<PAGE 1>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 1 0 - Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 1995
1-8175
________________________
(Commission file number)
IBM CREDIT CORPORATION
______________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 22-2351962
_______________________________ ____________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
290 Harbor Drive
P. O. Box 10399
Stamford, Connecticut
06904-2399
________________________________________
(Address of principal executive offices)
203-973-5100
____________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
___ ___
As of July 31, 1995, 899 shares of capital stock, par value $1.00 per
share, were outstanding and held by International Business Machines
Corporation. Aggregate market value of voting stock held by
non-affiliates of registrant at July 31, 1995: NONE.
The registrant meets the conditions set forth in General Instruction
H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with
the reduced disclosure format.
<PAGE 2>
INDEX
_____
Part I - Financial Information: Page
____
Item 1. Financial Statements:
Consolidated Statement of Financial Position
at June 30, 1995 and December 31, 1994 . . . . . . . . . . 1
Consolidated Statement of Earnings for the three
and six months ended June 30, 1995 and 1994. . . . . . . . 2
Consolidated Statement of Cash Flows
for the six months ended June 30, 1995 and 1994. . . . . . 3
Notes to Consolidated Financial Statements . . . . . . . . 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations. . 5
Part II - Other Information. . . . . . . . . . . . . . . . . . .12
<PAGE 3>
<TABLE>
IBM CREDIT CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Dollars in thousands)
<CAPTION>
At At
June 30, December 31,
1995 1994
___________ ____________
<S> <C> <C>
ASSETS:
Cash and cash equivalents. . . . . . . . $ 522,423 $ 614,339
Marketable securities. . . . . . . . . . 57,375 -
Net investment in capital leases . . . . 3,848,011 3,687,971
Equipment on operating leases, net . . . 1,737,076 1,573,242
Loans receivable . . . . . . . . . . . . 1,204,245 1,070,619
Working capital financing receivables. . 2,360,822 2,135,020
Investments and other assets . . . . . . 501,829 382,910
Due and deferred from receivable sales . 142,986 203,614
___________ ___________
Total Assets $10,374,767 $9,667,715
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Liabilities:
Short-term debt. . . . . . . . . . . . . $ 5,525,577 $4,355,038
Due to IBM Corporation and affiliates. . 1,236,250 1,493,449
Interest and other accruals. . . . . . . 492,337 462,277
Deferred income taxes. . . . . . . . . . 620,183 651,911
Long-term debt . . . . . . . . . . . . . 1,278,752 1,458,822
Long-term debt, IBM Corporation. . . . . 125,000 125,000
___________ ___________
Total liabilities. . . . . . . . . . . . 9,278,099 8,546,497
___________ ___________
Stockholder's equity:
Capital stock, par value $1 per share;
Shares authorized: 10,000;
Shares issued and outstanding: 899. . 453,711 453,711
Retained earnings. . . . . . . . . . . . 642,957 667,507
___________ ___________
Total stockholder's equity . . . . . . . 1,096,668 1,121,218
___________ ___________
Total Liabilities & Stockholder's Equity $10,374,767 $9,667,715
=========== ===========
<FN>
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>
-1-
<PAGE 4>
<TABLE>
IBM CREDIT CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in thousands)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
________ ________ ________ ________
<S> <C> <C> <C> <C>
FINANCE AND OTHER INCOME:
Income from leases:
Capital leases . . . . . . . . . $ 63,020 $ 82,704 $124,429 $172,327
Operating leases, net of
depreciation. . . . . . . . . . 52,874 35,161 103,810 73,949
________ ________ ________ ________
115,894 117,865 228,239 246,276
Income from loans . . . . . . . . . 27,130 23,750 53,666 44,813
Income from working capital
financing. . . . . . . . . . . . . 56,756 29,690 107,954 60,178
Equipment sales . . . . . . . . . . 130,967 161,320 245,070 311,850
Other income. . . . . . . . . . . . 30,482 50,395 63,781 80,037
________ ________ ________ ________
Total finance and other
income. . . . . . . . . . . . . 361,229 383,020 698,710 743,154
________ ________ ________ ________
COST AND EXPENSES:
Interest. . . . . . . . . . . . . . 94,621 76,442 180,917 151,867
Cost of equipment sales . . . . . . 104,809 145,440 205,644 283,526
Selling, general, and
administrative . . . . . . . . . . 43,009 39,776 83,879 79,984
Provision for receivable losses . . 13,605 11,924 27,311 20,928
________ ________ ________ ________
Total cost and expenses. . . . . 256,044 273,582 497,751 536,305
________ ________ ________ ________
EARNINGS BEFORE INCOME TAXES. . . . . 105,185 109,438 200,959 206,849
Provision for income taxes. . . . . . 41,261 43,068 79,090 81,418
________ ________ ________ ________
NET EARNINGS. . . . . . . . . . . . . $ 63,924 $ 66,370 $121,869 $125,431
======== ======== ======== ========
<FN>
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>
-2-
<PAGE 5>
<TABLE>
IBM CREDIT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30:
(Dollars in thousands) 1995 1994*
<CAPTION>
____________ __________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings . . . . . . . . . . . . . . . . . . . $ 121,869 $ 125,431
Adjustments to net earnings:
Depreciation and amortization . . . . . . . . . 395,127 313,495
Provision for receivable losses . . . . . . . . 27,311 20,928
Decrease in deferred income taxes . . . . . . . (33,384) (114,490)
Increase in interest and other accruals . . . . 22,368 88,297
Gross profit on equipment sales . . . . . . . . (39,426) (28,324)
Proceeds from equipment sales. . . . . . . . . . . 245,070 311,850
Decrease in due to IBM Corporation and affiliates. (257,199) (432,595)
Other, net . . . . . . . . . . . . . . . . . . . . 45,679 25,528
____________ __________
Cash provided by operating activities . . . . . . . 527,415 310,120
____________ __________
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in capital leases . . . . . . . . . . . (974,602) (516,770)
Collection of capital leases, net of income earned 715,427 527,103
Investment in equipment on operating leases. . . . (495,028) (186,063)
Investment in loans receivable . . . . . . . . . . (385,044) (161,692)
Collection of loans receivable, net of interest
earned. . . . . . . . . . . . . . . . . . . . . . 239,518 238,947
(Investment in) collection of working capital
financing receivables, net. . . . . . . . . . . . (232,913) 139,779
Purchases of marketable securities . . . . . . . . (176,112) -
Maturities of marketable securities. . . . . . . . 118,737 -
Cash payment for business acquired . . . . . . . . (92,478) -
Other, net . . . . . . . . . . . . . . . . . . . . (143,734) 176,003
____________ __________
Cash (used in) provided by investing activities . . (1,426,229) 217,307
____________ __________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt . . . . . 200,149 333,815
Repayment of debt with original maturities of one
year or more. . . . . . . . . . . . . . . . . . . (338,493) (584,205)
Issuance (repayment) of debt with original
maturities within one year. . . . . . . . . . . . 1,090,242 (59,406)
Cash dividends paid to IBM Corporation . . . . . . (145,000) (295,000)
____________ __________
Cash provided by (used in) financing activities . . 806,898 (604,796)
____________ __________
Decrease in cash and cash equivalents . . . . . . . (91,916) (77,369)
Cash and cash equivalents at January 1 . . . . . . 614,339 609,891
____________ __________
Cash and cash equivalents at June 30. . . . . . . . $ 522,423 $ 532,522
============ ==========
<FN>
<F1>
The accompanying notes are an integral part of this statement.
<F2>
*Reclassified to conform with 1995 presentation.
</FN>
</TABLE>
-3-
<PAGE 6>
IBM CREDIT CORPORATION
Notes to Consolidated Financial Statements
BASIS OF PRESENTATION:
In the opinion of management of IBM Credit Corporation (the Company),
all adjustments necessary to a fair statement of the results for the
three- and six-month periods are reflected in the unaudited interim
financial statements presented. These adjustments are of a normal
recurring nature.
RATIO OF EARNINGS TO FIXED CHARGES:
The ratio of earnings to fixed charges, calculated in accordance with
applicable Securities and Exchange Commission requirements, was 2.10
and 2.35 for the six months ended June 30, 1995 and 1994,
respectively.
ACQUISITION OF CHRYSLER SYSTEMS INC.:
On February 8, 1995, the Company acquired all of the issued and
outstanding stock of Chrysler Systems Inc. and certain of its
affiliates for $133.5 million. The acquisition was consummated
pursuant to a share purchase agreement with certain Chrysler
Corporation subsidiaries (the Seller). The purchase price was funded
by the Company's cash on hand and credits issued to the Seller that
are to be applied against certain future obligations to the Company.
IBM CS Systems, Inc., as the company is now known, buys, sells and
leases data processing equipment, and provides related technology
management services such as equipment procurement and asset
management. The transaction was accounted for as a purchase and IBM
CS Systems, Inc. is included in the Company's consolidated financial
statements from the date of acquisition.
RELATED PARTY TRANSACTIONS:
The Company provides capital equipment financing at market rates to
International Business Machines Corporation (IBM) and affiliated
companies for IBM and non-IBM products. During the first six months
of 1995, the Company originated $159.6 million of such financing,
compared with $82.3 million for the first six months of 1994.
Included in the Company's lease and loan portfolio was approximately
$887.7 million and $927.2 million, related to IBM and affiliated
companies, at June 30, 1995 and December 31, 1994, respectively. Of
these amounts, $833.9 million and $752.1 million were included in the
Company's operating lease portfolio at June 30, 1995 and December 31,
1994, respectively. The pre-tax income earned from operating leases
to IBM and affiliated companies, net of depreciation expense, was
approximately $45.5 million and $19.8 million in the first half of
1995 and the first half of 1994, respectively.
-4-
<PAGE 7>
Item 2.
IBM CREDIT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Net earnings for the six months ended June 30, 1995, were $121.9
million, yielding an annualized return on average equity of 23.1
percent.
FINANCING ORIGINATED
In the first six months of 1995, the Company originated capital
equipment financing for end users of $2,151.4 million, an 87 percent
increase from $1,150.8 million for the same 1994 period. For the
first half of 1995, originations of working capital financing for
dealers and remarketers of information industry products increased by
43 percent to $4,560.8 million, from $3,193.0 million for the first
half of 1994.
The growth in capital equipment financing originated is related to
IBM's increase in placements of its products and services in the
United States throughout the first six months of 1995, compared with
the same 1994 period. Furthermore, the percentage of such placements
that were financed by the Company during the first half of 1995
increased, compared with the same 1994 period.
Capital equipment financings for end users comprised purchases of
$1,388.9 million of information handling systems from IBM, financing
originated for installment receivables of $69.1 million, financing for
IBM software and services of $315.9 million, installment and lease
financing for state and local government customers of $158.0 million
for the account of IBM, and other financing of $219.5 million for IBM
equipment, as well as selected complementary non-IBM equipment that
meets IBM customers' total solution requirements. The purchases of
$1,388.9 million from IBM consisted of $919.4 million for capital
leases and $469.5 million for operating leases.
The growth in working capital financing originations reflects volume
increases in both IBM's workstation products and non-IBM products for
remarketers financed by the Company throughout the first six months of
1995. Working capital financing receivables arise primarily from
secured inventory and accounts receivable financing for IBM and
non-IBM dealers and remarketers. Payment terms for inventory secured
financing average 45 days. Payment terms for accounts receivable
secured financing typically range from 30 days to 180 days.
-5-
<PAGE 8>
REMARKETING ACTIVITIES
In addition to originating new financing, the Company remarkets used
IBM equipment. This equipment is primarily sourced from the
conclusion of lease transactions and is typically remarketed in
cooperation with the IBM sales force. The equipment is generally
leased or sold to end users. These transactions may be with existing
lessees or, when equipment is returned, with new customers. At June
30, 1995, the investment in remarketed equipment on capital and
operating leases totaled $626.4 million, remaining essentially
unchanged from the 1994 year-end investment of $623.7 million.
Remarketing activities comprises income from remarketed capital and
operating leases and gross profit on equipment sales, net of
write-downs in residual values of certain leased equipment. Income
from leases on the Consolidated Statement of Earnings includes income
from such remarketed leases. For the three months ended June 30,
1995, the remarketing activities contributed $40.2 million to pre-tax
income, remaining essentially unchanged from the $40.0 million for the
same 1994 period. The remarketing activities contributed $78.7
million to pre-tax income for the first six months of 1995, an
increase of 2 percent compared with $77.2 million for the same 1994
period.
ASSETS
Total assets increased to $10.4 billion at June 30, 1995, compared
with $9.7 billion at December 31, 1994. This increase is primarily
the result of financings originated exceeding cash collections on
capital leases, loans receivable and working capital financing
receivables, and growth in investment in equipment on operating leases
during the first six months of 1995, offset in part by payments to IBM
of cash and non-cash dividends of $146.4 million and a current tax
liability of $245.4 million.
Marketable securities, presented in the Consolidated Statement of
Financial Position at amortized cost which approximates market value,
included bank certificates of deposit of $8.8 million and corporate
debt securities of $48.6 million at June 30, 1995. The Company
intends to hold these securities to maturity.
LIABILITIES AND STOCKHOLDER'S EQUITY
The assets of the business were financed with $6,929.3 million of debt
at June 30, 1995. Total short-term and long-term debt increased by
approximately $990.4 million, from $5,938.9 million at December 31,
1994. This increase was the result of increases in commercial paper
outstanding of $1,171.5 million and other short-term debt of $18.1
million, offset by decreases in medium-term notes of $19.1 million and
long-term debt of $180.1 million. Included in long-term debt at June
30, 1995, and December 31, 1994, was $125.0 million payable to IBM at
market terms and conditions, maturing on November 1, 1997.
The Company has available $2.1 billion of a shelf registration with
the Securities and Exchange Commission for the issuance of debt
securities. This shelf registration allows the Company rapid access
to domestic financial markets. In addition, a subsidiary of the
Company has available $450.0 million of a separate shelf registration
for asset backed securities. The Company also has commercial paper
and medium-term note programs.
-6-
<PAGE 9>
LIABILITIES AND STOCKHOLDER'S EQUITY (continued)
The Company is an authorized borrower of up to $3.0 billion under a
$10.0 billion IBM committed global credit facility, and has a
liquidity agreement with IBM for $500.0 million. The Company has no
borrowings outstanding under the committed global credit facility or
the liquidity agreement. The Company also has the option, as approved
by the Board of Directors on September 30, 1994, to sell, assign,
pledge or transfer up to $4.0 billion of assets to third parties
through December 31, 1995. During the fourth quarter of 1994, the
Company and IBM signed master loan agreements providing additional
funding flexibility to each other. These agreements allow for
short-term (up to 270-day) funding, made available at market terms and
conditions, upon the request of either the Company or IBM. There are
no borrowings outstanding under these agreements. These financing
sources, along with the Company's internally generated cash and
medium-term note and commercial paper programs, provide flexibility to
the Company to grow its lease and loan portfolio, to fund working
capital requirements and to service debt.
The Company uses currency related and interest rate related agreements
to lower costs of funding its business, to diversify sources of
funding, or to manage interest rate and currency exposures arising
from mismatches between assets and liabilities. The Company enters
into such financial instruments solely for hedging purposes. The
Company does not enter into such financial instrument transactions for
trading or other speculative purposes. The Company routinely
evaluates existing and potential counterparty credit exposures
associated with such financial instrument transactions to ensure that
these exposures remain within credit guidelines. The Company does not
anticipate any material adverse effect on its financial position
resulting from its use of these instruments, nor does it anticipate
nonperformance by any of its counterparties.
Due to IBM Corporation and affiliates decreased by $257.1 million to
$1,236.3 million at June 30, 1995, from $1,493.4 million at December
31, 1994. This decrease was primarily attributable to the current tax
liability payment of $245.4 million made to IBM in the first half of
1995. Due to IBM Corporation and affiliates includes amounts of trade
payables arising from purchases of equipment for term leases and
installment receivables, working capital financing receivables for
dealers and remarketers, and software license fees, typically with
terms comparable to those offered to other IBM customers, unless the
Company is participating in IBM product promotions. Also included in
due to IBM Corporation and affiliates are income taxes currently
payable under the intercompany tax allocation agreement.
Total stockholder's equity at June 30, 1995, was $1,096.7 million,
down approximately $24.5 million from year-end 1994. The decline in
stockholder's equity reflects the payments of $145.0 million in cash
dividends and $1.4 million in non-cash dividends to IBM in the first
half of 1995, offset by net earnings of $121.9 million for the first
half of 1995.
At June 30, 1995, the Company's debt-to-equity ratio was 6.3:1,
compared with 5.3:1 at year-end 1994, and 6.3:1 at June 30, 1994.
-7-
<PAGE 10>
TOTAL CASH PROVIDED BEFORE DIVIDENDS
Total cash provided before dividends was $53.1 million for the six
months ended June 30, 1995, compared with $217.6 million for the same
1994 period. Total cash provided before dividends reflects $474.3
million of cash used in investing and financing activities before
dividends, offset by $527.4 million of cash provided by operating
activities for the first half of 1995.
Cash and cash equivalents at June 30, 1995, totaled $522.4 million, a
decrease of $91.9 million compared with the balance at December 31,
1994.
INCOME FROM LEASES
Income from leases decreased 2 percent to $115.9 million for the three
months ended June 30, 1995, from $117.9 million for the same 1994
period; for the six months ended June 30, 1995, income from leases
decreased 7 percent to $228.2 million, from $246.3 million for the
same 1994 period. These declines partially resulted from lower
average asset balances in the capital lease portfolio, which in turn
were primarily caused by the securitization and sale of capital lease
receivables in the third quarter of 1994. The income from leases
recognized by IBM CS Systems, Inc. partially offsets this decline.
Income from leases includes lease income resulting from remarketing
transactions. Lease income from remarketing transactions was $20.1
million and $45.3 million for the three- and six-month periods of
1995, a decrease of 17 percent and 7 percent, respectively, from the
comparable 1994 periods.
On a periodic basis, the Company reassesses the future residual values
of its portfolio of leases. In accordance with generally accepted
accounting principles, anticipated increases in specific future
residual values may not be recognized before realization and are thus
a source of potential future profits. Anticipated decreases in
specific future residual values, considered to be other than
temporary, must be recognized currently.
A review of the Company's $595.8 million residual value portfolio at
June 30, 1995, indicated that the overall estimated future value of
the portfolio continues to be greater than the value currently
recorded. The Company recorded a $6.0 million reduction to income
from leases during the second quarter of 1995 to recognize decreases
in the expected future residual value of specific leased equipment.
No reductions were recorded in the first quarter of 1995 nor the first
half of 1994.
INCOME FROM LOANS
Income from loans increased 14 percent to $27.1 million for the three
months ended June 30, 1995; for the first half of 1995, income from
loans increased 20 percent to $53.7 million, compared with the
respective 1994 periods. These increases were primarily the result of
an increase in financing originated for software and services during
1994 and the first six months of 1995. These increases were partially
offset by the securitization and sale of loan receivables in the third
quarter of 1994.
-8-
<PAGE 11>
INCOME FROM WORKING CAPITAL FINANCING
Income from working capital financing increased 91 percent to $56.8
million for the three months ended June 30, 1995, compared with the
same 1994 period; for the first half of 1995, income from working
capital financing increased 79 percent to $108.0 million, compared
with the respective 1994 period. These increases were primarily due
to growth in the average working capital financing receivables
outstanding and generally higher interest rates charged during the
first six months of 1995, compared with the same 1994 period. The
growth in average working capital financing receivables outstanding
primarily reflects increased originations as discussed in the
"Financing Originated" section.
EQUIPMENT SALES
Equipment sales amounted to $131.0 million for the second quarter of
1995, compared with $161.3 million for the same period in 1994; for
the first six months of 1995, equipment sales amounted to $245.1
million, compared with $311.9 million for the comparable 1994 period.
The revenue associated with outright sales and sales-type leases is
included in equipment sales. Company-owned equipment may be sold or
released to existing lessees or, when equipment is returned, to new
customers.
Gross profit on equipment sales for the second quarter of 1995 was
$26.2 million, an increase of 65 percent, compared with $15.9 million
for the same 1994 period. For the first six months of 1995, the gross
profit on equipment sales increased 39 percent to $39.4 million,
compared with $28.3 million for the same 1994 period. The gross
profit margin for the second quarter of 1995 was 20.0 percent, up from
9.8 percent for the second quarter of 1994; for the first six months
of 1995, the gross profit margin increased to 16.1 percent, compared
with 9.1 percent for the same 1994 period. These increases are partly
due to higher margins realized on high-end processors and
communication devices during the first six months of 1995, compared
with the same 1994 period, because of market demand which exceeded
supply during the applicable period.
OTHER INCOME
Other income decreased 40 percent to $30.5 million for the three
months ended June 30, 1995; for the six months ended June 30, 1995,
other income decreased 20 percent to $63.8 million. These decreases
are largely attributable to the recognition of a $13.3 million pre-tax
gain on the sale of IBM Credit Investment Management Corporation
during the second quarter of 1994 and a decrease in servicing fee
income during the 1995 period, compared with the 1994 period. These
items were partially offset by a $4.3 million pre-tax gain recognized
on the sale of financing assets during the second quarter of 1995, and
a $5.0 million pre-tax gain the Company recognized upon Comdisco,
Inc.'s redemption of the convertible subordinated promissory note on
March 1, 1995.
Included in other income is interest income earned on cash and cash
equivalents and notes, as well as fees for managing IBM's state and
local government installment and lease financing receivables
portfolio, and fees for the servicing of financing receivables sold.
-9-
<PAGE 12>
INTEREST EXPENSE
As a result of rising interest rates, interest expense increased 24
percent to $94.6 million for the three months ended June 30, 1995, and
19 percent to $180.9 million for the six months ended June 30, 1995,
compared with the same 1994 periods. The Company's year-to-date
average cost of debt through June 30, 1995, increased to 5.94 percent,
from 4.76 percent for the same period in 1994.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses were $43.0 million for
the second quarter of 1995, an increase of 8 percent compared with the
same 1994 period. For the first six months of 1995, selling, general,
and administrative expenses increased 5 percent to $83.9 million, from
$80.0 million for the same 1994 period. These increases are primarily
a result of the expenses incurred by IBM CS Systems, Inc. since the
acquisition date.
PROVISION FOR RECEIVABLE LOSSES
The Company's portfolio of capital equipment leases and loans is
predominantly with investment grade customers. The Company generally
retains ownership or takes a security interest in any underlying
equipment financed. The portfolio is diversified by geography,
industry, and individual unaffiliated customer.
With the continued growth of the Company's working capital financing
business in 1994 and the first half of 1995, the concentration of such
financings for certain large dealers and remarketers of information
industry products has become more significant. Such loans are
typically collateralized by the inventory and accounts receivable of
the dealers and remarketers. The Company does not believe that this
risk will have a material adverse effect on its financial position or
results of operations.
The provision for receivable losses increased to $13.6 million for the
quarter ended June 30, 1995, compared with $11.9 million for the same
period in 1994. For the six months ended June 30, 1995, the provision
for receivable losses increased to $27.3 million, compared with $20.9
million for the comparable period in 1994. These increases reflect
the growth in the amount of capital equipment and working capital
financing originated during the first half of 1995, the Company's
timely recognition of probable receivable losses, and its revised
estimate of the recoverability of specific receivables.
-10-
<PAGE 13>
NET EARNINGS
Net earnings decreased 4 percent to $63.9 million for the second
quarter of 1995, compared with $66.4 million for the same period in
1994.
Net earnings for the six months ended June 30, 1995, were $121.9
million, a decrease of 3 percent from the same period in 1994.
The decrease in net earnings for 1995, compared with 1994, is
primarily attributable to the recognition of a one-time gain on the
sale of IBM Credit Investment Management Corporation during the second
quarter of 1994. Despite this slight decline in net earnings, the
Company's working capital financing business expanded, its capital
equipment remarketing operations continued to be profitable and its
loan and lease portfolios grew, contributing to a favorable
performance during the second quarter and first half of 1995.
RETURN ON AVERAGE EQUITY
The results for the first six months of 1995 yielded an annualized
return on average equity of 23.1 percent, compared with 24.6 percent
for the comparable 1994 period.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) 114, "Accounting by Creditors for
Impairment of a Loan," in May 1993 and SFAS 118, "Accounting by
Creditors for Impairment of a Loan--Income Recognition and
Disclosures," an amendment of SFAS 114, in October 1994. These
standards prescribe impairment measurements and reporting related to
certain loans.
The Company implemented SFAS 114 and SFAS 118, effective January 1,
1995. The implementation had no material impact on the Company's
financial position and results of operations.
CLOSING DISCUSSION
The Company's resources continue to be sufficient to enable it to
carry out its mission of offering customers competitive leasing and
financing and providing information technology remarketers with
inventory and accounts receivable financing, which contribute to the
growth and stability of IBM earnings.
-11-
<PAGE 14>
[SIGNATURE]
Part II - Other Information
___________________________
Item 1. Legal Proceedings
__________________________
None material.
Item 6(b). Reports on Form 8-K
_______________________________
No reports on Form 8-K have been filed during the first six months
of 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
IBM CREDIT CORPORATION
______________________
(Registrant)
Date: August 3, 1995 By: /s/ Allison R. Schleicher
______________ _____________________________
(Allison R. Schleicher)
Vice President, Finance
and Chief Financial Officer
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM IBM CREDIT CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS AT AND
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 522,423
<SECURITIES> 57,375
<RECEIVABLES> 1,204,245
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,374,767
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 453,711
0
0
<OTHER-SE> 642,957
<TOTAL-LIABILITY-AND-EQUITY> 10,374,767
<SALES> 245,070
<TOTAL-REVENUES> 698,710
<CGS> 205,644
<TOTAL-COSTS> 205,644
<OTHER-EXPENSES> 83,879
<LOSS-PROVISION> 27,311
<INTEREST-EXPENSE> 180,917
<INCOME-PRETAX> 200,959
<INCOME-TAX> 79,090
<INCOME-CONTINUING> 121,869
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 121,869
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
