IBM 2003 Annual Report Download - page 112

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In connection with various acquisition transactions, there
are an additional 3.5 million options outstanding at
December 31, 2003, as a result of the company’s assumption
of options granted by the acquired entities. The weighted-
average exercise price of these options is $90.
IBM EMPLOYEES STOCK PURCHASE PLAN
In July 2003, the IBM 2003 ESPP became effective and 50
million additional shares of authorized common stock were
reserved and approved for issuance. The ESPP enables sub-
stantially all regular employees to purchase full or fractional
shares of IBM common stock through payroll deductions of
up to 10 percent of eligible compensation. The 2003 ESPP
provides for semi-annual offerings commencing July 1,
2003, and continuing as long as shares remain available
under the ESPP, unless terminated earlier at the discretion
of the Board of Directors. The share price paid by an employee
equals the lesser of 85 percent of the average market price
on the first business day of each offering period or 85 per-
cent of the average market price on the last business day of
each pay period. Individual ESPP participants are restricted
from purchasing more than $25,000 of common stock in
one calendar year or 1,000 shares in an offering period.
Approximately 44.2 million, 4.6 million and 16.5 million
reserved unissued shares were available for purchase under
the 2003 ESPP (or a predecessor plan) at December 31, 2003,
2002 and 2001, respectively.
PRO FORMA DISCLOSURE
See “Stock-Based Compensation” on pages 82 and 83, in
note A, “Significant Accounting Policies,” for the pro forma
disclosures of net income and earnings per share required
under SFAS No. 123.
Notes to Consolidated Financial Statements
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
110
The shares under option at December 31, 2003, were in the following exercise price ranges:
OPTIONS OUTSTANDING OPTIONS CURRENTLY EXERCISABLE
WTD. AVG.
WTD. AVG. NUMBER REMAINING WTD. AVG. NUMBER
EXERCISE OF SHARES CONTRACTUAL EXERCISE OF SHARES
EXERCISE PRICE RANGE PRICE UNDER OPTION LIFE (IN YEARS) PRICE UNDER OPTION
$13 – $60 $««45 58,085,692 5 $««42 46,673,075
$61–$85 77 59,168,633 9 71 7,482,142
$86 –$105 98 58,170,230 7 97 29,229,856
$106 and over 117 69,541,497 7 119 51,350,253
$««86 244,966,052 7 $««85 134,735,326
W
retirement-related benefits
IBM offers defined benefit pension plans, defined contribution pension plans, as well as nonpension postretirement plans
primarily consisting of retiree medical benefits. These benefits form an important part of the company’s total compensation
and benefits program that is designed to attract and retain highly skilled and talented employees. The following table provides
the total retirement-related benefit plans’ impact on income before income taxes.
(dollars in millions)
U.S. NON-U.S. TOTAL
FOR THE YEAR ENDED DECEMBER 31: 2003 2002 2001 2003 2002 2001 2003 2002 2001
Total retirement-related plans—
cost/(income) $««««67 $«(154) $«(256) $«295 $«(17) $«(181) $«362 $«(171) *$«(437) *
Comprise:
Defined benefit and contribution
pension plans—(income)/cost $«(227) $«(478) $«(632) $«254 $«(46) $«(209) $«««27 $«(524) $«(841)
Nonpension postretirement
benefits—cost 294 324 376 41 29 28 335 353 404
*Includes amounts for discontinued operations costs of $77 million and $56 million for 2002 and 2001, respectively.