[July 18, 2018] |
|
IBM Reports 2018 Second-Quarter Results
IBM (NYSE:IBM)
Revenue Up 4 Percent Year to Year; Strong Profit Performance
Highlights
-
GAAP EPS from continuing operations of $2.61; Operating (non-GAAP) EPS
of $3.08; both up 5 percent
-
GAAP Pre-tax income up 14 percent; Operating (non-GAAP) pre-tax income
up 11 percent
-- Pre-tax margins expanded more than 100
basis points year to year
-
Revenue of $20.0 billion, up 4 percent (up 2 percent adjusting for
currency)
-
Strategic imperatives revenue of $39.0 billion over last 12 months, up
15 percent (up 12 percent adjusting for currency); represents 48
percent of IBM revenue
-
Cloud revenue of $18.5 billion over last 12 months, up 23 percent (up
20 percent adjusting for currency)
-
As-a-service annual exit run rate for cloud revenue of $11.1 billion
in the quarter, up 26 percent year to year (up 24 percent adjusting
for currency)
-
Maintains full-year operating (non-GAAP) EPS and free cash flow
expectations
IBM (NYSE:IBM) today announced second-quarter results.
"We delivered strong revenue and profit growth in the quarter,
underscoring IBM's progress and momentum in the emerging, high-value
segments of the IT industry," said Ginni Rometty, IBM chairman,
president and chief executive officer. "More clients are engaging IBM on
their journey to the cloud, and deploying IBM Cloud, Watson AI,
analytics, blockchain and security solutions. This demonstrates IBM's
unique leadership in providing innovative technology coupled with deep
industry expertise, trust and security."
|
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SECOND QUARTER 2018
|
|
|
|
|
|
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Pre-tax
|
|
Gross Profit
|
|
|
Diluted EPS
|
|
Net Income
|
|
Income
|
|
Margin
|
GAAP from Continuing Operations
|
|
$2.61
|
|
$2.4B
|
|
$2.8B
|
|
46.0%
|
Year/Year
|
|
5%
|
|
3%
|
|
14%
|
|
(0.5)Pts
|
Operating (Non-GAAP)
|
|
$3.08
|
|
$2.8B
|
|
$3.4B
|
|
46.5%
|
Year/Year
|
|
5%
|
|
3%
|
|
11%
|
|
(0.6)Pts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As-a-service
|
|
|
|
|
Strategic
|
|
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|
annual exit
|
REVENUE
|
|
Total IBM
|
|
Imperatives
|
|
Cloud
|
|
run rate
|
As reported (US$)
|
|
$20.0B
|
|
$10.1B
|
|
$4.7B
|
|
$11.1B
|
Year/Year
|
|
4%
|
|
15%
|
|
20%
|
|
26%
|
Year/Year adjusting for currency
|
|
2%
|
|
13%
|
|
18%
|
|
24%
|
|
"We increased revenue, grew pre-tax income double digits and expanded
pre-tax income margins year to year, while continuing to invest in the
business and return capital to shareholders," said James Kavanaugh, IBM
senior vice president and chief financial officer. "We remain focused on
delivering consistent operational performance, in line with our
longer-term model."
Strategic Imperatives Revenue
Strategic imperatives revenue over the last 12 months was $39.0 billion,
up 15 percent (up 12 percent adjusting for currency). Total cloud
revenue over the last 12 months was $18.5 billion, up 23 percent (up 20
percent adjusting for currency), with $8.2 billion from hardware,
software and services to enable IBM clients to implement hybrid cloud
solutions across public, private and multi-cloud environments, and $10.4
billion delivered as a service. The annual exit run rate for
as-a-service revenue increased in the quarter to $11.1 billion, up 26
percent (up 24 percent adjusting for currency).
In the second quarter, revenues from analytics increased 7 percent to
$5.4 billion (up 5 percent adjusting for currency); revenues from mobile
increased 5 percent to $1.3 billion (up 3 percent adjusting for
currency); and revenues from security increased 81 percent to $1.0
billion (up 79 percent adjusting for currency).
Cash Flow and Balance Sheet
In the second quarter, the company generated net cash from operating
activities of $2.3 billion, or $2.9 billion, excluding Global Financing
receivables. IBM's free cash flow was $1.9 billion. IBM returned $2.4
billion to shareholders through $1.4 billion in dividends and $1.0
billion in gross share repurchases. At the end of June 2018, IBM had
$2.0 billion remaining in the current share repurchase authorization.
IBM ended the second quarter with $11.9 billion of cash on hand. Debt
totaled $45.5 billion, including Global Financing debt of $31.1 billion.
The balance sheet remains strong and is well positioned for the long
term.
Segment Results for Second Quarter
-
Cognitive Solutions (includes solutions software and transaction
processing software) -- revenues of $4.6 billion, flat year to
year (down 1 percent adjusting for currency), with growth in analytics
and industry vertical solutions led by financial services and IoT.
-
Global Business Services (includes consulting, global process
services and application management) -- revenues of $4.2 billion,
up 2 percent (flat year to year adjusting for currency), with growth
in consulting driven by digital offerings.
-
Technology Services & Cloud Platforms (includes
infrastructure services, technical support services and integration
software) -- revenues of $8.6 billion, up 2 percent (flat year to
year adjusting for currency). Strategic imperatives revenue grew 26
percent, led by hybrid cloud services, security and mobile.
-
Systems (includes systems hardware and operating systems software)
-- revenues of $2.2 billion, up 25 percent (up 23 percent
adjusting for currency) driven by growth in IBM Z, Power Systems and
storage.
-
Global Financing (includes financing and used equipment sales) --
revenues of $394 million, down 5 percent (down 6 percent adjusting for
currency).
Full-Year 2018 Expectations
The company expects operating (non-GAAP) diluted earnings per share of
at least $13.80 and GAAP diluted earnings per share of at least $11.60.
Operating (non-GAAP) diluted earnings per share exclude $2.20 per share
of charges for amortization of purchased intangible assets, other
acquisition-related charges and retirement-related charges as well as
impacts from the enactment of U.S. Tax Reform.
IBM expects free cash flow of approximately $12 billion, with a
realization rate greater than 100 percent.
Year-To-Date 2018 Results
Consolidated diluted earnings per share were $4.43 compared to $4.32, up
3 percent year to year. Consolidated net income was $4.1 billion, flat
year to year. Revenues from continuing operations for the six-month
period totaled $39.1 billion, an increase of 4 percent year to year (up
1 percent adjusting for currency) compared with $37.4 billion for the
first six months of 2017.
Operating (non-GAAP) diluted earnings per share from continuing
operations was $5.53 compared with $5.28 per diluted share for the 2017
period, an increase of 5 percent. Operating (non-GAAP) net income for
the six months ended June 30, 2018 was $5.1 billion compared with $5.0
billion in the year-ago period, an increase 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; 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; 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/2q18.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,
|
|
|
|
2018
|
|
2017
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE
|
|
|
|
|
|
|
|
|
|
|
Cognitive Solutions
|
|
$4,580
|
|
$4,559
|
|
|
$8,879
|
|
$8,621
|
|
Global Business Services
|
|
4,192
|
|
4,097
|
|
|
8,365
|
|
8,103
|
|
Technology Services & Cloud Platforms
|
|
8,615
|
|
8,406
|
|
|
17,240
|
|
16,622
|
|
Systems
|
|
2,177
|
|
1,747
|
|
|
3,676
|
|
3,142
|
|
Global Financing
|
|
394
|
|
415
|
|
|
799
|
|
819
|
|
Other
|
|
45
|
|
65
|
|
|
114
|
|
136
|
|
TOTAL REVENUE
|
|
20,003
|
|
19,289
|
|
|
39,075
|
|
37,443
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
9,199
|
|
8,968
|
*
|
|
17,445
|
|
16,912
|
*
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT MARGIN
|
|
|
|
|
|
|
|
|
|
|
Cognitive Solutions
|
|
77.7%
|
|
79.0%
|
*
|
|
77.0%
|
|
78.2%
|
*
|
Global Business Services
|
|
25.9%
|
|
24.7%
|
*
|
|
24.6%
|
|
24.0%
|
*
|
Technology Services & Cloud Platforms
|
|
39.4%
|
|
40.4%
|
*
|
|
38.8%
|
|
39.6%
|
*
|
Systems
|
|
50.6%
|
|
52.7%
|
*
|
|
47.8%
|
|
50.3%
|
*
|
Global Financing
|
|
26.6%
|
|
30.8%
|
*
|
|
30.6%
|
|
31.3%
|
*
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL GROSS PROFIT MARGIN
|
|
46.0%
|
|
46.5%
|
*
|
|
44.6%
|
|
45.2%
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSE AND OTHER INCOME
|
|
|
|
|
|
|
|
|
|
|
S,G&A
|
|
4,857
|
|
5,033
|
*
|
|
10,302
|
|
10,060
|
*
|
R,D&E
|
|
1,364
|
|
1,436
|
*
|
|
2,769
|
|
2,921
|
*
|
Intellectual property and
|
|
|
|
|
|
|
|
|
|
|
custom development income
|
|
(250)
|
|
(365)
|
|
|
(567)
|
|
(810)
|
|
Other (income) and expense
|
|
280
|
|
273
|
*
|
|
692
|
|
592
|
*
|
Interest expense
|
|
173
|
|
147
|
|
|
338
|
|
283
|
|
TOTAL EXPENSE AND OTHER INCOME
|
|
6,423
|
|
6,525
|
*
|
|
13,534
|
|
13,046
|
*
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
BEFORE INCOME TAXES
|
|
2,776
|
|
2,443
|
|
|
3,911
|
|
3,867
|
|
Pre-tax margin
|
|
13.9%
|
|
12.7%
|
|
|
10.0%
|
|
10.3%
|
|
Provision for / (Benefit from) income taxes
|
|
373
|
|
111
|
|
|
(166)
|
|
(218)
|
|
Effective tax rate
|
|
13.5%
|
|
4.5%
|
|
|
(4.3%)
|
|
(5.6%)
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS
|
|
$2,402
|
|
$2,332
|
|
|
$4,078
|
|
$4,085
|
|
DISCONTINUED OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss) from discontinued operations, net of taxes
|
|
1
|
|
(1)
|
|
|
5
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$2,404
|
|
$2,331
|
|
|
$4,083
|
|
$4,082
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER SHARE OF COMMON STOCK:
|
|
|
|
|
|
|
|
|
|
|
Assuming Dilution
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
$2.61
|
|
$2.48
|
|
|
$4.42
|
|
$4.32
|
|
Discontinued Operations
|
|
$0.00
|
|
$0.00
|
|
|
$0.01
|
|
$0.00
|
|
TOTAL
|
|
$2.61
|
|
$2.48
|
|
|
$4.43
|
|
$4.32
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
$2.63
|
|
$2.49
|
|
|
$4.44
|
|
$4.35
|
|
Discontinued Operations
|
|
$0.00
|
|
$0.00
|
|
|
$0.01
|
|
$0.00
|
|
TOTAL
|
|
$2.63
|
|
$2.49
|
|
|
$4.45
|
|
$4.35
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES
|
|
|
|
|
|
|
|
|
|
|
OUTSTANDING (M's):
|
|
|
|
|
|
|
|
|
|
|
Assuming Dilution
|
|
919.4
|
|
939.6
|
|
|
922.4
|
|
943.7
|
|
Basic
|
|
915.1
|
|
934.9
|
|
|
917.9
|
|
938.7
|
|
|
|
* Recast to reflect adoption of the FASB guidance on presentation of
net benefit cost.
|
|
INTERNATIONAL BUSINESS MACHINES CORPORATION
|
|
CONDENSED CONSOLIDATED BALANCE SHEET
|
|
(Unaudited)
|
|
|
|
At
|
|
At
|
|
(Dollars in Millions)
|
|
June 30,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$10,741
|
|
$11,972
|
|
Restricted cash
|
|
|
|
219
|
|
262
|
*
|
Marketable securities
|
|
|
|
966
|
|
608
|
|
Notes and accounts receivable - trade, net
|
|
|
|
7,445
|
|
8,928
|
|
Short-term financing receivables, net
|
|
|
|
19,806
|
|
21,721
|
|
Other accounts receivable, net
|
|
|
|
1,089
|
|
981
|
|
Inventory
|
|
|
|
1,742
|
|
1,583
|
|
Deferred Costs
|
|
|
|
2,344
|
|
1,820
|
**
|
Prepaid expenses and other current assets
|
|
|
|
2,443
|
|
1,860
|
* **
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
|
46,795
|
|
49,735
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
|
11,024
|
|
11,116
|
|
Long-term financing receivables, net
|
|
|
|
8,783
|
|
9,550
|
|
Prepaid pension assets
|
|
|
|
5,375
|
|
4,643
|
|
Deferred costs
|
|
|
|
2,613
|
|
2,136
|
**
|
Deferred taxes
|
|
|
|
4,689
|
|
4,862
|
|
Goodwill and intangibles, net
|
|
|
|
39,826
|
|
40,531
|
|
Investments and sundry assets
|
|
|
|
2,518
|
|
2,783
|
**
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
|
$121,622
|
|
$125,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
Taxes
|
|
|
|
$2,780
|
|
$4,219
|
|
Short-term debt
|
|
|
|
7,646
|
|
6,987
|
|
Accounts payable
|
|
|
|
5,518
|
|
6,451
|
|
Deferred income
|
|
|
|
11,752
|
|
11,552
|
|
Other liabilities
|
|
|
|
7,745
|
|
8,153
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
|
35,442
|
|
37,363
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
37,851
|
|
39,837
|
|
Retirement related obligations
|
|
|
|
15,963
|
|
16,720
|
|
Deferred income
|
|
|
|
3,718
|
|
3,746
|
|
Other liabilities
|
|
|
|
10,000
|
|
9,965
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
|
102,974
|
|
107,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IBM Stockholders' Equity:
|
|
|
|
|
|
|
|
Common stock
|
|
|
|
54,827
|
|
54,566
|
|
Retained earnings
|
|
|
|
157,349
|
|
153,126
|
|
Treasury stock -- at cost
|
|
|
|
(165,366)
|
|
(163,507)
|
|
Accumulated other comprehensive income/(loss)
|
|
|
|
(28,290)
|
|
(26,592)
|
|
|
|
|
|
|
|
|
|
Total IBM Stockholders' Equity
|
|
|
|
18,520
|
|
17,594
|
|
|
|
|
|
|
|
|
|
Noncontrolling interests
|
|
|
|
128
|
|
131
|
|
|
|
|
|
|
|
|
|
Total Equity
|
|
|
|
18,648
|
|
17,725
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity
|
|
|
|
$121,622
|
|
$125,356
|
|
|
* Recast to reflect adoption of the FASB guidance on restricted cash.
|
** Recast to conform to current period presentation.
|
|
INTERNATIONAL BUSINESS MACHINES CORPORATION
|
|
CASH FLOW ANALYSIS
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
(Dollars in Millions)
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2018
|
|
2017
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities per GAAP:
|
|
$2,295
|
|
$3,467
|
|
|
$6,896
|
|
$7,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: change in Global Financing (GF) Receivables
|
|
(582)
|
|
163
|
|
|
1,778
|
|
2,210
|
|
Capital Expenditures, Net
|
|
(1,004)
|
|
(749)
|
|
|
(1,897)
|
|
(1,567)
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
|
|
1,873
|
|
2,555
|
|
|
3,221
|
|
3,644
|
|
Acquisitions
|
|
(51)
|
|
(60)
|
|
|
(122)
|
|
(169)
|
|
Divestitures
|
|
-
|
|
30
|
|
|
-
|
|
29
|
|
Dividends
|
|
(1,437)
|
|
(1,403)
|
|
|
(2,819)
|
|
(2,724)
|
|
Share Repurchase
|
|
(989)
|
|
(1,432)
|
|
|
(1,767)
|
|
(2,725)
|
|
Non-GF Debt
|
|
(65)
|
|
2,119
|
|
|
(611)
|
|
2,363
|
|
Other (includes GF Net Receivables and GF Debt)
|
|
(559)
|
|
(173)
|
*
|
|
1,182
|
|
3,339
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Change in Cash, Cash Equivalents, Restricted Cash
|
|
|
|
|
|
|
|
|
|
|
and Short-term Marketable Securities
|
|
($1,229)
|
|
$1,636
|
*
|
|
($916)
|
|
$3,758
|
*
|
|
* Recast to reflect adoption of the FASB guidance on restricted cash.
|
|
INTERNATIONAL BUSINESS MACHINES CORPORATION
|
CASH FLOW
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
(Dollars in Millions)
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2018
|
|
2017
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income from Operations
|
|
$2,404
|
|
$2,331
|
|
|
$4,083
|
|
$4,082
|
|
Depreciation/Amortization of Intangibles
|
|
1,116
|
|
1,118
|
|
|
2,230
|
|
2,216
|
|
Stock-based Compensation
|
|
125
|
|
136
|
|
|
242
|
|
265
|
|
Working Capital / Other
|
|
(768)
|
|
(281)
|
|
|
(1,436)
|
|
(1,351)
|
|
Global Financing A/R
|
|
(582)
|
|
163
|
|
|
1,778
|
|
2,210
|
|
Net Cash Provided by Operating Activities
|
|
$2,295
|
|
$3,467
|
|
|
$6,896
|
|
$7,421
|
|
Capital Expenditures, net of payments & proceeds
|
|
(1,004)
|
|
(749)
|
|
|
(1,897)
|
|
(1,567)
|
|
Divestitures, net of cash transferred
|
|
-
|
|
30
|
|
|
-
|
|
29
|
|
Acquisitions, net of cash acquired
|
|
(51)
|
|
(60)
|
|
|
(122)
|
|
(169)
|
|
Marketable Securities / Other Investments, net
|
|
420
|
|
(889)
|
*
|
|
(380)
|
|
342
|
*
|
Net Cash Used in Investing Activities
|
|
($634)
|
|
($1,668)
|
*
|
|
($2,399)
|
|
($1,365)
|
*
|
Debt, net of payments & proceeds
|
|
(37)
|
|
2,279
|
|
|
(751)
|
|
2,756
|
|
Dividends
|
|
(1,437)
|
|
(1,403)
|
|
|
(2,819)
|
|
(2,724)
|
|
Common Stock Repurchases
|
|
(989)
|
|
(1,432)
|
|
|
(1,767)
|
|
(2,725)
|
|
Common Stock Transactions - Other
|
|
(55)
|
|
(54)
|
|
|
(91)
|
|
(50)
|
|
Net Cash Used in Financing Activities
|
|
($2,519)
|
|
($609)
|
|
|
($5,428)
|
|
($2,743)
|
|
Effect of Exchange Rate changes on Cash
|
|
(444)
|
|
447
|
|
|
(344)
|
|
547
|
|
Net Change in Cash, Cash Equivalents and Restricted Cash
|
|
($1,302)
|
|
$1,637
|
*
|
|
($1,274)
|
|
$3,860
|
*
|
|
|
* Recast to reflect adoption of the FASB guidance on restricted cash.
|
|
INTERNATIONAL BUSINESS MACHINES CORPORATION
|
SEGMENT DATA
|
(Unaudited)
|
|
|
|
|
|
SECOND - QUARTER 2018
|
|
|
|
|
|
|
Technology
|
|
|
|
|
|
|
|
|
Global
|
|
Services &
|
|
|
|
|
(Dollars in Millions)
|
|
Cognitive
|
|
Business
|
|
Cloud
|
|
|
|
Global
|
|
|
Solutions
|
|
Services
|
|
Platforms
|
|
Systems
|
|
Financing
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
External
|
|
$4,580
|
|
$4,192
|
|
$8,615
|
|
$2,177
|
|
$394
|
Internal
|
|
703
|
|
83
|
|
169
|
|
242
|
|
473
|
Total Segment Revenue
|
|
$5,283
|
|
$4,275
|
|
$8,784
|
|
$2,419
|
|
$867
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income from Continuing Operations
|
|
1,756
|
|
385
|
|
883
|
|
346
|
|
357
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax margin
|
|
33.2%
|
|
9.0%
|
|
10.1%
|
|
14.3%
|
|
41.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change YTY Revenue - External
|
|
0.5%
|
|
2.3%
|
|
2.5%
|
|
24.6%
|
|
(4.9)%
|
Change YTY Revenue - External @constant currency
|
|
(1.3)%
|
|
0.0%
|
|
0.2%
|
|
22.9%
|
|
(6.2)%
|
|
|
|
|
SECOND - QUARTER 2017
|
|
|
|
|
|
|
Technology
|
|
|
|
|
|
|
|
|
Global
|
|
Services &
|
|
|
|
|
(Dollars in Millions)
|
|
Cognitive
|
|
Business
|
|
Cloud
|
|
|
|
Global
|
|
|
Solutions
|
|
Services
|
|
Platforms
|
|
Systems
|
|
Financing
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
External
|
|
$4,559
|
|
$4,097
|
|
$8,406
|
|
$1,747
|
|
$415
|
Internal
|
|
655
|
|
93
|
|
173
|
|
177
|
|
290
|
Total Segment Revenue
|
|
$5,214
|
|
$4,190
|
|
$8,579
|
|
$1,924
|
|
$705
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income from Continuing Operations *
|
|
1,610
|
|
312
|
|
994
|
|
73
|
|
282
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax margin *
|
|
30.9%
|
|
7.4%
|
|
11.6%
|
|
3.8%
|
|
40.0%
|
|
* Recast to reflect adoption of the FASB guidance on presentation of
net benefit cost.
|
|
INTERNATIONAL BUSINESS MACHINES CORPORATION
|
SEGMENT DATA
|
(Unaudited)
|
|
|
|
|
|
SIX - MONTHS 2018
|
|
|
|
|
|
|
Technology
|
|
|
|
|
|
|
|
|
Global
|
|
Services &
|
|
|
|
|
(Dollars in Millions)
|
|
Cognitive
|
|
Business
|
|
Cloud
|
|
|
|
Global
|
|
|
Solutions
|
|
Services
|
|
Platforms
|
|
Systems
|
|
Financing
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
External
|
|
$8,879
|
|
$8,365
|
|
$17,240
|
|
$3,676
|
|
$799
|
Internal
|
|
1,483
|
|
172
|
|
310
|
|
395
|
|
902
|
Total Segment Revenue
|
|
$10,362
|
|
$8,538
|
|
$17,550
|
|
$4,072
|
|
$1,701
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income from Continuing Operations
|
|
3,089
|
|
530
|
|
1,320
|
|
143
|
|
734
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax margin
|
|
29.8%
|
|
6.2%
|
|
7.5%
|
|
3.5%
|
|
43.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change YTY Revenue - External
|
|
3.0%
|
|
3.2%
|
|
3.7%
|
|
17.0%
|
|
(2.5)%
|
Change YTY Revenue - External @constant currency
|
|
0.2%
|
|
(0.6)%
|
|
(0.2)%
|
|
14.4%
|
|
(5.1)%
|
|
|
|
|
SIX - MONTHS 2017
|
|
|
|
|
|
|
Technology
|
|
|
|
|
|
|
|
|
Global
|
|
Services &
|
|
|
|
|
(Dollars in Millions)
|
|
Cognitive
|
|
Business
|
|
Cloud
|
|
|
|
Global
|
|
|
Solutions
|
|
Services
|
|
Platforms
|
|
Systems
|
|
Financing
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
External
|
|
$8,621
|
|
$8,103
|
|
$16,622
|
|
$3,142
|
|
$819
|
Internal
|
|
1,371
|
|
179
|
|
333
|
|
344
|
|
653
|
Total Segment Revenue
|
|
$9,992
|
|
$8,282
|
|
$16,955
|
|
$3,486
|
|
$1,473
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income /(Loss) from Continuing Operations *
|
|
2,878
|
|
593
|
|
1,668
|
|
(115)
|
|
592
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax margin *
|
|
28.8%
|
|
7.2%
|
|
9.8%
|
|
(3.3)%
|
|
40.2%
|
|
* Recast to reflect adoption of the FASB guidance on presentation of
net benefit cost.
|
|
INTERNATIONAL BUSINESS MACHINES CORPORATION
|
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
|
(Unaudited; Dollars in millions except per share amounts)
|
|
|
|
|
|
SECOND - QUARTER 2018
|
|
|
CONTINUING OPERATIONS
|
|
|
|
|
Acquisition-
|
|
Retirement-
|
|
Tax Reform
|
|
|
|
|
|
|
Related
|
|
Related
|
|
One-Time
|
|
Operating
|
|
|
GAAP
|
|
Adjustments*
|
|
Adjustments**
|
|
Impact
|
|
(Non-GAAP)
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
$9,199
|
|
$94
|
|
-
|
|
-
|
|
$9,292
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit Margin
|
|
46.0%
|
|
0.5Pts
|
|
-
|
|
-
|
|
46.5%
|
|
|
|
|
|
|
|
|
|
|
|
S,G&A
|
|
4,857
|
|
(110)
|
|
-
|
|
-
|
|
4,746
|
|
|
|
|
|
|
|
|
|
|
|
R,D&E
|
|
1,364
|
|
-
|
|
-
|
|
-
|
|
1,364
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) & Expense
|
|
280
|
|
-
|
|
(394)
|
|
-
|
|
(115)
|
|
|
|
|
|
|
|
|
|
|
|
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%
|
|
1.0Pts
|
|
2.0Pts
|
|
-
|
|
16.9%
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (Benefit from) Income Taxes***
|
|
373
|
|
44
|
|
109
|
|
14
|
|
540
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate
|
|
13.5%
|
|
0.5Pts
|
|
1.6Pts
|
|
0.4Pts
|
|
16.0%
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
2,402
|
|
160
|
|
286
|
|
(14)
|
|
2,834
|
|
|
|
|
|
|
|
|
|
|
|
Income Margin from Continuing Operations
|
|
12.0%
|
|
0.8Pts
|
|
1.4Pts
|
|
(0.1)Pts
|
|
14.2%
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share: Continuing Operations
|
|
$2.61
|
|
$0.17
|
|
$0.31
|
|
($0.01)
|
|
$3.08
|
|
|
|
|
SECOND - QUARTER 2017
|
|
|
|
|
CONTINUING OPERATIONS
|
|
|
|
|
|
|
Acquisition-
|
|
Retirement-
|
|
|
|
|
|
|
|
|
Related
|
|
Related
|
|
Operating
|
|
|
|
|
GAAP
|
|
Adjustments*
|
|
Adjustments**
|
|
(Non-GAAP)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
$8,968
|
|
$117
|
|
-
|
|
$9,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit Margin
|
|
46.5%
|
|
0.6Pts
|
|
-
|
|
47.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S,G&A
|
|
5,033
|
|
(129)
|
|
-
|
|
4,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R,D&E
|
|
1,436
|
|
-
|
|
-
|
|
1,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) & Expense
|
|
273
|
|
(4)
|
|
(349)
|
|
(80)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expense & Other (Income)
|
|
6,525
|
|
(133)
|
|
(349)
|
|
6,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income from Continuing Operations
|
|
2,443
|
|
250
|
|
349
|
|
3,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income Margin from Continuing Operations
|
|
12.7%
|
|
1.3Pts
|
|
1.8Pts
|
|
15.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (Benefit from) Income Taxes***
|
|
111
|
|
66
|
|
105
|
|
282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate
|
|
4.5%
|
|
1.8Pts
|
|
2.9Pts
|
|
9.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
2,332
|
|
183
|
|
244
|
|
2,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Margin from Continuing Operations
|
|
12.1%
|
|
1.0Pts
|
|
1.3Pts
|
|
14.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share: Continuing Operations
|
|
$2.48
|
|
$0.20
|
|
$0.26
|
|
$2.94
|
|
|
* 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, amortization of prior service
cost and insolvency insurance. 2017 adjustments were recast to reflect
the adoption of the FASB guidance on net benefit cost. ***
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 2018
|
|
|
CONTINUING OPERATIONS
|
|
|
|
|
Acquisition-
|
|
Retirement-
|
|
Tax Reform
|
|
|
|
|
|
|
Related
|
|
Related
|
|
One-Time
|
|
Operating
|
|
|
GAAP
|
|
Adjustments*
|
|
Adjustments**
|
|
Impact
|
|
(Non-GAAP)
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
$17,445
|
|
$187
|
|
-
|
|
-
|
|
$17,633
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit Margin
|
|
44.6%
|
|
0.5Pts
|
|
-
|
|
-
|
|
45.1%
|
|
|
|
|
|
|
|
|
|
|
|
S,G&A
|
|
10,302
|
|
(220)
|
|
-
|
|
-
|
|
10,082
|
|
|
|
|
|
|
|
|
|
|
|
R,D&E
|
|
2,769
|
|
-
|
|
-
|
|
-
|
|
2,769
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) & Expense
|
|
692
|
|
-
|
|
(796)
|
|
-
|
|
(104)
|
|
|
|
|
|
|
|
|
|
|
|
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%
|
|
1.0Pts
|
|
2.0Pts
|
|
-
|
|
13.1%
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (Benefit from) Income Taxes***
|
|
(166)
|
|
83
|
|
185
|
|
(93)
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate
|
|
(4.3)%
|
|
2.0Pts
|
|
4.3Pts
|
|
(1.8)Pts
|
|
0.2%
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
4,078
|
|
324
|
|
611
|
|
93
|
|
5,106
|
|
|
|
|
|
|
|
|
|
|
|
Income Margin from Continuing Operations
|
|
10.4%
|
|
0.8Pts
|
|
1.6Pts
|
|
0.2Pts
|
|
13.1%
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share: Continuing Operations
|
|
$4.42
|
|
$0.35
|
|
$0.66
|
|
$0.10
|
|
$5.53
|
|
|
|
|
SIX - MONTHS 2017
|
|
|
|
|
CONTINUING OPERATIONS
|
|
|
|
|
|
|
Acquisition-
|
|
Retirement-
|
|
|
|
|
|
|
|
|
Related
|
|
Related
|
|
Operating
|
|
|
|
|
GAAP
|
|
Adjustments*
|
|
Adjustments**
|
|
(Non-GAAP)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
$16,912
|
|
$236
|
|
-
|
|
$17,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit Margin
|
|
45.2%
|
|
0.6Pts
|
|
-
|
|
45.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S,G&A
|
|
10,060
|
|
(269)
|
|
-
|
|
9,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R,D&E
|
|
2,921
|
|
-
|
|
-
|
|
2,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) & Expense
|
|
592
|
|
(7)
|
|
(696)
|
|
(111)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expense & Other (Income)
|
|
13,046
|
|
(276)
|
|
(696)
|
|
12,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-Tax Income from Continuing Operations
|
|
3,867
|
|
512
|
|
696
|
|
5,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income Margin from Continuing Operations
|
|
10.3%
|
|
1.4Pts
|
|
1.9Pts
|
|
13.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (Benefit from) Income Taxes***
|
|
(218)
|
|
134
|
|
175
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate
|
|
(5.6)%
|
|
3.2Pts
|
|
4.2Pts
|
|
1.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
4,085
|
|
378
|
|
521
|
|
4,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Margin from Continuing Operations
|
|
10.9%
|
|
1.0Pts
|
|
1.4Pts
|
|
13.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share: Continuing Operations
|
|
$4.32
|
|
$0.40
|
|
$0.56
|
|
$5.28
|
|
|
* 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, amortization of prior service
cost and insolvency insurance. 2017 adjustments were recast to reflect
the adoption of the FASB guidance on net benefit cost. ***
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)
|
|
|
|
2018
|
EPS Guidance
|
|
Expectations
|
GAAP Diluted EPS
|
|
|
at least $11.60
|
Operating EPS (non-GAAP)
|
|
|
at least $13.80
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
Acquisition-related Charges *
|
|
|
$0.78
|
Non-Operating Retirement-Related Items
|
|
|
$1.32
|
Tax Reform One-time Charge
|
|
|
$0.10
|
|
|
|
|
* Includes acquisitions as of June 30, 2018
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20180718005837/en/
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