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NotestoConsolidatedFinancialStatements
INTERNATIONALBUSINESSMACHINESCORPORATION ANDSUBSIDIARYCOMPANIES
70_ NotestoConsolidatedFinancialStatements
J. SecuritizationofReceivables
Thecompanyperiodicallysellsreceivablesthroughthesecuriti-
zation of trade receivables, loans, and leases. The company
retainsservicingrightsinthesecuritizedreceivablesforwhichit
receivesaservicingfee.Anygainorlossincurredasaresultof
suchsalesisrecognizedintheperiodinwhichthesaleoccurs.
During 2005, the company renewed its trade receivables
securitization facility that allows for the ongoing sale of up to
$500millionoftradereceivables.Thisfacilitywasputinplacein
2001 asanuncommittedfacility;however,itwasconvertedtoa
committed facility in 2004. The facility, which renews annually,
was put in place to provide backup liquidity and can be
accessedon a threedays’ notice.The company did nothave
anyamountsoutstanding under thetradereceivablessecuriti-
zationfacility atDecember31, 2005or2004.During2005,the
company securitized $6.3 million of trade receivables and
retained the servicing responsibilities for which it received a
servicingfee. In2005,boththepre-taxlossonthesaleofreceiv-
ables and the servicing fees received were insignificant. No
tradereceivableswere securitized in2004.
Thecompanyutilizescertainofitsfinancingreceivablesas
collateral for nonrecourse borrowings. Financing receivables
pledgedascollateralforborrowingswere$318 millionand$249
millionatDecember31,2005and2004,respectively.Thesebor-
rowingsareincludedinnote K,“Borrowings,” below.
K.Borrowings
Short-TermDebt
(Dollarsinmillions)
ATDECEMBER31: 2005 2004
Commercialpaper $««««858 $«3,151
Short-termloans 3,370 1,340
Long-termdebt—currentmaturities 2,988 3,608
Total $«7,216 $«8,099
The weighted-average interest rates for commercial paper at
December31,2005and2004,were 4.3 percentand2.2percent,
respectively.Theweighted-averageinterestratesforshort-term
loanswere 2.2 percentand1.5percentatDecember31, 2005
and2004,respectively.
Long-Term Debt
PRE-SWAP BORROWING
(Dollarsinmillions)
MATURITIES 2005 2004
U.S.Dollars:
Debentures:
5.875% 2032 $««««««600 $««««««600
6.22% 2027 469 469
6.5% 2028 313 313
7. 0 % 2025 600 600
7. 0 % 2045 150 150
7.125% 2096 850 850
7. 5 % 2013 532 532
8.375% 2019 750 750
3.43%convertiblenote* 2007 238 278
Notes:5.4%average 2006–2013 2,713 2,724
Medium-termnote
program:4.4%average 2006–2018 5,620 3,627
Other: 4.1%average** 2006–2011 1,833 1,555
14,668 12,448
Othercurrencies(average
interestrateatDecember
31,2005,inparentheses):
Euros(3.1%) 2006–2010 1,280 1,095
Japaneseyen(1.4%) 2006–2015 1,450 3,435
Canadiandollars(7.7%) 2008–2011 59
Swissfrancs(1.5%) 2008 378 220
Other(6.1%) 2006–2011 406 513
18,187 17,720
Less:Netunamortizeddiscount 45 49
Add:SFASNo.133fair
valueadjustment+271 765
18,413 18,436
Less:Currentmaturities 2,988 3,608
Total $«15,425 $«14,828
* Aspartofthecompany’s2002acquisitionof PricewaterhouseCoopers’Global
BusinessConsultingandTechnologyServicesUnit(PwCC),thecompanyissued
convertiblenotesbearinginterestatastatedrateof3.43percentwithafacevalue
ofapproximately$328milliontocertainoftheacquiredPwCCpartners.Thenotes
areconvertibleinto4,764,543sharesofIBMcommonstockattheoptionofthe
holdersatanytimebasedonafixedconversionpriceof$68.81 pershareofthe
company’scommonstock.AsofDecember31,2005,atotalof1,172,578shares
hadbeenissuedunderthisprovision.
** Includes$318 millionand$249millionofdebtcollateralizedbyfinancingreceiv-
ablesatDecember31,2005and2004,respectively.Seenote J,“Securitizationof
Receivables” above forfurtherdetails.
+ InaccordancewiththerequirementsofSFASNo.133,theportionofthecompany’s
fixedratedebtobligationsthatishedgedisreflectedintheConsolidatedStatement
ofFinancialPositionasanamountequaltothesumofthedebt’scarryingvalueplus
anSFASNo. 133fairvalueadjustmentrepresentingchanges inthefairvalueofthe
hedgeddebtobligationsattributabletomovementsin benchmark interestrates.