CP&L's 10Q Statement Raises Question About Cost of Remediation

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Question about recent 10-Q with SEC

*Paste from 10-Q*

Year 2000

Background

The Company's overall goal is to be Year 2000 ready. "Year 2000 ready" means that critical systems, devices, applications or business relationships have been evaluated and are expected to be suitable for continued use into and beyond the Year 2000, or contingency plans are in place.

The Company began addressing the Year 2000 issue in 1994 by beginning to assess its business computer systems

Snip

Costs

The Company currently plans to complete the Year 2000 Project by August 1999. The total remaining cost of the Year 2000 Project is estimated at $13 million. (This estimate excludes Year 2000 Project costs attributable to recent subsidiary acquisitions, which the Company does not expect to be material to its financial position and results of operations.) Approximately $6 million is for new software and hardware purchases and will be capitalized. The remaining $7 million will be expensed as incurred over the next two years. To date, the Company has incurred and expensed approximately $4 million related to the inventory, assessment and remediation of non-compliant systems, equipment and applications. The costs of the project and the date on which the Company plans to complete the Year 2000 modifications are based on management's best estimates, which were derived using assumptions of future events including the continued availability of certain resources, third parties' Year 2000 readiness and other factors.

*End paste*

Question about recent 10-Q with SEC

Can someone tell me how this makes sense. Are they saying that CP&L spent four million dollars in 5 years and that they plan to finish in August by spending thirteen million dollars in the next 5 or 6 months? Is that just management gobbledygook? What's going on?

Even if the six million for new software is billed in one lump sum, there's still that additional seven million dollars. If they're going to finish in August, why will the seven million be incurred over 2 years. I'd like to contact CP&L about this, but I want to know what I'm talking about first.

-- ed (eddie@edgar.zap), March 31, 1999


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