[October 17, 2017] |
|
IBM Reports 2017 Third-Quarter Results
IBM (NYSE: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 (NYSE: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
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20171017006744/en/
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