IBM
$170.55
IBM
$3.74
2.24%
Earnings Details
4th Quarter December 2016
Thursday, January 19, 2017 4:08:01 PM
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Summary

IBM Beats

IBM (IBM) reported 4th Quarter December 2016 earnings of $5.01 per share on revenue of $21.8 billion. The consensus earnings estimate was $4.89 per share. The Earnings Whisper number was $4.96 per share. Revenue fell 1.3% compared to the same quarter a year ago.

The company said it expects 2017 non-GAAP earnings of at least $13.80 per share. The current consensus earnings estimate is $13.74 per share for the year ending December 31, 2017.

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
$5.01
Earnings Whisper
$4.96
Consensus Estimate
$4.89
Reported Revenue
$21.77 Bil
Revenue Estimate
Growth
Earnings Growth
Revenue Growth
Guidance
Power Rating
Grade
Earnings Release

IBM Reports 2016 Fourth-Quarter and Full-Year Results

IBM (IBM)

Continued Strong Growth in Strategic Imperatives Led by IBM Cloud

Highlights

Diluted EPS from continuing operations: GAAP of $4.73; Operating (non-GAAP) of $5.01

-- Revenue from continuing operations of $21.8 billion

Strategic imperatives revenue for full-year 2016 of $32.8 billion up 13 percent (up 14 percent adjusting for currency) represents 41 percent of IBM revenue

Cloud revenue of $13.7 billion for full-year 2016, up 35 percent -- Cloud as-a-service annual exit run rate of $8.6 billion at year end, up 61 percent year to year (up 63 percent adjusting for currency)

2017 EPS Expectations: GAAP of at least $11.95; Operating (non-GAAP) of at least $13.80

IBM (IBM) today announced fourth-quarter and full-year 2016 earnings results.

"In 2016, our strategic imperatives grew to represent more than 40 percent of our total revenue and we have established ourselves as the industry’s leading cognitive solutions and cloud platform company," said Ginni Rometty, IBM chairman, president and chief executive officer. "IBM Watson is the world’s leading AI platform for business, and emerging solutions such as IBM Blockchain are enabling new levels of trust in transactions of every kind. More and more clients are choosing the IBM Cloud because of its differentiated capabilities, which are helping to transform industries, such as financial services, airlines and retail."

FOURTH QUARTER 2016
Gross Profit
Diluted EPS
Net Income
Margin
GAAP from Continuing Operations
$4.73
$4.5B
50.0%
Year/Year
3%
1%
-1.7Pts
Operating (Non-GAAP)
$5.01
$4.8B
51.0%
Year/Year
4%
1%
-1.8Pts
Strategic
REVENUE
Total IBM
Imperatives
Cloud
As reported (US$)
$21.8B
$9.5B
$4.2B
Year/Year
-1%
11%
33%
Year/Year adjusting for currency
-1%
12%
33%

"In 2016, we again made substantial capital investments, increased our R&D spending and acquired 15 companies -- a total of more than $15 billion across these elements. The acquisitions further strengthened our capabilities in analytics, security, cognitive and cloud, while expanding our level of industry expertise with additions such as Truven Health Analytics and Promontory Financial Group," said Martin Schroeter, IBM senior vice president and chief financial officer. "At the same time, we returned almost $9 billion to shareholders through dividends and gross share repurchases."

Strategic Imperatives

Fourth-quarter cloud revenues increased 33 percent. The annual exit run rate for cloud as-a-service revenue increased to $8.6 billion from $5.3 billion at year-end 2015. Revenues from analytics increased 9 percent. Revenues from mobile increased 16 percent (up 17 percent adjusting for currency) and revenues from security increased 7 percent (up 8 percent adjusting for currency).

For the full year, revenues from strategic imperatives increased 13 percent (up 14 percent adjusting for currency). Cloud revenues increased 35 percent to $13.7 billion. The annual exit run rate for cloud as-a-service revenue increased 61 percent (up 63 percent adjusting for currency) year to year. Revenues from analytics increased 9 percent. Revenues from mobile increased 34 percent (up 35 percent adjusting for currency) and from security increased 13 percent (up 14 percent adjusting for currency).

Full-Year 2017 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 $11.95. Operating (non-GAAP) diluted earnings per share exclude $1.85 per share of charges for amortization of purchased intangible assets, other acquisition-related charges and retirement-related charges. IBM expects a free cash flow realization rate in excess of 90 percent of GAAP net income.

Cash Flow and Balance Sheet

In the fourth quarter, the company generated net cash from operating activities of $3.2 billion; or $5.6 billion excluding Global Financing receivables. IBM’s free cash flow was $4.7 billion. IBM returned $1.3 billion in dividends and $0.9 billion of gross share repurchases to shareholders. At the end of December 2016, IBM had $5.1 billion remaining in the current share repurchase authorization.

The company generated full-year free cash flow of $11.6 billion, excluding Global Financing receivables. The company returned $8.8 billion to shareholders through $5.3 billion in dividends and $3.5 billion of gross share repurchases.

IBM ended the fourth-quarter 2016 with $8.5 billion of cash on hand. Debt, including Global Financing debt of $27.9 billion, totaled $42.2 billion. Core (non-Global Financing) debt totaled $14.3 billion. The balance sheet remains strong and is well positioned to support the business over the long term.

Segment Results for Fourth Quarter

Cognitive Solutions (includes solutions software and transaction processing software) -- revenues of $5.3 billion, up 1.4 percent (up 2.2 percent adjusting for currency) were driven by growth in cloud, analytics and security.

Global Business Services (includes consulting, global process services and application management) -- revenues of $4.1 billion, down 4.1 percent (down 3.6 percent adjusting for currency).

Technology Services & Cloud Platforms (includes infrastructure services, technical support services and integration software) -- revenues of $9.3 billion, up 1.7 percent (up 2.4 percent adjusting for currency). Growth was driven by strong hybrid cloud services, analytics and security performance.

Systems (includes systems hardware and operating systems software) -- revenues of $2.5 billion, down 12.5 percent (down 12.1 percent adjusting for currency). Gross profit margins improved driven by z Systems performance.

Global Financing (includes financing and used equipment sales) -- revenues of $447 million, down 1.5 percent (down 2.1 percent adjusting for currency).

Full-Year 2016 Results

Diluted earnings per share from continuing operations were $12.39, down 9 percent compared to the 2015 period. Net income from continuing operations for the twelve months ended December 31, 2016 was $11.9 billion compared with $13.4 billion in the year-ago period, a decrease of 11 percent.

Consolidated net income was $11.9 billion compared to $13.2 billion in the year-ago period. Consolidated diluted earnings per share were $12.38 compared to $13.42, down 8 percent year to year. Revenues from continuing operations for the twelve-month period totaled $79.9 billion, a decrease of 2 percent year to year compared with $81.7 billion for the twelve months of 2015.

Operating (non-GAAP) diluted earnings per share from continuing operations were $13.59 compared with $14.92 per diluted share for the 2015 period, a decrease of 9 percent. Operating (non-GAAP) net income from continuing operations for the twelve months ended December 31, 2016 was $13.0 billion compared with $14.7 billion in the year-ago period, a decrease of 11 percent.

FULL YEAR 2016
Gross Profit
Diluted EPS
Net Income
Margin
GAAP from Continuing Operations
$12.39
$11.9B
47.9%
Year/Year
-9%
-11%
-1.9 Pts
Operating (Non-GAAP)
$13.59
$13.0B
48.9%
Year/Year
-9%
-11%
-1.9 Pts
Strategic
REVENUE
Total IBM
Imperatives
Cloud
As reported (US$)
$79.9B
$32.8B
$13.7B
Year/Year
-2%
13%
35%
Year/Year adjusting for currency
-2%
14%
35%

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company’s current assumptions regarding future business and financial performance. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including the following: a downturn in economic environment and client spending budgets; the company’s failure to meet growth and productivity objectives, a failure of the company’s innovation initiatives; risks from investing in growth opportunities; failure of the company’s intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; cybersecurity and data privacy considerations; fluctuations in financial results, impact of local legal, economic, political and health conditions; adverse effects from environmental matters, tax matters and the company’s pension plans; ineffective internal controls; the company’s use of accounting estimates; the company’s ability to attract and retain key personnel and its reliance on critical skills; impacts of relationships with critical suppliers; product quality issues; impacts of business with government clients; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; reliance on third party distribution channels and ecosystems; the company’s ability to successfully manage acquisitions, alliances and dispositions; risks from legal proceedings; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company’s Form 10-Qs, Form 10-K and in the company’s other filings with the U.S. Securities and Exchange Commission (SEC) or in materials incorporated therein by reference. Any forward-looking statement in this release speaks only as of the date on which it is made. The company assumes no obligation to update or revise any forward-looking statements.

Presentation of Information in this Press Release

In an effort to provide investors with additional information regarding the company’s results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information which management believes provides useful information to investors:

IBM results --

presenting operating (non-GAAP) earnings per share amounts and related income statement items;

-- adjusting for free cash flow;

-- adjusting for currency (i.e., at constant currency).

Free cash flow guidance is derived using an estimate of profit, working capital and operational cash outflows. The company views Global Financing receivables as a profit-generating investment, which it seeks to maximize and therefore it is not considered when formulating guidance for free cash flow. As a result, the company does not estimate a GAAP Net Cash from Operations expectation metric.

The rationale for management’s use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8-K that includes this press release and is being submitted today to the SEC.

Conference Call and Webcast

IBM’s regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. EST, today. The Webcast may be accessed via a link at http://www.ibm.com/investor/events/earnings/4q16.html. Presentation charts will be available shortly before the Webcast.

Financial Results Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).

INTERNATIONAL BUSINESS MACHINES CORPORATION
COMPARATIVE FINANCIAL RESULTS
(Unaudited; Dollars in millions except per share amounts)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2016
2015*
2016
2015*
REVENUE
Cognitive Solutions
$
5,297
$
5,225
$ 18,187
$ 17,841
Global Business Services
4,121
4,297
16,700
17,166
Technology Services & Cloud Platforms
9,308
9,149
35,337
35,142
Systems
2,530
2,892
7,714
9,547
Global Financing
447
454
1,692
1,840
Other
66
43
289
206
TOTAL REVENUE
21,770
22,059
79,919
81,741
GROSS PROFIT
10,893
11,407
38,294
40,684
GROSS PROFIT MARGIN
Cognitive Solutions
82.7 %
85.7 %
81.9 %
85.1 %
Global Business Services
26.9 %
28.2 %
27.0 %
28.2 %
Technology Services & Cloud Platforms
42.9 %
44.3 %
41.9 %
42.7 %
Systems
56.9 %
55.8 %
55.7 %
55.8 %
Global Financing
36.2 %
39.9 %
38.7 %
45.6 %
TOTAL GROSS PROFIT MARGIN
50.0 %
51.7 %
47.9 %
49.8 %
EXPENSE AND OTHER INCOME
S,G&A
4,976
5,157
21,069
20,430
R,D&E
1,431
1,362
5,751
5,247
Intellectual property and
custom development income
(521 )
(193 )
(1,631 )
(682 )
Other (income) and expense
(136 )
(146 )
145
(724 )
Interest expense
157
128
630
468
TOTAL EXPENSE AND OTHER INCOME
5,907
6,308
25,964
24,740
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
4,986
5,098
12,330
15,945
Pre-tax margin
22.9 %
23.1 %
15.4 %
19.5 %
Provision for / (Benefit) from income taxes
480
638
449
2,581
Effective tax rate
9.6 %
12.5 %
3.6 %
16.2 %
INCOME FROM CONTINUING OPERATIONS
$
4,505
$
4,460
$ 11,881
$ 13,364
DISCONTINUED OPERATIONS
Income/(Loss) from discontinued operations, net of taxes
(4 )
3
(9 )
(174 )
NET INCOME
$
4,501
$
4,463
$ 11,872
$ 13,190
EARNINGS PER SHARE OF COMMON STOCK:
Assuming Dilution
Continuing Operations
$
4.73
$
4.59
$
12.39
$
13.60
Discontinued Operations
($0.01 )
$
0.00
($0.01 )
($0.18 )
TOTAL
$
4.72
$
4.59
$
12.38
$
13.42
Basic
Continuing Operations
$
4.75
$
4.60
$
12.44
$
13.66
Discontinued Operations
($0.01 )
$
0.00
($0.01 )
($0.18 )
TOTAL
$
4.74
$
4.60
$
12.43
$
13.48
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (M’s):
Assuming Dilution
952.7
972.8
958.7
982.7
Basic
948.6
969.4
955.4
978.7
* Recast to conform with 2016 segment presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
At
At
(Dollars in Millions)
December 31,
December 31,
2016
2015
ASSETS:
Current Assets:
Cash and cash equivalents
$
7,826
$
7,686
Marketable securities
701
508
Notes and accounts receivable - trade, net
9,182
8,333
Short-term financing receivables, net
19,006
19,020
Other accounts receivable, net
1,057
1,201
Inventory
1,553
1,551
Prepaid expenses and other current assets
4,564
4,205
Total Current Assets
43,888
42,504
Property, plant and equipment, net
10,830
10,727
Long-term financing receivables, net
9,021
10,013
Prepaid pension assets
3,034
1,734
Deferred taxes
5,224
4,822
Goodwill and intangibles, net
40,887
35,508
Investments and sundry assets
4,585
5,187
Total Assets
$
117,470
$
110,495
LIABILITIES:
Current Liabilities:
Taxes
$
3,235
$
2,847
Short-term debt
7,513
6,461
Accounts payable
6,209
6,028
Deferred income
11,035
11,021
Other liabilities
8,283
7,913
Total Current Liabilities
36,275
34,269
Long-term debt
34,655
33,428
Retirement related obligations
17,070
16,504
Deferred income
3,600
3,771
Other liabilities
7,477
8,099
Total Liabilities
99,078
96,071
EQUITY:
IBM Stockholders’ Equity:
Common stock
53,935
53,262
Retained earnings
152,759
146,124
Treasury stock -- at cost
(159,050 )
(155,518 )
Accumulated other comprehensive income/(loss)
(29,398 )
(29,607 )
Total IBM stockholders’ equity
18,246
14,262
Noncontrolling interests
146
162
Total Equity
18,392
14,424
Total Liabilities and Equity
$
117,470
$
110,495
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW ANALYSIS
(Unaudited)
Three Months Ended
Twelve Months Ended
(Dollars in Millions)
December 31,
December 31,
2016
2015
2016
2015
Net Cash Provided by Operating Activities per GAAP:
$
3,217
$
5,278
$ 16,518
$ 17,008
Less: change in Global Financing (GF)
Receivables
(2,429 )
(1,810 )
1,218
152
Capital Expenditures, Net
(925 )
(1,016 )
(3,726 )
(3,780 )
Free Cash Flow
4,721
6,072
11,574
13,075
Acquisitions
(235 )
(2,529 )
(5,679 )
(3,349 )
Divestitures
(490 )
87
(454 )
(401 )
Dividends
(1,329 )
(1,261 )
(5,256 )
(4,897 )
Share Repurchase
(871 )
(764 )
(3,502 )
(4,609 )
Non-GF Debt
(2,048 )
(898 )
1,317
(128 )
Other (includes GF Receivables and GF Debt)
(1,189 )
(2,080 )
2,333
28
Change in Cash, Cash Equivalents and
Short-term Marketable Securities
($1,441 )
($1,373 )
$
332
($282 )
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW
(Unaudited)
Three Months Ended
Twelve Months Ended
(Dollars in Millions)
December 31,
December 31,
2016
2015
2016
2015
Net Income from Operations
$
4,501
$
4,463
$
11,872
$
13,190
Depreciation/Amortization of Intangibles
1,127
990
4,381
3,856
Stock-based Compensation
141
99
544
468
Working Capital / Other
(124 )
1,514
(1,497 )
(729 )
Global Financing A/R
(2,429 )
(1,810 )
1,218
152
Loss on Microelectronics Business Disposal
0
23
0
71
Net Cash Provided by Operating Activities
$
3,217
$
5,278
$
16,518
$
17,008
Capital Expenditures, net of payments & proceeds
(925 )
(1,016 )
(3,726 )
(3,780 )
Divestitures, net of cash transferred
(490 )
87
(454 )
(401 )
Acquisitions, net of cash acquired
(235 )
(2,529 )
(5,679 )
(3,349 )
Marketable Securities / Other Investments, net
(1,286 )
(1,987 )
(676 )
(629 )
Net Cash Used in Investing Activities
($2,936 )
($5,445 )
($10,536 )
($8,159 )
Debt, net of payments & proceeds
875
626
2,763
19
Dividends
(1,329 )
(1,261 )
(5,256 )
(4,897 )
Common Stock Repurchases
(871 )
(764 )
(3,502 )
(4,609 )
Common Stock Transactions - Other
37
50
204
322
Net Cash Used in Financing Activities
($1,287 )
($1,348 )
($5,791 )
($9,166 )
Effect of Exchange Rate changes on Cash
(206 )
(279 )
(51 )
(473 )
Net Change in Cash & Cash Equivalents
($1,213 )
($1,794 )
$
140
($790 )
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
FOURTH - QUARTER 2016
Cognitive Solutions &
Industry Services
Technology
Global
Services &
(Dollars in Millions)
Cognitive
Business
Cloud
Global
Solutions
Services
Platforms
Systems
Financing
Revenue
External
$ 5,297
$ 4,121
$ 9,308
$ 2,530
$
447
Internal
701
100
214
156
462
Total Segment Revenue
$ 5,999
$ 4,221
$ 9,522
$ 2,686
$
909
Pre-tax Income from Continuing Operations
2,313
522
1,882
579
448
Pre-tax margin
38.6 %
12.4 %
19.8 %
21.6 %
49.3 %
Change YTY Revenue - External
1.4 %
(4.1 )%
1.7 %
(12.5 )%
(1.5 )%
Change YTY Revenue - External @constant currency
2.2 %
(3.6 )%
2.4 %
(12.1 )%
(2.1 )%
FOURTH - QUARTER 2015*
Cognitive Solutions &
Industry Services
Technology
Global
Services &
(Dollars in Millions)
Cognitive
Business
Cloud
Global
Solutions
Services
Platforms
Systems
Financing
Revenue
External
$ 5,225
$ 4,297
$ 9,149
$ 2,892
$
454
Internal
520
118
198
207
763
Total Segment Revenue
$ 5,744
$ 4,415
$ 9,347
$ 3,099
$
1,216
Pre-tax Income from Continuing Operations
2,296
707
1,808
674
674
Pre-tax margin
40.0 %
16.0 %
19.3 %
21.7 %
55.4 %
* Recast to conform with 2016 segment presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
TWELVE - MONTHS 2016
Cognitive Solutions &
Industry Services
Technology
Global
Services &
(Dollars in Millions)
Cognitive
Business
Cloud
Global
Solutions
Services
Platforms
Systems
Financing
Revenue
External
$ 18,187
$ 16,700
$ 35,337
$
7,714
$
1,692
Internal
2,630
409
715
750
1,802
Total Segment Revenue
$ 20,817
$ 17,109
$ 36,052
$
8,464
$
3,494
Pre-tax Income from Continuing Operations
6,352
1,732
4,707
933
1,656
Pre-tax margin
30.5 %
10.1 %
13.1 %
11.0 %
47.4 %
Change YTY Revenue - External
1.9 %
(2.7 )%
0.6 %
(19.2 )%
(8.0 )%
Change YTY Revenue - External @constant currency
2.7 %
(2.5 )%
1.4 %
(18.9 )%
(6.9 )%
TWELVE - MONTHS 2015*
Cognitive Solutions &
Industry Services
Technology
Global
Services &
(Dollars in Millions)
Cognitive
Business
Cloud
Global
Solutions
Services
Platforms
Systems
Financing
Revenue
External
$ 17,841
$ 17,166
$ 35,142
$
9,547
$
1,840
Internal
2,215
499
698
778
2,637
Total Segment Revenue
$ 20,055
$ 17,664
$ 35,840
$ 10,325
$
4,477
Pre-tax Income from Continuing Operations
7,245
2,602
5,669
1,722
2,364
Pre-tax margin
36.1 %
14.7 %
15.8 %
16.7 %
52.8 %
* 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)
FOURTH - QUARTER 2016
CONTINUING OPERATIONS
Acquisition-
Retirement-
Related
Related
Operating
GAAP
Adjustments*
Adjustments**
(Non-GAAP)
Gross Profit
$ 10,893
$
124
$
78
$ 11,095
Gross Profit Margin
50.0 %
0.6Pts
0.4Pts
51.0 %
S,G&A
4,976
(136 )
(69 )
4,771
R,D&E
1,431
- -
(6 )
1,425
Other (Income) & Expense
(136 )
0
- -
(136 )
Total Expense & Other (Income)
5,907
(136 )
(76 )
5,696
Pre-tax Income from Continuing Operations
4,986
260
154
5,399
Pre-tax Income Margin from Continuing Operations
22.9 %
1.2Pts
0.7Pts
24.8 %
Provision for Income Taxes***
480
66
77
623
Effective Tax Rate
9.6 %
0.8Pts
1.2Pts
11.5 %
Income from Continuing Operations
4,505
193
77
4,776
Income Margin from Continuing Operations
20.7 %
0.9Pts
0.4Pts
21.9 %
Diluted Earnings Per Share: Continuing Operations
$
4.73
$ 0.20
$ 0.08
$
5.01
FOURTH - QUARTER 2015
CONTINUING OPERATIONS
Acquisition-
Retirement-
Related
Related
Operating
GAAP
Adjustments*
Adjustments**
(Non-GAAP)
Gross Profit
$ 11,407
$
105
$
119
$ 11,630
Gross Profit Margin
51.7 %
0.5Pts
0.5Pts
52.7 %
S,G&A
5,157
(95 )
(88 )
4,975
R,D&E
1,362
- -
(12 )
1,350
Other (Income) & Expense
(146 )
0
- -
(146 )
Total Expense & Other (Income)
6,308
(95 )
(100 )
6,114
Pre-tax Income from Continuing Operations
5,098
199
218
5,516
Pre-tax Income Margin from Continuing Operations
23.1 %
0.9Pts
1.0Pts
25.0 %
Provision for Income Taxes***
638
89
82
809
Effective Tax Rate
12.5 %
1.2Pts
1.0Pts
14.7 %
Income from Continuing Operations
4,460
110
137
4,707
Income Margin from Continuing Operations
20.2 %
0.5Pts
0.6Pts
21.3 %
Diluted Earnings Per Share: Continuing Operations
$
4.59
$ 0.11
$ 0.14
$
4.84
* Includes amortization of purchased intangible assets, in
process R&D, severance cost for acquired employees, vacant space
for acquired companies, deal costs and acquisition integration tax
charges.
** Includes retirement-related interest cost, expected return
on plan assets, recognized actuarial losses or gains, amortization
of transition assets, other settlements, curtailments,
multi-employer plans and insolvency insurance.
*** Tax impact on operating (non-GAAP) pre-tax income from
continuing operations is calculated under the same accounting
principles applied to the As Reported pre-tax income under ASC
740, which employs an annual effective tax rate method to the
results.
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; Dollars in millions except per share amounts)
TWELVE - MONTHS 2016
CONTINUING OPERATIONS
Acquisition-
Retirement-
Related
Related
Operating
GAAP
Adjustments*
Adjustments**
(Non-GAAP)
Gross Profit
$ 38,294
$
494
$
316
$ 39,104
Gross Profit Margin
47.9 %
0.6Pts
0.4Pts
48.9 %
S,G&A
21,069
(501 )
(253 )
20,315
R,D&E
5,751
- -
(29 )
5,722
Other (Income) & Expense
145
(7 )
- -
138
Total Expense & Other (Income)
25,964
(508 )
(282 )
25,174
Pre-tax Income from Continuing Operations
12,330
1,003
598
13,931
Pre-tax Income Margin from Continuing Operations
15.4 %
1.3Pts
0.7Pts
17.4 %
Provision for / (Benefit) from Income Taxes***
449
268
183
900
Effective Tax Rate
3.6 %
1.7Pts
1.2Pts
6.5 %
Income from Continuing Operations
11,881
735
415
13,031
Income Margin from Continuing Operations
14.9 %
0.9Pts
0.5Pts
16.3 %
Diluted Earnings Per Share: Continuing Operations
$
12.39
$
0.77
$
0.43
$
13.59
TWELVE - MONTHS 2015
CONTINUING OPERATIONS
Acquisition-
Retirement-
Related
Related
Operating
GAAP
Adjustments*
Adjustments**
(Non-GAAP)
Gross Profit
$ 40,684
$
373
$
469
$ 41,526
Gross Profit Margin
49.8 %
0.5Pts
0.6Pts
50.8 %
S,G&A
20,430
(324 )
(533 )
19,573
R,D&E
5,247
- -
(48 )
5,200
Other (Income) & Expense
(724 )
(5 )
- -
(729 )
Total Expense & Other (Income)
24,740
(330 )
(581 )
23,830
Pre-Tax Income from Continuing Operations
15,945
703
1,050
17,697
Pre-tax Income Margin from Continuing Operations
19.5 %
0.9Pts
1.3Pts
21.6 %
Provision for Income Taxes***
2,581
141
316
3,037
Effective Tax Rate
16.2 %
0.2Pts
0.9Pts
17.2 %
Income from Continuing Operations
13,364
562
734
14,659
Income Margin from Continuing Operations
16.3 %
0.7Pts
0.9Pts
17.9 %
Diluted Earnings Per Share: Continuing Operations
$
13.60
$
0.57
$
0.75
$
14.92
* 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)
2017
EPS Guidance
Expectations
IBM GAAP EPS
at least $11.95
IBM Operating EPS (non-GAAP)
at least $13.80
Adjustments
Acquisition related charges *
$0.75
Non-Operating Retirement-Related Items
$1.10
* Includes acquisitions through December 31, 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