IBM Reports 2019 Second-Quarter Results
Growth in Software, Consulting and Cloud Revenue; Continued Margin Expansion
Highlights
Second Quarter:
- GAAP EPS from continuing operations of $2.81
- Operating (non-GAAP) EPS of $3.17
- Revenue of $19.2 billion, down 4.2 percent (down 1.6 percent adjusting for currency)
-
Revenue growth in Cloud & Cognitive Software, and Global Business Services segments
-- Cloud & Cognitive Software up 3.2 percent (up 5.4 percent adjusting for currency)
-- Global Business Services up 0.5 percent (up 3.4 percent adjusting for currency) - Cloud revenue of $19.5 billion over the last 12 months, up 5 percent (up 8 percent adjusting for currency)
- Gross profit margin up 100 basis points; largest year-to-year expansion in more than 5 years
- Net cash from operating activities of $16.1 billion over the last 12 months; free cash flow of $12.7 billion over the last 12 months
- Through the second quarter, on track to achieve full-year 2019 EPS and free cash flow expectations excluding impact of Red Hat acquisition
Full-Year Expectations Update:
- Company to update full-year 2019 expectations, including the impact of Red Hat acquisition, on August 2
- Continues to expect Red Hat, including related activity, to be accretive to free cash flow in the first year, and accretive to operating (non-GAAP) earnings per share by the end of the second year after closing, as previously stated
IBM Reports 2019 Second-Quarter Results
IBM
Â
IBM (NYSE:IBM) today announced second-quarter results.
“In the second quarter, we continued to grow in the high-value areas of the business, led by a strong performance across our Cloud and Cognitive Software segment,†said Ginni Rometty, IBM chairman, president and chief executive officer. “With the completion of our acquisition of Red Hat, we will provide the only true open hybrid multicloud platform in the industry, strengthening our leadership position and uniquely helping clients succeed in chapter 2 of their digital reinventions.â€
 |
SECOND QUARTER 2019 |
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 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Pre-tax |
 |
Gross |
 |
 |
Diluted |
 |
Net |
 |
Pre-tax |
 |
Income |
 |
Profit |
 |
|||
 |
EPS |
 |
Income |
 |
Income |
 |
Margin |
 |
Margin |
 |
|||
GAAP from Continuing Operations |
$ |
2.81 |
 |
$ |
2.5B |
 |
$ |
2.8B |
 |
14.4 |
% |
47.0 |
% |
Year/Year |
 |
8 |
% |
 |
4 |
% |
 |
0 |
% |
0.6 |
Pts |
1.0 |
Pts |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Operating (Non-GAAP) |
$ |
3.17 |
 |
$ |
2.8B |
 |
$ |
3.2B |
 |
16.6 |
% |
47.4 |
% |
Year/Year |
 |
3 |
% |
 |
0 |
% |
 |
(6) |
% |
(0.3) |
Pts |
1.0 |
Pts |
“We maintained our momentum in the second quarter, again expanding gross profit margin and growing free cash flow, driven to a great extent by our increasing mix of high-value offerings for clients,†said James Kavanaugh, IBM senior vice president and chief financial officer. “On August 2, we will discuss how the acquisition of Red Hat will accelerate IBM's revenue growth, contribute to our high-value model and enhance our free cash flow generation going forward.â€
Cash Flow and Balance Sheet
In the second quarter, the company generated net cash from operating activities of $2.9 billion, or $2.8 billion, excluding Global Financing receivables. IBM’s free cash flow was $2.4 billion. IBM returned $1.8 billion to shareholders through $1.4 billion in dividends and $0.3 billion in gross share repurchases. The company suspended its share repurchase program on July 9.
IBM ended the second quarter with $46.4 billion of cash on hand, of which approximately $34 billion was used in July to close the acquisition of Red Hat. Debt totaled $73.0 billion, including Global Financing debt of $25.0 billion.
Segment Results for Second Quarter
- Cloud & Cognitive Software (includes cloud and data platforms, cognitive applications and transaction processing platforms) --revenues of $5.6 billion, up 3.2 percent (up 5.4 percent adjusting for currency), with growth in cloud and data platforms, up 5 percent (up 7 percent adjusting for currency); cognitive applications, up 3 percent (up 5 percent adjusting for currency); and transaction processing platforms, up 2 percent (up 4 percent adjusting for currency).
- Global Business Services (includes consulting, application management and global process services) -- revenues of $4.2 billion, up 0.5 percent (up 3.4 percent adjusting for currency), with broad-based strength led by growth in consulting, up 2 percent (up 5 percent adjusting for currency).
- Global Technology Services (includes infrastructure and cloud services and technology support services) -- revenues of $6.8 billion, down 6.7 percent (down 3.5 percent adjusting for currency). Gross profit margin increased 120 basis points.
- Systems (includes systems hardware and operating systems software) -- revenues of $1.8 billion, down 19.5 percent (down 18.0 percent adjusting for currency), with growth in Power, more than offset by the impact of product cycle dynamics in IBM Z and Storage.
- Global Financing (includes financing and used equipment sales) -- revenues of $351 million, down 11.0 percent (down 8.5 percent adjusting for currency), reflects the wind-down of OEM commercial financing.
Full-Year 2019 Expectations
Through the second quarter, IBM remains on track to achieve GAAP diluted earnings per share of at least $12.45, operating (non-GAAP) diluted earnings per share of at least $13.90 and free cash flow of approximately $12 billion, all excluding the impact of Red Hat and related activity. Operating (non-GAAP) diluted earnings per share expectations exclude $1.45 per share of charges for amortization of purchased intangible assets and other acquisition-related charges, including pre-closing charges, such as financing costs associated with the Red Hat acquisition; retirement-related charges; and tax reform enactment impacts. It does not include any other amounts for Red Hat or Red Hat related activity. The company will provide an update to these full-year expectations (including GAAP EPS expectations) on August 2, 2019 to reflect the addition of the recently-closed Red Hat acquisition. IBM continues to expect Red Hat, including related activity, to be accretive to free cash flow in the first year; accretive to operating (non-GAAP) earnings per share by the end of the second year after closing; and dilutive to full-year 2019 earnings per share due primarily to a non-cash purchase accounting adjustment.
Year-To-Date 2019 Results
Consolidated diluted earnings per share was $4.58 compared to $4.43, up 3 percent year to year. Consolidated net income was $4.1 billion, flat year to year. Revenues for the six-month period ended June 30, 2019 totaled $37.3 billion, a decrease of 4 percent year to year (down 1 percent adjusting for currency) compared with $39.1 billion for the first six months of 2018.
Operating (non-GAAP) diluted earnings per share from continuing operations was $5.42 compared with $5.53 per diluted share for the 2018 period, a decrease of 2 percent. Operating (non-GAAP) net income for the six months ended June 30, 2019 was $4.8 billion compared with $5.1 billion in the prior-year period, a decrease of 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, but not limited to, 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; damage to the company’s reputation; 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 employees 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, including integration challenges, failure to achieve objectives, the assumption of liabilities, and higher debt levels; legal proceedings and investigatory risks; 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. Except as required by law, 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;
- net cash from operating activities, excluding Global Financing receivables;
- 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/2q19.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, |
 |
 |
||||||||||||
 |
 |
2019 |
 |
2018 |
 |
 |
 |
2019 |
 |
2018 |
 |
 |
||||||||
REVENUE |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Cloud & Cognitive Software |
 |
$ |
5,645 |
 |
 |
$ |
5,470 |
 |
 |
* |
 |
$ |
10,682 |
 |
 |
$ |
10,586 |
 |
 |
* |
Global Business Services |
 |
 |
4,155 |
 |
 |
 |
4,135 |
 |
 |
* |
 |
 |
8,274 |
 |
 |
 |
8,250 |
 |
 |
* |
Global Technology Services |
 |
 |
6,837 |
 |
 |
 |
7,325 |
 |
 |
* |
 |
 |
13,711 |
 |
 |
 |
14,746 |
 |
 |
* |
Systems |
 |
 |
1,753 |
 |
 |
 |
2,177 |
 |
 |
 |
 |
 |
3,081 |
 |
 |
 |
3,676 |
 |
 |
 |
Global Financing |
 |
 |
351 |
 |
 |
 |
394 |
 |
 |
 |
 |
 |
757 |
 |
 |
 |
799 |
 |
 |
 |
Other |
 |
 |
420 |
 |
 |
 |
503 |
 |
 |
* |
 |
 |
837 |
 |
 |
 |
1,017 |
 |
 |
* |
TOTAL REVENUE |
 |
 |
19,161 |
 |
 |
 |
20,003 |
 |
 |
 |
 |
 |
37,342 |
 |
 |
 |
39,075 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
GROSS PROFIT |
 |
 |
9,010 |
 |
 |
 |
9,199 |
 |
 |
 |
 |
 |
17,053 |
 |
 |
 |
17,445 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
GROSS PROFIT MARGIN |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Cloud & Cognitive Software |
 |
 |
77.3 |
 |
% |
 |
77.7 |
 |
% |
* |
 |
 |
76.3 |
 |
% |
 |
77.1 |
 |
% |
* |
Global Business Services |
 |
 |
26.0 |
 |
% |
 |
26.0 |
 |
% |
* |
 |
 |
26.1 |
 |
% |
 |
24.7 |
 |
% |
* |
Global Technology Services |
 |
 |
34.4 |
 |
% |
 |
33.2 |
 |
% |
* |
 |
 |
34.1 |
 |
% |
 |
32.9 |
 |
% |
* |
Systems |
 |
 |
53.5 |
 |
% |
 |
50.6 |
 |
% |
 |
 |
 |
50.3 |
 |
% |
 |
47.8 |
 |
% |
 |
Global Financing |
 |
 |
35.0 |
 |
% |
 |
26.6 |
 |
% |
 |
 |
 |
34.9 |
 |
% |
 |
30.6 |
 |
% |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
TOTAL GROSS PROFIT MARGIN |
 |
 |
47.0 |
 |
% |
 |
46.0 |
 |
% |
 |
 |
 |
45.7 |
 |
% |
 |
44.6 |
 |
% |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
EXPENSE AND OTHER INCOME |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
S,G&A |
 |
 |
5,456 |
 |
 |
 |
4,857 |
 |
 |
 |
 |
 |
10,147 |
 |
 |
 |
10,302 |
 |
 |
 |
R,D&E |
 |
 |
1,407 |
 |
 |
 |
1,364 |
 |
 |
 |
 |
 |
2,840 |
 |
 |
 |
2,769 |
 |
 |
 |
Intellectual property and custom development income |
 |
 |
(222 |
) |
 |
 |
(250 |
) |
 |
 |
 |
 |
(323 |
) |
 |
 |
(567 |
) |
 |
 |
Other (income) and expense |
 |
 |
(747 |
) |
 |
 |
280 |
 |
 |
 |
 |
 |
(820 |
) |
 |
 |
692 |
 |
 |
 |
Interest expense |
 |
 |
348 |
 |
 |
 |
173 |
 |
 |
 |
 |
 |
558 |
 |
 |
 |
338 |
 |
 |
 |
TOTAL EXPENSE AND OTHER INCOME |
 |
 |
6,242 |
 |
 |
 |
6,423 |
 |
 |
 |
 |
 |
12,402 |
 |
 |
 |
13,534 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
INCOME FROM CONTINUING OPERATIONS |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
BEFORE INCOME TAXES |
 |
 |
2,768 |
 |
 |
 |
2,776 |
 |
 |
 |
 |
 |
4,651 |
 |
 |
 |
3,911 |
 |
 |
 |
Pre-tax margin |
 |
 |
14.4 |
 |
% |
 |
13.9 |
 |
% |
 |
 |
 |
12.5 |
 |
% |
 |
10.0 |
 |
% |
 |
Provision for / (Benefit from) income taxes |
 |
 |
269 |
 |
 |
 |
373 |
 |
 |
 |
 |
 |
558 |
 |
 |
 |
(166 |
) |
 |
 |
Effective tax rate |
 |
 |
9.7 |
 |
% |
 |
13.5 |
 |
% |
 |
 |
 |
12.0 |
 |
% |
 |
(4.3 |
) |
% |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
INCOME FROM CONTINUING OPERATIONS |
 |
$ |
2,499 |
 |
 |
$ |
2,402 |
 |
 |
 |
 |
$ |
4,093 |
 |
 |
$ |
4,078 |
 |
 |
 |
DISCONTINUED OPERATIONS |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Income / (Loss) from discontinued operations, net of taxes |
 |
 |
(1 |
) |
 |
 |
1 |
 |
 |
 |
 |
 |
(4 |
) |
 |
 |
5 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
NET INCOME |
 |
$ |
2,498 |
 |
 |
$ |
2,404 |
 |
 |
 |
 |
$ |
4,089 |
 |
 |
$ |
4,083 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
EARNINGS / (LOSS) PER SHARE OF COMMON STOCK |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Assuming Dilution |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Continuing Operations |
 |
$ |
2.81 |
 |
 |
$ |
2.61 |
 |
 |
 |
 |
$ |
4.58 |
 |
 |
$ |
4.42 |
 |
 |
 |
Discontinued Operations |
 |
$ |
0.00 |
 |
 |
$ |
0.00 |
 |
 |
 |
 |
$ |
0.00 |
 |
 |
$ |
0.01 |
 |
 |
 |
TOTAL |
 |
$ |
2.81 |
 |
 |
$ |
2.61 |
 |
 |
 |
 |
$ |
4.58 |
 |
 |
$ |
4.43 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Basic |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Continuing Operations |
 |
$ |
2.82 |
 |
 |
$ |
2.63 |
 |
 |
 |
 |
$ |
4.61 |
 |
 |
$ |
4.44 |
 |
 |
 |
Discontinued Operations |
 |
$ |
0.00 |
 |
 |
$ |
0.00 |
 |
 |
 |
 |
$ |
0.00 |
 |
 |
$ |
0.01 |
 |
 |
 |
TOTAL |
 |
$ |
2.82 |
 |
 |
$ |
2.63 |
 |
 |
 |
 |
$ |
4.61 |
 |
 |
$ |
4.45 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (M’s) |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Assuming Dilution |
 |
 |
890.8 |
 |
 |
 |
919.4 |
 |
 |
 |
 |
 |
892.4 |
 |
 |
 |
922.4 |
 |
 |
 |
Basic |
 |
 |
886.3 |
 |
 |
 |
915.1 |
 |
 |
 |
 |
 |
887.9 |
 |
 |
 |
917.9 |
 |
 |
 |
_________________________________
|
||||||||||||||||||||
INTERNATIONAL BUSINESS MACHINES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) |
||||||||
 |
||||||||
 |
 |
At |
 |
At |
||||
 |
 |
June 30, |
 |
December 31, |
||||
(Dollars in Millions) |
 |
2019 |
 |
2018 |
||||
ASSETS: |
 |
 |
 |
 |
 |
 |
||
 |
 |
 |
 |
 |
 |
 |
||
Current Assets: |
 |
 |
 |
 |
 |
 |
||
Cash and cash equivalents |
 |
$ |
45,399 |
 |
 |
$ |
11,379 |
 |
Restricted cash |
 |
 |
135 |
 |
 |
 |
225 |
 |
Marketable securities |
 |
 |
874 |
 |
 |
 |
618 |
 |
Notes and accounts receivable - trade, net |
 |
 |
7,414 |
 |
 |
 |
7,432 |
 |
Short-term financing receivables, net |
 |
 |
15,543 |
 |
 |
 |
22,388 |
 |
Other accounts receivable, net |
 |
 |
1,781 |
 |
 |
 |
743 |
 |
Inventories |
 |
 |
1,745 |
 |
 |
 |
1,682 |
 |
Deferred costs |
 |
 |
2,217 |
 |
 |
 |
2,300 |
 |
Prepaid expenses and other current assets |
 |
 |
2,409 |
 |
 |
 |
2,378 |
 |
Total Current Assets |
 |
 |
77,517 |
 |
 |
 |
49,146 |
 |
 |
 |
 |
 |
 |
 |
 |
||
Property, plant and equipment, net |
 |
 |
10,202 |
 |
 |
 |
10,792 |
 |
Operating right-of-use assets, net* |
 |
 |
4,998 |
 |
 |
 |
— |
|
Long-term financing receivables, net |
 |
 |
8,441 |
 |
 |
 |
9,148 |
 |
Prepaid pension assets |
 |
 |
5,319 |
 |
 |
 |
4,666 |
 |
Deferred costs |
 |
 |
2,662 |
 |
 |
 |
2,676 |
 |
Deferred taxes |
 |
 |
5,274 |
 |
 |
 |
5,216 |
 |
Goodwill and intangibles, net |
 |
 |
38,011 |
 |
 |
 |
39,353 |
 |
Investments and sundry assets |
 |
 |
2,228 |
 |
 |
 |
2,386 |
 |
Total Assets |
 |
$ |
154,652 |
 |
 |
$ |
123,382 |
 |
 |
 |
 |
 |
 |
 |
 |
||
LIABILITIES: |
 |
 |
 |
 |
 |
 |
||
 |
 |
 |
 |
 |
 |
 |
||
Current Liabilities: |
 |
 |
 |
 |
 |
 |
||
Taxes |
 |
$ |
2,439 |
 |
 |
$ |
3,046 |
 |
Short-term debt |
 |
 |
14,594 |
 |
 |
 |
10,207 |
 |
Accounts payable |
 |
 |
4,724 |
 |
 |
 |
6,558 |
 |
Deferred income |
 |
 |
11,261 |
 |
 |
 |
11,165 |
 |
Operating lease liabilities* |
 |
 |
1,319 |
 |
 |
 |
— |
|
Other liabilities |
 |
 |
8,014 |
 |
 |
 |
7,251 |
 |
Total Current Liabilities |
 |
 |
42,351 |
 |
 |
 |
38,227 |
 |
 |
 |
 |
 |
 |
 |
 |
||
Long-term debt |
 |
 |
58,445 |
 |
 |
 |
35,605 |
 |
Retirement related obligations |
 |
 |
16,471 |
 |
 |
 |
17,002 |
 |
Deferred income |
 |
 |
3,474 |
 |
 |
 |
3,445 |
 |
Operating lease liabilities* |
 |
 |
3,946 |
 |
 |
 |
— |
|
Other liabilities |
 |
 |
12,190 |
 |
 |
 |
12,174 |
 |
Total Liabilities |
 |
 |
136,876 |
 |
 |
 |
106,452 |
 |
 |
 |
 |
 |
 |
 |
 |
||
EQUITY: |
 |
 |
 |
 |
 |
 |
||
 |
 |
 |
 |
 |
 |
 |
||
IBM Stockholders’ Equity: |
 |
 |
 |
 |
 |
 |
||
Common stock |
 |
 |
55,404 |
 |
 |
 |
55,151 |
 |
Retained earnings |
 |
 |
160,467 |
 |
 |
 |
159,206 |
 |
Treasury stock — at cost |
 |
 |
(169,385 |
) |
 |
 |
(168,071 |
) |
Accumulated other comprehensive income/(loss) |
 |
 |
(28,841 |
) |
 |
 |
(29,490 |
) |
Total IBM Stockholders’ Equity |
 |
 |
17,645 |
 |
 |
 |
16,796 |
 |
 |
 |
 |
 |
 |
 |
 |
||
Noncontrolling interests |
 |
 |
131 |
 |
 |
 |
134 |
 |
Total Equity |
 |
 |
17,776 |
 |
 |
 |
16,929 |
 |
 |
 |
 |
 |
 |
 |
 |
||
Total Liabilities and Equity |
 |
$ |
154,652 |
 |
 |
$ |
123,382 |
 |
________________________
|
||||||||
INTERNATIONAL BUSINESS MACHINES CORPORATION CASH FLOW ANALYSIS (Unaudited) |
||||||||||||||||
 |
||||||||||||||||
 |
 |
Three Months Ended |
 |
Six Months Ended |
||||||||||||
 |
 |
June 30, |
 |
June 30, |
||||||||||||
(Dollars in Millions) |
 |
2019 |
 |
2018 |
 |
2019 |
 |
2018 |
||||||||
Net Cash Provided by Operating Activities per GAAP: |
 |
$ |
2,941 |
 |
 |
$ |
2,295 |
 |
 |
$ |
7,700 |
 |
 |
$ |
6,896 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Less: change in Global Financing (GF) Receivables |
 |
 |
119 |
 |
 |
 |
(582 |
) |
 |
 |
2,577 |
 |
 |
 |
1,778 |
 |
Capital Expenditures, Net |
 |
 |
(431 |
) |
 |
 |
(1,004 |
) |
 |
 |
(1,045 |
) |
 |
 |
(1,897 |
) |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Free Cash Flow |
 |
 |
2,391 |
 |
 |
 |
1,873 |
 |
 |
 |
4,078 |
 |
 |
 |
3,221 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Acquisitions |
 |
 |
(42 |
) |
 |
 |
(51 |
) |
 |
 |
(43 |
) |
 |
 |
(122 |
) |
Divestitures |
 |
 |
855 |
 |
 |
 |
— |
 |
 |
888 |
 |
 |
 |
— |
||
Dividends |
 |
 |
(1,435 |
) |
 |
 |
(1,437 |
) |
 |
 |
(2,833 |
) |
 |
 |
(2,819 |
) |
Share Repurchase |
 |
 |
(316 |
) |
 |
 |
(989 |
) |
 |
 |
(1,236 |
) |
 |
 |
(1,767 |
) |
Non-GF Debt |
 |
 |
27,509 |
 |
 |
 |
(65 |
) |
 |
 |
33,399 |
 |
 |
 |
(611 |
) |
Other (includes GF Net Receivables and GF Debt) |
 |
 |
(698 |
) |
 |
 |
(559 |
) |
 |
 |
(68 |
) |
 |
 |
1,182 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Change in Cash, Cash Equivalents, Restricted Cash and Short-term Marketable Securities |
 |
$ |
28,264 |
 |
 |
$ |
(1,229 |
) |
 |
$ |
34,186 |
 |
 |
$ |
(916 |
) |
INTERNATIONAL BUSINESS MACHINES CORPORATION CASH FLOW (Unaudited) |
||||||||||||||||
 |
||||||||||||||||
 |
 |
Three Months Ended |
 |
Six Months Ended |
||||||||||||
 |
 |
June 30, |
 |
June 30, |
||||||||||||
(Dollars in Millions) |
 |
2019 |
 |
2018 |
 |
2019 |
 |
2018 |
||||||||
Net Income from Operations |
 |
$ |
2,498 |
 |
 |
$ |
2,404 |
 |
 |
$ |
4,089 |
 |
 |
$ |
4,083 |
 |
Depreciation/Amortization of Intangibles |
 |
 |
1,294 |
 |
 |
 |
1,116 |
 |
 |
 |
2,740 |
 |
 |
 |
2,230 |
 |
Stock-based Compensation |
 |
 |
135 |
 |
 |
 |
125 |
 |
 |
 |
248 |
 |
 |
 |
242 |
 |
Working Capital / Other |
 |
 |
(1,106 |
) |
 |
 |
(768 |
) |
 |
 |
(1,954 |
) |
 |
 |
(1,436 |
) |
Global Financing A/R |
 |
 |
119 |
 |
 |
 |
(582 |
) |
 |
 |
2,577 |
 |
 |
 |
1,778 |
 |
Net Cash Provided by Operating Activities |
 |
$ |
2,941 |
 |
 |
$ |
2,295 |
 |
 |
$ |
7,700 |
 |
 |
$ |
6,896 |
 |
Capital Expenditures, net of payments & proceeds |
 |
 |
(431 |
) |
 |
 |
(1,004 |
) |
 |
 |
(1,045 |
) |
 |
 |
(1,897 |
) |
Divestitures, net of cash transferred |
 |
 |
855 |
 |
 |
 |
— |
 |
 |
888 |
 |
 |
 |
— |
||
Acquisitions, net of cash acquired |
 |
 |
(42 |
) |
 |
 |
(51 |
) |
 |
 |
(43 |
) |
 |
 |
(122 |
) |
Marketable Securities / Other Investments, net |
 |
 |
3,779 |
 |
 |
 |
420 |
 |
 |
 |
3,509 |
 |
 |
 |
(380 |
) |
Net Cash Provided by / (Used in) Investing Activities |
 |
$ |
4,162 |
 |
 |
$ |
(634 |
) |
 |
$ |
3,309 |
 |
 |
$ |
(2,399 |
) |
Debt, net of payments & proceeds |
 |
 |
22,841 |
 |
 |
 |
(37 |
) |
 |
 |
27,073 |
 |
 |
 |
(751 |
) |
Dividends |
 |
 |
(1,435 |
) |
 |
 |
(1,437 |
) |
 |
 |
(2,833 |
) |
 |
 |
(2,819 |
) |
Common Stock Repurchases |
 |
 |
(316 |
) |
 |
 |
(989 |
) |
 |
 |
(1,236 |
) |
 |
 |
(1,767 |
) |
Common Stock Transactions – Other |
 |
 |
(59 |
) |
 |
 |
(55 |
) |
 |
 |
(111 |
) |
 |
 |
(91 |
) |
Net Cash Provided by / (Used in) Financing Activities |
 |
$ |
21,031 |
 |
 |
$ |
(2,519 |
) |
 |
$ |
22,894 |
 |
 |
$ |
(5,428 |
) |
Effect of Exchange Rate changes on Cash |
 |
 |
129 |
 |
 |
 |
(444 |
) |
 |
 |
27 |
 |
 |
 |
(344 |
) |
Net Change in Cash, Cash Equivalents and Restricted Cash |
 |
$ |
28,263 |
 |
 |
$ |
(1,302 |
) |
 |
$ |
33,930 |
 |
 |
$ |
(1,274 |
) |
INTERNATIONAL BUSINESS MACHINES CORPORATION SEGMENT DATA (Unaudited) |
|||||||||||||||||||
 |
|||||||||||||||||||
 |
 |
SECOND - QUARTER 2019 |
 |
||||||||||||||||
 |
 |
Cloud & |
 |
Global |
 |
Global |
 |
 |
 |
 |
 |
 |
 |
||||||
 |
 |
Cognitive |
 |
Business |
 |
Technology |
 |
 |
 |
 |
Global |
 |
|||||||
(Dollars in Millions) |
 |
Software |
 |
Services |
 |
Services |
 |
Systems |
 |
Financing |
 |
||||||||
Revenue |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||
External |
 |
$ |
5,645 |
 |
$ |
4,155 |
 |
$ |
6,837 |
 |
 |
$ |
1,753 |
 |
 |
$ |
351 |
 |
 |
Internal |
 |
 |
607 |
 |
 |
69 |
 |
 |
302 |
 |
 |
 |
171 |
 |
 |
 |
281 |
 |
 |
Total Segment Revenue |
 |
$ |
6,252 |
 |
$ |
4,224 |
 |
$ |
7,139 |
 |
 |
$ |
1,924 |
 |
 |
$ |
632 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||
Pre-tax Income / (Loss) from Continuing Operations |
 |
 |
2,001 |
 |
 |
300 |
 |
 |
235 |
 |
 |
 |
61 |
 |
 |
 |
239 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||
Pre-tax margin |
 |
 |
32.0 |
% |
 |
7.1 |
% |
 |
3.3 |
 |
% |
 |
3.2 |
 |
% |
 |
37.8 |
 |
% |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||
Change YTY Revenue – External |
 |
 |
3.2 |
% |
 |
0.5 |
% |
 |
(6.7 |
) |
% |
 |
(19.5 |
) |
% |
 |
(11.0 |
) |
% |
Change YTY Revenue - External @constant currency |
 |
 |
5.4 |
% |
 |
3.4 |
% |
 |
(3.5 |
) |
% |
 |
(18.0 |
) |
% |
 |
(8.5 |
) |
% |
 |
 |
SECOND - QUARTER 2018 |
 |
|||||||||||||
 |
 |
Cloud & |
 |
Global |
 |
Global |
 |
 |
 |
 |
 |
 |
 |
|||
 |
 |
Cognitive |
 |
Business |
 |
Technology |
 |
 |
 |
 |
Global |
 |
||||
(Dollars in Millions) |
 |
Software* |
 |
Services* |
 |
Services* |
 |
Systems |
 |
Financing |
 |
|||||
Revenue |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
External |
 |
$ |
5,470 |
 |
$ |
4,135 |
 |
$ |
7,325 |
 |
$ |
2,177 |
 |
$ |
394 |
 |
Internal |
 |
 |
811 |
 |
 |
83 |
 |
 |
169 |
 |
 |
242 |
 |
 |
473 |
 |
Total Segment Revenue |
 |
$ |
6,280 |
 |
$ |
4,218 |
 |
$ |
7,494 |
 |
$ |
2,419 |
 |
$ |
867 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Pre-tax Income / (Loss) from Continuing Operations |
 |
 |
2,029 |
 |
 |
372 |
 |
 |
451 |
 |
 |
346 |
 |
 |
357 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Pre-tax margin |
 |
 |
32.3 |
% |
 |
8.8 |
% |
 |
6.0 |
% |
 |
14.3 |
% |
 |
41.2 |
% |
______________________
|
||||||||||||||||
INTERNATIONAL BUSINESS MACHINES CORPORATION SEGMENT DATA (Unaudited) |
|||||||||||||||||||
 |
 |
SIX MONTHS 2019 |
 |
||||||||||||||||
 |
 |
Cloud & |
 |
Global |
 |
Global |
 |
 |
 |
 |
 |
 |
 |
||||||
 |
 |
Cognitive |
 |
Business |
 |
Technology |
 |
 |
 |
 |
Global |
 |
|||||||
(Dollars in Millions) |
 |
Software |
 |
Services |
 |
Services |
 |
Systems |
 |
Financing |
 |
||||||||
Revenue |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||
External |
 |
$ |
10,682 |
 |
$ |
8,274 |
 |
$ |
13,711 |
 |
 |
$ |
3,081 |
 |
 |
$ |
757 |
 |
 |
Internal |
 |
 |
1,448 |
 |
 |
143 |
 |
 |
591 |
 |
 |
 |
334 |
 |
 |
 |
581 |
 |
 |
Total Segment Revenue |
 |
$ |
12,131 |
 |
$ |
8,417 |
 |
$ |
14,303 |
 |
 |
$ |
3,415 |
 |
 |
$ |
1,338 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||
Pre-tax Income / (Loss) from Continuing Operations |
 |
 |
3,768 |
 |
 |
615 |
 |
 |
510 |
 |
 |
 |
(141 |
) |
 |
 |
527 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||
Pre-tax margin |
 |
 |
31.1 |
% |
 |
7.3 |
% |
 |
3.6 |
 |
% |
 |
(4.1 |
) |
% |
 |
39.4 |
 |
% |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||
Change YTY Revenue – External |
 |
 |
0.9 |
% |
 |
0.3 |
% |
 |
(7.0 |
) |
% |
 |
(16.2 |
) |
% |
 |
(5.3 |
) |
% |
Change YTY Revenue - External @constant currency |
 |
 |
3.6 |
% |
 |
3.9 |
% |
 |
(3.3 |
) |
% |
 |
(14.2 |
) |
% |
 |
(2.2 |
) |
% |
 |
 |
SIX MONTHS 2018 |
 |
|||||||||||||
 |
 |
Cloud & |
 |
Global |
 |
Global |
 |
 |
 |
 |
 |
 |
 |
|||
 |
 |
Cognitive |
 |
Business |
 |
Technology |
 |
 |
 |
 |
Global |
 |
||||
(Dollars in Millions) |
 |
Software* |
 |
Services* |
 |
Services* |
 |
Systems |
 |
Financing |
 |
|||||
Revenue |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
External |
 |
$ |
10,586 |
 |
$ |
8,250 |
 |
$ |
14,746 |
 |
$ |
3,676 |
 |
$ |
799 |
 |
Internal |
 |
 |
1,741 |
 |
 |
172 |
 |
 |
310 |
 |
 |
395 |
 |
 |
902 |
 |
Total Segment Revenue |
 |
$ |
12,327 |
 |
$ |
8,422 |
 |
$ |
15,055 |
 |
$ |
4,072 |
 |
$ |
1,701 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Pre-tax Income / (Loss) from Continuing Operations |
 |
 |
3,709 |
 |
 |
497 |
 |
 |
517 |
 |
 |
143 |
 |
 |
734 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Pre-tax margin |
 |
 |
30.1 |
% |
 |
5.9 |
% |
 |
3.4 |
% |
 |
3.5 |
% |
 |
43.1 |
% |
___________________
|
||||||||||||||||
INTERNATIONAL BUSINESS MACHINES CORPORATION U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION (Unaudited; Dollars in millions except per share amounts) |
|||||||||||||||||||||
 |
|||||||||||||||||||||
 |
 |
SECOND - QUARTER 2019 |
 |
||||||||||||||||||
 |
 |
CONTINUING OPERATIONS |
 |
||||||||||||||||||
 |
 |
 |
 |
 |
Acquisition- |
 |
Retirement- |
 |
Tax |
 |
 |
 |
 |
||||||||
 |
 |
 |
 |
 |
Related |
 |
Related |
 |
Reform |
 |
Operating |
 |
|||||||||
 |
 |
GAAP |
 |
Adjustments* |
 |
Adjustments** |
 |
Impacts |
 |
(Non-GAAP) |
 |
||||||||||
Gross Profit |
 |
$ |
9,010 |
 |
 |
$ |
73 |
 |
 |
 |
— |
 |
 |
— |
 |
$ |
9,083 |
 |
 |
||
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||||
Gross Profit Margin |
 |
 |
47.0 |
 |
% |
 |
0.4 |
 |
Pts |
 |
— |
 |
 |
— |
 |
 |
47.4 |
 |
% |
||
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||||
S,G&A |
 |
 |
5,456 |
 |
 |
 |
(149 |
) |
 |
 |
— |
 |
 |
— |
 |
 |
5,307 |
 |
 |
||
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||||
R,D&E |
 |
 |
1,407 |
 |
 |
 |
— |
 |
 |
— |
 |
 |
— |
 |
 |
1,407 |
 |
 |
|||
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||||
Other (Income) & Expense |
 |
 |
(747 |
) |
 |
 |
119 |
 |
 |
 |
(136 |
) |
 |
 |
— |
 |
 |
(764 |
) |
 |
|
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||||
Interest Expense |
 |
 |
348 |
 |
 |
 |
(168 |
) |
 |
 |
— |
 |
 |
— |
 |
 |
180 |
 |
 |
||
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||||
Total Expense & Other (Income) |
 |
 |
6,242 |
 |
 |
 |
(198 |
) |
 |
 |
(136 |
) |
 |
 |
— |
 |
 |
5,907 |
 |
 |
|
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||||
Pre-tax Income from Continuing Operations |
 |
 |
2,768 |
 |
 |
 |
272 |
 |
 |
 |
136 |
 |
 |
 |
— |
 |
 |
3,176 |
 |
 |
|
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||||
Pre-tax Income Margin from Continuing Operations |
 |
 |
14.4 |
 |
% |
 |
1.4 |
 |
Pts |
 |
0.7 |
 |
Pts |
 |
— |
 |
 |
16.6 |
 |
% |
|
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||||
Provision for Income Taxes*** |
 |
 |
269 |
 |
 |
 |
55 |
 |
 |
 |
40 |
 |
 |
 |
(14 |
) |
 |
 |
349 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||||
Effective Tax Rate |
 |
 |
9.7 |
 |
% |
 |
0.9 |
 |
Pts |
 |
0.8 |
 |
Pts |
 |
(0.4 |
) |
Pts |
 |
11.0 |
 |
% |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||||
Income from Continuing Operations |
 |
 |
2,499 |
 |
 |
 |
217 |
 |
 |
 |
97 |
 |
 |
 |
14 |
 |
 |
 |
2,827 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||||
Income Margin from Continuing Operations |
 |
 |
13.0 |
 |
% |
 |
1.1 |
 |
Pts |
 |
0.5 |
 |
Pts |
 |
0.1 |
 |
Pts |
 |
14.8 |
 |
% |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|||||
Diluted Earnings / (Loss) Per Share: Continuing Operations |
 |
$ |
2.81 |
 |
 |
$ |
0.24 |
 |
 |
$ |
0.11 |
 |
 |
$ |
0.01 |
 |
 |
$ |
3.17 |
 |
 |
 |
 |
SECOND - QUARTER 2018 |
 |
|||||||||||||||||
 |
 |
CONTINUING OPERATIONS |
 |
|||||||||||||||||
 |
 |
 |
 |
 |
Acquisition- |
 |
Retirement- |
 |
Tax |
 |
 |
 |
 |
|||||||
 |
 |
 |
 |
 |
Related |
 |
Related |
 |
Reform |
 |
Operating |
 |
||||||||
 |
 |
GAAP |
 |
Adjustments* |
 |
Adjustments** |
 |
Impacts |
 |
(Non-GAAP) |
 |
|||||||||
Gross Profit |
 |
$ |
9,199 |
 |
$ |
94 |
 |
 |
 |
— |
 |
 |
— |
 |
$ |
9,292 |
 |
 |
||
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Gross Profit Margin |
 |
 |
46.0 |
% |
 |
0.5 |
 |
Pts |
 |
— |
 |
 |
— |
 |
 |
46.5 |
 |
% |
||
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
S,G&A |
 |
 |
4,857 |
 |
 |
(110 |
) |
 |
 |
— |
 |
 |
— |
 |
 |
4,746 |
 |
 |
||
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
R,D&E |
 |
 |
1,364 |
 |
 |
— |
 |
 |
— |
 |
 |
— |
 |
 |
1,364 |
 |
 |
|||
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Other (Income) & Expense |
 |
 |
280 |
 |
 |
— |
 |
 |
(394 |
) |
 |
 |
— |
 |
 |
(115 |
) |
 |
||
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Interest Expense |
 |
 |
173 |
 |
 |
— |
 |
 |
— |
 |
 |
— |
 |
 |
173 |
 |
 |
|||
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Total Expense & Other (Income) |
 |
 |
6,423 |
 |
 |
(110 |
) |
 |
 |
(394 |
) |
 |
 |
— |
 |
 |
5,918 |
 |
 |
|
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Pre-tax Income from Continuing Operations |
 |
 |
2,776 |
 |
 |
204 |
 |
 |
 |
394 |
 |
 |
 |
— |
 |
 |
3,374 |
 |
 |
|
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Pre-tax Income Margin from Continuing Operations |
 |
 |
13.9 |
% |
 |
1.0 |
 |
Pts |
 |
2.0 |
 |
Pts |
 |
— |
 |
 |
16.9 |
 |
% |
|
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Provision for Income Taxes*** |
 |
 |
373 |
 |
 |
44 |
 |
 |
 |
109 |
 |
 |
 |
14 |
 |
 |
 |
540 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Effective Tax Rate |
 |
 |
13.5 |
% |
 |
0.5 |
 |
Pts |
 |
1.6 |
 |
Pts |
 |
0.4 |
 |
Pts |
 |
16.0 |
 |
% |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Income from Continuing Operations |
 |
 |
2,402 |
 |
 |
160 |
 |
 |
 |
286 |
 |
 |
 |
(14 |
) |
 |
 |
2,834 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Income Margin from Continuing Operations |
 |
 |
12.0 |
% |
 |
0.8 |
 |
Pts |
 |
1.4 |
 |
Pts |
 |
(0.1 |
) |
Pts |
 |
14.2 |
 |
% |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
||||
Diluted Earnings / (Loss) Per Share: Continuing Operations |
 |
$ |
2.61 |
 |
$ |
0.17 |
 |
 |
$ |
0.31 |
 |
 |
$ |
(0.01 |
) |
 |
$ |
3.08 |
 |
 |
| ______________________________ |
* Includes amortization of purchased intangible assets, in process R&D, transaction costs, applicable restructuring and related expenses, tax charges related to acquisition integration and pre-closing charges, such as financing costs. |
** Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs. |
*** 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 2019 |
 |
|||||||||||||
 |
 |
CONTINUING OPERATIONS |
 |
|||||||||||||
 |
 |
 |
 |
 |
Acquisition- |
 |
Retirement- |
 |
Tax |
 |
 |
 |
 |
|||
 |
 |
 |
 |
 |
Related |
 |
Related |
 |
Reform |
 |
Operating |
 |
||||
 |
 |
GAAP |
 |
Adjustments* |
 |
Adjustments** |
 |
Impacts |
 |
(Non-GAAP) |
 |
|||||
Gross Profit |
 |
$ |
17,053 |
 |
$ |
149 |
 |
 |
— |
 |
 |
— |
 |
$ |
17,202 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Gross Profit Margin |
 |
 |
45.7 |
% |
 |
0.4 |
Pts |
 |
— |
 |
 |
— |
 |
 |
46.1 |
% |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
S,G&A |
 |
 |
10,147 |
 |
 |
(273) |
 |
 |
— |
 |
 |
— |
 |
 |
9,873 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
R,D&E |
 |
 |
2,840 |
 |
 |
— |
 |
 |
— |
 |
 |
— |
 |
 |
2,840 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Other (Income) & Expense |
 |
 |
(820) |
 |
 |
142 |
 |
 |
(274) |
 |
 |
— |
 |
 |
(951) |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Interest Expense |
 |
 |
558 |
 |
 |
(204) |
 |
 |
— |
 |
 |
— |
 |
 |
354 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Total Expense & Other (Income) |
 |
 |
12,402 |
 |
 |
(335) |
 |
 |
(274) |
 |
 |
— |
 |
 |
11,793 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Pre-tax Income from Continuing Operations |
 |
 |
4,651 |
 |
 |
484 |
 |
 |
274 |
 |
 |
— |
 |
 |
5,409 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Pre-tax Income Margin from Continuing Operations |
 |
 |
12.5 |
% |
 |
1.3 |
Pts |
 |
0.7 |
Pts |
 |
— |
 |
 |
14.5 |
% |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Provision for / (Benefit from) Income Taxes*** |
 |
 |
558 |
 |
 |
104 |
 |
 |
66 |
 |
 |
(155) |
 |
 |
574 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Effective Tax Rate |
 |
 |
12.0 |
% |
 |
0.8 |
Pts |
 |
0.6 |
Pts |
 |
(2.9) |
Pts |
 |
10.6 |
% |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Income from Continuing Operations |
 |
 |
4,093 |
 |
 |
381 |
 |
 |
208 |
 |
 |
155 |
 |
 |
4,836 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Income Margin from Continuing Operations |
 |
 |
11.0 |
% |
 |
1.0 |
Pts |
 |
0.6 |
Pts |
 |
0.4 |
Pts |
 |
13.0 |
% |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Diluted Earnings / (Loss) Per Share: Continuing Operations |
 |
$ |
4.58 |
 |
$ |
0.44 |
 |
$ |
0.23 |
 |
$ |
0.17 |
 |
$ |
5.42 |
 |
 |
 |
SIX MONTHS 2018 |
 |
|||||||||||||
 |
 |
CONTINUING OPERATIONS |
 |
|||||||||||||
 |
 |
 |
 |
 |
Acquisition- |
 |
Retirement- |
 |
Tax |
 |
 |
 |
 |
|||
 |
 |
 |
 |
 |
Related |
 |
Related |
 |
Reform |
 |
Operating |
 |
||||
 |
 |
GAAP |
 |
Adjustments* |
 |
Adjustments** |
 |
Impacts |
 |
(Non-GAAP) |
 |
|||||
Gross Profit |
 |
$ |
17,445 |
 |
$ |
187 |
 |
 |
— |
 |
 |
— |
 |
$ |
17,633 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Gross Profit Margin |
 |
 |
44.6 |
% |
 |
0.5 |
Pts |
 |
— |
 |
 |
— |
 |
 |
45.1 |
% |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
S,G&A |
 |
 |
10,302 |
 |
 |
(220) |
 |
 |
— |
 |
 |
— |
 |
 |
10,082 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
R,D&E |
 |
 |
2,769 |
 |
 |
— |
 |
 |
— |
 |
 |
— |
 |
 |
2,769 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Other (Income) & Expense |
 |
 |
692 |
 |
 |
— |
 |
 |
(796) |
 |
 |
— |
 |
 |
(104) |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Interest Expense |
 |
 |
338 |
 |
 |
— |
 |
 |
— |
 |
 |
— |
 |
 |
338 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Total Expense & Other (Income) |
 |
 |
13,534 |
 |
 |
(220) |
 |
 |
(796) |
 |
 |
— |
 |
 |
12,518 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Pre-tax Income from Continuing Operations |
 |
 |
3,911 |
 |
 |
407 |
 |
 |
796 |
 |
 |
— |
 |
 |
5,114 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Pre-tax Income Margin from Continuing Operations |
 |
 |
10.0 |
% |
 |
1.0 |
Pts |
 |
2.0 |
Pts |
 |
— |
 |
 |
13.1 |
% |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Provision for / (Benefit from) Income Taxes*** |
 |
 |
(166) |
 |
 |
83 |
 |
 |
185 |
 |
 |
(93) |
 |
 |
8 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Effective Tax Rate |
 |
 |
(4.3) |
% |
 |
2.0 |
Pts |
 |
4.3 |
Pts |
 |
(1.8) |
Pts |
 |
0.2 |
% |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Income from Continuing Operations |
 |
 |
4,078 |
 |
 |
324 |
 |
 |
611 |
 |
 |
93 |
 |
 |
5,106 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Income Margin from Continuing Operations |
 |
 |
10.4 |
% |
 |
0.8 |
Pts |
 |
1.6 |
Pts |
 |
0.2 |
Pts |
 |
13.1 |
% |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Diluted Earnings / (Loss) Per Share: Continuing Operations |
 |
$ |
4.42 |
 |
$ |
0.35 |
 |
$ |
0.66 |
 |
$ |
0.10 |
 |
$ |
5.53 |
 |
| ____________________________ |
* Includes amortization of purchased intangible assets, in process R&D, transaction costs, applicable restructuring and related expenses, tax charges related to acquisition integration and pre-closing charges, such as financing costs. |
** Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs. |
*** 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 NON – GAAP RECONCILIATION (Unaudited) |
|||
EPS expectations (GAAP and Operating (non-GAAP)) will be updated on August 2 to include the impact of the Red Hat acquisition. |
|||
 |
 |
 |
|
2019 Full Year Expectations (through second-quarter 2019, prior to the completion of the Red Hat acquisition) |
 |
 |
|
GAAP Diluted EPS |
 |
 |
at least $12.45 |
 |
 |
 |
 |
Operating EPS (non-GAAP) |
 |
 |
at least $13.90 |
 |
 |
 |
 |
Adjustments |
 |
 |
 |
 |
 |
 |
 |
Acquisition-related Charges * |
 |
$ |
0.76 |
 |
 |
 |
 |
Non-Operating Retirement-Related Items |
 |
$ |
0.45 |
 |
 |
 |
 |
Tax Reform Enactment Impacts |
 |
$ |
0.24 |
| _______________________ |
* Includes acquisitions as of June 30, 2019. This amount includes pre-closing charges, such as financing costs, associated with the Red Hat acquisition. It does not include any other amounts for Red Hat or Red Hat related activity. |
 IBM
Melinda Zurich, 914‑499‑4034
melinda.zurich@us.ibm.com
John Bukovinsky, 732‑618‑3531
jbuko@us.ibm.com
View source version on businesswire.com: https://www.businesswire.com/news/home/20190717005781/en/
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