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: October 21, 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 October 21, 1996, regarding its
financial results for the periods ended September 30, 1996, including
unaudited consolidated financial statements for the periods ended
September 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: October 21, 1996
By: John R. Joyce
--------------------------------
(John R. Joyce)
Vice President and Controller
IBM Announces Third-Quarter 1996 Results
October 21, 1996
IBM today reported third-quarter 1996 net earnings of
$1.3 billion, or $2.45 per common share. This compares to
earnings of $1.3 billion, or $2.30 per common share, in the same
period of last year, excluding a one-time charge of approximately
$1.8 billion associated with IBM's acquisition of the Lotus
Development Corporation. Third-quarter 1996 revenues grew
8 percent year over year to $18.1 billion.
Louis V. Gerstner, Jr., IBM chairman and chief executive officer,
said: "This was a very good quarter. A highlight was the
continued rollout of integrated solutions that help fulfill the
promise of a networked world to our customers. For example, we
joined with 16 major banks to form Integrion Financial Network,
an on-line service for interactive banking and electronic
commerce. Our Internet mall -- known as World Avenue -- opened
its doors, allowing customers to shop electronically using
secure, industry-leading technology. In addition, the Singapore
government launched a network-based system, developed with IBM,
to speed and simplify all aspects of procurement.
"Our network computing efforts also resulted in the delivery of
major new products such as 'Domino,' which helps customers
rapidly develop applications for the Internet and intranets using
Lotus Notes. In addition, we introduced our first network
computer and a family of products and services called
CommercePOINT designed to provide secure electronic commerce on
the World Wide Web.
"From a business unit standpoint," Mr. Gerstner said, "our PC
division had another outstanding quarter and our server product
performance was strong with the exception of the RS/6000, which
has been undergoing a major product transition. Software
revenues were basically flat, but our high-priority software
products grew well, including Lotus Notes and Tivoli system
management software as well as other pivotal distributed
products. Our services business continued to show excellent
growth.
"As a result of these factors, total revenues increased
11 percent at constant currency. Importantly, our revenue growth
over the past seven quarters has averaged 8 percent at constant
currency."
Revenues increased in North America, Asia, and Latin America,
while European revenues were flat. Specifically, revenues from
North America were $8.2 billion, up 14 percent year over year.
Asia-Pacific revenues grew 8 percent to $3.5 billion and Latin
America revenues rose 12 percent to $811 million. European
revenues were essentially unchanged year over year at
$5.6 billion.
Currency had an approximately 3 percentage point negative impact
on revenue results in the third quarter. This compares with an
approximately 3-point favorable impact in the third quarter of
last year and an approximately 5-point negative impact in the
second quarter of this year. Excluding the effects of currency,
Asia-Pacific revenues climbed 19 percent and European revenues
grew 1 percent.
Hardware sales revenues totaled $8.4 billion, up 8 percent year
over year. Personal computer, AS/400, and storage product
revenues increased from the same period of last year, while
RS/6000 revenues fell. System/390 revenues declined from the
year-earlier period, although shipments of mainframe computing
capacity as measured in MIPS (millions of instructions per
second) increased 77 percent. Semiconductor revenues also
decreased from the previous year as a result of continuing
industry-wide pricing pressures.
Services revenues increased 26 percent to $3.9 billion. During
the quarter, IBM won a 5-year, $340 million outsourcing contract
from Prudential, and the IBM Global Network signed major
contracts with Puerto Rico Telephone and Pacific Bell.
Software revenues declined 1 percent to $3.1 billion. The
software revenue drop was largely due to a decline in host-based
software revenues. Distributed software revenues grew
significantly in the quarter compared with the year-earlier
period.
Maintenance revenues dropped 7 percent year over year to
$1.8 billion, while rentals and financing revenues increased
4 percent to $933 million.
The company's overall gross profit margin for the quarter was
40.2 percent compared with 41.3 percent during the same period of
last year and 39.5 percent in the second quarter of 1996.
Total expenses increased 9 percent in the quarter. This increase
was due primarily to ongoing restructuring, advertising and
promotional expenses associated with the 1996 Olympics, increased
investments in customer solutions from IBM's industry-specific
business units, and expanded investments in channels and business
partners.
The company's tax rate was 35.1 percent in the third quarter
compared with 37.3 percent during the same period of last year.
IBM spent approximately $1.3 billion for common share repurchases
in the third quarter. The average number of common shares
outstanding in the quarter was 521.8 million compared with
564.6 million during the same period of 1995.
Net earnings for the nine months ended September 30, 1996 were
$3.8 billion, or $7.16 per common share, excluding charges
associated with research and development related to acquisitions
in the first quarter of 1996. This compares with net earnings of
$4.3 billion, or $7.39 per common share, during the first nine
months of 1995, excluding a one-time charge of approximately
$1.8 billion associated with the acquisition of Lotus Development
Corporation. Including these charges, IBM's nine-month 1996 net
earnings were $3.4 billion, or $6.36 per common share compared
with net earnings of $2.5 billion, or $4.19 per common share,
during the first nine months of 1995.
Revenues for the nine months ended September 30, 1996 were
$52.8 billion, an increase of 6 percent from the $50.0 billion
recorded during the same period of last year.
Since December 31, 1995, "core" debt (debt in support of
operations, excluding customer financing) increased $542 million
to $2.4 billion. Customer financing debt increased $960 million
during the same period to $20.7 billion.
Financial Results Attached
INTERNATIONAL BUSINESS MACHINES CORPORATION
SUPPLEMENTAL SCHEDULE - COMPARATIVE FINANCIAL RESULTS
(EXCLUDES EFFECTS OF ACQUISITIONS IN
FIRST QUARTER 1996 AND THIRD QUARTER 1995)*
(Unaudited; Dollars in millions except per share amounts)
Three Months Nine Months
Ended September 30 Ended September 30
Percent Percent
1996 1995 Change 1996 1995 Change
------- ------- ------- ------- ------- -------
Revenue:
Hardware sales $8,372 $7,745 8.1% $24,656 $24,131 2.2%
Gross margin 36.9% 36.1% 35.1% 38.1%
Services 3,932 3,133 25.5% 10,864 8,619 26.0%
Gross margin 18.1% 20.2% 19.4% 20.4%
Software 3,102 3,134 -1.0% 9,334 9,079 2.8%
Gross margin 68.2% 65.6% 68.9% 65.3%
Maintenance 1,723 1,849 -6.8% 5,226 5,547 -5.8%
Gross margin 47.5% 50.7% 47.7% 51.7%
Rentals
and financing 933 893 4.4% 2,724 2,644 3.0%
Gross margin 55.8% 56.3% 56.3% 55.5%
Total revenue 18,062 16,754 7.8% 52,804 50,020 5.6%
Gross profit 7,258 6,921 4.9% 21,218 21,216 ---
Gross margin 40.2% 41.3% 40.2% 42.4%
Operating expenses:
S,G&A 4,175 3,858 8.2% 11,761 11,374 3.4%
% of revenue 23.1% 23.0% 22.3% 22.7%
R,D&E (1,2) 1,115 1,035 7.7% 3,322 2,922 13.7%
% of revenue 6.2% 6.2% 6.3% 5.8%
Operating
income 1,968 2,028 -3.0% 6,135 6,920 -11.3%
Other income 183 208 -11.5% 526 692 -23.9%
Interest expense 172 159 8.6% 526 527 -0.2%
Earnings before
income taxes 1,979 2,077 -4.7% 6,135 7,085 -13.4%
Pre-tax margin 11.0% 12.4% 11.6% 14.2%
Provision for
income taxes 694 775 -10.4% 2,294 2,778 -17.4%
Effective tax
rate 35.1% 37.3% 37.4% 39.2%
Net earnings $1,285 $1,302 -1.4% $3,841 $4,307 -10.8%
Net margin 7.1% 7.8% 7.3% 8.6%
Preferred stock
dividends and trans-
action costs 5 5 15 57
Net earnings
applicable to common
shareholders $1,280 $1,297 -1.4% $3,826 $4,250 -10.0%
====== ====== ====== ======
Net earnings per
share of common
stock $2.45 $2.30 6.5% $7.16 $7.39 -3.1%
====== ====== ====== ======
Average number of
common shares out-
standing (M's) 521.8 564.6 533.3 575.1
* Supplemental information provided for comparative purposes:
(1) Nine months 1996 excludes $435 million ($.80 per common
share) of non-recurring, non-tax deductible charges for
purchased in-process research and development in
connection with the Tivoli Systems Inc. and Object
Technology International Inc. acquisitions in March, 1996.
(2) Three and nine months 1995 excludes a $1,840 million
($3.26 per common share) non-recurring, non-tax
deductible charge for purchased in-process research and
development in connection with the Lotus Development
Corporation acquisition in July, 1995.
INTERNATIONAL BUSINESS MACHINES CORPORATION
COMPARATIVE FINANCIAL RESULTS
(Unaudited; Dollars in millions except per share amounts)
Three Months Nine Months
Ended September 30 Ended September 30
Percent Percent
1996 1995 Change 1996 1995 Change
------- ------- ------- ------- ------- -------
Revenue:
Hardware sales $8,372 $7,745 8.1% $24,656 $24,131 2.2%
Gross margin 36.9% 36.1% 35.1% 38.1%
Services 3,932 3,133 25.5% 10,864 8,619 26.0%
Gross margin 18.1% 20.2% 19.4% 20.4%
Software 3,102 3,134 -1.0% 9,334 9,079 2.8%
Gross margin 68.2% 65.6% 68.9% 65.3%
Maintenance 1,723 1,849 -6.8% 5,226 5,547 -5.8%
Gross margin 47.5% 50.7% 47.7% 51.7%
Rentals
and financing 933 893 4.4% 2,724 2,644 3.0%
Gross margin 55.8% 56.3% 56.3% 55.5%
Total revenue 18,062 16,754 7.8% 52,804 50,020 5.6%
Gross profit 7,258 6,921 4.9% 21,218 21,216 ---
Gross margin 40.2% 41.3% 40.2% 42.4%
Operating expenses:
S,G&A 4,175 3,858 8.2% 11,761 11,374 3.4%
% of revenue 23.1% 23.0% 22.3% 22.7%
R,D&E (1,2) 1,115 2,875 -61.2% 3,757 4,762 -21.1%
% of revenue 6.2% 17.2% 7.1% 9.5%
Operating income 1,968 188 948.2% 5,700 5,080 12.2%
Other income 183 208 -11.5% 526 692 -23.9%
Interest expense 172 159 8.6% 526 527 -0.2%
Earnings before
income taxes 1,979 237 734.9% 5,700 5,245 8.7%
Pre-tax margin 11.0% 1.4% 10.8% 10.5%
Provision for
income taxes 694 775 -10.4% 2,294 2,778 -17.4%
Effective tax
rate 35.1% 326.6% 40.3% 53.0%
Net earnings
(loss) $1,285 ($538) --- $3,406 $2,467 38.0%
Net margin 7.1% -3.2% 6.4% 4.9%
Preferred stock
dividends and trans-
action costs 5 5 15 57
Net earnings (loss)
applicable to common
shareholders $1,280 ($543) --- $3,391 $2,410 40.7%
====== ====== ====== ======
Net earnings (loss)
per share of common
stock $2.45 ($0.96) --- $6.36 $4.19 51.8%
====== ====== ====== ======
Average number of
common shares out-
standing (M's) 521.8 564.6 533.3 575.1
(1) Nine months 1996 includes $435 million ($.80 per common
share) of non-recurring, non-tax deductible charges for
purchased in-process research and development in
connection with the Tivoli Systems Inc. and Object
Technology International Inc. acquisitions in March, 1996.
(2) Three and nine months 1995 includes a $1,840 million
($3.26 per common share) non-recurring, non-tax
deductible charge for purchased in-process research and
development in connection with the Lotus Development
Corporation acquisition in July, 1995.
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited; Dollars in millions)
At At
September 30 December 31 Percent
1996 1995 Change
------------ ----------- -------
Assets:
Cash, cash equivalents,
and marketable securities $7,002 $7,701 -9.1%
Receivables - net, inventories,
and prepaid expenses 32,377 32,990 -1.9%
Plant, rental machines,
and other property - net 16,676 16,579 0.6%
Investments and other assets 21,941 23,022 -4.7%
-------- --------
Total Assets $77,996 $80,292 -2.9%
======== ========
Liabilities and Stockholders' Equity:
Short-term debt $13,462 $11,569 16.4%
Long-term debt 9,669 10,060 -3.9%
-------- --------
Total debt 23,131 21,629 6.9%
Accounts payable, taxes,
and accruals 17,609 20,079 -12.3%
Other liabilities and
deferred income taxes 15,888 16,161 -1.7%
-------- --------
Total liabilities 56,628 57,869 -2.1%
Stockholders' equity 21,368 22,423 -4.7%
-------- --------
Total Liabilities and
Stockholders' Equity $77,996 $80,292 -2.9%
======== ========