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52 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 (non-GAAP) earnings, as presented, may differ from
similarly titled measures reported by other companies. Please refer to the “Operating (non-GAAP) Earnings” section on page 22 for the
company’s rationale for presenting operating earnings information.
($ in millions except per share amounts)
For the fourth quarter 2014: GAAP
Acquisition-
Related
Adjustments
Retirement-
Related
Adjustments
Operating
(non-GAAP)
Gross profit $12,862 $ 101 $ 33 $12,996
Gross profit margin 53.3% 0.4 pts. 0.1 pts. 53.9%
SG&A $ 6,034 $ (94) $ (95) $ 5,845
RD&E 1,320 — 21 1,341
Other (income) and expense (1,506) (1) — (1,506)
Total expense and other (income) 5,767 (95) (74) 5,598
Pre-tax income from continuing operations 7,094 196 107 7,398
Pre-tax margin from continuing operations 29.4% 0.8 pts. 0.4 pts. 30.7%
Provision for income taxes* $ 1,580 $ 10 $ 24 $ 1,613
Effective tax rate 22.3% (0.5) pts. 0.0 pts. 21.8%
Income from continuing operations $ 5,515 $ 186 $ 84 $ 5,785
Income margin from continuing operations 22.9% 0.8 pts. 0.3 pts. 24.0%
Loss from discontinued operations, net of tax $ (31) $ — $ — $ (31)
Net income $ 5,484 $ 186 $ 84 $ 5,753
Diluted earnings per share:
Continuing operations $ 5.54 $0.19 $0.08 $ 5.81
Discontinued operations $ (0.03) $ — $ — $ (0.03)
*
The tax impact on operating (non-GAAP) pre-tax income from continuing operations 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 fourth quarter 2013: GAAP
Acquisition-
Related
Adjustments
Retirement-
Related
Adjustments
Operating
(non-GAAP)
Gross profit $14,337 $ 105 $ 154 $14,596
Gross profit margin 52.4% 0.4 pts. 0.6 pts. 53.3%
SG&A $ 5,987 $(101) $ (90) $ 5,796
RD&E 1,452 — (14) 1,438
Other (income) and expense (116) (8) — (124)
Total expense and other (income) 7,235 (109) (104) 7,023
Pre-tax income from continuing operations 7,102 213 258 7,574
Pre-tax margin from continuing operations 25.9% 0.8 pts. 0.9 pts. 27.7%
Provision for income taxes* $ 885 $ (55) $ 94 $ 925
Effective tax rate 12.5% (1.1) pts. 0.8 pts. 12.2%
Income from continuing operations $ 6,216 $ 268 $ 164 $ 6,649
Income margin from continuing operations 22.7% 1.0 pts. 0.6 pts. 24.3%
Loss from discontinued operations, net of tax $ (32) $ — $ — $ (32)
Net income $ 6,185 $ 268 $ 164 $ 6,617
Diluted earnings per share:
Continuing operations $ 5.76 $0.25 $0.15 $ 6.16
Discontinued operations $ (0.03) $ — $ — $ (0.03)
*
The tax impact on operating (non-GAAP) pre-tax income from continuing operations 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.