N. Stockholders’ equity activity
The authorized capital stock of IBM consists of 4,687,500,000 shares of common stock with a $.20 per share par value, of which 1,339,095,922 shares were outstanding at December 31, 2008 and 150,000,000 shares of preferred stock with a $.01 per share par value, none of which were outstanding at December 31, 2008.
The Board of Directors authorizes the company to repurchase IBM common stock. The company repurchased 89,890,347 common shares at a cost of $10,563 million, 178,385,436 common shares at a cost of $18,783 million and 97,564,462 common shares at a cost of $8,022 million in 2008, 2007 and 2006, respectively.
Included in the 2007 repurchases highlighted above, in May 2007, IBM International Group (IIG), a wholly owned foreign subsidiary of the company, repurchased 118.8 million shares of common stock for $12.5 billion under accelerated share repurchase (ASR) agreements with three banks.
Pursuant to the ASR agreements, executed on May 25, 2007, IIG paid an initial purchase price of $105.18 per share for the repurchase. The initial purchase price was subject to adjustment based on the volume weighted-average price of IBM common stock over a settlement period of three months for each of the banks. The adjustment also reflected certain other amounts including the banks’ carrying costs, compensation for ordinary dividends declared by the company during the settlement period and interest benefits for receiving the $12.5 billion payment in advance of the anticipated purchases by each bank of shares in the open market during the respective settlement periods. The adjustment amount could be settled in cash, registered shares or unregistered shares at IIG’s option. Under the ASR agreements, IIG had a separate settlement with each of the three banks. The first settlement occurred on September 6, 2007, resulting in a settlement payment to the bank of $151.8 million. The second settlement occurred on December 5, 2007, resulting in a settlement payment to the bank of $253.1 million. The third settlement occurred on March 4, 2008, resulting in a settlement payment to the company of $54.2 million. The adjusted average price paid per share during the ASR was $108.13, resulting in a total purchase price of $12,581 million. The $351 million difference was settled in cash. The settlement amounts were paid in cash at the election of IIG in accordance with the provisions of the ASR agreements and were recorded as adjustments to stockholders’ equity in the Consolidated Statement of Financial Position on the settlement dates.
The company issued 5,882,800 treasury shares in 2008, 9,282,055 treasury shares in 2007 and 3,489,803 treasury shares in 2006, as a result of exercises of stock options by employees of certain recently acquired businesses and by non-U.S. employees. At December 31, 2008, $5,647 million of Board authorized common stock repurchases was still available. The company plans to purchase shares on the open market or in private transactions from time to time, depending on market conditions. In connection with the issuance of stock as part of the company’s stock-based compensation plans, 1,505,107 common shares at a cost of $166 million, 1,282,131 common shares at a cost of $134 million and 633,769 common shares at a cost of $52 million in 2008, 2007 and 2006, respectively, were remitted by employees to the company in order to satisfy minimum statutory tax withholding requirements. These amounts are included in the treasury stock balance in the Consolidated Statement of Financial Position and the Consolidated Statement of Stockholders’ Equity.
Accumulated gains and (losses) not affecting retained earnings (net of tax)
|($ in millions)|
|Net Unrealized Gains/(Losses) on Cash Flow Hedge Derivatives||Foreign Currency Translation Adjustments*||Net Change Retirement-related Benefit Plans||Net Unrealized Gains/(Losses) on Marketable Securities||Accumulated Gains/(Losses) Not Affecting Retained Earnings|
* Foreign currency translation adjustments are presented gross with associated hedges shown net of tax.
|December 31, 2006||$(104)||$2,929||$(11,846)||$119||$(8,901)|
|Change for period||(123)||726||4,678||206||5,487|
|December 31, 2007||(227)||3,655||(7,168)||325||(3,414)|
|Change for period||301||(3,552)||(14,856)||(324)||(18,431)|
|December 31, 2008||$74||$103||$(22,025)||$2||$(21,845)|
Net change in unrealized (losses)/gains on marketable securities (net of tax)
|($ in millions)|
|For the period ended December 31:||2008||2007*|
* Reclassified to conform with 2008 presentation.
** Includes writedowns of $3.0 million and $0.5 million in 2008 and 2007, respectively.
|Net unrealized (losses)/gains arising during the period||$(224)||$255|
|Less: Net gains included in net income for the period**||100||49|
|Net change in unrealized (Losses)/gains on marketable securities||$(324)||$206|