Segment Information

6 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

SEGMENT INFORMATION

NOTE Q – SEGMENT INFORMATION

The Company’s Mainframe Solutions and Enterprise Solutions segments comprise its software business organized by the nature of the Company’s software offerings and the platform on which the products operate. The Services segment comprises product implementation, consulting, customer education and customer training, including those directly related to the Mainframe Solutions and Enterprise Solutions software that the Company sells to its customers.

Segment expenses do not include share-based compensation expense; amortization of purchased software; amortization of other intangible assets; certain foreign exchange derivative hedging gains and losses; charges relating to rebalancing initiatives that are large enough to require approval from the Company’s Board of Directors (i.e., costs associated with the Company’s Fiscal 2014 Plan); and other miscellaneous costs. The Company considers all costs of internally developed software as segment expense in the period the costs are incurred and as a result, the Company excludes amortization of internally developed software costs previously capitalized from segment expenses. A measure of segment assets is not currently provided to the Company’s Chief Executive Officer and has therefore not been disclosed.

The Company’s segment information for the three and six months ended September 30, 2015 and 2014 was as follows:

Three Months Ended September 30, 2015	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	554		$	368		$	83		$	1,005
Expenses	212			357			79			648
Segment profit	$	342		$	11		$	4		$	357
Segment operating margin	62		%	3		%	5		%	36		%
Depreciation	$	9		$	6		$	—		$	15

Reconciliation of segment profit to income from continuing operations before income taxes for the three months ended September 30, 2015:

(in millions)
Segment profit	$	357
Less:
Purchased software amortization	39
Other intangibles amortization	14
Internally developed software products amortization	28
Share-based compensation expense	23
Other gains, net (1)	(6		)
Interest expense, net	12
Income from continuing operations before income taxes	$	247

(1) Other gains, net consists of costs associated with certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs.

Six Months Ended September 30, 2015	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	1,114		$	706		$	162		$	1,982
Expenses	423			647			150			1,220
Segment profit	$	691		$	59		$	12		$	762
Segment operating margin	62		%	8		%	7		%	38		%
Depreciation	$	18		$	13		$	—		$	31

Reconciliation of segment profit to income from continuing operations before income taxes for the six months ended September 30, 2015:

(in millions)
Segment profit	$	762
Less:
Purchased software amortization	67
Other intangibles amortization	25
Internally developed software products amortization	60
Share-based compensation expense	45
Other expenses, net (1)	2
Interest expense, net	21
Income from continuing operations before income taxes	$	542

(1) Other expenses, net consists of costs associated with certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs.

Three Months Ended September 30, 2014	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	610		$	378		$	91		$	1,079
Expenses	234			327			89			650
Segment profit	$	376		$	51		$	2		$	429
Segment operating margin	62		%	13		%	2		%	40		%
Depreciation	$	11		$	7		$	—		$	18

Reconciliation of segment profit to income from continuing operations before income taxes for the three months ended September 30, 2014:

(in millions)
Segment profit	$	429
Less:
Purchased software amortization	31
Other intangibles amortization	16
Internally developed software products amortization	44
Share-based compensation expense	22
Other gains, net (1)	(4		)
Interest expense, net	12
Income from continuing operations before income taxes	$	308

(1) Other gains, net consists of costs associated with the Fiscal 2014 Plan, certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs.

Six Months Ended September 30, 2014	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	1,224		$	746		$	178		$	2,148
Expenses	469			652			171			1,292
Segment profit	$	755		$	94		$	7		$	856
Segment operating margin	62		%	13		%	4		%	40		%
Depreciation	$	23		$	14		$	—		$	37

Reconciliation of segment profit to income from continuing operations before income taxes for the six months ended September 30, 2014:

(in millions)
Segment profit	$	856
Less:
Purchased software amortization	59
Other intangibles amortization	31
Internally developed software products amortization	83
Share-based compensation expense	42
Other expenses, net (1)	8
Interest expense, net	26
Income from continuing operations before income taxes	$	607

(1) Other expenses, net consists of costs associated with the Fiscal 2014 Plan, certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs.

The table below summarizes the Company’s revenue from the United States and from international (i.e., non-U.S.) locations:

	Three Months Ended September 30,				Six Months Ended September 30,
	2015		2014		2015		2014
	(in millions)
United States	$	645	$	656	$	1,264	$	1,299
EMEA (1)	228		259		449		518
Other	132		164		269		331
Total revenue	$	1,005	$	1,079	$	1,982	$	2,148

(1) Consists of Europe, the Middle East and Africa.