Segment Information | 9 Months Ended |
Dec. 31, 2013 |
Segment Reporting [Abstract] | ' |
SEGMENT INFORMATION | ' |
NOTE P – SEGMENT INFORMATION |
The Company’s Mainframe Solutions and Enterprise Solutions operating segments comprise its software business organized by the nature of the Company’s software offerings and the platform on which the products operate. The Services operating segment comprises implementation, consulting, education and training services, including those directly related to the Mainframe Solutions and Enterprise Solutions software that the Company sells to its customers. |
Segment expenses do not include share-based compensation expense; amortization of purchased software; amortization of other intangible assets; certain foreign exchange derivative hedging gains and losses; costs associated with our Fiscal 2014 Plan; and other miscellaneous costs. Additionally, starting in the first quarter of fiscal year 2014, the measure of segment expenses and segment profit was revised by the Chief Operating Decision Maker, who is the Company's Chief Executive Officer, to treat all costs of internal software development as segment expense in the period the costs are incurred and as a result, the Company will add back capitalized internal software costs and exclude amortization of internally developed software costs previously capitalized from segment expenses. Prior period segment expense and profit information has been revised to present segment profit and expense on consistent basis. A measure of segment assets is not currently provided to the Company’s Chief Executive Officer and has therefore not been disclosed. |
As part of the Company’s efforts to more fully utilize its intellectual property assets, in the first quarter of fiscal year 2013, the Company closed a transaction that assigned the rights to certain of these assets to a large technology company for approximately $35 million. The entire contract amount is included in the Enterprise Solutions segment for the nine months ended December 31, 2012. The Company will continue to have the ability to use these intellectual property assets in current and future product offerings. |
During the third quarter of fiscal year 2013, the Company incurred severance costs of which $5 million, $11 million and $2 million were assigned to the Mainframe Solutions, Enterprise Solutions and Services segments, respectively. Refer to Note C, “Severance and Exit Costs.” |
The Company’s segment information for the three and nine months ended December 31, 2013 and 2012 was as follows: |
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Three Months Ended December 31, 2013 | | Mainframe | | Enterprise | | Services | | Total |
(dollars in millions) | Solutions | Solutions |
Revenue | | $ | 622 | | | $ | 447 | | | $ | 94 | | | $ | 1,163 | |
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Expenses | | 239 | | | 378 | | | 90 | | | 707 | |
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Segment profit | | $ | 383 | | | $ | 69 | | | $ | 4 | | | $ | 456 | |
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Segment operating margin | | 62 | % | | 15 | % | | 4 | % | | 39 | % |
Depreciation | | $ | 13 | | | $ | 8 | | | $ | — | | | $ | 21 | |
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Reconciliation of segment profit to income before income taxes for the three months ended December 31, 2013: |
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(in millions) | | | | | | | | | | | | | | |
Segment profit | $ | 456 | | | | | | | | | | | | | | |
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Less: | | | | | | | | | | | | | | |
Purchased software amortization | 29 | | | | | | | | | | | | | | |
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Other intangibles amortization | 19 | | | | | | | | | | | | | | |
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Software development costs capitalized | (1 | ) | | | | | | | | | | | | | |
Internally developed software products amortization | 43 | | | | | | | | | | | | | | |
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Share-based compensation expense | 23 | | | | | | | | | | | | | | |
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Other (gains) expenses, net (1) | 9 | | | | | | | | | | | | | | |
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Interest expense, net | 15 | | | | | | | | | | | | | | |
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Income before income taxes | $ | 319 | | | | | | | | | | | | | | |
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-1 | Other (gains) expenses, net consists of approximately $12 million of costs associated with the Fiscal 2014 Plan, certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. | | | | | | | | | | | | | | | |
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Nine Months Ended December 31, 2013 | | Mainframe | | Enterprise | | Services | | Total |
(dollars in millions) | Solutions | Solutions |
Revenue | | $ | 1,865 | | | $ | 1,277 | | | $ | 289 | | | $ | 3,431 | |
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Expenses | | 709 | | | 1,105 | | | 268 | | | 2,082 | |
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Segment profit | | $ | 1,156 | | | $ | 172 | | | $ | 21 | | | $ | 1,349 | |
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Segment operating margin | | 62 | % | | 13 | % | | 7 | % | | 39 | % |
Depreciation | | $ | 39 | | | $ | 26 | | | $ | — | | | $ | 65 | |
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Reconciliation of segment profit to income before income taxes for the nine months ended December 31, 2013: |
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(in millions) | | | | | | | | | | | | | | |
Segment profit | $ | 1,349 | | | | | | | | | | | | | | |
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Less: | | | | | | | | | | | | | | |
Purchased software amortization | 88 | | | | | | | | | | | | | | |
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Other intangibles amortization | 48 | | | | | | | | | | | | | | |
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Software development costs capitalized | (32 | ) | | | | | | | | | | | | | |
Internally developed software products amortization | 126 | | | | | | | | | | | | | | |
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Share-based compensation expense | 64 | | | | | | | | | | | | | | |
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Other (gains) expenses, net (1) | 134 | | | | | | | | | | | | | | |
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Interest expense, net | 39 | | | | | | | | | | | | | | |
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Income before income taxes | $ | 882 | | | | | | | | | | | | | | |
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-1 | Other (gains) expenses, net consists of approximately $134 million of costs associated with the Fiscal 2014 Plan, certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. | | | | | | | | | | | | | | | |
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Three Months Ended December 31, 2012 | | Mainframe | | Enterprise | | Services | | Total |
(dollars in millions) | Solutions | Solutions |
Revenue | | $ | 622 | | | $ | 476 | | | $ | 97 | | | $ | 1,195 | |
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Expenses | | 253 | | | 425 | | | 93 | | | 771 | |
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Segment profit | | $ | 369 | | | $ | 51 | | | $ | 4 | | | $ | 424 | |
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Segment operating margin | | 59 | % | | 11 | % | | 4 | % | | 35 | % |
Depreciation | | $ | 14 | | | $ | 11 | | | $ | — | | | $ | 25 | |
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Reconciliation of segment profit to income before income taxes for the three months ended December 31, 2012: |
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(in millions) | | | | | | | | | | | | | | |
Segment profit | $ | 424 | | | | | | | | | | | | | | |
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Less: | | | | | | | | | | | | | | |
Purchased software amortization | 26 | | | | | | | | | | | | | | |
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Other intangibles amortization | 14 | | | | | | | | | | | | | | |
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Software development costs capitalized | (44 | ) | | | | | | | | | | | | | |
Internally developed software products amortization | 40 | | | | | | | | | | | | | | |
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Share-based compensation expense | 18 | | | | | | | | | | | | | | |
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Other (gains) expenses, net (1) | — | | | | | | | | | | | | | | |
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Interest expense, net | 12 | | | | | | | | | | | | | | |
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Income before income taxes | $ | 358 | | | | | | | | | | | | | | |
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-1 | Other (gains) expenses, net consists of certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. | | | | | | | | | | | | | | | |
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Nine Months Ended December 31, 2012 | | Mainframe | | Enterprise | | Services | | Total |
(dollars in millions) | Solutions | Solutions |
Revenue | | $ | 1,869 | | | $ | 1,340 | | | $ | 283 | | | $ | 3,492 | |
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Expenses | | 764 | | | 1,191 | | | 269 | | | 2,224 | |
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Segment profit | | $ | 1,105 | | | $ | 149 | | | $ | 14 | | | $ | 1,268 | |
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Segment operating margin | | 59 | % | | 11 | % | | 5 | % | | 36 | % |
Depreciation | | $ | 46 | | | $ | 33 | | | $ | — | | | $ | 79 | |
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Reconciliation of segment profit to income before income taxes for the nine months ended December 31, 2012: |
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(in millions) | | | | | | | | | | | | | | |
Segment profit | $ | 1,268 | | | | | | | | | | | | | | |
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Less: | | | | | | | | | | | | | | |
Purchased software amortization | 80 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Other intangibles amortization | 41 | | | | | | | | | | | | | | |
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Software development costs capitalized | (122 | ) | | | | | | | | | | | | | |
Internally developed software products amortization | 117 | | | | | | | | | | | | | | |
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Share-based compensation expense | 62 | | | | | | | | | | | | | | |
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Other (gains) expenses, net (1) | 2 | | | | | | | | | | | | | | |
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Interest expense, net | 33 | | | | | | | | | | | | | | |
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Income before income taxes | $ | 1,055 | | | | | | | | | | | | | | |
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-1 | Other (gains) expenses, net consists of certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. | | | | | | | | | | | | | | | |
The table below summarizes the Company’s revenue from the United States and from international (i.e., non-U.S.) locations: |
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| Three Months Ended | | Nine Months Ended | |
December 31, | December 31, | |
| 2013 | | 2012 | | 2013 | | 2012 | |
| (in millions) | |
United States | $ | 684 | | | $ | 701 | | | $ | 2,044 | | | $ | 2,068 | | |
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Europe | 288 | | | 291 | | | 819 | | | 830 | | |
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Other | 191 | | | 203 | | | 568 | | | 594 | | |
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Total revenue | $ | 1,163 | | | $ | 1,195 | | | $ | 3,431 | | | $ | 3,492 | | |
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