IBM (NYSE:IBM)
Highlights
- Diluted EPS from continuing operations:
GAAP of $2.92; Operating (non-GAAP) of $3.30
- Revenue of $19.2 billion
- Strategic imperatives revenue of $34.9
billion over the trailing 12 months, up 10 percent; represents 45
percent of IBM revenue-- Third-quarter revenue up 11 percent (up 10
percent adjusting for currency)
- Cloud revenue of $15.8 billion over the
trailing 12 months, up 25 percent year to year (up 26 percent
adjusting for currency)-- As-a-service annual exit run rate of $9.4
billion in the quarter, up 25 percent year to year (up 24 percent
adjusting for currency)
- Maintains full-year EPS and free cash
flow expectations
IBM (NYSE:IBM) today announced third-quarter earnings
results.
"In the third quarter we achieved double-digit
growth in our strategic imperatives, extended our enterprise cloud
leadership, and expanded our cognitive solutions business," said
Ginni Rometty, IBM chairman, president and chief executive officer.
"There was enthusiastic adoption of IBM's new z Systems mainframe,
which delivers breakthrough security capabilities to our
clients.
THIRD QUARTER 2017
Gross Profit Diluted EPS Net
Income Margin GAAP from Continuing
Operations $2.92 $2.7B 45.9% Year/Year
-2% -4% -0.9Pts
Operating (Non-GAAP)
$3.30 $3.1B 47.6% Year/Year 0%
-2% -0.4Pts
As-a-service Strategic annual
exit REVENUE Total IBM
Imperatives Cloud run rate As
reported (US$) $19.2B $8.8B $4.1B
$9.4B Year/Year 0% 11% 20% 25%
Year/Year adjusting for currency -1% 10% 20%
24%
"During the first three quarters of the year, our strong free
cash flow has enabled us to maintain our R&D investments and to
expand IBM's cloud and cognitive capabilities through capital
investments," said Martin Schroeter, IBM senior vice president and
chief financial officer. "In addition, we have returned nearly $8
billion to shareholders through dividends and share
repurchases."
Strategic Imperatives Revenue
Third-quarter cloud revenues increased 20 percent to $4.1
billion. Cloud revenue over the last 12 months was $15.8 billion,
including $8.8 billion delivered as-a-service and $7.0 billion for
hardware, software and services to enable IBM clients to implement
comprehensive cloud solutions. The annual exit run rate for
as-a-service revenue increased to $9.4 billion from $7.5 billion in
the third quarter of 2016. In the quarter, revenues from analytics
increased 5 percent. Revenues from mobile increased 7 percent and
revenues from security increased 51 percent (up 49 percent
adjusting for currency).
Full-Year 2017 Expectations
The company continues to expect operating (non-GAAP) diluted
earnings per share of at least $13.80 and GAAP diluted earnings per
share of at least $11.95. Operating (non-GAAP) diluted earnings per
share exclude $1.85 per share of charges for amortization of
purchased intangible assets, other acquisition-related charges and
retirement-related charges. IBM continues to expect free cash flow
to be relatively flat year to year.
Cash Flow and Balance Sheet
In the third quarter, the company generated net cash from
operating activities of $3.6 billion, or $3.3 billion excluding
Global Financing receivables. IBM’s free cash flow was $2.5
billion. IBM returned $1.4 billion in dividends and $0.9 billion of
gross share repurchases to shareholders. At the end of September
2017, IBM had $1.5 billion remaining in the current share
repurchase authorization.
IBM ended the third quarter of 2017 with $11.5 billion of cash
on hand. Debt totaled $45.6 billion, including Global Financing
debt of $29.4 billion. The balance sheet remains strong and is well
positioned over the long term.
Segment Results for Third Quarter
- Cognitive Solutions (includes solutions
software and transaction processing software) -- revenues of $4.4
billion, up 4 percent (up 3 percent adjusting for currency), driven
by solutions software, including security and analytics, and
transaction processing software.
- Global Business Services (includes
consulting, global process services and application management) --
revenues of $4.1 billion, down 2 percent. Strategic imperatives
revenue grew 10 percent led by the cloud practice.
- Technology Services & Cloud
Platforms (includes infrastructure services, technical support
services and integration software) -- revenues of $8.5 billion,
down 3 percent (down 4 percent adjusting for currency). Strategic
imperatives revenue grew 12 percent, driven by hybrid cloud
services, security and mobile.
- Systems (includes systems hardware and
operating systems software) -- revenues of $1.7 billion, up 10
percent, driven by growth in z Systems and storage.
- Global Financing (includes financing
and used equipment sales) -- revenues of $427 million, up 4 percent
(up 3 percent adjusting for currency).
Expense and Other Income
Third-quarter GAAP expense and other income year-to-year
performance reflects lower IP income of $221 million, an impact of
$105 million year to year related to several commercial disputes
and a benefit of $91 million resulting from the favorable
resolution of pension-related litigation in the U.K.
Operating (non-GAAP) expense and other income for the third
quarter of 2017 compared to 2016 reflects lower IP income of $221
million and an impact of $105 million year to year related to
several commercial disputes.
Tax Rate
IBM's third-quarter effective GAAP and operating (non-GAAP) tax
rates were 11.0 percent and 14.7 percent, respectively. The company
continues to expect a full-year effective operating (non-GAAP) tax
rate of 15 percent, plus or minus 3 points, excluding discrete
items.
Year-To-Date 2017 Results
Consolidated diluted earnings per share were $7.24 compared to
$7.67, down 6 percent year to year. Consolidated net income was
$6.8 billion compared to $7.4 billion in the year-ago period, a
decrease of 8 percent. Revenues from continuing operations for the
nine-month period totaled $56.6 billion, a decrease of 3 percent
year to year (decrease of 2 percent adjusting for currency)
compared with $58.1 billion for the first nine months of 2016.
Operating (non-GAAP) diluted earnings per share from continuing
operations were $8.64 compared with $8.59 per diluted share for the
2016 period, an increase of 1 percent. Operating (non-GAAP) net
income for the nine months ended September 30, 2017 was $8.1
billion compared with $8.3 billion in the year-ago period, a
decrease of 2 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 client spending budgets; the
company’s failure to meet growth and productivity objectives, a
failure of the company’s innovation initiatives; risks from
investing in growth opportunities; failure of the company’s
intellectual property portfolio to prevent competitive offerings
and the failure of the company to obtain necessary licenses;
cybersecurity and data privacy considerations; fluctuations in
financial results, 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;
product quality issues; impacts of 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 and
ecosystems; the company’s ability to successfully manage
acquisitions, alliances and dispositions; risks from legal
proceedings; risk factors related to IBM securities; and other
risks, uncertainties and factors discussed in the company’s
Form 10-Qs, Form 10-K and in the company’s other filings
with the U.S. Securities and Exchange Commission (SEC) or in
materials incorporated therein by reference. Any forward-looking
statement in this release speaks only as of the date on which it is
made. The company assumes no obligation to update or revise any
forward-looking statements.
Presentation of Information in this Press Release
In an effort to provide investors with additional information
regarding the company’s results as determined by generally accepted
accounting principles (GAAP), the company has also disclosed in
this press release the following non-GAAP information which
management believes provides useful information to investors:
IBM results --
- presenting operating (non-GAAP)
earnings per share amounts and related income statement items;
- adjusting for free cash flow;
- adjusting for currency (i.e., at
constant currency).
Free cash flow guidance is derived using an estimate of profit,
working capital and operational cash outflows. The company views
Global Financing receivables as a profit-generating investment,
which it seeks to maximize and therefore it is not considered when
formulating guidance for free cash flow. As a result, the company
does not estimate a GAAP Net Cash from Operations expectation
metric.
The rationale for management’s use of these non-GAAP measures is
included in Exhibit 99.2 in 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 5:00 p.m. EDT, today. The Webcast may be accessed via
a link at http://www.ibm.com/investor/events/earnings/3q17.html.
Presentation charts will be available shortly before the
Webcast.
Financial Results Below (certain amounts may not add due
to use of rounded numbers; percentages presented are calculated
from the underlying whole-dollar amounts).
INTERNATIONAL BUSINESS MACHINES CORPORATION COMPARATIVE
FINANCIAL RESULTS (Unaudited; Dollars in millions except per
share amounts) Three Months Ended
Nine Months Ended September 30, September 30,
2017 2016 2017 2016
REVENUE Cognitive Solutions $ 4,400 $ 4,235 $
13,021 $ 12,889 Global Business Services 4,093 4,191 12,196 12,578
Technology Services & Cloud Platforms 8,457 8,748 25,079 26,029
Systems 1,721 1,558 4,863 5,184 Global Financing 427 412 1,246
1,245 Other 56 81 192
223
TOTAL REVENUE 19,153 19,226
56,597 58,149
GROSS PROFIT 8,800 9,013 25,365 27,401
GROSS PROFIT MARGIN Cognitive Solutions 78.7 % 80.4 %
78.4 % 81.5 % Global Business Services 27.3 % 28.8 % 25.3 % 27.0 %
Technology Services & Cloud Platforms 41.1 % 42.0 % 40.2 % 41.5
% Systems 53.6 % 51.1 % 51.5 % 55.1 % Global Financing 25.2 % 37.8
% 29.2 % 39.6 %
TOTAL GROSS PROFIT MARGIN 45.9 % 46.9
% 44.8 % 47.1 %
EXPENSE AND OTHER INCOME
S,G&A 4,648 4,732 14,959 16,093 R,D&E 1,342 1,397 4,360
4,320 Intellectual property and custom development income (308 )
(528 ) (1,118 ) (1,110 ) Other (income) and expense (114 ) (8 )
(218 ) 281 Interest expense 168 158 451 473
TOTAL EXPENSE AND OTHER INCOME 5,735
5,751 18,434 20,056
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 3,065 3,263 6,931 7,345 Pre-tax margin
16.0 % 17.0 % 12.2 % 12.6 % Provision for / (Benefit from) income
taxes 339 409 120 (31 ) Effective tax rate 11.0 % 12.5 % 1.7 % (0.4
%)
INCOME FROM CONTINUING OPERATIONS $ 2,726 $ 2,854
$ 6,811 $ 7,375
DISCONTINUED OPERATIONS Income/(Loss)
from discontinued operations, net of taxes (0 )
(1 ) (3 ) (4 )
NET INCOME
$ 2,726 $ 2,853 $ 6,807 $ 7,371
EARNINGS PER SHARE OF COMMON STOCK:
Assuming Dilution Continuing Operations $ 2.92 $ 2.98 $ 7.24 $ 7.67
Discontinued Operations $ 0.00 $ 0.00 $ 0.00
$ 0.00 TOTAL $ 2.92 $ 2.98
$ 7.24 $ 7.67 Basic Continuing
Operations $ 2.93 $ 2.99 $ 7.28 $ 7.70 Discontinued Operations $
0.00 $ 0.00 $ 0.00 $ 0.00
TOTAL $ 2.93 $ 2.99 $ 7.28 $
7.70
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (M's): Assuming Dilution 933.2 957.3 940.2 960.7
Basic 929.4 954.0 935.6 957.7
INTERNATIONAL BUSINESS
MACHINES CORPORATION CONDENSED CONSOLIDATED BALANCE
SHEET (Unaudited) At
At (Dollars in Millions) September 30,
December 31, 2017 2016 ASSETS:
Current Assets: Cash and cash equivalents $ 10,915 $ 7,826
Marketable securities 600 701 Notes and accounts receivable -
trade, net 8,150 9,182 Short-term financing receivables, net 18,050
19,006 Other accounts receivable, net 926 1,057 Inventory 1,711
1,553 Prepaid expenses and other current assets 4,389 4,564
Total Current Assets 44,742 43,888
Property, plant and equipment, net 11,057 10,830 Long-term
financing receivables, net 8,459 9,021 Prepaid pension assets 4,521
3,034 Deferred taxes 7,289 5,224 Goodwill and intangibles, net
40,763 40,887 Investments and sundry assets 4,806 4,585
Total Assets $ 121,636 $
117,470 LIABILITIES:
Current Liabilities: Taxes $ 3,038 $ 3,235 Short-term debt
4,299 7,513 Accounts payable 5,442 6,209 Deferred income 10,649
11,035 Other liabilities 8,270 8,283
Total Current
Liabilities 31,697 36,275 Long-term debt
41,327 34,655 Retirement related obligations 17,554 17,070 Deferred
income 3,579 3,600 Other liabilities 7,723 7,477
Total Liabilities 101,879 99,078
EQUITY: IBM Stockholders' Equity: Common stock
54,395 53,935 Retained earnings 155,565 152,759 Treasury stock --
at cost (162,812 ) (159,050 ) Accumulated other comprehensive
income/(loss) (27,521 ) (29,398 )
Total IBM
stockholders' equity 19,627 18,246
Noncontrolling interests 130 146
Total Equity
19,757 18,392 Total Liabilities and
Equity $ 121,636 $ 117,470
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW ANALYSIS (Unaudited) Three
Months Ended Nine Months Ended (Dollars in
Millions) September 30, September 30, 2017
2016 2017 2016 Net
Cash Provided by Operating Activities per GAAP: $
3,570 $ 4,118 * ** $
10,991 $ 13,105 * ** Less:
change in Global Financing (GF) Receivables 258 835 * 2,468 3,336 *
Capital Expenditures, Net (780 ) (851 ) (2,347 ) (2,801 )
Free Cash Flow 2,532 2,431 **
6,176 6,969 ** Acquisitions (274 ) (40
) (442 ) (5,445 ) Divestitures 6 0 35 35 Dividends (1,396 ) (1,337
) (4,119 ) (3,927 ) Share Repurchase (949 ) (856 ) (3,674 ) (2,632
) Non-GF Debt (467 ) (1,696 ) 1,896 3,365 Other (includes GF
Receivables and GF Debt) (233 ) 850
* ** 3,117 3,408
*
** Change in Cash, Cash Equivalents and
Short-term Marketable Securities ($780
) ($648 ) $ 2,988
$ 1,773 * Revised classification of
certain financing receivables. ** Reclassified to reflect adoption
of the FASB guidance on stock-based compensation.
INTERNATIONAL BUSINESS MACHINES CORPORATION CASH FLOW
(Unaudited) Three Months Ended
Nine Months Ended (Dollars in Millions) September
30, September 30, 2017 2016
2017 2016 Net Income from
Operations $ 2,726 $ 2,853 $
6,807 $ 7,371 Depreciation/Amortization of
Intangibles 1,175 1,126 3,392 3,253 Stock-based Compensation 123
142 388 403 Working Capital / Other (713 ) (839 ) ** (2,064 )
(1,258 ) ** Global Financing A/R 258 835 * 2,468 3,336 *
Net
Cash Provided by Operating Activities $ 3,570
$ 4,118 * ** $ 10,991 $
13,105 * ** Capital Expenditures, net of payments
& proceeds (780 ) (851 ) (2,347 ) (2,801 ) Divestitures, net of
cash transferred 6 - 35 35 Acquisitions, net of cash acquired (274
) (40 ) (442 ) (5,445 ) Marketable Securities / Other Investments,
net (875 ) (60 ) * (523 ) 921 *
Net Cash Used in Investing
Activities ($1,923 ) ($951 )
* ($3,278 ) ($7,289 ) *
Debt, net of payments & proceeds (446 ) (2,041 ) 2,310 1,888
Dividends (1,396 ) (1,337 ) (4,119 ) (3,927 ) Common Stock
Repurchases (949 ) (856 ) (3,674 ) (2,632 ) Common Stock
Transactions - Other 35 49
** (15 ) 52
** Net Cash
Used in Financing Activities ($2,756 )
($4,185 ) ** ($5,499 )
($4,619 ) ** Effect of Exchange Rate changes
on Cash
328 41 875 155 Net Change in
Cash & Cash Equivalents ($781 ) ($978
) $ 3,089 $ 1,352 *
Revised classification of certain financing receivables. **
Reclassified to reflect adoption of the FASB guidance on
stock-based compensation.
INTERNATIONAL BUSINESS MACHINES
CORPORATION SEGMENT DATA (Unaudited)
THIRD - QUARTER 2017 Cognitive Solutions &
Industry Services
Technology Global Services & (Dollars
in Millions) Cognitive Business Cloud
Global Solutions Services
Platforms Systems Financing
Revenue External $ 4,400 $ 4,093 $ 8,457 $ 1,721 $ 427
Internal 629 92
164 227 272
Total Segment Revenue $ 5,030 $ 4,185 $ 8,621 $ 1,948 $ 698
Pre-tax Income from Continuing Operations 1,649 453
1,192 339 244
Pre-tax margin 32.8 % 10.8 % 13.8 %
17.4 % 34.9 %
Change YTY Revenue - External
3.9 % (2.3 )% (3.3 )%
10.4 % 3.7 % Change YTY Revenue -
External @constant currency 3.0 % (2.2
)% (4.1 )% 9.6 % 2.8
% THIRD - QUARTER 2016 Cognitive
Solutions & Industry Services Technology
Global Services & (Dollars in Millions)
Cognitive Business Cloud Global
Solutions Services Platforms
Systems Financing Revenue
External $ 4,235 $ 4,191 $ 8,748 $ 1,558 $ 412 Internal 667
93 180
176 352
Total Segment
Revenue $ 4,902 $ 4,284 $ 8,929 $ 1,734 $ 763
Pre-tax
Income from Continuing Operations 1,574 544 1,288 136 355
Pre-tax margin 32.1 % 12.7 % 14.4 % 7.8 % 46.5 %
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA (Unaudited) NINE -
MONTHS 2017 Cognitive Solutions &
Industry Services Technology
Global Services & (Dollars in Millions)
Cognitive Business Cloud Global
Solutions Services Platforms
Systems Financing Revenue
External $ 13,021 $ 12,196 $ 25,079 $ 4,863 $ 1,246 Internal
2,001 271 497
571 925
Total Segment
Revenue $ 15,022 $ 12,467 $ 25,576 $ 5,434 $ 2,171
Pre-tax Income from Continuing Operations 4,539 1,065 2,888
227 836
Pre-tax margin 30.2 % 8.5 % 11.3 % 4.2 % 38.5
%
Change YTY Revenue - External 1.0 %
(3.0 )% (3.7 )% (6.2 )%
0.1 % Change YTY Revenue - External @constant
currency 1.3 % (1.9 )% (3.3
)% (5.9 )% (0.4 )%
NINE - MONTHS 2016 Cognitive Solutions &
Industry Services Technology Global
Services & (Dollars in Millions) Cognitive
Business Cloud Global Solutions
Services Platforms Systems
Financing Revenue External $ 12,889 $ 12,578 $
26,029 $ 5,184 $ 1,245 Internal 1,929
310 501 594
1,340
Total Segment Revenue $ 14,818 $ 12,888
$ 26,530 $ 5,778 $ 2,585
Pre-tax Income from Continuing
Operations 4,039 1,210 2,825 354 1,208
Pre-tax
margin 27.3 % 9.4 % 10.6 % 6.1 % 46.7 %
INTERNATIONAL
BUSINESS MACHINES CORPORATION U.S. GAAP TO OPERATING
(Non-GAAP) RESULTS RECONCILIATION (Unaudited; Dollars in
millions except per share amounts) THIRD -
QUARTER 2017 CONTINUING OPERATIONS
Acquisition- Retirement- Related
Related Operating GAAP
Adjustments* Adjustments**
(Non-GAAP) Gross Profit $ 8,800 $ 114 $ 203 $
9,116
Gross Profit Margin 45.9 % 0.6Pts 1.1Pts 47.6 %
S,G&A 4,648 (125 ) (53 ) 4,470
R,D&E 1,342 - (51 ) 1,291
Other (Income) &
Expense (114 ) 0 - (114 )
Total Expense & Other
(Income) 5,735 (125 ) (103 ) 5,507
Pre-tax Income
from Continuing Operations 3,065 238 306 3,609
Pre-tax Income Margin from Continuing Operations 16.0 %
1.2Pts 1.6Pts 18.8 %
Provision for / (Benefit from)
Income Taxes*** 339 79 113 531
Effective Tax Rate
11.0 % 1.5Pts 2.2Pts 14.7 %
Income from Continuing
Operations 2,726 159 193 3,079
Income Margin from
Continuing Operations 14.2 % 0.8Pts 1.0Pts 16.1 %
Diluted Earnings Per Share: Continuing Operations $ 2.92 $
0.17 $ 0.21 $ 3.30
THIRD - QUARTER 2016
CONTINUING OPERATIONS Acquisition- Retirement-
Related Related Operating GAAP
Adjustments* Adjustments**
(Non-GAAP) Gross Profit $ 9,013 $ 129 $ 79 $
9,221
Gross Profit Margin 46.9 % 0.7Pts 0.4Pts 48.0 %
S,G&A 4,732 (138 ) (53 ) 4,541
R,D&E 1,397 - (7 ) 1,390
Other (Income) &
Expense (8 ) (2 ) - (10 )
Total Expense & Other
(Income) 5,751 (140 ) (60 ) 5,550
Pre-tax Income from
Continuing Operations 3,263 269 139 3,671
Pre-tax
Income Margin from Continuing Operations 17.0 % 1.4Pts 0.7Pts
19.1 %
Provision for / (Benefit from) Income Taxes***
409 73 40 521
Effective Tax Rate 12.5 % 1.1Pts 0.6Pts
14.2 %
Income from Continuing Operations 2,854 197 99
3,149
Income Margin from Continuing Operations 14.8 %
1.0Pts 0.5Pts 16.4 %
Diluted Earnings Per Share:
Continuing Operations $ 2.98 $ 0.21 $ 0.10 $ 3.29
*
Includes amortization of purchased
intangible assets, in process R&D, severance cost for acquired
employees, vacant space for acquired companies, deal costs and
acquisition integration tax charges.
**
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.
***
Tax impact on operating (non-GAAP)
pre-tax income from continuing operations 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.
INTERNATIONAL BUSINESS MACHINES CORPORATION U.S. GAAP TO
OPERATING (Non-GAAP) RESULTS RECONCILIATION (Unaudited;
Dollars in millions except per share amounts)
NINE - MONTHS 2017 CONTINUING OPERATIONS
Acquisition- Retirement- Related
Related Operating GAAP
Adjustments* Adjustments**
(Non-GAAP) Gross Profit $ 25,365 $ 349 $ 591 $
26,305
Gross Profit Margin 44.8 % 0.6Pts 1.0Pts 46.5
%
S,G&A 14,959 (393 ) (326 ) 14,240
R,D&E 4,360 - (148 ) 4,212
Other (Income)
& Expense (218 ) (7 ) - (225 )
Total Expense
& Other (Income) 18,434 (401 ) (474 ) 17,559
Pre-tax Income from Continuing Operations 6,931 750 1,065
8,746
Pre-tax Income Margin from Continuing
Operations 12.2 % 1.3Pts 1.9Pts 15.5 %
Provision for
/ (Benefit from) Income Taxes*** 120 212 288 621
Effective Tax Rate 1.7 % 2.3Pts 3.1Pts 7.1 %
Income from Continuing Operations 6,811 537 777 8,125
Income Margin from Continuing Operations 12.0 % 0.9Pts
1.4Pts 14.4 %
Diluted Earnings Per Share: Continuing
Operations $ 7.24 $ 0.57 $ 0.83 $ 8.64
NINE -
MONTHS 2016 CONTINUING OPERATIONS Acquisition-
Retirement- Related Related Operating
GAAP Adjustments* Adjustments**
(Non-GAAP) Gross Profit $ 27,401 $ 371
$ 238 $ 28,010
Gross Profit Margin 47.1 % 0.6Pts
0.4Pts 48.2 %
S,G&A 16,093 (365 ) (183 ) 15,545
R,D&E 4,320 - (23 ) 4,297
Other
(Income) & Expense 281 (7 ) - 274
Total Expense
& Other (Income) 20,056 (372 ) (206 ) 19,478
Pre-Tax Income from Continuing Operations 7,345 743 444
8,532
Pre-tax Income Margin from Continuing
Operations 12.6 % 1.3Pts 0.8Pts 14.7 %
Provision for
/ (Benefit from) Income Taxes*** (31 ) 201 106 277
Effective Tax Rate (0.4 )% 2.4Pts 1.3Pts 3.2 %
Income from Continuing Operations 7,375 542 338 8,255
Income Margin from Continuing Operations 12.7 % 0.9Pts
0.6Pts 14.2 %
Diluted Earnings Per Share: Continuing
Operations $ 7.67 $ 0.57 $ 0.35 $ 8.59
*
Includes amortization of purchased
intangible assets, in process R&D, severance cost for acquired
employees, vacant space for acquired companies, deal costs and
acquisition integration tax charges.
**
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.
***
Tax impact on operating (non-GAAP)
pre-tax income from continuing operations 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.
INTERNATIONAL BUSINESS MACHINES CORPORATION
RECONCILIATION OF OPERATING EARNINGS PER SHARE
(Unaudited)
2017
EPS
Guidance
Expectations IBM GAAP EPS at least $11.95 IBM
Operating EPS (non-GAAP) at least $13.80 Adjustments
Acquisition-related charges * $0.75 Non-Operating
Retirement-Related Items $1.10 * Includes acquisitions
through September 30, 2017
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171017006744/en/
IBMIan Colley, 914-434-3043colley@us.ibm.comorJohn Bukovinsky,
732-618-3531jbuko@us.ibm.com
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