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Stephen Hock of Triaxis monitors Year 2000 information in Securities and Exchange Commissioning filings. He says the largest U.S. companies are not providing anything like full information, and what little is being provided reveals how far behind they are.
This is his June 10 testimomy before the Senate Banking, Housing and Urban Affairs Committee, Subcommittee on Financial Services and Technology, Hearing on Disclosure of Year-2000 Readiness.
He said: "When analyzed collectively, the data disclosed by these 136 companies reveals that the largest public companies in the US have made remarkably little progress on Year 2000. This conclusion applies across all industries represented in the top 250."
This preoblem has been simmering for a generation. But: "Forty-seven companies disclosed the year in which they began work on the Year 2000 problem. Sixty-six percent (66%) of these companies did not start work on the problem until the last two years, and thirty-three percent (33%) did not begin work until 1997."
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Earlier this year, Triaxsys undertook a comprehensive study of federal securities filings (Forms I OK, I OK-405, I OQ and/or 8K) by the largest 250 public companies in the US, ranked by revenue. The objectives of the study were to analyze the nature and adequacy of Year 2000 disclosures and to determine the progress of these companies in solving the Year 2000 problem. The study was completed on April 17, and the results are contained in the April 1998 Triaxsys Research Report, copies of which have been provided to all Members of the Subcommittee and staff. A detailed table, summarizing the disclosures by each company, is contained in the report at pages 25-37.
Lack of Meaningful Information in Many of the Disclosures
Nearly half of the top 250 companies disclosed no information or so little information that it is impossible to glean anything meaningful from the securities filings about their progress or costs in addressing the Year 2000 problem. . . .
In short, as of April 17 no meaningful information whatsoever could be found in federal securities filings for 114 of the largest 250 public companies. These 114 companies span all industries represented in the top 250. Subsequent to April 17, several of these 114 companies made securities filings mentioning Year 2000, but most of these recent filings contain little or no meaningful information.
Lack of Progress by Companies Disclosing Information
As of April 17, 136 of the top 250 companies disclosed at least some information relating to Year 2000 progress and/or costs. The nature and adequacy of the disclosures by these 136 companies vary considerably. Many provide only sketchy information; some provide a great deal of information. When analyzed collectively, the data disclosed by these 136 companies reveals that the largest public companies in the US have made remarkably little progress on Year 2000. This conclusion applies across all industries represented in the top 250.
Forty-seven companies disclosed the year in which they began work on the Year 2000 problem. Sixty-six percent (66%) of these companies did not start work on the problem until the last two years, and thirty-three percent (33%) did not begin work until 1997.
101 companies disclosed whether or not they have completed the assessment phase of their project. Assessment is the most preliminary phase of any Year 2000 project. Sixty percent (60%) of these companies revealed that they had not completed their assessments.
Of the companies discussing project status, only thirty-eight percent (38%) affirmatively stated that they have reached the stage of converting at least some code to be Year 2000 compliant. Only two companies reported how much progress they have made on code conversion. Only six percent (6%) affirmatively stated that they are engaged in at least some Year 2000 compliance testing. None reported the status of testing.
Thirty-three companies disclosed both (1) Year 2000 project costs incurred through the end of 1997 and (2) total estimated Year 2000 project costs. One measure of project progress is the percentage of total estimated project costs incurred through the end of 1997. The percentages disclosed by these thirty-three companies range from 7% to 45%. The average is 21%, or one-fifth progress toward completion.
For these thirty-three companies, average estimated total Year 2000 project costs are $148 million. The thirty-three companies are a fairly good representative sample of the top 250 in terms of both size and industries. Extrapolating the cost data they disclosed to the entire top 250 indicates that the top 250 collectively will spend approximately $37 billion in attempting to solve the Year 2000 problem. Of that amount, approximately $29 billion - seventy-nine percent (79%) of the job - has been left to this year and next.
Study Continuing
Triaxsys has expanded the study to include the top 500 US public companies, ranked by revenue. The results of the expanded study will be published in the June 1998 Triaxsys Research Report, scheduled for release later this month. We would be pleased to provide copies to Members of the Subcommittee and staff. In general, the data for the 251-500 ranked companies is consistent with the results outlined in this testimony regarding the top 250 - many of the companies disclose no meaningful information, and those providing at least some information have made remarkably little progress, with few exceptions. . . .
The lack of disclosure by many companies, and the wide disparities in the nature and adequacy of disclosures by other companies, are especially troubling in light of the hard data that can be gleaned from the securities filings. That data shows remarkably little progress by the largest US companies in addressing the Year 2000 problem. Most of the work has been compressed into an extremely tight window of time. Given the information technology industry's long history of failure to complete large scale system conversion projects on time, this is cause for serious concern.
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