REG-Intnl Bus. Mach: Final Results
26/01/2023 07:15
IBM RELEASES FOURTH-QUARTER RESULTS
Revenue Growth in All Key Segments; Expanded Margins; Solid Cash Generation
ARMONK, N.Y., Jan. 25, 2023 -- IBM (NYSE: IBM (http://www.ibm.com/investor))
today announced fourth-quarter 2022 earnings results.
Logo - https://mma.prnewswire.com/media/95470/ibm_logo.jpg
"Our solid fourth-quarter performance capped a year in which we grew revenue
above our mid-single digit model. Clients in all geographies increasingly
embraced our hybrid cloud and AI solutions as technology remains a
differentiating force in today's business environment," said Arvind Krishna,
IBM chairman and chief executive officer. "Looking ahead to 2023, we expect
full-year revenue growth consistent with our mid-single digit model."
Fourth-Quarter Highlights
* Revenue of $16.7 billion, flat, up 6 percent at constant currency
- Software revenue up 3 percent, up 8 percent at constant currency
- Consulting revenue up 0.5 percent, up 9 percent at constant currency
- Infrastructure revenue up 2 percent, up 7 percent at constant currency
Full-Year Highlights
* Revenue of $60.5 billion, up 6 percent, up 12 percent at constant currency
(about 4 points from sales to Kyndryl)
- Hybrid cloud revenue of $22.4 billion, up 11 percent, up 17 percent at
constant currency
* On a consolidated basis, net cash from operating activities of $10.4
billion; free cash flow of $9.3 billion
Full-Year 2023 Expectations
* The company expects constant currency revenue growth consistent with its
mid-single digit model and about $10.5 billion in consolidated free cash flow,
up more than $1 billion year to year
FOURTH QUARTER 2022 INCOME STATEMENT SUMMARY
Pre-tax Diluted
Gross Pre-tax Income Net Earnings
Revenue Profit Income Margin Income Per Share
GAAP from Continuing $ 16.7B $ 9.6B $ 3.3B 19.8 % $ 2.9B $ 3.13
Operations
Year/Year 0 %* 1 % 15 % 2.7 Pts 17 % 15 %
Operating (Non-GAAP) $ 9.8B $ 3.8B 22.9 % $ 3.3B $ 3.60
Year/Year 1 % 8 % 1.7 Pts 9 % 7 %
* 6% at constant currency
"IBM's revenue growth and operating profit in 2022 demonstrate the strength
and multiplier effect of our platform-centric approach to hybrid cloud and
AI," said James Kavanaugh, IBM senior vice president and chief financial
officer. "Our client-focused portfolio and strong recurring revenue stream
position IBM well for continued growth, solid cash generation and returning
value to shareholders through dividends."
Segment Results for Fourth Quarter
* Software (includes Hybrid Platform & Solutions, Transaction Processing)—
revenues of $7.3 billion, up 2.8 percent, up 8.0 percent at constant currency:
- Hybrid Platform & Solutions up 5 percent, up 10 percent at constant
currency:
-- Red Hat up 10 percent, up 15 percent at constant currency
-- Automation up 4 percent, up 9 percent at constant currency
-- Data & AI up 4 percent, up 8 percent at constant currency
-- Security up 4 percent, up 10 percent at constant currency
- Transaction Processing down 3 percent, up 3 percent at constant currency
* Consulting (includes Business Transformation, Technology Consulting and
Application Operations)— revenues of $4.8 billion, up 0.5 percent, up 9.3
percent at constant currency:
- Business Transformation down 1 percent, up 7 percent at constant currency
- Technology Consulting up 1 percent, up 10 percent at constant currency
- Application Operations up 2 percent, up 12 percent at constant currency
* Infrastructure (includes Hybrid Infrastructure, Infrastructure
Support)— revenues of $4.5 billion, up 1.6 percent, up 7.4 percent at
constant currency:
- Hybrid Infrastructure up 6 percent, up 11 percent at constant currency:
-- IBM z Systems up 16 percent, up 21 percent at constant currency
-- Distributed Infrastructure flat, up 5 percent at constant
currency
- Infrastructure Support down 8 percent, flat at constant currency
* Financing (includes client and commercial financing)— revenues of $0.2
billion, down 0.4 percent, up 3.9 percent at constant currency
Cash Flow and Balance Sheet
On a consolidated basis, in the fourth quarter, the company generated net cash
from operating activities of $4.0 billion, up $1.4 billion. Net cash from
operating activities excluding IBM Financing receivables was $5.8 billion, up
$1.9 billion. IBM's free cash flow was $5.2 billion, up $1.9 billion. The
company returned $1.5 billion to shareholders in dividends in the fourth
quarter.
On a consolidated basis, for the full year, the company generated net cash
from operating activities of $10.4 billion, down $2.4 billion. Net cash from
operating activities excluding IBM Financing receivables was $11.2 billion, up
$2.3 billion. IBM's free cash flow was $9.3 billion, up $2.8 billion. IBM
returned $5.9 billion to shareholders in dividends.
IBM ended the fourth quarter with $8.8 billion of cash on hand (which includes
marketable securities), up $1.3 billion from year-end 2021. Debt, including
IBM Financing debt of $12.9 billion, totaled $50.9 billion, down $0.8 billion
since the end of 2021.
Full-Year 2022 Results
FULL-YEAR 2022 INCOME STATEMENT
GAAP results include impact of one-time, non-cash pension settlement charge*
Pre-tax
Gross Pre-tax Income Net Diluted
Revenue Profit Income Margin Income EPS
GAAP from Continuing $ 60.5B $ 32.7B $ 1.2B * 1.9 %* $ 1.8B * $ 1.95 *
Operations
Year/Year 6 %** 4 % (76) %* (6.5) Pts* (62) %* (63) %*
Operating (Non-GAAP) $ 33.4B $ 9.8B 16.2 % $ 8.3B $ 9.13
Year/Year 4 % 25 % 2.5 Pts 16 % 15 %
* GAAP results include the impact of a one-time, non-cash pension settlement charge in the third quarter of $5.9 billion ($4.4 billion net of tax) related to the transfer of a portion of the company's U.S. defined benefit pension obligations and related plan assets to third party insurers.
** 12% at constant currency
Full-Year 2023 Expectations
* Revenue Growth: The company expects constant currency revenue growth
consistent with its mid-single digit model. At current foreign exchange rates,
currency is expected to be neutral to a one-point tailwind to revenue growth.
* Free Cash Flow: The company expects about $10.5 billion in consolidated free
cash flow, up more than $1 billion year to year.
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. The
reference in Full-Year Highlights to the revenue impacts from sales to Kyndryl
are incremental sales post-separation, year to date through October.
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. EST, today. The Webcast may be accessed via a link at
https://www.ibm.com/investor/events/earnings-4q22. 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 Year Ended
December 31, December 31,
2022 2021* 2022** 2021*
REVENUE BY SEGMENT
Software $ 7,288 $ 7,087 $ 25,037 $ 23,426
Consulting 4,770 4,746 19,107 17,844
Infrastructure 4,483 4,414 15,288 14,188
Financing 172 172 645 774
Other (22) 275 453 1,119
TOTAL REVENUE 16,690 16,695 60,530 57,350
GROSS PROFIT 9,632 9,500 32,687 31,486
GROSS PROFIT MARGIN
Software 81.2 % 81.6 % 79.6 % 79.6 %
Consulting 27.4 % 27.0 % 25.5 % 28.0 %
Infrastructure 54.9 % 54.8 % 52.8 % 55.3 %
Financing 47.1 % 32.5 % 38.3 % 31.7 %
TOTAL GROSS PROFIT MARGIN 57.7 % 56.9 % 54.0 % 54.9 %
EXPENSE AND OTHER INCOME
S,G&A 4,765 4,903 18,609 18,745
R,D&E 1,604 1,625 6,567 6,488
Intellectual property and custom development income (245) (181) (663) (612)
Other (income) and expense (118) (18) 5,803 873
Interest expense 313 303 1,216 1,155
TOTAL EXPENSE AND OTHER INCOME 6,320 6,632 31,531 26,649
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 3,312 2,869 1,156 4,837
Pre-tax margin 19.8 % 17.2 % 1.9 % 8.4 %
Provision for/(Benefit from) income taxes 443 407 (626) 124
Effective tax rate 13.4 % 14.2 % (54.2) % 2.6 %
INCOME FROM CONTINUING OPERATIONS $ 2,869 $ 2,462 $ 1,783 $ 4,712
DISCONTINUED OPERATIONS
Income/(loss) from discontinued operations, net of taxes (159) (129) (143) 1,030
NET INCOME $ 2,711 $ 2,332 $ 1,639 $ 5,743
EARNINGS PER SHARE OF COMMON STOCK
Assuming Dilution
Continuing Operations $ 3.13 $ 2.72 $ 1.95 $ 5.21
Discontinued Operations $ (0.17) $ (0.14) $ (0.16) $ 1.14
TOTAL $ 2.96 $ 2.57 $ 1.80 $ 6.35
Basic
Continuing Operations $ 3.17 $ 2.74 $ 1.97 $ 5.26
Discontinued Operations $ (0.18) $ (0.14) $ (0.16) $ 1.15
TOTAL $ 2.99 $ 2.60 $ 1.82 $ 6.41
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (M's)
Assuming Dilution 915.9 906.6 912.3 904.6
Basic 905.8 898.2 902.7 896.0
____________________
* Recast to conform with 2022 presentation.
** Includes a one-time, non-cash pension settlement charge of $5.9 billion ($4.4 billion net of tax).
INTERNATIONAL BUSINESS MACHINES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
At At
December 31, December 31,
(Dollars in Millions) 2022 2021
ASSETS:
Current Assets:
Cash and cash equivalents $ 7,886 $ 6,650
Restricted cash 103 307
Marketable securities 852 600
Notes and accounts receivable - trade, net 6,541 6,754
Short-term financing receivables, net 7,790 8,014
Other accounts receivable, net 817 1,002
Inventories 1,552 1,649
Deferred costs 967 1,097
Prepaid expenses and other current assets 2,611 3,466
Total Current Assets 29,118 29,539
Property, plant and equipment, net 5,334 5,694
Operating right-of-use assets, net 2,878 3,222
Long-term financing receivables, net 5,806 5,425
Prepaid pension assets 8,236 9,850
Deferred costs 866 924
Deferred taxes 6,256 7,370
Goodwill 55,949 55,643
Intangibles, net 11,184 12,511
Investments and sundry assets 1,617 1,823
Total Assets $ 127,243 $ 132,001
LIABILITIES:
Current Liabilities:
Taxes $ 2,196 $ 2,289
Short-term debt 4,760 6,787
Accounts payable 4,051 3,955
Deferred income 12,032 12,518
Operating lease liabilities 874 974
Other liabilities 7,592 7,097
Total Current Liabilities 31,505 33,619
Long-term debt 46,189 44,917
Retirement related obligations 9,596 14,435
Deferred income 3,499 3,577
Operating lease liabilities 2,190 2,462
Other liabilities 12,243 13,996
Total Liabilities 105,222 113,005
EQUITY:
IBM Stockholders' Equity:
Common stock 58,343 57,319
Retained earnings 149,825 154,209
Treasury stock — at cost (169,484) (169,392)
Accumulated other comprehensive income/(loss) (16,740) (23,234)
Total IBM Stockholders' Equity 21,944 18,901
Noncontrolling interests 77 95
Total Equity 22,021 18,996
Total Liabilities and Equity $ 127,243 $ 132,001
INTERNATIONAL BUSINESS MACHINES CORPORATION CASH FLOW ANALYSIS (Unaudited)
Three Months Ended Year Ended
December 31, December 31,
(Dollars in Millions) 2022 2021 2022 2021
Consolidated Net Cash from Operations per GAAP $ 3,965 $ 2,543 $ 10,435 $ 12,796
Less: change in IBM Financing receivables (1,788) (1,328) (717) 3,907
Capital Expenditures, net (544) (526) (1,860) (2,381)
Consolidated Free Cash Flow 5,209 3,345 9,291 6,508
Acquisitions (1,329) (275) (2,348) (3,293)
Divestitures 1 88 1,272 114
Dividends (1,494) (1,474) (5,948) (5,869)
Non-Financing Debt (2,777) (20) 1,909 (1,191)
Other (includes IBM Financing net receivables and debt) (498) (2,514) (2,893) (2,987)
Change in Cash, Cash Equivalents, Restricted Cash and Short-term Marketable Securities* $ (888) $ (850) $ 1,283 $ (6,718)
____________________
* Cash flows are presented on a consolidated basis.
INTERNATIONAL BUSINESS MACHINES CORPORATION CASH FLOW (Unaudited)
Three Months Ended Year Ended
December 31, December 31,
(Dollars in Millions) 2022 2021 2022 2021
Net Income from Operations $ 2,711 $ 2,332 $ 1,639 $ 5,743
Pension Settlement Charge - - 5,894 -
Depreciation/Amortization of Intangibles 1,137 1,380 4,802 6,416
Stock-based Compensation 248 264 987 982
Working Capital / Other 1,657 (105) (2,170) (4,253)
IBM Financing A/R (1,788) (1,328) (717) 3,907
Net Cash Provided by Operating Activities $ 3,965 $ 2,543 $ 10,435 $ 12,796
Capital Expenditures, net of payments & proceeds (544) (526) (1,860) (2,381)
Divestitures, net of cash transferred 1 88 1,272 114
Acquisitions, net of cash acquired (1,329) (275) (2,348) (3,293)
Marketable Securities / Other Investments, net 553 38 (1,265) (414)
Net Cash Provided by/(Used in) Investing Activities $ (1,318) $ (675) $ (4,202) $ (5,975)
Debt, net of payments & proceeds (1,350) (2,030) 1,221 (8,116)
Dividends (1,494) (1,474) (5,948) (5,869)
Financing - Other (8) 811 (231) 630
Net Cash Provided by/(Used in) Financing Activities $ (2,852) $ (2,692) $ (4,958) $ (13,354)
Effect of Exchange Rate changes on Cash 219 (26) (244) (185)
Net Change in Cash, Cash Equivalents and Restricted Cash* $ 13 $ (850) $ 1,032 $ (6,718)
____________________
* Cash flows are presented on a consolidated basis.
INTERNATIONAL BUSINESS MACHINES CORPORATION SEGMENT DATA (Unaudited)
Three Months Ended December 31, 2022
(Dollars in Millions) Software Consulting Infrastructure Financing
Revenue $ 7,288 $ 4,770 $ 4,483 $ 172
Pre-tax Income from Continuing Operations $ 2,347 $ 523 $ 1,026 $ 75
Pre-tax Margin 32.2 % 11.0 % 22.9 % 43.6 %
Change YTY Revenue 2.8 % 0.5 % 1.6 % (0.4) %
Change YTY Revenue - constant currency 8.0 % 9.3 % 7.4 % 3.9 %
Three Months Ended December 31, 2021
(Dollars in Millions) Software * Consulting Infrastructure Financing
Revenue $ 7,087 $ 4,746 $ 4,414 $ 172
Pre-tax Income from Continuing Operations $ 2,142 $ 436 $ 1,036 $ 79
Pre-tax Margin 30.2 % 9.2 % 23.5 % 46.0 %
____________________
* Recast to conform with 2022 presentation.
Year Ended December 31, 2022
(Dollars in Millions) Software Consulting Infrastructure Financing
Revenue $ 25,037 $ 19,107 $ 15,288 $ 645
Pre-tax Income from Continuing Operations $ 6,162 $ 1,677 $ 2,262 $ 340
Pre-tax Margin 24.6 % 8.8 % 14.8 % 52.6 %
Change YTY Revenue 6.9 % 7.1 % 7.8 % (16.6) %
Change YTY Revenue - constant currency 11.9 % 14.9 % 13.5 % (13.0) %
Year Ended December 31, 2021
(Dollars in Millions) Software * Consulting Infrastructure Financing
Revenue $ 23,426 $ 17,844 $ 14,188 $ 774
Pre-tax Income from Continuing Operations $ 4,849 $ 1,449 $ 2,025 $ 441
Pre-tax Margin 20.7 % 8.1 % 14.3 % 57.0 %
____________________
* 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 December 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 $ 9,632 $ 156 $ — $ — $ — $ 9,788
Gross Profit Margin 57.7 % 0.9 pts. — pts. — pts. — pts. 58.6 %
S,G&A $ 4,765 $ (262) $ — $ — $ (0) $ 4,503
Other (Income) & Expense (118) (1) (93) — 2 (210)
Total Expense & Other (Income) 6,320 (263) (93) — 2 5,965
Pre-tax Income from Continuing Operations 3,312 419 93 — (2) 3,823
Pre-tax Income Margin from Continuing Operations 19.8 % 2.5 pts. 0.6 pts. — pts. (0.0) pts. 22.9 %
Provision for/(Benefit from) Income Taxes ((4)) $ 443 $ 109 $ 16 $ (42) $ — $ 526
Effective Tax Rate 13.4 % 1.4 pts. 0.1 pts. (1.1) pts. 0.0 pts. 13.8 %
Income from Continuing Operations $ 2,869 $ 310 $ 77 $ 42 $ (2) $ 3,296
Income Margin from Continuing Operations 17.2 % 1.9 pts. 0.5 pts. 0.3 pts. (0.0) pts. 19.8 %
Diluted Earnings Per Share:Continuing Operations $ 3.13 $ 0.34 $ 0.08 $ 0.05 $ (0.00) $ 3.60
Three Months Ended December 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 $ 9,500 $ 182 $ — $ — $ — $ 9,682
Gross Profit Margin 56.9 % 1.1 pts. — pts. — pts. — pts. 58.0 %
S,G&A $ 4,903 $ (290) $ — $ — $ (8) $ 4,605
Other (Income) & Expense (18) (1) (315) — 126 (208)
Total Expense & Other (Income) 6,632 (290) (315) — 118 6,145
Pre-tax Income from Continuing Operations 2,869 472 315 — (118) 3,537
Pre-tax Income Margin from Continuing Operations 17.2 % 2.8 pts. 1.9 pts. — pts. (0.7) pts. 21.2 %
Provision for/(Benefit from) Income Taxes ((4)) $ 407 $ 117 $ 109 $ (94) $ (37) $ 502
Effective Tax Rate 14.2 % 1.4 pts. 1.8 pts. (2.7) pts. (0.6) pts. 14.2 %
Income from Continuing Operations $ 2,462 $ 355 $ 206 $ 94 $ (81) $ 3,035
Income Margin from Continuing Operations 14.7 % 2.1 pts. 1.2 pts. 0.6 pts. (0.5) pts. 18.2 %
Diluted Earnings Per Share: Continuing Operations $ 2.72 $ 0.39 $ 0.23 $ 0.10 $ (0.09) $ 3.35
____________________
(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 the realized gain/(loss) and unrealized fair value changes in Kyndryl common stock and the related 2022 cash-settled swap.
(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.
INTERNATIONAL BUSINESS MACHINES CORPORATION U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION (Unaudited; Dollars in millions except per share amounts)
Year Ended December 31, 2022
Continuing Operations
Acquisition- Retirement- Tax Kyndryl-
Related Related Reform Related Operating
GAAP Adjustments ((1)) Adjustments* ((2)) Impacts Impacts ((3)) (Non-GAAP)
Gross Profit $ 32,687 $ 682 $ — $ — $ — $ 33,370
Gross Profit Margin 54.0 % 1.1 pts. — pts. — pts. — pts. 55.1 %
S,G&A $ 18,609 $ (1,080) $ — $ — $ (0) $ 17,529
Other (Income) & Expense 5,803 (3) (6,548) — (351) (1,099)
Total Expense & Other (Income) 31,531 (1,083) (6,548) — (351) 23,549
Pre-tax Income from Continuing Operations 1,156 1,765 6,548 — 351 9,821
Pre-tax Income Margin from Continuing Operations 1.9 % 2.9 pts. 10.8 pts. — pts. 0.6 pts. 16.2 %
Provision for/(Benefit from) Income Taxes ((4)) $ (626) $ 436 $ 1,615 $ 70 $ — $ 1,495
Effective Tax Rate (54.2) % 14.2 pts. 52.6 pts. 0.7 pts. 1.9 pts. 15.2 %
Income from Continuing Operations $ 1,783 $ 1,329 $ 4,933 $ (70) $ 351 $ 8,326
Income Margin from Continuing Operations 2.9 % 2.2 pts. 8.1 pts. (0.1) pts. 0.6 pts. 13.8 %
Diluted Earnings Per Share: Continuing Operations $ 1.95 $ 1.46 $ 5.41 $ (0.08) $ 0.38 $ 9.13
____________________
* Includes a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion ($4.4 billion net of tax).
Year Ended December 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 $ 31,486 $ 719 $ — $ — $ — $ 32,205
Gross Profit Margin 54.9 % 1.3 pts. — pts. — pts. — pts. 56.2 %
S,G&A $ 18,745 $ (1,160) $ — $ — $ (8) $ 17,577
Other (Income) & Expense 873 (2) (1,282) — 126 (285)
Total Expense & Other (Income) 26,649 (1,162) (1,282) — 118 24,324
Pre-tax Income from Continuing Operations 4,837 1,881 1,282 — (118) 7,881
Pre-tax Income Margin from Continuing Operations 8.4 % 3.3 pts. 2.2 pts. — pts. (0.2) pts. 13.7 %
Provision for/(Benefit from) Income Taxes ((4)) $ 124 $ 457 $ 251 $ (89) $ (37) $ 706
Effective Tax Rate 2.6 % 5.2 pts. 2.8 pts. (1.1) pts. (0.4) pts. 9.0 %
Income from Continuing Operations $ 4,712 $ 1,424 $ 1,031 $ 89 $ (81) $ 7,174
Income Margin from Continuing Operations 8.2 % 2.5 pts. 1.8 pts. 0.2 pts. (0.1) pts. 12.5 %
Diluted Earnings Per Share: Continuing Operations $ 5.21 $ 1.57 $ 1.14 $ 0.10 $ (0.09) $ 7.93
____________________
(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 the realized gain/(loss) and unrealized fair value changes in Kyndryl common stock and the related 2022 cash-settled swap.
(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.
SOURCE IBM
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