Six International Drive
Rye Brook, New York 10573-1058
Fax: (914) 935-4179
Incorporated: 1966 as Jamaica Water Supply Company
Sales: $3.6 billion
Stock Exchanges: New York
SIC s: 1731 Electrical Work; 1796 Installing Building Equipment Nee; 4953 Refuse Systems
JWP Inc. is a transnational technical services firm that specializes in the areas of systems engineering, facilities management, information systems, and environmental management systems. JWP is involved in the construction, installation, and maintenance of cost-control systems for Fortune 1000 companies, institutions, and governments. The firm has 220 offices worldwide on all continents except Australia.
Begun in the mid-1960s as a water supplier to Long Island and Queens, New York, JWP transformed itself through acquisition. By the start of the 1980s, JWP was the nation’s largest computer reseller and the biggest electrical and maintenance contractor. Essentially, clients use JWP to help increase productivity and decrease costs by upgrading their facilities through, for example, more efficient communication and computer systems. JWP designs, installs, and supports these technical systems.
Through its myriad subsidiaries, JWP also contracts for general electrical systems, electrical power systems, heating and air conditioning systems, ventilation and duct work, plumbing and piping, computer and computer peripherals, wire and cable lines, and telephone equipment, among other services. Today, water systems sales account for less than two percent of JWP’s sales, while facilities management (66 percent) and information systems (32 percent) dominate the company’s business. With a heavy debt load accumulated in the 1980s and 1990s, the company recently announced that it would apply for Chapter 11 bankruptcy protection.
JWP Inc. was launched in 1966 as the Jamaica Water Supply Company and, for much of its early history, was the primary provider of water to Nassau County, Long Island, and Queens, New York. The company thus functioned for many years as a regulated monopoly, with low but stable profits and regulated prices. The company began to branch out in the mid- to late-1960s and henceforth was exposed to the instabilities of the marketplace. As it diversified its product lines, JWP experienced many ups and downs in its bottom line.
The company changed its name often between 1966 and 1986, the year it adopted its present name, JWP Inc. This 20-year period was marked by extreme instability, and not in name only. From 1966 to around 1970, the company expanded by buying up other water companies. For example, in 1966 the firm acquired the entire capital stock of Sea Cliff Water Company. In 1968 they acquired most (80 percent) of Orbit International Inc. of San Juan, Puerto Rico.
With this accumulation through acquisition of other water companies, the firm was ready to make its first significant move out of the water business. Founder Martin Dwyer expressed the frustration with the water business at the time, stating, “Private companies have no place in an urban area.” Limited by public regulation, he sought to diversify into specialized construction, utility type operations, telephone systems, and electric lighting. In support of this shift in business focus, the company’s most significant move was its 1971 acquisition of the Welsbach Corporation, a Philadelphia-based electrical contracting concern. Welsbach also installed street lighting and traffic control systems. Welsbach was merged into Jamaica Water, and the company took on the name Welsbach in 1974. Welsbach had a profit of $659,000 in 1969, and thus helped push Jamaica’s bottom line out of the red. Jamaica’s acquisitions throughout the late 1960s also led the firm to take on an increasingly expanding stock of debt, and, with interest rates rising, the company’s cash flow was severely threatened. Combined with the severe recession of 1973 and 1974, the company went from a stable water utility company to near bankruptcy in the mid-1970s.
In 1978 Andrew T. Dwyer, the son of founder Martin Dwyer, was put in charge of the ailing company. It took Dwyer and his associates several years to fend off complete collapse. They restructured the cost structure of the company to increase cash flow, and in the process, removed some of the debt burden that was dragging down the company’s growth prospects. To begin with, Dwyer sold off many of the money-losing ventures (including many of the non-utility holdings). He also began a complete retrenchment of the water utility component of the company (which at the time comprised 50 percent of the company’s business) and set his sights on diversification, offering JWP’s sophisticated and technologically advanced plumbing and piping systems technology for other applications.
Dwyer’s stated goal at the time was to transform the company once again, this time using its already developed strengths in developing large computer systems, equipment, and office maintenance as a base. He started development of heating ventilation and air conditioning systems maintenance and other systems involved in operating high rise buildings in New York City. ‘The technologies needed to merge,” Dwyer said, and his company set up building systems whereby one box could control fire, alarm, energy management, and security systems. By the mid 1980s, in New York City, JWP maintained everything from electric signs in Times Square to printing presses at the New York Times.
This general strategy continued to yield positive results as JWP adapted existing technologies to diverse applications. As Dwyer reflected in November of 1991: “We tried to identify those markets where there was a need for sophisticated equipment.” The result was phenomenal growth for the company in the 1980s, as the company once again completed a fundamental, and profitable, shift in its focus. Dwyer’s first specific target was the fastest growing segment of the economy in the 1980s, the financial services sector. He aimed at providing all the technical services support required to create high tech and efficient trading rooms for Wall Street giants such as Merrill Lynch & Co, Inc., including installation and maintenance of air conditioning, telephones, wiring, cables, and computers. Clients also included Morgan Stanley, Goldman Sachs, and Salomon Brothers. From here, JWP branched out further, installing energy management systems for Sears and computer rooms for Hewlett-Packard.
In the wake of these very successful endeavors, Dwyer’s JWP won big contracts with DuPont and also began providing services to hospitals and utilities, including Illinois Bell. One of the largest contracts was a six and one half year, $468 million contract to convert New York City’s sludge to fertilizer pellets to be marketed nationally. From solid waste management and conversion plants, JWP developed and marketed security systems and electrical networks. The company expanded overseas during this time as well.
The company grew not only in the rapidly expanding market for technical services and the decentralized management style implemented by Dwyer, but also through smartly managed acquisitions. Dwyer acquired Forest Electric in 1986 and Dynalectric in 1988 to broaden the company’s electrical services repertoire. The acquisition of University Industries in 1988 got them into the West Coast mechanical services market. To crack the international market, JWP acquired Drake & Skull Holdings, a British electrical and mechanical services company. Dwyer’s JWP gobbled up two dozen companies from 1984 to 1987, generating scale economies out of mergers and getting a jump on the competition in the high tech end of the technical services industry. “We are continually migrating to the higher technology side of the business,” Dwyer said, “that’s where the margins are better, the growth greater, and the competition a lot smarter.” The company’s name was officially changed to JWP in 1986.
The successes of these acquisitions were phenomenal. In fact, from 1980 until the end of 1991, JWP enjoyed 48 quarters of uninterrupted growth. The company grew from 400 employees working out of five offices in 1980 to over 21,000 employees in 195 offices in 1990. Successful diversification went hand in hand with the company’s move away from water sales as its dominant market. The stable water sales, which made up over 50 percent of the company’s total revenues in 1980, declined to less than two percent in 1990, while total net income grew from a loss of $495,000 in 1980 to $59.3 million profit in 1990. At the start of the 1980s JWP was a $40 million water utility that had lost money for eight straight years and was on the brink of bankruptcy. By 1990 the company was a $3 billion technical services company. Compound growth from 1985 through 1989 was 179 percent, and JWP became the dominant maintenance firm in New York. Sales from 1981 to 1986, for example, went from $42 million to $379 million, and net income rose from $1.7 million to $13.5 million.
With the company’s expansion into high tech applications, JWP was increasingly getting into the business of setting up computer systems. Thus, it was a natural outgrowth of the company to begin selling the computers to its clients. In 1990 this new avenue of growth for JWP meant the purchase of Neeco, Inc., a desktop computer systems sales company which operated out of Canton, Massachusetts. In its most important recent acquisition to date, the firm bought Businessland in early 1991, a move that was considered a natural extension of the firm’s experience in selling electrical systems. This deal pushed total revenues from $744.6 million to $944.9 million. From the Businessland acquisition, Dwyer created JWP Businessland Inc., a division of JWP Information Services, which had sales of $1.8 billion worldwide and which operated through its own retail outlets.
While the 1980s were a decade of unprecedented growth, the early 1990s saw near bankruptcy and collapse. Contributing to the decline of JWP was a commercial construction slump, price wars, and intensified competition in the personal computer component of the business, and of course, the burden of servicing a huge debt accumulated during the boom years of acquisition in the 1980s. JWP’s high debt-equity ratio in particular (1.2 to 1.0) caused great concern. Profits fell to around $40 million for 1990 and 1991 as the company struggled through the recession that plagued those years. By the fourth quarter of 1992, however, losses were as great as $265 million.
The company’s highly leveraged position threatened its very existence, prompting some drastic action to restructure the company’s debt. Meanwhile trouble brewed elsewhere. In April 1992, in their water business, complaints about high rates charged for water were lodged against JWP’s water subsidiary, Jamaica Water Supply Co., which still served homes in Queens and Nassau County. JWP eventually sold the unit as part of the corporate restructuring and not, they said, in response to the consumer complaint controversy.
In October of 1992, David Sokel presented to the board evidence of what were alleged to be widespread accounting improprieties, confirming the charges of shareholders, and then he resigned as president of the company. More restructuring decisions led to the sale often or more businesses (including the sale of four environmental businesses to Wheelabrator Technologies, Inc., for about $69 million) in order to raise $250 million as the company focused on its traditionally more lucrative mechanical and electrical services. These moves helped raise needed cash to deal with the heavy debt load, which at one point was said to be as large as $485 million.
In a major debt restructuring move, in July of 1993 JWP sold its Information Services subsidiary to an investment group in a deal releasing JWP from about $210 million of the company’s more than $300 million in outstanding debt. In 1993 Andrew Dwyer resigned as chairman of the board of JWP, and Edward Kosnik was elected to the post.
Expansion continued, notably on the international front; international operations generated about $1 billion in revenue in 1992. Coupled with the debt restructuring, long-term growth prospects brightened. In 1991 JWP acquired Comstock Canada, the largest electrical and mechanical services firm in Canada, with twelve offices in Canada and $200 million in sales. Furthermore, the Businessland project did business in Canada, the United Kingdom, Germany, and France, selling its interactive personal computer system integrated to complement its international facilities management. JWP also expected growth in new markets in transportation projects, pharmaceutical, and biotechnology facilities. The most promising general source of demand for JWP’s services lay in the fact that, in general, businesses found it increasingly cheaper to “outsource” the kind of services that JWP provided.
Despite its demonstrated resiliency, JWP announced in October of 1993 that it would file for Chapter 11 bankruptcy protection, after nearly a year of negotiating a financial restructuring with its creditors. Under the proposed debt restructuring and capitalization plan, JWP’s creditors, a group of fifty bankers, insurance companies, and equity funds, exchanged $484 million of the company’s debt for $180 million of new debt and 100 percent control of JWP’s equity. The new debt was to be paid from the proceeds of asset sales.
Azco Modular Structures Corporation; Dynalectric Company; Enviro-Gro Technologies; Hetra Computer and Communications Inc.; J.C. Higgins Corp.; JWP Energy Products Inc.; JWP Gowan Inc.; JWP Guzovsky Electrical Corp.; JWP Inc. IK Electric Company; JWP Information Services; JWP Mechanical Services Inc.; JWP Network Services; JWP Telecom Inc.; JWP Welsbach Electric Corporation; JWP West; Jamaica Water Supply Company; Kirkwood Dynalectric Company; Lera Electric Company Inc.; R and C Corporation.
“Accord Is Signed to Sell Information Services Unit,” New York Times, July 17, 1993.
Cook, James, “If at First You Don’t Succeed,” Forbes, June 29, 1987.
Emmett, Arielle, “JWP: Lean, Mean Business Machine,” Computer-world, June 15, 1992.
Gilpin, Kenneth N., “JWP’s Bankruptcy Plan Will Put the Creditors in Control,” New York Times, October 12, 1993.
“Jamaica Water Agrees to Acquire Welsbach for About $10.2 Million,” Wall Street Journal, May 28, 1969.
“Jamaica Water Links With Welsbach; to Get 49% It Doesn’t Own,” Wall Street Journal, October 15, 1970.
“JWP Completes Sale of Four Businesses for about $69 Million,” Wall Street Journal, October 19, 1992.
Lueck, Thomas J., “Private Owner to Sell L.I. and Queens Water Utility,” New York Times, April 21, 1992.
Pacey, Margaret D., “Thirst for Acquisitions: Investor-Owned Water Works Grow by Swallowing Municipal Ones,” Barron’s, February 15, 1971.
Pollack, Andrew, “JWP Gains Control of Businessland,” New York Times, August 6, 1991.
Quickel, Stephen W., “By Leaps and Bounds,” Business Month, March, 1989; “Ghostbusters: What Are Big Corporations Afraid Of? Buying and Installing Complex Systems,” Financial World, March 20, 1990.
Steinberg, Jacques, “Water Utility of a Thousand Faces,” New York Times, November 2, 1991.
Zweig, Jason, “Roller Coaster: JWP Sold Just Water Until Andy Dwyer Arrived. Now the Utility Is Diversified, but Not Very Profitably So,” Forbes, August 3, 1992.
—John A. Sarich