ARMONK, N.Y.--(BUSINESS WIRE)--IBM (NYSE:IBM)
Highlights
-
Fourth-quarter GAAP EPS from continuing operations of $(1.14)
-- Includes a one-time charge of $5.5 billion associated with the enactment of U.S. tax reform
-
Fourth-quarter operating (non-GAAP) EPS of $5.18
-- Excludes the one-time charge of $5.5 billion associated with the enactment of U.S. tax reform
-- Consistent with the basis of previously-provided 2017 expectations
- Fourth-quarter revenue of $22.5 billion, up 4 percent (up 1 percent adjusting for currency)
-
Full-year strategic imperatives revenue of $36.5 billion, up 11
percent; represents 46 percent of IBM revenue
-- Fourth-quarter strategic imperatives revenue up 17 percent (up 14 percent adjusting for currency)
-
Full-year cloud revenue of $17.0 billion, up 24 percent year to year
-- As-a-service annual exit run rate of $10.3 billion in the quarter, up 20 percent year to year (up 18 percent adjusting for currency)
IBM (NYSE:IBM) today announced fourth-quarter and full-year 2017 earnings results.
"Our strategic imperatives revenue again grew at a double-digit rate and now represents 46 percent of our total revenue, and we are pleased with our overall revenue growth in the quarter," said Ginni Rometty, IBM chairman, president and chief executive officer. "During 2017, we strengthened our position as the leading enterprise cloud provider and established IBM as the blockchain leader for business. Looking ahead, we are uniquely positioned to help clients use data and AI to build smarter businesses."
| FOURTH QUARTER 2017 | |||||||||||
| Net Income | Gross Profit | ||||||||||
| Diluted EPS | (Loss) | Margin | |||||||||
| GAAP from Continuing Operations | $(1.14) | * | $(1.1B) | * | 48.2% | ||||||
| Year/Year | -124% | * | -123% | * | -1.9Pts | ||||||
| Operating (Non-GAAP) | $5.18 | $4.8B | 49.5% | ||||||||
| Year/Year | 3% | 1% | -1.4Pts | ||||||||
| As-a-service | |||||||||||
| Strategic | annual exit | ||||||||||
| REVENUE | Total IBM | Imperatives | Cloud | run rate | |||||||
| As reported (US$) | $22.5B | $11.1B | $5.5B | $10.3B | |||||||
| Year/Year | 4% | 17% | 30% | 20% | |||||||
| Year/Year adjusting for currency | 1% | 14% | 27% | 18% | |||||||
| * Includes a one-time charge of $5.5 billion associated with the enactment of U.S. tax reform. | |||||||||||
"Over the past several years we have invested aggressively in technology and our people to reposition IBM,” said James Kavanaugh, IBM senior vice president and chief financial officer. "2018 will be all about reinforcing IBM's leadership position in key high-value segments of the IT industry, including cloud, AI, security and blockchain."
Strategic Imperatives Revenue
Fourth-quarter cloud revenues increased 30 percent to $5.5 billion (up 27 percent adjusting for currency). Cloud revenue over the last 12 months was $17.0 billion, including $9.3 billion delivered as-a-service and $7.8 billion for hardware, software and services to enable IBM clients to implement comprehensive cloud solutions. The annual exit run rate for as-a-service revenue increased to $10.3 billion from $8.6 billion in the fourth quarter of 2016. In the quarter, revenues from analytics increased 9 percent (up 6 percent adjusting for currency). Revenues from mobile increased 23 percent (up 21 percent adjusting for currency) and revenues from security increased 132 percent (up 127 percent adjusting for currency).
Full-Year 2018 Expectations
The company will discuss 2018 expectations during today’s quarterly earnings conference call.
Cash Flow and Balance Sheet
In the fourth quarter, the company generated net cash from operating activities of $5.7 billion, or $7.8 billion excluding Global Financing receivables. IBM’s free cash flow was $6.8 billion. IBM returned $1.4 billion in dividends and $0.7 billion of gross share repurchases to shareholders. At the end of December 2017, IBM had $3.8 billion remaining in the current share repurchase authorization.
The company generated full-year free cash flow of $13.0 billion, excluding Global Financing receivables. The company returned $9.8 billion to shareholders through $5.5 billion in dividends and $4.3 billion of gross share repurchases.
IBM ended the fourth quarter of 2017 with $12.6 billion of cash on hand. Debt totaled $46.8 billion, including Global Financing debt of $31.4 billion. The balance sheet remains strong and is well positioned over the long term.
Segment Results for Fourth Quarter
- Cognitive Solutions (includes solutions software and transaction processing software) -- revenues of $5.4 billion, up 3 percent (flat adjusting for currency), driven by security and transaction processing software.
- Global Business Services (includes consulting, global process services and application management) -- revenues of $4.2 billion, up 1 percent (down 2 percent adjusting for currency). Strategic imperatives revenue grew 9 percent led by the cloud practice, mobile and analytics.
- Technology Services & Cloud Platforms (includes infrastructure services, technical support services and integration software) -- revenues of $9.2 billion, down 1 percent (down 4 percent adjusting for currency). Strategic imperatives revenue grew 15 percent, driven by hybrid cloud services, security and mobile.
- Systems (includes systems hardware and operating systems software) -- revenues of $3.3 billion, up 32 percent (up 28 percent adjusting for currency) driven by growth in IBM Z, Power Systems and storage.
- Global Financing (includes financing and used equipment sales) -- revenues of $450 million, up 1 percent (down 2 percent adjusting for currency).
Tax Rate
The enactment of the Tax Cuts and Jobs Act in December 2017 resulted in a one-time charge of $5.5 billion in the fourth quarter. The charge encompasses several elements, including a tax on accumulated overseas profits and the revaluation of deferred tax assets and liabilities. As a result, IBM's reported GAAP tax rate, which includes the one-time charge, was 124 percent for the fourth quarter, and 49 percent for the full year. IBM's operating (non-GAAP) tax rate, which excludes the one-time charge, was 6 percent for the fourth quarter; and 7 percent for the full year, which includes the effect of discrete tax benefits in the first and second quarters. Without discrete tax items, the full-year operating (non-GAAP) tax rate was 12 percent, at the low end of the company's previously estimated range.
Full-Year Results
-
Full-year GAAP EPS from continuing operations of $6.14
-- Includes a one-time charge of $5.5 billion associated with the enactment of U.S. tax reform
-
Full-year operating (non-GAAP) EPS of $13.80
-- Excludes the one-time charge of $5.5 billion associated with the enactment of U.S. tax reform
- Full-year revenue of $79.1 billion, down 1 percent
| FULL YEAR 2017 | |||||||||||
| Gross Profit | |||||||||||
| Diluted EPS | Net Income | Margin | |||||||||
| GAAP from Continuing Operations | $6.14 | * | $5.8B | * | 45.8% | ||||||
| Year/Year | -50% | * | -52% | * | -2.1Pts | ||||||
| Operating (Non-GAAP) | $13.80 | $12.9B | 47.4% | ||||||||
| Year/Year | 2% | -1% | -1.6Pts | ||||||||
| As-a-service | |||||||||||
| Strategic | annual exit | ||||||||||
| REVENUE | Total IBM | Imperatives | Cloud | run rate | |||||||
| As reported (US$) | $79.1B | $36.5B | $17.0B | $10.3B | |||||||
| Year/Year | -1% | 11% | 24% | 20% | |||||||
| Year/Year adjusting for currency | -1% | 11% | 24% | 18% | |||||||
| * Includes a one-time charge of $5.5 billion associated with the enactment of U.S. tax reform. | |||||||||||
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. EST, today. The Webcast may be accessed via a link at http://www.ibm.com/investor/events/earnings/4q17.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 | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| REVENUE | ||||||||||||||||
| Cognitive Solutions | $ | 5,432 | $ | 5,297 | $ | 18,453 | $ | 18,187 | ||||||||
| Global Business Services | 4,152 | 4,121 | 16,348 | 16,700 | ||||||||||||
| Technology Services & Cloud Platforms | 9,198 | 9,308 | 34,277 | 35,337 | ||||||||||||
| Systems | 3,332 | 2,530 | 8,194 | 7,714 | ||||||||||||
| Global Financing | 450 | 447 | 1,696 | 1,692 | ||||||||||||
| Other | (20 | ) | 66 | 171 | 289 | |||||||||||
| TOTAL REVENUE | 22,543 | 21,770 | 79,139 | 79,919 | ||||||||||||
| GROSS PROFIT | 10,862 | 10,893 | 36,227 | 38,294 | ||||||||||||
| GROSS PROFIT MARGIN | ||||||||||||||||
| Cognitive Solutions | 79.2 | % | 82.7 | % | 78.6 | % | 81.9 | % | ||||||||
| Global Business Services | 24.8 | % | 26.9 | % | 25.2 | % | 27.0 | % | ||||||||
| Technology Services & Cloud Platforms | 40.9 | % | 42.9 | % | 40.4 | % | 41.9 | % | ||||||||
| Systems | 55.7 | % | 56.9 | % | 53.2 | % | 55.7 | % | ||||||||
| Global Financing | 29.5 | % | 36.2 | % | 29.3 | % | 38.7 | % | ||||||||
| TOTAL GROSS PROFIT MARGIN | 48.2 | % | 50.0 | % | 45.8 | % | 47.9 | % | ||||||||
| EXPENSE AND OTHER INCOME | ||||||||||||||||
| S,G&A | 5,147 | 4,976 | 20,107 | 21,069 | ||||||||||||
| R,D&E | 1,427 | 1,431 | 5,787 | 5,751 | ||||||||||||
| Intellectual property and | ||||||||||||||||
| custom development income | (348 | ) | (521 | ) | (1,466 | ) | (1,631 | ) | ||||||||
| Other (income) and expense | 2 | (136 | ) | (216 | ) | 145 | ||||||||||
| Interest expense | 164 | 157 | 615 | 630 | ||||||||||||
| TOTAL EXPENSE AND OTHER INCOME | 6,393 | 5,907 | 24,827 | 25,964 | ||||||||||||
| INCOME FROM CONTINUING OPERATIONS | ||||||||||||||||
| BEFORE INCOME TAXES | 4,469 | 4,986 | 11,400 | 12,330 | ||||||||||||
| Pre-tax margin | 19.8 | % | 22.9 | % | 14.4 | % | 15.4 | % | ||||||||
| Provision for / (Benefit from) income taxes | 5,522 | 480 | 5,642 | 449 | ||||||||||||
| Effective tax rate | 123.6 | % | 9.6 | % | 49.5 | % | 3.6 | % | ||||||||
| INCOME / (LOSS) FROM CONTINUING OPERATIONS | ($1,053 | ) | $ | 4,505 | $ | 5,758 | $ | 11,881 | ||||||||
| DISCONTINUED OPERATIONS | ||||||||||||||||
| Income/(Loss) from discontinued operations, net of taxes | (1 | ) | (4 | ) | (5 | ) | (9 | ) | ||||||||
| NET INCOME / (LOSS) | ($1,054 | ) | $ | 4,501 | $ | 5,753 | $ | 11,872 | ||||||||
| EARNINGS / (LOSS) PER SHARE OF COMMON STOCK: | ||||||||||||||||
| Assuming Dilution | ||||||||||||||||
| Continuing Operations | ($1.14 | ) | $ | 4.73 | $ | 6.14 | $ | 12.39 | ||||||||
| Discontinued Operations | $ | 0.00 | ($0.01 | ) | $ | 0.00 | ($0.01 | ) | ||||||||
| TOTAL | ($1.14 | ) | $ | 4.72 | $ | 6.14 | $ | 12.38 | ||||||||
| Basic | ||||||||||||||||
| Continuing Operations | ($1.14 | ) | $ | 4.75 | $ | 6.17 | $ | 12.44 | ||||||||
| Discontinued Operations | $ | 0.00 | ($0.01 | ) | $ | 0.00 | ($0.01 | ) | ||||||||
| TOTAL | ($1.14 | ) | $ | 4.74 | $ | 6.17 | $ | 12.43 | ||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES | ||||||||||||||||
| OUTSTANDING (M's): | ||||||||||||||||
| Assuming Dilution | 928.9 | 952.7 | 937.4 | 958.7 | ||||||||||||
| Basic | 924.5 | 948.6 | 932.8 | 955.4 | ||||||||||||
| INTERNATIONAL BUSINESS MACHINES CORPORATION | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEET | ||||||||
| (Unaudited) | ||||||||
| At | At | |||||||
| (Dollars in Millions) | December 31, | December 31, | ||||||
| 2017 | 2016 | |||||||
| ASSETS: | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 11,972 | $ | 7,826 | ||||
| Marketable securities | 608 | 701 | ||||||
| Notes and accounts receivable - trade, net | 8,928 | 9,182 | ||||||
| Short-term financing receivables, net | 21,721 | 19,006 | ||||||
| Other accounts receivable, net | 981 | 1,057 | ||||||
| Inventory | 1,583 | 1,553 | ||||||
| Prepaid expenses and other current assets | 3,942 | 4,564 | ||||||
| Total Current Assets | 49,735 | 43,888 | ||||||
| Property, plant and equipment, net | 11,116 | 10,830 | ||||||
| Long-term financing receivables, net | 9,550 | 9,021 | ||||||
| Prepaid pension assets | 4,643 | 3,034 | ||||||
| Deferred taxes | 4,862 | 5,224 | ||||||
| Goodwill and intangibles, net | 40,531 | 40,887 | ||||||
| Investments and sundry assets | 4,919 | 4,585 | ||||||
| Total Assets | $ | 125,356 | $ | 117,470 | ||||
| LIABILITIES: | ||||||||
| Current Liabilities: | ||||||||
| Taxes | $ | 4,219 | $ | 3,235 | ||||
| Short-term debt | 6,987 | 7,513 | ||||||
| Accounts payable | 6,451 | 6,209 | ||||||
| Deferred income | 11,552 | 11,035 | ||||||
| Other liabilities | 8,153 | 8,283 | ||||||
| Total Current Liabilities | 37,363 | 36,275 | ||||||
| Long-term debt | 39,837 | 34,655 | ||||||
| Retirement related obligations | 16,720 | 17,070 | ||||||
| Deferred income | 3,746 | 3,600 | ||||||
| Other liabilities | 9,965 | 7,477 | ||||||
| Total Liabilities | 107,631 | 99,078 | ||||||
| EQUITY: | ||||||||
| IBM Stockholders' Equity: | ||||||||
| Common stock | 54,566 | 53,935 | ||||||
| Retained earnings | 153,126 | 152,759 | ||||||
| Treasury stock -- at cost | (163,507 | ) | (159,050 | ) | ||||
| Accumulated other comprehensive income/(loss) | (26,592 | ) | (29,398 | ) | ||||
| Total IBM stockholders' equity | 17,594 | 18,246 | ||||||
| Noncontrolling interests | 131 | 146 | ||||||
| Total Equity | 17,725 | 18,392 | ||||||
| Total Liabilities and Equity | $ | 125,356 | $ | 117,470 | ||||
| INTERNATIONAL BUSINESS MACHINES CORPORATION | ||||||||||||||||||
| CASH FLOW ANALYSIS | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||
| (Dollars in Millions) | December 31, | December 31, | ||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||
| Net Cash Provided by Operating Activities per GAAP: | $ | 5,733 | $ | 3,979 | * | $ | 16,724 | $ | 17,084 | * | ||||||||
| Less: change in Global Financing (GF) | ||||||||||||||||||
| Receivables | (2,049 | ) | (1,678 | ) | 419 | 1,658 | ||||||||||||
| Capital Expenditures, Net | (965 | ) | (925 | ) | (3,312 | ) | (3,726 | ) | ||||||||||
| Free Cash Flow | 6,817 | 4,731 | * | 12,992 | 11,700 | * | ||||||||||||
| Acquisitions | (53 | ) | (235 | ) | (496 | ) | (5,679 | ) | ||||||||||
| Divestitures | (240 | ) | (490 | ) | (205 | ) | (454 | ) | ||||||||||
| Dividends | (1,387 | ) | (1,329 | ) | (5,506 | ) | (5,256 | ) | ||||||||||
| Share Repurchase | (666 | ) | (871 | ) | (4,340 | ) | (3,502 | ) | ||||||||||
| Non-GF Debt | (840 | ) | (2,048 | ) | 1,056 | 1,317 | ||||||||||||
| Other (includes GF Receivables and GF Debt) | (2,565 | ) | (1,200 | ) | * | 552 | 2,208 | * | ||||||||||
| Change in Cash, Cash Equivalents and | ||||||||||||||||||
| Short-term Marketable Securities | $ | 1,065 | ($1,441 | ) | $ | 4,053 | $ | 332 | ||||||||||
| * Reclassified to reflect adoption of the FASB guidance on stock-based compensation. | ||||||||||||||||||
| INTERNATIONAL BUSINESS MACHINES CORPORATION | ||||||||||||||||||
| CASH FLOW | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||
| (Dollars in Millions) | December 31, | December 31, | ||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||
| Net Income from Operations | ($1,054 | ) | $ | 4,501 | $ | 5,753 | $ | 11,872 | ||||||||||
| Depreciation/Amortization of Intangibles | 1,150 | 1,127 | 4,541 | 4,381 | ||||||||||||||
| Stock-based Compensation | 146 | 141 | 534 | 544 | ||||||||||||||
| Working Capital / Other | 7,540 | (113 | ) | * | 5,476 | (1,371 | ) | * | ||||||||||
| Global Financing A/R | (2,049 | ) | (1,678 | ) | 419 | 1,658 | ||||||||||||
| Net Cash Provided by Operating Activities | $ | 5,733 | $ | 3,979 | * | $ | 16,724 | $ | 17,084 | * | ||||||||
| Capital Expenditures, net of payments & proceeds | (965 | ) | (925 | ) | (3,312 | ) | (3,726 | ) | ||||||||||
| Divestitures, net of cash transferred | (240 | ) | (490 | ) | (205 | ) | (454 | ) | ||||||||||
| Acquisitions, net of cash acquired | (53 | ) | (235 | ) | (496 | ) | (5,679 | ) | ||||||||||
| Marketable Securities / Other Investments, net | (2,559 | ) | (2,038 | ) | (3,083 | ) | (1,116 | ) | ||||||||||
| Net Cash Used in Investing Activities | ($3,818 | ) | ($3,687 | ) | ($7,096 | ) | ($10,976 | ) | ||||||||||
| Debt, net of payments & proceeds | 1,137 | 875 | 3,446 | 2,763 | ||||||||||||||
| Dividends | (1,387 | ) | (1,329 | ) | (5,506 | ) | (5,256 | ) | ||||||||||
| Common Stock Repurchases | (666 | ) | (871 | ) | (4,340 | ) | (3,502 | ) | ||||||||||
| Common Stock Transactions - Other | (3 | ) | 26 | * | (18 | ) | 78 | * | ||||||||||
| Net Cash Used in Financing Activities | ($919 | ) | ($1,298 | ) | * | ($6,418 | ) | ($5,917 | ) | * | ||||||||
| Effect of Exchange Rate changes on Cash | 62 | (206 | ) | 937 | (51 | ) | ||||||||||||
| Net Change in Cash & Cash Equivalents | $ | 1,057 | ($1,213 | ) | $ | 4,146 | $ | 140 | ||||||||||
| * Reclassified to reflect adoption of the FASB guidance on stock-based compensation. | ||||||||||||||||||
| INTERNATIONAL BUSINESS MACHINES CORPORATION | ||||||||||||||||||||
| SEGMENT DATA | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| FOURTH - QUARTER 2017 | ||||||||||||||||||||
| Cognitive Solutions & | ||||||||||||||||||||
| Industry Services | ||||||||||||||||||||
| Technology | ||||||||||||||||||||
| Global | Services & | |||||||||||||||||||
| (Dollars in Millions) | Cognitive | Business | Cloud | Global | ||||||||||||||||
| Solutions | Services | Platforms | Systems | Financing | ||||||||||||||||
| Revenue | ||||||||||||||||||||
| External | $ | 5,432 | $ | 4,152 | $ | 9,198 | $ | 3,332 | $ | 450 | ||||||||||
| Internal | 646 | 92 | 160 | 179 | 546 | |||||||||||||||
| Total Segment Revenue | $ | 6,078 | $ | 4,244 | $ | 9,358 | $ | 3,511 | $ | 997 | ||||||||||
| Pre-tax Income from Continuing Operations | 2,279 | 337 | 1,456 | 908 | 443 | |||||||||||||||
| Pre-tax margin | 37.5 | % | 7.9 | % | 15.6 | % | 25.9 | % | 44.4 | % | ||||||||||
| Change YTY Revenue - External | 2.5 | % | 0.7 | % | (1.2 | )% | 31.7 | % | 0.8 | % | ||||||||||
| Change YTY Revenue - External @constant currency | 0.0 | % | (1.5 | )% | (4.0 | )% | 28.5 | % | (1.8 | )% | ||||||||||
| FOURTH - QUARTER 2016 | ||||||||||||||||||||
| Cognitive Solutions & | ||||||||||||||||||||
| Industry Services | ||||||||||||||||||||
| Technology | ||||||||||||||||||||
| Global | Services & | |||||||||||||||||||
| (Dollars in Millions) | Cognitive | Business | Cloud | Global | ||||||||||||||||
| Solutions | Services | Platforms | Systems | Financing | ||||||||||||||||
| Revenue | ||||||||||||||||||||
| External | $ | 5,297 | $ | 4,121 | $ | 9,308 | $ | 2,530 | $ | 447 | ||||||||||
| Internal | 701 | 100 | 214 | 156 | 462 | |||||||||||||||
| Total Segment Revenue | $ | 5,999 | $ | 4,221 | $ | 9,522 | $ | 2,686 | $ | 909 | ||||||||||
| Pre-tax Income from Continuing Operations | 2,313 | 522 | 1,882 | 579 | 448 | |||||||||||||||
| Pre-tax margin | 38.6 | % | 12.4 | % | 19.8 | % | 21.6 | % | 49.3 | % | ||||||||||
| INTERNATIONAL BUSINESS MACHINES CORPORATION | ||||||||||||||||||||
| SEGMENT DATA | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| TWELVE - MONTHS 2017 | ||||||||||||||||||||
| Cognitive Solutions & | ||||||||||||||||||||
| Industry Services | ||||||||||||||||||||
| Technology | ||||||||||||||||||||
| Global | Services & | |||||||||||||||||||
| (Dollars in Millions) | Cognitive | Business | Cloud | Global | ||||||||||||||||
| Solutions | Services | Platforms | Systems | Financing | ||||||||||||||||
| Revenue | ||||||||||||||||||||
| External | $ | 18,453 | $ | 16,348 | $ | 34,277 | $ | 8,194 | $ | 1,696 | ||||||||||
| Internal | 2,647 | 363 | 657 | 750 | 1,471 | |||||||||||||||
| Total Segment Revenue | $ | 21,100 | $ | 16,711 | $ | 34,934 | $ | 8,945 | $ | 3,168 | ||||||||||
| Pre-tax Income from Continuing Operations | 6,817 | 1,401 | 4,344 | 1,135 | 1,279 | |||||||||||||||
| Pre-tax margin | 32.3 | % | 8.4 | % | 12.4 | % | 12.7 | % | 40.4 | % | ||||||||||
| Change YTY Revenue - External | 1.5 | % | (2.1 | )% | (3.0 | )% | 6.2 | % | 0.3 | % | ||||||||||
| Change YTY Revenue - External @constant currency | 1.0 | % | (1.8 | )% | (3.4 | )% | 5.4 | % | (0.7 | )% | ||||||||||
| TWELVE - MONTHS 2016 | ||||||||||||||||||||
| Cognitive Solutions & | ||||||||||||||||||||
| Industry Services | ||||||||||||||||||||
| Technology | ||||||||||||||||||||
| Global | Services & | |||||||||||||||||||
| (Dollars in Millions) | Cognitive | Business | Cloud | Global | ||||||||||||||||
| Solutions | Services | Platforms | Systems | Financing | ||||||||||||||||
| Revenue | ||||||||||||||||||||
| External | $ | 18,187 | $ | 16,700 | $ | 35,337 | $ | 7,714 | $ | 1,692 | ||||||||||
| Internal | 2,630 | 409 | 715 | 750 | 1,802 | |||||||||||||||
| Total Segment Revenue | $ | 20,817 | $ | 17,109 | $ | 36,052 | $ | 8,464 | $ | 3,494 | ||||||||||
| Pre-tax Income from Continuing Operations | 6,352 | 1,732 | 4,707 | 933 | 1,656 | |||||||||||||||
| Pre-tax margin | 30.5 | % | 10.1 | % | 13.1 | % | 11.0 | % | 47.4 | % | ||||||||||
| INTERNATIONAL BUSINESS MACHINES CORPORATION | ||||||||||||||||||||
| U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION | ||||||||||||||||||||
| (Unaudited; Dollars in millions except per share amounts) | ||||||||||||||||||||
| FOURTH - QUARTER 2017 | ||||||||||||||||||||
| CONTINUING OPERATIONS | ||||||||||||||||||||
| Acquisition- | Retirement- | Tax Reform | ||||||||||||||||||
| Related | Related | One-Time | Operating | |||||||||||||||||
| GAAP | Adjustments* | Adjustments** | Charge (1) | (Non-GAAP) | ||||||||||||||||
| Gross Profit | $ | 10,862 | $ | 99 | $ | 209 | - | $ | 11,170 | |||||||||||
| Gross Profit Margin | 48.2 | % | 0.4Pts | 0.9Pts | - | 49.5 | % | |||||||||||||
| S,G&A | 5,147 | (116 | ) | (145 | ) | - | 4,886 | |||||||||||||
| R,D&E | 1,427 | - | (50 | ) | - | 1,378 | ||||||||||||||
| Other (Income) & Expense | 2 | (32 | ) | - | - | (30 | ) | |||||||||||||
| Total Expense & Other (Income) | 6,393 | (148 | ) | (195 | ) | - | 6,050 | |||||||||||||
| Pre-tax Income from Continuing Operations | 4,469 | 247 | 404 | - | 5,120 | |||||||||||||||
| Pre-tax Income Margin from Continuing Operations | 19.8 | % | 1.1Pts | 1.8Pts | - | 22.7 | % | |||||||||||||
| Provision for Income Taxes*** | 5,522 | 67 | 197 | (5,475 | ) | 310 | ||||||||||||||
| Effective Tax Rate | 123.6 | % | -4.7Pts | -5.9Pts | -106.9Pts | 6.1 | % | |||||||||||||
| Income / (Loss) from Continuing Operations | (1,053 | ) | 181 | 206 | 5,475 | 4,809 | ||||||||||||||
| Income / (Loss) Margin from Continuing Operations | (4.7 | )% | 0.8Pts | 0.9Pts | 24.3Pts | 21.3 | % | |||||||||||||
| Diluted Earnings / (Loss) Per Share: Continuing Operations | ($1.14 | ) | $ | 0.19 | $ | 0.22 | $ | 5.91 | $ | 5.18 | ||||||||||
|
(1) |
Operating (non-GAAP) earnings excludes a one-time charge of $5.5 billion associated with the enactment of U.S. tax reform due to its unique non-recurring nature. |
|
|
|
| FOURTH - QUARTER 2016 | ||||||||||||||||
| CONTINUING OPERATIONS | ||||||||||||||||
| Acquisition- | Retirement- | |||||||||||||||
| Related | Related | Operating | ||||||||||||||
| GAAP | Adjustments* | Adjustments** | (Non-GAAP) | |||||||||||||
| Gross Profit | $ | 10,893 | $ | 124 | $ | 78 | $ | 11,095 | ||||||||
| Gross Profit Margin | 50.0 | % | 0.6Pts | 0.4Pts | 51.0 | % | ||||||||||
| S,G&A | 4,976 | (136 | ) | (69 | ) | 4,771 | ||||||||||
| R,D&E | 1,431 | - | (6 | ) | 1,425 | |||||||||||
| Other (Income) & Expense | (136 | ) | 0 | - | (136 | ) | ||||||||||
| Total Expense & Other (Income) | 5,907 | (136 | ) | (76 | ) | 5,696 | ||||||||||
| Pre-tax Income from Continuing Operations | 4,986 | 260 | 154 | 5,399 | ||||||||||||
| Pre-tax Income Margin from Continuing Operations | 22.9 | % | 1.2Pts | 0.7Pts | 24.8 | % | ||||||||||
| Provision for Income Taxes*** | 480 | 66 | 77 | 623 | ||||||||||||
| Effective Tax Rate | 9.6 | % | 0.8Pts | 1.1Pts | 11.5 | % | ||||||||||
| Income from Continuing Operations | 4,505 | 193 | 77 | 4,776 | ||||||||||||
| Income Margin from Continuing Operations | 20.7 | % | 0.9Pts | 0.4Pts | 21.9 | % | ||||||||||
| Diluted Earnings Per Share: Continuing Operations | $ | 4.73 | $ | 0.20 | $ | 0.08 | $ | 5.01 | ||||||||
|
* |
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) | ||||||||||||||||||||
| TWELVE - MONTHS 2017 | ||||||||||||||||||||
| CONTINUING OPERATIONS | ||||||||||||||||||||
| Acquisition- | Retirement- | Tax Reform | ||||||||||||||||||
| Related | Related | One-Time | Operating | |||||||||||||||||
| GAAP | Adjustments* | Adjustments** | Charge (1) | (Non-GAAP) | ||||||||||||||||
| Gross Profit | $ | 36,227 | $ | 449 | $ | 799 | - | $ | 37,475 | |||||||||||
| Gross Profit Margin | 45.8 | % | 0.6Pts | 1.0Pts | - | 47.4 | % | |||||||||||||
| S,G&A | 20,107 | (509 | ) | (472 | ) | - | 19,126 | |||||||||||||
| R,D&E | 5,787 | - | (197 | ) | - | 5,590 | ||||||||||||||
| Other (Income) & Expense | (216 | ) | (39 | ) | - | - | (255 | ) | ||||||||||||
| Total Expense & Other (Income) | 24,827 | (548 | ) | (669 | ) | - | 23,609 | |||||||||||||
| Pre-tax Income from Continuing Operations | 11,400 | 997 | 1,468 | - | 13,866 | |||||||||||||||
| Pre-tax Income Margin from Continuing Operations | 14.4 | % | 1.3Pts | 1.9Pts | - | 17.5 | % | |||||||||||||
| Provision for Income Taxes*** | 5,642 | 279 | 485 | (5,475 | ) | 931 | ||||||||||||||
| Effective Tax Rate | 49.5 | % | -1.5Pts | -1.7Pts | -39.5Pts | 6.7 | % | |||||||||||||
| Income from Continuing Operations | 5,758 | 718 | 983 | 5,475 | 12,935 | |||||||||||||||
| Income Margin from Continuing Operations | 7.3 | % | 0.9Pts | 1.2Pts | 6.9Pts | 16.3 | % | |||||||||||||
| Diluted Earnings Per Share: Continuing Operations | $ | 6.14 | $ | 0.77 | $ | 1.05 | $ | 5.84 | $ | 13.80 | ||||||||||
|
(1) |
Operating (non-GAAP) earnings excludes a one-time charge of $5.5 billion associated with the enactment of U.S. tax reform due to its unique non-recurring nature. |
|
|
|
| TWELVE - MONTHS 2016 | ||||||||
| CONTINUING OPERATIONS | ||||||||
| Acquisition- | Retirement- | |||||||
| Related | Related | Operating | ||||||
| GAAP | Adjustments* | Adjustments** | (Non-GAAP) | |||||
| Gross Profit | $38,294 | $494 | $316 | $39,104 | ||||
| Gross Profit Margin | 47.9% | 0.6Pts | 0.4Pts | 48.9% | ||||
| S,G&A | 21,069 | (501) | (253) | 20,315 | ||||
| R,D&E | 5,751 | - | (29) | 5,722 | ||||
| Other (Income) & Expense | 145 | (7) | - | 138 | ||||
| Total Expense & Other (Income) | 25,964 | (508) | (282) | 25,174 | ||||
| Pre-Tax Income from Continuing Operations | 12,330 | 1,003 | 598 | 13,931 | ||||
| Pre-tax Income Margin from Continuing Operations | 15.4% | 1.3Pts | 0.7Pts | 17.4% | ||||
| Provision for Income Taxes*** | 449 | 268 | 183 | 900 | ||||
| Effective Tax Rate | 3.6% | 1.7Pts | 1.2Pts | 6.5% | ||||
| Income from Continuing Operations | 11,881 | 735 | 415 | 13,031 | ||||
| Income Margin from Continuing Operations | 14.9% | 0.9Pts | 0.5Pts | 16.3% | ||||
| Diluted Earnings Per Share: Continuing Operations | $12.39 | $0.77 | $0.43 | $13.59 | ||||
|
* |
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. |
|
|
|
