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63
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 year ended December 31, 2013: GAAP
Acquisition-
Related
Adjustments
Retirement-
Related
Adjustments
Operating
(non-GAAP)
Gross profit $48,684 $ 394 $ 629 $49,706
Gross profit margin 49.5% 0.4 pts. 0.6 pts. 50.5%
SG&A $23,451 $(394) $ (376) $22,680
RD&E 5,743 — (57) 5,686
Other (income) and expense (333) (16) — (349)
Total expense and other (income) 28,440 (410) (433) 27,597
Pre-tax income from continuing operations 20,244 804 1,062 22,110
Pre-tax margin from continuing operations 20.6% 0.8 pts. 1.1 pts. 22.5%
Provision for income taxes* $ 3,363 $ 57 $ 333 $ 3,753
Effective tax rate 16.6% (0.4) pts. 0.7 pts. 17.0%
Income from continuing operations $16,881 $ 747 $ 729 $18,356
Income margin from continuing operations 17.2% 0.8 pts. 0.7 pts. 18.7%
Loss from discontinued operations, net of tax $ (398 ) $ — $ — $ (398 )
Net income $16,483 $ 747 $ 729 $17,959
Diluted earnings per share:
Continuing operations $ 15.30 $0.68 $ 0.66 $ 16.64
Discontinued operations $ (0.36) $ — $ — $ (0.36 )
*
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, 2012: GAAP
Acquisition-
Related
Adjustments
Retirement-
Related
Adjustments
Operating
(non-GAAP)
Gross profit $50,361 $ 376 $ 264 $51,001
Gross profit margin 49.0% 0.4 pts. 0.3 pts. 49.6%
SG&A $23,463 $(349) $(294) $22,820
RD&E 5,816 — 20 5,837
Other (income) and expense (843) (13) — (857)
Total expense and other (income) 27,821 (363) (274) 27,184
Pre-tax income from continuing operations 22,540 739 538 23,817
Pre-tax margin from continuing operations 21.9% 0.7 pts. 0.5 pts. 23.2%
Provision for income taxes* $ 5,541 $ 98 $ 156 $ 5,795
Effective tax rate 24.6% (0.4) pts. 0.1 pts. 24.3%
Income from continuing operations $16,999 $ 641 $ 381 $18,022
Income margin from continuing operations 16.5% 0.6 pts. 0.4 pts. 17.5%
Loss from discontinued operations, net of tax $ (395) $ — $ — $ (395)
Net income $16,604 $ 641 $ 381 $17,627
Diluted earnings per share:
Continuing operations $ 14.71 $0.56 $0.33 $ 15.60
Discontinued operations $ (0.34) $ — $ — $ (0.34 )
* 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.