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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
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
____________
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
________________________________ _______________________
5.36% Notes due October 27, 1998 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
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 February 29, 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 February 29, 1996: NONE.
The registrant meets the conditions set forth in General Instruction J
(1)(a) and (b) of Form 10-K and is therefore filing this Form with the
reduced disclosure format.
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TABLE OF CONTENTS
_________________
PART I Page
Item 1. Business 3
Item 2. Properties 3
Item 3. Legal Proceedings 3
Item 4. Submission of Matters to a Vote of Security Holders 3
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 3
Item 6. Selected Financial Data 4
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 41
PART III
Item 10. Directors and Executive Officers of the Registrant 41
Item 11. Executive Compensation 41
Item 12. Security Ownership of Certain Beneficial Owners and
Management 41
Item 13. Certain Relationships and Related Transactions 41
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 41
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PART I
ITEM 1. BUSINESS:
The principal business of IBM Credit Corporation (the
Company) is the financing of IBM products and services. All
the outstanding capital stock of the Company is owned by
International Business Machines Corporation (IBM), a New
York corporation. The Company finances the purchase and
lease of IBM products and related products and services by
customers of IBM in the U.S. and finances inventory and
accounts receivable for dealers and remarketers of IBM and
non-IBM products and services.
Pursuant to a Support Agreement between IBM and the
Company, IBM has agreed to retain 100 percent of the voting
capital stock of the Company, unless required to dispose of
any or all such shares of stock pursuant to a court decree
or order of any governmental authority that, in the opinion
of counsel to IBM, may not be successfully challenged. IBM
has also agreed to cause the Company to have a tangible net
worth of at least $1.00 at all times.
ITEM 2. PROPERTIES:
The Company's principal executive offices in Stamford,
Connecticut, comprise approximately 129,000 square feet of
office space. The Company occupies this space under an
arrangement with IBM, which is the master tenant of this
property under long-term lease. IBM CS Systems, Inc., a
subsidiary of the Company, maintains offices in Oakbrook,
Illinois, under long-term lease.
ITEM 3. LEGAL PROCEEDINGS:
None material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
Omitted pursuant to General Instruction J.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS:
All shares of the Company's capital stock are owned by
IBM, and accordingly, there is no market for such stock.
The Company paid IBM cash dividends of $145,000,000 and
noncash dividends of $1,419,000 in 1995 and cash dividends
of $295,000,000 in 1994. Dividends are paid as declared by
the Board of Directors of the Company.
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<TABLE>
ITEM 6. SELECTED FINANCIAL DATA:
The following selected financial data should be read in conjunction with the financial statements of
IBM Credit Corporation and the related notes to the financial statements included in this document.
<CAPTION>
(Dollars in thousands) 1995 1994 1993 1992 1991
____________ ___________ ___________ ___________ ___________
<S> <C> <C> <C> <C> <C>
For the year:
Finance and other income. . . . . . .$ 1,452,285 $1,484,680 $1,770,430 $1,762,530 $1,644,527
Gross profit on equipment sales . . . 74,613 68,508 63,580 66,873 75,306
Interest expense. . . . . . . . . . . 394,572 306,125 365,675 445,816 562,531
Net earnings. . . . . . . . . . . . . 230,475 250,589 220,220 219,270 200,221
Dividends . . . . . . . . . . . . . . 146,419 295,000 325,000 50,000 25,000
Products purchased for leases . . . . 2,931,619 1,659,019 2,165,577 2,794,567 2,786,088
Loans receivable financing. . . . . . 892,796 496,308 441,939 651,153 665,735
IBM state and local installment
receivables and leases. . . . . . . 364,636 232,845 294,166 412,476 486,872
Other capital equipment financing . . 291,688 376,296 488,594 503,952 352,210
Working capital financing . . . . . . 10,297,600 7,597,300 5,866,300 4,213,000 4,905,000
Return on average assets. . . . . . . 2.3% 2.7% 2.0% 2.0% 1.9%
Return on average equity. . . . . . . 20.9% 24.1% 19.1% 19.0% 20.3%
At end of year:
Total assets. . . . . . . . . . . . .$11,425,551 $9,667,715 $10,041,543 $11,451,267 $11,326,662
Net investment in capital leases. . . 3,966,255 3,687,971 4,437,257 6,037,269 5,930,493
Equipment on operating leases, net. . 1,695,812 1,573,242 1,753,121 1,776,576 1,726,226
Loans receivable. . . . . . . . . . . 1,473,822 1,070,619 1,037,864 1,416,252 1,558,591
Working capital financing receivables 3,158,932 2,135,020 1,425,781 1,138,131 1,092,785
Short-term debt . . . . . . . . . . . 6,472,627 4,355,038 4,227,724 5,399,030 5,343,811
Long-term debt. . . . . . . . . . . . 1,115,440 1,583,822 2,279,796 2,406,071 2,158,988
Stockholder's equity. . . . . . . . . 1,208,574 1,121,218 1,150,729 1,255,509 1,086,239
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</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS:
OVERVIEW
Net earnings for 1995 were $230.5 million, yielding a return
on average equity of 20.9 percent.
Net earnings for 1994 of $250.6 million benefited from
one-time after-tax gains of $8.1 million (pretax of $13.3
million) from the sale of IBM Credit Investment Management
Corporation to a Fleet Financial Group subsidiary in the
second quarter, and $27.9 million (pretax of $46.0 million),
which is net of directly related expenses, from the
Company's litigation settlement with Comdisco, Inc. in the
third quarter.
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 were 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.
FINANCING ORIGINATED
For the year ended December 31, 1995, the Company originated
capital equipment financing for end users of $4,480.7
million, a 62 percent increase from $2,764.5 million for
1994. For the year ended December 31, 1995, originations of
working capital financing for dealers and remarketers of
information industry products increased by 36 percent to
$10,297.6 million, from $7,597.3 million for 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 1995, compared with
1994. Furthermore, the propensity for customers to finance
their acquisitions with the Company has increased during
1995, compared with 1994.
Capital equipment financings for end users comprised
purchases of $2,735.3 million of information handling
systems from IBM, financing originated for installment
receivables of $166.2 million, financing for IBM software
and services of $728.4 million, installment and lease
financing for state and local government customers of $364.6
million for the account of IBM, and other financing of
$486.2 million for IBM equipment, as well as related non-IBM
equipment to meet IBM customers' total solution
requirements. The purchases of $2,735.3 million from IBM
consisted of $1,737.1 million for capital leases and $998.2
million for operating leases.
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FINANCING ORIGINATED (Continued)
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
reflects volume increases in both IBM's workstation products
and non-IBM products for remarketers financed by the Company
throughout 1995. 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.
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.
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 December 31, 1995, the investment in remarketed equipment
on capital and operating leases totaled $470.5 million, a
decrease of 25 percent from the 1994 year-end investment of
$623.7 million. For the year ended December 31, 1995, the
remarketing activities contributed $150.0 million to pretax
earnings, an increase of 6 percent compared with $141.6
million for 1994. Refer to Equipment Sales in Management's
Discussion and Analysis on page 11 for additional details.
ASSETS
Total assets increased to $11.4 billion at December 31,
1995, compared with $9.7 billion at December 31, 1994. This
increase is primarily the result of financings originated of
$13.3 billion exceeding cash collections of $11.5 billion on
capital leases, loans receivable and working capital
financing receivables, plus growth of $122.6 million in
investment in equipment on operating leases during 1995,
offset in part by payments to IBM of cash dividends of
$145.0 million, noncash dividends of $1.4 million and a tax
payment of $330.8 million.
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ASSETS (Continued)
Total financing assets serviced by the Company at December
31, 1995, were $11.8 billion, compared with $10.6 billion at
December 31, 1994. Total financing assets serviced include
those financing receivables securitized and sold ($610.1
million in 1995, $1,181.6 million in 1994), capital and
operating leases ($5,662.1 million in 1995, $5,261.2 million
in 1994), loans receivable ($1,473.8 million in 1995,
$1,070.6 million in 1994), working capital financing
receivables ($3,158.9 million in 1995, $2,135.0 million in
1994), subordinated interests in trusts resulting from the
securitization and sale of financing receivables ($86.8
million in 1995, $159.0 million in 1994) and other assets
($55.4 million in 1995, $90.9 million in 1994), as well as
state and local government installment and lease financing
receivables of IBM ($757.2 million in 1995, $726.4 million
in 1994).
The carrying amount of marketable securities, as reported in
the Consolidated Statement of Financial Position,
approximates market value. At December 31, 1995, the
marketable securities consisted entirely of debt securities,
and were available-for-sale.
LIABILITIES AND STOCKHOLDER'S EQUITY
The assets of the business were financed with $7,588.1
million of debt at December 31, 1995. Total short-term and
long-term debt increased by approximately $1,649.2 million,
from $5,938.9 million at December 31, 1994. This increase
was the result of increases in commercial paper outstanding
of $1,755.7 million, medium-term notes of $147.8 million and
$214.1 million payable to IBM at market terms and
conditions, maturing on January 2, 1996, offset by a
decrease in long-term debt of $468.4 million. Included in
long-term debt at December 31, 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 $1.0 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 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 intention to issue any
debt securities over the next twelve months under this
program is dependent on prevailing market conditions and its
need for such funding.
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LIABILITIES AND STOCKHOLDER'S EQUITY (Continued)
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
intention to issue any asset-backed securities over the next
twelve months 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.
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. As previously mentioned, the Company had borrowings
outstanding under this agreement of $214.1 million, at
December 31, 1995, payable to IBM. No borrowings were
outstanding at December 31, 1994. 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 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 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.
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LIABILITIES AND STOCKHOLDER'S EQUITY (Continued)
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
$34.9 million to $1,458.5 million at December 31, 1995, from
$1,493.4 million at December 31, 1994. This decline was
primarily attributable to the current tax liability payments
of $330.8 million made to IBM during 1995, partially offset
by a current federal and a consolidated state income tax
provision of $137.7 million, and a $181.7 million increase
in the amount payable for capital equipment purchases.
Total stockholder's equity at December 31, 1995, was
$1,208.6 million, up $87.4 million from year-end 1994. The
increase in stockholder's equity reflects 1995 net earnings
of $230.5 million and the issuance of $3.3 million of
capital stock to IBM, offset by the payment of $145.0
million in cash dividends and $1.4 million in noncash
dividends to IBM during 1995. During 1994, a program was
developed to periodically transfer certain excess IBM
manufacturing assets to the Company for the purpose of
remarketing such assets. In exchange for assets IBM
transferred to the Company, the Company issued 33 shares and
149 shares of capital stock, par value $1.00 per share, to
IBM during the fourth quarters of 1995 and 1994,
respectively.
At December 31, 1995, the Company's debt to equity ratio was
6.3:1, compared with 5.3:1 at December 31, 1994.
TOTAL CASH USED BEFORE DIVIDENDS
Total cash used before dividends was $132.5 million in 1995,
compared with total cash provided before dividends of $299.4
million in 1994. Total cash used before dividends reflects
$1,984.7 million of cash used in investing and financing
activities before dividends, offset by $1,852.2 million of
cash provided by operating activities in 1995. For 1994,
total cash provided before dividends reflects $1,591.3
million of cash used in investing and financing activities
before dividends, offset by $1,890.7 million of cash
provided by operating activities. Cash and cash equivalents
at December 31, 1995, totaled $336.8 million, a decrease of
$277.5 million, compared with the balance at December 31,
1994.
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INCOME FROM LEASES
Income from leases increased 7 percent to $466.4 million for
the year ended December 31, 1995, from $437.6 million in
1994. The growth in capital equipment financings for end
users under capital and operating leases during 1995
contributed to the overall increase in income from leases.
The securitization and sale of capital lease receivables in
the third quarter of 1994 and the resulting loss of finance
income in subsequent periods partially offset this increase.
Income from leases includes lease income resulting from
remarketing transactions. Lease income from remarketing
transactions was $91.4 million in 1995, an increase of 14
percent from 1994.
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 $666.3 million residual value
portfolio at December 31, 1995, 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 1995 to recognize decreases in the expected
future residual value of specific leased equipment, compared
with $7.0 million during 1994.
INCOME FROM LOANS
Income from loans increased 27 percent to $117.7 million in
1995, compared with $92.7 million in 1994. This increase
was primarily the result of an increase in financing
originated for software and services during 1994 and 1995.
INCOME FROM WORKING CAPITAL FINANCING
Income from working capital financing increased 71 percent
to $242.5 million in 1995, compared with $141.7 million in
1994. This increase was primarily due to growth in the
average working capital financing receivables outstanding
and generally higher interest rates charged during 1995,
compared with 1994. The growth in average working capital
financing receivables outstanding primarily reflects
increased originations.
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EQUIPMENT SALES
Equipment sales amounted to $493.6 million in 1995, compared
with $625.7 million in 1994. 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 in 1995 was $74.6 million,
an increase of 9 percent, compared with $68.5 million in
1994. The gross profit margin in 1995 increased to 15.1
percent, compared with 10.9 percent in 1994. 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 decreased 29 percent to $132.0 million in 1995,
compared with $187.0 million in 1994. This decrease is
largely attributable to the recognition of one-time pretax
gains of $46.0 million, net of directly related expenses,
for the litigation settlement reached with Comdisco, Inc.
during the third quarter of 1994, and $13.3 million on the
sale of IBM Credit Investment Management Corporation during
the second quarter of 1994. These items were partially
offset by pretax gains of $4.3 million recognized from the
sale of financing assets during the second quarter of 1995,
and $5.0 million recognized upon Comdisco, Inc.'s redemption
of the convertible subordinated promissory note on March 1,
1995.
The securitization and sale of financing receivables
generally accelerates the recognition of income and can
result in a current period gain or loss. The amount of such
gain or loss is dependent on a number of factors and may
create a degree of volatility in earnings depending on the
type of receivables securitized and sold, the structure of
the transaction, and prevailing financial market conditions.
No material gain or loss resulted from the $300.0 million
securitization and sale of capital lease and loan
receivables in the third quarter of 1994. The Company
continues to service the financing receivables securitized
and sold, and earns a fee, which is included in other
income.
Also 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.
INTEREST EXPENSE
As a result of rising interest rates and an increase in the
Company's average outstanding debt balance, interest expense
increased 29 percent to $394.6 million in 1995, compared
with $306.1 million in 1994. The Company's average cost of
debt in 1995 increased to 6.0 percent, from 5.0 percent in
1994.
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SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses were $190.4
million in 1995, an increase of 16 percent compared with
$163.9 million in 1994. This increase is 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 1995, 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 December
31, 1995, almost 70 percent of the working capital financing
receivables outstanding were concentrated in ten working
capital accounts, up from approximately 64 percent at
December 31, 1994. 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 did not experience
material losses in 1995 and 1994, 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 increased to $68.4
million in 1995, compared with $44.1 million in 1994. The
Company provides for receivable losses at the time
financings are originated for capital equipment. With the
growth of capital equipment financings originated during
1995, there has been a corresponding increase in the
provision for receivable losses. In addition, the Company's
timely recognition of probable receivable losses and its
revised estimate of the recoverability of certain specific
working capital financing receivables have contributed to
the increase in the provision for receivable losses.
INCOME TAXES
The effective tax rate in 1995 was 39.3 percent, compared
with 39.4 percent in 1994. Consistent with 1995, the
Company expects its effective tax rate to continue to
approximate the statutory federal and state income tax rates
in future years.
NET EARNINGS
Net earnings decreased 8 percent to $230.5 million in 1995,
compared with $250.6 million in 1994. The decrease in net
earnings in 1995, compared with 1994, is primarily
attributable to the recognition of one-time after-tax gains
of $27.9 million for the litigation settlement reached with
Comdisco, Inc. during the third quarter of 1994, and $8.1
million for the sale of IBM Credit Investment Management
Corporation during the second quarter of 1994.
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<PAGE 13>
NET EARNINGS (Continued)
These items were partially offset on a year-to-year basis by
one-time after-tax gains recognized upon the sale of
financing assets during the second quarter of 1995 and
Comdisco, Inc.'s redemption of the convertible subordinated
promissory note during the first quarter of 1995.
Despite the decline in net earnings, the Company's working
capital financing business expanded, its loan and lease
portfolios grew and its capital equipment remarketing
operations continued to be profitable, contributing to a
favorable performance during 1995.
RETURN ON AVERAGE EQUITY
The 1995 results yielded an annualized return on average
equity of 20.9 percent, compared with 24.1 percent in 1994.
ACCOUNTING CHANGES
The Company implemented new accounting standards in 1995 and
1994. None of these standards had a material effect on the
financial position or results of operations of the Company.
Effective January 1, 1995, the Company implemented Statement
of Financial Accounting Standards (SFAS) 114, "Accounting by
Creditors for Impairment of a Loan," and SFAS 118,
"Accounting by Creditors for Impairment of a Loan--Income
Recognition and Disclosures." These standards prescribe
impairment measurements and reporting related to certain
loans.
In 1995, the Company implemented SFAS 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." This standard prescribes the
method for asset impairment evaluation for long-lived assets
and certain identifiable intangibles which are either held
and used or to be disposed of. The Company was generally in
conformance with this standard prior to adoption.
Effective January 1, 1994, the Company implemented SFAS 115,
"Accounting for Certain Investments in Debt and Equity
Securities." This standard addresses the accounting and
reporting for investments in equity securities that have
readily determinable fair values and for all investments in
debt securities.
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 14>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:
<AUDIT-REPORT>
Report of Independent Accountants
To the Stockholder and Board of Directors
of IBM Credit Corporation
In our opinion, the consolidated financial statements listed
in the index appearing under Item 14(a) 1. and 2. on page 41
present fairly, in all material respects, the financial
position of IBM Credit Corporation and its subsidiaries at
December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. These financial
statements are the responsibility of the Company's
management; our responsibility is to express an opinion on
these financial statements based on our audits. We
conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
Stamford, CT
January 19, 1996, except as to the Subsequent Event note on
page 39, which is as of January 31, 1996
</AUDIT-REPORT>
-14-
<PAGE 15>
<TABLE>
IBM CREDIT CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at December 31:
(Dollars in thousands)
<CAPTION>
1995 1994
___________ __________
<S> <C> <C>
ASSETS:
Cash and cash equivalents. . . . . . . . . $ 336,839 $ 614,339
Marketable securities. . . . . . . . . . . 89,930 -
Net investment in capital leases . . . . . 3,966,255 3,687,971
Equipment on operating leases, net . . . . 1,695,812 1,573,242
Loans receivable . . . . . . . . . . . . . 1,473,822 1,070,619
Working capital financing receivables. . . 3,158,932 2,135,020
Investments and other assets . . . . . . . 597,882 382,910
Due and deferred from receivable sales . . 106,079 203,614
___________ __________
Total Assets $11,425,551 $9,667,715
=========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Liabilities:
Short-term debt. . . . . . . . . . . . . . $ 6,258,485 $4,355,038
Short-term debt, IBM . . . . . . . . . . . 214,142 -
Due to IBM and affiliates. . . . . . . . . 1,458,466 1,493,449
Interest and other accruals. . . . . . . . 505,278 462,277
Deferred income taxes. . . . . . . . . . . 665,166 651,911
Long-term debt . . . . . . . . . . . . . . 990,440 1,458,822
Long-term debt, IBM. . . . . . . . . . . . 125,000 125,000
___________ __________
Total liabilities . . . . . . . . . . . 10,216,977 8,546,497
___________ __________
Stockholder's equity:
Capital stock, par value $1.00 per share
Shares authorized: 10,000
Shares issued and outstanding:
932 in 1995 and 899 in 1994 . . . . . 457,011 453,711
Retained earnings. . . . . . . . . . . . . 751,563 667,507
___________ __________
Total stockholder's equity. . . . . . . 1,208,574 1,121,218
___________ __________
Total Liabilities and Stockholder's Equity $11,425,551 $9,667,715
=========== ==========
<FN>
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>
-15-
<PAGE 16>
<TABLE>
IBM CREDIT CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS
For the year ended December 31:
(Dollars in thousands)
<CAPTION>
1995 1994 1993
___________ ___________ ___________
<S> <C> <C> <C>
FINANCE AND OTHER INCOME:
Income from leases:
Capital leases . . . . . . . . . . . . $ 281,072 $ 308,313 $ 450,071
Operating leases (net of depreciation:
1995 - $1,035,480, 1994 - $701,055
and 1993 - $662,898). . . . . . . . . 185,317 129,314 123,326
___________ ___________ ___________
466,389 437,627 573,397
Income from loans. . . . . . . . . . . . 117,728 92,656 112,339
Income from working capital financing. . 242,508 141,655 104,286
Equipment sales. . . . . . . . . . . . . 493,619 625,729 840,944
Other income. . . . . . . . . . . . . . 132,041 187,013 139,464
___________ ___________ ___________
Total finance and other income . . . . 1,452,285 1,484,680 1,770,430
___________ ___________ ___________
COST AND EXPENSES:
Interest . . . . . . . . . . . . . . . . 394,572 306,125 365,675
Cost of equipment sales. . . . . . . . . 419,006 557,221 777,364
Selling, general, and administrative . . 190,360 163,945 185,493
Provision for receivable losses. . . . . 68,417 44,097 38,017
Restructuring charges. . . . . . . . . . - - 10,489
___________ ___________ ___________
Total cost and expenses. . . . . . . . 1,072,355 1,071,388 1,377,038
___________ ___________ ___________
EARNINGS BEFORE INCOME TAXES . . . . . . . 379,930 413,292 393,392
Provision for income taxes . . . . . . . . 149,455 162,703 173,172
___________ ___________ ___________
NET EARNINGS . . . . . . . . . . . . . . . 230,475 250,589 220,220
Dividends . . . . . . . . . . . . . . . . (146,419) (295,000) (325,000)
Retained earnings, January 1 . . . . . . . 667,507 711,918 816,698
___________ ___________ ___________
Retained earnings, December 31 . . . . . . $ 751,563 $ 667,507 $ 711,918
=========== =========== ===========
<FN>
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>
-16-
<PAGE 17>
<TABLE>
IBM CREDIT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31:
(Dollars in thousands) 1995 1994* 1993*
____________ ____________ ____________
<CAPTION>
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings . . . . . . . . . . . .$ 230,475 $ 250,589 $ 220,220
Adjustments to reconcile net
earnings to cash provided by
operating activities:
Depreciation and amortization. . . . 1,039,812 700,643 667,593
Provision for receivable losses. . . 68,417 44,097 38,017
Change in deferred income taxes. . . 11,599 (159,372) 95,112
Increase in interest and other
accruals. . . . . . . . . . . . . . 35,309 149,813 41,724
Gross profit on equipment sales. . . (74,613) (68,508) (63,580)
Other items that provided (used)
cash:
Proceeds from equipment sales. . . 493,619 625,729 840,944
Change in amounts due IBM and
affiliates. . . . . . . . . . . . (34,983) 248,802 (144,199)
Other, net . . . . . . . . . . . . 82,586 98,954 (266,932)
____________ ____________ ____________
Cash provided by operating activities . 1,852,221 1,890,747 1,428,899
____________ ____________ ____________
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in capital leases . . . . (1,863,923) (1,194,559) (1,397,459)
Collection of capital leases, net
of income earned. . . . . . . . . . 1,336,054 1,206,120 1,612,983
Investment in equipment on
operating leases. . . . . . . . . . (1,067,696) (464,460) (768,118)
Investment in loans receivable . . . (892,796) (496,308) (441,939)
Collection of loans receivable,
net of interest earned. . . . . . . 484,593 423,455 668,544
Investment in working capital
financing receivables, net of
cash collected. . . . . . . . . . . (1,056,420) (714,636) (685,651)
Purchases of marketable securities . (255,888) - -
Maturities of marketable securities. 165,958 - -
Cash payment for business acquired . (92,478) - -
Proceeds from sale of financing
receivables . . . . . . . . . . . . - 300,000 1,350,000
Other, net . . . . . . . . . . . . . (354,420) (87,422) (135,492)
____________ ____________ ____________
Cash (used in) provided by investing
activities . . . . . . . . . . . . . . (3,597,016) (1,027,810) 202,868
____________ ____________ ____________
<FN>
<F1>
The accompanying notes are an integral part of this statement.
<F2>
* Reclassified to conform with 1995 presentation.
</FN>
</TABLE>
-17-
<PAGE 18>
<TABLE>
IBM CREDIT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
For the year ended December 31:
(Dollars in thousands) 1995 1994* 1993*
____________ ____________ ____________
<CAPTION>
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of
long-term debt. . . . . . . . . . . 379,539 668,849 1,670,009
Repayment of debt with original
maturities of one year or more. . . (665,601) (771,337) (1,313,432)
Issuance (repayment) of debt with
original maturities within one year 1,898,357 (461,001) (1,652,010)
Cash dividends paid to IBM . . . . . (145,000) (295,000) (325,000)
____________ ____________ ____________
Cash provided by (used in) financing
activities . . . . . . . . . . . . . . 1,467,295 (858,489) (1,620,433)
____________ ____________ ____________
Change in cash and cash equivalents . . (277,500) 4,448 11,334
Cash and cash equivalents, January 1. . 614,339 609,891 598,557
____________ ____________ ____________
Cash and cash equivalents, December 31.$ 336,839 $ 614,339 $ 609,891
============ ============ ============
<FN>
<F1>
Supplemental schedule of noncash investing and financing
activities:
During the fourth quarters of 1995 and 1994, respectively,
the Company issued to IBM 33 and 149 shares of capital
stock, par value $1.00 per share, in exchange for assets IBM
transferred to the Company. The assets transferred during
1995 had a net book value of $0.5 million, which
approximated fair value, and a deferred tax asset value of
$2.8 million. The assets transferred during 1994 had a net
book value of $1.9 million, which approximated fair value,
and a deferred tax asset value of $13.0 million. As a
result, stockholder's equity was increased by $3.3 million
and $14.9 million during 1995 and 1994, respectively.
During the second quarter of 1995, the Company paid IBM $1.4
million in noncash dividends, representing financing
receivables transferred to IBM by the Company.
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 1995 presentation.
</FN>
</TABLE>
-18-
<PAGE 19>
IBM CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation: The consolidated financial
statements include the accounts of the Company and those of
its subsidiaries that are more than 50 percent owned.
Investments in partnerships in which the Company has
typically a 20 percent ownership are accounted for using the
equity method.
Cash and Cash Equivalents: Time deposits with original
maturities generally of three months or less are included in
cash and cash equivalents. Cash paid for interest was
$388.3 million, $315.9 million and $366.2 million in 1995,
1994 and 1993, respectively.
Marketable Securities: The Company's marketable securities,
all of which are debt securities, are available-for-sale.
The carrying amount of the debt securities approximates
market value.
Finance Income Recognition: Income attributable to direct
financing leases and loans receivable is initially recorded
as unearned income and subsequently recognized as finance
income at level rates of return over the term of the leases
or receivables. Income recognized from leveraged leases
includes the amortization of unearned finance income and
deferred investment and other tax credits over the term of
the leases, at level rates of return, during periods when
the net investment balance is positive.
Equipment on Operating Leases: Equipment is depreciated on
a straight-line basis to its estimated residual value over
the lease term.
Equipment Sales Income Recognition: Revenue from equipment
sales to existing lessees is recognized at the effective
date a purchase provision is exercised. Revenue from sales
to parties other than existing lessees is recognized when
title transfers.
Allowance for Receivable Losses: The allowance for
receivable losses is determined on the basis of actual
collection experience and estimated collectibility of the
related assets.
Income Taxes: The application of the intercompany tax
allocation agreement (the Agreement) between the Company and
its parent company, IBM, was mutually clarified during the
first quarter of 1993. The Agreement now aligns the
settlement of federal and state tax benefits and/or
obligations with the Company's provision for income taxes
determined on a separate company basis. The Company is part
of the IBM consolidated federal tax return and files
separate state tax returns in selected states. Included in
amounts due to IBM and affiliates at December 31, 1995, and
1994, are $40.9 million and $246.2 million, respectively, of
current income taxes payable as determined in accordance
with the Agreement. Cash paid for income taxes to IBM and
to states that require separate tax returns in 1995, 1994
and 1993 was $339.2 million, $348.3 million and $120.6
million, respectively.
-19-
<PAGE 20>
SIGNIFICANT ACCOUNTING POLICIES (Continued):
Financial Instruments: 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 solely for hedging
purposes. The Company does not enter into such financial
instrument transactions for trading or other speculative
purposes. Debt obligations denominated in foreign
currencies and subject to foreign currency swap agreements
are included in the Consolidated Statement of Financial
Position at the contractual rate of exchange in the
respective foreign currency swap agreement. Gains and
losses on forward contracts and purchased options,
designated as hedges, are deferred and included in the
settlement of the related transaction.
Use of Estimates: Management uses estimates in preparing
the consolidated financial statements, in conformity with
generally accepted accounting principles. Significant
estimates include collectibility of receivables,
recoverability of residual values of equipment on capital
and operating leases, and useful economic life of long-term
fixed assets. The Company regularly assesses these
estimates, and while actual results may differ from these
estimates, management believes that material changes will
not occur in the near term.
RELATIONSHIP WITH IBM:
Pursuant to a Support Agreement between IBM and the Company,
IBM has agreed to retain 100 percent of the voting capital
stock of the Company, unless required to dispose of any or
all such shares of stock pursuant to a court decree or order
of any governmental authority that in the opinion of counsel
to IBM may not be successfully challenged. IBM has also
agreed to cause the Company to have a tangible net worth of
at least $1.00 at all times. The Support Agreement provides
that it shall not be deemed to constitute a guarantee by IBM
to any party of the payment of any debt or other obligation,
indebtedness or liability of the Company. The Support
Agreement may not be modified, amended or terminated while
there is outstanding any debt of the Company, unless all
holders of such debt have consented in writing.
Pursuant to an operating agreement, IBM provides collection,
administration and other services and products for the
Company and is reimbursed for the cost of these services and
products. The Company is compensated for services performed
for IBM, primarily for management of IBM's state and local
government installment receivables portfolio, the fees for
which are reflected in other income.
The operating agreement with IBM also provides that
installment receivables, which include finance charges, may
be purchased by the Company at a mutually agreed-upon price.
The Company is reimbursed by IBM for any price adjustments
and concessions that reduce the amount of receivables
previously purchased by the Company.
-20-
<PAGE 21>
RELATIONSHIP WITH IBM (Continued):
The operating agreement with IBM also provides that IBM
will offer term leases of the Company to creditworthy
potential lessees. IBM's sales price of the equipment
to the Company will typically be at the purchase price
payable by the lessee, unless the Company is participating
in IBM product promotions.
The Company also has an agreement with IBM that provides
that credit losses on working capital financing receivables
arising from sales of IBM equipment to authorized dealers
and remarketers in excess of 2.25 percent of the average
aggregate monthly receivables balance for any given year
will be reimbursed to the Company by IBM. The Company has
not received any payments from IBM as a result of this
agreement. In addition to this agreement, IBM reimburses
the Company for losses on working capital financing
receivables with specific dealers and for specific
transactions. Approximately $9.3 million, $3.1 million and
$4.6 million of such losses have been reimbursed by IBM in
1995, 1994 and 1993, respectively.
The Company has a liquidity agreement with IBM International
Finance, N.V. (IIF), whereby the Company has agreed to
advance funds to IIF as an enhancement to IIF's ability to
carry out business. The amount of the advances is not to
exceed the greater of $500.0 million or 5 percent of the
Company's total assets. To support this agreement, the
Company has entered into a backup agreement with IBM,
whereby IBM has agreed to advance funds to the Company, in
an amount not to exceed the greater of $500.0 million or 5
percent of the Company's total assets, if at any time the
Company requires such funds to satisfy its agreement with
IIF. The Company has neither received nor made any advances
with respect to these agreements at December 31, 1995 and
1994.
From time to time, the Company will either borrow funds from
or lend funds to IBM and its affiliates, at prevailing
interest rates. 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. The purpose of these
agreements is to finance the borrower's assets, for working
capital or for other general corporate purposes. At
December 31, 1995, the Company had borrowings outstanding
under this agreement of $214.1 million, payable to IBM.
This borrowing was repaid on January 2, 1996. There were no
borrowings outstanding under these agreements at December
31, 1994.
The Company, together with IBM and IIF, has the option to
issue and sell debt securities in an aggregate nominal
amount of up to 3.0 billion in European Currency Units, or
its equivalent in any other currency. This option is part
of a $4.0 billion Board of Directors' authorization the
Company has to issue and sell debt securities in domestic
and foreign financial markets through December 31, 1996.
The Company's intention to issue any debt securities over
the next twelve months under this program is dependent on
prevailing market conditions and the Company's need for such
funding.
-21-
<PAGE 22>
RELATIONSHIP WITH IBM (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.
MARKETABLE SECURITIES:
The following is a summary of marketable securities at
December 31, 1995, which were available-for-sale. The
marketable securities consisted entirely of debt securities.
There were no marketable securities outstanding at December
31, 1994. Contractual maturities of marketable debt
securities at December 31, 1995, are between one and five
years. It is expected that actual maturities will differ
from contractual maturities because some borrowers have the
right to call or prepay certain obligations, sometimes
without call or prepayment penalties.
(Dollars in thousands)
Corporate . . . . . . . . . . . . . . . . $68,220
U.S. federal agency . . . . . . . . . . . 21,710
_______
Total, which approximates market value. . $89,930
=======
NET INVESTMENT IN CAPITAL LEASES:
The Company's capital lease portfolio includes direct
financing and leveraged leases. The Company originates
financing for customers in a variety of industries and
throughout the United States. The Company has a diversified
portfolio of capital equipment financings for end users.
Direct financing leases consist principally of IBM
information handling equipment with terms generally from
three to five years. The components of the net investment
in direct financing leases at December 31, 1995 and 1994,
are as follows:
(Dollars in thousands) 1995 1994
___________ ___________
Gross lease payments receivable . . . . . $4,071,811 $3,735,154
Estimated unguaranteed residual values. . 293,497 287,511
Deferred initial direct costs . . . . . . 20,520 30,076
Unearned income . . . . . . . . . . . . . (576,149) (547,685)
Allowance for receivable losses . . . . . (46,266) (24,389)
___________ ___________
$3,763,413 $3,480,667
=========== ===========
-22-
<PAGE 23>
NET INVESTMENT IN CAPITAL LEASES (Continued):
The scheduled maturities of minimum lease payments
outstanding at December 31, 1995, expressed as a percentage
of the total, are due approximately as follows:
Within 12 months. . . . . . . . . . . . . . . . . . . . 45%
13 to 24 months . . . . . . . . . . . . . . . . . . . . 31
25 to 36 months . . . . . . . . . . . . . . . . . . . . 17
37 to 48 months . . . . . . . . . . . . . . . . . . . . 6
After 48 months . . . . . . . . . . . . . . . . . . . . 1
____
100%
====
Included in the net investment in capital leases are $118.4
million and $252.8 million of seller interest at December
31, 1995 and 1994, respectively, relating to the
securitization of such leases.
Leveraged lease investments include coal-fired electric
generating facilities, commercial aircraft and other non-IBM
manufactured equipment. Leveraged leases have remaining
terms ranging from six to twenty-three years. The
components of the net investment in leveraged leases at
December 31, 1995 and 1994, are as follows:
(Dollars in thousands) 1995 1994
__________ __________
Net rents receivable. . . . . . . . . . $ 263,800 $ 269,649
Estimated unguaranteed residual values. 39,752 40,752
Unearned and deferred income. . . . . . (94,606) (95,926)
Allowance for receivable losses . . . . (6,104) (7,171)
__________ __________
Investment in leveraged leases. . . . . 202,842 207,304
Less: Deferred income taxes. . . . . . (206,487) (227,096)
__________ __________
Net investment in leveraged leases. . . $ (3,645) $ (19,792)
========== ==========
Refer to the note on page 26, Allowance for Receivable
Losses, for a reconciliation of the direct financing leases
and leveraged leases allowances for receivable losses.
EQUIPMENT ON OPERATING LEASES:
Operating leases consist principally of IBM information
handling equipment with terms generally from two to four
years. The components of equipment on operating lease at
December 31, 1995 and 1994, are as follows:
(Dollars in thousands) 1995 1994
____________ ____________
Cost. . . . . . . . . . . . . . . . . . . $ 3,752,380 $ 3,135,364
Accumulated depreciation. . . . . . . . . (2,056,568) (1,562,122)
____________ ____________
$ 1,695,812 $ 1,573,242
============ ============
-23-
<PAGE 24>
EQUIPMENT ON OPERATING LEASES (Continued):
Minimum future rentals were approximately $1,550.7 million
at December 31, 1995. The scheduled maturities of the
minimum future rentals at December 31, 1995, expressed as a
percentage of the total, are due approximately as follows:
Within 12 months. . . . . . . . . . . . . . . . . . . . 44%
13 to 24 months . . . . . . . . . . . . . . . . . . . . 32
25 to 36 months . . . . . . . . . . . . . . . . . . . . 16
37 to 48 months . . . . . . . . . . . . . . . . . . . . 5
After 48 months . . . . . . . . . . . . . . . . . . . . 3
____
100%
====
LOANS RECEIVABLE:
Loans receivable include installment receivables which are
principally financings of customer purchases of IBM
information handling products. Also included are other
financings, comprising primarily IBM software and services.
The components of loans receivable at December 31, 1995 and
1994, are as follows:
(Dollars in thousands) 1995 1994
___________ ___________
Gross loans receivable . . . . . . . $1,743,920 $1,257,434
Deferred initial direct costs. . . . 9,259 8,481
Unearned income. . . . . . . . . . . (219,988) (153,631)
Allowance for receivable losses. . . (59,369) (41,665)
___________ ___________
$1,473,822 $1,070,619
=========== ===========
The scheduled maturities of loans receivable outstanding at
December 31, 1995, expressed as a percentage of the total,
are due approximately as follows:
Within 12 months . . . . . . . . . . . . . . . . . . . 41%
13 to 24 months. . . . . . . . . . . . . . . . . . . . 32
25 to 36 months. . . . . . . . . . . . . . . . . . . . 18
37 to 48 months. . . . . . . . . . . . . . . . . . . . 7
After 48 months. . . . . . . . . . . . . . . . . . . . 2
____
100%
====
Included in loans receivable are $63.0 million and $65.7
million at December 31, 1995, and 1994, respectively, that
are due from the Company's term lease partnerships. Such
loans are secured by the general pool of leases in the
partnerships. Also included in loans receivable are $29.5
million and $36.6 million of seller interest at December 31,
1995, and 1994, respectively, relating to the securitization
of such loans.
Refer to the note on page 26, Allowance for Receivable
Losses, for a reconciliation of the loans receivable
allowance for receivable losses.
-24-
<PAGE 25>
WORKING CAPITAL FINANCING RECEIVABLES:
Working capital financing receivables arise primarily from
secured inventory and accounts receivable financing for
dealers and remarketers of IBM and non-IBM products and
services. Inventory financing includes the financing of the
purchase by these dealers and remarketers of information
handling products. With the growth of the Company's working
capital financing business in 1995 and 1994, the
concentration of such financings for certain large dealers
and remarketers of information industry products has become
more significant. As previously discussed in the note on
pages 20 through 22, Relationship with IBM, the Company
would be indemnified by IBM for excess credit losses on
working capital financing receivables arising from sales of
IBM equipment to authorized dealers and remarketers. The
Company has not received any payments from IBM as a result
of this arrangement. In addition to this agreement, IBM
reimburses the Company for losses on working capital
financing receivables with specific dealers and for specific
transactions. Approximately $9.3 million, $3.1 million and
$4.6 million of such losses have been reimbursed by IBM in
1995, 1994 and 1993, respectively.
Payment terms for inventory-secured financing generally
range from 30 days to 45 days. Accounts receivable
financing includes the financing of trade accounts
receivable for these dealers and remarketers. Payment terms
for accounts receivable secured financing typically range
from 30 days to 90 days. The components of working capital
financing receivables at December 31, 1995, and 1994, are as
follows:
(Dollars in thousands)
1995 1994
___________ ___________
Working capital financing receivables $3,206,736 $2,151,284
Allowance for receivable losses . . . (47,804) (16,264)
___________ ___________
$3,158,932 $2,135,020
=========== ===========
Included in working capital financing receivables are $693.7
million and $662.2 million of seller interest at December
31, 1995, and 1994, respectively, relating to the
securitization of such receivables. Additionally, the
Company has $1,001.2 million of approved but unused working
capital financing credit lines available to customers at
December 31, 1995.
Refer to the note on page 26, Allowance for Receivable
Losses, for a reconciliation of the working capital
financing receivables allowance for receivable losses.
-25-
<PAGE 26>
ALLOWANCE FOR RECEIVABLE LOSSES:
The following is a reconciliation of the allowance for
receivable losses, by portfolio, for the years ended
December 31, 1995, 1994 and 1993:
(Dollars in thousands) Direct Working
Financing Leveraged Loans Capital
1995 Total Leases Leases Receivable Fin. Rec.
_____________________ _________ _________ __________ __________ _________
Beginning of year . . $ 89,489 $24,389 $ 7,171 $41,665 $16,264
Provision for
receivable losses. . 68,417 16,208 - 21,200 31,009
Accounts written off
(net of recoveries). (5,680) 2,967 (1,067) (7,232) (348)
Transfers from
allowance for losses
on receivables sold
and other, net . . . 7,317 2,702 - 3,736 879
_________ _________ __________ __________ _________
End of year . . . . . $159,543 $46,266 $ 6,104 $59,369 $47,804
========= ========= ========== ========== =========
Direct Working
Financing Leveraged Loans Capital
1994 Total Leases Leases Receivable Fin. Rec.
_____________________ _________ _________ __________ __________ _________
Beginning of year . . $126,440 $ 47,398 $ 7,240 $ 57,504 $14,298
Provision for
receivable losses. . 44,097 37,200 - 1,500 5,397
Accounts written off
(net of recoveries). (75,533) (54,610) (69) (17,862) (2,992)
Transfers (to) from
allowance for losses
on receivables sold
and other, net . . . (5,515) (5,599) - 523 (439)
_________ _________ __________ __________ _________
End of year . . . . . $ 89,489 $ 24,389 $ 7,171 $ 41,665 $16,264
========= ========= ========== ========== =========
Direct Working
Financing Leveraged Loans Capital
1993 Total Leases Leases Receivable Fin. Rec.
_____________________ _________ _________ __________ __________ _________
Beginning of year . . $178,381 $ 74,548 $ 24,890 $ 69,971 $ 8,972
Provision for
receivable losses. . 38,017 18,556 - 13,460 6,001
Accounts written off
(net of recoveries). (80,773) (45,336) (17,650) (16,585) (1,202)
Transfers (to) from
allowance for losses
on receivables sold
and other, net . . . (9,185) (370) - (9,342) 527
_________ _________ __________ __________ _________
End of year . . . . . $126,440 $ 47,398 $ 7,240 $ 57,504 $14,298
========= ========= ========== ========== =========
-26-
<PAGE 27>
ALLOWANCE FOR RECEIVABLE LOSSES (Continued):
The reconciliation of the allowance for receivable losses,
by portfolio, presented on page 26, excludes the allowance
for estimated credit losses on receivables sold, which is
included in the note on page 28, Due and Deferred From
Receivable Sales. The allowance for estimated credit losses
on receivables sold is maintained for credit enhancement
purposes.
At December 31, 1995, 1994 and 1993, the allowance for
receivable losses approximated 1.6 percent, 1.1 percent and
1.5 percent, respectively, of the Company's portfolio of
leases, loans and working capital financing receivables.
The rise in this ratio from 1994 to 1995 was due to fewer
accounts written off and an increase in specific reserves
recorded for certain receivables.
INVESTMENTS AND OTHER ASSETS:
The components of investments and other assets at December
31, 1995, and 1994, are as follows:
(Dollars in thousands)
1995 1994
________ ________
Receivables from customers . . . . . . . . . $223,851 $148,884
Receivables from affiliates . . . . . . . . . 215,292 96,958
Investments in partnerships and other . . . . 72,524 3,873
Remarketing inventory . . . . . . . . . . . . 50,822 72,973
Other assets . . . . . . . . . . . . . . . . 35,393 40,222
Note receivable from Comdisco, Inc. . . . . . - 20,000
________ ________
$597,882 $382,910
======== ========
Pursuant to the settlement agreement reached among IBM, the
Company, certain partnerships in which the Company is the
general partner and Comdisco, Inc. (Comdisco) during 1994,
Comdisco delivered $70.0 million in cash to the Company,
$20.0 million of which the Company loaned back to Comdisco
in exchange for an interest-bearing convertible subordinated
promissory note, which was repaid on March 1, 1995. Refer
to the note on page 38, Litigation Settlement, for details.
Included in other assets at December 31, 1995, and 1994, are
$6.5 million and $2.9 million, respectively, on deposit in
restricted accounts, held as security deposits received from
customers. Also included in other assets at December 31,
1995, and 1994, are $4.1 million and $6.9 million,
respectively, on deposit in restricted accounts for purposes
of credit enhancement. The Company, as servicer, deposited
the cash in connection with certain tax-exempt grantor
trusts comprised of pools of IBM state and local government
installment receivables. The trustee of each grantor trust
is entitled to draw upon the amounts in the restricted
accounts, in the event of nonperformance, default or other
loss relating to such installment receivables.
-27-
<PAGE 28>
DUE AND DEFERRED FROM RECEIVABLE SALES:
The Company sold financing receivables to investors subject
to limited recourse provisions in 1994. There were no
additional sales in 1995. The Company's subordinated
interests in trusts, cash deposits, receivables from
investors, and interest in excess servicing cash flows are
restricted assets and subject to limited recourse
provisions. The components of due and deferred from
receivable sales at December 31, 1995, and 1994, are as
follows:
(Dollars in thousands) 1995 1994
_________ _________
Subordinated interests in trusts. . . . $ 86,848 $159,020
Cash deposits held by trustee . . . . . 15,524 19,394
Receivables from investors. . . . . . . 13,362 34,068
Excess servicing. . . . . . . . . . . . - 6,847
Less: Allowance for estimated credit
losses on receivables sold . . . (9,655) (15,715)
_________ _________
$106,079 $203,614
========= =========
The securitization and sale of financing receivables
generally accelerates the recognition of income and can
result in a gain or loss in the period in which the sale
occurs. Provisions for expected credit losses are provided
during the periods in which the receivables were originated,
and, as such, the gain or loss is not usually required to be
adjusted for expected credit losses. The Company's 1994
securitization and sale of $300.0 million of capital lease
and loan receivables resulted in no material gain or loss.
The provision for credit losses relating to financing
receivables securitized and sold in 1994 amounted to $4.8
million for the year ended December 31, 1994. No material
provision was made for the year ended December 31, 1995.
At December 31, 1995, the Company, as servicer, is
contingently liable for up to $16.1 million in the event of
nonperformance, default or other loss relating to the
outstanding pool balance at December 31, 1995, of IBM state
and local government installment receivables securitized and
sold. Adequate reserves exist to cover potential losses.
-28-
<PAGE 29>
SHORT-TERM DEBT:
The components of short-term debt at December 31, 1995, and
1994, are as follows:
(Dollars in thousands) 1995 1994
__________ __________
Commercial paper, with rates averaging
5.7% in 1995 and 4.8% in 1994. . . . . . . . . $4,012,615 $2,256,879
Other short-term debt, with rates averaging
6.3% in 1995 and 6.5% in 1994. . . . . . . . . 1,532,187 755,058
Current maturities of long-term debt. . . . . . 713,683 1,343,101
__________ __________
6,258,485 4,355,038
IBM short-term borrowings . . . . . . . . . . . 214,142 -
__________ __________
$6,472,627 $4,355,038
========== ==========
The approximate weighted average effective interest rates,
above, include the effects of interest rate swap
agreements and have been calculated on the basis of
rates in effect at December 31, 1995, and 1994. The
approximate weighted average stated rates (before the
effects of interest rate swap agreements) on
commercial paper outstanding at December 31, 1995, and 1994,
were 5.9% and 6.1%, respectively. The approximate weighted
average stated rates (before the effects of interest rate
swap agreements) on other short-term debt outstanding at
December 31, 1995, and 1994, were 6.5% and 5.8%,
respectively. Other short-term debt primarily includes notes
having maturities between nine and twelve months offered
through the Company's medium-term note program.
On December 28, 1995, the Company borrowed $214.1 million
from IBM at market terms and conditions. Refer to the note
on pages 20 through 22, Relationship with IBM, for details.
The loan was repaid on January 2, 1996.
LONG-TERM DEBT:
The components of long-term debt at December 31, 1995, and
1994, are as follows:
(Dollars in thousands) 1995 1994
___________ ___________
Medium-term notes with original maturities
ranging from 1996 to 2008, with rates
averaging 5.8% in 1995 and 5.6% in 1994. . . $1,704,982 $2,703,755
IBM loan payable, due November 1997 . . . . . 125,000 125,000
Other debt, with rates averaging 5.7% in 1994 - 99,000
___________ ___________
1,829,982 2,927,755
Net unamortized discounts . . . . . . . . . . (859) (832)
___________ ___________
1,829,123 2,926,923
Less: Current maturities . . . . . . . . . . 713,683 1,343,101
___________ ___________
$1,115,440 $1,583,822
=========== ===========
-29-
<PAGE 30>
LONG-TERM DEBT (Continued):
The approximate weighted average effective interest rates,
on the previous page, include the effects of interest rate
swap agreements and have been calculated on the basis of
rates in effect at December 31, 1995, and 1994. The
approximate weighted average stated rates (before the
effects of interest rate swap agreements) on medium-term
notes outstanding at December 31, 1995, and 1994, were 5.8%
and 5.6%, respectively. The approximate weighted average
stated rate (before the effects of interest rate swap
agreements) on other debt outstanding at December 31, 1994
was 8.5%. Discounts and premiums have the effect of
modifying the stated rate of interest on long-term debt
offerings.
On November 1, 1994, the Company borrowed $125.0 million
from IBM at market terms and conditions. The loan matures
on November 1, 1997.
Annual maturity of long-term debt at December 31, 1995, is
as follows:
(Dollars in thousands)
1996 . . . . . . . . . . . . . . . . . . . $ 713,683
1997 . . . . . . . . . . . . . . . . . . . 348,900
1998 . . . . . . . . . . . . . . . . . . . 457,124
1999 . . . . . . . . . . . . . . . . . . . 5,275
2000 . . . . . . . . . . . . . . . . . . . 291,000
2001 and thereafter . . . . . . . . . . . 14,000
__________
$1,829,982
==========
RATIO OF EARNINGS TO FIXED CHARGES:
The ratio of earnings to fixed charges calculated in
accordance with applicable Securities and Exchange
Commission requirements was 1.96, 2.34 and 2.07 for the
years ended December 31, 1995, 1994 and 1993, respectively.
RELATED COMPANY TRANSACTIONS:
IBM charged the Company $62.6 million, $67.2 million and
$97.8 million in 1995, 1994 and 1993, respectively,
representing costs for lease services, employee benefit
plans, facilities rental and staff support.
The Company received compensation for services and benefits
provided to IBM. Included in income from working capital
financing is fee income earned from IBM of $51.1 million,
$40.4 million and $33.4 million in 1995, 1994 and 1993,
respectively. The fees received also include payment for
the management of IBM's portfolio of state and local
government installment receivables of $46.8 million, $50.8
million and $65.9 million in 1995, 1994 and 1993,
respectively, which are included in other income.
-30-
<PAGE 31>
RELATED COMPANY TRANSACTIONS (Continued):
Amounts due to IBM and affiliates include current income
taxes payable, as well as amounts for software, services,
purchases of receivables and purchases of equipment for term
leases, typically with terms comparable to those offered to
other IBM customers, unless otherwise agreed. At December
31, 1995, and 1994, amounts due to IBM and affiliates were
$1,458.5 million and $1,493.4 million, respectively.
Interest and finance income of $6.9 million, $12.9 million
and $8.0 million was earned from loans to IBM and affiliates
in 1995, 1994 and 1993, respectively. Interest expense of
$10.2 million, $8.5 million and $2.8 million was incurred on
loans from IBM and affiliates during 1995, 1994 and 1993,
respectively.
The Company provides equipment financing at market rates to
IBM and affiliated companies for both IBM and non-IBM
products. The Company originated $305.5 million and $155.0
million of such financings during 1995 and 1994,
respectively. At December 31, 1995, and 1994, approximately
$687.4 million and $927.2 million, respectively, of such
financings were included in the lease and loan portfolio.
Of these amounts, $677.3 million and $752.1 million were
included in the Company's operating lease portfolio at
December 31, 1995, and 1994, respectively. The pretax
income earned from operating leases to IBM and affiliated
companies, net of depreciation expense, was $91.9 million
and $53.3 million in 1995, and 1994, respectively.
PROVISION FOR INCOME TAXES:
The components of the provision for income taxes are as
follows:
(Dollars in thousands)
1995 1994 1993
_________ __________ __________
Federal:
Current . . . . . . . . . . $114,262 $ 271,304 $ 30,612
Deferred. . . . . . . . . . 9,306 (136,766) 116,494
_________ __________ __________
123,568 134,538 147,106
_________ __________ __________
State and local:
Current . . . . . . . . . . 23,405 53,996 47,353
Deferred. . . . . . . . . . 2,482 (25,831) (21,287)
_________ __________ __________
25,887 28,165 26,066
_________ __________ __________
Total provision . . . . . . $149,455 $ 162,703 $ 173,172
========== ========== ==========
-31-
<PAGE 32>
PROVISION FOR INCOME TAXES (Continued):
Changes in the deferred tax assets and liabilities resulting
from temporary differences between financial and tax
reporting are as follows:
(Dollars in thousands) 1995 1994
__________ __________
Deferred tax assets (liabilities):
Provision for receivable losses. . . . . . $ 66,981 $ 48,107
Federal benefit for state and local taxes. 24,080 21,161
Lease income and depreciation. . . . . . . (801,561) (727,389)
Other, net . . . . . . . . . . . . . . . . 45,334 6,210
__________ __________
Deferred income taxes . . . . . . . . . . . . $(665,166) $(651,911)
========== ==========
The provision for income taxes varied from the U.S. federal
statutory income tax rate as follows:
1995 1994 1993
______ ______ ______
Federal statutory rate. . . . . . . . 35.0% 35.0% 35.0%
Federal tax rate increase (1) . . . . - - 5.1
State and local taxes, net of
federal tax benefit . . . . . . . 4.4 4.5 4.2
Other, net. . . . . . . . . . . . . . (0.1) (0.1) (0.3)
______ ______ ______
Effective income tax rate . . . . . . 39.3% 39.4% 44.0%
====== ====== ======
(1) On August 10, 1993, the Omnibus Budget Reconciliation
Act of 1993 (the Act) was enacted. The Act increased the
U.S. corporate income tax rate from 34 percent to 35
percent, retroactive to January 1, 1993. SFAS 109,
"Accounting for Income Taxes," requires that the income
effects on deferred taxes of enacted changes in tax laws are
to be recognized in the period of enactment. Consequently,
the Company's deferred income tax liability at December 31,
1993, was adjusted to reflect the new tax rate, and federal
tax expense for 1993 was calculated using the new rate.
-32-
<PAGE 33>
FINANCIAL INSTRUMENTS:
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
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.
Under interest rate swaps, the Company agrees with other
parties to exchange, at specified intervals, the difference
between interest amounts calculated by reference to a
floating index or a fixed rate on an agreed upon notional
principal amount. Swap contracts are primarily between one
and five years in duration. The Company enters into
currency exchange agreements to hedge debt denominated in
foreign currencies. The term of the currency derivatives is
generally fewer than five years. The purpose of the
Company's foreign currency hedging activities is to protect
itself from the risk that the eventual dollar net cash
outflows will be affected by changes in exchange rates. The
Company enters into interest rate cap and floor agreements
to reduce the potential impact of changes in interest rates
on floating rate debt, supporting fixed rate assets.
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. The tables on page 34 illustrate the
contract or notional (face) amounts outstanding, maturity
dates, weighted average receive and pay rates and the net
unrealized gain (loss) of derivative financial instruments
by category at December 31, 1995, and 1994. Notional amount
represents agreed upon amounts on which calculations of
interest payments to be exchanged are based. Notional
amounts do not represent direct credit exposures. Rather,
they provide an indication of the extent of the Company's
involvement in such derivative financial instruments.
Interest rate agreements generally involve the exchange of
interest payments without the exchange of the underlying
notional amount on which the interest payments are
calculated. The net unrealized gain (loss) for the
derivative financial instruments on page 34 is equal to
their estimated fair value.
-33-
<PAGE 34>
FINANCIAL INSTRUMENTS (Continued):
(Dollars in thousands)
At December 31, 1995:
Notional Weighted Average Rate
Type Amount Maturities Receive Pay
____________________ __________ __________ _____________________
Swap to Fixed $1,564,000 1996-2000 4.84% 6.00%
Swap to Floating 880,000 1996-2000 6.78% 5.02%
Currency Related 95,374 1998 n/a * n/a *
Int. Rate Cap/Floor 72,500 1996 n/a * n/a *
__________
$2,611,874
==========
At December 31, 1995 (Continued):
Notional Unrealized Unrealized Net Unrealized
Type Amount Gross Gain Gross (Loss) Gain (Loss)
____________________ __________ __________ ____________ ______________
Swap to Fixed $1,564,000 $ 107 $(29,643) $(29,536)
Swap to Floating 880,000 6,102 (440) 5,662
Currency Related 95,374 3,936 - 3,936
Int. Rate Cap/Floor 72,500 - - -
__________ __________ ____________ ______________
$2,611,874 $10,145 $(30,083) $(19,938)
========== ========== ============ ==============
At December 31, 1994:
Notional Weighted Average Rate
Type Amount Maturities Receive Pay
____________________ __________ __________ _____________________
Swap to Fixed $1,124,000 1995-1998 7.82% 7.24%
Swap to Floating 973,000 1995-1999 11.38% 12.79%
Currency Related 192,787 1995-1998 n/a * n/a *
Int. Rate Cap 22,500 1996 n/a * n/a *
__________
$2,312,287
==========
At December 31, 1994 (Continued):
Notional Unrealized Unrealized Net Unrealized
Type Amount Gross Gain Gross (Loss) Gain (Loss)
____________________ __________ __________ ____________ ______________
Swap to Fixed $1,124,000 $16,567 $ (8,026) $ 8,541
Swap to Floating 973,000 1,947 (5,209) (3,262)
Currency Related 192,787 23,279 (78,291) (55,012)
Int. Rate Cap 22,500 - - -
__________ __________ ____________ ______________
$2,312,287 $41,793 $(91,526) $(49,733)
========== ========== ============ ==============
* n/a: not applicable
-34-
<PAGE 35>
FINANCIAL INSTRUMENTS (Continued):
As of December 31, 1995, approximately 34 percent of the
Company's total debt was hedged through the use of currency
and interest rate related agreements. Before the effects of
such agreements, the Company's debt comprised approximately
35 percent fixed rate debt and 65 percent floating rate
debt. After the effects of such agreements, the Company's
debt consisted of approximately 50 percent fixed rate debt
and 50 percent floating rate debt. As of December 31, 1994,
about 39 percent of the Company's total debt was hedged
through the use of currency and interest rate related
agreements. Before the effects of such agreements, the
Company's debt comprised approximately 36 percent fixed rate
debt and 64 percent floating rate debt. After the effects
of such agreements, the Company's debt consisted of
approximately 58 percent fixed rate debt and 42 percent
floating rate debt.
The approximate weighted average effective interest rates
for the commercial paper, other short-term debt, medium-term
notes and other long-term debt, as disclosed in the notes on
pages 29 and 30, Short-Term Debt and Long-Term Debt, include
the effects of interest rate swap agreements.
-35-
<PAGE 36>
FINANCIAL INSTRUMENTS (Continued):
Fair value is a very subjective and imprecise measurement
that is based on numerous estimates and assumptions that
require substantial judgment and may be valid only at a
particular point in time. As such, fair value can represent
only a very general approximation of possible value that may
never actually be realized.
The following methods and assumptions were used to estimate
the fair value of each class of financial instrument for
which it is practicable to estimate.
Cash and cash equivalents: The carrying amount approximates
fair value due to the short maturity of these instruments.
Marketable securities: The carrying amount approximates
fair value which is estimated using quoted market prices.
Loans receivable: The fair value is estimated by
discounting the future cash flows using current rates at
which similar loans would be made to borrowers with similar
credit ratings with the same remaining maturities.
Working capital financing receivables: The carrying amount
approximates fair value due to the short maturity of most of
these instruments.
Due and deferred from receivable sales: The carrying amount
approximates fair value.
Investments and other assets: The convertible subordinated
promissory note from Comdisco and certain restricted
securities are included in this category in 1994. For these
financial instruments, the carrying amount approximates fair
value. These investments were liquidated in 1995.
Short-term debt: For the majority of these instruments, the
carrying amount approximates fair value due to their short
maturity.
Long-term debt and current maturities of long-term debt:
The fair value of these instruments is based on replacement
cost or quoted market prices for the same issues.
Replacement cost is the cost to issue a similar instrument
with similar maturity and credit risk.
Interest rate related and currency related agreements: The
fair value of these instruments has been estimated as the
amount the Company would receive or pay to terminate the
agreements, taking into consideration current interest and
currency exchange rates.
Commitments to extend credit: The fair value of commitments
to extend credit is estimated as the amount of approved but
unused working capital financing credit lines available to
customers.
Financial guarantees: The fair value of financial
guarantees is estimated as the amounts that would be paid if
the Company had to settle the obligations.
-36-
<PAGE 37>
FINANCIAL INSTRUMENTS (Continued):
The following table summarizes the carrying amount and the
estimated fair value of all of the Company's financial
instruments:
(Dollars in thousands)
Carrying Estimated
At December 31, 1995: Amount Fair Value
__________ ___________
Cash and cash equivalents $ 336,839 $ 336,839
Marketable securities 89,930 89,930
Loans receivable 1,473,822 1,536,726
Working capital financing receivables 3,158,932 3,158,932
Due and deferred from receivable sales 106,079 106,079
Short-term debt (excluding current
maturities of long-term debt) 5,758,944 5,908,779
Long-term debt and current
maturities of long-term debt 1,829,123 1,690,747
Off-balance-sheet derivatives:
Currency related --
Assets - 3,936
Interest rate related --
Assets - 6,209
Liabilities - 30,083
Commitments to extend credit - 1,001,186
Financial guarantees - 23,207
Carrying Estimated
At December 31, 1994: Amount Fair Value
__________ ___________
Cash and cash equivalents $ 614,339 $ 614,339
Loans receivable 1,070,619 1,071,513
Working capital financing receivables 2,135,020 2,135,020
Investments and other assets 28,521 28,521
Due and deferred from receivable sales 203,614 203,614
Short-term debt (excluding current
maturities of long-term debt) 3,011,937 3,011,429
Long-term debt and current
maturities of long-term debt 2,926,923 2,793,598
Derivatives:
Off-balance-sheet:
Currency related --
Assets - 13,110
Liabilities - 69,632
Interest rate related --
Assets - 18,514
Liabilities - 13,235
On-balance-sheet:
Currency related --
Assets 11,511 10,169
Liabilities 9,923 8,659
Commitments to extend credit - 861,000
Financial guarantees - 17,576
-37-
<PAGE 38>
CREDIT RATING:
On August 28, 1995, Moody's Investors Service, Inc.,
announced it had upgraded its rating for the Company's
long-term debt from A3 to A1.
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 were 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.
LITIGATION SETTLEMENT:
Effective August 26, 1994, IBM, the Company, certain
partnerships in which the Company is the general partner and
Comdisco settled all outstanding litigation between the
parties. Pursuant to the settlement agreement, on August
30, 1994, Comdisco delivered $70.0 million in cash proceeds
to the Company, $20.0 million of which the Company loaned
back to Comdisco in exchange for an interest-bearing
convertible subordinated promissory note, which was repaid
on March 1, 1995. As a result of reaching this settlement
agreement, the Company recognized a pretax gain, net of
directly related expenses, of $46.0 million. This amount
was included in other income on the Consolidated Statement
of Earnings and Retained Earnings for the year ended
December 31, 1994. The outstanding balance of the note was
included in investments and other assets on the Consolidated
Statement of Financial Position at December 31, 1994.
IBM and the Company had filed cases charging that assets
owned by the Company were illegally misappropriated by
Comdisco, and that Comdisco violated the Lanham Act by
manufacturing computer systems memory and marketing it as
genuine IBM memory, eligible for IBM maintenance agreement
service.
Under the terms of the settlement agreement, Comdisco agreed
to label altered memory and other parts as not being IBM
parts, and to disclose to customers that such parts are not
eligible for IBM maintenance agreement service. Comdisco
also agreed that it will not lease, sublease, relocate or
sell the Company's property without prior written consent.
-38-
<PAGE 39>
SALE OF IBM CREDIT INVESTMENT MANAGEMENT CORPORATION:
During the second quarter of 1994, a Fleet Financial Group
subsidiary purchased 100 percent of the stock of IBM Credit
Investment Management Corporation (ICIM), a wholly owned
subsidiary of the Company. ICIM provided investment
management and administrative services for the IBM Mutual
Funds. As a result of this sale, the Company recognized a
pretax gain of $13.3 million, which was included in other
income. In connection with the sale of ICIM, the IBM Money
Market Account notes were redeemed in early July 1994. The
IBM Money Market Account notes were a source of short-term
funding for the Company.
INDUSTRY SEGMENT REPORTING:
The Company operates principally in a single business
segment offering customer financing of information industry
products and services.
SUBSEQUENT EVENT:
On January 31, 1996, the Company's Board of Directors
declared a $45.0 million dividend, payable to IBM on March
1, 1996.
-39-
<PAGE 40>
SELECTED QUARTERLY FINANCIAL DATA: (Unaudited)
(Dollars in thousands)
Finance Gross Profit
and Other Interest Equipment on Equipment Net
Income Expense Sales Sales Earnings
___________ ________ _________ ____________ ________
1995
____
First Quarter . .$ 337,481* $ 86,296 $ 114,103 $13,268 $ 57,945
Second Quarter. . 361,229* 94,621 130,967 26,158 63,924
Third Quarter . . 378,739 106,050 123,454 13,539 53,526
Fourth Quarter. . 374,836 107,605 125,095 21,648 55,080
___________ ________ _________ _______ ________
$1,452,285 $394,572 $ 493,619 $74,613 $230,475
=========== ======== ========= ======= ========
1994
____
First Quarter . .$ 360,134 $ 75,425 $150,530 $12,444 $ 59,061
Second Quarter. . 383,020* 76,442 161,320 15,880 66,370
Third Quarter . . 423,387* 75,634 193,211 29,715 78,009
Fourth Quarter. . 318,139 78,624 120,668 10,469 47,149
___________ ________ ________ _______ ________
$1,484,680 $306,125 $625,729 $68,508 $250,589
=========== ======== ======== ======= ========
* During the first quarter of 1995, the Company recognized a pretax
gain of $5.0 million upon Comdisco Inc.'s redemption of the
convertible subordinated promissory note on March 1, 1995.
During the second quarter of 1995, the Company recognized a pretax
gain of $4.3 million from the sale of financing assets.
During the second quarter of 1994, the Company recognized a pretax
gain of $13.3 million from the sale of IBM Credit Investment
Management Corporation. As a result of the litigation settlement
reached with Comdisco, Inc. during the third quarter of 1994, the
Company recognized a pretax gain, net of directly related expenses,
of $46.0 million. These amounts are included in other income.
-40-
<PAGE 41>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE:
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:
Omitted pursuant to General Instruction J.
ITEM 11. EXECUTIVE COMPENSATION:
Omitted pursuant to General Instruction J.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT:
Omitted pursuant to General Instruction J.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
Omitted pursuant to General Instruction J.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K:
(a) The following documents are filed as part of this report:
1. Consolidated Financial Statements
included in Part II of this report:
Report of Independent Accountants (page 14).
Consolidated Statement of Financial Position at December
31, 1995 and 1994 (page 15).
Consolidated Statement of Earnings and Retained Earnings
for the years ended December 31, 1995, 1994 and 1993
(page 16).
Consolidated Statement of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 (pages 17 and 18).
Notes to Consolidated Financial Statements (pages 19
through 40).
2. Financial statement schedules required to be filed by
Item 8 of this Form 10-K:
Schedules are omitted because of the absence
of the conditions under which they are required or
because the information is disclosed in the financial
statements or in the notes thereto.
-41-
<PAGE 42>
3. Exhibits required to be filed by Item 601 of Regulation S-K:
Included in this Form 10-K:
Exhibit Number
______________
I. Agreement to furnish information defining the
rights of debt holders
II. Statement re computation of ratios
III. Consent of experts and counsel
IV(a). Power of Attorney of W. Wilson Lowery, Jr.
IV(b). Power of Attorney of David R. Carlucci
IV(c). Power of Attorney of Buell G. Duncan III
IV(d). Power of Attorney of William A. Etherington
IV(e). Power of Attorney of John R. Joyce
IV(f). Power of Attorney of Abby F. Kohnstamm
IV(g). Power of Attorney of William E. McCracken
IV(h). Power of Attorney of Iain R. McGregor
IV(i). Power of Attorney of Mark J. Ryan
IV(j). Power of Attorney of Jeffrey D. Serkes
IV(k). Power of Attorney of William M. Stuek
IV(l). Power of Attorney of James T. Vanderslice
IV(m). Power of Attorney of Irving Wladawsky-Berger
V. Financial Data Schedule
Not included in this Form 10-K:
The Certificate of Incorporation of IBM Credit Corporation
is filed pursuant to the quarterly report on Form 10-Q for
the quarterly period ended June 30, 1993, on August 10,
1993, and is hereby incorporated by reference.
The By-Laws of IBM Credit Corporation are filed pursuant
to the quarterly report on Form 10-Q for the quarterly
period ended September 30, 1993, on November 10, 1993,
and are hereby incorporated by reference.
The Support Agreement dated as of April 15, 1981, between
the Company and IBM is filed with Form SE dated March 26,
1987, and is hereby incorporated by reference.
(b) Reports on Form 8-K:
There were no Form 8-K reports filed during 1995.
-42-
<PAGE 43>
[SIGNATURE]
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /s/W. Wilson Lowery, Jr.
________________________
(W. Wilson Lowery, Jr.)
Chairman
Date: March 18, 1996
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities on March 18, 1996.
Signature Title
_________ _____
_/s/W. Wilson Lowery, Jr.__
___________________________
(W. Wilson Lowery, Jr.) Chairman
_/s/Allison R. Schleicher__
___________________________
(Allison R. Schleicher) Vice President, Finance
and Chief Financial Officer
_/s/Nancy E. Cooper________
___________________________
(Nancy E. Cooper) Controller and Treasurer
David R. Carlucci Director }
} /s/Allison R. Schleicher
Buell G. Duncan III Director } By: ________________________
} (Allison R. Schleicher)
William A. Etherington Director } Attorney-in-fact
}
John R. Joyce Director }
}
Abby F. Kohnstamm Director }
}
William E. McCracken Director }
}
Iain R. McGregor Director }
}
Mark J. Ryan Director }
}
Jeffrey D. Serkes Director }
}
William M. Stuek Director }
}
James T. Vanderslice Director }
}
Irving Wladawsky-Berger Director }
-43-
<PAGE 44>
EXHIBIT INDEX
_____________
Reference Number Exhibit Number
per Item 601 of in This
Regulation S-K Description of Exhibits Form 10-K
________________ _________________________________________ ______________
(3) Certificate of Incorporation and By-Laws
The Certificate of Incorporation of IBM
Credit Corporation is filed pursuant to
Form 10Q for the quarterly period ended
June 30, 1993, on August 10, 1993, and is
hereby incorporated by reference.
The By-Laws of IBM Credit Corporation are
filed pursuant to the quarterly report on
Form 10Q for the quarterly period ended
September 30, 1993, on November 10, 1993,
and are hereby incorporated by reference.
(4)(a) Instruments defining the rights of
security holders.
An agreement to furnish to the Securities I
and Exchange Commission, on request, a
copy of instruments defining the rights
of debt holders.
(4)(b) Indenture dated as of January 15, 1989,
filed electronically as Exhibit No. 4 to
Amendment No. 1 to Form S-3 on April 3,
1989, and is hereby incorporated by
reference.
(9) Voting trust agreement. Not
applicable
(10) Material contracts.
The Support Agreement as of dated April 15,
1981, between the Company and IBM is
filed with Form SE dated March 26, 1987,
and is hereby incorporated by reference.
(11) Statement re computation of per share Not
earnings. applicable
(12) Statement re computation of ratios. II
(18) Letter re change in accounting principles. Not
applicable
(21) Subsidiaries of the registrant. Omitted
(22) Published report regarding matters Not
submitted to vote of security holders. applicable
(23) Consent of experts and counsel. III
-44-
<PAGE 45>
EXHIBIT INDEX
_____________
(continued)
Reference Number Exhibit Number
per Item 601 of in This
Regulation S-K Description of Exhibits Form 10-K
________________ _________________________________________ ______________
(24)(a) Power of Attorney of W. Wilson Lowery, Jr. IV(a)
(24)(b) Power of Attorney of David R. Carlucci IV(b)
(24)(c) Power of Attorney of Buell G. Duncan III IV(c)
(24)(d) Power of Attorney of William A. Etherington IV(d)
(24)(e) Power of Attorney of John R. Joyce IV(e)
(24)(f) Power of Attorney of Abby F. Kohnstamm IV(f)
(24)(g) Power of Attorney of William E. McCracken IV(g)
(24)(h) Power of Attorney of Iain R. McGregor IV(h)
(24)(i) Power of Attorney of Mark J. Ryan IV(i)
(24)(j) Power of Attorney of Jeffrey D. Serkes IV(j)
(24)(k) Power of Attorney of William M. Stuek IV(k)
(24)(l) Power of Attorney of James T. Vanderslice IV(l)
(24)(m) Power of Attorney of Irving Wladawsky-Berger IV(m)
(27) Financial data schedule. V
(28) Information from reports furnished to Not
state insurance regulatory authorities. applicable
(99) Additional exhibits. Not
applicable
-45-
<PAGE 1>
[SIGNATURE]
EXHIBIT I
_________
AGREEMENT TO FURNISH INFORMATION DEFINING
_________________________________________
THE RIGHTS OF DEBT HOLDERS
__________________________
Securities and Exchange Commission
450 Fifth Avenue
Washington, D.C. 20549
Subject: IBM Credit Corporation Annual Report on Form 10-K for
the fiscal year ended December 31, 1995 - File No. 1-8175
Dear Sirs:
IBM Credit Corporation (the Company) including its subsidiaries does
not have outstanding any instrument other than the Indenture dated
January 15, 1989, as filed electronically as Exhibit No. 4 to Form S-3
with the Securities and Exchange Commission on April 3, 1989, defining
the rights of the holders of its long-term debt under which the total
amount of securities authorized exceeds 10 percent of the total assets
of the Company and its subsidiaries on a consolidated basis.
In accordance with paragraph (b)(4)(iii) of Item 601 of Regulation S-K,
the Company hereby agrees to furnish to the Securities and Exchange
Commission, upon request, a copy of each instrument that defines the
rights of the holders of its long-term debt.
Very truly yours,
IBM CREDIT CORPORATION
By: /s/Allison R. Schleicher
_____________________________
Date: March 18, 1996 (Allison R. Schleicher)
Vice President, Finance
and Chief Financial Officer
-46-
<PAGE 1>
<TABLE>
<CAPTION>
EXHIBIT II
__________
IBM CREDIT CORPORATION
STATEMENT RE COMPUTATION OF RATIOS
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31:
1995 1994 1993 1992 1991
________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C>
Fixed Charges:
Interest Expense $394,572 $306,125 $365,675 $445,816 $562,531
Approximate portion of rental
expense representative of
the interest factor 507 2,780 3,290 3,078 1,446
________ ________ ________ ________ ________
Total fixed charges 395,079 308,905 368,965 448,894 563,977
Net earnings 230,475 250,589 220,220 219,270 200,221
Provision for income taxes 149,455 162,703 173,172 131,562 124,858
________ ________ ________ ________ ________
Earnings before income taxes
and fixed charges $775,009 $722,197 $762,357 $799,726 $889,056
======== ======== ======== ======== ========
Ratio of earnings to fixed
charges 1.96 2.34 2.07 1.78 1.58
==== ==== ==== ==== ====
-47-
</TABLE>
<PAGE 1>
[SIGNATURE]
EXHIBIT III
___________
CONSENT OF INDEPENDENT ACCOUNTANTS
__________________________________
We hereby consent to the incorporation by reference in
the Prospectus constituting part of the Registration
Statements on Form S-3 (Nos. 33-36862, 33-44594, 33-43073,
33-49411 and 33-56207) of IBM Credit Corporation of our
report dated January 19, 1996, except as to the Subsequent
Event note on page 39, which is as of January 31, 1996
appearing on page 14 of this Form 10-K.
/s/Price Waterhouse LLP
Stamford, CT
March 18, 1996
-48-
<PAGE 1>
[SIGNATURE]
EXHIBIT IV(a)
_____________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned chairman
of the board of directors of IBM Credit Corporation, a Delaware
corporation, which expects to file with the Securities and
Exchange Commission, Washington, D.C., under provisions of the
Securities Laws, an Annual Report on Form 10-K, and Registration
Statements for amounts of debentures and notes to be determined
by the Board of Directors, hereby appoints the Vice-President,
Finance; Secretary; and any Assistant Secretary of said corporation;
and each of such officers individually, his attorney-in-fact and
agent, for him and in his name, to sign, or cause to be signed
electronically, said 10-K and Registration Statements and amendments
thereto, and to file them with the Securities and Exchange Commission,
hereby granting unto said attorneys-in-fact and agents, and each of
them, full power to do any and all acts and things as fully as he
might or could do in person. This authorization shall remain in
force throughout the period that the undersigned is the chairman
of the board of directors of IBM Credit Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 9th day of January, 1996.
/s/ W. Wilson Lowery, Jr.
-----------------------------
Name: W. Wilson Lowery, Jr.
Title: Chairman
-49-
<PAGE 1>
[SIGNATURE]
EXHIBIT IV(b)
_____________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
of IBM Credit Corporation, a Delaware corporation, which expects
to file with the Securities and Exchange Commission, Washington, D.C.,
under provisions of the Securities Laws, an Annual Report on Form 10-K,
and Registration Statements for amounts of debentures and notes to be
determined by the Board of Directors, hereby appoints the Chairman;
Vice-President, Finance; Secretary; and any Assistant Secretary of
said corporation; and each of such officers individually, his attorney-
in-fact and agent, for him and in his name, to sign, or cause to be
signed electronically, said 10-K and Registration Statements and
amendments thereto, and to file them with the Securities and Exchange
Commission, hereby granting unto said attorneys-in-fact and agents,
and each of them, full power to do any and all acts and things as fully
as he might or could do in person. This authorization shall remain in
force throughout the period that the undersigned is a director of
IBM Credit Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 9th day of January, 1996.
/s/ David R. Carlucci
-----------------------------
Name: David R. Carlucci
Title: Director
-50-
<PAGE 1>
[SIGNATURE]
EXHIBIT IV(c)
_____________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
of IBM Credit Corporation, a Delaware corporation, which expects
to file with the Securities and Exchange Commission, Washington, D.C.,
under provisions of the Securities Laws, an Annual Report on Form 10-K,
and Registration Statements for amounts of debentures and notes to be
determined by the Board of Directors, hereby appoints the Chairman;
Vice-President, Finance; Secretary; and any Assistant Secretary of
said corporation; and each of such officers individually, his attorney-
in-fact and agent, for him and in his name, to sign, or cause to be
signed electronically, said 10-K and Registration Statements and
amendments thereto, and to file them with the Securities and Exchange
Commission, hereby granting unto said attorneys-in-fact and agents,
and each of them, full power to do any and all acts and things as fully
as he might or could do in person. This authorization shall remain in
force throughout the period that the undersigned is a director of
IBM Credit Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 9th day of January, 1996.
/s/ Buell G. Duncan III
-----------------------------
Name: Buell G. Duncan III
Title: Director
-51-
<PAGE 1>
[SIGNATURE]
EXHIBIT IV(d)
_____________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
of IBM Credit Corporation, a Delaware corporation, which expects
to file with the Securities and Exchange Commission, Washington, D.C.,
under provisions of the Securities Laws, an Annual Report on Form 10-K,
and Registration Statements for amounts of debentures and notes to be
determined by the Board of Directors, hereby appoints the Chairman;
Vice-President, Finance; Secretary; and any Assistant Secretary of
said corporation; and each of such officers individually, his attorney-
in-fact and agent, for him and in his name, to sign, or cause to be
signed electronically, said 10-K and Registration Statements and
amendments thereto, and to file them with the Securities and Exchange
Commission, hereby granting unto said attorneys-in-fact and agents,
and each of them, full power to do any and all acts and things as fully
as he might or could do in person. This authorization shall remain in
force throughout the period that the undersigned is a director of
IBM Credit Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 9th day of January, 1996.
/s/ William A. Etherington
-------------------------------
Name: William A. Etherington
Title: Director
-52-
<PAGE 1>
[SIGNATURE]
EXHIBIT IV(e)
_____________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
of IBM Credit Corporation, a Delaware corporation, which expects
to file with the Securities and Exchange Commission, Washington, D.C.,
under provisions of the Securities Laws, an Annual Report on Form 10-K,
and Registration Statements for amounts of debentures and notes to be
determined by the Board of Directors, hereby appoints the Chairman;
Vice-President, Finance; Secretary; and any Assistant Secretary of
said corporation; and each of such officers individually, his attorney-
in-fact and agent, for him and in his name, to sign, or cause to be
signed electronically, said 10-K and Registration Statements and
amendments thereto, and to file them with the Securities and Exchange
Commission, hereby granting unto said attorneys-in-fact and agents,
and each of them, full power to do any and all acts and things as fully
as he might or could do in person. This authorization shall remain in
force throughout the period that the undersigned is a director of
IBM Credit Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 9th day of January, 1996.
/s/ John R. Joyce
-------------------------------
Name: John R. Joyce
Title: Director
-53-
<PAGE 1>
[SIGNATURE]
EXHIBIT IV(f)
_____________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
of IBM Credit Corporation, a Delaware corporation, which expects
to file with the Securities and Exchange Commission, Washington, D.C.,
under provisions of the Securities Laws, an Annual Report on Form 10-K,
and Registration Statements for amounts of debentures and notes to be
determined by the Board of Directors, hereby appoints the Chairman;
Vice-President, Finance; Secretary; and any Assistant Secretary of
said corporation; and each of such officers individually, his attorney-
in-fact and agent, for him and in his name, to sign, or cause to be
signed electronically, said 10-K and Registration Statements and
amendments thereto, and to file them with the Securities and Exchange
Commission, hereby granting unto said attorneys-in-fact and agents,
and each of them, full power to do any and all acts and things as fully
as he might or could do in person. This authorization shall remain in
force throughout the period that the undersigned is a director of
IBM Credit Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 9th day of January, 1996.
/s/ Abby F. Kohnstamm
-------------------------------
Name: Abby F. Kohnstamm
Title: Director
-54-
<PAGE 1>
[SIGNATURE]
EXHIBIT IV(g)
_____________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
of IBM Credit Corporation, a Delaware corporation, which expects
to file with the Securities and Exchange Commission, Washington, D.C.,
under provisions of the Securities Laws, an Annual Report on Form 10-K,
and Registration Statements for amounts of debentures and notes to be
determined by the Board of Directors, hereby appoints the Chairman;
Vice-President, Finance; Secretary; and any Assistant Secretary of
said corporation; and each of such officers individually, his attorney-
in-fact and agent, for him and in his name, to sign, or cause to be
signed electronically, said 10-K and Registration Statements and
amendments thereto, and to file them with the Securities and Exchange
Commission, hereby granting unto said attorneys-in-fact and agents,
and each of them, full power to do any and all acts and things as fully
as he might or could do in person. This authorization shall remain in
force throughout the period that the undersigned is a director of
IBM Credit Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 9th day of January, 1996.
/s/ William E. McCracken
-------------------------------
Name: William E. McCracken
Title: Director
-55-
<PAGE 1>
[SIGNATURE]
EXHIBIT IV(h)
_____________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
of IBM Credit Corporation, a Delaware corporation, which expects
to file with the Securities and Exchange Commission, Washington, D.C.,
under provisions of the Securities Laws, an Annual Report on Form 10-K,
and Registration Statements for amounts of debentures and notes to be
determined by the Board of Directors, hereby appoints the Chairman;
Vice-President, Finance; Secretary; and any Assistant Secretary of
said corporation; and each of such officers individually, his attorney-
in-fact and agent, for him and in his name, to sign, or cause to be
signed electronically, said 10-K and Registration Statements and
amendments thereto, and to file them with the Securities and Exchange
Commission, hereby granting unto said attorneys-in-fact and agents,
and each of them, full power to do any and all acts and things as fully
as he might or could do in person. This authorization shall remain in
force throughout the period that the undersigned is a director of
IBM Credit Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 9th day of January, 1996.
/s/ Iain R. McGregor
-------------------------------
Name: Iain R. McGregor
Title: Director
-56-
<PAGE 1>
[SIGNATURE]
EXHIBIT IV(i)
_____________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
of IBM Credit Corporation, a Delaware corporation, which expects
to file with the Securities and Exchange Commission, Washington, D.C.,
under provisions of the Securities Laws, an Annual Report on Form 10-K,
and Registration Statements for amounts of debentures and notes to be
determined by the Board of Directors, hereby appoints the Chairman;
Vice-President, Finance; Secretary; and any Assistant Secretary of
said corporation; and each of such officers individually, his attorney-
in-fact and agent, for him and in his name, to sign, or cause to be
signed electronically, said 10-K and Registration Statements and
amendments thereto, and to file them with the Securities and Exchange
Commission, hereby granting unto said attorneys-in-fact and agents,
and each of them, full power to do any and all acts and things as fully
as he might or could do in person. This authorization shall remain in
force throughout the period that the undersigned is a director of
IBM Credit Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 9th day of January, 1996.
/s/ Mark J. Ryan
-------------------------------
Name: Mark J. Ryan
Title: Director
-57-
<PAGE 1>
[SIGNATURE]
EXHIBIT IV(j)
_____________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
of IBM Credit Corporation, a Delaware corporation, which expects
to file with the Securities and Exchange Commission, Washington, D.C.,
under provisions of the Securities Laws, an Annual Report on Form 10-K,
and Registration Statements for amounts of debentures and notes to be
determined by the Board of Directors, hereby appoints the Chairman;
Vice-President, Finance; Secretary; and any Assistant Secretary of
said corporation; and each of such officers individually, his attorney-
in-fact and agent, for him and in his name, to sign, or cause to be
signed electronically, said 10-K and Registration Statements and
amendments thereto, and to file them with the Securities and Exchange
Commission, hereby granting unto said attorneys-in-fact and agents,
and each of them, full power to do any and all acts and things as fully
as he might or could do in person. This authorization shall remain in
force throughout the period that the undersigned is a director of
IBM Credit Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 9th day of January, 1996.
/s/ Jeffrey D. Serkes
-------------------------------
Name: Jeffrey D. Serkes
Title: Director
-58-
<PAGE 1>
[SIGNATURE]
EXHIBIT IV(k)
_____________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
of IBM Credit Corporation, a Delaware corporation, which expects
to file with the Securities and Exchange Commission, Washington, D.C.,
under provisions of the Securities Laws, an Annual Report on Form 10-K,
and Registration Statements for amounts of debentures and notes to be
determined by the Board of Directors, hereby appoints the Chairman;
Vice-President, Finance; Secretary; and any Assistant Secretary of
said corporation; and each of such officers individually, his attorney-
in-fact and agent, for him and in his name, to sign, or cause to be
signed electronically, said 10-K and Registration Statements and
amendments thereto, and to file them with the Securities and Exchange
Commission, hereby granting unto said attorneys-in-fact and agents,
and each of them, full power to do any and all acts and things as fully
as he might or could do in person. This authorization shall remain in
force throughout the period that the undersigned is a director of
IBM Credit Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 9th day of January, 1996.
/s/ William M. Stuek
-------------------------------
Name: William M. Stuek
Title: Director
-59-
<PAGE 1>
[SIGNATURE]
EXHIBIT IV(l)
_____________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
of IBM Credit Corporation, a Delaware corporation, which expects
to file with the Securities and Exchange Commission, Washington, D.C.,
under provisions of the Securities Laws, an Annual Report on Form 10-K,
and Registration Statements for amounts of debentures and notes to be
determined by the Board of Directors, hereby appoints the Chairman;
Vice-President, Finance; Secretary; and any Assistant Secretary of
said corporation; and each of such officers individually, his attorney-
in-fact and agent, for him and in his name, to sign, or cause to be
signed electronically, said 10-K and Registration Statements and
amendments thereto, and to file them with the Securities and Exchange
Commission, hereby granting unto said attorneys-in-fact and agents,
and each of them, full power to do any and all acts and things as fully
as he might or could do in person. This authorization shall remain in
force throughout the period that the undersigned is a director of
IBM Credit Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 9th day of January, 1996.
/s/ James T. Vanderslice
-------------------------------
Name: James T. Vanderslice
Title: Director
-60-
<PAGE 1>
[SIGNATURE]
EXHIBIT IV(m)
_____________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
of IBM Credit Corporation, a Delaware corporation, which expects
to file with the Securities and Exchange Commission, Washington, D.C.,
under provisions of the Securities Laws, an Annual Report on Form 10-K,
and Registration Statements for amounts of debentures and notes to be
determined by the Board of Directors, hereby appoints the Chairman;
Vice-President, Finance; Secretary; and any Assistant Secretary of
said corporation; and each of such officers individually, his attorney-
in-fact and agent, for him and in his name, to sign, or cause to be
signed electronically, said 10-K and Registration Statements and
amendments thereto, and to file them with the Securities and Exchange
Commission, hereby granting unto said attorneys-in-fact and agents,
and each of them, full power to do any and all acts and things as fully
as he might or could do in person. This authorization shall remain in
force throughout the period that the undersigned is a director of
IBM Credit Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 9th day of January, 1996.
/s/ Irving Wladawsky-Berger
-------------------------------
Name: Irving Wladawsky-Berger
Title: Director
-61-
<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 YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 336,839
<SECURITIES> 89,930
<RECEIVABLES> 1,473,822
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,425,551
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 457,011
0
0
<OTHER-SE> 751,563
<TOTAL-LIABILITY-AND-EQUITY> 1,208,574
<SALES> 493,619
<TOTAL-REVENUES> 1,452,285
<CGS> 419,006
<TOTAL-COSTS> 419,006
<OTHER-EXPENSES> 190,360
<LOSS-PROVISION> 68,417
<INTEREST-EXPENSE> 394,572
<INCOME-PRETAX> 379,930
<INCOME-TAX> 149,455
<INCOME-CONTINUING> 230,475
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 230,475
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
