Segment Information

3 Months Ended

Jun. 30, 2017

Segment Reporting [Abstract]

SEGMENT INFORMATION

NOTE M – SEGMENT INFORMATION

The Company’s Mainframe Solutions and Enterprise Solutions segments are comprised of its software business organized by the nature of the Company’s software offerings and the platforms on which the products operate. The Services segment is comprised of 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, severance and facility actions approved 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 months ended June 30, 2017 and 2016 was as follows:

Three Months Ended June 30, 2017	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	536		$	414		$	75		$	1,025
Expenses	187			381			74			642
Segment profit	$	349		$	33		$	1		$	383
Segment operating margin	65		%	8		%	1		%	37		%
Depreciation	$	9		$	7		$	—		$	16

Reconciliation of segment profit to income before income taxes for the three months ended June 30, 2017:

(in millions)
Segment profit	$	383
Less:
Purchased software amortization	58
Other intangibles amortization	10
Internally developed software products amortization	12
Share-based compensation expense	32
Other expenses, net (1)	8
Interest expense, net	25
Income before income taxes	$	238

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

Three Months Ended June 30, 2016	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	551		$	371		$	77		$	999
Expenses	208			324			75			607
Segment profit	$	343		$	47		$	2		$	392
Segment operating margin	62		%	13		%	3		%	39		%
Depreciation	$	9		$	6		$	—		$	15

Reconciliation of segment profit to income before income taxes for the three months ended June 30, 2016:

(in millions)
Segment profit	$	392
Less:
Purchased software amortization	43
Other intangibles amortization	5
Internally developed software products amortization	23
Share-based compensation expense	29
Interest expense, net	15
Income before income taxes	$	277

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

	Three Months Ended June 30,
	2017		2016
	(in millions)
United States	$	657	$	637
EMEA (1)	229		225
Other	139		137
Total revenue	$	1,025	$	999

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