Monday, August 16, 1999

Y2K costs isle firms $90 million

Public companies say most
potential problems have
already been fixed

By Russ Lynch


Hawaii's publicly traded companies are spending nearly $90 million to identify and fix possible Y2K problems, according to the financial reports filed with the Securities & Exchange Commission.

But the numbers may make Y2K fixes look costlier than they are, executives say, since many companies are using the opportunity to make improvements that will serve them into the next millennium as well as fix near-term potential problems.

The companies also stressed that they already have identified and, in most cases, fixed any possible Y2K problems, and they expect business as usual through and beyond Dec. 31.

The so-called "Y2K computer bug" stems from the fact that many computer programs use only two digits to designate the year.

When Jan. 1 comes it is believed that many older computers will read the "00" as the year 1900 instead of 2000 and will malfunction.

The potential problems run well beyond just computers.

Anything that uses a non-Y2K compliant computer chip -- from cash registers to security systems -- are susceptible to trouble, experts say.

Fighting Y2K bug

Spending on Y2K compliance by Hawaii public companies*

Bullet Pacific Century Financial Corp.: $41 million

Bullet BancWest Corp.: $12.3 million

Bullet Hawaiian Electric Industries Inc.: $11.2 million

Bullet Hawaiian Airlines Inc.: $10 million

Bullet Alexander & Baldwin Inc.: $8 million

Bullet CPB Inc.: $4 million

Bullet CB Bancshares Inc.: $0.5 million

Bullet Maui Land & Pineapple Inc.: $0.25 million

Bullet Schuler Homes Inc.: $0.11 million

*The remaining 11 publicly traded companies in Hawaii either reported much smaller amounts or no costs for Y2K compliance.

Source: Companies' filings with the Securities & Exchange Commission

The SEC requires publicly held companies to disclose their Y2K costs so shareholders can see how much their companies are spending and what problems, if any, they expect to encounter.

So far, nine of 20 Hawaii-based local companies have reported spending significant amounts on Y2K compliance.

The largest amount is $41 million at Pacific Century Financial Corp., parent of Bank of Hawaii.

Mike Curtis, who heads the company's Y2K management office, says that's an overestimate to err on the conservative side.

"I am happy to report that we estimate completing the project under that figure," said Curtis, who said he wasn't quite ready to say how much.

"This isn't simply achieving Y2K compliance," Curtis said. In the process of going through and "cleaning house," the company has gained a number of benefits by seeing ways it can modernize its equipment and systems.

Also, Curtis said, the need to be sure of Y2K compliance "caused an acceleration of projects that were already on the books," such as expanding the bandwidth (or data carrying capacity) of the company's communications systems.

"The bulk of our Y2K programs are being executed by our internal staff," he said. Curtis cautioned that while his company accounts for a good deal of that staff time as a Y2K cost, other companies may not.

At BancWest Corp., parent company of First Hawaiian Bank and some mainland banks, spokesman Gerry Keir said it counts the cost of full-time work on Y2K solutions by its employees, but not for those employees who occasionally do Y2K-related work.

BancWest told the SEC it expects its Y2K costs to run to $12.3 million.

Hawaiian Airlines Inc. says its Y2K costs are expected to run between $9 million and $10 million.

The company said it "continues to perform constant awareness activities" and has developed "personal Y2K kits" for employees to show how they might be affected. Hawaiian said it also has an "aggressive business partner management program," working with the people it does business with to make sure they, too, are Y2K compliant.

Hawaiian said it sees "little potential impact of Year 2000 issues" in its own flight systems, but, like other companies, it can't be 100 percent sure that all the third parties it relies on will be in compliance.

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