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IBM REPORTS 2013 THIRD-QUARTER RESULTS
o GAAP Results:
- Diluted EPS: $3.68, up 11 percent;
- Net income: $4.0 billion, up 6 percent;
- Gross profit margin: 48.0 percent, up 0.6 points;
o Operating (non-GAAP) Results:
- Diluted EPS: $3.99, up 10 percent;
- Net income: $4.4 billion, up 6 percent;
- Gross profit margin: 49.1 percent, up 1.0 points;
o Revenue:
$23.7 billion, down 4 percent, down 2 percent adjusting for currency:
- Software revenue up 1 percent, up 2 percent adjusting for currency;
-- Key branded middleware up 3 percent; up 4 percent adjusting for
currency;
- Services revenue down 3 percent, up 1 percent adjusting for currency;
-- Global Business Services revenue flat, up 5 percent adjusting
for currency;
- Services backlog of $141 billion, up 2 percent, up 6 percent adjusting for
currency;
- Systems and Technology revenue down 17 percent, down 16 percent adjusting
for currency;
-- System z mainframe revenue up 6 percent; up 7 percent adjusting for
currency;
- Growth markets revenue down 9 percent, down 5 percent adjusting for
currency;
- Business analytics revenue up 8 percent year to date;
- Smarter Planet revenue up more than 20 percent year to date;
- Cloud revenue up more than 70 percent year to date;
-- Revenue in third-quarter exceeds $1 billion, of which about $460 million
is delivered as a cloud service;
o Maintaining full-year 2013 Operating (non-GAAP) EPS expectation of at least
$16.25; at least $16.90, excluding second-quarter workforce rebalancing charge.
ARMONK, N.Y., October 16, 2013 . . . IBM (NYSE: IBM) today announced
third-quarter 2013 diluted earnings of $3.68 per share, compared with diluted
earnings of $3.33 per share in the third-quarter of 2012, an increase of 11 percent.
Operating (non-GAAP) diluted earnings were $3.99 per share compared with operating
diluted earnings of $3.62 per share in the third-quarter of 2012, an increase of 10
percent.
Third-quarter net income was $4.0 billion compared with $3.8 billion in the
third-quarter of 2012, an increase of 6 percent. Operating (non-GAAP) net income was
$4.4 billion, as compared with $4.2 billion in the third-quarter of 2012, an increase
of 6 percent.
Total revenues for the third-quarter of 2013 of $23.7 billion were down 4
percent (down 2 percent, adjusting for currency) from the third-quarter of 2012.
“In the third-quarter we continued to expand operating margins and increased
earnings per share, but fell short on revenue. Where we had identified high growth
opportunities and pursued them aggressively --- cloud, mobile, business analytics,
and security --- we continued to show strong growth. This underscores our strategy
to continuously transform the company to high value,” said Ginni Rometty, IBM
chairman, president and chief executive officer.
“We are taking action to improve execution in our growth markets unit and in the
elements of our hardware businesses that are under performing. Given these actions,
our strategic initiatives and the strength of our model, we are maintaining our view
for the full year and remain confident in our ability to achieve at least $20
operating EPS in 2015.”
Third-Quarter GAAP – Operating (non-GAAP) Reconciliation
Third-quarter operating (non-GAAP) diluted earnings exclude $0.31 per share
of charges: $0.15 per share for the amortization of purchased intangible assets and
other acquisition-related charges, and $0.16 per share for retirement-related charges
driven by changes to plan assets and liabilities primarily related to market
performance.
Full-Year 2013 Expectations
The company expects full-year 2013 GAAP diluted earnings per share of at least
$15.01. Operating (non-GAAP) diluted earnings per share expectations remain at least
$16.25; and at least $16.90, excluding the second-quarter workforce rebalancing
charge of $1.0 billion. Operating (non-GAAP) diluted earnings expectations exclude
$1.24 per share of charges for amortization of purchased intangible assets, other
acquisition-related charges, and retirement-related charges.
Geographic Regions
The Americas’ third-quarter revenues were $10.3 billion, a decrease of
1 percent (flat, adjusting for currency) from the 2012 period. Revenues from
Europe/Middle East/Africa were up 1 percent to $7.3 billion (down 2 percent,
adjusting for currency). Asia-Pacific revenues decreased 15 percent (down 4 percent,
adjusting for currency) to $5.5 billion. OEM revenues were $534 million, down 1
percent (flat, adjusting for currency) compared with the 2012 third-quarter.
Growth Markets
Revenues from the company’s growth markets were down 9 percent (down 5 percent,
adjusting for currency). Revenues in the BRIC countries — Brazil, Russia, India and
China — were down 15 percent (down 12 percent, adjusting for currency).
Services
Global Technology Services segment revenues decreased 4 percent (down 1 percent,
adjusting for currency) to $9.5 billion. Global Business Services segment revenues
were flat (up 5 percent, adjusting for currency) at $4.6 billion.
Pre-tax income from Global Technology Services increased 12 percent and pre-tax
margin increased to 19.4 percent. Global Business Services pre-tax income increased
28 percent and pre-tax margin increased to 20.0 percent.
The estimated services backlog at September 30 was $141 billion, up 2 percent
year over year at actual rates (up 6 percent, adjusting for currency).
Software
Revenues from the Software segment were $5.8 billion, up 1 percent (up 2
percent, adjusting for currency) compared with the third-quarter of 2012. Software
pre-tax income increased 2 percent and pre-tax margin increased to 36.8 percent.
Revenues from IBM’s key middleware products, which include WebSphere,
Information Management, Tivoli, Social Workforce Solutions and Rational products,
were $3.7 billion, up 3 percent (up 4 percent, adjusting for currency) versus the
third-quarter of 2012. Operating systems revenues of $576 million were down 4
percent (down 2 percent, adjusting for currency) compared with the prior-year
quarter.
Revenues from the WebSphere family of software products were flat year over
year. Information Management software revenues increased 2 percent. Revenues
from Tivoli software increased 2 percent. Revenues from Social Workforce Solutions
increased 14 percent, and Rational software increased 12 percent.
Hardware
Revenues from the Systems and Technology segment totaled $3.2 billion for
the quarter, down 17 percent (down 16 percent, adjusting for currency) from the
third-quarter of 2012. Systems and Technology pre-tax income decreased $291 million
to a loss of $167 million.
Total systems revenues decreased 19 percent (down 18 percent, adjusting for
currency). Revenues from Power Systems were down 38 percent compared with the 2012
period. Revenues from System x were down 18 percent. Revenues from System z
mainframe server products increased 6 percent compared with the year-ago period.
Total delivery of System z computing power, as measured in MIPS (millions of
instructions per second), increased 56 percent. Revenues from System Storage
decreased 11 percent. Revenues from Microelectronics OEM increased 1 percent.
Financing
Global Financing segment revenues increased 6 percent (up 9 percent, adjusting
for currency) in the third-quarter at $502 million. Pre-tax income for the segment
increased 4 percent to $494 million.
Gross Profit
The company’s total gross profit margin was 48.0 percent in the 2013
third-quarter compared with 47.4 percent in the 2012 third-quarter period.
Total operating (non-GAAP) gross profit margin was 49.1 percent in the 2013
third-quarter compared with 48.1 percent in the 2012 third-quarter period, with
increases in Global Technology Services, Global Business Services and Global
Financing.
Expense
Total expense and other income decreased 1 percent to $6.6 billion compared with
the prior year period. S,G&A expense of $5.3 billion decreased 11 percent year over
year, including the prior year third-quarter workforce rebalancing charge of $408
million. R,D&E expense of $1.5 billion decreased 4 percent compared with the yearago period. Intellectual property and custom development income decreased to
$191 million compared with $303 million a year ago. Other (income) and expense was
income of $62 million compared with prior-year income of $606 million, which included
a $447 million gain from the divestiture of Retail Store Solutions. Interest expense
decreased to $97 million compared with $124 million in the prior year.
Total operating (non-GAAP) expense and other income was flat at $6.4 billion
compared with the prior-year period. Operating (non-GAAP) S,G&A expense decreased
10 percent to $5.1 billion compared with the prior-year period. Operating (non-GAAP)
R,D&E expense of $1.5 billion was down 6 percent compared with the year-ago period.
Pre-Tax Income
Pre-tax income decreased 5 percent to $4.8 billion and pre-tax margin of
20.3 percent was down 0.2 points compared with the prior-year period. Operating
(non-GAAP) pre-tax income decreased 4 percent to $5.3 billion and pre-tax margin
was flat compared to the year-ago period.
***
IBM’s tax rate was 16.0 percent, down 8.6 points year over year; operating
(non-GAAP) tax rate was 17.0 percent, down 7.7 points compared to the year-ago
period. The change in the third-quarter tax rate reflects a decrease to 23 percent in
the ongoing effective tax rate for the full-year, discrete benefits associated with
foreign tax audits and the third-quarter 2012 tax charge related to the divestiture
of Retail Store Solutions.
Net income margin increased 1.6 points to 17.0 percent. Total operating
(non-GAAP) net income margin increased 1.7 points to 18.5 percent.
The weighted-average number of diluted common shares outstanding in the
third-quarter 2013 was 1.10 billion compared with 1.15 billion shares in the
same period of 2012. As of September 30, 2013, there were 1.09 billion basic
common shares outstanding.
Debt, including Global Financing, totaled $36.2 billion, compared with $33.3
billion at year-end 2012. From a management segment view, Global Financing debt
totaled $25.8 billion versus $24.5 billion at year-end 2012, resulting in a debt-toequity ratio of 7.1 to 1. Non-global financing debt totaled $10.4 billion, an
increase of $1.6 billion since year-end 2012, resulting in a debt-to-capitalization
ratio of 38.7 percent from 36.1 percent. On a year-over-year basis, debt increased
$2.5 billion, primarily driven by Global Financing debt.
IBM ended the third-quarter 2013 with $10.2 billion of cash on hand and
generated free cash flow of $2.2 billion, excluding Global Financing receivables,
down approximately $0.9 billion year over year. The company returned $3.0 billion to
shareholders through $1.0 billion in dividends and $1.9 billion of gross share
repurchases.
Year-To-Date 2013 Results
Net income for the nine months ended September 30, 2013 was $10.3 billion
compared with $10.8 billion in the year-ago period, a decrease of 4 percent. Diluted
earnings per share were $9.27, flat compared to the 2012 period. Revenues for the
nine-month period totaled $72.1 billion, a decrease of 4 percent (down 2 percent,
adjusting for currency) compared with $75.2 billion for the nine months of 2012.
Operating (non-GAAP) net income for the nine months ended September 30, 2013 was
$11.3 billion compared with $11.5 billion in the year-ago period, a decrease of 1.4
percent. Operating (non-GAAP) diluted earnings per share were $10.21 compared with
$9.90 per diluted share for the 2012 period, an increase of 3 percent. Operating
(non-GAAP) diluted earnings per share, excluding the impact of second-quarter
workforce rebalancing charges, were $10.91.
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 corporate IT 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 and purchases,
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 and
alliances; 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 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);
o adjusting for workforce rebalancing.
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
4:30 p.m. EDT, today. The Webcast may be accessed via a link at
http://www.ibm.com/investor/events/3q13.phtml. 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
2013
2012
Change
2013
2012
Change
------- ------------- ------- ------- ------REVENUE
Global Technology Services
Gross profit margin
$9,494
39.0%
$9,922
37.3%
-4.3% $28,634
37.9%
$29,952
36.3%
-4.4%
Global Business Services
Gross profit margin
4,558
32.9%
4,542
31.2%
0.4%
13,649
30.9%
13,846
30.0%
-1.4%
Software
Gross profit margin
5,798
88.0%
5,763
88.0%
0.6%
17,792
88.0%
17,533
87.8%
1.5%
Systems and Technology
Gross profit margin
3,247
33.6%
3,895
37.3%
-16.6%
10,111
34.4%
11,903
36.7%
-15.1%
Global Financing
Gross profit margin
502
47.2%
472
45.8%
6.5%
1,488
46.4%
1,478
47.5%
0.7%
Other
Gross profit margin
122
-211.6%
154
-80.4%
-20.8%
378
-185.3%
490
-71.3%
-22.8%
TOTAL REVENUE
23,720
24,747
-4.1%
72,052
75,203
-4.2%
GROSS PROFIT
Gross profit margin
11,380
48.0%
11,732
47.4%
-3.0%
34,189
47.5%
35,131
46.7%
-2.7%
S,G&A
Expense to revenue
5,255
22.2%
5,908
23.9%
-11.0%
17,512
24.3%
17,632
23.4%
-0.7%
R,D&E
Expense to revenue
1,468
6.2%
1,534
6.2%
-4.3%
4,661
6.5%
4,722
6.3%
-1.3%
Intellectual property and
custom development income
(191)
(303)
-36.8%
(621)
(847)
-26.7%
(62)
(606)
-89.7%
(214)
(796)
-73.2%
97
124
-21.5%
289
350
-17.5%
TOTAL EXPENSE AND
OTHER INCOME
Expense to revenue
6,567
27.7%
6,657
26.9%
-1.4%
21,627
30.0%
21,060
28.0%
2.7%
INCOME BEFORE
INCOME TAXES
Pre-tax margin
4,812
20.3%
5,074
20.5%
-5.2%
12,562
17.4%
14,071
18.7%
-10.7%
Provision for income taxes
Effective tax rate
772
16.0%
1,251
24.6%
-38.3%
2,263
18.0%
3,300
23.5%
-31.4%
$3,824
======
15.5%
5.7% $10,299
======
14.3%
$10,771
======
14.3%
-4.4%
Net income margin
$4,041
======
17.0%
EARNINGS PER SHARE
OF COMMON STOCK:
ASSUMING DILUTION
BASIC
$3.68
$3.70
$3.33
$3.36
$9.27
$9.35
$9.27
$9.38
0.0%
-0.3%
1,098.8
1,090.9
1,149.3
1,137.2
1,110.7
1,101.8
1,161.8
1,148.4
EXPENSE AND OTHER INCOME
Other (income) and expense
Interest expense
NET INCOME
WEIGHTED-AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING (M's):
ASSUMING DILUTION
BASIC
10.5%
10.1%
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited)
(Dollars in Millions)
At
September 30,
2013
At
December 31,
2012
------------
------------
ASSETS:
Current Assets:
Cash and cash equivalents
Marketable securities
Notes and accounts receivable - trade
(net of allowances of $273 in 2013 and $255 in 2012)
Short-term financing receivables
(net of allowances of $280 in 2013 and $288 in 2012)
Other accounts receivable
(net of allowances of $29 in 2013 and $17 in 2012)
Inventories, at lower of average cost or market:
Finished goods
Work in process and raw materials
Total inventories
Deferred taxes
Prepaid expenses and other current assets
Total Current Assets
Property, plant and equipment
Less: Accumulated depreciation
Property, plant and equipment - net
Long-term financing receivables
(net of allowances of $72 in 2013 and $66 in 2012)
Prepaid pension assets
Deferred taxes
Goodwill
Intangible assets - net
Investments and sundry assets
Total Assets
$10,072
160
$10,412
717
9,865
10,667
16,786
18,038
1,683
1,873
528
1,964
--------2,492
1,752
4,723
--------47,533
475
1,812
--------2,287
1,415
4,024
--------49,433
40,808
26,931
--------13,877
40,501
26,505
--------13,996
11,675
1,476
3,682
30,882
4,003
4,718
--------$117,845
=========
12,812
945
3,973
29,247
3,787
5,021
--------$119,213
=========
$4,746
7,702
6,263
4,210
11,658
4,643
--------39,222
$4,948
9,181
7,952
4,745
11,952
4,847
--------43,625
28,478
24,088
17,994
4,087
8,057
--------97,837
20,418
4,491
7,607
--------100,229
LIABILITIES:
Current Liabilities:
Taxes
Short-term debt
Accounts payable
Compensation and benefits
Deferred income
Other accrued expenses and liabilities
Total Current Liabilities
Long-term debt
Retirement and nonpension postretirement
benefit obligations
Deferred income
Other liabilities
Total Liabilities
EQUITY:
IBM Stockholders' Equity:
Common stock
Retained earnings
Treasury stock -- at cost
Accumulated other comprehensive income/(loss)
Total IBM stockholders' equity
Noncontrolling interests
Total Equity
Total Liabilities and Equity
51,203
124,885
(131,240)
(24,971)
--------19,877
50,110
117,641
(123,131)
(25,759)
--------18,860
131
--------20,008
--------$117,845
=========
124
--------18,984
--------$119,213
=========
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW ANALYSIS
(Unaudited)
(Dollars in Millions)
Net Cash from Operating Activities per GAAP:
Less: the change in Global Financing (GF)
Receivables
Net Cash from Operating Activities
(Excluding GF Receivables)
Capital Expenditures, Net
Free Cash Flow
(Excluding GF Receivables)
Acquisitions
Divestitures
Dividends
Share Repurchase
Non-GF Debt
Other (includes GF Receivables, and
GF Debt)
Change in Cash, Cash Equivalents and
Short-term Marketable Securities
Three Months Ended
September 30,
2013
2012
-----------$3,760
$4,514
Nine Months Ended
September 30,
2013
2012
------------$10,957
$13,240
481
------
327
------
1,628
------
1,245
------
3,279
4,187
9,329
11,995
(1,041)
(1,046)
(2,709)
(3,326)
2,238
3,141
6,620
8,670
(2,382)
235
(1,037)
(1,917)
1,351
(342)
573
(968)
(2,986)
694
(2,562)
247
(3,033)
(8,062)
1,556
(2,266)
587
(2,816)
(8,988)
2,284
1,388
954
4,337
2,861
($125)
========
$1,067
========
($897)
=======
$331
=======
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
THIRD-QUARTER 2013
-----------------------------------------------------
(Dollars in Millions)
--------- Revenue --------External
Internal
Total
----------------------
Pre-tax
Income/
(Loss)
--------
Pre-tax
Margin
-------
SEGMENTS
Global Technology Services
Y-T-Y change
$9,494
-4.3%
$262
-8.0%
$9,755
-4.4%
$1,895
11.7%
19.4%
Global Business Services
Y-T-Y change
4,558
0.4%
177
0.9%
4,735
0.4%
948
28.4%
20.0%
Software
Y-T-Y change
5,798
0.6%
744
-11.8%
6,542
-1.0%
2,410
2.3%
36.8%
3,247
-16.6%
168
-7.3%
3,415
-16.2%
(167)
NM
-4.9%
502
6.5%
512
4.2%
1,015
5.3%
494
3.8%
48.7%
$23,599
-4.0%
$1,863
-5.7%
$25,461
-4.2%
$5,579
3.5%
21.9%
122
(1,863)
(1,741)
(766)
$23,720
-4.1%
$0
$23,720
-4.1%
$4,812
-5.2%
Systems and Technology
Y-T-Y change
Global Financing
Y-T-Y change
TOTAL REPORTABLE SEGMENTS
Y-T-Y change
Eliminations / Other
TOTAL IBM CONSOLIDATED
Y-T-Y change
20.3%
NM - Not Meaningful
(Dollars in Millions)
THIRD-QUARTER 2012
----------------------------------------------------Pre-tax
--------- Revenue --------Income/
Pre-tax
External
Internal
Total
(Loss)
Margin
---------------------------- -------
SEGMENTS
Global Technology Services
$9,922
$285
$10,206
$1,697
16.6%
Global Business Services
4,542
175
4,717
738
15.6%
Software
5,763
843
6,606
2,355
35.6%
Systems and Technology
3,895
181
4,076
124
3.0%
472
491
963
476
49.4%
$24,594
$1,976
$26,570
$5,389
20.3%
154
(1,976)
(1,822)
(315)
$24,747
$0
$24,747
$5,074
Global Financing
TOTAL REPORTABLE SEGMENTS
Eliminations / Other
TOTAL IBM CONSOLIDATED
20.5%
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
(Dollars in Millions)
NINE-MONTHS 2013
--------------------------------------------------Pre-tax
--------- Revenue --------Income/
Pre-tax
External
Internal
Total
(Loss)
Margin
-----------------------------------
SEGMENTS
Global Technology Services
Y-T-Y change
$28,634
-4.4%
$801
-7.7%
$29,435
-4.5%
$4,994
1.2%
17.0%
Global Business Services
Y-T-Y change
13,649
-1.4%
545
1.3%
14,194
-1.3%
2,274
6.1%
16.0%
Software
Y-T-Y change
17,792
1.5%
2,312
-6.0%
20,105
0.6%
6,867
1.1%
34.2%
Systems and Technology
Y-T-Y change
10,111
-15.1%
423
-13.9%
10,533
-15.0%
(713)
NM
-6.8%
1,488
0.7%
1,628
9.1%
3,116
4.9%
1,582
4.4%
50.8%
$71,674
-4.1%
$5,710
-2.4%
$77,383
-3.9%
$15,003
-4.1%
19.4%
378
(5,710)
(5,331)
(2,441)
$72,052
-4.2%
$0
$72,052
-4.2%
$12,562
-10.7%
Global Financing
Y-T-Y change
TOTAL REPORTABLE SEGMENTS
Y-T-Y change
Eliminations / Other
TOTAL IBM CONSOLIDATED
Y-T-Y change
17.4%
NM - Not Meaningful
(Dollars in Millions)
NINE-MONTHS 2012
------------------------------------------------Pre-tax
--------- Revenue --------Income/
Pre-tax
External Internal
Total
(Loss)
Margin
-------- ---------------------------
SEGMENTS
Global Technology Services
$29,952
$869
$30,821
$4,934
16.0%
Global Business Services
13,846
538
14,384
2,142
14.9%
Software
17,533
2,459
19,992
6,793
34.0%
Systems and Technology
11,903
491
12,394
253
2.0%
1,478
1,492
2,970
1,516
51.0%
$74,713
$5,848
$80,561
$15,637
19.4%
Global Financing
TOTAL REPORTABLE SEGMENTS
Eliminations / Other
TOTAL IBM CONSOLIDATED
490
(5,848)
(5,358)
(1,566)
$75,203
$0
$75,203
$14,071
18.7%
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING RESULTS RECONCILIATION
(Unaudited; Dollars in millions except per share amounts)
Gross Profit
THIRD-QUARTER 2013
-----------------------------------------------Acquisition- RetirementRelated
Related
Operating
GAAP
Adjustments* Adjustments** (Non-GAAP)
-------- ------------ --------------------$11,380
$102
$154
$11,636
Gross Profit Margin
48.0%
0.4Pts
0.6Pts
49.1%
S,G&A
5,255
(111)
(89)
5,055
R,D&E
1,468
0
(14)
1,454
(62)
(1)
0
(63)
Total Expense & Other (Income)
6,567
(112)
(103)
6,352
Pre-Tax Income
4,812
214
257
5,284
Pre-Tax Income Margin
20.3%
0.9Pts
1.1Pts
22.3%
772
48
77
897
Effective Tax Rate
16.0%
0.3Pts
0.7Pts
17.0%
Net Income
4,041
166
181
4,387
Net Income Margin
17.0%
0.7Pts
0.8Pts
18.5%
Diluted Earnings Per Share
$3.68
$0.15
$0.16
$3.99
Other (Income) & Expense
Provision for Income Taxes***
Gross Profit
THIRD-QUARTER 2012
-----------------------------------------------Acquisition- RetirementRelated
Related
Operating
GAAP
Adjustments* Adjustments** (Non-GAAP)
-------- ------------ --------------------$11,732
$95
$67
$11,894
Gross Profit Margin
47.4%
0.4Pts
0.3Pts
48.1%
S,G&A
5,908
(88)
(196)
5,625
R,D&E
1,534
0
5
1,539
Other (Income) & Expense
(606)
(5)
0
(611)
Total Expense & Other (Income)
6,657
(92)
(191)
6,374
Pre-Tax Income
5,074
188
258
5,520
Pre-Tax Income Margin
20.5%
0.8Pts
1.0Pts
22.3%
Provision for Income Taxes***
1,251
47
67
1,364
Effective Tax Rate
24.6%
0.0Pts
0.1Pts
24.7%
Net Income
3,824
141
191
4,155
Net Income Margin
15.5%
0.6Pts
0.8Pts
16.8%
Diluted Earnings Per Share
$3.33
$0.12
$0.17
$3.62
* 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 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 per share amounts)
Gross Profit
Gross Profit Margin
NINE-MONTHS 2013
-----------------------------------------------Acquisition- RetirementRelated
Related
Operating
GAAP
Adjustments* Adjustments** (Non-GAAP)
-------- ------------ ------------ ----------$34,189
$289
$474
$34,953
47.5%
0.4Pts
0.7Pts
48.5%
S,G&A
17,512
(294)
(286)
16,933
R,D&E
4,661
0
(43)
4,618
Other (Income) & Expense
(214)
(8)
0
(222)
Total Expense & Other (Income)
21,627
(302)
(329)
20,997
Pre-Tax Income
12,562
590
803
13,956
17.4%
0.8Pts
1.1Pts
19.4%
Pre-Tax Income Margin
Provision for Income Taxes***
2,263
112
239
2,614
Effective Tax Rate
18.0%
0.0Pts
0.7Pts
18.7%
10,299
479
564
11,342
Net Income Margin
14.3%
0.7Pts
0.8Pts
15.7%
Diluted Earnings Per Share
$9.27
$0.43
$0.51
$10.21
Net Income
Gross Profit
Gross Profit Margin
NINE-MONTHS 2012
-----------------------------------------------Acquisition- RetirementRelated
Related
Operating
GAAP
Adjustments* Adjustments** (Non-GAAP)
-------- ------------ ------------ ----------$35,131
$276
$204
$35,611
46.7%
0.4Pts
0.3Pts
47.4%
S,G&A
17,632
(258)
(265)
17,108
R,D&E
4,722
0
14
4,736
Other (Income) & Expense
(796)
(7)
0
(803)
Total Expense & Other (Income)
21,060
(265)
(251)
20,545
Pre-Tax Income
14,071
541
454
15,067
Pre-Tax Income Margin
18.7%
0.7Pts
0.6Pts
20.0%
Provision for Income Taxes***
3,300
143
127
3,569
Effective Tax Rate
23.5%
0.1Pts
0.1Pts
23.7%
10,771
399
328
11,498
Net Income Margin
14.3%
0.5Pts
0.4Pts
15.3%
Diluted Earnings Per Share
$9.27
$0.34
$0.28
$9.90
Net Income
* 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 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.
Contact: IBM
Mike Fay, 914-525-8476
[email protected]
John Bukovinsky, 732-618-3531
[email protected]
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