<PAGE 1>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission file number 1-8175
_____________________________
IBM CREDIT CORPORATION
______________________________________________________
(Exact name of registrant as specified in its charter)
DELAWARE 22-2351962
________________________ ____________________________________
(State of incorporation) (IRS employer identification number)
290 Harbor Drive
P. O. Box 10399
Stamford, Connecticut 06904-2399
________________________________________ ____________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 203-973-5100
____________
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 May 1, 1996, 936 shares of capital stock, par value $1.00
per share, were held by International Business Machines Corporation.
Aggregate market value of the voting stock held by nonaffiliates
of the registrant at May 1, 1996: 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 March 31, 1996 and December 31, 1995. . . . . . . . . . 1
Consolidated Statement of Earnings for the three
months ended March 31, 1996 and 1995 . . . . . . . . . . . 2
Consolidated Statement of Cash Flows
for the three months ended March 31, 1996 and 1995 . . . . 3
Notes to Consolidated Financial Statements . . . . . . . . 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations. . 6
Part II - Other Information. . . . . . . . . . . . . . . . . . .14
<PAGE 3>
<TABLE>
IBM CREDIT CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Dollars in thousands)
<CAPTION>
At At
March 31, December 31,
1996 1995*
___________ ____________
<S> <C> <C>
ASSETS:
Cash and cash equivalents. . . . . . . . . $ 281,606 $ 336,839
Marketable securities. . . . . . . . . . . 103,783 89,930
Net investment in capital leases . . . . . 3,937,661 3,966,255
Equipment on operating leases, net . . . . 1,803,171 1,695,812
Loans receivable . . . . . . . . . . . . . 1,505,317 1,473,822
Working capital financing receivables. . . 2,744,186 3,158,932
Investments and other assets . . . . . . . 479,296 597,882
Due and deferred from receivable sales . . 90,676 106,079
___________ ___________
Total Assets $10,945,696 $11,425,551
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Liabilities:
Short-term debt. . . . . . . . . . . . . . $ 6,358,494 $ 6,258,485
Short-term debt, IBM . . . . . . . . . . . - 214,142
Due to IBM and affiliates. . . . . . . . . 1,292,703 1,606,433
Interest and other accruals. . . . . . . . 277,443 357,311
Deferred income taxes. . . . . . . . . . . 687,444 665,166
Long-term debt . . . . . . . . . . . . . . 966,710 990,440
Long-term debt, IBM. . . . . . . . . . . . 125,000 125,000
___________ ___________
Total liabilities . . . . . . . . . . . 9,707,794 10,216,977
___________ ___________
Stockholder's equity:
Capital stock, par value $1.00 per share
Shares authorized: 10,000
Shares issued and outstanding:
936 in 1996 and 932 in 1995 . . . . . 457,411 457,011
Retained earnings. . . . . . . . . . . . . 780,491 751,563
___________ ___________
Total stockholder's equity. . . . . . . 1,237,902 1,208,574
___________ ___________
Total Liabilities and Stockholder's Equity $10,945,696 $11,425,551
=========== ===========
<FN>
<F1>
The accompanying notes are an integral part of this statement.
<F2>
* Reclassified to conform with 1996 presentation.
</FN>
</TABLE>
-1-
<PAGE 4>
<TABLE>
IBM CREDIT CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31:
(Dollars in thousands)
<CAPTION>
1996 1995
________ ________
<S> <C> <C>
FINANCE AND OTHER INCOME:
Income from leases:
Capital leases . . . . . . . . . . . . . . $ 69,604 $ 61,409
Operating leases (net of depreciation:
1996 - $206,318 and 1995 - $172,537). . . 45,381 50,936
________ ________
114,985 112,345
Income from loans. . . . . . . . . . . . . . 36,983 26,536
Income from working capital financing. . . . 68,437 51,198
Equipment sales. . . . . . . . . . . . . . . 106,488 114,103
Other income. . . . . . . . . . . . . . . . 47,286 33,299
________ ________
Total finance and other income . . . . . . 374,179 337,481
________ ________
COST AND EXPENSES:
Interest . . . . . . . . . . . . . . . . . . 106,280 86,296
Cost of equipment sales. . . . . . . . . . . 87,799 100,835
Selling, general, and administrative . . . . 44,861 40,870
Provision for receivable losses. . . . . . . 12,963 13,706
________ ________
Total cost and expenses. . . . . . . . . . 251,903 241,707
________ ________
EARNINGS BEFORE INCOME TAXES . . . . . . . . . 122,276 95,774
Provision for income taxes . . . . . . . . . . 48,348 37,829
________ ________
NET EARNINGS . . . . . . . . . . . . . . . . . $ 73,928 $ 57,945
======== ========
<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 THREE MONTHS ENDED MARCH 31:
(Dollars in thousands)
<CAPTION>
1996 1995*
__________ __________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings . . . . . . . . . . . . . . . . . $ 73,928 $ 57,945
Adjustments to reconcile net earnings to
cash provided by operating activities:
Depreciation and amortization. . . . . . . . . 208,717 172,636
Provision for receivable losses. . . . . . . . 12,963 13,706
Change in deferred income taxes. . . . . . . . 22,278 (11,187)
Decrease in interest and other accruals. . . . (79,868) (32,103)
Gross profit on equipment sales. . . . . . . . (18,689) (13,268)
Other items that provided (used) cash:
Proceeds from equipment sales. . . . . . . . 106,488 114,103
Decrease in amounts due IBM and affiliates . (313,730) (185,874)
Other, net . . . . . . . . . . . . . . . . . 6,069 28,480
__________ __________
Cash provided by operating activities . . . . . . 18,156 144,438
__________ __________
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in capital leases . . . . . . . . . (473,225) (461,939)
Collection of capital leases, net of income
earned. . . . . . . . . . . . . . . . . . . . 409,706 307,862
Investment in equipment on operating leases. . (324,374) (262,631)
Investment in loans receivable . . . . . . . . (285,346) (195,286)
Collection of loans receivable, net of
interest earned . . . . . . . . . . . . . . . 260,451 175,450
Collection of (investment in) working capital
financing receivables, net. . . . . . . . . . 408,233 (14,789)
Purchases of marketable securities . . . . . . (13,853) (121,237)
Cash payment for business acquired . . . . . . - (92,478)
Other, net . . . . . . . . . . . . . . . . . . 128,885 50,604
__________ __________
Cash provided by (used in) investing activities . 110,477 (614,444)
__________ __________
<FN>
<F1>
The accompanying notes are an integral part of this statement.
<F2>
* Reclassified to conform with 1996 presentation.
</FN>
</TABLE>
-3-
<PAGE 6>
<TABLE>
IBM CREDIT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31:
(Continued)
(Dollars in thousands)
<CAPTION>
1996 1995*
__________ __________
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt . . . 90,000 120,000
Repayment of debt with original maturities
of one year or more . . . . . . . . . . . . . (120,850) (151,853)
(Repayment) issuance of debt with original
maturities within one year, net . . . . . . . (108,016) 259,501
Cash dividends paid to IBM . . . . . . . . . . (45,000) (145,000)
__________ __________
Cash (used in) provided by financing activities . (183,866) 82,648
__________ __________
Decrease in cash and cash equivalents . . . . . . (55,233) (387,358)
Cash and cash equivalents, January 1. . . . . . . 336,839 614,339
__________ __________
Cash and cash equivalents, March 31 . . . . . . . $ 281,606 $ 226,981
========== ==========
<FN>
<F1>
Supplemental schedule of noncash investing and financing
activities:
During the first quarter of 1996, the Company issued to IBM
four shares of capital stock, par value $1.00 per share, in
exchange for assets IBM transferred to the Company. The
assets transferred had a net book value of about $50.0
thousand which approximated fair value, and a deferred tax
asset value of approximately $350.0 thousand. As a result,
stockholder's equity was increased by approximately $400.0
thousand.
The purchase price for the acquisition of Chrysler Systems
Inc. during the first quarter of 1995, was funded by the
Company's cash on hand and credits of $41.0 million issued
to certain Chrysler Corporation subsidiaries that were
applied against certain future obligations to the Company.
<F2>
The accompanying notes are an integral part of this statement.
<F3>
* Reclassified to conform with 1996 presentation.
</FN>
</TABLE>
-4-
<PAGE 7>
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-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 2.15 and 2.10 for the three
months ended March 31, 1996 and 1995, respectively.
RELATED COMPANY TRANSACTIONS:
The Company provides equipment financing at market rates to
International Business Machines Corporation (IBM) and
affiliated companies for both IBM and non-IBM products. The
Company originated $133.8 million and $45.5 million of such
financings during the three months ended March 31, 1996, and
1995, respectively. At March 31, 1996, and December 31,
1995, approximately $734.4 million and $687.4 million,
respectively, of such financings were included in the lease
and loan portfolio. Of these amounts, $722.6 million and
$677.3 million were included in the Company's operating
lease portfolio at March 31, 1996, and December 31, 1995,
respectively. The pretax income earned from operating
leases to IBM and affiliated companies, net of depreciation
expense, was approximately $23.4 million and $19.3 million
in the first quarter of 1996 and 1995, respectively.
-5-
<PAGE 8>
IBM CREDIT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Net earnings for the three months ended March 31, 1996, were
$73.9 million, yielding an annualized return on average
equity of 24.4 percent. Net earnings for the three months
ended March 31, 1995, were $57.9 million.
FINANCING ORIGINATED
For the three months ended March 31, 1996, the Company
originated capital equipment financing for end users of
$1,233.4 million, an 18 percent increase from $1,049.6
million for the same 1995 period. For the three months
ended March 31, 1996, originations of working capital
financing for dealers and remarketers of information
industry products increased by 19 percent to $2,550.1
million, from $2,140.2 million for the same 1995 period.
The growth in capital equipment financing originated is
related to the increase in the propensity for customers to
finance their acquisitions of IBM equipment with the
Company, during the first quarter of 1996, compared with the
same period in 1995.
Capital equipment financings for end users included
purchases of $726.0 million of information handling systems
from IBM, consisting of $420.2 million for capital leases
and $305.8 million for operating leases. In addition,
capital equipment financings for end users included the
following: (1) financing originated for installment
receivables of $43.0 million; (2) financing for IBM software
and services of $242.3 million; (3) installment and lease
financing for state and local government customers of $102.0
million for the account of IBM; and (4) other financing of
$120.1 million for IBM equipment, as well as related non-IBM
equipment to meet IBM customers' total solution
requirements.
The Company's capital lease portfolio primarily includes
direct financing leases. Direct financing leases
consist principally of IBM information handling equipment
with terms generally from three to five years.
Operating leases consist principally of IBM information
handling equipment with terms generally from two to four
years.
The growth in working capital financing originations
throughout the first three months of 1996, reflects volume
increases in both IBM's workstation products and non-IBM
products for remarketers financed by the Company, compared
with the same 1995 period. Working capital financing
receivables arise primarily from secured inventory and
accounts receivable financing for dealers and remarketers of
IBM and non-IBM products. Payment terms for inventory
secured financing generally range from 30 days to 45 days.
Payment terms for accounts receivable secured financing
generally range from 30 days to 90 days.
-6-
<PAGE 9>
REMARKETING ACTIVITIES
In addition to originating new financing, the Company
remarkets used IBM equipment. This equipment is primarily
sourced from customers at 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.
Remarketing activities are fully integrated in the Company's
financial statements. Remarketing activities are comprised
of income from follow-on capital and operating leases and
gross profit on equipment sales, net of write-downs in
residual values of certain leased equipment.
At March 31, 1996, the investment in remarketed equipment on
capital and operating leases totaled $430.7 million, a
decrease of 8 percent from the 1995 year-end investment of
$470.5 million. For the three months ended March 31, 1996,
the remarketing activities contributed $32.3 million to
pretax earnings, a decrease of 16 percent compared with
$38.5 million for the same 1995 period. Refer to Equipment
Sales in Management's Discussion and Analysis on page 11 for
additional details.
ASSETS
Total assets decreased to $10.9 billion at March 31, 1996,
compared with $11.4 billion at December 31, 1995. This
decrease is primarily the result of cash collections of $3.7
billion exceeding financings originated of $3.4 billion on
capital leases, loans receivable and working capital
financing receivables, plus repayments of debt exceeding
issuances by approximately $137.9 million, offset by growth
of $107.4 million in investment in equipment on operating
leases, during the first quarter of 1996.
The carrying amount of marketable securities, as reported in
the Consolidated Statement of Financial Position,
approximates market value. These marketable securities were
available-for-sale. At March 31, 1996, and December 31,
1995, the marketable securities included investments in U.S.
federal agency debt securities of $21.7 million and
corporate debt securities of $82.1 million and $68.2
million, respectively.
LIABILITIES AND STOCKHOLDER'S EQUITY
The assets of the business were financed with $7,450.2
million of debt at March 31, 1996. Total short-term and
long-term debt decreased by approximately $137.9 million,
from $7,588.1 million at December 31, 1995. This decline was
the result of decreases in commercial paper outstanding of
$47.6 million, long-term debt of $23.7 million and the
January 2, 1996 maturity of $214.1 million, payable to IBM
at market terms and conditions, offset by increases of
$147.5 million in medium-term notes. Included in long-term
debt at March 31, 1996, and December 31, 1995, was $125.0
million payable to IBM at market terms and conditions,
maturing on November 1, 1997.
-7-
<PAGE 10>
LIABILITIES AND STOCKHOLDER'S EQUITY (Continued)
The Company has the option, as approved by the Board of
Directors on December 13, 1995, to issue and sell up to $4.0
billion of debt securities in domestic and foreign financial
markets through December 31, 1996. Included within this
$4.0 billion authorization is the option, together with IBM
and IBM International Finance, N.V., to issue and sell debt
securities in an aggregate nominal amount of up to 3.0
billion in European Currency Units (ECU), or its equivalent
in any other currency. The Company's decision to issue any
debt securities over the remaining authorized period under
this program is dependent on prevailing market conditions
and its need for such funding.
The Company has available $0.7 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, and the Company intends to continue to issue debt
securities under this shelf registration. The Company has
no firm commitments for the purchase of debt securities that
it may issue from the unused portion of this shelf
registration.
The Company has the option, as approved by the Board of
Directors on December 13, 1995, to sell, assign, pledge or
transfer up to $2.0 billion of assets to third parties
through December 31, 1996. Included within this $2.0
billion authorization is $450.0 million of a separate shelf
registration for issuance of asset-backed securities, which
a subsidiary of the Company has available. The subsidiary's
decision to issue any asset-backed securities over the
remaining authorized period under this shelf registration is
dependent on prevailing market conditions and its need for
such funding. The Company also has a commercial paper
program.
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 and IBM have also 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. No borrowings
were outstanding at March 31, 1996. As previously
mentioned, the Company had borrowings outstanding under this
agreement of $214.1 million, at December 31, 1995.
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.
-8-
<PAGE 11>
LIABILITIES AND STOCKHOLDER'S EQUITY (Continued)
The Company uses agreements related to currency and interest
rate 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
instrument transactions for risk management and 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 or results of operations from its use of these
instruments, nor does it anticipate nonperformance by any of
its counterparties.
Amounts due to IBM and affiliates include 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
amounts due to IBM and affiliates are income taxes currently
payable under the intercompany tax allocation agreement.
Amounts due to IBM and affiliates decreased by approximately
$313.7 million to $1,292.7 million at March 31, 1996, from
$1,606.4 million at December 31, 1995. This decline was
primarily attributable to a $234.0 million decrease in the
amount payable for capital equipment purchases and a current
tax liability payment of $33.4 million made to IBM during
the first quarter of 1996, partially offset by a 1996 first
quarter current income tax provision of $25.4 million.
Total stockholder's equity at March 31, 1996, was $1,237.9
million, up $29.3 million from year-end 1995. The increase
in stockholder's equity reflects net earnings of $73.9
million for the first three months of 1996 and the issuance
of $0.4 million of capital stock to IBM, offset by the
payment of $45.0 million in cash dividends to IBM during the
first quarter of 1996.
At March 31, 1996, and 1995, the Company's debt to equity
ratio was 6.0:1, compared with 6.3:1 at December 31, 1995.
TOTAL CASH USED BEFORE DIVIDENDS
Total cash used before dividends was $10.2 million for the
three months ended March 31, 1996, compared with total cash
used before dividends of $242.4 million for the same 1995
period. Total cash used before dividends reflects $28.4
million of cash used in investing and financing activities
before dividends, offset by $18.2 million of cash provided
by operating activities for the first quarter of 1996.
-9-
<PAGE 12>
TOTAL CASH USED BEFORE DIVIDENDS (Continued)
For the three months ended March 31, 1995, total cash used
before dividends reflected $386.8 million of cash used in
investing and financing activities before dividends, offset
by $144.4 million of cash provided by operating activities.
Cash and cash equivalents at March 31, 1996, totaled $281.6
million, a decrease of $55.2 million, compared with the
balance at December 31, 1995.
INCOME FROM LEASES
Income from leases increased 2 percent to $115.0 million for
the three months ended March 31, 1996, from $112.3 million
for the same 1995 period. The growth in capital equipment
financings for end users during 1995 contributed to the
overall increase in income from leases. Income from leases
includes lease income resulting from remarketing
transactions. Lease income from remarketing transactions
increased 17 percent to $29.6 million for the three months
ended March 31, 1996, from $25.2 million for the same 1995
period.
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 $673.1 million residual value
portfolio at March 31, 1996, indicated that the overall
estimated future value of the portfolio continues to be
greater than the value currently recorded, which is the
lower of the Company's cost or net realizable value. The
Company recorded a $16.0 million reduction to income from
leases during the first quarter of 1996 to recognize
decreases in the expected future residual value of specific
leased equipment. No material declines in the future
residual value of leased equipment were identified or
recorded in the first quarter of 1995.
INCOME FROM LOANS
Income from loans increased 40 percent to $37.0 million for
the three months ended March 31, 1996, compared with $26.5
million for the same 1995 period. This increase resulted
from higher asset balances, which in turn were primarily due
to an increase in financing originated for software and
services during 1995 and the first quarter of 1996.
INCOME FROM WORKING CAPITAL FINANCING
Income from working capital financing increased 34 percent
to $68.4 million for the three months ended March 31, 1996,
compared with $51.2 million for the same 1995 period. This
increase was primarily due to growth in the average working
capital financing receivables outstanding during the 1996
period, compared with the 1995 period. The growth in
average working capital financing receivables outstanding
primarily reflects increased originations.
-10-
<PAGE 13>
EQUIPMENT SALES
Equipment sales amounted to $106.5 million for the three
months ended March 31, 1996, compared with $114.1 million
for the same 1995 period. The decrease in equipment sales
reflects less equipment available at the end of lease term,
which in turn is primarily due to lower financing originated
in prior years. Also contributing to this decrease in
equipment sales is the growth of equipment remarketed as
operating leases, rather than sales. 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 three months ended
March 31, 1996 was $18.7 million, an increase of 41 percent,
compared with $13.3 million for the same 1995 period. The
gross profit margin for the first quarter of 1996 increased
to 17.6 percent, compared with 11.6 percent for the same
1995 period. The mix of products available for sale and
changing market conditions for certain used equipment during
the applicable periods are factors contributing to the
increase in gross profit margins.
OTHER INCOME
Other income increased 42 percent to $47.3 million for the
three months ended March 31, 1996, compared with $33.3
million for the same 1995 period. This increase for the
three months ended March 31, 1996, compared with the same
1995 period, is primarily due to a $9.3 million gain
recognized upon the sale of certain restricted securities
during the first quarter of 1996, as well as increases in
interest income earned on cash and cash equivalents and
notes. Also, fees for managing IBM's state and local
government installment and lease financing receivables
portfolio and fees for the servicing of such IBM financing
receivables securitized and sold, increased during the first
quarter of 1996, compared with the same 1995 period.
During the first quarter of 1995, a gain of $5.0 million was
recognized upon Comdisco, Inc.'s redemption of a convertible
subordinated promissory note on March 1, 1995.
INTEREST EXPENSE
As a result of an increase in the Company's average
outstanding debt balance, interest expense increased 23
percent to $106.3 million for the three months ended March
31, 1996, compared with $86.3 million for the same 1995
period. Due to generally lower interest rates, the
Company's year-to-date average cost of debt through March
31, 1996, decreased to 5.72 percent, from 5.89 percent for
the same 1995 period.
-11-
<PAGE 14>
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses were $44.9
million for the three months ended March 31, 1996, compared
with $40.9 million for the same 1995 period. This increase
is primarily a result of the first quarter of 1996
reflecting three months of expenses incurred by IBM CS
Systems, Inc. (formerly known as Chrysler Systems, Inc.),
compared to two months of expenses during the first quarter
of 1995.
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 1995 and the first quarter of 1996,
and with the continuation of the trend toward consolidation
in this industry segment, the concentration of such
financings for certain large dealers and remarketers of
information industry products has become more significant.
At March 31, 1996, and December 31, 1995, approximately 70
percent of the working capital financing receivables
outstanding were concentrated in ten working capital
accounts. The Company's working capital financing business
is predominantly with non-investment grade customers. Such
financing receivables are typically collateralized by the
inventory and accounts receivable of the dealers and
remarketers. The Company provides for working capital
financing receivable losses on the basis of actual
collection experience and estimated collectibility of the
related financing receivables. The Company did not
experience material losses in 1995, nor during the first
quarter of 1996, and does not believe that these risks will
have a material adverse effect on its financial position or
results of operations.
The provision for receivable losses decreased to $13.0
million for the quarter ended March 31, 1996, compared with
$13.7 million for the same 1995 period. The Company
provides for receivable losses at the time financings are
originated for capital equipment. Although there was growth
in capital equipment financing originated during the first
quarter of 1996, compared with the same 1995 period, the
corresponding increase in the provision for receivable
losses was offset by a decline in specific reserves.
NET EARNINGS
Net earnings increased 28 percent to $73.9 million for the
first quarter of 1996, compared with $57.9 million for the
same 1995 period.
The Company's loan and lease portfolios grew, its working
capital financing originations increased during the first
quarter of 1996, compared to the same 1995 period and its
capital equipment remarketing operations continued to be
profitable, contributing to a favorable performance during
the first quarter of 1996.
-12-
<PAGE 15>
RETURN ON AVERAGE EQUITY
The results for the first quarter of 1996 yielded an
annualized return on average equity of 24.4 percent,
compared with 22.3 percent for the same 1995 period.
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.
-13-
<PAGE 16>
[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 three months
of 1996.
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: May 14, 1996 By: /s/ Allison R. Schleicher
____________ _____________________________
(Allison R. Schleicher)
Vice President, Finance
and Chief Financial Officer
-14-
<TABLE> <S> <C>
<ARTICLE> 5
EXHIBIT V
_________
FINANCIAL DATA SCHEDULE
_______________________
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM IBM CREDIT CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS AT AND
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 281,606
<SECURITIES> 103,783
<RECEIVABLES> 4,249,503
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,945,696
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 457,411
0
0
<OTHER-SE> 780,491
<TOTAL-LIABILITY-AND-EQUITY> 10,945,696
<SALES> 106,488
<TOTAL-REVENUES> 374,179
<CGS> 87,799
<TOTAL-COSTS> 87,799
<OTHER-EXPENSES> 44,861
<LOSS-PROVISION> 12,963
<INTEREST-EXPENSE> 106,280
<INCOME-PRETAX> 122,276
<INCOME-TAX> 48,348
<INCOME-CONTINUING> 73,928
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,928
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
