Number Crunching

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Source : IBM Investor Relations.

Fourth-Quarter 2012:

  • Diluted EPS:
    • GAAP: $5.13, up 11 percent;
    • Operating (non-GAAP): $5.39, up 14 percent;
  • Net income:
    • GAAP: $5.8 billion, up 6 percent;
    • Operating (non-GAAP): $6.1 billion, up 10 percent;
  • Gross profit margin:
    • GAAP: 51.8 percent, up 1.8 points;
    • Operating (non-GAAP): 52.3 percent, up 2.1 points;
  • Revenue of $29.3 billion, down 1 percent, flat adjusting for currency:
    • Up 1 percent excluding divested RSS business adjusting for currency;
  • Free cash flow of $9.5 billion, up $0.6 billion;
  • Software revenue up 3 percent, up 4 percent adjusting for currency;
  • Services revenue down 2 percent, down 1 percent adjusting for currency;
  • Services backlog of $140 billion, flat, up $1 billion adjusting for currency;
  • Systems and Technology revenue down 1 percent, up 4 percent excluding RSS:
    • System z mainframe up 56 percent.

Full-Year 2012:

  • Diluted EPS, up double-digits for 10thconsecutive year:
    • GAAP: $14.37, up 10 percent;
    • Operating (non-GAAP): $15.25, up 13 percent;
  • Net income:
    • GAAP: $16.6 billion, up 5 percent;
    • Operating (non-GAAP): $17.6 billion, up 8 percent;
  • Revenue of $104.5 billion, down 2 percent, flat adjusting for currency;
  • Free cash flow of $18.2 billion, up $1.6 billion;
  • Growth markets revenue up 4 percent, up 7 percent adjusting for currency:
    • BRIC countries up 7 percent, up 12 percent adjusting for currency;
  • Business analytics revenue up 13 percent;
  • Smarter Planet revenue up more than 25 percent;
  • Cloud revenue up 80 percent.

Full-Year 2013 Expectation:

  • GAAP EPS of at least $15.53 and operating (non-GAAP) EPS of at least $16.70.

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
2012 2011 Change 2012 2011 Change
REVENUE
Global Technology Services $ 10,284 $ 10,452 -1.6 % $ 40,236 $ 40,879 -1.6 %
Gross profit margin 37.6 % 36.6 % 36.6 % 35.0 %
Global Business Services 4,720 4,877 -3.2 % 18,566 19,284 -3.7 %
Gross profit margin 29.9 % 29.3 % 30.0 % 28.8 %
Software 7,915 7,648 3.5 % 25,448 24,944 2.0 %
Gross profit margin 90.6 % 89.8 % 88.7 % 88.5 %
System and Technology 5,763 5,803 -0.7 % 17,667 18,985 -6.9 %
Gross profit margin 44.1 % 40.5 % 39.1 % 39.8 %
Global Financing 535 548 -2.3 % 2,013 2,102 -4.2 %
Gross profit margin 43.8 % 49.7 % 46.5 % 49.8 %
Other 87 159 -45.3 % 577 722 -20.1 %
Gross profit margin -73.2 % -11.0 % -71.6 % -54.5 %
TOTAL REVENUE 29,304 29,486 -0.6 % 104,507 106,916 -2.3 %
GROSS PROFIT 15,167 14,722 3.0 % 50,298 50,138 0.3 %
Gross profit margin 51.8 % 49.9 % 48.1 % 46.9 %
EXPENSE AND OTHER INCOME
S,G&A 5,921 6,076 -2.6 % 23,553 23,594 -0.2 %
Expense to revenue 20.2 % 20.6 % 22.5 % 22.1 %
R,D&E 1,580 1,555 1.6 % 6,302 6,258 0.7 %
Expense to revenue 5.4 % 5.3 % 6.0 % 5.9 %
Intellectual property
and custom development
income (227 ) (253 ) -10.1 % (1,074 ) (1,108 ) -3.0 %
Other (income)and expense (47 ) (44 ) 7.3 % (843 ) (20 ) NM
Interest expense 109 113 -3.8 % 459 411 11.8 %
TOTAL EXPENSE AND
OTHER INCOME 7,336 7,448 -1.5 % 28,396 29,135 -2.5 %
Expense to revenue 25.0 % 25.3 % 27.2 % 27.3 %
INCOME BEFORE
INCOME TAXES 7,831 7,274 7.7 % 21,902 21,003 4.3 %
Pre-tax margin 26.7 % 24.7 % 21.0 % 19.6 %
Provision for income taxes 1,998 1,784 12.0 % 5,298 5,148 2.9 %
Effective tax rate 25.5 % 24.5 % 24.2 % 24.5 %
NET INCOME $ 5,833 $ 5,490 6.3 % $ 16,604 $ 15,855 4.7 %
Net income margin 19.9 % 18.6 % 15.9 % 14.8 %
EARNINGS PER SHARE
OF COMMON STOCK:
ASSUMING DILUTION $ 5.13 $ 4.62 11.0 % $ 14.37 $ 13.06 10.0 %
BASIC $ 5.19 $ 4.68 10.9 % $ 14.53 $ 13.25 9.7 %
WEIGHTED-AVERAGE NUMBER
OF COMMON SHARES OUT-
STANDING (M’s):
ASSUMING DILUTION 1,136.4 1,188.7 1,155.4 1,213.8
BASIC 1,124.7 1,172.2 1,142.5 1,197.0
NM – – Not Meaningful
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At At
(Dollars in Millions) December 31, December 31,
2012 2011
ASSETS:
Current Assets:
Cash and cash equivalents $ 10,412 $ 11,922
Marketable securities 717
Notes and accounts receivable – trade
(net of allowances of $255 in 2012 and $256 in 2011) 10,667 11,179
Short-term financing receivables
(net of allowances of $288 in 2012 and $311 in 2011) 18,038 16,901
Other accounts receivable
(net of allowances of $17 in 2012 and $11 in 2011) 1,873 1,481
Inventories, at lower of average cost or market:
Finished goods 475 589
Work in process and raw materials 1,812 2,007
Total inventories 2,287 2,595
Deferred taxes 1,415 1,601
Prepaid expenses and other current assets 4,024 5,249
Total Current Assets 49,433 50,928
Property, plant and equipment 40,501 40,124
Less: Accumulated depreciation 26,505 26,241
Property, plant and equipment – net 13,996 13,883
Long-term financing receivables
(net of allowances of $66 in 2012 and $38 in 2011) 12,812 10,776
Prepaid pension assets 945 2,843
Deferred taxes 3,973 3,503
Goodwill 29,247 26,213
Intangible assets – net 3,787 3,392
Investments and sundry assets 5,021 4,895
Total Assets $ 119,213 $ 116,433
LIABILITIES:
Current Liabilities:
Taxes $ 4,948 $ 3,313
Short-term debt 9,181 8,463
Accounts payable 7,952 8,517
Compensation and benefits 4,745 5,099
Deferred income 11,952 12,197
Other accrued expenses and liabilities 4,847 4,535
Total Current Liabilities 43,625 42,123
Long-term debt 24,088 22,857
Retirement and nonpension postretirement
benefit obligations 20,418 18,374
Deferred income 4,491 3,847
Other liabilities 7,607 8,996
Total Liabilities 100,229 96,197
EQUITY:
IBM Stockholders’ Equity:
Common stock 50,110 48,129
Retained earnings 117,641 104,857
Treasury stock — at cost (123,131 ) (110,963 )
Accumulated other comprehensive income/(loss) (25,759 ) (21,885 )
Total IBM stockholders’ equity 18,860 20,138
Noncontrolling interests 124 97
Total Equity 18,984 20,236
Total Liabilities and Equity $ 119,213 $ 116,433
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW ANALYSIS
Three Months Ended Twelve Months Ended
(Dollars in Millions) December 31, December 31,
2012 2011 2012 2011
Net Cash from Operating Activities per GAAP: $ 6,346 $ 7,097 $ 19,586 $ 19,846
Less: the change in Global Financing (GF)
Receivables (4,151 ) (2,927 ) (2,906 ) (817 )
Net Cash from Operating Activities
(Excluding GF Receivables) 10,497 10,024 22,492 20,663
Capital Expenditures, Net (981 ) (1,059 ) (4,307 ) (4,059 )
Free Cash Flow
(Excluding GF Receivables) 9,515 8,965 18,185 16,604
Acquisitions (1,455 ) (1,588 ) (3,722 ) (1,811 )
Divestitures 13 10 599 14
Dividends (957 ) (880 ) (3,773 ) (3,473 )
Share Repurchase (3,006 ) (3,581 ) (11,995 ) (15,046 )
Non-GF Debt (1,571 ) 599 713 1,692
Other (includes GF Receivables, and
GF Debt) (3,664 ) (2,906 ) (802 ) 2,291
Change in Cash, Cash Equivalents and
Short-term Marketable Securities ($1,125 ) $ 619 ($794 ) $ 271
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
FOURTH-QUARTER 2012
(Dollars in Millions) Pre-tax
Revenue Income/ Pre-tax
External Internal Total (Loss) Margin
SEGMENTS
Global Technology Services $ 10,284 $ 297 $ 10,581 $ 2,027 19.2 %
Y-T-Y change -1.6 % -0.6 % -1.6 % 5.0 %
Global Business Services 4,720 181 4,901 841 17.2 %
Y-T-Y change -3.2 % -5.9 % -3.3 % 0.1 %
Software 7,915 815 8,730 4,017 46.0 %
Y-T-Y change 3.5 % -4.2 % 2.7 % 8.3 %
Systems and Technology 5,763 186 5,949 974 16.4 %
Y-T-Y change -0.7 % 0.0 % -0.7 % 23.2 %
Global Financing 535 568 1,103 518 46.9 %
Y-T-Y change -2.3 % -0.1 % -1.2 % 0.7 %
TOTAL REPORTABLE SEGMENTS $ 29,217 $ 2,048 $ 31,265 $ 8,377 26.8 %
Y-T-Y change -0.4 % -2.4 % -0.5 % 7.6 %
Eliminations / Other 87 (2,048 ) (1,961 ) (546 )
TOTAL IBM CONSOLIDATED $ 29,304 $ 0 $ 29,304 $ 7,831 26.7 %
Y-T-Y change -0.6 % -0.6 % 7.7 %
FOURTH-QUARTER 2011
(Dollars in Millions) Pre-tax
Revenue Income/ Pre-tax
External
Internal
Total (Loss) Margin
SEGMENTS
Global Technology Services $ 10,452 $ 299 $ 10,751 $ 1,930 18.0 %
Global Business Services 4,877 193 5,069 841 16.6 %
Software 7,648 851 8,499 3,710 43.7 %
Systems and Technology 5,803 186 5,989 790 13.2 %
Global Financing 548 569 1,116 514 46.1 %
TOTAL REPORTABLE SEGMENTS $ 29,328 $ 2,098 $ 31,425 $ 7,786 24.8 %
Eliminations / Other 159 (2,098 ) (1,939 ) (512 )
TOTAL IBM CONSOLIDATED $ 29,486 $ 0 $ 29,486 $ 7,274 24.7 %
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
TWELVE-MONTHS 2012
(Dollars in Millions) Pre-tax
Revenue Income/ Pre-tax
External Internal Total (Loss) Margin
SEGMENTS
Global Technology Services $ 40,236 $ 1,166 $ 41,402 $ 6,961 16.8 %
Y-T-Y change -1.6 % -6.2 % -1.7 % 10.8 %
Global Business Services 18,566 719 19,286 2,983 15.5 %
Y-T-Y change -3.7 % -9.7 % -4.0 % -0.8 %
Software 25,448 3,274 28,722 10,810 37.6 %
Y-T-Y change 2.0 % -0.1 % 1.8 % 8.4 %
Systems and Technology 17,667 676 18,343 1,227 6.7 %
Y-T-Y change -6.9 % -19.3 % -7.5 % -24.9 %
Global Financing 2,013 2,060 4,073 2,034 49.9 %
Y-T-Y change -4.2 % -1.6 % -2.9 % 1.1 %
TOTAL REPORTABLE SEGMENTS $ 103,930 $ 7,896 $ 111,826 $ 24,015 21.5 %
Y-T-Y change -2.1 % -4.3 % -2.3 % 4.8 %
Eliminations / Other 577 (7,896 ) (7,319 ) (2,113 )
TOTAL IBM CONSOLIDATED $ 104,507 $ 0 $ 104,507 $ 21,902 21.0 %
Y-T-Y change -2.3 % -2.3 % 4.3 %
TWELVE-MONTHS 2011
(Dollars in Millions) Pre-tax
Revenue Income/ Pre-tax
External Internal Total (Loss) Margin
SEGMENTS
Global Technology Services $ 40,879 $ 1,242 $ 42,121 $ 6,284 14.9 %
Global Business Services 19,284 797 20,081 3,006 15.0 %
Software 24,944 3,276 28,219 9,970 35.3 %
Systems and Technology 18,985 838 19,823 1,633 8.2 %
Global Financing 2,102 2,092 4,195 2,011 47.9 %
TOTAL REPORTABLE SEGMENTS $ 106,194 $ 8,246 $ 114,440 $ 22,904 20.0 %
Eliminations / Other 722 (8,246 ) (7,524 ) (1,901 )
TOTAL IBM CONSOLIDATED $ 106,916 $ 0 $ 106,916 $ 21,003 19.6 %
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING RESULTS RECONCILIATION
(Dollars in millions except per share amounts)
FOURTH-QUARTER 2012
Acquisition- Retirement-
Related Related Operating
GAAP Adjustments* Adjustments** (Non-GAAP)
Gross Profit $ 15,167 $ 100 $ 60 $ 15,327
Gross Profit Margin 51.8 % 0.3Pts 0.2Pts 52.3 %
S,G&A 5,921 (91 ) (29 ) 5,801
R,D&E 1,580 0 6 1,586
Other (Income) & Expense (47 ) (7 ) 0 (54 )
Total Expense & Other (Income) 7,336 (98 ) (23 ) 7,215
Pre-Tax Income 7,831 198 83 8,112
Pre-Tax Income Margin 26.7 % 0.7Pts 0.3Pts 27.7 %
Provision for Income Taxes*** 1,998 (45 ) 30 1,983
Effective Tax Rate 25.5 % -1.2Pts 0.1Pts 24.4 %
Net Income 5,833 243 53 6,129
Net Income Margin 19.9 % 0.8Pts 0.2Pts 20.9 %
Diluted Earnings Per Share $ 5.13 $ 0.21 $ 0.05 $ 5.39
FOURTH-QUARTER 2011
Acquisition- Retirement-
Related Related Operating
GAAP Adjustments* Adjustments** (Non-GAAP)
Gross Profit $ 14,722 $ 81 ($10 ) $ 14,793
Gross Profit Margin 49.9 % 0.3Pts -0.0Pts 50.2 %
S,G&A 6,076 (82 ) 2 5,996
R,D&E 1,555 0 23 1,578
Other (Income) & Expense (44 ) (2 ) 0 (46 )
Total Expense & Other (Income) 7,448 (85 ) 25 7,388
Pre-Tax Income 7,274 166 (35 ) 7,405
Pre-Tax Income Margin 24.7 % 0.6Pts -0.1Pts 25.1 %
Provision for Income Taxes*** 1,784 47 (24 ) 1,808
Effective Tax Rate 24.5 % 0.1Pts -0.2Pts 24.4 %
Net Income 5,490 119 (12 ) 5,597
Net Income Margin 18.6 % 0.4Pts -0.0Pts 19.0 %
Diluted Earnings Per Share $ 4.62 $ 0.10 ($0.01 ) $ 4.71
* Includes amortization of acquired intangible assets and other acquisition-related charges.
** Includes retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.
*** Tax impact on operating (non-GAAP) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income which employs an annual effective tax rate method to the results.
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING RESULTS RECONCILIATION
(Dollars in millions except per share amounts)
TWELVE-MONTHS 2012
Acquisition- Retirement-
Related Related Operating
GAAP Adjustments* Adjustments** (Non-GAAP)
Gross Profit $ 50,298 $ 376 $ 264 $ 50,938
Gross Profit Margin 48.1 % 0.4Pts 0.3Pts 48.7 %
S,G&A 23,553 (349 ) (294 ) 22,910
R,D&E 6,302 0 20 6,322
Other (Income) & Expense (843 ) (13 ) 0 (857 )
Total Expense & Other (Income) 28,396 (363 ) (274 ) 27,760
Pre-Tax Income 21,902 739 538 23,179
Pre-Tax Income Margin 21.0 % 0.7Pts 0.5Pts 22.2 %
Provision for Income Taxes*** 5,298 98 156 5,552
Effective Tax Rate 24.2 % -0.4Pts 0.1Pts 24.0 %
Net Income 16,604 641 381 17,627
Net Income Margin 15.9 % 0.6Pts 0.4Pts 16.9 %
Diluted Earnings Per Share $ 14.37 $ 0.55 $ 0.33 $ 15.25
TWELVE-MONTHS 2011
Acquisition- Retirement-
Related Related Operating
GAAP Adjustments* Adjustments** (Non-GAAP)
Gross Profit $ 50,138 $ 341 $ 2 $ 50,481
Gross Profit Margin 46.9 % 0.3Pts 0.0Pts 47.2 %
S,G&A 23,594 (309 ) (13 ) 23,272
R,D&E 6,258 0 88 6,345
Other (Income) & Expense (20 ) (25 ) 0 (45 )
Total Expense & Other (Income) 29,135 (334 ) 74 28,875
Pre-Tax Income 21,003 675 (72 ) 21,605
Pre-Tax Income Margin 19.6 % 0.6Pts -0.1Pts 20.2 %
Provision for Income Taxes*** 5,148 179 (40 ) 5,287
Effective Tax Rate 24.5 % 0.1Pts -0.1Pts 24.5 %
Net Income 15,855 495 (32 ) 16,318
Net Income Margin 14.8 % 0.5Pts -0.0Pts 15.3 %
Diluted Earnings Per Share $ 13.06 $ 0.41 ($0.03 ) $ 13.44

* Includes amortization of acquired intangible assets and other acquisition-related charges.
** Includes retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.
*** Tax impact on operating (non-GAAP) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income which employs an annual effective tax rate method to the results.

Contact:
IBM
Mike Fay, 914-525-8476
mikefay@us.ibm.com
or
John Bukovinsky, 732-618-3531
jbuko@us.ibm.com

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