IBM
$149.65
IBM
$1.09
.73%
Earnings Details
2nd Quarter June 2018
Wednesday, July 18, 2018 4:03:00 PM
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Summary

IBM Beats

IBM (IBM) reported 2nd Quarter June 2018 earnings of $3.08 per share on revenue of $20.0 billion. The consensus earnings estimate was $3.03 per share on revenue of $19.7 billion. The Earnings Whisper number was $3.06 per share. Revenue grew 3.7% on a year-over-year basis.

The company said it continues to expect 2018 earnings of at least $13.80 per share. The current consensus earnings estimate is $13.84 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
$3.08
Earnings Whisper
$3.06
Consensus Estimate
$3.03
Reported Revenue
$20.00 Bil
Revenue Estimate
$19.70 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

IBM Reports 2018 Second-Quarter Results

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

Revenue Up 4 Percent Year to Year; Strong Profit Performance

Highlights

  • GAAP EPS from continuing operations of $2.61; Operating (non-GAAP) EPS of $3.08; both up 5 percent
  • GAAP Pre-tax income up 14 percent; Operating (non-GAAP) pre-tax income up 11 percent

    -- Pre-tax margins expanded more than 100 basis points year to year
  • Revenue of $20.0 billion, up 4 percent (up 2 percent adjusting for currency)
  • Strategic imperatives revenue of $39.0 billion over last 12 months, up 15 percent (up 12 percent adjusting for currency); represents 48 percent of IBM revenue
  • Cloud revenue of $18.5 billion over last 12 months, up 23 percent (up 20 percent adjusting for currency)
  • As-a-service annual exit run rate for cloud revenue of $11.1 billion in the quarter, up 26 percent year to year (up 24 percent adjusting for currency)
  • Maintains full-year operating (non-GAAP) EPS and free cash flow expectations

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

"We delivered strong revenue and profit growth in the quarter, underscoring IBM's progress and momentum in the emerging, high-value segments of the IT industry," said Ginni Rometty, IBM chairman, president and chief executive officer. "More clients are engaging IBM on their journey to the cloud, and deploying IBM Cloud, Watson AI, analytics, blockchain and security solutions. This demonstrates IBM's unique leadership in providing innovative technology coupled with deep industry expertise, trust and security."

  SECOND QUARTER 2018
    Pre-tax   Gross Profit
Diluted EPS   Net Income   Income   Margin
GAAP from Continuing Operations $2.61 $2.4B $2.8B 46.0%
Year/Year   5%   3%   14%   (0.5)Pts
Operating (Non-GAAP) $3.08 $2.8B $3.4B 46.5%
Year/Year   5%   3%   11%   (0.6)Pts
 
As-a-service
Strategic annual exit
REVENUE   Total IBM   Imperatives   Cloud   run rate
As reported (US$) $20.0B $10.1B $4.7B $11.1B
Year/Year   4%   15%   20%   26%
Year/Year adjusting for currency   2%   13%   18%   24%
 

"We increased revenue, grew pre-tax income double digits and expanded pre-tax income margins year to year, while continuing to invest in the business and return capital to shareholders," said James Kavanaugh, IBM senior vice president and chief financial officer. "We remain focused on delivering consistent operational performance, in line with our longer-term model."

Strategic Imperatives Revenue

Strategic imperatives revenue over the last 12 months was $39.0 billion, up 15 percent (up 12 percent adjusting for currency). Total cloud revenue over the last 12 months was $18.5 billion, up 23 percent (up 20 percent adjusting for currency), with $8.2 billion from hardware, software and services to enable IBM clients to implement hybrid cloud solutions across public, private and multi-cloud environments, and $10.4 billion delivered as a service. The annual exit run rate for as-a-service revenue increased in the quarter to $11.1 billion, up 26 percent (up 24 percent adjusting for currency).

In the second quarter, revenues from analytics increased 7 percent to $5.4 billion (up 5 percent adjusting for currency); revenues from mobile increased 5 percent to $1.3 billion (up 3 percent adjusting for currency); and revenues from security increased 81 percent to $1.0 billion (up 79 percent adjusting for currency).

Cash Flow and Balance Sheet

In the second quarter, the company generated net cash from operating activities of $2.3 billion, or $2.9 billion, excluding Global Financing receivables. IBM’s free cash flow was $1.9 billion. IBM returned $2.4 billion to shareholders through $1.4 billion in dividends and $1.0 billion in gross share repurchases. At the end of June 2018, IBM had $2.0 billion remaining in the current share repurchase authorization.

IBM ended the second quarter with $11.9 billion of cash on hand. Debt totaled $45.5 billion, including Global Financing debt of $31.1 billion. The balance sheet remains strong and is well positioned for the long term.

Segment Results for Second Quarter

  • Cognitive Solutions (includes solutions software and transaction processing software) -- revenues of $4.6 billion, flat year to year (down 1 percent adjusting for currency), with growth in analytics and industry vertical solutions led by financial services and IoT.
  • Global Business Services (includes consulting, global process services and application management) -- revenues of $4.2 billion, up 2 percent (flat year to year adjusting for currency), with growth in consulting driven by digital offerings.
  • Technology Services & Cloud Platforms (includes infrastructure services, technical support services and integration software) -- revenues of $8.6 billion, up 2 percent (flat year to year adjusting for currency). Strategic imperatives revenue grew 26 percent, led by hybrid cloud services, security and mobile.
  • Systems (includes systems hardware and operating systems software) -- revenues of $2.2 billion, up 25 percent (up 23 percent adjusting for currency) driven by growth in IBM Z, Power Systems and storage.
  • Global Financing (includes financing and used equipment sales) -- revenues of $394 million, down 5 percent (down 6 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 and retirement-related charges as well as 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 were $4.43 compared to $4.32, up 3 percent year to year. Consolidated net income was $4.1 billion, flat year to year. Revenues from continuing operations for the six-month period totaled $39.1 billion, an increase of 4 percent year to year (up 1 percent adjusting for currency) compared with $37.4 billion for the first six months of 2017.

Operating (non-GAAP) diluted earnings per share from continuing operations was $5.53 compared with $5.28 per diluted share for the 2017 period, an increase of 5 percent. Operating (non-GAAP) net income for the six months ended June 30, 2018 was $5.1 billion compared with $5.0 billion in the year-ago period, an increase of 2 percent.

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company’s current assumptions regarding future business and financial performance. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including the following: a downturn in economic environment and client spending budgets; the company’s failure to meet growth and productivity objectives; a failure of the company’s innovation initiatives; 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/2q18.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 Six Months Ended
June 30, June 30,
2018   2017 2018   2017
   
REVENUE
Cognitive Solutions $4,580 $4,559 $8,879 $8,621
Global Business Services 4,192 4,097 8,365 8,103
Technology Services & Cloud Platforms 8,615 8,406 17,240 16,622
Systems 2,177 1,747 3,676 3,142
Global Financing 394 415 799 819
Other 45   65 114   136
TOTAL REVENUE 20,003 19,289 39,075 37,443
 
GROSS PROFIT 9,199 8,968 * 17,445 16,912 *
 
GROSS PROFIT MARGIN
Cognitive Solutions 77.7% 79.0% * 77.0% 78.2% *
Global Business Services 25.9% 24.7% * 24.6% 24.0% *
Technology Services & Cloud Platforms 39.4% 40.4% * 38.8% 39.6% *
Systems 50.6% 52.7% * 47.8% 50.3% *
Global Financing 26.6% 30.8% * 30.6% 31.3% *
 
TOTAL GROSS PROFIT MARGIN 46.0% 46.5% * 44.6% 45.2% *
 
 
EXPENSE AND OTHER INCOME
S,G&A 4,857 5,033 * 10,302 10,060 *
R,D&E 1,364 1,436 * 2,769 2,921 *
Intellectual property and
custom development income (250) (365) (567) (810)
Other (income) and expense 280 273 * 692 592 *
Interest expense 173   147 338   283
TOTAL EXPENSE AND OTHER INCOME 6,423 6,525 * 13,534 13,046 *
 
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 2,776 2,443 3,911 3,867
Pre-tax margin 13.9% 12.7% 10.0% 10.3%
Provision for / (Benefit from) income taxes 373 111 (166) (218)
Effective tax rate 13.5% 4.5% (4.3%) (5.6%)
 
INCOME FROM CONTINUING OPERATIONS $2,402 $2,332 $4,078 $4,085
DISCONTINUED OPERATIONS
Income/(Loss) from discontinued operations, net of taxes 1   (1) 5   (3)
 
NET INCOME $2,404   $2,331 $4,083   $4,082
 
EARNINGS PER SHARE OF COMMON STOCK:
Assuming Dilution
Continuing Operations $2.61 $2.48 $4.42 $4.32
Discontinued Operations $0.00   $0.00 $0.01   $0.00
TOTAL $2.61   $2.48 $4.43   $4.32
 
Basic
Continuing Operations $2.63 $2.49 $4.44 $4.35
Discontinued Operations $0.00   $0.00 $0.01   $0.00
TOTAL $2.63   $2.49 $4.45   $4.35
 
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (M's):
Assuming Dilution 919.4 939.6 922.4 943.7
Basic 915.1 934.9 917.9 938.7
 
* Recast to reflect adoption of the FASB guidance on presentation of net benefit cost.
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
  At   At
(Dollars in Millions) June 30, December 31,
2018 2017
ASSETS:    
 
Current Assets:
Cash and cash equivalents $10,741 $11,972
Restricted cash 219 262 *
Marketable securities 966 608
Notes and accounts receivable - trade, net 7,445 8,928
Short-term financing receivables, net 19,806 21,721
Other accounts receivable, net 1,089 981
Inventory 1,742 1,583
Deferred Costs 2,344 1,820 **
Prepaid expenses and other current assets 2,443 1,860 * **
       
Total Current Assets 46,795 49,735
 
Property, plant and equipment, net 11,024 11,116
Long-term financing receivables, net 8,783 9,550
Prepaid pension assets 5,375 4,643
Deferred costs 2,613 2,136 **
Deferred taxes 4,689 4,862
Goodwill and intangibles, net 39,826 40,531
Investments and sundry assets 2,518 2,783 **
       
Total Assets     $121,622 $125,356
 
 
LIABILITIES:
 
Current Liabilities:
Taxes $2,780 $4,219
Short-term debt 7,646 6,987
Accounts payable 5,518 6,451
Deferred income 11,752 11,552
Other liabilities 7,745 8,153
       
Total Current Liabilities 35,442 37,363
 
Long-term debt 37,851 39,837
Retirement related obligations 15,963 16,720
Deferred income 3,718 3,746
Other liabilities 10,000 9,965
       
Total Liabilities 102,974 107,631
 
 
EQUITY:
 
IBM Stockholders' Equity:
Common stock 54,827 54,566
Retained earnings 157,349 153,126
Treasury stock -- at cost (165,366) (163,507)
Accumulated other comprehensive income/(loss) (28,290) (26,592)
       
Total IBM Stockholders' Equity 18,520 17,594
 
Noncontrolling interests 128 131
       
Total Equity 18,648 17,725
       
Total Liabilities and Equity     $121,622 $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 Six Months Ended
(Dollars in Millions) June 30, June 30,
2018   2017 2018   2017
 
Net Cash Provided by Operating Activities per GAAP: $2,295 $3,467 $6,896 $7,421
 
 
Less: change in Global Financing (GF) Receivables (582) 163 1,778 2,210
Capital Expenditures, Net (1,004) (749) (1,897) (1,567)
 
Free Cash Flow 1,873 2,555 3,221 3,644
Acquisitions (51) (60) (122) (169)
Divestitures - 30 - 29
Dividends (1,437) (1,403) (2,819) (2,724)
Share Repurchase (989) (1,432) (1,767) (2,725)
Non-GF Debt (65) 2,119 (611) 2,363
Other (includes GF Net Receivables and GF Debt) (559) (173) * 1,182 3,339 *
 
Change in Cash, Cash Equivalents, Restricted Cash
and Short-term Marketable Securities ($1,229) $1,636 * ($916) $3,758 *
 
* Recast to reflect adoption of the FASB guidance on restricted cash.
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW
(Unaudited)
   
Three Months Ended Six Months Ended
(Dollars in Millions) June 30, June 30,
2018   2017 2018   2017
 
Net Income from Operations $2,404 $2,331 $4,083 $4,082
Depreciation/Amortization of Intangibles 1,116 1,118 2,230 2,216
Stock-based Compensation 125 136 242 265
Working Capital / Other (768) (281) (1,436) (1,351)
Global Financing A/R (582) 163 1,778 2,210
Net Cash Provided by Operating Activities $2,295 $3,467 $6,896 $7,421
Capital Expenditures, net of payments & proceeds (1,004) (749) (1,897) (1,567)
Divestitures, net of cash transferred - 30 - 29
Acquisitions, net of cash acquired (51) (60) (122) (169)
Marketable Securities / Other Investments, net 420 (889) * (380) 342 *
Net Cash Used in Investing Activities ($634) ($1,668) * ($2,399) ($1,365) *
Debt, net of payments & proceeds (37) 2,279 (751) 2,756
Dividends (1,437) (1,403) (2,819) (2,724)
Common Stock Repurchases (989) (1,432) (1,767) (2,725)
Common Stock Transactions - Other (55) (54) (91) (50)
Net Cash Used in Financing Activities ($2,519) ($609) ($5,428) ($2,743)
Effect of Exchange Rate changes on Cash (444) 447 (344) 547
Net Change in Cash, Cash Equivalents and Restricted Cash ($1,302) $1,637 * ($1,274) $3,860 *
 
* Recast to reflect adoption of the FASB guidance on restricted cash.
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
 
SECOND - QUARTER 2018
    Technology    
Global Services &
(Dollars in Millions) Cognitive Business Cloud Global
Solutions   Services   Platforms   Systems   Financing
Revenue
External $4,580 $4,192 $8,615 $2,177 $394
Internal 703   83   169   242   473
Total Segment Revenue $5,283 $4,275 $8,784 $2,419 $867
 
Pre-tax Income from Continuing Operations 1,756 385 883 346 357
 
Pre-tax margin 33.2% 9.0% 10.1% 14.3% 41.2%
 
 
Change YTY Revenue - External 0.5% 2.3% 2.5% 24.6% (4.9)%
Change YTY Revenue - External @constant currency (1.3)% 0.0% 0.2% 22.9% (6.2)%
 
 
SECOND - QUARTER 2017
Technology
Global Services &
(Dollars in Millions) Cognitive Business Cloud Global
Solutions   Services   Platforms   Systems   Financing
Revenue
External $4,559 $4,097 $8,406 $1,747 $415
Internal 655   93   173   177   290
Total Segment Revenue $5,214 $4,190 $8,579 $1,924 $705
 
Pre-tax Income from Continuing Operations * 1,610 312 994 73 282
 
Pre-tax margin * 30.9% 7.4% 11.6% 3.8% 40.0%
 
* Recast to reflect adoption of the FASB guidance on presentation of net benefit cost.
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
 
SIX - MONTHS 2018
    Technology    
Global Services &
(Dollars in Millions) Cognitive Business Cloud Global
Solutions   Services   Platforms   Systems   Financing
Revenue
External $8,879 $8,365 $17,240 $3,676 $799
Internal 1,483   172   310   395   902
Total Segment Revenue $10,362 $8,538 $17,550 $4,072 $1,701
 
Pre-tax Income from Continuing Operations 3,089 530 1,320 143 734
 
Pre-tax margin 29.8% 6.2% 7.5% 3.5% 43.1%
 
 
Change YTY Revenue - External 3.0% 3.2% 3.7% 17.0% (2.5)%
Change YTY Revenue - External @constant currency 0.2% (0.6)% (0.2)% 14.4% (5.1)%
 
 
SIX - MONTHS 2017
Technology
Global Services &
(Dollars in Millions) Cognitive Business Cloud Global
Solutions   Services   Platforms   Systems   Financing
Revenue
External $8,621 $8,103 $16,622 $3,142 $819
Internal 1,371   179   333   344   653
Total Segment Revenue $9,992 $8,282 $16,955 $3,486 $1,473
 
Pre-tax Income /(Loss) from Continuing Operations * 2,878 593 1,668 (115) 592
 
Pre-tax margin * 28.8% 7.2% 9.8% (3.3)% 40.2%
 
* Recast to reflect adoption of the FASB guidance on presentation of net benefit cost.
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; Dollars in millions except per share amounts)
 
SECOND - QUARTER 2018
CONTINUING OPERATIONS
  Acquisition-   Retirement-   Tax Reform  
Related Related One-Time Operating
GAAP   Adjustments*   Adjustments**   Impact   (Non-GAAP)
 
Gross Profit $9,199 $94 - - $9,292
 
Gross Profit Margin 46.0% 0.5Pts - - 46.5%
 
S,G&A 4,857 (110) - - 4,746
 
R,D&E 1,364 - - - 1,364
 
Other (Income) & Expense 280 - (394) - (115)
 
Total Expense & Other (Income) 6,423 (110) (394) - 5,918
 
Pre-tax Income from Continuing Operations 2,776 204 394 - 3,374
 
Pre-tax Income Margin from Continuing Operations 13.9% 1.0Pts 2.0Pts - 16.9%
 
Provision for (Benefit from) Income Taxes*** 373 44 109 14 540
 
Effective Tax Rate 13.5% 0.5Pts 1.6Pts 0.4Pts 16.0%
 
Income from Continuing Operations 2,402 160 286 (14) 2,834
 
Income Margin from Continuing Operations 12.0% 0.8Pts 1.4Pts (0.1)Pts 14.2%
 
Diluted Earnings Per Share: Continuing Operations $2.61 $0.17 $0.31 ($0.01) $3.08
 
 
SECOND - QUARTER 2017
CONTINUING OPERATIONS
Acquisition- Retirement-
Related Related Operating
GAAP   Adjustments*   Adjustments**   (Non-GAAP)
 
Gross Profit $8,968 $117 - $9,085
 
Gross Profit Margin 46.5% 0.6Pts - 47.1%
 
S,G&A 5,033 (129) - 4,904
 
R,D&E 1,436 - - 1,436
 
Other (Income) & Expense 273 (4) (349) (80)
 
Total Expense & Other (Income) 6,525 (133) (349) 6,043
 
Pre-tax Income from Continuing Operations 2,443 250 349 3,042
 
Pre-tax Income Margin from Continuing Operations 12.7% 1.3Pts 1.8Pts 15.8%
 
Provision for (Benefit from) Income Taxes*** 111 66 105 282
 
Effective Tax Rate 4.5% 1.8Pts 2.9Pts 9.3%
 
Income from Continuing Operations 2,332 183 244 2,760
 
Income Margin from Continuing Operations 12.1% 1.0Pts 1.3Pts 14.3%
 
Diluted Earnings Per Share: Continuing Operations $2.48 $0.20 $0.26 $2.94

* 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 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)
 
SIX - MONTHS 2018
CONTINUING OPERATIONS
  Acquisition-   Retirement-   Tax Reform  
Related Related One-Time Operating
GAAP   Adjustments*   Adjustments**   Impact   (Non-GAAP)
 
Gross Profit $17,445 $187 - - $17,633
 
Gross Profit Margin 44.6% 0.5Pts - - 45.1%
 
S,G&A 10,302 (220) - - 10,082
 
R,D&E 2,769 - - - 2,769
 
Other (Income) & Expense 692 - (796) - (104)
 
Total Expense & Other (Income) 13,534 (220) (796) - 12,518
 
Pre-tax Income from Continuing Operations 3,911 407 796 - 5,114
 
Pre-tax Income Margin from Continuing Operations 10.0% 1.0Pts 2.0Pts - 13.1%
 
Provision for (Benefit from) Income Taxes*** (166) 83 185 (93) 8
 
Effective Tax Rate (4.3)% 2.0Pts 4.3Pts (1.8)Pts 0.2%
 
Income from Continuing Operations 4,078 324 611 93 5,106
 
Income Margin from Continuing Operations 10.4% 0.8Pts 1.6Pts 0.2Pts 13.1%
 
Diluted Earnings Per Share: Continuing Operations $4.42 $0.35 $0.66 $0.10 $5.53
 
 
SIX - MONTHS 2017
CONTINUING OPERATIONS
Acquisition- Retirement-
Related Related Operating
GAAP   Adjustments*   Adjustments**   (Non-GAAP)
 
Gross Profit $16,912 $236 - $17,148
 
Gross Profit Margin 45.2% 0.6Pts - 45.8%
 
S,G&A 10,060 (269) - 9,791
 
R,D&E 2,921 - - 2,921
 
Other (Income) & Expense 592 (7) (696) (111)
 
Total Expense & Other (Income) 13,046 (276) (696) 12,074
 
Pre-Tax Income from Continuing Operations 3,867 512 696 5,074
 
Pre-tax Income Margin from Continuing Operations 10.3% 1.4Pts 1.9Pts 13.6%
 
Provision for (Benefit from) Income Taxes*** (218) 134 175 90
 
Effective Tax Rate (5.6)% 3.2Pts 4.2Pts 1.8%
 
Income from Continuing Operations 4,085 378 521 4,984
 
Income Margin from Continuing Operations 10.9% 1.0Pts 1.4Pts 13.3%
 
Diluted Earnings Per Share: Continuing Operations $4.32 $0.40 $0.56 $5.28

* 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 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
Tax Reform One-time Charge $0.10
 
* Includes acquisitions as of June 30, 2018

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

Source: IBM