TIDMIBM
IBM (NYSE: IBM) today announced fourth-quarter and full-year
2020 earnings results.
"We made progress in 2020 growing our hybrid cloud platform as
the foundation for our clients' digital transformations while
dealing with the broader uncertainty of the macro environment,"
said Arvind Krishna, IBM chairman and chief executive officer. "The
actions we are taking to focus on hybrid cloud and AI will take
hold, giving us confidence we can achieve revenue growth in
2021."
Highlights
Fourth Quarter:
-- GAAP EPS from continuing operations of $1.41; Operating (non-GAAP) EPS of
$2.07 -- EPS includes the impact of a pre-tax charge of more than $2.0
billion for structural actions in the fourth quarter
-- Revenue of $20.4 billion, down 6 percent (down 8 percent adjusting for
divested businesses and currency)
-- Total cloud revenue of $7.5 billion, up 10 percent (up 8 percent
adjusting for divested businesses and currency)
-- Red Hat revenue up 19 percent (up 17 percent adjusting for currency),
normalized for historical comparability
-- GAAP gross profit margin of 51.7 percent, up 70 basis points; Operating
(non-GAAP) gross profit margin of 52.5 percent, up 70 basis points
-- Debt reduced by $3.9 billion since end of third quarter
Full Year:
-- GAAP EPS from continuing operations of $6.13; Operating (non-GAAP) EPS of
$8.67
-- Revenue of $73.6 billion, down 5 percent (down 4 percent adjusting for
divested businesses and currency)
-- Total cloud revenue of $25.1 billion, up 19 percent (up 20 percent
adjusting for divested businesses and currency)
-- Red Hat revenue up 18 percent, normalized for historical comparability
-- GAAP gross profit margin up 100 basis points; operating (non-GAAP) gross
profit margin up 130 basis points
-- Net cash from operating activities of $18.2 billion; free cash flow of
$10.8 billion
-- Cash on hand of $14.3 billion; debt reduced by more than $11 billion
since closing the Red Hat acquisition
FOURTH QUARTER 2020
Results include the impact of $2.04 billion pre-tax charge
Pre-tax Gross
Diluted Net Pre-tax Income Profit
Income Income Margin
EPS * * * * Margin
GAAP from
Continuing
Operations $1.41 $1.3B $1.3B 6.3 % 51.7 %
Year/Year (66) % (66) % (68) % (12.0) Pts 0.7 Pts
Operating
(Non-GAAP) $2.07 $1.9B $2.1B 10.2 % 52.5 %
Year/Year (56) % (56) % (56) % (11.4) Pts 0.7 Pts
* Results include the impact of pre-tax charge of $2.04 billion for structural
actions in the fourth quarter.
"In 2020 we increased investment in our business across R&D
and CAPEX, and since October, announced the acquisition of seven
companies focused on hybrid cloud and AI," said James Kavanaugh,
IBM senior vice president and chief financial officer. "With solid
cash generation, steadily expanding gross profit margins,
disciplined financial management and ample liquidity, we are well
positioned for success as the leading hybrid cloud platform
company."
Cash Flow and Balance Sheet
In the fourth quarter, the company generated net cash from
operating activities of $5.9 billion, or $6.8 billion excluding
Global Financing receivables. IBM's free cash flow was $6.1
billion. The company returned $1.5 billion to shareholders in
dividends.
For the full year, the company generated net cash from operating
activities of $18.2 billion, or $13.8 billion excluding Global
Financing receivables. Net capital expenditures of $3 billion
increased $0.7 billion, primarily for cloud infrastructure. Free
cash flow was $10.8 billion. IBM returned $5.8 billion to
shareholders in dividends.
IBM ended the fourth quarter with $14.3 billion of cash on hand,
which includes marketable securities, up $5.3 billion from year-end
2019. Debt, including Global Financing debt of $21.2 billion,
totaled $61.5 billion, down $3.9 billion since the end of the third
quarter, and down $11.5 billion since closing the Red Hat
acquisition.
Segment Results for Fourth Quarter
Segment pre-tax results reflect the impact of the $2.04 billion
pre-tax charge for structural actions in the fourth quarter.
-- Cloud & Cognitive Software (includes Cloud & Data Platforms which
includes Red Hat, Cognitive Applications and Transaction Processing
Platforms) -- revenues of $6.8 billion, down 4.5 percent (down 6.6
percent adjusting for currency). Cloud & Data Platforms grew 9 percent
(up 6 percent adjusting for currency) led by Red Hat. Cognitive
Applications revenue was flat (down 2 percent adjusting for currency),
with growth in Security and IoT. Transaction Processing Platforms
declined 24 percent (down 26 percent adjusting for currency). Cloud
revenue up 39 percent (up 36 percent adjusting for currency). Gross
profit margin up 20 basis points.
-- Global Business Services (includes Consulting, Application Management and
Global Process Services) -- revenues of $4.2 billion, down 2.7 percent
(down 5.2 percent adjusting for currency), driven by declines in
Application Management and Consulting. Global Process Services revenue
grew. Cloud revenue up 16 percent (up 14 percent adjusting for currency).
Gross profit margin up 260 basis points.
-- Global Technology Services (includes Infrastructure & Cloud Services and
Technology Support Services) -- revenues of $6.6 billion, down 5.5
percent (down 7.8 percent adjusting for currency). Cloud revenue up 4
percent (up 1 percent adjusting for currency). Gross profit margin up 70
basis points.
-- Systems (includes Systems Hardware and Operating Systems Software) --
revenues of $2.5 billion, down 17.8 percent (down 19.4 percent adjusting
for currency), as a result of declines in all Systems Hardware platforms,
reflecting the impact of product cycle dynamics. Cloud revenue down 18
percent (down 19 percent adjusting for currency). Gross profit margin up
380 basis points.
-- Global Financing (includes financing and used equipment sales) --
revenues of $286 million, down 4.8 percent (down 6.0 percent adjusting
for currency), reflecting the wind-down of OEM commercial financing.
Full-year 2020 Results
Full-year results reflect transaction-related impacts associated
with the Red Hat acquisition, which closed in July 2019, and the
impact of the $2.04 billion pre-tax charge for structural actions
in the fourth quarter.
Diluted earnings per share from continuing operations was $6.13
compared to $10.57 in 2019, a decrease of 42 percent. Net income
from continuing operations was $5.5 billion, down 42 percent year
to year. Revenues for the full year 2020 totaled $73.6 billion, a
decrease of 4.6 percent year to year (down 3.5 percent adjusting
for divested businesses and currency) compared with $77.1 billion
for the full year 2019.
Operating (non-GAAP) diluted earnings per share from continuing
operations was $8.67 compared with $12.81 per diluted share for
2019, a decrease of 32 percent. Operating (non-GAAP) net income for
the full year ended December 31, 2020 was $7.8 billion compared
with $11.4 billion in the prior-year period, a decrease of 32
percent.
FULL YEAR 2020
Results include the impact of $2.04 billion pre-tax charge
Pre-tax Gross
Diluted Net Pre-tax Income Profit
Income Income Margin
EPS * * * * Margin
GAAP from
Continuing
Operations $6.13 ** $5.5B ** $4.6B 6.3 % 48.3 %
Year/Year (42) % (42) % (54) % (6.9) Pts 1.0 Pts
Operating
(Non-GAAP) $8.67 $7.8B $7.7B 10.4 % 49.3 %
Year/Year (32) % (32) % (39) % (5.8) Pts 1.3 Pts
* Results include the impact of pre-tax charge of $2.04 billion for structural
actions in the fourth quarter.
** Consolidated diluted earnings per share was $6.23 compared to $10.56 in
2019, a decrease of 41 percent. Consolidated net income was $5.6 billion, down
41 percent year to year.
Full-Year 2021 Expectations
The company expects to grow revenue for the full year 2021 based
on the current foreign exchange rates. The company also expects
adjusted free cash flow of $11 billion to $12 billion in 2021.
Adjusted free cash flow excludes approximately $3 billion of cash
impacts from the company's structural actions initiated in the
fourth quarter of 2020 and the transaction costs associated with
the separation of the managed infrastructure services business.
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; the possibility that the proposed separation of
the managed infrastructure services unit of the company's Global
Technology Services segment will not be completed within the
anticipated time period or at all, the possibility of disruption or
unanticipated costs in connection with the proposed separation or
the possibility that the separation will not achieve its intended
benefits; 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;
-- net cash from operating activities, excluding Global Financing
receivables;
-- free cash flow;
-- adjusted free cash flow (expectations).
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. EST, today. The Webcast may be accessed via a
link at https://www.ibm.com/investor/events/earnings-4q20.
Presentation charts will be available shortly before the
Webcast.
Financial Results Below (certain amounts may not add due to use
of rounded numbers; percentages presented are calculated from the
underlying whole-dollar amounts).
INTERNATIONAL BUSINESS MACHINES CORPORATION
COMPARATIVE FINANCIAL RESULTS
(Unaudited; Dollars in millions except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
2020 2019 2020 2019
REVENUE
Cloud & Cognitive
Software $6,837 $7,160 * $23,376 $22,891*
Global Business
Services 4,170 4,285 * 16,162 16,798*
Global Technology
Services 6,568 6,949 25,812 27,361
Systems 2,501 3,042 6,978 7,604
Global Financing 286 301 1,123 1,400
Other 6 40 * 169 1,092 *
TOTAL REVENUE 20,367 21,777 73,620 77,147
GROSS PROFIT 10,523 11,100 35,575 36,488
GROSS PROFIT MARGIN
Cloud & Cognitive
Software 79.8 % 79.5 % * 77.5 % 77.1 % *
Global Business
Services 30.1 % 27.6 % * 29.7 % 27.7 % *
Global Technology
Services 35.9 % 35.2 % 34.8 % 34.8 %
Systems 59.9 % 56.0 % 55.9 % 53.1 %
Global Financing 33.8 % 35.6 % 37.7 % 35.6 %
TOTAL GROSS PROFIT
MARGIN 51.7 % 51.0 % 48.3 % 47.3 %
EXPENSE AND OTHER
INCOME
S,G&A 7,232 5,433 23,082 20,604
R,D&E 1,611 1,596 6,333 5,989
Intellectual
property and custom
development income (173) (159) (626) (648)
Other (income) and
expense 247 (117) 861 (968)
Interest expense 317 354 1,288 1,344
TOTAL EXPENSE AND
OTHER INCOME 9,234 7,107 30,937 26,322
INCOME FROM
CONTINUING
OPERATIONS
BEFORE INCOME TAXES 1,289 3,993 4,637 10,166
Pre-tax margin 6.3 % 18.3 % 6.3 % 13.2 %
Provision
for/(Benefit from)
income taxes 25 324 (864) 731
Effective tax rate 1.9 % 8.1 % (18.6)% 7.2 %
INCOME FROM
CONTINUING
OPERATIONS $1,264 $3,669 $5,501 $9,435
DISCONTINUED
OPERATIONS
Income/(Loss) from
discontinued
operations, net of
taxes 92 0 89 (4)
NET INCOME $1,356 $3,670 $5,590 $9,431
EARNINGS/(LOSS) PER
SHARE OF COMMON
STOCK
Assuming Dilution
Continuing
Operations $1.41 $4.11 $6.13 $10.57
Discontinued
Operations $0.10 $0.00 $0.10 $(0.01)
TOTAL $1.51 $4.11 $6.23 $10.56
Basic
Continuing
Operations $1.42 $4.14 $6.18 $10.63
Discontinued
Operations $0.10 $0.00 $0.10 $0.00
TOTAL $1.52 $4.14 $6.28 $10.63
WEIGHTED-AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING
(M's)
Assuming Dilution 899.0 893.7 896.6 892.8
Basic 892.6 887.1 890.3 887.2
_____________________
* Recast to conform with 2020 presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
At At
December 31, December 31,
(Dollars in Millions) 2020 2019
ASSETS:
Current Assets:
Cash and cash equivalents $ 13,212 $ 8,172
Restricted cash 463 141
Marketable securities 600 696
Notes and accounts receivable - trade, net 7,132 7,870
Short-term financing receivables, net 10,892 14,192
Other accounts receivable, net 714 1,733
Inventories 1,839 1,619
Deferred costs 2,107 1,896
Prepaid expenses and other current assets 2,206 2,101
Total Current Assets 39,165 38,420
Property, plant and equipment, net 10,040 10,010
Operating right-of-use assets, net 4,686 4,996
Long-term financing receivables, net 7,086 8,712
Prepaid pension assets 7,610 6,865
Deferred costs 2,449 2,472
Deferred taxes 9,241 5,182
Goodwill 59,617 58,222
Intangibles, net 13,796 15,235
Investments and sundry assets 2,282 2,074
Total Assets $ 155,971 $ 152,186
LIABILITIES:
Current Liabilities:
Taxes $ 3,301 $ 2,839
Short-term debt 7,183 8,797
Accounts payable 4,908 4,896
Deferred income 12,833 12,026
Operating lease liabilities 1,357 1,380
Other liabilities 10,287 7,763
Total Current Liabilities 39,869 37,701
Long-term debt 54,355 54,102
Retirement related obligations 18,248 17,142
Deferred income 4,301 3,851
Operating lease liabilities 3,574 3,879
Other liabilities 14,897 14,526
Total Liabilities 135,244 131,202
EQUITY:
IBM Stockholders' Equity:
Common stock 56,556 55,895
Retained earnings 162,717 162,954
Treasury stock -- at cost (169,339) (169,413)
Accumulated other comprehensive
income/(loss) (29,337) (28,597)
Total IBM Stockholders' Equity 20,597 20,841
Noncontrolling interests 129 144
Total Equity 20,727 20,985
Total Liabilities and Equity $ 155,971 $ 152,186
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW ANALYSIS
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
(Dollars in Millions) 2020 2019 2020 2019
Net Cash Provided by
Operating Activities
per GAAP: $5,859 $3,451 $18,197 $14,770
Less: change in Global
Financing (GF)
Receivables (974) (3,220) 4,349 491
Capital Expenditures,
Net (780) (645) (3,042) (2,370)
Free Cash Flow 6,054 6,027 10,805 11,909
Acquisitions (299) -- (336) (32,630)
Divestitures (7) 149 503 1,076
Dividends (1,455) (1,438) (5,797) (5,707)
Share Repurchase -- -- -- (1,361)
Non-GF Debt (4,756) (5,640) 221 22,792
Other (includes GF Net
Receivables and GF
Debt) (1,016) (1,046) (130) 709
Change in Cash, Cash
Equivalents,
Restricted Cash and
Short-term Marketable
Securities $(1,478) $(1,948) $5,265 $(3,213)
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
(Dollars in Millions) 2020 2019 2020 2019
Net Income from Operations $1,356 $3,670 $5,590 $9,431
Depreciation/Amortization
of Intangibles 1,699 1,650 6,695 6,059
Stock-based Compensation 279 210 937 679
Working Capital / Other 3,499 1,142 625 (1,890)
Global Financing A/R (974) (3,220) 4,349 491
Net Cash Provided by
Operating Activities $5,859 $3,451 $18,197 $14,770
Capital Expenditures, net
of payments & proceeds (780) (645) (3,042) (2,370)
Divestitures, net of cash
transferred (7) 149 503 1,076
Acquisitions, net of cash
acquired (299) -- (336) (32,630)
Marketable Securities /
Other Investments, net 528 624 (153) 6,988
Net Cash Provided by/(Used
in) Investing Activities $(558) $127 $(3,028) $(26,936)
Debt, net of payments &
proceeds (4,781) (4,181) (3,714) 16,284
Dividends (1,455) (1,438) (5,797) (5,707)
Common Stock Repurchases -- -- -- (1,361)
Common Stock Transactions -
Other (57) (55) (210) (173)
Net Cash Provided by/(Used
in) Financing Activities $(6,293) $(5,674) $(9,721) $9,042
Effect of Exchange Rate
changes on Cash 113 185 (87) (167)
Net Change in Cash, Cash
Equivalents and Restricted
Cash $(878) $(1,911) $5,361 $(3,290)
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
Three Months Ended December 31, 2020
Cloud & Global Global
Cognitive Business Technology Global
(Dollars in Millions) Software Services Services Systems Financing
Revenue
External $ 6,837 $ 4,170 $ 6,568 $2,501 $ 286
Internal 738 43 316 196 233
Total Segment Revenue $ 7,575 $ 4,213 $ 6,884 $2,697 $ 519
Pre-tax Income/(Loss)
from Continuing
Operations 1,887 148 (353) 455 195
Pre-tax Margin 24.9 % 3.5 % (5.1) % 16.9 % 37.6 %
Change YTY Revenue -
External (4.5) % (2.7) % (5.5) % (17.8)% (4.8) %
Change YTY Revenue -
External @constant
currency (6.6) % (5.2) % (7.8) % (19.4)% (6.0) %
Three Months Ended December 31, 2019
Cloud & Global Global
Cognitive Business Technology Global
(Dollars in Millions) Software* Services* Services Systems Financing
Revenue
External $ 7,160 $ 4,285 $ 6,949 $ 3,042 $ 301
Internal 692 65 278 198 348
Total Segment Revenue $ 7,853 $ 4,350 $ 7,227 $ 3,240 $ 649
Pre-tax Income/(Loss)
from Continuing
Operations 2,729 469 645 802 252
Pre-tax Margin 34.8 % 10.8 % 8.9 % 24.8 % 38.9 %
_____________________
* Recast to conform with 2020 presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
Year Ended December 31, 2020
Cloud & Global Global
Cognitive Business Technology Global
(Dollars in Millions) Software Services Services Systems Financing
Revenue
External $ 23,376 $ 16,162 $ 25,812 $ 6,978 $ 1,123
Internal 3,169 193 1,226 824 894
Total Segment Revenue $ 26,545 $ 16,355 $ 27,039 $ 7,802 $ 2,017
Pre-tax Income/(Loss)
from Continuing
Operations 6,362 1,351 117 449 761
Pre-tax Margin 24.0 % 8.3 % 0.4 % 5.8 % 37.7 %
Change YTY Revenue -
External 2.1 % (3.8) % (5.7) % (8.2)% (19.8) %
Change YTY Revenue -
External @constant
currency 1.9 % (4.1) % (5.4) % (8.7)% (19.2) %
Year Ended December 31, 2019
Cloud & Global Global
Cognitive Business Technology Global
(Dollars in Millions) Software* Services* Services Systems Financing
Revenue
External $ 22,891 $ 16,798 $ 27,361 $ 7,604 $ 1,400
Internal 2,827 278 1,157 726 1,232
Total Segment Revenue $ 25,718 $ 17,076 $ 28,518 $ 8,330 $ 2,632
Pre-tax Income/(Loss)
from Continuing
Operations 7,811 1,623 1,645 701 1,055
Pre-tax Margin 30.4 % 9.5 % 5.8 % 8.4 % 40.1 %
_____________________
* 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 December 31, 2020
Continuing Operations
Acquisition- Retirement- Tax Spin-off-
Related Related Reform Related Operating
Adjustments Adjustments Charges
GAAP (1) (2) Impacts (4) (Non-GAAP)
Gross Profit $10,523 $177 $-- $ -- $1 $ 10,700
Gross Profit Margin 51.7 % 0.9 Pts -- Pts -- Pts 0.0 Pts 52.5 %
S,G&A 7,232 (287) -- -- (28) 6,917
R,D&E 1,611 -- -- -- -- 1,611
Other (Income) &
Expense 247 (1) (295) -- -- (48)
Interest Expense 317 -- -- -- -- 317
Total Expense &
Other (Income) 9,234 (288) (295) -- (28) 8,623
Pre-tax Income from
Continuing
Operations 1,289 465 295 -- 28 2,077
Pre-tax Income
Margin from
Continuing
Operations 6.3 % 2.3 Pts 1.4 Pts -- Pts 0.1 Pts 10.2 %
Provision
for/(Benefit from)
Income Taxes (3) 25 105 96 (18) 7 216
Effective Tax Rate 1.9 % 4.6 Pts 4.4 Pts (0.9) Pts 0.3 Pts 10.4 %
Income from
Continuing
Operations 1,264 359 198 18 21 1,861
Income Margin from
Continuing
Operations 6.2 % 1.8 Pts 1.0 Pts 0.1 Pts 0.1 Pts 9.1 %
Diluted
Earnings/(Loss) Per
Share: Continuing
Operations $1.41 $0.40 $0.22 $ 0.02 $0.02 $ 2.07
Three Months Ended December 31, 2019
Continuing Operations
Acquisition- Retirement- Tax Spin-off-
Related Related Reform Related Operating
Adjustments Adjustments
GAAP (1) (2) Impacts Charges (4) (Non-GAAP)
Gross Profit $11,100 $189 $-- $-- $ -- $ 11,289
Gross Profit Margin 51.0 % 0.9 Pts -- Pts -- Pts -- Pts 51.8 %
S,G&A 5,433 (320) -- -- -- 5,113
R,D&E 1,596 (0) -- -- -- 1,596
Other (Income) &
Expense (117) (1) (196) -- -- (314)
Interest Expense 354 -- -- -- -- 354
Total Expense &
Other (Income) 7,107 (320) (196) -- -- 6,591
Pre-tax Income from
Continuing
Operations 3,993 509 196 -- -- 4,698
Pre-tax Income
Margin from
Continuing
Operations 18.3 % 2.3 Pts 0.9 Pts -- Pts -- Pts 21.6 %
Provision
for/(Benefit from)
Income Taxes (3) 324 133 21 14 -- 492
Effective Tax Rate 8.1 % 2.0 Pts 0.1 Pts 0.3 Pts -- Pts 10.5 %
Income from
Continuing
Operations 3,669 376 175 (14) -- 4,206
Income Margin from
Continuing
Operations 16.8 % 1.7 Pts 0.8 Pts (0.1) Pts -- Pts 19.3 %
Diluted
Earnings/(Loss) Per
Share: Continuing
Operations $4.11 $0.42 $0.20 $(0.02) $ -- $ 4.71
_____________________
(1) 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.
(2) 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.
(3) 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.
(4) Managed infrastructure services spin-off charges primarily relate to
transaction and third-party support costs, business separation and
applicable employee retention fees, pension settlements and related tax
charges.
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; Dollars in millions except per share amounts)
Year Ended December 31, 2020
Continuing Operations
Acquisition- Retirement- Tax Spin-off-
Related Related Reform Related Operating
Adjustments Adjustments Charges
GAAP (1) (2) Impacts (4) (Non-GAAP)
Gross Profit $35,575 $732 $-- $-- $1 $ 36,308
Gross Profit Margin 48.3 % 1.0 Pts -- Pts -- Pts 0.0 Pts 49.3 %
S,G&A 23,082 (1,137) -- -- (28) 21,917
R,D&E 6,333 -- -- -- -- 6,333
Other (Income) &
Expense 861 (2) (1,123) -- -- (265)
Interest Expense 1,288 -- -- -- -- 1,288
Total Expense &
Other (Income) 30,937 (1,139) (1,123) -- (28) 28,648
Pre-tax Income from
Continuing
Operations 4,637 1,871 1,123 -- 28 7,660
Pre-tax Income
Margin from
Continuing
Operations 6.3 % 2.5 Pts 1.5 Pts -- Pts 0.0 Pts 10.4 %
Provision
for/(Benefit from)
Income Taxes (3) (864) 418 215 110 7 (114)
Effective Tax Rate (18.6)% 10.0 Pts 5.5 Pts 1.4 Pts 0.2 Pts (1.5) %
Income from
Continuing
Operations 5,501 1,454 908 (110) 21 7,774
Income Margin from
Continuing
Operations 7.5 % 2.0 Pts 1.2 Pts (0.1) Pts 0.0 Pts 10.6 %
Diluted
Earnings/(Loss) Per
Share: Continuing
Operations $6.13 $1.63 $1.01 $(0.12) $0.02 $ 8.67
Year Ended December 31, 2019
Continuing Operations
Acquisition- Retirement- Tax Spin-off-
Related Related Reform Related Operating
Adjustments Adjustments
GAAP (1) (2) Impacts Charges (4) (Non-GAAP)
Gross Profit $36,488 $547 $-- $ -- $ -- $ 37,035
Gross Profit Margin 47.3 % 0.7 Pts -- Pts -- Pts -- Pts 48.0 %
S,G&A 20,604 (1,044) -- -- -- 19,560
R,D&E 5,989 (53) -- -- -- 5,936
Other (Income) &
Expense (968) 152 (615) -- -- (1,431)
Interest Expense 1,344 (228) -- -- -- 1,116
Total Expense &
Other (Income) 26,322 (1,173) (615) -- -- 24,533
Pre-tax Income from
Continuing
Operations 10,166 1,721 615 -- -- 12,503
Pre-tax Income
Margin from
Continuing
Operations 13.2 % 2.2 Pts 0.8 Pts -- Pts -- Pts 16.2 %
Provision
for/(Benefit from)
Income Taxes (3) 731 378 103 (146) -- 1,067
Effective Tax Rate 7.2 % 2.0 Pts 0.5 Pts (1.2) Pts -- Pts 8.5 %
Income from
Continuing
Operations 9,435 1,343 512 146 -- 11,436
Income Margin from
Continuing
Operations 12.2 % 1.7 Pts 0.7 Pts 0.2 Pts -- Pts 14.8 %
Diluted
Earnings/(Loss) Per
Share: Continuing
Operations $10.57 $1.50 $0.58 $ 0.16 $ -- $ 12.81
_____________________
(1) 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.
(2) 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.
(3) 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.
(4) Managed infrastructure services spin-off charges primarily relate to
transaction and third-party support costs, business separation and
applicable employee retention fees, pension settlements and related tax
charges.
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; Dollars in millions except per share amounts)
Three Months Ended Year Ended
December 31, 2020 December 31, 2020
Change YTY Change YTY
Revenue
Adjusting
for
Divested
Businesses
and Total Total
Currency IBM Cloud IBM Cloud
Revenue as
reported (6.5) % 9.8 % (4.6) % 18.6 %
Impact from
divested
businesses 0.3 Pts 0.6 Pts 1.1 Pts 1.4 Pts
Currency
impact (2.2) Pts (2.7) Pts (0.1) Pts (0.4) Pts
Revenue
adjusting
for divested
businesses
and currency
(non-GAAP) (8.4) % 7.7 % (3.5) % 19.6 %
Three Months Ended Year Ended
December 31, 2020 December 31, 2020
Red Hat Revenue,
Normalized for
Historical
Comparability Change YTY Change YTY
Red Hat Revenue GAAP
growth rate (1) 92 % 288 %
Impact from Red Hat
revenue prior to
acquisition (2) -- Pts (239) Pts
Impact from purchase
accounting deferred
revenue and
intercompany
adjustments (3) (73) Pts (31) Pts
Red Hat revenue
growth rate,
normalized for
historical
comparability
(non-GAAP) 19 % 18 %
Impact from currency (2) Pts 0 Pts
Red Hat revenue
growth rate,
normalized for
historical
comparability and
adjusting for
currency (non-GAAP) 17 % 18 %
(1) Represents change in GAAP revenue as reported by IBM, which is included
in the Cloud & Cognitive Software segment.
(2) Red Hat revenue was included in IBM's consolidated results beginning
July 9, 2019. Revenue for January 1 -- July 8, 2019 represents
pre-acquisition Red Hat standalone revenue and is included for
computing year over year change purposes.
(3) Represents change in the fourth-quarter and full-year 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.
IBM
Edward Barbini, 914--499--6565
barbini@us.ibm.com
John Bukovinsky, 732--618--3531
jbuko@us.ibm.com
View source version on businesswire.com:
https://www.businesswire.com/news/home/20210121005941/en/
CONTACT:
IBM
SOURCE: Intnl Bus. Mach
Copyright Business Wire 2021
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