IBM
$148.97
IBM
($.15)
(.10%)
Earnings Details
3rd Quarter September 2017
Tuesday, October 17, 2017 4:11:00 PM
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Summary

IBM Misses

IBM (IBM) reported 3rd Quarter September 2017 earnings of $3.30 per share on revenue of $19.2 billion. The consensus earnings estimate was $3.28 per share on revenue of $18.7 billion. The Earnings Whisper number was $3.36 per share. Revenue fell 0.4% compared to the same quarter a year ago.

The company said it continues to expect 2017 earnings of at least $13.80 per share. The current consensus earnings estimate is $13.77 per share for the year ending December 31, 2017.

International Business Machines Corp is an Information Technology (IT) company. It creates business value for clients and solves business problems through integrated solutions that leverage information technology & knowledge of business processes.

Results
Reported Earnings
$3.30
Earnings Whisper
$3.36
Consensus Estimate
$3.28
Reported Revenue
$19.15 Bil
Revenue Estimate
$18.67 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

IBM Reports 2017 Third-Quarter Results

IBM (IBM)

Highlights

Diluted EPS from continuing operations: GAAP of $2.92; Operating (non-GAAP) of $3.30

-- Revenue of $19.2 billion

Strategic imperatives revenue of $34.9 billion over the trailing 12 months, up 10 percent; represents 45 percent of IBM revenue -- Third-quarter revenue up 11 percent (up 10 percent adjusting for currency)

Cloud revenue of $15.8 billion over the trailing 12 months, up 25 percent year to year (up 26 percent adjusting for currency) -- As-a-service annual exit run rate of $9.4 billion in the quarter, up 25 percent year to year (up 24 percent adjusting for currency)

-- Maintains full-year EPS and free cash flow expectations

IBM (IBM) today announced third-quarter earnings results.

"In the third quarter we achieved double-digit growth in our strategic imperatives, extended our enterprise cloud leadership, and expanded our cognitive solutions business," said Ginni Rometty, IBM chairman, president and chief executive officer. "There was enthusiastic adoption of IBM’s new z Systems mainframe, which delivers breakthrough security capabilities to our clients.

THIRD QUARTER 2017
Gross Profit
Diluted EPS
Net Income
Margin
GAAP from Continuing Operations
$2.92
$2.7B
45.9%
Year/Year
-2%
-4%
-0.9Pts
Operating (Non-GAAP)
$3.30
$3.1B
47.6%
Year/Year
0%
-2%
-0.4Pts
As-a-service
Strategic
annual exit
REVENUE
Total IBM
Imperatives
Cloud
run rate
As reported (US$)
$19.2B
$8.8B
$4.1B
$9.4B
Year/Year
0%
11%
20%
25%
Year/Year adjusting for currency
-1%
10%
20%
24%

"During the first three quarters of the year, our strong free cash flow has enabled us to maintain our R&D investments and to expand IBM’s cloud and cognitive capabilities through capital investments," said Martin Schroeter, IBM senior vice president and chief financial officer. "In addition, we have returned nearly $8 billion to shareholders through dividends and share repurchases."

Strategic Imperatives Revenue

Third-quarter cloud revenues increased 20 percent to $4.1 billion. Cloud revenue over the last 12 months was $15.8 billion, including $8.8 billion delivered as-a-service and $7.0 billion for hardware, software and services to enable IBM clients to implement comprehensive cloud solutions. The annual exit run rate for as-a-service revenue increased to $9.4 billion from $7.5 billion in the third quarter of 2016. In the quarter, revenues from analytics increased 5 percent. Revenues from mobile increased 7 percent and revenues from security increased 51 percent (up 49 percent adjusting for currency).

Full-Year 2017 Expectations

The company continues to expect operating (non-GAAP) diluted earnings per share of at least $13.80 and GAAP diluted earnings per share of at least $11.95. Operating (non-GAAP) diluted earnings per share exclude $1.85 per share of charges for amortization of purchased intangible assets, other acquisition-related charges and retirement-related charges. IBM continues to expect free cash flow to be relatively flat year to year.

Cash Flow and Balance Sheet

In the third quarter, the company generated net cash from operating activities of $3.6 billion, or $3.3 billion excluding Global Financing receivables. IBM’s free cash flow was $2.5 billion. IBM returned $1.4 billion in dividends and $0.9 billion of gross share repurchases to shareholders. At the end of September 2017, IBM had $1.5 billion remaining in the current share repurchase authorization.

IBM ended the third quarter of 2017 with $11.5 billion of cash on hand. Debt totaled $45.6 billion, including Global Financing debt of $29.4 billion. The balance sheet remains strong and is well positioned over the long term.

Segment Results for Third Quarter

Cognitive Solutions (includes solutions software and transaction processing software) -- revenues of $4.4 billion, up 4 percent (up 3 percent adjusting for currency), driven by solutions software, including security and analytics, and transaction processing software.

Global Business Services (includes consulting, global process services and application management) -- revenues of $4.1 billion, down 2 percent. Strategic imperatives revenue grew 10 percent led by the cloud practice.

Technology Services & Cloud Platforms (includes infrastructure services, technical support services and integration software) -- revenues of $8.5 billion, down 3 percent (down 4 percent adjusting for currency). Strategic imperatives revenue grew 12 percent, driven by hybrid cloud services, security and mobile.

Systems (includes systems hardware and operating systems software) -- revenues of $1.7 billion, up 10 percent, driven by growth in z Systems and storage.

Global Financing (includes financing and used equipment sales) -- revenues of $427 million, up 4 percent (up 3 percent adjusting for currency).

Expense and Other Income

Third-quarter GAAP expense and other income year-to-year performance reflects lower IP income of $221 million, an impact of $105 million year to year related to several commercial disputes and a benefit of $91 million resulting from the favorable resolution of pension-related litigation in the U.K.

Operating (non-GAAP) expense and other income for the third quarter of 2017 compared to 2016 reflects lower IP income of $221 million and an impact of $105 million year to year related to several commercial disputes.

Tax Rate

IBM’s third-quarter effective GAAP and operating (non-GAAP) tax rates were 11.0 percent and 14.7 percent, respectively. The company continues to expect a full-year effective operating (non-GAAP) tax rate of 15 percent, plus or minus 3 points, excluding discrete items.

Year-To-Date 2017 Results

Consolidated diluted earnings per share were $7.24 compared to $7.67, down 6 percent year to year. Consolidated net income was $6.8 billion compared to $7.4 billion in the year-ago period, a decrease of 8 percent. Revenues from continuing operations for the nine-month period totaled $56.6 billion, a decrease of 3 percent year to year (decrease of 2 percent adjusting for currency) compared with $58.1 billion for the first nine months of 2016.

Operating (non-GAAP) diluted earnings per share from continuing operations were $8.64 compared with $8.59 per diluted share for the 2016 period, an increase of 1 percent. Operating (non-GAAP) net income for the nine months ended September 30, 2017 was $8.1 billion compared with $8.3 billion in the year-ago period, a decrease of 2 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/3q17.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
Nine Months Ended
September 30,
September 30,
2017
2016
2017
2016
REVENUE
Cognitive Solutions
$
4,400
$
4,235
$ 13,021
$ 12,889
Global Business Services
4,093
4,191
12,196
12,578
Technology Services & Cloud Platforms
8,457
8,748
25,079
26,029
Systems
1,721
1,558
4,863
5,184
Global Financing
427
412
1,246
1,245
Other
56
81
192
223
TOTAL REVENUE
19,153
19,226
56,597
58,149
GROSS PROFIT
8,800
9,013
25,365
27,401
GROSS PROFIT MARGIN
Cognitive Solutions
78.7 %
80.4 %
78.4 %
81.5 %
Global Business Services
27.3 %
28.8 %
25.3 %
27.0 %
Technology Services & Cloud Platforms
41.1 %
42.0 %
40.2 %
41.5 %
Systems
53.6 %
51.1 %
51.5 %
55.1 %
Global Financing
25.2 %
37.8 %
29.2 %
39.6 %
TOTAL GROSS PROFIT MARGIN
45.9 %
46.9 %
44.8 %
47.1 %
EXPENSE AND OTHER INCOME
S,G&A
4,648
4,732
14,959
16,093
R,D&E
1,342
1,397
4,360
4,320
Intellectual property and
custom development income
(308 )
(528 )
(1,118 )
(1,110 )
Other (income) and expense
(114 )
(8 )
(218 )
281
Interest expense
168
158
451
473
TOTAL EXPENSE AND OTHER INCOME
5,735
5,751
18,434
20,056
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
3,065
3,263
6,931
7,345
Pre-tax margin
16.0 %
17.0 %
12.2 %
12.6 %
Provision for / (Benefit from) income taxes
339
409
120
(31 )
Effective tax rate
11.0 %
12.5 %
1.7 %
(0.4 %)
INCOME FROM CONTINUING OPERATIONS
$
2,726
$
2,854
$
6,811
$
7,375
DISCONTINUED OPERATIONS
Income/(Loss) from discontinued operations, net of taxes
(0 )
(1 )
(3 )
(4 )
NET INCOME
$
2,726
$
2,853
$
6,807
$
7,371
EARNINGS PER SHARE OF COMMON STOCK:
Assuming Dilution
Continuing Operations
$
2.92
$
2.98
$
7.24
$
7.67
Discontinued Operations
$
0.00
$
0.00
$
0.00
$
0.00
TOTAL
$
2.92
$
2.98
$
7.24
$
7.67
Basic
Continuing Operations
$
2.93
$
2.99
$
7.28
$
7.70
Discontinued Operations
$
0.00
$
0.00
$
0.00
$
0.00
TOTAL
$
2.93
$
2.99
$
7.28
$
7.70
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (M’s):
Assuming Dilution
933.2
957.3
940.2
960.7
Basic
929.4
954.0
935.6
957.7
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
At
At
(Dollars in Millions)
September 30,
December 31,
2017
2016
ASSETS:
Current Assets:
Cash and cash equivalents
$
10,915
$
7,826
Marketable securities
600
701
Notes and accounts receivable - trade, net
8,150
9,182
Short-term financing receivables, net
18,050
19,006
Other accounts receivable, net
926
1,057
Inventory
1,711
1,553
Prepaid expenses and other current assets
4,389
4,564
Total Current Assets
44,742
43,888
Property, plant and equipment, net
11,057
10,830
Long-term financing receivables, net
8,459
9,021
Prepaid pension assets
4,521
3,034
Deferred taxes
7,289
5,224
Goodwill and intangibles, net
40,763
40,887
Investments and sundry assets
4,806
4,585
Total Assets
$
121,636
$
117,470
LIABILITIES:
Current Liabilities:
Taxes
$
3,038
$
3,235
Short-term debt
4,299
7,513
Accounts payable
5,442
6,209
Deferred income
10,649
11,035
Other liabilities
8,270
8,283
Total Current Liabilities
31,697
36,275
Long-term debt
41,327
34,655
Retirement related obligations
17,554
17,070
Deferred income
3,579
3,600
Other liabilities
7,723
7,477
Total Liabilities
101,879
99,078
EQUITY:
IBM Stockholders’ Equity:
Common stock
54,395
53,935
Retained earnings
155,565
152,759
Treasury stock -- at cost
(162,812 )
(159,050 )
Accumulated other comprehensive income/(loss)
(27,521 )
(29,398 )
Total IBM stockholders’ equity
19,627
18,246
Noncontrolling interests
130
146
Total Equity
19,757
18,392
Total Liabilities and Equity
$
121,636
$
117,470
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW ANALYSIS
(Unaudited)
Three Months Ended
Nine Months Ended
(Dollars in Millions)
September 30,
September 30,
2017
2016
2017
2016
Net Cash Provided by Operating Activities per GAAP:
$
3,570
$
4,118
* **
$ 10,991
$ 13,105
* **
Less: change in Global Financing (GF)
Receivables
258
835
*
2,468
3,336
*
Capital Expenditures, Net
(780 )
(851 )
(2,347 )
(2,801 )
Free Cash Flow
2,532
2,431
**
6,176
6,969
**
Acquisitions
(274 )
(40 )
(442 )
(5,445 )
Divestitures
6
0
35
35
Dividends
(1,396 )
(1,337 )
(4,119 )
(3,927 )
Share Repurchase
(949 )
(856 )
(3,674 )
(2,632 )
Non-GF Debt
(467 )
(1,696 )
1,896
3,365
Other (includes GF Receivables and GF Debt)
(233 )
850
* **
3,117
3,408
* **
Change in Cash, Cash Equivalents and
Short-term Marketable Securities
($780 )
($648 )
$
2,988
$
1,773
* Revised classification of certain financing receivables.
** Reclassified to reflect adoption of the FASB guidance on
stock-based compensation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW
(Unaudited)
Three Months Ended
Nine Months Ended
(Dollars in Millions)
September 30,
September 30,
2017
2016
2017
2016
Net Income from Operations
$
2,726
$
2,853
$
6,807
$
7,371
Depreciation/Amortization of Intangibles
1,175
1,126
3,392
3,253
Stock-based Compensation
123
142
388
403
Working Capital / Other
(713 )
(839 )
**
(2,064 )
(1,258 )
**
Global Financing A/R
258
835
*
2,468
3,336
*
Net Cash Provided by Operating Activities
$
3,570
$
4,118
* **
$
10,991
$
13,105
* **
Capital Expenditures, net of payments & proceeds
(780 )
(851 )
(2,347 )
(2,801 )
Divestitures, net of cash transferred
6
-
35
35
Acquisitions, net of cash acquired
(274 )
(40 )
(442 )
(5,445 )
Marketable Securities / Other Investments, net
(875 )
(60 )
*
(523 )
921
*
Net Cash Used in Investing Activities
($1,923 )
($951 )
*
($3,278 )
($7,289 )
*
Debt, net of payments & proceeds
(446 )
(2,041 )
2,310
1,888
Dividends
(1,396 )
(1,337 )
(4,119 )
(3,927 )
Common Stock Repurchases
(949 )
(856 )
(3,674 )
(2,632 )
Common Stock Transactions - Other
35
49
**
(15 )
52
**
Net Cash Used in Financing Activities
($2,756 )
($4,185 )
**
($5,499 )
($4,619 )
**
Effect of Exchange Rate changes on Cash
328
41
875
155
Net Change in Cash & Cash Equivalents
($781 )
($978 )
$
3,089
$
1,352
* Revised classification of certain financing receivables.
** Reclassified to reflect adoption of the FASB guidance on
stock-based compensation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
THIRD - QUARTER 2017
Cognitive Solutions &
Industry Services
Technology
Global
Services &
(Dollars in Millions)
Cognitive
Business
Cloud
Global
Solutions
Services
Platforms
Systems
Financing
Revenue
External
$ 4,400
$ 4,093
$ 8,457
$ 1,721
$
427
Internal
629
92
164
227
272
Total Segment Revenue
$ 5,030
$ 4,185
$ 8,621
$ 1,948
$
698
Pre-tax Income from Continuing Operations
1,649
453
1,192
339
244
Pre-tax margin
32.8 %
10.8 %
13.8 %
17.4 %
34.9 %
Change YTY Revenue - External
3.9 %
(2.3 )%
(3.3 )%
10.4 %
3.7 %
Change YTY Revenue - External @constant currency
3.0 %
(2.2 )%
(4.1 )%
9.6 %
2.8 %
THIRD - QUARTER 2016
Cognitive Solutions &
Industry Services
Technology
Global
Services &
(Dollars in Millions)
Cognitive
Business
Cloud
Global
Solutions
Services
Platforms
Systems
Financing
Revenue
External
$ 4,235
$ 4,191
$ 8,748
$ 1,558
$
412
Internal
667
93
180
176
352
Total Segment Revenue
$ 4,902
$ 4,284
$ 8,929
$ 1,734
$
763
Pre-tax Income from Continuing Operations
1,574
544
1,288
136
355
Pre-tax margin
32.1 %
12.7 %
14.4 %
7.8 %
46.5 %
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
NINE - MONTHS 2017
Cognitive Solutions &
Industry Services
Technology
Global
Services &
(Dollars in Millions)
Cognitive
Business
Cloud
Global
Solutions
Services
Platforms
Systems
Financing
Revenue
External
$ 13,021
$ 12,196
$ 25,079
$ 4,863
$
1,246
Internal
2,001
271
497
571
925
Total Segment Revenue
$ 15,022
$ 12,467
$ 25,576
$ 5,434
$
2,171
Pre-tax Income from Continuing Operations
4,539
1,065
2,888
227
836
Pre-tax margin
30.2 %
8.5 %
11.3 %
4.2 %
38.5 %
Change YTY Revenue - External
1.0 %
(3.0 )%
(3.7 )%
(6.2 )%
0.1 %
Change YTY Revenue - External @constant currency
1.3 %
(1.9 )%
(3.3 )%
(5.9 )%
(0.4 )%
NINE - MONTHS 2016
Cognitive Solutions &
Industry Services
Technology
Global
Services &
(Dollars in Millions)
Cognitive
Business
Cloud
Global
Solutions
Services
Platforms
Systems
Financing
Revenue
External
$ 12,889
$ 12,578
$ 26,029
$ 5,184
$
1,245
Internal
1,929
310
501
594
1,340
Total Segment Revenue
$ 14,818
$ 12,888
$ 26,530
$ 5,778
$
2,585
Pre-tax Income from Continuing Operations
4,039
1,210
2,825
354
1,208
Pre-tax margin
27.3 %
9.4 %
10.6 %
6.1 %
46.7 %
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; Dollars in millions except per share amounts)
THIRD - QUARTER 2017
CONTINUING OPERATIONS
Acquisition-
Retirement-
Related
Related
Operating
GAAP
Adjustments*
Adjustments**
(Non-GAAP)
Gross Profit
$ 8,800
$
114
$
203
$
9,116
Gross Profit Margin
45.9 %
0.6Pts
1.1Pts
47.6 %
S,G&A
4,648
(125 )
(53 )
4,470
R,D&E
1,342
-
(51 )
1,291
Other (Income) & Expense
(114 )
0
-
(114 )
Total Expense & Other (Income)
5,735
(125 )
(103 )
5,507
Pre-tax Income from Continuing Operations
3,065
238
306
3,609
Pre-tax Income Margin from Continuing Operations
16.0 %
1.2Pts
1.6Pts
18.8 %
Provision for / (Benefit from) Income Taxes***
339
79
113
531
Effective Tax Rate
11.0 %
1.5Pts
2.2Pts
14.7 %
Income from Continuing Operations
2,726
159
193
3,079
Income Margin from Continuing Operations
14.2 %
0.8Pts
1.0Pts
16.1 %
Diluted Earnings Per Share: Continuing Operations
$
2.92
$ 0.17
$ 0.21
$
3.30
THIRD - QUARTER 2016
CONTINUING OPERATIONS
Acquisition-
Retirement-
Related
Related
Operating
GAAP
Adjustments*
Adjustments**
(Non-GAAP)
Gross Profit
$ 9,013
$
129
$
79
$
9,221
Gross Profit Margin
46.9 %
0.7Pts
0.4Pts
48.0 %
S,G&A
4,732
(138 )
(53 )
4,541
R,D&E
1,397
-
(7 )
1,390
Other (Income) & Expense
(8 )
(2 )
-
(10 )
Total Expense & Other (Income)
5,751
(140 )
(60 )
5,550
Pre-tax Income from Continuing Operations
3,263
269
139
3,671
Pre-tax Income Margin from Continuing Operations
17.0 %
1.4Pts
0.7Pts
19.1 %
Provision for / (Benefit from) Income Taxes***
409
73
40
521
Effective Tax Rate
12.5 %
1.1Pts
0.6Pts
14.2 %
Income from Continuing Operations
2,854
197
99
3,149
Income Margin from Continuing Operations
14.8 %
1.0Pts
0.5Pts
16.4 %
Diluted Earnings Per Share: Continuing Operations
$
2.98
$ 0.21
$ 0.10
$
3.29
*
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)
NINE - MONTHS 2017
CONTINUING OPERATIONS
Acquisition-
Retirement-
Related
Related
Operating
GAAP
Adjustments*
Adjustments**
(Non-GAAP)
Gross Profit
$ 25,365
$
349
$
591
$ 26,305
Gross Profit Margin
44.8 %
0.6Pts
1.0Pts
46.5 %
S,G&A
14,959
(393 )
(326 )
14,240
R,D&E
4,360
-
(148 )
4,212
Other (Income) & Expense
(218 )
(7 )
-
(225 )
Total Expense & Other (Income)
18,434
(401 )
(474 )
17,559
Pre-tax Income from Continuing Operations
6,931
750
1,065
8,746
Pre-tax Income Margin from Continuing Operations
12.2 %
1.3Pts
1.9Pts
15.5 %
Provision for / (Benefit from) Income Taxes***
120
212
288
621
Effective Tax Rate
1.7 %
2.3Pts
3.1Pts
7.1 %
Income from Continuing Operations
6,811
537
777
8,125
Income Margin from Continuing Operations
12.0 %
0.9Pts
1.4Pts
14.4 %
Diluted Earnings Per Share: Continuing Operations
$
7.24
$ 0.57
$
0.83
$
8.64
NINE - MONTHS 2016
CONTINUING OPERATIONS
Acquisition-
Retirement-
Related
Related
Operating
GAAP
Adjustments*
Adjustments**
(Non-GAAP)
Gross Profit
$ 27,401
$
371
$
238
$ 28,010
Gross Profit Margin
47.1 %
0.6Pts
0.4Pts
48.2 %
S,G&A
16,093
(365 )
(183 )
15,545
R,D&E
4,320
-
(23 )
4,297
Other (Income) & Expense
281
(7 )
-
274
Total Expense & Other (Income)
20,056
(372 )
(206 )
19,478
Pre-Tax Income from Continuing Operations
7,345
743
444
8,532
Pre-tax Income Margin from Continuing Operations
12.6 %
1.3Pts
0.8Pts
14.7 %
Provision for / (Benefit from) Income Taxes***
(31 )
201
106
277
Effective Tax Rate
(0.4 )%
2.4Pts
1.3Pts
3.2 %
Income from Continuing Operations
7,375
542
338
8,255
Income Margin from Continuing Operations
12.7 %
0.9Pts
0.6Pts
14.2 %
Diluted Earnings Per Share: Continuing Operations
$
7.67
$ 0.57
$
0.35
$
8.59
*
Includes amortization of purchased intangible assets, in
process R&D, severance cost for acquired employees, vacant space
for acquired companies, deal costs and acquisition integration tax
charges.
**
Includes retirement-related interest cost, expected return on
plan assets, recognized actuarial losses or gains, amortization of
transition assets, other settlements, curtailments, multi-employer
plans and insolvency insurance.
***
Tax impact on operating (non-GAAP) pre-tax income from
continuing operations is calculated under the same accounting
principles applied to the As Reported pre-tax income under ASC
740, which employs an annual effective tax rate method to the
results.
INTERNATIONAL BUSINESS MACHINES CORPORATION
RECONCILIATION OF OPERATING EARNINGS PER SHARE
(Unaudited)
2017
EPS Guidance
Expectations
IBM GAAP EPS
at least $11.95
IBM Operating EPS (non-GAAP)
at least $13.80
Adjustments
Acquisition-related charges *
$0.75
Non-Operating Retirement-Related Items
$1.10
* Includes acquisitions through September 30, 2017

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