IBM 2004 Annual Report Download - page 77

Download and view the complete annual report

Please find page 77 of the 2004 IBM annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 100

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
75
International Business Machines Corporation and Subsidiary Companies
ibm annual report 2004
(a) This amount was recorded in SG&A expense in 2002 and primarily represents the aban-
donment and loss on sale of certain capital assets during the second quarter of 2002.
(b) These amounts comprise costs incurred to remove abandoned capital assets and the
remaining lease payments for leased equipment that was abandoned in the second
quarter of 2002. Such amounts were recorded in SG&A expense in 2002. The liability
at December 31, 2003 and 2004 relates to the remaining lease payments, which will
continue through 2005.
(c) The company was subject to certain non-cancelable purchase commitments. As a result
of the decision to significantly reduce aluminum manufacturing capacity, the company
no longer had a need for certain materials subject to these agreements. The required
future payments for materials no longer needed under these contracts were paid
through 2004. This amount was recorded in SG&A expense in 2002.
(d) The Microelectronics workforce reductions comprised 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 requirements, these required payments will continue until the former
employee begins receiving pension benefits or dies.
(e) The vacant 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
arrangements. 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 storage prod-
ucts business to LSI Logic Corporation and the company sold part of its wireless phone
chipset operations to TriQuint Semiconductor, 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 related to the company’s Global Services busi-
ness. The workforce reductions comprised 14,213 people, all of whom left the company
as of June 30, 2003. These charges were 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
requirements, these required payments will continue until the former employee begins
receiving pension benefits or dies.
(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 lengths of these
obligations vary by lease with the longest extending through 2016. These amounts
were recorded in Other (income) and expense in 2002.