EX-99.1 2 a18-3308_1ex99d1.htm EX-99.1

Exhibit 99.1

IBM REPORTS 2017 FOURTH-QUARTER AND FULL-YEAR RESULTS

 

Highlights

 

·            Fourth-quarter GAAP EPS from continuing operations of $(1.14)

 

·            Includes a one-time charge of $5.5 billion associated with the enactment of U.S. tax reform

 

·            Fourth-quarter operating (non-GAAP) EPS of $5.18

 

·            Excludes the one-time charge of $5.5 billion associated with the enactment of U.S. tax reform

 

·            Consistent with the basis of previously-provided 2017 expectations

 

·            Fourth-quarter revenue of $22.5 billion, up 4 percent (up 1 percent adjusting for currency)

 

·            Full-year strategic imperatives revenue of $36.5 billion, up 11 percent; represents 46 percent of IBM revenue

 

·            Fourth-quarter strategic imperatives revenue up 17 percent (up 14 percent adjusting for currency)

 

·            Full-year cloud revenue of $17.0 billion, up 24 percent year to year

 

·            As-a-service annual exit run rate of $10.3 billion in the quarter, up 20 percent year to year (up 18 percent adjusting for currency)

 

ARMONK, N.Y., January 18, 2018 . . . IBM (NYSE: IBM) today announced fourth-quarter and full-year 2017 earnings results.

 

“Our strategic imperatives revenue again grew at a double-digit rate and now represents 46 percent of our total revenue, and we are pleased with our overall revenue growth in the quarter,” said Ginni Rometty, IBM chairman, president and chief executive officer.  “During 2017, we strengthened our position as the leading enterprise cloud provider and established IBM as the blockchain leader for business.  Looking ahead, we are uniquely positioned to help clients use data and AI to build smarter businesses.”

 

 

 

FOURTH QUARTER 2017

 

 

 

 

 

Net Income

 

Gross Profit

 

 

 

Diluted EPS

 

(Loss)

 

Margin

 

GAAP from Continuing Operations

 

$

(1.14

)*

$

(1.1

B)*

48.2

%

Year/Year

 

-124

%*

-123

%*

-1.9

Pts

 

 

 

 

 

 

 

 

Operating (Non-GAAP)

 

$

5.18

 

$

4.8

B

49.5

%

Year/Year

 

3

%

1

%

-1.4

Pts

 

 

 

 

 

 

 

 

 

As-a-service

 

 

 

 

 

Strategic

 

 

 

annual exit

 

REVENUE

 

Total IBM

 

Imperatives

 

Cloud

 

run rate

 

As reported (US$)

 

$

22.5

B

$

11.1

B

$

5.5

B

$

10.3

B

Year/Year

 

4

%

17

%

30

%

20

%

Year/Year adjusting for currency

 

1

%

14

%

27

%

18

%

 


* Includes a one-time charge of $5.5 billion associated with the enactment of U.S. tax reform.

 

“Over the past several years we have invested aggressively in technology and our people to reposition IBM,” said James Kavanaugh, IBM senior vice president and chief financial officer. “2018 will

 



 

be all about reinforcing IBM’s leadership position in key high-value segments of the IT industry, including cloud, AI, security and blockchain.”

 

Strategic Imperatives Revenue

 

Fourth-quarter cloud revenues increased 30 percent to $5.5 billion (up 27 percent adjusting for currency).  Cloud revenue over the last 12 months was $17.0 billion, including $9.3 billion delivered as-a-service and $7.8 billion for hardware, software and services to enable IBM clients to implement comprehensive cloud solutions.  The annual exit run rate for as-a-service revenue increased to $10.3 billion from $8.6 billion in the fourth quarter of 2016.  In the quarter, revenues from analytics increased 9 percent (up 6 percent adjusting for currency).  Revenues from mobile increased 23 percent (up 21 percent adjusting for currency) and revenues from security increased 132 percent (up 127 percent adjusting for currency).

 

Full-Year 2018 Expectations

 

The company will discuss 2018 expectations during today’s quarterly earnings conference call.

 

Cash Flow and Balance Sheet

 

In the fourth quarter, the company generated net cash from operating activities of $5.7 billion, or $7.8 billion excluding Global Financing receivables. IBM’s free cash flow was $6.8 billion.  IBM returned $1.4 billion in dividends and $0.7 billion of gross share repurchases to shareholders.  At the end of December 2017, IBM had $3.8 billion remaining in the current share repurchase authorization.

 

The company generated full-year free cash flow of $13.0 billion, excluding Global Financing receivables.  The company returned $9.8 billion to shareholders through $5.5 billion in dividends and $4.3 billion of gross share repurchases.

 

IBM ended the fourth quarter of 2017 with $12.6 billion of cash on hand.  Debt totaled $46.8 billion, including Global Financing debt of $31.4 billion.  The balance sheet remains strong and is well positioned over the long term.

 

Segment Results for Fourth Quarter

 

·                  Cognitive Solutions (includes solutions software and transaction processing software) — revenues of $5.4 billion, up 3 percent (flat adjusting for currency), driven by security and transaction processing software.

 

·                  Global Business Services (includes consulting, global process services and application management) — revenues of $4.2 billion, up 1 percent (down 2 percent adjusting for currency).  Strategic imperatives revenue grew 9 percent led by the cloud practice, mobile and analytics.

 

·                  Technology Services & Cloud Platforms (includes infrastructure services, technical support services and integration software) — revenues of $9.2 billion, down 1 percent (down 4 percent adjusting for currency).  Strategic imperatives revenue grew 15 percent, driven by hybrid cloud services, security and mobile.

 

·                  Systems (includes systems hardware and operating systems software) — revenues of $3.3 billion, up 32 percent (up 28 percent adjusting for currency) driven by growth in IBM Z, Power Systems and storage.

 

·                  Global Financing (includes financing and used equipment sales) — revenues of $450 million, up 1 percent (down 2 percent adjusting for currency).

 

Tax Rate

 

The enactment of the Tax Cuts and Jobs Act in December 2017 resulted in a one-time charge of

 



 

$5.5 billion in the fourth quarter.  The charge encompasses several elements, including a tax on accumulated overseas profits and the revaluation of deferred tax assets and liabilities.  As a result, IBM’s reported GAAP tax rate, which includes the one-time charge, was 124 percent for the fourth quarter, and 49 percent for the full year.  IBM’s operating (non-GAAP) tax rate, which excludes the one-time charge, was 6 percent for the fourth quarter; and 7 percent for the full year, which includes the effect of discrete tax benefits in the first and second quarters.  Without discrete tax items, the full-year operating (non-GAAP) tax rate was 12 percent, at the low end of the company’s previously estimated range.

 

Full-Year Results

 

·            Full-year GAAP EPS from continuing operations of $6.14

 

·            Includes a one-time charge of $5.5 billion associated with the enactment of U.S. tax reform

 

·            Full-year operating (non-GAAP) EPS of $13.80

 

·            Excludes the one-time charge of $5.5 billion associated with the enactment of U.S. tax reform

 

·            Full-year revenue of $79.1 billion, down 1 percent

 

 

 

FULL YEAR 2017

 

 

 

 

 

 

 

Gross Profit

 

 

 

Diluted EPS

 

Net Income

 

Margin

 

GAAP from Continuing Operations

 

$

6.14

*

$

5.8

B*

45.8

%

Year/Year

 

-50

%*

-52

%*

-2.1

Pts

 

 

 

 

 

 

 

 

Operating (Non-GAAP)

 

$

13.80

 

$

12.9

B

47.4

%

Year/Year

 

2

%

-1

%

-1.6

Pts

 

 

 

 

 

 

 

 

 

As-a-service

 

 

 

 

 

Strategic

 

 

 

annual exit

 

REVENUE

 

Total IBM

 

Imperatives

 

Cloud

 

run rate

 

As reported (US$)

 

$

79.1

B

$

36.5

B

$

17.0

B

$

10.3

B

Year/Year

 

-1

%

11

%

24

%

20

%

Year/Year adjusting for currency

 

-1

%

11

%

24

%

18

%

 


* Includes a one-time charge of $5.5 billion associated with the enactment of U.S. tax reform.

 

Forward-Looking and Cautionary Statements

 

Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are based on the company’s current assumptions regarding future business and financial performance.  These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including the following: a downturn in economic environment and client spending budgets; the company’s failure to meet growth and productivity objectives, a failure of the company’s innovation initiatives; risks from investing in growth opportunities; failure of the company’s intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; cybersecurity and data privacy considerations; fluctuations in financial results, impact of local legal, economic, political and health conditions; adverse effects from environmental matters, tax matters and the company’s pension plans; ineffective internal controls; the company’s use of accounting estimates; the company’s ability to attract and retain key personnel and its reliance on critical skills; impacts of relationships with critical suppliers; product quality issues; impacts of business with government clients; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; reliance on third party distribution channels and ecosystems; the company’s ability to successfully manage acquisitions, alliances and dispositions; risks from legal proceedings; risk factors

 



 

related to IBM securities; and other risks, uncertainties and factors discussed in the company’s Form 10-Qs, Form 10-K and in the company’s other filings with the U.S. Securities and Exchange Commission (SEC) or in materials incorporated therein by reference.  Any forward-looking statement in this release speaks only as of the date on which it is made.  The company assumes no obligation to update or revise any forward-looking statements.

 

Presentation of Information in this Press Release

 

In an effort to provide investors with additional information regarding the company’s results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information which management believes provides useful information to investors:

 

IBM results —

 

·            presenting operating (non-GAAP) earnings per share amounts and related income statement items;

 

·            adjusting for free cash flow;

 

·            adjusting for currency (i.e., at constant currency).

 

Free cash flow guidance is derived using an estimate of profit, working capital and operational cash outflows.  The company views Global Financing receivables as a profit-generating investment, which it seeks to maximize and therefore it is not considered when formulating guidance for free cash flow.  As a result, the company does not estimate a GAAP Net Cash from Operations expectation metric.

 

The rationale for management’s use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8-K that includes this press release and is being submitted today to the SEC.

 

Conference Call and Webcast

 

IBM’s regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. EST, today.  The Webcast may be accessed via a link at http://www.ibm.com/investor/events/earnings/4q17.html.  Presentation charts will be available shortly before the Webcast.

 

Financial Results Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).

 

Contact:  IBM

Ian Colley, 914-434-3043

colley@us.ibm.com

 

John Bukovinsky, 732-618-3531

jbuko@us.ibm.com

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

COMPARATIVE FINANCIAL RESULTS

(Unaudited; Dollars in millions except per share amounts)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

December 31,

 

December 31,

 

 

 

2017

 

2016

 

2017

 

2016

 

REVENUE

 

 

 

 

 

 

 

 

 

Cognitive Solutions

 

$

5,432

 

$

5,297

 

$

18,453

 

$

18,187

 

Global Business Services

 

4,152

 

4,121

 

16,348

 

16,700

 

Technology Services & Cloud Platforms

 

9,198

 

9,308

 

34,277

 

35,337

 

Systems

 

3,332

 

2,530

 

8,194

 

7,714

 

Global Financing

 

450

 

447

 

1,696

 

1,692

 

Other

 

(20

)

66

 

171

 

289

 

TOTAL REVENUE

 

22,543

 

21,770

 

79,139

 

79,919

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

10,862

 

10,893

 

36,227

 

38,294

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT MARGIN

 

 

 

 

 

 

 

 

 

Cognitive Solutions

 

79.2

%

82.7

%

78.6

%

81.9

%

Global Business Services

 

24.8

%

26.9

%

25.2

%

27.0

%

Technology Services & Cloud Platforms

 

40.9

%

42.9

%

40.4

%

41.9

%

Systems

 

55.7

%

56.9

%

53.2

%

55.7

%

Global Financing

 

29.5

%

36.2

%

29.3

%

38.7

%

 

 

 

 

 

 

 

 

 

 

TOTAL GROSS PROFIT MARGIN

 

48.2

%

50.0

%

45.8

%

47.9

%

 

 

 

 

 

 

 

 

 

 

EXPENSE AND OTHER INCOME

 

 

 

 

 

 

 

 

 

S,G&A

 

5,147

 

4,976

 

20,107

 

21,069

 

R,D&E

 

1,427

 

1,431

 

5,787

 

5,751

 

Intellectual property and custom development income

 

(348

)

(521

)

(1,466

)

(1,631

)

Other (income) and expense

 

2

 

(136

)

(216

)

145

 

Interest expense

 

164

 

157

 

615

 

630

 

TOTAL EXPENSE AND OTHER INCOME

 

6,393

 

5,907

 

24,827

 

25,964

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

 

4,469

 

4,986

 

11,400

 

12,330

 

Pre-tax margin

 

19.8

%

22.9

%

14.4

%

15.4

%

Provision for / (Benefit from) income taxes

 

5,522

 

480

 

5,642

 

449

 

Effective tax rate

 

123.6

%

9.6

%

49.5

%

3.6

%

 

 

 

 

 

 

 

 

 

 

INCOME / (LOSS) FROM CONTINUING OPERATIONS

 

$

(1,053

)

$

4,505

 

$

5,758

 

$

11,881

 

DISCONTINUED OPERATIONS

 

 

 

 

 

 

 

 

 

Income/(Loss) from discontinued operations, net of taxes

 

(1

)

(4

)

(5

)

(9

)

 

 

 

 

 

 

 

 

 

 

NET INCOME / (LOSS)

 

$

(1,054

)

$

4,501

 

$

5,753

 

$

11,872

 

 

 

 

 

 

 

 

 

 

 

EARNINGS / (LOSS) PER SHARE OF COMMON STOCK:

 

 

 

 

 

 

 

 

 

Assuming Dilution

 

 

 

 

 

 

 

 

 

Continuing Operations

 

$

(1.14

)

$

4.73

 

$

6.14

 

$

12.39

 

Discontinued Operations

 

$

0.00

 

$

(0.01

)

$

0.00

 

$

(0.01

)

TOTAL

 

$

(1.14

)

$

4.72

 

$

6.14

 

$

12.38

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

Continuing Operations

 

$

(1.14

)

$

4.75

 

$

6.17

 

$

12.44

 

Discontinued Operations

 

$

0.00

 

$

(0.01

)

$

0.00

 

$

(0.01

)

TOTAL

 

$

(1.14

)

$

4.74

 

$

6.17

 

$

12.43

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (M’s):

 

 

 

 

 

 

 

 

 

Assuming Dilution

 

928.9

 

952.7

 

937.4

 

958.7

 

Basic

 

924.5

 

948.6

 

932.8

 

955.4

 

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

 

 

 

At

 

At

 

 

 

December 31,

 

December 31,

 

(Dollars in Millions)

 

2017

 

2016

 

ASSETS:

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

11,972

 

$

7,826

 

Marketable securities

 

608

 

701

 

Notes and accounts receivable - trade, net

 

8,928

 

9,182

 

Short-term financing receivables, net

 

21,721

 

19,006

 

Other accounts receivable, net

 

981

 

1,057

 

Inventory

 

1,583

 

1,553

 

Prepaid expenses and other current assets

 

3,942

 

4,564

 

Total Current Assets

 

49,735

 

43,888

 

Property, plant and equipment, net

 

11,116

 

10,830

 

Long-term financing receivables, net

 

9,550

 

9,021

 

Prepaid pension assets

 

4,643

 

3,034

 

Deferred taxes

 

4,862

 

5,224

 

Goodwill and intangibles, net

 

40,531

 

40,887

 

Investments and sundry assets

 

4,919

 

4,585

 

Total Assets

 

$

125,356

 

$

117,470

 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Taxes

 

$

4,219

 

$

3,235

 

Short-term debt

 

6,987

 

7,513

 

Accounts payable

 

6,451

 

6,209

 

Deferred income

 

11,552

 

11,035

 

Other liabilities

 

8,153

 

8,283

 

Total Current Liabilities

 

37,363

 

36,275

 

Long-term debt

 

39,837

 

34,655

 

Retirement related obligations

 

16,720

 

17,070

 

Deferred income

 

3,746

 

3,600

 

Other liabilities

 

9,965

 

7,477

 

Total Liabilities

 

107,631

 

99,078

 

 

 

 

 

 

 

EQUITY:

 

 

 

 

 

 

 

 

 

 

 

IBM Stockholders’ Equity:

 

 

 

 

 

Common stock

 

54,566

 

53,935

 

Retained earnings

 

153,126

 

152,759

 

Treasury stock — at cost

 

(163,507

)

(159,050

)

Accumulated other comprehensive income/(loss)

 

(26,592

)

(29,398

)

Total IBM stockholders’ equity

 

17,594

 

18,246

 

Noncontrolling interests

 

131

 

146

 

Total Equity

 

17,725

 

18,392

 

Total Liabilities and Equity

 

$

125,356

 

$

117,470

 

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

(Unaudited)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

December 31,

 

December 31,

 

(Dollars in Millions)

 

2017

 

2016

 

2017

 

2016

 

Net Cash Provided by Operating Activities per GAAP:

 

$

5,733

 

$

3,979

*

$

16,724

 

$

17,084

*

 

 

 

 

 

 

 

 

 

 

Less: change in Global Financing (GF) Receivables

 

(2,049

)

(1,678

)

419

 

1,658

 

Capital Expenditures, Net

 

(965

)

(925

)

(3,312

)

(3,726

)

 

 

 

 

 

 

 

 

 

 

Free Cash Flow

 

6,817

 

4,731

*

12,992

 

11,700

*

 

 

 

 

 

 

 

 

 

 

Acquisitions

 

(53

)

(235

)

(496

)

(5,679

)

Divestitures

 

(240

)

(490

)

(205

)

(454

)

Dividends

 

(1,387

)

(1,329

)

(5,506

)

(5,256

)

Share Repurchase

 

(666

)

(871

)

(4,340

)

(3,502

)

Non-GF Debt

 

(840

)

(2,048

)

1,056

 

1,317

 

Other (includes GF Receivables and GF Debt)

 

(2,565

)

(1,200

)*

552

 

2,208

*

 

 

 

 

 

 

 

 

 

 

Change in Cash, Cash Equivalents and

 

 

 

 

 

 

 

 

 

Short-term Marketable Securities

 

$

1,065

 

$

(1,441

)

$

4,053

 

$

332

 

 


* Reclassified to reflect adoption of the FASB guidance on stock-based compensation.

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW

(Unaudited)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

December 31,

 

December 31,

 

(Dollars in Millions)

 

2017

 

2016

 

2017

 

2016

 

Net Income from Operations

 

$

(1,054

)

$

4,501

 

$

5,753

 

$

11,872

 

Depreciation/Amortization of Intangibles

 

1,150

 

1,127

 

4,541

 

4,381

 

Stock-based Compensation

 

146

 

141

 

534

 

544

 

Working Capital / Other

 

7,540

 

(113

)*

5,476

 

(1,371

)*

Global Financing A/R

 

(2,049

)

(1,678

)

419

 

1,658

 

Net Cash Provided by Operating Activities

 

$

5,733

 

$

3,979

*

$

16,724

 

$

17,084

*

Capital Expenditures, net of payments & proceeds

 

(965

)

(925

)

(3,312

)

(3,726

)

Divestitures, net of cash transferred

 

(240

)

(490

)

(205

)

(454

)

Acquisitions, net of cash acquired

 

(53

)

(235

)

(496

)

(5,679

)

Marketable Securities / Other Investments, net

 

(2,559

)

(2,038

)

(3,083

)

(1,116

)

Net Cash Used in Investing Activities

 

$

(3,818

)

$

(3,687

)

$

(7,096

)

$

(10,976

)

Debt, net of payments & proceeds

 

1,137

 

875

 

3,446

 

2,763

 

Dividends

 

(1,387

)

(1,329

)

(5,506

)

(5,256

)

Common Stock Repurchases

 

(666

)

(871

)

(4,340

)

(3,502

)

Common Stock Transactions - Other

 

(3

)

26

*

(18

)

78

*

Net Cash Used in Financing Activities

 

$

(919

)

$

(1,298

)*

$

(6,418

)

$

(5,917

)*

Effect of Exchange Rate changes on Cash

 

62

 

(206

)

937

 

(51

)

Net Change in Cash & Cash Equivalents

 

$

1,057

 

$

(1,213

)

$

4,146

 

$

140

 

 


* Reclassified to reflect adoption of the FASB guidance on stock-based compensation.

 



 

 INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)

 

 

 

FOURTH - QUARTER 2017

 

 

 

Cognitive Solutions &
Industry Services

 

 

 

 

 

 

 

 

 

 

 

Technology

 

 

 

 

 

 

 

 

 

Global

 

Services &

 

 

 

 

 

 

 

Cognitive

 

Business

 

Cloud

 

 

 

Global

 

(Dollars in Millions)

 

Solutions

 

Services

 

Platforms

 

Systems

 

Financing

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

External

 

$

5,432

 

$

4,152

 

$

9,198

 

$

3,332

 

$

450

 

Internal

 

646

 

92

 

160

 

179

 

546

 

Total Segment Revenue

 

$

6,078

 

$

4,244

 

$

9,358

 

$

3,511

 

$

997

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income from Continuing Operations

 

2,279

 

337

 

1,456

 

908

 

443

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax margin

 

37.5

%

7.9

%

15.6

%

25.9

%

44.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change YTY Revenue - External

 

2.5

%

0.7

%

(1.2

)%

31.7

%

0.8

%

Change YTY Revenue - External @constant currency

 

0.0

%

(1.5

)%

(4.0

)%

28.5

%

(1.8

)%

 

 

 

FOURTH - QUARTER 2016

 

 

 

Cognitive Solutions &
Industry Services

 

 

 

 

 

 

 

 

 

 

 

Technology

 

 

 

 

 

 

 

 

 

Global

 

Services &

 

 

 

 

 

 

 

Cognitive

 

Business

 

Cloud

 

 

 

Global

 

(Dollars in Millions)

 

Solutions

 

Services

 

Platforms

 

Systems

 

Financing

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

External

 

$

5,297

 

$

4,121

 

$

9,308

 

$

2,530

 

$

447

 

Internal

 

701

 

100

 

214

 

156

 

462

 

Total Segment Revenue

 

$

5,999

 

$

4,221

 

$

9,522

 

$

2,686

 

$

909

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income from Continuing Operations

 

2,313

 

522

 

1,882

 

579

 

448

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax margin

 

38.6

%

12.4

%

19.8

%

21.6

%

49.3

%

 



 

 INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)

 

 

 

TWELVE - MONTHS 2017

 

 

 

Cognitive Solutions &
Industry Services

 

 

 

 

 

 

 

 

 

 

 

Technology

 

 

 

 

 

 

 

 

 

Global

 

Services &

 

 

 

 

 

 

 

Cognitive

 

Business

 

Cloud

 

 

 

Global

 

(Dollars in Millions)

 

Solutions

 

Services

 

Platforms

 

Systems

 

Financing

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

External

 

$

18,453

 

$

16,348

 

$

34,277

 

$

8,194

 

$

1,696

 

Internal

 

2,647

 

363

 

657

 

750

 

1,471

 

Total Segment Revenue

 

$

21,100

 

$

16,711

 

$

34,934

 

$

8,945

 

$

3,168

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income from Continuing Operations

 

6,817

 

1,401

 

4,344

 

1,135

 

1,279

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax margin

 

32.3

%

8.4

%

12.4

%

12.7

%

40.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change YTY Revenue - External

 

1.5

%

(2.1

)%

(3.0

)%

6.2

%

0.3

%

Change YTY Revenue - External@constant currency

 

1.0

%

(1.8

)%

(3.4

)%

5.4

%

(0.7

)%

 

 

 

TWELVE - MONTHS 2016

 

 

 

Cognitive Solutions &
Industry Services

 

 

 

 

 

 

 

 

 

 

 

Technology

 

 

 

 

 

 

 

 

 

Global

 

Services &

 

 

 

 

 

 

 

Cognitive

 

Business

 

Cloud

 

 

 

Global

 

(Dollars in Millions)

 

Solutions

 

Services

 

Platforms

 

Systems

 

Financing

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

External

 

$

18,187

 

$

16,700

 

$

35,337

 

$

7,714

 

$

1,692

 

Internal

 

2,630

 

409

 

715

 

750

 

1,802

 

Total Segment Revenue

 

$

20,817

 

$

17,109

 

$

36,052

 

$

8,464

 

$

3,494

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income from Continuing Operations

 

6,352

 

1,732

 

4,707

 

933

 

1,656

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax margin

 

30.5

%

10.1

%

13.1

%

11.0

%

47.4

%

 



 

 INTERNATIONAL BUSINESS MACHINES CORPORATION

U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION

(Unaudited; Dollars in millions except per share amounts)

 

 

 

FOURTH - QUARTER 2017
CONTINUING OPERATIONS

 

 

 

 

 

Acquisition-

 

Retirement-

 

Tax Reform

 

 

 

 

 

 

 

Related

 

Related

 

One-Time

 

Operating

 

 

 

GAAP

 

Adjustments*

 

Adjustments**

 

Charge (1)

 

(Non-GAAP)

 

Gross Profit

 

$

10,862

 

$

99

 

$

209

 

 

$

11,170

 

Gross Profit Margin

 

48.2

%

0.4

Pts

0.9

Pts

 

49.5

%

S,G&A

 

5,147

 

(116

)

(145

)

 

4,886

 

R,D&E

 

1,427

 

 

(50

)

 

1,378

 

Other (Income) & Expense

 

2

 

(32

)

 

 

(30

)

Total Expense & Other (Income)

 

6,393

 

(148

)

(195

)

 

6,050

 

Pre-tax Income from Continuing Operations

 

4,469

 

247

 

404

 

 

5,120

 

Pre-tax Income Margin from Continuing Operations

 

19.8

%

1.1

Pts

1.8

Pts

 

22.7

%

Provision for Income Taxes***

 

5,522

 

67

 

197

 

(5,475

)

310

 

Effective Tax Rate

 

123.6

%

-4.7

Pts

-5.9

Pts

-106.9

Pts

6.1

%

Income / (Loss) from Continuing Operations

 

(1,053

)

181

 

206

 

5,475

 

4,809

 

Income / (Loss) Margin from Continuing Operations

 

(4.7

)%

0.8

Pts

0.9

Pts

24.3

Pts

21.3

%

Diluted Earnings / (Loss) Per Share: Continuing Operations

 

$

(1.14

)

$

0.19

 

$

0.22

 

$

5.91

 

$

5.18

 

 


(1) Operating (non-GAAP) earnings excludes a one-time charge of $5.5 billion associated with the enactment of U.S. tax reform due to its unique non-recurring nature.

 

 

 

FOURTH - QUARTER 2016
CONTINUING OPERATIONS

 

 

 

 

 

 

 

 

Acquisition-

 

Retirement-

 

 

 

 

 

 

 

Related

 

Related

 

Operating

 

 

 

GAAP

 

Adjustments*

 

Adjustments**

 

(Non-GAAP)

 

Gross Profit

 

$

10,893

 

$

124

 

$

78

 

$

11,095

 

Gross Profit Margin

 

50.0

%

0.6

Pts

0.4

Pts

51.0

%

S,G&A

 

4,976

 

(136

)

(69

)

4,771

 

R,D&E

 

1,431

 

 

(6

)

1,425

 

Other (Income) & Expense

 

(136

)

0

 

 

(136

)

Total Expense & Other (Income)

 

5,907

 

(136

)

(76

)

5,696

 

Pre-tax Income from Continuing Operations

 

4,986

 

260

 

154

 

5,399

 

Pre-tax Income Margin from Continuing Operations

 

22.9

%

1.2

Pts

0.7

Pts

24.8

%

Provision for Income Taxes***

 

480

 

66

 

77

 

623

 

Effective Tax Rate

 

9.6

%

0.8

Pts

1.1

Pts

11.5

%

Income from Continuing Operations

 

4,505

 

193

 

77

 

4,776

 

Income Margin from Continuing Operations

 

20.7

%

0.9

Pts

0.4

Pts

21.9

%

Diluted Earnings Per Share: Continuing Operations

 

$

4.73

 

$

0.20

 

$

0.08

 

$

5.01

 

 


* Includes amortization of purchased intangible assets, in process R&D, severance cost for acquired employees, vacant space for acquired companies, deal costs and acquisition integration tax charges.

** Includes retirement-related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition assets, other settlements, curtailments, multi-employer plans and insolvency insurance.

*** Tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the As Reported pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

 



 

 INTERNATIONAL BUSINESS MACHINES CORPORATION

U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION

(Unaudited; Dollars in millions except per share amounts)

 

 

 

TWELVE - MONTHS 2017
CONTINUING OPERATIONS

 

 

 

 

 

Acquisition-

 

Retirement-

 

Tax Reform

 

 

 

 

 

 

 

Related

 

Related

 

One-Time

 

Operating

 

 

 

GAAP

 

Adjustments*

 

Adjustments**

 

Charge (1)

 

(Non-GAAP)

 

Gross Profit

 

$

36,227

 

$

449

 

$

799

 

 

$

37,475

 

Gross Profit Margin

 

45.8

%

0.6

Pts

1.0

Pts

 

47.4

%

S,G&A

 

20,107

 

(509

)

(472

)

 

19,126

 

R,D&E

 

5,787

 

 

(197

)

 

5,590

 

Other (Income) & Expense

 

(216

)

(39

)

 

 

(255

)

Total Expense & Other (Income)

 

24,827

 

(548

)

(669

)

 

23,609

 

Pre-tax Income from Continuing Operations

 

11,400

 

997

 

1,468

 

 

13,866

 

Pre-tax Income Margin from Continuing Operations

 

14.4

%

1.3

Pts

1.9

Pts

 

17.5

%

Provision for Income Taxes***

 

5,642

 

279

 

485

 

(5,475

)

931

 

Effective Tax Rate

 

49.5

%

-1.5

Pts

-1.7

Pts

-39.5

Pts

6.7

%

Income from Continuing Operations

 

5,758

 

718

 

983

 

5,475

 

12,935

 

Income Margin from Continuing Operations

 

7.3

%

0.9

Pts

1.2

Pts

6.9

Pts

16.3

%

Diluted Earnings Per Share: Continuing Operations

 

$

6.14

 

$

0.77

 

$

1.05

 

$

5.84

 

$

13.80

 

 


(1)    Operating (non-GAAP) earnings excludes a one-time charge of $5.5 billion associated with the enactment of U.S. tax reform due to its unique non-recurring nature.

 

 

 

TWELVE - MONTHS 2016
CONTINUING OPERATIONS

 

 

 

 

 

 

 

 

Acquisition-

 

Retirement-

 

 

 

 

 

 

 

Related

 

Related

 

Operating

 

 

 

GAAP

 

Adjustments*

 

Adjustments**

 

(Non-GAAP)

 

Gross Profit

 

$

38,294

 

$

494

 

$

316

 

$

39,104

 

Gross Profit Margin

 

47.9

%

0.6

Pts

0.4

Pts

48.9

%

S,G&A

 

21,069

 

(501

)

(253

)

20,315

 

R,D&E

 

5,751

 

 

(29

)

5,722

 

Other (Income) & Expense

 

145

 

(7

)

 

138

 

Total Expense & Other (Income)

 

25,964

 

(508

)

(282

)

25,174

 

Pre-Tax Income from Continuing Operations

 

12,330

 

1,003

 

598

 

13,931

 

Pre-tax Income Margin from Continuing Operations

 

15.4

%

1.3

Pts

0.7

Pts

17.4

%

Provision for Income Taxes***

 

449

 

268

 

183

 

900

 

Effective Tax Rate

 

3.6

%

1.7

Pts

1.2

Pts

6.5

%

Income from Continuing Operations

 

11,881

 

735

 

415

 

13,031

 

Income Margin from Continuing Operations

 

14.9

%

0.9

Pts

0.5

Pts

16.3

%

Diluted Earnings Per Share: Continuing Operations

 

$

12.39

 

$

0.77

 

$

0.43

 

$

13.59

 

 


*   Includes amortization of purchased intangible assets, in process R&D, severance cost for acquired employees, vacant space for acquired companies, deal costs and acquisition integration tax charges.

**  Includes retirement-related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition assets, other settlements, curtailments, multi-employer plans and insolvency insurance.

*** Tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the As Reported pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.