Last checked at 20 Oct 2015 07:00
IBM (NYSE:IBM)
Diluted EPS from continuing operations: Operating (non-GAAP): $3.34, down 9 percent; GAAP: $3.02, down 13 percent; Net income from continuing operations: Operating (non-GAAP): $3.3 billion, down 11 percent; GAAP: $3.0 billion, down 14 percent; Gross profit margin from continuing operations: Operating (non-GAAP): 50.0 percent, up 80 basis points; GAAP: 48.9 percent, up 40 basis points; Revenue from continuing operations: $19.3 billion: Down 1 percent adjusting for currency (9 points) and the divested System x business (4 points); down 14 percent as reported; Strategic imperatives revenue: Up 27 percent year-to-year, adjusting for currency and divested business; up 17 percent as reported; Up more than 30 percent year-to-date adjusting for currency and divested business; up 20 percent as reported: Cloud revenue up more than 65 percent year-to-date adjusting for currency and divested business; up more than 45 percent as reported; Total cloud revenue of $9.4 billion over trailing 12 months; For cloud delivered as a service, annual run rate of $4.5 billion vs. $3.1 billion in third-quarter 2014; Business analytics revenue up 19 percent year-to-date adjusting for currency; up 9 percent as reported; Services backlog of $118 billion, up 1 percent adjusting for currency; Free cash flow of $13.6 billion over trailing 12 months; Total capital return to shareholders of $8.7 billion over trailing 12 months; dividends of $4.7 billion and gross share repurchases of $4.0 billion; Expect full-year 2015 operating (non-GAAP) EPS of $14.75 to $15.75; Expect full-year 2015 free cash flow to be relatively flat.IBM (NYSE: IBM) today announced third-quarter 2015 diluted earnings from continuing operations of $3.02 per share, down 13 percent year-to-year. Operating (non-GAAP) diluted earnings from continuing operations were $3.34 per share, compared with operating diluted earnings of $3.68 per share in the third quarter of 2014, a decrease of 9 percent.
"In the third quarter we again made progress in the transformation of our business to higher value, with strong growth in our strategic imperatives and expanded operating margins,” said Ginni Rometty, IBM chairman, president and chief executive officer. "We are continuing to make significant investments to build platforms around analytics, cloud, mobility and security that lay the foundation for a new era of cognitive business -- where we see long-term value for our clients and shareholders."
Third-quarter net income from continuing operations was $3.0 billion compared with $3.5 billion in the third quarter of 2014, a decrease of 14 percent. Operating (non-GAAP) net income was $3.3 billion compared with $3.7 billion in the third quarter of 2014, a decrease of 11 percent, impacted by currency.
Total revenues from continuing operations for the third quarter of 2015 of $19.3 billion were down 14 percent (down 1 percent, adjusting for currency and the divested System x business) from the third quarter of 2014.
Third-Quarter GAAP – Operating (non-GAAP) Reconciliation
Third-quarter operating (non-GAAP) diluted earnings exclude $0.32 per share of charges: $0.18 per share for the amortization of purchased intangible assets and other acquisition-related charges, and $0.14 per share for non-operating retirement-related charges driven by changes to plan assets and liabilities primarily related to past market performance.
Full-Year 2015 Expectations
IBM expects full-year 2015 GAAP diluted earnings per share of $13.25 to $14.25, and operating (non-GAAP) diluted earnings per share of $14.75 to $15.75. IBM expects free cash flow to be relatively flat year-to-year. The 2015 operating (non-GAAP) earnings expectation excludes $1.50 per share of charges for amortization of purchased intangible assets, other acquisition-related charges and retirement-related charges.
Strategic Imperatives
Revenues from the company’s strategic imperatives --- cloud, analytics, and engagement --- increased 17 percent year-to-year (up 27 percent adjusting for currency and the divested System x business); increased 20 percent year-to-date (up more than 30 percent adjusting for currency and the divested System x business). Total cloud revenues (public, private and hybrid) increased more than 45 percent (more than 65 percent adjusting for currency and the divested System x business) year-to-date, and is $9.4 billion over trailing 12 months. The annual run rate for cloud delivered as a service -- a subset of the total cloud revenue -- increased to $4.5 billion from $3.1 billion in the third quarter of 2014. Revenues from business analytics increased 9 percent year-to-date (19 percent adjusting for currency). Revenues year-to-date from mobile more than quadrupled, from security increased 6 percent (12 percent adjusting for currency) and from social increased 32 percent (about 40 percent adjusting for currency).
Geographic Regions
The Americas’ third-quarter revenues were $9.1 billion, a decrease of 10 percent (down 3 percent adjusting for currency and the divested System x business) from the 2014 period. Revenues from Europe/Middle East/Africa were $6.1 billion, down 16 percent (up 1 percent adjusting for currency and the divested System x business). Asia-Pacific revenues decreased 19 percent (down 1 percent adjusting for currency and the divested System x business) to $4.1 billion. Revenues from the BRIC countries were down 30 percent as reported (down 7 percent adjusting for currency and the divested System x business).
Services
Global Technology Services segment revenues were down 10 percent (up 1 percent adjusting for currency and the divested System x business) to $7.9 billion. Global Business Services segment revenues were down 13 percent (down 5 percent adjusting for currency) to $4.2 billion.
The estimated services backlog as of September 30 was $118 billion, up 1 percent year-to-year adjusting for currency.
Software
Revenues from the Software segment were down 10 percent to $5.1 billion (down 3 percent adjusting for currency) compared with the third quarter of 2014.
Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Workforce Solutions and Rational products, were $3.4 billion, down 7 percent (down 1 percent adjusting for currency) year-to-year. Operating systems revenues of $0.4 billion were down 14 percent (down 7 percent adjusting for currency) year-to-year.
Hardware
Revenues from the Systems Hardware segment totaled $1.5 billion for the quarter, down 39 percent (down 2 percent adjusting for currency and the divested System x business) year-to-year.
Revenues from z Systems mainframe server products increased 15 percent compared with the year-ago period (up 20 percent adjusting for currency). Total delivery of z Systems computing power, as measured in MIPS (millions of instructions per second), increased 18 percent. Revenues from Power Systems were down 3 percent compared with the 2014 period (up 2 percent adjusting for currency). Revenues from System Storage decreased 19 percent (down 14 percent adjusting for currency).
Financing
Global Financing segment revenues decreased 8 percent (up 7 percent, adjusting for currency) in the third quarter at $0.4 billion.
Gross Profit
The company’s total gross profit margin from continuing operations was 48.9 percent in the 2015 third quarter compared with 48.6 percent in the 2014 third quarter. Total operating (non-GAAP) gross profit margin from continuing operations was 50.0 percent in the 2015 third quarter compared with 49.2 percent in the 2014 third quarter, with an increase in Hardware and an improving segment mix partially offset by declines in Services.
Expense
Total expense and other income from continuing operations decreased to $5.8 billion, down 11 percent compared to the prior-year period, primarily due to the impact of currency. S,G&A expense of $4.7 billion decreased 10 percent year over year. R,D&E expense of $1.3 billion decreased 5 percent year-to-year; the related expense-to-revenue ratio increased to 6.7 percent compared with 6.0 percent in the year-ago period. Intellectual property and custom development income increased to $188 million compared with $145 million a year ago. Other (income) and expense was income of $133 million compared with prior-year income of $103 million. Interest expense decreased to $117 million compared with $126 million in the prior year.
Total operating (non-GAAP) expense and other income from continuing operations decreased to $5.7 billion, down 12 percent compared with the prior-year period. Operating (non-GAAP) S,G&A expense of $4.6 billion decreased 11 percent compared with prior-year expense. Operating (non-GAAP) R,D&E expense of $1.3 billion decreased 7 percent year-to-year; the related expense-to-revenue ratio increased to 6.6 percent compared with 6.1 percent in the year-ago period.
Pre-Tax Income
Pre-tax income from continuing operations decreased 17 percent to $3.6 billion. Pre-tax margin from continuing operations decreased 0.7 points to 18.8 percent. Operating (non-GAAP) pre-tax income from continuing operations decreased 14 percent to $4.0 billion and pre-tax margin was 20.7 percent, flat year to year.
***
IBM’s tax rate from continuing operations was 18.2 percent, down 2.6 points year over year; the operating (non-GAAP) tax rate was 18.0 percent, down 2.8 points compared to the year-ago period.
Net income margin from continuing operations is essentially flat at 15.4 percent. Total operating (non-GAAP) net income margin from continuing operations increased 0.6 points to 17.0 percent.
The weighted-average number of diluted common shares outstanding in the third-quarter 2015 was 979 million compared with 998 million shares in the same period of 2014. As of September 30, 2015, there were 970 million basic common shares outstanding.
Debt, including Global Financing, totaled $39.7 billion, compared with $40.8 billion at year-end 2014. From a management segment view, Global Financing debt totaled $26.0 billion versus $29.1 billion at year-end 2014. The debt-to-equity ratio is 7.0 to 1. Core (non-global financing) debt totaled $13.7 billion, an increase of $2.0 billion since year-end 2014 and a decrease of $3.4 billion from the third quarter of 2014. IBM ended the third-quarter 2015 with $9.6 billion of cash on hand.
The company generated free cash flow of $2.6 billion, excluding Global Financing receivables, up $0.4 billion year over year. The company returned $2.8 billion to shareholders through $1.3 billion in dividends and $1.5 billion of gross share repurchases. The balance sheet remains strong, and is well positioned to support the business over the long term.
Year-To-Date 2015 Results
Net income from continuing operations for the nine months ended September 30, 2015 was $8.9 billion compared with $10.2 billion in the year-ago period, a decrease of 13 percent. Diluted earnings per share from continuing operations were $9.03, down 11 percent compared to the 2014 period.
Consolidated net income was $8.7 billion compared to $6.5 billion, including operating net losses in discontinued operations related to the divested Microelectronics business. Consolidated diluted earnings per share were $8.85 compared to $6.44, up 37 percent year-to-year. Revenues from continuing operations for the nine-month period totaled $59.7 billion, a decrease of 13 percent (down 1 percent year to year, adjusting for currency and divested businesses) compared with $68.7 billion for the first nine months of 2014.
Operating (non-GAAP) net income from continuing operations for the nine months ended September 30, 2015 was $10.0 billion compared with $10.9 billion in the year-ago period, a decrease of 9 percent. Operating (non-GAAP) diluted earnings per share from continuing operations were $10.09 compared with $10.76 per diluted share for the 2014 period, a decrease of 6 percent.
Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company’s current assumptions regarding future business and financial performance. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including the following: a downturn in economic environment and client spending budgets; the company’s failure to meet growth and productivity objectives, a failure of the company’s innovation initiatives; risks from investing in growth opportunities; failure of the company’s intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; cybersecurity and data privacy considerations; fluctuations in financial results, impact of local legal, economic, political and health conditions; adverse effects from environmental matters, tax matters and the company’s pension plans; ineffective internal controls; the company’s use of accounting estimates; the company’s ability to attract and retain key personnel and its reliance on critical skills; impacts of relationships with critical suppliers and business with government clients; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; reliance on third party distribution channels; the company’s ability to successfully manage acquisitions, alliances and dispositions; risks from legal proceedings; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company’s Form 10-Qs, Form 10-K and in the company’s other filings with the U.S. Securities and Exchange Commission (SEC) or in materials incorporated therein by reference. Any forward-looking statement in this release speaks only as of the date on which it is made. The company assumes no obligation to update or revise any forward-looking statements.
Presentation of Information in this Press Release
In an effort to provide investors with additional information regarding the company’s results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information which management believes provides useful information to investors:
IBM results and expectations --
presenting operating (non-GAAP) earnings per share amounts and related income statement items; adjusting for free cash flow; adjusting for currency (i.e., at constant currency); adjusting for the divestiture of the System x and the customer care outsourcing businesses.The rationale for management’s use of non-GAAP measures is included as part of the supplemental materials presented within the third-quarter earnings materials. These materials are available via a link on the IBM investor relations Web site at www.ibm.com/investor and are being included in Attachment II (“Non-GAAP Supplemental Materials”) to the Form 8-K that includes this press release and is being submitted today to the SEC.
Conference Call and Webcast
IBM’s regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. EDT, today. The Webcast may be accessed via a link at http://www.ibm.com/investor/events/earnings/3q15.html. Presentation charts will be available shortly before the Webcast.
Financial Results Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).
| INTERNATIONAL BUSINESS MACHINES CORPORATION | |||||||||||||||
| COMPARATIVE FINANCIAL RESULTS | |||||||||||||||
| (Unaudited; Dollars in millions except per share amounts) | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September30, | ||||||||||||||
| Percent | Percent | ||||||||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | ||||||||||
| REVENUE | |||||||||||||||
| Global Technology Services * | $ | 7,937 | $ | 8,837 | -10.2% | $ | 23,891 | $ | 26,696 | -10.5% | |||||
| Gross profit margin | 38.1% | 39.0% | 37.3% | 38.9% | |||||||||||
| Global Business Services * | 4,206 | 4,840 | -13.1% | 12,869 | 14,742 | -12.7% | |||||||||
| Gross profit margin | 29.7% | 30.9% | 28.2% | 30.0% | |||||||||||
| Software | 5,136 | 5,708 | -10.0% | 16,165 | 17,857 | -9.5% | |||||||||
| Gross profit margin | 86.4% | 87.6% | 87.0% | 88.0% | |||||||||||
| Systems Hardware | 1,492 | 2,434 | -38.7% | 5,209 | 7,590 | -31.4% | |||||||||
| Gross profit margin | 44.7% | 33.9% | 46.0% | 36.3% | |||||||||||
| Global Financing | 447 | 487 | -8.1% | 1,386 | 1,502 | -7.7% | |||||||||
| Gross profit margin | 48.4% | 47.8% | 47.5% | 49.6% | |||||||||||
| Other | 60 | 92 | -34.4% | 162 | 292 | -44.4% | |||||||||
| Gross profit margin | -260.4% | -143.8% | -237.0% | -162.5% | |||||||||||
| TOTAL REVENUE | 19,280 | 22,397 | -13.9% | 59,682 | 68,680 | -13.1% | |||||||||
| GROSS PROFIT | 9,436 | 10,874 | -13.2% | 29,278 | 33,545 | -12.7% | |||||||||
| Gross profit margin | 48.9% | 48.6% | 49.1% | 48.8% | |||||||||||
| EXPENSE AND OTHER INCOME | |||||||||||||||
| S,G&A | 4,731 | 5,281 | -10.4% | 15,273 | 17,146 | -10.9% | |||||||||
| Expense to revenue | 24.5% | 23.6% | 25.6% | 25.0% | |||||||||||
| R,D&E | 1,287 | 1,354 | -4.9% | 3,885 | 4,117 | -5.6% | |||||||||
| Expense to revenue | 6.7% | 6.0% | 6.5% | 6.0% | |||||||||||
| Intellectual property and | |||||||||||||||
| custom development income | (188) | (145) | 29.2% | (489) | (543) | -10.0% | |||||||||
| Other (income) and expense | (133) | (103) | 29.5% | (578) | (433) | 33.6% | |||||||||
| Interest expense | 117 | 126 | -7.2% | 340 | 367 | -7.3% | |||||||||
| TOTAL EXPENSE AND | |||||||||||||||
| OTHER INCOME | 5,815 | 6,513 | -10.7% | 18,431 | 20,654 | -10.8% | |||||||||
| Expense to revenue | 30.2% | 29.1% | 30.9% | 30.1% | |||||||||||
| INCOME FROM CONTINUING | |||||||||||||||
| OPERATIONS BEFORE INCOME TAXES | 3,621 | 4,361 | -17.0% | 10,846 | 12,891 | -15.9% | |||||||||
| Pre-tax margin | 18.8% | 19.5% | 18.2% | 18.8% | |||||||||||
| Provision for income taxes | 659 | 906 | -27.2% | 1,943 | 2,655 | -26.8% | |||||||||
| Effective tax rate | 18.2% | 20.8% | 17.9% | 20.6% | |||||||||||
| INCOME FROM CONTINUING | |||||||||||||||
| OPERATIONS | $ | 2,962 | $ | 3,455 | -14.3% | $ | 8,904 | $ | 10,237 | -13.0% | |||||
| Net margin | 15.4% | 15.4% | 14.9% | 14.9% | |||||||||||
| DISCONTINUED OPERATIONS | |||||||||||||||
| Loss from discontinued | |||||||||||||||
| operations, net of taxes | (12) | (3,437) | (176) | (3,698) | |||||||||||
| NET INCOME | $ | 2,950 | $ | 18 | NM | $ | 8,727 | $ | 6,539 | 33.5% | |||||
| EARNINGS PER SHARE | |||||||||||||||
| OF COMMON STOCK: | |||||||||||||||
| Assuming Dilution | |||||||||||||||
| Continuing Operations | $ | 3.02 | $ | 3.46 | -12.7% | $ | 9.03 | $ | 10.09 | -10.5% | |||||
| Discontinued Operations | ($0.01) | ($3.44) | ($0.18) | ($3.65) | |||||||||||
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| TOTAL | $ | 3.01 | $ | 0.02 | NM | $ | 8.85 | $ | 6.44 | 37.4% | |||||
| Basic | |||||||||||||||
| Continuing Operations | $ | 3.04 | $ | 3.48 | -12.6% | $ | 9.07 | $ | 10.15 | -10.6% | |||||
| Discontinued Operations | ($0.01) | ($3.46) | ($0.18) | ($3.67) | |||||||||||
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| TOTAL | $ | 3.03 | $ | 0.02 | NM | $ | 8.89 | $ | 6.48 | 37.2% | |||||
| WEIGHTED-AVERAGE NUMBER | |||||||||||||||
| OF COMMON SHARES | |||||||||||||||
| OUTSTANDING (M's): | |||||||||||||||
| Assuming Dilution | 979.0 | 997.7 | 986.0 | 1,014.9 | |||||||||||
| Basic | 975.1 | 991.8 | 981.8 | 1,008.9 | |||||||||||
| *Reclassified to conform with 2015 presentation. | |||||||||||||||
| NM – Not Meaningful | |||||||||||||||
| INTERNATIONAL BUSINESS MACHINES CORPORATION | |||||
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | |||||
| (Unaudited) | |||||
| At | At | ||||
| (Dollars in Millions) | September 30, | December 31, | |||
| 2015 | 2014 | ||||
| ASSETS: | |||||
| Current Assets: | |||||
| Cash and cash equivalents | $ | 9,480 | $ | 8,476 | |
| Marketable securities | 88 | 0 | |||
| Notes and accounts receivable - trade | |||||
| (net of allowances of $362 in 2015 and $336 in 2014) | 7,987 | 9,090 | |||
| Short-term financing receivables | |||||
| (net of allowances of $488 in 2015 and $452 in 2014) | 16,195 | 19,835 | |||
| Other accounts receivable | |||||
| (net of allowances of $53 in 2015 and $40 in 2014) | 931 | 2,906 | |||
| Inventories, at lower of average cost or market: | |||||
| Finished goods | 388 | 430 | |||
| Work in process and raw materials | 1,224 | 1,674 | |||
| Total inventories | 1,613 | 2,103 | |||
| Deferred taxes | 1,660 | 2,044 | |||
| Prepaid expenses and other current assets | 4,158 | 4,967 | |||
| Total Current Assets | 42,112 | 49,422 | |||
| Property, plant and equipment | 29,229 | 39,034 | |||
| Less: Accumulated depreciation | 18,568 | 28,263 | |||
| Property, plant and equipment - net | 10,661 | 10,771 | |||
| Long-term financing receivables | |||||
| (net of allowances of $121 in 2015 and $126 in 2014) | 9,517 | 11,109 | |||
| Prepaid pension assets | 4,033 | 2,160 | |||
| Deferred taxes | 3,690 | 4,808 | |||
| Goodwill | 30,275 | 30,556 | |||
| Intangible assets - net | 2,775 | 3,104 | |||
| Investments and sundry assets | 5,586 | 5,603 | |||
| Total Assets | $ | 108,649 | $ | 117,532 | |
| LIABILITIES: | |||||
| Current Liabilities: | |||||
| Taxes | $ | 2,883 | $ | 5,084 | |
| Short-term debt | 7,538 | 5,731 | |||
| Accounts payable | 5,166 | 6,864 | |||
| Compensation and benefits | 3,785 | 4,031 | |||
| Deferred income | 10,458 | 11,877 | |||
| Other accrued expenses and liabilities | 3,902 | 6,013 | |||
| Total Current Liabilities | 33,732 | 39,600 | |||
| Long-term debt | 32,122 | 35,073 | |||
| Retirement and nonpension postretirement | |||||
| benefit obligations | 17,012 | 18,261 | |||
| Deferred income | 3,593 | 3,691 | |||
| Other liabilities | 8,739 | 8,892 | |||
| Total Liabilities | 95,198 | 105,518 | |||
| EQUITY: | |||||
| IBM Stockholders' Equity: | |||||
| Common stock | 53,220 | 52,666 | |||
| Retained earnings | 141,898 | 137,793 | |||
| Treasury stock -- at cost | (154,669) | (150,715) | |||
| Accumulated other comprehensive income/(loss) | (28,155) | (27,875) | |||
| Total IBM stockholders' equity | 13,294 | 11,868 | |||
| Noncontrolling interests | 157 | 146 | |||
| Total Equity | 13,450 | 12,014 | |||
| Total Liabilities and Equity | $ | 108,649 | $ | 117,532 | |
| INTERNATIONAL BUSINESS MACHINES CORPORATION | ||||||||||||
| CASH FLOW ANALYSIS | ||||||||||||
| (Unaudited) | ||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||
| (Dollars in Millions) | September 30, | September 30, | ||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||
| Net Cash from Operating Activities per GAAP: | $ | 4,235 | $ | 3,904 | $ | 11,729 | $ | 10,809 | ||||
| Less: the change in Global Financing (GF) | ||||||||||||
| Receivables | 749 | 719 | 1,962 | 2,223 | ||||||||
| Net Cash from Operating Activities | ||||||||||||
| (Excluding GF Receivables) | 3,487 | 3,185 | 9,767 | 8,587 | ||||||||
| Capital Expenditures, Net | (934) | (1,008) | (2,764) | (2,803) | ||||||||
| Free Cash Flow | ||||||||||||
| (Excluding GF Receivables) | 2,553 | 2,177 | 7,003 | 5,783 | ||||||||
| Acquisitions | (112) | (47) | (821) | (650) | ||||||||
| Divestitures | (568) | 81 | (488) | 489 | ||||||||
| Dividends | (1,271) | (1,090) | (3,636) | (3,176) | ||||||||
| Share Repurchase | (1,542) | (1,719) | (3,846) | (13,547) | ||||||||
| Non-GF Debt | 379 | (483) | 770 | 4,536 | ||||||||
| Other (includes GF Receivables, and | ||||||||||||
| GF Debt) | 1,370 | 925 | 2,108 | 5,065 | ||||||||
| Change in Cash, Cash Equivalents and | ||||||||||||
| Short-term Marketable Securities | $ | 808 | ($156) | $ | 1,091 | $ | (1,501) | |||||
| INTERNATIONAL BUSINESS MACHINES CORPORATION | ||||||||||||||
| SEGMENT DATA | ||||||||||||||
| (Unaudited) | ||||||||||||||
| THIRD-QUARTER 2015 | ||||||||||||||
| Pre-tax | ||||||||||||||
| Income/ | ||||||||||||||
| (Loss) | ||||||||||||||
| (Dollars in Millions) | Revenue | Continuing | Pre-tax | |||||||||||
| External | Internal | Total | Operations | Margin | ||||||||||
| SEGMENTS | ||||||||||||||
| Global Technology Services | $ | 7,937 | $ | 190 | $ | 8,127 | $ | 1,274 | 15.7% | |||||
| Y-T-Y change | -10.2% | -24.6% | -10.6% | -21.6% | ||||||||||
| Global Business Services | 4,206 | 120 | 4,326 | 673 | 15.6% | |||||||||
| Y-T-Y change | -13.1% | -11.5% | -13.0% | -21.8% | ||||||||||
| Software | 5,136 | 785 | 5,921 | 1,899 | 32.1% | |||||||||
| Y-T-Y change | -10.0% | -8.9% | -9.9% | -18.6% | ||||||||||
| Systems Hardware | 1,492 | 121 | 1,613 | (24) | -1.5% | |||||||||
| Y-T-Y change | -38.7% | -33.9% | -38.3% | NM | ||||||||||
| Global Financing | 447 | 584 | 1,031 | 562 | 54.5% | |||||||||
| Y-T-Y change | -8.1% | -2.3% | -4.9% | 18.1% | ||||||||||
| TOTAL REPORTABLE SEGMENTS | $ | 19,219 | $ | 1,800 | $ | 21,019 | $ | 4,384 | 20.9% | |||||
| Y-T-Y change | -13.8% | -11.3 | -13.6% | -15.6% | ||||||||||
| Eliminations / Other | 60 | (1,800) | (1,739) | (763) | ||||||||||
| TOTAL IBM CONSOLIDATED | $ | 19,280 | $ | 0 | $ | 19,280 | $ | 3,621 | 18.8% | |||||
| Y-T-Y change | -13.9% | -13.9% | -17.0% | |||||||||||
| THIRD-QUARTER 2014 | ||||||||||||||
| Pre-tax | ||||||||||||||
| Income/ | ||||||||||||||
| (Loss) | ||||||||||||||
| (Dollars in Millions) | Revenue | Continuing | Pre-tax | |||||||||||
| External | Internal | Total | Operations | Margin | ||||||||||
| SEGMENTS | ||||||||||||||
| Global Technology Services * | $ | 8,837 | $ | 252 | $ | 9,089 | $ | 1,625 | 17.9% | |||||
| Global Business Services * | 4,840 | 135 | 4,975 | 861 | 17.3% | |||||||||
| Software | 5,708 | 862 | 6,570 | 2,333 | 35.5% | |||||||||
| Systems Hardware | 2,434 | 182 | 2,616 | (99) | -3.8% | |||||||||
| Global Financing | 487 | 598 | 1,084 | 475 | 43.9% | |||||||||
| TOTAL REPORTABLE SEGMENTS | $ | 22,305 | $ | 2,029 | $ | 24,334 | $ | 5,195 | 21.3% | |||||
| Eliminations / Other | 92 | (2,029) | (1,937) | (835) | ||||||||||
| TOTAL IBM CONSOLIDATED | $ | 22,397 | $ | 0 | $ | 22,397 | $ | 4,361 | 19.5% | |||||
| *Reclassified to conform with 2015 presentation. | ||||||||||||||
| NM = Not Meaningful | ||||||||||||||
| INTERNATIONAL BUSINESS MACHINES CORPORATION | ||||||||||||||
| SEGMENT DATA | ||||||||||||||
| (Unaudited) | ||||||||||||||
| NINE-MONTHS 2015 | ||||||||||||||
| Pre-tax | ||||||||||||||
| Income/ | ||||||||||||||
| (Loss) | ||||||||||||||
| (Dollars in Millions) | Revenue | Continuing | Pre-tax | |||||||||||
| External | Internal | Total | Operations | Margin | ||||||||||
| SEGMENTS | ||||||||||||||
| Global Technology Services | $ | 23,891 | $ | 589 | $ | 24,480 | $ | 3,516 | 14.4% | |||||
| Y-T-Y change | -10.5% | -20.3% | -10.8% | -22.0% | ||||||||||
| Global Business Services | 12,869 | 380 | 13,249 | 1,926 | 14.5% | |||||||||
| Y-T-Y change | -12.7% | -8.6% | -12.6% | -26.8% | ||||||||||
| Software | 16,165 | 2,519 | 18,684 | 6,107 | 32.7% | |||||||||
| Y-T-Y change | -9.5% | -5.0% | -8.9% | -11.9% | ||||||||||
| Systems Hardware | 5,209 | 320 | 5,529 | 255 | 4.6% | |||||||||
| Y-T-Y change | -31.4% | -40.9% | -32.0% | NM | ||||||||||
| Global Financing | 1,386 | 1,874 | 3,261 | 1,690 | 51.8% | |||||||||
| Y-T-Y change | -7.7% | -1.4% | -4.2% | 1.6% | ||||||||||
| TOTAL REPORTABLE SEGMENTS | $ | 59,520 | $ | 5,683 | $ | 65,203 | $ | 13,494 | 20.7% | |||||
| Y-T-Y change | -13.0% | -9.0% | -12.6% | -12.3% | ||||||||||
| Eliminations / Other | 162 | (5,683) | (5,520) | (2,647) | ||||||||||
| TOTAL IBM CONSOLIDATED | $ | 59,682 | $ | 0 | $ | 59,682 | $ | 10,846 | 18.2% | |||||
| Y-T-Y change | -13.1% | -13.1% | -15.9% | |||||||||||
| NINE-MONTHS 2014 | ||||||||||||||
| Pre-tax | ||||||||||||||
| Income | ||||||||||||||
| (Loss)/ | ||||||||||||||
| (Dollars in Millions) | Revenue | Continuing | Pre-tax | |||||||||||
| External | Internal | Total | Operations | Margin | ||||||||||
| SEGMENTS | ||||||||||||||
| Global Technology Services * | $ | 26,696 | $ | 739 | $ | 27,435 | $ | 4,509 | 16.4% | |||||
| Global Business Services * | 14,742 | 416 | 15,158 | 2,633 | 17.4% | |||||||||
| Software | 17,857 | 2,652 | 20,508 | 6,935 | 33.8% | |||||||||
| Systems Hardware | 7,590 | 541 | 8,131 | (354) | -4.4% | |||||||||
| Global Financing | 1,502 | 1,900 | 3,403 | 1,664 | 48.9% | |||||||||
| TOTAL REPORTABLE SEGMENTS | $ | 68,387 | $ | 6,248 | $ | 74,635 | $ | 15,386 | 20.6% | |||||
| Eliminations / Other | 292 | (6,248) | (5,955) | (2,495) | ||||||||||
| TOTAL IBM CONSOLIDATED | $ | 68,680 | $ | 0 | $ | 68,680 | $ | 12,891 | 18.8% | |||||
| *Reclassified to conform with 2015 presentation. | ||||||||||||||
| NM = Not Meaningful | ||||||||||||||
| INTERNATIONAL BUSINESS MACHINES CORPORATION | ||||||||||||
| U.S. GAAP TO OPERATING RESULTS RECONCILIATION | ||||||||||||
| (Unaudited; Dollars in millions except pershare amounts) | ||||||||||||
| THIRD-QUARTER 2015 | ||||||||||||
| CONTINUING OPERATIONS | ||||||||||||
| Acquisition- | Retirement- | |||||||||||
| Related | Related | Operating | ||||||||||
| GAAP | Adjustments* | Adjustments** | (Non-GAAP) | |||||||||
| Gross Profit | $ | 9,436 | $ | 89 | $ | 118 | $ | 9,643 | ||||
| Gross Profit Margin | 48.9% | 0.5Pts | 0.6Pts | 50.0% | ||||||||
| S,G&A | 4,731 | (76) | (74) | 4,581 | ||||||||
| R,D&E | 1,287 | - | (12) | 1,275 | ||||||||
| Other (Income) & Expense | (133) | 0 | - | (133) | ||||||||
| Total Expense & Other (Income) | 5,815 | (76) | (86) | 5,652 | ||||||||
| Pre-tax Income from | ||||||||||||
| Continuing Operations | 3,621 | 165 | 204 | 3,991 | ||||||||
| Pre-tax Income Margin from | ||||||||||||
| Continuing Operations | 18.8% | 0.9Pts | 1.1Pts | 20.7% | ||||||||
| Provision for Income Taxes*** | 659 | (5) | 64 | 718 | ||||||||
| Effective Tax Rate | 18.2% | -0.9Pts | 0.7Pts | 18.0% | ||||||||
| Income from Continuing Operations | 2,962 | 170 | 140 | 3,272 | ||||||||
| Income Margin from | ||||||||||||
| Continuing Operations | 15.4% | 0.9Pts | 0.7Pts | 17.0% | ||||||||
| Diluted Earnings Per Share: | ||||||||||||
| Continuing Operations | $ | 3.02 | $ | 0.18 | $ | 0.14 | $ | 3.34 | ||||
| THIRD-QUARTER 2014 | ||||||||||||
| CONTINUING OPERATIONS | ||||||||||||
| Acquisition- | Retirement- | |||||||||||
| Related | Related | Operating | ||||||||||
| GAAP | Adjustments* | Adjustments** | (Non-GAAP) | |||||||||
| Gross Profit | $ | 10,874 | $ | 106 | $ | 43 | $ | 11,023 | ||||
| Gross Profit Margin | 48.6% | 0.5Pts | 0.2Pts | 49.2% | ||||||||
| S,G&A | 5,281 | (96) | (48) | 5,137 | ||||||||
| R,D&E | 1,354 | - | 19 | 1,373 | ||||||||
| Other (Income) & Expense | (103) | 0 | - | (103) | ||||||||
| Total Expense & Other (Income) | 6,513 | (96) | (29) | 6,389 | ||||||||
| Pre-tax Income from | ||||||||||||
| Continuing Operations | 4,361 | 202 | 71 | 4,634 | ||||||||
| Pre-tax Income Margin from | ||||||||||||
| Continuing Operations | 19.5% | 0.9Pts | 0.3Pts | 20.7% | ||||||||
| Provision for Income Taxes*** | 906 | 42 | 14 | 963 | ||||||||
| Effective Tax Rate | 20.8% | 0.0Pts | 0.0Pts | 20.8% | ||||||||
| Income from Continuing Operations | 3,455 | 159 | 57 | 3,671 | ||||||||
| Income Margin from | ||||||||||||
| Continuing Operations | 15.4% | 0.7Pts | 0.3Pts | 16.4% | ||||||||
| Diluted Earnings Per Share: | ||||||||||||
| Continuing Operations | $ | 3.46 | $ | 0.16 | $ | 0.06 | $ | 3.68 | ||||
* Includes amortization of acquired intangible assets and other acquisition-related charges.
** Includes retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.
*** Tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the GAAP pre-tax income which employs an annual effective tax rate method to the results.
| INTERNATIONAL BUSINESS MACHINES CORPORATION | ||||||||||||
| U.S. GAAP TO OPERATING RESULTS RECONCILIATION | ||||||||||||
| (Unaudited; Dollars in millions except pershare amounts) | ||||||||||||
| NINE-MONTHS 2015 | ||||||||||||
| CONTINUING OPERATIONS | ||||||||||||
| Acquisition- | Retirement- | |||||||||||
| Related | Related | Operating | ||||||||||
| GAAP | Adjustments* | Adjustments** | (Non-GAAP) | |||||||||
| Gross Profit | $ | 29,278 | $ | 268 | $ | 350 | $ | 29,896 | ||||
| Gross Profit Margin | 49.1% | 0.4Pts | 0.6Pts | 50.1% | ||||||||
| S,G&A | 15,273 | (230) | (445) | 14,598 | ||||||||
| R,D&E | 3,885 | - | (36) | 3,849 | ||||||||
| Other (Income) & Expense | (578) | (5) | - | (583) | ||||||||
| Total Expense & Other (Income) | 18,431 | (235) | (481) | 17,715 | ||||||||
| Pre-tax Income from | ||||||||||||
| Continuing Operations | 10,846 | 503 | 831 | 12,181 | ||||||||
| Pre-tax Income Margin from | ||||||||||||
| Continuing Operations | 18.2% | 0.8Pts | 1.4Pts | 20.4% | ||||||||
| Provision for Income Taxes*** | 1,943 | 52 | 234 | 2,228 | ||||||||
| Effective Tax Rate | 17.9% | -0.3Pts | 0.7Pts | 18.3% | ||||||||
| Income from Continuing Operations | 8,904 | 452 | 597 | 9,953 | ||||||||
| Income Margin from | ||||||||||||
| Continuing Operations | 14.9% | 0.8Pts | 1.0Pts | 16.7% | ||||||||
| Diluted Earnings Per Share: | ||||||||||||
| Continuing Operations | $ | 9.03 | $ | 0.46 | $ | 0.60 | $ | 10.09 | ||||
| NINE-MONTHS 2014 | ||||||||||||
| CONTINUING OPERATIONS | ||||||||||||
| Acquisition- | Retirement- | |||||||||||
| Related | Related | Operating | ||||||||||
| GAAP | Adjustments* | Adjustments** | (Non-GAAP) | |||||||||
| Gross Profit | $ | 33,545 | $ | 315 | $ | 141 | $ | 34,001 | ||||
| Gross Profit Margin | 48.8% | 0.5Pts | 0.2Pts | 49.5% | ||||||||
| S,G&A | 17,146 | (291) | (162) | 16,693 | ||||||||
| R,D&E | 4,117 | - | 56 | 4,173 | ||||||||
| Other (Income) & Expense | (433) | 0 | - | (433) | ||||||||
| Total Expense & Other (Income) | 20,654 | (292) | (106) | 20,257 | ||||||||
| Pre-tax Income from | ||||||||||||
| Continuing Operations | 12,891 | 607 | 246 | 13,744 | ||||||||
| Pre-tax Income Margin from | ||||||||||||
| Continuing Operations | 18.8% | 0.9Pts | 0.4Pts | 20.0% | ||||||||
| Provision for Income Taxes*** | 2,655 | 123 | 49 | 2,827 | ||||||||
| Effective Tax Rate | 20.6% | 0.0Pts | 0.0Pts | 20.6% | ||||||||
| Income from Continuing Operations | 10,237 | 483 | 197 | 10,917 | ||||||||
| Income Margin from | ||||||||||||
| Continuing Operations | 14.9% | 0.7Pts | 0.3Pts | 15.9% | ||||||||
| Diluted Earnings Per Share: | ||||||||||||
| Continuing Operations | $ | 10.09 | $ | 0.48 | $ | 0.19 | $ | 10.76 | ||||
* Includes amortization of acquired intangible assets and other acquisition-related charges.
** Includes retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.
*** Tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the GAAP pre-tax income which employs an annual effective tax rate method to the results.
IBMIan Colley, 914-434-3043colley@us.ibm.comorJohn Bukovinsky, 732-618-3531jbuko@us.ibm.com
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