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The company
is engaged in modifying or replacing its affected systems in a manner
that will minimize any detrimental effects on operations and has
substantially completed its goal of correcting affected systems
that would have a critical effect on its business operations. While
some significant components remain uncorrected, the company believes
that all such systems have been identified and has plans in place
to correct such systems by the end of second quarter of 1999. The
company expects to complete the testing and verification of such
systems during 1999.
While
it is difficult at present to fully quantify the overall cost of
this work, the company estimates that the overall cost of remediation
could approach $100 million. The company presently believes that
such costs will not have a material effect on the company's current
financial position or liquidity; however, in any given future reporting
period, such costs could have a material effect on results of operations.
Through the fourth quarter of 1998, the company has incurred $54
million of remediation costs, of which $1 million was incurred in
1997 and $11 million has been capitalized for new hardware and software.
The company expects substantial additional costs to be incurred
in the first and second quarters of 1999.
Depending
on whether suppliers, customers and other entities with which the
company does business are able to successfully address the Year
2000 issue, the company's results of operations could be materially
adversely affected in any given future reporting period during which
such a Year 2000 event occurred. As
a result, the company is communicating with such entities to determine
their state of readiness. The company is also developing contingency
plans to allow primary operations of the company to continue if
the company's significant systems or such entities are disrupted
by the Year 2000 problem. The company currently expects that its
contingency plans will be developed by the end of the second quarter
of 1999. In addition, the company has initiated a process to develop
joint contingency plans with its customers and suppliers. The company
currently expects that it will be prepared in the event of systems
failures to continue to do business, although such operations may
be at a higher cost.
These
estimates and conclusions contain forward-looking statements that
are subject to risks and uncertainties that could cause actual results
to differ materially. The company's current estimates of the amount
of time and the costs necessary to address the Year 2000 problem
are based on the facts and circumstances existing at this time.
The estimates were derived using multiple assumptions of future
events, including the continued availability of certain resources,
implementation success and other factors. New developments may occur
that could affect the company's estimates, such as the amount of
planning and modification needed to achieve full resolution of the
Year 2000 problem; the availability and cost of resources; the company's
ability to discover and correct all Year 2000 sensitive computer
code and equipment; and the ability of suppliers, customers and
other entities to bring their systems into compliance.
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