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Exhibit 99.1

 

IBM REPORTS 2016 THIRD-QUARTER EARNINGS

Continued Strong Growth in Strategic Imperatives Led by IBM Cloud, Analytics

 

Highlights

 

·            Diluted EPS: GAAP of $2.98; Operating (non-GAAP) of $3.29

·            Revenue from continuing operations of $19.2 billion

·            Strategic imperatives revenue of $31.8 billion over the last 12 months represents 40 percent of IBM revenue

-  Strategic imperatives revenue of $8.0 billion in the quarter, up 16 percent year to year (up 15 percent adjusting for currency)

·            Cloud revenue of $12.7 billion over the last 12 months

-  Cloud as-a-Service annual run rate of $7.5 billion in the quarter, up 66 percent year to year (up 65 percent adjusting for currency)

 

ARMONK, N.Y., October 17, 2016 . . . IBM (NYSE: IBM) today announced third-quarter 2016 earnings results.

 

“IBM’s third-quarter performance, led by continued double-digit growth in our strategic imperatives, is a testament to our leadership in cognitive solutions and cloud,” said Ginni Rometty, IBM chairman, president and chief executive officer.  “Our ability to apply deep expertise and breakthrough technology, led by Watson and the IBM Cloud, to massive amounts of data is enabling us to build new markets and transform industries.  Whether it is banks implementing IBM blockchain solutions, hospitals leveraging Watson to fight cancer, or retailers using cognitive apps built on the IBM Cloud to transform the customer experience, clients across all industries are tapping into a new kind of innovation value from IBM.”

 

 

 

THIRD QUARTER 2016

 

 

 

 

 

 

 

Gross Profit

 

 

 

Diluted EPS

 

Net Income

 

Margin

 

GAAP from Continuing Operations

 

$

2.98

 

$

2.9

B

46.9

%

Year/Year

 

-1

%

-4

%

-2.1

Pts

Operating (Non-GAAP)

 

$

3.29

 

$

3.1

B

48.0

%

Year/Year

 

-1

%

-4

%

-2.1

Pts

 

 

 

 

 

Strategic

 

 

 

REVENUE

 

Total IBM

 

Imperatives

 

Cloud

 

As reported (US$)

 

$

19.2

B

$

8.0

B

$

3.4

B

Year/Year

 

0

%

16

%

44

%

Year/Year adjusting for currency

 

-1

%

15

%

42

%

 

“Throughout the year, we have continued to invest where we see the greatest opportunities to create new markets and strengthen our enterprise IT leadership position,” said Martin Schroeter, IBM senior vice president and chief financial officer.  “This has included more than $12 billion across capital expenditures, R&D and acquisitions so far this year.  At the same time, we have returned more than $6 billion to shareholders through dividends and share repurchases.”

 



 

Strategic Imperatives

 

Third-quarter revenues from the company’s strategic imperatives -— cloud, analytics, mobility and security -— increased 16 percent year to year (up 15 percent adjusting for currency).  Cloud revenues (public, private and hybrid) for the quarter increased 44 percent (up 42 percent adjusting for currency).  Cloud revenue over the trailing 12 months was $12.7 billion.  The annual run rate for cloud as-a-Service revenue -— a subset of total cloud revenue -— increased to $7.5 billion from $4.5 billion in the third quarter of 2015.  Revenues from analytics increased 15 percent (up 14 percent adjusting for currency).  Revenues from mobile increased 19 percent and revenues from security increased 11 percent.

 

Full-Year 2016 Expectations

 

The company continues to expect operating (non-GAAP) diluted earnings per share of at least $13.50 and GAAP diluted earnings per share of at least $12.23.  Operating (non-GAAP) diluted earnings per share exclude $1.27 per share of charges for amortization of purchased intangible assets, other acquisition-related charges and retirement-related charges.  There is no change to IBM’s previously-provided free cash flow guidance.

 

Cash Flow and Balance Sheet

 

The company generated net cash from operating activities of $4.2 billion; or $3.3 billion excluding Global Financing receivables.  IBM’s free cash flow was $2.4 billion in the third quarter.  IBM returned $1.3 billion in dividends and $0.9 billion of gross share repurchases to shareholders.  At the end of September 2016, IBM had $3.0 billion remaining in the current share repurchase authorization.

 

IBM ended the third-quarter 2016 with $10.0 billion of cash on hand.  Debt, including Global Financing debt of $26.1 billion, totaled $42.5 billion.  Core (non-Global Financing) debt totaled $16.4 billion.  The balance sheet remains strong and is well positioned to support the business over the long term.

 

Segment Results

 

·                  Cognitive Solutions (includes solutions software and transaction processing software) — revenues of $4.2 billion, up 4.5 percent.  Cloud revenue within the segment grew 74 percent (up 75 percent adjusting for currency), and Solutions Software grew 8 percent.

 

·                  Global Business Services (includes consulting, global process services, application management) — revenues of $4.2 billion, down 0.4 percent (down 1.6 percent adjusting for currency).  Strategic imperatives revenue within the segment was up 13 percent (up 12 percent adjusting for currency).

 

·                  Technology Services & Cloud Platforms (includes infrastructure services, technical support services, integration software) — revenues of $8.7 billion, up 2.4 percent (up 1.4 percent adjusting for currency).  Growth of 45 percent (up 42 percent adjusting for currency) in strategic imperatives revenue within the segment was driven by strong hybrid cloud services performance.

 

·                  Systems (includes systems hardware and operating systems software) — revenues of $1.6 billion, down 21.0 percent (down 21.5 percent adjusting for currency).  Revenue reflects z Systems product cycle dynamics.

 

·                  Global Financing (includes financing and used equipment sales) — revenues of $412 million, down 7.9 percent (down 9.2 percent adjusting for currency).

 

Year-To-Date 2016 Results

 

Diluted earnings per share from continuing operations were $7.67, down 15 percent compared to the 2015 period.  Net income from continuing operations for the nine months ended September 30, 2016 was $7.4 billion compared with $8.9 billion in the year-ago period, a decrease of 17 percent.

 



 

Consolidated net income was $7.4 billion compared to $8.7 billion in the year-ago period.  Consolidated diluted earnings per share were $7.67 compared to $8.85, down 13 percent year to year. Revenues from continuing operations for the nine-month period totaled $58.1 billion, a decrease of 3 percent year to year (down 2 percent adjusting for currency) compared with $59.7 billion for the first nine months of 2015.

 

Operating (non-GAAP) diluted earnings per share from continuing operations were $8.59 compared with $10.09 per diluted share for the 2015 period, a decrease of 15 percent.  Operating (non-GAAP) net income from continuing operations for the nine months ended September 30, 2016 was $8.3 billion compared with $10.0 billion in the year-ago period, a decrease of 17 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; product quality issues; impacts of 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 and ecosystems; 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 —

 

·            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).

 

Free cash flow guidance is derived using an estimate of profit, working capital and operational cash outflows.  The company views Global Financing receivables as a profit-generating investment, which it seeks to maximize and therefore it is not considered when formulating guidance for free cash flow.  As a result, the company does not estimate a GAAP Net Cash from Operations expectation metric.

 

The rationale for management’s use of these non-GAAP measures is included in Exhibit 99.2 in 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/3q16.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).

 

Contact:   IBM

Ian Colley, 914-434-3043

colley@us.ibm.com

 

John Bukovinsky, 732-618-3531

jbuko@us.ibm.com

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

COMPARATIVE FINANCIAL RESULTS

(Unaudited; Dollars in millions except per share amounts)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2016

 

2015*

 

2016

 

2015*

 

 

 

 

 

 

 

 

 

 

 

REVENUE

 

 

 

 

 

 

 

 

 

Cognitive Solutions

 

$

4,235

 

$

4,052

 

$

12,889

 

$

12,616

 

Global Business Services

 

4,191

 

4,206

 

12,578

 

12,869

 

Technology Services & Cloud Platforms

 

8,748

 

8,541

 

26,029

 

25,993

 

Systems

 

1,558

 

1,973

 

5,184

 

6,656

 

Global Financing

 

412

 

447

 

1,245

 

1,386

 

Other

 

81

 

60

 

223

 

162

 

TOTAL REVENUE

 

19,226

 

19,280

 

58,149

 

59,682

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

9,013

 

9,436

 

27,401

 

29,278

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT MARGIN

 

 

 

 

 

 

 

 

 

Cognitive Solutions

 

80.4

%

84.4

%

81.5

%

84.9

%

Global Business Services

 

28.8

%

29.7

%

27.0

%

28.2

%

Technology Services & Cloud Platforms

 

42.0

%

42.2

%

41.5

%

42.2

%

Systems

 

51.1

%

55.9

%

55.1

%

55.8

%

Global Financing

 

37.8

%

48.4

%

39.6

%

47.5

%

 

 

 

 

 

 

 

 

 

 

TOTAL GROSS PROFIT MARGIN

 

46.9

%

48.9

%

47.1

%

49.1

%

 

 

 

 

 

 

 

 

 

 

EXPENSE AND OTHER INCOME

 

 

 

 

 

 

 

 

 

S,G&A

 

4,732

 

4,731

 

16,093

 

15,273

 

R,D&E

 

1,397

 

1,287

 

4,320

 

3,885

 

Intellectual property and custom development income

 

(528

)

(188

)

(1,110

)

(489

)

Other (income) and expense

 

(8

)

(133

)

281

 

(578

)

Interest expense

 

158

 

117

 

473

 

340

 

 

 

 

 

 

 

 

 

 

 

TOTAL EXPENSE AND OTHER INCOME

 

5,751

 

5,815

 

20,056

 

18,431

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM CONTINUING OPERATIONS

 

 

 

 

 

 

 

 

 

BEFORE INCOME TAXES

 

3,263

 

3,621

 

7,345

 

10,846

 

Pre-tax margin

 

17.0

%

18.8

%

12.6

%

18.2

%

Provision for / (Benefit) from income taxes

 

409

 

659

 

(31

)

1,943

 

Effective tax rate

 

12.5

%

18.2

%

(0.4

)%

17.9

%

 

 

 

 

 

 

 

 

 

 

INCOME FROM CONTINUING OPERATIONS

 

$

2,854

 

$

2,962

 

$

7,375

 

$

8,904

 

DISCONTINUED OPERATIONS

 

 

 

 

 

 

 

 

 

Loss from discontinued operations, net of taxes

 

(1

)

(12

)

(4

)

(176

)

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$

2,853

 

$

2,950

 

$

7,371

 

$

8,727

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE OF COMMON STOCK:

 

 

 

 

 

 

 

 

 

Assuming Dilution

 

 

 

 

 

 

 

 

 

Continuing Operations

 

$

2.98

 

$

3.02

 

$

7.67

 

$

9.03

 

Discontinued Operations

 

$

0.00

 

$

(0.01

)

$

0.00

 

$

(0.18

)

TOTAL

 

$

2.98

 

$

3.01

 

$

7.67

 

$

8.85

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

Continuing Operations

 

$

2.99

 

$

3.04

 

$

7.70

 

$

9.07

 

Discontinued Operations

 

$

0.00

 

$

(0.01

)

$

0.00

 

$

(0.18

)

TOTAL

 

$

2.99

 

$

3.03

 

$

7.70

 

$

8.89

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (M’s):

 

 

 

 

 

 

 

 

 

Assuming Dilution

 

957.3

 

979.0

 

960.7

 

986.0

 

Basic

 

954.0

 

975.1

 

957.7

 

981.8

 

 

 

 

 

 

 

 

 

 

 

 


*      Recast to conform with 2016 segment presentation.

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)

 

 

At

 

At

 

 

 

September 30,

 

December 31,

 

(Dollars in Millions)

 

2016

 

2015

 

 

 

 

 

 

 

ASSETS:

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

9,039

 

$

7,686

 

Marketable securities

 

929

 

508

 

Notes and accounts receivable - trade, net

 

8,291

 

8,333

 

Short-term financing receivables, net

 

16,032

 

19,020

 

Other accounts receivable, net

 

873

 

1,201

 

Inventory

 

1,729

 

1,551

 

Prepaid expenses and other current assets

 

4,539

 

4,205

 

 

 

 

 

 

 

Total Current Assets

 

41,433

 

42,504

 

 

 

 

 

 

 

Property, plant and equipment, net

 

11,104

 

10,727

 

Long-term financing receivables, net

 

8,936

 

10,013

 

Prepaid pension assets

 

3,487

 

1,734

 

Deferred taxes

 

4,289

 

4,822

 

Goodwill and intangibles, net

 

41,282

 

35,508

 

Investments and sundry assets

 

5,075

 

5,187

 

 

 

 

 

 

 

Total Assets

 

$

115,606

 

$

110,495

 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Taxes

 

$

2,137

 

$

2,847

 

Short-term debt

 

6,920

 

6,461

 

Accounts payable

 

5,271

 

6,028

 

Deferred income

 

10,815

 

11,021

 

Other liabilities

 

9,304

 

7,913

 

 

 

 

 

 

 

Total Current Liabilities

 

34,447

 

34,269

 

 

 

 

 

 

 

Long-term debt

 

35,563

 

33,428

 

Retirement related obligations

 

16,688

 

16,504

 

Deferred income

 

3,611

 

3,771

 

Other liabilities

 

8,138

 

8,099

 

 

 

 

 

 

 

Total Liabilities

 

98,447

 

96,071

 

 

 

 

 

 

 

EQUITY:

 

 

 

 

 

 

 

 

 

 

 

IBM Stockholders’ Equity:

 

 

 

 

 

Common stock

 

53,759

 

53,262

 

Retained earnings

 

149,585

 

146,124

 

Treasury stock — at cost

 

(158,170

)

(155,518

)

Accumulated other comprehensive income/(loss)

 

(28,164

)

(29,607

)

 

 

 

 

 

 

Total IBM stockholders’ equity

 

17,010

 

14,262

 

 

 

 

 

 

 

Noncontrolling interests

 

149

 

162

 

 

 

 

 

 

 

Total Equity

 

17,159

 

14,424

 

 

 

 

 

 

 

Total Liabilities and Equity

 

$

115,606

 

$

110,495

 

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

(Dollars in Millions)

 

2016

 

2015

 

2016

 

2015

 

 

 

 

 

 

 

 

 

 

 

Net Cash Provided by Operating Activities per GAAP:

 

$

4,213

 

$

4,235

 

$

13,301

 

$

11,729

 

 

 

 

 

 

 

 

 

 

 

Less: change in Global Financing (GF) Receivables

 

934

 

749

 

3,647

 

1,962

 

Capital Expenditures, Net

 

(851

)

(934

)

(2,801

)

(2,764

)

 

 

 

 

 

 

 

 

 

 

Free Cash Flow

 

2,428

 

2,553

 

6,854

 

7,003

 

 

 

 

 

 

 

 

 

 

 

Acquisitions

 

(40

)

(112

)

(5,445

)

(821

)

Divestitures

 

0

 

(568

)

35

 

(488

)

Dividends

 

(1,337

)

(1,271

)

(3,927

)

(3,636

)

Share Repurchase

 

(856

)

(1,542

)

(2,632

)

(3,846

)

Non-GF Debt

 

(1,696

)

379

 

3,365

 

770

 

Other (includes GF Receivables and GF Debt)

 

853

 

1,370

 

3,523

 

2,108

 

 

 

 

 

 

 

 

 

 

 

Change in Cash, Cash Equivalents and Short-term Marketable Securities

 

$

(648

)

$

808

 

$

1,773

 

$

1,091

 

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

(Dollars in Millions)

 

2016

 

2015

 

2016

 

2015

 

 

 

 

 

 

 

 

 

 

 

Net Income from Operations

 

$

2,853

 

$

2,950

 

$

7,371

 

$

8,727

 

Depreciation/Amortization of Intangibles

 

1,126

 

936

 

3,253

 

2,865

 

Stock-based Compensation

 

142

 

111

 

403

 

369

 

Working Capital / Other

 

(842

)

(522

)

(1,373

)

(2,243

)

Global Financing A/R

 

934

 

749

 

3,647

 

1,962

 

Loss on Microelectronics Business Disposal

 

0

 

12

 

0

 

48

 

Net Cash Provided by Operating Activities

 

$

4,213

 

$

4,235

 

$

13,301

 

$

11,729

 

Capital Expenditures, net of payments & proceeds

 

(851

)

(934

)

(2,801

)

(2,764

)

Divestitures, net of cash transferred

 

0

 

(568

)

35

 

(488

)

Acquisitions, net of cash acquired

 

(40

)

(112

)

(5,445

)

(821

)

Marketable Securities / Other Investments, net

 

(159

)

272

 

610

 

1,358

 

Net Cash Used in Investing Activities

 

$

(1,050

)

$

(1,343

)

$

(7,600

)

$

(2,714

)

Debt, net of payments & proceeds

 

(2,041

)

915

 

1,888

 

(607

)

Dividends

 

(1,337

)

(1,271

)

(3,927

)

(3,636

)

Common Stock Repurchases

 

(856

)

(1,542

)

(2,632

)

(3,846

)

Common Stock Transactions - Other

 

52

 

51

 

166

 

271

 

Net Cash Used in Financing Activities

 

$

(4,182

)

$

(1,848

)

$

(4,504

)

$

(7,818

)

Effect of Exchange Rate changes on Cash

 

41

 

42

 

155

 

(194

)

Net Change in Cash & Cash Equivalents

 

$

(978

)

$

1,087

 

$

1,352

 

$

1,004

 

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)

 

 

 

THIRD - QUARTER 2016

 

 

 

Cognitive Solutions &

 

 

 

 

 

 

 

 

 

Industry Services

 

Technology

 

 

 

 

 

 

 

 

 

Global

 

Services &

 

 

 

 

 

 

 

Cognitive

 

Business

 

Cloud

 

 

 

Global

 

(Dollars in Millions)

 

Solutions

 

Services

 

Platforms

 

Systems

 

Financing

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

External

 

$

4,235

 

$

4,191

 

$

8,748

 

$

1,558

 

$

412

 

Internal

 

667

 

93

 

180

 

176

 

352

 

Total Segment Revenue

 

$

4,902

 

$

4,284

 

$

8,929

 

$

1,734

 

$

763

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income from Continuing Operations

 

1,574

 

544

 

1,288

 

136

 

355

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax margin

 

32.1

%

12.7

%

14.4

%

7.8

%

46.5

%

 

 

 

 

 

 

 

 

 

 

 

 

Change YTY Revenue - External

 

4.5

%

(0.4

)%

2.4

%

(21.0

)%

(7.9

)%

Change YTY Revenue - External @constant currency

 

4.5

%

(1.6

)%

1.4

%

(21.5

)%

(9.2

)%

 

 

 

THIRD - QUARTER 2015*

 

 

 

Cognitive Solutions &

 

 

 

 

 

 

 

 

 

Industry Services

 

Technology

 

 

 

 

 

 

 

 

 

Global

 

Services &

 

 

 

 

 

 

 

Cognitive

 

Business

 

Cloud

 

 

 

Global

 

(Dollars in Millions)

 

Solutions

 

Services

 

Platforms

 

Systems

 

Financing

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

External

 

$

4,052

 

$

4,206

 

$

8,541

 

$

1,973

 

$

447

 

Internal

 

528

 

120

 

161

 

209

 

584

 

Total Segment Revenue

 

$

4,580

 

$

4,326

 

$

8,702

 

$

2,182

 

$

1,031

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income from Continuing Operations

 

1,596

 

664

 

1,317

 

248

 

562

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax margin

 

34.9

%

15.4

%

15.1

%

11.4

%

54.5

%

 


*                 Recast to conform with 2016 segment presentation.

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)

 

 

 

NINE - MONTHS 2016

 

 

 

Cognitive Solutions &

 

 

 

 

 

 

 

 

 

Industry Services

 

Technology

 

 

 

 

 

 

 

 

 

Global

 

Services &

 

 

 

 

 

 

 

Cognitive

 

Business

 

Cloud

 

 

 

Global

 

(Dollars in Millions)

 

Solutions

 

Services

 

Platforms

 

Systems

 

Financing

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

External

 

$

12,889

 

$

12,578

 

$

26,029

 

$

5,184

 

$

1,245

 

Internal

 

1,929

 

310

 

501

 

594

 

1,340

 

Total Segment Revenue

 

$

14,818

 

$

12,888

 

$

26,530

 

$

5,778

 

$

2,585

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income from Continuing Operations

 

4,039

 

1,210

 

2,825

 

354

 

1,208

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax margin

 

27.3

%

9.4

%

10.6

%

6.1

%

46.7

%

 

 

 

 

 

 

 

 

 

 

 

 

Change YTY Revenue - External

 

2.2

%

(2.3

)%

0.1

%

(22.1

)%

(10.2

)%

Change YTY Revenue - External @constant currency

 

2.9

%

(2.2

)%

1.0

%

(21.9

)%

(8.5

)%

 

 

 

NINE - MONTHS 2015*

 

 

 

Cognitive Solutions &

 

 

 

 

 

 

 

 

 

Industry Services

 

Technology

 

 

 

 

 

 

 

 

 

Global

 

Services &

 

 

 

 

 

 

 

Cognitive

 

Business

 

Cloud

 

 

 

Global

 

(Dollars in Millions)

 

Solutions

 

Services

 

Platforms

 

Systems

 

Financing

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

External

 

$

12,616

 

$

12,869

 

$

25,993

 

$

6,656

 

$

1,386

 

Internal

 

1,695

 

380

 

500

 

571

 

1,874

 

Total Segment Revenue

 

$

14,311

 

$

13,249

 

$

26,493

 

$

7,226

 

$

3,261

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income from Continuing Operations

 

4,949

 

1,895

 

3,861

 

1,048

 

1,690

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax margin

 

34.6

%

14.3

%

14.6

%

14.5

%

51.8

%

 


*                 Recast to conform with 2016 segment presentation.

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION

(Unaudited; Dollars in millions except per share amounts)

 

 

 

THIRD - QUARTER 2016

 

 

 

CONTINUING OPERATIONS

 

 

 

 

 

Acquisition-

 

Retirement-

 

 

 

 

 

 

 

Related

 

Related

 

Operating

 

 

 

GAAP

 

Adjustments*

 

Adjustments**

 

(Non-GAAP)

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

$

9,013

 

$

129

 

$

79

 

$

9,221

 

 

 

 

 

 

 

 

 

 

 

Gross Profit Margin

 

46.9

%

0.7

Pts

0.4

Pts

48.0

%

 

 

 

 

 

 

 

 

 

 

S,G&A

 

4,732

 

(138

)

(53

)

4,541

 

 

 

 

 

 

 

 

 

 

 

R,D&E

 

1,397

 

—

 

(7

)

1,390

 

 

 

 

 

 

 

 

 

 

 

Other (Income) & Expense

 

(8

)

(2

)

—

 

(10

)

 

 

 

 

 

 

 

 

 

 

Total Expense & Other (Income)

 

5,751

 

(140

)

(60

)

5,550

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income from Continuing Operations

 

3,263

 

269

 

139

 

3,671

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income Margin from Continuing Operations

 

17.0

%

1.4

Pts

0.7

Pts

19.1

%

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes***

 

409

 

73

 

40

 

521

 

 

 

 

 

 

 

 

 

 

 

Effective Tax Rate

 

12.5

%

1.1

Pts

0.7

Pts

14.2

%

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

2,854

 

197

 

99

 

3,149

 

 

 

 

 

 

 

 

 

 

 

Income Margin from Continuing Operations

 

14.8

%

1.0

Pts

0.5

Pts

16.4

%

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share: Continuing Operations

 

$

2.98

 

$

0.21

 

$

0.10

 

$

3.29

 

 

 

 

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

%

0.5

Pts

0.6

Pts

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

%

0.9

Pts

1.1

Pts

20.7

%

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes***

 

659

 

(5

)

64

 

718

 

 

 

 

 

 

 

 

 

 

 

Effective Tax Rate

 

18.2

%

-0.9

Pts

0.7

Pts

18.0

%

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

2,962

 

170

 

140

 

3,272

 

 

 

 

 

 

 

 

 

 

 

Income Margin from Continuing Operations

 

15.4

%

0.9

Pts

0.7

Pts

17.0

%

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share: Continuing Operations

 

$

3.02

 

$

0.18

 

$

0.14

 

$

3.34

 

 


*                 Includes amortization of purchased intangible assets, in process R&D, severance cost for acquired employees, vacant space for acquired companies, deal costs and acquisition integration tax charges.

**          Includes retirement-related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition assets, other settlements, curtailments, multi-employer plans and insolvency insurance.

***   Tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the As Reported pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION

(Unaudited; Dollars in millions except per share amounts)

 

 

 

NINE - MONTHS 2016

 

 

 

CONTINUING OPERATIONS

 

 

 

 

 

Acquisition-

 

Retirement-

 

 

 

 

 

 

 

Related

 

Related

 

Operating

 

 

 

GAAP

 

Adjustments*

 

Adjustments**

 

(Non-GAAP)

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

$

27,401

 

$

371

 

$

238

 

$

28,010

 

 

 

 

 

 

 

 

 

 

 

Gross Profit Margin

 

47.1

%

0.6

Pts

0.4

Pts

48.2

%

 

 

 

 

 

 

 

 

 

 

S,G&A

 

16,093

 

(365

)

(183

)

15,545

 

 

 

 

 

 

 

 

 

 

 

R,D&E

 

4,320

 

—

 

(23

)

4,297

 

 

 

 

 

 

 

 

 

 

 

Other (Income) & Expense

 

281

 

(7

)

—

 

274

 

 

 

 

 

 

 

 

 

 

 

Total Expense & Other (Income)

 

20,056

 

(372

)

(206

)

19,478

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income from Continuing Operations

 

7,345

 

743

 

444

 

8,532

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income Margin from Continuing Operations

 

12.6

%

1.3

Pts

0.8

Pts

14.7

%

 

 

 

 

 

 

 

 

 

 

Provision for / (Benefit) from Income Taxes***

 

(31

)

201

 

106

 

277

 

 

 

 

 

 

 

 

 

 

 

Effective Tax Rate

 

(0.4

)%

2.5

Pts

1.4

Pts

3.2

%

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

7,375

 

542

 

338

 

8,255

 

 

 

 

 

 

 

 

 

 

 

Income Margin from Continuing Operations

 

12.7

%

0.9

Pts

0.6

Pts

14.2

%

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share: Continuing Operations

 

$

7.67

 

$

0.57

 

$

0.35

 

$

8.59

 

 

 

 

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

%

0.4

Pts

0.6

Pts

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

%

0.8

Pts

1.4

Pts

20.4

%

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes***

 

1,943

 

52

 

234

 

2,228

 

 

 

 

 

 

 

 

 

 

 

Effective Tax Rate

 

17.9

%

-0.3

Pts

0.7

Pts

18.3

%

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

8,904

 

452

 

597

 

9,953

 

 

 

 

 

 

 

 

 

 

 

Income Margin from Continuing Operations

 

14.9

%

0.8

Pts

1.0

Pts

16.7

%

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share: Continuing Operations

 

$

9.03

 

$

0.46

 

$

0.60

 

$

10.09

 

 


*                 Includes amortization of purchased intangible assets, in process R&D, severance cost for acquired employees, vacant space for acquired companies, deal costs and acquisition integration tax charges.

**          Includes retirement-related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition assets, other settlements, curtailments, multi-employer plans and insolvency insurance.

***   Tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the As Reported pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

RECONCILIATION OF OPERATING EARNINGS PER SHARE

(Unaudited)

 

 

 

2016

 

EPS Guidance

 

Expectations

 

 

 

 

 

IBM GAAP EPS

 

at least $12.23

 

 

 

 

 

IBM Operating EPS (non-GAAP)

 

at least $13.50

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

Acquisition related charges *

 

$0.84

 

 

 

 

 

Non-Operating Retirement-Related Items

 

$0.43

 

 


*                 Includes acquisitions through September 30, 2016

 


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