TIDMIBM
IBM (NYSE: IBM) today announced third-quarter results.
"In the third quarter, as we continued to help clients with
their digital reinventions, we grew revenue in our Cloud &
Cognitive Software segment and in Global Business Services," said
Ginni Rometty, IBM chairman, president and chief executive officer.
"Our results demonstrate that clients see IBM and Red Hat as a
powerful combination and they trust us to provide them with the
open hybrid cloud technology, innovation and industry expertise to
help them shift their mission-critical workloads to the cloud."
THIRD QUARTER 2019
Results Reflect the Impact of Items Related to
the Red Hat Acquisition Closed in July 2019
Pre-tax Gross
Diluted Net Pre-tax Income Profit
EPS Income Income Margin Margin
GAAP from Continuing Operations $ 1.87 $ 1.7B $ 1.5B 8.4 % 46.2 %
Year/Year (36) % (38) % (49) % (7.5) Pts (0.7) Pts
Operating (Non-GAAP) $ 2.68 $ 2.4B $ 2.4B 13.3 % 47.4 %
Year/Year (22) % (24) % (33) % (5.9) Pts (0.0) Pts
"We continued our focus on the strength of our balance sheet in
the third quarter," said James Kavanaugh, IBM senior vice president
and chief financial officer. "We generated $12.3 billion in free
cash flow over the last 12 months and with our disciplined
financial management we reduced debt by nearly $7 billion in the
quarter, while maintaining a strong cash balance."
Cash Flow and Balance Sheet
In the third quarter, the company generated net cash from
operating activities of $3.6 billion, or $2.5 billion excluding
Global Financing receivables. IBM's free cash flow was $1.8
billion. IBM returned $1.6 billion to shareholders through $1.4
billion in dividends and $0.1 billion in gross share repurchases.
The company suspended its share repurchase program on July 9.
IBM ended the third quarter with $11.0 billion of cash on hand.
Debt, including Global Financing debt of $23.1 billion, totaled
$66.3 billion - down $6.7 billion since the end of the second
quarter.
Segment Results for Third Quarter
-- Cloud & Cognitive Software (includes cloud and data platforms which includes Red Hat; cognitive applications; and transaction processing platforms) - revenues of $5.3 billion, up 6.4 percent (up 7.8 percent adjusting for currency), led by security, IoT, data and AI platforms and hybrid cloud; cloud and data platforms, up 17 percent (up 19 percent adjusting for currency); cognitive applications, up 4 percent (up 6 percent adjusting for currency); transaction processing platforms, down 5 percent (down 4 percent adjusting for currency).
-- Global Business Services (includes consulting, application management and global process services) - revenues of $4.1 billion, up 1.0 percent (up 2.2 percent adjusting for currency), led by growth in consulting, up 4 percent (up 5 percent adjusting for currency); gross profit margin increased 110 basis points.
-- Global Technology Services (includes infrastructure and cloud services and technology support services) - revenues of $6.7 billion, down 5.6 percent (down 4.1 percent adjusting for currency).
-- Systems (includes systems hardware and operating systems software) - revenues of $1.5 billion, down 14.7 percent (down 13.8 percent adjusting for currency), reflecting the end of the IBM z14 product cycle and shipping of the new IBM z15 in the last week of September; gross profit margin expansion in Power and Storage.
-- Global Financing (includes financing and used equipment sales) - revenues of $343 million, down 11.7 percent (down 10.7 percent adjusting for currency); revenue reflects the wind-down of OEM commercial financing; gross profit margin expansion.
Full-Year 2019 Expectations
On August 2, 2019, the company updated full-year expectations to
reflect the impact of the Red Hat acquisition and related
activities. IBM expects GAAP diluted earnings per share for the
full year to be at least $10.58. The company continues to expect
operating (non-GAAP) diluted earnings per share of at least $12.80.
Operating (non-GAAP) diluted earnings per share exclude $2.22 per
share of charges for: amortization of purchased intangible assets
and other acquisition-related charges, including pre-closing
charges, such as financing costs, associated with the Red Hat
acquisition; retirement-related charges; and tax reform enactment
impacts.
IBM continues to expect free cash flow of approximately $12
billion, with a realization rate over 100 percent of GAAP Net
Income.
Year-To-Date 2019 Results
Year-to-date results reflect the impact of items related to the
Red Hat acquisition closed in July 2019. Consolidated diluted
earnings per share was $6.45 compared to $7.37, down 12 percent
year to year. Consolidated net income was $5.8 billion, down 15
percent year to year. Revenues for the nine-month period ended
September 30, 2019 totaled $55.4 billion, a decrease of 4 percent
year to year (down 0.7 percent adjusting for divested businesses
and currency) compared with $57.8 billion for the first nine months
of 2018.
Operating (non-GAAP) diluted earnings per share from continuing
operations was $8.10 compared with $8.96 per diluted share for the
2018 period, a decrease of 10 percent. Operating (non-GAAP) net
income for the nine months ended September 30, 2019 was $7.2
billion compared with $8.2 billion in the prior-year period, a
decrease of 12 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, but not limited to,
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; damage to the company's reputation; 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 employees 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, including integration
challenges, failure to achieve objectives, the assumption of
liabilities, and higher debt levels; legal proceedings and
investigatory risks; 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. Except
as required by law, 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 -
-- adjusting for currency (i.e., at constant currency);
-- total revenue and cloud revenue adjusting for divested businesses and currency;
-- revenue for Red Hat normalized for historical comparability;
-- presenting operating (non-GAAP) earnings per share amounts and related income statement items;
-- adjusting for free cash flow;
-- net cash from operating activities, excluding Global Financing receivables.
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/3q19.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,
2019 2018 2019 2018
REVENUE
Cloud & Cognitive Software $ 5,280 $ 4,962 * $ 15,962 $ 15,548 *
Global Business Services 4,117 4,076 * 12,391 12,326 *
Global Technology Services 6,700 7,101 * 20,412 21,846 *
Systems 1,481 1,736 4,562 5,412
Global Financing 343 388 1,100 1,188
Other 107 493 * 944 1,511 *
TOTAL REVENUE 18,028 18,756 55,370 57,830
GROSS PROFIT 8,336 8,803 25,388 26,249
GROSS PROFIT MARGIN
Cloud & Cognitive Software 74.1 % 76.1 % * 75.5 % 76.8 % *
Global Business Services 31.1 % 30.0 % * 27.8 % 26.5 % *
Global Technology Services 35.8 % 37.0 % * 34.6 % 34.3 % *
Systems 52.6 % 52.7 % 51.1 % 49.3 %
Global Financing 36.9 % 26.3 % 35.6 % 29.1 %
TOTAL GROSS PROFIT MARGIN 46.2 % 46.9 % 45.9 % 45.4 %
EXPENSE AND OTHER INCOME
S,G&A 5,024 4,363 15,171 14,665
R,D&E 1,553 1,252 4,393 4,021
Intellectual property (166) (275) (489) (842)
and custom
development income
Other (income) and expense (31) 275 (850) 968
Interest expense 432 191 990 530
TOTAL EXPENSE AND 6,813 5,807 19,215 19,341
OTHER INCOME
INCOME FROM CONTINUING
OPERATIONS
BEFORE INCOME TAXES 1,522 2,996 6,173 6,908
Pre-tax margin 8.4 % 16.0 % 11.1 % 11.9 %
Provision for / (Benefit (151) 304 407 138
from) income taxes
Effective tax rate (9.9) % 10.2 % 6.6 % 2.0 %
INCOME FROM CONTINUING $ 1,673 $ 2,692 $ 5,766 $ 6,770
OPERATIONS
DISCONTINUED OPERATIONS
Income / (Loss) from (1) 2 (5) 7
discontinued
operations, net of taxes
NET INCOME $ 1,672 $ 2,694 $ 5,761 $ 6,777
EARNINGS / (LOSS) PER SHARE
OF COMMON STOCK
Assuming Dilution
Continuing Operations $ 1.87 $ 2.94 $ 6.46 $ 7.36
Discontinued Operations $ 0.00 $ 0.00 $ (0.01) $ 0.01
TOTAL $ 1.87 $ 2.94 $ 6.45 $ 7.37
Basic
Continuing Operations $ 1.89 $ 2.95 $ 6.50 $ 7.39
Discontinued Operations $ 0.00 $ 0.00 $ (0.01) $ 0.01
TOTAL $ 1.89 $ 2.95 $ 6.49 $ 7.40
WEIGHTED-AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING (M's)
Assuming Dilution 892.8 915.2 892.5 920.0
Basic 886.0 911.2 887.3 915.6
_________________________________
* Recast to conform with
2019 presentation.
INTERNATIONAL BUSINESS
MACHINES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
At At
September 30, December 31,
(Dollars in Millions) 2019 2018
ASSETS:
Current Assets:
Cash and cash equivalents $ 10,087 $ 11,379
Restricted cash 138 225
Marketable securities 733 618
Notes and accounts receivable 6,753 7,432
- trade, net
Short-term financing receivables, net 12,330 22,388
Other accounts receivable, net 1,876 743
Inventories 1,712 1,682
Deferred costs 1,978 2,300
Prepaid expenses and 2,515 2,378
other current assets
Total Current Assets 38,121 49,146
Property, plant and equipment, net 10,063 10,792
Operating right-of-use assets, net* 4,901 -
Long-term financing receivables, net 7,739 9,148
Prepaid pension assets 5,481 4,666
Deferred costs 2,535 2,676
Deferred taxes 4,994 5,216
Goodwill and intangibles, net 73,564 39,353
Investments and sundry assets 2,221 2,386
Total Assets $ 149,620 $ 123,382
LIABILITIES:
Current Liabilities:
Taxes $ 2,154 $ 3,046
Short-term debt 8,530 10,207
Accounts payable 4,042 6,558
Deferred income 11,223 11,165
Operating lease liabilities* 1,377 -
Other liabilities 7,739 7,251
Total Current Liabilities 35,066 38,227
Long-term debt 57,797 35,605
Retirement related obligations 15,925 17,002
Deferred income 3,382 3,445
Operating lease liabilities* 3,790 -
Other liabilities 15,564 12,174
Total Liabilities 131,524 106,452
EQUITY:
IBM Stockholders' Equity:
Common stock 55,808 55,151
Retained earnings 160,709 159,206
Treasury stock - at cost (169,474) (168,071)
Accumulated other comprehensive (29,086) (29,490)
income/(loss)
Total IBM Stockholders' Equity 17,956 16,796
Noncontrolling interests 139 134
Total Equity 18,096 16,929
Total Liabilities and Equity $ 149,620 $ 123,382
________________________
* Reflects the adoption of the
FASB guidance on leases.
INTERNATIONAL
BUSINESS
MACHINES
CORPORATION
CASH FLOW
ANALYSIS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in 2019 2018 2019 2018
Millions)
Net Cash $ 3,619 $ 4,232 $ 11,319 $ 11,128
Provided
by Operating
Activities
per GAAP:
Less: change 1,135 1,096 3,712 2,874
in Global
Financing
(GF) Receivables
Capital (681) (942) (1,725) (2,839)
Expenditures,
Net
Free Cash Flow 1,803 2,194 5,882 5,415
Acquisitions (32,587) (1) (32,630) (123)
Divestitures 39 - 927 -
Dividends (1,436) (1,431) (4,269) (4,250)
Share Repurchase (126) (627) (1,361) (2,393)
Non-GF Debt (4,967) 2,218 28,432 1,607
Other (includes 1,823 382 1,755 1,564
GF
Net Receivables
and GF Debt)
Change in Cash, $ (35,451) $ 2,736 $ (1,265) $ 1,820
Cash
Equivalents,
Restricted
Cash
and Short-term
Marketable
Securities
INTERNATIONAL
BUSINESS
MACHINES CORPORATION
CASH FLOW
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in 2019 2018 2019 2018
Millions)
Net Income from $ 1,672 $ 2,694 $ 5,761 $ 6,777
Operations
Depreciation/Amortization 1,669 1,138 4,409 3,368
of Intangibles
Stock-based 220 129 468 371
Compensation
Working Capital (1,077) (825) (3,031) (2,261)
/ Other
Global Financing A/R 1,135 1,096 3,712 2,874
Net Cash Provided by $ 3,619 $ 4,232 $ 11,319 $ 11,128
Operating Activities
Capital (681) (942) (1,725) (2,839)
Expenditures,
net
of payments
& proceeds
Divestitures, net of 39 - 927 -
cash transferred
Acquisitions, net (32,587) (1) (32,630) (123)
of cash acquired
Marketable Securities 2,856 (2,026) 6,365 (2,406)
/
Other Investments,
net
Net Cash Provided $ (30,373) $ (2,969) $ (27,064) $ (5,368)
by / (Used
in) Investing
Activities
Debt, net of (6,608) 1,595 20,465 845
payments
& proceeds
Dividends (1,436) (1,431) (4,269) (4,250)
Common Stock (126) (627) (1,361) (2,393)
Repurchases
Common Stock (7) 26 (118) (66)
Transactions
- Other
Net Cash Provided $ (8,177) $ (437) $ 14,717 $ (5,864)
by / (Used
in) Financing
Activities
Effect of Exchange (378) (55) (352) (399)
Rate
changes on Cash
Net Change in Cash, $ (35,310) $ 771 $ (1,379) $ (503)
Cash Equivalents
and Restricted Cash
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
Three Months Ended September 30, 2019
Cloud & Global Global
Cognitive Business Technology Global
(Dollars in Millions) Software Services Services Systems Financing
Revenue
External $ 5,280 $ 4,117 $ 6,700 $ 1,481 $ 343
Internal 686 70 287 195 302
Total Segment Revenue $ 5,966 $ 4,187 $ 6,988 $ 1,676 $ 645
Pre-tax Income / (Loss) from 1,283 573 490 39 275
Continuing Operations
Pre-tax margin 21.5 % 13.7 % 7.0 % 2.3 % 42.6 %
Change YTY Revenue - External 6.4 % 1.0 % (5.6) % (14.7) % (11.7) %
Change YTY Revenue - External 7.8 % 2.2 % (4.1) % (13.8) % (10.7) %
@constant currency
Three Months Ended September 30, 2018
Cloud & Global Global
Cognitive Business Technology Global
(Dollars in Millions) Software* Services* Services* Systems Financing
Revenue
External $ 4,962 $ 4,076 $ 7,101 $ 1,736 $ 388
Internal 777 77 279 181 338
Total Segment Revenue $ 5,738 $ 4,153 $ 7,380 $ 1,917 $ 726
Pre-tax Income / (Loss) from 2,050 566 607 209 308
Continuing Operations
Pre-tax margin 35.7 % 13.6 % 8.2 % 10.9 % 42.5 %
______________________
* Recast to conform with
2019 presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
Nine Months Ended September 30, 2019
Cloud & Global Global
Cognitive Business Technology Global
(Dollars in Millions) Software Services Services Systems Financing
Revenue
External $ 15,962 $ 12,391 $ 20,412 $ 4,562 $ 1,100
Internal 2,135 213 879 528 884
Total Segment Revenue $ 18,097 $ 12,604 $ 21,291 $ 5,091 $ 1,983
Pre-tax Income / (Loss) from 5,052 1,188 1,000 (101) 803
Continuing Operations
Pre-tax margin 27.9 % 9.4 % 4.7 % (2.0) % 40.5 %
Change YTY Revenue - External 2.7 % 0.5 % (6.6) % (15.7) % (7.4) %
Change YTY Revenue - External 4.9 % 3.3 % (3.6) % (14.1) % (5.0) %
@constant currency
Nine Months Ended September 30, 2018
Cloud & Global Global
Cognitive Business Technology Global
(Dollars in Millions) Software* Services* Services* Systems Financing
Revenue
External $ 15,548 $ 12,326 $ 21,846 $ 5,412 $ 1,188
Internal 2,518 249 589 576 1,240
Total Segment Revenue $ 18,066 $ 12,575 $ 22,435 $ 5,989 $ 2,428
Pre-tax Income / (Loss) from 5,760 1,063 1,124 352 1,042
Continuing Operations
Pre-tax margin 31.9 % 8.5 % 5.0 % 5.9 % 42.9 %
___________________
* Recast to conform with
2019 presentation.
INTERNATIONAL BUSINESS
MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP)
RESULTS RECONCILIATION
(Unaudited; Dollars in millions
except per share amounts)
Three Months Ended September 30, 2019
Continuing Operations
Acquisition- Retirement- Tax
Related Related Reform Operating
GAAP Adjustments* Adjustments** Impacts (Non-GAAP)
Gross Profit $ 8,336 $ 209 - - $ 8,545
Gross Profit Margin 46.2 % 1.2 Pts - - 47.4 %
S,G&A 5,024 (451) - - 4,573
R,D&E 1,553 (53) - - 1,500
Other (Income) & Expense (31) 10 (145) - (166)
Interest Expense 432 (24) - - 408
Total Expense & Other (Income) 6,813 (518) (145) - 6,150
Pre-tax Income from Continuing 1,522 727 145 - 2,395
Operations
Pre-tax Income Margin from 8.4 % 4.0 Pts 0.8 Pts - 13.3 %
Continuing Operations
Provision for / (Benefit (151) 142 16 (5) 1
from) Income Taxes***
Effective Tax Rate (9.9) % 8.9 Pts 1.3 Pts (0.2) Pts 0.1 %
Income from Continuing Operations 1,673 586 130 5 2,394
Income Margin from Continuing 9.3 % 3.3 Pts 0.7 Pts 0.0 Pts 13.3 %
Operations
Diluted Earnings / (Loss) Per $ 1.87 $ 0.66 $ 0.14 $ 0.01 $ 2.68
Share: Continuing Operations
Three Months Ended September 30, 2018
Continuing Operations
Acquisition- Retirement- Tax
Related Related Reform Operating
GAAP Adjustments* Adjustments** Impacts (Non-GAAP)
Gross Profit $ 8,803 $ 96 - - $ 8,899
Gross Profit Margin 46.9 % 0.5 Pts - - 47.4 %
S,G&A 4,363 (112) - - 4,251
R,D&E 1,252 - - - 1,252
Other (Income) & Expense 275 (1) (389) - (115)
Interest Expense 191 - - - 191
Total Expense & Other (Income) 5,807 (113) (389) - 5,304
Pre-tax Income from Continuing 2,996 209 389 - 3,594
Operations
Pre-tax Income Margin from 16.0 % 1.1 Pts 2.1 Pts - 19.2 %
Continuing Operations
Provision for / (Benefit 304 56 100 - 460
from) Income Taxes***
Effective Tax Rate 10.2 % 1.0 Pts 1.7 Pts - Pts 12.8 %
Income from Continuing Operations 2,692 153 289 - 3,134
Income Margin from Continuing 14.4 % 0.8 Pts 1.5 Pts - Pts 16.7 %
Operations
Diluted Earnings / (Loss) Per $ 2.94 $ 0.17 $ 0.31 $ - $ 3.42
Share: Continuing Operations
______________________________
* Includes amortization of purchased intangible assets, in process
R&D, transaction costs, applicable restructuring and
related expenses, tax charges related to acquisition integration
and pre-closing charges, such as financing costs.
** Includes amortization of prior service costs, interest cost,
expected return on plan assets, amortized actuarial
gains/losses, the impacts of any plan curtailments/settlements
and pension insolvency costs and other costs.
*** 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 Ended September 30, 2019
Continuing Operations
Acquisition- Retirement- Tax
Related Related Reform Operating
GAAP Adjustments* Adjustments** Impacts (Non-GAAP)
Gross Profit $ 25,388 $ 359 - - $ 25,747
Gross Profit Margin 45.9 % 0.6 Pts - - 46.5 %
S,G&A 15,171 (724) - - 14,447
R,D&E 4,393 (53) - - 4,340
Other (Income) & Expense (850) 152 (419) - (1,118)
Interest Expense 990 (228) - - 762
Total Expense & Other (Income) 19,215 (853) (419) - 17,942
Pre-tax Income from Continuing 6,173 1,212 419 - 7,805
Operations
Pre-tax Income Margin from 11.1 % 2.2 Pts 0.8 Pts - 14.1 %
Continuing Operations
Provision for / (Benefit 407 245 82 (160) 575
from) Income Taxes***
Effective Tax Rate 6.6 % 2.1 Pts 0.7 Pts (2.0) Pts 7.4 %
Income from Continuing Operations 5,766 967 338 160 7,230
Income Margin from Continuing 10.4 % 1.7 Pts 0.6 Pts 0.3 Pts 13.1 %
Operations
Diluted Earnings / (Loss) Per $ 6.46 $ 1.08 $ 0.38 $ 0.18 $ 8.10
Share: Continuing Operations
Nine Months Ended September 30, 2018
Continuing Operations
Acquisition- Retirement- Tax
Related Related Reform Operating
GAAP Adjustments* Adjustments** Impacts (Non-GAAP)
Gross Profit $ 26,249 $ 283 - - $ 26,531
Gross Profit Margin 45.4 % 0.5 Pts - - 45.9 %
S,G&A 14,665 (332) - - 14,333
R,D&E 4,021 - - - 4,021
Other (Income) & Expense 968 (1) (1,185) - (219)
Interest Expense 530 - - - 530
Total Expense & Other (Income) 19,341 (333) (1,185) - 17,822
Pre-tax Income from Continuing 6,908 616 1,185 - 8,709
Operations
Pre-tax Income Margin from 11.9 % 1.1 Pts 2.0 Pts - 15.1 %
Continuing Operations
Provision for / (Benefit 138 138 285 (93) 468
from) Income Taxes***
Effective Tax Rate 2.0 % 1.4 Pts 3.0 Pts (1.1) Pts 5.4 %
Income from Continuing Operations 6,770 478 900 93 8,241
Income Margin from Continuing 11.7 % 0.8 Pts 1.6 Pts 0.2 Pts 14.2 %
Operations
Diluted Earnings / (Loss) Per $ 7.36 $ 0.52 $ 0.98 $ 0.10 $ 8.96
Share: Continuing Operations
______________________________
* Includes amortization of purchased intangible assets, in process R&D, transaction costs, applicable restructuring and related expenses, tax charges related to acquisition integration and pre-closing charges, such as financing costs.
** Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs.
*** 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)
Three Months Ended Nine Months Ended
September 30, 2019 September 30, 2019
Change YTY Change YTY
Revenue Cloud Total IBM Total IBM
Adjusting
for Divested
Businesses and
Currency
Revenue as 10.6 % (3.9) % (4.3) %
reported
Impact from 1.8 Pts 2.0 Pts 0.9 Pts
divested
businesses
Currency impact 1.5 Pts 1.3 Pts 2.6 Pts
Revenue 13.9 % (0.6) % (0.7) %
adjusting
for
divested
businesses
and currency
(non-GAAP)
Three Months Ended Change
Revenue for Red Hat, September 30,2019 September 30,2018 YTY YTY @constantcurrency
Normalized
for Historical
Comparability
Red Hat revenue $ 371 $ -
as reported in
IBM consolidated
results (1)
Add: Red Hat revenue 84 829
prior
to acquisition (2)
Add: Purchase 531 -
accounting
deferred revenue
and intercompany
adjustments (3)
Red Hat revenue, $ 987 $ 829 19 % 20 %
normalized
for historical
comparability
(non-GAAP)
(1) Represents GAAP revenue as reported by IBM, which is
included in the Cloud & Cognitive Software segment.
(2) Red Hat revenue was included in IBM's consolidated results beginning
on July 9, 2019. Revenue for July 1 - July 8, 2019 and the three
months ended September 30, 2018 represents pre-acquisition Red Hat
standalone revenue and is included for comparative purposes.
(3) Represents the third-quarter 2019 impact of the deferred
revenue purchase accounting adjustment and
adjustments to add back revenue which was eliminated
for sales between Red Hat and IBM. This line
represents revenue that would have been recognized
by Red Hat under GAAP if the acquisition had not
occurred, but was not recognized by IBM due to purchase
accounting and intercompany adjustments.
2019 Full Year Expectations
(as of third quarter 2019)
GAAP Diluted EPS at least $10.58
Operating EPS (non-GAAP) at least $12.80
Adjustments
Acquisition-related Charges * $ 1.52
Non-Operating Retirement-Related Items $ 0.51
Tax Reform Enactment Impacts $ 0.19
______________________________
* Includes acquisitions as of September 30, 2019.
IBMEdward Barbini, 914-499-6565barbini@us.ibm.com John
Bukovinsky, 732-618-3531jbuko@us.ibm.com
View source version on businesswire.com:
https://www.businesswire.com/news/home/20191016005893/en/
This information is provided by Business Wire
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