4Q11 charts (pdf, 1.07 MB)

®
4Q 2011 Earnings Presentation
January 19, 2012
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 supplementary materials entitled “Non-GAAP Supplementary Materials” that are
posted on the Company’s investor relations web site at http://www.ibm.com/investor/4q11/
The Non-GAAP Supplementary Materials are also included as Attachment II to the Company’s
Form 8-K dated January 19, 2012.
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2
2011 Summary
Revenue
Operating Pre-Tax Income
Operating (Non-GAAP) EPS
4Q11
$
Yr/Yr
$29.5B
+2%
$7.4B
+6%
$4.71 +11%
FY11
$
$106.9B
$21.6B
$13.44
Yr/Yr
+7%
+9%
+15%
¾ 4Q Segment highlights:
• Continued momentum in Software: Revenue +9%, Profit +12%
• Services revenue led by growth markets +13% @CC; Services Profit +17%
• Continued strength and share gain in Power
¾ Expanded operating margins: gross (+1.1 pts), pre-tax (+0.9 pts), net (+0.5 pts)
¾ 9th consecutive year of double-digit EPS growth
¾ Generated $9B of Free Cash Flow in the quarter, $16.6B for the year
Expect at least $14.85 of Operating EPS in 2012
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3
Key Financial Metrics
$ in Billions, except EPS
P&L Highlights
Revenue
4Q11
B/(W)
Yr/Yr
$29.5
2%
GP Margin
50.2%
1.1 pts
1%
PTI Margin
25.1%
0.9 pts
NI Margin
19.0%
0.5 pts
Tax Rate
24.4% (0.7 pts)
@CC
PTI – Operating
$7.4
6%
EPS – Operating
$4.71
11%
Cash Highlights
P&L Ratios
(Operating)
4Q11
B/(W)
Yr/Yr
4Q11
Last
12 Mos.
$9.0
$16.6
Share Repurchase
3.6
15.0
Dividends
0.9
3.5
Free Cash Flow
(excl GF Receivables)
Cash Balance @ Dec. 31
11.9
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4
Revenue by Geography
$ in Billions
4Q11
Americas
B/(W) Yr/Yr
Rptd
@CC
$12.5
3%
3%
Europe/ME/A
9.6
1%
1%
Asia Pacific
6.7
2%
(1%)
OEM
0.7
(9%)
(9%)
IBM
$29.5
2%
1%
Major Markets
Flat
Flat
Growth Markets
7%
8%
10%
11%
BRIC Countries
Canada/
LA
U.S.
+1%
EMEA
Japan APac
- 9%
@CC
OEM
Performance led by Growth Markets
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5
Revenue and Gross Profit Margin by Segment
Operating
Gross Profit Margin
Revenue
$ in Billions
4Q11
Global Technology Services
B/(W) Yr/Yr
Rptd
@CC
4Q11
B/(W)
Yr/Yr Pts
$10.5
3%
3%
36.6%
2.1 pts
Global Business Services
4.9
3%
2%
29.3%
1.3 pts
Software
7.6
9%
9%
89.8%
0.2 pts
Systems & Technology
5.8
(8%)
(8%)
40.5%
(3.1 pts)
Global Financing
0.5
(13%)
(13%)
49.7%
(2.1 pts)
50.2%
1.1 pts
Total Revenue &
Operating GP Margin
$29.5
2%
1%
Revenue growth led by Software; GP Margin driven by Services and Mix
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6
Expense Summary
$ in Billions
4Q11
B/(W)
Yr/Yr
SG&A – Operating
$6.0
RD&E – Operating
1.6
IP and Development Income
(0.3)
Currency
Acq.*
Base
(2%)
0 pts
(1 pts)
(1 pts)
2%
0 pts
(2 pts)
3 pts
0 pts
(1 pts)
(1 pts)
(20%)
Other (Income)/Expense
0.0
Interest Expense
0.1
(12%)
$7.4
(2%)
Operating Expense & Other Income
B/(W) Yr/Yr Drivers
5%
* Includes acquisitions made in the last twelve months, net of non-operating acquisition-related charges
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7
Services Segments
Global Technology Services (GTS)
$ in Billions
4Q11
Revenue (External)
Gross Margin (External)
$10.5
36.6%
Pre-Tax Income
$1.9
PTI Margin
18.0%
B/(W) Yr/Yr
Rptd
@CC
3%
2.1 pts
3%
$ in Billions
Revenue (External)
GBS
GBS Outsourcing
Consulting & Systems Integration
4Q11
$141B
2.3 pts
PTI Margin
Rptd
3%
5%
(1%)
@CC
3%
4%
(1%)
5%
2%
4%
1%
($2B)
$4.9
Pre-Tax Income
Yr/Yr
GTS
GTS Outsourcing
Integrated Technology Services
Maintenance
4Q11
Gross Margin (External)
18%
4Q11 Revenue
Services Backlog
Global Business Services (GBS)
Flat
B/(W) Yr/Yr
Rptd
@CC
3%
29.3%
1.3 pts
$0.8
14%
16.6%
1.8 pts
2%
4Q11 Revenue
(% of Total Services)
Maint.
12%
GTS
Outsourcing
40%
GBS
Outsourcing
7%
ITS
16%
GBS C&SI
25%
Strong profit growth and margin expansion
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8
Total Services Backlog Run Out
2011 Revenue
(% of Total Services)
Services Run Out
60
Revenue from
base growth
and new
signings
50
($B)
40
Transactional
40%
Outsourcing
47%
30
70%
Revenue from
12/31/10
Backlog
Projected
Revenue from
12/31/11
Backlog
Revenue from
Backlog
20
+3% Yr/Yr *
10
Maint.
13%
0
2011
2012
Revenue from New Signings
Revenue from Base Growth
Revenue from Backlog
* @ consistent foreign exchange rates yr/yr
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9
Software Segment
$ in Billions
4Q11
$7.6
89.8%
$3.7
43.7%
Revenue (External)
Gross Margin (External)
Pre-Tax Income
PTI Margin
4Q11 Revenue
Yr/Yr
Rptd
@CC
21%
21%
9%
9%
Tivoli
14%
14%
Lotus
(2%)
(3%)
4%
4%
Key Branded Middleware
11%
11%
Total Middleware
10%
10%
9%
9%
WebSphere Family
Information Management
Rational
Total Software
B/(W) Yr/Yr
Rptd
@CC
9%
9%
0.2 pts
12%
1.4 pts
4Q11 Revenue
(% of Total Software)
Key
Branded
Middleware
68%
Other
Middleware
16%
Operating
Systems
Other 9%
7%
Fifth consecutive quarter of double-digit growth in Branded Middleware
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10
Systems & Technology Segment
$ in Billions
Revenue (External)
Gross Margin (External)
Pre-Tax Income
PTI Margin
4Q11 Revenue
System z
Power Systems
System x
Storage
Retail Store Solutions
Total Systems
Microelectronics OEM
Total Systems & Technology
4Q11
B/(W) Yr/Yr
Rptd
@CC
$5.8
(8%)
40.5%
(3.1 pts)
$0.8
(33%)
13.2%
(4.8 pts)
Yr/Yr
Rptd
(31%)
6%
(2%)
(1%)
9%
(7%)
(11%)
(8%)
@CC
(31%)
6%
(3%)
(1%)
9%
(7%)
(11%)
(8%)
(8%)
4Q11 Revenue
(% of Total Sys & Tech)
Servers
66%
Storage
20%
RSS
Micr
o OE
10% M
Power Systems extend Unix leadership with record competitive displacements
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11
Cash Flow Analysis
$ in Billions
Net Cash from Operations
Less: Global Financing Receivables
4Q11
B/(W)
Yr/Yr
FY11
B/(W)
Yr/Yr
$7.1
$0.3
$19.8
$0.3
(2.9)
0.1
(0.8)
10.0
0.2
20.7
(1.1)
0.0
(4.1)
9.0
0.3
16.6
0.3
Acquisitions
(1.6)
1.3
(1.8)
4.1
Divestitures
0.0
0.0
0.0
0.0
Dividends
(0.9)
(0.1)
(3.5)
(0.3)
Share Repurchases
(3.6)
0.0
0.6
(0.1)
1.7
(0.6)
(2.9)
(1.3)
2.3
(1.2)
$0.6
$0.1
Net Cash from Operations
(excluding GF Receivables)
Net Capital Expenditures
Free Cash Flow (excluding GF Receivables)
Non-GF Debt
Other (includes GF A/R & GF Debt)
Change in Cash & Marketable Securities
www.ibm.com/investor
(15.0)
$0.3
(0.1)
0.4
(0.1)
0.3
$2.6
12
Balance Sheet Summary
Dec. 10
Dec. 11
$11.7
$11.9
Non-GF Assets*
67.3
69.4
Global Financing Assets
34.5
35.1
113.5
116.4
Other Liabilities
61.7
64.9
Non-GF Debt*
5.8
8.0
22.8
23.3
28.6
31.3
Total Liabilities
90.3
96.2
Equity
23.2
20.2
23%
32%
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
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13
Operating EPS Bridge – 4Q10 to 4Q11
$0.26
$4.25
$0.07
$4.71
$0.13
Gross Margin 0.19
Expense E/R (0.02)
Tax (0.04)
4Q10
Operating EPS
Revenue Growth
@ Actual
Margin
Expansion
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Share
Repurchases
4Q11
Operating EPS
14
Operating EPS Bridge – FY10 to FY11
$0.82
$11.67
$0.77
$13.44
Share
Repurchases
2011
Operating EPS
$0.18
Gross Margin 0.68
Expense E/R (0.49)
Tax (0.01)
2010
Operating EPS
Revenue Growth
@ Actual
Margin
Expansion
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15
2015e
At least
$20
FY 2011 Summary
¾ Continued strength in growth initiatives
• Growth markets +11% @CC yr/yr, 22% of Geo revenue
• Business analytics +16% yr/yr
2012e
$14.85+
• Smarter Planet +47% yr/yr
2011
$13.44
• Cloud >3x yr/yr
2010
$11.67
¾ Expanded margins in line with the model
• Operating gross profit margin +1.1 pts
• Operating pre-tax margin +0.3 pts
¾ Generated $16.6B Free Cash Flow
¾ Leveraging cash generation to return value to shareholders
• $15B share repurchases; $3.5B dividends
Operating EPS
Expect at least $14.85 of Operating EPS in 2012
www.ibm.com/investor
16
IBM Transformation Continues
At Least
$20
Operating PTI / EPS *
Segment Operating PTI
Operating EPS
At Least
$14.85
$13.44
'00
'01
'02
'03
'04
'05
'06
Hardware / Financing
'07
'08
'09
'10
Services
'11
'12e
'13e
'14e
'15e
Software
* Non-GAAP: Excludes acquisition-related charges and non-operating retirement-related charges
2000 & 2001 segments not restated for stock based compensation; 2000-2010 Segment PTI is reclassified to conform with 2011 operating presentation
Sum of external segment pre-tax income not equal to IBM pre-tax income
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17
www.ibm.com/investor
18
Supplemental Materials
Supplemental Materials
Some columns and rows in these materials, including the supplemental exhibits, may not add due to rounding
¾
¾
¾
¾
¾
¾
¾
¾
¾
¾
¾
¾
¾
¾
¾
¾
Currency – Year/Year Comparison
Supplemental Segment Information – Global Services
Supplemental Segment Information – Systems & Technology, Software
Global Financing Portfolio
Key Financial Metrics – FY 2011
Revenue by Geography – FY 2011
Revenue by Segment – FY 2011
Revenue by Key Industry Sales Unit – 4Q and FY 2011
Gross Margins by Segment – FY 2011
Expense Summary – FY 2011
Pre-Tax Income by Segment – FY 2011
Cash Flow (FAS 95)
Retirement-Related Charges
Retirement-Related Charges
Retirement-Related Charges
Non-GAAP Supplementary Materials
•
Operating (Non-GAAP) Earnings Per Share and Related Income Statement Items, Constant Currency
•
Cash Flow, Debt-to-Capital Ratio, Other Items
•
Reconciliation of Operating Earnings Per Share
•
GAAP to Operating (Non-GAAP) Bridge – 4Q 2011
•
GAAP to Operating (Non-GAAP) Bridge – 4Q 2010
•
GAAP to Operating (Non-GAAP) Bridge – FY 2011
•
GAAP to Operating (Non-GAAP) Bridge – FY 2010
•
GAAP to Operating (Non-GAAP) Bridge – 4Q 2011
•
GAAP to Operating (Non-GAAP) Bridge – 4Q 2010
•
GAAP to Operating (Non-GAAP) Bridge – FY 2011
•
GAAP to Operating (Non-GAAP) Bridge – FY 2010
•
Reconciliation of Revenue Growth – Geographies
•
Reconciliation of GBS Revenue Growth
•
Reconciliation of B/(W) Yr/Yr Expense Drivers – 4Q11
•
Reconciliation of B/(W) Yr/Yr Expense Drivers – FY11
•
Reconciliation of Debt-to-Capital Ratio
•
Reconciliation of Operating EPS Bridge 4Q10 to 4Q11
•
Reconciliation of Operating EPS Bridge FY10 to FY11
•
Reconciliation of Consolidated EPS
•
Reconciliation of Segment Pre-Tax Income and Margin Growth
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19
Supplemental Materials
Currency – Year/Year Comparison
Quarterly Averages per US $
1Q12
Yr/Yr @ 1/18 Spot
2Q12
3Q12
4Q12
FY12
3Q11
Yr/Yr
4Q11
Yr/Yr
1/18
Spot
Euro
0.71
8%
0.74
(1%)
0.78
(7%)
(12%)
(10%)
(5%)
(8%)
Pound
0.62
4%
0.64
(1%)
0.65
(4%)
(6%)
(4%)
(2%)
(4%)
78
9%
77
6%
77
7%
6%
1%
1%
4%
Yen
IBM Revenue
Impact
5 pts
0 pts
Vs. 10/14 View - Pts B/(W)
(1 pts)
- $B B/(W)
($0.3)
Revenue As Reported
Currency Impact
Revenue @CC
(US$B)
Yr/Yr
$29.5
2%
0.1
$29.4
~(1 pts) ~(3 pts) ~(3 pts) ~(1 pts) ~(2 pts)
0 pts
1%
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20
Supplemental Materials
Supplemental Segment Information – 4Q 2011
Supplemental Revenue Information
Supplemental Backlog / Signings Information
Revenue Growth
$ in Billions
Yr/Yr
@CC
Global Services
4Q11
Yr/Yr
@CC
GTS Outsourcing
3%
3%
Total Backlog
$141
($2)
Flat
Integrated Tech Services
5%
4%
Change in Backlog due to Currency
(1%)
(1%)
3%
3%
($4)
($3)
GBS Outsourcing
5%
4%
$ in Billions
GBS C&SI
2%
1%
Global Services
4Q11
Yr/Yr
@CC
3%
2%
Outsourcing
$11.6
(16%)
(15%)
Global Services
Maintenance
Total GTS
Total GBS
Backlog
Quarter-to-Quarter
($1)
Year-to-Year
($2)
Outsourcing Backlog
$93
Signings
- GTS O/S, GBS O/S (AMS)
Total Outsourcing
4%
3%
Total Transactional
3%
2%
(1%)
(1%)
Maintenance
Transactional
8.8
5%
4%
(8%)
(8%)
- ITS, Consulting & AMS SI
(incl. US Federal)
Total Signings
$20.4
Note: Actual backlog calculated using December 31 currency spot rates
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21
Supplemental Materials
Supplemental Segment Information – 4Q 2011
Revenue Growth
Revenue Growth
Systems & Technology
System z
Power Systems
Yr/Yr
@CC
GP%
(31%)
(31%)
Share
Software
Yr/Yr
@CC
21%
21%
9%
9%
Tivoli
14%
14%
(2%)
(3%)
4%
4%
11%
11%
3%
3%
10%
10%
Operating Systems
3%
3%
Other Software/Services
6%
6%
Total Software
9%
9%
WebSphere Family
Information Management
6%
6%
System x
(2%)
(3%)
=
Lotus
Storage
(1%)
(1%)
=
Rational
9%
9%
(7%)
(7%)
(11%)
(11%)
(8%)
(8%)
Retail Store Solutions
Total Systems
Microelectronics OEM
Total Systems & Technology
Key Branded Middleware
Other Middleware
Total Middleware
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22
Supplemental Materials
Global Financing Portfolio
4Q11 – $27.0B Net External Receivables
Invest ment Grade
63%
N o n- Invest ment Grade
3 7%
50%
40%
30%
20%
10%
39%
24%
20%
10%
5%
2%
Ba1-Ba2
Ba3-B1
B2-B3
Caa-D
0%
Aaa-A3
Baa1-Baa3
4Q11
3Q11
4Q10
Identified Loss Rate
0.8%
1.0%
1.1%
Anticipated Loss Rate
0.5%
0.3%
0.4%
Reserve Coverage
1.3%
1.3%
1.5%
Client Days Delinquent Outstanding
1.9
2.7
2.4
$37M
$46M
$20M
Commercial A/R > 30 Days
23
www.ibm.com/investor
23
Supplemental Materials
Key Financial Metrics – FY 2011
$ in Billions, except EPS
P&L Highlights
Revenue
FY11
$106.9
@CC
B/(W)
Yr/Yr
P&L Ratios
(Operating)
FY11
B/(W)
Yr/Yr
7%
GP Margin
47.2%
1.1 pts
3%
PTI Margin
20.2%
0.3 pts
NI Margin
15.3%
0.2 pts
Tax Rate
24.5% (0.1 pts)
PTI – Operating
$21.6
9%
EPS – Operating
$13.44
15%
Cash Highlights
Free Cash Flow
FY11
(excl GF Receivables)
Share Repurchase
Dividends
$16.6
15.0
3.5
Cash Balance @ Dec. 31
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11.9
24
Supplemental Materials
Revenue by Geography – FY 2011
$ in Billions
Americas
FY11
B/(W) Yr/Yr
Rptd
@CC
$44.9
7%
6%
Europe/ME/A
34.0
7%
2%
Asia Pacific
25.3
9%
2%
(2%)
(3%)
7%
3%
5%
2%
16%
11%
19%
16%
OEM
2.7
IBM
$106.9
Major Markets
Growth Markets
BRIC Countries
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Canada/
LA
U.S.
+4%
EMEA
Japan APac
- 7%
@CC
OEM
25
Supplemental Materials
Revenue by Segment – FY 2011
$ in Billions
FY11
Global Technology Services
B/(W) Yr/Yr
Rptd
@CC
$40.9
7%
3%
Global Business Services
19.3
6%
1%
Software
24.9
11%
8%
Systems & Technology
19.0
6%
3%
(6%)
(9%)
7%
3%
Global Financing
Total IBM
2.1
$106.9
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Global
Business
Services
Global
Technology
Services
Systems
&
Technology
Software
Global
Financing
26
Supplemental Materials
Revenue by Key Industry Sales Unit – 4Q & FY 2011
B/(W) Yr/Yr
Rptd
@CC
B/(W) Yr/Yr
Rptd
@CC
FY11
$8.9
Flat
(1%)
$31.8
9%
5%
Public
4.4
Flat
Flat
16.1
3%
Flat
Industrial
2.9
3%
2%
10.6
5%
1%
Distribution
2.9
6%
6%
10.3
7%
4%
Communications
2.8
5%
6%
10.5
9%
6%
General Business
6.1
7%
7%
21.6
12%
8%
$29.5
2%
1%
$106.9
7%
3%
$ in Billions
Financial Services
Total IBM
4Q11
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27
Supplemental Materials
Gross Margins by Segment – FY 2011
External
Gross Profit Margins
FY11
B/(W)
Yr/Yr Pts
Global Technology Services
35.0%
0.5 pts
Global Business Services
28.8%
0.7 pts
Software
88.5%
0.5 pts
Systems & Technology
39.8%
1.6 pts
Global Financing
49.8%
(1.5 pts)
Total IBM - Operating
47.2%
1.1 pts
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28
Supplemental Materials
Expense Summary – FY 2011
$ in Billions
FY11
B/(W)
Yr/Yr
SG&A – Operating
$23.3
RD&E – Operating
IP and Development Income
Currency
Acq.*
Base
(8%)
(3 pts)
(3 pts)
(2 pts)
6.3
(3%)
(2 pts)
(4 pts)
2 pts
(1.1)
(4%)
(4 pts)
(3 pts)
(3 pts)
Other (Income)/Expense
0.0
(94%)
Interest Expense
0.4
(12%)
$28.9
(10%)
Operating Expense & Other Income
B/(W) Yr/Yr Drivers
* Includes acquisitions made in the last twelve months, net of non-operating acquisition-related charges
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29
Supplemental Materials
Pre-Tax Income by Segment – FY 2011
Segment PTI $
Segment PTI Margin
PTI $
B/(W)
Yr/Yr
B/(W) Yr/Yr
w/o Unique
Items*
PTI %
B/(W)
Yr/Yr
B/(W) Yr/Yr
w/o Unique
Items*
$6.3
14%
11%
14.9%
1.0 pts
0.6 pts
3.0
18%
14%
15.0%
1.6 pts
1.1 pts
10.0
5%
12%
35.3%
(1.9 pts)
0.2 pts
Systems & Technology
1.6
12%
9%
8.2%
0.5 pts
0.3 pts
Global Financing
2.0
3%
3%
47.9%
0.0 pts
0.0 pts
$21.6
9%
20.2%
0.3 pts
$ in Billions
Global Technology Services
Global Business Services
Software
Total Operating PTI
* 1Q11 Workforce Rebalancing charge of $221M
1Q10 PLM gain of $591M (Software) and Workforce Rebalancing charge of $557M
www.ibm.com/investor
30
Supplemental Materials
$ in Billions
Cash Flow (FAS 95)
4Q11
4Q10
FY11
FY10
$5.5
$5.3
$15.9
$14.8
Depreciation / Amortization of Intangibles
1.2
1.2
4.8
4.8
Stock-based Compensation
0.2
0.2
0.7
0.6
Working Capital / Other
3.1
3.1
(0.7)
0.0
(2.9)
(3.0)
(0.8)
(0.7)
7.1
6.8
19.8
19.5
(1.1)
(1.1)
(4.1)
(4.0)
0.0
0.1
0.0
0.1
Acquisitions, net of cash acquired
(1.6)
(2.9)
(1.8)
(5.9)
Marketable Securities / Other Investments, net
(0.9)
(0.1)
1.5
1.3
(3.5)
(4.1)
(4.4)
(8.5)
1.2
1.4
2.4
2.3
Dividends
(0.9)
(0.8)
(3.5)
(3.2)
Common Stock Repurchases
(3.6)
(3.6)
(15.0)
(15.4)
0.4
1.1
Net Cash used in Financing Activities
(2.8)
(1.9)
(13.7)
(12.4)
Effect of Exchange Rate changes on Cash
(0.2)
(0.1)
(0.5)
(0.1)
Net Change in Cash & Cash Equivalents
$0.6
$0.8
$1.3
Net Income from Operations
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
Common Stock Transactions - Other
www.ibm.com/investor
2.5
3.8
($1.5)
31
Supplemental Materials
Retirement-Related Charges
Funded Status*
US
WW
101%
99%
98%
96%
YE 2010
YE 2011
Actual ROA Expected ROA
US WW
WW
13.6% 11.7%
7.3%
8.4% 6.1%
7.3%
Discount Rate
WW
4.7%
4.2%
Non-Operating
Operating
Pre-Tax Retirement-Related (Cost) / Income ($B)
$0.5
$0.4
$0.1
($0.4)
($0.8)
($0.4)
($0.0)
($1.9) ($1.8) ($1.9) ($1.9) ($1.9) ($1.9) ($1.9)
2009
2010
2011
2012
2013
2014
2015
2009
2010
2011
2012
2013
2014
2015
Retirement-Related Cash Drivers ($B)
($1.9) ($1.8) ($1.9) ($1.9) ($1.9) ($1.9) ($1.9)
2009
2010
* Tax-qualified plans
2011
2012
2013
2014
Actual
2015
($1.4) ($1.4) ($1.4) ($1.4) ($1.5)
($1.7) ($1.5)
2009
2010
2011
2012
2013
2014
2015
Projection based on Dec ‘11 assumptions
www.ibm.com/investor
32
Supplemental Materials
Retirement-Related Charges
YE 2010
YE 2011
Upside
Downside
Funded Status*
US
WW
101%
99%
98%
96%
Expected ROA
WW
7.3%
7.3%
7.3%
7.3%
Actual ROA
WW
11.7%
6.1%
14.0%
0.0%
Discount Rate
WW
4.7%
4.2%
4.7%
3.7%
Operating
Non-Operating
Pre-Tax Retirement-Related (Cost) / Income ($B)
$0.5
$0.4
$0.1
($0.4)
($0.8)
($0.4)
($0.0)
~$2B
Range
($1.9) ($1.8) ($1.9) ($1.9) ($1.9) ($1.9) ($1.9)
2009
2010
2011
2012
2013
2014
2015
* Tax-qualified plans
2010
2011
Actual
2012
2010
2011
2012
2013
2014
2015
Retirement-Related Cash Drivers ($B)
($1.9) ($1.8) ($1.9) ($1.9) ($1.9) ($1.9) ($1.9)
2009
2009
2013
2014
2015
($1.4) ($1.4) ($1.4) ($1.4) ($1.5)
($1.7) ($1.5)
2009
2010
Projection based on Dec ‘11 assumptions
www.ibm.com/investor
2011
2012
Upside Case
2013
2014
2015
Downside Case
33
Supplemental Materials
Retirement-Related Charges
Non-operating Retirement-Related ($B)
Pre-tax (Cost) / Income
$0.5
$0.4
$0.1
($0.4)
($0.8)
($0.4)
($0.1) ($0.3) ($0.5) ($0.4) $0.4
B/(W) Y/Y
2009
2010
2011
2012
2013
2014
($0.0)
$0.4
2015
Cash Drivers
($1.4) ($1.4) ($1.4) ($1.4) ($1.5)
($1.7) ($1.5)
B/(W) Y/Y
$0.2
2009
Actual
2010
$0.1 ($0.0) ($0.0) $0.0 ($0.1)
2011
2012
2013
2014
2015
Projection based on Dec ‘11 assumptions
www.ibm.com/investor
34
Supplemental Materials
Non-GAAP Supplementary 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. Effective January 1, 2011, 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
35
Supplemental Materials
Non-GAAP Supplementary 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 profit-generating
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.
Other Items
Management presents certain financial results excluding the effects of the following items: (1) certain
income tax settlement payments, (2) the PLM divestiture (representing the March 2010 sale of IBM
activities associated with the sales and support of Dassault Systemes’ product lifecycle management
(PLM) software, including customer contracts and related assets, to Dassault), (3) workforce rebalancing
charges, and (4) Japan and Public Sector results. Management believes that presenting certain financial
information without these items is more representative of the company’s operational performance and
provides additional insight into, and clarifies the basis for, historical and/or future performance, which
may be more useful for investors.
www.ibm.com/investor
36
Supplemental Materials
Non
-GAAP Supplementary Materials
Non-GAAP
Reconciliation of Operating Earnings Per Share
2012
Expectations
IBM GAAP EPS
$14.16+
IBM Operating EPS (Non-GAAP)
$14.85+
Adjustments
Acquisition-Related Charges *
$0.43
Amortization of Purchased Intangibles
$0.41
Other Acquisition-Related Charges
$0.02
Non-Operating Retirement-Related Items
$0.26
* Includes acquisitions closed as of 12/31/2011
The above serves to reconcile the Non-GAAP financial information contained in the “2011 Summary” and “FY 2011 Summary” discussion in the
company’s earnings presentation. See Slide 35 of this presentation for additional information on the use of these Non-GAAP financial measures.
www.ibm.com/investor
37
Supplemental Materials
Non-GAAP Supplementary Materials
GAAP to Operating (Non-GAAP) Bridge – 4Q 2011
$ in Millions, except EPS
Gross Profit
GAAP
Acquisition-related
Adjustments*
Retirement-related
Adjustments**
Operating
(Non-GAAP)
$14,722
$81
($10)
$14,793
2
5,996
23
1,578
SG&A
6,076
RD&E
1,555
Other Income & Expense
(44)
(82)
0
(2)
0
(46)
25
7,388
Total Operating Expense & Other Income
7,448
(85)
Pre-Tax Income
7,274
166
(35)
7,405
Tax ***
1,784
47
(24)
1,808
Net Income
5,490
119
(12)
5,597
Diluted Earnings Per Share
$4.62
$0.10
($0.01)
$4.71
* Includes amortization of purchased Intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, and deal costs
** Includes retirement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition assets, other settlements, curtailments,
multi-employer plans and insolvency insurance
***The tax impact on the Operating (Non-GAAP) Pre-Tax Income is calculated under the same accounting principles applied to the As Reported Pre-Tax Income under ASC 740,
which employs an annual effective tax rate method to the results.
The above serves to reconcile the Non-GAAP financial information contained in the “2011 Summary,” “Key Financial Metrics” and “Expense Summary”
discussions in the company’s earnings presentation. See Slide 35 of this presentation for additional information on the use of these Non-GAAP
financial measures.
www.ibm.com/investor
38
Supplemental Materials
Non-GAAP Supplementary Materials
GAAP to Operating (Non-GAAP) Bridge – 4Q 2010
$ in Millions, except EPS
Gross Profit
GAAP
Acquisition-related
Adjustments*
Retirement-related
Adjustments**
Operating
(Non-GAAP)
$14,227
$82
($60)
$14,249
SG&A
5,951
RD&E
1,578
Other Income & Expense
(42)
(95)
0
28
5,884
33
1,611
(2)
0
61
(44)
Total Operating Expense & Other Income
7,271
(98)
Pre-Tax Income
6,956
180
(121)
7,015
Tax ***
1,698
10
(47)
1,661
Net Income
5,257
170
(74)
5,354
Diluted Earnings Per Share
$4.18
$0.14
($0.06)
7,235
$4.25
* Includes amortization of purchased Intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, and deal costs
** Includes retirement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition assets, other settlements, curtailments,
multi-employer plans and insolvency insurance
***The tax impact on the Operating (Non-GAAP) Pre-Tax Income is calculated under the same accounting principles applied to the As Reported Pre-Tax Income under ASC 740,
which employs an annual effective tax rate method to the results.
The above serves to reconcile the Non-GAAP financial information contained in the “2011 Summary,” “Key Financial Metrics” and “Expense Summary”
discussions in the company’s earnings presentation. See Slide 35 of this presentation for additional information on the use of these Non-GAAP
financial measures.
www.ibm.com/investor
39
Supplemental Materials
Non-GAAP Supplementary Materials
GAAP to Operating (Non-GAAP) Bridge – FY 2011
$ in Millions, except EPS
Gross Profit
GAAP
Acquisition-related
Adjustments*
Retirement-related
Adjustments**
Operating
(Non-GAAP)
$50,138
$341
$2
$50,481
SG&A
23,594
RD&E
6,258
Other Income & Expense
(20)
(309)
0
(13)
88
(25)
0
23,272
6,345
(45)
Total Operating Expense & Other Income
29,135
(334)
74
28,875
Pre-Tax Income
21,003
675
(72)
21,605
5,148
179
(40)
5,287
15,855
495
(32)
16,318
($0.03)
$13.44
Tax ***
Net Income
Diluted Earnings Per Share
$13.06
$0.41
* Includes amortization of purchased intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, and deal costs
** Includes retirement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition assets, other settlements, curtailments,
multi-employer plans and insolvency insurance
***The tax impact on the Operating (Non-GAAP) Pre-Tax Income is calculated under the same accounting principles applied to the As Reported Pre-Tax Income under ASC 740,
which employs an annual effective tax rate method to the results.
The above serves to reconcile the Non-GAAP financial information contained in the “2011 Summary,” “FY 2011 Summary”, “Key Financial Metrics –
FY 2011” and “Expense Summary – FY 2011” discussion in the company’s earnings presentation. See Slide 35 of this presentation for additional
information on the use of these Non-GAAP financial measures.
www.ibm.com/investor
40
Supplemental Materials
Non-GAAP Supplementary Materials
GAAP to Operating (Non-GAAP) Bridge – FY 2010
$ in Millions, except EPS
Gross Profit
GAAP
Acquisition-related
Adjustments*
Retirement-related
Adjustments**
Operating
(Non-GAAP)
$46,014
$260
($204)
$46,070
84
21,628
126
6,152
SG&A
21,837
RD&E
6,026
Other Income & Expense
(787)
(294)
0
(4)
0
(791)
Total Operating Expense & Other Income
26,291
(298)
210
26,202
Pre-Tax Income
19,723
558
(414)
19,867
4,890
116
(162)
4,844
14,833
443
(253)
15,023
$0.34
($0.20)
$11.67
Tax ***
Net Income
Diluted Earnings Per Share
$11.52
* Includes amortization of purchased Intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, and deal costs
** Includes retirement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition assets, other settlements, curtailments,
multi-employer plans and insolvency insurance
***The tax impact on the Operating (Non-GAAP) Pre-Tax Income is calculated under the same accounting principles applied to the As Reported Pre-Tax Income under ASC 740,
which employs an annual effective tax rate method to the results.
The above serves to reconcile the Non-GAAP financial information contained in the “2011 Summary,” “FY 2011 Summary”, “Key Financial Metrics –
FY 2011” and “Expense Summary – FY 2011” discussion in the company’s earnings presentation. See Slide 35 of this presentation for additional
information on the use of these Non-GAAP financial measures.
www.ibm.com/investor
41
Supplemental Materials
Non-GAAP Supplementary Materials
GAAP to Operating (Non-GAAP) Bridge – 4Q 2011
GAAP
Acquisitionrelated *
adjustments
Retirementrelated **
adjustments
Operating
(Non-GAAP)
Gross Profit Margin
49.9%
0.3 pts
(0.0 pts)
50.2 %
PTI Margin
24.7%
0.6 pts
(0.1 pts)
25.1 %
Tax Rate ***
24.5 %
0.1 pts
(0.2 pts)
24.4 %
Net Income Margin
18.6 %
0.4 pts
(0.0 pts)
19.0%
* Includes amortization of purchased Intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, and deal costs
** Includes retirement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition assets, other settlements,
curtailments, multi-employer plans and insolvency insurance
***The tax impact on the Operating (Non-GAAP) Pre-Tax Income is calculated under the same accounting principles applied to the As Reported Pre-Tax Income under
ASC 740, which employs an annual effective tax rate method to the results.
The above serves to reconcile the Non-GAAP financial information contained in the “2011 Summary” and “Key Financial Metrics” discussions in the
company’s earnings presentation. See Slide 35 of this presentation for additional information on the use of these Non-GAAP financial measures.
www.ibm.com/investor
42
Supplemental Materials
Non-GAAP Supplementary Materials
GAAP to Operating (Non-GAAP) Bridge – 4Q 2010
GAAP
Acquisitionrelated *
adjustments
Retirementrelated **
adjustments
Operating
(Non-GAAP)
Gross Profit Margin
49.0%
0.3 pts
(0.2 pts)
49.1 %
PTI Margin
24.0%
0.6 pts
(0.4 pts)
24.2 %
Tax Rate ***
24.4 %
(0.5 pts)
(0.3 pts)
23.7 %
Net Income Margin
18.1 %
0.6 pts
(0.3 pts)
18.5 %
* Includes amortization of purchased Intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, and deal costs
** Includes retirement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition assets, other settlements,
curtailments, multi-employer plans and insolvency insurance
***The tax impact on the Operating (Non-GAAP) Pre-Tax Income is calculated under the same accounting principles applied to the As Reported Pre-Tax Income under
ASC 740, which employs an annual effective tax rate method to the results.
The above serves to reconcile the Non-GAAP financial information contained in the “2011 Summary” and “Key Financial Metrics” discussions in the
company’s earnings presentation. See Slide 35 of this presentation for additional information on the use of these Non-GAAP financial measures.
www.ibm.com/investor
43
Supplemental Materials
Non-GAAP Supplementary Materials
GAAP to Operating (Non-GAAP) Bridge – FY 2011
GAAP
Acquisitionrelated *
adjustments
Retirementrelated **
adjustments
Operating
(Non-GAAP)
Gross Profit Margin
46.9%
0.3 pts
0.0 pts
47.2%
PTI Margin
19.6%
0.6 pts
(0.1 pts)
20.2%
Tax Rate ***
24.5%
0.1 pts
(0.1 pts)
24.5%
Net Income Margin
14.8 %
0.5 pts
(0.0 pts)
15.3%
* Includes amortization of purchased Intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, and deal costs
** Includes retirement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition assets, other settlements,
curtailments, multi-employer plans and insolvency insurance
***The tax impact on the Operating (Non-GAAP) Pre-Tax Income is calculated under the same accounting principles applied to the As Reported Pre-Tax Income under
ASC 740, which employs an annual effective tax rate method to the results.
The above serves to reconcile the Non-GAAP financial information contained in the “2011 Summary”, “FY 2011 Summary” and “Key Financial Metrics –
FY 2011” discussion in the company’s earnings presentation. See Slide 35 of this presentation for additional information on the use of these Non-GAAP
financial measures.
www.ibm.com/investor
44
Supplemental Materials
Non-GAAP Supplementary Materials
GAAP to Operating (Non-GAAP) Bridge – FY 2010
GAAP
Acquisitionrelated *
adjustments
Retirementrelated **
adjustments
Operating
(Non-GAAP)
Gross Profit Margin
46.1%
0.3 pts
(0.2 pts)
46.1 %
PTI Margin
19.7%
0.6 pts
(0.4 pts)
19.9 %
Tax Rate ***
24.8%
(0.1 pts)
(0.3 pts)
24.4 %
Net Income Margin
14.9 %
0.4 pts
(0.3 pts)
15.0 %
* Includes amortization of purchased Intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, and deal costs
** Includes retirement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition assets, other settlements,
curtailments, multi-employer plans and insolvency insurance
***The tax impact on the Operating (Non-GAAP) Pre-Tax Income is calculated under the same accounting principles applied to the As Reported Pre-Tax Income under
ASC 740, which employs an annual effective tax rate method to the results.
The above serves to reconcile the Non-GAAP financial information contained in the “2011 Summary”, “FY 2011 Summary” and “Key Financial Metrics –
FY 2011” discussion in the company’s earnings presentation. See Slide 35 of this presentation for additional information on the use of these Non-GAAP
financial measures.
www.ibm.com/investor
45
Supplemental Materials
Non-GAAP Supplementary Materials
Reconciliation of Revenue Growth
4Q11 Yr/Yr
Japan
Canada
Germany
UK
Spain
Growth Markets - Services
As Rptd
@CC
(3%)
12%
3%
8%
8%
11%
(9%)
13%
4%
9%
9%
13%
FY11 Yr/Yr
Japan
As Rptd
2%
@CC
(7%)
The above serves to reconcile the Non-GAAP financial information contained in the “2011 Summary,” “Revenue by Geography” and
“Revenue by Geography – FY 2011” discussions in the company’s earnings presentation. See Slide 35 of this presentation for additional
information on the use of these Non-GAAP financial measures.
www.ibm.com/investor
46
Supplemental Materials
Non-GAAP Supplementary Materials
Reconciliation of GBS Revenue Growth
As Rptd
As Rptd
(Excl. Japan and
Public Sector)
@CC
(Excl. Japan and
Public Sector)
4Q11
3%
8%
9%
FY11
6%
12%
8%
The above serves to reconcile the Non-GAAP financial information contained in the “Services Segment” discussion in the company’s earnings
presentation. See Slides 35-36 of this presentation for additional information on the use of these Non-GAAP financial measures.
www.ibm.com/investor
47
Supplemental Materials
Non-GAAP Supplementary Materials
Reconciliation of B/(W) Yr/Yr Expense Drivers – 4Q11
GAAP
Non-GAAP
Adjustments
Operating
(Non-GAAP)
0 pts
0 pts
0 pts
Acquisitions
(1 pts)
0 pts
(1 pts)
Base
(1 pts)
0 pts
(1 pts)
0 pts
0 pts
0 pts
(2 pts)
0 pts
(2 pts)
3 pts
1 pts
3 pts
0 pts
0 pts
0 pts
Acquisitions
(1 pts)
0 pts
(1 pts)
Base
(1 pts)
0 pts
(1 pts)
SG&A
Currency
RD&E
Currency
Acquisitions
Base
Operating Expense & Other Income
Currency
The above serves to reconcile the Non-GAAP financial information contained in the “Expense Summary” discussion in the company’s earnings
presentation. See Slide 35 of this presentation for additional information on the use of these Non-GAAP financial measures.
www.ibm.com/investor
48
Supplemental Materials
Non-GAAP Supplementary Materials
Reconciliation of B/(W) Yr/Yr Expense Drivers – FY11
GAAP
Non-GAAP
Adjustments
Operating
(Non-GAAP)
Currency
(3 pts)
0 pts
(3 pts)
Acquisitions
(3 pts)
0 pts
(3 pts)
Base
(2 pts)
0 pts
(2 pts)
Currency
(2 pts)
0 pts
(2 pts)
Acquisitions
(4 pts)
0 pts
(4 pts)
2 pts
1 pts
2 pts
Currency
(4 pts)
0 pts
(4 pts)
Acquisitions
(3 pts)
0 pts
(3 pts)
Base
(3 pts)
0 pts
(3 pts)
SG&A
RD&E
Base
Operating Expense & Other Income
The above serves to reconcile the Non-GAAP financial information contained in the “Expense Summary – FY 2011” discussion in the company’s
earnings presentation. See Slide 35 of this presentation for additional information on the use of these Non-GAAP financial measures.
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Supplemental Materials
Non-GAAP Supplementary Materials
Reconciliation of Debt-to-Capital Ratio
FY11
FY10
Non-Global Financing Debt / Capital
32%
23%
IBM Consolidated Debt / Capital
61%
55%
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 36 of this presentation for additional information on the use of these Non-GAAP financial
measures.
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50
Supplemental Materials
Non-GAAP Supplementary Materials
Reconciliation of Operating EPS Bridge 4Q10 to 4Q11
GAAP
Acquisitionrelated
Adjustments*
Retirement-related
Adjustments**
Operating
(Non-GAAP)
4Q10 EPS
$4.18
$0.14
($0.06)
$4.25
Revenue growth @
actual
0.07
0.00
0.00
0.07
Margin expansion
Gross Margin
Expense
Tax
0.16
(0.04)
(0.01)
0.00
0.00
(0.04)
0.03
0.02
0.00
0.19
(0.02)
(0.04)
Share repurchases
0.26
0.00
0.00
0.26
4Q11 EPS
$4.62
$0.10
($0.01)
$4.71
* Includes amortization of purchased intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired
companies, deal costs
** Includes retirement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition
assets, other settlements, curtailments, multi-employer plans and insolvency insurance
The above serves to reconcile the Non-GAAP financial information contained in the “Operating EPS Bridge – 4Q10 to 4Q11” discussion in the
company’s earnings presentation. See Slide 35 of this presentation for additional information on the use of these Non-GAAP financial measures.
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51
Supplemental Materials
Non-GAAP Supplementary Materials
Reconciliation of Operating EPS Bridge FY10 to FY11
GAAP
Acquisitionrelated
Adjustments*
Retirement-related
Adjustments**
Operating
(Non-GAAP)
$11.52
$0.34
($0.20)
$11.67
0.81
0.02
(0.01)
0.82
Margin expansion
Gross Margin
Expense
Tax
0.51
(0.58)
0.05
0.04
0.01
(0. 02)
0.13
0.09
(0.04)
0.68
(0.49)
(0.01)
Share repurchases
0.75
0.02
0.00
0.77
$13.06
$0.41
($0.03)
$13.44
FY10 EPS
Revenue growth @
actual
FY11 EPS
* Includes amortization of purchased intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired
companies, deal costs
** Includes retirement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition
assets, other settlements, curtailments, multi-employer plans and insolvency insurance
The above serves to reconcile the Non-GAAP financial information contained in the “Operating EPS Bridge – FY10 to FY11” discussion in the
company’s earnings presentation. See Slide 35 of this presentation for additional information on the use of these Non-GAAP financial measures.
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52
Supplemental Materials
Non-GAAP Supplementary Materials
Reconciliation of Consolidated EPS
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
EPS
(As Reported)
$3.88
$3.94
$2.43
$3.76
$4.39
$4.91
$6.05
$7.15
$8.89
$10.01
$11.52
$13.06
Acquisition
Related
$0.05
$0.04
$0.07
$0.13
$0.13
$0.14
$0.14
$0.17
$0.29
$0.27
$0.34
$0.41
Non-Operating
Retirement Related
($0.62)
($0.72)
($0.68)
($0.48)
($0.19)
$0.13
$0.12
$0.14
($0.32)
($0.25)
($0.20)
($0.03)
Operating EPS
$3.32
$3.26
$1.81
$3.41
$4.33
$5.18
$6.31
$7.46
$8.86
$10.03
$11.67
$13.44
The above serves to reconcile the Non-GAAP financial information contained in the “IBM Transformation Continues” discussion in the
company’s earnings presentation. See Slide 35 of this presentation for additional information on the use of these Non-GAAP financial
measures.
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53
Supplemental Materials
Non-GAAP Supplementary Materials
Reconciliation of Segment Pre-Tax Income and Margin Growth
FY11 Yr/Yr
As Rptd
Workforce
Rebalancing
14%
18%
5%
12%
3%
(3 pts)
(4 pts)
(1 pt)
(3 pts)
0 pts
PLM Gain
Normalized
Pre-Tax Income Growth
Global Technology Services
Global Business Services
Software
Systems & Technology
Global Financing
0
0
7
0
0
pts
pts
pts
pts
pts
11%
14%
12%
9%
3%
Pre-Tax Margin Growth
Global Technology Services
Global Business Services
Software
Systems & Technology
Global Financing
1.0 pt
1.6 pts
(1.9 pts)
0.5 pts
0.0 pts
(0.4
(0.4
(0.2
(0.2
0.0
pts)
pts)
pts)
pts)
pts
0.0
0.0
2.3
0.0
0.0
pts
pts
pts
pts
pts
0.6
1.1
0.2
0.3
0.0
pts
pts
pts
pts
pts
The above serves to reconcile the Non-GAAP financial information contained in the “Pre-Tax Income by Segment – FY 2011” discussion
in the company’s earnings presentation. See Slide 36 of this presentation for additional information on the use of these Non-GAAP
financial measures.
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54
www.ibm.com/investor
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