YEAR 2000 READINESS DISCLOSURE
The Company's Year 2000 remediation efforts have focused on its key business computer applications representing those systems that the Company is dependent upon to conduct day-to-day business operations. Starting in 1997, the Company initiated a comprehensive review of its business applications to determine their Year 2000 readiness and the adequacy of these systems to meet future business requirements. Out of this effort, a number of systems were identified that were not Year 2000 compliant. In most cases these systems were already in the process of being replaced or upgraded.
As of December 31, 1998, the Company believes that its key homebuilding business systems are Year 2000 compliant. No material costs have been incurred to date in achieving Year 2000 readiness for these systems. However, certain data, voice communication and financial service's systems are in the process of being replaced or upgraded. Some implementation and testing procedures were completed in 1998 and the remainder are scheduled for completion in mid-1999. The additional costs of achieving Year 2000 compliance could aggregate between $1 to $2 million.
The Company is currently assessing other potential Year 2000 issues, including non-information technology systems. The Company's relationships with vendors, financial institutions and other third parties are being reviewed to determine the status of their Year 2000 compliance and the impact their potential noncompliance could have on the Company. The Company has no means of ensuring that its third party service providers will be Year 2000 ready. In the event that they are not ready on a timely basis, the Company will seek alternative sources for goods and services, where practicable. The Company is in the process of developing a Year 2000 contingency plan.
Although the Company will continue to monitor the situation, it is possible that the Company or the third parties with whom it has significant relationships will not successfully complete all of their Year 2000 remediation efforts. If this were to occur, the Company could encounter disruptions to its business, but, currently believes it unlikely that such disruptions would have a material adverse effect on its results of operations. The Company could also be impacted by financial market disruption or by Year 2000 computer system failures at government agencies on which the Company is dependent for zoning, building permits and related matters.
