IBM 2000 Annual Report Download - page 86

page no.
eighty-four
notes to consolidated financial statements
international business machines corporation
and Subsidiary Companies
2000 1999 1998
Wtd. Avg. Wtd. Avg. Wtd. Avg.
Exercise No. of Shares Exercise No. of Shares Exercise No. of Shares
Price Under Option Price Under Option Price Under Option
Balance at January 1 $««60 146,136,523 $««36 131,443,850 $«27 123,456,722
Options granted 102 42,601,014 115 42,786,845 53 41,175,350
Options exercised 35 (18,243,347) 28 (23,160,228) 22 (29,633,476)
Options canceled/expired 87 (9,937,187) 61 (4,933,944) 36 (3,554,746)
Balance at December 31 $««73 160,557,003 $««60 146,136,523 $«36 131,443,850
Exercisable at December 31 $««45 66,599,878 $««29 51,599,735 $«22 46,191,636
The shares under option at December 31, 2000, were in the following exercise price ranges:
Options Outstanding Options Currently Exercisable
Wtd. Avg.
Wtd. Avg. Remaining Wtd. Avg.
No. of Exercise Contractual No. of Exercise
Exercise Price Range Options Price Life (in years) Options Price
$10 — 40 50,046,086 $«28 5 42,552,911 $«27
$41 — 70 30,932,902 52 7 13,935,446 52
$71 — 100 16,777,572 88 8 3,911,821 85
$101 and over 62,800,443 116 9 6,199,700 129
160,557,003 $«73 7 66,599,878 $«45
USTOCK-BASED COMPENSATION PLANS
The company applies Accounting Principles Board (APB)
Opinion No. 25, “Accounting for Stock Issued to Employees,”
and related Interpretations in accounting for its stock-based
compensation plans. A description of the terms of the com-
pany’s stock-based compensation plans follows:
Long-Term Performance Plan
Incentive awards are provided to officers and other key
employees under the terms of the IBM 1999 Long-Term
Performance Plan, which was approved by stockholders
in April 1999, and its predecessor plan, the IBM 1997
Long-Term Performance Plan (“the Plans”). The Plans are
administered by the Executive Compensation and Manage-
ment Resources Committee of the Board of Directors. The
committee determines the type and terms of the awards to
be granted, including vesting provisions.
Awards may include stock options, stock appreciation
rights, restricted stock, cash or stock awards, or any combi-
nation thereof. The number of shares that may be issued
under the IBM 1999 Long-Term Performance Plan is 118.7
million. There were 121.9 million and 118.7 million unused
shares available to be granted under the IBM 1999 Long-
Term Performance Plan as of December 31, 2000 and 1999,
respectively. The increase in unused shares available resulted
from the rollover of remaining 1997 Plan shares to the 1999
Plan. There were no unused shares available and 33.7 mil-
lion unused shares available to be granted under the IBM
1997 Long-Term Performance Plan as of December 31, 2000
and 1999, respectively.
With the exception of stock options, these awards (which
are expressed in terms of shares) are adjusted to fair value at
the end of each period, and the change in value is included
in net income. Awards under the Plans resulted in compen-
sation expense of $134.0 million, $267.3 million and $322.4
million in 2000, 1999 and 1998, respectively.
STOCK OPTION GRANTS
Stock options are granted to employees at an exercise price
equal to the fair market value of the company’s stock at the
date of grant. Generally, options vest 25 percent per year, are
fully vested four years from the grant date and have a term
of ten years. The following tables summarize option activity
under the Plans during 2000, 1999 and 1998: