Company Website:
http://www.ibm.com
ARMONK, N.Y. -- (Business Wire)
IBM (NYSE:IBM)
- Diluted EPS:
- GAAP: $4.12, up 42 percent;
- Operating (non-GAAP): $4.32, up 34 percent;
- Net income:
- GAAP: $4.1 billion, up 28 percent;
- Operating (non-GAAP): $4.3 billion, up 21 percent;
- Gross profit margin:
- GAAP: 49.1 percent, up 50 basis points;
- Operating (non-GAAP): 49.8 percent, up 10 basis points;
- Revenue: $24.4 billion:
- Down 2 percent; down 1 percent adjusting for divested customer
care outsourcing business;
- Software, Services adjusting for divested customer care
outsourcing business and Global Financing grew; Systems and
Technology declined;
- Services backlog of $136 billion, down 1 percent adjusting for
divested customer care outsourcing business;
- Strategic growth initiatives grew double digits:
- Continue to expect full-year operating (non-GAAP) EPS of at least
$18.00.
IBM (NYSE:IBM) today announced second-quarter 2014 diluted earnings of
$4.12 per share, compared with diluted earnings of $2.91 per share in
the second quarter of 2013, an increase of 42 percent. Operating
(non-GAAP) diluted earnings were $4.32 per share, compared with
operating diluted earnings of $3.22 per share in the second quarter of
2013, an increase of 34 percent.
Second-quarter net income was $4.1 billion compared with $3.2 billion in
the second quarter of 2013, an increase of 28 percent. Operating
(non-GAAP) net income was $4.3 billion compared with $3.6 billion in the
second quarter of 2013, an increase of 21 percent. The year-to-year
results include the impact of a charge in the prior year period of $1
billion for workforce rebalancing.
Total revenues for the second quarter of 2014 of $24.4 billion were down
2 percent (down 1 percent, as reported and adjusting for currency,
adjusting for the divested customer care outsourcing business) from the
second quarter of 2013.
“In the second quarter, we made further progress on our transformation.
We performed well in our strategic imperatives around cloud, big data
and analytics, security and mobile,” said Ginni Rometty, IBM chairman,
president and chief executive officer. “We will continue to extend and
leverage our unique strengths to address the emerging trends in
enterprise IT and transform our business, positioning ourselves for
growth over the long term.”
Second-Quarter GAAP – Operating (non-GAAP) Reconciliation
Second-quarter operating (non-GAAP) diluted earnings exclude $0.20 per
share of charges: $0.16 per share for the amortization of purchased
intangible assets and other acquisition-related charges, and $0.04 per
share for non-operating retirement-related charges driven by changes to
plan assets and liabilities primarily related to market performance.
Full-Year 2014 Expectations
IBM expects full-year 2014 GAAP diluted earnings per share of at least
$17.00, and operating (non-GAAP) diluted earnings per share of at least
$18.00. The 2014 operating (non-GAAP) earnings expectations exclude
$1.00 per share of charges for amortization of purchased intangible
assets, other acquisition-related charges, and retirement-related
charges.
Geographic Regions
The Americas’ second-quarter revenues were $10.6 billion, a decrease of
1 percent (up 1 percent, adjusting for currency) from the 2013 period.
Revenues from Europe/Middle East/Africa were up 1 percent at $7.9
billion (down 3 percent adjusting for currency). Asia-Pacific revenues
decreased 9 percent (down 6 percent adjusting for currency) to $5.3
billion. OEM revenues were $433 million, down 19 percent (down 19
percent adjusting for currency) compared with the 2013 second quarter.
Growth Markets
Revenues from the company’s growth markets were down 7 percent (down 4
percent, adjusting for currency). Revenues in the BRIC countries —
Brazil, Russia, India and China — were down 2 percent (up 1 percent,
adjusting for currency).
Services
Global Services segment revenues decreased 1 percent (down 1 percent,
adjusting for currency) to $13.9 billion. Revenues increased 1 percent
adjusting for the impact of the divested customer care outsourcing
business. Global Technology Services segment revenues decreased 1
percent (down 1 percent, adjusting for currency) to $9.4 billion.
Adjusting for the impact of the divested customer care outsourcing
business, revenues were up 2 percent (up 2 percent adjusting for
currency). Global Business Services segment revenues were down 2 percent
(down 2 percent, adjusting for currency) to $4.5 billion.
Pre-tax income from Global Technology Services increased 22 percent and
pre-tax margin increased to 19.2 percent, including the impact of a $0.4
billion workforce rebalancing charge in the prior year. Global Business
Services pre-tax income increased 34 percent and pre-tax margin
increased to 17.8 percent, including the impact of a $0.2 billion
workforce rebalancing charge in the prior year.
The estimated services backlog at June 30 was $136 billion, down 1
percent adjusting for the divested customer care outsourcing business
(down 3 percent adjusting for currency).
Software
Revenues from the Software segment were $6.5 billion, up 1 percent (flat
adjusting for currency) compared with the second quarter of 2013.
Software pre-tax income increased 10 percent and pre-tax margin
increased to 36.5 percent, including the impact of a $0.2 billion
workforce rebalancing charge in the prior year.
Revenues from IBM’s key middleware products, which include WebSphere,
Information Management, Tivoli, Workforce Solutions and Rational
products, were $4.3 billion, up 1 percent (flat adjusting for currency)
versus the second quarter of 2013. Operating systems revenues of $530
million were down 13 percent (down 13 percent, adjusting for currency)
compared with the prior-year quarter.
Financing
Global Financing segment revenues increased 4 percent (up 4 percent,
adjusting for currency) in the second quarter at $504 million. Pre-tax
income for the segment increased 8 percent to $593 million.
Hardware
Revenues from the Systems and Technology segment totaled $3.3 billion
for the quarter, down 11 percent (down 12 percent, adjusting for
currency) from the second quarter of 2013. Systems and Technology
segment pre-tax income increased $0.2 billion, including the impact of a
$0.2 billion workforce rebalancing charge in the prior year.
Total systems revenues decreased 11 percent (down 11 percent, adjusting
for currency). Revenues from System z mainframe server products, in the
seventh quarter since they were announced, decreased 1 percent compared
with the year-ago period. Total delivery of System z computing power, as
measured in MIPS (millions of instructions per second), was flat.
Revenues from Power Systems were down 28 percent compared with the 2013
period. Revenues from System x were down 3 percent. Revenues from System
Storage decreased 12 percent and within this business area, flash
storage grew more than 100 percent. Revenues from Microelectronics OEM
decreased 18 percent.
Gross Profit
The company’s total gross profit margin was 49.1 percent in the 2014
second quarter compared with 48.7 percent in the 2013 second-quarter
period. Total operating (non-GAAP) gross profit margin was 49.8 percent
in the 2014 second quarter compared with 49.7 percent in the 2013
second-quarter period, with increases in Global Technology Services and
Global Financing.
Expense
Total expense and other income decreased to $6.8 billion or 15 percent,
including a gain of $121 million from the divestiture of the customer
care outsourcing business and the impact of a $1.0 billion workforce
rebalancing charge in the prior year period. S,G&A expense of $5.6
billion decreased 16 percent year over year. R,D&E expense of $1.5
billion decreased 6 percent compared with the year-ago period, and was 6
percent of revenue, consistent with the second-quarter of 2013.
Intellectual property and custom development income decreased to $191
million compared with $247 million a year ago. Other (income) and
expense was income of $201 million compared with prior-year income of
$91 million. Interest expense increased to $136 million compared with
$98 million in the prior year.
Total operating (non-GAAP) expense and other income decreased 14 percent
to $6.7 billion compared with the prior-year period, including the
impact of a $1.0 billion workforce rebalancing charge in the prior year
period. Operating (non-GAAP) S,G&A expense decreased 16 percent to $5.5
billion compared with the prior-year period. Operating (non-GAAP) R,D&E
expense of $1.5 billion was down 4 percent compared with the year-ago
period.
Pre-Tax Income
Pre-tax income increased 25 percent to $5.2 billion and pre-tax margin
of 21.2 percent was up 4.6 points compared with the prior-year period.
Operating (non-GAAP) pre-tax income increased 18 percent to $5.4 billion
and pre-tax margin was 22.3 percent, up 3.9 points.
***
IBM’s tax rate was 20.0 percent, down 2.1 points year over year;
operating (non-GAAP) tax rate was 20.0 percent, down 2.0 points compared
to the year-ago period.
Net income margin increased 4.0 points to 17.0 percent. Total operating
(non-GAAP) net income margin increased 3.5 points to 17.8 percent.
The weighted-average number of diluted common shares outstanding in the
second-quarter 2014 was 1.01 billion compared with 1.11 billion shares
in the same period of 2013. As of June 30, 2014, there were 998 million
basic common shares outstanding.
Debt, including Global Financing, totaled $46.5 billion, compared with
$39.7 billion at year-end 2013. From a management segment view, Global
Financing debt totaled $29.4 billion versus $27.5 billion at year-end
2013, resulting in a debt-to-equity ratio of 7.1 to 1. Non-global
financing debt totaled $17.1 billion, an increase of $4.9 billion since
year-end 2013, resulting in a debt-to-capitalization ratio of 56.1,
essentially flat quarter-to-quarter and higher than the ratio at
year-end 2013.
IBM ended the second-quarter 2014 with $9.7 billion of cash on hand and
generated free cash flow of $3.0 billion, excluding Global Financing
receivables, up $0.3 billion year over year. The company returned $4.8
billion to shareholders through $1.1 billion in dividends and $3.7
billion of gross share repurchases.
Year-To-Date 2014 Results
Net income for the six months ended June 30, 2014 was $6.5 billion
compared with $6.3 billion in the year-ago period, an increase of 4
percent. Diluted earnings per share were $6.37 compared with $5.60 per
diluted share for the 2013 period, an increase of 14 percent. Revenues
for the six-month period totaled $46.8 billion, a decrease of 3 percent
(down 2 percent, adjusting for currency) compared with $48.3 billion for
the first six months of 2013.
Operating (non-GAAP) net income for the six months ended June 30, 2014
was $7.0 billion, flat year to year. Operating (non-GAAP) diluted
earnings per share were $6.82 compared with $6.23 per diluted share for
the 2013 period, an increase of 9.5 percent.
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
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 and 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; 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 and expectations --
-
presenting operating (non-GAAP) earnings per share amounts and related
income statement items;
-
presenting non-global financing debt-to-capitalization ratio;
-
adjusting for free cash flow;
-
adjusting for currency (i.e., at constant currency);
-
adjusting for the divestiture of the customer care outsourcing
business.
The rationale for management’s use of non-GAAP measures is included as
part of the supplemental materials presented within the second-quarter
earnings materials. These materials are available via a link on the IBM
investor relations Web site at www.ibm.com/investor
and are being included in Attachment II (“Non-GAAP Supplemental
Materials”) to 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 4:30 p.m. EDT, today. The Webcast may be accessed via a link at http://www.ibm.com/investor/events/earnings/2q14.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).
INTERNATIONAL BUSINESS MACHINES CORPORATION
|
COMPARATIVE FINANCIAL RESULTS
|
(Unaudited; Dollars in millions except per share amounts)
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
| |
June 30,
| |
June 30,
|
| | |
| |
|
Percent
| | |
| |
|
Percent
|
| |
2014
| |
2013
| |
Change
| |
2014
| |
2013
| |
Change
|
REVENUE
| | | | | | | | | | | | |
| | | | | | | | | | | |
|
Global Technology
| | | | | | | | | | | | |
Services
| |
$
|
9,414
| | |
$
|
9,536
| | |
-1.3
|
%
| |
$
|
18,744
| | |
$
|
19,140
| | |
-2.1
|
%
|
Gross profit margin
| | |
38.4
|
%
| | |
37.8
|
%
| | | | |
38.2
|
%
| | |
37.3
|
%
| | |
| | | | | | | | | | | |
|
Global Business
| | | | | | | | | | | | |
Services
| | |
4,534
| | | |
4,606
| | |
-1.6
|
%
| | |
9,017
| | | |
9,091
| | |
-0.8
|
%
|
Gross profit margin
| | |
30.0
|
%
| | |
31.2
|
%
| | | | |
30.0
|
%
| | |
29.9
|
%
| | |
| | | | | | | | | | | |
|
Software
| | |
6,488
| | | |
6,423
| | |
1.0
|
%
| | |
12,149
| | | |
11,995
| | |
1.3
|
%
|
Gross profit margin
| | |
88.8
|
%
| | |
88.8
|
%
| | | | |
88.2
|
%
| | |
88.1
|
%
| | |
| | | | | | | | | | | |
|
Systems and
| | | | | | | | | | | | |
Technology
| | |
3,331
| | | |
3,758
| | |
-11.4
|
%
| | |
5,722
| | | |
6,864
| | |
-16.6
|
%
|
Gross profit margin
| | |
33.9
|
%
| | |
36.7
|
%
| | | | |
31.0
|
%
| | |
34.7
|
%
| | |
| | | | | | | | | | | |
|
Global Financing
| | |
504
| | | |
487
| | |
3.5
|
%
| | |
1,016
| | | |
985
| | |
3.1
|
%
|
Gross profit margin
| | |
54.8
|
%
| | |
46.3
|
%
| | | | |
50.4
|
%
| | |
46.0
|
%
| | |
| | | | | | | | | | | |
|
Other
| | |
93
| | | |
115
| | |
-19.1
|
%
| | |
200
| | | |
257
| | |
-22.0
|
%
|
Gross profit margin
| | |
-179.7
|
%
| | |
-190.5
|
%
| | | | |
-171.1
|
%
| | |
-172.8
|
%
| | |
| | | | | | | | | | | |
|
TOTAL REVENUE
| | |
24,364
| | | |
24,924
| | |
-2.2
|
%
| | |
46,848
| | | |
48,332
| | |
-3.1
|
%
|
| | | | | | | | | | | |
|
GROSS PROFIT
| | |
11,975
| | | |
12,132
| | |
-1.3
|
%
| | |
22,518
| | | |
22,810
| | |
-1.3
|
%
|
Gross margin
| | |
49.1
|
%
| | |
48.7
|
%
| | | | |
48.1
|
%
| | |
47.2
|
%
| | |
| | | | | | | | | | | |
|
|
EXPENSE AND OTHER INCOME
| | | | | | | | | | | | |
| | | | | | | | | | | |
|
S,G&A
| | |
5,603
| | | |
6,680
| | |
-16.1
|
%
| | |
11,892
| | | |
12,257
| | |
-3.0
|
%
|
Expense to revenue
| | |
23.0
|
%
| | |
26.8
|
%
| | | | |
25.4
|
%
| | |
25.4
|
%
| | |
|
R,D&E
| | |
1,457
| | | |
1,548
| | |
-5.9
|
%
| | |
2,958
| | | |
3,193
| | |
-7.3
|
%
|
Expense to revenue
| | |
6.0
|
%
| | |
6.2
|
%
| | | | |
6.3
|
%
| | |
6.6
|
%
| | |
|
Intellectual property
| | | | | | | | | | | | |
and custom development
| | | | | | | | | | | | |
income
| | |
(191
|
)
| | |
(247
|
)
| |
-22.7
|
%
| | |
(398
|
)
| | |
(430
|
)
| |
-7.5
|
%
|
|
Other (income)
| | | | | | | | | | | | |
and expense
| | |
(201
|
)
| | |
(91
|
)
| |
120.7
|
%
| | |
(326
|
)
| | |
(151
|
)
| |
115.7
|
%
|
|
Interest expense
| | |
136
| | | |
98
| | |
38.3
|
%
| | |
240
| | | |
192
| | |
25.3
|
%
|
| | | | | | | | | | | |
|
TOTAL EXPENSE AND
| | | | | | | | | | | | |
OTHER INCOME
| | |
6,804
| | | |
7,988
| | |
-14.8
|
%
| | |
14,367
| | | |
15,060
| | |
-4.6
|
%
|
Expense to revenue
| | |
27.9
|
%
| | |
32.0
|
%
| | | | |
30.7
|
%
| | |
31.2
|
%
| | |
| | | | | | | | | | | |
|
INCOME BEFORE
| | | | | | | | | | | | |
INCOME TAXES
| | |
5,171
| | | |
4,144
| | |
24.8
|
%
| | |
8,151
| | | |
7,750
| | |
5.2
|
%
|
Pre-tax margin
| | |
21.2
|
%
| | |
16.6
|
%
| | | | |
17.4
|
%
| | |
16.0
|
%
| | |
|
Provision for
| | | | | | | | | | | | |
income taxes
| | |
1,034
| | | |
918
| | |
12.7
|
%
| | |
1,630
| | | |
1,492
| | |
9.3
|
%
|
Effective tax
| | | | | | | | | | | | |
rate
| | |
20.0
|
%
| | |
22.1
|
%
| | | | |
20.0
|
%
| | |
19.2
|
%
| | |
| | | | | | | | | | | |
|
NET INCOME
| |
$
|
4,137
|
| |
$
|
3,226
|
| |
28.2
|
%
| |
$
|
6,521
|
| |
$
|
6,258
|
| |
4.2
|
%
|
Net income margin
| | |
17.0
|
%
| | |
12.9
|
%
| | | | |
13.9
|
%
| | |
12.9
|
%
| | |
| | | | | | | | | | | |
|
EARNINGS PER SHARE
| | | | | | | | | | | | |
OF COMMON STOCK:
| | | | | | | | | | | | |
ASSUMING DILUTION
| |
$
|
4.12
| | |
$
|
2.91
| | |
41.6
|
%
| |
$
|
6.37
| | |
$
|
5.60
| | |
13.8
|
%
|
BASIC
| |
$
|
4.14
| | |
$
|
2.93
| | |
41.3
|
%
| |
$
|
6.41
| | |
$
|
5.65
| | |
13.5
|
%
|
| | | | | | | | | | | |
|
WEIGHTED-AVERAGE NUMBER
| | | | | | | | | | | | |
OF COMMON SHARES OUT-
| | | | | | | | | | | | |
STANDING (M's):
| | | | | | | | | | | | |
ASSUMING DILUTION
| | |
1,005.1
| | | |
1,109.4
| | | | | |
1,023.5
| | | |
1,116.7
| | | |
BASIC
| | |
999.6
| | | |
1,100.9
| | | | | |
1,017.4
| | | |
1,107.3
| | | |
|
INTERNATIONAL BUSINESS MACHINES CORPORATION
|
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
|
(Unaudited)
|
|
|
|
At
|
|
At
|
(Dollars in Millions)
| |
June 30,
| |
December 31,
|
| |
2014
| |
2013
|
ASSETS:
| | | | |
| | | |
|
Current Assets:
| | | | |
Cash and cash equivalents
| |
$
|
9,715
| | |
$
|
10,716
| |
Marketable securities
| | |
5
| | | |
350
| |
Notes and accounts receivable - trade
| | | | |
(net of allowances of $294 in 2014 and $291 in 2013)
| | |
9,902
| | | |
10,465
| |
Short-term financing receivables
| | | | |
(net of allowances of $404 in 2014 and $308 in 2013)
| | |
18,620
| | | |
19,787
| |
Other accounts receivable
| | | | |
(net of allowances of $45 in 2014 and $36 in 2013)
| | |
1,555
| | | |
1,584
| |
Inventories, at lower of average cost or market:
| | | | |
Finished goods
| | |
449
| | | |
444
| |
Work in process and raw materials
| |
|
1,889
|
| |
|
1,866
|
|
Total inventories
| | |
2,338
| | | |
2,310
| |
Deferred taxes
| | |
1,783
| | | |
1,651
| |
Prepaid expenses and other current assets
| |
|
4,263
|
| |
|
4,488
|
|
Total Current Assets
| | |
48,182
| | | |
51,350
| |
| | | |
|
Property, plant and equipment
| | |
40,936
| | | |
40,475
| |
Less: Accumulated depreciation
| |
|
27,188
|
| |
|
26,654
|
|
Property, plant and equipment - net
| | |
13,748
| | | |
13,821
| |
Long-term financing receivables
| | | | |
(net of allowances of $68 in 2014 and $80 in 2013)
| | |
12,140
| | | |
12,755
| |
Prepaid pension assets
| | |
6,894
| | | |
5,551
| |
Deferred taxes
| | |
2,828
| | | |
3,051
| |
Goodwill
| | |
31,568
| | | |
31,184
| |
Intangible assets - net
| | |
3,585
| | | |
3,871
| |
Investments and sundry assets
| |
|
5,369
|
| |
|
4,639
|
|
Total Assets
| |
$
|
124,314
|
| |
$
|
126,223
|
|
LIABILITIES:
| | | | |
| | | |
|
Current Liabilities:
| | | | |
Taxes
| |
$
|
2,335
| | |
$
|
4,633
| |
Short-term debt
| | |
12,462
| | | |
6,862
| |
Accounts payable
| | |
6,271
| | | |
7,461
| |
Compensation and benefits
| | |
4,037
| | | |
3,893
| |
Deferred income
| | |
12,591
| | | |
12,557
| |
Other accrued expenses and liabilities
| |
|
4,737
|
| |
|
4,748
|
|
Total Current Liabilities
| | |
42,433
| | | |
40,154
| |
| | | |
|
Long-term debt
| | |
34,008
| | | |
32,856
| |
Retirement and nonpension postretirement
| | | | |
benefit obligations
| | |
15,984
| | | |
16,242
| |
Deferred income
| | |
4,152
| | | |
4,108
| |
Other liabilities
| |
|
10,224
|
| |
|
9,934
|
|
Total Liabilities
| | |
106,801
| | | |
103,294
| |
|
EQUITY:
| | | | |
|
IBM Stockholders' Equity:
| | | | |
Common stock
| | |
52,163
| | | |
51,594
| |
Retained earnings
| | |
134,483
| | | |
130,042
| |
Treasury stock -- at cost
| | |
(148,900
|
)
| | |
(137,242
|
)
|
Accumulated other comprehensive income/(loss)
| |
|
(20,369
|
)
| |
|
(21,602
|
)
|
Total IBM stockholders' equity
| | |
17,377
| | | |
22,792
| |
| | | |
|
Noncontrolling interests
| |
|
136
|
| |
|
137
|
|
Total Equity
| |
|
17,513
|
| |
|
22,929
|
|
Total Liabilities and Equity
| |
$
|
124,314
|
| |
$
|
126,223
|
|
|
INTERNATIONAL BUSINESS MACHINES CORPORATION
|
CASH FLOW ANALYSIS
|
(Unaudited)
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
(Dollars in Millions)
| |
June 30,
| |
June 30,
|
| |
2014
|
|
2013
| |
2014
|
|
2013
|
Net Cash from Operating Activities per GAAP:
| |
$
|
3,579
| | |
$
|
3,175
| | |
$
|
6,905
| | |
$
|
7,197
| |
| | | | | | | |
|
Less: the change in Global Financing (GF)
| | | | | | | | |
Receivables
| |
|
(304
|
)
| |
|
(450
|
)
| |
|
1,503
|
| |
|
1,147
|
|
Net Cash from Operating Activities
| | | | | | | | |
(Excluding GF Receivables)
| | |
3,883
| | | |
3,625
| | | |
5,402
| | | |
6,051
| |
|
Capital Expenditures, Net
| | |
(909
|
)
| | |
(939
|
)
| | |
(1,796
|
)
| | |
(1,668
|
)
|
| | | | | | | |
|
Free Cash Flow
| | | | | | | | |
(Excluding GF Receivables)
| | |
2,975
| | | |
2,686
| | | |
3,606
| | | |
4,382
| |
| | | | | | | |
|
Acquisitions
| | |
(339
|
)
| | |
(121
|
)
| | |
(603
|
)
| | |
(179
|
)
|
Divestitures
| | |
17
| | | |
2
| | | |
408
| | | |
12
| |
Dividends
| | |
(1,096
|
)
| | |
(1,048
|
)
| | |
(2,086
|
)
| | |
(1,996
|
)
|
Share Repurchase
| | |
(3,662
|
)
| | |
(3,552
|
)
| | |
(11,828
|
)
| | |
(6,145
|
)
|
Non-GF Debt
| | |
1,385
| | | |
922
| | | |
5,019
| | | |
205
| |
Other (includes GF Receivables, and
| | | | | | | | |
GF Debt)
| | |
738
| | | |
(524
|
)
| | |
4,140
| | | |
2,949
| |
| | | | | | | |
|
Change in Cash, Cash Equivalents and
| | | | | | | | |
Short-term Marketable Securities
| |
$
|
17
|
| |
|
($1,635
|
)
| |
|
($1,345
|
)
| |
|
($772
|
)
|
|
INTERNATIONAL BUSINESS MACHINES CORPORATION
|
SEGMENT DATA
|
(Unaudited)
|
|
|
|
SECOND-QUARTER 2014
|
| | |
| |
| |
|
Pre-tax
|
| |
(Dollars in Millions)
| |
Revenue
| |
Income/
| |
Pre-tax
|
| |
External
| |
Internal
| |
Total
| |
(Loss)
| |
Margin
|
SEGMENTS
| | | | | | | | | | |
| | | | | | | | | |
|
Global Technology Services
| |
$
|
9,414
| | |
$
|
247
| | |
$
|
9,661
| | |
$
|
1,850
| | |
19.2
|
%
|
Y-T-Y change
| | |
-1.3
|
%
| | |
-15.4
|
%
| | |
-1.7
|
%
| | |
22.2
|
%
| | |
| | | | | | | | | |
|
Global Business Services
| | |
4,534
| | | |
140
| | | |
4,674
| | | |
832
| | |
17.8
|
%
|
Y-T-Y change
| | |
-1.6
|
%
| | |
-25.6
|
%
| | |
-2.5
|
%
| | |
33.7
|
%
| | |
| | | | | | | | | |
|
Software
| | |
6,488
| | | |
857
| | | |
7,345
| | | |
2,683
| | |
36.5
|
%
|
Y-T-Y change
| | |
1.0
|
%
| | |
16.1
|
%
| | |
2.6
|
%
| | |
9.8
|
%
| | |
| | | | | | | | | |
|
Systems and Technology
| | |
3,331
| | | |
190
| | | |
3,521
| | | |
25
| | |
0.7
|
%
|
Y-T-Y change
| | |
-11.4
|
%
| | |
40.9
|
%
| | |
-9.5
|
%
| | |
117.9
|
%
| | |
|
Global Financing
| | |
504
| | | |
685
| | | |
1,189
| | | |
593
| | |
49.8
|
%
|
Y-T-Y change
| | |
3.5
|
%
| | |
19.2
|
%
| | |
12.0
|
%
| | |
7.7
|
%
| | |
| | | | | | | | | |
|
TOTAL REPORTABLE SEGMENTS
| |
$
|
24,271
| | |
$
|
2,119
| | |
$
|
26,390
| | |
$
|
5,983
| | |
22.7
|
%
|
Y-T-Y change
| | |
-2.2
|
%
| | |
9.9
|
%
| | |
-1.3
|
%
| | |
19.9
|
%
| | |
| | | | | | | | | |
|
Eliminations / Other
| | |
93
| | | |
(2,119
|
)
| | |
(2,026
|
)
| | |
(812
|
)
| | |
| | | | | | | | | |
|
TOTAL IBM CONSOLIDATED
| |
$
|
24,364
| | |
$
|
0
| | |
$
|
24,364
| | |
$
|
5,171
| | |
21.2
|
%
|
Y-T-Y change
| | |
-2.2
|
%
| | | | |
-2.2
|
%
| | |
24.8
|
%
| | |
|
|
| |
SECOND-QUARTER 2013
|
| | | | | | | |
Pre-tax
| | |
(Dollars in Millions)
| |
Revenue
| |
Income/
| |
Pre-tax
|
| |
External
| |
Internal
| |
Total
| |
(Loss)
| |
Margin
|
|
SEGMENTS
| | | | | | | | | | |
| | | | | | | | | |
|
Global Technology Services
| |
$
|
9,536
| | |
$
|
292
| | |
$
|
9,828
| | |
$
|
1,514
| | |
15.4
|
%
|
| | | | | | | | | |
|
Global Business Services
| | |
4,606
| | | |
188
| | | |
4,795
| | | |
623
| | |
13.0
|
%
|
|
Software
| | |
6,423
| | | |
738
| | | |
7,161
| | | |
2,443
| | |
34.1
|
%
|
| | | | | | | | | |
|
Systems and Technology
| | |
3,758
| | | |
135
| | | |
3,893
| | | |
(141
|
)
| |
-3.6
|
%
|
| | | | | | | | | |
|
Global Financing
| | |
487
| | | |
575
| | | |
1,061
| | | |
550
| | |
51.8
|
%
|
| | | | | | | | | |
|
TOTAL REPORTABLE SEGMENTS
| |
$
|
24,809
| | |
$
|
1,928
| | |
$
|
26,737
| | |
$
|
4,989
| | |
18.7
|
%
|
|
Eliminations / Other
| | |
115
| | | |
(1,928
|
)
| | |
(1,813
|
)
| | |
(846
|
)
| | |
| | | | | | | | | |
|
TOTAL IBM CONSOLIDATED
| |
$
|
24,924
| | |
$
|
0
| | |
$
|
24,924
| | |
$
|
4,144
| | |
16.6
|
%
|
|
INTERNATIONAL BUSINESS MACHINES CORPORATION
|
SEGMENT DATA
|
(Unaudited)
|
|
|
|
SIX-MONTHS 2014
|
| | |
| |
| |
|
Pre-tax
|
| |
(Dollars in Millions)
| |
Revenue
| |
Income/
| |
Pre-tax
|
| |
External
| |
Internal
| |
Total
| |
(Loss)
| |
Margin
|
SEGMENTS
| | | | | | | | | | |
| | | | | | | | | |
|
Global Technology Services
| |
$
|
18,744
| | |
$
|
488
| | |
$
|
19,232
| | |
$
|
3,196
| | |
16.6
|
%
|
Y-T-Y change
| | |
-2.1
|
%
| | |
-9.7
|
%
| | |
-2.3
|
%
| | |
3.1
|
%
| | |
| | | | | | | | | |
|
Global Business Services
| | |
9,017
| | | |
281
| | | |
9,298
| | | |
1,461
| | |
15.7
|
%
|
Y-T-Y change
| | |
-0.8
|
%
| | |
-23.7
|
%
| | |
-1.7
|
%
| | |
10.2
|
%
| | |
| | | | | | | | | |
|
Software
| | |
12,149
| | | |
1,789
| | | |
13,939
| | | |
4,601
| | |
33.0
|
%
|
Y-T-Y change
| | |
1.3
|
%
| | |
14.1
|
%
| | |
2.8
|
%
| | |
3.2
|
%
| | |
|
Systems and Technology
| | |
5,722
| | | |
358
| | | |
6,080
| | | |
(635
|
)
| |
-10.4
|
%
|
Y-T-Y change
| | |
-16.6
|
%
| | |
40.7
|
%
| | |
-14.6
|
%
| | |
-16.3
|
%
| | |
| | | | | | | | | |
|
Global Financing
| | |
1,016
| | | |
1,303
| | | |
2,318
| | | |
1,188
| | |
51.3
|
%
|
Y-T-Y change
| | |
3.1
|
%
| | |
16.7
|
%
| | |
10.3
|
%
| | |
9.2
|
%
| | |
| | | | | | | | | |
|
TOTAL REPORTABLE SEGMENTS
| |
$
|
46,648
| | |
$
|
4,218
| | |
$
|
50,866
| | |
$
|
9,812
| | |
19.3
|
%
|
Y-T-Y change
| | |
-3.0
|
%
| | |
9.7
|
%
| | |
-2.0
|
%
| | |
4.1
|
%
| | |
| | | | | | | | | |
|
Eliminations / Other
| | |
200
| | | |
(4,218
|
)
| | |
(4,018
|
)
| | |
(1,660
|
)
| | |
|
TOTAL IBM CONSOLIDATED
| |
$
|
46,848
| | |
$
|
0
| | |
$
|
46,848
| | |
$
|
8,151
| | |
17.4
|
%
|
Y-T-Y change
| | |
-3.1
|
%
| | | | |
-3.1
|
%
| | |
5.2
|
%
| | |
|
|
| |
SIX-MONTHS 2013
|
| | | | | | | |
Pre-tax
| | |
(Dollars in Millions)
| |
Revenue
| |
Income/
| |
Pre-tax
|
| |
External
| |
Internal
| |
Total
| |
(Loss)
| |
Margin
|
SEGMENTS
| | | | | | | | | | |
| | | | | | | | | |
|
Global Technology Services
| |
$
|
19,140
| | |
$
|
540
| | |
$
|
19,680
| | |
$
|
3,099
| | |
15.7
|
%
|
|
Global Business Services
| | |
9,091
| | | |
368
| | | |
9,459
| | | |
1,326
| | |
14.0
|
%
|
| | | | | | | | | |
|
Software
| | |
11,995
| | | |
1,569
| | | |
13,563
| | | |
4,457
| | |
32.9
|
%
|
| | | | | | | | | |
|
Systems and Technology
| | |
6,864
| | | |
255
| | | |
7,118
| | | |
(546
|
)
| |
-7.7
|
%
|
| | | | | | | | | |
|
Global Financing
| | |
985
| | | |
1,116
| | | |
2,101
| | | |
1,088
| | |
51.8
|
%
|
| | | | | | | | | |
|
TOTAL REPORTABLE SEGMENTS
| |
$
|
48,075
| | |
$
|
3,847
| | |
$
|
51,922
| | |
$
|
9,425
| | |
18.2
|
%
|
| | | | | | | | | |
|
Eliminations / Other
| | |
257
| | | |
(3,847
|
)
| | |
(3,590
|
)
| | |
(1,675
|
)
| | |
|
TOTAL IBM CONSOLIDATED
| |
$
|
48,332
| | |
$
|
0
| | |
$
|
48,332
| | |
$
|
7,750
| | |
16.0
|
%
|
|
INTERNATIONAL BUSINESS MACHINES CORPORATION
|
U.S. GAAP TO OPERATING RESULTS RECONCILIATION
|
(Unaudited; Dollars in millions except per share amounts)
|
|
|
|
SECOND-QUARTER 2014
|
| | |
|
Acquisition-
|
|
Retirement-
|
| |
| | | |
Related
| |
Related
| |
Operating
|
| |
GAAP
| |
Adjustments*
| |
Adjustments**
| |
(Non-GAAP)
|
Gross Profit
| |
$
|
11,975
| | |
$
|
105
| | |
$
|
45
| | |
$
|
12,126
| |
| | | | | | | |
|
Gross Profit Margin
| | |
49.1
|
%
| |
0.4Pts
| |
0.2Pts
| | |
49.8
|
%
|
| | | | | | | |
|
S,G&A
| | |
5,603
| | | |
(98
|
)
| | |
(27
|
)
| | |
5,478
| |
| | | | | | | |
|
R,D&E
| | |
1,457
| | | |
0
| | | |
20
| | | |
1,477
| |
| | | | | | | |
|
Other (Income) & Expense
| | |
(201
|
)
| | |
0
| | | |
0
| | | |
(201
|
)
|
|
Total Expense & Other (Income)
| | |
6,804
| | | |
(98
|
)
| | |
(7
|
)
| | |
6,699
| |
| | | | | | | |
|
Pre-Tax Income
| | |
5,171
| | | |
203
| | | |
52
| | | |
5,427
| |
| | | | | | | |
|
Pre-Tax Income Margin
| | |
21.2
|
%
| |
0.8Pts
| |
0.2Pts
| | |
22.3
|
%
|
| | | | | | | |
|
Provision for Income Taxes***
| | |
1,034
| | | |
41
| | | |
10
| | | |
1,085
| |
| | | | | | | |
|
Effective Tax Rate
| | |
20.0
|
%
| |
0.0Pts
| |
0.0Pts
| | |
20.0
|
%
|
| | | | | | | |
|
Net Income
| | |
4,137
| | | |
163
| | | |
42
| | | |
4,341
| |
| | | | | | | |
|
Net Income Margin
| | |
17.0
|
%
| |
0.7Pts
| |
0.2Pts
| | |
17.8
|
%
|
| | | | | | | |
|
Diluted Earnings Per Share
| |
$
|
4.12
| | |
$
|
0.16
| | |
$
|
0.04
| | |
$
|
4.32
| |
|
|
| |
SECOND-QUARTER 2013
|
| | | |
Acquisition-
| |
Retirement-
| | |
| | | |
Related
| |
Related
| |
Operating
|
| |
GAAP
| |
Adjustments*
| |
Adjustments**
| |
(Non-GAAP)
|
Gross Profit
| |
$
|
12,132
| | |
$
|
91
| | |
$
|
156
| | |
$
|
12,379
| |
| | | | | | | |
|
Gross Profit Margin
| | |
48.7
|
%
| |
0.4Pts
| |
0.6Pts
| | |
49.7
|
%
|
| | | | | | | |
|
S,G&A
| | |
6,680
| | | |
(91
|
)
| | |
(93
|
)
| | |
6,496
| |
| | | | | | | |
|
R,D&E
| | |
1,548
| | | |
0
| | | |
(13
|
)
| | |
1,535
| |
| | | | | | | |
|
Other (Income) & Expense
| | |
(91
|
)
| | |
0
| | | |
0
| | | |
(91
|
)
|
|
Total Expense & Other (Income)
| | |
7,988
| | | |
(91
|
)
| | |
(106
|
)
| | |
7,791
| |
| | | | | | | |
|
Pre-Tax Income
| | |
4,144
| | | |
182
| | | |
262
| | | |
4,588
| |
| | | | | | | |
|
Pre-Tax Income Margin
| | |
16.6
|
%
| |
0.7Pts
| |
1.1Pts
| | |
18.4
|
%
|
| | | | | | | |
|
Provision for Income Taxes***
| | |
918
| | | |
9
| | | |
82
| | | |
1,009
| |
| | | | | | | |
|
Effective Tax Rate
| | |
22.1
|
%
| |
-0.7Pts
| |
0.6Pts
| | |
22.0
|
%
|
| | | | | | | |
|
Net Income
| | |
3,226
| | | |
173
| | | |
180
| | | |
3,579
| |
| | | | | | | |
|
Net Income Margin
| | |
12.9
|
%
| |
0.7Pts
| |
0.7Pts
| | |
14.4
|
%
|
| | | | | | | |
|
Diluted Earnings Per Share
| |
$
|
2.91
| | |
$
|
0.15
| | |
$
|
0.16
| | |
$
|
3.22
| |
* Includes amortization of acquired intangible assets and other
acquisition-related charges.
** Includes retirement-related items
driven by changes to plan assets and liabilities primarily related to
market performance.
*** Tax impact on operating (non-GAAP) pre-tax
income is calculated under the same accounting principles applied to the
GAAP pre-tax income which employs an annual effective tax rate method to
the results.
|
INTERNATIONAL BUSINESS MACHINES CORPORATION
|
U.S. GAAP TO OPERATING RESULTS RECONCILIATION
|
(Unaudited; Dollars in millions except per share amounts)
|
|
|
|
SIX-MONTHS 2014
|
| | |
|
Acquisition-
|
|
Retirement-
|
| |
| | | |
Related
| |
Related
| |
Operating
|
| |
GAAP
| |
Adjustments*
| |
Adjustments**
| |
(Non-GAAP)
|
Gross Profit
| |
$
|
22,518
| | |
$
|
209
| | |
$
|
98
| | |
$
|
22,825
| |
| | | | | | | |
|
Gross Profit Margin
| | |
48.1
|
%
| |
0.4Pts
| |
0.2Pts
| | |
48.7
|
%
|
| | | | | | | |
|
S,G&A
| | |
11,892
| | | |
(196
|
)
| | |
(114
|
)
| | |
11,583
| |
| | | | | | | |
|
R,D&E
| | |
2,958
| | | |
0
| | | |
37
| | | |
2,995
| |
| | | | | | | |
|
Other (Income) & Expense
| | |
(326
|
)
| | |
0
| | | |
0
| | | |
(326
|
)
|
|
Total Expense & Other (Income)
| | |
14,367
| | | |
(196
|
)
| | |
(77
|
)
| | |
14,094
| |
| | | | | | | |
|
Pre-Tax Income
| | |
8,151
| | | |
405
| | | |
175
| | | |
8,731
| |
| | | | | | | |
|
Pre-Tax Income Margin
| | |
17.4
|
%
| |
0.9Pts
| |
0.4Pts
| | |
18.6
|
%
|
| | | | | | | |
|
Provision for Income Taxes***
| | |
1,630
| | | |
81
| | | |
35
| | | |
1,746
| |
| | | | | | | |
|
Effective Tax Rate
| | |
20.0
|
%
| |
0.0Pts
| |
0.0Pts
| | |
20.0
|
%
|
| | | | | | | |
|
Net Income
| | |
6,521
| | | |
324
| | | |
140
| | | |
6,985
| |
| | | | | | | |
|
Net Income Margin
| | |
13.9
|
%
| |
0.7Pts
| |
0.3Pts
| | |
14.9
|
%
|
| | | | | | | |
|
Diluted Earnings Per Share
| |
$
|
6.37
| | |
$
|
0.31
| | |
$
|
0.14
| | |
$
|
6.82
| |
|
|
| |
SIX-MONTHS 2013
|
| | | |
Acquisition-
| |
Retirement-
| | |
| | | |
Related
| |
Related
| |
Operating
|
| |
GAAP
| |
Adjustments*
| |
Adjustments**
| |
(Non-GAAP)
|
Gross Profit
| |
$
|
22,810
| | |
$
|
186
| | |
$
|
320
| | |
$
|
23,316
| |
| | | | | | | |
|
Gross Profit Margin
| | |
47.2
|
%
| |
0.4Pts
| |
0.7Pts
| | |
48.2
|
%
|
| | | | | | | |
|
S,G&A
| | |
12,257
| | | |
(183
|
)
| | |
(197
|
)
| | |
11,878
| |
| | | | | | | |
|
R,D&E
| | |
3,193
| | | |
0
| | | |
(29
|
)
| | |
3,163
| |
| | | | | | | |
|
Other (Income) & Expense
| | |
(151
|
)
| | |
(7
|
)
| | |
0
| | | |
(158
|
)
|
|
Total Expense & Other (Income)
| | |
15,060
| | | |
(190
|
)
| | |
(226
|
)
| | |
14,644
| |
| | | | | | | |
|
Pre-Tax Income
| | |
7,750
| | | |
376
| | | |
546
| | | |
8,672
| |
| | | | | | | |
|
Pre-Tax Income Margin
| | |
16.0
|
%
| |
0.8Pts
| |
1.1Pts
| | |
17.9
|
%
|
| | | | | | | |
|
Provision for Income Taxes***
| | |
1,492
| | | |
63
| | | |
162
| | | |
1,717
| |
| | | | | | | |
|
Effective Tax Rate
| | |
19.2
|
%
| |
-0.1Pts
| |
0.7Pts
| | |
19.8
|
%
|
| | | | | | | |
|
Net Income
| | |
6,258
| | | |
313
| | | |
384
| | | |
6,955
| |
| | | | | | | |
|
Net Income Margin
| | |
12.9
|
%
| |
0.6Pts
| |
0.8Pts
| | |
14.4
|
%
|
| | | | | | | |
|
Diluted Earnings Per Share
| |
$
|
5.60
| | |
$
|
0.28
| | |
$
|
0.35
| | |
$
|
6.23
| |
* Includes amortization of acquired intangible assets and other
acquisition-related charges.
** Includes retirement-related items
driven by changes to plan assets and liabilities primarily related to
market performance.
*** Tax impact on operating (non-GAAP) pre-tax
income is calculated under the same accounting principles applied to the
GAAP pre-tax income which employs an annual effective tax rate method to
the results.
Contacts:
IBM
Mike Fay, 914-525-8476
mikefay@us.ibm.com
or
John
Bukovinsky, 732-618-3531
jbuko@us.ibm.com
Source: IBM IBM
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