IBM Reports 2015 Third-Quarter Results

ARMONK, N.Y.--()--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)

 

 

 

 

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)

 

 

 

 

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.

Contacts

IBM
Ian Colley, 914-434-3043
colley@us.ibm.com
or
John Bukovinsky, 732-618-3531
jbuko@us.ibm.com

Contacts

IBM
Ian Colley, 914-434-3043
colley@us.ibm.com
or
John Bukovinsky, 732-618-3531
jbuko@us.ibm.com