IBM 2003 Annual Report Download - page 97

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J
sale and securitization of receivables
The company periodically sells receivables through the securi-
tization of loans, leases and trade receivables. The company
retains servicing rights in the securitized receivables for
which it receives a servicing fee. Any gain or loss incurred as
a result of such sales is recognized in the period in which the
sale occurs.
During 2001, the company entered into an uncommitted
trade receivables securitization facility that allows for the
ongoing sale of up to $500 million of trade receivables. This
facility was put in place primarily to provide backup liquidity
and can be accessed on three days notice. The company sold
$179 million of trade receivables through this facility in
2001. The company has not had any amounts outstanding
under the trade receivables securitization facility since 2001.
In addition, the company has a program to sell loans receivable
from state and local government clients. This program was
established in 1990 and has been used from time to time
since then. The company sold $278 million of loans receivable
due from state and local government clients in 2001. No
receivables were sold under either of these programs in 2003
or 2002.
At December 31, 2003 and 2002, the total balance of the
state and local receivables securitized and under the company’s
management was $21 million and $101 million, respectively.
Servicing assets net of servicing liabilities were insignificant.
The investors in the state and local loans receivable
securitizations have recourse to the company via a limited
guarantee of $14 million at December 31, 2003. At year-end
2003, delinquent amounts from the receivables sold and net
credit losses were insignificant.
K
borrowings
SHORT-TERM DEBT
(dollars in millions)
AT DECEMBER 31: 2003 2002
Commercial paper $«2,349 $«1,302
Short-term loans 1,124 1,013
Long-term debt—current maturities 3,173 3,716
Total $«6,646 $«6,031
The weighted-average interest rates for commercial paper at
December 31, 2003 and 2002, were 1.0 percent and 1.7 percent,
respectively. The weighted-average interest rate for short-term
loans was 2.5 percent at both December 31, 2003 and 2002.
LONG-TERM DEBT
Pre-Swap Activity
(dollars in millions)
AT DECEMBER 31: MATURITIES 2003 2002
U.S. Dollars:
Debentures:
5.875% 2032 ««$«««««600 «$«««««««—
6.22% 2027 ««««««500 ««««««500
6.5% 2028 319 700
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 309 328
Notes: 5.9% average 2004–2013 3,034 2,130
Medium-term note
program: 3.7% average 2004–2018 4,690 7,113
Other: 4.0% average 2004–2009 508 610
12,860 14,281
Other currencies
(average interest rate
at December 31, 2003,
in parentheses):
Euros (5.3%) 2004–2009 1,174 2,111
Japanese yen (1.1%) 2004–2015 4,363 4,976
Canadian dollars (5.8%) 2004–2011 201 445
Swiss francs (4.0%) 2003 —180
Other (6.0%) 2004–2014 770 730
19,368 22,723
Less: Net unamortized
discount/(premium) 15 (1)
Add: SFAS No. 133 fair
value adjustment** 806 978
20,159 23,702
Less: Current maturities 3,173 3,716
Total $«16,986 $«19,986
*On October 1, 2002, as part of the purchase price consideration for the PwCC acqui-
sition, as addressed in note C, “Acquisitions/Divestitures,” on pages 89 to 92, the
company issued convertible notes bearing interest at a stated rate of 3.43 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. As of December
31, 2003, a total of 274,347 shares had been issued under this provision.
** 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.
Notes to Consolidated Financial Statements
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
95