International Business Machines Corp 8-K 2020-07-20
Sign in or join
Add a note by highlighting text or Replying to an existing note.
Add a note by highlighting text or Replying to an existing note.
Exhibit 99.1
IBM REPORTS 2020 SECOND-QUARTER RESULTS
Accelerated Cloud Revenue Growth; Gross Margin Expansion; Strong Balance Sheet and Liquidity Position
ARMONK, N.Y., July 20, 2020 . . . IBM (NYSE: IBM) today announced second-quarter 2020 earnings results.
“Our clients see the value of IBM’s hybrid cloud platform, based on open technologies, at a time of unprecedented business disruption," said Arvind Krishna, IBM chief executive officer. "We are committed to building, with a growing ecosystem of partners, an enduring hybrid cloud platform that will serve as a powerful catalyst for innovation for our clients and the world.”
Highlights for the second quarter include:
| ● | GAAP EPS from continuing operations of $1.52 |
| ● | Operating (non-GAAP) EPS of $2.18 |
| ● | Revenue of $18.1 billion, down 5.4 percent (down 1.9 percent adjusting for divested businesses and currency) |
-- Cloud & Cognitive Software revenue up 3 percent (up 5 percent adjusting for currency)
-- Systems revenue up 6 percent
| ● | Total cloud revenue of $6.3 billion, up 30 percent (up 34 percent adjusting for divested businesses and currency) |
-- Total cloud revenue of $23.5 billion over the last 12 months, up 20 percent (up 23 percent adjusting for divested businesses and currency)
| ● | Red Hat revenue up 17 percent (up 18 percent adjusting for currency), normalized for historical comparability |
| ● | GAAP gross profit margin of 48 percent, up 100 basis points; Operating (non-GAAP) gross profit margin of 49 percent up 160 basis points |
| ● | Net cash from operating activities of $15.1 billion and free cash flow of $11.5 billion, over the last 12 months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SECOND QUARTER 2020 |
|
|||||||||||
|
|
Results Reflect the Impact of Items Related to |
|
|||||||||||
|
|
the Red Hat Acquisition Closed in July 2019 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
Pre-tax |
|
Gross |
|
|
|
|
Diluted |
|
Net |
|
Pre-tax |
|
Income |
|
Profit |
|
|||
|
|
EPS |
|
Income |
|
Income |
|
Margin |
|
Margin |
|
|||
GAAP from Continuing Operations |
|
$ |
1.52 |
|
$ |
1.4B |
|
$ |
1.6B |
|
8.7 |
% |
48.0 |
% |
Year/Year |
|
|
(46) |
% |
|
(46) |
% |
|
(43) |
% |
(5.8) |
Pts |
1.0 |
Pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (Non-GAAP) |
|
$ |
2.18 |
|
$ |
1.9B |
|
$ |
2.3B |
|
12.8 |
% |
49.0 |
% |
Year/Year |
|
|
(31) |
% |
|
(31) |
% |
|
(27) |
% |
(3.8) |
Pts |
1.6 |
Pts |
“Our prudent financial management in these turbulent times enabled us to expand our gross profit margin, generate strong free cash flow and improve our liquidity position," said James Kavanaugh, IBM senior vice president and chief financial officer. "We have the financial flexibility to continue to invest in our business and return value to our shareholders through our dividend policy.”
Cash Flow and Balance Sheet
In the second quarter, the company generated net cash from operating activities of $3.6 billion, or $3.0 billion excluding Global Financing receivables. IBM’s free cash flow was $2.3 billion. The company returned $1.5 billion to shareholders in dividends.
IBM ended the second quarter with $14.3 billion of cash on hand which includes marketable securities, up $5.2 billion from year-end 2019. Debt, including Global Financing debt of $21.9 billion, totaled $64.7 billion.
Segment Results for Second Quarter
Segment results reflect growing adoption of IBM's hybrid cloud platform while clients continue to shift priorities to preserve cash and maintain operational stability.
| ● | Cloud & Cognitive Software (includes Cloud & Data Platforms which includes Red Hat, Cognitive Applications and Transaction Processing Platforms) — revenues of $5.7 billion, up 3 percent (up 5 percent adjusting for currency), with growth in Cloud & Data Platforms, up 29 percent (up 30 percent adjusting for currency) led by Red Hat. Cognitive Applications and Transaction Processing Platforms declined. Cloud revenue more than doubled. |
| ● | Global Business Services (includes Consulting, Application Management and Global Process Services) — revenues of $3.9 billion, down 7 percent (down 6 percent adjusting for currency), driven by declines in Application Management and Consulting. Cloud revenue up 12 percent (up 13 percent adjusting for currency). Gross profit margin up 240 basis points. |
| ● | Global Technology Services (includes Infrastructure & Cloud Services and Technology Support Services) — revenues of $6.3 billion, down 8 percent (down 5 percent adjusting for currency). Cloud revenue up 18 percent (up 20 percent adjusting for currency). |
| ● | Systems (includes Systems Hardware and Operating Systems Software) — revenues of $1.9 billion, up 6 percent, led by IBM Z, up 69 percent (up 68 percent adjusting for currency). Storage Systems revenue up 2 percent (up 3 percent adjusting for currency); Power declined. Cloud revenue up 22 percent. Gross profit margin up 430 basis points. |
| ● | Global Financing (includes financing and used equipment sales) — revenues of $265 million, down 25 percent (down 23 percent adjusting for currency), reflecting the wind-down of OEM commercial financing. Gross profit margin up 360 basis points. |
Year-To-Date 2020 Results
Consolidated diluted earnings per share was $2.83 compared to $4.58, down 38 percent year to year. Consolidated net income was $2.5 billion, down 38 percent year to year. Revenues for the six-month period ended June 30, 2020 totaled $35.7 billion, a decrease of 4 percent year to year (down 1 percent adjusting for divested businesses and currency) compared with $37.3 billion for the first six months of 2019.
Operating (non-GAAP) diluted earnings per share from continuing operations was $4.02 compared with $5.42 per diluted share for the 2019 period, a decrease of 26 percent. Operating (non-GAAP) net income for the six months ended June 30, 2020 was $3.6 billion compared with $4.8 billion in the prior-year period, a decrease of 26 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, but not limited to, 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, health and other conditions; adverse effects from environmental matters, tax matters and the company’s pension plans; ineffective internal controls; the company’s use of accounting estimates; impairment of the company’s goodwill or amortizable intangible assets; 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, including integration challenges, failure to achieve objectives, the assumption of liabilities, and higher debt levels; legal proceedings and investigatory risks; 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. Except as required by law, 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 —
| ● | adjusting for currency (i.e., at constant currency); |
| ● | total revenue and cloud revenue adjusting for divested businesses and currency; |
| ● | Red Hat revenue normalized for historical comparability; |
| ● | presenting operating (non-GAAP) earnings per share amounts and related income statement items; |
| ● | adjusting for free cash flow; |
| ● | net cash from operating activities, excluding Global Financing receivables. |
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 https://www.ibm.com/investor/events/ibm-2q-2020-earnings-announcement. 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).
Contact: |
IBM |
|
Edward Barbini, 914-499-6565 |
|
barbini@us.ibm.com |
|
|
|
John Bukovinsky, 732-618-3531 |
|
jbuko@us.ibm.com |
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, |
|
|
||||||||
|
|
2020 |
|
2019 |
|
|
|
2020 |
|
2019 |
|
|
||||
REVENUE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cloud & Cognitive Software |
|
$ |
5,748 |
|
$ |
5,563 |
* |
|
|
$ |
10,987 |
|
$ |
10,530 |
* |
|
Global Business Services |
|
|
3,890 |
|
|
4,197 |
* |
|
|
|
8,027 |
|
|
8,353 |
* |
|
Global Technology Services |
|
|
6,316 |
|
|
6,837 |
|
|
|
|
12,783 |
|
|
13,711 |
|
|
Systems |
|
|
1,852 |
|
|
1,753 |
|
|
|
|
3,220 |
|
|
3,081 |
|
|
Global Financing |
|
|
265 |
|
|
351 |
|
|
|
|
564 |
|
|
757 |
|
|
Other |
|
|
50 |
|
|
460 |
* |
|
|
|
113 |
|
|
911 |
* |
|
TOTAL REVENUE |
|
|
18,123 |
|
|
19,161 |
|
|
|
|
35,694 |
|
|
37,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
|
8,700 |
|
|
9,010 |
|
|
|
|
16,622 |
|
|
17,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT MARGIN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cloud & Cognitive Software |
|
|
77.1 |
% |
|
77.7 |
% |
* |
|
|
76.3 |
% |
|
76.7 |
% |
* |
Global Business Services |
|
|
28.4 |
% |
|
26.0 |
% |
* |
|
|
27.8 |
% |
|
26.1 |
% |
* |
Global Technology Services |
|
|
34.2 |
% |
|
34.4 |
% |
|
|
|
34.1 |
% |
|
34.1 |
% |
|
Systems |
|
|
57.8 |
% |
|
53.5 |
% |
|
|
|
54.6 |
% |
|
50.3 |
% |
|
Global Financing |
|
|
38.6 |
% |
|
35.0 |
% |
|
|
|
39.7 |
% |
|
34.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL GROSS PROFIT MARGIN |
|
|
48.0 |
% |
|
47.0 |
% |
|
|
|
46.6 |
% |
|
45.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSE AND OTHER INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S,G&A |
|
|
5,248 |
|
|
5,456 |
|
|
|
|
11,203 |
|
|
10,147 |
|
|
R,D&E |
|
|
1,582 |
|
|
1,407 |
|
|
|
|
3,207 |
|
|
2,840 |
|
|
Intellectual property and custom development income |
|
|
(203) |
|
|
(222) |
|
|
|
|
(319) |
|
|
(323) |
|
|
Other (income) and expense |
|
|
179 |
|
|
(747) |
|
|
|
|
361 |
|
|
(820) |
|
|
Interest expense |
|
|
323 |
|
|
348 |
|
|
|
|
649 |
|
|
558 |
|
|
TOTAL EXPENSE AND OTHER INCOME |
|
|
7,129 |
|
|
6,242 |
|
|
|
|
15,101 |
|
|
12,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BEFORE INCOME TAXES |
|
|
1,571 |
|
|
2,768 |
|
|
|
|
1,522 |
|
|
4,651 |
|
|
Pre-tax margin |
|
|
8.7 |
% |
|
14.4 |
% |
|
|
|
4.3 |
% |
|
12.5 |
% |
|
Provision for / (Benefit from) income taxes |
|
|
209 |
|
|
269 |
|
|
|
|
(1,017) |
|
|
558 |
|
|
Effective tax rate |
|
|
13.3 |
% |
|
9.7 |
% |
|
|
|
(66.8) |
% |
|
12.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS |
|
$ |
1,362 |
|
$ |
2,499 |
|
|
|
$ |
2,538 |
|
$ |
4,093 |
|
|
DISCONTINUED OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income / (Loss) from discontinued operations, net of taxes |
|
|
(1) |
|
|
(1) |
|
|
|
|
(2) |
|
|
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
$ |
1,361 |
|
$ |
2,498 |
|
|
|
$ |
2,536 |
|
$ |
4,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS / (LOSS) PER SHARE OF COMMON STOCK |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assuming Dilution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations |
|
$ |
1.52 |
|
$ |
2.81 |
|
|
|
$ |
2.83 |
|
$ |
4.58 |
|
|
Discontinued Operations |
|
$ |
0.00 |
|
$ |
0.00 |
|
|
|
$ |
0.00 |
|
$ |
0.00 |
|
|
TOTAL |
|
$ |
1.52 |
|
$ |
2.81 |
|
|
|
$ |
2.83 |
|
$ |
4.58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations |
|
$ |
1.53 |
|
$ |
2.82 |
|
|
|
$ |
2.85 |
|
$ |
4.61 |
|
|
Discontinued Operations |
|
$ |
0.00 |
|
$ |
0.00 |
|
|
|
$ |
0.00 |
|
$ |
0.00 |
|
|
TOTAL |
|
$ |
1.53 |
|
$ |
2.82 |
|
|
|
$ |
2.85 |
|
$ |
4.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (M’s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assuming Dilution |
|
|
894.9 |
|
|
890.8 |
|
|
|
|
895.0 |
|
|
892.4 |
|
|
Basic |
|
|
889.4 |
|
|
886.3 |
|
|
|
|
888.7 |
|
|
887.9 |
|
|
*Recast to conform with 2020 presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
|
|
At |
|
At |
||
|
|
June 30, |
|
December 31, |
||
(Dollars in Millions) |
|
2020 |
|
2019 |
||
ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
12,041 |
|
$ |
8,172 |
Restricted cash |
|
|
147 |
|
|
141 |
Marketable securities |
|
|
2,063 |
|
|
696 |
Notes and accounts receivable - trade, net |
|
|
6,543 |
|
|
7,870 |
Short-term financing receivables, net |
|
|
11,967 |
|
|
14,192 |
Other accounts receivable, net |
|
|
937 |
|
|
1,733 |
Inventories |
|
|
1,869 |
|
|
1,619 |
Deferred costs |
|
|
2,127 |
|
|
1,896 |
Prepaid expenses and other current assets |
|
|
2,260 |
|
|
2,101 |
Total Current Assets |
|
|
39,953 |
|
|
38,420 |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
9,709 |
|
|
10,010 |
Operating right-of-use assets, net |
|
|
4,774 |
|
|
4,996 |
Long-term financing receivables, net |
|
|
7,351 |
|
|
8,712 |
Prepaid pension assets |
|
|
7,254 |
|
|
6,865 |
Deferred costs |
|
|
2,445 |
|
|
2,472 |
Deferred taxes |
|
|
8,689 |
|
|
5,182 |
Goodwill |
|
|
57,833 |
|
|
58,222 |
Intangibles, net |
|
|
14,270 |
|
|
15,235 |
Investments and sundry assets |
|
|
1,921 |
|
|
2,074 |
Total Assets |
|
$ |
154,200 |
|
$ |
152,186 |
|
|
|
|
|
|
|
LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
Taxes |
|
$ |
2,627 |
|
$ |
2,839 |
Short-term debt |
|
|
9,289 |
|
|
8,797 |
Accounts payable |
|
|
4,719 |
|
|
4,896 |
Deferred income |
|
|
12,469 |
|
|
12,026 |
Operating lease liabilities |
|
|
1,343 |
|
|
1,380 |
Other liabilities |
|
|
7,995 |
|
|
7,763 |
Total Current Liabilities |
|
|
38,442 |
|
|
37,701 |
|
|
|
|
|
|
|
Long-term debt |
|
|
55,449 |
|
|
54,102 |
Retirement related obligations |
|
|
16,483 |
|
|
17,142 |
Deferred income |
|
|
3,787 |
|
|
3,851 |
Operating lease liabilities |
|
|
3,684 |
|
|
3,879 |
Other liabilities |
|
|
15,666 |
|
|
14,526 |
Total Liabilities |
|
|
133,512 |
|
|
131,202 |
|
|
|
|
|
|
|
EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
IBM Stockholders’ Equity: |
|
|
|
|
|
|
Common stock |
|
|
56,135 |
|
|
55,895 |
Retained earnings |
|
|
162,559 |
|
|
162,954 |
Treasury stock — at cost |
|
|
(169,386) |
|
|
(169,413) |
Accumulated other comprehensive income/(loss) |
|
|
(28,757) |
|
|
(28,597) |
Total IBM Stockholders’ Equity |
|
|
20,551 |
|
|
20,841 |
|
|
|
|
|
|
|
Noncontrolling interests |
|
|
137 |
|
|
144 |
Total Equity |
|
|
20,688 |
|
|
20,985 |
|
|
|
|
|
|
|
Total Liabilities and Equity |
|
$ |
154,200 |
|
$ |
152,186 |
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW ANALYSIS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
Trailing Twelve Months |
|||||||||
|
|
June 30, |
|
June 30, |
|
Ended June 30, |
|||||||||
(Dollars in Millions) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
2020 |
|||||
Net Cash Provided by Operating Activities per GAAP: |
|
$ |
3,576 |
|
$ |
2,941 |
|
$ |
8,052 |
|
$ |
7,700 |
|
$ |
15,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: change in Global Financing (GF) Receivables |
|
|
589 |
|
|
119 |
|
|
2,971 |
|
|
2,577 |
|
|
885 |
Capital Expenditures, Net |
|
|
(697) |
|
|
(431) |
|
|
(1,434) |
|
|
(1,045) |
|
|
(2,759) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow |
|
|
2,290 |
|
|
2,391 |
|
|
3,647 |
|
|
4,078 |
|
|
11,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions |
|
|
(6) |
|
|
(42) |
|
|
(19) |
|
|
(43) |
|
|
(32,607) |
Divestitures |
|
|
731 |
|
|
855 |
|
|
757 |
|
|
888 |
|
|
945 |
Dividends |
|
|
(1,450) |
|
|
(1,435) |
|
|
(2,890) |
|
|
(2,833) |
|
|
(5,764) |
Share Repurchase |
|
|
— |
|
|
(316) |
|
|
— |
|
|
(1,236) |
|
|
(126) |
Non-GF Debt |
|
|
455 |
|
|
27,509 |
|
|
3,958 |
|
|
33,399 |
|
|
(6,649) |
Other (includes GF Net Receivables and GF Debt) |
|
|
213 |
|
|
(698) |
|
|
(213) |
|
|
(68) |
|
|
564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Cash, Cash Equivalents, Restricted Cash and Short-term Marketable Securities |
|
$ |
2,233 |
|
$ |
28,264 |
|
$ |
5,241 |
|
$ |
34,186 |
|
$ |
(32,158) |
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW
(Unaudited)
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
(Dollars in Millions) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
Net Income from Operations |
|
$ |
1,361 |
|
$ |
2,498 |
|
$ |
2,536 |
|
$ |
4,089 |
Depreciation/Amortization of Intangibles |
|
|
1,678 |
|
|
1,294 |
|
|
3,313 |
|
|
2,740 |
Stock-based Compensation |
|
|
247 |
|
|
135 |
|
|
436 |
|
|
248 |
Working Capital / Other |
|
|
(300) |
|
|
(1,106) |
|
|
(1,204) |
|
|
(1,954) |
Global Financing A/R |
|
|
589 |
|
|
119 |
|
|
2,971 |
|
|
2,577 |
Net Cash Provided by Operating Activities |
|
$ |
3,576 |
|
$ |
2,941 |
|
$ |
8,052 |
|
$ |
7,700 |
Capital Expenditures, net of payments & proceeds |
|
|
(697) |
|
|
(431) |
|
|
(1,434) |
|
|
(1,045) |
Divestitures, net of cash transferred |
|
|
731 |
|
|
855 |
|
|
757 |
|
|
888 |
Acquisitions, net of cash acquired |
|
|
(6) |
|
|
(42) |
|
|
(19) |
|
|
(43) |
Marketable Securities / Other Investments, net |
|
|
(1,264) |
|
|
3,779 |
|
|
(1,442) |
|
|
3,509 |
Net Cash Provided by / (Used in) Investing Activities |
|
$ |
(1,236) |
|
$ |
4,162 |
|
$ |
(2,138) |
|
$ |
3,309 |
Debt, net of payments & proceeds |
|
|
(38) |
|
|
22,841 |
|
|
1,319 |
|
|
27,073 |
Dividends |
|
|
(1,450) |
|
|
(1,435) |
|
|
(2,890) |
|
|
(2,833) |
Common Stock Repurchases |
|
|
— |
|
|
(316) |
|
|
— |
|
|
(1,236) |
Common Stock Transactions - Other |
|
|
(137) |
|
|
(59) |
|
|
(168) |
|
|
(111) |
Net Cash Provided by / (Used in) Financing Activities |
|
$ |
(1,624) |
|
$ |
21,031 |
|
$ |
(1,739) |
|
$ |
22,894 |
Effect of Exchange Rate changes on Cash |
|
|
101 |
|
|
129 |
|
|
(301) |
|
|
27 |
Net Change in Cash, Cash Equivalents and Restricted Cash |
|
$ |
817 |
|
$ |
28,263 |
|
$ |
3,874 |
|
$ |
33,930 |
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020 |
|
|||||||||||||
|
|
Cloud & |
|
Global |
|
Global |
|
|
|
|
|
|
|
|||
|
|
Cognitive |
|
Business |
|
Technology |
|
|
|
|
Global |
|
||||
(Dollars in Millions) |
|
Software |
|
Services |
|
Services |
|
Systems |
|
Financing |
|
|||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External |
|
$ |
5,748 |
|
$ |
3,890 |
|
$ |
6,316 |
|
$ |
1,852 |
|
$ |
265 |
|
Internal |
|
|
743 |
|
|
55 |
|
|
304 |
|
|
240 |
|
|
241 |
|
Total Segment Revenue |
|
$ |
6,491 |
|
$ |
3,945 |
|
$ |
6,621 |
|
$ |
2,092 |
|
$ |
506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income / (Loss) from Continuing Operations |
|
|
1,708 |
|
|
362 |
|
|
250 |
|
|
248 |
|
|
176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Margin |
|
|
26.3 |
% |
|
9.2 |
% |
|
3.8 |
% |
|
11.8 |
% |
|
34.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change YTY Revenue - External |
|
|
3.3 |
% |
|
(7.3) |
% |
|
(7.6) |
% |
|
5.7 |
% |
|
(24.5) |
% |
Change YTY Revenue - External @constant currency |
|
|
4.6 |
% |
|
(6.0) |
% |
|
(5.4) |
% |
|
6.3 |
% |
|
(22.7) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019 |
|
|||||||||||||
|
|
Cloud & |
|
Global |
|
Global |
|
|
|
|
|
|
|
|||
|
|
Cognitive |
|
Business |
|
Technology |
|
|
|
|
Global |
|
||||
(Dollars in Millions) |
|
Software* |
|
Services* |
|
Services |
|
Systems |
|
Financing |
|
|||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External |
|
$ |
5,563 |
|
$ |
4,197 |
|
$ |
6,837 |
|
$ |
1,753 |
|
$ |
351 |
|
Internal |
|
|
607 |
|
|
69 |
|
|
302 |
|
|
171 |
|
|
281 |
|
Total Segment Revenue |
|
$ |
6,170 |
|
$ |
4,266 |
|
$ |
7,139 |
|
$ |
1,924 |
|
$ |
632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income / (Loss) from Continuing Operations |
|
|
2,007 |
|
|
290 |
|
|
235 |
|
|
61 |
|
|
239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Margin |
|
|
32.5 |
% |
|
6.8 |
% |
|
3.3 |
% |
|
3.2 |
% |
|
37.8 |
% |
* Recast to conform with 2020 presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
|
|
Six Months Ended June 30, 2020 |
|
|||||||||||||
|
|
Cloud & |
|
Global |
|
Global |
|
|
|
|
|
|
|
|||
|
|
Cognitive |
|
Business |
|
Technology |
|
|
|
|
Global |
|
||||
(Dollars in Millions) |
|
Software |
|
Services |
|
Services |
|
Systems |
|
Financing |
|
|||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External |
|
$ |
10,987 |
|
$ |
8,027 |
|
$ |
12,783 |
|
$ |
3,220 |
|
$ |
564 |
|
Internal |
|
|
1,556 |
|
|
101 |
|
|
599 |
|
|
388 |
|
|
453 |
|
Total Segment Revenue |
|
$ |
12,543 |
|
$ |
8,128 |
|
$ |
13,382 |
|
$ |
3,608 |
|
$ |
1,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income / (Loss) from Continuing Operations |
|
|
2,641 |
|
|
633 |
|
|
72 |
|
|
31 |
|
|
370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Margin |
|
|
21.1 |
% |
|
7.8 |
% |
|
0.5 |
% |
|
0.9 |
% |
|
36.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change YTY Revenue - External |
|
|
4.3 |
% |
|
(3.9) |
% |
|
(6.8) |
% |
|
4.5 |
% |
|
(25.4) |
% |
Change YTY Revenue - External @constant currency |
|
|
5.6 |
% |
|
(2.6) |
% |
|
(4.7) |
% |
|
5.4 |
% |
|
(23.9) |
% |
|
|
Six Months Ended June 30, 2019 |
|
|||||||||||||
|
|
Cloud & |
|
Global |
|
Global |
|
|
|
|
|
|
|
|||
|
|
Cognitive |
|
Business |
|
Technology |
|
|
|
|
Global |
|
||||
(Dollars in Millions) |
|
Software* |
|
Services* |
|
Services |
|
Systems |
|
Financing |
|
|||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External |
|
$ |
10,530 |
|
$ |
8,353 |
|
$ |
13,711 |
|
$ |
3,081 |
|
$ |
757 |
|
Internal |
|
|
1,448 |
|
|
143 |
|
|
591 |
|
|
334 |
|
|
581 |
|
Total Segment Revenue |
|
$ |
11,978 |
|
$ |
8,495 |
|
$ |
14,303 |
|
$ |
3,415 |
|
$ |
1,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income / (Loss) from Continuing Operations |
|
|
3,792 |
|
|
587 |
|
|
510 |
|
|
(141) |
|
|
527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Margin |
|
|
31.7 |
% |
|
6.9 |
% |
|
3.6 |
% |
|
(4.1) |
% |
|
39.4 |
% |
* Recast to conform with 2020 presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; Dollars in millions except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020 |
|
|||||||||||||
|
|
Continuing Operations |
|
|||||||||||||
|
|
|
|
|
Acquisition- |
|
Retirement- |
|
Tax |
|
|
|
|
|||
|
|
|
|
|
Related |
|
Related |
|
Reform |
|
Operating |
|
||||
|
|
GAAP |
|
Adjustments* |
|
Adjustments** |
|
Impacts |
|
(Non-GAAP) |
|
|||||
Gross Profit |
|
$ |
8,700 |
|
$ |
187 |
|
$ |
— |
|
$ |
— |
|
$ |
8,887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit Margin |
|
|
48.0 |
% |
|
1.0 |
Pts |
|
— |
|
|
— |
|
|
49.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S,G&A |
|
|
5,248 |
|
|
(285) |
|
|
— |
|
|
— |
|
|
4,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R,D&E |
|
|
1,582 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) & Expense |
|
|
179 |
|
|
(1) |
|
|
(273) |
|
|
— |
|
|
(95) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
323 |
|
|
— |
|
|
— |
|
|
— |
|
|
323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expense & Other (Income) |
|
|
7,129 |
|
|
(286) |
|
|
(273) |
|
|
— |
|
|
6,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income from Continuing Operations |
|
|
1,571 |
|
|
473 |
|
|
273 |
|
|
— |
|
|
2,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income Margin from Continuing Operations |
|
|
8.7 |
% |
|
2.6 |
Pts |
|
1.5 |
Pts |
|
— |
|
|
12.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for / (Benefit from) Income Taxes*** |
|
|
209 |
|
|
108 |
|
|
52 |
|
|
— |
|
|
369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate |
|
|
13.3 |
% |
|
1.9 |
Pts |
|
0.7 |
Pts |
|
— |
|
|
15.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations |
|
|
1,362 |
|
|
365 |
|
|
222 |
|
|
— |
|
|
1,949 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Margin from Continuing Operations |
|
|
7.5 |
% |
|
2.0 |
Pts |
|
1.2 |
Pts |
|
— |
|
|
10.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings / (Loss) Per Share: Continuing Operations |
|
$ |
1.52 |
|
$ |
0.41 |
|
$ |
0.25 |
|
$ |
— |
|
$ |
2.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019 |
|
|||||||||||||
|
|
Continuing Operations |
|
|||||||||||||
|
|
|
|
|
Acquisition- |
|
Retirement- |
|
Tax |
|
|
|
|
|||
|
|
|
|
|
Related |
|
Related |
|
Reform |
|
Operating |
|
||||
|
|
GAAP |
|
Adjustments* |
|
Adjustments** |
|
Impacts |
|
(Non-GAAP) |
|
|||||
Gross Profit |
|
$ |
9,010 |
|
$ |
73 |
|
$ |
— |
|
$ |
— |
|
$ |
9,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit Margin |
|
|
47.0 |
% |
|
0.4 |
Pts |
|
— |
|
|
— |
|
|
47.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S,G&A |
|
|
5,456 |
|
|
(149) |
|
|
— |
|
|
— |
|
|
5,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R,D&E |
|
|
1,407 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) & Expense |
|
|
(747) |
|
|
119 |
|
|
(136) |
|
|
— |
|
|
(764) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
348 |
|
|
(168) |
|
|
— |
|
|
— |
|
|
180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expense & Other (Income) |
|
|
6,242 |
|
|
(198) |
|
|
(136) |
|
|
— |
|
|
5,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income from Continuing Operations |
|
|
2,768 |
|
|
272 |
|
|
136 |
|
|
— |
|
|
3,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income Margin from Continuing Operations |
|
|
14.4 |
% |
|
1.4 |
Pts |
|
0.7 |
Pts |
|
— |
|
|
16.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for / (Benefit from) Income Taxes*** |
|
|
269 |
|
|
55 |
|
|
40 |
|
|
(14) |
|
|
349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate |
|
|
9.7 |
% |
|
0.9 |
Pts |
|
0.8 |
Pts |
|
(0.4) |
Pts |
|
11.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations |
|
|
2,499 |
|
|
217 |
|
|
97 |
|
|
14 |
|
|
2,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Margin from Continuing Operations |
|
|
13.0 |
% |
|
1.1 |
Pts |
|
0.5 |
Pts |
|
0.1 |
Pts |
|
14.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings / (Loss) Per Share: Continuing Operations |
|
$ |
2.81 |
|
$ |
0.24 |
|
$ |
0.11 |
|
$ |
0.01 |
|
$ |
3.17 |
|
* Includes amortization of purchased intangible assets, in process R&D, transaction costs, applicable restructuring and related expenses, tax charges related to acquisition integration and pre-closing charges, such as financing costs.
** Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs.
*** 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 Ended June 30, 2020 |
|
|||||||||||||
|
|
Continuing Operations |
|
|||||||||||||
|
|
|
|
|
Acquisition- |
|
Retirement- |
|
Tax |
|
|
|
|
|||
|
|
|
|
|
Related |
|
Related |
|
Reform |
|
Operating |
|
||||
|
|
GAAP |
|
Adjustments* |
|
Adjustments** |
|
Impacts |
|
(Non-GAAP) |
|
|||||
Gross Profit |
|
$ |
16,622 |
|
$ |
375 |
|
$ |
— |
|
$ |
— |
|
$ |
16,998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit Margin |
|
|
46.6 |
% |
|
1.1 |
Pts |
|
— |
|
|
— |
|
|
47.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S,G&A |
|
|
11,203 |
|
|
(570) |
|
|
— |
|
|
— |
|
|
10,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R,D&E |
|
|
3,207 |
|
|
— |
|
|
— |
|
|
— |
|
|
3,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) & Expense |
|
|
361 |
|
|
(1) |
|
|
(538) |
|
|
— |
|
|
(178) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
649 |
|
|
— |
|
|
— |
|
|
— |
|
|
649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expense & Other (Income) |
|
|
15,101 |
|
|
(571) |
|
|
(538) |
|
|
— |
|
|
13,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income from Continuing Operations |
|
|
1,522 |
|
|
946 |
|
|
538 |
|
|
— |
|
|
3,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income Margin from Continuing Operations |
|
|
4.3 |
% |
|
2.7 |
Pts |
|
1.5 |
Pts |
|
— |
|
|
8.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for / (Benefit from) Income Taxes*** |
|
|
(1,017) |
|
|
210 |
|
|
65 |
|
|
149 |
|
|
(592) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate |
|
|
(66.8) |
% |
|
28.0 |
Pts |
|
14.1 |
Pts |
|
5.0 |
Pts |
|
(19.7) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations |
|
|
2,538 |
|
|
736 |
|
|
472 |
|
|
(149) |
|
|
3,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Margin from Continuing Operations |
|
|
7.1 |
% |
|
2.1 |
Pts |
|
1.3 |
Pts |
|
(0.4) |
Pts |
|
10.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings / (Loss) Per Share: Continuing Operations |
|
$ |
2.83 |
|
$ |
0.83 |
|
$ |
0.53 |
|
$ |
(0.17) |
|
$ |
4.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019 |
|
|||||||||||||
|
|
Continuing Operations |
|
|||||||||||||
|
|
|
|
|
Acquisition- |
|
Retirement- |
|
Tax |
|
|
|
|
|||
|
|
|
|
|
Related |
|
Related |
|
Reform |
|
Operating |
|
||||
|
|
GAAP |
|
Adjustments* |
|
Adjustments** |
|
Impacts |
|
(Non-GAAP) |
|
|||||
Gross Profit |
|
$ |
17,053 |
|
$ |
149 |
|
$ |
— |
|
$ |
— |
|
$ |
17,202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit Margin |
|
|
45.7 |
% |
|
0.4 |
Pts |
|
— |
|
|
— |
|
|
46.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S,G&A |
|
|
10,147 |
|
|
(273) |
|
|
— |
|
|
— |
|
|
9,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R,D&E |
|
|
2,840 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) & Expense |
|
|
(820) |
|
|
142 |
|
|
(274) |
|
|
— |
|
|
(951) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
558 |
|
|
(204) |
|
|
— |
|
|
— |
|
|
354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expense & Other (Income) |
|
|
12,402 |
|
|
(335) |
|
|
(274) |
|
|
— |
|
|
11,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income from Continuing Operations |
|
|
4,651 |
|
|
484 |
|
|
274 |
|
|
— |
|
|
5,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income Margin from Continuing Operations |
|
|
12.5 |
% |
|
1.3 |
Pts |
|
0.7 |
Pts |
|
— |
|
|
14.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for / (Benefit from) Income Taxes*** |
|
|
558 |
|
|
104 |
|
|
66 |
|
|
(155) |
|
|
574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate |
|
|
12.0 |
% |
|
0.8 |
Pts |
|
0.6 |
Pts |
|
(2.9) |
Pts |
|
10.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations |
|
|
4,093 |
|
|
381 |
|
|
208 |
|
|
155 |
|
|
4,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Margin from Continuing Operations |
|
|
11.0 |
% |
|
1.0 |
Pts |
|
0.6 |
Pts |
|
0.4 |
Pts |
|
13.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings / (Loss) Per Share: Continuing Operations |
|
$ |
4.58 |
|
$ |
0.44 |
|
$ |
0.23 |
|
$ |
0.17 |
|
$ |
5.42 |
|
* Includes amortization of purchased intangible assets, in process R&D, transaction costs, applicable restructuring and related expenses, tax charges related to acquisition integration and pre-closing charges, such as financing costs.
** Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs.
*** 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)
|
|
|
|
|
|
|
Trailing |
|
||||||
|
|
Three Months Ended |
|
|
Six Months Ended |
|
Twelve Months Ended |
|
||||||
|
|
June 30, 2020 |
|
|
June 30, 2020 |
|
June 30, 2020 |
|
||||||
|
|
Change YTY |
|
|
Change YTY |
|
Change YTY |
|
||||||
Revenue Adjusting for Divested Businesses and Currency |
|
Cloud |
|
Total IBM |
|
|
Total IBM |
|
Cloud |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue as reported |
|
|
30.1 |
% |
|
(5.4) |
% |
|
|
(4.4) |
% |
|
20.2 |
% |
Impact from divested businesses |
|
|
2.4 |
Pts |
|
2.0 |
Pts |
|
|
2.0 |
Pts |
|
1.8 |
Pts |
Currency impact |
|
|
1.8 |
Pts |
|
1.6 |
Pts |
|
|
1.6 |
Pts |
|
1.3 |
Pts |
Revenue adjusting for divested businesses and currency (non-GAAP) |
|
|
34.3 |
% |
|
(1.9) |
% |
|
|
(0.9) |
% |
|
23.4 |
% |
|
|
Three Months Ended |
|
Change |
|
||||||
Red Hat Revenue, Normalized for Historical Comparability |
|
June 30, 2020 |
|
June 30, 2019 |
|
YTY |
|
YTY @constant currency |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
Red Hat revenue as reported in IBM consolidated results (1) |
|
$ |
867 |
|
$ |
— |
|
|
|
|
|
Add: Red Hat revenue prior to acquisition (2) |
|
|
— |
|
|
936 |
|
|
|
|
|
Add: Purchase accounting deferred revenue and intercompany adjustments (3) |
|
|
227 |
|
|
— |
|
|
|
|
|
Red Hat revenue, normalized for historical comparability (non-GAAP) |
|
$ |
1,094 |
|
$ |
936 |
|
17 |
% |
18 |
% |
(1) Represents GAAP revenue as reported by IBM, which is included in the Cloud & Cognitive Software segment.
(2) Revenue for the three months ended June 30, 2019 represents pre-acquisition Red Hat standalone revenue and is included for comparative purposes.
(3) Represents the second-quarter 2020 impact of the deferred revenue purchase accounting adjustment and adjustments to add back revenue which was eliminated for sales between Red Hat and IBM. This line represents revenue that would have been recognized by Red Hat under GAAP if the acquisition had not occurred, but was not recognized by IBM due to purchase accounting and intercompany adjustments.
