IBM 1999 Annual Report Download - page 77

notes to consolidated financial statements
International Business Machines Corporation
and Subsidiary Companies
75
K Interest on Debt
Interest paid and accrued on borrowings of the company and
its subsidiaries was $1,475 million in 1999, $1,585 million in
1998 and $1,596 million in 1997. Of these amounts, the company
capitalized $23 million in 1999, $28 million in 1998 and $32 mil-
lion in 1997. Of the remainder, the company charged to the cost
of financing $725 million in 1999, $844 million in 1998 and $836
million in 1997, and to interest expense $727 million in 1999,
$713 million in 1998 and $728 million in 1997. The decrease in
total interest in 1999 versus 1998 was due primarily to lower
average interest rates, partially offset by an increase in average
debt outstanding during 1999. The decrease in 1998 versus
1997 was due primarily to lower average interest rates, partially
offset by higher outstanding average debt. The average effec-
tive interest rate for total debt was 5.1 percent, 5.7 percent and
6.4 percent in 1999, 1998 and 1997, respectively. These rates
include the results of currency and interest rate swaps applied
to the debt described in note J, “Debt,” on page 74.
L Financial Instruments
The company maintains on- and off-balance sheet portfolios of
financial instruments.
Financial Instruments On-Balance Sheet (excluding derivatives)
Financial assets with carrying values that approximate fair value
include cash and cash equivalents, marketable securities, notes
and other accounts receivable and other investments. Financial
liabilities with carrying values that approximate fair value include
accounts payable and other accrued expenses and liabilities,
and short-term and long-term debt.
The following table summarizes the company’s marketable
securities, all of which are considered available for sale.
MARKETABLE SECURITIES*
(Dollars in millions) Fair Value
At December 31: 1999 1998
Current marketable securities:
U.S. government securities $««««««15 $«««15
Time deposits and other bank obligations 746 335
Non-U.S. government securities and
other fixed-term obligations 27 43
Total $««««788 $«393
Marketable securities—non-current:**
Time deposits and other bank obligations $««««105 $«271
Non-U.S. government securities and
other fixed-term obligations 810
Total $««««113 $«281
Alliance investments** $«1,439 $«138
*Gross unrealized gains (before taxes) on marketable securities were
$1,310 million and $87 million at December 31, 1999 and 1998, respectively.
Gross unrealized losses (before taxes) on marketable securities were
$7 million and $8 million at December 31, 1999 and 1998, respectively.
**Included within Investments and sundry assets on the Consolidated
Statement of Financial Position. (See note G on page 73.)
Financial Instruments Off-Balance Sheet (excluding derivatives)
IBM has guaranteed certain loans and financial commitments of
its affiliates. The approximate amount of these financial guaran-
tees was $1.2 billion at December 31, 1999 and 1998.
The company’s dealers had unused lines of credit available from
IBM for working capital financing of approximately $4.5 billion
and $3.6 billion at December 31, 1999 and 1998, respectively.