IBM 2015 Annual Report Download - page 44

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42 Management Discussion
International Business Machines Corporation and Subsidiary Companies
($ inmillions except per share amount)
For the year ended December 31, 2014: GAAP
Acquisition-
Related
Adjustments
Retirement-
Related
Adjustments
Operating
(non-GAAP)
Gross profi t $46,407 $ 416 $ 173 $46,996
Gross profi t margin 50.0% 0.4 pts. 0.2 pts. 50.6%
SG&A $23,180 $(385) $(257 ) $22,537
RD&E 5,437 — 77 5,514
Other (income) and expense (1,938) (1) — (1,939)
Total expense and other (income) 26,421 (386) (180) 25,855
Pre-tax income from continuing operations 19,986 803 353 21,142
Pre-tax margin from continuing operations 21.5% 0.9 pts. 0.4 pts. 22.8%
Provision for income taxes* $ 4,234 $ 133 $ 73 $ 4,440
Effective tax rate 21.2% (0.2) pts. 0.0 pts. 21.0%
Income from continuing operations $15,751 $ 670 $ 280 $16,702
Income margin from continuing operations 17.0% 0.7 pts. 0.3 pts. 18.0%
Diluted earnings per share from continuing operations $ 15.59 $0.66 $0.28 $ 16.53
* 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.
Consolidated Fourth-Quarter Results
($ and shares inmillions except per share amounts)
For the fourth quarter: 2015 2014
Yr.-to-Yr.
Percent/
Margin
Change
Revenue $22,059 $24,113 (8.5)%*
Gross profi t margin 51.7% 53.3% (1.6) pts.
Total expense and other (income) $ 6,308 $ 5,767 9.4%
Total expense and other
(income)-to-revenue ratio 28.6% 23.9% 4.7 pts.
Income from continuing operations
before income taxes $ 5,098 $ 7,094 (28.1)%
Provision for income taxes from
continuing operations $ 638 $ 1,580 (59.6)%
Income from continuing operations $ 4,460 $ 5,515 (19.1)%
Income from continuing
operations margin 20.2% 22.9% (2.7) pts.
Income/(loss) from discontinued
operations, net of tax $ 3 $ (31) NM
Net income $ 4,463 $ 5,484 (18.6)%
Earnings per share from continuing
operations:
Assuming dilution $ 4.59 $ 5.54 (17.1)%
Consolidated earnings per share—
assuming dilution $ 4.59 $ 5.51 (16.7)%
Weighted-average shares
outstanding
Assuming dilution 972.8 995.4 (2.3)%
* (2.3)percent adjusted for currency.
NM—Not meaningful
The following table provides the company’s operating (non-GAAP)
earnings for the fourth quarter of 2015 and 2014.
($ inmillions except per share amounts)
For the fourth quarter: 2015 2014
Yr.-to-Yr.
Percent
Change
Net income as reported $4,463 $5,484 (18.6)%
Income/(loss) from discontinued
operations, net of tax 3(31) NM
Income from continuing operations 4,460 5,515 (19.1)
Non-operating adjustments
(net of tax)
Acquisition-related charges 110 186 (41.0)
Non-operating retirement-related
costs/(income) 137 84 63.8
Operating (non-GAAP) earnings* $4,707 $5,785 (18.6)%
Diluted operating (non-GAAP)
earnings per share $ 4.84 $ 5.81 (16.7)%
* See page48 for a more detailed reconciliation of net income to operating earnings.
NM—Not meaningful