Segment Information

6 Months Ended

Sep. 30, 2016

Segment Reporting [Abstract]

SEGMENT INFORMATION

NOTE N – 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 platforms on which the products operate. The Services segment comprises product implementation, consulting, customer education and customer training services, including those directly related to the Mainframe Solutions and Enterprise Solutions software that the Company sells to its customers.

Segment expenses do not include amortization of purchased software; amortization of other intangible assets; amortization of internally developed software products; share-based compensation expense; certain foreign exchange derivative hedging gains and losses; approved severance and facility actions by the Board; and other miscellaneous costs. 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, 2016 and 2015 was as follows:

Three Months Ended September 30, 2016	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	550		$	393		$	75		$	1,018
Expenses	211			324			73			608
Segment profit	$	339		$	69		$	2		$	410
Segment operating margin	62		%	18		%	3		%	40		%
Depreciation	$	8		$	6		$	—		$	14

Reconciliation of segment profit to income from continuing operations before income taxes for the three months ended September 30, 2016:

(in millions)
Segment profit	$	410
Less:
Purchased software amortization	38
Other intangibles amortization	4
Internally developed software products amortization	21
Share-based compensation expense	25
Other expenses, net (1)	2
Interest expense, net	14
Income from continuing operations before income taxes	$	306

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

Six Months Ended September 30, 2016	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	1,101		$	764		$	152		$	2,017
Expenses	419			648			148			1,215
Segment profit	$	682		$	116		$	4		$	802
Segment operating margin	62		%	15		%	3		%	40		%
Depreciation	$	17		$	12		$	—		$	29

Reconciliation of segment profit to income from continuing operations before income taxes for the six months ended September 30, 2016:

(in millions)
Segment profit	$	802
Less:
Purchased software amortization	81
Other intangibles amortization	9
Internally developed software products amortization	44
Share-based compensation expense	54
Other expenses, net (1)	2
Interest expense, net	29
Income from continuing operations before income taxes	$	583

(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, 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.

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,
	2016		2015		2016		2015
	(in millions)
United States	$	657	$	645	$	1,294	$	1,264
EMEA (1)	219		228		444		449
Other	142		132		279		269
Total revenue	$	1,018	$	1,005	$	2,017	$	1,982

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