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International Business Machines 8-K 2011

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report:  October 17, 2011

(Date of earliest event reported)

 

INTERNATIONAL BUSINESS MACHINES
CORPORATION

(Exact name of registrant as specified in its charter)

 

New York

 

1-2360

 

13-0871985

(State of Incorporation)

 

(Commission File Number)

 

(IRS employer Identification No.)

 

ARMONK, NEW YORK

 

10504

(Address of principal executive offices)

 

(Zip Code)

 

914-499-1900

(Registrant’s telephone number)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 2.02.   Results of Operations and Financial Condition.

 

The registrant’s press release dated October 17, 2011, regarding its financial results for the periods ended September 30, 2011, including consolidated financial statements for the periods ended September 30, 2011, is Attachment I of this Form 8-K.  Attachment II are the slides for IBM’s Chief Financial Officer Mark Loughridge’s third quarter earnings presentation on October 17, 2011, as well as certain reconciliation and other information (“Non-GAAP Supplementary Materials”) for information in Attachment I (press release), Attachment II (slides) and in Mr. Loughridge’s presentation. All of the information in Attachment I and II is hereby filed.

 

IBM’s web site (www.ibm.com) contains a significant amount of information about IBM, including financial and other information for investors (www.ibm.com/investor/).  IBM encourages investors to visit its various web sites from time to time, as information is updated and new information is posted.

 

2



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

 

Date: October 17, 2011

 

 

 

 

By:

/s/ James J. Kavanaugh

 

 

 

 

 

James J. Kavanaugh

 

 

Vice President and Controller

 

3



 

ATTACHMENT I

 

IBM REPORTS 2011 THIRD-QUARTER RESULTS

 

·                     Diluted EPS:

·       GAAP: $3.19, up 13 percent;

·       Operating (non-GAAP): $3.28, up 15 percent;

·                     Revenue: $26.2 billion, up 8 percent, up 3 percent adjusting for currency;

·                     Net income:

·                      GAAP: $3.8 billion, up 7 percent;

·                      Operating (non-GAAP): $4.0 billion, up 9 percent;

·                     Pre-tax income:

·                      GAAP: $5.0 billion, up 7 percent;

·                      Operating (non-GAAP): $5.2 billion, up 10 percent;

·                     Gross profit margin:

·                      GAAP: 46.5 percent, up 1.2 points;

·                      Operating (non-GAAP): 46.8 percent, up 1.5 points;

·                     Software revenue up 13 percent, 8 percent adjusting for currency;

·                     Services revenue up 8 percent, 2 percent adjusting for currency;

·                      Services backlog of $137 billion, up $2.4 billion;

·                     Systems and Technology revenue up 4 percent, 1 percent adjusting for currency:

·                      Power Systems up 15 percent;

·                     Growth markets revenue up 19 percent, 13 percent adjusting for currency;

·                     Business analytics revenue up 19 percent year to date;

·                     Smarter Planet revenue up 50 percent year to date;

·                     Cloud revenue year to date has doubled full-year 2010 revenue;

·                     Full-year 2011 Operating (non-GAAP) EPS expectations raised to at least $13.35 from at least $13.25.

 

ARMONK, N.Y., October 17, 2011 . . . IBM (NYSE: IBM) today announced third-quarter 2011 diluted earnings of $3.19 per share, compared with diluted earnings of $2.82 per share in the third quarter of 2010, an increase of 13 percent.  Operating (non-GAAP) diluted earnings were $3.28 per share, compared with operating diluted earnings of $2.85 per share in the third quarter of 2010, an increase of 15 percent.

 

Third-quarter net income was $3.8 billion compared with $3.6 billion in the third quarter of 2010, an increase of 7 percent.  Operating (non-GAAP) net income was $4.0 billion compared with $3.6 billion in the third quarter of 2010, an increase of 9 percent.

 

Total revenues for the third quarter of 2011 of $26.2 billion increased 8 percent (3 percent, adjusting for currency) from the third quarter of 2010.

 

“In the third quarter, we drove revenue growth, margin expansion and increased earnings as a result of our innovation-based strategy and continued investment in growth initiatives,” said Samuel J. Palmisano, IBM chairman, president and chief executive officer.  “Growth markets delivered outstanding revenue performance across software, hardware, and services and contributed to the company’s expanded margins.  We also achieved strong results in Smarter Planet, business analytics and cloud.

 

“Based on this performance, we are raising our 2011 full-year operating earnings per share expectations to at least $13.35.”

 

Third-Quarter GAAP - Operating (non-GAAP) Reconciliation

 

Third-quarter operating (non-GAAP) diluted earnings exclude $0.09 per share of net charges: $0.11 per share for the amortization of purchased intangible assets and other acquisition-related charges, offset by ($0.01) per share for retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.

 



 

Full-Year 2011 Expectations

 

IBM raised its expectations for full-year 2011 GAAP diluted earnings per share to at least $12.95 from at least $12.87; and operating (non-GAAP) diluted earnings per share to at least $13.35 from at least $13.25.  The 2011 operating (non-GAAP) earnings exclude $0.40 per share of charges for amortization of purchased intangible assets, other acquisition-related charges, and retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.

 

Geographic Regions

 

The Americas’ third-quarter revenues were $10.9 billion, an increase of 7 percent (6 percent, adjusting for currency) from the 2010 period.  Revenues from Europe/Middle East/Africa were $8.0 billion, up 9 percent (flat, adjusting for currency).  Asia-Pacific revenues increased 10 percent (1 percent, adjusting for currency) to $6.5 billion.  OEM revenues were $743 million, down 8 percent (8 percent, adjusting for currency) compared with the 2010 third quarter.

 

Growth Markets

 

Revenues from the company’s growth markets increased 19 percent (13 percent, adjusting for currency).  Revenues in the BRIC countries — Brazil, Russia, India and China — increased 17 percent (13 percent, adjusting for currency).  Growth markets revenue represents 23 percent of IBM’s total geographic revenue for the third quarter.

 

Services

 

Total Global Services revenues increased 8 percent (2 percent, adjusting for currency).  Global Technology Services segment revenues increased 9 percent (3 percent, adjusting for currency) to $10.3 billion.  Global Business Services segment revenues were up 6 percent (flat, adjusting for currency) at $4.8 billion.

 

Total Global Services pre-tax income increased to $2.5 billion, up 13 percent year over year.  Pre-tax income from both Global Technology Services and Global Business Services also increased 13 percent.

 

The estimated services backlog at September 30 was $137 billion, up $2.4 billion year over year at actual rates ($2.3 billion, adjusting for currency).  Services backlog at the end of a quarter measures the current value of work under contract expected to be recognized as revenue in future quarters.

 

Software

 

Revenues from the Software segment were $5.8 billion, an increase of 13 percent (8 percent, adjusting for currency).  Software pre-tax income of $2.2 billion was up 12 percent year over year.

 

Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Lotus and Rational products, were $3.6 billion, an increase of 17 percent (12 percent, adjusting for currency) versus the third quarter of 2010.  Operating systems revenues of $598 million increased 9 percent (4 percent, adjusting for currency) compared with the prior-year quarter.

 

Revenues from the WebSphere family of software products increased 52 percent year over year.  Information Management software revenues increased 12 percent.  Revenues from Tivoli software increased 8 percent.  Revenues from Lotus software increased 6 percent, and Rational software increased 7 percent.

 

Hardware

 

Revenues from the Systems and Technology segment totaled $4.5 billion for the quarter, up 4 percent (1 percent, adjusting for currency) from the third quarter of 2010.  Systems and Technology pre-tax income was $318 million, an increase of 8 percent year over year.

 

Systems revenues increased 6 percent (2 percent, adjusting for currency).  Revenues from Power Systems increased 15 percent compared with the 2010 period.  Revenues from System x increased 1 percent.  Revenues from System z mainframe server products decreased 5 percent compared with the year-ago period.  Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), decreased 11 percent.  Revenues from System Storage increased 8 percent, and revenues

 



 

from Retail Store Solutions increased 14 percent year over year.  Revenues from Microelectronics OEM decreased 6 percent.

 

Financing

 

Global Financing segment revenues decreased 2 percent (6 percent, adjusting for currency) in the third quarter to $520 million.  Pre-tax income for the segment decreased 4 percent to $481 million.

 

***

 

The company’s total gross profit margin was 46.5 percent in the 2011 third quarter compared with 45.3 percent in the 2010 third-quarter period.  Total operating (non-GAAP) gross profit margin was 46.8 percent in the 2011 third quarter compared with 45.4 percent in the 2010 third-quarter period, with increases in Software, Services and Systems and Technology.

 

Total expense and other income increased 13 percent to $7.1 billion compared with the prior-year period.  S,G&A expense of $5.7 billion increased 10 percent compared with prior-year expense.  R,D&E expense of $1.5 billion increased 6 percent compared with the year-ago period.  Intellectual property and custom development income increased to $298 million compared with $278 million a year ago.  Other (income) and expense was expense of $128 million compared with prior-year income of $106 million.  Interest expense increased to $107 million compared with $95 million in the prior year.

 

Total operating (non-GAAP) expense and other income increased 12 percent to $7.1 billion compared with the prior-year period.  Operating (non-GAAP) S,G&A expense of $5.6 billion increased 10 percent year over year compared with prior-year expense.  Operating (non-GAAP) R,D&E expense of $1.6 billion increased 5 percent compared with the year-ago period.

 

Pre-tax income increased 7 percent to $5.0 billion, and pre-tax margin was 19.2 percent, down 0.1 points.  Operating (non-GAAP) pre-tax income increased 10 percent to $5.2 billion and pre-tax margin was 19.8 percent, up 0.4 points.

 

IBM’s tax rate was 23.6 percent, up 0.4 points year over year; operating (non-GAAP) tax rate was also 23.6 percent, up 0.6 points.

 

Net income margin decreased 0.1 points to 14.7 percent.  Operating (non-GAAP) net income margin increased 0.2 points to 15.1 percent.

 

The weighted-average number of diluted common shares outstanding in the third-quarter 2011 was 1.20 billion compared with 1.27 billion shares in the same period of 2010.  As of September 30, 2011, there were 1.18 billion basic common shares outstanding.

 

Debt, including Global Financing, totaled $30.2 billion, compared with $28.6 billion at year-end 2010.  From a management segment view, Global Financing debt totaled $22.8 billion versus $22.8 billion at year-end 2010, resulting in a debt-to-equity ratio of 7.1 to 1.  Non-global financing debt totaled $7.4 billion, an increase of $1.6 billion since year-end 2010, resulting in a debt-to-capitalization ratio of 27.8 percent from 22.6 percent.

 

IBM ended the third-quarter 2011 with $11.3 billion of cash on hand and generated free cash flow of $3.5 billion, up approximately $300 million year over year.  The company returned $4.3 billion to shareholders through $0.9 billion in dividends and $3.4 billion of share repurchases.  The balance sheet remains strong, and the company is well positioned to support the business over the long term.

 

Year-To-Date 2011 Results

 

Net income for the nine months ended September 30, 2011 was $10.4 billion compared with $9.6 billion in the year-ago period, an increase of 8 percent.  Diluted earnings per share were $8.48 compared with $7.38 per diluted share for the 2010 period, an increase of 15 percent.  Revenues for the nine-month period totaled $77.4 billion, an increase of 9 percent (4 percent, adjusting for currency) compared with $70.9 billion for the nine months of 2010.

 

Operating (non-GAAP) net income for the nine months ended September 30, 2011 was $10.7 billion compared with $9.7 billion in the year-ago period, an increase of 11

 



 

percent.  Operating (non-GAAP) diluted earnings per share were $8.77 compared with $7.45 per diluted share for the 2010 period, an increase of 18 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 corporate IT 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; breaches of data security; fluctuations in financial results and purchases, 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 and alliances; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company’s Form 10-Q, 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 and expectations –

 

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

·                 presenting non-global financing debt-to-capitalization ratio;

·                  adjusting for free cash flow;

·                  adjusting for currency (i.e., at constant currency).

 

The rationale for management’s use of non-GAAP measures is included as part of the supplementary materials presented within the third-quarter earnings materials.  These materials are available on the IBM investor relations Web site at www.ibm.com/investor and are being included in Attachment II (“Non-GAAP Supplementary 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 4:30 p.m. EDT, today.  Investors may participate by viewing the Webcast at www.ibm.com/investor/3q11.  Presentation charts will be available on the Web site 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
September 30,

 

Nine Months Ended
September 30,

 

 

 

2011

 

2010*

 

Percent
Change

 

2011

 

2010*

 

Percent
Change

 

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Technology Services

 

$

10,322

 

$

9,496

 

8.7

%

$

30,427

 

$

28,036

 

8.5

%

Gross margin

 

35.7

%

35.1

%

 

 

34.5

%

34.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Business Services

 

4,832

 

4,572

 

5.7

%

14,407

 

13,465

 

7.0

%

Gross margin

 

29.4

%

28.6

%

 

 

28.6

%

28.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

5,817

 

5,151

 

12.9

%

17,295

 

15,447

 

12.0

%

Gross margin

 

88.1

%

87.9

%

 

 

87.9

%

87.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Systems and Technology

 

4,482

 

4,325

 

3.6

%

13,182

 

11,696

 

12.7

%

Gross margin

 

39.8

%

36.4

%

 

 

39.5

%

35.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Financing

 

520

 

529

 

-1.7

%

1,555

 

1,610

 

-3.4

%

Gross margin

 

47.4

%

53.3

%

 

 

49.9

%

51.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

182

 

199

 

-8.3

%

563

 

599

 

-5.9

%

Gross margin

 

-48.3

%

-10.8

%

 

 

-66.7

%

-13.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL REVENUE

 

26,157

 

24,271

 

7.8

%

77,430

 

70,852

 

9.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

12,173

 

11,001

 

10.6

%

35,416

 

31,787

 

11.4

%

Gross margin

 

46.5

%

45.3

%

 

 

45.7

%

44.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSE AND OTHER INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

S,G&A

 

5,662

 

5,149

 

10.0

%

17,518

 

15,886

 

10.3

%

% of revenue

 

21.6

%

21.2

%

 

 

22.6

%

22.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R,D&E

 

1,546

 

1,464

 

5.6

%

4,703

 

4,448

 

5.7

%

% of revenue

 

5.9

%

6.0

%

 

 

6.1

%

6.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intellectual property and custom development income

 

(298

)

(278

)

7.2

%

(855

)

(836

)

2.2

%

Other (income) and expense

 

128

 

(106

)

nm

 

23

 

(746

)

nm

 

Interest expense

 

107

 

95

 

13.5

%

298

 

267

 

11.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL EXPENSE AND OTHER INCOME

 

7,146

 

6,324

 

13.0

%

21,687

 

19,019

 

14.0

%

% of revenue

 

27.3

%

26.1

%

 

 

28.0

%

26.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

5,027

 

4,677

 

7.5

%

13,729

 

12,767

 

7.5

%

Pre-tax margin

 

19.2

%

19.3

%

 

 

17.7

%

18.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

1,188

 

1,088

 

9.2

%

3,364

 

3,192

 

5.4

%

Effective tax rate

 

23.6

%

23.3

%

 

 

24.5

%

25.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$

3,839

 

$

3,589

 

7.0

%

$

10,365

 

$

9,576

 

8.2

%

Net margin

 

14.7

%

14.8

%

 

 

13.4

%

13.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE OF COMMON STOCK:

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSUMING DILUTION

 

$

3.19

 

$

2.82

 

13.1

%

$

8.48

 

$

7.38

 

14.9

%

BASIC

 

$

3.23

 

$

2.86

 

12.9

%

$

8.60

 

$

7.49

 

14.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUT- STANDING (M’s):

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSUMING DILUTION

 

1,204.9

 

1,272.8

 

 

 

1,222.1

 

1,297.0

 

 

 

BASIC

 

1,188.6

 

1,255.2

 

 

 

1,205.2

 

1,278.3

 

 

 

 


nm — not meaningful

 

*  Segment gross profit margins in 2010 reclassified to conform with 2011 presentation.

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(Unaudited)

 

(Dollars in Millions)

 

At
September 30,
2011

 

At
December 31,
2010

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

11,303

 

$

10,661

 

Marketable securities

 

 

990

 

Notes and accounts receivable - trade

 

 

 

 

 

(net of allowances of $282 in 2011 and $324 in 2010)

 

9,719

 

10,834

 

Short-term financing receivables

 

 

 

 

 

(net of allowances of $266 in 2011 and $342 in 2010)

 

14,145

 

16,257

 

Other accounts receivable

 

 

 

 

 

(net of allowances of $11 in 2011 and $10 in 2010)

 

1,123

 

1,134

 

Inventories, at lower of average cost or market:

 

 

 

 

 

Finished goods

 

618

 

432

 

Work in process and raw materials

 

2,045

 

2,018

 

Total inventories

 

2,663

 

2,450

 

Deferred taxes

 

1,247

 

1,564

 

Prepaid expenses and other current assets

 

5,172

 

4,226

 

Total Current Assets

 

45,373

 

48,116

 

 

 

 

 

 

 

Plant, rental machines, and other property

 

40,139

 

40,289

 

Less: Accumulated depreciation

 

26,252

 

26,193

 

Plant, rental machines, and other property - net

 

13,887

 

14,096

 

Long-term financing receivables

 

 

 

 

 

(net of allowances of $37 in 2011 and $58 in 2010)

 

9,830

 

10,548

 

Prepaid pension assets

 

5,131

 

3,068

 

Deferred taxes

 

2,570

 

3,220

 

Goodwill

 

24,913

 

25,136

 

Intangible assets - net

 

3,033

 

3,488

 

Investments and sundry assets

 

5,422

 

5,778

 

Total Assets

 

$

110,158

 

$

113,452

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Taxes

 

$

2,360

 

$

4,216

 

Short-term debt

 

6,071

 

6,778

 

Accounts payable

 

7,093

 

7,804

 

Compensation and benefits

 

4,826

 

5,028

 

Deferred income

 

11,252

 

11,580

 

Other accrued expenses and liabilities

 

4,426

 

5,156

 

Total Current Liabilities

 

36,028

 

40,562

 

 

 

 

 

 

 

Long-term debt

 

24,089

 

21,846

 

Retirement and nonpension postretirement benefit obligations

 

15,375

 

15,978

 

Deferred income

 

3,634

 

3,666

 

Other liabilities

 

8,654

 

8,226

 

Total Liabilities

 

87,781

 

90,279

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

IBM Stockholders’ Equity:

 

 

 

 

 

Common stock

 

47,558

 

45,418

 

Retained earnings

 

100,266

 

92,532

 

Treasury stock — at cost

 

(107,434

)

(96,161

)

Accumulated other comprehensive income/(loss)

 

(18,099

)

(18,743

)

Total IBM stockholders’ equity

 

22,291

 

23,046

 

 

 

 

 

 

 

Noncontrolling interests

 

87

 

126

 

Total Equity

 

22,378

 

23,172

 

Total Liabilities and Equity

 

$

110,158

 

$

113,452

 

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

(Unaudited)

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

(Dollars in Millions)

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Net Cash from Operating Activities per GAAP:

 

$

4,678

 

$

4,551

 

$

12,750

 

$

12,754

 

 

 

 

 

 

 

 

 

 

 

Less: the change in Global Financing (GF) Receivables

 

207

 

374

 

2,110

 

2,257

 

 

 

 

 

 

 

 

 

 

 

Net Cash from Operating Activities

 

 

 

 

 

 

 

 

 

(Excluding GF Receivables)

 

4,471

 

4,177

 

10,640

 

10,497

 

 

 

 

 

 

 

 

 

 

 

Capital Expenditures, Net

 

(991

)

(1,007

)

(3,000

)

(2,881

)

 

 

 

 

 

 

 

 

 

 

Free Cash Flow

 

 

 

 

 

 

 

 

 

(Excluding GF Receivables)

 

3,481

 

3,169

 

7,640

 

7,616

 

 

 

 

 

 

 

 

 

 

 

Acquisitions

 

(64

)

(1,984

)

(223

)

(2,993

)

Divestitures

 

0

 

0

 

4

 

0

 

Dividends

 

(893

)

(818

)

(2,593

)

(2,369

)

Share Repurchase

 

(3,444

)

(3,653

)

(11,465

)

(11,774

)

Non-GF Debt

 

86

 

273

 

1,093

 

1,534

 

Other (includes GF Receivables, and GF Debt)

 

374

 

1,858

 

5,196

 

5,099

 

 

 

 

 

 

 

 

 

 

 

Change in Cash, Cash Equivalents and Short-term Marketable Securities

 

$

(461

)

$

(1,154

)

$

(348

)

$

(2,887

)

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)

 

 

 

THIRD-QUARTER 2011

 

 

 

Revenue

 

Pre-tax

 

Pre-tax

 

(Dollars in Millions)

 

External

 

Internal

 

Total

 

Income

 

Margin

 

SEGMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Technology Services

 

$

10,322

 

$

316

 

$

10,638

 

$

1,695

 

15.9

%

Y-T-Y change

 

8.7

%

-12.6

%

7.9

%

12.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Business Services

 

4,832

 

199

 

5,031

 

775

 

15.4

%

Y-T-Y change

 

5.7

%

0.1

%

5.5

%

12.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

5,817

 

804

 

6,621

 

2,214

 

33.4

%

Y-T-Y change

 

12.9

%

10.4

%

12.6

%

12.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Systems and Technology

 

4,482

 

190

 

4,672

 

318

 

6.8

%

Y-T-Y change

 

3.6

%

-3.2

%

3.3

%

7.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Financing

 

520

 

480

 

999

 

481

 

48.2

%

Y-T-Y change

 

-1.7

%

10.9

%

4.0

%

-4.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL REPORTABLE SEGMENTS

 

$

25,974

 

$

1,989

 

$

27,963

 

$

5,484

 

19.6

%

Y-T-Y change

 

7.9

%

3.7

%

7.6

%

10.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eliminations / Other

 

182

 

(1,989

)

(1,806

)

(457

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL IBM CONSOLIDATED

 

$

26,157

 

$

0

 

$

26,157

 

$

5,027

 

19.2

%

Y-T-Y change

 

7.8

%

 

 

7.8

%

7.5

%

 

 

 

 

 

THIRD-QUARTER 2010

 

 

 

Revenue

 

Pre-tax

 

Pre-tax

 

(Dollars in Millions)

 

External

 

Internal

 

Total

 

Income*

 

Margin*

 

SEGMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Technology Services

 

$

9,496

 

$

362

 

$

9,857

 

$

1,506

 

15.3

%

 

 

 

 

 

 

 

 

 

 

 

 

Global Business Services

 

4,572

 

199

 

4,771

 

687

 

14.4

%

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

5,151

 

728

 

5,879

 

1,978

 

33.6

%

 

 

 

 

 

 

 

 

 

 

 

 

Systems and Technology

 

4,325

 

196

 

4,521

 

295

 

6.5

%

 

 

 

 

 

 

 

 

 

 

 

 

Global Financing

 

529

 

432

 

961

 

502

 

52.2

%

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL REPORTABLE SEGMENTS

 

$

24,072

 

$

1,917

 

$

25,990

 

$

4,968

 

19.1

%

 

 

 

 

 

 

 

 

 

 

 

 

Eliminations / Other

 

199

 

(1,917

)

(1,718

)

(291

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL IBM CONSOLIDATED

 

$

24,271

 

$

0

 

$

24,271

 

$

4,677

 

19.3

%

 


* Reclassified to conform with 2011 presentation.

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)

 

 

 

NINE-MONTHS 2011

 

 

 

Revenue

 

Pre-tax

 

Pre-tax

 

(Dollars in Millions)

 

External

 

Internal

 

Total

 

Income

 

Margin

 

SEGMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Technology Services

 

$

30,427

 

$

943

 

$

31,370

 

$

4,353

 

13.9

%

Y-T-Y change

 

8.5

%

-7.0

%

8.0

%

12.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Business Services

 

14,407

 

604

 

15,012

 

2,166

 

14.4

%

Y-T-Y change

 

7.0

%

0.9

%

6.7

%

19.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

17,295

 

2,425

 

19,720

 

6,260

 

31.7

%

Y-T-Y change

 

12.0

%

11.4

%

11.9

%

1.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Systems and Technology

 

13,182

 

652

 

13,834

 

843

 

6.1

%

Y-T-Y change

 

12.7

%

14.1

%

12.8

%

197.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Financing

 

1,555

 

1,524

 

3,078

 

1,497

 

48.6

%

Y-T-Y change

 

-3.4

%

20.3

%

7.0

%

7.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL REPORTABLE SEGMENTS

 

$

76,866

 

$

6,148

 

$

83,015

 

$

15,118

 

18.2

%

Y-T-Y change

 

9.4

%

9.3

%

9.4

%

11.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eliminations / Other

 

563

 

(6,148

)

(5,585

)

(1,389

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL IBM CONSOLIDATED

 

$

77,430

 

$

0

 

$

77,430

 

$

13,729

 

17.7

%

Y-T-Y change

 

9.3

%

 

 

9.3

%

7.5

%

 

 

 

 

 

NINE-MONTHS 2010

 

 

 

Revenue

 

Pre-tax

 

Pre-tax

 

(Dollars in Millions)

 

External

 

Internal

 

Total

 

Income*

 

Margin*

 

SEGMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Technology Services

 

$

28,036

 

$

1,014

 

$

29,050

 

$

3,863

 

13.3

%

 

 

 

 

 

 

 

 

 

 

 

 

Global Business Services

 

13,465

 

599

 

14,064

 

1,811

 

12.9

%

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

15,447

 

2,176

 

17,623

 

6,167

 

35.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Systems and Technology

 

11,696

 

572

 

12,267

 

283

 

2.3

%

 

 

 

 

 

 

 

 

 

 

 

 

Global Financing

 

1,610

 

1,267

 

2,877

 

1,391

 

48.3

%

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL REPORTABLE SEGMENTS

 

$

70,253

 

$

5,627

 

$

75,880

 

$

13,514

 

17.8

%

 

 

 

 

 

 

 

 

 

 

 

 

Eliminations / Other

 

599

 

(5,627

)

(5,028

)

(747

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL IBM CONSOLIDATED

 

$

70,852

 

$

0

 

$

70,852

 

$

12,767

 

18.0

%

 


* Reclassified to conform with 2011 presentation.

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

U.S. GAAP TO OPERATING RESULTS RECONCILIATION

(Unaudited, Dollars in millions except per share amounts)

 

 

 

THIRD-QUARTER 2011

 

 

 

 

 

Acquisition-

 

Retirement-

 

 

 

 

 

 

 

Related

 

Related

 

Operating

 

 

 

GAAP

 

Adjustments*

 

Adjustments

 

(Non-GAAP)

 

Gross Profit

 

$

12,173

 

$

87

 

$

(7

)

$

12,253

 

 

 

 

 

 

 

 

 

 

 

Gross Profit Margin

 

46.5

%

0.3Pts

 

0.0Pts

 

46.8

%

 

 

 

 

 

 

 

 

 

 

S,G&A

 

5,662

 

(75

)

(0

)

5,587

 

 

 

 

 

 

 

 

 

 

 

R,D&E

 

1,546

 

0

 

22

 

1,568

 

 

 

 

 

 

 

 

 

 

 

Other (Income) & Expense

 

128

 

(18

)

0

 

111

 

 

 

 

 

 

 

 

 

 

 

Total Expense & Other (Income)

 

7,146

 

(92

)

21

 

7,075

 

 

 

 

 

 

 

 

 

 

 

Pre-Tax Income

 

5,027

 

180

 

(29

)

5,178

 

 

 

 

 

 

 

 

 

 

 

Pre-Tax Income Margin

 

19.2

%

0.7Pts

 

-0.1Pts

 

19.8

%

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes**

 

1,188

 

47

 

(11

)

1,224

 

 

 

 

 

 

 

 

 

 

 

Effective Tax Rate

 

23.6

%

0.1Pts

 

-0.1Pts

 

23.6

%

 

 

 

 

 

 

 

 

 

 

Net Income

 

3,839

 

133

 

(17

)

3,954