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43
Management Discussion
International Business Machines Corporation and Subsidiary Companies
GAAP Reconciliation
The tables below provide a reconciliation of the company’s income statement results as reported under GAAP to its operating earnings
presentation which is a non-GAAP measure. The company’s calculation of operating earnings, as presented, may differ from similarly titled
measures reported by other companies. Please refer to the “Operating (non-GAAP) Earnings” section on page 18 for the company’s rationale
for presenting operating earnings information.
($ in millions)
For the fourth quarter 2011: GAAP
Acquisition-
related
Adjustments
Retirement-
related
Adjustments
Operating
(non-GAAP)
Gross profit $14,722 $ 81 $ (10) $14,793
Gross profit margin 49.9%0.3 pts. (0.0) pts. 50.2%
SG&A $ 6,076 $ (82) $ 2 $ 5,996
RD&E 1,555 0 23 1,578
Other (income) and expense (44) (2) 0 (46)
Total expense and other (income) 7,448 (85) 25 7,388
Pre-tax income 7,274 166 (35) 7,405
Pre-tax income margin 24.7%0.6 pts. (0.1) pts. 25.1%
Provision for income taxes* $ 1,784 $ 47 $ (24) $ 1,808
Effective tax rate 24.5%0.1 pts. (0.2) pts. 24.4%
Net income $ 5,490 $ 119 $ (12) $ 5,597
Net income margin 18.6%0.4 pts. (0.0) pts. 19.0%
Diluted earnings per share $ 4.62 $0.10 $(0.01) $ 4.71
*
The tax impact on operating (non-GAAP) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income which employs an annual
effective tax rate method to the results.
($ in millions)
For the fourth quarter 2010: GAAP
Acquisition-
related
Adjustments
Retirement-
related
Adjustments
Operating
(non-GAAP)
Gross profit $14,227 $ 82 $ (60)$14,249
Gross profit margin 49.0% 0.3 pts. (0.2) pts. 49.1%
SG&A $ 5,951 $ (95) $ 28 $ 5,884
RD&E 1,578 0 33 1,611
Other (income) and expense (42) (2) 0 (44)
Total expense and other (income) 7,271 (98) 61 7,235
Pre-tax income 6,956 180 (121)7,015
Pre-tax income margin 24.0% 0.6 pts. (0.4) pts. 24.2%
Provision for income taxes* $ 1,698 $ 10 $ (47)$ 1,661
Effective tax rate 24.4% (0.5) pts. (0.3) pts. 23.7%
Net income $ 5,257 $ 170 $ (74)$ 5,354
Net income margin 18.1% 0.6 pts. (0.3) pts. 18.5%
Diluted earnings per share $ 4.18 $0.14 $(0.06)$ 4.25
*
The tax impact on operating (non-GAAP) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income which employs an annual
effective tax rate method to the results.