IBM Reports 2015 Fourth-Quarter and Full-Year R...

IBM Reports 2015 Fourth-Quarter and Full-Year Results

IBM

IBM (NYSE:IBM)

Fourth-Quarter 2015:

o Diluted EPS from continuing operations:

- Operating (non-GAAP): $4.84, down 17 percent; impact of 20 points from prior year System x divestiture gain;

- GAAP: $4.59, down 17 percent;

o Net income from continuing operations:

- Operating (non-GAAP): $4.7 billion, down 19 percent; impact of 19 points from prior year System x divestiture gain;

- GAAP: $4.5 billion, down 19 percent;

o Revenue from continuing operations: $22.1 billion:

- Down 2 percent adjusting for currency; down 9 percent as reported;

o Services backlog of $121 billion, up 1 percent adjusting for currency.

Full-Year 2015:

o Diluted EPS from continuing operations:

- Operating (non-GAAP): $14.92, down 10 percent; impact of 7 points from prior year System x and customer care divestiture gains;

- GAAP: $13.60, down 13 percent;

o Net income from continuing operations:

- Operating (non-GAAP): $14.7 billion, down 12 percent; impact of 7 points from prior year System x and customer care divestiture gains;

- GAAP: $13.4 billion, down 15 percent;

o Gross profit margin from continuing operations:

- Operating (non-GAAP): 50.8 percent, up 20 basis points;

- GAAP: 49.8 percent, down 20 basis points;

o Revenue from continuing operations: $81.7 billion:

- Down 1 percent adjusting for currency (8 points or more than $7 billion) and divestitures (3 points or nearly $3 billion); down 12 percent as reported;

o Strategic imperatives revenue of $28.9 billion now represents 35 percent of total IBM revenue, up 26 percent adjusting for currency and the System x divestiture; up 17 percent as reported:

- Total Cloud revenue of $10.2 billion up 57 percent adjusting for currency and the System x divestiture, up 43 percent as reported;

-- Cloud delivered as a service revenues of $4.5 billion, up 61 percent adjusting for currency, up 50 percent as reported;

-- Annual run rate of $5.3 billion vs. $3.5 billion in the fourth quarter 2014 for cloud delivered as a service;

- Business analytics revenue up 16 percent adjusting for currency, up 7 percent as reported to $17.9 billion;

- Mobile revenue more than tripled;

- Security revenue up 12 percent adjusting for currency, up 5 percent as reported;

o Free cash flow of $13.1 billion, up $0.7 billion;

- Free cash flow realization equaled 98 percent of GAAP net income from continuing operations;

o Total capital return to shareholders of $9.5 billion; dividends of $4.9 billion and gross share repurchases of $4.6 billion;

o The company will discuss 2016 during today’s quarterly earnings conference call.

IBM (NYSE: IBM) today announced fourth-quarter 2015 diluted earnings from continuing operations of $4.59 per share, down 17 percent year-to-year. Operating (non-GAAP) diluted earnings from continuing operations were $4.84 per share, compared with operating diluted earnings of $5.81 per share in the fourth quarter of 2014, down 17 percent. The prior-year gain from the divestiture of the System x business impacted operating diluted earnings per share from continuing operations by 20 points.

"We continue to make significant progress in our transformation to higher value. In 2015, our strategic imperatives of cloud, analytics, mobile, social and security grew 26 percent to $29 billion and now represent 35 percent of our total revenue," said Ginni Rometty, IBM chairman, president and chief executive officer. "We strengthened our existing portfolio while investing aggressively in new opportunities like Watson Health, Watson Internet of Things and hybrid cloud. As we transform to a cognitive solutions and cloud platform company, we are well positioned to continue delivering greater value to our clients and returning capital to our shareholders."

Fourth-quarter net income from continuing operations was $4.5 billion compared with $5.5 billion in the fourth quarter of 2014, down 19 percent. Operating (non-GAAP) net income was $4.7 billion compared with $5.8 billion in the fourth quarter of 2014, down 19 percent. The prior-year gain from the divestiture of the System x business impacted operating net income by 19 points.

Total revenues from continuing operations for the fourth quarter of 2015 of $22.1 billion were down 9 percent (down 2 percent adjusting for currency) from the fourth quarter of 2014.

GAAP – Operating (non-GAAP) Reconciliation

Fourth-quarter operating (non-GAAP) diluted earnings exclude $0.25 per share of charges: $0.11 per share for the amortization of purchased intangible assets and other acquisition-related charges, and $0.14 per share for non-operating retirement-related charges driven by changes to plan assets and liabilities primarily related to past market performance.

Full-year operating (non-GAAP) diluted earnings exclude $1.32 per share of charges: $0.57 per share for the amortization of purchased intangible assets and other acquisition-related charges, and $0.75 per share for non-operating retirement-related charges driven by changes to plan assets and liabilities primarily related to past market performance.

Strategic Imperatives

Fourth-quarter revenues from the company’s strategic imperatives --- cloud, analytics and engagement --- increased 10 percent year to year (up 16 percent adjusting for currency). For the full year, revenues from strategic imperatives increased 17 percent (up 26 percent adjusting for currency and the divested System x business) to $28.9 billion and now represent 35 percent of total IBM consolidated revenue.

For the full year, total cloud revenues (public, private and hybrid) increased 43 percent (up 57 percent adjusting for currency and the divested System x business) to $10.2 billion. Revenues for cloud delivered as a service -- a subset of the total cloud revenue -- increased 50 percent to $4.5 billion; and the annual as-a-service run rate increased to $5.3 billion from $3.5 billion in the fourth quarter of 2014. Revenues from business analytics increased 7 percent (up 16 percent adjusting for currency) to $17.9 billion. Revenues from mobile more than tripled and from security increased 5 percent (up 12 percent adjusting for currency).

Geographic Regions

The Americas’ fourth-quarter revenues were $10.3 billion, a decrease of 8 percent (down 4 percent adjusting for currency) from the 2014 period. Revenues from Europe/Middle East/Africa were $7.3 billion, down 9 percent (up 1 percent adjusting for currency). Asia-Pacific revenues decreased 10 percent (down 3 percent adjusting for currency) to $4.4 billion. Revenues from the BRIC countries were down 21 percent as reported (down 11 percent adjusting for currency).

Services

Global Technology Services segment revenues were down 7 percent (up 1 percent adjusting for currency) to $8.1 billion. Global Business Services segment revenues were down 10 percent (down 4 percent adjusting for currency) to $4.3 billion.

The estimated services backlog as of December 31 was $121 billion, up 1 percent year to year adjusting for currency.

Software

Revenues from the Software segment were down 11 percent to $6.8 billion (down 6 percent adjusting for currency) compared with the fourth quarter of 2014.

Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Workforce Solutions and Rational products, were $4.9 billion, down 10 percent (down 6 percent adjusting for currency) year to year. Operating systems revenues of $0.5 billion were down 12 percent (down 7 percent adjusting for currency) year to year.

Hardware

Revenues from the Systems Hardware segment totaled $2.4 billion for the quarter, down 1 percent (up 3 percent adjusting for currency) year to year.

Revenues from z Systems mainframe server products increased 16 percent compared with the year-ago period (up 21 percent adjusting for currency). Total delivery of z Systems computing power, as measured in MIPS (millions of instructions per second), increased 28 percent. Revenues from Power Systems were up 4 percent compared with the 2014 period (up 8 percent adjusting for currency). Revenues from System Storage decreased 11 percent (down 7 percent adjusting for currency).

Financing

Global Financing segment revenues decreased 15 percent (down 6 percent adjusting for currency) in the fourth quarter at $0.5 billion.

Gross Profit

The company’s total gross profit margin from continuing operations was 51.7 percent in the 2015 fourth quarter compared with 53.3 percent in the 2014 fourth quarter. Total operating (non-GAAP) gross profit margin from continuing operations was 52.7 percent in the 2015 fourth quarter compared with 53.9 percent in the 2014 fourth quarter.

Expense

Total expense and other income from continuing operations increased to $6.3 billion, up 9 percent compared to the prior-year period. S,G&A expense of $5.2 billion decreased 15 percent year over year. R,D&E expense of $1.4 billion increased 3 percent year to year; the related expense-to-revenue ratio increased to 6.2 percent compared with 5.5 percent in the year-ago period. Other (income) and expense was income of $146 million compared with prior-year income of $1.5 billion. Intellectual property and custom development income was $193 million and interest expense was $128 million.

Total operating (non-GAAP) expense and other income from continuing operations increased to $6.1 billion, up 9 percent compared with the prior-year period, driven by the prior-year $1.4 billion gain from the divested System x business and the prior-year expense of $0.6 billion for workforce rebalancing. Operating (non-GAAP) S,G&A expense of $5.0 billion decreased 15 percent compared with prior-year expense. Operating (non-GAAP) R,D&E expense of $1.4 billion increased 1 percent year to year; the related expense-to-revenue ratio increased to 6.1 percent compared with 5.6 percent in the year-ago period.

Pre-Tax Income

Pre-tax income from continuing operations decreased 28 percent to $5.1 billion. Pre-tax margin from continuing operations decreased 6.3 points to 23.1 percent. Operating (non-GAAP) pre-tax income from continuing operations decreased 25 percent to $5.5 billion and pre-tax margin was 25.0 percent, a decrease of 5.7 points year to year.

***

IBM’s tax rate from continuing operations was 12.5 percent, down 9.7 points year over year; the operating (non-GAAP) tax rate was 14.7 percent, down 7.1 points compared to the year-ago period driven by current period discrete items.

Net income margin from continuing operations decreased 2.7 points to 20.2 percent. Total operating (non-GAAP) net income margin from continuing operations decreased 2.7 points to 21.3 percent.

The weighted-average number of diluted common shares outstanding in the fourth-quarter 2015 was 973 million compared with 995 million shares in the same period of 2014. As of December 31, 2015, there were 966 million basic common shares outstanding.

Debt, including Global Financing, totaled $39.9 billion, compared with $40.7 billion at year-end 2014. From a management segment view, Global Financing debt totaled $27.2 billion versus $29.1 billion at year-end 2014, resulting in a debt-to-equity ratio of 7.3 to 1. Core (non-global financing) debt totaled $12.7 billion, an increase of $1.1 billion since year-end 2014. IBM ended the fourth-quarter 2015 with $8.2 billion of cash on hand.

The company generated full-year free cash flow of $13.1 billion, excluding Global Financing receivables, up $0.7 billion compared to 2014. The company returned $9.5 billion to shareholders through $4.9 billion in dividends and $4.6 billion of gross share repurchases. The balance sheet remains strong and is well positioned to support the business over the long term.

At the end of December 2015, IBM had approximately $5.6 billion remaining from the current share repurchase authorization.

Full-Year 2015 Results

Diluted earnings per share from continuing operations were $13.60, down 13 percent compared to the 2014 period. Net income from continuing operations for the twelve months ended December 31, 2015 was $13.4 billion compared with $15.8 billion in the year-ago period, a decrease of 15 percent.

Consolidated net income was $13.2 billion compared to $12.0 billion in the year-ago period, including operating net losses in discontinued operations related to the divested Microelectronics business. Consolidated diluted earnings per share were $13.42 compared to $11.90, up 13 percent year to year. Revenues from continuing operations for the twelve-month period totaled $81.7 billion, a decrease of 12 percent (down 1 percent year to year, adjusting for currency and divested businesses) compared with $92.8 billion for the first twelve months of 2014.

Operating (non-GAAP) diluted earnings per share from continuing operations were $14.92 compared with $16.53 per diluted share for the 2014 period, a decrease of 10 percent. The prior-year gain from the divestitures of the System x and the customer care outsourcing businesses impacted earnings per share from continuing operations by 7 points. Operating (non-GAAP) net income from continuing operations for the twelve months ended December 31, 2015 was $14.7 billion compared with $16.7 billion in the year-ago period, a decrease of 12 percent. The prior-year gain from the divestitures of the System x and the customer care outsourcing businesses impacted net income from continuing operations by 7 points.

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 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 --

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

o adjusting for free cash flow;

o adjusting for currency (i.e., at constant currency);

o adjusting for the divestiture of the System x and the customer care outsourcing businesses.

The rationale for management’s use of non-GAAP measures is included as part of the supplemental materials presented within the fourth-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 5:00 p.m. EST, today. The Webcast may be accessed via a link at http://www.ibm.com/investor/events/earnings/4q15.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

  Twelve Months Ended
December 31, December 31,
    Percent Percent
2015 2014 Change 2015   2014   Change
REVENUE
 
Global Technology Services * $ 8,126 $ 8,746 -7.1% $ 32,017 $ 35,442 -9.7%
Gross profit margin 37.7% 39.1% 37.4% 39.0%
 
Global Business Services * 4,297 4,771 -9.9% 17,166 19,512 -12.0%
Gross profit margin 28.2% 31.5% 28.2% 30.4%
 
Software 6,767 7,578 -10.7% 22,932 25,434 -9.8%
Gross profit margin 88.0% 90.0% 87.3% 88.6%
 
Systems Hardware 2,372 2,406 -1.4% 7,581 9,996 -24.2%
Gross profit margin 48.0% 49.6% 46.6% 39.5%
 
Global Financing 454 532 -14.6% 1,840 2,034 -9.5%
Gross profit margin 39.9% 48.7% 45.6% 49.4%
 
Other 43 82 -47.1% 206 374 -45.0%
Gross profit margin -312.7% -401.7% -253.0% -215.0%
 
TOTAL REVENUE 22,059 24,113 -8.5% 81,741 92,793 -11.9%
 
GROSS PROFIT 11,407 12,862 -11.3% 40,684 46,407 -12.3%
Gross profit margin 51.7% 53.3% 49.8% 50.0%
 
EXPENSE AND OTHER INCOME
 
S,G&A 5,157 6,034 -14.5% 20,430 23,180 -11.9%
Expense to revenue 23.4% 25.0% 25.0% 25.0%
 
R,D&E 1,362 1,320 3.1% 5,247 5,437 -3.5%
Expense to revenue 6.2% 5.5% 6.4% 5.9%
 

Intellectual property and

custom development income (193) (199) -2.9% (682) (742) -8.1%
 
Other (income) and expense (146) (1,506) -90.3% (724) (1,938) -62.6%
 
Interest expense 128 117 9.7% 468 484 -3.2%
 
TOTAL EXPENSE AND
OTHER INCOME 6,308 5,767 9.4% 24,740 26,421 -6.4%
Expense to revenue 28.6% 23.9% 30.3% 28.5%
 
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 5,098 7,094 -28.1% 15,945 19,986 -20.2%
Pre-tax margin 23.1% 29.4% 19.5% 21.5%
 
Provision for income taxes 638 1,580 -59.6% 2,581 4,234 -39.1%
Effective tax rate 12.5% 22.3% 16.2% 21.2%
 
INCOME FROM CONTINUING
OPERATIONS $ 4,460 $ 5,515 -19.1% $ 13,364 $ 15,751 -15.2%
Net margin 20.2% 22.9% 16.3% 17.0%
 
DISCONTINUED OPERATIONS

Income / (loss) from discontinued

 

operations, net of taxes 3 (31) (174) (3,729)
 
NET INCOME $ 4,463 $ 5,484 -18.6% $ 13,190 $ 12,022 9.7%
 
EARNINGS PER SHARE
OF COMMON STOCK:
Assuming Dilution
Continuing Operations $ 4.59 $ 5.54 -17.1% $ 13.60 $ 15.59 -12.8%
Discontinued Operations $ 0.00 ($0.03) ($0.18) ($3.69)
 

 

 

 

 

TOTAL $ 4.59 $ 5.51 -16.7% $ 13.42 $ 11.90 12.8%
 
Basic
Continuing Operations $ 4.60 $ 5.57 -17.4% $ 13.66 $ 15.68 -12.9%
Discontinued Operations $ 0.00 ($0.03) ($0.18) ($3.71)

 

 

 

 

TOTAL $ 4.60 $ 5.54 -17.0% $ 13.48 $ 11.97 12.6%
 
WEIGHTED-AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING (M's):
Assuming Dilution 972.8 995.4 982.7 1,010.0
Basic 969.4 990.4 978.7 1,004.3
 
 

*Reclassified to conform with 2015 presentation.

 
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited)
     
At At
(Dollars in Millions) December 31, December 31,
2015 2014 * **
ASSETS:
 
Current Assets:
Cash and cash equivalents $ 7,686 $ 8,476
Marketable securities 508 0
Notes and accounts receivable - trade
(net of allowances of $367 in 2015 and $336 in 2014) 8,333 9,090
Short-term financing receivables
(net of allowances of $490 in 2015 and $452 in 2014) 19,020 19,835
Other accounts receivable
(net of allowances of $51 in 2015 and $40 in 2014) 1,201 2,906
Inventories, at lower of average cost or market:
Finished goods 352 430
Work in process and raw materials 1,199 1,674
Total inventories 1,551 2,103
Prepaid expenses and other current assets 4,205 4,967
Total Current Assets * 42,504 47,377
 
Property, plant and equipment 29,342 39,034
Less: Accumulated depreciation 18,615 28,263
Property, plant and equipment - net 10,727 10,771
Long-term financing receivables
(net of allowances of $118 in 2015 and $126 in 2014) 10,013 11,109
Prepaid pension assets 1,734 2,160
Deferred taxes * 4,822 6,675
Goodwill 32,021 30,556
Intangible assets - net 3,487 3,104
Investments and sundry assets ** 5,187 5,520
Total Assets * ** $ 110,495 $ 117,271
LIABILITIES:
 
Current Liabilities:
Taxes $ 2,847 $ 5,084
Short-term debt ** 6,461 5,731
Accounts payable 6,028 6,864
Compensation and benefits 3,560 4,031
Deferred income 11,021 11,877
Other accrued expenses and liabilities * 4,353 5,994
Total Current Liabilities * ** 34,269 39,581
 
Long-term debt ** 33,428 34,991

Retirement and nonpension post retirement

benefit obligations 16,504 18,261
Deferred income 3,771 3,691
Other liabilities * 8,099 8,733
Total Liabilities * ** 96,071 105,257
 
EQUITY:
 
IBM Stockholders' Equity:
Common stock 53,262 52,666
Retained earnings 146,124 137,793
Treasury stock -- at cost (155,518) (150,715)
Accumulated other comprehensive income/(loss) (29,607) (27,875)
Total IBM stockholders' equity 14,262 11,868
 
Noncontrolling interests 162 146
Total Equity 14,424 12,014
Total Liabilities and Equity * ** $ 110,495 $ 117,271
 

* Reclassified to reflect adoption of the FASB guidance on deferred taxes in consolidated financial statements.

** Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements.

 
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW ANALYSIS
(Unaudited)
 
    Three Months Ended   Twelve Months Ended
(Dollars in Millions) December 31, December 31,
2015   2014 2015   2014
 
Net Cash from Operating Activities per GAAP: $ 5,278 $ 6,059 $ 17,008 $ 16,868
 
Less: the change in Global Financing (GF)
Receivables (1,810) (1,505) 152 718
Net Cash from Operating Activities
(Excluding GF Receivables) 7,088 7,564 16,855 16,151
 
Capital Expenditures, Net (1,016) (976) (3,780) (3,779)
 
Free Cash Flow
(Excluding GF Receivables) 6,072 6,588 13,075 12,372
 
Acquisitions (2,529) (6) (3,349) (656)
Divestitures 87 1,869 (401) 2,357
Dividends (1,261) (1,089) (4,897) (4,265)
Share Repurchase (764) (132) (4,609) (13,679)
Non-GF Debt (898) (5,883) (128) (1,348)
Other (includes GF Receivables, and
GF Debt) (2,080) (2,435) 28 2,629
 
Change in Cash, Cash Equivalents and
Short-term Marketable Securities ($1,373) ($1,088) ($282) ($2,589)
 
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
 
   

FOURTH-QUARTER 2015

   

 

 

Pre-tax

 

 

Income/

 

(Loss)

(Dollars in Millions)

--------- Revenue ---------

Continuing Pre-tax
External Internal Total

Operations

Margin

SEGMENTS
 
Global Technology Services $ 8,126 $ 234 $ 8,359 $ 1,486 17.8%
Y-T-Y change -7.1% 20.0% -6.5% 4.5%
 
Global Business Services 4,297 118 4,415 708 16.0%
Y-T-Y change -9.9% -6.4% -9.8% -8.6%
 
Software 6,767 748 7,515 2,959 39.4%
Y-T-Y change -10.7% -11.5% -10.8% -21.4%
 
Systems Hardware 2,372 131 2,503 349 13.9%
Y-T-Y change -1.4% 23.1% -0.4% -10.1%
 
Global Financing 454 763 1,216 674 55.4%
Y-T-Y change -14.6% 29.7% 8.7% 28.3%
 
TOTAL REPORTABLE SEGMENTS $ 22,015 $ 1,994 $ 24,009 $ 6,177 25.7%
Y-T-Y change -8.4% 7.2% -7.3% -10.2%
 
Eliminations / Other 43 (1,994) (1,950) (1,078)
 
TOTAL IBM CONSOLIDATED $ 22,059 $ 0 $ 22,059 $ 5,098 23.1%
Y-T-Y change -8.5% -8.5% -28.1%
 
 
 
FOURTH-QUARTER 2014

 

Pre-tax

 

Income/

 

(Loss)

(Dollars in Millions)

--------- Revenue ---------

Continuing

Pre-tax
External Internal Total

Operations

Margin

SEGMENTS
 
Global Technology Services * $ 8,746 $ 195 $ 8,941 $ 1,422 15.9%
 
Global Business Services * 4,771 127 4,897 775 15.8%
 
Software 7,578 845 8,422 3,765 44.7%
 
Systems Hardware 2,406 107 2,512 388 15.5%
 
Global Financing 532 588 1,119 526 47.0%
 
TOTAL REPORTABLE SEGMENTS $ 24,031 $ 1,860 $ 25,891 $ 6,876 26.6%
 
Eliminations / Other 82 (1,860) (1,778) 219
 
TOTAL IBM CONSOLIDATED $ 24,113 $ 0 $ 24,113 $ 7,094 29.4%
 
 
*Reclassified to conform with 2015 presentation.
 
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
           
TWELVE-MONTHS 2015
 
Pre-tax
Income/
(Loss)
(Dollars in Millions)

--------- Revenue ---------

Continuing Pre-tax
External Internal Total Operations Margin
 
Global Technology Services $ 32,017 $ 823 $ 32,840 $ 5,002 15.2%
Y-T-Y change -9.7% -11.9% -9.7% -15.7%
 
Global Business Services 17,166 499 17,664 2,634 14.9%
Y-T-Y change -12.0% -8.1% -11.9% -22.7%
 
Software 22,932 3,267 26,199 9,066 34.6%
Y-T-Y change -9.8% -6.6% -9.4% -15.3%
 
Systems Hardware 7,581 451 8,032 604 7.5%
Y-T-Y change -24.2% -30.3% -24.5% NM
 
Global Financing 1,840 2,637 4,477 2,364 52.8%
Y-T-Y change -9.5% 6.0% -1.0% 8.0%
 
TOTAL REPORTABLE SEGMENTS $ 81,535 $ 7,676 $ 89,211 $ 19,670 22.0%
Y-T-Y change -11.8% -5.3% -11.3% -11.6%
 
Eliminations / Other 206 (7,676) (7,470) (3,726)
 
TOTAL IBM CONSOLIDATED $ 81,741 $ 0 $ 81,741 $ 15,945 19.5%
Y-T-Y change -11.9% -11.9% -20.2%
 
 
TWELVE-MONTHS 2014
 
Pre-tax
Income
(Loss)/
(Dollars in Millions)

--------- Revenue ---------

Continuing Pre-tax
External Internal Total Operations Margin
SEGMENTS
 
 
Global Technology Services * $ 35,442 $ 934 $ 36,376 $ 5,931 16.3%
 
Global Business Services * 19,512 543 20,055 3,408 17.0%
 
Software 25,434 3,496 28,931 10,699 37.0%
 
Systems Hardware 9,996 647 10,643 34 0.3%
 
Global Financing 2,034 2,488 4,522 2,189 48.4%
 
TOTAL REPORTABLE SEGMENTS $ 92,418 $ 8,108 $ 100,527 $ 22,262 22.1%
 
Eliminations / Other 374 (8,108) (7,734) (2,276)
 
TOTAL IBM CONSOLIDATED $ 92,793 $ 0 $ 92,793 $ 19,986 21.5%
 

*Reclassified to conform with 2015 presentation.

NM = Not Meaningful
 
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING RESULTS RECONCILIATION

(Unaudited; Dollars in millions except per share amounts)

 
 
    FOURTH-QUARTER 2015
CONTINUING OPERATIONS
  Acquisition-   Retirement-  
Related Related Operating
GAAP Adjustments* Adjustments** (Non-GAAP)
Gross Profit $ 11,407 $ 105 $ 119 $ 11,630
 
Gross Profit Margin 51.7% 0.5Pts 0.5Pts 52.7%
 
S,G&A 5,157 (95) (88) 4,975
 
R,D&E 1,362 - (12) 1,350
 
Other (Income) & Expense (146) 0 - (146)
 
Total Expense & Other (Income) 6,308 (95) (100) 6,114
 
Pre-tax Income from
Continuing Operations 5,098 199 218 5,516
 
Pre-tax Income Margin from
Continuing Operations 23.1% 0.9Pts 1.0Pts 25.0%
 
Provision for Income Taxes*** 638 89 82 809
 
Effective Tax Rate 12.5% 1.2Pts 1.0Pts 14.7%
 
Income from Continuing Operations 4,460 110 137 4,707
 
Income Margin from
Continuing Operations 20.2% 0.5Pts 0.6Pts 21.3%
 
Diluted Earnings Per Share:
Continuing Operations $ 4.59 $ 0.11 $ 0.14 $ 4.84
 
 
    FOURTH-QUARTER 2014
CONTINUING OPERATIONS

 

 

Acquisition-

  Retirement-  

 

Related

Related Operating

GAAP

Adjustments*

Adjustments** (Non-GAAP)
 
 
Gross Profit $ 12,862 $ 101 $ 33 $ 12,996
 
Gross Profit Margin 53.3% 0.4Pts 0.1Pts 53.9%
 
S,G&A 6,034 (94) (95) 5,845
 
R,D&E 1,320 - 21 1,341
 
Other (Income) & Expense (1,506) (1) - (1,506)
 
Total Expense & Other (Income) 5,767 (95) (74) 5,598
 
Pre-tax Income from
Continuing Operations 7,094 196 107 7,398
 
Pre-tax Income Margin from
Continuing Operations 29.4% 0.8Pts 0.4Pts 30.7%
 
Provision for Income Taxes*** 1,580 10 24 1,613
 
Effective Tax Rate 22.3% -0.5Pts 0.0Pts 21.8%
 
Income from Continuing Operations 5,515 186 84 5,785
 
Income Margin from
Continuing Operations 22.9% 0.8Pts 0.3Pts 24.0%
 
Diluted Earnings Per Share:
Continuing Operations $ 5.54 $ 0.19 $ 0.08 $ 5.81
 

* 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 from continuing operations 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)

 
 
    TWELVE-MONTHS 2015
CONTINUING OPERATIONS
  Acquisition-   Retirement-  
Related Related Operating
GAAP Adjustments* Adjustments** (Non-GAAP)
Gross Profit $ 40,684 $ 373 $ 469 $ 41,526
 
Gross Profit Margin 49.8% 0.5Pts 0.6Pts 50.8%
 
S,G&A 20,430 (324) (533) 19,573
 
R,D&E 5,247 - (48) 5,200
 
Other (Income) & Expense (724) (5) - (729)
 
Total Expense & Other (Income) 24,740 (330) (581) 23,830
 
Pre-tax Income from
Continuing Operations 15,945 703 1,050 17,697
 
Pre-tax Income Margin from
Continuing Operations 19.5% 0.9Pts 1.3Pts 21.6%
 
Provision for Income Taxes*** 2,581 141 316 3,037
 
Effective Tax Rate 16.2% 0.2Pts 0.9Pts 17.2%
 
Income from Continuing Operations 13,364 562 734 14,659
 
Income Margin from
Continuing Operations 16.3% 0.7Pts 0.9Pts 17.9%
 
Diluted Earnings Per Share:
Continuing Operations $ 13.60 $ 0.57 $ 0.75 $ 14.92
 
 
TWELVE-MONTHS 2014
CONTINUING OPERATIONS
Acquisition- Retirement-
Related Related Operating
GAAP Adjustments* Adjustments** (Non-GAAP)
Gross Profit $ 46,407 $ 416 $ 173 $ 46,996
 
Gross Profit Margin 50.0% 0.4Pts 0.2Pts 50.6%
 
S,G&A 23,180 (385) (257) 22,537
 
R,D&E 5,437 - 77 5,514
 
Other (Income) & Expense (1,938) (1) - (1,939)
 
Total Expense & Other (Income) 26,421 (386) (180) 25,855
 
Pre-tax Income from
Continuing Operations 19,986 803 353 21,142
 
Pre-tax Income Margin from
Continuing Operations 21.5% 0.9Pts 0.4Pts 22.8%
 
Provision for Income Taxes*** 4,234 133 73 4,440
 
Effective Tax Rate 21.2% -0.2Pts 0.0Pts 21.0%
 
Income from Continuing Operations 15,751 670 280 16,702
 
Income Margin from
Continuing Operations 17.0% 0.7Pts 0.3Pts 18.0%
 
Diluted Earnings Per Share:
Continuing Operations $ 15.59 $ 0.66 $ 0.28 $ 16.53
 

* 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 from continuing operations 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.

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

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