London High Court Rules Against IBM (IBM) in C Plan Modification; Sees Q3 GAAP EPS Impact

On October 12, 2012, the High Court in London issued a ruling against IBM United Kingdom Limited and IBM United Kingdom Holdings Limited, both wholly-owned subsidiaries of IBM (NYSE: IBM), in a suit seeking an order modifying certain documents and terms relating to retirement provisions in IBM UK’s largest defined benefit plan (the “C Plan”) dating back to 1983. The Court held that the 1983 Trust Deeds and Rules should be modified to allow certain categories of current IBM UK employees who are members of the C Plan to retire from the age of 60 (rather than from the age of 63) without actuarial reduction of their defined benefit pension. The Court declined to similarly modify the Trust Deeds and Rules for former employees who were C Plan members and who left the company prior to retirement, although the Court stated that it will provide an opportunity for further legal argument on this issue. IBM UK is considering the company’s rights of appeal.

As a result of the ruling, IBM will record an additional retirement-related obligation of approximately $160 million in the third quarter of 2012, which will negatively impact GAAP income and earnings per share.

The charges will not affect IBM’s operating (non-GAAP) reported results for the third quarter of 2012.

IBM’s regular quarterly earnings conference call is scheduled to begin at 4:30 p.m. EDT, on October 16.

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