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IBM REPORTS 2012 THIRD-QUARTER RESULTS
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Diluted EPS:
- GAAP: $3.33, up 4 percent; $3.44, up 8 percent excluding UK pension-related
charges;
- Operating (non-GAAP): $3.62, up 10 percent;
Net income:
- GAAP: $3.8 billion, flat; $3.9 billion, up 3 percent excluding UK
pension-related charges;
- Operating (non-GAAP): $4.2 billion, up 5 percent;
Gross profit margin:
- GAAP: 47.4 percent, up 0.9 points;
- Operating (non-GAAP): 48.1 percent, up 1.2 points;
Revenue: $24.7 billion, down 5 percent, down 2 percent adjusting for currency;
- Negative currency impact of nearly $1 billion;
- Divestiture of Retail Store Solutions (RSS) reduced revenue by 1 percent;
Software revenue down 1 percent, up 3 percent adjusting for currency;
Services revenue down 5 percent, flat adjusting for currency;
Services backlog of $138 billion, up 1 percent;
Systems and Technology revenue down 13 percent, down 12 percent adjusting for
currency;
Growth markets revenue down 1 percent, up 4 percent adjusting for currency;
- BRIC countries up 4 percent, up 11 percent adjusting for currency;
Business analytics revenue up 14 percent year to date;
Smarter Planet revenue up more than 20 percent year to date;
Cloud revenue year to date has exceeded full-year 2011 revenue;
Reiterating full-year 2012 operating (non-GAAP) EPS expectation of at least
$15.10.
ARMONK, N.Y., October 16, 2012 . . . IBM (NYSE: IBM) today announced thirdquarter 2012 diluted earnings of $3.33 per share, a year-to-year increase of 4
percent, or $3.44 per share, up 8 percent excluding the impact of UK pension-related
charges. Operating (non-GAAP) diluted earnings were $3.62 per share, compared with
operating diluted earnings of $3.28 per share in the third quarter of 2011, an
increase of 10 percent.
Third-quarter net income was $3.8 billion, flat year-to-year; or $3.9 billion,
up 3 percent excluding the impact of UK pension-related charges. Operating (non-GAAP
) net income was $4.2 billion compared with $4.0 billion in the third quarter of
2011, an increase of 5 percent.
Total revenues for the third quarter of 2012 of $24.7 billion were down 5
percent (down 2 percent, adjusting for currency) from the third quarter of 2011.
Currency negatively impacted revenue growth by nearly $1 billion.
“In the third quarter, we continued to drive margin, profit and earnings growth
through our focus on higher-value businesses, strategic growth initiatives and
productivity,” said Ginni Rometty, IBM chairman, president and chief executive
officer.
“Looking ahead, we see good opportunity with a strong product lineup heading
into this quarter and annuity businesses that provide a solid base of revenue, profit
and cash. We are reiterating our full-year 2012 operating earnings per share
expectation of at least $15.10.”
Third-Quarter GAAP – Operating (non-GAAP) Reconciliation
Third-quarter operating (non-GAAP) diluted earnings exclude $0.29 per share of
charges: $0.12 per share for the amortization of purchased intangible assets and
other acquisition-related charges, and $0.17 per share for retirement-related
charges, including $0.11 per share for the impact of UK pension-related charges.
Full-Year 2012 Expectations
IBM is adjusting its expectation for full-year 2012 GAAP diluted earnings per
share to at least $14.29, to reflect the impact of UK pension-related charges.
Operating (non-GAAP) diluted earnings per share expectations remain at least $15.10.
The 2012 operating (non-GAAP) earnings expectations exclude $0.81 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 $10.4 billion, a decrease of 4 percent
(down 3 percent, adjusting for currency) from the 2011 period. Revenues from
Europe/Middle East/Africa were $7.2 billion, down 9 percent (down 1 percent,
adjusting for currency). Asia-Pacific revenues increased 1 percent (up 2 percent,
adjusting for currency) to $6.5 billion. OEM revenues were $538 million, down 28
percent compared with the 2011 third quarter.
Growth Markets
Revenues from the company’s growth markets decreased 1 percent (up 4 percent,
adjusting for currency) and 35 countries had double-digit revenue growth, adjusting
for currency. Revenues in the BRIC countries — Brazil, Russia, India and China —
increased 4 percent (up 11 percent, adjusting for currency).
Services
Global Technology Services segment revenues decreased 4 percent (up 1 percent,
adjusting for currency) to $9.9 billion. Global Business Services segment revenues
were down 6 percent (down 3 percent, adjusting for currency) to $4.5 billion.
Pre-tax income from Global Technology Services was flat and pre-tax margin
increased to 16.6 percent (up 9 percent and 18.1 percent, respectively, when adjusted
for workforce rebalancing charges in the third quarters of 2011 and 2012). Global
Business Services pre-tax income decreased 5 percent and pre-tax margin increased to
15.6 percent (up 9 percent and 18 percent, respectively, when adjusted for workforce
rebalancing charges in the third quarters of 2011 and 2012).
The estimated services backlog at September 30 was $138 billion, up 1 percent
year over year at actual rates (up 1 percent, adjusting for currency).
Software
Revenues from the Software segment were $5.8 billion, down 1 percent (up 3
percent, adjusting for currency) compared with the third quarter of 2011. Software
pre-tax income increased 6 percent and pre-tax margin increased to 35.6 percent
(up 10 percent and 37.1 percent, respectively, when adjusted for workforce
rebalancing charges in the third quarters of 2011 and 2012).
Revenues from IBM’s key middleware products, which include WebSphere,
Information Management, Tivoli, Lotus and Rational products, were $3.6 billion, down
1 percent (up 3 percent, adjusting for currency) versus the third quarter of 2011.
Operating systems revenues of $597 million were flat (up 4 percent, adjusting for
currency) compared with the prior-year quarter.
Revenues from the WebSphere family of software products increased 2 percent year
over year. Information Management software revenues decreased 1 percent. Revenues
from Tivoli software increased 5 percent. Revenues from Lotus software decreased
10 percent, and Rational software decreased 16 percent.
Hardware
Revenues from the Systems and Technology segment totaled $3.9 billion for the
quarter, down 13 percent (down 12 percent, adjusting for currency) from the third
quarter of 2011. Excluding Retail Store Solutions (RSS), revenues were down 11
percent (9 percent, adjusting for currency). Systems and Technology pre-tax income
decreased $0.2 billion.
Total systems revenues, excluding RSS, decreased 8 percent (down 6 percent,
adjusting for currency). Revenues from Power Systems were down 2 percent compared
with the 2011 period. Revenues from System x were down 5 percent. Revenues from
System z mainframe server products decreased 20 percent compared with the year-ago
period. Total delivery of System z computing power, as measured in MIPS (millions of
instructions per second), decreased 2 percent. Revenues from System Storage
decreased 10 percent. Revenues from Retail Store Solutions decreased 79 percent year
over year as a result of the divestiture in the quarter. Revenues from
Microelectronics OEM decreased 25 percent.
Financing
Global Financing segment revenues were down 9 percent (down 5 percent, adjusting
for currency) in the third quarter at $472 million. Pre-tax income for the segment
decreased 1 percent to $476 million.
Gross Profit
The company’s total gross profit margin was 47.4 percent in the 2012 third
quarter compared with 46.5 percent in the 2011 third-quarter period. Total operating
(non-GAAP) gross profit margin was 48.1 percent in the 2012 third quarter compared
with 46.8 percent in the 2011 third-quarter period, with increases in Global
Technology Services and Global Business Services.
Expense
Total expense and other income decreased 7 percent to $6.7 billion, or a
decrease of 9 percent to $6.5 billion, excluding $162 million for UK pension-related
charges, compared with the prior-year period. S,G&A expense of $5.9 billion
increased 4 percent year over year, or expense of $5.7 billion, up 1 percent
excluding the impact of UK pension-related charges. S,G&A expense includes $408
million for workforce rebalancing, which negatively impacted net income by
approximately $310 million. R,D&E expense of $1.5 billion decreased 1 percent
compared with the year-ago period. Intellectual property and custom development
income increased to $303 million compared with $298 million a year ago. Other
(income) and expense was income of $606 million compared with prior-year expense of
$128 million. This increase in income was primarily due to a $447 million gain from
the divestiture of Retail Store Solutions, which contributed approximately $280
million to net income. Interest expense increased to $124 million compared with $107
million in the prior year.
Total operating (non-GAAP) expense and other income decreased 10 percent to $6.4
billion compared with the prior-year period. Operating (non-GAAP) S,G&A expense of
$5.6 billion increased 1 percent compared with prior-year expense. Operating (nonGAAP) R,D&E expense of $1.5 billion decreased 2 percent compared with the year-ago
period.
***
Pre-tax income increased 1 percent to $5.1 billion, or 4 percent to $5.2 billion
excluding the impact of UK pension-related charges. Pre-tax margin increased 1.3
points to 20.5 percent, or 1.9 points to 21.2 percent excluding the impact of UK
pension-related charges, compared with the prior-year period. Operating (non-GAAP)
pre-tax income increased 7 percent to $5.5 billion and pre-tax margin was 22.3
percent, up 2.5 points.
IBM’s tax rate was 24.6 percent, up 1.0 points year over year; operating
(non-GAAP) tax rate was 24.7 percent, up 1.1 points compared to the year-ago period.
Net income margin increased 0.8 points to 15.5 percent, or 1.3 points to 16.0
percent excluding the impact of UK pension-related charges. Total operating (nonGAAP) net income margin increased 1.7 points to 16.8 percent.
The weighted-average number of diluted common shares outstanding in the thirdquarter 2012 was 1.15 billion compared with 1.20 billion shares in the same period of
2011. As of September 30, 2012, there were 1.13 billion basic common shares
outstanding.
Debt, including Global Financing, totaled $33.7 billion, compared with $31.3
billion at year-end 2011. From a management segment view, Global Financing debt
totaled $23.3 billion versus $23.3 billion at year-end 2011, resulting in a debt-toequity ratio of 7.1 to 1. Non-global financing debt totaled $10.3 billion, an
increase of $2.4 billion since year-end 2011, resulting in a debt-to-capitalization
ratio of 36.0 percent from 32.0 percent.
IBM ended the third-quarter 2012 with $12.3 billion of cash on hand and
generated free cash flow of $3.1 billion, excluding Global Financing receivables,
down approximately $0.3 billion year over year. The company returned $4.0 billion to
shareholders through $1.0 billion in dividends and $3.0 billion of share repurchases.
The balance sheet remains strong, and the company is well positioned to support the
business over the long term.
Year-To-Date 2012 Results
Net income for the nine months ended September 30, 2012 was $10.8 billion, a
year-to-year increase of 4 percent, or $10.9 billion, up 5 percent, excluding the
impact of UK pension-related charges. Diluted earnings per share were $9.27 compared
with $8.48 per diluted share for the 2011 period, an increase of 9 percent, or $9.38,
up 11 percent excluding the impact of UK pension-related charges. Revenues for the
nine-month period totaled $75.2 billion, a decrease of 3 percent (flat, adjusting for
currency) compared with $77.4 billion for the nine months of 2011.
Operating (non-GAAP) net income for the nine months ended September 30, 2012 was
$11.5 billion compared with $10.7 billion in the year-ago period, an increase of 7
percent. Operating (non-GAAP) diluted earnings per share were $9.90 compared with
$8.77 per diluted share for the 2011 period, an increase of 13 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 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-Q, 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 charges.
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 viewed at www.ibm.com/investor/3q12.
Presentation charts will be available on the Web site 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
September 30,
Nine Months Ended
September 30,
2012
-------
2011
-------
Percent
Change
2012
------- -------
2011
-------
Percent
Change
-------
$9,922
37.3%
$10,322
35.7%
-3.9% $29,952
36.3%
$30,427
34.5%
-1.6%
Global Business Services
Gross profit margin
4,542
31.2%
4,832
29.4%
-6.0%
13,846
30.0%
14,407
28.6%
-3.9%
Software
Gross profit margin
5,763
88.0%
5,817
88.1%
-0.9%
17,533
87.8%
17,295
87.9%
1.4%
Systems and Technology
Gross profit margin
3,895
37.3%
4,482
39.8%
-13.1%
11,903
36.7%
13,182
39.5%
-9.7%
Global Financing
Gross profit margin
472
45.8%
520
47.4%
-9.2%
1,478
47.5%
1,555
49.9%
-4.9%
Other
Gross profit margin
154
-80.4%
182
-48.3%
-15.9%
490
-71.3%
563
-66.7%
-13.0%
REVENUE
Global Technology Services
Gross profit margin
TOTAL REVENUE
24,747
26,157
-5.4%
75,203
77,430
-2.9%
GROSS PROFIT
Gross profit margin
11,732
47.4%
12,173
46.5%
-3.6%
35,131
46.7%
35,416
45.7%
-0.8%
EXPENSE AND OTHER INCOME
S,G&A
Expense to revenue
5,908
23.9%
5,662
21.6%
4.3%
17,632
23.4%
17,518
22.6%
0.6%
R,D&E
Expense to revenue
1,534
6.2%
1,546
5.9%
-0.8%
4,722
6.3%
4,703
6.1%
0.4%
Intellectual property
and custom development
income
(303)
(298)
1.4%
(847)
(855)
-0.9%
Other (income) and expense
(606)
128
NM
(796)
23
NM
124
107
15.2%
350
298
17.7%
TOTAL EXPENSE AND
OTHER INCOME
Expense to revenue
6,657
26.9%
7,146
27.3%
-6.8%
21,060
28.0%
21,687
28.0%
-2.9%
INCOME BEFORE
INCOME TAXES
Pre-tax margin
5,074
20.5%
5,027
19.2%
0.9%
14,071
18.7%
13,729
17.7%
2.5%
Provision for income taxes
Effective tax rate
1,251
24.6%
1,188
23.6%
5.2%
3,300
23.5%
3,364
24.5%
-1.9%
$3,839
======
14.7%
-0.4% $10,771
======
14.3%
$10,365
======
13.4%
3.9%
Net income margin
$3,824
======
15.5%
EARNINGS PER SHARE
OF COMMON STOCK:
ASSUMING DILUTION
BASIC
$3.33
$3.36
$3.19
$3.23
$9.27
$9.38
$8.48
$8.60
9.3%
9.1%
1,149.3
1,137.2
1,204.9
1,188.6
1,161.8
1,148.4
1,222.1
1,205.2
Interest expense
NET INCOME
WEIGHTED-AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING (M's):
ASSUMING DILUTION
BASIC
4.4%
4.0%
NM -- Not Meaningful
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited)
(Dollars in Millions)
At
September 30,
At
December 31,
2012
-------------
2011
------------
ASSETS:
Current Assets:
Cash and cash equivalents
Marketable securities
Notes and accounts receivable - trade
(net of allowances of $250 in 2012 and $256 in 2011)
Short-term financing receivables
(net of allowances of $277 in 2012 and $311 in 2011)
Other accounts receivable
(net of allowances of $20 in 2012 and $11 in 2011)
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 $65 in 2012 and $38 in 2011)
Prepaid pension assets
Deferred taxes
Goodwill
Intangible assets - net
Investments and sundry assets
Total Assets
$11,909
345
$11,922
--
9,772
11,179
14,925
16,901
2,066
1,481
649
1,937
-------2,586
1,522
5,016
-------48,141
589
2,007
-------2,595
1,601
5,249
-------50,928
40,716
26,688
-------14,027
40,124
26,241
-------13,883
10,791
3,424
2,555
28,270
3,565
5,006
-------$115,778
========
10,776
2,843
3,503
26,213
3,392
4,895
-------$116,433
========
$2,147
9,334
7,085
4,730
11,230
4,973
-------39,499
$3,313
8,463
8,517
5,099
12,197
4,535
-------42,123
24,333
22,857
16,682
4,263
9,335
-------94,112
18,374
3,847
8,996
-------96,197
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
49,603
112,773
(120,115)
(20,720)
-------21,541
48,129
104,857
(110,963)
(21,885)
-------20,138
126
-------21,666
-------$115,778
========
97
-------20,236
-------$116,433
========
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW ANALYSIS
(Unaudited)
Three Months Ended
September 30,
2012
2011
----------Net Cash from Operating Activities per GAAP: $4,514
$4,678
Nine Months Ended
September 30,
2012
2011
----------$13,240
$12,750
(Dollars in Millions)
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
327
------
207
------
1,245
------
2,110
------
4,187
4,471
11,995
10,640
(1,046)
(991)
(3,326)
(3,000)
3,141
3,481
8,670
7,640
(342)
573
(968)
(2,986)
694
(64)
0
(893)
(3,444)
86
(2,266)
587
(2,816)
(8,988)
2,284
(223)
4
(2,593)
(11,465)
1,093
954
374
2,861
5,196
$1,067
========
($461)
========
$331
========
($348)
========
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
(Dollars in Millions)
THIRD-QUARTER 2012
------------------------------------------------Pre-tax
--------- Revenue --------Income/
Pre-tax
External Internal
Total
(Loss)
Margin
-------- -------------- ---------------
SEGMENTS
Global Technology Services
Y-T-Y change
$9,922
-3.9%
$285
-10.0%
$10,206
-4.1%
$1,697
0.1%
16.6%
Global Business Services
Y-T-Y change
4,542
-6.0%
175
-12.0%
4,717
-6.2%
738
-4.8%
15.6%
Software
Y-T-Y change
5,763
-0.9%
843
4.9%
6,606
-0.2%
2,355
6.3%
35.6%
Systems and Technology
Y-T-Y change
3,895
-13.1
181
-4.6%
4,076
-12.8%
124
-61.1%
3.0%
Global Financing
Y-T-Y change
472
-9.2%
491
2.5%
963
-3.6%
476
-1.2%
49.4%
$24,594
-5.3%
$1,976
-0.6%
$26,570
-5.0%
$5,389
-1.7%
20.3%
154
(1,976)
(1,822)
(315)
$24,747
-5.4%
$0
$24,747
-5.4%
$5,074
0.9%
TOTAL REPORTABLE SEGMENTS
Y-T-Y change
Eliminations / Other
TOTAL IBM CONSOLIDATED
Y-T-Y change
20.5%
(Dollars in Millions)
THIRD-QUARTER 2011
------------------------------------------------Pre-tax
--------- Revenue --------Income/
Pre-tax
External Internal
Total
(Loss)
Margin
-------- -------------- ---------------
SEGMENTS
Global Technology Services
$10,322
$316
$10,638
$1,695
15.9%
Global Business Services
4,832
199
5,031
775
15.4%
Software
5,817
804
6,621
2,214
33.4%
Systems and Technology
4,482
190
4,672
318
6.8%
520
480
999
481
48.2%
$25,974
$1,989
$27,963
$5,484
19.6%
182
(1,989)
(1,806)
(457)
$26,157
$0
$26,157
$5,027
Global Financing
TOTAL REPORTABLE SEGMENTS
Eliminations / Other
TOTAL IBM CONSOLIDATED
19.2%
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
(Dollars in Millions)
NINE-MONTHS 2012
------------------------------------------------Pre-tax
--------- Revenue --------Income/
Pre-tax
External Internal
Total
(Loss)
Margin
-------- -------------- ---------------
SEGMENTS
Global Technology Services
Y-T-Y change
$29,952
-1.6%
$869
-7.9%
$30,821
-1.8%
$4,934
13.3%
16.0%
Global Business Services
Y-T-Y change
13,846
-3.9%
538
-11.0%
14,384
-4.2%
2,142
-1.1%
14.9%
Software
Y-T-Y change
17,533
1.4%
2,459
1.4%
19,992
1.4%
6,793
8.5%
34.0%
Systems and Technology
Y-T-Y change
11,903
-9.7%
491
-24.8%
12,394
-10.4%
253
-70.0%
2.0%
1,478
-4.9%
1,492
-2.1%
2,970
-3.5%
1,516
1.3%
51.0%
$74,713
-2.8%
$5,848
-4.9%
$80,561
-3.0%
$15,637
3.4%
19.4%
490
(5,848)
(5,358)
(1,566)
$75,203
-2.9%
$0
$75,203
-2.9%
$14,071
2.5%
Global Financing
Y-T-Y change
TOTAL REPORTABLE SEGMENTS
Y-T-Y change
Eliminations / Other
TOTAL IBM CONSOLIDATED
Y-T-Y change
18.7%
(Dollars in Millions)
NINE-MONTHS 2011
------------------------------------------------Pre-tax
--------- Revenue --------Income/
Pre-tax
External Internal
Total
(Loss)
Margin
-------- -------------- ---------------
SEGMENTS
Global Technology Services
$30,427
$943
$31,370
$4,353
13.9%
Global Business Services
14,407
604
15,012
2,166
14.4%
Software
17,295
2,425
19,720
6,260
31.7%
Systems and Technology
13,182
652
13,834
843
6.1%
1,555
1,524
3,078
1,497
48.6%
$76,866
$6,148
$83,015
$15,118
18.2%
Global Financing
TOTAL REPORTABLE SEGMENTS
Eliminations / Other
TOTAL IBM CONSOLIDATED
563
(6,148)
(5,585)
(1,389)
$77,430
$0
$77,430
$13,729
17.7%
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING RESULTS RECONCILIATION
(Unaudited; Dollars in millions except per share amounts)
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
Gross Profit
THIRD-QUARTER 2011
----------------------------------------------AcquisitionRetirementRelated
Related
Operating
GAAP
Adjustments* Adjustments** (Non-GAAP)
-------- ------------ --------------------$12,173
$87
($7)
$12,253
Gross Profit Margin
46.5%
0.3Pts
0.0Pts
46.8%
S,G&A
5,662
(75)
(0)
5,587
R,D&E
1,546
0
22
1,568
Other (Income) & Expense
128
(18)
0
111
Total Expense & Other (Income)
7,146
(92)
21
7,075
Pre-Tax Income
5,027
180
(29)
5,178
Pre-Tax Income Margin
19.2%
0.7Pts
-0.1Pts
19.8%
Provision for Income Taxes***
1,188
47
(11)
1,224
Effective Tax Rate
23.6%
0.1Pts
-0.1Pts
23.6%
Net Income
3,839
133
(17)
3,954
Net Income Margin
14.7%
0.5Pts
-0.1Pts
15.1%
Diluted Earnings Per Share
$3.19
$0.11
($0.01)
$3.28
* 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 2012
----------------------------------------------AcquisitionRetirementRelated
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%
Net Income
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
Gross Profit
NINE-MONTHS 2011
----------------------------------------------AcquisitionRetirementRelated
Related
Operating
GAAP
Adjustments* Adjustments** (Non-GAAP)
-------- ------------ --------------------$35,416
$259
$12
$35,687
Gross Profit Margin
45.7%
0.3Pts
0.0Pts
46.1%
S,G&A
17,518
(226)
(16)
17,276
R,D&E
4,703
0
65
4,768
23
(23)
0
1
Total Expense & Other Income
21,687
(249)
49
21,487
Pre-Tax Income
13,729
508
(37)
14,200
Pre-Tax Income Margin
17.7%
0.7Pts
0.0Pts
18.3%
Provision for Income Taxes***
3,364
132
(17)
3,479
Effective Tax Rate
24.5%
0.1Pts
-0.1Pts
24.5%
10,365
376
(20)
10,721
Net Income Margin
13.4%
0.5Pts
0.0Pts
13.8%
Diluted Earnings Per Share
$8.48
$0.31
($0.02)
$8.77
Other (Income) & Expense
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, 914-499-6107
[email protected]
John Bukovinsky, 732-618-3531
[email protected]
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