UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: July 25, 1996
(Date of earliest event reported)
INTERNATIONAL BUSINESS MACHINES CORPORATION
(Exact name of registrant as specified in its charter)
New York 1-2360 13-0871985
(State of Incorporation) (Commission (IRS employer
File Number) Identification No.)
ARMONK, NEW YORK 10504
(Address of principal executive offices) (Zip Code)
914-765-1900
(Registrant's telephone number)
Item 5. Other Events
The registrant's press release dated July 25, 1996, regarding its financial
results for the periods ended June 30, 1996, including unaudited consolidated
financial statements for the periods ended June 30, 1996, are attached.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
INTERNATIONAL BUSINESS MACHINES CORPORATION
(Registrant)
Date: July 25, 1996
By: John R. Joyce
-------------------------------
(John R. Joyce)
Vice President and Controller
IBM Announces Second-Quarter 1996 Results
July 25, 1996
IBM today announced second-quarter 1996 net earnings of $1.3 billion, or $2.51
per common share, compared with net earnings of $1.7 billion, or $2.97 per
common share, in the second quarter of 1995. Second-quarter 1996 revenues were
$18.2 billion, an increase of 4 percent from the second quarter of last year.
Louis V. Gerstner, Jr., IBM chairman and chief executive officer, said: "This
was a tough quarter, as we had expected. Our results were largely affected by a
few short-term factors, particularly a sharp drop in memory prices and currency.
"However, the fact that we earned $2.6 billion in the first half of 1996, even
with these short-term issues, speaks to the resiliency of IBM. But what really
gives us a sense of optimism are the many manifestations in the second quarter
that our long-term strategies are working.
"Simply put, our traditional businesses are continuing to re-invent themselves
and our newer businesses are showing great strength," Mr. Gerstner said. "We saw
excellent results across our server families: AS/400 revenues increased; our
Unix processors, led by the high-end SP2, had an exceptional quarter; and demand
remained strong for our System/390 products. This was the second quarter in a
row of solid performance by our PC Company.
"At the same time, we continued to make significant progress in services and
software growth areas. Our services revenues grew by 23 percent and we closed
nearly $4 billion in new services contracts in the quarter. We had outstanding
results from our most recent major acquisition, Tivoli Systems. We announced the
Lotus Notes 'Domino' product, which establishes Notes as the leading platform
for server-based intranet solutions. Second-quarter shipments of Lotus Notes
seats nearly doubled compared with the same period of last year. It has been one
year since we acquired Lotus. Since then, Notes seats have increased from 2.2
million to 6.3 million," Mr. Gerstner said.
"I'm also delighted with our improved revenue results from North America and,
measured in local currencies, our results from Asia-Pacific. Europe, however,
remained sluggish."
Revenues from North America increased 11 percent from the second quarter of last
year to $7.8 billion. Revenues from Europe/Middle East/Africa declined 2 percent
year over year to $6 billion. Asia-Pacific revenues were $3.6 billion,
essentially flat with the same period of 1995, while revenues from Latin America
grew 6 percent to $786 million.
Currency had an approximately 5-percentage-point negative effect on the
company's overall revenues in the second quarter. Excluding the effects of
currency, Asia-Pacific revenues grew 19 percent and Latin America revenues
increased 6 percent, year over year, while European revenues climbed 2 percent.
Hardware sales totaled $8.6 billion, a decline of 1 percent from the second
quarter of last year. Personal computer revenues increased within all market
segments. RISC System/6000 and AS/400 revenues also grew, as did networking
hardware revenues. System/390, semiconductor and storage revenues declined,
principally as a result of year-over-year price reductions.
IBM took significant steps in the second quarter to strengthen the
competitiveness of its storage business. Specifically, IBM signed a worldwide
OEM agreement with Storage Technology Corp. that provides customers with a wider
range of storage products. IBM also introduced the world's first magnetic disk
drives that exceed one billion bits of data in a square inch of disk space.
Services revenues grew 23 percent to $3.7 billion. New services contracts signed
during the quarter included a 10-year, multi-billion dollar contract with
Ameritech and a $533 million agreement with Washington Mutual, a financial
services company with operations in five western states.
Software revenues climbed 4 percent to $3.2 billion from the second quarter of
1995. During the quarter, IBM announced the availability of Net.Commerce,
software that helps businesses create 'virtual storefronts' on the Internet, and
Cryptolopes (TM), secure 'electronic envelopes' that can be used to distribute
copyrighted information over the Internet.
Maintenance revenues fell 7 percent year over year to $1.8 billion, while
rentals and financing revenues increased 5 percent to $924 million.
The total gross profit margin was 39.5 percent in the second quarter compared
with 43.5 percent during the same period of 1995.
Total expenses grew 4 percent compared with last year's second quarter,
primarily because of increased spending for acquisitions and investments in
IBM's industry-specific business units. Excluding these types of investments,
total expenses would have decreased approximately 8 percent year over year.
The company's tax rate in the second quarter was 38.1 percent compared with 39.2
percent in the second quarter of 1995.
Since December 31, 1995, "core" debt (debt in support of operations, excluding
customer financing) increased $325 million to $2.2 billion. During the same
period, customer financing debt increased $1.2 billion to $20.9 billion.
IBM spent approximately $1.3 billion for common share repurchases in the second
quarter. The average number of common shares outstanding in the quarter was
533.9 million compared with 575.4 million during the same period of last year.
Net earnings for the six months ended June 30, 1996 were $2.6 billion, or $4.72
per common share, excluding charges associated with write-offs of research and
development related to acquisitions in the first quarter of 1996. This compares
with earnings of $3 billion in the first six months of 1995, or $5.09 per common
share. Revenues for the six months ended June 30, 1996 were $34.7 billion, an
increase of 4 percent from the prior year's $33.3 billion.
Financial Results Attached
INTERNATIONAL BUSINESS MACHINES CORPORATION
SUPPLEMENTAL SCHEDULE - COMPARATIVE FINANCIAL RESULTS
(EXCLUDES EFFECTS OF SOFTWARE ACQUISITIONS
IN THE FIRST QUARTER 1996)*
(Unaudited; Dollars in millions except per share amounts)
Three Months Six Months
Ended June 30 Ended June 30
Percent Percent
1996 1995 Change 1996 1995 Change
------- ------- ------ ------- ------- ------
Revenue:
Hardware sales $8,576 $8,659 -1.0% $16,284 $16,386 -0.6%
Gross margin 33.4% 40.1% 34.2% 39.1%
Services 3,734 3,041 22.8% 6,932 5,486 26.4%
Gross margin 20.8% 21.5% 20.1% 20.5%
Software 3,195 3,072 4.0% 6,232 5,945 4.8%
Gross margin 68.4% 65.3% 69.2% 65.2%
Maintenance 1,754 1,877 -6.5% 3,503 3,698 -5.3%
Gross margin 47.8% 53.8% 47.8% 52.2%
Rentals
and financing 924 882 4.7% 1,791 1,751 2.3%
Gross margin 57.4% 55.7% 56.6% 55.0%
Total revenue 18,183 17,531 3.7% 34,742 33,266 4.4%
Gross profit 7,191 7,631 -5.8% 13,960 14,295 -2.3%
Gross margin 39.5% 43.5% 40.2% 43.0%
Operating expenses:
S,G&A 3,889 3,883 0.2% 7,586 7,516 0.9%
% of revenue 21.4% 22.2% 21.8% 22.6%
R,D&E (1) 1,116 974 14.6% 2,207 1,887 17.0%
% of revenue 6.1% 5.6% 6.4% 5.7%
Operating income 2,186 2,774 -21.2% 4,167 4,892 -14.8%
Other income 193 238 -18.8% 343 484 -29.2%
Interest expense 205 188 8.8% 354 368 -3.9%
Earnings before
income taxes 2,174 2,824 -23.0% 4,156 5,008 -17.0%
Pre-tax margin 12.0% 16.1% 12.0% 15.1%
Provision for
income taxes 827 1,108 -25.3% 1,600 2,003 -20.1%
Effective tax
rate 38.1% 39.2% 38.5% 40.0%
Net earnings $1,347 $1,716 -21.5% $2,556 $3,005 -14.9%
Net margin 7.4% 9.8% 7.4% 9.0%
Preferred stock
dividends and trans-
action costs 5 5 10 52
Net earnings
applicable to common
shareholders $1,342 $1,711 -21.6% $2,546 $2,953 -13.8%
====== ====== ====== ======
Net earnings per
share of common
stock $2.51 $2.97 -15.4% $4.72 $5.09 -7.3%
====== ====== ====== ======
Average number of
common shares out-
standing (M's) 533.9 575.4 539.1 580.3
* Supplemental information provided for comparative purposes:
(1) Six months 1996 excludes non-recurring, non-tax deductible charges of $435
million ($.80 per common share) for purchased in-process research and
development in connection with the acquisitions of Tivoli Systems Inc. and
Object Technology International Inc.
INTERNATIONAL BUSINESS MACHINES CORPORATION
COMPARATIVE FINANCIAL RESULTS
(Unaudited; Dollars in millions except per share amounts)
Three Months Six Months
Ended June 30 Ended June 30
Percent Percent
1996 1995 Change 1996 1995 Change
------- ------- ------- ------- ------- -------
Revenue:
Hardware sales $8,576 $8,659 -1.0% $16,284 $16,386 -0.6%
Gross margin 33.4% 40.1% 34.2% 39.1%
Services 3,734 3,041 22.8% 6,932 5,486 26.4%
Gross margin 20.8% 21.5% 20.1% 20.5%
Software 3,195 3,072 4.0% 6,232 5,945 4.8%
Gross margin 68.4% 65.3% 69.2% 65.2%
Maintenance 1,754 1,877 -6.5% 3,503 3,698 -5.3%
Gross margin 47.8% 53.8% 47.8% 52.2%
Rentals
and financing 924 882 4.7% 1,791 1,751 2.3%
Gross margin 57.4% 55.7% 56.6% 55.0%
Total revenue 18,183 17,531 3.7% 34,742 33,266 4.4%
Gross profit 7,191 7,631 -5.8% 13,960 14,295 -2.3%
Gross margin 39.5% 43.5% 40.2% 43.0%
Operating expenses:
S,G&A 3,889 3,883 0.2% 7,586 7,516 0.9%
% of revenue 21.4% 22.2% 21.8% 22.6%
R,D&E (1) 1,116 974 14.6% 2,642 1,887 40.0%
% of revenue 6.1% 5.6% 7.6% 5.7%
Operating income 2,186 2,774 -21.2% 3,732 4,892 -23.7%
Other income 193 238 -18.8% 343 484 -29.2%
Interest expense 205 188 8.8% 354 368 -3.9%
Earnings before
income taxes 2,174 2,824 -23.0% 3,721 5,008 -25.7%
Pre-tax margin 12.0% 16.1% 10.7% 15.1%
Provision for
income taxes 827 1,108 -25.3% 1,600 2,003 -20.1%
Effective tax
rate 38.1% 39.2% 43.0% 40.0%
Net earnings $1,347 $1,716 -21.5% $2,121 $3,005 -29.4%
Net margin 7.4% 9.8% 6.1% 9.0%
Preferred stock
dividends and trans-
action costs 5 5 10 52
Net earnings
applicable to common
shareholders $1,342 $1,711 -21.6% $2,111 $2,953 -28.5%
====== ====== ====== ======
Net earnings per
share of common
stock $2.51 $2.97 -15.4% $3.92 $5.09 -23.0%
====== ====== ====== ======
Average number of
common shares out-
standing (M's) 533.9 575.4 539.1 580.3
(1) Six months 1996 includes non-recurring, non-tax deductible
charges of $435 million ($.80 per common share) for purchased
in-process research and development in connection with the
acquisitions of Tivoli Systems Inc. and Object Technology
International Inc.
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited; Dollars in millions)
At At
June 30 December 31 Percent
1996 1995 Change
------- ----------- -------
Assets:
Cash, cash equivalents,
and marketable securities $6,377 $7,701 -17.2%
Receivable - net, inventories,
and prepaid expenses 32,559 32,990 -1.3%
Plant, rental machines,
and other property - net 16,337 16,579 -1.5%
Investments and other assets 22,201 23,022 -3.6%
------- -------
Total Assets $77,474 $80,292 -3.5%
======= =======
Liabilities and Stockholders' Equity:
Short-term debt $13,580 $11,569 17.4%
Long-term debt 9,478 10,060 -5.8%
------- -------
Total debt 23,058 21,629 6.6%
Accounts payable, taxes,
and accruals 17,049 20,079 -15.1%
Other liabilities and
deferred income taxes 15,839 16,161 -2.0%
------- -------
Total liabilities 55,946 57,869 -3.3%
Stockholders' equity 21,528 22,423 -4.0%
------- -------
Total Liabilities and
Stockholders' Equity $77,474 $80,292 -3.5%
======= =======