IBM 2002 Annual Report Download - page 85

Notes to Consolidated Financial Statements
83international business machines corporation and Subsidiary Companies
The weighted-average interest rates for commercial paper
at December 31, 2002 and 2001, were 1.7 percent and 1.9 per-
cent, respectively. The weighted-average interest rates for
short-term loans at December 31, 2002 and 2001, were 2.5 per-
cent and 4.0 percent, respectively.
Long-Term Debt
pre-swap activity
(dollars in millions)
at december 31: maturities 2002 2001
U.S. Dollars:
Debentures:
6.22% 2027 $««««««500 $««««««500
6.5% 2028 700 700
7.0% 2025 600 600
7.0% 2045 150 150
7.125% 2096 850 850
7.5% 2013 550 550
8.375% 2019 750 750
3.43% convertible notes*2007 328 —
Notes: 6.0% average 2003-2032 2,130 2,772
Medium-term note
program: 4.0% average 2003-2018 7,113 3,620
Other: 4.9% average 2003-2009 610 828
14,281 11,320
Other currencies
(average interest rate
at December 31, 2002,
in parentheses):
Euros (5.4%) 2003-2009 2,111 3,042
Japanese yen (1.0%) 2003-2015 4,976 4,749
Canadian dollars (5.8%) 2003-2011 445 441
Swiss francs (4.0%) 2003 180 151
Other (6.6%) 2003-2014 730 726
22,723 20,429
Less: Net unamortized
(premium)/discount (1) 47
Add: SFAS No. 133 fair
value adjustment** 978 396
23,702 20,778
Less: Current maturities 3,716 4,815
Total $«19,986 $«15,963
*On October 1, 2002, as part of the purchase price consideration for the PwCC
acquisition, as addressed in note C, “Acquisitions/Divestitures,” on pages 78 to 80, the
company issued convertible notes bearing interest at a stated rate of 3.4 percent with a
face value of approximately $328 million to certain of the acquired PwCC partners.
The notes are convertible into 4,764,543 shares of IBM common stock at the option
of the holders at any time after the first anniversary of their issuance based on a
fixed conversion price of $68.81 per share of the company’s common stock.
** In accordance with the requirements of SFAS No. 133, the portion of the company’s
fixed rate debt obligations that is hedged is reflected in the Consolidated Statement of
Financial Position as an amount equal to the sum of the debt’s carrying value plus a
SFAS No. 133 fair value adjustment representing changes recorded in the fair value
of the hedged debt obligations attributable to movements in market interest rates and
applicable foreign currency exchange rates.
Annual contractual maturities on long-term debt outstand-
ing at December 31, 2002, are as follows:
(dollars in millions)
2003««« $«3,949
2004 3,613
2005 1,670
2006 2,705
2007 846
2008 and beyond ««««9,940
Interest on Debt
(dollars in millions)
for the year ended december 31: 2002 2001 2000
Cost of Global Financing $«633 $««««964 $«1,082
Interest expense 145 234 344
Interest expense —
discontinued operations 243
Interest capitalized 35 33 20
Total interest paid
and accrued $«815 $«1,235 $«1,449
Refer to the related discussion on pages 101 through 103 in
note x, “Segment Information,” for the total interest expense
of the Global Financing segment. See note l, “Derivatives and
Hedging Transactions,” on pages 84 to 86 for a discussion of
the use of currency and interest rate swaps in the company’s
debt risk management program.
Lines of Credit
The company maintains two global credit facilities totaling
$12.0 billion in committed lines, including an $8.0 billion
multiyear facility with a term extending through May 31, 2006,
and a $4.0 billion, 364-day facility that expires on May 30,
2003. The company’s other lines of credit, most of which
were uncommitted, totaled $7,190 million and $6,860 million
at December 31, 2002 and 2001, respectively. Interest rates and
other terms of borrowing under these lines of credit vary from
country to country, depending on local market conditions.
(dollars in millions)
at december 31: 2002 2001
Unused lines:
From the committed global
credit facility $«11,945 $«11,383
From other committed
and uncommitted lines 4,989 4,738
Total unused lines of credit $«16,934 $«16,121