IBM 2012 Annual Report Download - page 59

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5858 Management Discussion
International Business Machines Corporation and Subsidiary Companies
Contractual Obligations
($ in millions)
Total Contractual
Payment Stream
Payments Due In
2013 2014-15 2016-17 After 2017
Long-term debt obligations $29,599 $ 5,548 $ 6,444 $ 7,570 $10,037
Interest on long-term debt obligations 9,842 1,014 1,617 1,410 5,800
Capital (finance) lease obligations 61 13 24 19 6
Operating lease obligations 5,806 1,466 2,312 1,281 747
Purchase obligations 1,383 559 618 139 68
Other long-term liabilities
Minimum pension funding (mandated)* 4,000 700 1,600 1,700 —
Executive compensation 1,595 94 206 229 1,066
Long-term termination benefits 1,283 221 174 126 763
Tax reserves** 3,942 1,724 — — —
Other 1,107 60 91 81 876
To t a l $58,619 $11,398 $13,086 $12,554 $19,363
* As funded status on plans will vary, obligations for mandated minimum pension payments after 2017 could not be reasonably estimated.
**
These amounts represent the liability for unrecognized tax benefits. The company estimates that approximately $1,724 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 Position.
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 com-
pany 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 purchase goods or services is non-
cancelable, 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 obligation. Contracted minimum amounts specified
in take-or-pay contracts are also included in the table as they rep-
resent the portion of each contract that is a firm commitment.
In the ordinary course of business, the company enters into con-
tracts 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 generally 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, 2012, plus the interest 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, 2012, the company had 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 operations, liquidity, capi-
tal expenditures or capital resources. See the table above for the
company’s contractual obligations, and note M, “Contingencies and
Commitments,” on page 113, for detailed information about the com-
pany’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.