UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: March 29, 2018
(Date of earliest event reported)
INTERNATIONAL BUSINESS MACHINES CORPORATION
(Exact name of registrant as specified in its charter)
|
New York |
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1-2360 |
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13-0871985 |
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(State of Incorporation) |
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(Commission File Number) |
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(IRS employer Identification No.) |
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ARMONK, NEW YORK |
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10504 |
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(Address of principal executive offices) |
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(Zip Code) |
914-499-1900
(Registrant’s telephone number)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 7.01 (Regulation FD Disclosure)
On March 29, 2018, IBM posted information on its Investor Relations website (www.ibm.com/investor/) providing a view of GAAP and operating results for 2016 and 2017 following IBM’s adoption of accounting guidance on pension reporting. Exhibits 99.1 and 99.2 of this Form 8-K contain the information that was posted on IBM’s Investor Relations website. The information in this Item 7.01, including the corresponding Exhibit 99.1, is being furnished with the U.S. Securities and Exchange Commission (SEC) and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (Exchange Act). Exhibit 99.2 shall be deemed “filed” for purposes of Section 18 of the Exchange Act.
Presentation of Information
In an effort to provide additional and useful information regarding the company’s financial results and other financial information, as determined by generally accepted accounting principles (GAAP), these materials contain certain non-GAAP financial measures, which management believes provides useful information to investors. The rationale for management’s use of this non-GAAP information is included on pages 26 and 27 of the company’s 2017 Annual Report, which is Exhibit 13 to the Form 10-K, filed with the SEC on February 27, 2018. For reconciliation of the 2018 operating (non-GAAP) earnings per share, please refer to page 30 of the company’s 2017 Annual Report. For reconciliations of the company’s financial data for 2016 and 2017, please refer to Exhibit 99.2 of this Form 8-K.
Forward-Looking Statements
These materials may contain forward-looking statements under the Private Securities Litigation Reform Act of 1995, which statements involve numerous factors that could cause actual results to differ materially. Additional information concerning these factors is contained in the company’s filings with the SEC. Copies are available from the SEC or from IBM’s web site (www.ibm.com).
Item 9.01 (Financial Statements and Exhibits)
(d) Exhibits
The following exhibit is being furnished as part of this report:
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Exhibit No. |
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Description of Exhibit |
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99.1 |
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The following exhibit is being filed as part of this report:
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Exhibit No. |
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Description of Exhibit |
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99.2 |
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2016 and 2017 Financial Data under the New Reporting Structure |
IBM’s web site (www.ibm.com) contains a significant amount of information about IBM, including financial and other information for investors (www.ibm.com/investor/). IBM encourages investors to visit its various web sites from time to time, as information is updated and new information is posted.
IBM Adopts New FASB Guidance on Pension Reporting Change Effective in 2018
Provides Historical Financial Information in Advance of First-Quarter Earnings Report
29 March 2018
During IBM’s fourth-quarter 2017 earnings webcast on January 18, 2018, Jim Kavanaugh, IBM Senior Vice President and Chief Financial Officer discussed the company’s 2018 expectations which included certain accounting changes effective January 1, 2018. One change is the adoption of the new revenue recognition guidance, which is expected to modestly increase IBM’s operating (non-GAAP) earnings per share (EPS) in 2018. Another change, which affects the presentation of certain retirement-related benefits costs, modestly reduces operating EPS. The impact of these two changes essentially offset each other within the company’s 2018 expectations of at least $13.80 of operating EPS.
The adoption of the guidance on the presentation of certain retirement-related benefits costs requires a restatement of prior period GAAP results. Today, the company is providing a view of GAAP and operating results for 2016 and 2017 reflecting this reporting change, to allow investors to update their historical financial models in advance of the first-quarter earnings report on April 17th.
Changes to Operating Definition
In 2010, IBM introduced operating (non-GAAP) results, to provide investors with additional transparency into the operational results of the business. The operating results exclude certain non-operating retirement-related benefits costs and certain acquisition-related activity. The non-operating retirement-related costs are primarily related to changes in pension plan assets and liabilities which are tied to financial market performance; the company considers these costs to be outside of the operational performance of the business.
In March 2017, the Financial Accounting Standards Board (FASB) issued guidance that changes the presentation of net periodic pension and postretirement benefit costs. This guidance is very similar to the view IBM introduced in 2010. Effective January 1, 2018, the company adopted this new guidance, and as a result, the company will align its presentation of operating (non-GAAP) earnings to conform to the FASB presentation of these costs within the Consolidated Statement of Earnings. While the presentation requirement under the new guidance is substantially similar to IBM’s operating definition, IBM’s operating earnings will no longer include amortization of prior service costs and will now include multi-employer plan costs.
A summary of the previous and current definition of operating earnings is included in the following table, which is also described in IBM’s 2017 Annual Report on pages 26, 27 and 96.
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IBM Previous Definition |
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New Definition |
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Operating earnings includes: |
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Operating earnings includes: |
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Service Cost |
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Service Cost |
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Amortization of Prior Service Costs |
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Multi-employer plan costs |
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Defined Contribution Cost |
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Defined Contribution cost |
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Operating excludes (“non-operating”): |
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Operating excludes (“non-operating”): |
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Interest Cost |
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Interest Cost |
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Expected Return on Plan Assets |
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Expected Return on Plan Assets |
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Amortized actuarial gains/losses |
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Amortized actuarial gains/losses |
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Multi-employer plan costs |
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Amortization of Prior Service Costs |
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Curtailments/settlements |
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Curtailments/settlements |
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Pension insolvency/other costs |
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Pension insolvency/other costs |
The 2016 and 2017 historical performance has now been restated by quarter to provide comparability to investors.
There is no change to IBM’s GAAP consolidated earnings per share, though certain retirement-related activity has been reclassified to conform to the new guidance.
However, as IBM aligns to the FASB presentation guidance, there is a modest change to IBM’s operating earnings per share, with IBM’s 2016 operating EPS reduced by $0.15 to $13.44 and 2017 operating EPS reduced by $0.14 to $13.66.
As stated earlier, the full-year 2018 operating earnings per share expectation provided in January 2018 and reiterated on March 20, 2018 reflects this new definition.
The following three attachments provide data for 2016 and 2017 under the new reporting requirements:
· Attachment 1: Reclassified Consolidated Financial Statements (GAAP Basis)
· Attachment 2: Reclassified Non-GAAP Supplementary Materials
· Attachment 3: Reclassified Management System Segment View
Attachment 1: Reclassified Consolidated Financial Statements (GAAP Basis)
INTERNATIONAL BUSINESS MACHINES CORPORATION
RECLASSIFIED CONSOLIDATED FINANCIAL STATEMENTS
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Three Months |
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Three Months |
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Three Months |
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Three Months |
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Twelve Months |
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Ended March 31 |
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Ended June 30 |
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Ended September 30 |
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Ended December 31 |
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Ended December 31 |
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(Dollars in millions except per share amounts) |
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2017 |
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2016 |
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2017 |
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2016 |
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2017 |
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2016 |
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2017 |
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2016 |
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2017 |
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2016 |
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Revenue |
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18,155 |
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18,684 |
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19,289 |
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20,238 |
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19,153 |
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19,226 |
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22,543 |
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21,770 |
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79,139 |
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79,919 |
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Gross Profit* |
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7,944 |
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8,742 |
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8,968 |
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9,759 |
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8,981 |
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9,068 |
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11,049 |
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10,947 |
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36,943 |
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38,516 |
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Expense and other (income): |
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Selling, general and administrative* |
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5,027 |
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5,970 |
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5,033 |
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5,287 |
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4,606 |
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4,693 |
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5,013 |
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4,920 |
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19,680 |
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20,869 |
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Research, development and engineering* |
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1,484 |
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1,450 |
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1,436 |
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1,459 |
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1,291 |
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1,391 |
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1,378 |
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1,426 |
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5,590 |
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5,726 |
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Intellectual property and custom development income |
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(445 |
) |
(217 |
) |
(365 |
) |
(365 |
) |
(308 |
) |
(528 |
) |
(348 |
) |
(521 |
) |
(1,466 |
) |
(1,631 |
) | |||||||||
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Total other (income) and expense* |
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319 |
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358 |
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273 |
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162 |
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159 |
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92 |
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374 |
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(19 |
) |
1,125 |
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593 |
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Other (income) and expense - retirement-related* |
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347 |
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106 |
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349 |
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125 |
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273 |
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100 |
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371 |
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116 |
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1,341 |
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448 |
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Other (income) and expense |
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(28 |
) |
253 |
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(76 |
) |
37 |
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(114 |
) |
(8 |
) |
2 |
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(136 |
) |
(216 |
) |
145 |
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Interest expense |
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135 |
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147 |
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147 |
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167 |
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168 |
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158 |
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164 |
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157 |
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615 |
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630 |
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Total expense and other (income)* |
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6,521 |
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7,708 |
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6,525 |
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6,710 |
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5,917 |
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5,805 |
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6,580 |
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5,962 |
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25,543 |
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26,186 |
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Income from continuing operations before income taxes |
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1,424 |
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1,034 |
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2,443 |
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3,049 |
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3,065 |
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3,263 |
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4,469 |
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4,986 |
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11,400 |
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12,330 |
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Provision for/(benefit from) income taxes |
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(329 |
) |
(983 |
) |
111 |
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544 |
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339 |
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409 |
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5,522 |
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480 |
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5,642 |
|
449 |
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Income from continuing operations |
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1,753 |
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2,016 |
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2,332 |
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2,505 |
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2,726 |
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2,854 |
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(1,053 |
) |
4,505 |
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5,758 |
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11,881 |
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Earnings/(loss) per share of common stock: |
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Assuming dilution: |
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Continuing operations |
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$ |
1.85 |
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$ |
2.09 |
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$ |
2.48 |
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$ |
2.61 |
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$ |
2.92 |
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$ |
2.98 |
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-$ 1.14 |
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$ |
4.73 |
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$ |
6.14 |
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$ |
12.39 |
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*Reclassified to reflect adoption of the FASB guidance on presentation of net periodic pension and nonpension postretirement benefit costs
Attachment 2: Reclassified Non-GAAP Supplementary Materials
INTERNATIONAL BUSINESS MACHINES CORPORATION
GAAP TO OPERATING BRIDGES
(UNAUDITED)
$ in millions, except for EPS numbers
For the twelve months ended December 31, 2017
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GAAP |
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ACQUISITION |
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RETIREMENT |
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TAX REFORM |
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OPERATING |
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Gross Profit |
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36,943 |
|
449 |
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— |
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— |
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37,392 |
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Gross Profit Margin |
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46.7 |
% |
0.6 |
Pts |
— |
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— |
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47.2 |
% |
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SG&A |
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19,680 |
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(509 |
) |
— |
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— |
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19,170 |
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RD&E |
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5,590 |
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— |
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— |
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— |
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5,590 |
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Other Income & Expense |
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1,125 |
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(39 |
) |
(1,341 |
) |
— |
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(255 |
) |
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Total Expense & Other Income |
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25,543 |
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(548 |
) |
(1,341 |
) |
— |
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23,654 |
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Pre-Tax Income from Continuing Operations |
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11,400 |
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997 |
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1,341 |
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— |
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13,738 |
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PTI Margin from Continuing Operations |
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14.4 |
% |
1.3 |
Pts |
1.7 |
Pts |
— |
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17.4 |
% |
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Tax |
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5,642 |
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279 |
|
485 |
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(5,475 |
) |
931 |
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Tax Rate |
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49.5 |
% |
-1.6 |
Pts |
-1.3 |
Pts |
-39.9 |
Pts |
6.8 |
% |
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Income from Continuing Operations |
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5,758 |
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718 |
|
856 |
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5,475 |
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12,807 |
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Income Margin from Continuing Operations |
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7.3 |
% |
0.9 |
Pts |
1.1 |
Pts |
6.9 |
Pts |
16.2 |
% |
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Diluted EPS from Continuing Operations |
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6.14 |
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0.77 |
|
0.91 |
|
5.84 |
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13.66 |
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For the twelve months ended December 31, 2016
|
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GAAP |
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ACQUISITION |
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RETIREMENT |
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TAX REFORM |
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OPERATING |
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|
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Gross Profit |
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38,516 |
|
494 |
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— |
|
— |
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39,010 |
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Gross Profit Margin |
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48.2 |
% |
0.6 |
Pts |
— |
|
— |
|
48.8 |
% |
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SG&A |
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20,869 |
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(501 |
) |
— |
|
— |
|
20,368 |
|
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RD&E |
|
5,726 |
|
— |
|
— |
|
— |
|
5,726 |
|
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Other Income & Expense |
|
593 |
|
(7 |
) |
(448 |
) |
— |
|
138 |
|
|
Total Expense & Other Income |
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26,186 |
|
(508 |
) |
(448 |
) |
— |
|
25,230 |
|
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Pre-Tax Income from Continuing Operations |
|
12,330 |
|
1,003 |
|
448 |
|
— |
|
13,780 |
|
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PTI Margin from Continuing Operations |
|
15.4 |
% |
1.3 |
Pts |
0.6 |
Pts |
— |
|
17.2 |
% |
|
Tax |
|
449 |
|
268 |
|
183 |
|
— |
|
900 |
|
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Tax Rate |
|
3.6 |
% |
1.7 |
Pts |
1.2 |
Pts |
— |
|
6.5 |
% |
|
Income from Continuing Operations |
|
11,881 |
|
735 |
|
265 |
|
— |
|
12,880 |
|
|
Income Margin from Continuing Operations |
|
14.9 |
% |
0.9 |
Pts |
0.3 |
Pts |
— |
|
16.1 |
% |
|
Diluted EPS from Continuing Operations |
|
12.39 |
|
0.77 |
|
0.28 |
|
— |
|
13.44 |
|
INTERNATIONAL BUSINESS MACHINES CORPORATION
QUARTERLY GAAP TO OPERATING BRIDGES
(UNAUDITED)
$ in millions, except for EPS numbers
For the three months ended March 31, 2017
|
|
|
|
|
ACQUISITION |
|
RETIREMENT |
|
|
|
|
|
|
GAAP |
|
ADJUSTMENTS |
|
ADJUSTMENTS |
|
OPERATING |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
7,944 |
|
119 |
|
— |
|
8,063 |
|
|
Gross Profit Margin |
|
43.8 |
% |
0.7 |
Pts |
— |
|
44.4 |
% |
|
SG&A |
|
5,027 |
|
(139 |
) |
— |
|
4,887 |
|
|
RD&E |
|
1,484 |
|
— |
|
— |
|
1,484 |
|
|
Other Income & Expense |
|
319 |
|
(4 |
) |
(347 |
) |
(31 |
) |
|
Total Expense & Other Income |
|
6,521 |
|
(143 |
) |
(347 |
) |
6,031 |
|
|
Pre-Tax Income from Continuing Operations |
|
1,424 |
|
262 |
|
347 |
|
2,033 |
|
|
PTI Margin from Continuing Operations |
|
7.8 |
% |
1.4 |
Pts |
1.9 |
Pts |
11.2 |
% |
|
Tax |
|
(329 |
) |
67 |
|
70 |
|
(192 |
) |
|
Tax Rate |
|
-23.1 |
% |
6.3 |
Pts |
7.4 |
Pts |
-9.4 |
% |
|
Income from Continuing Operations |
|
1,753 |
|
195 |
|
277 |
|
2,224 |
|
|
Income Margin from Continuing Operations |
|
9.7 |
% |
1.1 |
Pts |
1.5 |
Pts |
12.3 |
% |
|
Diluted EPS from Continuing Operations |
|
1.85 |
|
0.21 |
|
0.29 |
|
2.35 |
|
For the three months ended June 30, 2017
|
|
|
|
|
ACQUISITION |
|
RETIREMENT |
|
|
|
|
|
|
GAAP |
|
ADJUSTMENTS |
|
ADJUSTMENTS |
|
OPERATING |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
8,968 |
|
117 |
|
— |
|
9,085 |
|
|
Gross Profit Margin |
|
46.5 |
% |
0.6 |
Pts |
— |
|
47.1 |
% |
|
SG&A |
|
5,033 |
|
(129 |
) |
— |
|
4,904 |
|
|
RD&E |
|
1,436 |
|
— |
|
— |
|
1,436 |
|
|
Other Income & Expense |
|
273 |
|
(4 |
) |
(349 |
) |
(80 |
) |
|
Total Expense & Other Income |
|
6,525 |
|
(133 |
) |
(349 |
) |
6,043 |
|
|
Pre-Tax Income from Continuing Operations |
|
2,443 |
|
250 |
|
349 |
|
3,042 |
|
|
PTI Margin from Continuing Operations |
|
12.7 |
% |
1.3 |
Pts |
1.8 |
Pts |
15.8 |
% |
|
Tax |
|
111 |
|
66 |
|
105 |
|
282 |
|
|
Tax Rate |
|
4.5 |
% |
1.8 |
Pts |
2.9 |
Pts |
9.3 |
% |
|
Income from Continuing Operations |
|
2,332 |
|
183 |
|
244 |
|
2,760 |
|
|
Income Margin from Continuing Operations |
|
12.1 |
% |
1.0 |
Pts |
1.3 |
Pts |
14.3 |
% |
|
Diluted EPS from Continuing Operations |
|
2.48 |
|
0.20 |
|
0.26 |
|
2.94 |
|
For the three months ended September 30, 2017
|
|
|
|
|
ACQUISITION |
|
RETIREMENT |
|
|
|
|
|
|
GAAP |
|
ADJUSTMENTS |
|
ADJUSTMENTS |
|
OPERATING |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
8,981 |
|
114 |
|
— |
|
9,095 |
|
|
Gross Profit Margin |
|
46.9 |
% |
0.6 |
Pts |
— |
|
47.5 |
% |
|
SG&A |
|
4,606 |
|
(125 |
) |
— |
|
4,482 |
|
|
RD&E |
|
1,291 |
|
— |
|
— |
|
1,291 |
|
|
Other Income & Expense |
|
159 |
|
0 |
|
(273 |
) |
(114 |
) |
|
Total Expense & Other Income |
|
5,917 |
|
(125 |
) |
(273 |
) |
5,519 |
|
|
Pre-Tax Income from Continuing Operations |
|
3,065 |
|
238 |
|
273 |
|
3,576 |
|
|
PTI Margin from Continuing Operations |
|
16.0 |
% |
1.2 |
Pts |
1.4 |
Pts |
18.7 |
% |
|
Tax |
|
339 |
|
79 |
|
113 |
|
531 |
|
|
Tax Rate |
|
11.0 |
% |
1.5 |
Pts |
2.3 |
Pts |
14.8 |
% |
|
Income from Continuing Operations |
|
2,726 |
|
159 |
|
160 |
|
3,045 |
|
|
Income Margin from Continuing Operations |
|
14.2 |
% |
0.8 |
Pts |
0.8 |
Pts |
15.9 |
% |
|
Diluted EPS from Continuing Operations |
|
2.92 |
|
0.17 |
|
0.17 |
|
3.26 |
|
For the three months ended December 31, 2017
|
|
|
|
|
ACQUISITION |
|
RETIREMENT |
|
TAX REFORM |
|
|
|
|
|
|
GAAP |
|
ADJUSTMENTS |
|
ADJUSTMENTS |
|
ONE-TIME CHARGE |
|
OPERATING |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
11,049 |
|
99 |
|
— |
|
— |
|
11,149 |
|
|
Gross Profit Margin |
|
49.0 |
% |
0.4 |
Pts |
— |
|
— |
|
49.5 |
% |
|
SG&A |
|
5,013 |
|
(116 |
) |
— |
|
— |
|
4,897 |
|
|
RD&E |
|
1,378 |
|
— |
|
— |
|
— |
|
1,378 |
|
|
Other Income & Expense |
|
374 |
|
(32 |
) |
(371 |
) |
— |
|
(30 |
) |
|
Total Expense & Other Income |
|
6,580 |
|
(148 |
) |
(371 |
) |
— |
|
6,061 |
|
|
Pre-Tax Income from Continuing Operations |
|
4,469 |
|
247 |
|
371 |
|
— |
|
5,087 |
|
|
PTI Margin from Continuing Operations |
|
19.8 |
% |
1.1 |
Pts |
1.6 |
Pts |
— |
|
22.6 |
% |
|
Tax |
|
5,522 |
|
67 |
|
197 |
|
(5,475 |
) |
310 |
|
|
Tax Rate |
|
123.6 |
% |
-4.7 |
Pts |
-5.1 |
Pts |
-107.6 |
Pts |
6.1 |
% |
|
Income from Continuing Operations |
|
(1,053 |
) |
181 |
|
174 |
|
5,475 |
|
4,777 |
|
|
Income Margin from Continuing Operations |
|
-4.7 |
% |
0.8 |
Pts |
0.8 |
Pts |
24.3 |
Pts |
21.2 |
% |
|
Diluted EPS from Continuing Operations |
|
-1.14 |
|
0.19 |
|
0.19 |
|
5.90 |
|
5.14 |
|
INTERNATIONAL BUSINESS MACHINES CORPORATION
QUARTERLY GAAP TO OPERATING BRIDGES
(UNAUDITED)
$ in millions, except for EPS numbers
For the three months ended March 31, 2016
|
|
|
|
|
ACQUISITION |
|
RETIREMENT |
|
|
|
|
|
|
GAAP |
|
ADJUSTMENTS |
|
ADJUSTMENTS |
|
OPERATING |
|
|
Gross Profit |
|
8,742 |
|
112 |
|
— |
|
8,854 |
|
|
Gross Profit Margin |
|
46.8 |
% |
0.6 |
Pts |
— |
|
47.4 |
% |
|
SG&A |
|
5,970 |
|
(67 |
) |
— |
|
5,903 |
|
|
RD&E |
|
1,450 |
|
— |
|
— |
|
1,450 |
|
|
Other Income & Expense |
|
358 |
|
(6 |
) |
(106 |
) |
247 |
|
|
Total Expense & Other Income |
|
7,708 |
|
(73 |
) |
(106 |
) |
7,530 |
|
|
Pre-Tax Income from Continuing Operations |
|
1,034 |
|
185 |
|
106 |
|
1,324 |
|
|
PTI Margin from Continuing Operations |
|
5.5 |
% |
1.0 |
Pts |
0.6 |
Pts |
7.1 |
% |
|
Tax |
|
(983 |
) |
47 |
|
27 |
|
(909 |
) |
|
Tax Rate |
|
-95.1 |
% |
16.8 |
Pts |
9.6 |
Pts |
-68.7 |
% |
|
Income from Continuing Operations |
|
2,016 |
|
138 |
|
79 |
|
2,233 |
|
|
Income Margin from Continuing Operations |
|
10.8 |
% |
0.7 |
Pts |
0.4 |
Pts |
12.0 |
% |
|
Diluted EPS from Continuing Operations |
|
2.09 |
|
0.14 |
|
0.09 |
|
2.32 |
|
For the three months ended June 30, 2016
|
|
|
|
|
ACQUISITION |
|
RETIREMENT |
|
|
|
|
|
|
GAAP |
|
ADJUSTMENTS |
|
ADJUSTMENTS |
|
OPERATING |
|
|
Gross Profit |
|
9,759 |
|
129 |
|
— |
|
9,888 |
|
|
Gross Profit Margin |
|
48.2 |
% |
0.6 |
Pts |
— |
|
48.9 |
% |
|
SG&A |
|
5,287 |
|
(159 |
) |
— |
|
5,127 |
|
|
RD&E |
|
1,459 |
|
— |
|
— |
|
1,459 |
|
|
Other Income & Expense |
|
162 |
|
0 |
|
(125 |
) |
37 |
|
|
Total Expense & Other Income |
|
6,710 |
|
(159 |
) |
(125 |
) |
6,426 |
|
|
Pre-Tax Income from Continuing Operations |
|
3,049 |
|
289 |
|
125 |
|
3,463 |
|
|
PTI Margin from Continuing Operations |
|
15.1 |
% |
1.4 |
Pts |
0.6 |
Pts |
17.1 |
% |
|
Tax |
|
544 |
|
82 |
|
39 |
|
665 |
|
|
Tax Rate |
|
17.8 |
% |
0.9 |
Pts |
0.5 |
Pts |
19.2 |
% |
|
Income from Continuing Operations |
|
2,505 |
|
207 |
|
86 |
|
2,798 |
|
|
Income Margin from Continuing Operations |
|
12.4 |
% |
1.0 |
Pts |
0.4 |
Pts |
13.8 |
% |
|
Diluted EPS from Continuing Operations |
|
2.61 |
|
0.21 |
|
0.09 |
|
2.91 |
|
For the three months ended September 30, 2016
|
|
|
|
|
ACQUISITION |
|
RETIREMENT |
|
|
|
|
|
|
GAAP |
|
ADJUSTMENTS |
|
ADJUSTMENTS |
|
OPERATING |
|
|
Gross Profit |
|
9,068 |
|
129 |
|
— |
|
9,197 |
|
|
Gross Profit Margin |
|
47.2 |
% |
0.7 |
Pts |
— |
|
47.8 |
% |
|
SG&A |
|
4,693 |
|
(138 |
) |
— |
|
4,554 |
|
|
RD&E |
|
1,391 |
|
— |
|
— |
|
1,391 |
|
|
Other Income & Expense |
|
92 |
|
(2 |
) |
(100 |
) |
(10 |
) |
|
Total Expense & Other Income |
|
5,805 |
|
(140 |
) |
(100 |
) |
5,565 |
|
|
Pre-Tax Income from Continuing Operations |
|
3,263 |
|
269 |
|
100 |
|
3,632 |
|
|
PTI Margin from Continuing Operations |
|
17.0 |
% |
1.4 |
Pts |
0.5 |
Pts |
18.9 |
% |
|
Tax |
|
409 |
|
73 |
|
40 |
|
521 |
|
|
Tax Rate |
|
12.5 |
% |
1.1 |
Pts |
0.8 |
Pts |
14.3 |
% |
|
Income from Continuing Operations |
|
2,854 |
|
197 |
|
60 |
|
3,111 |
|
|
Income Margin from Continuing Operations |
|
14.8 |
% |
1.0 |
Pts |
0.3 |
Pts |
16.2 |
% |
|
Diluted EPS from Continuing Operations |
|
2.98 |
|
0.21 |
|
0.06 |
|
3.25 |
|
For the three months ended December 31, 2016
|
|
|
|
|
ACQUISITION |
|
RETIREMENT |
|
|
|
|
|
|
GAAP |
|
ADJUSTMENTS |
|
ADJUSTMENTS |
|
OPERATING |
|
|
Gross Profit |
|
10,947 |
|
124 |
|
— |
|
11,071 |
|
|
Gross Profit Margin |
|
50.3 |
% |
0.6 |
Pts |
— |
|
50.9 |
% |
|
SG&A |
|
4,920 |
|
(136 |
) |
— |
|
4,784 |
|
|
RD&E |
|
1,426 |
|
— |
|
— |
|
1,426 |
|
|
Other Income & Expense |
|
(19 |
) |
0 |
|
(116 |
) |
(136 |
) |
|
Total Expense & Other Income |
|
5,962 |
|
(136 |
) |
(116 |
) |
5,709 |
|
|
Pre-Tax Income from Continuing Operations |
|
4,986 |
|
260 |
|
116 |
|
5,362 |
|
|
PTI Margin from Continuing Operations |
|
22.9 |
% |
1.2 |
Pts |
0.5 |
Pts |
24.6 |
% |
|
Tax |
|
480 |
|
66 |
|
77 |
|
623 |
|
|
Tax Rate |
|
9.6 |
% |
0.8 |
Pts |
1.2 |
Pts |
11.6 |
% |
|
Income from Continuing Operations |
|
4,505 |
|
193 |
|
40 |
|
4,738 |
|
|
Income Margin from Continuing Operations |
|
20.7 |
% |
0.9 |
Pts |
0.2 |
Pts |
21.8 |
% |
|
Diluted EPS from Continuing Operations |
|
4.73 |
|
0.20 |
|
0.04 |
|
4.97 |
|
Attachment 3: Reclassified Management System Segment View
International Business Machines Corporation
Management System Segment View
|
|
|
|
|
|
|
TECHNOLOGY |
|
|
|
|
|
|
|
|
|
|
COGNITIVE |
|
GLOBAL BUSINESS |
|
SERVICES AND |
|
|
|
|
|
|
|
|
|
|
SOLUTIONS |
|
SERVICES |
|
CLOUD PLATFORMS |
|
SYSTEMS |
|
GLOBAL FINANCING |
|
TOTAL SEGMENTS |
|
|
($M) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Q16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUE |
|
4,647 |
|
4,245 |
|
8,589 |
|
1,888 |
|
896 |
|
20,264 |
|
|
EXTERNAL REVENUE |
|
3,979 |
|
4,131 |
|
8,424 |
|
1,675 |
|
410 |
|
18,619 |
|
|
INTERNAL REVENUE |
|
668 |
|
113 |
|
165 |
|
212 |
|
486 |
|
1,645 |
|
|
SEGMENT PTI* |
|
1,007 |
|
178 |
|
243 |
|
-12 |
|
386 |
|
1,801 |
|
|
PTI MARGIN* |
|
22 |
% |
4 |
% |
3 |
% |
-1 |
% |
43 |
% |
9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2Q16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUE |
|
5,269 |
|
4,359 |
|
9,013 |
|
2,156 |
|
926 |
|
21,723 |
|
|
EXTERNAL REVENUE |
|
4,675 |
|
4,255 |
|
8,857 |
|
1,950 |
|
424 |
|
20,162 |
|
|
INTERNAL REVENUE |
|
594 |
|
103 |
|
156 |
|
206 |
|
502 |
|
1,561 |
|
|
SEGMENT PTI* |
|
1,444 |
|
463 |
|
1,263 |
|
227 |
|
467 |
|
3,863 |
|
|
PTI MARGIN* |
|
27 |
% |
11 |
% |
14 |
% |
11 |
% |
50 |
% |
18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3Q16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUE |
|
4,902 |
|
4,284 |
|
8,929 |
|
1,734 |
|
763 |
|
20,613 |
|
|
EXTERNAL REVENUE |
|
4,235 |
|
4,191 |
|
8,748 |
|
1,558 |
|
412 |
|
19,145 |
|
|
INTERNAL REVENUE |
|
667 |
|
93 |
|
180 |
|
176 |
|
352 |
|
1,468 |
|
|
SEGMENT PTI* |
|
1,567 |
|
532 |
|
1,272 |
|
134 |
|
354 |
|
3,858 |
|
|
PTI MARGIN* |
|
32 |
% |
12 |
% |
14 |
% |
8 |
% |
46 |
% |
19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4Q16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUE |
|
5,999 |
|
4,221 |
|
9,522 |
|
2,686 |
|
909 |
|
23,337 |
|
|
EXTERNAL REVENUE |
|
5,297 |
|
4,121 |
|
9,308 |
|
2,530 |
|
447 |
|
21,704 |
|
|
INTERNAL REVENUE |
|
701 |
|
100 |
|
214 |
|
156 |
|
462 |
|
1,633 |
|
|
SEGMENT PTI* |
|
2,306 |
|
510 |
|
1,866 |
|
577 |
|
448 |
|
5,707 |
|
|
PTI MARGIN* |
|
38 |
% |
12 |
% |
20 |
% |
21 |
% |
49 |
% |
24 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUE |
|
20,817 |
|
17,109 |
|
36,052 |
|
8,464 |
|
3,494 |
|
85,936 |
|
|
EXTERNAL REVENUE |
|
18,187 |
|
16,700 |
|
35,337 |
|
7,714 |
|
1,692 |
|
79,630 |
|
|
INTERNAL REVENUE |
|
2,630 |
|
409 |
|
715 |
|
750 |
|
1,802 |
|
6,307 |
|
|
SEGMENT PTI* |
|
6,325 |
|
1,683 |
|
4,643 |
|
925 |
|
1,654 |
|
15,230 |
|
|
PTI MARGIN* |
|
30 |
% |
10 |
% |
13 |
% |
11 |
% |
47 |
% |
18 |
% |
*Reclassified to reflect adoption of the FASB guidance on presentation of net periodic pension and nonpension postretirement benefit costs
International Business Machines Corporation
Management System Segment View
|
|
|
|
|
|
|
TECHNOLOGY |
|
|
|
|
|
|
|
|
|
|
COGNITIVE |
|
GLOBAL BUSINESS |
|
SERVICES AND |
|
|
|
|
|
|
|
|
|
|
SOLUTIONS |
|
SERVICES |
|
CLOUD PLATFORMS |
|
SYSTEMS |
|
GLOBAL FINANCING |
|
TOTAL SEGMENTS |
|
|
($M) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Q17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUE |
|
4,778 |
|
4,092 |
|
8,376 |
|
1,562 |
|
768 |
|
19,576 |
|
|
EXTERNAL REVENUE |
|
4,062 |
|
4,006 |
|
8,216 |
|
1,395 |
|
405 |
|
18,083 |
|
|
INTERNAL REVENUE |
|
716 |
|
86 |
|
160 |
|
167 |
|
363 |
|
1,492 |
|
|
SEGMENT PTI* |
|
1,268 |
|
281 |
|
673 |
|
-188 |
|
311 |
|
2,346 |
|
|
PTI MARGIN* |
|
27 |
% |
7 |
% |
8 |
% |
-12 |
% |
40 |
% |
12 |
% |
|
2Q17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUE |
|
5,214 |
|
4,190 |
|
8,579 |
|
1,924 |
|
705 |
|
20,612 |
|
|
EXTERNAL REVENUE |
|
4,559 |
|
4,097 |
|
8,406 |
|
1,747 |
|
415 |
|
19,224 |
|
|
INTERNAL REVENUE |
|
655 |
|
93 |
|
173 |
|
177 |
|
290 |
|
1,388 |
|
|
SEGMENT PTI* |
|
1,610 |
|
312 |
|
994 |
|
73 |
|
282 |
|
3,270 |
|
|
PTI MARGIN* |
|
31 |
% |
7 |
% |
12 |
% |
4 |
% |
40 |
% |
16 |
% |
|
3Q17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUE |
|
5,030 |
|
4,185 |
|
8,621 |
|
1,948 |
|
698 |
|
20,482 |
|
|
EXTERNAL REVENUE |
|
4,400 |
|
4,093 |
|
8,457 |
|
1,721 |
|
427 |
|
19,097 |
|
|
INTERNAL REVENUE |
|
629 |
|
92 |
|
164 |
|
227 |
|
272 |
|
1,384 |
|
|
SEGMENT PTI* |
|
1,643 |
|
442 |
|
1,177 |
|
337 |
|
243 |
|
3,843 |
|
|
PTI MARGIN* |
|
33 |
% |
11 |
% |
14 |
% |
17 |
% |
35 |
% |
19 |
% |
|
4Q17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUE |
|
6,078 |
|
4,244 |
|
9,358 |
|
3,511 |
|
997 |
|
24,188 |
|
|
EXTERNAL REVENUE |
|
5,432 |
|
4,152 |
|
9,198 |
|
3,332 |
|
450 |
|
22,563 |
|
|
INTERNAL REVENUE |
|
646 |
|
92 |
|
160 |
|
179 |
|
546 |
|
1,624 |
|
|
SEGMENT PTI* |
|
2,273 |
|
327 |
|
1,441 |
|
906 |
|
443 |
|
5,390 |
|
|
PTI MARGIN* |
|
37 |
% |
8 |
% |
15 |
% |
26 |
% |
44 |
% |
22 |
% |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUE |
|
21,100 |
|
16,711 |
|
34,934 |
|
8,945 |
|
3,168 |
|
84,857 |
|
|
EXTERNAL REVENUE |
|
18,453 |
|
16,348 |
|
34,277 |
|
8,194 |
|
1,696 |
|
78,968 |
|
|
INTERNAL REVENUE |
|
2,647 |
|
363 |
|
657 |
|
750 |
|
1,471 |
|
5,889 |
|
|
SEGMENT PTI* |
|
6,795 |
|
1,362 |
|
4,286 |
|
1,128 |
|
1,278 |
|
14,849 |
|
|
PTI MARGIN* |
|
32 |
% |
8 |
% |
12 |
% |
13 |
% |
40 |
% |
17 |
% |
*Reclassified to reflect adoption of the FASB guidance on presentation of net periodic pension and nonpension postretirement benefit costs
Attachment 3A: Additional Revenue and Gross Profit Information
International Business Machines Corporation
|
COGNITIVE SOLUTIONS SEGMENT |
|
1Q’16 |
|
2Q’16 |
|
3Q’16 |
|
4Q’16 |
|
FY’16 |
|
1Q’17 |
|
2Q’17 |
|
3Q’17 |
|
4Q’17 |
|
FY’17 |
|
|
Total External Revenue |
|
3,979 |
|
4,675 |
|
4,235 |
|
5,297 |
|
18,187 |
|
4,062 |
|
4,559 |
|
4,400 |
|
5,432 |
|
18,453 |
|
|
Gross Profit $ (External)* |
|
3,260 |
|
3,839 |
|
3,405 |
|
4,379 |
|
14,883 |
|
3,138 |
|
3,600 |
|
3,463 |
|
4,301 |
|
14,503 |
|
|
Gross Margin % (External)* |
|
81.9 |
% |
82.1 |
% |
80.4 |
% |
82.7 |
% |
81.8 |
% |
77.3 |
% |
79.0 |
% |
78.7 |
% |
79.2 |
% |
78.6 |
% |
|
GLOBAL BUSINESS SERVICES SEGMENT |
|
1Q’16 |
|
2Q’16 |
|
3Q’16 |
|
4Q’16 |
|
FY’16 |
|
1Q’17 |
|
2Q’17 |
|
3Q’17 |
|
4Q’17 |
|
FY’17 |
|
|
Total External Revenue |
|
4,131 |
|
4,255 |
|
4,191 |
|
4,121 |
|
16,700 |
|
4,006 |
|
4,097 |
|
4,093 |
|
4,152 |
|
16,348 |
|
|
Gross Profit $ (External)* |
|
1,057 |
|
1,109 |
|
1,195 |
|
1,097 |
|
4,457 |
|
938 |
|
1,011 |
|
1,108 |
|
1,021 |
|
4,077 |
|
|
Gross Margin % (External)* |
|
25.6 |
% |
26.1 |
% |
28.5 |
% |
26.6 |
% |
26.7 |
% |
23.4 |
% |
24.7 |
% |
27.1 |
% |
24.6 |
% |
24.9 |
% |
|
TECHNOLOGY SERVICES AND CLOUD PLATFORMS |
|
1Q’16 |
|
2Q’16 |
|
3Q’16 |
|
4Q’16 |
|
FY’16 |
|
1Q’17 |
|
2Q’17 |
|
3Q’17 |
|
4Q’17 |
|
FY’17 |
|
|
Total External Revenue |
|
8,424 |
|
8,857 |
|
8,748 |
|
9,308 |
|
35,337 |
|
8,216 |
|
8,406 |
|
8,457 |
|
9,198 |
|
34,277 |
|
|
Gross Profit $ (External)* |
|
3,437 |
|
3,672 |
|
3,665 |
|
3,983 |
|
14,757 |
|
3,188 |
|
3,400 |
|
3,462 |
|
3,752 |
|
13,802 |
|
|
Gross Margin % (External)* |
|
40.8 |
% |
41.5 |
% |
41.9 |
% |
42.8 |
% |
41.8 |
% |
38.8 |
% |
40.4 |
% |
40.9 |
% |
40.8 |
% |
40.3 |
% |
|
SYSTEMS SEGMENT |
|
1Q’16 |
|
2Q’16 |
|
3Q’16 |
|
4Q’16 |
|
FY’16 |
|
1Q’17 |
|
2Q’17 |
|
3Q’17 |
|
4Q’17 |
|
FY’17 |
|
|
Total External Revenue |
|
1,675 |
|
1,950 |
|
1,558 |
|
2,530 |
|
7,714 |
|
1,395 |
|
1,747 |
|
1,721 |
|
3,332 |
|
8,194 |
|
|
Gross Profit $ (External)* |
|
959 |
|
1,102 |
|
796 |
|
1,439 |
|
4,296 |
|
662 |
|
920 |
|
923 |
|
1,857 |
|
4,362 |
|
|
Gross Margin % (External)* |
|
57.2 |
% |
56.5 |
% |
51.1 |
% |
56.9 |
% |
55.7 |
% |
47.5 |
% |
52.7 |
% |
53.6 |
% |
55.7 |
% |
53.2 |
% |
|
GLOBAL FINANCING SEGMENT |
|
1Q’16 |
|
2Q’16 |
|
3Q’16 |
|
4Q’16 |
|
FY’16 |
|
1Q’17 |
|
2Q’17 |
|
3Q’17 |
|
4Q’17 |
|
FY’17 |
|
|
Total External Revenue |
|
410 |
|
424 |
|
412 |
|
447 |
|
1,692 |
|
405 |
|
415 |
|
427 |
|
450 |
|
1,696 |
|
|
Gross Profit $ (External)* |
|
174 |
|
164 |
|
156 |
|
162 |
|
655 |
|
129 |
|
128 |
|
108 |
|
133 |
|
497 |
|
|
Gross Margin % (External)* |
|
42.4 |
% |
38.7 |
% |
37.8 |
% |
36.2 |
% |
38.7 |
% |
31.8 |
% |
30.8 |
% |
25.2 |
% |
29.5 |
% |
29.3 |
% |
|
TOTAL SEGMENTS |
|
1Q’16 |
|
2Q’16 |
|
3Q’16 |
|
4Q’16 |
|
FY’16 |
|
1Q’17 |
|
2Q’17 |
|
3Q’17 |
|
4Q’17 |
|
FY’17 |
|
|
Total External Revenue |
|
18,619 |
|
20,162 |
|
19,145 |
|
21,704 |
|
79,630 |
|
18,083 |
|
19,224 |
|
19,097 |
|
22,563 |
|
78,968 |
|
|
Gross Profit $ (External)* |
|
8,887 |
|
9,886 |
|
9,216 |
|
11,060 |
|
39,050 |
|
8,055 |
|
9,059 |
|
9,064 |
|
11,064 |
|
37,241 |
|
|
Gross Margin % (External)* |
|
47.7 |
% |
49.0 |
% |
48.1 |
% |
51.0 |
% |
49.0 |
% |
44.5 |
% |
47.1 |
% |
47.5 |
% |
49.0 |
% |
47.2 |
% |
*Reclassified to reflect adoption of the FASB guidance on presentation of net periodic pension and nonpension postretirement benefit costs