IBM
$120.31
IBM
($1.26)
(1.04%)
Earnings Details
3rd Quarter September 2018
Tuesday, October 16, 2018 4:07:00 PM
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Summary

IBM Misses

IBM (IBM) reported 3rd Quarter September 2018 earnings of $3.42 per share on revenue of $18.8 billion. The consensus earnings estimate was $3.40 per share on revenue of $19.1 billion. The Earnings Whisper number was $3.43 per share. Revenue fell 2.1% compared to the same quarter a year ago.

The company said it continues to expect 2018 earnings of at least $13.80 per share. The current consensus earnings estimate is $13.82 per share for the year ending December 31, 2018

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
$3.42
Earnings Whisper
$3.43
Consensus Estimate
$3.40
Reported Revenue
$18.76 Bil
Revenue Estimate
$19.12 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

IBM Reports 2018 Third-Quarter Results

ARMONK, N.Y.--(BUSINESS WIRE)-- IBM (NYSE:IBM)

Best Year-to-Year Gross Margin Performance in 3 Years, Reflecting Higher Value Business

Highlights

  • GAAP EPS from continuing operations of $2.94; Operating (non-GAAP) EPS of $3.42
  • Revenue of $18.8 billion, down 2 percent (flat adjusting for currency)
  • Strategic imperatives revenue of $39.5 billion over last 12 months, up 13 percent (up 11 percent adjusting for currency)
  • Cloud revenue of $19.0 billion over last 12 months, up 20 percent (up 18 percent adjusting for currency)
  • As-a-service annual exit run rate for cloud revenue of $11.4 billion in the quarter, up 21 percent year to year (up 24 percent adjusting for currency)
  • Strong services gross profit margin expansion year to year
  • Maintains full-year operating (non-GAAP) EPS and free cash flow expectations

IBM (NYSE:IBM) today announced third-quarter results.

"IBM's progress and momentum this year in the emerging, high-value segments of the IT industry are driven by our innovative technology, deep industry expertise and commitment to trust and security," said Ginni Rometty, IBM chairman, president and chief executive officer. "Our leadership in the technology and services that deliver hybrid cloud, AI, blockchain, analytics and security has helped drive our overall performance, and is helping our clients unleash the full business value of these innovations."

  THIRD QUARTER 2018
            Pre-tax     Gross
Diluted Net Pre-tax Income Profit
EPS     Income     Income     Margin     Margin
 
GAAP from Continuing Operations $2.94 $2.7B $3.0B 16.0% 46.9%
Year/Year   1%     -1%     -2%     0.0Pts     0.0Pts
 
Operating (Non-GAAP) $3.42 $3.1B $3.6B 19.2% 47.4%
Year/Year   5%     3%     1%     0.5Pts     0.0Pts
 

"In the quarter, we again expanded our overall operating pre-tax income margin year to year, and produced our strongest year-to-year gross margin performance in three years," said James Kavanaugh, IBM senior vice president and chief financial officer. "At the same time, with our strong cash generation, we increased our capital investment in the business through the first three quarters and continued to return capital to shareholders."

Strategic Imperatives Revenue

Strategic imperatives revenue over the last 12 months was $39.5 billion, up 13 percent (up 11 percent adjusting for currency). Total cloud revenue over the last 12 months was $19.0 billion, up 20 percent (up 18 percent adjusting for currency), with $8.1 billion from hardware, software and services to enable IBM clients to implement hybrid cloud solutions across public, private and multi-cloud environments, and $10.9 billion delivered as a service. The annual exit run rate for as-a-service revenue increased in the quarter to $11.4 billion, up 21 percent (up 24 percent adjusting for currency).

Cash Flow and Balance Sheet

In the third quarter, the company generated net cash from operating activities of $4.2 billion, or $3.1 billion, excluding Global Financing receivables. IBM’s free cash flow was $2.2 billion. IBM returned $2.1 billion to shareholders through $1.4 billion in dividends and $0.6 billion in gross share repurchases. At the end of September 2018, IBM had $1.4 billion remaining in the current share repurchase authorization.

IBM ended the third quarter with $14.7 billion of cash on hand. Debt totaled $46.9 billion, including Global Financing debt of $30.4 billion. The balance sheet remains strong and is well positioned for the long term.

Segment Results for Third Quarter

  • Cognitive Solutions (includes solutions software and transaction processing software) -- revenues of $4.1 billion, down 6 percent (down 5 percent adjusting for currency), with growth in Watson health, security solutions, and key strategic areas in analytics.
  • Global Business Services (includes consulting, application management and global process services) -- revenues of $4.1 billion, up 1 percent (up 3 percent adjusting for currency), led by consulting. Gross profit margin increased 270 basis points.
  • Technology Services & Cloud Platforms (includes infrastructure services, technical support services and integration software) -- revenues of $8.3 billion, down 2 percent (flat year to year adjusting for currency), with growth in cloud revenue. Gross profit margin increased 120 basis points.
  • Systems (includes systems hardware and operating systems software) -- revenues of $1.7 billion, up 1 percent (up 2 percent adjusting for currency), driven by growth in Power and IBM Z.
  • Global Financing (includes financing and used equipment sales) -- revenues of $388 million, down 9 percent (down 7 percent adjusting for currency).

Full-Year 2018 Expectations

The company expects operating (non-GAAP) diluted earnings per share of at least $13.80, and GAAP diluted earnings per share of at least $11.60. Operating (non-GAAP) diluted earnings per share exclude $2.20 per share of charges for amortization of purchased intangible assets, other acquisition-related charges, retirement-related charges and any one-time impacts from the enactment of U.S. Tax Reform. GAAP expectations exclude any fourth-quarter one-time impacts from the enactment of U.S. Tax Reform.

IBM expects free cash flow of approximately $12 billion, with a realization rate greater than 100 percent.

Year-To-Date 2018 Results

Consolidated diluted earnings per share from continuing operations was $7.36 compared to $7.24, up 2 percent year to year. Consolidated net income was $6.8 billion, flat year to year. Revenues for the nine-month period totaled $57.8 billion, an increase of 2 percent year to year (flat year to year adjusting for currency), compared with $56.6 billion for the first nine months of 2017.

Operating (non-GAAP) diluted earnings per share from continuing operations was $8.96 compared with $8.54 per diluted share for the 2017 period, an increase of 5 percent. Operating (non-GAAP) net income for the nine months ended September 30, 2018 was $8.2 billion compared with $8.0 billion in the year-ago period, an increase of 3 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; 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; 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/3q18.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,
2018   2017 2018   2017
 
REVENUE
Cognitive Solutions $   4,148 $   4,400 $   13,027 $   13,021
Global Business Services 4,130 4,093 12,495 12,196
Technology Services & Cloud Platforms 8,292 8,457 25,533 25,079
Systems 1,736 1,721 5,412 4,863
Global Financing 388 427 1,188 1,246
Other     62       56       176       192  
TOTAL REVENUE 18,756 19,153 57,830 56,597
 
GROSS PROFIT 8,803 8,981 * 26,249 25,894 *
 
GROSS PROFIT MARGIN
Cognitive Solutions 76.0 % 78.7 % * 76.7 % 78.3 % *
Global Business Services 29.8 % 27.1 % * 26.3 % 25.1 % *
Technology Services & Cloud Platforms 42.1 % 40.9 % * 39.9 % 40.1 % *
Systems 52.7 % 53.6 % * 49.3 % 51.5 % *
Global Financing 26.3 % 25.2 % * 29.1 % 29.2 % *
 
TOTAL GROSS PROFIT MARGIN 46.9 % 46.9 % * 45.4 % 45.8 % *
 
 
EXPENSE AND OTHER INCOME
S,G&A 4,363 4,606 * 14,665 14,666 *
R,D&E 1,252 1,291 * 4,021 4,212 *
Intellectual property and
custom development income (275 ) (308 ) (842 ) (1,118 )
Other (income) and expense 275 159 * 968 751 *
Interest expense     191       168       530       451  
TOTAL EXPENSE AND OTHER INCOME 5,807 5,917 * 19,341 18,962 *
 
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 2,996 3,065 6,908 6,931
Pre-tax margin 16.0 % 16.0 % 11.9 % 12.2 %
Provision for income taxes 304 339 138 120
Effective tax rate 10.2 % 11.0 % 2.0 % 1.7 %
 
INCOME FROM CONTINUING OPERATIONS $ 2,692 $ 2,726 $ 6,770 $ 6,811
DISCONTINUED OPERATIONS
Income/(Loss) from discontinued operations, net of taxes     2       0       7       (3 )
 
NET INCOME $   2,694   $   2,726   $   6,777   $   6,807  
 
EARNINGS PER SHARE OF COMMON STOCK:
Assuming Dilution
Continuing Operations $ 2.94 $ 2.92 $ 7.36 $ 7.24
Discontinued Operations $   0.00   $   0.00   $   0.01   $   0.00  
TOTAL $   2.94   $   2.92   $   7.37   $   7.24  
 
Basic
Continuing Operations $ 2.95 $ 2.93 $ 7.39 $ 7.28
Discontinued Operations $   0.00   $   0.00   $   0.01   $   0.00  
TOTAL $   2.95   $   2.93   $   7.40   $   7.28  
 
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (M's):
Assuming Dilution 915.2 933.2 920.0 940.2
Basic 911.2 929.4 915.6 935.6
 
* Recast to reflect adoption of the FASB guidance on presentation of net postretirement benefit cost.
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
  At   At
(Dollars in Millions) September 30, December 31,
2018 2017
ASSETS:
 
Current Assets:
Cash and cash equivalents $   11,563 $   11,972
Restricted cash 168 262 *
Marketable securities 2,932 608
Notes and accounts receivable - trade, net 7,071 8,928
Short-term financing receivables, net 19,249 21,721
Other accounts receivable, net 767 981
Inventory 1,893 1,583
Deferred Costs 2,227 1,820 **
Prepaid expenses and other current assets     2,388       1,860   * **
Total Current Assets 48,257 49,735
 
Property, plant and equipment, net 10,949 11,116
Long-term financing receivables, net 8,179 9,550
Prepaid pension assets 5,655 4,643
Deferred costs 2,581 2,136 **
Deferred taxes 4,436 4,862
Goodwill and intangibles, net 39,660 40,531
Investments and sundry assets     2,272       2,783   **
Total Assets $   121,990   $   125,356  
 
LIABILITIES:
 
Current Liabilities:
Taxes $ 2,502 $ 4,219
Short-term debt 10,932 6,987
Accounts payable 5,384 6,451
Deferred income 10,704 11,552
Other liabilities     7,300       8,153  
Total Current Liabilities 36,822 37,363
 
Long-term debt 35,989 39,837
Retirement related obligations 15,774 16,720
Deferred income 3,507 3,746
Other liabilities     9,979       9,965  
Total Liabilities 102,071 107,631
 
EQUITY:
 
IBM Stockholders' Equity:
Common stock 54,987 54,566
Retained earnings 158,612 153,126
Treasury stock -- at cost (165,995 ) (163,507 )
Accumulated other comprehensive income/(loss)     (27,820 )     (26,592 )
Total IBM Stockholders' Equity 19,784 17,594
 
Noncontrolling interests     134       131  
Total Equity     19,918       17,725  
Total Liabilities and Equity $   121,990   $   125,356  
 
* Recast to reflect adoption of the FASB guidance on restricted cash.
** Recast to conform to current period presentation.
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW ANALYSIS
(Unaudited)
 
  Three Months Ended   Nine Months Ended
(Dollars in Millions) September 30, September 30,
2018   2017 2018   2017
 
Net Cash Provided by Operating Activities per GAAP: $   4,232 $   3,570 $   11,128 $   10,991
 
Less: change in Global Financing (GF) Receivables 1,096 258 2,874 2,468
Capital Expenditures, Net (942 ) (780 ) (2,839 ) (2,347 )
 
Free Cash Flow 2,194 2,532 5,415 6,176
 
Acquisitions (1 ) (274 ) (123 ) (442 )
Divestitures - 6 - 35
Dividends (1,431 ) (1,396 ) (4,250 ) (4,119 )
Share Repurchase (627 ) (949 ) (2,393 ) (3,674 )
Non-GF Debt 2,218 (467 ) 1,607 1,896
Other (includes GF Net Receivables and GF Debt) 382 (216 ) * 1,564 3,124 *
 
Change in Cash, Cash Equivalents, Restricted Cash
and Short-term Marketable Securities $   2,736       ($763 ) * $   1,820   $   2,995   *
 
* Recast to reflect adoption of the FASB guidance on restricted cash.
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW
(Unaudited)
 
Three Months Ended   Nine Months Ended
(Dollars in Millions) September 30, September 30,
2018   2017 2018   2017
 
Net Income from Operations $   2,694 $   2,726 $   6,777 $   6,807
Depreciation/Amortization of Intangibles 1,138 1,175 3,368 3,392
Stock-based Compensation 129 123 371 388
Working Capital / Other (825 ) (713 ) (2,261 ) (2,064 )
Global Financing A/R 1,096 258 2,874 2,468
Net Cash Provided by Operating Activities $ 4,232 $ 3,570 $ 11,128 $ 10,991
Capital Expenditures, net of payments & proceeds (942 ) (780 ) (2,839 ) (2,347 )
Divestitures, net of cash transferred - 6 - 35
Acquisitions, net of cash acquired (1 ) (274 ) (123 ) (442 )
Marketable Securities / Other Investments, net (2,026 ) (858 ) * (2,406 ) (517 ) *
Net Cash Used in Investing Activities ($2,969 ) ($1,906 ) * ($5,368 ) ($3,271 ) *
Debt, net of payments & proceeds 1,595 (446 ) 845 2,310
Dividends (1,431 ) (1,396 ) (4,250 ) (4,119 )
Common Stock Repurchases (627 ) (949 ) (2,393 ) (3,674 )
Common Stock Transactions - Other 26 35 (66 ) (15 )
Net Cash Used in Financing Activities ($437 ) ($2,756 ) ($5,864 ) ($5,499 )
Effect of Exchange Rate changes on Cash (55 ) 328 (399 ) 875
Net Change in Cash, Cash Equivalents and Restricted Cash $ 771 ($764 ) * ($503 ) $ 3,096 *
 
* Recast to reflect adoption of the FASB guidance on restricted cash.
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
 

THIRD - QUARTER 2018

    Technology    
Global Services &
(Dollars in Millions) Cognitive Business Cloud Global
Solutions   Services   Platforms   Systems   Financing
Revenue
External $   4,148 $   4,130 $   8,292 $   1,736 $   388
Internal     639         77         240         181         338  
Total Segment Revenue $ 4,787 $ 4,207 $ 8,533 $ 1,917 $ 726
 
Pre-tax Income from Continuing Operations 1,629 579 1,075 209 308
 
Pre-tax margin 34.0 % 13.8 % 12.6 % 10.9 % 42.5 %
 
 
Change YTY Revenue - External (5.7 )% 0.9 % (1.9 )% 0.9 % (9.0 )%
Change YTY Revenue - External @constant currency (4.6 )% 2.5 % 0.2 % 1.8 % (7.1 )%
 
 

THIRD - QUARTER 2017

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 * 1,643 442 1,177 337 243
 
Pre-tax margin * 32.7 % 10.6 % 13.7 % 17.3 % 34.8 %
 
* Recast to reflect adoption of the FASB guidance on presentation of net postretirement benefit cost.
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
 
NINE - MONTHS 2018
    Technology    
Global Services &
(Dollars in Millions) Cognitive Business Cloud Global
Solutions   Services   Platforms   Systems   Financing
Revenue
External $   13,027 $   12,495 $   25,533 $   5,412 $   1,188
Internal     2,122         249         550         576         1,240  
Total Segment Revenue $ 15,149 $ 12,744 $ 26,083 $ 5,989 $ 2,428
 
Pre-tax Income from Continuing Operations 4,718 1,109 2,395 352 1,042
 
Pre-tax margin 31.1 % 8.7 % 9.2 % 5.9 % 42.9 %
 
 
Change YTY Revenue - External 0.0 % 2.4 % 1.8 % 11.3 % (4.7 )%
Change YTY Revenue - External @constant currency (1.4 )% 0.5 % (0.1 )% 9.9 % (5.8 )%
 
 
NINE - MONTHS 2017
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 * 4,522 1,035 2,845 222 835
 
Pre-tax margin * 30.1 % 8.3 % 11.1 % 4.1 % 38.5 %
 
* Recast to reflect adoption of the FASB guidance on presentation of net postretirement benefit cost.
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; Dollars in millions except per share amounts)
 
THIRD - QUARTER 2018
CONTINUING OPERATIONS
  Acquisition-   Retirement-   Tax Reform  
Related Related One-Time Operating
GAAP Adjustments* Adjustments** Impact (Non-GAAP)
 
Gross Profit $   8,803 $   96   -   - $   8,899
 
Gross Profit Margin 46.9 % 0.5Pts - - 47.4 %
 
S,G&A 4,363 (112 ) - - 4,251
 
R,D&E 1,252 - - - 1,252
 
Other (Income) & Expense 275 (1 ) (389 ) - (115 )
 
Total Expense & Other (Income) 5,807 (113 ) (389 ) - 5,304
 
Pre-tax Income from Continuing Operations 2,996 209 389 - 3,594
 
Pre-tax Income Margin from Continuing Operations 16.0 % 1.1Pts 2.1Pts - 19.2 %
 
Provision for Income Taxes*** 304 56 100 - 460
 
Effective Tax Rate 10.2 % 1.0Pts 1.7Pts - 12.8 %
 
Income from Continuing Operations 2,692 153 289 - 3,134
 
Income Margin from Continuing Operations 14.4 % 0.8Pts 1.5Pts - 16.7 %
 
Diluted Earnings Per Share: Continuing Operations $ 2.94 $ 0.17 $ 0.31 - $ 3.42
 
 
THIRD - QUARTER 2017
CONTINUING OPERATIONS
Acquisition- Retirement-
Related Related Operating
GAAP Adjustments* Adjustments** (Non-GAAP)
 
Gross Profit $ 8,981 $ 114 - $ 9,095
 
Gross Profit Margin 46.9 % 0.6Pts - 47.5 %
 
S,G&A 4,606 (125 ) - 4,482
 
R,D&E 1,291 - - 1,291
 
Other (Income) & Expense 159 - (273 ) (114 )
 
Total Expense & Other (Income) 5,917 (125 ) (273 ) 5,519
 
Pre-tax Income from Continuing Operations 3,065 238 273 3,576
 
Pre-tax Income Margin from Continuing Operations 16.0 % 1.2Pts 1.4Pts 18.7 %
 
Provision for Income Taxes*** 339 79 113 531
 
Effective Tax Rate 11.0 % 1.5Pts 2.3Pts 14.8 %
 
Income from Continuing Operations 2,726 159 160 3,045
 
Income Margin from Continuing Operations 14.2 % 0.8Pts 0.8Pts 15.9 %
 
Diluted Earnings Per Share: Continuing Operations $ 2.92 $ 0.17 $ 0.17 $ 3.26

* 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, amortization of prior service cost and insolvency insurance. 2017 adjustments were recast to reflect the adoption of the FASB guidance on net postretirement benefit cost.

*** 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 2018
CONTINUING OPERATIONS
  Acquisition-   Retirement-   Tax Reform  
Related Related One-Time Operating
GAAP Adjustments* Adjustments** Impact (Non-GAAP)
 
Gross Profit $   26,249 $   283   -   - $   26,531
 
Gross Profit Margin 45.4 % 0.5Pts - - 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 )
 
Total Expense & Other (Income) 19,341 (333 ) (1,185 ) - 17,822
 
Pre-tax Income from Continuing Operations 6,908 616 1,185 - 8,709
 
Pre-tax Income Margin from Continuing Operations 11.9 % 1.1Pts 2.0Pts - 15.1 %
 
Provision for Income Taxes*** 138 138 285 (93 ) 468
 
Effective Tax Rate 2.0 % 1.4Pts 3.0Pts (1.1)Pts 5.4 %
 
Income from Continuing Operations 6,770 478 900 93 8,241
 
Income Margin from Continuing Operations 11.7 % 0.8Pts 1.6Pts 0.2Pts 14.2 %
 
Diluted Earnings Per Share: Continuing Operations $ 7.36 $ 0.52 $ 0.98 $ 0.10 $ 8.96
 
 
NINE - MONTHS 2017
CONTINUING OPERATIONS
Acquisition- Retirement-
Related Related Operating
GAAP Adjustments* Adjustments** (Non-GAAP)
 
Gross Profit $ 25,894 $ 349 - $ 26,243
 
Gross Profit Margin 45.8 % 0.6Pts - 46.4 %
 
S,G&A 14,666 (393 ) - 14,273
 
R,D&E 4,212 - - 4,212
 
Other (Income) & Expense 751 (7 ) (969 ) (225 )
 
Total Expense & Other (Income) 18,962 (401 ) (969 ) 17,593
 
Pre-Tax Income from Continuing Operations 6,931 750 969 8,650
 
Pre-tax Income Margin from Continuing Operations 12.2 % 1.3Pts 1.7Pts 15.3 %
 
Provision for Income Taxes*** 120 212 288 621
 
Effective Tax Rate 1.7 % 2.3Pts 3.1Pts 7.2 %
 
Income from Continuing Operations 6,811 537 681 8,030
 
Income Margin from Continuing Operations 12.0 % 0.9Pts 1.2Pts 14.2 %
 
Diluted Earnings Per Share: Continuing Operations $ 7.24 $ 0.57 $ 0.73 $ 8.54

* 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, amortization of prior service cost and insolvency insurance. 2017 adjustments were recast to reflect the adoption of the FASB guidance on net postretirement benefit cost.

*** 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)
 
    2018

EPS Guidance

Expectations
GAAP Diluted EPS at least $11.60
Operating EPS (non-GAAP) at least $13.80
 
 
Adjustments
 
Acquisition-related Charges * $0.78
 
Non-Operating Retirement-Related Items $1.32
 
Year-to-Date Tax Reform One-time Charge $0.10
 
* Includes acquisitions as of September 30, 2018

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

Source: IBM