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54
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 except per share amounts)
For the year ended December 31, 2010: GAAP
Acquisition-
related
Adjustments
Retirement-
related
Adjustments
Operating
(non-GAAP)
Gross profit $46,014 $ 260 $ (204)$46,070
Gross profit margin 46.1% 0.3 pts. (0.2) pts. 46.1%
SG&A $21,837 $(294) $ 84 $21,628
RD&E 6,026 0 126 6,152
Other (income) and expense (787) (4) 0 (791)
Total expense and other (income) 26,291 (298) 210 26,202
Pre-tax income 19,723 558 (414)19,867
Pre-tax income margin 19.7% 0.6 pts. (0.4) pts. 19.9%
Provision for income taxes* $ 4,890 $ 116 $ (162)$ 4,844
Effective tax rate 24.8% (0.1) pts. (0.3) pts. 24.4%
Net income $14,833 $ 443 $ (253)$15,023
Net income margin 14.9% 0.4 pts. (0.3) pts. 15.0%
Diluted earnings per share $ 11.52 $0.34 $(0.20)$ 11.67
* 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 except per share amounts)
For the year ended December 31, 2009: GAAP
Acquisition-
related
Adjustments
Retirement-
related
Adjustments
Operating
(non-GAAP)
Gross profit $43,785 $ 204 $ (259)$43,730
Gross profit margin 45.7% 0.2 pts. (0.3) pts. 45.7%
SG&A $20,952 $(293) $ 127 $20,787
RD&E 5,820 0 123 5,943
Other (income) and expense (351) (1) 0 (352)
Total expense and other (income) 25,647 (294) 250 25,603
Pre-tax income 18,138 498 (509)18,126
Pre-tax income margin 18.9% 0.5 pts. (0.5) pts. 18.9%
Provision for income taxes* $ 4,713 $ 141 $ (179)$ 4,675
Effective tax rate 26.0% 0.1pts. (0.3) pts. 25.8%
Net income $13,425 $ 357 $ (330)$13,452
Net income margin 14.0% 0.4 pts. (0.3) pts. 14.0%
Diluted earnings per share $ 10.01 $0.27 $(0.25)$ 10.03
* 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.