YEAR 2000 READINESS (end 10Q from 2/12/99)
The following statements are "Year 2000 Readiness Disclosures" in Conformance with the Year 2000 Information and readiness Disclosure Act (15 U.S.C. 1 note) enacted on October 19, 1998.
The goal of the Company is to ensure that all systems and products will be ready for any date-based processing related to the millennium. The following readiness disclosure is presented for each of the Company's business segments; Electronic Commerce, Software and Investment Services.
State of Readiness. The Company is moving all of its Electronic Commerce Division processing to Year 2000-ready environments and is making satisfactory progress to ensure that all of its systems will be ready for any date-based functions related to the millennium. An inventory of all information technology and non-information technology systems is maintained and periodically updated. Those functions that are likely to have a material effect on Company business have been identified and assessed. Validation is based on third party representations and/or internal testing. Based on a review of third-party representations, the Company is not currently aware of any third-party issue applicable to the Year 2000 that is likely to have a material impact on the conduct of business, the results of operations or the financial condition of the Company. The Company has not performed its own tests on many of these third-party systems and no assurance can be given at this time that these systems are Year 2000 ready.
Previous implementation phases included building a Year 2000-ready data center and the physical move of the processing systems to that center. The final implementation phase will include the planned migration of customers from the Chicago and Columbus systems to the Year 2000-ready environment followed by applicable testing on that system to be completed by the middle of 1999. In anticipation of limited customer migration from the Austin system to Genesis before January 1, 2000, the Austin system has been made Year 2000 ready and testing with financial institutions is substantially complete. Any of the existing systems or facilities that will be retained were made Year 2000-ready by the end of calendar 1998. During the first half of calendar 1999, the Company will address any remaining Year 2000 functions that are not considered mission critical and will support the certification efforts of its financial institution partners.
Costs to Address the Company's Year 2000 Issues. Although the development of Genesis has taken into account relevant Year 2000 issues, the planned conversion was not accelerated due to Year 2000 issues and Year 2000 costs are not included in development for the Norcross system. The following chart reflects the Company's Year 2000 specific costs. The fiscal year 1998 costs were attributed to remediation of legacy systems and applications. The cost to complete includes remediation, testing and verification, but is primarily budgeted to remedy any Year 2000 related situations that management has not heretofore anticipated. The Company believes that associated costs are adequately budgeted for in its fiscal 1999 business plans.
(In Thousands)
================================================================================
YEAR TO
COST TO DATE FISCAL FISCAL FISCAL
BUSINESS SEGMENT COMPLETE 1999 1998 1997 TOTAL
-------------------- ------------ ------------ ------------ ------------ ------------
Electronic Commerce $ 849 $ 551 $ 100 $ -- $ 1,500
Software 200 400 500 -- 1,000
Investment Services 154 653 375 -- 1,182
Corporate 212 98 -- -- 310
------------ ------------ ------------ ------------ ------------
Total $ 1,415 $ 1,702 $ 975 $ -- $ 4,092
============ ============ ============ ============ ============
Risks of the Company's Year 2000 Issues. In order to accurately process transactions, the Company must rely on technology supported by its customers and suppliers. Transaction processing relies on transmissions of data from consumer personal computers, through financial institution and merchant web servers and the internet, over third party data and voice communication lines, and through the Federal Funds System. Failure by the Company, its customers or suppliers to adequately address the Year 2000 issues in a timely manner could impede the Company's ability to process transactions and can have a direct impact on its ability to generate revenue per agreements with financial
institution, portfolio management, merchant and direct customers. This in turn could have a material impact on the conduct of the business, the results of operations and the financial condition of the Company. Accordingly, the Company plans to address all Year 2000 issues before problems materialize. However, should efforts on the part of the Company, its customers and suppliers fail to adequately address their relevant Year 2000 issues, the most likely worst case scenario would be a total loss of revenue to the Company.
The Company's Contingency Plans. The Company is internally reviewing and testing all mission critical systems and major system components for Year 2000 readiness. Additionally, Year 2000 considerations have been and will continue to be incorporated into the Company's business contingency plans.
The Company cannot guarantee that its efforts will prevent all consequences and there may be undetermined future costs due to business disruption that may be caused by customers, suppliers or unforeseen circumstances.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended December 31, 1998, the Company expended approximately $30 million to repurchase shares of its own common stock. In spite of this expenditure, the Company has retained in excess of $21 million in cash, cash equivalents and short-term investments. Additionally, the December 31, 1998 balance sheet reflects a strong current ratio of 1.85. Over the remainder of the fiscal year the Company expects to generate positive cash flow from operations. Additionally, in conjunction with the purchase of a new building in Dublin, Ohio, the Company expects to increase cash in the next several months by up to $15.0 million through available financing alternatives. The Company believes that existing cash, cash equivalents and investments combined with projected positive operating cash flow and the financing of the building mentioned above, will be more than sufficient to meet presently anticipated requirements for the foreseeable future. To the extent that additional capital resources may be needed, the Company has access to an untapped line of credit totaling $20 million.
INFLATION
The Company believes the effects of inflation have not had a significant impact on the Company's results of operations.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information contained herein, the matters discussed in this Form 10-Q include certain forward looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which are intended to be covered by the safe harbors created thereby. Those statements include, but may not be limited to, all statements regarding the intent, belief and expectations of the Company and its management, such as statements concerning the Company's future profitability. Investors are cautioned that all forward looking statements involve risks and uncertainties including, without limitation, factors detailed from time to time in the Company's filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year ended June 30, 1998 and the Company's Proxy Statement for the Annual Meeting of Stockholders held on November 9, 1998. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate. Therefore, there can be no assurance that the forward-looking statements included in this Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a presentation by the Company or any other person that the objectives and plans of the Company will be achieved. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company will not undertake, and specifically declines, any obligation to publicly release the results of any revisions which may be made to any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or anticipated events.
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Recent Filings: May 1998 (Qtrly Rpt) | Nov 1998 (Qtrly Rpt) | Feb 1999 (Qtrly Rpt)
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