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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 17, 1993
POLICY MANAGEMENT SYSTEMS CORPORATION
(Exact name of registrant as specified in Charter)
South Carolina 0-10175 57-0723125
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One PMS Center (P.O.Box Ten)
Blythewood, S.C. (Columbia, S.C.) 29016 (29202)
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (803) 735-4000
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Item 4. Changes in Registrant's Certifying Accountant
On August 17, 1993, Policy Management Systems
Corporation (the "Company") engaged the firm of Coopers & Lybrand
("Coopers") as its independent accountants to audit the Company's
financial statements for the six months ended June 30, 1993,
including a review of the Company's internal control structure.
Coopers has also agreed to work with the Company's previous
independent accountants to resolve any adjustments that could
impact prior periods. On August 17, the Company dismissed Arthur
Andersen & Co. ("Arthur Andersen"), which has served as the
Company's independent accountants since 1992. These actions were
approved by the Board of Directors upon the recommendation of the
Audit Committee.
Neither the previously issued auditors' report of
Arthur Andersen on the Company's financial statements for the
year ended December 31, 1992 nor the previously issued auditors'
report of Ernst & Young on the Company's financial statements for
the year ended December 31, 1991 contained any adverse opinion or
disclaimer, nor was either report qualified as to uncertainty,
audit scope, or accounting principles. By letter dated August
10, 1993, Arthur Andersen informed the Company of its withdrawal
of its auditors' report on the Company's financial statements for
the year ended December 31, 1992 for the reasons set forth in its
letter, a copy of which is filed herewith as Exhibit 99.1 and
incorporated by reference herein.
By letter dated August 13, 1993, Ernst & Young informed
the Company that its February 20, 1992 auditors' report should no
longer be associated with the Company's financial statements for
the years ended December 31, 1991 and 1990 for the reasons set
forth in its letter, a copy of which is attached herewith as
Exhibit 99.2 and is incorporated by reference herein.
By letter dated August 16, 1993, Ernst & Young further
advised the Company that its review reports on interim
financial statements during the years ended December 31, 1992,
1991 and 1990 should no longer be associated with those financial
statements. A copy of that letter is attached herewith as
Exhibit 99.3 and is incorporated by reference herein.
There have been no disagreements within the meaning of
Item 304(a) of Regulation S-K between the Company and either
Arthur Andersen or Ernst & Young in connection with the audits
for the fiscal years ended December 31, 1992 and 1991,
respectively, or subsequently, on any matter of accounting
principles or practices, financial statements disclosure, or
auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of such former principal accountants, would
have caused either firm to make reference to the subject matter
of the disagreements in connection with its report.
At a meeting on August 10, 1993, in connection with the
withdrawal of its auditors' report, Arthur Andersen advised the
Board of Directors that subsequent to the issuance of Arthur
Andersen's report and after the first quarter of 1993, certain
information came to its attention relating to the following
matters. Arthur Andersen advised the Board that it believes that
there are material weaknesses in the internal controls of the Company,
that information has come to its attention that has led it to question
certain of the Company's business practices and whether it would
any longer be able to rely on management's representations and
that information has come to its attention that, if further
investigated, may materially impact the fairness and reliability
of the Company's financial statements for prior periods. In its
comments to the Board of Directors, Arthur Andersen raised
questions regarding the Company's accounting practices related to
revenue recognition and certain other matters which had not been
resolved at the time of its termination. The Company, through
its representatives, has discussed each of these matters with
Arthur Andersen. The Company has authorized Arthur Andersen to
respond fully to inquiries of Coopers & Lybrand concerning these
matters, based upon information that has come to Arthur Andersen
in its capacity as principal accountant to audit the Company's
financial statements.
The Company and certain of its officers and directors
are defendants in a lawsuit alleging violation of the Federal
Securities Laws and purporting to be a class action. Among the
allegations are that the Company's financial statements for the
year ended December 31, 1992 are materially false and misleading.
Because Arthur Andersen audited those financial statements, the
Company believes that there exists the potential for conflicts
between the Company and Arthur Andersen. As a result, the
Company concluded that a change in its outside auditors was
appropriate.
The Company has furnished Arthur Andersen a copy of
this report and requested Arthur Andersen furnish a letter
addressed to the Securities and Exchange Commission stating
whether it agrees with the statements made herein. A copy of
such letter is filed herewith as Exhibit 16.1 and incorporated
by reference herein.
Item 7. Exhibits
Exhibit Number Description
16.1 Letter of Arthur Andersen dated
August 24, 1993
99.1 Letter of Arthur Andersen dated
August 10, 1993
99.2 Letter of Ernst & Young dated
August 13, 1993
99.3 Letter of Ernst & Young dated
August 16, 1993
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
POLICY MANAGEMENT SYSTEMS CORPORATION
(Registrant)
Date: August 24, 1993 By: Robert L. Gresham
Executive Vice President
(Chief Financial Officer)
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Exhibit 16.1
August 24, 1993
Arthur Andersen & Co.
Suite 2300
1201 Main Street
Columbia SC 29201
803 254 8102
The Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549
Gentlemen:
We have read item 4 included in the attached Form 8-k dated
August 24, 1993 of Policy Management Systems Corporation to be
filed with the Securities and Exchange Commission and are in
agreement with the statements contained therein.
Very Truly Yours,
ARTHUR ANDERSEN & CO.
/s/ ARTHUR ANDERSEN & CO.
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Exhibit 99.1
August 10, 1993
Arthur Andersen & Co.
Suite 2300
1201 Main Street
Columbia SC 29201
803 254 8102
Board of Directors of Policy Management
Systems Corporation
c/o Mr. G. Larry Wilson
Chairman of the Board, President,
and Chief Executive Officer
Policy Management Systems Corporation
Post Office Box 10
Columbia, South Carolina 29202
This is to inform you that Arthur Andersen & Co. withdraws its
report dated February 26, 1993 issued on the 1992 financial
statements of Policy Management Systems Corporation ("the
Company") due to the significant uncertainty related to the
outcome of the extended and broadened internal investigation
being conducted by the Company and Jones Day Reavis and Pogue,
concerning certain of the Company's business and accounting
practices and the effect of those practices on the financial
statements. Reliance should not be placed on the Arthur Andersen
& Co. report or the 1992 financial statements. The outcome of
the internal investigation is likely to require a restatement of
the 1992 financial statements. Please inform the Securities and
Exchange Commission concerning this development and make other
disclosures as appropriate.
Very truly yours,
ARTHUR ANDERSEN & CO.
/s/ ARTHUR ANDERSEN & CO.
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Exhibit 99.2
ERNST & YOUNG
Two Insignia Financial Plaza
Suite 800
P.O. Box 10647
Greenville
South Carolina
803 242 5740
August 13, 1993
Board of Directors of Policy Management
Systems Corporation
c/o Mr. G. Larry Wilson
Chairman of the Board, President,
and Chief Executive Officer
Policy Management Systems Corporation
Post Office Box 10
Columbia, South Carolina 29202
This is to inform you that Ernst & Young's report dated February
20, 1992 should no longer be associated with the financial
statements of Policy Management Systems Corporation (the Company)
for the years ended December 31, 1991 and December 31, 1990.
Following our inquiry of August 10, 1993, the Company confirmed
on August 13, 1993 that the outcome of an internal investigation
being conducted by the Company and its legal counsel into certain
of the Company's business and accounting practices is likely to
result in revision of its financial statements for periods prior
to 1992. We are taking this action as a result of the
significant uncertainty which thus exists as to the effect of
this matter on the Company's 1991 and 1990 financial statements.
Please inform the Securities and Exchange Commission and all
persons known to be currently relying on, or who are likely to
rely on, the financial statements that our report must no longer
be associated with the Company's financial statements for the
years ended December 31, 1991 and December 31, 1990.
/s/ ERNST & YOUNG
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Exhibit 99.3
ERNST & YOUNG
Two Insigna Financial Plaza
Suite 800
P.O. Box 10647
Greenville
South Carolina
803 242 5740
August 16, 1993
Board of Directors of Policy Management
Systems Corporation
c/o Mr. G. Larry Wilson
Chairman of the Board, President,
and Chief Executive Officer
Policy Management Systems Corporation
Post Office Box 10
Columbia, South Carolina 29202
We refer to our letter dated August 13, 1993 in which we informed
you that Ernst & Young's report dated February 20, 1992 should no
longer be associated with the financial statements of Policy
Management Systems Corporation (the Company) for the years ended
December 31, 1991 and December 31, 1990. This letter is to
inform you that Ernst & Young's review reports on interim
financial statements during the years ended December 31, 1992,
1991 and 1990 should no longer be associated with the respective
interim financial statements of the Company. Please inform all
persons known to be currently relying on, or who are likely to
rely on, the interim financial statements that our review reports
must no longer be associated with the Company's interim financial
statements for such periods.
/s/ ERNST & YOUNG