IBM
$166.52
IBM
$1.16
.70%
Earnings Details
3rd Quarter September 2016
Monday, October 17, 2016 4:11:00 PM
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Summary

IBM Beats

IBM (IBM) reported 3rd Quarter September 2016 earnings of $3.29 per share on revenue of $19.2 billion. The consensus earnings estimate was $3.21 per share on revenue of $19.0 billion. The Earnings Whisper number was $3.25 per share. Revenue fell 0.3% compared to the same quarter a year ago.

The company said it continues to expect 2016 earnings of at least $13.50 per share. The current consensus earnings estimate is $13.50 per share for the year ending December 31, 2016.

International Business Machines Corp is an Information Technology (IT) company. It creates business value for clients and solves business problems through integrated solutions that leverage information technology & knowledge of business processes.

Results
Reported Earnings
$3.29
Earnings Whisper
$3.25
Consensus Estimate
$3.21
Reported Revenue
$19.23 Bil
Revenue Estimate
$19.01 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

IBM Reports 2016 Third-Quarter Earnings

Highlights

--Diluted EPS: GAAP of $2.98; Operating (non-GAAP) of $3.29

--Revenue from continuing operations of $19.2 billion

Strategic imperatives revenue of $31.8 billion over the last 12 months represents 40 percent of IBM revenue- Strategic imperatives revenue of $8.0 billion in the quarter, up 16 percent year to year (up 15 percent adjusting for currency)

Cloud revenue of $12.7 billion over the last 12 months- Cloud as-a-Service annual run rate of $7.5 billion in the quarter, up 66 percent year to year (up 65 percent adjusting for currency)

IBM (IBM) today announced third-quarter 2016 earnings results.

"IBM’s third-quarter performance, led by continued double-digit growth in our strategic imperatives, is a testament to our leadership in cognitive solutions and cloud," said Ginni Rometty, IBM chairman, president and chief executive officer. "Our ability to apply deep expertise and breakthrough technology, led by Watson and the IBM Cloud, to massive amounts of data is enabling us to build new markets and transform industries. Whether it is banks implementing IBM blockchain solutions, hospitals leveraging Watson to fight cancer, or retailers using cognitive apps built on the IBM Cloud to transform the customer experience, clients across all industries are tapping into a new kind of innovation value from IBM."

THIRD QUARTER 2016
Gross Profit
Diluted EPS
Net Income
Margin
GAAP from Continuing Operations
$2.98
$2.9B
46.9%
Year/Year
-1%
-4%
-2.1Pts
Operating (Non-GAAP)
$3.29
$3.1B
48.0%
Year/Year
-1%
-4%
-2.1Pts
Strategic
REVENUE
Total IBM
Imperatives
Cloud
As reported (US$)
$19.2B
$8.0B
$3.4B
Year/Year
0%
16%
44%
Year/Year adjusting for currency
-1%
15%
42%

"Throughout the year, we have continued to invest where we see the greatest opportunities to create new markets and strengthen our enterprise IT leadership position," said Martin Schroeter, IBM senior vice president and chief financial officer. "This has included more than $12 billion across capital expenditures, R&D and acquisitions so far this year. At the same time, we have returned more than $6 billion to shareholders through dividends and share repurchases."

Strategic Imperatives

Third-quarter revenues from the company’s strategic imperatives --- cloud, analytics, mobility and security --- increased 16 percent year to year (up 15 percent adjusting for currency). Cloud revenues (public, private and hybrid) for the quarter increased 44 percent (up 42 percent adjusting for currency). Cloud revenue over the trailing 12 months was $12.7 billion. The annual run rate for cloud as-a-Service revenue --- a subset of total cloud revenue --- increased to $7.5 billion from $4.5 billion in the third quarter of 2015. Revenues from analytics increased 15 percent (up 14 percent adjusting for currency). Revenues from mobile increased 19 percent and revenues from security increased 11 percent.

Full-Year 2016 Expectations

The company continues to expect operating (non-GAAP) diluted earnings per share of at least $13.50 and GAAP diluted earnings per share of at least $12.23. Operating (non-GAAP) diluted earnings per share exclude $1.27 per share of charges for amortization of purchased intangible assets, other acquisition-related charges and retirement-related charges. There is no change to IBM’s previously-provided free cash flow guidance.

Cash Flow and Balance Sheet

The company generated net cash from operating activities of $4.2 billion; or $3.3 billion excluding Global Financing receivables. IBM’s free cash flow was $2.4 billion in the third quarter. IBM returned $1.3 billion in dividends and $0.9 billion of gross share repurchases to shareholders. At the end of September 2016, IBM had $3.0 billion remaining in the current share repurchase authorization.

IBM ended the third-quarter 2016 with $10.0 billion of cash on hand. Debt, including Global Financing debt of $26.1 billion, totaled $42.5 billion. Core (non-Global Financing) debt totaled $16.4 billion. The balance sheet remains strong and is well positioned to support the business over the long term.

Segment Results

Cognitive Solutions (includes solutions software and transaction processing software) -- revenues of $4.2 billion, up 4.5 percent. Cloud revenue within the segment grew 74 percent (up 75 percent adjusting for currency), and Solutions Software grew 8 percent.

Global Business Services (includes consulting, global process services, application management) -- revenues of $4.2 billion, down 0.4 percent (down 1.6 percent adjusting for currency). Strategic imperatives revenue within the segment was up 13 percent (up 12 percent adjusting for currency).

Technology Services & Cloud Platforms (includes infrastructure services, technical support services, integration software) -- revenues of $8.7 billion, up 2.4 percent (up 1.4 percent adjusting for currency). Growth of 45 percent (up 42 percent adjusting for currency) in strategic imperatives revenue within the segment was driven by strong hybrid cloud services performance.

Systems (includes systems hardware and operating systems software) -- revenues of $1.6 billion, down 21.0 percent (down 21.5 percent adjusting for currency). Revenue reflects z Systems product cycle dynamics.

Global Financing (includes financing and used equipment sales) -- revenues of $412 million, down 7.9 percent (down 9.2 percent adjusting for currency).

Year-To-Date 2016 Results

Diluted earnings per share from continuing operations were $7.67, down 15 percent compared to the 2015 period. Net income from continuing operations for the nine months ended September 30, 2016 was $7.4 billion compared with $8.9 billion in the year-ago period, a decrease of 17 percent.

Consolidated net income was $7.4 billion compared to $8.7 billion in the year-ago period. Consolidated diluted earnings per share were $7.67 compared to $8.85, down 13 percent year to year. Revenues from continuing operations for the nine-month period totaled $58.1 billion, a decrease of 3 percent year to year (down 2 percent adjusting for currency) compared with $59.7 billion for the first nine months of 2015.

Operating (non-GAAP) diluted earnings per share from continuing operations were $8.59 compared with $10.09 per diluted share for the 2015 period, a decrease of 15 percent. Operating (non-GAAP) net income from continuing operations for the nine months ended September 30, 2016 was $8.3 billion compared with $10.0 billion in the year-ago period, a decrease of 17 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/3q16.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,
2016
2015*
2016
2015*
REVENUE
Cognitive Solutions
$
4,235
$
4,052
$ 12,889
$ 12,616
Global Business Services
4,191
4,206
12,578
12,869
Technology Services & Cloud Platforms
8,748
8,541
26,029
25,993
Systems
1,558
1,973
5,184
6,656
Global Financing
412
447
1,245
1,386
Other
81
60
223
162
TOTAL REVENUE
19,226
19,280
58,149
59,682
GROSS PROFIT
9,013
9,436
27,401
29,278
GROSS PROFIT MARGIN
Cognitive Solutions
80.4 %
84.4 %
81.5 %
84.9 %
Global Business Services
28.8 %
29.7 %
27.0 %
28.2 %
Technology Services & Cloud Platforms
42.0 %
42.2 %
41.5 %
42.2 %
Systems
51.1 %
55.9 %
55.1 %
55.8 %
Global Financing
37.8 %
48.4 %
39.6 %
47.5 %
TOTAL GROSS PROFIT MARGIN
46.9 %
48.9 %
47.1 %
49.1 %
EXPENSE AND OTHER INCOME
S,G&A
4,732
4,731
16,093
15,273
R,D&E
1,397
1,287
4,320
3,885
Intellectual property and
custom development income
(528 )
(188 )
(1,110 )
(489 )
Other (income) and expense
(8 )
(133 )
281
(578 )
Interest expense
158
117
473
340
TOTAL EXPENSE AND OTHER INCOME
5,751
5,815
20,056
18,431
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
3,263
3,621
7,345
10,846
Pre-tax margin
17.0 %
18.8 %
12.6 %
18.2 %
Provision for / (Benefit) from income taxes
409
659
(31 )
1,943
Effective tax rate
12.5 %
18.2 %
(0.4 %)
17.9 %
INCOME FROM CONTINUING OPERATIONS
$
2,854
$
2,962
$
7,375
$
8,904
DISCONTINUED OPERATIONS
Loss from discontinued operations, net of taxes
(1 )
(12 )
(4 )
(176 )
NET INCOME
$
2,853
$
2,950
$
7,371
$
8,727
EARNINGS PER SHARE OF COMMON STOCK:
Assuming Dilution
Continuing Operations
$
2.98
$
3.02
$
7.67
$
9.03
Discontinued Operations
$
0.00
($0.01 )
$
0.00
($0.18 )
TOTAL
$
2.98
$
3.01
$
7.67
$
8.85
Basic
Continuing Operations
$
2.99
$
3.04
$
7.70
$
9.07
Discontinued Operations
$
0.00
($0.01 )
$
0.00
($0.18 )
TOTAL
$
2.99
$
3.03
$
7.70
$
8.89
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (M’s):
Assuming Dilution
957.3
979.0
960.7
986.0
Basic
954.0
975.1
957.7
981.8
* Recast to conform with 2016 segment presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
At
At
(Dollars in Millions)
September 30,
December 31,
2016
2015
ASSETS:
Current Assets:
Cash and cash equivalents
$
9,039
$
7,686
Marketable securities
929
508
Notes and accounts receivable - trade, net
8,291
8,333
Short-term financing receivables, net
16,032
19,020
Other accounts receivable, net
873
1,201
Inventory
1,729
1,551
Prepaid expenses and other current assets
4,539
4,205
Total Current Assets
41,433
42,504
Property, plant and equipment, net
11,104
10,727
Long-term financing receivables, net
8,936
10,013
Prepaid pension assets
3,487
1,734
Deferred taxes
4,289
4,822
Goodwill and intangibles, net
41,282
35,508
Investments and sundry assets
5,075
5,187
Total Assets
$
115,606
$
110,495
LIABILITIES:
Current Liabilities:
Taxes
$
2,137
$
2,847
Short-term debt
6,920
6,461
Accounts payable
5,271
6,028
Deferred income
10,815
11,021
Other liabilities
9,304
7,913
Total Current Liabilities
34,447
34,269
Long-term debt
35,563
33,428
Retirement related obligations
16,688
16,504
Deferred income
3,611
3,771
Other liabilities
8,138
8,099
Total Liabilities
98,447
96,071
EQUITY:
IBM Stockholders’ Equity:
Common stock
53,759
53,262
Retained earnings
149,585
146,124
Treasury stock -- at cost
(158,170 )
(155,518 )
Accumulated other comprehensive income/(loss)
(28,164 )
(29,607 )
Total IBM stockholders’ equity
17,010
14,262
Noncontrolling interests
149
162
Total Equity
17,159
14,424
Total Liabilities and Equity
$
115,606
$
110,495
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW ANALYSIS
(Unaudited)
Three Months Ended
Nine Months Ended
(Dollars in Millions)
September 30,
September 30,
2016
2015
2016
2015
Net Cash Provided by Operating Activities per GAAP:
$
4,213
$
4,235
$ 13,301
$ 11,729
Less: change in Global Financing (GF)
Receivables
934
749
3,647
1,962
Capital Expenditures, Net
(851 )
(934 )
(2,801 )
(2,764 )
Free Cash Flow
2,428
2,553
6,854
7,003
Acquisitions
(40 )
(112 )
(5,445 )
(821 )
Divestitures
0
(568 )
35
(488 )
Dividends
(1,337 )
(1,271 )
(3,927 )
(3,636 )
Share Repurchase
(856 )
(1,542 )
(2,632 )
(3,846 )
Non-GF Debt
(1,696 )
379
3,365
770
Other (includes GF Receivables and GF Debt)
853
1,370
3,523
2,108
Change in Cash, Cash Equivalents and
Short-term Marketable Securities
($648 )
$
808
$
1,773
$
1,091
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW
(Unaudited)
Three Months Ended
Nine Months Ended
(Dollars in Millions)
September 30,
September 30,
2016
2015
2016
2015
Net Income from Operations
$
2,853
$
2,950
$
7,371
$
8,727
Depreciation/Amortization of Intangibles
1,126
936
3,253
2,865
Stock-based Compensation
142
111
403
369
Working Capital / Other
(842 )
(522 )
(1,373 )
(2,243 )
Global Financing A/R
934
749
3,647
1,962
Loss on Microelectronics Business Disposal
0
12
0
48
Net Cash Provided by Operating Activities
$
4,213
$
4,235
$
13,301
$
11,729
Capital Expenditures, net of payments & proceeds
(851 )
(934 )
(2,801 )
(2,764 )
Divestitures, net of cash transferred
0
(568 )
35
(488 )
Acquisitions, net of cash acquired
(40 )
(112 )
(5,445 )
(821 )
Marketable Securities / Other Investments, net
(159 )
272
610
1,358
Net Cash Used in Investing Activities
($1,050 )
($1,343 )
($7,600 )
($2,714 )
Debt, net of payments & proceeds
(2,041 )
915
1,888
(607 )
Dividends
(1,337 )
(1,271 )
(3,927 )
(3,636 )
Common Stock Repurchases
(856 )
(1,542 )
(2,632 )
(3,846 )
Common Stock Transactions - Other
52
51
166
271
Net Cash Used in Financing Activities
($4,182 )
($1,848 )
($4,504 )
($7,818 )
Effect of Exchange Rate changes on Cash
41
42
155
(194 )
Net Change in Cash & Cash Equivalents
($978 )
$
1,087
$
1,352
$
1,004
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
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 %
Change YTY Revenue - External
4.5 %
(0.4 )%
2.4 %
(21.0 )%
(7.9 )%
Change YTY Revenue - External @constant currency
4.5 %
(1.6 )%
1.4 %
(21.5 )%
(9.2 )%
THIRD - QUARTER 2015*
Cognitive Solutions &
Industry Services
Technology
Global
Services &
(Dollars in Millions)
Cognitive
Business
Cloud
Global
Solutions
Services
Platforms
Systems
Financing
Revenue
External
$ 4,052
$ 4,206
$ 8,541
$ 1,973
$
447
Internal
528
120
161
209
584
Total Segment Revenue
$ 4,580
$ 4,326
$ 8,702
$ 2,182
$
1,031
Pre-tax Income from Continuing Operations
1,596
664
1,317
248
562
Pre-tax margin
34.9 %
15.4 %
15.1 %
11.4 %
54.5 %
* Recast to conform with 2016 segment presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
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 %
Change YTY Revenue - External
2.2 %
(2.3 )%
0.1 %
(22.1 )%
(10.2 )%
Change YTY Revenue - External @constant currency
2.9 %
(2.2 )%
1.0 %
(21.9 )%
(8.5 )%
NINE - MONTHS 2015*
Cognitive Solutions &
Industry Services
Technology
Global
Services &
(Dollars in Millions)
Cognitive
Business
Cloud
Global
Solutions
Services
Platforms
Systems
Financing
Revenue
External
$ 12,616
$ 12,869
$ 25,993
$ 6,656
$
1,386
Internal
1,695
380
500
571
1,874
Total Segment Revenue
$ 14,311
$ 13,249
$ 26,493
$ 7,226
$
3,261
Pre-tax Income from Continuing Operations
4,949
1,895
3,861
1,048
1,690
Pre-tax margin
34.6 %
14.3 %
14.6 %
14.5 %
51.8 %
* Recast to conform with 2016 segment presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; Dollars in millions except per share amounts)
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 Income Taxes***
409
73
40
521
Effective Tax Rate
12.5 %
1.1Pts
0.7Pts
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
THIRD - QUARTER 2015
CONTINUING OPERATIONS
Acquisition-
Retirement-
Related
Related
Operating
GAAP
Adjustments*
Adjustments**
(Non-GAAP)
Gross Profit
$ 9,436
$
89
$
118
$
9,643
Gross Profit Margin
48.9 %
0.5Pts
0.6Pts
50.0 %
S,G&A
4,731
(76 )
(74 )
4,581
R,D&E
1,287
-
(12 )
1,275
Other (Income) & Expense
(133 )
0
-
(133 )
Total Expense & Other (Income)
5,815
(76 )
(86 )
5,652
Pre-tax Income from Continuing Operations
3,621
165
204
3,991
Pre-tax Income Margin from Continuing Operations
18.8 %
0.9Pts
1.1Pts
20.7 %
Provision for Income Taxes***
659
(5 )
64
718
Effective Tax Rate
18.2 %
-0.9Pts
0.7Pts
18.0 %
Income from Continuing Operations
2,962
170
140
3,272
Income Margin from Continuing Operations
15.4 %
0.9Pts
0.7Pts
17.0 %
Diluted Earnings Per Share: Continuing Operations
$
3.02
$ 0.18
$ 0.14
$
3.34
* 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 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 )%
2.5Pts
1.4Pts
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
NINE - MONTHS 2015
CONTINUING OPERATIONS
Acquisition-
Retirement-
Related
Related
Operating
GAAP
Adjustments*
Adjustments**
(Non-GAAP)
Gross Profit
$ 29,278
$
268
$
350
$ 29,896
Gross Profit Margin
49.1 %
0.4Pts
0.6Pts
50.1 %
S,G&A
15,273
(230 )
(445 )
14,598
R,D&E
3,885
-
(36 )
3,849
Other (Income) & Expense
(578 )
(5 )
-
(583 )
Total Expense & Other (Income)
18,431
(235 )
(481 )
17,715
Pre-Tax Income from Continuing Operations
10,846
503
831
12,181
Pre-tax Income Margin from Continuing Operations
18.2 %
0.8Pts
1.4Pts
20.4 %
Provision for Income Taxes***
1,943
52
234
2,228
Effective Tax Rate
17.9 %
-0.3Pts
0.7Pts
18.3 %
Income from Continuing Operations
8,904
452
597
9,953
Income Margin from Continuing Operations
14.9 %
0.8Pts
1.0Pts
16.7 %
Diluted Earnings Per Share: Continuing Operations
$
9.03
$ 0.46
$ 0.60
$
10.09
* 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)
2016
EPS Guidance
Expectations
IBM GAAP EPS
at least $12.23
IBM Operating EPS (non-GAAP)
at least $13.50
Adjustments
Acquisition related charges *
$0.84
Non-Operating Retirement-Related Items
$0.43
* Includes acquisitions through September 30, 2016

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SOURCE: IBM

IBM
Ian Colley, 914-434-3043
colley@us.ibm.com
or
John Bukovinsky, 732-618-3531
jbuko@us.ibm.com