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REG-Intnl Bus. Mach: 1st Quarter Results

IBM RELEASES FIRST QUARTER RESULTS

Double-Digit Software and Consulting Growth Led by Hybrid Cloud Adoption;
Strong Profit Generation

ARMONK, N.Y., April 19, 2022 -- IBM (NYSE: IBM
(https://c212.net/c/link/?t=0&l=en&o=3509139-1&h=3267030657&u=http%3A%2F%2Fwww.ibm.com%2Finvestor&a=IBM))
today announced first-quarter 2022 earnings results.

"Demand for hybrid cloud and AI drove growth in both Software and Consulting
in the first quarter. Today we're a more focused business and our results
reflect the execution of our strategy," said Arvind Krishna, IBM chairman and
chief executive officer. "We are off to a solid start for the year, and we now
see revenue growth for 2022 at the high end of our model."

First-Quarter Highlights
* Revenue
 - Revenue of $14.2 billion, up 8 percent, up 11 percent at constant currency
(over 5 points from incremental sales to Kyndryl) 
 - Software revenue up 12 percent, up 15 percent at constant currency (over 8
points from incremental sales to Kyndryl)
 - Consulting revenue up 13 percent, up 17 percent at constant currency
 - Infrastructure revenue down 2 percent, flat at constant currency (over 8
points from incremental sales to Kyndryl)
 - Hybrid cloud revenue:
    -- First Quarter: $5.0 billion, up 14 percent, up 17 percent at
constant currency
    -- Last 12 months: $20.8 billion, up 17 percent
* Free Cash Flow
 - On a consolidated basis, net cash from operating activities of $3.2
billion; free cash flow of $1.2 billion
                                                                                                                            
                                                FIRST QUARTER 2022 INCOME STATEMENT SUMMARY                                 
                                                                         Pre-tax                                            
                                          Gross            Pre-tax        Income              Net             Diluted       
                      Revenue            Profit             Income        Margin            Income              EPS         
 GAAP from          $    14.2B         $    7.3B         $     0.6B           4.4 %       $    0.7B         $     0.73      
 Continuing                                                                                                                 
 Operations                                                                                                                 
 Year/Year                   8 %*              4 %              156 %         2.5 Pts            64 %               62 %    
 Operating                             $    7.5B         $     1.5B          10.7 %       $    1.3B         $     1.40      
 (Non-GAAP)                                                                                                                 
 Year/Year                                     4 %               46 %         2.8 Pts            25 %               25 %    
 * 11% at constant currency                                                                                                 

"In the first quarter we continued to strengthen the fundamentals of our
business, consistent with our medium-term model," said James Kavanaugh, IBM
senior vice president and chief financial officer. "We are a faster growing,
more profitable company with a higher-value business mix, a significant
recurring revenue base and strong cash generation."

Segment Results for First Quarter
* Software (includes Hybrid Platform & Solutions, Transaction Processing)— 
revenues of $5.8 billion, up 12.3 percent, up 15.4 percent at constant
currency (over 8 points from incremental sales to Kyndryl):
 - Hybrid Platform & Solutions up 7 percent, up 10 percent at constant
currency (about  1.5 points from incremental sales to Kyndryl):
    -- Red Hat up 18 percent, up 21 percent at constant currency
    -- Automation up 3 percent, up 5 percent at constant currency
    -- Data & AI up 2 percent, up 4 percent at constant currency
    -- Security up 5 percent, up 8 percent at constant currency
 - Transaction Processing up 26 percent, up 31 percent at constant currency
(about 28 points from incremental sales to Kyndryl)
 - Software segment hybrid cloud revenue up 22 percent, up 25 percent at
constant currency
* Consulting (includes Business Transformation, Technology Consulting and
Application Operations)—  revenues of $4.8 billion, up 13.3 percent, up
17.4 percent at constant currency:
 - Business Transformation up 15 percent, up 19 percent at constant currency
 - Technology Consulting up 14 percent, up 19 percent at constant currency
 - Application Operations up 10 percent, up 14 percent at constant currency
 - Consulting segment hybrid cloud revenue up 24 percent, up 29 percent at
constant currency
* Infrastructure (includes Hybrid Infrastructure, Infrastructure
Support)—  revenues of $3.2 billion, down 2.3 percent, up 0.3 percent at
constant currency (over 8 points from incremental sales to Kyndryl):
 - Hybrid Infrastructure down 5 percent, down 2 percent at constant
currency (over 8 points from incremental sales to Kyndryl)
    -- IBM z Systems down 19 percent, down 18 percent at constant currency
    -- Distributed Infrastructure up 5 percent, up 8 percent at constant
currency
 - Infrastructure Support flat, up 4 percent at constant currency (over 8
points from incremental sales to Kyndryl)
 - Infrastructure segment hybrid cloud revenue down 20 percent, down 18
percent at constant currency
* Financing (includes client and commercial financing)— revenues of $0.2
billion, down 26.2 percent, down 24.5 percent at constant currency
Cash Flow and Balance Sheet
On a consolidated basis, in the first quarter, the company generated net cash
from operating activities of $3.2 billion or $1.6 billion excluding IBM
Financing receivables. IBM's free cash flow was $1.2 billion, which includes
cash impacts from the company's structural actions initiated at the end of
2020.

IBM ended the first quarter with $10.8 billion of cash on hand (which includes
marketable securities), up $3.2 billion from year-end 2021. Debt, including
IBM Financing debt of $12.2 billion, totaled $54.2 billion, up $2.5 billion
since the end of 2021. The company returned $1.5 billion to shareholders in
dividends in the first quarter.

Full-Year 2022 Expectations
* Revenue growth: The company now expects constant currency revenue growth at
the high end of the mid-single digit range. The company also expects an
additional 3.5 point contribution from incremental sales to Kyndryl. At
mid-April 2022 foreign exchange rates, currency is expected to be a three to
four point headwind.
* Free Cash Flow: The company continues to expect $10 billion to $10.5 billion
in consolidated free cash flow.
Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained herein,
statements contained in this release may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on the company's current assumptions
regarding future business and financial performance. These statements involve
a number of risks, uncertainties and other factors that could cause actual
results to differ materially, including, but not limited to, the following: a
downturn in economic environment and client spending budgets; a failure of the
company's innovation initiatives; damage to the company's reputation; risks
from investing in growth opportunities; failure of the company's intellectual
property portfolio to prevent competitive offerings and the failure of the
company to obtain necessary licenses; the company's ability to successfully
manage acquisitions, alliances and dispositions, including integration
challenges, failure to achieve objectives, the assumption of liabilities, and
higher debt levels; fluctuations in financial results; impact of local legal,
economic, political, health and other conditions; the company's failure to
meet growth and productivity objectives; ineffective internal controls; the
company's use of accounting estimates; impairment of the company's goodwill or
amortizable intangible assets; the company's ability to attract and retain key
employees and its reliance on critical skills; impacts of relationships with
critical suppliers; product quality issues; impacts of business with
government clients; reliance on third party distribution channels and
ecosystems; cybersecurity and data privacy considerations; adverse effects
related to climate change and environmental matters, tax matters; legal
proceedings and investigatory risks; the company's pension plans; currency
fluctuations and customer financing risks; impact of changes in market
liquidity conditions and customer credit risk on receivables; potential
failure of the separation of Kyndryl Holdings, Inc. to qualify for tax-free
treatment; 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 or in materials incorporated therein by reference. Any
forward-looking statement in this release speaks only as of the date on which
it is made. Except as required by law, the company assumes no obligation to
update or revise any forward-looking statements.

Presentation of Information in this Press Release
On November 3, 2021, IBM completed the separation of Kyndryl. Unless otherwise
specified, results are presented on a continuing operations basis.

In an effort to provide investors with additional information regarding the
company's results as determined by generally accepted accounting principles
(GAAP), the company has also disclosed in this press release the following
non-GAAP information, which management believes provides useful information to
investors: 

IBM results —
* adjusting for currency (i.e., at constant currency);
* presenting operating (non-GAAP) earnings per share amounts and related
income statement items;
* consolidated free cash flow;
* consolidated cash from operating activities excluding IBM Financing
receivables;
The rationale for management's use of these non-GAAP measures is included in
Exhibit 99.2 in the Form 8–K that includes this press release and is being
submitted today to the SEC.

Conference Call and Webcast
IBM's regular quarterly earnings conference call is scheduled to begin at
5:00 p.m. EDT, today. The Webcast may be accessed via a link
at https://www.ibm.com/investor/events/earnings-1q22. Presentation charts
will be available shortly before the Webcast.

Financial Results Below (certain amounts may not add due to use of rounded
numbers; percentages presented are calculated from the underlying
whole-dollar amounts).

Contact:       IBM
                    Sarah Meron, 347 891 1770
                    sarah.meron@ibm.com
    
                    Tim Davidson, 914 844 7847
                    tfdavids@us.ibm.com 

                              INTERNATIONAL BUSINESS MACHINES CORPORATION  COMPARATIVE FINANCIAL RESULTS  (Unaudited; Dollars in millions except per share amounts)                                 
                                                                                                                                                                                                    
                                                                                                                      Three Months Ended                                                            
                                                                                                                          March 31,                                                                 
                                                                                                2022                                                     2021*                                      
 REVENUE                                                                                                                                                                                            
 Software                                                                                        $              5,772                                     $              5,138                      
 Consulting                                                                                                     4,829                                                    4,262                      
 Infrastructure                                                                                                 3,219                                                    3,293                      
 Financing                                                                                                        154                                                      208                      
 Other                                                                                                            224                                                      284                      
 TOTAL REVENUE                                                                                                 14,197                                                   13,187                      
                                                                                                                                                                                                    
 GROSS PROFIT                                                                                                   7,335                                                    7,027                      
                                                                                                                                                                                                    
 GROSS PROFIT MARGIN                                                                                                                                                                                
 Software                                                                                                        78.8 %                                                   77.8 %                    
 Consulting                                                                                                      24.3 %                                                   27.8 %                    
 Infrastructure                                                                                                  50.5 %                                                   56.3 %                    
 Financing                                                                                                       37.7 %                                                   35.5 %                    
                                                                                                                                                                                                    
 TOTAL GROSS PROFIT MARGIN                                                                                       51.7 %                                                   53.3 %                    
                                                                                                                                                                                                    
 EXPENSE AND OTHER INCOME                                                                                                                                                                           
 S,G&A                                                                                                          4,597                                                    4,688                      
 R,D&E                                                                                                          1,679                                                    1,616                      
 Intellectual property and custom development income                                                            (121)                                                    (146)                      
 Other (income) and expense                                                                                       246                                                      346                      
 Interest expense                                                                                                 311                                                      280                      
 TOTAL EXPENSE AND OTHER INCOME                                                                                 6,712                                                    6,784                      
                                                                                                                                                                                                    
 INCOME/(LOSS) FROM CONTINUING OPERATIONS                                                                                                                                                           
 BEFORE INCOME TAXES                                                                                              623                                                      244                      
 Pre-tax margin                                                                                                   4.4 %                                                    1.8 %                    
 Provision for/(Benefit from) income taxes                                                                       (39)                                                    (160)                      
 Effective tax rate                                                                                             (6.3) %                                                 (65.5) %                    
                                                                                                                                                                                                    
 INCOME FROM CONTINUING OPERATIONS                                                               $                662                                     $                403                      
                                                                                                                                                                                                    
 DISCONTINUED OPERATIONS                                                                                                                                                                            
 Income/(Loss) from discontinued operations, net of taxes                                                          71                                                      552                      
                                                                                                                                                                                                    
 NET INCOME                                                                                      $                733                                     $                955                      
                                                                                                                                                                                                    
 EARNINGS/(LOSS) PER SHARE OF COMMON STOCK                                                                                                                                                          
 Assuming Dilution                                                                                                                                                                                  
 Continuing Operations                                                                           $               0.73                                     $               0.45                      
 Discontinued Operations                                                                         $               0.08                                     $               0.61                      
 TOTAL                                                                                           $               0.81                                     $               1.06                      
                                                                                                                                                                                                    
 Basic                                                                                                                                                                                              
 Continuing Operations                                                                           $               0.74                                     $               0.45                      
 Discontinued Operations                                                                         $               0.08                                     $               0.62                      
 TOTAL                                                                                           $               0.82                                     $               1.07                      
                                                                                                                                                                                                    
 WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (M's)                                                                                                                                         
 Assuming Dilution                                                                                              909.2                                                    901.7                      
 Basic                                                                                                          899.3                                                    893.6                      
 ____________________ * Recast to conform with 2022 presentation.                                                                                                                                   

   

 INTERNATIONAL BUSINESS MACHINES CORPORATION  CONDENSED CONSOLIDATED BALANCE SHEET  (Unaudited) 
                                                                                          
                                                         At                   At          
                                                      March 31,          December 31,     
 (Dollars in Millions)                                  2022                 2021         
 ASSETS:                                                                                  
 Current Assets:                                                                          
 Cash and cash equivalents                             $      9,934          $      6,650 
 Restricted cash                                                286                   307 
 Marketable securities                                          550                   600 
 Notes and accounts receivable - trade, net                   5,963                 6,754 
 Short-term financing receivables, net                        7,169                 8,014 
 Other accounts receivable, net                               1,003                 1,002 
 Inventories                                                  1,776                 1,649 
 Deferred costs                                               1,103                 1,097 
 Prepaid expenses and other current assets                    3,548                 3,466 
 Total Current Assets                                        31,330                29,539 
                                                                                          
 Property, plant and equipment, net                           5,559                 5,694 
 Operating right-of-use assets, net                           3,108                 3,222 
 Long-term financing receivables, net                         4,610                 5,425 
 Prepaid pension assets                                       9,995                 9,850 
 Deferred costs                                                 916                   924 
 Deferred taxes                                               7,567                 7,370 
 Goodwill                                                    56,106                55,643 
 Intangibles, net                                            12,312                12,511 
 Investments and sundry assets                                1,771                 1,823 
 Total Assets                                          $    133,275          $    132,001 
                                                                                          
 LIABILITIES:                                                                             
 Current Liabilities:                                                                     
 Taxes                                                 $      1,798          $      2,289 
 Short-term debt                                              7,690                 6,787 
 Accounts payable                                             3,453                 3,955 
 Deferred income                                             13,526                12,518 
 Operating lease liabilities                                    954                   974 
 Other liabilities                                            6,635                 7,097 
 Total Current Liabilities                                   34,056                33,619 
                                                                                          
 Long-term debt                                              46,545                44,917 
 Retirement related obligations                              13,937                14,435 
 Deferred income                                              3,423                 3,577 
 Operating lease liabilities                                  2,358                 2,462 
 Other liabilities                                           13,844                13,996 
 Total Liabilities                                          114,162               113,005 
                                                                                          
 EQUITY:                                                                                  
 IBM Stockholders' Equity:                                                                
 Common stock                                                57,603                57,319 
 Retained earnings                                          153,401               154,209 
 Treasury stock — at cost                                 (169,422)             (169,392) 
 Accumulated other comprehensive income/(loss)             (22,532)              (23,234) 
 Total IBM Stockholders' Equity                              19,050                18,901 
                                                                                          
 Noncontrolling interests                                        62                    95 
 Total Equity                                                19,112                18,996 
                                                                                          
 Total Liabilities and Equity                          $    133,275          $    132,001 

   

                          INTERNATIONAL BUSINESS MACHINES CORPORATION  CASH FLOW ANALYSIS  (Unaudited)                          
                                                                                                                                
                                                                                                    Three Months Ended          
                                                                                                         March 31,              
 (Dollars in Millions)                                                                           2022                 2021      
 Consolidated Net Cash from Operations per GAAP                                                 $    3,248           $    4,914 
                                                                                                                                
 Less: change in IBM Financing receivables                                                           1,631                2,863 
 Capital Expenditures, net                                                                           (378)                (529) 
                                                                                                                                
 Consolidated Free Cash Flow                                                                         1,240                1,522 
                                                                                                                                
 Acquisitions                                                                                        (698)              (1,120) 
 Divestitures                                                                                           61                 (15) 
 Dividends                                                                                         (1,475)              (1,457) 
 Non-Financing Debt                                                                                  4,675              (1,725) 
 Other (includes IBM Financing net receivables and debt)                                             (590)                (207) 
                                                                                                                                
 Change in Cash, Cash Equivalents, Restricted Cash and Short-term Marketable Securities*        $    3,213           $  (3,002) 
 ____________________ * Cash flows are presented on a consolidated basis.                                                       

   

                                   INTERNATIONAL BUSINESS MACHINES CORPORATION  CASH FLOW  (Unaudited)                                      
                                                                                                                                            
                                                                                                Three Months Ended                          
                                                                                                    March 31,                               
 (Dollars in Millions)                                                             2022                                   2021              
 Net Income from Operations                                                         $          733                         $          955   
 Depreciation/Amortization of Intangibles                                                    1,257                                  1,672   
 Stock-based Compensation                                                                      234                                    213   
 Working Capital / Other                                                                     (606)                                  (789)   
 IBM Financing A/R                                                                           1,631                                  2,863   
 Net Cash Provided by Operating Activities                                          $        3,248                         $        4,914   
 Capital Expenditures, net of payments & proceeds                                            (378)                                  (529)   
 Divestitures, net of cash transferred                                                          61                                   (15)   
 Acquisitions, net of cash acquired                                                          (698)                                (1,120)   
 Marketable Securities / Other Investments, net                                              (344)                                  (335)   
 Net Cash Provided by/(Used in) Investing Activities                                $      (1,358)                         $      (2,000)   
 Debt, net of payments & proceeds                                                            2,948                                (4,299)   
 Dividends                                                                                 (1,475)                                (1,457)   
 Financing - Other                                                                            (95)                                   (26)   
 Net Cash Provided by/(Used in) Financing Activities                                $        1,377                         $      (5,783)   
 Effect of Exchange Rate changes on Cash                                                       (5)                                  (134)   
 Net Change in Cash, Cash Equivalents and Restricted Cash*                          $        3,263                         $      (3,002)   
 ____________________ * Cash flows are presented on a consolidated basis.                                                                   

   

                                  INTERNATIONAL BUSINESS MACHINES CORPORATION  SEGMENT DATA  (Unaudited)                                   
                                                                                                                                           
                                                                             Three Months Ended March 31, 2022                             
                                                                                                                                           
 (Dollars in Millions)                                 Software            Consulting            Infrastructure            Financing       
 Revenue                                                  $  5,772             $   4,829               $     3,219            $     154    
 Pre-tax Income/(Loss) from Continuing Operations            1,134                   348                       199                   84    
 Pre-tax Margin                                               19.7 %                 7.2 %                     6.2 %               54.6 %  
 Change YTY Revenue                                           12.3 %                13.3 %                   (2.3) %             (26.2) %  
 Change YTY Revenue - constant currency                       15.4 %                17.4 %                     0.3 %             (24.5) %  
                                                                                                                                           
                                                                             Three Months Ended March 31, 2021*                            
                                                                                                                                           
 (Dollars in Millions)                                 Software            Consulting            Infrastructure            Financing       
 Revenue                                                  $  5,138             $   4,262               $     3,293            $     208    
 Pre-tax Income/(Loss) from Continuing Operations              658                   277                       292                   98    
 Pre-tax Margin                                               12.8 %                 6.5 %                     8.9 %               47.0 %  
 ____________________ * Recast to conform with 2022 presentation.                                                                          

   

                                                                                                     INTERNATIONAL BUSINESS MACHINES CORPORATION  U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION  (Unaudited; Dollars in millions except per share amounts)                                                                                                      
                                                                                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                                                  Three Months Ended March 31, 2022                                                                                                                                        
                                                                                                                                                                                                        Continuing Operations                                                                                                                                              
                                                                                                                                    Acquisition-                                     Retirement-                                         Tax                                          Kyndryl-                                                                             
                                                                                                                                       Related                                         Related                                         Reform                                          Related                                        Operating                            
                                                                                        GAAP                                      Adjustments ((1))                               Adjustments ((2))                                    Impacts                                      Impacts ((3))                                    (Non-GAAP)                            
 Gross Profit                                                                            $           7,335                               $             181                               $               —                               $               —                               $               —                               $           7,516                 
 Gross Profit Margin                                                                                  51.7 %                                           1.3 pts.                                          — pts.                                          — pts.                                          — pts.                                       52.9 %               
 S,G&A                                                                                   $           4,597                               $           (286)                               $               —                               $               —                               $             (0)                               $           4,311                 
 Other (Income) & Expense                                                                              246                                             (1)                                           (202)                                               —                                           (222)                                           (179)                 
 Total Expense & Other (Income)                                                                      6,712                                           (287)                                           (202)                                               —                                           (222)                                           6,001                 
 Pre-tax Income from Continuing Operations                                                             623                                             468                                             202                                               —                                             222                                           1,515                 
 Pre-tax Income Margin from Continuing Operations                                                      4.4 %                                           3.3 pts.                                        1.4 pts.                                          — pts.                                        1.6 pts.                                       10.7 %               
 Provision for/(Benefit from) Income Taxes ((4))                                         $            (39)                               $             109                               $              58                               $             116                               $               —                               $             244                 
 Effective Tax Rate                                                                                  (6.3) %                                           9.1 pts.                                        4.6 pts.                                        7.7 pts.                                        0.9 pts.                                       16.1 %               
 Income from Continuing Operations                                                       $             662                               $             359                               $             144                               $           (116)                               $             222                               $           1,271                 
 Income Margin from Continuing Operations                                                              4.7 %                                           2.5 pts.                                        1.0 pts.                                      (0.8) pts.                                        1.6 pts.                                        9.0 %               
 Diluted Earnings/(Loss) Per Share: Continuing Operations                                $            0.73                               $            0.39                               $            0.16                               $          (0.13)                               $            0.24                               $            1.40                 
                                                                                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                                                  Three Months Ended March 31, 2021                                                                                                                                        
                                                                                                                                                                                                        Continuing Operations                                                                                                                                              
                                                                                                                                    Acquisition-                                     Retirement-                                         Tax                                          Kyndryl-                                                                             
                                                                                                                                       Related                                         Related                                         Reform                                          Related                                        Operating                            
                                                                                        GAAP                                      Adjustments ((1))                               Adjustments ((2))                                    Impacts                                      Impacts ((3))                                    (Non-GAAP)                            
 Gross Profit                                                                            $           7,027                               $             174                               $               —                               $               —                               $               —                               $           7,201                 
 Gross Profit Margin                                                                                  53.3 %                                           1.3 pts.                                          — pts.                                          — pts.                                          — pts.                                       54.6 %               
 S,G&A                                                                                   $           4,688                               $           (288)                               $               —                               $               —                               $               —                               $           4,399                 
 Other (Income) & Expense                                                                              346                                             (1)                                           (332)                                               —                                               —                                              13                 
 Total Expense & Other (Income)                                                                      6,784                                           (289)                                           (332)                                               —                                               —                                           6,162                 
 Pre-tax Income/(Loss) from Continuing Operations                                                      244                                             463                                             332                                               —                                               —                                           1,039                 
 Pre-tax Income Margin from Continuing Operations                                                      1.8 %                                           3.5 pts.                                        2.5 pts.                                          — pts.                                          — pts.                                        7.9 %               
 Provision for/(Benefit from) Income Taxes ((4))                                         $           (160)                               $             132                               $              33                               $              19                               $               —                               $              25                 
 Effective Tax Rate                                                                                 (65.5) %                                          41.9 pts.                                       24.2 pts.                                        1.8 pts.                                          — pts.                                        2.4 %               
 Income from Continuing Operations                                                       $             403                               $             330                               $             299                               $            (19)                               $               —                               $           1,013                 
 Income Margin from Continuing Operations                                                              3.1 %                                           2.5 pts.                                        2.3 pts.                                      (0.1) pts.                                          — pts.                                        7.7 %               
 Diluted Earnings/(Loss) Per Share: Continuing Operations                                $            0.45                               $            0.37                               $            0.33                               $          (0.02)                               $               —                               $            1.12                 
 ____________________                                                                                                                                                                                                                                                                                                                                                      
                                                       (1) Includes amortization of purchased intangible assets, in process R&D, transaction costs, applicable restructuring and related expenses, tax charges related to acquisition integration and pre-closing charges, such as financing costs.                                                                        
                                                       (2) Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/ settlements and pension insolvency costs and other costs.                                                                                  
                                                       (3) Primarily relates to fair value changes in shares of Kyndryl common stock that were retained by IBM.                                                                                                                                                                                                            
                                                       (4) 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.                                                      



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