IBM 2009 Annual Report Download - page 109

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Notes to Consolidated Financial Statements
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
The shares under option at December 31, 2009 were in the following exercise price ranges:
Options Outstanding
Wtd. Avg.
Wtg. Avg. Number Aggregate Remaining
Exercise of Shares Intrinsic Contractual
Exercise Price Range Price Under Option Value Life (in years)
$61
–
$85 $ 77 17,468,272 $ 940,917,103 3.2
$86
–
$105 98 32,894,001 1,067,822,966 3.4
$106 and over 112 22,848,184 432,260,579 1.5
$ 98 73,210,457 $2,441,000,648 2.8
Options Exercisable
Wtd. Avg.
Wtd. Avg. Number Aggregate Remaining
Exercise of Shares Intrinsic Contractual
Exercise Price Range Price Under Option Value Life (in years)
$61
–
$85 $ 77 17,439,702 $ 939,529,901 3.2
$86
–
$105 98 31,929,240 1,039,848,239 3.3
$106 and over 112 22,848,184 432,260,579 1.5
$ 98 72,217,126 $2,411,638,719 2.7
In connection with various acquisition transactions, there were
an additional 1.1 million options outstanding at December 31,
2009, as a result of the company’s assumption of options
granted by the acquired entities. The weighted-average exercise
price of these options was $76 per share.
Exercises of Employee Stock Options
The total intrinsic value of options exercised during the years
ended December 31, 2009, 2008 and 2007 was $639 million,
$1,073 million and $1,414 million, respectively. The total cash
received from employees as a result of employee stock option
exercises for the years ended December 31, 2009, 2008 and
2007 was approximately $2,744 million, $3,320 million and
$3,619 million, respectively. In connection with these exercises,
the tax benefits realized by the company for the years ended
December 31, 2009, 2008 and 2007 were $243 million, $356
million and $481 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,
2009 and 2008 were approximately 822 million and 758 million
shares, respectively.
Stock Awards
In lieu of stock options, currently 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 Share 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 one- 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. For RSUs awarded after December 31, 2007, divi-
dend equivalents will not be paid. The fair value of such RSUs is
determined and fixed on the grant date based on the company’s
stock price adjusted for the exclusion of dividend equivalents.
The tables on page 108 summarize RSU and PSU activity
under the Plans during the years ended December 31, 2009,
2008 and 2007.
107