ARMONK, N.Y.--(BUSINESS WIRE)--IBM (NYSE:IBM):
NOTE: Results from continuing operations exclude discontinued Microelectronics business, to be acquired by GLOBALFOUNDRIES as announced today.
-
Diluted EPS from continuing operations:
- GAAP: $3.46, down 8 percent;
- Operating (non-GAAP): $3.68, down 10 percent;
-
Net income from continuing operations:
- GAAP: $3.5 billion, down 17 percent;
- Operating (non-GAAP): $3.7 billion, down 18 percent;
-
Consolidated results, including net loss on discontinued operations
of $3.4 billion:
- Net income: $18 million
- EPS: $0.02
-
Gross profit margin from continuing operations:
- GAAP: 48.6 percent, down 40 basis points;
- Operating (non-GAAP): 49.2 percent, down 90 basis points;
-
Revenue from continuing operations: $22.4 billion:
- Down 4 percent; down 2 percent adjusting for divested customer care outsourcing business and currency;
-
Strategic imperatives grew double digits year-to-date:
-
Cloud revenue up more than 50 percent year-to-date;
- For cloud delivered as a service, up 80 percent year-to-date with a third-quarter annual run rate of $3.1 billion;
- Business analytics revenue up 8 percent year-to-date;
- Mobile revenue more than doubled year-to-date;
- Security revenue up more than 20 percent year-to-date;
-
Cloud revenue up more than 50 percent year-to-date;
-
Impact of customer care outsourcing, industry standard server and
Microelectronics business divestitures, based on full-year 2013:
- Generated more than $7.0 billion of annual revenue;
- Incurred more than $0.5 billion in annual pre-tax losses.
IBM (NYSE:IBM) today announced third-quarter 2014 diluted earnings from continuing operations of $3.46 per share, compared with diluted earnings of $3.77 per share in the third-quarter of 2013, a decrease of 8 percent. Operating (non-GAAP) diluted earnings from continuing operations were $3.68 per share compared with operating diluted earnings of $4.08 per share in the third-quarter of 2013, a decrease of 10 percent.
Third-quarter net income from continuing operations was $3.5 billion compared with $4.1 billion in the third-quarter of 2013, a decrease of 17 percent. Operating (non-GAAP) net income from continuing operations was $3.7 billion, as compared with $4.5 billion in the third-quarter of 2013, a decrease of 18 percent.
For the third-quarter of 2014, IBM reported consolidated net income of $18 million or $0.02 of diluted earnings per share, which includes a net loss from discontinued operations of $3.4 billion, or $3.44 per diluted common share.
Total revenues from continuing operations for the third-quarter of 2014 of $22.4 billion were down 4 percent (down 2 percent, adjusting for the impact of the divested customer care outsourcing business and for currency) from the third-quarter of 2013.
“We are disappointed in our performance. We saw a marked slowdown in September in client buying behavior, and our results also point to the unprecedented pace of change in our industry. While we did not produce the results we expected to achieve, we again performed well in our strategic growth areas – cloud, data and analytics, security, social and mobile - where we continue to shift our business. We will accelerate this transformation,” said Ginni Rometty, IBM chairman, president and chief executive officer.
“We are executing on a clear strategy that is moving IBM to higher value, and we've taken significant actions to exit nonstrategic elements of the business. This includes the announcement that we will divest semiconductor manufacturing to focus on research and development that will differentiate our systems. We will continue to make the investments and the changes necessary to manage our business for the long term. And we remain fully committed to returning significant value to shareholders through dividends and share repurchase."
Discontinued Operations
The company has reached an agreement under which GLOBALFOUNDRIES will acquire IBM’s Microelectronics OEM semiconductor business and manufacturing operations. The transaction with GLOBALFOUNDRIES is expected to close in 2015. The results from continuing operations exclude the Microelectronics business, which is presented separately as discontinued operations.
The loss from discontinued operations in the third quarter includes a non-recurring pre-tax charge of $4.7 billion, or $3.3 billion, net of tax. The charge includes an impairment to reflect fair value less estimated costs to sell the Microelectronics business assets, which the company has classified as held for sale at September 30, 2014. The charge also includes other estimated costs related to the transaction, including cash consideration expected to be transferred to GLOBALFOUNDRIES of approximately $1.5 billion. The cash consideration is expected to be paid to GLOBALFOUNDRIES over the next three years and will be adjusted by the amount of the working capital due by GLOBALFOUNDRIES to IBM, estimated to be $0.2 billion. In addition, discontinued operations includes operational net losses from the Microelectronics business of $0.1 billion in both the third quarter of 2014 and the third quarter of 2013.
Third-Quarter GAAP – Operating (non-GAAP) Reconciliation
Third-quarter operating (non-GAAP) diluted earnings from continuing operations exclude $0.22 per share of charges; $0.16 per share for the amortization of purchased intangible assets and other acquisition-related charges; and $0.06 per share for retirement-related charges driven by changes to plan assets and liabilities primarily related to market performance.
Earnings Guidance
The company will provide earnings guidance during today’s quarterly earnings conference call, and it is included in the presentation charts.
Geographic Regions
The Americas’ third-quarter revenues were $10.1 billion, a decrease of 2 percent (down 1 percent, adjusting for currency) from the 2013 period. Revenues from Europe/Middle East/Africa were down 2 percent to $7.2 billion (down 3 percent, adjusting for currency). Asia-Pacific revenues decreased 9 percent (down 8 percent, adjusting for currency) to $5.0 billion.
Growth Markets
Revenues from the company’s growth markets were down 6 percent (down 5 percent, adjusting for currency). Revenues in the BRIC countries — Brazil, Russia, India and China — were down 7 percent (down 7 percent, adjusting for currency).
Services
Global Services segment revenues decreased 3 percent (flat adjusting for the impact of the divested customer care outsourcing business and for currency) to $13.7 billion. Global Technology Services segment revenues decreased 3 percent (up 1 percent adjusting for the impact of the divested customer care outsourcing business and for currency) to $9.2 billion. Global Business Services segment revenues were down 2 percent (down 1 percent, adjusting for currency) to $4.5 billion.
Pre-tax income from Global Technology Services decreased 11 percent and pre-tax margin decreased to 17.7 percent. Global Business Services pre-tax income decreased 15 percent and pre-tax margin decreased to 17.5 percent.
The estimated services backlog at September 30, 2014 was $128 billion, down 7 percent year to year adjusting for the divested customer care outsourcing business (down 2 percent, adjusting for currency).
Software
Revenues from the Software segment were $5.7 billion, down 2 percent (down 2 percent, adjusting for currency) compared with the third-quarter of 2013. Software pre-tax income decreased 3 percent and pre-tax margin decreased to 35.5 percent.
Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Workforce Solutions and Rational products, were $3.7 billion, down 1 percent (down 1 percent, adjusting for currency) versus the third-quarter of 2013. Operating systems revenues of $513 million were down 11 percent (down 11 percent, adjusting for currency) compared with the prior-year quarter.
Financing
Global Financing segment revenues decreased 3 percent (down 3 percent, adjusting for currency) in the third-quarter to $487 million. Pre-tax income for the segment decreased 4 percent to $475 million.
Hardware
Revenues from continuing operations from the Systems and Technology segment totaled $2.4 billion for the quarter, down 15 percent (down 15 percent, adjusting for currency) from the third-quarter of 2013. Systems and Technology pre-tax loss increased $91 million to a loss of $99 million.
Revenues from Power Systems were down 12 percent compared with the 2013 period. Revenues from System x were down 10 percent. Revenues from System z mainframe server products decreased 35 percent compared with the year-ago period. Revenues from System Storage decreased 6 percent.
Gross Profit
The company’s total gross profit margin from continuing operations was 48.6 percent in the 2014 third-quarter period compared with 49.0 percent in the 2013 third-quarter period. Total operating (non-GAAP) gross profit margin from continuing operations was 49.2 percent in the 2014 third-quarter compared with 50.1 percent in the 2013 third-quarter period.
Expense
Total expense and other income from continuing operations increased 1 percent to $6.5 billion compared with the prior year period. S,G&A expense of $5.3 billion was flat year over year. R,D&E expense of $1.4 billion was flat compared with the year-ago period. Intellectual property and custom development income decreased to $145 million compared with $191 million a year ago. Other (income) and expense was income of $103 million compared with prior-year income of $63 million. Interest expense increased to $126 million compared with $97 million in the prior year period.
Total operating (non-GAAP) expense and other income from continuing operations increased 2 percent to $6.4 billion compared with the prior-year period. Operating (non-GAAP) S,G&A expense increased 2 percent to $5.1 billion compared with the prior-year period. Operating (non-GAAP) R,D&E expense of $1.4 billion was up 2 percent compared with the year-ago period.
Pre-Tax Income
Pre-tax income from continuing operations decreased 12 percent to $4.4 billion and pre-tax margin of 19.5 percent was down 1.8 points compared with the prior-year period. Operating (non-GAAP) pre-tax income decreased 15 percent to $4.6 billion and pre-tax margin was 20.7 percent, down 2.6 points, compared to the year-ago period.
***
IBM’s tax rate from continuing operations was 20.8 percent, up 4.0 points year over year; operating (non-GAAP) tax rate was 20.8 percent, up 3.2 points compared to the year-ago period. The change in the third-quarter tax rate is driven by discrete benefits associated with foreign tax audits in the third-quarter 2013.
Net income margin from continuing operations decreased 2.3 points to 15.4 percent. Total operating (non-GAAP) net income margin decreased 2.8 points to 16.4 percent.
The weighted-average number of diluted common shares outstanding in the third-quarter 2014 was 998 million compared with 1.10 billion shares in the same period of 2013. As of September 30, 2014, there were 990 million basic common shares outstanding.
Debt, including Global Financing, totaled $45.7 billion, compared with $39.7 billion at year-end 2013. From a management segment view, Global Financing debt totaled $28.6 billion versus $27.5 billion at year-end 2013, resulting in a debt-to-equity ratio of 7.4 to 1. Non-global financing debt totaled $17.1 billion, an increase of $4.8 billion since year-end 2013, resulting in a debt-to-capitalization ratio of 61.9 percent (higher than the ratio at year-end 2013).
IBM ended the third-quarter 2014 with $9.6 billion of cash on hand and generated free cash flow of $2.2 billion, excluding Global Financing receivables, down approximately $0.1 billion year over year. In the third quarter of 2014, the company returned $2.8 billion to shareholders through $1.1 billion in dividends and $1.7 billion of gross share repurchases.
At the end of September 2014, IBM had approximately $1.4 billion remaining from the current share repurchase authorization. The company expects to request an additional share repurchase authorization at the October 2014 board meeting.
Year-To-Date 2014 Results
Net income from continuing operations for the nine months ended September 30, 2014 was $10.2 billion compared with $10.7 billion in the year-ago period, a decrease of 4 percent. Diluted earnings per share from continuing operations were $10.09, up 5 percent compared to the 2013 period. The consolidated diluted earnings per share were $6.44 as compared to $9.27, down 31 percent as compared to the 2013 period. Revenues from continuing operations for the nine-month period totaled $68.7 billion, a decrease of 3 percent (down 3 percent, adjusting for currency) compared with $71.0 billion for the first nine months of 2013.
Operating (non-GAAP) net income from continuing operations for the nine months ended September 30, 2014 was $10.9 billion compared with $11.7 billion in the year-ago period, a decrease of 7 percent. Operating (non-GAAP) diluted earnings per share from continuing operations were $10.76 compared with $10.54 per diluted share for the 2013 period, an increase of 2 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 --
o presenting operating (non-GAAP) earnings per share from continuing operations amounts and related income statement items;
o presenting non-global financing debt-to-capitalization ratio;
o adjusting for free cash flow;
o adjusting for currency (i.e., at constant currency).
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 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 8:00 a.m. EDT, today. The Webcast may be accessed via a link at http://www.ibm.com/investor/events/earnings/3q14.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, |
September 30, |
||||||||||||||||||
|
Percent |
Percent |
|||||||||||||||||||
|
2014 |
|
2013* |
Change |
2014 |
2013* |
Change |
||||||||||||||
|
REVENUE |
||||||||||||||||||||
| Global Technology Services |
$ |
9,218 |
|
$ |
9,494 |
-2.9% |
$ |
$27,962 |
|
$28,634 |
-2.3% | |||||||||
| Gross profit margin |
38.5 |
% |
39.0 |
% |
38.3% | 37.9% | ||||||||||||||
| Global Business Services | 4,459 | 4,558 | -2.2% | 13,476 | 13,649 | -1.3% | ||||||||||||||
| Gross profit margin |
31.3 |
% |
32.9 |
% |
30.4% | 30.9% | ||||||||||||||
| Software | 5,708 | 5,798 | -1.6% | 17,857 | 17,792 | 0.4% | ||||||||||||||
| Gross profit margin |
87.6 |
% |
88.0 |
% |
88.0% | 88.0% | ||||||||||||||
| Systems and Technology | 2,434 | 2,864 | -15.0% | 7,590 | 9,041 | -16.0% | ||||||||||||||
| Gross profit margin | 33.9% |
39.9 |
% |
36.3% | 40.2% | |||||||||||||||
| Global Financing | 487 | 502 | -3.2% | 1,502 | 1,488 | 1.0% | ||||||||||||||
| Gross profit margin |
47.8 |
% |
47.2 |
% |
49.6% | 46.4% | ||||||||||||||
| Other | 92 | 122 | -24.3% | 292 | 378 | -22.8% | ||||||||||||||
| Gross profit margin |
-143.8 |
% |
-211.6 |
% |
-162.5% | -185.3% | ||||||||||||||
|
TOTAL REVENUE |
22,397 | 23,338 | -4.0% | 68,680 | 70,982 | -3.2% | ||||||||||||||
|
GROSS PROFIT |
10,874 | 11,429 | -4.9% | 33,545 | 34,347 | -2.3% | ||||||||||||||
| Gross profit margin |
48.6 |
% |
49.0 |
% |
48.8% | 48.4% | ||||||||||||||
|
EXPENSE AND OTHER INCOME |
||||||||||||||||||||
| S,G&A | 5,281 | 5,260 | 0.4% | 17,146 | 17,463 | -1.8% | ||||||||||||||
| Expense to revenue |
23.6 |
% |
22.5 |
% |
25.0% | 24.6% | ||||||||||||||
| R,D&E | 1,354 | 1,356 | -0.1% | 4,117 | 4,291 | -4.0% | ||||||||||||||
| Expense to revenue |
6.0 |
% |
5.8 |
% |
6.0% | 6.0% | ||||||||||||||
| Intellectual property and | ||||||||||||||||||||
| custom development income |
(145 |
) |
(191 |
) |
-23.9% | (543) | (621) | -12.5% | ||||||||||||
| Other (income) and expense |
(103 |
) |
(63 |
) |
62.3% | (433) | (217) | 99.3% | ||||||||||||
| Interest expense | 126 | 97 | 30.2% | 367 | 289 | 26.9% | ||||||||||||||
|
TOTAL EXPENSE AND |
||||||||||||||||||||
|
OTHER INCOME |
6,513 | 6,458 | 0.9% | 20,654 | 21,205 | -2.6% | ||||||||||||||
| Expense to revenue |
29.1 |
% |
27.7 |
% |
30.1% | 29.9% | ||||||||||||||
|
INCOME FROM CONTINUING |
||||||||||||||||||||
|
OPERATIONS BEFORE INCOME TAXES |
4,361 |
4,972 |
-12.3% |
12,891 |
13,142 |
-1.9% |
||||||||||||||
| Pre-tax margin |
19.5 |
% |
21.3% |
|
18.8% |
18.5% |
||||||||||||||
| Provision for income taxes | 906 | 832 | 8.8% | 2,655 | 2,478 | 7.1% | ||||||||||||||
| Effective tax rate |
20.8 |
% |
16.7% | 20.6% | 18.9% | |||||||||||||||
|
INCOME FROM CONTINUING |
||||||||||||||||||||
|
OPERATIONS |
$ |
3,455 |
|
$4,139 |
-16.5% |
|
$10,237 |
|
$10,665 |
-4.0% | ||||||||||
| Net margin |
15.4 |
% |
17.7% | 14.9% | 15.0% | |||||||||||||||
|
DISCONTINUED OPERATIONS |
||||||||||||||||||||
| Loss from discontinued | ||||||||||||||||||||
| operations, net of taxes |
(3,437 |
) |
(98) | (3,698) | (366) | |||||||||||||||
|
NET INCOME |
$ |
18 |
|
$4,041 |
-99.6% |
|
$6,539 |
|
$10,299 |
-36.5% | ||||||||||
|
EARNINGS PER SHARE |
||||||||||||||||||||
|
OF COMMON STOCK: |
||||||||||||||||||||
| ASSUMING DILUTION | ||||||||||||||||||||
| CONTINUING OPERATIONS |
$ |
3.46 |
|
$3.77 |
-8.2% |
|
$10.09 |
|
$9.60 |
5.1% | ||||||||||
| DISCOUNTINUED OPERATIONS |
($3.44 |
) |
($0.09) | ($3.65) | ($0.33) | |||||||||||||||
| ----- | ----- | ----- | ----- | |||||||||||||||||
|
TOTAL |
$ |
0.02 |
|
$3.68 |
-99.5% |
|
$6.44 |
|
$9.27 |
-30.5% | ||||||||||
| BASIC | ||||||||||||||||||||
| CONTINUING OPERATIONS |
$ |
3.48 |
|
$3.79 |
-8.2% |
|
$10.15 |
|
$9.68 |
4.9% | ||||||||||
| DISCOUNTINUED OPERATIONS |
($3.46 |
) |
($0.09) | ($3.67) | ($0.33) | |||||||||||||||
|
----- |
----- | ----- | ----- | |||||||||||||||||
|
TOTAL |
$ |
0.02 |
|
$3.70 |
-99.5% |
|
$6.48 |
|
$9.35 |
-30.7% | ||||||||||
|
WEIGHTED-AVERAGE NUMBER |
||||||||||||||||||||
|
OF COMMON SHARES OUT- |
||||||||||||||||||||
|
STANDING (M's): |
||||||||||||||||||||
| ASSUMING DILUTION | 997.7 | 1,098.8 | 1,014.9 | 1,110.7 | ||||||||||||||||
| BASIC | 991.8 | 1,090.9 | 1,008.9 | 1,101.8 | ||||||||||||||||
| * | Reclassified to reflect discontinued operations presentation. | |
| INTERNATIONAL BUSINESS MACHINES CORPORATION | |||||
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | |||||
| (Unaudited) | |||||
| At | At | ||||
| (Dollars in Millions) | September 30, | December 31, | |||
| 2014 | 2013 | ||||
| ASSETS: | |||||
| Current Assets: | |||||
| Cash and cash equivalents | $9,561 | $10,716 | |||
| Marketable securities | 4 | 350 | |||
| Notes and accounts receivable - trade | |||||
| (net of allowances of $316 in 2014 and $291 in 2013) | 9,122 | 10,465 | |||
| Short-term financing receivables | |||||
| (net of allowances of $432 in 2014 and $308 in 2013) | 17,411 | 19,787 | |||
| Other accounts receivable | |||||
| (net of allowances of $46 in 2014 and $36 in 2013) | 1,469 | 1,584 | |||
| Inventories, at lower of average cost or market: | |||||
| Finished goods | 508 | 444 | |||
| Work in process and raw materials |
1,848 |
1,866 | |||
| Total inventories | 2,356 | 2,310 | |||
| Deferred taxes | 2,219 | 1,651 | |||
| Prepaid expenses and other current assets | 5,022 | 4,488 | |||
| Total Current Assets | 47,163 | 51,350 | |||
| Property, plant and equipment | 39,950 | 40,475 | |||
| Less: Accumulated depreciation | 28,882 | 26,654 | |||
| Property, plant and equipment - net | 11,068 | 13,821 | |||
| Long-term financing receivables | |||||
| (net of allowances of $87 in 2014 and $80 in 2013) | 10,993 | 12,755 | |||
| Prepaid pension assets | 7,443 | 5,551 | |||
| Deferred taxes | 2,697 | 3,051 | |||
| Goodwill | 31,045 | 31,184 | |||
| Intangible assets - net | 3,373 | 3,871 | |||
| Investments and sundry assets | 5,126 | 4,639 | |||
| Total Assets |
|
$118,911 |
|
$126,223 |
|
| LIABILITIES: |
|
||||
| Current Liabilities: | |||||
| Taxes |
|
$2,475 |
|
$4,633 |
|
| Short-term debt | 12,876 | 6,862 | |||
| Accounts payable | 5,855 | 7,461 | |||
| Compensation and benefits | 3,965 | 3,893 | |||
| Deferred income | 11,346 | 12,557 | |||
| Other accrued expenses and liabilities | 5,788 | 4,748 | |||
| Total Current Liabilities | 42,306 | 40,154 | |||
| Long-term debt | 32,821 | 32,856 | |||
| Retirement and nonpension postretirement | |||||
| benefit obligations | 15,093 | 16,242 | |||
| Deferred income | 3,683 | 4,108 | |||
| Other liabilities | 10,613 | 9,934 | |||
| Total Liabilities | 104,515 | 103,294 | |||
| EQUITY: | |||||
| IBM Stockholders' Equity: | |||||
| Common stock | 52,446 | 51,594 | |||
| Retained earnings | 133,403 | 130,042 | |||
| Treasury stock -- at cost | (150,616) | (137,242) | |||
| Accumulated other comprehensive income/(loss) | (20,978) | (21,602) | |||
| Total IBM stockholders' equity | 14,255 | 22,792 | |||
| Noncontrolling interests | 140 | 137 | |||
| Total Equity | 14,395 | 22,929 | |||
| Total Liabilities and Equity |
|
$118,911 |
|
$126,223 |
|
| INTERNATIONAL BUSINESS MACHINES CORPORATION | ||||||||
| CASH FLOW ANALYSIS | ||||||||
| (Unaudited) | ||||||||
|
Three Months Ended |
Nine Months Ended | |||||||
| (Dollars in Millions) |
September 30, |
September 30, |
||||||
| 2014 | 2013 | 2014 | 2013 | |||||
| Net Cash from Operating Activities per GAAP: |
$3,904 |
$3,760 |
$10,809 |
$10,957 |
||||
| Less: the change in Global Financing (GF) | ||||||||
| Receivables | 719 | 481 | 2,223 | 1,628 | ||||
| Net Cash from Operating Activities | ||||||||
| (Excluding GF Receivables) | 3,185 | 3,279 | 8,587 | 9,329 | ||||
| Capital Expenditures, Net | (1,008) | (1,041) | (2,803) | (2,709) | ||||
| Free Cash Flow | ||||||||
| (Excluding GF Receivables) | 2,177 | 2,238 | 5,783 | 6,620 | ||||
| Acquisitions | (47) | (2,382) | (650) | (2,562) | ||||
| Divestitures | 81 | 235 | 489 | 247 | ||||
| Dividends | (1,090) | (1,037) | (3,176) | (3,033) | ||||
| Share Repurchase | (1,719) | (1,917) | (13,547) | (8,062) | ||||
| Non-GF Debt | (483) | 1,351 | 4,536 | 1,556 | ||||
| Other (includes GF Receivables, and | ||||||||
| GF Debt) | 925 | 1,388 | 5,065 | 4,337 | ||||
| Change in Cash, Cash Equivalents and | ||||||||
| Short-term Marketable Securities | ($156) | ($125) | ($1,501) | ($897) | ||||
| INTERNATIONAL BUSINESS MACHINES CORPORATION | ||||||||||||||
| SEGMENT DATA | ||||||||||||||
| (Unaudited) | ||||||||||||||
| THIRD-QUARTER 2014 | ||||||||||||||
|
Pre-tax |
||||||||||||||
|
Income/ |
||||||||||||||
|
(Loss) |
||||||||||||||
|
(Dollars in Millions) |
----------- Revenue ------------ |
Continuing |
Pre-tax |
|||||||||||
|
External |
Internal |
Total |
Operations |
Margin |
||||||||||
|
SEGMENTS |
||||||||||||||
| Global Technology Services |
|
$9,218 |
|
$252 |
|
$9,470 |
|
$1,680 |
17.7% | |||||
| Y-T-Y change | -2.9% | -3.8% | -2.9% | -11.3% | ||||||||||
| Global Business Services | 4,459 | 135 | 4,594 | 805 | 17.5% | |||||||||
| Y-T-Y change | -2.2% | -23.7% | -3.0% | -15.0% | ||||||||||
| Software | 5,708 | 862 | 6,570 | 2,333 | 35.5% | |||||||||
| Y-T-Y change | -1.6% | 15.9% | 0.4% | -3.2% | ||||||||||
| Systems and Technology | 2,434 | 182 | 2,616 | (99) | -3.8% | |||||||||
| Y-T-Y change | -15.0% | 8.7% | -13.7% | NM | ||||||||||
| Global Financing | 487 | 598 | 1,084 | 475 | 43.9% | |||||||||
| Y-T-Y change | -3.2% | 16.7% | 6.9% | -3.7% | ||||||||||
| TOTAL REPORTABLE SEGMENTS |
|
$22,305 |
|
$2,029 |
|
$24,334 |
|
$5,195 |
21.3% | |||||
| Y-T-Y change | -3.9% | 8.9% | -3.0% | -9.5% | ||||||||||
| Eliminations / Other | 92 | (2,029) | (1,937) | (835) | ||||||||||
| TOTAL IBM CONSOLIDATED |
|
$22,397 |
|
$0 |
|
$22,397 |
|
$4,361 |
19.5% | |||||
| Y-T-Y change | -4.0% | -4.0% | -12.3% | |||||||||||
| THIRD-QUARTER 2013* | ||||||||||||||
|
Pre-tax |
||||||||||||||
|
Income/ |
||||||||||||||
| (Loss) | ||||||||||||||
| (Dollars in Millions) |
----------- Revenue ------------ |
Continuing | Pre-tax | |||||||||||
| External | Internal | Total | Operations | Margin | ||||||||||
| SEGMENTS | ||||||||||||||
| Global Technology Services |
|
$9,494 |
|
$262 |
|
$9,755 |
|
$1,895 |
19.4% | |||||
| Global Business Services | 4,558 | 177 | 4,735 | 948 | 20.0% | |||||||||
| Software | 5,798 | 744 | 6,542 | 2,410 | 36.8% | |||||||||
| Systems and Technology* | 2,864 | 168 | 3,032 | (8) | -0.3% | |||||||||
| Global Financing | 502 | 512 | 1,015 | 494 | 48.7% | |||||||||
| TOTAL REPORTABLE SEGMENTS |
|
$23,216 |
|
$1,863 |
|
$25,079 |
|
$5,738 |
22.9% | |||||
| Eliminations / Other | 122 | (1,863) | (1,741) | (766) | ||||||||||
| TOTAL IBM CONSOLIDATED |
|
$23,338 |
|
$0 |
|
$23,338 |
|
$4,972 |
21.3% | |||||
| * Reclassified to reflect discontinued operations presentation. | ||||||||||||||
| NM = Not Meaningful | ||||||||||||||
| INTERNATIONAL BUSINESS MACHINES CORPORATION | |||||||||||||||
| SEGMENT DATA | |||||||||||||||
| (Unaudited) | |||||||||||||||
| NINE-MONTHS 2014 | |||||||||||||||
| Pre-tax | |||||||||||||||
| Income/ | |||||||||||||||
| (Loss) | |||||||||||||||
| (Dollars in Millions) | ----------Revenue ----------- | Continuing | Pre-tax | ||||||||||||
| External | Internal | Total | Operations | Margin | |||||||||||
|
SEGMENTS |
|||||||||||||||
| Global Technology Services |
|
$27,962 |
|
$739 |
|
$28,701 |
|
$4,876 |
17.0% | ||||||
| Y-T-Y change | -2.3% | -7.8% | -2.5% | -2.4% | |||||||||||
| Global Business Services | 13,476 | 416 | 13,892 | 2,266 | 16.3% | ||||||||||
| Y-T-Y change | -1.3% | -23.7% | -2.1% | -0.3% | |||||||||||
| Software | 17,857 | 2,652 | 20,508 | 6,935 | 33.8% | ||||||||||
| Y-T-Y change | 0.4% | 14.7% | 2.0% | 1.0% | |||||||||||
| Systems and Technology | 7,590 | 541 | 8,131 | (354) | -4.4% | ||||||||||
| Y-T-Y change | -16.0% | 27.9% | -14.1% | 167.1% | |||||||||||
| Global Financing | 1,502 | 1,900 | 3,403 | 1,664 | 48.9% | ||||||||||
| Y-T-Y change | 1.0% | 16.7% | 9.2% | 5.2% | |||||||||||
| TOTAL REPORTABLE SEGMENTS |
|
$68,387 |
|
$6,248 |
|
$74,635 |
|
$15,386 |
20.6% | ||||||
| Y-T-Y change | -3.1% | 9.4% | -2.2% | -1.3% | |||||||||||
| Eliminations / Other | 292 | (6,248) | (5,955) | (2,495) | |||||||||||
| TOTAL IBM CONSOLIDATED |
|
$68,680 |
|
$0 |
|
$68,680 |
|
$12,891 |
18.8% | ||||||
| Y-T-Y change | -3.2% | -3.2% | -1.9% | ||||||||||||
| NINE-MONTHS 2013* | |||||||||||||||
| Pre-tax | |||||||||||||||
| Income | |||||||||||||||
| (Loss)/ | |||||||||||||||
| (Dollars in Millions) | --------Revenue ------------ | Continuing | Pre-tax | ||||||||||||
| External | Internal | Total | Operations | Margin | |||||||||||
| SEGMENTS | |||||||||||||||
| Global Technology Services |
|
$28,634 |
|
$801 |
|
$29,435 |
|
$4,994 |
17.0% | ||||||
| Global Business Services | 13,649 | 545 | 14,194 | 2,274 | 16.0% | ||||||||||
| Software | 17,792 | 2,312 | 20,105 | 6,867 | 34.2% | ||||||||||
| Systems and Technology* | 9,041 | 423 | 9,464 | (133) | -1.4% | ||||||||||
| Global Financing | 1,488 | 1,628 | 3,116 | 1,582 | 50.8% | ||||||||||
| TOTAL REPORTABLE SEGMENTS |
|
$70,604 |
|
$5,710 |
|
$76,314 |
|
$15,583 |
20.4% | ||||||
| Eliminations / Other | 378 | (5,710) | (5,331) | (2,441) | |||||||||||
| TOTAL IBM CONSOLIDATED |
|
$70,982 |
|
$0 |
|
$70,982 |
|
$13,142 |
18.5% | ||||||
| * Reclassified to reflectdiscontinued operations presentation. | |||||||||||||||
| INTERNATIONAL BUSINESS MACHINES CORPORATION | |||||||||||
| U.S. GAAP TO OPERATING RESULTS RECONCILIATION | |||||||||||
| (Unaudited; Dollars in millions except pershare amounts) | |||||||||||
| 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% | |||||||
| Loss from Discontinued Operations | |||||||||||
| Net of Taxes | (3,437) | - | - | (3,437) | |||||||
| Net Income | 18 | 159 | 57 | 234 | |||||||
| Diluted Earnings Per Share: | |||||||||||
| Continuing Operations |
|
$3.46 |
|
$0.16 |
|
$0.06 |
|
$3.68 |
|||
| Discontinued Operations | ($3.44) | - | - | ($3.44) | |||||||
| THIRD-QUARTER 2013**** | ||||||||||||
| CONTINUING OPERATIONS | ||||||||||||
| Acquisition- | Retirement- | |||||||||||
| Related | Related | Operating | ||||||||||
| GAAP | Adjustments* | Adjustments** | (Non-GAAP) | |||||||||
| Gross Profit |
|
$11,429 |
|
$102 |
|
$154 |
|
$11,686 |
||||
| Gross Profit Margin | 49.0% | 0.4Pts | 0.7Pts | 50.1% | ||||||||
| S,G&A | 5,260 | (111) | (89) | 5,060 | ||||||||
| R,D&E | 1,356 | - | (14) | 1,342 | ||||||||
| Other (Income) & Expense | (63) | (1) | - | (64) | ||||||||
| Total Expense & Other (Income) | 6,458 | (112) | (103) | 6,243 | ||||||||
| Pre-Tax Income from | ||||||||||||
| Continuing Operations | 4,972 | 214 | 257 | 5,443 | ||||||||
| Pre-Tax Income Margin from | ||||||||||||
| Continuing Operations | 21.3% | 0.9Pts | 1.1Pts | 23.3% | ||||||||
| Provision for Income Taxes*** | 832 | 48 | 77 | 958 | ||||||||
| Effective Tax Rate | 16.7% | 0.2Pts | 0.6Pts | 17.6% | ||||||||
| Income from Continuing Operations | 4,139 | 166 | 181 | 4,485 | ||||||||
| Income Margin from | ||||||||||||
| Continuing Operations | 17.7% | 0.7Pts | 0.8Pts | 19.2% | ||||||||
| Loss from Discontinued Operations | ||||||||||||
| Net of Taxes | (98) | - | - | (98) | ||||||||
| Net Income | 4,041 | 166 | 181 | 4,387 | ||||||||
| Diluted Earnings Per Share: | ||||||||||||
| Continuing Operations |
|
$3.77 |
|
$0.15 |
|
$0.16 |
|
$4.08 |
||||
| Discontinued Operations | ($0.09) | - | - | ($0.09) | ||||||||
| * | 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. | ||
| **** | Reclassified to reflect discontinued operations presentation. | ||
| INTERNATIONAL BUSINESS MACHINES CORPORATION | ||||||||||||||
| U.S. GAAP TO OPERATING RESULTS RECONCILIATION | ||||||||||||||
| (Unaudited; Dollars in millions except per share amounts) | ||||||||||||||
|
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% | ||||||||||
| Loss from Discontinued Operations | ||||||||||||||
| Net of Taxes | (3,698) | - | - | (3,698) | ||||||||||
| Net Income | 6,539 | 483 | 197 | 7,219 | ||||||||||
| Diluted Earnings Per Share: | ||||||||||||||
| Continuing Operations |
|
$10.09 |
|
$0.48 |
|
$0.19 |
|
$10.76 |
||||||
| Discontinued Operations | ($3.65) | - | - | ($3.65) | ||||||||||
|
NINE-MONTHS 2013**** |
||||||||||||||
| CONTINUING OPERATIONS | ||||||||||||||
| Acquisition- | Retirement- | |||||||||||||
| Related | Related | Operating | ||||||||||||
| GAAP | Adjustments* | Adjustments** | (Non-GAAP) | |||||||||||
| Gross Profit |
|
$34,347 |
|
$289 |
|
$474 |
|
$35,110 |
||||||
| Gross Profit Margin | 48.4% | 0.4Pts | 0.7Pts | 49.5% | ||||||||||
| S,G&A | 17,463 | (294) | (286) | 16,884 | ||||||||||
| R,D&E | 4,291 | - | (43) | 4,248 | ||||||||||
| Other (Income) & Expense | (217) | (8) | - | (225) | ||||||||||
| Total Expense & Other (Income) | 21,205 | (302) | (329) | 20,574 | ||||||||||
| Pre-Tax Income from | ||||||||||||||
| Continuing Operations | 13,142 | 590 | 803 | 14,536 | ||||||||||
| Pre-Tax Income Margin from | ||||||||||||||
| Continuing Operations | 18.5% | 0.8Pts | 1.1Pts | 20.5% | ||||||||||
| Provision for Income Taxes*** | 2,478 | 112 | 239 | 2,828 | ||||||||||
| Effective Tax Rate | 18.9% | 0.0Pts | 0.6Pts | 19.5% | ||||||||||
| Income from Continuing Operations | 10,665 | 479 | 564 | 11,708 | ||||||||||
| Income Margin from | ||||||||||||||
| Continuing Operations | 15.0% | 0.7Pts | 0.8Pts | 16.5% | ||||||||||
| Loss from Discontinued Operations | ||||||||||||||
| Net of Taxes | (366) | - | - | (366) | ||||||||||
| Net Income | 10,299 | 479 | 564 | 11,342 | ||||||||||
| Diluted Earnings Per Share: | ||||||||||||||
| Continuing Operations |
|
$9.60 |
|
$0.43 |
|
$0.51 |
|
$10.54 |
||||||
| Discontinued Operations | ($0.33) | - | - | ($0.33) | ||||||||||
| * | 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. | |
| **** | Reclassified to reflect discontinued operations presentation. | |
