IBM REPORTS 2011 SECOND-QUARTER RESULTS
o
o
o
o
o
o
o
o
o
o
o
o
o
o
Diluted EPS:
- GAAP: $3.00, up 15 percent;
- Operating (non-GAAP): $3.09, up 18 percent;
Revenue: $26.7 billion, up 12 percent, up 5 percent adjusting for currency;
Net income:
- GAAP: $3.7 billion, up 8 percent;
- Operating (non-GAAP): $3.8 billion, up 11 percent;
Pre-tax income:
- GAAP: $4.9 billion, up 7 percent;
- Operating (non-GAAP): $5.0 billion, up 10 percent;
Gross profit margin:
- GAAP: 46.4 percent, up 0.9 points;
- Operating (non-GAAP): 46.8 percent, up 1.2 points;
Software revenue up 17 percent, 10 percent adjusting for currency;
Systems and Technology revenue up 17 percent, 12 percent adjusting for currency:
- System z mainframe revenue up 61 percent; MIPS up 86 percent;
- Power Systems up 12 percent;
Services revenue up 10 percent, 2 percent adjusting for currency;
Services backlog of $144 billion, up $15 billion;
Growth markets revenue up 23 percent, 13 percent adjusting for currency;
Business analytics revenue up more than 20 percent in the first half;
Smarter Planet revenue up more than 50 percent in the first half;
Cloud revenue on track to double in 2011;
Full-year 2011 Operating (non-GAAP) EPS expectations raised to at least $13.25
from at least $13.15.
ARMONK, N.Y., July 18, 2011 . . . IBM (NYSE: IBM) today announced second-quarter
2011 diluted earnings of $3.00 per share, compared with diluted earnings of $2.61 per
share in the second quarter of 2010, an increase of 15 percent. Operating (non-GAAP)
diluted earnings were $3.09 per share, compared with operating diluted earnings of
$2.62 per share in the second quarter of 2010, an increase of 18 percent.
Second-quarter net income was $3.7 billion compared with $3.4 billion in the
second quarter of 2010, an increase of 8 percent. Operating (non-GAAP) net income was
$3.8 billion compared with $3.4 billion in the second quarter of 2010, an increase of
11 percent.
Total revenues for the second quarter of 2011 of $26.7 billion increased 12
percent (5 percent, adjusting for currency) from the second quarter of 2010.
"In the second quarter our long-term strategic investments in the company's growth
initiatives again helped drive strong revenue performance," said Samuel J. Palmisano,
IBM chairman, president and chief executive officer. "Hardware, software and services
revenue grew at double digits, and we achieved strong profit and free cash flow growth.
"As IBM begins its second century, we continue a process of transformation,
positioning the company to lead in the future and deliver higher value to our clients
and our shareholders. Given our strong start to 2011, we are raising our full-year
operating earnings per share expectations to at least $13.25."
Second-Quarter GAAP - Operating (non-GAAP) Reconciliation
Second-quarter operating (non-GAAP) diluted earnings exclude $0.09 per share of
net charges: $0.10 per share for the amortization of purchased intangible assets and
other acquisition-related charges, offset by ($0.01) per share for retirement-related
items driven by changes to plan assets and liabilities primarily related to market
performance.
Full-Year 2011 Expectations
IBM raised its expectations for full-year 2011 GAAP diluted earnings per share to
at least $12.87 from at least $12.73; and operating (non-GAAP) diluted earnings per
share to at least $13.25 from at least $13.15. The 2011 operating (non-GAAP) earnings
exclude $0.38 per share of charges for amortization of purchased intangible assets,
other acquisition-related charges, and retirement-related items driven by changes to
plan assets and liabilities primarily related to market performance.
Geographic Regions
The Americas’ second-quarter revenues were $11.2 billion, an increase of 10
percent (8 percent, adjusting for currency) from the 2010 period. Revenues from
Europe/Middle East/Africa were $8.6 billion, up 16 percent (3 percent, adjusting for
currency). Asia-Pacific revenues increased 14 percent (3 percent, adjusting for
currency) to $6.2 billion. OEM revenues were $674 million, flat (down 1 percent,
adjusting for currency) compared with the 2010 second quarter.
Growth Markets
Revenues from the company’s growth markets increased 23 percent (13 percent,
adjusting for currency). Revenues in the BRIC countries -- Brazil, Russia, India and
China -- increased 27 percent (21 percent, adjusting for currency). Growth markets
revenue represents 22 percent of IBM’s total geographic revenue for the second quarter.
Services
Total Global Services revenues increased 10 percent (2 percent, adjusting for
currency). Global Technology Services segment revenues increased 11 percent (3
percent, adjusting for currency) to $10.2 billion. Global Business Services segment
revenues were up 9 percent (1 percent, adjusting for currency) at $4.9 billion.
Global Services pre-tax income increased to $2.2 billion, up 4 percent year over
year. Pre-tax income from Global Technology Services increased 1 percent; pre-tax
income growth was reduced by 7 points as a result of increased workforce rebalancing
expenses. Global Business Services pre-tax income increased 11 percent.
The estimated services backlog at June 30 was $144 billion, up $15 billion year
over year at actual rates ($2 billion, adjusting for currency). Services backlog at
the end of a quarter measures the current value of work under contract expected to be
recognized as revenue in future quarters.
Software
Revenues from the Software segment were $6.2 billion, an increase of 17 percent
(10 percent, adjusting for currency). Software pre-tax income of $2.3 billion was up
12 percent year over year.
Revenues from IBM’s key middleware products, which include WebSphere, Information
Management, Tivoli, Lotus and Rational products, were $3.9 billion, an increase of
21 percent (14 percent, adjusting for currency) versus the second quarter of 2010.
Operating systems revenues of $630 million increased 16 percent (9 percent, adjusting
for currency) compared with the prior-year quarter.
Revenues from the WebSphere family of software products increased 55 percent year
over year. Information Management software revenues increased 18 percent. Revenues
from Tivoli software increased 9 percent. Revenues from Lotus software increased 12
percent, and Rational software increased 4 percent.
Hardware
Revenues from the Systems and Technology segment totaled $4.7 billion for the
quarter, up 17 percent (12 percent, adjusting for currency) from the second quarter of
2010. Systems and Technology pre-tax income was $393 million, an increase of 112
percent year over year.
Systems revenues increased 20 percent (13 percent, adjusting for currency).
Revenues from System z mainframe server products increased 61 percent compared with the
year-ago period. Total delivery of System z computing power, as measured in MIPS
(millions of instructions per second), increased 86 percent. Revenues from Power
Systems increased 12 percent compared with the 2010 period. Revenues from System x
increased 15 percent. Revenues from System Storage increased 10 percent, and revenues
from Retail Store Solutions increased 8 percent year over year.
Microelectronics OEM increased 4 percent.
Revenues from
Financing
Global Financing segment revenues decreased 5 percent (11 percent, adjusting for
currency) in the second quarter to $519 million. Pre-tax income for the segment
increased 7 percent to $496 million.
***
The company’s total gross profit margin was 46.4 percent in the 2011 second
quarter compared with 45.6 percent in the 2010 second-quarter period. Total operating
(non-GAAP) gross profit margin was 46.8 percent in the 2011 second quarter compared
with 45.6 percent in the 2010 second-quarter period, with increases in Systems and
Technology, Global Business Services and Software.
Total expense and other income increased 20 percent to $7.5 billion compared with
the prior-year period. SG&A expense of $6.0 billion increased 19 percent compared with
prior-year expense. RD&E expense of $1.6 billion increased 6 percent compared with the
year-ago period. Intellectual property and custom development income decreased to $295
million compared with $297 million a year ago. Other (income) and expense was expense
of $97 million compared with prior-year income of $95 million. Interest expense
increased to $97 million compared with $90 million in the prior year.
Total operating (non-GAAP) expense and other income increased 20 percent to $7.4
billion compared with the prior-year period. Operating (non-GAAP) SG&A expense of $5.9
billion increased 18 percent year over year compared with prior-year expense.
Operating (non-GAAP) RD&E expense of $1.6 billion increased 6 percent compared with the
year-ago period.
Pre-tax income increased 7 percent to $4.9 billion, and pre-tax margin was 18.3
percent, down 1.0 points. Operating (non-GAAP) pre-tax income increased 10 percent to
$5.0 billion and pre-tax margin was 18.9 percent, down 0.4 points.
IBM’s tax rate was 25.0 percent, down 1.0 points year over year; operating (nonGAAP) tax rate was also 25.0 percent, down 0.8 points.
Net income margin decreased 0.5 points to 13.7 percent. Operating (non-GAAP) net
income margin decreased 0.2 points to 14.2 percent.
The weighted-average number of diluted common shares outstanding in the secondquarter 2011 was 1.22 billion compared with 1.30 billion shares in the same period of
2010. As of June 30, 2011, there were 1.19 billion basic common shares outstanding.
Debt, including Global Financing, totaled $29.8 billion, compared with $28.6
billion at year-end 2010. From a management segment view, Global Financing debt
totaled $23.4 billion versus $22.8 billion at year-end 2010, resulting in a debt-toequity ratio of 7.0 to 1. Non-global financing debt totaled $6.4 billion, an increase
of $581 million since year-end 2010, resulting in a debt-to-capitalization ratio of
24.3 percent from 22.6 percent.
IBM ended the second-quarter 2011 with $11.8 billion of cash on hand and generated
free cash flow of $3.4 billion, up approximately $350 million year over year. The
company returned $4.9 billion to shareholders through $0.9 billion in dividends and
$4.0 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 2011 Results
Net income for the six months ended June 30, 2011 was $6.5 billion compared with
$6.0 billion in the year-ago period, an increase of 9 percent. Diluted earnings per
share were $5.30 compared with $4.57 per diluted share for the 2010 period, an increase
of 16 percent. Revenues for the six-month period totaled $51.3 billion, an increase of
10 percent (5 percent, adjusting for currency) compared with $46.6 billion for the six
months of 2010.
Operating (non-GAAP) net income for the six months ended June 30, 2011 was $6.8
billion compared with $6.0 billion in the year-ago period, an increase of 12 percent.
Operating (non-GAAP) diluted earnings per share were $5.50 compared with $4.61 per
diluted share for the 2010 period, an increase of 19 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; breaches of data security;
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 forwardlooking 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).
The rationale for management’s use of non-GAAP measures is included as part of the
supplementary materials presented within the second-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 Supplementary 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. Investors may participate by viewing the Webcast at
www.ibm.com/investor/2q11. 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
June 30,
Percent
2011
2010* Change
------- ------- -------
Six Months Ended
June 30,
Percent
2011
2010* Change
------- ------- -------
REVENUE
Global Technology
Services
Gross margin
$10,241
34.0%
$9,234
34.3%
Global Business
Services
Gross margin
4,866
28.9%
4,483
28.2%
8.5%
9,575
28.2%
8,893
27.7%
7.7%
Software
Gross margin
6,169
88.4%
5,277
88.1%
16.9%
11,478
87.8%
10,296
86.8%
11.5%
Systems and
Technology
Gross margin
4,681
40.6%
3,985
35.7%
17.5%
8,700
39.3%
7,370
34.5%
18.0%
519
48.7%
544
50.1%
-4.6%
1,035
51.1%
1,081
50.0%
-4.3%
191
-57.7%
200
16.4%
-4.8%
381
-75.5%
400
-14.6%
-4.7%
Global Financing
Gross margin
Other
Gross margin
10.9% $20,104 $18,540
33.9%
34.3%
8.4%
TOTAL REVENUE
26,666
23,724
12.4%
51,273
46,581
10.1%
GROSS PROFIT
Gross margin
12,385
46.4%
10,809
45.6%
14.6%
23,243
45.3%
20,785
44.6%
11.8%
EXPENSE AND OTHER INCOME
S,G&A
% of revenue
6,030
22.6%
5,061
21.3%
19.2%
11,856
23.1%
10,737
23.1%
10.4%
R,D&E
% of revenue
1,569
5.9%
1,475
6.2%
6.4%
3,156
6.2%
2,984
6.4%
5.8%
(297)
-0.8%
(557)
(558)
-0.3%
(95)
90
NM
8.3%
(105)
190
(640)
172
-83.6%
10.6%
Intellectual property
and custom development
income
(295)
Other (income)
and expense
97
Interest expense
97
TOTAL EXPENSE AND
OTHER INCOME
% of revenue
7,500
28.1%
6,234
26.3%
20.3%
14,541
28.4%
12,695
27.3%
14.5%
INCOME BEFORE
INCOME TAXES
Pre-tax margin
4,885
18.3%
4,575
19.3%
6.8%
8,702
17.0%
8,090
17.4%
7.6%
Provision for
income taxes
Effective tax
rate
1,221
1,190
25.0%
26.0%
$3,664
======
13.7%
$3,386
======
14.3%
$3.00
$3.04
$2.61
$2.65
WEIGHTED-AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING (M's):
ASSUMING DILUTION 1,221.4
BASIC
1,204.8
1,296.7
1,278.6
NET INCOME
Net margin
EARNINGS PER SHARE
OF COMMON STOCK:
ASSUMING DILUTION
BASIC
2.7%
2,175
2,103
3.4%
25.0%
26.0%
8.2%
$6,526
======
12.7%
$5,987
======
12.9%
9.0%
14.9%
14.7%
$5.30
$5.38
$4.57
$4.64
16.0%
15.9%
1,230.7
1,213.5
1,309.2
1,289.9
NM -- Not Meaningful
* Segment gross profit margins in 2010 reclassified to
conform with 2011 presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited)
(Dollars in Millions)
At
June 30,
2011
------------
At
December 31,
2010
-------------
ASSETS
Current Assets:
Cash and cash equivalents
$11,714
Marketable securities
50
Notes and accounts receivable - trade
(net of allowances of $305 in 2011 and $324 in 2010)
10,539
Short-term financing receivables
(net of allowances of $286 in 2011 and $342 in 2010)
14,715
Other accounts receivable
(net of allowances of $12 in 2011 and $10 in 2010)
1,127
Inventories, at lower of average cost or market:
Finished goods
560
Work in process and raw materials
2,013
------------Total inventories
2,573
Deferred taxes
1,557
Prepaid expenses and other current assets
4,662
------------Total Current Assets
46,937
Plant, rental machines, and other property
Less: Accumulated depreciation
Plant, rental machines, and other property - net
41,126
26,887
------------14,239
$10,661
990
10,834
16,257
1,134
432
2,018
------------2,450
1,564
4,226
------------48,116
40,289
26,193
------------14,096
Long-term financing receivables
(net of allowances of $40 in 2011 and $58 in 2010)
Prepaid pension assets
Deferred taxes
Goodwill
Intangible assets - net
Investments and sundry assets
Total Assets
10,422
4,855
2,877
25,609
3,205
5,329
------------$113,474
=============
10,548
3,068
3,220
25,136
3,488
5,778
------------$113,452
=============
$2,363
7,858
7,112
4,706
12,660
5,144
------------39,843
$4,216
6,778
7,804
5,028
11,580
5,156
------------40,562
21,915
21,846
16,014
3,641
8,851
------------90,263
15,978
3,666
8,226
------------90,279
46,975
97,334
(104,073)
(17,109)
------------23,127
45,418
92,532
(96,161)
(18,743)
------------23,046
84
------------23,210
------------$113,474
=============
126
------------23,172
------------$113,452
=============
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
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW ANALYSIS
(Unaudited)
Three Months Ended
June 30,
2011
2010
------------Net Cash from Operating Activities per GAAP: $4,279
$3,766
(Dollars in Millions)
Less: the change in Global Financing (GF)
Receivables
(33)
------
(218)
------
Six Months Ended
June 30,
2011
2010
------------$8,071
$8,203
1,903
------
1,883
------
Net Cash from Operating Activities
(Excluding GF Receivables)
4,313
Capital Expenditures, Net
3,985
(952)
Free Cash Flow
(Excluding GF Receivables)
(2,010)
(1,873)
3,361
3,015
4,159
4,446
(107)
4
(905)
(3,976)
(20)
(185)
0
(833)
(4,104)
920
(159)
4
(1,700)
(8,021)
1,007
(1,009)
0
(1,551)
(8,121)
1,261
4,822
3,241
$113
($1,732)
Acquisitions
Divestitures
Dividends
Share Repurchase
Non-GF Debt
Other (includes GF Receivables,
GF Debt)
162
Change in Cash, Cash Equivalents and
Short-term Marketable Securities
6,320
(970)
6,168
($1,481)
(548)
($1,736)
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
(Dollars in Millions)
SECOND-QUARTER 2011
------------------------------------------------Pre-tax
--------- Revenue --------Income/
Pre-tax
External Internal
Total
(Loss)
Margin
-------- -------------- ---------------
SEGMENTS
Global Technology Services
Y-T-Y change
$10,241 $
10.9%
320
-3.6%
$10,561
10.4%
$1,420
1.5%
13.4%
Global Business Services
Y-T-Y change
4,866
8.5%
205
4.3%
5,071
8.3%
750
10.7%
14.8%
Software
Y-T-Y change
6,169
16.9%
792
14.8%
6,961
16.7%
2,310
12.0%
33.2%
Systems and Technology
Y-T-Y change
4,681
17.5%
218
7.9%
4,899
17.0%
393
112.1%
8.0%
519
-4.6%
547
26.8%
1,066
9.3%
496
7.4%
46.5%
$26,476 $ 2,082
12.6%
12.4%
$28,558
12.5%
$5,370
12.2%
18.8%
(1,891)
(485)
$26,666
12.4%
$4,885
6.8%
Global Financing
Y-T-Y change
TOTAL REPORTABLE SEGMENTS
Y-T-Y change
Eliminations / Other
TOTAL IBM CONSOLIDATED
Y-T-Y change
191
$26,666 $
12.4%
(2,082)
(0)
SECOND-QUARTER 2010
18.3%
------------------------------------------------Pre-tax
--------- Revenue --------Income/
Pre-tax
External Internal
Total
(Loss)*
Margin*
-------- -------------- ---------------
(Dollars in Millions)
SEGMENTS
Global Technology Services
$ 9,234
$
332
$ 9,566
$ 1,399
14.6%
Global Business Services
4,483
197
4,680
678
14.5%
Software
5,277
690
5,967
2,062
34.5%
Systems and Technology
3,985
202
4,187
185
4.4%
544
431
975
462
47.3%
$23,523
$ 1,852
$25,376
$ 4,786
18.9%
Global Financing
TOTAL REPORTABLE SEGMENTS
Eliminations / Other
200
TOTAL IBM CONSOLIDATED
$23,724
(1,852)
$
(0)
(1,652)
$23,724
(211)
$ 4,575
19.3%
* Reclassified to conform with 2011 presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
(Dollars in Millions)
SIX-MONTHS 2011
------------------------------------------------Pre-tax
--------- Revenue --------Income/
Pre-tax
External Internal
Total
(Loss)
Margin
-------- -------------- ---------------
SEGMENTS
Global Technology Services
Y-T-Y change
$20,104 $
8.4%
627
-3.9%
$20,732
8.0%
$2,658
12.8%
12.8%
9,575
7.7%
405
1.3%
9,980
7.4%
1,390
23.7%
13.9%
11,478
11.5%
1,621
12.0%
13,099
11.5%
4,045
-3.4%
30.9%
Systems and Technology
Y-T-Y change
8,700
18.0%
462
23.1%
9,162
18.3%
525
NM
5.7%
Global Financing
Y-T-Y change
1,035
-4.3%
1,044
25.1%
2,079
8.5%
1,015
14.2%
48.8%
$50,892 $ 4,160
10.2%
12.1%
$55,052
10.3%
$9,634
12.7%
17.5%
(3,779)
(932)
Global Business Services
Y-T-Y change
Software
Y-T-Y change
TOTAL REPORTABLE SEGMENTS
Y-T-Y change
Eliminations / Other
TOTAL IBM CONSOLIDATED
381
$51,273
(4,160)
$
(0)
$51,273
$8,702
17.0%
Y-T-Y change
10.1%
10.1%
7.6%
NM -- Not Meaningful
(Dollars in Millions)
SIX-MONTHS 2010
------------------------------------------------Pre-tax
--------- Revenue --------Income/
Pre-tax
External Internal
Total
(Loss)*
Margin*
-------- -------------- ---------------
SEGMENTS
Global Technology Services
$18,540
652
$19,192
$ 2,357
12.3%
8,893
400
9,293
1,124
12.1%
10,296
1,448
11,743
4,189
35.7%
Systems and Technology
7,370
376
7,746
(12)
-0.2%
Global Financing
1,081
834
1,916
889
46.4%
$46,181
$ 3,710
$49,891
$ 8,546
17.1%
Global Business Services
Software
TOTAL REPORTABLE SEGMENTS
Eliminations / Other
$
TOTAL IBM CONSOLIDATED
400
$46,581
(3,710)
$
(0)
(3,310)
$46,581
(456)
$ 8,090
17.4%
* Reclassified to conform with 2011 presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING RESULTS RECONCILIATION
(Unaudited, Dollars in millions except per share amounts)
Gross Profit
Gross Profit Margin
SECOND-QUARTER 2011
----------------------------------------------Acquisition- RetirementRelated
Related
Operating
GAAP
Adjustments* Adjustments
(Non-GAAP)
-------- ------------ ------------- ----------$12,385
$ 87
$
6
$12,477
46.4%
0.3Pts
0.0Pts
46.8%
S,G&A
6,030
(76)
(5)
5,950
R,D&E
1,569
0
24
1,593
97
(1)
0
96
Total Expense & Other (Income)
7,500
(77)
18
7,441
Pre-Tax Income
4,885
163
(12)
5,036
Other (Income) & Expense
Pre-Tax Income Margin
Provision for Income Taxes**
18.3%
1,221
0.6Pts
-0.0Pts
38
0
18.9%
1,259
Effective Tax Rate
25.0%
Net Income
-0.1Pts
3,664
Net Income Margin
Diluted Earnings Per Share
$
-0.1Pts
126
13.7%
0.5Pts
3.00
$0.10
25.0%
(13)
3,777
-0.0Pts
($0.01)
14.2%
$
3.09
SECOND-QUARTER 2010
----------------------------------------------Acquisition- RetirementRelated
Related
Operating
GAAP
Adjustments* Adjustments
(Non-GAAP)
-------- ------------ ------------- ----------Gross Profit
$10,809
Gross Profit Margin
45.6%
$
58
0.2Pts
($
56)
$10,811
-0.2Pts
45.6%
S,G&A
5,061
(62)
25
5,024
R,D&E
1,475
0
32
1,507
(3)
0
(97)
Other (Income) & Expense
(95)
Total Expense & Other (Income)
6,234
(64)
57
6,227
Pre-Tax Income
4,575
122
(113)
4,584
Pre-Tax Income Margin
19.3%
Provision for Income Taxes**
1,190
Effective Tax Rate
26.0%
Net Income
3,386
Net Income Margin
Diluted Earnings Per Share
$
0.5Pts
38
0.1Pts
84
14.3%
0.4Pts
2.61
$0.06
-0.5Pts
19.3%
(45)
1,183
-0.4Pts
25.8%
(68)
3,402
-0.3Pts
($0.05)
14.3%
$
2.62
* Includes amortization of acquired intangible assets and other acquisition-related
charges.
** 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)
SIX-MONTHS 2011
----------------------------------------------Acquisition- RetirementRelated
Related
Operating
Gross Profit
GAAP
Adjustments* Adjustments
(Non-GAAP)
-------- ------------ ------------- ----------$23,243
$ 172
$ 19
$23,434
Gross Profit Margin
45.3%
S,G&A
11,856
R,D&E
3,156
0.0Pts
11,689
0
43
3,199
(5)
0
14,541
(157)
28
14,412
8,702
329
(8)
9,022
(105)
Total Expense & Other (Income)
Pre-Tax Income
Pre-Tax Income Margin
17.0%
Provision for Income Taxes**
2,175
Effective Tax Rate
25.0%
Net Income
6,526
Net Income Margin
$
(152)
45.7%
(15)
Other (Income) & Expense
Diluted Earnings Per Share
0.3Pts
0.6Pts
-0.0Pts
86
0.0Pts
(5)
0.0Pts
243
12.7%
0.5Pts
5.30
$0.20
(3)
-0.0Pts
($0.00)
(110)
17.6%
2,256
25.0%
6,767
13.2%
$5.50
SIX-MONTHS 2010
----------------------------------------------Acquisition- RetirementRelated
Related
Operating
GAAP
Adjustments* Adjustments
(Non-GAAP)
-------- ------------ ------------- ----------Gross Profit
Gross Profit Margin
$20,785
44.6%
S,G&A
10,737
R,D&E
2,984
Other (Income) & Expense
Total Expense & Other (Income)
Pre-Tax Income
Pre-Tax Income Margin
Provision for Income Taxes**
Effective Tax Rate
Net Income
Net Income Margin
$ 113
0.2Pts
91)
-0.2Pts
$20,807
44.7%
36
10,650
0
62
3,046
(3)
0
12,695
(126)
97
12,667
8,090
239
(189)
8,140
(640)
17.4%
2,103
26.0%
5,987
12.9%
(123)
($
0.5Pts
72
0.1Pts
166
0.4Pts
-0.4Pts
(76)
-0.3Pts
(113)
-0.2Pts
(643)
17.5%
2,100
25.8%
6,040
13.0%
Diluted Earnings Per Share
$
4.57
$0.13
($0.09)
$
4.61
* Includes amortization of acquired intangible assets and other acquisition-related
charges.
** 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]