IBM 2008 Annual Report Download - page 49

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
Management Discussion
INTERNATIONAL BUSINESS MACHINES CORPORATION and Subsidiary Companies
Events that could temporarily change the historical cash flow dynam-
ics discussed on page  include significant changes in operating
results, material changes in geographic sources of cash, unexpected
adverse impacts from litigation or future pension funding require-
ments during periods of severe downturn in the capital markets.
Whether any litigation has such an adverse impact will depend on a
number of variables, which are more completely described on pages
 to . With respect to pension funding, in , the company
contributed $ million to its non-U.S. defined benefit plans, versus
$ million in . Also, in , the company made a $ million
voluntary cash contribution to the U.S. nonpension postretirement
plan. As highlighted in the Contractual Obligations table below, the
company expects to make legally mandated pension plan contributions
to certain non-U.S. plans of approximately $. billion in the next
five years. The  contributions are expected to be approximately
$ billion. Financial market performance in  could increase the
legally mandated minimum contributions in certain non-U.S. coun-
tries that require more frequent remeasurement of the funded status.
The company is not quantifying any further impact from pension
funding because it is not possible to predict future movements in the
capital markets or pension plan funding regulations.
The Pension Protection Act of  (the Act) was enacted into
law in , and, among other things, increases the funding require-
ments for certain U.S. defined benefit plans beginning after December
,. No mandatory contribution is required for the U.S. defined
benefit plan in  or  as of December ,.
Contractual Obligations
Total
Contractual Payments due in
($  ) Payment Stream 2009 2010-11 2012-13 After 2013
Long-term debt obligations $30,289 $ 8,874 $ 5,190 $ 5,595 $10,630
Interest on long-term debt obligations 16,437 1,382 2,264 1,821 10,969
Capital (finance) lease obligations 213 57 78 40 38
Operating lease obligations 5,969 1,481 2,312 1,362 814
Purchase obligations 1,280 568 512 133 67
Other long-term liabilities:
Minimum pension funding (mandated)* 5,582 974 2,467 2,141 —
Executive compensation 894 60 136 157 541
Long-term termination benefits 2,230 571 285 229 1,145
Tax reserves** 3,485 163 — — —
Other 788 81 126 79 502
TOTAL $67,167 $14,212 $13,370 $11,557 $24,706
* Represents future pension contributions that are mandated by local regulations or statute, all associated with non-U.S. pension plans. The projected payments beyond 2013 are not
currently determinable. See note U, “Retirement-Related Benefits,” on pages 106 to 116 for additional information on the non-U.S. plans’ investment strategies and expected
contributions and for information regarding the company’s unfunded pension plans of $20,086 million at December 31, 2008.
** These amounts represent the liability for unrecognized tax benefits under FIN 48. The company estimates that approximately $163 million of the liability is expected to be settled
within the next 12 months. The settlement period for the noncurrent portion of the income tax liability cannot be reasonably estimated as the timing of the payments will depend on
the progress of tax examinations with the various tax authorities; however, it is not expected to be due within the next 12 months.