IBM 2003 Annual Report Download - page 102

Notes to Consolidated Financial Statements
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
or anticipated insurance recoveries, were $243 million and
$247 million at December 31, 2003 and 2002, respectively.
Estimated environmental costs are not expected to materi-
ally affect the consolidated financial position or consolidated
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.
N
stockholders’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
89 to 92, 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
additional 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 49,994,514 common shares at a cost of $4,403
million and 48,481,100 common shares at a cost of $4,212
million in 2003 and 2002, respectively. In 2003 and 2002, the
company issued 2,120,293 and 979,246 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, 2003, $2,961 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 repur-
chased 291,921 common shares at a cost of $24 million and
189,797 common shares at a cost of $18 million in 2003 and
2002, respectively, as part of other stock compensation plans.
100
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 redemp-
tion 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 pre-
ferred stock, represented by the depositary shares, ceased to
accrue on the redemption date.
EMPLOYEE BENEFITS TRUST
In 1997, the company created an employee benefits trust to
which the company contributed 10 million shares of treasury
stock. The company was authorized to instruct the trustee
to sell such shares from time to time and to use the proceeds
from such sales, and any dividends paid or earnings received
on such stock, toward the partial payment of the company’s
obligations under certain of its compensation and benefit
plans. The shares held in trust were not considered out-
standing for earnings per share purposes until they were
committed to be released. The company did not commit any
shares for release from the trust during its existence nor
were any shares sold from the trust. The trust would have
expired in 2007. Due to the fact that the company had not
used the trust, nor was it expected to need the trust prior to
its expiration, the company dissolved the trust, effective
May 31, 2001, and all of the shares (20 million on a split-
adjusted basis) were returned to the company as treasury
shares. Dissolution of the trust did not affect the company’s
obligations related to any of its compensation and employee
benefit plans or its ability to settle the obligations. In addi-
tion, the dissolution is not expected to have any impact on
net income. At this time, the company plans to fully meet its
obligations for the compensation and benefit plans in the
same manner as it does today, using cash from operations.
ACCUMULATED GAINS AND (LOSSES) NOT AFFECTING RETAINED EARNINGS*
(dollars in millions)
NET NET ACCUMULATED
UNREALIZED FOREIGN MINIMUM UNREALIZED GAINS/(LOSSES)
GAINS/(LOSSES) CURRENCY PENSION GAINS/(LOSSES) NOT AFFECTING
ON CASH FLOW TRANSLATION LIABILITY ON MARKETABLE RETAINED
HEDGE DERIVATIVES ADJUSTMENTS ADJUSTMENT SECURITIES EARNINGS
December 31, 2001 $««296 $«««(612) $««««(526) $«14 $««««(828)
Change for period (659) 850 (2,765) (16) (2,590)
December 31, 2002 (363) 238 (3,291) (2) (3,418)
Change for period (91) 1,768 (162) 7 1,522
December 31, 2003 $«(454) $«2,006 $«(3,453) $«««5 $«(1,896)
*net of tax