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5454 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, 2011: GAAP
Acquisition-
Related
Adjustments
Retirement-
Related
Adjustments
Operating
(non-GAAP)
Gross profit $50,138 $ 341 $ 2 $50,481
Gross profit margin 46.9% 0.3 pts. 0.0 pts. 47.2%
SG&A $23,594 $(309) $ (13) $23,272
RD&E 6,258 0 88 6,345
Other (income) and expense (20) (25) 0 (45)
Total expense and other (income) 29,135 (334) 74 28,875
Pre-tax income 21,003 675 (72)21,605
Pre-tax income margin 19.6% 0.6 pts. (0.1) pts. 20.2%
Provision for income taxes* $ 5,148 $ 179 $ (40)$ 5,287
Effective tax rate 24.5% 0.1 pts. (0.1) pts. 24.5%
Net income $15,855 $ 495 $ (32)$16,318
Net income margin 14.8% 0.5 pts. (0.0) pts. 15.3%
Diluted earnings per share $ 13.06 $0.41 $(0.03)$ 13.44
*
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, 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.