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48 Management Discussion
International Business Machines Corporation and Subsidiary Companies
($ inmillions except per share amount)
For the fourth quarter 2015: GAAP
Acquisition-
Related
Adjustments
Retirement-
Related
Adjustments
Operating
(non-GAAP)
Gross profi t $11,407 $ 105 $ 119 $11,630
Gross profi t margin 51.7% 0.5 pts. 0.5 pts. 52.7%
SG&A $ 5,157 $ (95) $ (88) $ 4,975
RD&E 1,362 — (12) 1,350
Other (income) and expense (146) 0 — (146)
Total expense and other (income) 6,308 (95) (100) 6,114
Pre-tax income from continuing operations $ 5,098 $ 199 $ 218 $ 5,516
Pre-tax margin from continuing operations 23.1% 0.9 pts. 1.0 pts. 25.0%
Provision for income taxes* $ 638 $ 89 $ 82 $ 809
Effective tax rate 12.5% 1.2 pts. 1.0 pts. 14.7%
Income from continuing operations $ 4,460 $ 110 $ 137 $ 4,707
Income margin from continuing operations 20.2% 0.5 pts. 0.6 pts. 21.3%
Diluted earnings per share from continuing operations $ 4.59 $0.11 $0.14 $ 4.84
* 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 amount)
For the fourth quarter 2014: GAAP
Acquisition-
Related
Adjustments
Retirement-
Related
Adjustments
Operating
(non-GAAP)
Gross profi t $12,862 $ 101 $ 33 $12,996
Gross profi t 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%
Diluted earnings per share from continuing operations $ 5.54 $0.19 $0.08 $ 5.81
* 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.
GAAP Reconciliation
The tables below provide a reconciliation of the company’s income
statement results as reported under GAAP to its operating earn-
ings 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
pages 18 and 19 for the company’s rationale for presenting oper-
ating earnings information.