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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): DECEMBER 3, 1998
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DIGITAL GENERATION SYSTEMS, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
California 000-27644 94-3140772
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
875 Battery Street, San Francisco, California 94111
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (415) 276-6600
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Same
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(Former name or Former Address, if Changed Since Last Report.)
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ITEM 5. OTHER EVENTS.
(a) The following disclosure statements contained in the Registrant's
Quarterly Reports on Form 10-Q for the three-month periods ended March 31, 1998
and June 30, 1998 and Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended, regarding the Registrant's Year 2000 readiness each
constitute "Year 2000 Readiness Disclosure" for purposes of the Year 2000
Information and Disclosure Act of 1998 (Public Law 105-271, 112 Stat. 2386, a
U.S. statute). These disclosure statements were true and correct when made but
do not necessarily reflect the Registrant's current state of Year 2000
readiness. Complete copies of such reports can be obtained from the Registrant
upon request.
Year 2000 Readiness Disclosure contained in Quarterly Report on
Form 10-Q for the three-month period ended June 30, 1998, filed with the
Securities and Exchange Commission on August 14, 1998:
YEAR 2000 RISK COMPLIANCE. Many currently installed computer
systems and software products are coded to accept only two digit entries in the
date code field. Beginning in the year 2000, these date codes fields will need
to accept four digit entries to distinguish 21st century dates from 20th century
dates. As a result, in less than two years, many such currently installed
computer systems and software products used by many companies will need to be
upgraded to enable such systems and computer hardware and software products to
avoid the potential effects associated with this year 2000 coding problem. The
Company has done a preliminary assessment of the components and applications of
its Network and has determined that a number of these components are year 2000
compliant. The Company has begun taking the steps it believes are necessary to
make the remainder of the network and related applications as well as the other
systems utilized by the Company year 2000 compliant. Although the Company
currently does not anticipate that the resource requirements or expenses related
to these procedures will have a material affect on its operating results or
financial position, there can be no assurance that such steps will be
successful. In addition, although the Company has direct programming control
over its Network applications and believes that it utilizes the most recently
available hardware and software products of leading industry providers, whom the
Company believes are allocating significant resources to address and resolve
these issues, there can be no assurance that the Company's computer hardware and
software products will contain all necessary code changes in their date code
fields to avoid any or all damaging interruptions and other problems associated
with date entry limitations. The Company believes that the purchasing pattern of
its current and potential customers may be affected by the year 2000 problem
described above in a variety of ways. For example, as the year 2000 approaches,
some of the Company's current customers may develop concerns about the
reliability of the Company's electronic delivery services and, as a result,
shift their delivery work to less technical dub and ship operations. Likewise,
some potential customers of the Company with the same concern may elect not to
utilize the Company's electronic delivery services until after year 2000 and
beyond. If any current customers of the Company shift some or all of their
delivery work to other delivery providers, the Company's business, financial
condition and results of operations will be adversely affected, and if any
potential customer select to not utilize the Company's
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delivery services for any period of time on the basis of year 2000 concerns, the
Company's business and financial prospects for growth could be adversely
affected. In addition to the foregoing, in the event that the Company does
experience interruptions and problems with its computer hardware and software
products due to year 2000 limitations of such products, some or all of the
Company's current customers may shift some or all of their delivery work to
other delivery providers without year 2000 problems. Moreover, potential
customers of the Company may elect not to utilize the Company's delivery
services in the event of any such interruptions and problems. Any of the
foregoing could have a material adverse effect on the Company's business,
financial condition and results of operations.
Year 2000 Readiness Disclosure contained in Quarterly Report on
Form 10-Q for the three-month period ended March 31, 1998, filed with the
Securities and Exchange Commission on May 15, 1998:
YEAR 2000 RISK COMPLIANCE. Many currently installed computer
systems and software products are coded to accept only two digit entries in the
date code field. Beginning in the year 2000, these date codes fields will need
to accept four digit entries to distinguish 21st century dates from 20th century
dates. As a result, in less than two years, many such currently installed
computer systems and software products used by many companies will need to be
upgraded to enable such systems and computer hardware and software products to
avoid the potential effects associated with this year 2000 coding problem.
Although the Company has begun taking the steps it believes are necessary to
make its network and other systems year 2000 compliant and despite the Company's
belief that it utilizes the most recently available hardware and software
products of leading industry providers, whom the Company believes are allocating
significant resources to address and resolve these issues, there can be no
assurance that the Company's computer hardware and software products will
contain all necessary code changes in their date code fields to avoid any or all
damaging interruptions and other problems associated with date entry
limitations. The Company believes that the purchasing pattern of its current and
potential customers may be affected by the year 2000 problem described above in
a variety of ways. For example, as the year 2000 approaches, some of the
Company's current customers may develop concerns about the reliability of the
Company's electronic delivery services and, as a result, shift their delivery
work to less technical dub and ship operations. Likewise, some potential
customers of the Company with the same concern may elect not to utilize the
Company's electronic delivery services until after year 2000 and beyond. If any
current customers of the Company shift some or all of their delivery work to
other delivery providers, the Company's business, financial condition and
results of operations will be adversely affected, and if any potential customer
select to not utilize the Company's delivery services for any period of time on
the basis of year 2000 concerns, the Company's business and financial prospects
for growth could be adversely affected. In addition to the foregoing, in the
event that the Company does experience interruptions and problems with its
computer hardware and software products due to year 2000 limitations of such
products, some or all of the Company's current customers may shift some or all
of their delivery work to other delivery providers without year 2000 problems.
Moreover, potential customers of the Company may elect not to utilize the
Company's delivery services in the event of any such interruptions and problems.
Any of the foregoing
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could have a material adverse affect on the Company's business, financial
condition and results of operations.
Year 2000 Readiness Disclosure contained in the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997, filed with the
Securities and Exchange Commission on March 31, 1998:
YEAR 2000 RISK COMPLIANCE. Many currently installed computer
systems and software products are coded to accept only two digit entries in the
date code field. Beginning in the year 2000, these date codes fields will need
to accept four digit entries to distinguish 21st century dates from 20th century
dates. As a result, in less than two years, many such currently installed
computer systems and software products used by many companies will need to be
upgraded to enable such systems and computer hardware and software products to
avoid the potential effects associated with this year 2000 coding problem.
Although the Company has begun taking the steps it believes are necessary to
make its network and other systems year 2000 compliant and despite the Company's
belief that it utilizes the most recently available hardware and software
products of leading industry providers, whom the Company believes are allocating
significant resources to address and resolve these issues, there can be no
assurance that the Company's computer hardware and software products will
contain all necessary code changes in their date code fields to avoid any or all
damaging interruptions and other problems associated with date entry
limitations. The Company believes that the purchasing pattern of its current and
potential customers may be affected by the year 2000 problem described above in
a variety of ways. For example, as the year 2000 approaches, some of the
Company's current customers may develop concerns about the reliability of the
Company's electronic delivery services and, as a result, shift their delivery
work to less technical dub and ship operations. Likewise, some potential
customers of the Company with the same concern may elect not to utilize the
Company's electronic delivery services until after year 2000 and beyond. If any
current customers of the Company shift some or all of their delivery work to
other delivery providers, the Company's business, financial condition and
results of operations will be adversely affected, and if any potential customer
select to not utilize the Company's delivery services for any period of time on
the basis of year 2000 concerns, the Company's business and financial prospects
for growth could be adversely affected. In addition to the foregoing, in the
event that the Company does experience interruptions and problems with its
computer hardware and software products due to year 2000 limitations of such
products, some or all of the Company's current customers may shift some or all
of their delivery work to other delivery providers without year 2000 problems.
Moreover, potential customers of the Company may elect not to utilize the
Company's delivery services in the event of any such interruptions and problems.
Any of the foregoing could have a material adverse affect on the Company's
business, financial condition and results of operations.
(b) The following Year 2000 Readiness Disclosure statement reflects
the Registrant's current state of readiness with respect to Year 2000 issues:
YEAR 2000 RISK COMPLIANCE. Many currently installed computer
systems and software products are coded to accept only two digit entries in the
date code field. Beginning in
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the year 2000, these date codes fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, in less
than 14 months, many such currently installed computer systems and software
products used by many companies will need to be upgraded to enable such systems
and computer hardware and software products to avoid the potential effects
associated with this year 2000 coding problem. The Company has done a
preliminary internal assessment of the components and applications of its
network and has determined that a number of these components are year
2000compliant. To further identify potential issues, the Company has hired a
third party consulting firm to inventory the various internal and external
systems and related applications upon which the Company may be dependent and to
assess both the level of dependence and the exposure in each area to year 2000
risks. This study is not yet complete and the Company has not yet fully
completed the assessment of the full range of risks. A complete action plan
awaits the completion of this report and is expected to be in place early in
1999.
In the interim, the Company is continuing to take the steps it
believes are necessary to address the network and related applications it has
identified that are not year 2000 compliant, primarily through internal
development efforts. Although the Company has direct programming control over
its network applications, there can be no assurance that the Company's computer
hardware and software products will contain all necessary code changes in their
date code fields to avoid any or all damaging interruptions and other problems
associated with date entry limitations. The Company is also dependent upon
other third parties, in particular it's telephone and satellite transmission
suppliers, in order to provide its electronic distribution services. The
Company is in the process of obtaining relevant information from these
suppliers in order to increase awareness of potential issues. If such vendors
systems are not year 2000 compliant it could have a material adverse affect on
the Company's operations. At this time the Company has not fully quantified the
potential impact of third party vendor year 2000 issues. The Company currently
does not anticipate that the direct resource requirements or expenses of the
Company related to resolving year 2000 issues will have a significant adverse
effect on its operating results or financial position.
The Company believes that the purchasing pattern of its current and
potential customers may be affected by the year 2000 problem described above in
a variety of ways. For example, as the year 2000 approaches, some of the
Company's current customers may develop concerns about the reliability of the
Company's electronic delivery services and, as a result, shift their delivery
work to less technical dub and ship operations. Likewise, some potential
customers of the Company with the same concern may elect not to utilize the
Company's electronic delivery services until after year 2000 and beyond. If any
current customers of the Company shift some or all of their delivery work to
other delivery providers, the Company's business, financial condition and
results of operations will be adversely affected, and if any potential customers
elect to not utilize the Company's delivery services for any period of time on
the basis of year 2000 concerns, the Company's business and financial prospects
for growth could be adversely affected. In addition to the foregoing, in the
event that the Company does experience interruptions and problems with its
computer hardware and software products due to
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year 2000 limitations of such products, some or all of the Company's current
customers may shift some or all of their delivery work to other delivery
providers without year 2000 problems. Moreover, potential customers of the
Company may elect not to utilize the Company's delivery services in the event of
any such interruptions and problems. Any of the foregoing could have a material
adverse effect on the Company's business, financial condition and results of
operations. At this time, the Company has not fully developed detailed
contingency plans for the possibility of significant disruption due to year 2000
issues. Preliminary discussions have been held but timing of the development of
such a contingency plan will be dependent upon the findings and resulting
actions taken based on the risk assessment studies discussed above.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
DIGITAL GENERATION SYSTEMS, INC.
Date: December 3, 1998 By: /s/ PAUL W. EMERY, II
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Paul W. Emery, II
Vice President and Chief Financial Officer
(Principal Financial and Chief Accounting
Officer)
