TIDMIBM
IBM (NYSE:IBM)
Highlights
-- Fourth-quarter GAAP EPS from continuing operations of $(1.14)
--
Includes a one-time charge of $5.5 billion associated with
the
enactment of U.S. tax reform
-- Fourth-quarter operating (non-GAAP) EPS of $5.18
--
Excludes the one-time charge of $5.5 billion associated with
the
enactment of U.S. tax reform
-- Consistent with the basis
of previously-provided 2017 expectations
-- Fourth-quarter revenue of $22.5 billion, up 4 percent (up 1 percent
adjusting for currency)
-- Full-year strategic imperatives revenue of $36.5 billion, up 11
percent; represents 46 percent of IBM revenue
--
Fourth-quarter strategic imperatives revenue up 17 percent (up
14
percent adjusting for currency)
-- Full-year cloud revenue of $17.0 billion, up 24 percent year to year
--
As-a-service annual exit run rate of $10.3 billion in the
quarter, up
20 percent year to year (up 18 percent adjusting for
currency)
IBM (NYSE:IBM) today announced fourth-quarter and full-year 2017
earnings results.
"Our strategic imperatives revenue again grew at a double-digit
rate and now represents 46 percent of our total revenue, and we are
pleased with our overall revenue growth in the quarter," said Ginni
Rometty, IBM chairman, president and chief executive officer.
"During 2017, we strengthened our position as the leading
enterprise cloud provider and established IBM as the blockchain
leader for business. Looking ahead, we are uniquely positioned to
help clients use data and AI to build smarter businesses."
FOURTH QUARTER 2017
Net Income Gross Profit
Diluted EPS (Loss) Margin
GAAP from Continuing $(1.14) * $(1.1B) * 48.2%
Operations
Year/Year -124% * -123% * -1.9Pts
Operating (Non-GAAP) $5.18 $4.8B 49.5%
Year/Year 3% 1% -1.4Pts
As-a-service
Strategic annual exit
REVENUE Total IBM Imperatives Cloud run rate
As reported (US$) $22.5B $11.1B $5.5B $10.3B
Year/Year 4% 17% 30% 20%
Year/Year adjusting 1% 14% 27% 18%
for currency
* Includes a one-time charge of $5.5 billion associated
with the enactment of U.S. tax reform.
"Over the past several years we have invested aggressively in
technology and our people to reposition IBM," said James Kavanaugh,
IBM senior vice president and chief financial officer. "2018 will
be all about reinforcing IBM's leadership position in key
high-value segments of the IT industry, including cloud, AI,
security and blockchain."
Strategic Imperatives Revenue
Fourth-quarter cloud revenues increased 30 percent to $5.5
billion (up 27 percent adjusting for currency). Cloud revenue over
the last 12 months was $17.0 billion, including $9.3 billion
delivered as-a-service and $7.8 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 $10.3 billion from $8.6 billion in the fourth quarter
of 2016. In the quarter, revenues from analytics increased 9
percent (up 6 percent adjusting for currency). Revenues from mobile
increased 23 percent (up 21 percent adjusting for currency) and
revenues from security increased 132 percent (up 127 percent
adjusting for currency).
Full-Year 2018 Expectations
The company will discuss 2018 expectations during today's
quarterly earnings conference call.
Cash Flow and Balance Sheet
In the fourth quarter, the company generated net cash from
operating activities of $5.7 billion, or $7.8 billion excluding
Global Financing receivables. IBM's free cash flow was $6.8
billion. IBM returned $1.4 billion in dividends and $0.7 billion of
gross share repurchases to shareholders. At the end of December
2017, IBM had $3.8 billion remaining in the current share
repurchase authorization.
The company generated full-year free cash flow of $13.0 billion,
excluding Global Financing receivables. The company returned $9.8
billion to shareholders through $5.5 billion in dividends and $4.3
billion of gross share repurchases.
IBM ended the fourth quarter of 2017 with $12.6 billion of cash
on hand. Debt totaled $46.8 billion, including Global Financing
debt of $31.4 billion. The balance sheet remains strong and is well
positioned over the long term.
Segment Results for Fourth Quarter
-- Cognitive Solutions (includes solutions software and transaction
processing software) --
revenues of $5.4 billion, up 3 percent
(flat adjusting for currency), driven by security and
transaction
processing software.
-- Global Business Services (includes consulting, global process
services and application management) --
revenues of $4.2 billion,
up 1 percent (down 2 percent adjusting for currency).
Strategic
imperatives revenue grew 9 percent led by the cloud practice,
mobile
and analytics.
-- Technology Services & Cloud Platforms
(
includes
infrastructure services, technical support services and
integration
software) --
revenues of $9.2 billion, down 1 percent (down 4
percent adjusting for currency). Strategic imperatives revenue
grew 15
percent, driven by hybrid cloud services, security and
mobile.
-- Systems (includes systems hardware and operating systems software)
--
revenues of $3.3 billion, up 32 percent (up 28 percent
adjusting for currency) driven by growth in IBM Z, Power Systems
and
storage.
-- Global Financing (includes financing and used equipment sales) --
revenues of $450 million, up 1 percent (down 2 percent adjusting
for
currency).
Tax Rate
The enactment of the Tax Cuts and Jobs Act in December 2017
resulted in a one-time charge of $5.5 billion in the fourth
quarter. The charge encompasses several elements, including a tax
on accumulated overseas profits and the revaluation of deferred tax
assets and liabilities. As a result, IBM's reported GAAP tax rate,
which includes the one-time charge, was 124 percent for the fourth
quarter, and 49 percent for the full year. IBM's operating
(non-GAAP) tax rate, which excludes the one-time charge, was 6
percent for the fourth quarter; and 7 percent for the full year,
which includes the effect of discrete tax benefits in the first and
second quarters. Without discrete tax items, the full-year
operating (non-GAAP) tax rate was 12 percent, at the low end of the
company's previously estimated range.
Full-Year Results
-- Full-year GAAP EPS from continuing operations of $6.14
--
Includes a one-time charge of $5.5 billion associated with
the
enactment of U.S. tax reform
-- Full-year operating (non-GAAP) EPS of $13.80
-- Excludes
the one-time charge of $5.5 billion associated with the
enactment of
U.S. tax reform
-- Full-year revenue of $79.1 billion, down 1 percent
FULL YEAR 2017
Gross Profit
Diluted EPS Net Income Margin
GAAP from Continuing $6.14 * $5.8B * 45.8%
Operations
Year/Year -50% * -52% * -2.1Pts
Operating (Non-GAAP) $13.80 $12.9B 47.4%
Year/Year 2% -1% -1.6Pts
As-a-service
Strategic annual exit
REVENUE Total IBM Imperatives Cloud run rate
As reported (US$) $79.1B $36.5B $17.0B $10.3B
Year/Year -1% 11% 24% 20%
Year/Year adjusting -1% 11% 24% 18%
for currency
* Includes a one-time charge of $5.5 billion associated
with the enactment of U.S. tax reform.
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. EST, today. The Webcast may be accessed via a
link at http://www.ibm.com/investor/events/earnings/4q17.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 Twelve Months Ended
December 31, December 31,
2017 2016 2017 2016
REVENUE
Cognitive Solutions $ 5,432 $ 5,297 $ 18,453 $ 18,187
Global Business 4,152 4,121 16,348 16,700
Services
Technology Services 9,198 9,308 34,277 35,337
& Cloud Platforms
Systems 3,332 2,530 8,194 7,714
Global Financing 450 447 1,696 1,692
Other (20 ) 66 171 289
TOTAL REVENUE 22,543 21,770 79,139 79,919
GROSS PROFIT 10,862 10,893 36,227 38,294
GROSS PROFIT MARGIN
Cognitive Solutions 79.2 % 82.7 % 78.6 % 81.9 %
Global Business 24.8 % 26.9 % 25.2 % 27.0 %
Services
Technology Services 40.9 % 42.9 % 40.4 % 41.9 %
& Cloud Platforms
Systems 55.7 % 56.9 % 53.2 % 55.7 %
Global Financing 29.5 % 36.2 % 29.3 % 38.7 %
TOTAL GROSS PROFIT 48.2 % 50.0 % 45.8 % 47.9 %
MARGIN
EXPENSE AND OTHER
INCOME
S,G&A 5,147 4,976 20,107 21,069
R,D&E 1,427 1,431 5,787 5,751
Intellectual
property and
custom development (348 ) (521 ) (1,466 ) (1,631 )
income
Other (income) 2 (136 ) (216 ) 145
and expense
Interest expense 164 157 615 630
TOTAL EXPENSE AND 6,393 5,907 24,827 25,964
OTHER INCOME
INCOME FROM
CONTINUING
OPERATIONS
BEFORE INCOME TAXES 4,469 4,986 11,400 12,330
Pre-tax margin 19.8 % 22.9 % 14.4 % 15.4 %
Provision for 5,522 480 5,642 449
/ (Benefit
from) income taxes
Effective tax rate 123.6 % 9.6 % 49.5 % 3.6 %
INCOME / (LOSS) FROM ($1,053 ) $ 4,505 $ 5,758 $ 11,881
CONTINUING
OPERATIONS
DISCONTINUED
OPERATIONS
Income/(Loss) from (1 ) (4 ) (5 ) (9 )
discontinued
operations, net
of taxes
NET INCOME / (LOSS) ($1,054 ) $ 4,501 $ 5,753 $ 11,872
EARNINGS / (LOSS)
PER SHARE
OF COMMON STOCK:
Assuming Dilution
Continuing Operations ($1.14 ) $ 4.73 $ 6.14 $ 12.39
Discontinued $ 0.00 ($0.01 ) $ 0.00 ($0.01 )
Operations
TOTAL ($1.14 ) $ 4.72 $ 6.14 $ 12.38
Basic
Continuing Operations ($1.14 ) $ 4.75 $ 6.17 $ 12.44
Discontinued $ 0.00 ($0.01 ) $ 0.00 ($0.01 )
Operations
TOTAL ($1.14 ) $ 4.74 $ 6.17 $ 12.43
WEIGHTED-AVERAGE
NUMBER
OF COMMON SHARES
OUTSTANDING (M's):
Assuming Dilution 928.9 952.7 937.4 958.7
Basic 924.5 948.6 932.8 955.4
INTERNATIONAL BUSINESS
MACHINES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
At At
(Dollars in Millions) December 31, December 31,
2017 2016
ASSETS:
Current Assets:
Cash and cash equivalents $ 11,972 $ 7,826
Marketable securities 608 701
Notes and accounts receivable 8,928 9,182
- trade, net
Short-term financing receivables, net 21,721 19,006
Other accounts receivable, net 981 1,057
Inventory 1,583 1,553
Prepaid expenses and 3,942 4,564
other current assets
Total Current Assets 49,735 43,888
Property, plant and equipment, net 11,116 10,830
Long-term financing receivables, net 9,550 9,021
Prepaid pension assets 4,643 3,034
Deferred taxes 4,862 5,224
Goodwill and intangibles, net 40,531 40,887
Investments and sundry assets 4,919 4,585
Total Assets $ 125,356 $ 117,470
LIABILITIES:
Current Liabilities:
Taxes $ 4,219 $ 3,235
Short-term debt 6,987 7,513
Accounts payable 6,451 6,209
Deferred income 11,552 11,035
Other liabilities 8,153 8,283
Total Current Liabilities 37,363 36,275
Long-term debt 39,837 34,655
Retirement related obligations 16,720 17,070
Deferred income 3,746 3,600
Other liabilities 9,965 7,477
Total Liabilities 107,631 99,078
EQUITY:
IBM Stockholders' Equity:
Common stock 54,566 53,935
Retained earnings 153,126 152,759
Treasury stock -- at cost (163,507 ) (159,050 )
Accumulated other comprehensive (26,592 ) (29,398 )
income/(loss)
Total IBM stockholders' equity 17,594 18,246
Noncontrolling interests 131 146
Total Equity 17,725 18,392
Total Liabilities and Equity $ 125,356 $ 117,470
INTERNATIONAL
BUSINESS
MACHINES
CORPORATION
CASH FLOW
ANALYSIS
(Unaudited)
Three Months Ended Twelve Months Ended
(Dollars in December 31, December 31,
Millions)
2017 2016 2017 2016
Net Cash $ 5,733 $ 3,979 * $ 16,724 $ 17,084 *
Provided
by Operating
Activities
per GAAP:
Less: change
in Global
Financing (GF)
Receivables (2,049 ) (1,678 ) 419 1,658
Capital (965 ) (925 ) (3,312 ) (3,726 )
Expenditures,
Net
Free Cash Flow 6,817 4,731 * 12,992 11,700 *
Acquisitions (53 ) (235 ) (496 ) (5,679 )
Divestitures (240 ) (490 ) (205 ) (454 )
Dividends (1,387 ) (1,329 ) (5,506 ) (5,256 )
Share Repurchase (666 ) (871 ) (4,340 ) (3,502 )
Non-GF Debt (840 ) (2,048 ) 1,056 1,317
Other (includes (2,565 ) (1,200 ) * 552 2,208 *
GF Receivables
and GF Debt)
Change in Cash,
Cash
Equivalents and
Short-term $ 1,065 ($1,441 ) $ 4,053 $ 332
Marketable
Securities
* Reclassified
to reflect
adoption of
the FASB
guidance on
stock-based
compensation.
INTERNATIONAL
BUSINESS
MACHINES CORPORATION
CASH FLOW
(Unaudited)
Three Months Ended Twelve Months Ended
(Dollars in December 31, December 31,
Millions)
2017 2016 2017 2016
Net Income from ($1,054 ) $ 4,501 $ 5,753 $ 11,872
Operations
Depreciation/Amortization 1,150 1,127 4,541 4,381
of Intangibles
Stock-based 146 141 534 544
Compensation
Working Capital 7,540 (113 ) * 5,476 (1,371 ) *
/ Other
Global Financing A/R (2,049 ) (1,678 ) 419 1,658
Net Cash Provided by $ 5,733 $ 3,979 * $ 16,724 $ 17,084 *
Operating Activities
Capital (965 ) (925 ) (3,312 ) (3,726 )
Expenditures,
net
of payments
& proceeds
Divestitures, net of (240 ) (490 ) (205 ) (454 )
cash transferred
Acquisitions, net (53 ) (235 ) (496 ) (5,679 )
of cash acquired
Marketable (2,559 ) (2,038 ) (3,083 ) (1,116 )
Securities
/
Other Investments,
net
Net Cash Used ($3,818 ) ($3,687 ) ($7,096 ) ($10,976 )
in Investing
Activities
Debt, net of 1,137 875 3,446 2,763
payments
& proceeds
Dividends (1,387 ) (1,329 ) (5,506 ) (5,256 )
Common Stock (666 ) (871 ) (4,340 ) (3,502 )
Repurchases
Common Stock (3 ) 26 * (18 ) 78 *
Transactions
- Other
Net Cash Used ($919 ) ($1,298 ) * ($6,418 ) ($5,917 ) *
in Financing
Activities
Effect of Exchange 62 (206 ) 937 (51 )
Rate
changes on Cash
Net Change in Cash $ 1,057 ($1,213 ) $ 4,146 $ 140
& Cash Equivalents
* Reclassified
to reflect
adoption of the FASB
guidance on
stock-based
compensation.
INTERNATIONAL
BUSINESS
MACHINES
CORPORATION
SEGMENT
DATA
(Unaudited)
FOURTH - QUARTER 2017
Cognitive Solutions &
Industry Services
Technology
Global Services &
(Dollars Cognitive Business Cloud Global
in
Millions)
Solutions Services Platforms Systems Financing
Revenue
External $ 5,432 $ 4,152 $ 9,198 $ 3,332 $ 450
Internal 646 92 160 179 546
Total $ 6,078 $ 4,244 $ 9,358 $ 3,511 $ 997
Segment
Revenue
Pre-tax 2,279 337 1,456 908 443
Income
from
Continuing
Operations
Pre-tax 37.5 % 7.9 % 15.6 % 25.9 % 44.4 %
margin
Change 2.5 % 0.7 % (1.2 )% 31.7 % 0.8 %
YTY
Revenue
-
External
Change 0.0 % (1.5 )% (4.0 )% 28.5 % (1.8 )%
YTY
Revenue
-
External
@constant
currency
FOURTH - QUARTER 2016
Cognitive Solutions &
Industry Services
Technology
Global Services &
(Dollars Cognitive Business Cloud Global
in
Millions)
Solutions Services Platforms Systems Financing
Revenue
External $ 5,297 $ 4,121 $ 9,308 $ 2,530 $ 447
Internal 701 100 214 156 462
Total $ 5,999 $ 4,221 $ 9,522 $ 2,686 $ 909
Segment
Revenue
Pre-tax 2,313 522 1,882 579 448
Income
from
Continuing
Operations
Pre-tax 38.6 % 12.4 % 19.8 % 21.6 % 49.3 %
margin
INTERNATIONAL
BUSINESS
MACHINES
CORPORATION
SEGMENT
DATA
(Unaudited)
TWELVE - MONTHS 2017
Cognitive Solutions &
Industry Services
Technology
Global Services &
(Dollars Cognitive Business Cloud Global
in
Millions)
Solutions Services Platforms Systems Financing
Revenue
External $ 18,453 $ 16,348 $ 34,277 $ 8,194 $ 1,696
Internal 2,647 363 657 750 1,471
Total $ 21,100 $ 16,711 $ 34,934 $ 8,945 $ 3,168
Segment
Revenue
Pre-tax 6,817 1,401 4,344 1,135 1,279
Income
from
Continuing
Operations
Pre-tax 32.3 % 8.4 % 12.4 % 12.7 % 40.4 %
margin
Change 1.5 % (2.1 )% (3.0 )% 6.2 % 0.3 %
YTY
Revenue
-
External
Change 1.0 % (1.8 )% (3.4 )% 5.4 % (0.7 )%
YTY
Revenue
-
External
@constant
currency
TWELVE - MONTHS 2016
Cognitive Solutions &
Industry Services
Technology
Global Services &
(Dollars Cognitive Business Cloud Global
in
Millions)
Solutions Services Platforms Systems Financing
Revenue
External $ 18,187 $ 16,700 $ 35,337 $ 7,714 $ 1,692
Internal 2,630 409 715 750 1,802
Total $ 20,817 $ 17,109 $ 36,052 $ 8,464 $ 3,494
Segment
Revenue
Pre-tax 6,352 1,732 4,707 933 1,656
Income
from
Continuing
Operations
Pre-tax 30.5 % 10.1 % 13.1 % 11.0 % 47.4 %
margin
INTERNATIONAL
BUSINESS
MACHINES
CORPORATION
U.S. GAAP
TO
OPERATING
(Non-GAAP)
RESULTS
RECONCILIATION
(Unaudited;
Dollars
in
millions
except
per
share
amounts)
FOURTH - QUARTER 2017
CONTINUING OPERATIONS
Acquisition- Retirement- Tax Reform
Related Related One-Time Operating
GAAP Adjustments* Adjustments** Charge (1) (Non-GAAP)
Gross $ 10,862 $ 99 $ 209 - $ 11,170
Profit
Gross 48.2 % 0.4Pts 0.9Pts - 49.5 %
Profit
Margin
S,G&A 5,147 (116 ) (145 ) - 4,886
R,D&E 1,427 - (50 ) - 1,378
Other 2 (32 ) - - (30 )
(Income)
& Expense
Total 6,393 (148 ) (195 ) - 6,050
Expense
&
Other
(Income)
Pre-tax 4,469 247 404 - 5,120
Income
from
Continuing
Operations
Pre-tax 19.8 % 1.1Pts 1.8Pts - 22.7 %
Income
Margin
from
Continuing
Operations
Provision 5,522 67 197 (5,475 ) 310
for
Income
Taxes***
Effective 123.6 % -4.7Pts -5.9Pts -106.9Pts 6.1 %
Tax Rate
Income / (1,053 ) 181 206 5,475 4,809
(Loss)
from
Continuing
Operations
Income / (4.7 )% 0.8Pts 0.9Pts 24.3Pts 21.3 %
(Loss)
Margin
from
Continuing
Operations
Diluted ($1.14 ) $ 0.19 $ 0.22 $ 5.91 $ 5.18
Earnings
/ (Loss)
Per
Share:
Continuing
Operations
(1) Operating (non-GAAP) earnings excludes a one-time
charge of $5.5 billion associated
with the enactment of U.S. tax reform due
to its unique non-recurring nature.
FOURTH - QUARTER 2016
CONTINUING OPERATIONS
Acquisition- Retirement-
Related Related Operating
GAAP Adjustments* Adjustments** (Non-GAAP)
Gross $ 10,893 $ 124 $ 78 $ 11,095
Profit
Gross 50.0 % 0.6Pts 0.4Pts 51.0 %
Profit
Margin
S,G&A 4,976 (136 ) (69 ) 4,771
R,D&E 1,431 - (6 ) 1,425
Other (136 ) 0 - (136 )
(Income)
& Expense
Total Expense 5,907 (136 ) (76 ) 5,696
&
Other
(Income)
Pre-tax 4,986 260 154 5,399
Income
from
Continuing
Operations
Pre-tax 22.9 % 1.2Pts 0.7Pts 24.8 %
Income
Margin from
Continuing
Operations
Provision 480 66 77 623
for
Income
Taxes***
Effective 9.6 % 0.8Pts 1.1Pts 11.5 %
Tax Rate
Income from 4,505 193 77 4,776
Continuing
Operations
Income 20.7 % 0.9Pts 0.4Pts 21.9 %
Margin
from
Continuing
Operations
Diluted $ 4.73 $ 0.20 $ 0.08 $ 5.01
Earnings
Per Share:
Continuing
Operations
* 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)
TWELVE - MONTHS 2017
CONTINUING OPERATIONS
Acquisition- Retirement- Tax Reform
Related Related One-Time Operating
GAAP Adjustments* Adjustments** Charge (1) (Non-GAAP)
Gross $ 36,227 $ 449 $ 799 - $ 37,475
Profit
Gross 45.8 % 0.6Pts 1.0Pts - 47.4 %
Profit
Margin
S,G&A 20,107 (509 ) (472 ) - 19,126
R,D&E 5,787 - (197 ) - 5,590
Other (216 ) (39 ) - - (255 )
(Income)
& Expense
Total 24,827 (548 ) (669 ) - 23,609
Expense
&
Other
(Income)
Pre-tax 11,400 997 1,468 - 13,866
Income
from
Continuing
Operations
Pre-tax 14.4 % 1.3Pts 1.9Pts - 17.5 %
Income
Margin
from
Continuing
Operations
Provision 5,642 279 485 (5,475 ) 931
for
Income
Taxes***
Effective 49.5 % -1.5Pts -1.7Pts -39.5Pts 6.7 %
Tax Rate
Income 5,758 718 983 5,475 12,935
from
Continuing
Operations
Income 7.3 % 0.9Pts 1.2Pts 6.9Pts 16.3 %
Margin
from
Continuing
Operations
Diluted $ 6.14 $ 0.77 $ 1.05 $ 5.84 $ 13.80
Earnings
Per
Share:
Continuing
Operations
(1) Operating (non-GAAP) earnings excludes a one-time
charge of $5.5 billion associated
with the enactment of U.S. tax reform due
to its unique non-recurring nature.
TWELVE - MONTHS 2016
CONTINUING OPERATIONS
Acquisition- Retirement-
Related Related Operating
GAAP Adjustments* Adjustments** (Non-GAAP)
Gross Profit $38,294 $494 $316 $39,104
Gross Profit Margin 47.9% 0.6Pts 0.4Pts 48.9%
S,G&A 21,069 (501) (253) 20,315
R,D&E 5,751 - (29) 5,722
Other (Income) 145 (7) - 138
& Expense
Total Expense & 25,964 (508) (282) 25,174
Other (Income)
Pre-Tax Income from 12,330 1,003 598 13,931
Continuing
Operations
Pre-tax Income 15.4% 1.3Pts 0.7Pts 17.4%
Margin from
Continuing Operations
Provision for Income 449 268 183 900
Taxes***
Effective Tax Rate 3.6% 1.7Pts 1.2Pts 6.5%
Income from Continuing 11,881 735 415 13,031
Operations
Income Margin from 14.9% 0.9Pts 0.5Pts 16.3%
Continuing
Operations
Diluted Earnings $12.39 $0.77 $0.43 $13.59
Per Share:
Continuing Operations
* 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.
IBM Ian Colley, 914-434-3043 colley@us.ibm.com or John
Bukovinsky, 732-618-3531 jbuko@us.ibm.com
View source version on
businesswire.com:http://www.businesswire.com/news/home/20180118006388/en/
This information is provided by Business Wire
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January 19, 2018 02:00 ET (07:00 GMT)
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