EXHIBIT 12
COMPUTATION OF RATIO OF INCOME FROM
CONTINUING OPERATIONS TO FIXED CHARGES
FOR NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
(Dollars in millions) | | 2007 | | 2006 | |
| | | | | |
Income from continuing operations before income taxes (1) | | $ | 9,010 | | $ | 8,508 | |
| | | | | |
Add: Fixed charges, excluding capitalized interest | | 1,314 | | 1,049 | |
| | | | | |
Income as adjusted before income taxes | | $ | 10,324 | | $ | 9,557 | |
| | | | | |
Fixed charges: | | | | | |
Interest expense | | $ | 989 | | $ | 716 | |
Capitalized interest | | 6 | | 9 | |
Portion of rental expense representative of interest | | 325 | | 333 | |
| | | | | |
Total fixed charges | | $ | 1,320 | | $ | 1,058 | |
| | | | | |
Ratio of income from continuing operations to fixed charges | | 7.82 | | 9.03 | |
(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.
55
(This page intentionally left blank)
56
SEGMENT INFORMATION - ON CONTINUING OPERATIONS BASIS
(UNAUDITED)
| | Global Services | | | | | | | | | |
| | Global
Technology | | Global
Business | | Systems
and | | | | Global | | Total | |
(Dollars in millions) | | Services | | Services | | Technology | | Software | | Financing | | Segments | |
Three Months Ended September 30, 2007: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
External revenue | | $ | 9,093 | | $ | 4,586 | | $ | 4,898 | | $ | 4,694 | | $ | 623 | | $ | 23,894 | |
Internal revenue | | 408 | | 276 | | 236 | | 571 | | 348 | | 1,838 | |
Total revenue | | $ | 9,501 | | $ | 4,862 | | $ | 5,134 | | $ | 5,265 | | $ | 970 | | $ | 25,732 | |
Pre-tax income | | $ | 1,028 | | $ | 521 | | $ | 361 | | $ | 1,283 | | $ | 339 | | $ | 3,532 | |
| | | | | | | | | | | | | |
Revenue year-to-year change | | 12.0 | % | 13.2 | % | (10.3 | )% | 6.0 | % | 5.1 | % | 5.5 | % |
Pre-tax income year-to-year change | | 26.3 | % | 28.6 | % | (12.4 | )% | (1.5 | )% | 1.1 | % | 8.1 | % |
Pre-tax income margin | | 10.8 | % | 10.7 | % | 7.0 | % | 24.4 | % | 34.9 | % | 13.7 | % |
| | | | | | | | | | | | | |
Three Months Ended September 30, 2006: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
External revenue | | $ | 8,058 | | $ | 3,959 | | $ | 5,466 | | $ | 4,406 | | $ | 587 | | $ | 22,476 | |
Internal revenue | | 428 | | 337 | | 255 | | 559 | | 337 | | 1,916 | |
Total revenue | | $ | 8,486 | | $ | 4,295 | | $ | 5,721 | | $ | 4,965 | | $ | 924 | | $ | 24,391 | |
Pre-tax income | | $ | 814 | | $ | 405 | | $ | 413 | | $ | 1,302 | | $ | 335 | | $ | 3,268 | |
| | | | | | | | | | | | | |
Pre-tax income margin | | 9.6 | % | 9.4 | % | 7.2 | % | 26.2 | % | 36.2 | % | 13.4 | % |
Reconciliations to IBM as Reported:
| | Three Months Ended | | Three Months Ended | |
(Dollars in millions) | | September 30, 2007 | | September 30, 2006 | |
Revenue: | | | | | |
Total reportable segments | | $ | 25,732 | | $ | 24,391 | |
Eliminations/other | | (1,613 | ) | (1,774 | ) |
Total IBM Consolidated | | $ | 24,119 | | $ | 22,617 | |
| | | | | |
Pre-tax income: | | | | | |
Total reportable segments | | $ | 3,532 | | $ | 3,268 | |
Eliminations/other | | (252 | )* | (94 | ) |
Total IBM Consolidated | | $ | 3,280 | | $ | 3,174 | |
* Includes interest expense associated with the debt to support the company’s accelerated share repurchase.
57
| | Global Services | | | | | | | | | |
| | Global
Technology | | Global
Business | | Systems and | | | | Global | | Total | |
(Dollars in millions) | | Services | | Services | | Technology | | Software | | Financing | | Segments | |
Nine Months Ended September 30, 2007: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
External revenue | | $ | 26,106 | | $ | 13,108 | | $ | 14,520 | | $ | 13,723 | | $ | 1,834 | | $ | 69,291 | |
Internal revenue | | 1,243 | | 906 | | 758 | | 1,704 | | 1,037 | | 5,648 | |
Total revenue | | $ | 27,348 | | $ | 14,014 | | $ | 15,279 | | $ | 15,427 | | $ | 2,871 | | $ | 74,939 | |
Pre-tax income | | $ | 2,497 | | $ | 1,477 | | $ | 789 | | $ | 3,569 | | $ | 1,045 | | $ | 9,376 | |
| | | | | | | | | | | | | |
Revenue year-to-year change | | 9.1 | % | 9.7 | % | (2.7 | )% | 8.9 | % | 3.1 | % | 6.3 | % |
Pre-tax income year-to-year change | | 2.1 | % | 26.4 | % | 35.7 | % | 2.6 | % | (2.2 | )% | 7.3 | % |
Pre-tax income margin | | 9.1 | % | 10.5 | % | 5.2 | % | 23.1 | % | 36.4 | % | 12.5 | % |
| | | | | | | | | | | | | |
Nine Months Ended September 30, 2006: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
External revenue | | $ | 23,732 | | $ | 11,746 | | $ | 14,900 | | $ | 12,554 | | $ | 1,744 | | $ | 64,676 | |
Internal revenue | | 1,328 | | 1,023 | | 807 | | 1,616 | | 1,039 | | 5,814 | |
Total revenue | | $ | 25,061 | | $ | 12,769 | | $ | 15,706 | | $ | 14,170 | | $ | 2,784 | | $ | 70,490 | |
Pre-tax income | | $ | 2,445 | | $ | 1,168 | | $ | 582 | | $ | 3,478 | | $ | 1,068 | | $ | 8,741 | |
| | | | | | | | | | | | | |
Pre-tax income margin | | 9.8 | % | 9.1 | % | 3.7 | % | 24.5 | % | 38.4 | % | 12.4 | % |
Reconciliations to IBM as Reported:
| | Nine Months Ended | | Nine Months Ended | |
(Dollars in millions) | | September 30, 2007 | | September 30, 2006 | |
Revenue: | | | | | |
Total reportable segments | | $ | 74,939 | | $ | 70,490 | |
Eliminations/other | | (5,018 | ) | (5,323 | ) |
Total IBM Consolidated | | $ | 69,920 | | $ | 65,166 | |
| | | | | |
Pre-tax income: | | | | | |
Total reportable segments | | $ | 9,376 | | $ | 8,741 | |
Eliminations/other | | (375 | )* | (239 | ) |
Total IBM Consolidated | | $ | 9,001 | | $ | 8,503 | |
* Includes the gain from the divestiture of the company’s printing business and the interest expense associated with the debt to support the company’s accelerated share repurchase.
58
