Segment Information

6 Months Ended

Sep. 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 and six months ended September 30, 2017 and 2016 was as follows:

Three Months Ended September 30, 2017	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	539		$	420		$	75		$	1,034
Expenses	188			380			74			642
Segment profit	$	351		$	40		$	1		$	392
Segment operating margin	65		%	10		%	1		%	38		%
Depreciation	$	10		$	7		$	—		$	17

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

(in millions)
Segment profit	$	392
Less:
Purchased software amortization	58
Other intangibles amortization	10
Internally developed software products amortization	9
Share-based compensation expense	29
Other expenses, net (1)	4
Interest expense, net	24
Income before income taxes	$	258

(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, 2017	Mainframe Solutions			Enterprise Solutions			Services			Total
(dollars in millions)
Revenue	$	1,075		$	834		$	150		$	2,059
Expenses	375			761			148			1,284
Segment profit	$	700		$	73		$	2		$	775
Segment operating margin	65		%	9		%	1		%	38		%
Depreciation	$	19		$	14		$	—		$	33

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

(in millions)
Segment profit	$	775
Less:
Purchased software amortization	116
Other intangibles amortization	20
Internally developed software products amortization	21
Share-based compensation expense	61
Other expenses, net (1)	12
Interest expense, net	49
Income before income taxes	$	496

(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, 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 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 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 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 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.

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,
	2017		2016		2017		2016
	(in millions)
United States	$	658	$	657	$	1,315	$	1,294
EMEA (1)	235		219		464		444
Other	141		142		280		279
Total revenue	$	1,034	$	1,018	$	2,059	$	2,017

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