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 IBM Reports 2015 Fourth-Quarter and Full-Year Results
   Tuesday, January 19, 2016 4:06:00 PM ET

IBM (IBM )

Fourth-Quarter 2015:

o Diluted EPS from continuing operations:

- Operating (non-GAAP): $4.84, down 17 percent; impact of 20 points from prior year System x divestiture gain;

- GAAP: $4.59, down 17 percent;

o Net income from continuing operations:

- Operating (non-GAAP): $4.7 billion, down 19 percent; impact of 19 points from prior year System x divestiture gain;

- GAAP: $4.5 billion, down 19 percent;

o Revenue from continuing operations: $22.1 billion:

- Down 2 percent adjusting for currency; down 9 percent as reported;

o Services backlog of $121 billion, up 1 percent adjusting for currency.

Full-Year 2015:

o Diluted EPS from continuing operations:

- Operating (non-GAAP): $14.92, down 10 percent; impact of 7 points from prior year System x and customer care divestiture gains;

- GAAP: $13.60, down 13 percent;

o Net income from continuing operations:

- Operating (non-GAAP): $14.7 billion, down 12 percent; impact of 7 points from prior year System x and customer care divestiture gains;

- GAAP: $13.4 billion, down 15 percent;

o Gross profit margin from continuing operations:

- Operating (non-GAAP): 50.8 percent, up 20 basis points;

- GAAP: 49.8 percent, down 20 basis points;

o Revenue from continuing operations: $81.7 billion:

- Down 1 percent adjusting for currency (8 points or more than $7 billion) and divestitures (3 points or nearly $3 billion); down 12 percent as reported;

o Strategic imperatives revenue of $28.9 billion now represents 35 percent of total IBM revenue, up 26 percent adjusting for currency and the System x divestiture; up 17 percent as reported:

- Total Cloud revenue of $10.2 billion up 57 percent adjusting for currency and the System x divestiture, up 43 percent as reported;

-- Cloud delivered as a service revenues of $4.5 billion, up 61 percent adjusting for currency, up 50 percent as reported;

-- Annual run rate of $5.3 billion vs. $3.5 billion in the fourth quarter 2014 for cloud delivered as a service;

- Business analytics revenue up 16 percent adjusting for currency, up 7 percent as reported to $17.9 billion;

- Mobile revenue more than tripled;

- Security revenue up 12 percent adjusting for currency, up 5 percent as reported;

o Free cash flow of $13.1 billion, up $0.7 billion;

- Free cash flow realization equaled 98 percent of GAAP net income from continuing operations;

o Total capital return to shareholders of $9.5 billion; dividends of $4.9 billion and gross share repurchases of $4.6 billion;

o The company will discuss 2016 during today’s quarterly earnings conference call.

IBM (IBM ) today announced fourth-quarter 2015 diluted earnings from continuing operations of $4.59 per share, down 17 percent year-to-year. Operating (non-GAAP) diluted earnings from continuing operations were $4.84 per share, compared with operating diluted earnings of $5.81 per share in the fourth quarter of 2014, down 17 percent. The prior-year gain from the divestiture of the System x business impacted operating diluted earnings per share from continuing operations by 20 points.

"We continue to make significant progress in our transformation to higher value. In 2015, our strategic imperatives of cloud, analytics, mobile, social and security grew 26 percent to $29 billion and now represent 35 percent of our total revenue," said Ginni Rometty, IBM chairman, president and chief executive officer. "We strengthened our existing portfolio while investing aggressively in new opportunities like Watson Health, Watson Internet of Things and hybrid cloud. As we transform to a cognitive solutions and cloud platform company, we are well positioned to continue delivering greater value to our clients and returning capital to our shareholders."

Fourth-quarter net income from continuing operations was $4.5 billion compared with $5.5 billion in the fourth quarter of 2014, down 19 percent. Operating (non-GAAP) net income was $4.7 billion compared with $5.8 billion in the fourth quarter of 2014, down 19 percent. The prior-year gain from the divestiture of the System x business impacted operating net income by 19 points.

Total revenues from continuing operations for the fourth quarter of 2015 of $22.1 billion were down 9 percent (down 2 percent adjusting for currency) from the fourth quarter of 2014.

GAAP - Operating (non-GAAP) Reconciliation

Fourth-quarter operating (non-GAAP) diluted earnings exclude $0.25 per share of charges: $0.11 per share for the amortization of purchased intangible assets and other acquisition-related charges, and $0.14 per share for non-operating retirement-related charges driven by changes to plan assets and liabilities primarily related to past market performance.

Full-year operating (non-GAAP) diluted earnings exclude $1.32 per share of charges: $0.57 per share for the amortization of purchased intangible assets and other acquisition-related charges, and $0.75 per share for non-operating retirement-related charges driven by changes to plan assets and liabilities primarily related to past market performance.

Strategic Imperatives

Fourth-quarter revenues from the company’s strategic imperatives --- cloud, analytics and engagement --- increased 10 percent year to year (up 16 percent adjusting for currency). For the full year, revenues from strategic imperatives increased 17 percent (up 26 percent adjusting for currency and the divested System x business) to $28.9 billion and now represent 35 percent of total IBM consolidated revenue.

For the full year, total cloud revenues (public, private and hybrid) increased 43 percent (up 57 percent adjusting for currency and the divested System x business) to $10.2 billion. Revenues for cloud delivered as a service -- a subset of the total cloud revenue -- increased 50 percent to $4.5 billion; and the annual as-a-service run rate increased to $5.3 billion from $3.5 billion in the fourth quarter of 2014. Revenues from business analytics increased 7 percent (up 16 percent adjusting for currency) to $17.9 billion. Revenues from mobile more than tripled and from security increased 5 percent (up 12 percent adjusting for currency).

Geographic Regions

The Americas’ fourth-quarter revenues were $10.3 billion, a decrease of 8 percent (down 4 percent adjusting for currency) from the 2014 period. Revenues from Europe/Middle East/Africa were $7.3 billion, down 9 percent (up 1 percent adjusting for currency). Asia-Pacific revenues decreased 10 percent (down 3 percent adjusting for currency) to $4.4 billion. Revenues from the BRIC countries were down 21 percent as reported (down 11 percent adjusting for currency).

Services

Global Technology Services segment revenues were down 7 percent (up 1 percent adjusting for currency) to $8.1 billion. Global Business Services segment revenues were down 10 percent (down 4 percent adjusting for currency) to $4.3 billion.

The estimated services backlog as of December 31 was $121 billion, up 1 percent year to year adjusting for currency.

Software

Revenues from the Software segment were down 11 percent to $6.8 billion (down 6 percent adjusting for currency) compared with the fourth quarter of 2014.

Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Workforce Solutions and Rational products, were $4.9 billion, down 10 percent (down 6 percent adjusting for currency) year to year. Operating systems revenues of $0.5 billion were down 12 percent (down 7 percent adjusting for currency) year to year.

Hardware

Revenues from the Systems Hardware segment totaled $2.4 billion for the quarter, down 1 percent (up 3 percent adjusting for currency) year to year.

Revenues from z Systems mainframe server products increased 16 percent compared with the year-ago period (up 21 percent adjusting for currency). Total delivery of z Systems computing power, as measured in MIPS (millions of instructions per second), increased 28 percent. Revenues from Power Systems were up 4 percent compared with the 2014 period (up 8 percent adjusting for currency). Revenues from System Storage decreased 11 percent (down 7 percent adjusting for currency).

Financing

Global Financing segment revenues decreased 15 percent (down 6 percent adjusting for currency) in the fourth quarter at $0.5 billion.

Gross Profit

The company’s total gross profit margin from continuing operations was 51.7 percent in the 2015 fourth quarter compared with 53.3 percent in the 2014 fourth quarter. Total operating (non-GAAP) gross profit margin from continuing operations was 52.7 percent in the 2015 fourth quarter compared with 53.9 percent in the 2014 fourth quarter.

Expense

Total expense and other income from continuing operations increased to $6.3 billion, up 9 percent compared to the prior-year period. S,G&A expense of $5.2 billion decreased 15 percent year over year. R,D&E expense of $1.4 billion increased 3 percent year to year; the related expense-to-revenue ratio increased to 6.2 percent compared with 5.5 percent in the year-ago period. Other (income) and expense was income of $146 million compared with prior-year income of $1.5 billion. Intellectual property and custom development income was $193 million and interest expense was $128 million.

Total operating (non-GAAP) expense and other income from continuing operations increased to $6.1 billion, up 9 percent compared with the prior-year period, driven by the prior-year $1.4 billion gain from the divested System x business and the prior-year expense of $0.6 billion for workforce rebalancing. Operating (non-GAAP) S,G&A expense of $5.0 billion decreased 15 percent compared with prior-year expense. Operating (non-GAAP) R,D&E expense of $1.4 billion increased 1 percent year to year; the related expense-to-revenue ratio increased to 6.1 percent compared with 5.6 percent in the year-ago period.

Pre-Tax Income

Pre-tax income from continuing operations decreased 28 percent to $5.1 billion. Pre-tax margin from continuing operations decreased 6.3 points to 23.1 percent. Operating (non-GAAP) pre-tax income from continuing operations decreased 25 percent to $5.5 billion and pre-tax margin was 25.0 percent, a decrease of 5.7 points year to year.

***

IBM’s tax rate from continuing operations was 12.5 percent, down 9.7 points year over year; the operating (non-GAAP) tax rate was 14.7 percent, down 7.1 points compared to the year-ago period driven by current period discrete items.

Net income margin from continuing operations decreased 2.7 points to 20.2 percent. Total operating (non-GAAP) net income margin from continuing operations decreased 2.7 points to 21.3 percent.

The weighted-average number of diluted common shares outstanding in the fourth-quarter 2015 was 973 million compared with 995 million shares in the same period of 2014. As of December 31, 2015, there were 966 million basic common shares outstanding.

Debt, including Global Financing, totaled $39.9 billion, compared with $40.7 billion at year-end 2014. From a management segment view, Global Financing debt totaled $27.2 billion versus $29.1 billion at year-end 2014, resulting in a debt-to-equity ratio of 7.3 to 1. Core (non-global financing) debt totaled $12.7 billion, an increase of $1.1 billion since year-end 2014. IBM ended the fourth-quarter 2015 with $8.2 billion of cash on hand.

The company generated full-year free cash flow of $13.1 billion, excluding Global Financing receivables, up $0.7 billion compared to 2014. The company returned $9.5 billion to shareholders through $4.9 billion in dividends and $4.6 billion of gross share repurchases. The balance sheet remains strong and is well positioned to support the business over the long term.

At the end of December 2015, IBM had approximately $5.6 billion remaining from the current share repurchase authorization.

Full-Year 2015 Results

Diluted earnings per share from continuing operations were $13.60, down 13 percent compared to the 2014 period. Net income from continuing operations for the twelve months ended December 31, 2015 was $13.4 billion compared with $15.8 billion in the year-ago period, a decrease of 15 percent.

Consolidated net income was $13.2 billion compared to $12.0 billion in the year-ago period, including operating net losses in discontinued operations related to the divested Microelectronics business. Consolidated diluted earnings per share were $13.42 compared to $11.90, up 13 percent year to year. Revenues from continuing operations for the twelve-month period totaled $81.7 billion, a decrease of 12 percent (down 1 percent year to year, adjusting for currency and divested businesses) compared with $92.8 billion for the first twelve months of 2014.

Operating (non-GAAP) diluted earnings per share from continuing operations were $14.92 compared with $16.53 per diluted share for the 2014 period, a decrease of 10 percent. The prior-year gain from the divestitures of the System x and the customer care outsourcing businesses impacted earnings per share from continuing operations by 7 points. Operating (non-GAAP) net income from continuing operations for the twelve months ended December 31, 2015 was $14.7 billion compared with $16.7 billion in the year-ago period, a decrease of 12 percent. The prior-year gain from the divestitures of the System x and the customer care outsourcing businesses impacted net income from continuing operations by 7 points.

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 client 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, 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, alliances and dispositions; risks from legal proceedings; 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 --

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

o adjusting for free cash flow;

o adjusting for currency (i.e., at constant currency);

o adjusting for the divestiture of the System x and the customer care outsourcing businesses.

The rationale for management’s use of non-GAAP measures is included as part of the supplemental materials presented within the fourth-quarter earnings materials. These materials are available via a link on the IBM investor relations Web site at www.ibm.com/investor and are being included in Attachment II ("Non-GAAP Supplemental 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 5:00 p.m. EST, today. The Webcast may be accessed via a link at http://www.ibm.com/investor/events/earnings/4q15.html . 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                                                                                                   Twelve Months Ended
                                                                                                                                 December 31,                                                                                                                            December 31,
                                                                                                                                                     Percent                                                                          Percent
                                                                                                2015                                                  2014                                 Change                                2015                       2014                    Change
                                                                             ------------------------------------------                     -------------------------                     -------                      -------------------------                     -------------------------                     --------------------
REVENUE
                                                                                                                                                                                                                                                                                                                    
Global Technology Services *                                                                    $         8,126                               $         8,746                               -7.1%                        $        32,017                               $        35,442                                     -9.7%
  Gross profit margin                                                                                     37.7%                                         39.1%                                                                      37.4%                                         39.0%
                                                                                                                                                                                                                                                                                                                    
Global Business Services *                                                                                4,297                                         4,771                               -9.9%                                 17,166                                        19,512                                    -12.0%
  Gross profit margin                                                                                     28.2%                                         31.5%                                                                      28.2%                                         30.4%
                                                                                                                                                                                                                                                                                                                    
Software                                                                                                  6,767                                         7,578                              -10.7%                                 22,932                                        25,434                                     -9.8%
  Gross profit margin                                                                                     88.0%                                         90.0%                                                                      87.3%                                         88.6%
                                                                              
Systems Hardware                                                                                          2,372                                         2,406                               -1.4%                                  7,581                                         9,996                                    -24.2%
  Gross profit margin                                                                                     48.0%                                         49.6%                                                                      46.6%                                         39.5%
                                                                              
Global Financing                                                                                           454                                           532                               -14.6%                                  1,840                                         2,034                                     -9.5%
 Gross profit margin                                                                                      39.9%                                         48.7%                                                                      45.6%                                         49.4%
                                                                                                                                                                                                                                                                                                                    
Other                                                                                                      43                                            82                                -47.1%                                   206                                           374                                     -45.0%
  Gross profit margin                                                                                    -312.7%                                       -401.7%                                                                    -253.0%                                       -215.0%
                                                                                                                                                                                                                                                                                                                    
TOTAL REVENUE                                                                                            22,059                                        24,113                               -8.5%                                 81,741                                        92,793                                    -11.9%
                                                                                                                                                                                                                                                                                                                    
GROSS PROFIT                                                                                             11,407                                        12,862                              -11.3%                                 40,684                                        46,407                                    -12.3%
  Gross profit margin                                                                                     51.7%                                         53.3%                                                                      49.8%                                         50.0%
                                                                              
EXPENSE AND OTHER INCOME
                                                                                                                                                                                                                                                                                                                    
S,G&A                                                                                                     5,157                                         6,034                              -14.5%                                 20,430                                        23,180                                    -11.9%
  Expense to revenue                                                                                      23.4%                                         25.0%                                                                      25.0%                                         25.0%
                                                                              
R,D&E                                                                                                     1,362                                         1,320                               3.1%                                   5,247                                         5,437                                     -3.5%
  Expense to revenue                                                                                      6.2%                                          5.5%                                                                       6.4%                                          5.9%
                                                                              
Intellectual property and
  custom development income                                                                               (193)                                         (199)                               -2.9%                                  (682)                                         (742)                                     -8.1%
                                                                                                                                                                                                                                                                                                                    
Other (income) and expense                                                                                (146)                                        (1,506)                             -90.3%                                  (724)                                        (1,938)                                   -62.6%
                                                                              
Interest expense                                                                                           128                                           117                                9.7%                                    468                                           484                                      -3.2%
                                                                                                                                                                                                                                                                                                                    
TOTAL EXPENSE AND
 OTHER INCOME                                                                                             6,308                                         5,767                               9.4%                                  24,740                                        26,421                                     -6.4%
  Expense to revenue                                                                                      28.6%                                         23.9%                                                                      30.3%                                         28.5%
                                                                              
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES                                                                            5,098                                         7,094                              -28.1%                                 15,945                                        19,986                                    -20.2%
  Pre-tax margin                                                                                          23.1%                                         29.4%                                                                      19.5%                                         21.5%
                                                                              
Provision for income taxes                                                                                 638                                          1,580                              -59.6%                                  2,581                                         4,234                                    -39.1%
  Effective tax rate                                                                                      12.5%                                         22.3%                                                                      16.2%                                         21.2%
                                                                              
INCOME FROM CONTINUING
OPERATIONS                                                                                      $         4,460                               $         5,515                              -19.1%                        $        13,364                               $        15,751                                    -15.2%
  Net margin                                                                                              20.2%                                         22.9%                                                                      16.3%                                         17.0%
                                                                              
DISCONTINUED OPERATIONS
                                                                                         
 Income / (loss) from discontinued
 operations, net of taxes                                                                         3                                                     (31)                                                                       (174)                                        (3,729)
                                                                              
NET INCOME                                                                                      $         4,463                               $         5,484                              -18.6%                        $        13,190                               $        12,022                                     9.7%
                                                                             ==================== ====================                      === ====================                                                   === ====================                      === ====================
                                                                                                                                                                                                                                                                                                                    
EARNINGS PER SHARE
OF COMMON STOCK:
  Assuming Dilution
   Continuing Operations                                                                        $         4.59                                $         5.54                               -17.1%                        $         13.60                               $         15.59                                    -12.8%
   Discontinued Operations                                                                      $         0.00                                         ($0.03)                                                                    ($0.18)                                       ($3.69)
                                                                                                                                                                                              
                                                                             -------------------- --------------------                          --------------------                                                       --------------------                          --------------------
  TOTAL                                                                                         $         4.59                                $         5.51                               -16.7%                        $         13.42                               $         11.90                                     12.8%
                                                                             ==================== ====================                      === ====================                                                   === ====================                      === ====================
                                                                                                                                                                                                                                                                                                                    
  Basic
   Continuing Operations                                                                        $         4.60                                $         5.57                               -17.4%                        $         13.66                               $         15.68                                    -12.9%
   Discontinued Operations                                                                      $         0.00                                         ($0.03)                                                                    ($0.18)                                       ($3.71)
                                                                                                                                                                                                                 
                                                                                                  --------------------                          --------------------                                                       --------------------                          --------------------
  TOTAL                                                                                         $         4.60                                $         5.54                               -17.0%                        $         13.48                               $         11.97                                     12.6%
                                                                             ==================== ====================                      === ====================                                                   === ====================                      === ====================
                                                                                                                                                                                                                                                                                                                    
WEIGHTED-AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING (M’s):
  Assuming Dilution                                                                                       972.8                                         995.4                                                                      982.7                                        1,010.0
  Basic                                                                                                   969.4                                         990.4                                                                      978.7                                        1,004.3
                                                                              
                                                                              
*Reclassified to conform with 2015 presentation.
 
 
                                                         INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                        CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                                         (Unaudited)
                                                                             
                                                                                                        At                                       At
(Dollars in Millions)                                                                              December 31,                             December 31,
                                                                                                       2015                                   2014 * **
                                                                                                 -----------------                     ----------------------
ASSETS:
                                                                                                                                        
Current Assets:
Cash and cash equivalents                                                                             $     7,686                               $      8,476
Marketable securities                                                                                         508                                          0
Notes and accounts receivable - trade
  (net of allowances of $367 in 2015 and $336 in 2014)                                                      8,333                                      9,090
Short-term financing receivables
  (net of allowances of $490 in 2015 and $452 in 2014)                                                     19,020                                     19,835
Other accounts receivable
  (net of allowances of $51 in 2015 and $40 in 2014)                                                        1,201                                      2,906
Inventories, at lower of average cost or market:
  Finished goods                                                                                              352                                        430
  Work in process and raw materials                                                                         1,199                                      1,674
                                                                                                        ---------                                 ----------
Total inventories                                                                                           1,551                                      2,103
Prepaid expenses and other current assets                                                                   4,205                                      4,967
                                                                                                        ---------                                 ----------
Total Current Assets *                                                                                     42,504                                     47,377
                                                                                                                                        
Property, plant and equipment                                                                              29,342                                     39,034
  Less: Accumulated depreciation                                                                           18,615                                     28,263
                                                                                                        ---------                                 ----------
Property, plant and equipment - net                                                                        10,727                                     10,771
Long-term financing receivables
  (net of allowances of $118 in 2015 and $126 in 2014)                                                     10,013                                     11,109
Prepaid pension assets                                                                                      1,734                                      2,160
Deferred taxes *                                                                                            4,822                                      6,675
Goodwill                                                                                                   32,021                                     30,556
Intangible assets - net                                                                                     3,487                                      3,104
Investments and sundry assets **                                                                            5,187                                      5,520
                                                                                                        ---------                                 ----------
Total Assets * **                                                                                     $   110,495                               $    117,271
                                                                                                        =========                                 ==========
LIABILITIES:
                                                                                                                                        
Current Liabilities:
Taxes                                                                                                 $     2,847                               $      5,084
Short-term debt **                                                                                          6,461                                      5,731
Accounts payable                                                                                            6,028                                      6,864
Compensation and benefits                                                                                   3,560                                      4,031
Deferred income                                                                                            11,021                                     11,877
Other accrued expenses and liabilities *                                                                    4,353                                      5,994
                                                                                                        ---------                                 ----------
Total Current Liabilities * **                                                                             34,269                                     39,581
                                                                                                                                        
Long-term debt **                                                                                          33,428                                     34,991
Retirement and nonpension post retirement
  benefit obligations                                                                                      16,504                                     18,261
Deferred income                                                                                             3,771                                      3,691
Other liabilities *                                                                                         8,099                                      8,733
                                                                                                        ---------                                 ----------
Total Liabilities * **                                                                                     96,071                                    105,257
 
EQUITY:
 
IBM Stockholders’ Equity:
  Common stock                                                                                             53,262                                     52,666
  Retained earnings                                                                                       146,124                                    137,793
  Treasury stock -- at cost                                                                             (155,518)                                  (150,715)
  Accumulated other comprehensive income/(loss)                                                          (29,607)                                   (27,875)
                                                                                                        ---------                                 ----------
  Total IBM stockholders’ equity                                                                           14,262                                     11,868
                                                                                                                                        
Noncontrolling interests                                                                                      162                                        146
                                                                                                        ---------                                 ----------
Total Equity                                                                                               14,424                                     12,014
                                                                                                        ---------                                 ----------
Total Liabilities and Equity * **                                                                     $   110,495                               $    117,271
                                                                                                        =========                                 ==========
 

* Reclassified to reflect adoption of the FASB guidance on deferred taxes in consolidated financial statements.

** Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements.

 
                                                                                    INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                                                CASH FLOW ANALYSIS
                                                                                                    (Unaudited)
 
                                                               Three Months Ended                                   Twelve Months Ended
(Dollars in Millions)                                                                                   December 31,                                                            December 31,
                                                                                           2015           2014                              2015               2014
                                                                                       -------------                     -------------                     ------------                     ----------------------
                                                                                                                                                                                             
Net Cash from Operating Activities per GAAP:                                             $    5,278                        $    6,059                        $  17,008                               $     16,868
                                                                                                                                                                                             
  Less: the change in Global Financing (GF)
       Receivables                                                                          (1,810)                           (1,505)                              152                                        718
                                                                                           --------                          --------                          -------                                 ----------
Net Cash from Operating Activities
  (Excluding GF Receivables)                                                                  7,088                             7,564                           16,855                                     16,151
                                                                                                                                                                                             
  Capital Expenditures, Net                                                                 (1,016)                             (976)                          (3,780)                                    (3,779)
                                                                                                                                                                                             
Free Cash Flow
  (Excluding GF Receivables)                                                                  6,072                             6,588                           13,075                                     12,372
                                                                                                                                                                                             
  Acquisitions                                                                              (2,529)                               (6)                          (3,349)                                      (656)
  Divestitures                                                                                   87                             1,869                            (401)                                      2,357
  Dividends                                                                                 (1,261)                           (1,089)                          (4,897)                                    (4,265)
  Share Repurchase                                                                            (764)                             (132)                          (4,609)                                   (13,679)
  Non-GF Debt                                                                                 (898)                           (5,883)                            (128)                                    (1,348)
  Other (includes GF Receivables, and
   GF Debt)                                                                                 (2,080)                           (2,435)                               28                                      2,629
                                                                                                                                                                                             
Change in Cash, Cash Equivalents and
Short-term Marketable Securities                                                           ($1,373)                          ($1,088)                           ($282)                                   ($2,589)
                                                                                           ========                          ========                          =======                                 ==========
 
 
                                                                                                      INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                                                                     SEGMENT DATA
                                                                                                                      (Unaudited)
 
                                 FOURTH-QUARTER 2015
                                                                                                                       Pre-tax    
                                                                                                                                                                                Income/
                                                                                                                                                                                (Loss)
(Dollars in Millions)                                                                                      --------- Revenue ---------                                                           Continuing                              Pre-tax
                                                                         External                         Internal                                      Total                                    Operations                              Margin
                                                                       ----------                       -----------                       ------------------------------                       ------------                       --------------------
SEGMENTS
                                                                                                                                                                                                                                   
Global Technology Services                                                $  8,126                         $     234                               $                8,359                          $   1,486                                     17.8%
  Y-T-Y change                                                               -7.1%                             20.0%                                                -6.5%                               4.5%
                                                                                                                                                                                                                                   
Global Business Services                                                     4,297                               118                                                4,415                                708                                     16.0%
  Y-T-Y change                                                               -9.9%                             -6.4%                                                -9.8%                              -8.6%
                                                                                                                                                                                                                                   
Software                                                                     6,767                               748                                                7,515                              2,959                                     39.4%
  Y-T-Y change                                                              -10.7%                            -11.5%                                               -10.8%                             -21.4%
                                                                                                                                                                                                                                   
Systems Hardware                                                             2,372                               131                                                2,503                                349                                     13.9%
  Y-T-Y change                                                               -1.4%                             23.1%                                                -0.4%                             -10.1%
                                                                                                                                                                                                                                   
Global Financing                                                               454                               763                                                1,216                                674                                     55.4%
  Y-T-Y change                                                              -14.6%                             29.7%                                                 8.7%                              28.3%
                                                                                                                                                                                                                                   
TOTAL REPORTABLE SEGMENTS                                                 $ 22,015                         $   1,994                               $               24,009                          $   6,177                                     25.7%
  Y-T-Y change                                                               -8.4%                              7.2%                                                -7.3%                             -10.2%
                                                                                                                                                                                                                                   
Eliminations / Other                                                            43                           (1,994)                                              (1,950)                            (1,078)
                                                                                                                                                                                                                                   
TOTAL IBM CONSOLIDATED                                                    $ 22,059                         $       0                               $               22,059                          $   5,098                                     23.1%
Y-T-Y change                                                                 -8.5%                                                                                  -8.5%                             -28.1%
 
 
 
                                                                       FOURTH-QUARTER 2014
                                                                                                                                                                                Pre-tax
                                                                                                                                                                                Income/
                                                                                                                                                                                (Loss)
(Dollars in Millions)                                                                                      --------- Revenue ---------                                                           Continuing                              Pre-tax
                                                                         External                         Internal                                      Total                                    Operations                              Margin
                                                                       ----------                       -----------                       ------------------------------                       ------------                       --------------------
SEGMENTS
 
Global Technology Services *                                              $  8,746                         $     195                               $                8,941                          $   1,422                                     15.9%
                                                                                                                                                                                                                                   
Global Business Services *                                                   4,771                               127                                                4,897                                775                                     15.8%
                                                                                                                                                                                                                                   
Software                                                                     7,578                               845                                                8,422                              3,765                                     44.7%
                                                                                                                                                                                                                                   
Systems Hardware                                                             2,406                               107                                                2,512                                388                                     15.5%
                                                                                                                                                                                                                                   
Global Financing                                                               532                               588                                                1,119                                526                                     47.0%
                                                                                                                                                                                                                                   
TOTAL REPORTABLE SEGMENTS                                                 $ 24,031                         $   1,860                               $               25,891                          $   6,876                                     26.6%
                                                                                                                                                                                                                                   
Eliminations / Other                                                            82                           (1,860)                                              (1,778)                                219
                                                                                                                                                                                                                                   
TOTAL IBM CONSOLIDATED                                                    $ 24,113                         $       0                               $               24,113                          $   7,094                                     29.4%
 
 
*Reclassified to conform with 2015 presentation.
 
 
                                                                                            INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                                                           SEGMENT DATA
                                                                                                            (Unaudited)
                                                                                           
                                                                                                                                            TWELVE-MONTHS 2015
                                                                        
                                                                                                                                                                               Pre-tax
                                                                                                                                                                               Income/
                                                                                                                                                                               (Loss)
(Dollars in Millions)                                                                            --------- Revenue ---------                                                 Continuing                              Pre-tax
                                                                         External                         Internal                            Total                          Operations                              Margin
                                                                       ------------                     -------------                     ------------                     --------------                     --------------------
                                                                                                                                                                                                               
Global Technology Services                                                $ 32,017                         $     823                        $  32,840                          $   5,002                                     15.2%
  Y-T-Y change                                                               -9.7%                            -11.9%                            -9.7%                             -15.7%
 
Global Business Services                                                    17,166                               499                           17,664                              2,634                                     14.9%
  Y-T-Y change                                                              -12.0%                             -8.1%                           -11.9%                             -22.7%
                                                                                                                                                                                                               
Software                                                                    22,932                             3,267                           26,199                              9,066                                     34.6%
  Y-T-Y change                                                               -9.8%                             -6.6%                            -9.4%                             -15.3%
                                                                                                                                                                                                               
Systems Hardware                                                             7,581                               451                            8,032                                604                                      7.5%
  Y-T-Y change                                                              -24.2%                            -30.3%                           -24.5%                                 NM
                                                                                                                                                                                                               
Global Financing                                                             1,840                             2,637                            4,477                              2,364                                     52.8%
  Y-T-Y change                                                               -9.5%                              6.0%                            -1.0%                               8.0%
                                                                                                                                                                                                               
TOTAL REPORTABLE SEGMENTS                                                 $ 81,535                         $   7,676                        $  89,211                          $  19,670                                     22.0%
 Y-T-Y change                                                               -11.8%                             -5.3%                           -11.3%                             -11.6%
                                                                                                                                                                                                               
Eliminations / Other                                                           206                           (7,676)                          (7,470)                            (3,726)
 
TOTAL IBM CONSOLIDATED                                                    $ 81,741                         $       0                        $  81,741                          $  15,945                                     19.5%
  Y-T-Y change                                                              -11.9%                                                             -11.9%                             -20.2%
 
 
                                                                                                                                            TWELVE-MONTHS 2014
                                                                        
                                                                                                                                                                               Pre-tax
                                                                                                                                                                               Income
                                                                                                                                                                               (Loss)/
(Dollars in Millions)                                                                            --------- Revenue ---------                                                 Continuing                              Pre-tax
                                                                         External                         Internal                            Total                          Operations                              Margin
                                                                       ------------                     -------------                     ------------                     --------------                     --------------------
SEGMENTS
                                                                                                                                                                                                               
 
Global Technology Services *                                              $ 35,442                         $     934                        $  36,376                          $   5,931                                     16.3%
 
Global Business Services *                                                  19,512                               543                           20,055                              3,408                                     17.0%
                                                                                                                                                                                                               
Software                                                                    25,434                             3,496                           28,931                             10,699                                     37.0%
                                                                                                                                                                                                               
Systems Hardware                                                             9,996                               647                           10,643                                 34                                      0.3%
                                                                                                                                                                                                               
Global Financing                                                             2,034                             2,488                            4,522                              2,189                                     48.4%
                                                                                                                                                                                                               
TOTAL REPORTABLE SEGMENTS                                                 $ 92,418                         $   8,108                        $ 100,527                          $  22,262                                     22.1%
                                                                                                                                                                                                               
Eliminations / Other                                                           374                           (8,108)                          (7,734)                            (2,276)
 
TOTAL IBM CONSOLIDATED                                                    $ 92,793                         $       0                        $  92,793                          $  19,986                                     21.5%
 
*Reclassified to conform with 2015 presentation.
NM = Not Meaningful
 
 
                                                                               INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                              U.S. GAAP TO OPERATING RESULTS RECONCILIATION
                                                                        (Unaudited; Dollars in millions except per share amounts)
 
 
                                                                                           FOURTH-QUARTER 2015
                                                                                                                                CONTINUING OPERATIONS
                                                                            -----------------------------------------------------------------------------------------------------------------------------
                                                                                           Acquisition-     Retirement-  
                                                                                                                 Related                            Related                               Operating
                                                                                GAAP                          Adjustments*                       Adjustments**                           (Non-GAAP)
                                                                            ------------                     --------------                     --------------                     ----------------------
Gross Profit                                                                   $ 11,407                         $     105                          $     119                            $       11,630
                                                                                                                                                                                    
Gross Profit Margin                                                               51.7%                          0.5Pts                             0.5Pts                                       52.7%
                                                                                                                                                                                    
S,G&A                                                                             5,157                              (95)                               (88)                                     4,975
                                                                                                                                                                                    
R,D&E                                                                             1,362                             -                                   (12)                                     1,350
                                                                                                                                                                                    
Other (Income) & Expense                                                          (146)                             0                                  -                                         (146)
 
Total Expense & Other (Income)                                                    6,308                              (95)                               (100)                                    6,114
 
Pre-tax Income from
 Continuing Operations                                                            5,098                               199                                218                                     5,516
 
Pre-tax Income Margin from
 Continuing Operations                                                            23.1%                          0.9Pts                             1.0Pts                                       25.0%
                                                                                                                                                                                    
Provision for Income Taxes***                                                      638                                89                                 82                                       809
                                                                                                                                                                                    
Effective Tax Rate                                                                12.5%                          1.2Pts                             1.0Pts                                       14.7%
 
Income from Continuing Operations                                                 4,460                               110                                137                                     4,707
 
Income Margin from
 Continuing Operations                                                            20.2%                          0.5Pts                             0.6Pts                                       21.3%
 
Diluted Earnings Per Share:
 Continuing Operations                                                         $  4.59                          $    0.11                          $    0.14                            $        4.84
 
 
                                                                                                FOURTH-QUARTER 2014
                                                                                                                                     CONTINUING OPERATIONS
                                                                            ---------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Acquisition-     Retirement-  
                                                                                                        Related                            Related                               Operating
                                                                                     GAAP                               Adjustments*                       Adjustments**                           (Non-GAAP)
                                                                            --------------------                       ------------                       ------------                       --------------------
                                                                                                                                                                                              
 
Gross Profit                                                                         $   12,862                           $     101                          $     33                             $       12,996
                                                                                                                                                                                              
Gross Profit Margin                                                                       53.3%                            0.4Pts                             0.1Pts                                       53.9%
                                                                                                                                                                                              
S,G&A                                                                                     6,034                                (94)                               (95)                                     5,845
                                                                                                                                                                                              
R,D&E                                                                                     1,320                               -                                    21                                      1,341
                                                                                                                                                                                              
Other (Income) & Expense                                                                 (1,506)                                (1)                              -                                        (1,506)
 
Total Expense & Other (Income)                                                            5,767                                (95)                               (74)                                     5,598
 
Pre-tax Income from
 Continuing Operations                                                                    7,094                                 196                                107                                     7,398
 
Pre-tax Income Margin from
 Continuing Operations                                                                    29.4%                            0.8Pts                             0.4Pts                                       30.7%
 
Provision for Income Taxes***                                                             1,580                                 10                                 24                                      1,613
                                                                                                                                                                                              
Effective Tax Rate                                                                        22.3%                            -0.5Pts                            0.0Pts                                       21.8%
 
Income from Continuing Operations                                                         5,515                                 186                                84                                      5,785
 
Income Margin from
 Continuing Operations                                                                    22.9%                            0.8Pts                             0.3Pts                                       24.0%
 
Diluted Earnings Per Share:
 Continuing Operations                                                               $    5.54                            $    0.19                          $    0.08                            $        5.81
 

* 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 from continuing operations 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
                                                                         (Unaudited; Dollars in millions except per share amounts)
 
 
                                                                                            TWELVE-MONTHS 2015
                                                                                                                                 CONTINUING OPERATIONS
                                                                            ------------------------------------------------------------------------------------------------------------------------------
                                                                                            Acquisition-     Retirement-  
                                                                                                                  Related                            Related                               Operating
                                                                                GAAP                           Adjustments*                       Adjustments**                           (Non-GAAP)
                                                                            -------------                     --------------                     --------------                     ----------------------
Gross Profit                                                                   $  40,684                         $     373                          $     469                            $       41,526
                                                                                                                                                                                     
Gross Profit Margin                                                                49.8%                          0.5Pts                             0.6Pts                                       50.8%
                                                                                                                                                                                     
S,G&A                                                                             20,430                              (324)                              (533)                                   19,573
                                                                                                                                                                                     
R,D&E                                                                              5,247                             -                                   (48)                                     5,200
 
Other (Income) & Expense                                                           (724)                               (5)                              -                                         (729)
 
Total Expense & Other (Income)                                                    24,740                              (330)                              (581)                                   23,830
 
Pre-tax Income from
 Continuing Operations                                                            15,945                               703                               1,050                                   17,697
 
Pre-tax Income Margin from
 Continuing Operations                                                             19.5%                          0.9Pts                             1.3Pts                                       21.6%
                                                                                                                                                                                     
Provision for Income Taxes***                                                      2,581                               141                                316                                     3,037
                                                                                                                                                                                     
Effective Tax Rate                                                                 16.2%                          0.2Pts                             0.9Pts                                       17.2%
 
Income from Continuing Operations                                                 13,364                               562                                734                                    14,659
 
Income Margin from
 Continuing Operations                                                             16.3%                          0.7Pts                             0.9Pts                                       17.9%
 
Diluted Earnings Per Share:
 Continuing Operations                                                         $   13.60                         $    0.57                          $    0.75                            $        14.92
 
 
                                                                                                                                  TWELVE-MONTHS 2014
                                                                                                                                 CONTINUING OPERATIONS
                                                                            ------------------------------------------------------------------------------------------------------------------------------
                                                                                                               Acquisition-                        Retirement-
                                                                                                                  Related                            Related                               Operating
                                                                                GAAP                           Adjustments*                       Adjustments**                           (Non-GAAP)
                                                                            -------------                     --------------                     --------------                     ----------------------
Gross Profit                                                                   $  46,407                         $     416                          $     173                            $       46,996
                                                                                                                                                                                     
Gross Profit Margin                                                                50.0%                          0.4Pts                             0.2Pts                                       50.6%
                                                                                                                                                                                     
S,G&A                                                                             23,180                              (385)                              (257)                                   22,537
                                                                                                                                                                                     
R,D&E                                                                              5,437                             -                                    77                                      5,514
 
Other (Income) & Expense                                                          (1,938)                              (1)                              -                                        (1,939)
 
Total Expense & Other (Income)                                                    26,421                              (386)                              (180)                                   25,855
                                                                                                                                                                                     
Pre-tax Income from
 Continuing Operations                                                            19,986                               803                                353                                    21,142
 
Pre-tax Income Margin from
 Continuing Operations                                                             21.5%                          0.9Pts                             0.4Pts                                       22.8%
 
Provision for Income Taxes***                                                      4,234                               133                                73                                      4,440
                                                                                                                                                                                     
Effective Tax Rate                                                                 21.2%                          -0.2Pts                            0.0Pts                                       21.0%
 
Income from Continuing Operations                                                 15,751                               670                                280                                    16,702
 
Income Margin from
 Continuing Operations                                                             17.0%                          0.7Pts                             0.3Pts                                       18.0%
 
Diluted Earnings Per Share:
 Continuing Operations                                                         $   15.59                         $    0.66                          $    0.28                            $        16.53
 

* 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 from continuing operations 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.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20160119006826r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20160119006826/en/

SOURCE: IBM"> <Property FormalName="PrimaryTwitterHandle" Value="@ibm

IBM 
Ian Colley, 914-434-3043 
colley@us.ibm.com 
or 
John Bukovinsky, 732-618-3531 
jbuko@us.ibm.com


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