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International Business Machines 8-K 2014

 

 

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: January 21, 2014

(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 January 21, 2014, regarding its financial results for the periods ended December 31, 2013, including consolidated financial statements for the periods ended December 31, 2013, is Attachment I of this Form 8-K.  Attachment II are the slides for IBM’s Chief Financial Officer Martin Schroeter’s fourth quarter earnings presentation on January 21, 2014, as well as certain reconciliation and other information (“Non-GAAP Supplemental Materials”) for information in Attachment I (press release), Attachment II (slides) and in Mr. Schroeter’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: January 21, 2014

 

 

 

 

 

 

By:

/s/ James J. Kavanaugh

 

 

 

 

 

     James J. Kavanaugh

 

 

Vice President and Controller

 

3



 

ATTACHMENT I

 

IBM REPORTS 2013 FOURTH-QUARTER AND FULL-YEAR RESULTS

 

Fourth-Quarter 2013:

 

·                  Diluted EPS:

·                  GAAP: $5.73, up 12 percent;

·                  Operating (non-GAAP): $6.13, up 14 percent;

·                  Net income:

·                  GAAP: $6.2 billion, up 6 percent;

·                  Operating (non-GAAP): $6.6 billion, up 8 percent;

·                  Pre-tax income:

·                  GAAP: $7.0 billion, down 11 percent;

·                  Operating (non-GAAP): $7.4 billion, down 8 percent;

·                  Gross profit margin:

·                  GAAP: 51.7 percent, down 0.1 points;

·                  Operating (non-GAAP): 52.6 percent, up 0.3 points;

·                  Revenue of $27.7 billion, down 5 percent, down 3 percent adjusting for currency;

·                  Software, Services and Global Financing each grew, adjusting for currency:

·                  Software up 3 percent, up 4 percent adjusting for currency;

·                  Services down 2 percent, up 1 percent adjusting for currency;

·                  Global Financing revenue flat, up 3 percent adjusting for currency;

·                  Systems and Technology revenue declined 26 percent, down 25 percent adjusting for currency;

·                  Services backlog of $143 billion, up 2 percent, up 5 percent adjusting for currency;

·                  Free cash flow of $8.4 billion.

 

Full-Year 2013:

 

·                  Diluted EPS:

·                  GAAP: $14.94, up 4 percent;

·                  Operating (non-GAAP): $16.28, up 7 percent;

·                  Operating (non-GAAP) excluding second-quarter workforce rebalancing charges, $16.99;

·                  Net income:

·                  GAAP: $16.5 billion, down 1 percent;

·                  Operating (non-GAAP): $18.0 billion, up 2 percent;

·                  Pre-tax income:

·                  Software, Services and Global Financing each increased segment profit:

·                  Software: $11.1 billion, up approximately $300 million;

·                  Services: $10.2 billion, up more than $250 million;

·                  Global Financing: $2.2 billion, up more than $100 million;

·                  Systems and Technology segment profit declined $1.7 billion, to a loss of more than $500 million;

·                  Revenue of $99.8 billion, down 5 percent, down 2 percent adjusting for currency;

·                  Business Analytics revenue of $15.7 billion, up 9 percent;

·                  Smarter Planet revenue up approximately 20 percent;

·                  Cloud revenue of $4.4 billion, up 69 percent:

·                  Fourth-quarter annual revenue run rate of more than $2 billion delivered as a service;

·                  Free cash flow of $15.0 billion.

 

Full-Year 2014 Expectation:

 

·                  GAAP EPS of at least $17.00. Operating (non-GAAP) EPS of at least $18.00 compared with $16.28 for 2013, an increase of more than 10 percent.

 

ARMONK, N.Y., January 21, 2014 . . . IBM (NYSE: IBM) today announced fourth-quarter 2013 diluted earnings of $5.73 per share, compared with diluted earnings of $5.13 per share in the fourth quarter of 2012, an increase of 12 percent.  Operating

 



 

(non-GAAP) diluted earnings were $6.13 per share, compared with operating diluted earnings of $5.39 per share in the fourth quarter of 2012, an increase of 14 percent.

 

Fourth-quarter net income, which includes benefits from tax audit settlements, was $6.2 billion compared with $5.8 billion in the fourth quarter of 2012, an increase of 6 percent.  Operating (non-GAAP) net income was $6.6 billion compared with $6.1 billion in the fourth quarter of 2012, an increase of 8 percent.

 

Total revenues for the fourth quarter of 2013 of $27.7 billion decreased 5 percent (down 3 percent adjusting for currency) from the fourth quarter of 2012.

 

“We continued to drive strong results across much of our portfolio and again grew earnings per share in 2013.  While we made solid progress in businesses that are powering our future, in view of the company’s overall full year results, my senior team and I have recommended that we forgo our personal annual incentive payments for 2013,” said Ginni Rometty, IBM chairman, president and chief executive officer.

 

“As we enter 2014, we will continue to transform our business and invest aggressively in the areas that will drive growth and higher value.  We remain on track toward our 2015 roadmap for operating EPS of at least $20, a step in our long-term strategy of industry leadership and continuous transformation.”

 

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

 

Fourth-quarter operating (non-GAAP) diluted earnings exclude $0.40 per share of net charges: $0.25 per share for the amortization of purchased intangible assets and other acquisition-related charges, and $0.15 per share for retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.

 

Full-Year 2014 Expectation

 

IBM said that it expects to deliver full-year 2014 GAAP earnings per share of at least $17.00; and operating (non-GAAP) earnings per share of at least $18.00.  The 2014 operating (non-GAAP) earnings exclude $1.00 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.

 

Software

 

Revenues from the Software segment were $8.1 billion, an increase of 3 percent (up 4 percent, adjusting for currency) from the fourth quarter of 2012.  Software pre-tax income of $4.2 billion increased 6 percent year over year.

 

Revenues from IBM’s key middleware products, which include WebSphere,  Information Management, Tivoli, Social Workforce Solutions and Rational products, were $5.8 billion, an increase of 5 percent (up 6 percent, adjusting for currency) versus the fourth quarter of 2012.  Operating systems revenues of $687 million were down 3 percent (down 2 percent, adjusting for currency) compared with the prior-year quarter.

 

Revenues from the WebSphere family of software products increased 14 percent year over year.  Information Management software revenues increased 5 percent.  Revenues from Tivoli software increased 1 percent.  Revenues from Social Workforce Solutions increased 2 percent, and Rational software was flat.

 

Services

 

Global Technology Services segment revenues decreased 4 percent (down 1 percent adjusting for currency) to $9.9 billion, from the fourth quarter of 2012.  Global Business Services segment revenues were up 1 percent (up 4 percent, adjusting for currency) to $4.7 billion.

 

Pre-tax income from Global Technology Services decreased 2 percent; pre-tax margin increased to 19.5 percent.  Global Business Services pre-tax income increased 12 percent; pre-tax margin increased to 19.1 percent.

 

The estimated services backlog at December 31 was $143 billion, up 2 percent (up 5 percent, adjusting for currency).

 



 

Financing

 

Global Financing segment revenues were flat (up 3 percent, adjusting for currency) in the fourth quarter at $534 million.  Pre-tax income for the segment increased 14 percent to $589 million.

 

Hardware

 

Revenues from the Systems and Technology segment totaled $4.3 billion for the quarter, down 26 percent from the fourth quarter of 2012.  Systems and Technology pre-tax income was $0.2 billion, a decrease of $768 million.

 

Total systems revenues decreased 25 percent.  Revenues from System z mainframe server products decreased 37 percent compared with the year-ago period.  Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), decreased 26 percent versus the prior year.  Revenues from Power Systems decreased 31 percent compared with the 2012 period.  Revenues from System x decreased 16 percent.  Revenues from System Storage decreased 13 percent.  Revenues from Microelectronics OEM decreased 33 percent.

 

Geographic Regions

 

The Americas’ fourth-quarter revenues were $12.2 billion, down 3 percent (down 2 percent, adjusting for currency) from the 2012 period.  Revenues from Europe/Middle East/Africa were $9.2 billion, up 1 percent (down 2 percent, adjusting for currency).  Asia-Pacific revenues decreased 16 percent (down 6 percent, adjusting for currency) to $5.9 billion.  OEM revenues were $452 million, down 33 percent compared with the 2012 fourth quarter.

 

Growth Markets

 

Revenues from the company’s growth markets decreased 9 percent (down 6 percent, adjusting for currency).  Revenues in the BRIC countries — Brazil, Russia, India and China — decreased 14 percent (down 11 percent, adjusting for currency).

 

Gross Profit

 

The company’s total gross profit margin was 51.7 percent in the 2013 fourth quarter compared with 51.8 percent in the 2012 fourth-quarter period.  Total operating (non-GAAP) gross profit margin was 52.6 percent in the 2013 fourth quarter compared with 52.3 percent in the 2012 fourth-quarter period, driven by an increase in Services and a mix to Software.

 

Expense

 

Total expense and other income was flat at $7.4 billion compared with the prior-year period.  S,G&A expense of $6.0 billion increased 1 percent year over year compared with prior-year expense.  R,D&E expense of $1.6 billion decreased 1 percent compared with the year-ago period.  Intellectual property and custom development income decreased to $201 million compared with $227 million a year ago.  Other (income) and expense was income of $113 million compared with prior-year income of $47 million.  Interest expense increased to $113 million compared with $109 million in the prior year.

 

Total operating (non-GAAP) expense and other income decreased 1 percent to $7.1 billion compared with the prior-year period.  Operating (non-GAAP) S,G&A expense of $5.8 billion was flat compared with prior-year expense.  Operating (non-GAAP) R,D&E expense of $1.6 billion decreased 2 percent compared with the year-ago period.

 

***

 

Pre-tax income decreased 11 percent to $7.0 billion; total operating (non-GAAP) pre-tax income decreased 8 percent to $7.4 billion.  Pre-tax margin was 25.1 percent, down 1.6 points; total operating (non-GAAP) pre-tax margin was 26.8 percent, down 0.8 points.

 

IBM’s tax rate was 11.2 percent, down 14.3 points year over year; total operating (non-GAAP) tax rate was 11.0 percent, down 13.5 points compared to the year-ago period, due to discrete period tax items, including benefits from tax audit settlements.

 

Net income margin increased 2.4 points to 22.3 percent; total operating

 



 

(non-GAAP) net income margin was 23.9 percent, an increase of 3.0 points.

 

The weighted-average number of diluted common shares outstanding in the fourth-quarter 2013 was 1.08 billion compared with 1.14 billion shares in the same period of 2012.

 

In the quarter, IBM generated free cash flow of $8.4 billion excluding Global Financing receivables, down $1.1 billion year over year.

 

Full-Year 2013 Results

 

Net income for the year ended December 31, 2013 was $16.5 billion compared with $16.6 billion in the prior year, a decrease of 1 percent.  Operating (non-GAAP) net income was $18.0 billion compared with $17.6 billion in 2012, an increase of 2 percent.

 

Diluted earnings were $14.94 per share compared with $14.37 per diluted share in 2012, an increase of 4 percent.  Operating (non-GAAP) diluted earnings were $16.28 per share, compared with operating diluted earnings of $15.25 per share in 2012, an increase of 7 percent.  Operating (non-GAAP) diluted earnings per share, excluding second-quarter workforce rebalancing charges, were $16.99.

 

Revenues for 2013 totaled $99.8 billion, a decrease of 5 percent (down 2 percent adjusting for currency), compared with $104.5 billion in 2012.

 

GAAP - Operating (non-GAAP) Reconciliation

 

Operating (non-GAAP) diluted earnings for the year exclude $1.34 per share of net charges: $0.68 per share for the amortization of purchased intangible assets and other acquisition-related charges, and $0.66 per share for retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.

 

Geographic Regions

 

From a geographic perspective, the Americas’ full-year revenues were $43.2 billion, a decrease of 3 percent (down 2 percent adjusting for currency) from the 2012 period.  Revenues from Europe/Middle East/Africa were $31.6 billion, flat year to year (down 2 percent, adjusting for currency).  Asia-Pacific revenues decreased 12 percent to $22.9 billion (down 3 percent adjusting for currency).  OEM revenues were $2.0 billion, down 13 percent compared with 2012 (down 12 percent adjusting for currency).

 

Growth Markets

 

Revenues from the company’s growth markets decreased 5 percent (down 2 percent, adjusting for currency), and represents 23 percent of IBM’s total geographic revenue.  Revenues in the BRIC countries — Brazil, Russia, India and China — decreased 8 percent (down 6 percent, adjusting for currency).

 

Segments

 

Software segment revenues in 2013 totaled $25.9 billion, an increase of 2 percent (up 3 percent, adjusting for currency).  Total Global Services revenues decreased 3 percent (flat adjusting for currency).  Revenues from the Global Technology Services segment totaled $38.6 billion, a decrease of 4 percent (down 1 percent, adjusting for currency) compared with 2012.  Revenues from the Global Business Services segment were $18.4 billion, down 1 percent (up 3 percent, adjusting for currency).  Global Financing segment revenues totaled $2.0 billion, flat year to year (up 3 percent, adjusting for currency).  Systems and Technology segment revenues were $14.4 billion, a decrease of 19 percent (down 18 percent, adjusting for currency).

 

***

 

The company’s total gross profit margin was 48.6 percent in 2013 compared with 48.1 percent in 2012.  Overall gross profit margins improved year over year for the 10th consecutive year.  Total operating (non-GAAP) gross profit margin was 49.7 percent in the 2013 period compared with 48.7 percent in the 2012 period, with an increase in Services and a mix to Software.

 

The weighted-average number of diluted common shares outstanding in 2013 was 1.10 billion compared with 1.16 billion shares in 2012.  As of December 31, 2013, there were 1.05 billion basic common shares outstanding.

 



 

Debt, including Global Financing, totaled $39.7 billion, compared with $33.3 billion at year-end 2012.  From a management segment view, Global Financing debt totaled $27.5 billion versus $24.5 billion at year-end 2012, resulting in a debt-to-equity ratio of 7.2 to 1.  Non-global financing debt totaled $12.2 billion, an increase of $3.4 billion since year-end 2012, resulting in a debt-to-capitalization ratio of 39.0 percent, up from 36.1 percent.

 

IBM ended 2013 with $11.1 billion of cash on hand and generated free cash flow of $15.0 billion excluding Global Financing receivables, down approximately $3.2 billion year over year.  The company returned $17.9 billion to shareholders through $4.1 billion in dividends and $13.9 billion of gross share repurchases.  The company’s balance sheet remains strong and is well positioned to support the business over the long term.

 

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; cybersecurity and data privacy considerations; 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-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 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);

·             adjusting for workforce rebalancing.

 

The rationale for management’s use of non-GAAP measures is included as part of the supplementary materials presented within the fourth-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. EST, today.  The Webcast may be accessed via a link at http://www.ibm.com/investor/events/4q13.phtml.  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

(Dollars in millions except per share amounts)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

December 31,

 

December 31,

 

 

 

 

 

 

 

Percent

 

 

 

 

 

Percent

 

 

 

2013

 

2012

 

Change

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Technology Services

 

$

9,917

 

$

10,284

 

-3.6

%

$

38,551

 

$

40,236

 

-4.2

%

Gross profit margin

 

38.8

%

37.6

%

 

 

38.1

%

36.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Business Services

 

4,747

 

4,720

 

0.6

%

18,396

 

18,566

 

-0.9

%

Gross profit margin

 

30.7

%

29.9

%

 

 

30.9

%

30.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

8,140

 

7,915

 

2.8

%

25,932

 

25,448

 

1.9

%

Gross profit margin

 

90.5

%

90.6

%

 

 

88.8

%

88.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

System and Technology

 

4,261

 

5,763

 

-26.1

%

14,371

 

17,667

 

-18.7

%

Gross profit margin

 

38.6

%

44.1

%

 

 

35.6

%

39.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Financing

 

534

 

535

 

-0.1

%

2,022

 

2,013

 

0.4

%

Gross profit margin

 

43.3

%

43.8

%

 

 

45.6

%

46.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

100

 

87

 

15.2

%

478

 

577

 

-17.1

%

Gross profit margin

 

-234.8

%

-73.2

%

 

 

-195.6

%

-71.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL REVENUE

 

27,699

 

29,304

 

-5.5

%

99,751

 

104,507

 

-4.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

14,315

 

15,167

 

-5.6

%

48,505

 

50,298

 

-3.6

%

Gross profit margin

 

51.7

%

51.8

%

 

 

48.6

%

48.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSE AND OTHER INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

S,G&A

 

5,989

 

5,921

 

1.2

%

23,502

 

23,553

 

-0.2

%

Expense to revenue

 

21.6

%

20.2

%

 

 

23.6

%

22.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R,D&E

 

1,566

 

1,580

 

-0.9

%

6,226

 

6,302

 

-1.2

%

Expense to revenue

 

5.7

%

5.4

%

 

 

6.2

%

6.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intellectual property and custom development income

 

(201

)

(227

)

-11.5

%

(822

)

(1,074

)

-23.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (income) and expense

 

(113

)

(47

)

142.5

%

(327

)

(843

)

-61.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

113

 

109

 

3.6

%

402

 

459

 

-12.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL EXPENSE AND OTHER INCOME

 

7,353

 

7,336

 

0.2

%

28,981

 

28,396

 

2.1

%

Expense to revenue

 

26.5

%

25.0

%

 

 

29.1

%

27.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

6,962

 

7,831

 

-11.1

%

19,524

 

21,902

 

-10.9

%

Pre-tax margin

 

25.1

%

26.7

%

 

 

19.6

%

21.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

777

 

1,998

 

-61.1

%

3,041

 

5,298

 

-42.6

%

Effective tax rate

 

11.2

%

25.5

%

 

 

15.6

%

24.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$

6,185

 

$

5,833

 

6.0

%

$

16,483

 

$

16,604

 

-0.7

%

Net income margin

 

22.3

%

19.9

%

 

 

16.5

%

15.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE OF COMMON STOCK:

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSUMING DILUTION

 

$

5.73

 

$

5.13

 

11.7

%

$

14.94

 

$

14.37

 

4.0

%

BASIC

 

$

5.77

 

$

5.19

 

11.2

%

$

15.06

 

$

14.53

 

3.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSUMING DILUTION

 

1,080.0

 

1,136.4

 

 

 

1,103.0

 

1,155.4

 

 

 

BASIC

 

1,072.5

 

1,124.7

 

 

 

1,094.5

 

1,142.5

 

 

 

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

 

At

 

At

 

 

 

December 31,

 

December 31,

 

(Dollars in Millions)

 

2013

 

2012

 

 

 

 

 

 

 

ASSETS:

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

10,716

 

$

10,412

 

Marketable securities

 

350

 

717

 

Notes and accounts receivable - trade

 

 

 

 

 

(net of allowances of $291 in 2013 and $255 in 2012)

 

10,465

 

10,667

 

Short-term financing receivables

 

 

 

 

 

(net of allowances of $308 in 2013 and $288 in 2012)

 

19,787

 

18,038

 

Other accounts receivable

 

 

 

 

 

(net of allowances of $36 in 2013 and $17 in 2012)

 

1,584

 

1,873

 

Inventories, at lower of average cost or market:

 

 

 

 

 

Finished goods

 

444

 

475

 

Work in process and raw materials

 

1,866

 

1,812

 

 

 

 

 

 

 

Total inventories

 

2,310

 

2,287

 

Deferred taxes

 

1,651

 

1,415

 

Prepaid expenses and other current assets

 

4,488

 

4,024

 

 

 

 

 

 

 

Total Current Assets

 

51,350

 

49,433

 

 

 

 

 

 

 

Property, plant and equipment

 

40,475

 

40,501

 

Less: Accumulated depreciation

 

26,654

 

26,505

 

 

 

 

 

 

 

Property, plant and equipment - net

 

13,821

 

13,996

 

Long-term financing receivables

 

 

 

 

 

(net of allowances of $80 in 2013 and $66 in 2012)

 

12,755

 

12,812

 

Prepaid pension assets

 

5,551

 

945

 

Deferred taxes

 

3,051

 

3,973

 

Goodwill

 

31,184

 

29,247

 

Intangible assets - net

 

3,871

 

3,787

 

Investments and sundry assets

 

4,639

 

5,021

 

 

 

 

 

 

 

Total Assets

 

$

126,223

 

$

119,213

 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Taxes

 

$

4,633

 

$

4,948

 

Short-term debt

 

6,862

 

9,181

 

Accounts payable

 

7,461

 

7,952

 

Compensation and benefits

 

3,893

 

4,745

 

Deferred income

 

12,557

 

11,952

 

Other accrued expenses and liabilities

 

4,748

 

4,847

 

 

 

 

 

 

 

Total Current Liabilities

 

40,154

 

43,625

 

 

 

 

 

 

 

Long-term debt

 

32,856

 

24,088

 

Retirement and nonpension postretirement benefit obligations

 

16,242

 

20,418

 

Deferred income

 

4,108

 

4,491

 

Other liabilities

 

9,934

 

7,607

 

 

 

 

 

 

 

Total Liabilities

 

103,294

 

100,229

 

 

 

 

 

 

 

EQUITY:

 

 

 

 

 

 

 

 

 

 

 

IBM Stockholders’ Equity:

 

 

 

 

 

Common stock

 

51,594

 

50,110

 

Retained earnings

 

130,042

 

117,641

 

Treasury stock — at cost

 

(137,242

)

(123,131

)

Accumulated other comprehensive income/(loss)

 

(21,602

)

(25,759

)

 

 

 

 

 

 

Total IBM stockholders’ equity

 

22,792

 

18,860

 

 

 

 

 

 

 

Noncontrolling interests

 

137

 

124

 

 

 

 

 

 

 

Total Equity

 

22,929

 

18,984

 

 

 

 

 

 

 

Total Liabilities and Equity

 

$

126,223

 

$

119,213

 

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

December 31,

 

December 31,

 

(Dollars in Millions)

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Net Cash from Operating Activities per GAAP:

 

$

6,528

 

$

6,346

 

$

17,485

 

$

19,586

 

 

 

 

 

 

 

 

 

 

 

Less: the change in Global Financing (GF) Receivables

 

(2,932

)

(4,151

)

(1,304

)

(2,906

)

 

 

 

 

 

 

 

 

 

 

Net Cash from Operating Activities

 

 

 

 

 

 

 

 

 

(Excluding GF Receivables)

 

9,460

 

10,497

 

18,789

 

22,492

 

 

 

 

 

 

 

 

 

 

 

Capital Expenditures, Net

 

(1,059

)

(981

)

(3,768

)

(4,307

)

 

 

 

 

 

 

 

 

 

 

Free Cash Flow

 

 

 

 

 

 

 

 

 

(Excluding GF Receivables)

 

8,401

 

9,515

 

15,021

 

18,185

 

 

 

 

 

 

 

 

 

 

 

Acquisitions

 

(495

)

(1,455

)

(3,056

)

(3,722

)

Divestitures

 

50

 

13

 

297

 

599

 

Dividends

 

(1,025

)

(957

)

(4,058

)

(3,773

)

Share Repurchase

 

(5,797

)

(3,006

)

(13,859

)

(11,995

)

Non-GF Debt

 

1,637

 

(1,571

)

3,193

 

713

 

Other (includes GF Receivables, and GF Debt)

 

(1,937

)

(3,664

)

2,400

 

(802

)

 

 

 

 

 

 

 

 

 

 

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

 

$

834

 

$

(1,125

)

$

(63

)

$

(794

)

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

 

 

 

FOURTH-QUARTER 2013

 

 

 

 

 

 

 

 

 

Pre-tax

 

 

 

 

 

Revenue

 

Income/

 

Pre-tax

 

(Dollars in Millions)

 

External

 

Internal

 

Total

 

(Loss)

 

Margin

 

 

 

 

 

 

 

 

 

 

 

 

 

SEGMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Technology Services

 

$

9,917

 

$

262

 

$

10,179

 

$

1,989

 

19.5

%

Y-T-Y change

 

-3.6

%

-11.9

%

-3.8

%

-1.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Business Services

 

4,747

 

169

 

4,915

 

940

 

19.1

%

Y-T-Y change

 

0.6

%

-7.0

%

0.3

%

11.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

8,140

 

878

 

9,018

 

4,239

 

47.0

%

Y-T-Y change

 

2.8

%

7.7

%

3.3

%

5.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Systems and Technology

 

4,261

 

170

 

4,431

 

206

 

4.7

%

Y-T-Y change

 

-26.1

%

-8.4

%

-25.5

%

-78.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Financing

 

534

 

654

 

1,188

 

589

 

49.6

%

Y-T-Y change

 

-0.1

%

15.1

%

7.7

%

13.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL REPORTABLE SEGMENTS

 

$

27,599

 

$

2,133

 

$

29,732

 

$

7,964

 

26.8

%

Y-T-Y change

 

-5.5

%

4.2

%

-4.9

%

-4.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eliminations / Other

 

100

 

(2,133

)

(2,033

)

(1,002

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL IBM CONSOLIDATED

 

$

27,699

 

$

0

 

$

27,699

 

$

6,962

 

25.1

%

Y-T-Y change

 

-5.5

%

 

 

-5.5

%

-11.1

%

 

 

 

 

 

FOURTH-QUARTER 2012

 

 

 

 

 

 

 

 

 

Pre-tax

 

 

 

 

 

Revenue

 

Income/

 

Pre-tax

 

(Dollars in Millions)

 

External

 

Internal

 

Total

 

(Loss)

 

Margin

 

 

 

 

 

 

 

 

 

 

 

 

 

SEGMENTS

 

 

 

 

 

 

 

 

 

 

 

Global Technology Services

 

$

10,284

 

$

297

 

$

10,581

 

$

2,027

 

19.2

%

Global Business Services

 

4,720

 

181

 

4,901

 

841

 

17.2

%

Software

 

7,915

 

815

 

8,730

 

4,017

 

46.0

%

Systems and Technology

 

5,763

 

186

 

5,949

 

974

 

16.4

%

Global Financing

 

535

 

568

 

1,103

 

518

 

46.9

%

TOTAL REPORTABLE SEGMENTS

 

$

29,217

 

$

2,048

 

$

31,265

 

$

8,377

 

26.8

%

Eliminations / Other

 

87

 

(2,048

)

(1,961

)

(546

)

 

 

TOTAL IBM CONSOLIDATED

 

$

29,304

 

$

0

 

$

29,304

 

$

7,831

 

26.7

%

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

 

 

 

TWELVE-MONTHS 2013

 

 

 

 

 

 

 

 

 

Pre-tax

 

 

 

 

 

Revenue

 

Income/

 

Pre-tax

 

(Dollars in Millions)

 

External

 

Internal

 

Total

 

(Loss)

 

Margin

 

 

 

 

 

 

 

 

 

 

 

 

 

SEGMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Technology Services

 

$

38,551

 

$

1,063

 

$

39,615

 

$

6,983

 

17.6

%

Y-T-Y change

 

-4.2

%

-8.8

%

-4.3

%

0.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Business Services

 

18,396

 

714

 

19,109

 

3,214

 

16.8

%

Y-T-Y change

 

-0.9

%

-0.8

%

-0.9

%

7.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

25,932

 

3,191

 

29,123

 

11,106

 

38.1

%

Y-T-Y change

 

1.9

%

-2.5

%

1.4

%

2.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Systems and Technology

 

14,371

 

593

 

14,964

 

(507

)

-3.4

%

Y-T-Y change

 

-18.7

%

-12.4

%

-18.4

%

-141.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Financing

 

2,022

 

2,282

 

4,304

 

2,171

 

50.4

%

Y-T-Y change

 

0.4

%

10.8

%

5.7

%

6.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL REPORTABLE SEGMENTS

 

$

99,273

 

$

7,843

 

$

107,115

 

$

22,967

 

21.4

%

Y-T-Y change

 

-4.5

%

-0.7

%

-4.2

%

-4.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eliminations / Other

 

478

 

(7,843

)

(7,365

)

(3,443

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL IBM CONSOLIDATED

 

$

99,751

 

$

0

 

$

99,751

 

$

19,524

 

19.6

%

Y-T-Y change

 

-4.6

%

 

 

-4.6

%

-10.9

%

 

 

 

 

 

TWELVE-MONTHS 2012

 

 

 

 

 

 

 

 

 

Pre-tax

 

 

 

 

 

Revenue

 

Income/

 

Pre-tax

 

(Dollars in Millions)

 

External

 

Internal

 

Total

 

(Loss)

 

Margin

 

 

 

 

 

 

 

 

 

 

 

 

 

SEGMENTS

 

 

 

 

 

 

 

 

 

 

 

Global Technology Services

 

$

40,236

 

$

1,166

 

$

41,402

 

$

6,961

 

16.8

%

Global Business Services

 

18,566

 

719

 

19,286

 

2,983

 

15.5

%

Software

 

25,448

 

3,274

 

28,722

 

10,810

 

37.6

%

Systems and Technology

 

17,667

 

676

 

18,343

 

1,227

 

6.7

%

Global Financing

 

2,013

 

2,060

 

4,073

 

2,034

 

49.9

%

TOTAL REPORTABLE SEGMENTS

 

$

103,930

 

$

7,896

 

$

111,826

 

$

24,015

 

21.5

%

Eliminations / Other

 

577

 

(7,896

)

(7,319

)

(2,113

)

 

 

TOTAL IBM CONSOLIDATED

 

$

104,507

 

$

0

 

$

104,507

 

$

21,902

 

21.0

%

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

U.S. GAAP TO OPERATING RESULTS RECONCILIATION

(Dollars in millions except per share amounts)

 

 

 

FOURTH-QUARTER 2013

 

 

 

 

 

Acquisition-

 

Retirement-

 

 

 

 

 

 

 

Related

 

Related

 

Operating

 

 

 

GAAP

 

Adjustments*

 

Adjustments**

 

(Non-GAAP)

 

Gross Profit

 

$

14,315

 

$

105

 

$

154

 

$

14,574

 

Gross Profit Margin

 

51.7

%

0.4

Pts

0.6

Pts

52.6

%

S,G&A

 

5,989

 

(101

)

(90

)

5,798

 

R,D&E

 

1,566

 

0

 

(14

)

1,552

 

Other (Income) & Expense

 

(113

)

(8

)

0

 

(121

)

Total Expense & Other (Income)

 

7,353

 

(109

)

(104

)

7,140

 

Pre-Tax Income

 

6,962

 

213

 

258