businesses. Additionally, the Company's
Board of Directors has approved a plan for the sale of the Company's remaining
energy and environmental related businesses, other non-core businesses and
certain mechanical/electrical services operations. In connection with this
asset disposition plan, a loss of $88.1 million was provided for in 1992. The
loss represents the estimated loss to be realized upon the disposition of the
businesses held for sale. The loss consists of $24.1 million attributable to
the write-off of goodwill and $64.0 million related to the write-down of other
assets to net realizable value. In 1991, the Company incurred a loss of $6.6
million in connection with the sale of a certain subsidiary. The operating
results of these businesses as well as the provisions for the write-down of
assets are included in (loss) income from continuing operations.
Revenues and operating (loss) income of other businesses sold and held for
sale for the years ended December 31, 1993, 1992 and 1991 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1992 1991
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues....................................... $257,910 $526,894 $501,696
Operating (loss) income........................ (11,802) (41,151) 15,325
</TABLE>
41
<PAGE>
A condensed balance sheet relating to discontinued operations and other net
assets held for sale at December 31, 1993 is as follows (in thousands):
<TABLE>
<S> <C>
Cash............................. $ 17,617
Accounts receivable, net......... 59,869
Costs and estimated earnings in
excess of billings.............. 4,889
Inventories...................... 13,089
Other current assets............. 2,597
--------
98,061
Property, plant and equipment,
net............................. 154,836
Other assets..................... 12,653
--------
$265,550
========
</TABLE>
<TABLE>
<S> <C>
Current maturities of long-term debt and
capital lease obligations.................. $ 9,783
Accounts payable............................ 13,610
Billings in excess of costs and estimated
earnings................................... 9,200
Other accrued expenses...................... 72,696
--------
105,289
Long-term debt.............................. 36,945
Other long-term liabilities................. 39,701
Net assets held for sale--current........... 20,454
Net assets held for sale--long-term......... 63,161
--------
$265,550
========
</TABLE>
NOTE M RESTRUCTURING CHARGES
In 1992, the Company recorded $38.7 million of restructuring charges related
to continuing operations. The Company's business restructuring plans
contemplated the downsizing and consolidation of the Company's North American
mechanical/electrical services operations. The Company's strategy also provides
for the disposition of non-core businesses and certain mechanical/electrical
services operations. The restructuring charges consisted of $10.8 million
applicable to permanent impairment of goodwill and $27.9 million for severance
payments, facilities consolidation costs, provisions for contract losses and
the write-down of certain assets to net realizable value.
NOTE N INSURANCE RESERVES
The Company is primarily insured with an indirect wholly-owned captive
insurance subsidiary ("Defender") for its workers' compensation, automobile and
general liability insurance. The insurance liability is determined actuarially
based on claims filed and an estimate of claims incurred but not yet reported.
The present value of such claims was determined as of December 31, 1993 and
1992 using a 4% discount rate. The estimated current portion of the insurance
liability was $17.7 million and $16.5 million at December 31, 1993 and 1992,
respectively. Such amounts are included in "Other accrued expenses and
liabilities" in the accompanying Consolidated Balance Sheets. The noncurrent
portion of the insurance liability was $41.0 million and $33.1 million at
December 31, 1993 and 1992, respectively. Such amounts are included in "Other
long-term obligations". The undiscounted liability was approximately $65.2
million and $56.0 million at December 31, 1993 and 1992, respectively.
The Company and Defender have letters of credit outstanding totalling $36.4
million which in effect secure their insurance obligations. The letters of
credit were intended to serve as collateral for the obligations of Defender to
reimburse the Company's unrelated insurance carrier for claims paid in respect
of certain years' insurance programs. Such letters of credit expire in December
1994 ($34.9 million) and in February 1995 ($1.5 million). Since October 1992,
neither the Company nor Defender has been able to obtain additional letters of
credit to secure their insurance obligations and, as a result, have been
required to make cash collateral deposits to an unrelated insurance company to
secure those types of obligations. The deposits totalled $21.3 million and $7.7
million as of December 31, 1993 and December 31, 1992, respectively, and are
classified as a long-term asset in the accompanying Consolidated Balance Sheets
under the caption "Miscellaneous" in Other Assets. Such deposits have increased
to $29.7 million as of June 30, 1994.
The Company's proposed plan of reorganization contemplates that the letters
of credit described above will be drawn upon by the unrelated insurance
carriers and that the Company's obligations to Defender, which were pledged as
collateral to the banks issuing such letters of credit will be impaired in the
Chapter 11
42
<PAGE>
proceeding as well as any related Company obligations to those banks. The
Company's unrelated insurance carriers have commenced partial draw downs
against certain of the letters of credit. Approximately $5 million has been
drawn down against certain of the letters of credit through June 1994.
NOTE O ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1993 1992 1991
------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid (refunded) during the year for:
Interest......................................... $26,126 $ 62,582 $54,258
Income taxes..................................... (2,177) (15,617) 14,400
Significant non-cash financing and investment
transactions are as follows:
Notes receivable and other assets received from
sale of assets.................................. $10,875 $ -- $ --
Debt assumed in acquisitions..................... -- 929 93,662
Debt issued to acquire companies................. -- 2,566 9,648
Common stock issued for acquisitions............. -- 749 29,238
Preferred stock issued to retire debt............ -- -- 21,250
Fixed assets acquired under capital lease obliga-
tions........................................... 46 1,616 2,760
NOTE P TRANSLATION COMPONENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
Translation components of shareholders' equity (deficit) for the years ended
December 31, 1993, 1992 and 1991 are as follows:
<CAPTION>
1993 1992 1991
------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Amounts transferred from cumulative translation
adjustment as a result of the sale or substan-
tially complete liquidation of investments in
foreign entities................................ $ 890 $ -- $ --
Effect of balance sheet translation.............. (3,028) (8,737) 1,971
------- -------- -------
$(2,138) $ (8,737) $ 1,971
======= ======== =======
</TABLE>
NOTE Q SEGMENT INFORMATION
The following presents information about continuing operations by geographic
areas:
<TABLE>
<CAPTION>
OPERATING IDENTIFIABLE
REVENUES INCOME (LOSS) ASSETS
---------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
1993
United States........................ $1,692,470 $ (57,906) $572,468
Europe............................... 321,632 (4,403) 112,293
Canada............................... 180,633 (3,223) 38,066
Net assets held for sale............. -- -- 83,615
---------- --------- --------
$2,194,735 $ (65,532) $806,442
========== ========= ========
1992
United States........................ $1,793,350 $(220,242) $582,426
Europe............................... 386,003 (15,985) 145,435
Canada............................... 225,224 615 61,218
Net assets held for sale............. -- -- 118,505
---------- --------- --------
$2,404,577 $(235,612) $907,584
========== ========= ========
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
OPERATING IDENTIFIABLE
REVENUES INCOME (LOSS) ASSETS
---------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
1991
United States........................ $1,713,651 $42,706 $1,842,391
Europe............................... 374,380 5,199 283,315
Canada............................... 230,081 9,746 108,121
---------- ------- ----------
$2,318,112 $57,651 $2,233,827
========== ======= ==========
</TABLE>
NOTE R SELECTED UNAUDITED QUARTERLY INFORMATION
<TABLE>
<CAPTION>
1993 QUARTERLY RESULTS MARCH 31 JUNE 30 SEPT. 30 DEC. 31 TOTAL
- - - - - - - - - ---------------------- -------- -------- -------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues................... $563,879 $583,872 $565,845 $481,139 $2,194,735
Gross Profit............... 58,554 47,604 40,117 4,902 151,177
(Loss) from continuing op-
erations.................. (11,830) (18,956) (19,660) (63,545) (113,991)
Income (loss) from discon-
tinued operations......... 1,718 3,026 (4,793) (9,038) (9,087)
-------- -------- -------- -------- ----------
Net (loss)................. $(10,112) $(15,930) $(24,453) $(72,583) $ (123,078)
======== ======== ======== ======== ==========
(Loss) income per share:
Continuing operations...... $ (.30) $ (.48) $ (.49) $ (1.57) $ (2.84)
Discontinued operations.... .04 .08 (.12) (.22) (.22)
-------- -------- -------- -------- ----------
Net (loss) per share....... $ (.26) $ (.40) $ (.61) $ (1.79) $ (3.06)
======== ======== ======== ======== ==========
</TABLE>
The loss from continuing operations in the fourth quarter of 1993 reflects a
provision of $37.2 million primarily for estimated losses on large uncompleted
contracts. The loss from discontinued operations in the fourth quarter of 1993
includes a $7.4 million charge to write-down the net assets of the water supply
business to estimated net realizable value and a $2.4 million loss from the
sale of the Company's information services business in Germany.
<TABLE>
<CAPTION>
1992 QUARTERLY RESULTS MARCH 31 JUNE 30 SEPT. 30 DEC. 31 TOTAL
- - - - - - - - - ---------------------- -------- -------- --------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues................. $582,580 $606,824 $ 609,553 $ 605,620 $2,404,577
Gross profit............. 80,469 82,563 60,918 19,904 243,854
(Loss) from continuing
operations before
cumulative effect of
accounting change....... (7,822) (31,525) (89,599) (234,569) (363,515)
(Loss) from discontinued
operations.............. (9,712) (22,489) (38,176) (182,853) (253,230)
Cumulative effect of
change in method of
accounting for income
taxes................... 4,315 -- -- -- 4,315
-------- -------- --------- --------- ----------
Net (loss)............... $(13,219) $(54,014) $(127,775) $(417,422) $ (612,430)
======== ======== ========= ========= ==========
(Loss) income per share:
Continuing operations.... $ (0.20) $ (0.80) $ (2.22) $ (5.78) $ (9.00)
Discontinued operations.. (0.25) (0.54) (0.94) (4.51) (6.24)
Cumulative effect of
change in method of
accounting for income
taxes................... 0.11 -- -- -- 0.11
-------- -------- --------- --------- ----------
Net (loss) per share..... $ (0.34) $ (1.34) $ (3.16) $ (10.29) $ (15.13)
======== ======== ========= ========= ==========
</TABLE>
The loss from continuing operations in the fourth quarter of 1992 includes
the following: (i) restructuring charges of $13.9 million primarily for
consolidation and downsizing of certain North American
44
<PAGE>
mechanical/electrical units, (ii) $70.2 million for losses attributable to
assets held for sale, (iii) valuation allowances of $56.1 million relating to
accounts receivable, work-in-progress on uncompleted contracts and inventory
and (iv) a valuation allowance of $24.0 million provided against deferred tax
assets. The loss from discontinued operations in the fourth quarter of 1992
includes the following: (i) restructuring charges of $18.0 million relating to
severance payments and facilities consolidation, (ii) $37.6 million for losses
attributable to assets held for sale, (iii) valuation allowances of $62.4
million relating to accounts receivable and inventory and (iv) $29.3 million
relating to write-off of goodwill and other intangibles.
NOTE S LEGAL PROCEEDINGS
Since August 1992, nineteen purported class action lawsuits have been filed
against the Company arising out of the restatement of earnings, write-offs and
losses announced by the Company on August 4, 1992 and October 2, 1992. Pursuant
to Stipulation and Court Order on January 15, 1993, a single consolidated
amended class action complaint (the "Complaint") was filed. The Complaint names
as defendants the Company, certain former officers and directors, four current
directors, a former subsidiary officer and the Company's then outside auditor,
Ernst & Young.
The Complaint alleges violations of Section 10(b) of the Securities and
Exchange Act of 1934, Rule 10b-5 promulgated thereunder and common law fraud
and deceit on the part of the Company and certain other defendants. Among other
things, the Company is alleged to have intentionally and materially overstated
its inventory, accounts receivable and earnings in various public
disseminations during the purported class period May 1, 1991 through October 2,
1992. The Complaint seeks an unspecified amount of damages. The Company denies
the material allegations in the Complaint. The parties are now engaged in
discovery proceedings. However, under its proposed Chapter 11 plan of
reorganization, no damages will be recoverable from the Company by claimants in
the class action litigation although they will receive warrants to purchase
common stock of the reorganized Company.
The Company has been informed by the Securities and Exchange Commission (the
"SEC") that it was conducting a private investigation to determine whether
there have been violations of certain provisions of the federal securities laws
and/or the rules and regulations of the SEC in connection with the Company's
financial records, reports and public disclosures. The Company has been
cooperating with the SEC's staff and has voluntarily produced requested
documents and information. On April 12, 1994, the SEC's staff informed the
Company of its intention to recommend that the SEC file a civil injunction
against the Company. The Company is currently engaged in discussions with the
SEC's staff concerning a possible consensual resolution of the matter.
In January 1992, the Public Service Commission of the State of New York
("PSC") ordered its staff to perform an audit covering all aspects of
operations of JWS. The audit report alleged that mismanagement and imprudence
on the part of JWS may have resulted in excess charges to its customers of up
to $10.6 million. Based on the audit report, in June 1992 the PSC instituted a
proceeding requiring JWS to demonstrate that its rates charged to customers are
not excessive and provided for an investigation of JWS's management practices.
As part of this proceeding and citing the audit report's assertion without
receiving the audit report in evidence, the PSC ordered that $10.6 million of
JWS's annual revenues be made temporary and subject to refund, effective August
6, 1992, pending the completion of the investigation.
Between December 1992 and May 1993, representatives of JWS, the PSC, consumer
advocate groups, the County of Nassau, the town of Hempstead and others
appeared and submitted testimony in the PSC proceedings. On June 3, 1993, the
PSC issued an order suspending hearings and appointed two administrative law
judges for the purpose of effecting a settlement. Negotiations among the
parties and the settlement judges were ongoing from that time.
In addition on February 5, 1993, the County of Nassau filed a complaint in
the Supreme Court of the State of New York alleging that JWS intentionally
filed false rate applications with the PSC and, as a result,
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<PAGE>
for the period from March 31, 1987 through March 31, 1992, JWS had earnings
that exceeded its projections by $8.7 million. The complaint alleged that this
conduct constituted violations of the Racketeer Influenced and Corrupt
Organizations Act ("RICO") and common law fraud.
On December 22, 1993, JWS, the New York State Consumer Protection Board,
Nassau County, certain other governmental bodies and a consumer advocate group
entered into an agreement that ended the several regulatory and legal
proceedings against JWS. Subsequently, the agreement was approved by the PSC on
February 2, 1994. The agreement provides for, among other things, a three year
general rate case moratorium, resolution of the economic issues raised by the
PSC arising from its 1992 audit of JWS, settlement of related litigation and
the dismissal of Nassau County's RICO lawsuit against JWS. JWS agreed, in
consideration of avoided litigation and other costs associated with the
proceedings, to make payments over the next three years totalling $11.7 million
to customers in Nassau and Queens Counties in the State of New York. In
connection with this settlement, the Company provided a charge of $7.0 million
in 1992. The agreement also provides that JWS will use its best efforts to
bring about the separation of Jamaica Water Securities Corp., a subsidiary of
the Company which holds substantially all the common stock of JWS, from the
Company.
In 1986, the State of New York enacted a statute requiring the City of New
York (the "City") to acquire by condemnation all of the JWS property
constituting or relating to its water distribution system located in the City
only if a Supreme Court of the State of New York (the "Supreme Court") decides
that the amount of compensation to be paid for the system is determined solely
by the income capitalization method of valuation. If the Court determines
compensation by a method other than the income method capitalization or the
award is for more than the rate base of the condemned assets, the statute
permits the City to withdraw the proceeding without prejudice or costs. In
1988, the City instituted a proceeding pursuant to the statute to acquire the
system which constitutes approximately 75% of JWS' water utility plant. JWS
argued at trial that the judicially recognized method for valuing public
utility property is by the method known as "Reproduction Cost New, Less
Depreciation". JWS also sought consequential and severance damages that would
result from separating the JWS Nassau county water supply system from that in
the City. The aggregate amount sought by JWS as of December 31, 1987 was
approximately $924.0 million. The City submitted its income capitalization
valuation, as of December 31, 1987, at approximately $63.0 million.
In June 1993, the Supreme Court dismissed the City's petition. The Supreme
Court concluded, among other things, that the statute is unconstitutional
because it directs the Court to render an advisory opinion.
In February 1994, the New York Court of Appeals held constitutional a nearly-
identical statute dealing with another water utility. In April 1994, upon a
request made by the City for reconsideration by the City, the Supreme Court
stated that it would reconsider its prior decision in light of the February
decision of the Court of Appeals.
The Company cannot predict when or if the Supreme Court will conduct further
proceedings under the statute nor is it possible to predict what the decision
of the Supreme Court might be if it decides to value the JWS property or the
effect of the pending litigation of the proposed sale of JWS.
In 1993, the Company's French and Belgian information services subsidiaries
filed petitions in their respective countries seeking relief from their
creditors. The French and Belgian subsidiaries have outstanding unsecured
credit facilities which are guaranteed by the Company aggregating $5.9 million.
Such amount was provided for as a loss in 1992.
As described in Note K, in August 1993 the Company sold its U.S. information
services business. In October 1993, the subsidiary formerly carrying on this
business filed a voluntary petition under Chapter 7 of the U.S. Bankruptcy
Code.
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In connection with an investigation of the plumbing industry being conducted
by the New York County District Attorney's office, two related subsidiaries of
the Company engaged in the plumbing business in New York City have received
subpoenas for certain of their books and records. The subsidiaries have
complied with those subpoenas. Additionally, certain employees of these
subsidiaries have been subpoenaed to testify as witnesses before a grand jury
and those employees have complied with the subpoenas.
The Company is involved in other legal proceedings and claims which have
arisen in the ordinary course of business. The Company cannot predict the
outcome thereof or the impact that an adverse result will have upon the
Company's financial position or results of operations.
NOTE T ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT
Effective January 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 106, "Accounting For Postretirement Benefits
Other Than Pensions" (SFAS 106). The estimated present value of the accumulated
postretirement benefit obligations under SFAS 106 approximated $7.0 million at
January 1, 1993. Such amount relates to the Company's water supply business.
The net assets of the water supply business are included in "Net assets held
for sale" in the accompanying Consolidated Balance Sheets. The adoption of SFAS
106 did not have a material impact upon the Company's consolidated results of
operations.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 112 "Employers' Accounting for Postemployment
Benefits" which will be effective in 1994. This standard will not have a
material impact upon the Company's consolidated financial position or its
results of operations.
NOTE U OTHER
JWS is subject to a PSC order which requires that dividend payments by JWS
not exceed 50% of JWS's net income available to common shareholders for the
preceding twelve month period and subject further to a debt/equity ratio
restriction. Under such PSC order, approximately $2.5 million of JWS's retained
earnings were available for the payment of dividends and $44.7 million of JWS's
retained earnings were restricted as of December 31, 1993.
In September 1992, the PSC issued an order requiring additional
certifications before the payment by JWS of cash dividends on its common stock.
This resulted in the suspension of dividend payments to the Company by JWS for
the last two quarters of 1992 and all of 1993. Dividends paid by JWS in 1992
and 1991 amounted to $1.2 million and $2.0 million, respectively. As a result
of the settlement agreement described in Note S, JWS recommenced dividend
payments in 1994.
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of JWP INC.
We have audited the accompanying consolidated balance sheet of JWP INC. and its
subsidiaries (Debtor-in-Possession) (the "Company") as of December 31, 1993,
and the related consolidated statements of operations, shareholders' (deficit)
equity and cash flows for the year then ended. Our audit also included the
financial statement schedules for the year then ended December 31, 1993 listed
in the Index at Item 14(a)2. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to report on these financial statements and financial
statement schedules based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our report.
As further described in Notes A, C and D, the Company consented to an order of
relief under the provisions of Chapter 11 of the U.S. Bankruptcy Code. The
accompanying financial statements do not purport to reflect or provide for the
consequences of the bankruptcy proceedings. In particular, such financial
statements do not purport to show (a) as to assets, their realizable value on a
liquidation basis or their availability to satisfy liabilities; (b) as to pre-
petition liabilities, the amounts that may be allowed or claims or
contingencies, or the status and priority thereof; (c) as to shareholder
accounts, the effect of any changes that may be made in the capitalization of
the Company, or (d) as to operations, the effect of any changes that may be
made in its business. The outcome of these matters is not presently
determinable.
As more fully described in Note S, the Company is involved with certain legal
proceedings. The Company is presently unable to predict the outcome of these
proceedings, and the impact, if any, that the ultimate resolution of such
matters will have upon the Company and its financial statements.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully described in Note A,
the Company has suffered recurring losses from operations, the Company has a
working capital deficiency of $452 million and a shareholders' deficit of $302
million. The Company is in default of covenants contained in its loan
agreements and, as noted above, is operating under the protection of the U.S.
Bankruptcy Court. Many of the Company's mechanical/electrical services
contracts require surety bonds to guarantee the performance of such contracts.
The Company's surety companies are reviewing bid and performance bonding
requests on a case-by-case basis with special attention paid to large
construction projects and those with durations of more than two years in light
of the Company's financial condition. Management's plans concerning these
matters, including the restructuring of its operations and the sale of non-core
businesses and certain mechanical/electrical operations, are also discussed in
Note A. There is no assurance that the Company will be able to consummate its
proposed plan of reorganization or consummate the sales of the businesses
identified in its plan or realize the sales proceeds contemplated by its plan.
The matters discussed in this and the two preceding paragraphs raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include adjustments that might result should
the Company be unable to continue as a going concern.
Because of the possible material effects on the 1993 consolidated financial
statements referred to above of the uncertainties referred to in the three
preceding paragraphs, we are unable to express, and we do not express, an
opinion on these consolidated financial statements or the related financial
statement schedules.
Deloitte & Touche LLP
New York, New York
July 8, 1994
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REPORT OF INDEPENDENT AUDITORS
Board of Directors
JWP INC.
We have audited the accompanying consolidated balance sheet of JWP INC. and
subsidiaries as of December 31, 1992, and the related consolidated statements
of operations, shareholders' (deficit) equity, and cash flows for each of the
two years in the period ended December 31, 1992. Our audits also included the
financial statement schedules for the year ended December 31, 1992 and 1991
listed in the Index at Item 14(a). These financial statements and schedules are
the responsibility of the Company's management. Our responsibility is to report
on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our report.
As further described in Notes A and C, the Company is not in compliance with
certain covenants with respect to its revolving credit facility, senior notes
and subordinated debt under which the Company owed $501 million at December 31,
1992. The Company has negotiated the restructuring of its debt and intends to
effect the restructuring through a proposed plan of reorganization under an
ongoing proceeding under Chapter 11 of the U.S. Bankruptcy Code. The proposed
plan of reorganization also contemplates a business restructuring plan to
divest certain businesses, the proceeds of which, to date, have been used for
working capital and to reduce debt. There is no assurance that the Company will
be able to consummate the remaining sales and, if consummated, whether the
Company will realize the proceeds contemplated by the plan. Further, the
Company cannot predict the results of the reorganization, if completed, or
provide any assurance that the proposed plan of reorganization will be
completed or, if so, its timing. If the Company is not successful in these
efforts there is the likelihood that a liquidation would result.
As more fully described in Note S, the Company has been named as a defendant
in various litigation. The Company is presently unable to predict the outcome
of this litigation, and the impact, if any, that the ultimate resolution of
such litigation will have upon the Company and its financial statements.
The accompanying consolidated financial statements have been prepared
assuming that JWP INC. will continue as a going concern. The Company has a
working capital deficiency of $364.9 million and a shareholders' deficit of
$176.0 million at December 31, 1992. In addition, the Company has incurred a
loss of $612.4 million for the year ended December 31, 1992 that has
significantly weakened the Company's financial condition. The Company's surety
companies are issuing new bonds required to guarantee the Company's performance
on construction contracts, but are reviewing bonding requests on a case-by-case
basis for large construction projects and those with durations of more than two
years in light of the Company's financial condition. The matters discussed in
this and the two preceding paragraphs raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification
of liabilities that may result from the possible inability of JWP INC. to
continue as a going concern.
Because of the possible material effects on the 1992 consolidated financial
statements referred to above of the matters described in the three preceding
paragraphs, we are unable to, and do not, express an opinion on these
consolidated financial statements or the related financial statement schedules.
49
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As discussed in Note F, in 1992 the Company changed its method of accounting
for income taxes.
In our opinion, the 1991 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of
operations of JWP INC. and subsidiaries and their cash flows for the year ended
December 31, 1991, in conformity with generally accepted accounting principles.
Also, in our opinion, the related 1991 financial statement schedules, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
Ernst & Young LLP
New York, New York
June 30, 1994
50
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On February 9, 1994, the Company informed Ernst & Young ("E & Y"), the
independent accountant which was previously engaged as the principal accountant
to audit the consolidated financial statements of the Company and its
subsidiaries, that it would not be reappointed auditors for the year ended
December 31, 1993. The Company continued to engage E & Y to complete (a) an
audit of the Company's financial statements for the year ended December 31,
1992 and (b) an audit of the financial statements of the Company for the years
ended December 31, 1991 and 1990, as such financial statements were to be
restated.
E & Y has completed its audit of the Company's consolidated financial
statements for the year ended December 31, 1992. E & Y's report on the
financial statements for the year ended December 31, 1992 contains a disclaimer
of opinion because of uncertainties as to the Company's ability to continue as
a going concern, the Company's default under certain of its debt obligations, a
class action complaint filed against, among others, the Company, certain of its
former officers and certain directors in January 1993, an investigation by the
Securities and Exchange Commission and its Chapter 11 bankruptcy proceeding
described in Notes A and S to the Company's 1993 Consolidated Financial
Statements. In addition, the management of the Company has restated its
financial statements for the years ended December 31, 1991 and 1990 and E & Y
has audited such restatements and issued an unqualified opinion.
The decision to dismiss E & Y was recommended by management and approved by
both the Company's Audit Committee and Board of Directors on February 9, 1994.
During the Company'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 Company 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.
During 1993, in connection with its audit of the Company's 1992 financial
statements E & Y informed the Company:
(A) of certain material weaknesses or reportable conditions in the internal
control structure of the Company and two subsidiaries of the Company
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
Company's consolidated financial statements for the year ended December
31, 1992; and
(C) of the need for the Company 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.
Further, in connection with its audit of the Company's consolidated financial
statements for the year ended December 31, 1992 and in considerating whether
the Company's financial statements for the years ended December 31, 1991 and
1990 required restatement, E & Y raised questions about the representations of
the Company's prior management. The matter was discussed with the Audit
Committee.
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The Company has authorized E & Y to respond fully to the inquiries of the
successor accountant concerning the subject matters described above.
Engagement of New Independent Accountant.
On February 9, 1994, the Company engaged Deloitte & Touche independent
accountant ("D & T"), as the principal accountant to audit the consolidated
financial statements of the Company and its subsidiaries, as of and for the
year ended December 31, 1993.
In 1992, at the request of the Board of Directors of the Company, D & T
consulted on certain accounting issues.
Later in 1992, at the request of the Board of Directors of the Company, D & T
consulted on the Company'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 Company, D & T provided consulting services
with respect to certain accounting matters as to which management requested
advice, in order 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 Company'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 Company, D & T conducted a special review of such subsidiary's internal
control structure in connection with New York State Public Service Commission
rate related proceedings.
In 1993, at the request of the Company, D & T performed audits of certain of
the Company's retirement and welfare plans.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
Andrew T. Dwyer, Age 45; Chairman of the Board of Directors of Resource
Recycling Technologies, Inc. since May 1993 and an independent business
consultant since July 1993. From July 1, 1993 to December 31, 1993, Mr. Dwyer
was a consultant to the Company. Mr. Dwyer served as Chairman of the Board of
Directors of the Company from April 1987 through June 1993 and as its Chief
Executive Officer from April 1987 to April 1993. Mr. Dwyer also served as
President of the Company from 1985 until January 1992 when Mr. David L. Sokol
became President. Mr. Dwyer resumed such position in October 1992 following Mr.
Sokol's resignation. He resigned as the Company's President in April 1993 and
as its Chairman in June 1993. Mr. Dwyer has been a director of the Company
since 1977.
Frank T. MacInnis, Age 47; Chairman of the Board, President and Chief
Executive Officer of the Company since April 18, 1994. From April 1990 to April
1994 Mr. MacInnis served as President and Chief Executive Officer, and from
August 1990 to April 1994 Chairman of the Board, of Comstock Group Inc., a
nationwide electrical contracting company. From 1986 to April 1990, Mr.
MacInnis was Senior Vice President and Chief Financial Officer of Comstock
Group, Inc. In addition, from 1986 to April 1994 Mr. MacInnis was also
President of Spie Group Inc. which owns Comstock Group Inc., Spie Construction
Inc., a Canadian pipeline construction company, and Spie Horizontal Drilling
Inc., a U.S. company engaged in under the water drilling for pipelines and
communications cable.
Innis O'Rourke, Jr., Age 72; Arbitrator for the New York Stock Exchange and
the American Arbitration Association for more than the past five years. Mr.
O'Rourke has been a director of the Company since 1986. He is also a director
of GP Financial Corp.
Craig C. Perry, Age 44; Senior Vice President, with responsibility for sales
and account maintenance, of Marsh & McLennan, Inc., an international insurance
brokerage firm, since March 1991. For more than five years prior thereto, he
was a senior executive of Johnson & Higgins, an insurance brokerage firm, with
responsibility for mergers and acquisitions and the account management
department. Mr. Perry has been a director of the Company since 1987.
Edmund S. Twining, Jr., Age 78; Private investor for more than the past five
years. He has served as a director of the Company or its subsidiaries since
1971.
Executive Officers
In addition to Mr. MacInnis, the following are the executive officers of the
Company.
Sheldon I. Cammaker, Age 54; Executive Vice President and General Counsel of
the Company for more than the past five years.
Leicle E. Chesser, Age 47; Executive Vice President and Chief Financial
Officer of the Company since May 1994. From April 1990 to May 1994 Mr. Chesser
served as Executive Vice President and Chief Financial Officer of Comstock
Group Inc. and from 1986 to May 1994 he was also Executive Vice President and
Chief Financial Officer of Spie Group Inc.
Joseph A. Gallo, Age 42; Senior Vice President of the Company since April
1993, a Vice President of the Company from November 1991 to April 1993, and
Treasurer of the Company for more than the past five years.
Jeffrey M.Levy, Age 41; Senior Vice President of the Company since December
1993 and Chief Operating Officer of the Company since February 1994. From May
1992 to December 1993, Mr. Levy was President
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and Chief Executive Officer of the Company's subsidiary JWP
Mechanical/Electrical Services (East), Inc. From January 1991 to May 1992 Mr.
Levy served as Executive Vice President and Chief Operating Officer of Lehrer
McGovern Bovis, Inc., a construction management and construction company. From
December 1988 to December 1990 Mr. Levy was Vice President of Stone & Webster
Engineering Corporation which is engaged in the design and construction of
power, industrial and petrochemical facilities; Mr. Levy was responsible for
that company's New York operations.
Stephen H. Meyers, Age 52; Senior Vice President-Finance since January 1993.
Mr. Meyers served as Senior Vice President-Administration and Chief Financial
Officer, Controller and Treasurer of American Annuity Group, Inc., formerly
named Sprague Technologies, Inc. ("STI"), from March 1992 to December 1992,
which at that time was engaged in the worldwide manufacture of electronic
components. He was Senior Vice President--Finance and Administration of STI
from May 1989 to March 1992 and Senior Vice President of STI from May 1987 to
May 1989.
Philip M. McGinn, Age 43; Vice President of the Company since August 1992 and
Controller of the Company for more than the past five years.
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ITEM 11. EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following Summary Compensation Table sets forth the compensation awarded
to, earned by or paid to each of the Chief Executive Officer and the other four
most highly compensated executive officers of the Company (collectively the
"named executive officers") during the fiscal years ended December 31, 1993,
1992 and 1991 for services rendered in all capacities to the Company and its
subsidiaries. Since December 31, 1993, Mr. Edward F. Kosnik resigned and for
information regarding his resignation and the employment agreements, if any, of
the executive officers of the Company referred to herein see "Employment
Contracts and Termination of Employment and Change of Control Arrangements"
below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION AWARDS(5)
---------------- ----------------------
NUMBER OF
SECURITIES
RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ ALL OTHER
NAME AND PRINCIPAL SALARY(3) BONUS COMPENSATION(4) AWARD(S)(6) SARS(7) COMPENSATION(8)
POSITION YEAR ($) ($) ($) ($) (#) ($)
------------------ ---- --------- ------ --------------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Edward F. Kosnik(1)..... 1993 483,460 80,000 None None None 7,800
Chairman of the Board, 1992 30,769 None None 300,000 100,000 None
President and Chief 1991 -- -- -- -- -- --
Executive Officer
Sheldon I. Cammaker..... 1993 357,450 50,000 None None None 8,875
Executive Vice 1992 362,600 50,000 None 54,375 37,622 13,110
President and General 1991 356,750 None Not Applicable 327,856 None Not Applicable
Counsel
Stephen H. Meyers(1).... 1993 217,212 40,000 None 181,250 50,000 5,175
Senior Vice President-- 1992 -- -- -- -- -- --
Finance 1991 -- -- -- -- -- --
Joseph A. Gallo(2)...... 1993 183,060 40,000 None None None 5,175
Senior Vice President 1992 -- -- -- -- -- --
and Treasurer 1991 -- -- -- -- -- --
Philip M. McGinn(2)..... 1993 145,000 25,000 None None None 6,150
Vice President, Chief 1992 135,000 25,000 None 18,125 14,235 7,850
Accounting Officer and 1991 -- -- -- -- -- --
Controller
</TABLE>
- - - - - - - - - --------
(1) As Mr. Kosnik joined the Company in November 1992, amounts shown for him
for 1992 reflect less than a full year of compensation. The blanks opposite
his name indicate that during 1991 Mr. Kosnik was not employed by the
Company, and accordingly, there is no compensation information to report
for him in respect of such year. Mr. Meyers joined the Company in January
1993. The blanks opposite his name indicate that during 1992 and 1991 Mr.
Meyers was not employed by the Company, and accordingly, there is no
compensation information to report for him in respect of such years.
(2) Mr. McGinn and Mr. Gallo, although employed by the Company in 1991 and
1992, were appointed executive officers in August 1992 and April 1993,
respectively. Therefore, as required by the Securities and Exchange
Commission (the "SEC") pursuant to applicable rules, amounts shown for 1992
include amounts paid to Mr. McGinn during that portion of the year that
preceded his appointment as an executive officer, and amounts shown for
1993 include amounts paid to Mr. Gallo during that portion of the year that
preceded his appointment as an executive officer. The blanks opposite their
respective names indicate that for no portion of 1991 was Mr. McGinn an
executive officer of the Company and for no portion of 1991 or 1992 was Mr.
Gallo an executive officer of the Company, and accordingly, no compensation
information is required to be disclosed as to either individual in respect
of such years.
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(3) Amounts shown include amounts named executive officers earned but chose to
defer pursuant to the Company's 401(k) Retirement Savings Plan (the "401(k)
Plan"). Pursuant to the 401(k) Plan, Mr. Cammaker deferred $8,994 for
fiscal years 1993, 1992, and 1991; Mr. McGinn deferred $8,475 for fiscal
years 1993 and 1992; and Mr. Gallo deferred $8,728 for fiscal year 1993.
Messrs. Kosnik and Meyers were only eligible to contribute to the 401(k)
Plan during the 1993 fiscal year, and they each deferred $8,994 in such
year. Amounts shown for the named executive officers also include the
amounts applied to payment of their respective medical insurance premiums
made pursuant to the Company's Premium Conversion Plan (the "Medical
Plan"), a Cafeteria Plan established under Section 125 of the Internal
Revenue Code of 1986, as amended. Pursuant to the Medical Plan, during
1993, the following amounts were applied by each of the named executive
officers: Messrs. Kosnik, Cammaker and Meyers, $2,275; Mr. Gallo, $900; and
Mr. McGinn, $1,530. During 1992 Mr. Cammaker had applied $1,250 to the
Medical Plan and Mr. McGinn had $1,034 applied and, during 1991, Mr.
Cammaker had applied $960 to the Medical Plan.
(4) The personal benefits provided to the named executive officers did not
exceed the disclosure threshold established by the SEC pursuant to
applicable rules.
(5) The column designated by the SEC to report Long-Term Incentive Plan Payouts
has been excluded because the Company has no long-term incentive
compensation plans and has not had any such plan during any portion of
fiscal years 1993, 1992 or 1991.
(6) As of December 31, 1993, the aggregate number of shares of restricted stock
held by a named executive officer and the aggregate dollar value of such
shares (calculated by multiplying the aggregate number of shares held by
such named executive officer by $.01, the price in the over-the-counter
market for a share of the Company's unrestricted common stock on December
31, 1993) was: Mr. Kosnik, 66,667 shares ($667); Mr. Cammaker, 25,577
shares ($258); Mr. Gallo, 5,588 shares ($56); Mr. McGinn 5,000 shares
($50); and Mr. Meyers, 50,000 shares ($500). The restricted stock awards to
the named executive officers reported in the table vests or vested as
follows: awards made in respect of 1992 to Messrs. Cammaker, McGinn and
Gallo vested 50% on January 2, 1994 and vest 50% on January 2, 1995; awards
made in respect of 1991 to Mr. Cammaker vested 50% on January 2, 1993 and
50% on January 2, 1994. Upon joining the Company in November 1993, Mr.
Kosnik was awarded a grant of 100,000 shares of restricted stock, 1/3 of
which vested in November 1993 and the remaining shares were forfeited upon
his resignation. Dividends, if paid on unrestricted shares of common stock,
will be paid at the same rate and at the same time on the restricted shares
of common stock. No dividends have been paid on the unrestricted shares of
common stock, and hence not on the restricted shares, during the fiscal
years covered by this table.
(7) The awards set forth in this column are of stock options only. The Company
does not award stock appreciation rights ("SARs").
(8) The amounts reported in the column include matching contributions made by
the Company under the 401(k) Plan during the 1993 and 1992 fiscal years for
the account of the named executive officers as follows: 1993 fiscal year--
Messrs. Kosnik, Cammaker, Gallo, Meyers and McGinn, each $1,800; 1992
fiscal year--Messrs. Cammaker and McGinn, each $1,800. The amounts reported
for 1993 also include amounts to be paid during 1994 in respect of 1993 by
the Company for the account of the named executive officers pursuant to the
Company's Money Purchase Plan as follows: Mr. Kosnik, $6,000; Mr. Cammaker,
$7,075; Mr. Gallo, $3,375; Mr. McGinn, $4,350; and Mr. Meyers, $3,375. The
amounts reported for 1992 include contributions made during 1993 in respect
of 1992 by the Company for the account of the named executive officers
pursuant to the Company's Money Purchase Plan as follows: Mr. Cammaker,
$6,866 and Mr. McGinn, $3,630. Neither Mr. Kosnik nor Mr. Meyers was
eligible to participate in the Money Purchase Plan until July 1993. For
1992, the amounts reported also include contributions made during 1992 in
respect of the 1991 fiscal year pursuant to the Company's Employee Stock
Ownership Plan of $4,444 for Mr. Cammaker and $2,420 for Mr. McGinn.
56
<PAGE>
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
Mr. Stephen H. Meyers received a grant of options to purchase 50,000 shares
of the Company's common stock at $3.62 per share on January 15, 1993, which
price represents the fair market value on the date of grant of a share of the
Company's common stock determined by calculating the average of the high and
low market prices of a share of common stock on the New York Stock Exchange.
The options, which were granted pursuant to the Company's 1991 stock option
plan, become exercisable at the rate of 1/3 of the shares with respect to which
the options were awarded each year commencing January 15, 1994. The options,
which expire January 14, 2004, are exercisable while Mr. Meyers is an employee
of the Company or one of its subsidiaries or within two months of termination
of his employment. Mr. Meyers is the only employee of the Company or any of its
subsidiaries to be granted options during the 1993 fiscal year, and
accordingly, he received 100% of the options granted by the Company during that
year. The Company does not grant SARs of any kind.
Mr. Meyers' options are transferable solely by will or by the laws of descent
and distribution. No SARs or performance units or other instruments were
granted in tandem with Mr. Meyers' option. The grant date present value of the
option was $0 calculated using the Black-Scholes option pricing model which
involves an extrapolation of future price levels based solely on past
performance. The present value as of the date of grant, calculated using the
Black-Scholes method, is based on assumptions about future interest rates,
dividend yield and stock price volatility. In calculating the present value as
of the date of grant of the options reported in the table, the Company assumed
an interest rate of 14% per annum, an annual yield of zero and volatility of
35%. The Company's proposed plan of reorganization under its Chapter 11
proceeding contemplates the rejection of all option agreements, and,
accordingly the Company believes the options are valueless.
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information concerning unexercised
options to purchase common stock of the Company held at the end of fiscal year
1993 by the named executive officers. None of the named executive officers
exercised any options during fiscal year 1993. No named executive officer has
any SARs.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS/SARS AT MONEY OPTIONS/SARS AT FY-END
FY-END (#) ($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- ------------------------- ----------------------------
<S> <C> <C>
Edward F. Kosnik......... 33,333/66,667 0/0
Sheldon I. Cammaker...... 39,710/31,662 0/0
Joseph A. Gallo.......... 8,801/9,866 0/0
Stephen H. Meyers........ 0/50,000 0/0
Philip M. McGinn......... 3,000/14,235 0/0
</TABLE>
- - - - - - - - - --------
(1) At December 31, 1993, the over-the-counter price of the Company's common
stock was $.01, which was less than the exercise price of any option
awarded to the named executive officers.
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
Employment Agreements
The Company has entered into an Employment Agreement (the "Agreement"), dated
as of April 18, 1994, with Mr. Frank T. MacInnis providing for his employment
as Chief Executive Officer and President of the Company during the period April
18, 1994 through December 31, 1997. The Agreement provides that
57
<PAGE>
the term of employment will automatically be extended for successive one-year
periods unless the Company or Mr. MacInnis gives written notice not to extend
at least six months prior to the end of such period. The Company is also to use
its best efforts to insure his election as Chairman of the Board of Directors
of the Company.
Pursuant to the Agreement, the Company is to pay Mr. MacInnis an annual base
salary of $600,000 and to increase such base salary on the first day of each
calendar year during his employment by at least the percentage increase for the
prior year in the relevant consumer price index. In addition, Mr. MacInnis is
entitled to receive an annual bonus, which, for the period ending on December
31, 1994, will be no less than $150,000. For each calendar year thereafter, Mr.
MacInnis' bonus will be determined by a formula agreed upon by Mr. MacInnis and
the Compensation Committee of the Board of Directors of the Company. In
addition to his salary and bonus, Mr. MacInnis has been paid a one-time cash
payment of $250,000 and is to receive an option (the "Option") to purchase
200,000 shares of common stock of the Company at a price equal to the average
market price for the common stock over that 20 day trading period preceding the
issuance of the Option. The Option will be issued three months plus 20 days
after the Effective Date of the Company's plan of reorganization in its Chapter
11 proceeding (as defined in the JWP Plan of Reorganization).
Under the terms of the Agreement, Mr. MacInnis has been provided with certain
benefits customarily accorded to the Company's senior executive officers as
well as supplemental benefits such that he will become fully vested in the
Company's Money Purchase Plan and 401(k) Plan. In addition, Mr. MacInnis is
entitled to $600.00 per month for leasing (plus maintenance and insurance) of
an automobile; reimbursement for all initiation fees and monthly dues for
membership in a club suitable for entertaining clients of the Company; all
legal expenses incurred by him in connection with the Agreement; and the cost
of any increased tax liability to him caused by the receipt of these fringe
benefits.
If Mr. MacInnis' employment is terminated during the term of the Agreement by
the Company other than for Cause (as defined in the Agreement) or he terminates
his employment for Good Reason (as defined in the Agreement), Mr. MacInnis will
be entitled to receive a cash payment equal to the sum of: (i) the greater of
(A) his base salary at the highest annual rate in effect during his employment
from the date of termination through December 31, 1997 or (B) two times his
base salary at its then current annual rate and (ii) an amount equal to the
product of the highest bonus paid to him during his employment (but in no event
less than $150,000) times (A) the number of full or partial years remaining
from the date of termination through December 31, 1997 or (B) two, whichever is
greater; however, in the event of a termination following a Change in Control
(as defined in the Agreement), the factor of two in clause (i)(B) above will be
increased to three. In addition, Mr. MacInnis will be entitled to receive all
unpaid amounts in respect of any bonus for any calendar year ending before the
date of termination.
During fiscal year 1993, the Company had employment contracts with each of
Andrew T. Dwyer, which expired June 30, 1993, and Sheldon I. Cammaker, expiring
December 31, 1998, pursuant to which each served as a senior executive officer
of the Company. Mr. Dwyer received a base salary at the rate of $485,000 per
annum, which salary gave effect to a Company-wide 10% salary reduction
implemented July 1, 1992 and a further voluntary salary reduction and Mr.
Cammaker received an annual base salary of $357,450 which salary gave effect to
the Company-wide salary reduction. In addition, pursuant to the terms of their
employment contracts, Mr. Dwyer was and Mr. Cammaker is eligible to receive
annual bonuses.
Additionally, pursuant to their contracts, Messrs. Dwyer and Cammaker were
entitled to units under the Company's Senior Incentive Plan, which expired by
its terms as of December 31, 1993. The Senior Incentive Plan provided for
participation in an incentive pool that was determined annually and consisted
of an amount equal to 12% of the Company's pre-tax consolidated earnings after
deducting an amount equal to a 10% after-tax return on stockholders equity. As
the value of the pool was based on the performance of the Company, it
fluctuated from year to year as did the amounts distributed to plan
participants. No one received
58
<PAGE>
any compensation from the incentive pool for the 1993 fiscal year because the
Company suffered a loss in that year. Awards based on the value of the pool
could have taken the form of cash, restricted stock or a combination thereof.
The Senior Incentive Plan made provision for valuing awards of units made
pursuant to such plan had there been a change in control of the Company before
the plan expired.
Each of the above-referenced employment contracts provides that, in the event
of a change in control of the Company and within two years thereafter the named
executive officer is terminated or elects to terminate his employment, the
named executive officer will be compensated as follows: Mr. Dwyer would have
been entitled to retain any shares of restricted stock of the Company
previously issued to him and to be paid an amount equal to the sum of (i)
$875,000, (ii) $835,000, multiplied by each full calendar year remaining under
his employment agreement, and (iii) $425,000 less, with respect to clause
(iii), the base salary already paid to him for the year of termination; and Mr.
Cammaker would be entitled to retain any shares of restricted stock of the
Company previously issued to him and to be paid an amount equal to the sum of
(i) $470,000, (ii) $320,000 multiplied by each full calendar year remaining
under his employment agreement, and (iii) $320,000 less, with respect to clause
(iii), the base salary already paid to him for the year of termination.
Mr. McGinn does not have a formal employment agreement with the Company.
However, between August 5, 1992 and August 31, 1993, Mr. McGinn did have an
arrangement with the Company providing for certain benefits in the event he was
terminated by the Company without cause before September 1, 1993. If such
termination had occurred, the agreement provided that he would have received a
minimum of twelve months separation pay and the continuation of his other
employee benefits. This arrangement was not renewed.
Mr. Meyers has an employment agreement with the Company without a fixed term.
Mr. Meyers receives an annual base salary of $225,000 and is eligible for an
annual bonus. Upon joining the Company, Mr. Meyers received a grant of an
option to purchase 50,000 shares of common stock, at an exercise price of
$3.625 per share (the fair market value of a share of common stock on the date
of grant, January 15, 1993), in addition to a grant of 50,000 shares of
restricted stock. The restricted stock vests, and the stock options become
exercisable, one-third in January 1994, one-third in January 1995 and one-third
in January 1996.
Mr. Edward F. Kosnik joined the Company in November 1992 as Executive Vice
President and Chief Financial Officer. In April 1993 he succeeded Mr. Dwyer as
President and Chief Executive Officer and became Chairman of the Board as of
July 1, 1993 following Mr. Dwyer's resignation from that position. In April
1994 Mr. Kosnik resigned as Chairman of the Board, President and Chief
Executive Officer of the Company. When Mr. Kosnik joined the Company he
received an employment agreement without a fixed term. Prior to becoming
President and Chief Executive Officer, his base salary was at the rate of
$400,000 per annum in accordance with the terms of his employment agreement,
and thereafter his salary was at the annual rate of $500,000. Pursuant to the
employment agreement, Mr. Kosnik received an option to purchase 100,000 shares
of common stock, at an exercise price of $3.00 per share (the fair market value
of a share of common stock on the date of grant, November 24, 1992), in
addition to a grant of 100,000 shares of restricted stock. The restricted stock
was to vest, and the stock options were to become exercisable, one-third in
November 1993, one-third in November 1994 and one-third in November 1995. Mr.
Kosnik's employment agreement also provided that he was eligible for an annual
bonus. In December 1993 Mr. Kosnik indicated a desire to leave the Company, and
in order to induce him to remain with the Company for a period of time to
enable the Company to find a successor, Mr. Kosnik was paid $250,000 in 1994 in
addition to his base salary and in addition to a bonus of $80,000 paid to him
in respect of 1993. Following his resignation, Mr. Kosnik's options lapsed and
he forfeited 66,667 shares of the restricted stock issued to him that had not
vested.
Termination Arrangements
Mr. Dwyer's employment contract with the Company expired by its terms on June
30, 1993 and was not renewed. Upon the expiration of his contract, Mr. Dwyer
entered into a consulting agreement (the "Consulting Agreement") and a
separation agreement (the "Separation Agreement") with the Company.
59
<PAGE>
Pursuant to the Consulting Agreement, during the period July 1, 1993 through
December 31, 1993 Mr. Dwyer received a consulting fee for services rendered to
the Company in the aggregate amount of $242,500 payable in equal weekly
installments, as well as reimbursement for reasonable out-of-pocket expenses
incurred by him in the performance of his consulting duties. In addition, the
Separation Agreement provided for a severance payment in the aggregate amount
of $200,000 payable during the period January 1, 1994 through June 30, 1994 in
equal weekly installments. Under the terms of the agreements, for the period
from July 1, 1993 through July 1, 1994, the Company was to pay the insurance
premiums to continue Mr. Dwyer's then current coverage under the Company's
medical, dental and other insurance plans, subject to the provisions of such
plans, in the same proportion as is paid from time to time for senior
executives of the Company, and during the period July 1, 1993 through December
31, 1993 the Company paid to him $700 per month as an automobile allowance. No
amounts have been paid to Mr. Dwyer under the agreements since February 14,
1994 when the Company consented to the entry of an order for relief thereby
commencing its Chapter 11 proceeding. The Consulting Agreement prohibited Mr.
Dwyer during the period from July 1, 1993 through December 31, 1993 from
entering into any business or performing any services for another entity that
competes with the Company. The Separation Agreement has a similar non-compete
clause, although it allows Mr. Dwyer to solicit the business of the Company's
customers, suppliers and joint venturers in connection with good faith
competition. This clause runs from January 1, 1994 through December 31, 1994.
The Separation Agreement also includes provisions restricting the sale by Mr.
Dwyer of those of his shares (approximately 1,613,482 shares as of June 30,
1993) of the Company's common stock which are considered "restricted
securities" for purposes of Rule 144 promulgated under the Securities Act of
1933, as amended (the "Act"). Generally, the agreement provides that these
shares may not be sold until they vest and, upon vesting, only pursuant to an
effective registration statement under the Act or pursuant to an exemption from
registration under the Act. Subject to certain conditions, the agreement
provides for the shares to vest in increments of 100,000 shares a month or such
lesser number of shares as will ensure compliance with the sales volume
limitations of Rule 144 that apply to sales of restricted securities by
affiliates of an issuer. Further, in the event that Mr. Dwyer breaches the non-
compete provisions of the Consulting Agreement, all of his restricted shares
that shall not have vested as of the date of breach are to be immediately
forfeited. As Mr. Dwyer is no longer an officer of the Company but still serves
on the Board of Directors, he receives compensation identical to that paid to
other non-employee directors. See "Director Compensation." As a non-employee
director of the Company's subsidiary Jamaica Water Securities Corp. and a
member of the Executive Committee of such board, Mr. Dwyer also receives
directors' fees payable to all such directors of that corporation. Those fees
consist of an annual fee of $10,000, $600 for each meeting of the Board of
Directors attended, and $600 for each meeting of the Executive Committee of the
Board attended.
Other Arrangements
Effective as of June 25, 1993, the Company adopted the JWP INC. Employees'
Severance Pay/Stay Bonus Plan (the "Plan") in order to encourage designated
employees of the parent corporation to continue their employment over the next
two years while the Company is restructuring its business operations. As
amended, the Plan provides that a Plan participant will be entitled to receive
a pre-determined amount of severance pay if his employment with the Company is
terminated for reasons other than death, disability, voluntary resignation or
"for cause" as defined in the Plan during the two-year period commencing on
June 25, 1993 and ending on June 24, 1995. Certain Plan participants also will
be entitled to receive a pre-determined "stay bonus" if they remain
continuously employed with the Company during the period commencing on June 25,
1993 and ending on the earlier of September 30, 1994 or the date an order
confirming a plan of reorganization of the Company in its Chapter 11 proceeding
is signed by the United States Bankruptcy Court.
All severance pay and/or stay bonuses payable under the Plan represent an
obligation of the Company and are to be paid from its general assets.
Notwithstanding the foregoing, the Company may, from time to time, in its sole
discretion, make contributions to a taxable, irrevocable trust ("Trust") to
pre-fund all or a portion of a Plan participant's benefits to which he may
become entitled. Payments from the Trust to Plan
60
<PAGE>
participants shall be in discharge of the Company's liability under the Plan to
such participants to the extent such benefits are paid from the Trust. In
addition, the assets of the Trust, which would be allocated to accounts to be
established for the benefit of Plan participants, will not be subject to the
claims of the Company's creditors in a bankruptcy or other insolvency
proceeding under federal or state law. Although the Plan participants would
have a secured interest in the contributions made by the Company and credited
to their respective accounts, if any, they would have no interest, secured or
unsecured, in the income of the Trust (including unrealized capital gains),
which income would be distributed quarterly to the Company, which will be
responsible for the payment of any federal, state or local taxes payable on
such income. To date $969,514 has been contributed to the Plan, and amounts
payable as stay bonuses have been fully funded.
As soon as practicable following the date a Plan participant becomes entitled
to receive a stay bonus or severance pay under the Plan, the Company is to
direct the Trustee under the Trust (the "Trustee") to distribute to him in a
lump sum the lesser of: the amount credited to his account, if any, in the
Trust, or the amount of his stay bonus or severance pay benefit to which he is
then entitled to the extent, if any, of the amount credited to his Trust
account. To the extent that the amount credited to his Trust account is less
than such benefit, he is to receive the balance from the Company, either in a
lump sum or in weekly installments (not exceeding 52 installments), at such
times and in such amounts, as determined by the Committee administering the
Plan, in its sole discretion.
Payments under the Plan are subject to federal, state and local income tax
withholding and all other applicable federal, state and local taxes. The
Trustee and the Company, as the case may be, are to withhold from any payments
it makes all applicable federal, state and local withholding taxes and the
employee will be required to file any necessary certificate or other form in
connection therewith prior to receiving any payments.
In the event that a Plan participant dies or becomes disabled prior to
becoming entitled to any benefit payable under the Plan, his right to such
benefit will be forfeited. In the event a Plan participant dies after becoming
entitled to a benefit payable under the Plan but prior to recovering the full
amount of such benefit, his designated beneficiary or his estate (if no
beneficiary has been designated) will be entitled to receive such unpaid
benefits on the date or dates that the Plan participant would have received
them while living.
The Plan is to be administered by an administrative committee appointed by
the Board of Directors, which consists of such number of persons as shall from
time to time be determined by the Board of Directors. Members of the committee
may be officers, directors, or employees of the Company or others and shall
hold office at the pleasure of the Board of Directors and without compensation,
unless otherwise determined by the Board of Directors. The committee is charged
with the operation and administration of the Plan. The committee has the power
to interpret and construe the Plan, to determine all questions arising under
the Plan, and to adopt and amend from time to time such rules and regulations
necessary for the administration of the Plan which are not inconsistent with
the terms and provisions of the Plan. Notwithstanding the foregoing, the Board
of Directors retains the power to determine all questions of eligibility,
status and rights of Plan participants.
The Plan terminates automatically, effective as of August 24, 1995, unless
the termination date is deferred to a later date by the Board of Directors of
the Company ("Deferred Termination Date"). The Board of Directors of the
Company may amend, suspend or terminate the Plan or any portion thereof at any
time prior to the later of June 24, 1995 or any Deferred Termination Date;
provided, however, that unless the written consent of a Plan participant is
obtained, no such amendment or termination shall adversely affect the rights of
any Plan participant. Upon termination of the Plan, all Plan benefits not
payable from the Trust shall be paid by the Company within 60 days of such
termination date. Upon termination of both the Plan and the Trust, any assets
remaining in the Trust after all benefits payable under the Plan have been paid
in full shall be returned to the Company.
Under the terms of the Plan the following executive officers of the Company
would be entitled to receive a severance payment as follows: Sheldon I.
Cammaker-$340,788; Joseph A. Gallo-$200,000; Jeffrey M. Levy-
61
<PAGE>
$247,500; Stephen H. Meyers-$337,500. In addition, under the Plan the following
executive officers would be entitled to receive a stay bonus as follows: Mr.
Cammaker-$170,400; Mr. Gallo-$100,000; Mr. Meyers-$112,500; and Philip M.
McGinn-$72,500.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Ms. Diana D. Brooks, Mr. Bertram Harnett, Mr. Thomas W. Keesee and Mr. Edmund
S. Twining, all of whom were then non-employee directors, served on the
Compensation and Personnel Committee for part of 1993. Ms. Brooks ceased to
serve as a director of the Company, and hence as a member of the Compensation
and Personnel Committee on July 1, 1993. Messrs. Harnett and Keesee ceased to
serve as directors of the Company and hence as members of the Compensation and
Personnel Committee on October 14, 1993. Thereafter, the Board of Directors of
the Company was responsible for matters concerning executive compensation. Mr.
Dwyer was Chairman of the Board through June 30, 1993, and Mr. Kosnik, who
succeeded Mr. Dwyer as Chairman of the Board, also served as the Chief
Executive Officer and President of the Company during 1993.
Mr. Twining was Secretary of the Company from July 1981 to January 1988.
DIRECTOR COMPENSATION
Each director who is not an officer of the Company ("non-employee director")
receives annual compensation in the amount of $25,000 for all services as a
director. In addition, each non-employee director receives $1,000 for each
meeting of the Board and $1,000 for each meeting of a committee of the Board of
Directors attended by the director during the fiscal year. Each non-employee
director who chairs a committee of the Board receives an additional $2,500 per
annum. Directors who also serve as officers of the Company do not receive
compensation for services rendered as directors. See "Employment Contracts and
Termination of Employment and Change of Control Arrangements--Termination
Arrangements" for information regarding consulting and separation payments to
Mr. Dwyer, a director.
The Company also maintains a Directors' Retirement Plan, as amended (the
"Directors' Retirement Plan"), for non-employee directors of the Company. Under
the Directors' Retirement Plan, a director who retires on or after age 65 with
at least five years of service as a director (less in the case of directors
serving as of December 12, 1991) is entitled to an annual retirement benefit.
The annual retirement benefit will equal the product of (i) ten percent (10%)
of the annual compensation paid to the retiring director on the date of the
retiring director's retirement (excluding meeting fees paid to the director)
and (ii) the number of the retiring director's years of service (up to ten) as
a director (but not less than five in the case of directors in office on
December 12, 1991). In the alternative, a retiring director may elect to
receive a fixed annual retirement benefit equal to 100% of the annual
compensation paid to the retiring director during his last year as a director
for a number of years equal to those he served as a director of the Company,
but in no event more than nine years. In the case of directors presently
serving, the benefit determined pursuant to this alternative method will be
calculated based on a minimum of five years service. Four former directors had
been receiving retirement benefits under the Directors' Retirement Plan.
However, since February 14, 1994, following the date of entry of an order for
relief commencing the Company's Chapter 11 proceeding, no payments have been
made under the Directors' Retirement Plan.
62
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of the Company's common stock and its warrants of participation as of
July 15, 1994 by its current directors and each of the named executive officers
for its fiscal year ended December 31, 1993, and all its directors and
executive officers as a group. No person is known to be the beneficial owner of
more than five percent of the Company's common stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP AS OF PERCENT
NAME OF BENEFICIAL OWNER TITLE OF CLASS JULY 15, 1994 OF CLASS
------------------------ ------------------------- --------------- --------
<S> <C> <C> <C>
Andrew T. Dwyer............. Common Stock 1,509,874(a) 3.7
Warrants of Participation 15,687(a) 1.4
Frank T. MacInnis........... Common Stock --
Edward F. Kosnik............ Common Stock 33,333 +
Innis O'Rourke, Jr.......... Common Stock 5,025* +
Craig C. Perry.............. Common Stock 2,500* +
Edmund S. Twining, Jr....... Common Stock 52,072* +
Sheldon I. Cammaker......... Common Stock 127,257++ +
Joseph A. Gallo............. Common Stock 16,357++ +
Philip M. McGinn............ Common Stock 11,157++ +
Stephen H. Meyers........... Common Stock 66,667++ +
All directors and executive
officers as a group (10
persons)................... Common Stock 1,837,269(b) 4.5
Warrants of Participation 15,687 1.4
</TABLE>
- - - - - - - - - --------
(a) Includes 248,825 shares and 15,687 warrants of participation held by the
Estate of Martin Dwyer, Jr., of which Andrew T. Dwyer is a co-executor, as
to which securities he disclaims beneficial ownership. In addition,
includes 30,465 shares owned by his wife, as to which shares Mr. Dwyer
disclaims beneficial ownership.
(b) Includes 105,319 shares issuable upon the exercise of stock options granted
under the Company's stock option plans, as to which shares the directors
and executive officers have the right to acquire beneficial ownership
within sixty days of July 15, 1994.
* Includes 2,500 shares issuable upon the exercise of stock options granted
under the Company's 1991 Stock Option Plan for Non-Employee Directors, as to
which shares such director has the right to acquire beneficial ownership
within sixty days of July 15, 1994.
+ Represents less than 1% of the common stock.
++ Includes, for each of the persons set forth below, the number of shares
listed beside such person's name, which shares are issuable upon the
exercise of stock options granted under the Company's stock option plans, as
to which shares such persons have the right to acquire beneficial ownership
within sixty days of July 15, 1994: Sheldon I. Cammaker, 51,199 shares;
Joseph A. Gallo, 10,769 shares; Stephen H. Meyers, 16,667 shares; and Philip
M. McGinn, 6,157 shares.
63
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
64
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. The following consolidated financial statements of JWP INC. and
subsidiaries are included in Part II--Item 8:
Consolidated Balance Sheets as of December 31, 1993 and 1992.
Consolidated Statements of Operations for the Years Ended December 31,
1993, 1992 and 1991.
Consolidated Statements of Cash Flows for the Years Ended December 31,
1993, 1992 and 1991.
Consolidated Statements of Shareholders' (Deficit) Equity for the Years
Ended December 31, 1993, 1992 and 1991.
Notes to Consolidated Financial Statements.
(a)2. The following financial statement schedules are included in Part IV of
this Report:
<TABLE>
<CAPTION>
SCHEDULES
---------
<C> <S>
II Amounts Receivable from Related Parties and Underwriters,
Promoters, and Employees Other Than Related Parties.
III Condensed Financial Information of JWP INC.
VII Guarantees of Securities of Other Issuers.
VIII Valuation and Qualifying Accounts.
IX Short-Term Borrowings.
</TABLE>
Schedules other than those listed above are omitted for the reason that they
are not applicable or the required information is shown in the Consolidated
Financial Statements or Notes thereto.
(a)3. Exhibits--See Exhibit Index--Page 74.
(b) Reports on Form 8-K--Form 8-K; Date of Report: August 6, 1993; and Form 8-
K; Date of Report: September 30, 1993.
65
<PAGE>
SCHEDULE II
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND
EMPLOYEES OTHER THAN RELATED PARTIES
<TABLE>
<CAPTION>
DEDUCTIONS BALANCE AT END OF PERIOD
--------------------- ------------------------
BALANCE AT BEGINNING AMOUNTS AMOUNTS
NAME OF DEBTOR OF PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT NOT CURRENT
- - - - - - - - - -------------- -------------------- --------- --------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Year ended December 31,
1993
Notes receivable:
Joseph W. Barnett
Corporate Secretary... $116 -- $20 -- $ 96 --
---- ---- ---- ---- ------------ ------------
Total............... $116 -- $20 -- $ 96 --
==== ==== ==== ==== ============ ============
Year ended December 31,
1992
Notes receivable:
Joseph W. Barnett
Corporate Secretary.. $132 -- $16 -- $116 --
---- ---- ---- ---- ------------ ------------
Total............... $132 -- $16 -- $116 --
==== ==== ==== ==== ============ ============
Year ended December 31,
1991
Notes receivable:
Joseph W. Barnett
Corporate Secretary.. -- $132 -- -- $132 --
---- ---- ---- ---- ------------ ------------
Total............... -- $132 -- -- $132 --
==== ==== ==== ==== ============ ============
</TABLE>
Note: The note is non-interest bearing, unsecured and non-recourse.
66
<PAGE>
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF JWP INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1992
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents.............................. $ 6,984 $ 59,963
Prepaid expenses and other current assets.............. 3,985 7,565
Net assets held for sale............................... 20,454 32,894
--------- ---------
Total Current Assets..................................... 31,423 100,422
Net assets held for sale................................. 63,161 85,611
Investments, notes and other long-term receivables....... 452 4,678
Property and equipment, net.............................. 982 3,499
Other assets, principally investments in and amounts due
from wholly-owned subsidiaries.......................... 220,053 161,397
--------- ---------
Total Assets............................................. $ 316,071 $ 355,607
========= =========
LIABILITIES AND SHAREHOLDERS' (DEFICIT):
Current Liabilities:
Current maturities of long-term debt................... $ 744 $ 1,686
Debt in default........................................ 501,007 501,007
Accrued expenses and other current liabilities......... 74,419 26,843
--------- ---------
Total Current Liabilities................................ 576,170 529,536
--------- ---------
Long-term debt........................................... -- 822
Other long-term obligations.............................. 42,163 1,228
Shareholders' (Deficit):
Common Stock........................................... 4,072 4,075
Other shareholders' (deficit).......................... (306,334) (180,054)
--------- ---------
Total Shareholders' (Deficit)............................ (302,262) (175,979)
--------- ---------
Total Liabilities and Shareholders' (Deficit)............ $ 316,071 $ 355,607
========= =========
</TABLE>
67
<PAGE>
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF JWP INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1993 1992 1991
--------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Management fees from wholly-owned $ 16,632 $ 29,825 $ 27,280
subsidiaries..................................
Interest (expense) income from wholly-owned (2,265) 3,243 9,673
subsidiaries..................................
Other interest income......................... 557 899 603
--------- --------- --------
14,924 33,967 37,556
--------- --------- --------
Costs and expenses, net:
General, administrative and other expenses.. 26,401 48,371 19,159
Interest expense............................ 49,012 43,568 42,414
Net (gain) loss on businesses sold or held (1,028) 76,078 6,628
for sale......................................
Provision for losses on disposal of 20,350 49,491 --
discontinued operations.......................
--------- --------- --------
94,735 217,508 68,201
--------- --------- --------
(Loss) before income taxes, equity in net
(loss) income of subsidiaries and cumulative
effect of accounting change.................. (79,811) (183,541) (30,645)
(Benefit) for income taxes.................... -- -- (10,395)
Equity in net (loss) income of subsidiaries-- (54,530) (229,465) 24,962
continuing operations.........................
Equity in net income (loss) of subsidiaries-- 11,263 (203,739) 24,263
discontinued operations.......................
Cumulative effect of accounting change........ -- 4,315 --
--------- --------- --------
Net (Loss) Income......................... $(123,078) $(612,430) $ 28,975
========= ========= ========
</TABLE>
68
<PAGE>
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF JWP INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1993 1992 1991
--------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Net (Loss) Income.............................. $(123,078) $(612,430) $ 28,975
Adjustments to Reconcile Net (Loss) Income to
Cash (Used in)
Provided by Operating Activities
Depreciation and amortization................ 353 3,790 2,641
Write-off of deferred debt issuance cost..... -- 2,876 --
(Gain) loss on net assets held for sale or (1,028) 76,078 6,628
sold...........................................
Provision for losses on disposal of 20,350 49,491 --
discontinued operations........................
Cumulative effect of accounting change for -- (4,315) --
income taxes...................................
Equity loss (income) of consolidated 43,267 433,204 (49,225)
subsidiaries...................................
Other, net................................... -- 17,962 1,743
--------- --------- --------
(60,136) (33,344) (9,238)
Change in Current Assets and Liabilities
Decrease (increase) in receivables and other 3,580 (3,135) 87
current assets.................................
Increase (decrease) in accrued expenses and 61,175 11,317 (7,532)
other liabilities..............................
--------- --------- --------
Net Cash Provided by (Used in) Operations...... 4,619 (25,162) (16,683)
--------- --------- --------
Cash Flows from Financing Activities
Proceeds from long-term debt................. -- 60,000 30,000
Payments of long-term debt and capital lease (225) (23,789) (45,375)
obligations....................................
Proceeds from issuance of common stock and
exercise
of stock options.......................... -- 1,911 2,169
Payment of preferred dividends............... -- (1,354) (711)
Acquisition of common stock for the treasury. -- (8,130) (7,877)
Increase in notes payable, net............... -- 695 96,800
--------- --------- --------
Net Cash (Used in) Provided by Financing (225) 29,333 75,006
Activities.....................................
--------- --------- --------
Cash Flows from Investment Activities
Proceeds from sale of businesses and other 43,400 138,971 10,066
assets.........................................
(Increase) decrease in investments and
amounts due from
wholly-owned subsidiaries................. (100,773) (63,884) 27,611
Acquisition of businesses.................... -- (19,581) (97,667)
Purchase of property and equipment........... -- (1,958) (1,392)
--------- --------- --------
Net Cash (Used in) Provided by Investment (57,373) 53,548 (61,382)
Activities.....................................
--------- --------- --------
(Decrease) Increase in Cash and Cash (52,979) 57,719 (3,059)
Equivalents....................................
Cash and Cash Equivalents at Beginning of Year. 59,963 2,244 5,303
--------- --------- --------
Cash and Cash Equivalents at End of Year....... $ 6,984 $ 59,963 $ 2,244
========= ========= ========
</TABLE>
69
<PAGE>
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF JWP INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The Company's investment in subsidiaries is stated at cost plus equity in
undistributed earnings (loss) of subsidiaries since dates of acquisition, less
write-offs related to permanent impairment of cost in excess of net assets
acquired. Net assets held for sale consist of the net assets of wholly-owned
subsidiaries that the Company plans to sell. Such net assets are stated at
estimated net realizable value. These financial statements should be read in
conjunction with the Company's consolidated financial statements.
(2) DEBT IN DEFAULT
For a discussion and description of debt in default and long-term debt refer
to Notes A, C and D of the consolidated financial statements of JWP INC. and
Subsidiaries.
(3) INCOME TAXES
Effective January 1, 1992, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). The adoption of SFAS 109 changed the Company's method of accounting for
income taxes from the deferred method (APB 11) to an asset and liability
approach. Previously, the Company deferred the past tax effects of timing
differences between financial reporting and taxable income. The asset and
liability approach requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary differences
between the financial statement carrying amounts and the tax bases of assets
and liabilities. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense
is the tax payable for the period and the change during the period in deferred
tax assets and liabilities. Prior years' financial statements have not been
restated for the accounting change. The cumulative effect of adopting SFAS 109
was to record an income tax benefit of $4.3 million or $0.11 per share as of
January 1, 1992.
At December 31, 1993 and 1992 (after having given effect to the adoption of
SFAS No. 109), the valuation allowances recorded against deferred tax assets
were $170.1 million and $138.3 million, respectively.
(4) GUARANTEES
JWP INC. guarantees various obligations and credit agreements of its wholly-
owned subsidiaries. At December 31, 1993 such guarantees included the
following: (i) a mortgage note payable in the amount of $6.2 million secured by
land and building, having a net book value of $6.2 million at December 31,
1993, (ii) short and long-term credit facilities aggregating $5.2 million with
French banks for a French subsidiary, (iii) short-term credit facilities
aggregating $2.2 million with various German banks for a German subsidiary,
(iv) a demand note payable by a Canadian subsidiary in the amount of $6.5
million at December 31, 1993 and (v) short-term credit facilities of $2.5
million for a Belgian subsidiary. JWP also guarantees certain leases, contracts
and performance bonds of its subsidiaries.
In 1993, the Company's French and Belgian information services subsidiaries
filed petitions in their respective countries seeking relief from their
creditors. Equity in net loss of discontinued subsidiaries in 1992 includes a
loss of $5.9 million which represents the portion of the Company's guarantees
of the French and Belgian subsidiaries credit facilities which are unsecured.
70
<PAGE>
JWP INC. AND SUBSIDIARIES
SCHEDULE VII--GUARANTEES OF SECURITIES OF OTHER ISSUERS
DECEMBER 31, 1993
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F COL. G
- - - - - - - - - ----------------------- ------------- --------------- ----------- ---------- ---------------------- -----------------------
AMOUNT NATURE OF ANY DEFAULT
NAME OF ISSUER OWNED BY AMOUNT IN BY ISSUER OF SECURITIES
OF SECURITIES TITLE OF PERSON OR TREASURY GUARANTEED IN
GUARANTEED BY ISSUE OF PERSONS FOR OF ISSUER PRINCIPAL, INTEREST,
PERSON EACH CLASS TOTAL AMOUNT WHICH OF SINKING FUND OR
FOR WHICH OF SECURITIES GUARANTEED STATEMENT SECURITIES NATURE OF REDEMPTION PROVISIONS,
STATEMENT IS FILED GUARANTEED AND OUTSTANDING IS FILED GUARANTEED GUARANTEE OR PAYMENT OF DIVIDENDS
- - - - - - - - - ----------------------- ------------- --------------- ----------- ---------- ---------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Erlanger Land Co....... Mortgage $6.2 million Principal and interest None
</TABLE>
71
<PAGE>
JWP INC. AND SUBSIDIARIES
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
----------------------
BALANCE AT CHARGED TO CHARGED TO NET ASSETS BALANCE
BEGINNING COSTS AND OTHER HELD END OF
DESCRIPTION OF YEAR EXPENSES ACCOUNTS(2) DEDUCTIONS(1) FOR SALE YEAR
- - - - - - - - - ----------- ---------- ---------- ----------- ------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Allowance for doubtful
accounts
Year ended December $42,630 $ 13,663 $ (892) $(24,231) $ -- $31,170
31, 1993..............
Year ended December $29,541 $113,903 $10,591 $(78,715) $(32,690) $42,630
31, 1992..............
Year ended December
31, 1991............. $14,564 $ 16,241 $13,091 $(14,355) $ -- $29,541
</TABLE>
- - - - - - - - - --------
(1) Deductions represent uncollectible balances of accounts receivable written
off, net of recoveries.
(2) Amounts in 1992 and 1991 primarily represent valuation accounts related to
companies acquired.
72
<PAGE>
JWP INC. AND SUBSIDIARIES
SCHEDULE IX
SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
WEIGHTED MAXIMUM AVERAGE WEIGHTED
AVERAGE AMOUNT AMOUNT AVERAGE
BALANCE INTEREST OUTSTANDING OUTSTANDING INTEREST RATE
CATEGORY OF AGGREGATE AT END RATE AT END DURING THE DURING THE DURING THE
SHORT-TERM BORROWINGS OF PERIOD OF PERIOD PERIOD PERIOD(1) PERIOD(2)
- - - - - - - - - --------------------- --------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Year Ended December 31,
1993
Notes payable to $155,967 8.84% $193,003 $169,914 7.92%
banks(3)..............
Year Ended December 31,
1992
Notes payable to $162,247 7.16% $240,384 $189,442 6.12%
banks(3)................
Year Ended December 31,
1991
Notes payable to $110,600 6.07% $231,400 $143,800 7.64%
banks(3)................
</TABLE>
- - - - - - - - - --------
(1) The average amount outstanding during the period was computed by dividing
the average monthly principal balances by 12.
(2) The weighted average interest rate during the period was computed by
dividing the actual interest expense by average short-term debt
outstanding.
(3) Notes payable to banks include borrowings under lines of credit
arrangements which are reviewed annually for renewal. The balance at
December 31, 1993 and 1992 includes debt in default of $155,795.
73
<PAGE>
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. INCORPORATED BY
- - - - - - - - - ----------- REFERENCE TO REGISTRANT'S
-------------------------
<S> <C> <C>
3 (a-1) Certificate of Incorporation filed Exhibit 3 (a-1) to Annual Report on
March 31, 1987 Form 10-K for fiscal year ended
December 31, 1988
3 (a-2) Copy of Agreement and Plan of Merger Exhibit (b) to Current Report on Form
dated April 1, 1987 between JWP INC., a 8-K for August 4, 1987
New York corporation, and JWP INC. a
Delaware corporation
3 (a-3) Certificate of Amendment to Certificate Exhibit 3 (a-3) to Annual Report on
of Incorporation filed May 17, 1990 Form 10-K for fiscal year ended
December 31, 1990
3 (a-4) Certificate of Designation filed August Exhibit 4.1 to Quarterly Report on Form
15, 1991 10-Q for the quarter ended June 30,
1991
3 (b) By-Laws Exhibit 3 (b) to Annual Report on Form
10-K for fiscal year ended December 31,
1988
4 (a-1)* Form of Subordinated Note Agreement Exhibit B to Current Report on Form 8-K
executed April 10, 1986 between the for April 11, 1986
Registrant and each of several
insurance companies
4 (a-2)* Composite Conformed Copy of Note Exhibit 4 (a-8) to Annual Report on
Agreements dated as of March 10, 1987 Form 10-K for fiscal year ended
between the Registrant and each of December 31, 1986
several insurance companies
4 (a-3)* Conformed Copy of Note Agreement dated Exhibit 4 (a- ) to Annual Report on
as of December 15, 1987 between the Form 10-K for fiscal year ended
Registrant and each of several December 31, 1987
insurance companies
4 (a-4)* Conformed Copy of Senior Note Purchase Exhibit 4 (a-9) to Annual Report on
Agreement dated as of November 15, 1988 Form 10-K for fiscal year ended
between Registrant and each of several December 31, 1988
insurance companies
4 (a-5)* Conformed Copy of Senior Note Agreement Exhibit 4 (a-11) to Annual Report on
dated as of November 16, 1989 between Form 10-K for fiscal year ended
Registrant and each of several December 31, 1989
insurance companies
4.6* Indenture dated as of September 1, Exhibit 4 (a) to Quarterly Report on
1987, as amended by First and Second Form 10-Q for the quarter ended June
Supplemental Indentures, pursuant to 30, 1990
which 7 3/4% Convertible Subordinated
Debentures of NEECO, Inc. were assumed
by Registrant
4.7* Senior Note Agreement executed November Exhibit 4.13 to Form S-3 Registration
14, 1990 between Registrant and The Statement No. 33-38381
Prudential Insurance Company of America
4.8* Composite Conformed Copy of Senior Note Exhibit 4.14 to Form S-3 Registration
Agreement executed November 28, 1990 Statement No. 33-38381
between Registrant and each of several
insurance companies
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. INCORPORATED BY
- - - - - - - - - ----------- REFERENCE TO REGISTRANT'S
-------------------------
<S> <C> <C>
4.9* Conformed Copy of Senior Note Agreement Exhibit 4.15 to Form S-3 Registration
executed November 28, 1990 between Statement No. 33-43104
Registrant and Provident National
Assurance Co.
4.10* Conformed Copy of Senior Note Agreement Exhibit 4.15 to Form S-3 Registration
executed March 14, 1991 among JWP, New Statement No. 33-39550
York Life Insurance Company and New
York Life Insurance, an annuity
corporation
4.11* Composite Conformed Copy of Senior Note Exhibit 4.16 to Annual Report on Form
Agreement executed March 6, 1992 10-K for fiscal year ended December 31,
between the Registrant and several 1991
purchasers
4.12* Form of Amended and Restated Credit Exhibit 4.12 to Annual Report on Form
Agreement dated as of September 11, 10-K for fiscal year ended December 31,
1992 between Registrant and several 1992
banks
4.13* Form of Amendment dated as of September Exhibit 4.13 to Annual Report on Form
30, 1992 between Registrant and several 10-K for fiscal year ended December 31,
banks with respect to the Amended and 1992
Restated Credit Agreement
4.14* Form of Credit Agreement dated as of Exhibit 4.14 to Annual Report on Form
February 14, 1994 among Registrant, 10-K for fiscal year ended December 31,
certain subsidiaries thereof and 1992
Belmont Capital Partners II, L.P.
10 (a-1)* First Mortgage Indenture ("Mortgage") Exhibit B-l to Form S-l, Registration
dated December 1, 1936 of a subsidiary Statement No. 2-3995 of JWS
of Registrant, Jamaica Water Supply
Company ("JWS")
10 (a-2)* Supplemental Indenture to First Exhibit 1 to Annual Report on Form 10-K
Mortgage dated December 1, 1953 of JWS for fiscal year ended December 31, 1953
10 (a-3)* Supplemental Indenture to First Exhibit 1 to Current Report on Form 8-K
Mortgage dated May 1, 1962 of JWS for August 1962 of JWS
10 (a-4)* Supplemental Indenture to First Exhibit 4.21 to Form S-1, Registration
Mortgage dated May 1, 1970 of JWS Statement No. 2-62590
10 (a-5)* Supplemental Indenture to First Exhibit 4.22 to Form S-1, Registration
Mortgage dated February 15, 1975 of JWS Statement No. 2-62590
10 (a-6)* Supplemental Indenture to First Exhibit 4.23 to Form S-1, Registration
Mortgage dated January 1, 1978 Statement No. 2-62590
10 (a-7)* Supplemental Indenture to Mortgage Exhibit 10 (a-7) to S-1, Registration
dated as of April 1, 1981 of JWS Statement No. 2-86988
10 (a-8)* Supplemental Indenture to Mortgage Exhibit 10 (a-8) to Form S-1
dated as of August 1, 1983 of JWS Registration Statement No. 2-86988
10 (a-9)* Supplemental Indenture to Mortgage Exhibit 10 (a-9) to Annual Report on
dated as of December 1, 1984 10-K for fiscal year December 31, 1985
10 (b-1)* Agreement and Plan of Merger dated as Exhibit (c) (2) to the Schedule 14D-1
of June 3, 1991 among Businessland,
Inc., JWP INC., and JWP Acquisition,
Inc.
10 (b-2)* Asset Purchase Agreement dated July 16, Exhibit 2 to Form 8-K; Date of Report:
1993 by and among JWP INC., JWP August 6, 1993
Information Services, Inc. and ENTEX
Information Services, Inc.
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. INCORPORATED BY
- - - - - - - - - ----------- REFERENCE TO REGISTRANT'S
-------------------------
<S> <C> <C>
10 (c-1)* Employment Agreement dated as of Exhibit 10 (e) to Annual Report on Form
September 14, 1987 between the 10-K for fiscal year ended December 31,
Registrant and Sheldon I. Cammaker 1987
10 (c-2)* Amendment dated March 15, 1988 to Exhibit 10 (f) to Annual Report on Form
Employment Agreement dated as of 10-K for fiscal year ended December 31,
September 14, 1987 between Registrant 1987
and Sheldon I. Cammaker
10 (d)* Letter Agreement dated November 16, Exhibit 10 (d) to Annual Report on Form
1992 between the Registrant and Edward 10-K for fiscal year ended December 31,
F. Kosnik 1992
10 (e)* Letter Agreement dated December 21, Exhibit 10 (e) to Annual Report on Form
1992 between the Registrant and Stephen 10-K for fiscal year ended December 31,
H. Meyers 1992
10 (f)* Amended and Restated Stock Option and Exhibit 10 to Form S-8 (No. 3-25151)
Appreciation Rights Plan
10 (g)* Senior Incentive Compensation and Exhibit B to Proxy Statement for Annual
Restricted Stock Award Plan Meeting of Stockholders held May 17,
1989
10 (h)* 1991 Stock Option Plan Exhibit A to Proxy Statement for Annual
Meeting of Stockholders held May 16,
1991
10 (i)* Directors' Retirement Plan Exhibit 10 (i) to Annual Report on Form
10-K for fiscal year ended December 31,
1991
10 (j)* 1991 Stock Option Plan for Non-Employee Exhibit A to Proxy Statement for Annual
Directors Meeting of Stockholders held May 21,
1992
10 (k)* 1992 Stock Option Plan Exhibit 10 (k) to Annual Report on Form
10-K for fiscal year ended December 31,
1992
10 (l)* Separation Agreement dated as of June Exhibit 10 (l) to Annual Report on Form
30, 1993 between Registrant and Andrew 10-K for fiscal year ended December 31,
T. Dwyer 1992
10 (m)* Consulting Agreement dated as of June Exhibit 10 (m) to Annual Report on Form
30, 1993 between JWP 10-K for fiscal year ended December 31,
Mechanical/Electrical Services, Inc. 1992
and Andrew T. Dwyer
10 (n)* Restricted Stock Agreement dated as of Exhibit 10 (n) to Annual Report on Form
November 24, 1992 between Registrant 10-K for fiscal year ended December 31,
and Edward F. Kosnik 1992
10 (o)* Restricted Stock Agreement dated as of Exhibit 10 (o) to Annual Report on Form
January 3, 1992 between Registrant and 10-K for fiscal year ended December 31,
David L. Sokol 1992
10 (p)* Letter Agreement dated as of June 30, Exhibit 10 (p) to Annual Report on Form
1993 between Drake & Scull Holdings 10-K for fiscal year ended December 31,
Ltd. and Registrant and Steven H. 1992
Kornfeld
10 (q)* Letter Agreement dated August 21, 1992 Exhibit 10 (q) to Annual Report on Form
between Registrant and David L. Sokol 10-K for fiscal year ended December 31,
1992
10 (r)* JWP Inc. Employees' Severance Pay/Stay Exhibit 10 (r) to Annual Report on Form
Bonus Plan, as amended and restated as 10-K for fiscal year ended December 31,
of March 16, 1994 1992
10 (s)* Restricted Stock Agreement dated as of Exhibit 10 (s) to Annual Report on Form
January 15, 1993 between Registrant and 10-K for fiscal year ended December 31,
Stephen H. Meyers 1992
10 (t)* Employment Agreement dated as of April Exhibit 10 (t) to Annual Report on Form
18, 1994 between Registrant and Frank 10-K for fiscal year ended December 31,
T. MacInnis. 1992
21 List of Subsidiaries Page
27 Article 5, Financial Data Schedule Page
</TABLE>
Pursuant to Item 601 (b)(4)(iii) of Regulation S-K, upon request of the
Securities and Exchange Commission, the Registrant hereby undertakes to furnish
a copy of any unfiled instrument which defines the rights of holders of long-
term debt of the Registrant's subsidiaries.
- - - - - - - - - --------
* Required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c)
of the Annual Report Form 10-K.
76
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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: September 21, 1994 Frank T. MacInnis
By:
----------------------------------
Frank T. MacInnis Chairman of the
Board of Directors, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on September 21, 1994.
Frank T. MacInnis* Chairman of the
- - - - - - - - - ------------------------------- Board of Directors,
Frank T. MacInnis President, and Chief
Executive Officer
Andrew T. Dwyer * Director
- - - - - - - - - -------------------------------
Andrew T. Dwyer
Innis O'Rourke, Jr. * Director
- - - - - - - - - -------------------------------
Innis O'Rourke, Jr.
Craig C. Perry * Director
- - - - - - - - - -------------------------------
Craig C. Perry
Edmund S. Twining, Jr. * Director
- - - - - - - - - -------------------------------
Edmund S. Twining, Jr.
Leicle E. Chesser Executive Vice
- - - - - - - - - ------------------------------- President and Chief
Leicle E. Chesser Financial Officer
(principal financial
officer from May
1994 to date)
Stephen H. Meyers Senior Vice
- - - - - - - - - ------------------------------- President- Finance
Stephen H. Meyers (principal financial
officer from January
1993 to May 1994 and
principal accounting
officer from May
1994 to date)
- - - - - - - - - --------
*Constituting the entire Board of Directors of JWP INC.
77
<PAGE>
EXHIBIT 21
LIST OF SIGNIFICANT SUBSIDIARIES
<TABLE>
<S> <C>
Comstock Limited Ontario
Drake & Scull Holdings Limited United Kingdom
Drake & Scull International Limited United Kingdom
Dyn Specialty Contracting, Inc. Virginia
Dynalectric Company Florida
Jamaica Water Securities Corp. New York
Jamaica Water Supply Company New York
JWP Forest Electric Corp. New York
JWP International Inc. Delaware
JWP Mechanical/Electrical Services, Inc. Delaware
JWP Mechanical/Electrical Services (East), Inc. Delaware
JWP Mechanical/Electrical Services (Midwest), Inc. Delaware
JWP Mechanical/Electrical Services (West), Inc. Delaware
JWP Mechanical/Electrical Services (South), Inc. Delaware
JWP (U.K.) Limited United Kingdom
JWP West California
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-START> JAN-01-1993
<PERIOD-END> DEC-31-1993
<PERIOD-TYPE> YEAR
<CASH> 40
<SECURITIES> 0
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0
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</TABLE>
