- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 1994 1-2360 (Commission File Number) INTERNATIONAL BUSINESS MACHINES CORPORATION (Exact name of registrant as specified in its charter) NEW YORK 13-0871985 (STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NUMBER) ARMONK, NEW YORK 10504 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) 914-765-1900 (Registrant's telephone number) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: VOTING SHARES OUTSTANDING NAME OF EACH EXCHANGE TITLE OF EACH CLASS AT MARCH 7, 1995 ON WHICH REGISTERED - --------------------------------- -------------------------- ------------------------ Capital stock, par value 584,225,210 New York Stock Exchange $1.25 per share Midwest Stock Exchange Pacific Stock Exchange Depositary shares each New York Stock Exchange representing one-fourth of a share of 7 1/2% preferred stock, par value $ .01 per share 6 3/8% Notes due 1997 New York Stock Exchange 9% Notes due 1998 New York Stock Exchange 6 3/8% Notes due 2000 New York Stock Exchange 7 1/4% Notes due 2002 New York Stock Exchange 7 1/2% Debentures due 2013 New York Stock Exchange 8 3/8% Debentures due 2019 New York Stock Exchange Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X The aggregate market value of the voting stock held by non-affiliates of the registrant at March 7, 1995 was $46.6 billion. Documents incorporated by reference: Portions of IBM's Annual Report to Stockholders for the year ended December 31, 1994 into Parts I and II of Form 10-K. Portions of IBM's definitive Proxy Statement dated March 14, 1995 into Part III of Form 10-K. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS: IBM has two fundamental missions. First, the company strives to lead in the creation, development and manufacture of the industry's most advanced information technologies, including computer systems, software, networking systems, and microelectronics. Second, the company translates these advanced technologies into value for our customers worldwide through its sales and professional services units in North America, Europe/Middle East/Africa, Asia Pacific, and Latin America. Management continues to believe its decision, in 1993 to remain an integrated provider of information technology rather then becoming an emerging federation of companies, was the correct one. This single interface to the customer allows IBM employees to better understand and address the full range of the customers' information needs and to provide them with comprehensive and timely solutions. The value of unfilled orders is not a meaningful indicator of future revenues due to the significant proportion of revenue from services, the volume of products delivered from shelf inventories, and the shortening of product delivery schedules. Therefore, the company believes that backlog information is not material to an understanding of its business. IBM owns or is licensed under a number of patents relating to its products. Licenses under patents owned by IBM have been and are being granted to others. IBM believes its business as a whole is not materially dependent upon any particular patent or license, or any particular group of patents or licenses. The following information is included in IBM's 1994 Annual Report to Stockholders and is incorporated herein by reference: 1. Segment information and revenue by classes of similar products or services--Pages 74 and 75. 2. Financial information by geographic areas--Pages 76 and 77. 3. Amount spent during each of the last three years on research and development activities--Page 59. 4. The number of persons employed by the registrant-- Page 47. 5. The management discussion overview--Page 36. ITEM 2. PROPERTIES: At December 31, 1994, IBM's manufacturing and development facilities in the United States had aggregate floor space of 55.2 million square feet, of which 43.4 million was owned and 11.8 million was leased. Of these amounts, 8.5 million square feet was vacant and 1.0 million square feet was being leased to non-IBM businesses. Similar facilities in 15 other countries totaled 21.0 million square feet, of which 18.0 million was owned and 3.0 million was leased. Of these amounts, 2.0 million square feet was vacant and .7 million square feet was being leased to non-IBM businesses. Although improved production techniques, productivity gains, and restructuring actions have resulted in reduced manufacturing floor space, continuous upgrading of facilities is essential to 1 maintain technological leadership, improve productivity, and meet customer demand. For additional information on expenditures for plant, rental machines and other property, refer to "Investments" on page 43 of IBM's 1994 Annual Report to Stockholders which is incorporated herein by reference. ITEM 3. LEGAL PROCEEDINGS: Refer to note M "Contingencies" on page 62 of IBM's 1994 Annual Report to Stockholders which is incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: Not applicable. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS: Refer to pages 78 and 79 and the inside back cover of IBM's 1994 Annual Report to Stockholders which are incorporated herein by reference solely as they relate to this item. IBM common stock is listed on the New York Stock Exchange, Midwest Stock Exchange and Pacific Stock Exchange. There were 705,318 common stockholders of record at March 7, 1995. On February 28, 1995, the Board of Directors authorized the company to repurchase outstanding depositary shares representing the IBM Series A Preferred Stock. The company plans to buy the shares from time to time on the open market. As of February 28, 1995, approximately 10.5 million depositary shares were outstanding. ITEM 6. SELECTED FINANCIAL DATA: Refer to page 79 of IBM's 1994 Annual Report to Stockholders which is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: Refer to pages 36 through 47 of IBM's 1994 Annual Report to Stockholders which are incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA: Refer to pages 34 and 35 and 48 through 78 of IBM's 1994 Annual Report to Stockholders which are incorporated herein by reference. Also refer to the Financial Statement Schedule on page S-1 of this Form. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE: Not applicable. 2 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT: Refer to pages 4 through 6 of IBM's definitive Proxy Statement dated March 14, 1995 which are incorporated herein by reference solely as they relate to this item. EXECUTIVE OFFICERS OF THE REGISTRANT (AT MARCH 28, 1995): OFFICER AGE SINCE --- ------- Chairman of the Board of Directors and Chief Executive Officer Louis V. Gerstner, Jr.(1)................................... 53 1993 Senior Vice Presidents J. Thomas Bouchard, Human Resources......................... 54 1994 James A. Cannavino, Strategy and Development(2)............. 50 1988 Nicholas M. Donofrio, Group Executive....................... 49 1995 Donato A. Evangelista, General Counsel...................... 62 1983 Ned C. Lautenbach, Group Executive.......................... 51 1987 G. Richard Thoman, Group Executive.......................... 50 1993 John M. Thompson, Group Executive........................... 52 1989 Patrick A. Toole, Group Executive........................... 57 1984 Jerome B. York, Chief Financial Officer(1).................. 56 1993 Vice President and Treasurer Jeffrey D. Serkes........................................... 36 1994 - ------------ (1) Member of the Board of Directors. (2) Will be retiring effective March 31, 1995. All officers are elected by the Board of Directors and serve until the next election of officers in conjunction with the annual meeting of the stockholders as provided in the By-laws. Each officer named above, with the exception of J. Thomas Bouchard, Louis V. Gerstner, Jr., Jeffrey D. Serkes, G. Richard Thoman, and Jerome B. York, has been an an executive of IBM or its subsidiaries during the past five years. Mr. Bouchard was senior vice president, human resources, of U.S. West, Inc., a telecommunications company, from 1989 until joining IBM in 1994. Prior to 1989, he spent 15 years with United Technologies Corporation in a variety of executive positions, including senior vice president of human resources. Mr. Gerstner was the chairman of the board and chief executive officer of RJR Nabisco Holdings Corporation, a food and tobacco company, from 1989 until joining IBM in 1993. From 1985 to 1989, he was president of American Express Company, and from 1983 to 1989, he was chairman and chief executive officer of American Express Travel Related Services Co., Inc. Mr. Serkes was vice president and deputy treasurer of RJR Nabisco, Inc., a food and tobacco company, from 1993 until joining IBM in 1994. From 1987 to 1993, he also served as vice president and assistant treasurer, corporate finance; director, capital markets; and manager, foreign exchange of RJR Nabisco, Inc. Mr. Thoman was the president of Nabisco International, Inc., a food company, from 1992 until joining IBM in 1993. From 1985 to 1989, he was president of American Express Travel Related Services International, and co-CEO of American Express Travel Related Services Co., Inc. and CEO of American Express International from 1989 to 1992. Mr. York, from 1979 until joining IBM in 1993, served in a number of executive positions at Chrysler Corporation, an automotive manufacturer, including executive vice president-finance and chief financial officer from 1990 to 1993 and vice president and controller from 1989 to 1990. Prior 3 to joining Chrysler, he held a number of technical and management positions with General Motors Corporation, Ford Motor Corporation, The Hertz Corporation and Baker Industries, Inc. ITEM 11. EXECUTIVE COMPENSATION: Refer to pages 12 through 20 of IBM's definitive Proxy Statement dated March 14, 1995, which are incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT: (a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS: Refer to the section entitled "Stock Ownership" appearing on pages 9 through 11 of IBM's definitive Proxy Statement dated March 14, 1995, which is incorporated herein by reference solely as it relates to this item. (b) SECURITY OWNERSHIP OF MANAGEMENT: Refer to the section entitled "Stock Ownership" appearing on pages 9 through 11 of IBM's definitive Proxy Statement dated March 14, 1995, which is incorporated herein by reference solely as it relates to this item. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS: Refer to page 8 "Other Relationships" of IBM's definitive Proxy Statement dated March 14, 1995, which is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K: (a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT: 1. FINANCIAL STATEMENTS FROM IBM'S 1994 ANNUAL REPORT TO STOCKHOLDERS WHICH ARE INCORPORATED HEREIN BY REFERENCE: Report of Independent Accountants (page 35). Consolidated Statement of Operations for the years ended December 31, 1994, 1993 and 1992 (page 48). Consolidated Statement of Financial Position at December 31, 1994 and 1993 (page 49). Consolidated Statement of Cash Flows for the years ended December 31, 1994, 1993 and 1992 (page 50). Consolidated Statement of Stockholders' Equity at December 31, 1994, 1993 and 1992 (page 51). Notes to Consolidated Financial Statements (pages 52 through 78). 2. FINANCIAL STATEMENT SCHEDULES REQUIRED TO BE FILED BY ITEM 8 OF THIS FORM: SCHEDULE PAGE NUMBER - ---- -------- 7 Report of Independent Accountants on Financial Statement Schedules. S-1 II-- Valuation and Qualifying Accounts All other schedules are omitted as the required matter is not present, the amounts are not significant or the information is shown in the financial statements or the notes thereto. 4 3. EXHIBITS: INCLUDED IN THIS FORM 10-K: I-- Computation of Fully Diluted Earnings Per Share. II-- Parents and Subsidiaries. III-- Consent of Independent Accountants. IV-- Additional Exhibits (a) Supplemental Consolidated Statement of Operations--1994 and 1993. V-- The By-laws of IBM as amended through February 1, 1995. VI-- IBM's 1994 Annual Report to Stockholders, certain sections of which have been incorporated herein by reference. VII-- Powers of Attorney. VIII-- Financial Data Schedule. IX-- IBM Supplemental Executive Retirement Plan. X-- IBM Extended Tax Deferred Savings Plan. XI-- IBM Board of Directors Deferred Compensation and Equity Award Plan. NOT INCLUDED IN THIS FORM 10-K: -- The Certificate of Incorporation of IBM is Exhibit VI to Form 10-K for the year ended December 31, 1993, and is hereby incorporated by reference. -- A copy of the IBM 1994 Long-Term Performance Plan, a management compensatory plan, is contained in Registration Statement No. 33-53777 on Form S-8, filed on May 24, 1994, and is hereby incorporated by reference. -- Board of Directors compensatory plans, as described under "Directors' Compensation" on page 9 of IBM's definitive Proxy Statement dated March 14, 1995, which is incorporated herein by reference. -- The employment agreement for L.V. Gerstner, Jr. is Exhibit 19 to Form 10-Q dated March 31, 1993, and is hereby incorporated by reference. -- The instruments defining the rights of the holders of the 6 3/8% Notes due 1997 and the 7 1/4% Notes due 2002 are Exhibits 4(a) through 4(l) to Registration Statement No. 33-33590 on Form S-3, filed on February 22, 1990, and are hereby incorporated by reference. -- The instruments defining the rights of the holders of the 9% Notes due 1998 are Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1985, and Exhibit 4(b) to Registration Statement No. 33-6889 on Form S-3, filed on July 1, 1986, and are hereby incorporated by reference. -- The instruments defining the rights of the holders of the 6 3/8% Notes due 2000 and the 7 1/2% Debentures due 2013 are Exhibits 4(a) through 4(l) to Registration Statement No. 33-49475(1) on Form S-3, filed May 24, 1993, and are hereby incorporated by reference. -- The instruments defining the rights of holders of the 8 3/8% Debentures due 2019 are Exhibits 4(a)(b)(c) and (d) to Registration Statement 33-31732 on Form S-3, filed on October 24, 1989, and are hereby incorporated by reference. -- IBM's definitive Proxy Statement dated March 14, 1995, certain sections of which have been incorporated herein by reference. (b) REPORTS ON FORM 8-K: -- No reports on Form 8-K were filed during the last quarter of 1994. 5 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. INTERNATIONAL BUSINESS MACHINES CORPORATION (Registrant) By /s/ LOUIS V. GERSTNER,JR. ................................... (LOUIS V. GERSTNER, JR. CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER) Date: March 28, 1995 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. SIGNATURE TITLE DATE -------------- ----- ---- /s/ JEROME B. YORK Senior Vice March 28, 1995 .............................. President, (JEROME B. YORK) Chief Financial Officer, acting Controller, and Director | | | HAROLD BROWN Director | JAMES E. BURKE Director | FRITZ GERBER Director | NANNERL O. KEOHANE Director | CHARLES F. KNIGHT Director | THOMAS S. MURPHY Director | LUCIO A. NOTO Director | By /s/JOHN E. HICKEY JOHN B. SLAUGHTER Director | ...................... ALEX TROTMAN Director | (JOHN E. HICKEY) LODEWIJK C. VAN WACHEM Director | ATTORNEY-IN-FACT CHARLES M. VEST Director | EDGAR S. WOOLARD, JR. Director | 6 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors of INTERNATIONAL BUSINESS MACHINES CORPORATION Our audits of the consolidated financial statements referred to in our report dated January 20, 1995 (which refers to the changes in the methods of accounting for postemployment benefits in 1993, and income taxes in 1992), appearing on page 35 of the 1994 Annual Report to Stockholders of International Business Machines Corporation, (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a)2 of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ PRICE WATERHOUSE LLP 1177 Avenue of the Americas New York, N.Y. 10036 January 20, 1995 7 SCHEDULE II INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEAR ENDED DECEMBER 31: (DOLLARS IN MILLIONS) BALANCE AT BALANCE AT BEGINNING END DESCRIPTION OF PERIOD NET CHANGE(A) OF PERIOD - -------------------------------------------------------- ---------- ------------- ---------- 1994 Account deducted from assets: Allowance for doubtful accounts --Current........................................... $683 $ 36 $719 ----- ----- ----- ----- ----- ----- --Non-current....................................... $187 $ (21) $166 ----- ----- ----- ----- ----- ----- 1993 Account deducted from assets: Allowance for doubtful accounts --Current........................................... $578 $ 105 $683 ----- ----- ----- ----- ----- ----- --Non-current....................................... $209 $ (22) $187 ----- ----- ----- ----- ----- ----- 1992 Account deducted from assets: Allowance for doubtful accounts --Current........................................... $414 $ 164 $578 ----- ----- ----- ----- ----- ----- --Non-current....................................... $196 $ 13 $209 ----- ----- ----- ----- ----- ----- - --------- (A) Includes additions charged to costs and expenses less accounts written off and translation adjustments. Note-- The receivables upon which the above allowances are based are highly diversified by geography, industry, and individual customer. With the growth of the company's working capital financing business in 1994, the concentration of such financings for certain large dealers and remarketers of information industry products has become more significant. The allowances for receivable losses for the year ended 1994, approximate less than three and one-quarter percent of the company's current receivables and less than one and one-half percent of the company's non-current receivables. The allowances for the year ended 1993, approximate less than three and one-half percent of the company's current receivables and less than two percent of the company's non-current receivables. The allowances for the year ended 1992, approximate less than three percent of the company's current receivables and less than two percent of the company's non-current receivables. S-1 EXHIBIT INDEX REFERENCE NUMBER EXHIBIT PER ITEM 601 OF NUMBER IN REGULATION S-K DESCRIPTION OF EXHIBITS THIS FORM 10-K - ---------------- ----------------------------------------------------------- -------------- (3) Certificate of Incorporation and By-laws. The Certificate of Incorporation of IBM is Exhibit VI to Form 10-K for the year ended December 31, 1993, and is hereby incorporated by reference. The By-laws of IBM as amended through February 1, 1995. V (4) Instruments defining the rights of security holders. The instruments defining the rights of the holders of the 6 3/8% Notes due 1997 and the 7 1/4% Notes due 2002 are Exhibits 4(a) through 4(l) to Registration Statement No. 33-33590 on Form S-3, filed February 22, 1990, and are hereby incorporated by reference. The instruments defining the rights of the holders of the 9% Notes due 1998 are Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1985, and Exhibit 4(b) to Registration Statement No. 33-6889 on Form S-3 filed on July 1, 1986, and are hereby incorporated by reference. The instruments defining the rights of the holders of the 6 3/8% Notes due 2000 and the 7 1/2% Debentures due 2013 are Exhibits 4(a) through 4(l) to Registration Statement No. 33-49475(l) on Form S-3, file May 24, 1993, and are hereby incorporated by reference. The instruments defining the rights of the holders of the 8 3/8% Debentures due 2019 are Exhibits (4)(a)(b)(c) and (d) to Registration Statement No. 33-31732 on Form S-3, filed on October 24, 1989, are hereby incorporated by reference. (9) Voting trust agreement. Not applicable (10) Material contracts. A copy of the IBM 1994 Long-Term Performance Plan is contained in Registration Statement No. 33-53777 on Form S-8, filed on May 24, 1994, and is hereby incorporated by reference. Board of Directors compensatory arrangements, as described under "Director's Compensation" on page 9 of IBM's definitive Proxy Statement dated March 14, 1995, which is incorporated herein by reference. IBM Supplemental Executive Retirement Plan. IX IBM Extended Tax Deferred Savings Plan. X IBM Board of Directors Deferred Compensation and Equity XI Award Plan. The employment agreement for L.V. Gerstner, Jr. is Exhibit 19 to Form 10-Q dated March 31, 1993, and is hereby incorporated by reference. (11) Statement re computation of per share earnings. I (12) Statement re computation of ratios. Not applicable (13) Annual report to security holders. VI REFERENCE NUMBER EXHIBIT PER ITEM 601 OF NUMBER IN REGULATION S-K DESCRIPTION OF EXHIBITS THIS FORM 10-K - ---------------- ----------------------------------------------------------- -------------- (18) Letter re change in accounting principles. Not applicable (19) Previously unfiled documents. Not applicable (21) Subsidiaries of the registrant. II (22) Published report regarding matters submitted to vote of Not applicable security holders. (23) Consents of experts and counsel. III (24) Powers of attorney. VII (27) Financial Data Schedule. VIII (28) Information from reports furnished to state insurance Not applicable regulatory authorities. (99) Additional exhibits. IV EXHIBIT I COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE UNDER TREASURY STOCK METHOD SET FORTH IN ACCOUNTING PRINCIPLES BOARD OPINION NO. 15 YEAR ENDED DECEMBER 31: ----------------------------------------------------------------------- 1994 1993* 1992* 1991* 1990 ----------- ----------- ----------- ----------- ----------- Number of shares on which published earnings per share is based: Average outstanding during year........ 584,958,699 573,239,240 570,896,489 572,003,382 572,647,906 Add--Incremental shares under stock option and stock purchase plans.. 4,308,269 -- -- -- 1,665,262 - --Incremental shares related to 7 7/8% con- vertible debentures (average)............ -- -- -- -- 8,162,976 - --Incremental shares related to 5 3/4% CGI convertible bonds (average)............ 7,715,391 -- -- -- -- ----------- ----------- ----------- ----------- ----------- Number of shares on which fully diluted earnings per share is based..... 596,982,359 573,239,240 570,896,489 572,003,382 582,476,144 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net earnings (loss) applicable to common shareholders (millions)........... $2,937 $(8,148) $(4,965) $(2,861) $5,967 Add--Net earnings (loss) effect of interest on 7 7/8% convertible deben- tures (millions)..... -- -- -- -- 65 - --Net earnings (loss) effect of interest on 5 3/4% CGI convertible bonds (millions)..... 19 -- -- -- -- ----------- ----------- ----------- ----------- ----------- Net earnings (loss) on which fully diluted earnings per share is based (millions)..... $2,956 $(8,148) $(4,965) $(2,861) $6,032 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Fully diluted earnings (loss) per share......... $4.95 $(14.22) $(8.70) $(5.01) $10.36 Published earnings (loss) per share.............. $5.02 $(14.22) $(8.70) $(5.01) $10.42 - ------------ * In 1993, 1992, and 1991, incremental shares under stock plans and the effect of the convertible debentures and bonds were not considered for the fully diluted earnings per share calculation due to their antidilutive effect. As such, the amounts reported for primary and fully diluted earnings per share are the same. The 7 7/8% convertible debentures were called and redeemed on November 21, 1992. EXHIBIT II PARENTS AND SUBSIDIARIES AS OF DECEMBER 31, 1994 STATE OR PERCENTAGE OF COUNTRY VOTING OF SECURITIES INCORPORATION OWNED BY ITS OR ORGANIZATION IMMEDIATE PARENT --------------- ---------------- Registrant: International Business Machines Corporation......... New York Subsidiaries: IBM Credit Corporation.............................. Delaware 100 Integrated Systems Solutions Corp. ................. Delaware 100 IBM World Trade Corporation......................... Delaware 100 IBM Asia Pacific Service Corporation.............. Japan 100 IBM China/Hong Kong Corporation................... Delaware 100 IBM World Trade Asia Corporation.................. Delaware 100 WTC Insurance Corporation, Ltd. .................. Bermuda 100 IBM Argentina, S.A. .............................. Argentina 100(E) IBM Australia Ltd. ............................... Australia 100 IBM Bahamas Ltd. ................................. Bahamas 100 IBM de Bolivia, S.A. ............................. Bolivia 100 IBM Brasil-Industria, Maquinas e Servicos Ltda. .......................................... Brazil 100(E) IBM Canada Limited-- IBM Canada Limitee........... Canada 100 IBM China Company Limited......................... China 100 IBM de Chile, S.A.C. ............................. Chile 90(F) IBM de Colombia, S.A. ............................ Colombia 90(E) IBM del Ecuador, C.A. ............................ Ecuador 100 IBM Southeast Asia Services Ltd. ................. Hong Kong 100 Tata Information Systems Ltd. (TISL).............. India 50 IBM Japan, Ltd. .................................. Japan 100 IBM Korea Systems Corporation..................... Korea 100 IBM Korea, Inc. .................................. Korea (South) 100 Grupo IBM Mexico, S.A. de C.V. ................... Mexico 100(B) IBM de Mexico, S.A. ............................ Mexico 100(B) IBM New Zealand Ltd. ............................. New Zealand 100 IBM del Peru, S.A. ............................... Peru 100 IBM Latin American Region S.A. ................... Peru 100 IBM World Trade Asia-Pacific Corp. ............... Philippines 100(B) IBM Philippines, Incorporated..................... Philippines 100(B) IBM Singapore Pte. Ltd. .......................... Singapore 100 IBM Taiwan Corporation............................ Taiwan 100 Thai Systems Corporation Ltd. .................... Thailand 100 IBM Thailand Company Ltd. ........................ Thailand 100(B) IBM del Uruguay, S.A. ............................ Uruguay 100 IBM de Venezuela, S.A. ........................... Venezuela 100 IBM World Trade Europe/Middle East/ Africa Corporation.............................. Delaware 100 IBM Central Europe & Russia Inc. ............... Delaware 100 PARENTS AND SUBSIDIARIES AS OF DECEMBER 31, 1994--(CONTINUED) STATE OR PERCENTAGE OF COUNTRY VOTING OF SECURITIES INCORPORATION OWNED BY ITS OR ORGANIZATION IMMEDIATE PARENT --------------- ---------------- IBM World Trade Europe/Middle East/ Africa Corporation (continued) IBM Oesterreich, Internationale Bueromaschinen Gesellschaft m.b.H. .......................... Austria 100 International Business Machines of Belgium S.A. ......................................... Belgium 100(D) IBM Bulgaria Ltd. .............................. Bulgaria 100 C.T.S. d.o.o. .................................. Croatia 100 IBM Ceska Republika spol. s.r.o. ............... Czech Republic 100 IBM Slovensko spol. s.r.o. ..................... Slovak Republic 100 Compagnie IBM France, S.A. ..................... France 100(B) IBM Eurocoordination, S.A. ..................... France --(C) IBM Europe, S.A. ............................... France 100(B) IBM Beteiligungs GmbH........................... Germany 100 IBM Deutschland GmbH............................ Germany 72(H) International Business Machines Corporation Magyarorszagi Kft............................. Hungary 100 IBM International Treasury Services Company..... Ireland --(K) IBM Ireland Ltd. ............................... Ireland 100(D) IBM SEMEA S.p.A. ............................... Italy 100 IBM Hellas Information Handling Systems S.A. ....................................... Greece 100(D) IBM Israel Ltd. .............................. Israel 100(D) Companhia IBM Portuguesa, S.A. ............... Portugal 100 IBM (International Business Machines) Turk Ltd. Sirketi................................ Turkey 98(A) IBM International Centre for Asset Management N.V. ......................................... Netherlands 100 International Maintenance Parts Logistics B.V. ......................................... Netherlands --(J) IBM Nederland N.V. ............................. Netherlands 100 IBM International Finance N.V. ............... Netherlands 100 IBM Polska Sp. z.o.o. .......................... Poland 100 International Business Machines A/S............. Norway 60(G) IBM East Europe/Asia Ltd. ...................... Russia 100(D) IBM Slovenija d.o.o. ........................... Slovenia 100 ISG Ltd. ....................................... South Africa 28(I) International Business Machines, S.A. .......... Spain 100(B) IBM Nordic Aktiebolag........................... Sweden 100 IBM Danmark A/S............................... Denmark 100 Oy International Business Machines AB......... Finland 100 IBM Svenska Aktiebolag........................ Sweden 100 IBM International Centre for Asset Management A.G. ......................................... Switzerland 100 IBM (Schweiz)--IBM (Suisse)-- IBM (Svizzera)--IBM (Switzerland)................. Switzerland 100 IBM United Kingdom Holdings Ltd................. United Kingdom 100 (Footnotes on following page) (Footnotes for preceding page) - ------------ (A) Remaining percentage owned by IBM World Trade Europe/Middle East/Africa Corporation. (B) Minor percentage held by minority IBM shareholders, subject to repurchase option. (C) IBM Eurocoordination, S.A. is owned approximately 14% each by subsidiaries located in France, Germany, Italy and the United Kingdom and approximately 4% each by subsidiaries located in Austria, Belgium, Denmark, Finland, Ireland, Netherlands, Norway, Portugal, Spain, Sweden and Switzerland and by four other minority shareholders. (D) Minor percentage owned by IBM World Trade Corporation. (E) Remaining percentage owned by IBM World Trade Asia Corporation. (F) Minor percentage owned by IBM Americas/Far East Systems Corporation. (G) IBM Nordic Aktiebolag (100% owned by IBM World Trade Europe/ Middle East/Africa Corporation) owns the remaining percentage. (H) IBM World Trade Corporation owns 10% and IBM Beteiligungs GmbH owns 18%. (I) IBM SEMEA S.p.A. holds an additional 24% of ISG Ltd. (J) Owned jointly by nine IBM Europe/Middle East/Africa Corporation subsidiaries in Europe. (K) IBM France and IBM Finland each own 16.6% and IBM Denmark and IBM Switzerland each own 33.3% of IBM International Treasury Services Company. EXHIBIT III CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-8 (Nos. 2-77235, 2-77236, 33-5225, 33-29022, 33-33458 and 33-34406) and Form S-3 (No. 33-50537 and 33-54375) of International Business Machines Corporation of our report dated January 20, 1995 appearing on page 35 of the 1994 Annual Report to Stockholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page 7 of this Form 10-K. /s/ PRICE WATERHOUSE LLP 1177 Avenue of the Americas New York, N.Y. 10036 March 28, 1995