The Securities and Exchange Commission (SEC) requires publically held companies to file quarterly reports (aka Form 10-Q) which, among many other items, must address the company's Y2K efforts and status. The latest 10-Qs are now becoming available. Let's take a look at what one regional mid-sized telecommunications company has said. For the purposes of this discussion, we'll leave out the name of the company. Here's the statement (I've included only the 'Year 2000 Date Conversion' portion of the 10-Q):

YEAR 2000 DATE CONVERSION

The Company is currently working to verify system readiness for the processing of date-sensitive information by the Company's computerized information systems. The Year 2000 problem impacts computer programs and hardware timers using two digits (rather than four) to define the applicable year. Any of the Company's programs that have time-sensitive functions may recognize a date using "00" as the year 1900 rather than 2000, which could result in miscalculations or system failures.

The Company is conducting a review of its computer systems and programs to determine which, if any, systems and programs are not capable of recognizing the Year 2000 and to verify system readiness for the millennium date. The review includes consideration of the following areas:

1. Awareness and Communication,

2. Inventory of Systems Hardware, Software and Data Interfaces and Confirmation with Key Vendors of Year 2000 Readiness,

3. Identification of Mission-Critical Components for both Internal Systems and Vendor Relations,

4. Estimated Costs for Remediation,

5. Estimated Dates of Compliance,

6. Correction/Remediation,

7. Replacement Activities,

8. Testing and Verification, and

9. Implementation.

The Company is considering these areas for each of its major operating business units. As of July 31, 1998 the Company had completed more than 70% of the activities required for review of the Awareness and Communication area and more than 50% of the activities required for the review of the Inventory of Systems Hardware, Software and Data Interfaces and Confirmation with Key Vendors of Year 2000 Readiness area. The Company has begun the activities required for review of all of the remaining areas and such activities are in the initial stages.

The total cost of addressing potential problems, which will be expensed as incurred, are not known as of the date hereof. Based on preliminary information, however, such costs are not currently expected to have a material adverse effect on the Company's financial position, results of operations or cash flows in future periods.

If the Company, its customers or vendors, however, are unable to address the Year 2000 issues in a timely manner, it could have a material adverse effect on future operations. The Company is dependent on Regional Bell Operating Companies for provision of its local and certain of its long distance services. To the extent Ameritech Corporation ("Ameritech") or U S WEST Communications, Inc. ("U S WEST") face Year 2000 issues which might interfere with the ability of those companies to fulfill their obligations to the Company, such interference could have a material adverse effect on future operations.

While the Company's efforts are designed to be successful, because of the complexity of the Year 2000 issues and the interdependence of organizations using computer systems, there can be no assurance that the Company's efforts or those of a third party with which the Company interacts will be satisfactorily completed in a timely fashion.

OK, so given this statement, would you feel comfortable investing in this company? For the sake of discussion, assume you have already researched and feel comfortable with all the other issues you might consider before investing.

How comfortable are you that this company will be around in 2001?

By the way, if you are interested in the 10-Q reports of a specific company, go to:

http://www.sec.gov/cgi-bin/srch-edgar

Search for the company name and look for form 10-Q dated August of 1998

-Arnie

-- Arnie Rimmer (arnie_rimmer@usa.net), November 04, 1998

Answers

Typical lawyer mishmash - they don't want any possibility of a suit if something does cause trouble and some joker sues claiming a misleading filing. Still, given that, they seem pretty confident they will be around in 2001.

-- Paul Davis (davisp1953@yahoo.com), November 04, 1998.

Right, Paul, and of course if in fact they did NOT feel confident, why OF COURSE their disclosure statement would reflect that. I mean, investors might look at this stuff, and no company would ever want to mislead a possible investor.

-- Jack (jsprat@eld.net), November 04, 1998.

>given this statement, would you feel comfortable investing in this company?

NO, NO, NO!!!

They haven't even finished the FIRST step, the review. AAARRRGGGHHHH!!!

Is this company aware that the review step will be about _5-10%_ of the total Y2K effort, based on experience of other large corporations who are farther along in their Y2K work? Are they aware that the testing step will be about 50% of the total all by itself, and they're not anywhere in sight of that yet?

>How comfortable are you that this company will be around in 2001?

Considering the likely post-2000 mess in the courts, their bankruptcy proceedings will not have gotten very far by then, so I'd say "Yes, I'm very comfortable that this company will be around (like a rotting corpse) in 2001".

-- No Spam Please (anon@ymous.com), November 04, 1998.

OK, So now how would you feel if I told you that this company is, in fact, a major telecommunication service provider for a large, well-known midwestern (multi-state) electric utility?

Do you believe there is valid cause for concern about that electric utility as well?

-- Arnie Rimmer (arnie_rimmer@usa.net), November 04, 1998.

Gee, Arnie, you already told us "regional mid-sized" and left in the names "Ameritech" and "U S West" (so it straddles their regions' boundary). Now you throw in "provider for a large, well-known midwestern (multi-state) electric utility".

Yet you said, "For the purposes of this discussion, we'll leave out the name of the company."

Can I buy a vowel?

-- No Spam Please (anon@ymous.com), November 04, 1998.

Sorry, No Spam, I've already purchased all of the vowels in the pipeline and am hoardin..uh`...stockpiling them just in case theres a disast...uh truck strike or something.

-Arnie

-- Arnie Rimmer (arnie_rimmer@usa.net), November 04, 1998.

What I'm really trying to do here is see how others feel about what I think is a typical SEC 10-Q statement.

In my opinion, these disclosure statements are not very informative and the information they do provide is alarming, to say the least. They also do give much comfort with respect to the status of our electrical infrastructure.

-Arnie

-- Arnie Rimmer (arnie_rimmer@usa.net), November 04, 1998.

Sorry, I of course mean't "don't give much comfort" in my last message.

(Don't you just hate typos that completely reverse your intended meaning?)

-- Arnie Rimmer (arnie_rimmer@usa.net), November 04, 1998.

...and misused apostrophes.

-- Arnie Rimmer (arnie_rimmer@usa.net), November 04, 1998.

I looked at Pepco's 10-Q, since they are my electric company. There Y2K statement was similar to this one in that it contained a disclaimer that there are no guarantees. Of course, it also stated that they are much further along in the process than this telecom company. According to their statement they are optimistic about their own efforts but can't guarantee anything because of possible problems with getting supplies and parts. I think all of the 10-Q statements are going to look like this. No company is going to claim total Y2K compliance, and all of their SEC filings are going to include disclaimers due to interdependencies and unforeseen circumstances.

-- Buddy Y. (DC) (buddy@bellatlantic.net), November 04, 1998.

h, cmn rn, pls lt m by vwl. ts hrd t cmmnct wtht thm.

-- Craig (craig@ccinet.ab.ca), November 04, 1998.

Arnie,

>What I'm really trying to do here is see how others feel about what I think is a typical SEC 10-Q statement.

>In my opinion, these disclosure statements are not very informative and the information they do provide is alarming, to say the least.

The reason we know the example you gave is alarming is that we know what the realistic outline of a Y2K project looks like, so we can compare that with the Company's statement.

So, what's needed is for the SEC to require the 10-Q to include a realistic average Y2K project timeline for comparable companies !! That way, the shareholders can see just what's what.

(Wouldn't that have been a lovely idea to have suggested to the SEC three years ago? Two? One? Oh well, I suppose there's still time to implement it for the 2Q2000 reports.)

-- No Spam Please (anon@ymous.com), November 04, 1998.

Lets see if I have this correctly summarized.

7/98 50-60% done with ASSESSMENT of hardware/software. 70% done with Awareness & Communication (internal?, public?) actual status of vendors uncertain

1/2000 the Sounds of Silence- but its not our fault!

-- R. D..Herring (drherr@erols.com), November 04, 1998.

R.D.,

>Lets see if I have this correctly summarized.

No -- you missed what I missed the first time I read the 10-Q.

>70% done with Awareness & Communication

Look again.

"70% of the activities required for REVIEW [my emphasis - NSP] of the Awareness and Communication area"

They're _reviewing_, not _doing_, the Awareness and Communication area!

>50-60% done with ASSESSMENT of hardware/software.

"more than 50% of the activities required for the REVIEW [my emphasis - NSP] of the Inventory of Systems Hardware, Software and Data Interfaces and Confirmation with Key Vendors of Year 2000 Readiness area."

_review_, not _do_.

-- No Spam Please (anon@ymous.com), November 04, 1998.

Review not do= screw(ed)

-- Uncle Deedah (oncebitten@twiceshy.com), November 04, 1998.

Notice that the Company's use of "review" _cannot_ be a synonym for "do" because of:

"The Company has begun the activities required for review of all of the remaining areas and such activities are in the initial stages."

Since areas 8 and 9, for instance, cannot be started before at least some of the earlier areas are partially completed, the Company's statement cannot mean that they have started actual work on any of areas 1-9, according to their own use of "review".

(Of course, this assumes a consistent truthfulness in the document, but we'll have to let the SEC enforce that.)

-- No Spam Please (anon@ymous.com), November 04, 1998.

Arnie,

Say ... I learned in another Y2K forum that at least one midwestern (or midnorthern) utility company shares my initials -- Northern States Power.

(Pure coincidence - I have no connection with Northern States Power except insofar as all North American electric companies are connected to the continental grid.)

Does Northern States Power happen to be the "large, well-known midwestern (multi-state) electric utility" of which you wrote? I don't know its boundaries, but think it includes Minnesota and the Dakotas.

-- No Spam Please (anon@ymous.com), November 04, 1998.

Say there NSP!, those are some nice vowels you're sporting there -- looks like you'll have no trouble spelling 'electricity' after the big date -- care to barter for a little rice and a Baygen radio? (grin).

In answer to your question, no, the electric utility to which I was referring was not Northern States Power. But I'll give you a hint: this utility has recently been in the news because it just went in front of a certain (also unnamed but easily discovered) state utility board to request a rate increase because it "may" need to increase rates to cover its Y2K costs which it estimates could be as high as $32 million to $75 million. You just can't ask the stockholders to suffer such a burden, could you?

According to the news report, this company has also apparently "received approval from the state Utilities Board to use an accounting practice that would defer its year 2000 costs until a later time, when it has final figures to be used in a rate increase request"

If this doesn't help, you might be able to find additional information at this URL http://detnews.com/1998/technology/9811/04/11030113.htm

While I'm being a bit coy here, obviously, the goal here is not so much to hide the names of the companies involved -- all this information is publically available on the Internet -- but rather to address the more general issue of just how valuable the 10-Q instrument is in garnering useful information about the Y2K status of companies responsible for our critical infrastructure.

The general public has precious little to go on here. I've heard both good and bad news from a few insiders and it's difficult to judge the accuracy of such 'news'.

But I found this 10-Q both quite useful and revealing. Unfortunately, it was not the news I had been hoping for. Still, to the alert investor seeking to avoid certain risks as well as to the company seeking to lower its legal liability, I believe it serves well the purpose(s) for which it was intended. It just did not give me a warm fuzzy.

I guess I would have felt just a little more comfortable had this telecom provider not been so obviously far behind and/or was making measured progress with contingency plans. There was no mention of contingency planning at all.

My own personal opinion here based on this 10-Q is that it will take a minimum of 480 daily visits from the Y2K Magic Fairy to keep this company from experiencing severe Y2K problems (and she's gonna be in high demand later). Perhaps worse, this news, (again in my opinion), does not bode well for the electric utility that depends upon this telecom for critical services. Many electric utilities have said, in effect, "we'll be OK if our telecommunications providers are OK". I sincerely hope that the electric utility's contingency plans are taking this particular 10-Q into consideration. They had better be.

I would be greatly interested if someone runs across a good 'counter-example' 10-Q to the one I posted originally above. (i.e. one from which more realistically positive news is obtained).

-Arnie

-- Arnie Rimmer (Arnie_Rimmer@usa.net), November 05, 1998.

Oh for Pete's sake! Get a clue people. You do not have to finish review before you begin remediation - in fact I would bet that no one does. Good Grief - review will go on well into 2000 for many companies that will essentially be done with remediation by April of 1999 or so. You review everything you have ever done and then review everything new - if you have any brains. And then you check again. And then you test. And then you review some more. Thats life in the real world.

-- Paul Davis (davisp1953@yahoo.com), November 06, 1998.

Paul,

>Get a clue people. You do not have to finish review before you begin remediation

Then why didn't the Company say it had begun remediation?

Surely that would be a more positive report than not to say it had begun.

Get your own clue, Paul.

>Good Grief - review will go on well into 2000 for many companies that will essentially be done with remediation by April of 1999 or so.

OK, where is the Company's report of remediation progress, Paul?

Why did the Company say "70% of the activities required for REVIEW [my emphasis - NSP] of the Awareness and Communication area" instead of "70% of the Awareness and Communication area activities"?

Why did the Company claim only "more than 50% of the activities required for the REVIEW [my emphasis - NSP] of the Inventory of Systems Hardware, Software and Data Interfaces and Confirmation with Key Vendors of Year 2000 Readiness area" instead of the more positive, further-progress-reporting "more than 50% of the activities required for the Inventory of Systems Hardware, Software and Data Interfaces and Confirmation with Key Vendors of Year 2000 Readiness area"?

Show me the evidence of anything other than a tap-dance, Paul.

and more than 50% of the activities required for the review of the Inventory of Systems Hardware, Software and Data Interfaces and Confirmation with Key Vendors of Year 2000 Readiness area.

You review everything you have ever done and then review everything new - if you have any brains. And then you check again. And then you test. And then you review some more. Thats life in the real world.

Answered by Paul Davis (davisp1953@yahoo.com) on November 06, 1998.

-- No Spam Please (anon@ymous.com), November 06, 1998.

Paul,

WHOOPS! My editing oversight, Paul.

After copying your message so as to quote specific parts, I forget to delete the part that appears after my "... tap dance, Paul?", which I intended to be the end of my message.

-- No Spam Please (anon@ymous.com), November 06, 1998.

hey, i looked up a company i know that makes precision testing equipment (with lots of time chips) and their 10-Q did not have anything on y2k. are you sure they are required to tell, or does this mean that they don't even know how messed up they will be?

-- mark (me@net.com), November 06, 1998.

Mark: You may want to double check the date of that 10-Q, is it Oct, 1998? If so I don't have an explanation.

-- Arnie Rimmer (arnie_rimmer@usa.net), November 07, 1998.

Thanks for the response Arnie. The one I was looking at was dated 9-16-98. I am finding a lot of companies such as IBM and Compaq who don't seem to have anything in yet. Do you know if there was a definite deadline in August? I recall 37 brokerage firms being fined for not disclosing this. I am inclined to conclude that some of these companies are either willing to absorb the fines to avoid disclosing the truth, or they are trying to convey the assumption that they have everything under control, in which case they may not have to disclose.

Thanks again.

-- Mark (me@net.com), November 07, 1998.

They haven't measured everything - one way or another - they don't know what's needed to be done, they can advertise no progress towards fixing things, and yet they include:

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Why should anybody invest in these nitwits? Better to invest in their lawyers' firm.

-- Robert A. Cook, P.E. (Kennesaw, GA) (cook.r@csaatl.com), November 08, 1998.