IBM 2003 Annual Report Download - page 108

Notes to Consolidated Financial Statements
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
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(a) This amount was recorded in SG&A expense in 2002 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 abandoned
capital assets and the remaining lease payments for leased
equipment that was abandoned in the second quarter of
2002. The liability at December 31, 2003 relates to the
remaining lease payments, which will continue through
2005. These amounts were recorded in SG&A expense
in 2002.
(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
through June 30, 2004. This amount was recorded in
SG&A expense in 2002.
(d) The workforce reductions represent 1,400 people, all of
whom left the company as of June 30, 2003. This amount
was recorded in SG&A expense in 2002. The remaining
liability relates to terminated employees who were granted
annual payments to supplement their income in certain
countries. Depending on individual country legal require-
ments, 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 amounts were
recorded in Other (income) and expense in 2002.
(f ) As part of the company’s strategic realignment of its
Microelectronics business to exit the manufacture and
sale of certain products and component technologies, the
company 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, primarily relating to
land, buildings, machinery and equipment. This loss was
recorded in Other (income) and expense in 2002. This
transaction closed in the fourth quarter of 2002. The
company entered into a limited supply agreement with
EIT for future products, and it will also lease back, at fair
market value rental rates, approximately one-third of the
Endicott campus’ square footage for operations outside
the interconnect OEM business.
(g) As part of the strategic realignment of the company’s
Microelectronics business, the company agreed to sell
certain assets and liabilities comprising its Mylex business
to LSI Logic Corporation and the company sold part of its
wireless phone chipset operations to TriQuint Semi-
conductor, Inc. in June 2002. The Mylex transaction was
completed in August 2002. The loss of $74 million for the
Mylex transaction and the realized gain of $11 million for
the chipset sale were recorded in Other (income) and
expense in 2002.
(h) The majority of the workforce reductions relate to the
company’s Global Services business. The workforce
reductions represent 14,213 people, all of whom left the
company as of June 30, 2003. See (c) above for information
on the remaining liability. These charges were recorded in
SG&A expense in 2002.
(i) 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. This space relates primarily to workforce dynamics
in the Global Services business and the downturn in
corporate technology spending on services. The length of
these obligations varies by lease with the longest extending
through 2016. These amounts were recorded in Other
(income) and expense in 2002.