1Q13 charts (pdf, 3108 KB)

1Q 2013 Earnings Presentation
April 18, 2013 www.ibm.com/investor
Forward Looking Statements and Non-GAAP Information
Certain comments made in this presentation may be characterized as forward looking under
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.
Those statements by their nature address matters that are uncertain to different degrees.
Those statements involve a number of factors that could cause actual results to differ
materially. Additional information concerning these factors is contained in the Company's
filings with the SEC. Copies are available from the SEC, from the IBM web site, or from IBM
Investor Relations. Any forward-looking statement made during this presentation speaks only
as of the date on which it is made. The company assumes no obligation to update or revise
any forward-looking statements. These charts and the associated remarks and comments are
integrally related, and are intended to be presented and understood together.
In an effort to provide additional and useful information regarding the company’s financial
results and other financial information as determined by generally accepted accounting
principles (GAAP), the company also discusses, in its earnings press release and earnings
presentation materials, certain non-GAAP information including "operating earnings" and other
"operating" financial measures. The rationale for management’s use of this non-GAAP
information, the reconciliation of that information to GAAP, and other related information are
included in supplemental materials entitled “Non-GAAP Supplemental Materials” that are
linked to the Company’s investor relations web site at
http://www.ibm.com/investor/events/1q13.phtml The Non-GAAP Supplemental Materials are
also included as Attachment II to the Company’s Form 8-K dated April 18, 2013.
www.ibm.com/investor
2
1Q 2013 Highlights
Revenue
$23.4B
Operating (Non-GAAP) EPS
$3.00
-5%, -3% yr/yr @CC
+8% yr/yr
Ø Shift to higher value and productivity initiatives drove margin expansion
•  Expanded operating gross, pre-tax and net margins
Ø Services profit +10% yr/yr; Services backlog +1% yr/yr or +5% @CC
Ø Software and System z impacted by transaction closures; rollover to 2Q
Ø Growth initiatives performance mixed
•  Smarter Planet +>25%, Business Analytics +7%, Cloud +>70%
•  Growth Markets +1% @CC
Expect at least $16.70 of Opera9ng EPS in 2013 www.ibm.com/investor
3
Key Financial Metrics
$ in Billions, except EPS
P&L Highlights
Revenue
1Q13
B/(W)
Yr/Yr
P&L Ratios
(Operating)
$23.4
(5%)
@CC
1Q13
B/(W)
Yr/Yr
GP Margin
46.7%
1.0 pts
(3%)
PTI Margin
17.4%
0.8 pts
PTI – Operating
$4.1
(1%)
Tax Rate
17.3%
3.2 pts
NI – Operating
$3.4
3%
NI Margin
14.4%
1.2 pts
$3.00
8%
EPS – Operating
Cash Highlights
1Q13
Last
12 Mos.
$1.7
$18.0
Share Repurchase (Gross)
2.6
11.6
Dividends
0.9
3.9
Free Cash Flow (excl GF Receivables)
Cash Balance @ Mar. 31
12.0
www.ibm.com/investor
4
Revenue and Gross Profit Margin by Segment
Operating
Gross Profit Margin
Revenue
$ in Billions
B/(W) Yr/Yr
Rptd
@CC
1Q13
B/(W)
Yr/Yr Pts
$9.6
(4%)
(2%)
36.7%
1.5 pts
Global Business Services
4.5
(3%)
Flat
28.6%
0.6 pts
Software
5.6
Flat
1%
87.2%
0.3 pts
Systems & Technology
3.1
(17%)
(16%)
32.3%
(1.9 pts)
(14%)
(13%)
1Q13
Global Technology Services
excl. Retail Store Solutions
Global Financing
Total Revenue & Op. GP Margin
excl. Retail Store Solutions
0.5
$23.4
2%
4%
45.8%
(4.9 pts)
(5%)
(3%)
46.7%
1.0 pts
(5%)
(3%)
Con9nued margin expansion in Services and SoDware www.ibm.com/investor
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Revenue by Geography
1Q13
B/(W) Yr/Yr
Rptd
@CC
$10.0
(4%)
(3%)
Europe/ME/A
7.3
(4%)
(4%)
Asia Pacific
5.7
(7%)
(1%)
$ in Billions
Americas
Total Geographies
excl. Retail Store Solutions
IBM
excl. Retail Store Solutions
$23.0
(3%)
(2%)
(5%)
(5%)
(3%)
(3%)
Major Markets
(6%)
(4%)
Growth Markets
(1%)
1%
(1%)
3%
BRIC Countries
$23.4
(5%)
(4%)
Canada/ LA U.S. -­‐5% EMEA Japan APac +3% @CC OEM -­‐16% Growth Markets impacted by mid and low end systems www.ibm.com/investor
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Expense Summary
1Q13
B/(W)
Yr/Yr
SG&A – Operating
$5.4
RD&E – Operating
1.6
$ in Billions
Currency
Acq.*
Base
7%
1 pts
(1 pts)
7 pts
(1%)
0 pts
(3 pts)
1 pts
1 pts
(2 pts)
5 pts
IP and Development Income
(0.2)
(28%)
Other (Income)/Expense
(0.1)
14%
0.1
14%
$6.9
4%
Interest Expense
Operating Expense & Other Income
B/(W) Yr/Yr Drivers
* Includes acquisitions made in the last twelve months, net of non-operating acquisition-related charges
www.ibm.com/investor
7
Services Segments
Global Technology Services (GTS) $ in Billions
1Q13
$9.6
36.7%
$1.6
16.1%
Revenue (External)
Gross Margin (External)
Pre-Tax Income
PTI Margin
Global Business Services (GBS) B/(W) Yr/Yr
Rptd
@CC
(4%)
(2%)
1.5 pts
7%
1.8 pts
1Q13 Revenue
$ in Billions
Revenue (External)
Gross Margin (External)
Pre-Tax Income
PTI Margin
Yr/Yr
GTS
GTS Outsourcing
Integrated Technology Services
Maintenance
Rptd
(6%)
(1%)
(4%)
@CC
(3%)
2%
(2%)
(1%)
(4%)
3%
(1%)
1%
5%
GBS
GBS Outsourcing
Consulting & Systems Integration
Services Backlog
1Q13
$141B
1Q13
$4.5
28.6%
$0.7
15.1%
B/(W) Yr/Yr
Rptd
@CC
(3%)
Flat
0.6 pts
17%
2.6 pts
1Q13 Revenue (% of Total Services) Maint. 13% GTS Outsourcing 40% ITS 16% GBS C&SI 24% GBS Outsourcing 7% Backlog growth and con9nued margin expansion www.ibm.com/investor
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Software Segment
$ in Billions
1Q13
$5.6
87.2%
$2.0
31.5%
Revenue (External)
Gross Margin (External)
Pre-Tax Income
PTI Margin
1Q13 Revenue
Yr/Yr
Rptd
@CC
6%
7%
(2%)
(1%)
Tivoli
1%
3%
Social Workforce Solutions
8%
9%
(2%)
(1%)
Key Branded Middleware
1%
2%
Total Middleware
Flat
1%
Total Software
Flat
1%
WebSphere Family
Information Management
Rational
B/(W) Yr/Yr
Rptd
@CC
Flat
1%
0.3 pts
4%
1.2 pts
1Q13 Revenue (% of Total SoDware) Key Branded Middleware 63% Other Middleware 19% Opera9ng Systems 10% Other 8% Rollover deals impacted 1Q performance www.ibm.com/investor
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Systems & Technology Segment
B/(W) Yr/Yr
$ in Billions
Revenue (External) – including RSS
excluding RSS
Gross Margin (External)
Pre-Tax Income
PTI Margin
1Q13 Revenue
System z
Power Systems
System x
Storage
Total Systems excl. RSS
Microelectronics OEM
Total Systems & Technology excl. RSS
1Q13
Rptd
@CC
$3.1
(17%)
(14%)
(1.9 pts)
(287%)
(9.9 pts)
(16%)
(13%)
32.3%
($0.4)
(12.5%)
Yr/Yr
Rptd
7%
(32%)
(9%)
(11%)
(13%)
(16%)
(14%)
@CC
8%
(31%)
(8%)
(10%)
(13%)
(16%)
(13%)
1Q13 Revenue (% of Total Sys & Tech) Servers 67% Storage 21% Micr
o OE
12% M System z growth offset by declines in Power, System x and Storage www.ibm.com/investor
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Cash Flow Analysis
$ in Billions
Net Cash from Operations
Less: Global Financing Receivables
1Q13
B/(W)
Yr/Yr
FY12
$4.0
($0.3)
$19.6
1.6
0.2
2.4
(0.4)
(0.7)
0.3
1.7
(0.2)
Acquisitions
(0.1)
1.3
(3.7)
Divestitures
0.0
0.0
0.6
Dividends
(0.9)
(0.1)
(3.8)
Share Repurchases (Gross)
(2.6)
0.4
Non-GF Debt
(0.7)
(1.4)
0.7
3.5
0.4
(0.8)
$0.9
$0.5
($0.8)
Net Cash from Operations
(excluding
GF Receivables)
Net Capital Expenditures
Free Cash Flow (excluding GF Receivables)
Other (includes GF A/R & GF Debt)
Change in Cash & Marketable Securities
www.ibm.com/investor
(2.9)
22.5
(4.3)
18.2
(12.0)
11
Balance Sheet Summary
Mar. 12
Dec. 12
Mar. 13
$12.3
$11.1
$12.0
Non-GF Assets*
70.3
70.6
70.7
Global Financing Assets
32.7
37.5
34.5
115.3
119.2
117.3
Other Liabilities
62.5
67.0
64.6
Non-GF Debt*
8.5
8.8
8.2
23.6
24.5
25.2
32.1
33.3
33.4
Total Liabilities
94.6
100.2
98.0
Equity
20.8
19.0
19.2
33%
36%
34%
7.0
7.0
7.2
$ in Billions
Cash & Marketable Securities
Total Assets
Global Financing Debt
Total Debt
Non-GF Debt / Capital
Global Financing Leverage
* Includes eliminations of inter-company activity
www.ibm.com/investor
12
Operating EPS Bridge – 1Q12 to 1Q13
$2.78
($0.14)
$0.23
$0.13
$3.00
Gross Margin 0.16
Expense E/R (0.04)
Tax Rate
1Q12 Opera9ng EPS Revenue Growth @ Actual 0.11
Margin Expansion www.ibm.com/investor
Share Repurchases 1Q13 Opera9ng EPS 13
2015e
At least
$20
1Q 2013 Summary
Ø  EPS growth of 8%
•  Expanded operating gross, pre-tax, and net margins
2013e
$16.70+
2012
$15.25
2011
$13.44
2010
$11.67
Operating EPS
Ø  Improved backlog performance
•  +1% yr/yr, +5% @CC
Ø  Actions to improve performance
•  Improve sales execution
–  Close rollover transactions in Software and System z mainframe
–  Recover position in growth markets
•  Rebalance workforce in 2Q
•  Improve underperforming businesses
–  Capitalize on Power Linux opportunity
–  Leverage investments in flash and mid-range storage solutions
Ø  Deliver on our business model
•  Continue shift to higher value
•  Leverage key growth initiatives
•  Drive productivity across the enterprise
•  Invest in innovation
•  Return value to shareholders
Expect at least $16.70 of Opera9ng EPS in 2013 www.ibm.com/investor
14
www.ibm.com/investor
15
Supplemental Materials
Supplemental Materials
Some columns and rows in these materials, including the supplemental exhibits, may not add due to rounding
Ø  Currency – Year/Year Comparison
Ø  Supplemental Segment Information – Global Services
Ø  Supplemental Segment Information – Systems & Technology, Software
Ø  Global Financing Portfolio
Ø  Revenue by Key Industry Sales Unit
Ø  Cash Flow (FAS 95)
Ø  Non-GAAP Supplemental Materials
•  Operating (Non-GAAP) Earnings Per Share and Related Income Statement Items, Constant Currency
•  Cash Flow, Debt-to-Capital Ratio, Retail Store Solutions (RSS) Divestiture
•  Reconciliation of Operating Earnings Per Share
•  GAAP to Operating (Non-GAAP) Bridge – 1Q 2013
•  GAAP to Operating (Non-GAAP) Bridge – 1Q 2012
•  GAAP to Operating (Non-GAAP) Bridge – 1Q 2013 and 1Q 2012
•  Reconciliation of B/(W) Yr/Yr Expense Drivers – 1Q13
•  Reconciliation of Free Cash Flow (excluding GF Receivables) – 12 months ended 3/31/13,
3 months ended 3/31/12
•  Reconciliation of Debt-to-Capital Ratio
•  Reconciliation of Operating EPS Bridge – 1Q 2012 to 1Q 2013
•  Reconciliation of Consolidated EPS
•  Reconciliation of Revenue Growth
www.ibm.com/investor
16
Supplemental Materials
Currency – Year/Year Comparison
Quarterly Averages per US $ Yr/Yr @ 4/17 Spot
3Q13
4Q13
1Q13
Yr/Yr
4/17
Spot
Euro
0.76
1%
0.77
2%
4%
1%
2%
Pound
0.65
(1%)
0.66
(4%)
(4%)
(5%)
(4%)
(22%)
(24%)
(20%)
(21%)
~(1-2 pts)
~(1-2 pts)
~(2 pts)
~(2 pts)
Yen
92
IBM Revenue Impact
Revenue As Reported
Currency Impact
Revenue @CC
(16%)
(2 pts)
(US$B)
Yr/Yr
$23.4
(5%)
(0.5)
98
2Q13
FY13
(2 pts)
(3%)
www.ibm.com/investor
17
Supplemental Materials
Supplemental Segment Information – 1Q 2013
Global Services Revenue
Global Services Backlog / Signings
Revenue Growth Yr/Yr @CC GTS Outsourcing
(6%)
(3%)
Integrated Tech Services
(1%)
2%
Maintenance
(4%)
(2%)
(4%)
(2%)
GBS Outsourcing
(1%)
3%
GBS C&SI
(4%)
(1%)
(3%)
Flat
Total GTS
Total GBS
Total Outsourcing
(5%)
(3%)
Total Transactional
(3%)
Flat
Maintenance
(4%)
(2%)
$ in Billions Total Backlog
Backlog 1Q13 Yr/Yr @CC $141
1%
5%
Flat
4%
Change in Backlog due to Currency
Quarter-to-Quarter
($3)
Year-to-Year
($5)
Outsourcing Backlog
$91
Signings Outsourcing
1Q13 Yr/Yr @CC $10.7
97%
103%
- GTS O/S, GBS O/S (AMS)
Transactional
6.2
(2%)
1%
- ITS, Consulting & AMS SI
(incl. US Federal)
Total Signings
$16.9
44%
48%
Note: Actual backlog calculated using March 31 currency spot rates
www.ibm.com/investor
18
Supplemental Materials
Supplemental Segment Information – 1Q 2013
Systems & Technology
Software
Revenue Growth Revenue Growth System z
Power Systems
Yr/Yr @CC 7%
8%
(31%)
(9%)
(8%)
(11%)
(10%)
Total Systems excl. RSS
(13%)
(13%)
Microelectronics OEM
(16%)
(16%)
Total Sys & Tech excl. RSS
(14%)
(13%)
Storage
@CC 6%
7%
(2%)
(1%)
Tivoli
1%
3%
Social Workforce Sols.
8%
9%
(2%)
(1%)
1%
2%
(2%)
(1%)
Flat
1%
Operating Systems
(2%)
(1%)
Other Software/Services
(5%)
(4%)
Flat
1%
WebSphere Family
(32%)
System x
Yr/Yr GP% Share Information Management
Rational
Key Branded Middleware
Other Middleware
Total Middleware
Total Software
www.ibm.com/investor
19
Supplemental Materials
Global Financing Portfolio
1Q13 – $27.5B Net External Receivables
40%
Investment Grade
60%
Non-Investment Grade
40%
38%
30%
20%
22%
19%
10%
12%
7%
2%
B to B-
CCC+ to D
0%
AAA to A-
BBB+ to BBB-
BB+ to BB
1Q13
4Q12
1Q12
Identified Loss Rate
0.8%
0.8%
0.8%
Anticipated Loss Rate
0.4%
0.4%
0.5%
Reserve Coverage
1.2%
1.2%
1.3%
3.2
2.5
2.8
$42M
$22M
$68M
Client Days Delinquent Outstanding
Commercial A/R > 30 days
20
BB- to B+
www.ibm.com/investor
20
Supplemental Materials
Revenue by Key Industry Sales Unit
$ in Billions
Financial Services
B/(W) Yr/Yr*
Rptd
@CC
1Q13
$6.4
(3%)
Flat
Public
3.1
(7%)
(7%)
Industrial
2.1
(2%)
1%
Distribution
1.9
(8%)
(7%)
Communications
1.9
(9%)
(7%)
General Business
6.7
(3%)
(1%)
$23.4
(5%)
(3%)
Total IBM
Public Industrial Distribu9on Financial Services Comms General Business * Reclassified to conform with 2013 presentation
www.ibm.com/investor
21
Supplemental Materials
Cash Flow (FAS 95)
$ in Billions
1Q13
1Q12
Net Income from Operations
$3.0
$3.1
Depreciation / Amortization of Intangibles
1.2
1.2
Stock-based Compensation
0.1
0.2
(1.9)
(1.5)
1.6
1.4
4.0
4.3
(0.7)
(1.0)
0.0
0.0
Acquisitions, net of cash acquired
(0.1)
(1.3)
Marketable Securities / Other Investments, net
(0.2)
0.1
(1.0)
(2.2)
0.5
1.0
Dividends
(0.9)
(0.9)
Common Stock Repurchases (Gross)
(2.6)
(3.0)
Common Stock Transactions - Other
0.4
0.6
Net Cash used in Financing Activities
(2.7)
(2.3)
Effect of Exchange Rate changes on Cash
(0.1)
0.2
Net Change in Cash & Cash Equivalents
$0.2
Working Capital / Other
Global Financing A/R
Net Cash provided by Operating Activities
Capital Expenditures, net of payments & proceeds
Divestitures, net of cash transferred
Net Cash used in Investing Activities
Debt, net of payments & proceeds
www.ibm.com/investor
($0.1)
22
Supplemental Materials
Non-GAAP Supplemental Materials
In an effort to provide investors with additional information regarding the company's results as determined by generally
accepted accounting principles (GAAP), the company also discusses, in its earnings press release and earnings presentation
materials, the following Non-GAAP information which management believes provides useful information to investors.
Operating (Non-GAAP) Earnings Per Share and Related Income Statement Items
Management presents certain financial measures excluding the effects of certain acquisition-related charges, non-operating
retirement-related costs, and any related tax impacts. Management uses the term "operating" to describe this view of the
company's financial results and other financial information. For acquisitions, these measures exclude the amortization of
purchased intangible assets and acquisition-related charges such as in-process research and development, transaction
costs, applicable restructuring and related expenses, and tax charges related to acquisition integration. For retirementrelated costs, the company has characterized certain items as operating and others as non-operating. The company
includes service cost, amortization of prior service cost and the cost of defined contribution plans in its operating results.
Non-operating retirement-related costs include interest cost, expected return on plan assets, amortized actuarial gains/
losses, the impacts of any plan curtailments/settlements, multi-employer plan costs, pension insolvency costs, and other
costs. Non-operating costs primarily relate to changes in pension plan assets and liabilities which are tied to market
performance, and management considers these costs to be outside the operational performance of the business.
Management’s calculation of these operating measures, as presented, may differ from similarly titled measures reported by
other companies.
Overall, management believes that providing investors with an operating view as described above provides increased
transparency and clarity into both the operational results of the business and the performance of the company’s pension
plans, improves visibility to management decisions and their impacts on operational performance, enables better
comparison to peer companies, and allows the company to provide a long term strategic view of the business going
forward. For the 2015 earnings per share roadmap, the company is utilizing an operating view to establish its objectives
and track its progress. The company’s segment financial results and performance reflect operating earnings, consistent
with the company’s management and measurement system.
Constant Currency
Management refers to growth rates at constant currency or adjusting for currency so that certain financial results can be
viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period
comparisons of the company's business performance. Financial results adjusted for currency are calculated by translating
current period activity in local currency using the comparable prior year period’s currency conversion rate. This approach is
used for countries where the functional currency is the local currency. Generally, when the dollar either strengthens or
weakens against other currencies, the growth at constant currency rates or adjusting for currency will be higher or lower
than growth reported at actual exchange rates.
www.ibm.com/investor
23
Supplemental Materials
Non-GAAP Supplemental Materials
Cash Flow
Management uses a free cash flow measure to evaluate the company’s operating results, plan share repurchase levels,
evaluate strategic investments and assess the company’s ability and need to incur and service debt. The entire free cash
flow amount is not necessarily available for discretionary expenditures. The company defines free cash flow as net cash
from operating activities less the change in Global Financing receivables and net capital expenditures, including the
investment in software. A key objective of the Global Financing business is to generate strong returns on equity, and
increasing receivables is the basis for growth. Accordingly, management considers Global Financing receivables as a profitgenerating investment, not as working capital that should be minimized for efficiency. Therefore, management includes
presentations of both free cash flow and cash flow from operations that exclude the effect of Global Financing receivables.
Debt-to-Capital Ratio
Management presents its debt-to-capital ratio excluding the Global Financing business. A financing business is managed on a
leveraged basis. The company funds its Global Financing segment using a debt-to-equity ratio target of approximately
7 to 1. Given this significant leverage, the company presents a debt-to-capital ratio which excludes the Global Financing
segment debt and equity because the company believes this is more representative of the company’s core business
operations.
Retail Store Solutions (RSS) Divestiture
On April 17, 2012, the company announced that it had signed a definitive agreement with Toshiba Tec for the sale of its RSS
business to Toshiba Tec. Management presents certain financial results excluding the effects of the RSS divestiture.
Management believes that presenting financial information regarding revenue without this item is more representative of
operational performance and provides additional insight into, and clarifies the basis for, historical and/or future performance,
which may be more useful to investors.
www.ibm.com/investor
24
Supplemental Materials
Non-GAAP Supplemental Materials
Reconcilia9on of Opera9ng Earnings Per Share 2013
Expectations
IBM GAAP EPS
$15.53+
IBM Operating EPS (Non-GAAP)
$16.70+
Adjustments
Acquisition-Related Charges *
$0.48
Amortization of Purchased Intangibles
$0.47
Other Acquisition-Related Charges
$0.01
Non-Operating Retirement-Related Items
$0.69
* Includes acquisitions through March 31, 2013
The above serves to reconcile the Non-GAAP financial information contained in “1Q 2013 Summary” discussion in the company’s earnings
presentation. See Slide 23 of this presentation for additional information on the use of these Non-GAAP financial measures.
www.ibm.com/investor
25
Supplemental Materials
Non-GAAP Supplemental Materials
GAAP to Opera9ng (Non-­‐GAAP) Bridge – 1Q 2013 $ in Millions, except EPS
Gross Profit
GAAP
Acquisition-related
Adjustments*
Retirement-related
Adjustments**
Operating
(Non-GAAP)
$10,678
$95
$164
$10,937
SG&A
5,577
(92)
(104)
5,381
RD&E
1,644
0
(16)
1,628
(60)
(7)
0
Total Operating Expense & Other Income
7,072
(99)
(120)
6,853
Pre-Tax Income
3,606
194
283
4,084
574
54
79
708
Net Income
3,032
140
204
3,376
Diluted Earnings Per Share
$2.70
$0.12
$0.18
$3.00
Other Income & Expense
Tax ***
(67)
* Includes amor/za/on of purchased Intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, deal costs and acquisi/on integra/on tax charges. ** Includes re/rement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amor/za/on of transi/on assets, other seAlements, curtailments, mul/-­‐employer plans and insolvency insurance. ***The tax impact on the Opera/ng (Non-­‐GAAP) Pre-­‐Tax Income is calculated under the same accoun/ng principles applied to the As Reported Pre-­‐Tax Income under ASC 740, which employs an annual effec/ve tax rate method to the results. The above serves to reconcile the Non-GAAP financial information contained in the “1Q 2013 Highlights,” “Key Financial Metrics” and “Expense
Summary” discussions in the company’s earnings presentation. See Slide 23 of this presentation for additional information on the use of these NonGAAP financial measures.
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Supplemental Materials
Non-GAAP Supplemental Materials
GAAP to Opera9ng (Non-­‐GAAP) Bridge – 1Q 2012 $ in Millions, except EPS
Gross Profit
GAAP
Acquisition-related
Adjustments*
Retirement-related
Adjustments**
Operating
(Non-GAAP)
$11,118
$89
$71
$11,278
(84)
(36)
5,766
1,605
SG&A
5,886
RD&E
1,601
0
4
(58)
(1)
0
Other Income & Expense
(59)
Total Operating Expense & Other Income
7,283
(85)
(32)
7,166
Pre-Tax Income
3,836
173
102
4,111
47
30
846
73
3,265
Tax ***
769
Net Income
3,066
126
Diluted Earnings Per Share
$2.61
$0.11
$0.06
$2.78
* Includes amor/za/on of purchased Intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, deal costs and acquisi/on integra/on tax charges ** Includes re/rement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amor/za/on of transi/on assets, other seAlements, curtailments, mul/-­‐employer plans and insolvency insurance ***The tax impact on the Opera/ng (Non-­‐GAAP) Pre-­‐Tax Income is calculated under the same accoun/ng principles applied to the As Reported Pre-­‐Tax Income under ASC 740, which employs an annual effec/ve tax rate method to the results. The above serves to reconcile the Non-GAAP financial information contained in the “1Q 2013 Highlights,” “Key Financial Metrics” and “Expense
Summary” discussions in the company’s earnings presentation. See Slide 23 of this presentation for additional information on the use of these NonGAAP financial measures.
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Supplemental Materials
Non-GAAP Supplemental Materials
GAAP to Opera9ng (Non-­‐GAAP) Bridge – 1Q 2013 and 1Q 2012 1Q 2013
GAAP
Acquisitionrelated
Adjustments*
Retirementrelated
Adjustments **
Operating
(Non-GAAP)
Gross Profit Margin
45.6%
0.4 pts
0.7 pts
46.7%
PTI Margin
15.4%
0.8 pts
1.2 pts
17.4%
Tax Rate ***
15.9%
0.6 pts
0.9 pts
17.3%
Net Income Margin
13.0%
0.6 pts
0.9 pts
14.4%
Gross Profit Margin
45.1%
0.4 pts
0.3 pts
45.7%
PTI Margin
15.5%
0.7 pts
0.4 pts
16.7%
Tax Rate ***
20.1%
0.3 pts
0.2 pts
20.6%
Net Income Margin
12.4%
0.5 pts
0.3 pts
13.2%
1Q 2012
* Includes amor/za/on of purchased Intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, deal costs and acquisi/on integra/on tax charges ** Includes re/rement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amor/za/on of transi/on assets, other seAlements, curtailments, mul/-­‐employer plans and insolvency insurance ***The tax impact on the Opera/ng (Non-­‐GAAP) Pre-­‐Tax Income is calculated under the same accoun/ng principles applied to the As Reported Pre-­‐Tax Income under ASC 740, which employs an annual effec/ve tax rate method to the results. The above serves to reconcile the Non-GAAP financial information contained in the”1Q 2013 Summary” and “Key Financial Metrics” discussions in
the company’s earnings presentation. See Slide 23 of this presentation for additional information on the use of these Non-GAAP financial measures.
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Supplemental Materials
Non-GAAP Supplemental Materials Reconcilia9on of B/(W) Yr/Yr Expense Drivers – 1Q13 GAAP
Non-GAAP
Adjustments
Operating
(Non-GAAP)
1 pts
0 pts
1 pts
(2 pts)
0 pts
(1 pts)
6 pts
1 pts
7 pts
0 pts
0 pts
0 pts
Acquisitions
(3 pts)
0 pts
(3 pts)
Base
(1 pts)
1 pts
1 pts
1 pts
0 pts
1 pts
(2 pts)
0 pts
(2 pts)
4 pts
1 pts
5 pts
SG&A
Currency
Acquisitions
Base
RD&E
Currency
Operating Expense & Other Income
Currency
Acquisitions
Base
The above serves to reconcile the Non-GAAP financial information contained in the “Expense Summary” discussion in the company’s earnings
presentation. See Slide 23 of this presentation for additional information on the use of these Non-GAAP financial measures.
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Supplemental Materials
Non-GAAP Supplemental Materials
Reconcilia9on of Free Cash Flow (excluding GF Receivables) $ in Billions
Net Cash from Operations
Less: Global Financing Receivables
Net Cash from Operations (excluding GF
Receivables)
Net Capital Expenditures
Free Cash Flow (excluding GF
Receivables)
12 months
ended
3/31/13
3 months
ended
3/31/12
$19.3
$4.3
(2.7)
1.4
22.1
2.9
(4.0)
$18.0
(1.0)
$1.9
The above serves to reconcile the Non-GAAP financial information contained in the “1Q 2013 Financial Highlights,” and “Key Financial
Metrics” discussion in the company’s earnings presentation. See Slide 24 of this presentation for additional information on the use of
these Non-GAAP financial measures.
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Supplemental Materials
Non-GAAP Supplemental Materials
Reconcilia9on of Debt-­‐to-­‐Capital Ra9o Dec. 2012
March 2013
March 2012
Non-Global Financing Debt / Capital
36%
34%
33%
IBM Consolidated Debt / Capital
64%
63%
61%
The above serves to reconcile the Non-GAAP financial information contained in the “Balance Sheet Summary” discussion in the
company’s earnings presentation. See Slide 24 of this presentation for additional information on the use of these Non-GAAP financial
measures.
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Supplemental Materials
Non-GAAP Supplemental Materials
Reconcilia9on of Opera9ng EPS Bridge – 1Q 2012 to 1Q 2013 GAAP
Acquisitionrelated
Adjustments*
Retirementrelated
Adjustments**
Operating
(Non-GAAP)
1Q12 EPS
$2.61
$0.11
$0.06
$2.78
Revenue growth @ actual
(0.13)
(0.01)
0.00
(0.14)
Margin expansion
0.11
0.01
0.11
0.23
Share repurchases
0.11
0.01
0.01
0.13
$2.70
$0.12
$0.18
$3.00
1Q13 EPS
* Includes amor/za/on of purchased intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, deal costs and acquisi/on integra/on tax charges. ** Includes re/rement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amor/za/on of transi/on assets, other seAlements, curtailments, mul/-­‐employer plans and insolvency insurance. The above serves to reconcile the Non-GAAP financial information contained in the “Operating EPS Bridge – 1Q12 to 1Q13” discussion in the
company’s earnings presentation. See Slide 23 of this presentation for additional information on the use of these Non-GAAP financial measures.
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Supplemental Materials
Non-GAAP Supplemental Materials
Reconcilia9on of Consolidated EPS EPS
(As Reported)
AcquisitionRelated
Non-Operating
RetirementRelated
2010
$11.52
$0.34
($0.20)
$11.67
2011
13.06
0.41
(0.03)
13.44
2012
14.37
0.55
0.33
15.25
Operating
EPS
The above serves to reconcile the Non-GAAP financial information contained in the “1Q 2013 Summary” discussion in the company’s earnings
presentation. See Slide 23 of this presentation for additional information on the use of these Non-GAAP financial measures.
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Supplemental Materials
Non-GAAP Supplemental Materials
Reconcilia9on of Revenue Growth 4Q12 Yr/Yr
Global Business Services
IBM Global Services
Japan
Tivoli Security software
Tivoli Storage software
As Rptd
(3%)
(2%)
@CC
(2%)
(1%)
4Q12 Yr/Yr
Europe/ ME/A
As Rptd
(5%)
@CC
(3%)
1Q13 Yr/Yr
As Rptd
(3%)
(4%)
(12%)
13%
10%
@CC
Flat
(1%)
3%
15%
11%
1Q13 Yr/Yr
As Rptd
(4%)
@CC
(4%)
The above serves to reconcile the Non-GAAP financial information contained in the “Key Financial Metrics,” “Revenue by Geography,”
“Services Segments,” “Software Segment,” “Systems & Technology Segment,” discussions in the company’s earnings presentation.
See Slide 23 of this presentation for additional information on the use of these Non-GAAP financial measures.
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