EXHIBIT 12
COMPUTATION OF RATIO OF INCOME FROM
CONTINUING OPERATIONS TO FIXED CHARGES
FOR SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
(Dollars in millions) | | 2006 | | 2005 | |
| | | | | | | |
Income from continuing operations before income taxes (1) | | $ | 5,330 | | $ | 4,750 | |
| | | | | |
Add: Fixed charges, excluding capitalized interest | | 675 | | 609 | |
| | | | | |
Income as adjusted before income taxes | | $ | 6,005 | | $ | 5,359 | |
| | | | | |
Fixed charges: | | | | | |
Interest expense | | $ | 453 | | $ | 379 | |
Capitalized interest | | 6 | | 6 | |
Portion of rental expense representative of interest | | 222 | | 230 | |
| | | | | |
Total fixed charges | | $ | 681 | | $ | 615 | |
| | | | | |
Ratio of income from continuing operations to fixed charges | | 8.82 | | 8.71 | |
| | | | | | | | |
(1) Income from continuing operations before income taxes excludes (a) amortization of capitalized interest and (b) the company’s share in the income and losses of less-than-fifty percent-owned affiliates.
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SEGMENT INFORMATION - ON CONTINUING OPERATIONS BASIS
(UNAUDITED)
| | Global Services | | | |
| | Global | | Global | | Systems and | |
| | Technology | | Business | | Technology | |
(Dollars in millions) | | Services | | Services | | Group | |
Three Months Ended June 30, 2006: | | | | | | | |
| | | | | | | |
External revenue | | $ | 7,955 | | $ | 3,939 | | $ | 5,014 | |
Internal revenue | | 449 | | 351 | | 271 | |
Total revenue | | $ | 8,404 | | $ | 4,290 | | $ | 5,286 | |
Pre-tax income | | $ | 787 | | $ | 407 | | $ | 187 | |
| | | | | | | |
Revenue year-to-year change | | 0.0 | % | (4.7 | )% | 3.5 | % |
Pre-tax income year-to-year change | | nm | | nm | | (30.4 | )% |
Pre-tax income margin | | 9.4 | % | 9.5 | % | 3.5 | % |
| | | | | | | |
Three Months Ended June 30, 2005: | | | | | | | |
| | | | | | | |
External revenue | | $ | 7,872 | | $ | 4,129 | | $ | 4,855 | |
Internal revenue | | 535 | | 374 | | 254 | |
Total revenue | | $ | 8,407 | | $ | 4,503 | | $ | 5,109 | |
Pre-tax income (loss) | | $ | (16 | ) | $ | (68 | ) | $ | 269 | |
| | | | | | | |
Pre-tax income margin | | (0.2 | )% | (1.5 | )% | 5.3 | % |
Reconciliations to IBM as Reported:
| | Three Months Ended | | Three Months Ended | |
(Dollars in millions) | | June 30, 2006 | | June 30, 2005 | |
Total reportable segments | | $ | 23,677 | | $ | 24,008 | |
Eliminations/other | | (1,787 | ) | (1,737 | ) |
Total IBM Consolidated | | $ | 21,890 | | $ | 22,270 | |
Pre-tax income: | | | | | |
Total reportable segments | | $ | 2,856 | | $ | 1,283 | |
Eliminations/other | | 32 | | 1,449 | * |
Total IBM Consolidated | | $ | 2,889 | | $ | 2,733 | |
* Includes the gain from the sale of the company’s Personal Computing business to Lenovo, the gain related to the legal settlement with the Microsoft Corporation, and unallocated charges related to the company’s incremental restructuring actions in the second quarter of 2005.
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| | Personal | | | | | |
Global | | Computing | | Total | | | |
Software | | Financing | | Division | | Segments | |
| | | | | | | | | | | |
$ | 4,241 | | $ | 576 | | $ | — | | $ | 21,725 | |
543 | | 338 | | — | | 1,952 | |
$ | 4,784 | | $ | 914 | | $ | — | | $ | 23,677 | |
$ | 1,156 | | $ | 319 | | $ | — | | $ | 2,856 | |
| | | | | | | | | | | |
5.6 | % | 2.1 | % | nm | | (1.4 | )% |
27.1 | % | (5.7 | )% | nm | | 122.5 | % |
24.2 | % | 34.9 | % | nm | | 12.1 | % |
| | | | | | | |
$ | 4,056 | | $ | 620 | | $ | 557 | | $ | 22,089 | |
474 | | 275 | | 7 | | 1,919 | |
$ | 4,530 | | $ | 895 | | $ | 564 | | $ | 24,008 | |
$ | 909 | | $ | 338 | | $ | (149 | ) | $ | 1,283 | |
| | | | | | | | | | | |
20.1 | % | 37.8 | % | (26.4 | )% | 5.3 | % |
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SEGMENT INFORMATION - ON CONTINUING OPERATIONS BASIS
(UNAUDITED)
| | Global Services | | | |
| | Global | | Global | | Systems and | |
| | Technology | | Business | | Technology | |
(Dollars in millions) | | Services | | Services | | Group | |
Six Months Ended June 30, 2006: | | | | | | | |
| | | | | | | |
External revenue | | $ | 15,674 | | $ | 7,787 | | $ | 9,433 | |
Internal revenue | | 900 | | 687 | | 552 | |
Total revenue | | $ | 16,575 | | $ | 8,474 | | $ | 9,985 | |
Pre-tax income | | $ | 1,631 | | $ | 763 | | $ | 169 | |
| | | | | | | |
Revenue year-to-year change | | (1.4 | )% | (2.7 | )% | 3.6 | % |
Pre-tax income year-to-year change | | 153.2 | % | nm | | (45.3 | )% |
Pre-tax income margin | | 9.8 | % | 9.0 | % | 1.7 | % |
| | | | | | | |
Six Months Ended June 30, 2005: | | | | | | | |
| | | | | | | |
External revenue | | $ | 15,694 | | $ | 8,016 | | $ | 9,144 | |
Internal revenue | | 1,109 | | 697 | | 495 | |
Total revenue | | $ | 16,803 | | $ | 8,713 | | $ | 9,639 | |
Pre-tax income (loss) | | $ | 644 | | $ | 92 | | $ | 309 | |
| | | | | | | |
Pre-tax income margin | | 3.8 | % | 1.1 | % | 3.2 | % |
Reconciliations to IBM as Reported:
| | Six Months Ended | | Six Months Ended | |
(Dollars in millions) | | June 30, 2006 | | June 30, 2005 | |
Revenue: | | | | | |
Total reportable segments | | $ | 46,098 | | $ | 48,794 | |
Eliminations/other | | (3,549 | ) | (3,616 | ) |
Total IBM Consolidated | | $ | 42,549 | | $ | 45,178 | |
| | | | | |
Pre-tax income: | | | | | |
Total reportable segments | | $ | 5,473 | | $ | 3,323 | |
Eliminations/other | | (145 | ) | 1,419 | * |
Total IBM Consolidated | | $ | 5,328 | | $ | 4,743 | |
* Includes the gain from the sale of the company’s Personal Computing business to Lenovo, the gain related to the legal settlement with the Microsoft Corporation, and unallocated charges related to the company’s incremental restructuring actions in the second quarter of 2005.
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| | | | Personal | | | |
| | Global | | Computing | | Total | |
Software | | Financing | | Division | | Segments | |
| | | | | | | | | | | |
$ | 8,147 | | $ | 1,158 | | $ | — | | $ | 42,200 | |
1,057 | | 702 | | — | | 3,898 | |
$ | 9,205 | | $ | 1,860 | | $ | — | | $ | 46,098 | |
$ | 2,177 | | $ | 733 | | $ | — | | $ | 5,473 | |
| | | | | | | |
4.5 | % | (3.3 | )% | nm | | (5.5 | )% |
27.0 | % | 0.5 | % | nm | | 64.7 | % |
23.6 | % | 39.4 | % | nm | | 11.9 | % |
| | | | | | | |
$ | 7,871 | | $ | 1,199 | | $ | 2,876 | | $ | 44,799 | |
937 | | 724 | | 33 | | 3,995 | |
$ | 8,807 | | $ | 1,923 | | $ | 2,909 | | $ | 48,794 | |
$ | 1,714 | | $ | 729 | | $ | (165 | ) | $ | 3,323 | |
| | | | | | | |
19.5 | % | 37.9 | % | (5.7 | )% | 6.8 | % |
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