IBM 2002 Annual Report Download - page 89

Notes to Consolidated Financial Statements
87international business machines corporation and Subsidiary Companies
balance at other balance at
dec. 31, adjust- dec. 31,
(dollars in millions) 2001 additions payments ments*2002
Current:
Workforce $«««87 $«1,225 $«670 $««««5 $««««647
Space 65 146 97 67 181
Other —178 90 27 115
Total $«152 $«1,549 $«857 $««99 $««««943
Non-current:
Workforce $«385 $««««109 $«««— $««80 $««««574
Space 204 281 — (66) 419
Other —58—(27) 31
Total $«589 $««««448 $«««— $«(13) $«1,024
*The Other adjustments column in the table above includes the reclassification of
non-current to current and foreign currency translation adjustments. In addition,
net adjustments of $30 million were made in the fourth quarter of 2002 to reduce
the liabilities previously recorded in the second quarter of 2002.
The workforce accruals primarily relate to the company’s
Global Services business. The non-current portion of the
liability relates to terminated employees who are no longer
working for the company, but who were granted annual pay-
ments to supplement their incomes in certain countries.
Depending on the individual country’s legal requirements,
these required payments will continue until the former
employee begins receiving pension benefits or dies.
The space accruals are for ongoing obligations to pay rent
for vacant space that could not be sublet or space that was
sublet at rates lower than the committed lease arrangement.
The length of these obligations varies by lease with the
longest extending through 2019.
Other accruals are primarily the remaining liabilities associ-
ated with the 2002 second quarter actions described in note s,
“2002 Actions,” on pages 90 through 92. In addition, there
are $39 million of remaining liabilities associated with the
HDD-related restructuring discussed in note c, “Acquisitions/
Divestitures” on pages 78 to 80.
The Additions column in the table above includes accru-
als for workforce, space and other reductions relating to
actions taken in the second and fourth quarters of 2002.
Please see note s, “2002 Actions” on pages 90 through 92 for
a detailed discussion of second and fourth quarters 2002
actions. Also included in the Additions column are the actions
associated with the HDD business for reductions in work-
force, manufacturing capacity and space, totaling $295 million
that were recorded in the (Loss)/income from discontinued
operations in the Consolidated Statement of Earnings.
The company employs extensive internal environmental
protection programs that primarily are preventive in nature.
The company also participates in environmental assessments
and cleanups at a number of locations, including operating
facilities, previously owned facilities and Superfund sites.
The total amounts accrued for environmental liabilities,
including amounts classified as current in the Consolidated
Statement of Financial Position, that do not reflect actual or
anticipated insurance recoveries, were $247 million and
$238 million at December 31, 2002 and 2001, respectively.
Estimated environmental costs are not expected to mate-
rially affect the financial position or results of the company’s
operations in future periods. However, estimates of future
costs are subject to change due to protracted cleanup periods
and changing environmental remediation regulations.
nStockholders’ Equity Activity
In the fourth quarter of 2002, in connection with the PwCC
acquisition, IBM issued 3,677,213 shares of restricted stock
valued at approximately $254 million and recorded an addi-
tional $30 million for stock to be issued in future periods as
part of the purchase price consideration paid to the PwCC
partners. See note c, “Acquisitions/Divestitures,” on pages 78
to 80, for further information regarding this acquisition and
related payments made by the company. Additionally, in the
fourth quarter of 2002, in conjunction with the funding of the
company’s U.S. pension plan, the company issued an addi-
tional 24,037,354 shares of common stock from treasury
shares valued at $1,871 million.
Stock Repurchases
From time to time, the Board of Directors authorizes the
company to repurchase IBM common stock. The company
repurchased 48,481,100 common shares at a cost of $4,212 mil-
lion and 50,764,698 common shares at a cost of $5,293 million
in 2002 and 2001, respectively. In 2002 and 2001, the company
issued 979,246 and 1,923,502 treasury shares, respectively, as
a result of exercises of stock options by employees of certain
recently acquired businesses and by non-U.S. employees.
At December 31, 2002, $3,864 million of Board-authorized
repurchases remained. The company plans to purchase shares
on the open market from time to time, depending on market
conditions. The company also repurchased 189,797 common
shares at a cost of $18 million and 314,433 common shares at
a cost of $31 million in 2002 and 2001, respectively, as part of
other stock compensation plans.
In 1995, the Board of Directors authorized the company
to repurchase all of its outstanding Series A 7-1⁄2 percent
callable preferred stock. On May 18, 2001, the company
announced it would redeem all outstanding shares of its
Series A 7-1/2 percent callable preferred stock, represented
by the outstanding depositary shares (10,184,043 shares).
The depositary shares represent ownership of one-fourth of a
share of preferred stock. Depositary shares were redeemed as
of July 3, 2001, the redemption date, for cash at a redemption
price of $25 plus accrued and unpaid dividends to the
redemption date for each depositary share. Accordingly, these
shares are no longer outstanding. Dividends on preferred
stock, represented by the depositary shares, ceased to accrue
on the redemption date. The company did not repurchase
any shares in 2000.