IBM Reports 2016 Second-Quarter Earnings

Continued Strong Growth in Strategic Imperatives Led by IBM Cloud

Highlights

  • Diluted EPS: GAAP of $2.61; Operating (non-GAAP) of $2.95
  • Revenue from continuing operations of $20.2 billion
  • Strategic imperatives revenue of $30.7 billion over the last 12 months represents 38 percent of IBM revenue

    - Strategic imperatives revenue of $8.3 billion in the quarter, up 12 percent year to year
  • Cloud revenue of $11.6 billion over the last 12 months

    - Cloud as-a-service annual run rate of $6.7 billion in the quarter, up 50 percent year to year

IBM Reports 2016 Second-Quarter Earnings

IBM

IBM (NYSE:IBM) today announced second-quarter 2016 earnings results.

"IBM continues to establish itself as the leading cognitive solutions and cloud platform company. In doing so, IBM is pioneering new business opportunities beyond the traditional IT marketplace," said Ginni Rometty, IBM chairman, president and chief executive officer. "In the second quarter we delivered double-digit revenue growth in our strategic imperatives, driven by innovations in areas such as analytics, security, cloud video services and Watson Health, all powered by the IBM Cloud and differentiated by industry. And we continue to invest for growth with recent breakthroughs in quantum computing, Internet of Things and Blockchain solutions for the IBM Cloud."

      SECOND-QUARTER 2016
       
Gross Profit
Diluted EPS     Net Income     Margin
 
GAAP from Continuing Operations $2.61 $2.5B 47.9%
Year/Year     -27%     -29%     -2.0Pts
 
Operating (Non-GAAP) $2.95 $2.8B 49.0%
Year/Year     -23%     -25%     -1.9Pts
 
Strategic
REVENUE     Total IBM     Imperatives     Cloud
 
As reported (US$) $20.2B $8.3B $3.4B
Year/Year -3% 12% 30%
 

“In the first half of 2016, we grew our R&D investment, closed 11 acquisitions for more than $5 billion and invested nearly $2 billion in capital expenditures, while returning more than $4 billion to shareholders through dividends and gross share repurchases,” said Martin Schroeter, IBM senior vice president and chief financial officer. “These investments are key in helping us build new markets and maintain our leadership in enterprise IT.”

Strategic Imperatives

Second-quarter revenues from the company’s strategic imperatives --- cloud, analytics and engagement --- increased 12 percent year to year. Cloud revenues (public, private and hybrid) for the quarter increased 30 percent. Cloud revenue over the trailing 12 months was $11.6 billion. The annual run rate for cloud as-a-service revenue --- a subset of total cloud revenue --- increased to $6.7 billion from $4.5 billion in the second quarter of 2015. Revenues from analytics increased 5 percent (up 4 percent adjusting for currency). Revenues from mobile increased 43 percent and from security increased 18 percent.

Full-Year 2016 Expectations

The company continues to expect operating (non-GAAP) diluted earnings per share of at least $13.50. This excludes $1.27 per share of charges for amortization of purchased intangible assets, other acquisition-related charges and retirement-related charges. As a result, GAAP diluted earnings per share are now expected to be at least $12.23.

There is no change to IBM's previously provided free cash flow guidance.

Cash Flow and Balance Sheet

The company generated net cash from operating activities of $3.4 billion; or $3.1 billion excluding Global Financing receivables. IBM’s free cash flow was $2.1 billion in the second quarter. IBM returned $1.3 billion in dividends and $0.8 billion of gross share repurchases to shareholders. At the end of June 2016, IBM had $3.9 billion remaining in the current share repurchase authorization.

IBM ended the second-quarter 2016 with $10.6 billion of cash on hand. Debt, including Global Financing debt of $26.5 billion, totaled $44.5 billion. Core (non-global financing) debt totaled $18.0 billion. The balance sheet remains strong and is well positioned to support the business over the long term.

Segment Results

  • Cognitive Solutions (includes solutions software and transaction processing software) -- revenues of $4.7 billion, up 3.5 percent (up 3.8 percent adjusting for currency). Cloud revenue within the segment grew 54 percent. Solutions software revenue grew, led by Analytics (including Watson) and Security.
  • Global Business Services (includes consulting, global process services, application management) -- revenues of $4.3 billion, down 2.0 percent (down 2.5 percent adjusting for currency). Strategic imperatives revenue within the segment was up 14 percent (up 13 percent adjusting for currency).
  • Technology Services & Cloud Platforms (includes infrastructure services, technical support services, integration software) -- revenues of $8.9 billion, down 0.5 percent (flat adjusting for currency). Growth of 35 percent in strategic imperatives revenue within the segment was driven by strong hybrid cloud infrastructure services performance.
  • Systems (includes systems hardware and operating systems software) -- revenues of $2.0 billion, down 23.2 percent (down 23.3 percent adjusting for currency). Revenue reflects z Systems product cycle dynamics; gross profit margin improved in both z Systems and Power.
  • Global Financing (includes financing and used equipment sales) -- revenues of $424 million, down 11.3 percent (down 10.0 percent adjusting for currency).

Year-To-Date 2016 Results

Diluted earnings per share from continuing operations were $4.69, down 22 percent compared to the 2015 period. Net income from continuing operations for the six months ended June 30, 2016 was $4.5 billion compared with $5.9 billion in the year-ago period, a decrease of 24 percent.

Consolidated net income was $4.5 billion compared to $5.8 billion in the year-ago period. Consolidated diluted earnings per share were $4.69 compared to $5.84, down 20 percent year to year. Revenues from continuing operations for the six-month period totaled $38.9 billion, a decrease of 4 percent (down 2 percent year to year, adjusting for currency) compared with $40.4 billion for the first six months of 2015.

Operating (non-GAAP) diluted earnings per share from continuing operations were $5.30 compared with $6.75 per diluted share for the 2015 period, a decrease of 21 percent. Operating (non-GAAP) net income from continuing operations for the six months ended June 30, 2016 was $5.1 billion compared with $6.7 billion in the year-ago period, a decrease of 24 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 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. EDT, today. The Webcast may be accessed via a link at http://www.ibm.com/investor/events/earnings/2q16.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,
   
2016   2015* 2016   2015*
 
REVENUE
Cognitive Solutions $4,675 $4,516 $8,654 $8,564
Global Business Services 4,255 4,345 8,387 8,663
Technology Services & Cloud Platforms 8,857 8,898 17,280 17,452
Systems 1,950 2,541 3,626 4,683
Global Financing 424 478 834 939
Other 76   35 142   102
TOTAL REVENUE 20,238 20,813 38,923 40,403
 
GROSS PROFIT 9,702 10,390 18,388 19,842
 
GROSS PROFIT MARGIN
Cognitive Solutions 82.2% 85.7% 82.1% 85.1%
Global Business Services 26.3% 27.4% 26.1% 27.4%
Technology Services & Cloud Platforms 41.6% 42.2% 41.3% 42.1%
Systems 56.5% 56.5% 56.9% 55.7%
Global Financing 38.7% 44.7% 40.5% 47.1%
 
TOTAL GROSS PROFIT MARGIN 47.9% 49.9% 47.2% 49.1%
 
 
EXPENSE AND OTHER INCOME
S,G&A 5,349 5,179 11,361 10,541
 
R,D&E 1,465 1,300 2,923 2,598
 
Intellectual property and
custom development income (365) (128) (582) (301)
 
Other (income) and expense 37 (301) 289 (444)
 
Interest expense 167 115 315 223
           
TOTAL EXPENSE AND OTHER INCOME 6,653 6,165 14,306 12,617
 
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 3,049 4,224 4,082 7,225
Pre-tax margin 15.1% 20.3% 10.5% 17.9%
 
Provision for / (Benefit) from income taxes 544 698 (439) 1,283
Effective tax rate 17.8% 16.5% (10.8%) 17.8%
 
INCOME FROM CONTINUING OPERATIONS $2,505 $3,526 $4,521 $5,942
 
DISCONTINUED OPERATIONS
Loss from discontinued operations, net of taxes 0   (77) (3)   (165)
 
NET INCOME $2,504   $3,449 $4,518   $5,777
 
 
EARNINGS PER SHARE OF COMMON STOCK:
Assuming Dilution
Continuing Operations $2.61 $3.58 $4.69 $6.01
Discontinued Operations $0.00   ($0.08) $0.00   ($0.17)
TOTAL $2.61   $3.50 $4.69   $5.84
 
Basic
Continuing Operations $2.62 $3.59 $4.71 $6.03
Discontinued Operations $0.00   ($0.08) $0.00   ($0.17)
TOTAL $2.62   $3.51 $4.71   $5.86
 
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (M's):
Assuming Dilution 960.5 986.7 962.4 989.5
Basic 957.4 982.3 959.5 985.2
 
*Recast to conform with 2016 segment presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
 
  At   At
(Dollars in Millions) June 30, December 31,
2016 2015
ASSETS:  
 
Current Assets:
Cash and cash equivalents $10,017 $7,686
Marketable securities 600 508
Notes and accounts receivable - trade, net 8,782 8,333
Short-term financing receivables, net 16,635 19,020
Other accounts receivable, net 1,130 1,201
Inventory 1,685 1,551
Prepaid expenses and other current assets 4,676 4,205
     
Total Current Assets 43,524 42,504
 
Property, plant and equipment, net 11,092 10,727
Long-term financing receivables, net 9,267 10,013
Prepaid pension assets 2,957 1,734
Deferred taxes 4,387 4,822
Goodwill and intangibles, net 41,570 35,508
Investments and sundry assets 5,259 5,187
     
Total Assets   $118,056 $110,495
 
 
LIABILITIES:
 
Current Liabilities:
Taxes $2,275 $2,847
Short-term debt 4,887 6,461
Accounts payable 5,484 6,028
Deferred income 11,508 11,021
Other liabilities 9,430 7,913
     
Total Current Liabilities 33,585 34,269
 
Long-term debt 39,638 33,428
Retirement related obligations 16,723 16,504
Deferred income 3,837 3,771
Other liabilities 8,385 8,099
     
Total Liabilities 102,167 96,071
 
 
EQUITY:
 
IBM Stockholders' Equity:
Common stock 53,565 53,262
Retained earnings 148,071 146,124
Treasury stock -- at cost (157,298) (155,518)
Accumulated other comprehensive income/(loss) (28,604) (29,607)
     
Total IBM stockholders' equity 15,733 14,262
 
Noncontrolling interests 156 162
     
Total Equity 15,889 14,424
     
Total Liabilities and Equity   $118,056 $110,495
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW ANALYSIS
(Unaudited)
 
  Three Months Ended   Six Months Ended
(Dollars in Millions) June 30 June 30
   
2016 2015 2016 2015
 
Net Cash Provided by Operating Activities per GAAP: $3,443 $3,884 $9,088 $7,494
 
Less: change in Global Financing (GF)
Receivables 334 (392) 2,713 1,214
Capital Expenditures, Net (979) (906) (1,949) (1,830)
 
Free Cash Flow 2,130 3,369 4,426 4,450
 
Acquisitions (2,815) (560) (5,405) (708)
Divestitures (12) 61 35 81
Dividends (1,340) (1,278) (2,590) (2,366)
Share Repurchase (836) (1,138) (1,775) (2,303)
Non-GF Debt (810) 30 5,061 391
Other (includes GF Receivables, and GF Debt) (570) (528) 2,670 739
 
Change in Cash, Cash Equivalents and
Short-term Marketable Securities ($4,253)   ($43) $2,421 $284
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW
(Unaudited)
 
  Three Months Ended   Six Months Ended
(Dollars in Millions) June 30 June 30
   
2016 2015 2016 2015
 
Net Income from Operations $2,504 $3,449 $4,518 $5,777
Depreciation/Amortization of Intangibles 1,103 961 2,127 1,930
Stock-based Compensation 128 131 261 257
Working Capital / Other (626) (302) (531) (1,721)
Global Financing A/R 334 (392) 2,713 1,214
Loss on Microelectronics Business Disposal 0 37 0 37
Net Cash Provided by Operating Activities $3,443 $3,884 $9,088 $7,494
Capital Expenditures, net of payments & proceeds (979) (906) (1,949) (1,830)
Divestitures, net of cash transferred (12) 61 35 81
Acquisitions, net of cash acquired (2,815) (560) (5,405) (708)
Marketable Securities / Other Investments, net (717) (526) 769 1,086
Net Cash Used in Investing Activities ($4,522) ($1,931) ($6,550) ($1,371)
Debt, net of payments & proceeds (1,035) (212) 3,929 (1,522)
Dividends (1,340) (1,278) (2,590) (2,366)
Common Stock Repurchases (836) (1,138) (1,775) (2,303)
Common Stock Transactions - Other 55 59 115 221
Net Cash Used in Financing Activities ($3,156) ($2,568) ($322) ($5,970)
Effect of Exchange Rate changes on Cash (103) 213 114 (236)
Net Change in Cash & Cash Equivalents ($4,338) ($402) $2,330 ($83)
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
 
  SECOND - QUARTER 2016
Cognitive Solutions &      
Industry Services
  Technology
Global Services &
(Dollars in Millions) Cognitive Business Cloud Global
Solutions   Services   Platforms   Systems   Financing
Revenue
External $4,675 $4,255 $8,857 $1,950 $424
Internal 594   103   156   206   502
Total Segment Revenue $5,269 $4,359 $9,013 $2,156 $926
 
Pre-tax Income / (Loss) from Continuing Operations 1,451 476 1,279 229 467
 
Pre-tax margin 27.5% 10.9% 14.2% 10.6% 50.5%
 
 
Change YTY Revenue - External 3.5% (2.0)% (0.5)% (23.2)% (11.3)%
Change YTY Revenue - External @constant currency 3.8% (2.5)% 0.0% (23.3)% (10.0)%
 
 
SECOND - QUARTER 2015*
Cognitive Solutions &
Industry Services
Technology
Global Services &
(Dollars in Millions) Cognitive Business Cloud Global
Solutions   Services   Platforms   Systems   Financing
Revenue
External $4,516 $4,345 $8,898 $2,541 $478
Internal 532   130   173   189   704
Total Segment Revenue $5,049 $4,475 $9,071 $2,730 $1,182
 
Pre-tax Income / (Loss) from Continuing Operations 1,825 643 1,414 538 613
 
Pre-tax margin 36.1% 14.4% 15.6% 19.7% 51.9%
 
*Recast to conform with 2016 segment presentation.
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
 
  SIX - MONTHS 2016
Cognitive Solutions &      
Industry Services
  Technology
Global Services &
(Dollars in Millions) Cognitive Business Cloud Global
Solutions   Services   Platforms   Systems   Financing
Revenue
External $8,654 $8,387 $17,280 $3,626 $834
Internal 1,262   216   321   418   988
Total Segment Revenue $9,916 $8,603 $17,602 $4,044 $1,822
 
Pre-tax Income / (Loss) from Continuing Operations 2,465 665 1,537 218 853
 
Pre-tax margin 24.9% 7.7% 8.7% 5.4% 46.8%
 
 
Change YTY Revenue - External 1.1% (3.2)% (1.0)% (22.6)% (11.2)%
Change YTY Revenue - External @constant currency 2.2% (2.4)% 0.9% (22.1)% (8.2)%
 
 
SIX - MONTHS 2015*
Cognitive Solutions &
Industry Services
Technology
Global Services &
(Dollars in Millions) Cognitive Business Cloud Global
Solutions   Services   Platforms   Systems   Financing
Revenue
External $8,564 $8,663 $17,452 $4,683 $939
Internal 1,167   261   339   362   1,290
Total Segment Revenue $9,731 $8,923 $17,791 $5,044 $2,229
 
Pre-tax Income / (Loss) from Continuing Operations 3,353 1,231 2,544 800 1,128
 
Pre-tax margin 34.5% 13.8% 14.3% 15.9% 50.6%
 
*Recast to conform with 2016 segment presentation.
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; Dollars in millions except per share amounts)
 
SECOND - QUARTER 2016
CONTINUING OPERATIONS
  Acquisition-   Retirement-  
Related Related Operating
GAAP   Adjustments*   Adjustments**   (Non-GAAP)
 
Gross Profit $9,702 $129 $81 $9,912
 
Gross Profit Margin 47.9% 0.6Pts 0.4Pts 49.0%
 
S,G&A 5,349 (159) (75) 5,114
 
R,D&E 1,465 - (7) 1,458
 
Other (Income) & Expense 37 - - 37
 
Total Expense & Other (Income) 6,653 (159) (83) 6,411
 
Pre-tax Income from Continuing Operations 3,049 289 163 3,501
 
Pre-tax Income Margin from Continuing Operations 15.1% 1.4Pts 0.8Pts 17.3%
 
Provision for Income Taxes*** 544 82 39 665
 
Effective Tax Rate 17.8% 0.9Pts 0.3Pts 19.0%
 
Income from Continuing Operations 2,505 207 124 2,835
 
Income Margin from Continuing Operations 12.4% 1.0Pts 0.6Pts 14.0%
 
Diluted Earnings Per Share: Continuing Operations $2.61 $0.21 $0.13 $2.95
 
SECOND - QUARTER 2015
CONTINUING OPERATIONS
Acquisition- Retirement-
Related Related Operating
GAAP   Adjustments*   Adjustments**   (Non-GAAP)
 
Gross Profit $10,390 $88 $112 $10,590
 
Gross Profit Margin 49.9% 0.4Pts 0.5Pts 50.9%
 
S,G&A 5,179 (74) (63) 5,042
 
R,D&E 1,300 - (11) 1,289
 
Other (Income) & Expense (301) (5) - (306)
 
Total Expense & Other (Income) 6,165 (80) (74) 6,012
 
Pre-tax Income from Continuing Operations 4,224 168 186 4,578
 
Pre-tax Income Margin from Continuing Operations 20.3% 0.8Pts 0.9Pts 22.0%
 
Provision for Income Taxes*** 698 28 61 788
 
Effective Tax Rate 16.5% 0.0Pts 0.7Pts 17.2%
 
Income from Continuing Operations 3,526 140 124 3,790
 
Income Margin from Continuing Operations 16.9% 0.7Pts 0.6Pts 18.2%
 
Diluted Earnings Per Share: Continuing Operations $3.58 $0.14 $0.12 $3.84

*

 

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)
 
SIX - MONTHS 2016
  CONTINUING OPERATIONS
  Acquisition-   Retirement-  
Related Related Operating
GAAP   Adjustments*   Adjustments**   (Non-GAAP)
 
Gross Profit $18,388 $241 $160 $18,789
 
Gross Profit Margin 47.2% 0.6Pts 0.4Pts 48.3%
 
S,G&A 11,361 (227) (130) 11,004
 
R,D&E 2,923 - (16) 2,907
 
Other (Income) & Expense 289 (6) - 284
 
Total Expense & Other (Income) 14,306 (232) (146) 13,928
 
Pre-tax Income from Continuing Operations 4,082 473 306 4,861
 
Pre-tax Income Margin from Continuing Operations 10.5% 1.2Pts 0.8Pts 12.5%
 
Provision for / (Benefit) from Income Taxes*** (439) 129 66 (244)
 
Effective Tax Rate (10.8)% 3.9Pts 2.3Pts (5.0)%
 
Income from Continuing Operations 4,521 345 239 5,105
 
Income Margin from Continuing Operations 11.6% 0.9Pts 0.6Pts 13.1%
 
Diluted Earnings Per Share: Continuing Operations $4.69 $0.36 $0.25 $5.30
 
 
SIX - MONTHS 2015
CONTINUING OPERATIONS
Acquisition- Retirement-
Related Related Operating
GAAP   Adjustments*   Adjustments**   (Non-GAAP)
 
Gross Profit $19,842 $179 $233 $20,253
 
Gross Profit Margin 49.1% 0.4Pts 0.6Pts 50.1%
 
S,G&A 10,541 (154) (371) 10,017
 
R,D&E 2,598 - (24) 2,574
 
Other (Income) & Expense (444) (5) - (450)
 
Total Expense & Other (Income) 12,617 (159) (395) 12,063
 
Pre-Tax Income from Continuing Operations 7,225 338 627 8,190
 
Pre-tax Income Margin from Continuing Operations 17.9% 0.8Pts 1.6Pts 20.3%
 
Provision for Income Taxes*** 1,283 56 170 1,510
 
Effective Tax Rate 17.8% 0.0Pts 0.7Pts 18.4%
 
Income from Continuing Operations 5,942 281 457 6,680
 
Income Margin from Continuing Operations 14.7% 0.7Pts 1.1Pts 16.5%
 
Diluted Earnings Per Share: Continuing Operations $6.01 $0.28 $0.46 $6.75

*

 

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
RECONCILIATION OF OPERATING EARNINGS PER SHARE
 
            2016

EPS Guidance

Expectations

 
IBM GAAP EPS at least $12.23
 
IBM Operating EPS (non-GAAP) at least $13.50
 
 
 
Adjustments
 
Acquisition related charges * $0.84
 
Non-Operating Retirement-Related Items $0.43
 
* Includes acquisitions through June 30, 2016

IBM
Ian Colley, 914-434-3043
colley@us.ibm.com
or
John Bukovinsky, 732-618-3531
jbuko@us.ibm.com

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