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Notes to Consolidated Financial Statements
91international business machines corporation and Subsidiary Companies
The following table summarizes the significant components of these actions:
liability liability
pre-tax write-off recorded in other as of
(dollars in millions) charges of assets 2nd qtr. 2002 payments adjustments+dec. 31, 2002
Microelectronics:
Machinery/equipment: $««««423 $«323(a)«
Current $««««««67(b)*$«««38 $««13 $«««42
Non-current 33(b)** —(16) 17
Non-cancelable purchase commitments:«««««««««««««««« 60
Current ««35(c)*15 4 ««24
Non-current 25(c)** —(12) 13
Employee terminations: «45
Current ««44(d)*35 (8) ««1
Non-current 1(d)** —— 1
Vacant space: ««11
Current ««5(e)*11 ««5
Non-current 6(e)** —(1) 5
Sale of Endicott facility 223 221(f) ««2(f )*311 ««10
Sale of certain operations 63 53(g) 10(g)*9— 1
Global Services and other:
Employee terminations: ««722
Current ««671(h)*505 (23) ««143
Non-current 51(h)** —27 78
Vacant space: ««180 29(i)
Current ««57(i)*29 16 ««44
Non-current 94(i)** —(8) 86
Total $«1,727 $«626 $«1,101 $«635 $««««4 $«470
*Recorded in Accounts payable and accruals in the Consolidated Statement of Financial Position.
** Recorded in Other liabilities in the Consolidated Statement of Financial Position.
+Principally represents currency translation adjustments and reclassification of non-current to current. In addition, net adjustments of $30 million were made in the fourth quarter
of 2002 to reduce previously recorded liabilities. These adjustments, along with a net $10 million credit for assets previously written off, were for differences between the estimated
and actual proceeds on the disposition of certain assets and changes in the estimated cost of employee terminations.
(a) This amount was recorded in SG&A expense and primarily
represents the abandonment and loss on sale of certain
capital assets during the second quarter of 2002.
(b) This amount comprises costs incurred to remove aban-
doned capital assets and the remaining lease payments for
leased equipment that was abandoned in the second quar-
ter of 2002. The company expects to pay the removal
costs by June 30, 2003. The remaining lease payments will
continue through 2005. These amounts were recorded in
SG&A expense.
(c) The company is subject to certain noncancelable purchase
commitments. As a result of the decision to significantly
reduce aluminum capacity, the company no longer has a
need for certain materials subject to these agreements.
The required future payments for materials no longer
needed under these contracts are expected to be paid over
two years. This amount was recorded in SG&A expense.
(d) The workforce reductions represent 1,400 people of which
approximately 94 percent left the business as of Decem-
ber 31, 2002. These amounts were recorded in SG&A
expense. The non-current portion of the liability relates to
terminated employees who were granted annual payments
to supplement their income in certain countries. Depending
on individual country legal requirements, these required
payments will continue until the former employee begins
receiving pension benefits or dies.
(e) 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 arrange-
ments. The length of these obligations varies by lease with
the longest extending through 2006. These charges were
recorded in Other (income) and expense in the Consoli-
dated Statement of Earnings.
(f) As part of the company’s strategic decisions in its
Microelectronics business to exit the manufacture and sale
of certain products and component technologies, the com-
pany signed an agreement in the second quarter of 2002 to
sell its interconnect products operations in Endicott to
Endicott Interconnect Technologies, Inc. (EIT). As a result
of this transaction, the company incurred a $223 million
loss on sale in the second quarter of 2002, primarily relating
to land, buildings, machinery and equipment. This loss was
recorded in Other (income) and expense in the Consoli-
dated Statement of Earnings. This transaction closed in