-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OToHwbKpcZ3xnDRoFDh/gVMydTkJIChik3Hsi9NdC2GTM3nolpJIpvej/MwnStAT Siqo1LkabvQvRh7bHoIhlg== 0000722487-99-000017.txt : 19990419 0000722487-99-000017.hdr.sgml : 19990419 ACCESSION NUMBER: 0000722487-99-000017 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990416 ITEM INFORMATION: FILED AS OF DATE: 19990416 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMDISCO INC CENTRAL INDEX KEY: 0000722487 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER RENTAL & LEASING [7377] IRS NUMBER: 362687938 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-07725 FILM NUMBER: 99595933 BUSINESS ADDRESS: STREET 1: 6111 N RIVER RD CITY: ROSEMONT STATE: IL ZIP: 60018 BUSINESS PHONE: 8476983000 MAIL ADDRESS: STREET 1: 6111 NOTH RIVER ROAD STREET 2: 6111 NOTH RIVER ROAD CITY: ROSEMONT STATE: IL ZIP: 60018 8-K 1 8K SUBMISSION SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Filed pursuant to Section 13 or 15(d) of THE SECURITIES EXCHANGE ACT OF 1934 April 16, 1999 Date of Earliest Event Reported COMDISCO, INC. (a Delaware Corporation) 6111 North River Road Rosemont, Illinois 60018 Telephone (847) 698-3000 Commission file number 1-7725 I.R.S. Employer Identification Number 36-2687938 -1- Item 5. Other Events Year 2000 1. Overview The Company has implemented a program to attempt to assess, remediate and mitigate the potential impact of "Year 2000" issues throughout the Company. "Year 2000" issues arise where date-sensitive software uses two digit year date fields, sorting the year 2000 ("00") before the year 1999 ("99"). As a result, these systems may not process dates beyond 1999, resulting in data corruption and processing errors and possible system failures. The Company's program has been structured to address its internal computer systems and applications, facilities, equipment portfolio, and continuity and network services operations. This program includes assessment and mitigation of Year 2000 issues with respect to information technology and other equipment that uses software embedded on computer chips. In addition, the Company is attempting to monitor the Year 2000 compliance status of its vendors, suppliers and service providers. The Company believes that it is taking the necessary steps regarding Year 2000 compliance with respect to matters within its control to provide that Year 2000 issues will not materially impact the Company. However, there can be no assurance that Year 2000 issues will not adversely affect the Company. 2. State of Readiness The Company has organized its Year 2000 project into the following subprojects: internal information systems; customer service delivery capabilities; facilities; and business unit impact, including third party impact and equipment portfolio issues. The Company has approached each subproject in as many as four phases, as applicable: (1) assessment; (2) remediation; (3) testing; and (4) contingency planning. "Assessment" summarizes the process of issue and risk identification. "Remediation" refers to the process of taking corrective action to best mitigate identified Year 2000 risks. "Testing" is the process of validating a specific Company remediation effort or confirming a third party capability or certification of Year 2000 compliance. "Contingency planning" is the process by which the Company identifies an alternate course of action and/or procedures in the event the Company cannot or fails to remediate or mitigate a known Year 2000 risk. The Company may not engage in contingency planning for individual subproject components where successful Year 2000 remediation has been substantially validated through the testing process or other methods. A. Internal Information Systems The Company has organized its internal information systems subproject into four areas: (1) Company-developed applications software; (2) vendor applications software; (3) electronic data interchange trading partners; and (4) hardware. The Company has prioritized remediation and testing activities based upon the mission-critical nature of the underlying business function. The following summarizes the current status of this subproject: (1) Company-developed software The Company has nearly completed assessment, remediation and testing activities with respect to Company-developed mainframe and midrange software. The Company anticipates completing substantially all remaining assessment, remediation, and testing activities by July 31, 1999. (a) Mainframe. The Company has completed remediation and testing, and operates in its normal production environment, all mission-critical Company-developed mainframe modules and database records. (b) AS-400. The Company has completed all remediation and testing, and operates in its normal production environment, all mission-critical Company-developed AS-400 applications. (c) Client-Server. The Company has either completed all remediation and testing activities, returned into a production environment, or classified as obsolete with plans to discontinue usage prior to January 1, 2000, 85 of 101 Company-developed client-server applications. (2) Vendor Software The Company has identified 258 vendor software packages throughout the Company. Forty six (46) of those software packages have been classified as obsolete and the Company will discontinue their use prior to January 1, 2000. The Company has either converted or had the vendor certify as Year 2000 compliant 186 additional software packages. The Company plans to complete all assessment, testing and/or certification activities for vendor software by June 30, 1999. (3) Electronic Data Interchange Electronic data interchange ("EDI") involves the electronic communication and exchange of information by two companies in accordance with agreed upon protocols. A Year 2000 problem can arise where either trading partner does not utilize Year 2000-compliant protocols or standards. The Company completed development enabling the Year 2000-compliant 4010 EDI standard on December 31, 1998. The Company has sent out two mailings to all its EDI trading partners to survey trading partner EDI Year 2000 compliance plans and requesting that the trading partners schedule compatibility testing during 1999. The Company plans to conduct testing and migration of its trading partners to the 4010 standard throughout 1999. The Company intends to enable its EDI systems to accept both the 4010 standard and the current non-compliant EDI standard to minimize potential disruptions in the exchange of information. (4) Hardware The Company has completed its Year 2000 assessment of all internally used and centrally maintained hardware, including desktop computers. Replacement of non-compliant hardware will occur throughout 1999. As part of the business unit impact subproject, the Company will assess hardware and other equipment that is not centrally maintained. B. Customer Service Delivery Capabilities The Company commenced assessment of Year 2000 issues in conjunction with its business continuity services in April 1996 and network services during 1998. This subproject includes: assessing the Year 2000 readiness status and compliance plans for backup recovery equipment, infrastructure equipment, and software used in the Company's recovery centers; testing backup recovery and infrastructure equipment to validate Year 2000 readiness and document progress on a periodic basis. The business continuity component of the subproject has been organized by customer product line: (i) mainframe; (ii) midrange; (iii) customer network; (iv) internal network; (v) workarea; and (vi) trading floor. The Company is separately examining the Year 2000 readiness for the Company's thirty nine (39) business continuity service facilities including infrastructure, security systems, fire suppression, electrical and key utilities. The hardware supporting customer subscriptions has generally been found to be Year 2000 capable, if maintained at current firmware release levels. All critical systems supplied to customers can be made Year 2000 compliant according to manufacturer's specifications. The Company anticipates this subproject will be substantially completed by July 1, 1999. C. Facilities The Company has completed a preliminary assessment of its general and service delivery facilities. This subproject includes examination of the Company's leased and owned facilities Year 2000 readiness, including an assessment of infrastructure equipment, such as elevators, security and HVAC systems, and critical service provider readiness issues, including utility providers. The Company will continue to work with its landlords throughout 1999 to identify and minimize potential Year 2000 facility disruptions. The Company plans to continue facilities contingency planning during the first half of calendar year 1999. D. Business Units The Company has substantially completed an assessment of Year 2000 issues within each of its internal business units. Each business unit has assessed the impact of Year 2000 issues upon that business unit's operational capabilities. Each group will attempt to remediate or otherwise mitigate the impact of Year 2000 issues in the following areas: (1) software, hardware and equipment outside the scope of the information systems project, including impact upon portfolio value; (2) mission critical vendors; and (3) purchasing and other contractual processes and procedures. The Company plans to substantially complete remediation, mitigation and/or contingency planning activities by June 30, 1999. 3. Costs Management currently estimates the total cost of its Year 2000 remediation efforts, including capital expenditures, will approximate $21,000,000 through FY2000. The Company commenced its Year 2000 program in 1994 and has expended approximately $10,000,000 to date as follows: FY 1994- Less than $ 100,000 FY 1995- $2,030,000 FY 1996- $1,628,000 FY 1997- $2,790,000 FY 1998- $3,420,000 Management believes that it will incur approximately $9,000,000 in connection with its Year 2000 remediation efforts during fiscal year 1999. Approximately $6,250,000 of the FY 1999 estimate has been allocated to the replacement of identified Year 2000 non-compliant hardware, software and infrastructure equipment. The Company further estimates that it may incur approximately $2,000,000 in FY 2000. The Company may be required to adjust its estimates for FY 1999 and/or FY 2000 if the Company incurs unanticipated personnel costs, must replace or accelerate replacement or upgrade of equipment, systems and applications software as a result of Year 2000 non-compliance, or as a result of other currently unidentified expenses or costs associated with Year 2000 risks. The Company's Year 2000 expenditures and estimates include costs associated with the Company's outside consultants and contractors, internal personnel resources, and hardware, software and equipment replacement and upgrades attributable to the Company's Year 2000 efforts. The Company's allocation of personnel resources to the Year 2000 project has not resulted in the deferral of any significant information technology projects. The Company believes that the Year 2000 costs incurred in connection with the internal information systems subproject will not exceed ten percent (10%) of the Company's information technology group budget during FY 1999. 4. Risks Management believes that the Company's information technology and embedded systems will be substantially Year 2000 compliant prior to January 1, 2000, meaning they will be able to accurately process date/time data (including but not limited to, calculating, composing, and sequencing) from, into and between the twentieth and twenty-first centuries, and the year 1999 and 2000, including leap year calculations. Nevertheless, the Company believes that it may face potential Year 2000-related risk in several areas, given the inherent uncertainty in any assessment or remediation relating to Year 2000 issues, including the following: The Company may encounter Year 2000 risk as a result of the failure of equipment leased, sold and/or refurbished, or software licensed, by the Company to be Year 2000 compliant. The Company may face claims from customers and their end users arising in connection with bodily injury, property damage and business interruption as a result of a Year 2000 failure in equipment or software provided by the Company. Based on the Company's standard lease and license agreements, the Company believes that it would not be liable for such claims. However, there can be no assurance that such claims will not be brought against the Company. Year 2000 issues may have an impact on the Company's estimates of fair market value at lease termination, commonly referred to as "residual" value, for equipment leased to customers for which the manufacturer does not make available a Year 2000 compliance upgrade path or in the event an available Year 2000 upgrade is cost prohibitive relative to the market value of the equipment. Although the Company still is evaluating potential Year 2000 residual risks, the Company does not believe that the amounts the Company will ultimately realize would differ materially from the estimated residual amounts recorded in the Company's financial statements as a result of Year 2000 issues. The Company may experience intermittent business interruption to its internal operations and service delivery capability as a result of the Company's suppliers, vendors, service providers, business partners and/or customers failing to successfully address their own Year 2000 issues. While the Company exercises no control over such third parties, the Company's Year 2000 project plan includes a survey assessment of critical third parties response and remediation plans to identify Year 2000 issues within such companies and their potential impact upon the Company. The Company has no significant concentration of revenue with any single or group of customers. Revenue from the Company's largest customer in 1998 does not exceed 2% of Comdisco's total revenue. However, if a large number of the Company's major customers encounter operating problems due to Year 2000 issues that results in their inability to meet their obligations, including payment obligations, the Company may experience a material impact due to higher credit losses and lower income. Some commentators believe that a significant amount of litigation will arise from Year 2000 issues. Notwithstanding the Company's belief that its information technology and critical non-information technology systems will be Year 2000 compliant in all material respects by January 1, 2000, there can be no assurance that third parties will not assert claims based on Year 2000 compliance standards other than those articulated by the Company. Further, given the uncertainty inherent in any assessment of the potential Year 2000 issues, third parties may assert claims against the Company based on Year 2000 issues not currently anticipated by the Company. The Year 2000 issue also presents a number of other risks and uncertainties that could affect the Company, including utilities and telecommunications failures, the lack of personnel skilled in the resolution of Year 2000 issues, and the nature of government responses to the issues, among others. While the Company continues to believe that the Year 2000 matters discussed above will not have a material impact on its business, financial condition or results of operations, it remains uncertain whether or to what extent the Company may be affected. 5. Contingency Planning The Company currently anticipates that its information technology and critical non-information technology systems will be Year 2000 compliant in all material respects by January 1, 2000. This assessment is based upon the current readiness of a substantial majority of the information technology systems and the Company's assessed degree of difficulty associated with completing the remainder of its Year 2000 program. The Company has developed and maintains contingency plans for its business continuity operations. The remaining business units have not yet undertaken substantial contingency planning efforts in connection with Year 2000 risks. As necessary, the Company will evaluate the need for, and commence comprehensive contingency planning within the identified business units to address Year 2000 risks during the first half of calendar year 1999. This document contains historical information, as well as forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The Company's statements regarding the Company's expectations with respect to its Company's plans and objectives for assessment and remediation of Year 2000 issues; the anticipated costs associated with assessment, remediation and testing; the dates by which such efforts will be accomplished; the Company's contingency plans; and the Company's expectations with respect to its operations at Year 2000 are based on management's best current estimates, which were derived utilizing numerous assumptions about future events, including the continued availability of certain resources, representations received from third parties and other factors. However, there can be no guarantee that these estimates will be achieved, and actual results could differ materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the ability to identify and remediate all relevant information technology and noninformation technology systems, results of Year 2000 testing, the nature and amount of programming required to fix affected systems, the costs of labor and consultants related to such efforts, adequate resolution of Year 2000 issues by businesses and other third parties who are service providers, suppliers, business partners or customers of the Company, unanticipated system costs, and the adequacy of and ability to develop and implement contingency plans and similar uncertainties. . The Year 2000 statements set forth above are designated "Year 2000 Readiness Disclosures" pursuant to the Year 2000 Information and Readiness Disclosure Act (P.L. 105-271). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized. COMDISCO, INC. Date: April 16, 1999 by: /s/ John J. Vosicky ------------------- John J. Vosicky Executive Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----