IBM 2007 Annual Report Download - page 106

104
Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
EXERCISES OF EMPLOYEE STOCK OPTIONS
The total intrinsic value of options exercised during the years ended
December 31, 2007, 2006 and 2005 was $1,414 million, $727 million
and $470 million, respectively. The total cash received from employees
as a result of employee stock option exercises for the years ended
December 31, 2007, 2006 and 2005 was approximately $3,619 mil-
lion, $1,149 million and $550 million, respectively. In connection
with these exercises, the tax benefits realized by the company for the
years ended December 31, 2007, 2006 and 2005 were $481 million,
$242 million and $148 million, respectively.
The company settles employee stock option exercises primarily
with newly issued common shares and, occasionally, with treasury
shares. Total treasury shares held at December 31, 2007 and 2006 were
approximately 672 million and 502 million shares, respectively.
STOCK AWARDS
In addition to stock options, the company grants its employees stock
awards. These awards are made in the form of Restricted Stock Units
(RSUs), including Retention Restricted Stock Units (RRSUs), or
Performance Stock Units (PSUs). RSUs are stock awards granted to
employees that entitle the holder to shares of common stock as the
award vests, typically over a two- to five-year period. The fair value
of the awards is determined and fixed on the grant date based on the
company’s stock price. During the year ended December 31, 2006,
the company modified its equity compensation plans to increase
awards of RSUs compared to stock options. RSUs awarded during the
year ended December 31, 2005 were not material when compared to
the value of stock options awarded during that year.
The following table summarizes RSU activity under the Plans
during the years ended December 31, 2007 and 2006:
The shares under option at December 31, 2007 were in the following exercise price ranges:
OPTIONS OUTSTANDING
WTD. AVG.
WTD. AVG. NUMBER AGGREGATE REMAINING
EXERCISE OF SHARES INTRINSIC CONTRACTUAL
EXERCISE PRICE RANGE PRICE UNDER OPTION VALUE LIFE (IN YEARS)
$34 – $60 $ 51 3,535,698 $ 200,389,187 —*
$60 – $85 77 31,399,013 987,276,354 5
$85 – $105 98 64,129,462 648,821,490 5
$105 and over 117 58,597,084 37,137,467 3
$100 157,661,257 $1,873,624,498 4
OPTIONS EXERCISABLE
WTD. AVG.
WTD. AVG. NUMBER AGGREGATE REMAINING
EXERCISE OF SHARES INTRINSIC CONTRACTUAL
EXERCISE PRICE RANGE PRICE UNDER OPTION VALUE LIFE (IN YEARS)
$34 – $60 $ 51 3,535,698 $ 200,389,187 —*
$60 – $85 76 29,754,378 945,466,395 5
$85 – $105 98 53,103,839 542,234,878 4
$105 and over 117 57,698,254 35,220,308 3
$100 144,092,169 $1,723,310,768 4
* Weighted average remaining contractual life is less than one year.
In connection with various acquisition transactions, there were an additional 2.1 million options outstanding at December 31, 2007, as a result of
the company’s assumption of options granted by the acquired entities. The weighted-average exercise price of these options was $79 per share.
Management Discussion ..................................14
Consolidated Statements ..................................14
Notes ........................................................... 64
A-F ...................................................................64
G-M ..................................................................84
N-S ...................................................................94
T-W ........................................................... 102
T. Stock-Based Compensation ................ 102
U. Retirement-Related Benefits .............. 105
V. Segment Information ................................116
W. Subsequent Events ....................................119