IBM 2011 Annual Report Download - page 110

Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies108
Pre-swap annual contractual maturities of long-term debt outstanding
at December 31, 2011, are as follows:
($ in millions)
To t a l
2012 $ 4,311
2013 5,495
2014 3,763
2015 197
2016 3,009
2017 and beyond 9,926
To t a l $26,702
Interest on Debt
($ in millions)
For the year ended December 31: 2011 2010 2009
Cost of financing $553 $555 $ 706
Interest expense 402 365 404
Net investment derivative activity 93 (1)
Interest capitalized 95 13
Total interest paid and accrued $973 $928 $1,122
Refer to the related discussion on page 137 in note T, “Seg ment
Infor mation,” for total interest expense of the Global Financing
segment. See note D, “Financial Instruments,” on pages 96 to 100
for a discussion of the use of currency and interest rate swaps in
the company’s debt risk management program.
Lines of Credit
In 2011 the company renewed its five-year, $10 billion Credit Agreement
(the “Credit Agreement”), which now expires on November 10, 2016.
The total expense recorded by the company related to this facility
was $5.0 million in 2011, $6.2 million in 2010 and $6.3 million in 2009.
The Credit Agreement permits the company and its Subsidiary
Borrowers to borrow up to $10 billion on a revolving basis. Borrowings
of the Subsidiary Borrowers will be unconditionally backed by the
company. The company may also, upon the agreement of either
existing lenders, or of the additional banks not currently party to
the Credit Agreement, increase the commitments under the Credit
Agreement up to an additional $2.0 billion. Subject to certain terms
of the Credit Agreement, the company and Subsidiary Borrowers
may borrow, prepay and reborrow amounts under the Credit
Agreement at any time during the Credit Agreement. Interest rates
on borrowings under the Credit Agreement will be based on prevailing
market interest rates, as further described in the Credit Agreement.
The Credit Agreement contains customary representations and
warranties, covenants, events of default, and indemnification
provisions. The company believes that circumstances that might give
rise to breach of these covenants or an event of default, as specified
in the Credit Agreement, are remote. As of December 31, 2011, there
were no borrowings by the company, or its subsidiaries, under the
Credit Agreement.
The company also has other committed lines of credit in some
of the geographies which are not significant in the aggregate. Interest
rates and other terms of borrowing under these lines of credit vary
from country to country, depending on local market conditions.
Note K.
Other Liabilities
($ in millions)
At December 31: 2011 2010
Income tax reserves $3,989 $3,486
Executive compensation accruals 1,388 1,302
Disability benefits 835 739
Derivatives liabilities 166 135
Special actions 347 399
Workforce reductions 366 406
Deferred taxes 549 378
Environmental accruals 249 249
Noncurrent warranty accruals 163 130
Asset retirement obligations 166 161
Other 777 841
To t a l $8,996 $8,226
In response to changing business needs, the company periodically
takes workforce reduction actions to improve productivity, cost
competitiveness and to rebalance skills. The noncurrent contractually
obligated future payments associated with these activities are
reflected in the workforce reductions caption in the previous table.
In addition, the company executed certain special actions as
follows: (1) the second quarter of 2005 associated with Global
Services, primarily in Europe, (2) the fourth quarter of 2002 associated
with the acquisition of the PricewaterhouseCoopers consulting
business, (3) the second quarter of 2002 associated with the
Microelectronics Division and the rebalancing of the company’s
workforce and leased space resources, (4) the 2002 actions
associated with the hard disk drive business for reductions in
workforce, manufacturing capacity and space, (5) the actions taken
in 1999, and (6) the actions that were executed prior to 1994.