UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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) November 17, 2005
(November 10, 2005)
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WILLBROS GROUP, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Republic of Panama
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(State or Other Jurisdiction of Incorporation)
1-11953 98-0160660
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(Commission File Number) (IRS Employer Identification No.)
Plaza 2000 Building, 50th Street, P.O. Box 0816-01098,
8th Floor, Panama, Republic of Panama
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(Address of Principal Executive Offices) (Zip Code)
+50-7-213-0947
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act (17 CFR 240.13e-4(c))
ITEM 4.01. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
RESIGNATION OF INDEPENDENT AUDITORS
On November 10, 2005, Willbros Group, Inc. (the "Company") was notified
by KPMG LLP ("KPMG"), its independent auditors, that, effective upon the
completion of the audit of the Company's consolidated financial statements as of
and for the year ended December 31, 2004, and the issuance of their report
thereon, and filing of the Company's Form 10-Q's for the three month period
ended March 31, 2005 and the six month period ended June 30, 2005, it is
resigning as the Company's independent auditors. The reports of KPMG on the
Company's consolidated financial statements for the past two fiscal years ended
December 31, 2003 and 2002 contained no adverse opinion or disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope or accounting
principles, except that KPMG's report contained a separate paragraph stating
that "As discussed in Note 1 to the consolidated financial statements, as of
July 1, 2001, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 141, "Business Combinations" and certain provisions from SFAS
No.142, "Goodwill and Other Intangible Assets", and effective January 1, 2002,
adopted the remaining provisions of SFAS No. 142". In the Company's 8-K dated
February 22, 2005, the Company stated that it has concluded that its previously
issued financial statements for fiscal years 2002 and 2003 should not be relied
upon because of errors in those financial statements and that the Company would
restate those financial statements to make the necessary accounting adjustments.
The resignation of KPMG has been accepted by the Audit Committee of the
Company's Board of Directors. The Audit Committee has discussed with
representatives of KPMG certain material weaknesses in internal controls, as
described below, noted by KPMG and has taken certain actions, as described
below, to address such weaknesses.
In connection with the audit of the last two fiscal years and the
subsequent interim period through November 10, 2005, there were no disagreements
with KPMG 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 KPMG, would have caused KPMG to make reference
to the subject matter of the disagreements in connection with its report on the
financial statements for such years.
In connection with its audit for the two most recent fiscal years and
through November 10, 2005, there were no "reportable events" as defined by Item
304(a)(1)(v) of Regulation S-K, except that KPMG has advised the Company that it
noted certain material weaknesses in the Company's internal financial reporting
and accounting controls, as described below.
1. Company-Level Controls -- The Company did not maintain effective
company-level controls in the control environment, risk assessment, and
monitoring components as defined by COSO, including related antifraud controls.
Specifically, the following deficiencies were identified:
o The Company's control environment did not sufficiently promote
effective internal control over financial reporting throughout the
Company's management structure, and this
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material weakness was a contributing factor in the development of other
material weaknesses described below.
o The Company did not provide sufficient training for personnel engaged
in key elements of the financial reporting process, including training
on relevant regulations such as the Foreign Corrupt Practices Act.
o The Company's policies and procedures did not effectively ensure that:
(1) personnel, including internal audit, have the appropriate skills
and experience commensurate with their job responsibilities; (2) the
reporting structure of the organization was appropriate; and (3) key
personnel in certain international subsidiaries adhere to a periodic
rotation policy.
o The Company failed to educate and train employees in identifying,
monitoring, or reporting and responding to, incidents of alleged
misconduct or unethical behavior, including the Company's whistleblower
policy and the Company's code of conduct policies.
These deficiencies in the Company's internal control over financial reporting
resulted in material misstatements to various amounts in previously-issued
annual and interim financial statements. Accordingly, the Company is in the
process of restating its consolidated financial statements as of and for the
years ended December 31, 2002 and 2003 and the first three quarters of 2004.
2. Construction Contract Management -- The Company's operating subsidiaries in
Nigeria did not maintain effective policies and procedures regarding review and
approval processes relating to: (i) original and revised project cost estimates;
(ii) original contract pricing; (iii) establishment and management of contract
contingencies; and (iv) change order management. These deficiencies in the
Company's internal control over financial reporting resulted in material
overstatement of contract revenue and understatement of contract costs in
previously-issued annual and interim financial statements. Accordingly, the
Company is in the process of restating its consolidated financial statements as
of and for the years ended December 31, 2002 and 2003 and the first three
quarters of 2004.
3. International Taxes -- The Company's policies and procedures did not provide
for effective supervisory review of the Company's accounting for international
taxes, value added taxes, and payroll taxes and the related recordkeeping
activities. These deficiencies in the Company's internal control over financial
reporting resulted in material understatement of contract cost and income tax
expense in previously-issued annual and interim financial statements.
Accordingly, the Company is in the process of restating its consolidated
financial statements as of and for the years ended December 31, 2002 and 2003,
and the first three quarters of 2004.
4. Disbursements Process -- The Company did not maintain effective policies and
procedures regarding its disbursement process. Specifically, deficiencies in
policies and procedures were identified in the following areas: (i) petty cash
disbursements at the Company's Nigerian subsidiaries; (ii) the Company's vendor
approval process and maintenance of an approved vendor listing; and (iii)
disbursement approval levels for individuals, subsidiaries, and senior
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management. These deficiencies resulted in material undisclosed related party
transactions and payment of fraudulent vendor invoices resulting in material
overstatement of contract revenue and overstatement of contract cost in
previously-issued annual and interim financial statements. Accordingly, the
Company is in the process of restating its consolidated financial statements as
of and for the years ended December 31, 2003 and 2002, and the first three
quarters of 2004.
Company management with oversight from the Audit Committee has devoted
substantial effort to the remediation of its material weaknesses described
above, and to the improvement of the Company's internal control over financial
reporting. Specifically, prior to December 31, 2004, the Company:
o increased staffing and training of the finance and accounting personnel at
the business unit level; and
o adopted a more frequent rotation policy for the financial staff at its
business units.
Subsequent to December 31, 2004, the Company has undertaken the following
actions to remediate its material weaknesses, and to improve the Company's
internal control over financial reporting:
o initiation of an enhanced worldwide awareness program to educate employees
with respect to the content of our whistleblower policy to better achieve
reporting of any suspected problems;
o realignment of the reporting of all business units' financial staff directly
to the Corporate Controller's Office;
o adoption of a more frequent rotation policy for the operations staff at its
business units;
o adoption of a policy requiring approval of the General Counsel or the Chief
Financial Officer for the engagement of legal, accounting and tax advisors;
o implementation of an "enhanced and stand-alone" FCPA Compliance Program
(separate from that incorporated previously into our Code of Business Conduct
and Ethics), inclusive of a "Definitive FCPA Policy Statement" from the Board
of Directors and an FCPA Compliance Procedure providing for, among other
measures, routine training company-wide, starting in Nigeria, Latin America
and Oman;
o requirement that employees in positions of authority, as well as professional
consultants, identify any direct or indirect ownership interest in entities
doing business with the Company. Included in this disclosure will be any
entities owned or controlled in whole or in part by immediate family members
such as spouses;
o improvements to strengthen existing internal controls relating specifically
to Nigerian cash disbursements, approved vendor lists and approval levels for
individuals, subsidiaries and senior management; and
o expansion and formalization of the review process by corporate tax personnel
of all international tax returns on at least a quarterly basis. Book and tax
liability accounts will be
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reconciled and compared with tax returns as filed. This process was already
in place for the North American subsidiaries.
Company management with oversight from the Audit Committee is implementing
other improvements as described below:
o appointment of a senior-level Company employee with primary responsibility
for implementation, oversight and enforcement of the (i) Definitive FCPA
Policy Statement; (ii) the Code of Business Conduct and Ethics; and (iii) the
Whistleblower Policy, and communication of that appointment throughout the
Company. The appointee will have a direct communication line to the Audit
Committee; and
o movement of the internal audit function from an outsourced function with an
independent accounting firm to an in-house department to facilitate more
frequent and more in-depth examination of controls throughout the Company.
ENGAGEMENT OF NEW INDEPENDENT AUDITORS
The Audit Committee is in discussions with a number of independent registered
public accounting firms for selection as a replacement for KPMG.
STATEMENT OF INDEPENDENT AUDITORS
The Company has asked KPMG to furnish it with a letter addressed to the SEC
stating whether it agrees or disagrees with the above statements and a copy of
that letter is attached as Exhibit 16 to this Report. The Company has authorized
KPMG to fully respond to the inquiries of the successor accountants to be
selected by the Company.
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this report may constitute forward-looking
information within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements involve certain risks and uncertainties that
could cause actual results to differ materially from those expressed or implied
in such forward-looking statements. Such risks and uncertainties could cause
timing of events to differ significantly from those discussed above as a result
of various factors, including but not limited to, timing of selection of an
independent public accounting firm and other risks, some of which may be
identified from time to time in our filings with the SEC.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) The following exhibit is filed herewith:
16 Letter from KPMG dated November 16, 2005.
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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.
WILLBROS GROUP, INC.
Date: November 17, 2005 By: /s/ Warren L. Williams
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Warren L. Williams
Senior Vice President, Chief Financial
Officer and Treasurer
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EXHIBIT INDEX
<Table>
<Caption>
Exhibit No. Description
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16 Letter from KPMG dated November 16, 2005.
</Table>
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