IBM 2009 Annual Report Download - page 53

Contractual Obligations
($ in millions)
Total
Contractual Payments due in
Payment Stream 2010 2011 – 12 2013 – 14 After 2014
Long-term debt obligations $23,842 $2,186 $ 6,992 $ 5,250 $ 9,414
Interest on long-term debt obligations 12,381 1,166 2,073 1,507 7,635
Capital (finance) lease obligations 165 64 57 44 —
Operating lease obligations 5,938 1,504 2,263 1,395 776
Purchase obligations 2,314 771 851 423 269
Other long-term liabilities:
Minimum pension funding (mandated)* 3,936 803 1,535 1,261 337
Executive compensation 1,207 71 152 166 817
Long-term termination benefits 1,789 223 245 213 1,109
Tax reserves** 4,371 1,083 — — —
Other 879 66 93 67 653
Total $56,822 $7,937 $14,261 $10,326 $21,011
* Represents future pension contributions that are mandated by local regulations or statute, all associated with non-U.S. pension plans. See note U, “Retirement-Related
Benefits,” on pages 109 through 121 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 $16,819 million at December 31, 2009.
** These amounts represent the liability for unrecognized tax benefits. The company estimates that approximately $1,083 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.
Total contractual obligations are reported in the table above
excluding the effects of time value and therefore, may not equal
the amounts reported in the Consolidated Statement of Financial
Posi tion. Total contractual obligations decreased $10.4 billion
from the amount reported in the 2008 Annual Report primarily
due to the paydown of debt and the removal of the associ-
ated interest expense obligations. Long-term debt obligations
decreased $6.4 billion and interest expense related to long-term
debt obligations decreased $4.1 billion.
Purchase obligations include all commitments to purchase
goods or services of either a fixed or minimum quantity that
meet any of the following criteria: (1) they are noncancelable,
(2) the company would incur a penalty if the agreement was
canceled, or (3) the company must make specified minimum
payments even if it does not take delivery of the contracted
products or services (take-or-pay). If the obligation to pur-
chase goods or services is noncancelable, the entire value of
the contract is included in the table above. If the obligation is
cancelable, but the company would incur a penalty if canceled,
the dollar amount of the penalty is included as a purchase obli-
gation. Contracted minimum amounts specified in take-or-pay
contracts are also included in the table as they represent the
portion of each contract that is a firm commitment.
In the ordinary course of business, the company enters into
contracts that specify that the company will purchase all or a
portion of its requirements of a specific product, commodity or
service from a supplier or vendor. These contracts are gener-
ally entered into in order to secure pricing or other negotiated
terms. They do not specify fixed or minimum quantities to be
purchased and, therefore, the company does not consider them
to be purchase obligations.
Interest on floating rate debt obligations is calculated using
the effective interest rate at December 31, 2009, plus the inter-
est rate spread associated with that debt, if any.
Off-Balance Sheet Arrangements
From time to time, the company may enter into off-balance
sheet arrangements as defined by the SEC Financial Reporting
Release 67 (FRR-67), “Disclosure in Management’s Discussion
and Analysis about Off-Balance Sheet Arrangements and
Aggregate Con tractual Obligations.”
At December 31, 2009, the company has no off-balance
sheet arrangements that have, or are reasonably likely to have,
a material current or future effect on financial condition, changes
in financial condition, revenues or expenses, results of opera-
tions, liquidity, capital expenditures or capital resources. See
the table above for the company’s contractual obligations and
note O, “Contingencies and Commitments,” on pages 99 to
101, for detailed information about the company’s guarantees,
financial commitments and indemnification arrangements. The
company does not have retained interests in assets transferred
to unconsolidated entities or other material off-balance sheet
interests or instruments.
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