IBM 2008 Annual Report Download - page 105

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Notes to Consolidated Financial Statements
INTERNATIONAL BUSINESS MACHINES CORPORATION and Subsidiary Companies
Note S.
Rental Expense and Lease Commitments
Rental expense from continuing operations, including amounts
charged to inventories and fixed assets, and excluding amounts previ-
ously reserved, was $, million in , $, million in  and
$, million in . Rental expense in agreements with rent
holidays and scheduled rent increases is recorded on a straight-line
basis over the lease term. Contingent rentals are included in the
determination of rental expense as accruable. Rental expense in prior
periods is presented to conform with  presentation, inclusive of
rental expenses associated with automobile leases within certain coun-
tries. The table below depicts gross minimum rental commitments
from continuing operations under noncancelable leases, amounts
related to vacant space associated with infrastructure reductions and
restructuring actions taken prior to , and in ,  and 
(previously reserved), sublease income commitments and capital lease
commitments. These amounts reflect activities primarily related to
office space, as well as manufacturing facilities.
($  ) 2009 2010 2011 2012 2013 Beyond 2013
Operating lease commitments:
Gross minimum rental commitments
(including vacant space below) $1,481 $1,299 $1,013 $748 $614 $814
Vacant space $ 52 $ 38 $ 28 $ 24 $ 17 $ 61
Sublease income commitments $ 58 $ 38 $ 26 $ 17 $ 12 $ 8
Capital lease commitments $ 57 $ 56 $ 22 $ 30 $ 10 $ 38
Note T.
Stock-Based Compensation
Stock-based compensation cost is measured at grant date, based on
the fair value of the award, and is recognized over the employee req-
uisite service period. See note A, “Significant Accounting Policies,” on
page  for additional information.
The following table presents total stock-based compensation cost
included in the Consolidated Statement of Earnings.
($  )
For the year ended December : 2008 2007 2006
Cost $ 116 $ 166 $ 216
Selling, general and administrative 484 480 541
Research, development and engineering 58 68 89
Other (income) and expense* — (1) —
Pre-tax stock-based compensation cost 659 713 846
Income tax benefits (224) (248) (305)
TOTAL STOCK-BASED
COMPENSATION COST $ 435 $ 464 $ 541
* Reflects the one-time effects of the divestiture of the Printing Systems business in the
second quarter of 2007.
Total unrecognized compensation cost related to non-vested awards at
December ,  and  was $, million and $, million,
respectively, and is expected to be recognized over a weighted-average
period of approximately three years.
There was no significant capitalized stock-based compensation
cost at December , ,  and .
 
Stock-based incentive awards are provided to employees under the
terms of the company’s long-term performance plans (the “Plans”).
The Plans are administered by the Executive Compensation and
Management Resources Com mittee of the Board of Directors (the
“Committee”). Awards available under the Plans principally include
at-the-money stock options, restricted stock units, performance share
units, premium-priced stock options or any combination thereof.
The nonmanagement members of the IBM Board of Directors also
received stock options under a director stock option plan through
December , . The director stock option plan was terminated
effective January , .
The amount of shares originally authorized to be issued under the
company’s existing Plans was . million at December ,  and
. In addition, certain incentive awards granted under previous
plans, if and when those awards were canceled, could be reissued under
the company’s existing Plans. As such, . million and . million
additional awards were considered authorized to be issued under
the company’s existing Plans as of December ,  and ,
respectively. There were . million and . million option awards
outstanding (which were included in the total options outstanding at
December ,  and , respectively) under previous plans that,
if and when canceled, would increase the number of authorized
shares. There were . million and . million unused shares
available to be granted under the Plans as of December ,  and
, respectively.
Under the company’s long-standing practices and policies, all
awards are approved prior to or on the date of grant. The exercise
price of at-the-money stock options is the average of the high and