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 IBM Reports 2016 Fourth-Quarter and Full-Year Results
   Thursday, January 19, 2017 4:08:01 PM ET

IBM (IBM )

Continued Strong Growth in Strategic Imperatives Led by IBM Cloud

Highlights

-- Diluted EPS from continuing operations: GAAP of $4.73; Operating (non-GAAP) of $5.01

-- Revenue from continuing operations of $21.8 billion

-- Strategic imperatives revenue for full-year 2016 of $32.8 billion up 13 percent (up 14 percent adjusting for currency) represents 41 percent of IBM revenue

-- Cloud revenue of $13.7 billion for full-year 2016, up 35 percent -- Cloud as-a-service annual exit run rate of $8.6 billion at year end, up 61 percent year to year (up 63 percent adjusting for currency)

-- 2017 EPS Expectations: GAAP of at least $11.95; Operating (non-GAAP) of at least $13.80

IBM (IBM ) today announced fourth-quarter and full-year 2016 earnings results.

"In 2016, our strategic imperatives grew to represent more than 40 percent of our total revenue and we have established ourselves as the industry’s leading cognitive solutions and cloud platform company," said Ginni Rometty, IBM chairman, president and chief executive officer. "IBM Watson is the world’s leading AI platform for business, and emerging solutions such as IBM Blockchain are enabling new levels of trust in transactions of every kind. More and more clients are choosing the IBM Cloud because of its differentiated capabilities, which are helping to transform industries, such as financial services, airlines and retail."

                                                                         FOURTH QUARTER 2016
                                                          ---------------------------------------------------------------------------------------
                                                                                              Gross Profit
                                                          Diluted EPS    Net Income                 Margin
                                                          ----------- -------------------- ----------- -------------------- --------------------
                                                                                                                             
GAAP from Continuing Operations                                 $4.73                            $4.5B                                     50.0%
    Year/Year                                   3%            1%                -1.7Pts
------------------------------------ -------------------- ----------- -------------------- ----------- -------------------- --------------------
                                                                                                                             
Operating (Non-GAAP)                                            $5.01                            $4.8B                                     51.0%
    Year/Year                                   4%            1%                -1.8Pts
------------------------------------ -------------------- ----------- -------------------- ----------- -------------------- --------------------
                                                                                                                             
                                                                                             Strategic
REVENUE                                  Total IBM   Imperatives                  Cloud
------------------------------------ -------------------- ----------- -------------------- ----------- -------------------- --------------------
                                                                                                                             
As reported (US$)                                              $21.8B                            $9.5B                                     $4.2B
                                                                                                                             
    Year/Year                                  -1%           11%                    33%
------------------------------------ -------------------- ----------- -------------------- ----------- -------------------- --------------------
    Year/Year adjusting for currency           -1%           12%                    33%
------------------------------------ -------------------- ----------- -------------------- ----------- -------------------- --------------------
 

"In 2016, we again made substantial capital investments, increased our R&D spending and acquired 15 companies -- a total of more than $15 billion across these elements. The acquisitions further strengthened our capabilities in analytics, security, cognitive and cloud, while expanding our level of industry expertise with additions such as Truven Health Analytics and Promontory Financial Group," said Martin Schroeter, IBM senior vice president and chief financial officer. "At the same time, we returned almost $9 billion to shareholders through dividends and gross share repurchases."

Strategic Imperatives

Fourth-quarter cloud revenues increased 33 percent. The annual exit run rate for cloud as-a-service revenue increased to $8.6 billion from $5.3 billion at year-end 2015. Revenues from analytics increased 9 percent. Revenues from mobile increased 16 percent (up 17 percent adjusting for currency) and revenues from security increased 7 percent (up 8 percent adjusting for currency).

For the full year, revenues from strategic imperatives increased 13 percent (up 14 percent adjusting for currency). Cloud revenues increased 35 percent to $13.7 billion. The annual exit run rate for cloud as-a-service revenue increased 61 percent (up 63 percent adjusting for currency) year to year. Revenues from analytics increased 9 percent. Revenues from mobile increased 34 percent (up 35 percent adjusting for currency) and from security increased 13 percent (up 14 percent adjusting for currency).

Full-Year 2017 Expectations

The company expects operating (non-GAAP) diluted earnings per share of at least $13.80 and GAAP diluted earnings per share of at least $11.95. Operating (non-GAAP) diluted earnings per share exclude $1.85 per share of charges for amortization of purchased intangible assets, other acquisition-related charges and retirement-related charges. IBM expects a free cash flow realization rate in excess of 90 percent of GAAP net income.

Cash Flow and Balance Sheet

In the fourth quarter, the company generated net cash from operating activities of $3.2 billion; or $5.6 billion excluding Global Financing receivables. IBM’s free cash flow was $4.7 billion. IBM returned $1.3 billion in dividends and $0.9 billion of gross share repurchases to shareholders. At the end of December 2016, IBM had $5.1 billion remaining in the current share repurchase authorization.

The company generated full-year free cash flow of $11.6 billion, excluding Global Financing receivables. The company returned $8.8 billion to shareholders through $5.3 billion in dividends and $3.5 billion of gross share repurchases.

IBM ended the fourth-quarter 2016 with $8.5 billion of cash on hand. Debt, including Global Financing debt of $27.9 billion, totaled $42.2 billion. Core (non-Global Financing) debt totaled $14.3 billion. The balance sheet remains strong and is well positioned to support the business over the long term.

Segment Results for Fourth Quarter

-- Cognitive Solutions (includes solutions software and transaction processing software) -- revenues of $5.3 billion, up 1.4 percent (up 2.2 percent adjusting for currency) were driven by growth in cloud, analytics and security.

-- Global Business Services (includes consulting, global process services and application management) -- revenues of $4.1 billion, down 4.1 percent (down 3.6 percent adjusting for currency).

-- Technology Services & Cloud Platforms (includes infrastructure services, technical support services and integration software) -- revenues of $9.3 billion, up 1.7 percent (up 2.4 percent adjusting for currency). Growth was driven by strong hybrid cloud services, analytics and security performance.

-- Systems (includes systems hardware and operating systems software) -- revenues of $2.5 billion, down 12.5 percent (down 12.1 percent adjusting for currency). Gross profit margins improved driven by z Systems performance.

-- Global Financing (includes financing and used equipment sales) -- revenues of $447 million, down 1.5 percent (down 2.1 percent adjusting for currency).

Full-Year 2016 Results

Diluted earnings per share from continuing operations were $12.39, down 9 percent compared to the 2015 period. Net income from continuing operations for the twelve months ended December 31, 2016 was $11.9 billion compared with $13.4 billion in the year-ago period, a decrease of 11 percent.

Consolidated net income was $11.9 billion compared to $13.2 billion in the year-ago period. Consolidated diluted earnings per share were $12.38 compared to $13.42, down 8 percent year to year. Revenues from continuing operations for the twelve-month period totaled $79.9 billion, a decrease of 2 percent year to year compared with $81.7 billion for the twelve months of 2015.

Operating (non-GAAP) diluted earnings per share from continuing operations were $13.59 compared with $14.92 per diluted share for the 2015 period, a decrease of 9 percent. Operating (non-GAAP) net income from continuing operations for the twelve months ended December 31, 2016 was $13.0 billion compared with $14.7 billion in the year-ago period, a decrease of 11 percent.

                                                                           FULL YEAR 2016
                                                          ---------------------------------------------------------------------------------------
                                                                                              Gross Profit
                                                          Diluted EPS    Net Income                 Margin
                                                          ----------- -------------------- ----------- -------------------- --------------------
                                                                                                                             
GAAP from Continuing Operations                                $12.39                           $11.9B                                     47.9%
    Year/Year                                  -9%          -11%               -1.9 Pts
------------------------------------ -------------------- ----------- -------------------- ----------- -------------------- --------------------
                                                                                                                             
Operating (Non-GAAP)                                           $13.59                           $13.0B                                     48.9%
    Year/Year                                  -9%          -11%               -1.9 Pts
------------------------------------ -------------------- ----------- -------------------- ----------- -------------------- --------------------
                                                                                                                             
                                                                                             Strategic
REVENUE                                  Total IBM   Imperatives                  Cloud
------------------------------------ -------------------- ----------- -------------------- ----------- -------------------- --------------------
                                                                                                                             
As reported (US$)                                              $79.9B                           $32.8B                                    $13.7B
                                                                                                                             
    Year/Year                                  -2%           13%                    35%
------------------------------------ -------------------- ----------- -------------------- ----------- -------------------- --------------------
    Year/Year adjusting for currency           -2%           14%                    35%
------------------------------------ -------------------- ----------- -------------------- ----------- -------------------- --------------------
 

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; product quality issues; impacts of business with government clients; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; reliance on third party distribution channels and ecosystems; the company’s ability to successfully manage acquisitions, alliances and dispositions; 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 --

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

-- adjusting for free cash flow;

-- adjusting for currency (i.e., at constant currency).

Free cash flow guidance is derived using an estimate of profit, working capital and operational cash outflows. The company views Global Financing receivables as a profit-generating investment, which it seeks to maximize and therefore it is not considered when formulating guidance for free cash flow. As a result, the company does not estimate a GAAP Net Cash from Operations expectation metric.

The rationale for management’s use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8-K that includes this press release and is being submitted today to the SEC.

Conference Call and Webcast

IBM’s regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. EST, today. The Webcast may be accessed via a link at http://www.ibm.com/investor/events/earnings/4q16.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,
                                                                                  -----------------------------------------------------------------------------------------------------------------------                                          -----------------------------------------------------------------------------------------------------------------------
                                                                                                        2016                                               2015*                                                                                      2016                                               2015*
                                                                                  --------------------------------------------------------------------- -------------------------------------------------                                          --------------------------------------------------------------------- -------------------------------------------------
                                                                                                                                                                                                                                                                                                                          
REVENUE
Cognitive Solutions                                                                                  $  5,297                                                              $  5,225                                                                                   $ 18,187                                                              $ 17,841
Global Business Services                                                                                4,121                                                                 4,297                                                                                     16,700                                                                17,166
Technology Services & Cloud Platforms                                                                   9,308                                                                 9,149                                                                                     35,337                                                                35,142
Systems                                                                                                 2,530                                                                 2,892                                                                                      7,714                                                                 9,547
Global Financing                                                                                          447                                                                   454                                                                                      1,692                                                                 1,840
Other                                                                                   66           43                                                  289          206  
                                                                                  -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------                                           -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------
TOTAL REVENUE                                                                                          21,770                                                                22,059                                                                                     79,919                                                                81,741
                                                                                                                                                                                                                                                                                                                          
GROSS PROFIT                                                                                           10,893                                                                11,407                                                                                     38,294                                                                40,684
                                                                                                                                                                                                                                                                                                                          
GROSS PROFIT MARGIN
Cognitive Solutions                                                                                      82.7 %                                                                85.7 %                                                                                     81.9 %                                                                85.1 %
Global Business Services                                                                                 26.9 %                                                                28.2 %                                                                                     27.0 %                                                                28.2 %
Technology Services & Cloud Platforms                                                                    42.9 %                                                                44.3 %                                                                                     41.9 %                                                                42.7 %
Systems                                                                                                  56.9 %                                                                55.8 %                                                                                     55.7 %                                                                55.8 %
Global Financing                                                                                         36.2 %                                                                39.9 %                                                                                     38.7 %                                                                45.6 %
                                                                                                                                                                                                                                                                                                                          
TOTAL GROSS PROFIT MARGIN                                                                                50.0 %                                                                51.7 %                                                                                     47.9 %                                                                49.8 %
                                                                                                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                                                                                                          
EXPENSE AND OTHER INCOME
S,G&A                                                                                                   4,976                                                                 5,157                                                                                     21,069                                                                20,430
R,D&E                                                                                                   1,431                                                                 1,362                                                                                      5,751                                                                 5,247
Intellectual property and
  custom development income                                                                              (521 )                                                                (193 )                                                                                   (1,631 )                                                                (682 )
Other (income) and expense                                                                               (136 )                                                                (146 )                                                                                      145                                                                  (724 )
Interest expense                                                                                          157                                                                   128                                                                                        630                                                                   468
                                                                                                                                                                                                                           
                                                                                  --------------------------------------------------------------------- -------------------------------------------------                                          --------------------------------------------------------------------- -------------------------------------------------
TOTAL EXPENSE AND OTHER INCOME                                                                          5,907                                                                 6,308                                                                                     25,964                                                                24,740
                                                                                                                                                                                                                                                                                                                          
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES                                                                                     4,986                                                                 5,098                                                                                     12,330                                                                15,945
    Pre-tax margin                                                                                       22.9 %                                                                23.1 %                                                                                     15.4 %                                                                19.5 %
                                                                                                                                                                                                                                                                                                                          
Provision for / (Benefit) from income taxes                                                               480                                                                   638                                                                                        449                                                                 2,581
    Effective tax rate                                                                                    9.6 %                                                                12.5 %                                                                                      3.6 %                                                                16.2 %
                                                                                                                                                                                                                                                                                                                          
INCOME FROM CONTINUING OPERATIONS                                                                    $  4,505                                                              $  4,460                                                                                   $ 11,881                                                              $ 13,364
                                                                                                                                                                                                                                                                                                                          
DISCONTINUED OPERATIONS
    Income/(Loss) from discontinued operations, net of taxes                            (4 )                             3                                                   (9 )                          (174 )
                                                                                  -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------                                           -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                          
NET INCOME                                                                                           $  4,501                        $  4,463                                                                $ 11,872                        $ 13,190  
                                                                                  ==================== ====== ==================== ==================== ==================== ====== ====================                                           ==================== ====== ==================== ==================== ==================== ====== ====================
                                                                                                                                                                                                                                                                                                                          
EARNINGS PER SHARE OF COMMON STOCK:
    Assuming Dilution
        Continuing Operations                                                                        $   4.73                                                              $   4.59                                                                                   $  12.39                                                              $  13.60
        Discontinued Operations                                                     ($0.01 )                                         $   0.00                                               ($0.01 )                        ($0.18 )
                                                                                  -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------                                           -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------
    TOTAL                                                                                            $   4.72                        $   4.59                                                                $  12.38                        $  13.42  
                                                                                  ==================== ====== ==================== ==================== ==================== ====== ====================                                           ==================== ====== ==================== ==================== ==================== ====== ====================
    Basic
        Continuing Operations                                                                        $   4.75                                                              $   4.60                                                                                   $  12.44                                                              $  13.66
        Discontinued Operations                                                     ($0.01 )                                         $   0.00                                               ($0.01 )                        ($0.18 )
                                                                                  -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------                                           -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------
    TOTAL                                                                                            $   4.74                        $   4.60                                                                $  12.43                        $  13.48  
                                                                                  ==================== ====== ==================== ==================== ==================== ====== ====================                                           ==================== ====== ==================== ==================== ==================== ====== ====================
                                                                                                                                                                                                                                                                                                                          
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (M’s):
    Assuming Dilution                                                                                   952.7                                                                 972.8                                                                                      958.7                                                                 982.7
    Basic                                                                                               948.6                                                                 969.4                                                                                      955.4                                                                 978.7
 
* Recast to conform with 2016 segment presentation.
 
                                                            INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                               CONDENSED CONSOLIDATED BALANCE SHEET
                                                                            (Unaudited)
                                                                 At                                     At
(Dollars in Millions)                                                          December 31,                                              December 31,
                                                                                   2016                                                      2015
                                                                   -------------------------------------                     -------------------------------------
ASSETS:
                                                                                                                              
Current Assets:
Cash and cash equivalents                                               $    7,826                                                $    7,686
Marketable securities                                                          701                                                       508
Notes and accounts receivable - trade, net                                   9,182                                                     8,333
Short-term financing receivables, net                                       19,006                                                    19,020
Other accounts receivable, net                                               1,057                                                     1,201
Inventory                                                                    1,553                                                     1,551
Prepaid expenses and other current assets                                    4,564                                                     4,205
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total Current Assets                                                        43,888                                                    42,504
                                                                                                                              
Property, plant and equipment, net                                          10,830                                                    10,727
Long-term financing receivables, net                                         9,021                                                    10,013
Prepaid pension assets                                                       3,034                                                     1,734
Deferred taxes                                                               5,224                                                     4,822
Goodwill and intangibles, net                                               40,887                                                    35,508
Investments and sundry assets                                                4,585                                                     5,187
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total Assets                                                            $  117,470                             $  110,495  
                                                                   ====== ======== ====================                      ====== ======== ====================
                                                                                                                              
                                                                                                                              
LIABILITIES:
                                                                                                                              
Current Liabilities:
Taxes                                                                   $    3,235                                                $    2,847
Short-term debt                                                              7,513                                                     6,461
Accounts payable                                                             6,209                                                     6,028
Deferred income                                                             11,035                                                    11,021
Other liabilities                                                            8,283                                                     7,913
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total Current Liabilities                                                   36,275                                                    34,269
                                                                                                                              
Long-term debt                                                              34,655                                                    33,428
Retirement related obligations                                              17,070                                                    16,504
Deferred income                                                              3,600                                                     3,771
Other liabilities                                                            7,477                                                     8,099
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total Liabilities                                                           99,078                                                    96,071
                                                                                                                              
                                                                                                                              
EQUITY:
                                                                                                                              
IBM Stockholders’ Equity:
Common stock                                                                53,935                                                    53,262
Retained earnings                                                          152,759                                                   146,124
Treasury stock -- at cost                                                 (159,050 )                                                (155,518 )
Accumulated other comprehensive income/(loss)                              (29,398 )                                                 (29,607 )
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total IBM stockholders’ equity                                              18,246                                                    14,262
                                                                                                                              
Noncontrolling interests                                                       146                                                       162
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total Equity                                                                18,392                                                    14,424
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total Liabilities and Equity                                            $  117,470                             $  110,495  
                                                                   ====== ======== ====================                      ====== ======== ====================
 
                                                                                                             INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                                                                         CASH FLOW ANALYSIS
                                                                                                                             (Unaudited)
                                                                                                                                                          
                                                                                                          Three Months Ended                                                                                       Twelve Months Ended
(Dollars in Millions)                                                                                        December 31,                                                                                             December 31,
                                                                         -------------------------------------------------------------------------------------                     ----------------------------------------------------------------------------------
                                                                                       2016                                                 2015                                                2016                                                2015
                                                                         --------------------------------                     --------------------------------                     -------------------------------                     ------------------------------
                                                                                                                                                                                                                                        
Net Cash Provided by Operating Activities per GAAP:                                         $   3,217                                            $   5,278                          $ 16,518                                                              $ 17,008
                                                                                                                                                                                                                                        
    Less: change in Global Financing (GF)
      Receivables                                                                              (2,429 )                                             (1,810 )                           1,218                                                                   152
    Capital Expenditures, Net                                                                    (925 )                                             (1,016 )                          (3,726 )                                                              (3,780 )
                                                                                                                                                                                                                                        
Free Cash Flow                                                                                  4,721                                                6,072                            11,574                                                                13,075
                                                                                                                                                                                                                                        
    Acquisitions                                                                                 (235 )                                             (2,529 )                          (5,679 )                                                              (3,349 )
    Divestitures                                                                                 (490 )                                                 87                              (454 )                                                                (401 )
    Dividends                                                                                  (1,329 )                                             (1,261 )                          (5,256 )                                                              (4,897 )
    Share Repurchase                                                                             (871 )                                               (764 )                          (3,502 )                                                              (4,609 )
    Non-GF Debt                                                                                (2,048 )                                               (898 )                           1,317                                                                  (128 )
    Other (includes GF Receivables and GF Debt)                                                (1,189 )                                             (2,080 )                           2,333                                                                    28
                                                                                                                                                                                                                                        
Change in Cash, Cash Equivalents and
Short-term Marketable Securities                                           ($1,441 )      ($1,373 )                        $    332                           ($282 )
                                                                         ==================== ======= == ==================== ==================== ======= ==                      == ====== ====================                      ==================== ====== =
                                                                                                                         
                                                                               INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                                                CASH FLOW
                                                                                               (Unaudited)
                                                                                                       
                                                                                         Three Months Ended                                                        Twelve Months Ended
(Dollars in Millions)                                                                       December 31,                                                              December 31,
                                                                          -------------------------------------------------                     ---------------------------------------------------------
                                                                               2016                               2015                               2016                                   2015
                                                                          --------------                     --------------                     ---------------                     ---------------------
                                                                                                                                                                                     
Net Income from Operations                                                 $   4,501                          $   4,463                          $   11,872                              $  13,190
    Depreciation/Amortization of Intangibles                                   1,127                                990                               4,381                                  3,856
    Stock-based Compensation                                                     141                                 99                                 544                                    468
    Working Capital / Other                                                     (124 )                            1,514                              (1,497 )                                 (729 )
    Global Financing A/R                                                      (2,429 )                           (1,810 )                             1,218                                    152
    Loss on Microelectronics Business Disposal                                     0                                 23                                   0                                     71
Net Cash Provided by Operating Activities                                  $   3,217                          $   5,278                          $   16,518                              $  17,008
    Capital Expenditures, net of payments & proceeds                            (925 )                           (1,016 )                            (3,726 )                               (3,780 )
    Divestitures, net of cash transferred                                       (490 )                               87                                (454 )                                 (401 )
    Acquisitions, net of cash acquired                                          (235 )                           (2,529 )                            (5,679 )                               (3,349 )
    Marketable Securities / Other Investments, net                            (1,286 )                           (1,987 )                              (676 )                                 (629 )
Net Cash Used in Investing Activities                                        ($2,936 )                          ($5,445 )                          ($10,536 )                              ($8,159 )
    Debt, net of payments & proceeds                                             875                                626                               2,763                                     19
    Dividends                                                                 (1,329 )                           (1,261 )                            (5,256 )                               (4,897 )
    Common Stock Repurchases                                                    (871 )                             (764 )                            (3,502 )                               (4,609 )
    Common Stock Transactions - Other                                             37                                 50                                 204                                    322
Net Cash Used in Financing Activities                                        ($1,287 )                          ($1,348 )                           ($5,791 )                              ($9,166 )
Effect of Exchange Rate changes on Cash                                         (206 )                             (279 )                               (51 )                                 (473 )
Net Change in Cash & Cash Equivalents                                        ($1,213 )                          ($1,794 )                        $      140                                  ($790 )
 
                                                                                                                                                                                INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                                                                                                                                               SEGMENT DATA
                                                                                                                                                                                                (Unaudited)
                                                                                                                                                                                                                                                          
                                                                                                                                                                                                                              FOURTH - QUARTER 2016
                                                                      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                      Cognitive Solutions &
                                                                                                                        Industry Services
                                                                      ---------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                                   Technology
                                                                                                                                                                Global                                                             Services &
(Dollars in Millions)                                                                     Cognitive                                                            Business                                                               Cloud                                                                                                                                    Global
                                                                                          Solutions                                         Services                                          Platforms                                          Systems                                          Financing
                                                                      -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------
Revenue
External                                                                                 $ 5,297                                                              $ 4,121                                                              $ 9,308                                                              $ 2,530                                                              $    447
Internal                                                                  701         100         214         156          462  
                                                                      -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ------ --------------------
Total Segment Revenue                                                                    $ 5,999                                                              $ 4,221                                                              $ 9,522                                                              $ 2,686                                                              $    909
                                                                                                                                                                                                                                                                                                                                                           
Pre-tax Income from Continuing Operations                                                  2,313                                                                  522                                                                1,882                                                                  579                                                                   448
                                                                                                                                                                                                                                                                                                                                                           
Pre-tax margin                                                                              38.6 %                                                               12.4 %                                                               19.8 %                                                               21.6 %                                                                49.3 %
                                                                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                                                                                                                                                                                                           
Change YTY Revenue - External                                                                1.4 %                                                               (4.1 )%                                                               1.7 %                                                              (12.5 )%                                                               (1.5 )%
Change YTY Revenue - External @constant currency                                             2.2 %                                                               (3.6 )%                                                               2.4 %                                                              (12.1 )%                                                               (2.1 )%
                                                                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                                                                             FOURTH - QUARTER 2015*
                                                                      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                      Cognitive Solutions &
                                                                                                                        Industry Services
                                                                      ---------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                                   Technology
                                                                                                                                                                Global                                                             Services &
(Dollars in Millions)                                                                     Cognitive                                                            Business                                                               Cloud                                                                                                                                    Global
                                                                                          Solutions                                         Services                                          Platforms                                          Systems                                          Financing
                                                                      -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------
Revenue
External                                                                                 $ 5,225                                                              $ 4,297                                                              $ 9,149                                                              $ 2,892                                                              $    454
Internal                                                                  520         118         198         207          763  
                                                                      -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ------ --------------------
Total Segment Revenue                                                                    $ 5,744                                                              $ 4,415                                                              $ 9,347                                                              $ 3,099                                                              $  1,216
                                                                                                                                                                                                                                                                                                                                                           
Pre-tax Income from Continuing Operations                                                  2,296                                                                  707                                                                1,808                                                                  674                                                                   674
                                                                                                                                                                                                                                                                                                                                                           
Pre-tax margin                                                                              40.0 %                                                               16.0 %                                                               19.3 %                                                               21.7 %                                                                55.4 %
                                                                                                                                                                                                                                                                                                                                
* Recast to conform with 2016 segment presentation.
                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                  INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                                                                                                                                                 SEGMENT DATA
                                                                                                                                                                                                  (Unaudited)
                                                                                                                                                                                                                                                              
                                                                                                                                                                                                                                TWELVE - MONTHS 2016
                                                                      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                       Cognitive Solutions &
                                                                                                                         Industry Services
                                                                      -----------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                                     Technology
                                                                                                                                                                 Global                                                              Services &
(Dollars in Millions)                                                                     Cognitive                                                             Business                                                                Cloud                                                                                                                                      Global
                                                                                          Solutions                                          Services                                           Platforms                                           Systems                                           Financing
                                                                      --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- -------------------------------------------------
Revenue
External                                                                                 $ 18,187                                                              $ 16,700                                                              $ 35,337                                                              $  7,714                                                              $  1,692
Internal                                                                 2,630          409          715          750        1,802  
                                                                      -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------
Total Segment Revenue                                                                    $ 20,817                                                              $ 17,109                                                              $ 36,052                                                              $  8,464                                                              $  3,494
                                                                                                                                                                                                                                                                                                                                                               
Pre-tax Income from Continuing Operations                                                   6,352                                                                 1,732                                                                 4,707                                                                   933                                                                 1,656
                                                                                                                                                                                                                                                                                                                                                               
Pre-tax margin                                                                               30.5 %                                                                10.1 %                                                                13.1 %                                                                11.0 %                                                                47.4 %
                                                                                                                                                                                                                                                                                                                                                               
                                                                                                                                                                                                                                                                                                                                                               
Change YTY Revenue - External                                                                 1.9 %                                                                (2.7 )%                                                                0.6 %                                                               (19.2 )%                                                               (8.0 )%
Change YTY Revenue - External @constant currency                                              2.7 %                                                                (2.5 )%                                                                1.4 %                                                               (18.9 )%                                                               (6.9 )%
                                                                                                                                                                                                                                                                                                                                                               
                                                                                                                                                                                                                                                                                                                                                               
                                                                                                                                                                                                                                TWELVE - MONTHS 2015*
                                                                      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                       Cognitive Solutions &
                                                                                                                         Industry Services
                                                                      -----------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                                     Technology
                                                                                                                                                                 Global                                                              Services &
(Dollars in Millions)                                                                     Cognitive                                                             Business                                                                Cloud                                                                                                                                      Global
                                                                                          Solutions                                          Services                                           Platforms                                           Systems                                           Financing
                                                                      --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- -------------------------------------------------
Revenue
External                                                                                 $ 17,841                                                              $ 17,166                                                              $ 35,142                                                              $  9,547                                                              $  1,840
Internal                                                                 2,215          499          698          778        2,637  
                                                                      -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------
Total Segment Revenue                                                                    $ 20,055                                                              $ 17,664                                                              $ 35,840                                                              $ 10,325                                                              $  4,477
                                                                                                                                                                                                                                                                                                                                                               
Pre-tax Income from Continuing Operations                                                   7,245                                                                 2,602                                                                 5,669                                                                 1,722                                                                 2,364
                                                                                                                                                                                                                                                                                                                                                               
Pre-tax margin                                                                               36.1 %                                                                14.7 %                                                                15.8 %                                                                16.7 %                                                                52.8 %
                                                                                                                                                                                                                                                                                                                                 
* Recast to conform with 2016 segment presentation.
 
                                                                               INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                        U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
                                                                        (Unaudited; Dollars in millions except per share amounts)
                                                   
                                                                                                                             FOURTH - QUARTER 2016
                                                                                                                             CONTINUING OPERATIONS
                                                                       ---------------------------------------------------------------------------------------------------------------------------------
                                                                                         Acquisition-      Retirement-   
                                                                                                               Related                             Related                               Operating
                                                                            GAAP         Adjustments*     Adjustments**        (Non-GAAP)
                                                                       ----------------------------------- ----------------------------------- ----------------------------------- ---------------------
                                                                                                                                                                                    
Gross Profit                                                             $ 10,893                             $  124                              $   78                                $ 11,095
                                                                                                                                                                                    
Gross Profit Margin                                                          50.0 %                                0.6Pts                              0.4Pts                               51.0 %
                                                                                                                                                                                    
S,G&A                                                                       4,976                               (136 )                               (69 )                                 4,771
                                                                                                                                                                                    
R,D&E                                                                       1,431                                - -                                  (6 )                                 1,425
                                                                                                                                                                                    
Other (Income) & Expense                                                     (136 )                                0                                 - -                                    (136 )
                                                                                                                                                                                    
Total Expense & Other (Income)                                              5,907                               (136 )                               (76 )                                 5,696
                                                                                                                                                                                    
Pre-tax Income from Continuing Operations                                   4,986                                260                                 154                                   5,399
                                                                                                                                                                                    
Pre-tax Income Margin from Continuing Operations                             22.9 %                                1.2Pts                              0.7Pts                               24.8 %
                                                                                                                                                                                    
Provision for Income Taxes***                                                 480                                 66                                  77                                     623
                                                                                                                                                                                    
Effective Tax Rate                                                            9.6 %                                0.8Pts                              1.2Pts                               11.5 %
                                                                                                                                                                                    
Income from Continuing Operations                                           4,505                                193                                  77                                   4,776
                                                                                                                                                                                    
Income Margin from Continuing Operations                                     20.7 %                                0.9Pts                              0.4Pts                               21.9 %
                                                                                                                                                                                    
Diluted Earnings Per Share: Continuing Operations                        $   4.73                             $ 0.20                              $ 0.08                                $   5.01
                                                                                                                                                                                    
                                                                                                                             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
* Includes amortization of purchased intangible assets, in
process R&D, severance cost for acquired employees, vacant space
for acquired companies, deal costs and acquisition integration tax
charges.
** Includes retirement-related interest cost, expected return
on plan assets, recognized actuarial losses or gains, amortization
of transition assets, other settlements, curtailments,
multi-employer plans and insolvency insurance.
*** Tax impact on operating (non-GAAP) pre-tax income from
continuing operations is calculated under the same accounting
principles applied to the As Reported pre-tax income under ASC
740, which employs an annual effective tax rate method to the
results.
 
                                                                                INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                         U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
                                                                         (Unaudited; Dollars in millions except per share amounts)
                                                   
                                                                                                                              TWELVE - MONTHS 2016
                                                                                                           CONTINUING OPERATIONS
                                                  -------------------- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                          Acquisition-       Retirement-   
                                                                                                                Related                              Related                               Operating
                                                                            GAAP          Adjustments*      Adjustments**        (Non-GAAP)
                                                                       ----------------------------------- ------------------------------------ ------------------------------------ ---------------------
                                                                                                                                                                                      
Gross Profit                                                             $ 38,294                             $   494                              $   316                                $ 39,104
                                                                                                                                                                                      
Gross Profit Margin                                                          47.9 %                                 0.6Pts                               0.4Pts                               48.9 %
                                                                                                                                                                                      
S,G&A                                                                      21,069                                (501 )                               (253 )                                20,315
                                                                                                                                                                                      
R,D&E                                                                       5,751                                 - -                                  (29 )                                 5,722
                                                                                                                                                                                      
Other (Income) & Expense                                                      145                                  (7 )                                - -                                     138
                                                                                                                                                                                      
Total Expense & Other (Income)                                             25,964                                (508 )                               (282 )                                25,174
                                                                                                                                                                                      
Pre-tax Income from Continuing Operations                                  12,330                               1,003                                  598                                  13,931
                                                                                                                                                                                      
Pre-tax Income Margin from Continuing Operations                             15.4 %                                 1.3Pts                               0.7Pts                               17.4 %
                                                                                                                                                                                      
Provision for / (Benefit) from Income Taxes***                                449                                 268                                  183                                     900
                                                                                                                                                                                      
Effective Tax Rate                                                            3.6 %                                 1.7Pts                               1.2Pts                                6.5 %
                                                                                                                                                                                      
Income from Continuing Operations                                          11,881                                 735                                  415                                  13,031
                                                                                                                                                                                      
Income Margin from Continuing Operations                                     14.9 %                                 0.9Pts                               0.5Pts                               16.3 %
                                                                                                                                                                                      
Diluted Earnings Per Share: Continuing Operations                        $  12.39                             $  0.77                              $  0.43                                $  13.59
                                                                                                                                                                                      
                                                                                                                              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
* Includes amortization of purchased intangible assets, in
process R&D, severance cost for acquired employees, vacant space
for acquired companies, deal costs and acquisition integration tax
charges.
** Includes retirement-related interest cost, expected return
on plan assets, recognized actuarial losses or gains, amortization
of transition assets, other settlements, curtailments,
multi-employer plans and insolvency insurance.
*** Tax impact on operating (non-GAAP) pre-tax income from
continuing operations is calculated under the same accounting
principles applied to the As Reported pre-tax income under ASC
740, which employs an annual effective tax rate method to the
results.
      
                                          INTERNATIONAL BUSINESS MACHINES CORPORATION
                                        RECONCILIATION OF OPERATING EARNINGS PER SHARE
                                                          (Unaudited)
                                                         2017
EPS Guidance                                                                                                  Expectations
------------------------------------------                                                                --------------------
IBM GAAP EPS                                                                                                   at least $11.95
                                                                                                           
IBM Operating EPS (non-GAAP)                                                                                   at least $13.80
                                                                                                           
                                                                                                           
Adjustments
    Acquisition related charges *                                                                                        $0.75
    Non-Operating Retirement-Related Items                                                                               $1.10
                                                                                                           
* Includes acquisitions through December 31, 2016

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170119006193r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20170119006193/en/

SOURCE: 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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