IBM 2004 Annual Report Download - page 63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
61
International Business Machines Corporation and Subsidiary Companies
ibm annual report 2004
The company entered into an arm’s-length five-year supply agreement with Hitachi,
effective January 1, 2003, designed to provide the company with a majority of its on-
going internal disk drive requirements for the company’s Server, Storage and Personal
Systems products.
The loss on disposal recorded in 2002 was approximately $382 million, net of tax,
and was recorded in Loss from discontinued operations in the Consolidated Statement
of Earnings.
See note a, “Significant Accounting Policies,” on page 49 for the “Basis of Presentation”
for the discontinued operations.
In the second and fourth quarters of 2002, the company announced certain asset and
workforce reduction actions, and excess leased space charges related to its discontinued
HDD business. The company recorded a charge of approximately $508 million, net of tax,
in discontinued operations associated with these announced actions.
Summarized selected financial information for the discontinued operations is as follows:
(Dollars in millions)
FOR THE YEAR ENDED DECEMBER 31: 2004 2003 2002*
Revenue $««— $«— $«1,946
Loss before income taxes $««29 $«29 $«2,037
Income tax (benefit)/expense «(11) 1 (282))
Loss from discontinued operations $««18 $«30 $«1,755
*At closing, the company incurred a significant U.S. tax charge of approximately $248 million related to the repatriation
of divestiture proceeds from certain countries with low tax rates. This amount was included in the Income tax (benefit)/
expense line item of discontinued operations.
d. Financial Instruments (excluding derivatives)
fair value of financial instruments
Cash and cash equivalents, marketable securities, notes and other accounts receivable,
and other investments are financial assets with carrying values that approximate fair value.
Accounts payable, other accrued expenses and liabilities, short-term and long-term debt
are financial liabilities with carrying values that approximate fair value.
marketable securities*
The following table summarizes the company’s marketable securities, all of which are
considered available for sale, and alliance investments.
(Dollars in millions)
Fair Value
AT DECEMBER 31: 2004 2003
Marketable securities—current:
Time deposits and other obligations $«517 $«357
Marketable securities—non-current:**
Time deposits and other obligations $«««36 $«««36
Non-U.S. government securities and other
fixed-term obligations 22 23
Total $«««58 $«««59
Non-equity method alliance investments** $«309 $«234
*Gross unrealized gains (before taxes) on marketable securities and alliance investments were $85 million and $11 mil-
lion at December 31, 2004 and 2003, respectively. Gross unrealized losses (before taxes) on marketable securities
and alliance investments were $1 million and $2 million at December 31, 2004 and 2003, respectively. See note n,
“Stockholders’ Equity Activity,” on page 69 for net change in unrealized gains and losses on marketable securities and
certain other information regarding unrealized losses.
**Included within Investments and sundry assets in the Consolidated Statement of Financial Position. See note h,
“Investments and Sundry Assets,” on page 62.
e. Inventories
(Dollars in millions)
AT DECEMBER 31: 2004 2003
Finished goods $«1,179 $««««992
Work in process and raw materials 2,137 1,950
Total $«3,316 $«2,942