www.ibm.com/investor
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2Q 2011 Earnings PresentationJuly 18, 2011
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Forward Looking Statements and NonForward Looking Statements and Non--GAAP InformationGAAP Information
Certain comments made in this presentation may be characterized as forward looking under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company's current assumptions regarding future business and financial performance. Those statements by their nature address matters that are uncertain to different degrees. Those statements involve a number of factors that could cause actual results to differ materially. Additional information concerning these factors is contained in the Company's filings with the SEC. Copies are available from the SEC, from the IBM web site, or from IBM Investor Relations. Any forward-looking statement made during this presentation speaks only as of the date on which it is made. The company assumes no obligation to update or revise any forward-looking statements. These charts and the associated remarks and comments are integrally related, and are intended to be presented and understood together.
In an effort to provide additional and useful information regarding the company’s financial results and other financial information as determined by generally accepted accounting principles (GAAP), the company also discusses, in its earnings press release and earnings presentation materials, certain non-GAAP information including "operating earnings" and other "operating" financial measures. The rationale for management’s use of this non-GAAP information, the reconciliation of that information to GAAP, and other related information are included in supplementary materials entitled “Non-GAAP Supplementary Materials” that are posted on the Company’s investor relations web site at http://www.ibm.com/investor/2q11/ The Non-GAAP Supplementary Materials are also included as Attachment II to the Company’s Form 8-K dated July 18, 2011.
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2Q 2011 Highlights2Q 2011 Highlights
Increasing 2011 Operating (NonIncreasing 2011 Operating (Non--GAAP) EPS expectations to at least $13.25GAAP) EPS expectations to at least $13.25
12% revenue growth driven by:• Key Branded Middleware +21% yr/yr• Systems +20% yr/yr, strong performance across all three server lines • Services +10% yr/yr, led by growth markets +22% (+10% @CC)
Momentum in all four growth initiatives:• Growth Markets• Business Analytics
Double-digit growth in Operating Net Income
Returned $5B to shareholders
+18% yr/yr$3.09Operating (Non-GAAP) EPS
+12%, 5% yr/yr @CC$26.7BRevenue
• Cloud • Smarter Planet
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Key Financial MetricsKey Financial Metrics
(0.4 pts)18.9%PTI Margin
0.8 pts25.0%Tax Rate
(0.2 pts)14.2%NI Margin
1.2 pts46.8%GP Margin
B/(W)Yr/Yr2Q11
P&L Ratios(Operating)
5%@CC
10%$5.0PTI – Operating
18%$3.09EPS – Operating
12%$26.7Revenue
B/(W)Yr/Yr2Q11
P&L Highlights
$ in Billions, except EPS
3.3
15.3
$16.0
Last12 Mos.
Cash Balance @ June 30
Dividends
Share Repurchase
Free Cash Flow (excl GF Receivables)
Cash Highlights
11.8
0.9
4.0
$3.4
2Q11
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Revenue by GeographyRevenue by Geography
3%10%Major Markets13%23%Growth Markets 21%27%BRIC Countries
3%16%8.6Europe/ME/A
(1%)Flat0.7OEM
5%12%$26.7IBM
2Q11
3%14%6.2Asia Pacific
8%10%$11.2Americas
Rptd @CC$ in Billions
APac+12% @CC
OEM -1%
U.S.+6%
EMEA
Canada/ LA
Japan- 5% @CC
Performance led by Growth Markets and North AmericaPerformance led by Growth Markets and North America
B/(W) Yr/Yr
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Revenue and Gross Profit Margin by SegmentRevenue and Gross Profit Margin by Segment
46.8%
48.7%
40.6%
88.4%
28.9%
34.0%
2Q11
1.2 pts
(1.4 pts)
4.9 pts
0.4 pts
0.6 pts
(0.3 pts)
B/(W)Yr/Yr Pts
10%17%6.2Software
2Q11
5%12%$26.7Total Revenue & Operating GP Margin
(11%)(5%)0.5Global Financing
12%17%4.7Systems & Technology
1%9%4.9Global Business Services
3%11%$10.2Global Technology Services
B/(W) Yr/Yr Rptd @CC
$ in Billions
Gross Profit MarginRevenue
Margin expansion led by Systems & TechnologyMargin expansion led by Systems & TechnologyTransaction businesses drove revenue performanceTransaction businesses drove revenue performance
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Expense SummaryExpense Summary
(6 pts)
2 pts
(7 pts)
Base
(4 pts)(10 pts)(20%)$7.4Operating Expense & Other Income
(8%)0.1Interest Expense
nm0.1Other (Income)/Expense
(1%)(0.3)IP and Development Income
(5 pts)(3 pts)(6%)1.6RD&E – Operating
(4 pts)(8 pts)(18%)$5.9SG&A – Operating
Acq.*CurrencyB/(W)Yr/Yr2Q11$ in Billions
B/(W) Yr/Yr Drivers
* Includes acquisitions made in the last twelve months, net of non-operating acquisition-related charges
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1%$1.4Pre-Tax Income
(1.2 pts)13.4%PTI Margin
@CCRptd2Q11
(0.3 pts)34.0%Gross Margin (External)3%11%$10.2Revenue (External)
B/(W) Yr/Yr
Services SegmentsServices SegmentsGlobal Technology Services (GTS) Global Business Services (GBS)
Growth Markets backlog up 50% over last two yearsGrowth Markets backlog up 50% over last two years
2Q11 Revenues (% of Total Services)
$ in Billions
11%$0.8Pre-Tax Income
0.3 pts14.8%PTI Margin
@CCRptd2Q11
0.6 pts28.9%Gross Margin (External)
1%9%$4.9Revenue (External)
B/(W) Yr/Yr$ in Billions
2Q11
@CCRptdGTS
+$2B
Flat4%
Flat3%3%
+$15BServices Backlog $144B
7%Consulting & Systems Integration12%GBS Outsourcing
GBS
Yr/Yr2Q11 Revenue
7%Maintenance11%Integrated Technology Services12%GTS Outsourcing
GTS Outsourcing
40%
GBS C&SI 25%
Maint. 13%
ITS15%
GBS Outsourcing
7%
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Software SegmentSoftware Segment
12%$2.3Pre-Tax Income
@CCRptd2Q11
(1.4 pts)33.2%PTI Margin
0.4 pts88.4%Gross Margin (External)10%17%$6.2Revenue (External)
B/(W) Yr/Yr
@CCRptd
10%
10%
14%
(2%)
4%
3%
11%
47%
17%Total Software
17%Total Middleware
21%Key Branded Middleware
4%Rational
12%Lotus
Yr/Yr2Q11 Revenue
9%Tivoli
18%Information Management
55%WebSphere Family
2Q11 Revenue (% of Total Software)
Key Branded
Middleware 64% Operating
Systems 10%
Other Middleware
18%
Other 8%
$ in Billions
Branded Middleware grew 21%, represents 64% of total SoftwareBranded Middleware grew 21%, represents 64% of total Software
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Systems & Technology SegmentSystems & Technology Segment
112%$0.4Pre-Tax Income
@CCRptd2Q11
3.6 pts8.0%PTI Margin
4.9 pts40.6%Gross Margin (External)
12%17%$4.7Revenue (External)
B/(W) Yr/Yr$ in Billions
2Q11 Revenue(% of Total Sys & Tech)
Servers 65%
Storage 19%
Micro OEM 12%
RSS
Yr/Yr2Q11 Revenue
12%4%
13%3%4%9%7%
53%@CC
12%Power Systems
20%Total Systems
17%Total Systems & Technology4%Microelectronics OEM
8%Retail Store Solutions 10%Storage15%System x
Rptd61%System z
Strong growth in revenue, profit and marginStrong growth in revenue, profit and margin
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Cash Flow AnalysisCash Flow Analysis
$1.8
1.6
(0.3)
0.1
(0.1)
0.0
0.9
(0.3)
(0.1)
(0.2)
0.0
($0.1)
B/(W)Yr/Yr
$0.1$0.3($1.5)Change in Cash & Marketable Securities
4.8
1.0
(8.0)
(1.7)
0.0
(0.2)
4.2
(2.0)
6.2
1.9
$8.1
YTD1H11
0.70.2Other (includes GF A/R & GF Debt)
(0.9)0.0Non-GF Debt
0.1(4.0)Share Repurchases
(0.1)(0.9)Dividends
0.00.0Divestitures
0.1(0.1)Acquisitions
0.33.4Free Cash Flow (excluding GF Receivables)
0.0(1.0)Net Capital Expenditures
B/(W)Yr/Yr2Q11
0.34.3Net Cash from Operations (excluding GF Receivables)
0.20.0Less: Global Financing Receivables
$0.5$4.3Net Cash from Operations
$ in Billions
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7.0
24%
23.2
90.3
29.8
23.4
6.4
60.5
113.5
32.9
68.8
$11.8
June 11
7.0
23%
23.2
90.3
28.6
22.8
5.8
61.7
113.5
34.5
67.3
$11.7
Dec. 10
21.2Equity
82.2Total Liabilities
26.7Total Debt
21.2Global Financing Debt
5.5Non-GF Debt*
7.1Global Financing Leverage
23%
55.6
103.4
29.5
61.6
$12.2
June 10
Non-GF Debt / Capital
Other Liabilities
Total Assets
Global Financing Assets
Non-GF Assets*
Cash & Marketable Securities
Balance Sheet SummaryBalance Sheet Summary$ in Billions
* Includes eliminations of inter-company activity
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2Q10 Operating EPS
Revenue Growth @ Actual
Margin Expansion
Share Repurchases
2Q11 Operating EPS
Operating EPS Bridge – 2Q10 to 2Q11Operating EPS Bridge Operating EPS Bridge –– 2Q10 to 2Q112Q10 to 2Q11
$0.33 ($0.04)
$0.18
$2.62
$3.09
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2Q 2011 Summary2Q 2011 Summary
Increasing 2011 Operating (NonIncreasing 2011 Operating (Non--GAAP) EPS expectations GAAP) EPS expectations to at least $13.25to at least $13.25
Revenue growth driven by transaction businesses
Momentum in growth initiatives• Growth markets +13% yr/yr @CC for 2Q and YTD,
half of geographic revenue growth
• 1st half business analytics revenue up >20% yr/yr
• Cloud revenue on track to double in 2011
• 1st half Smarter Planet revenue up >50% yr/yr
Double-digit growth in Operating Net Income
Leveraging strong cash generation to return value to shareholders
Operating EPS
2010
2015
$11.67
At least$20
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Supplemental MaterialsSupplemental Materials
Currency – Year/Year ComparisonSupplemental Segment Information – Global ServicesSupplemental Segment Information – Systems & Technology, SoftwareGlobal Financing PortfolioRevenue by Key Industry Sales Unit Cash Flow (FAS 95) Non-GAAP Supplementary Materials
• Operating (Non-GAAP) Earnings Per Share and Related Income Statement Items, Constant Currency
• Cash Flow, Debt-to-Capital Ratio, Current Item (Workforce Rebalancing)• Reconciliation of Operating Earnings Per Share• GAAP to Operating (Non-GAAP) Bridge – 2Q 2011• GAAP to Operating (Non-GAAP) Bridge – 2Q 2010• Reconciliation of Free Cash Flow (excluding GF Receivables)• Reconciliation of Revenue Growth Rates – Geographies • Reconciliation of Revenue Growth Rates – Segments• Reconciliation of Revenue Growth – Growth Markets vs. Major Markets• Reconciliation of Yr/Yr Expense Drivers• Reconciliation of Debt-to-Capital Ratio• Reconciliation of Operating EPS Bridge 2Q10 to 2Q11
Some columns and rows in these materials, including the supplemental exhibits, may not add due to rounding
Supplemental Materials
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Currency Currency –– Year/Year ComparisonYear/Year Comparison
5%$24.9Revenue @CC
12%$26.7Revenue As Reported
7 pts1.7Currency Impact
Yr/Yr(US$B)
82
0.61
0.69
2Q11
7 pts
11%
9%
12%
Yr/Yr
~4-5 pts
8%
5%
7%
FY11
~5-6 pts
8%
4%
9%
3Q11
3 pts
4%
2%
4%
4Q11
79
0.62
0.71
7/15Spot
3 pts
9%
3%
(1%)
Yr/Yr1Q11
IBM Revenue Impact
82Yen
0.62Pound
0.73Euro
Yr/Yr @ 7/15 Spot
Quarterly Averages per US $
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Supplemental Segment Information Supplemental Segment Information –– 2Q 20112Q 2011
8%17%$7.1Outsourcing
- GTS O/S, GBS O/S (AMS)
7%15%7.1Transactional
- ITS, Consulting & AMS SI (incl. US Federal)
8%16%$14.3Total Signings
Backlog$ in Billions
@CCYr/Yr2Q11Global Services
+$2+$15$144Total Backlog
(1)+896Outsourcing Backlog
Signings$ in Billions
@CCYr/Yr2Q11Global Services
Note: YTY signings growth reflects 2010 signings categories consistent with 2011
3%11%Total GTS
Flat7%Maintenance
1%9%Total GBS
Flat7%Maintenance
3%11%Integrated Tech Services
Flat7%GBS C&SI
3%12%Total Outsourcing
@CCYr/YrGlobal Services
1%9%Total Transactional
Revenue Growth
4%12%GBS Outsourcing
3%12%GTS Outsourcing
Supplemental Revenue InformationSupplemental Revenue Information Supplemental Backlog / Signings InformationSupplemental Backlog / Signings Information
Supplemental Materials
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Supplemental Segment Information Supplemental Segment Information –– 2Q 20112Q 2011
ShareGP%@CCYr/YrSystems & Technology
12%
4%
13%
3%
4%
9%
7%
53%
=
=
=
17%Total Systems & Technology
4%Microelectronics OEM
20%Total Systems
8%Retail Store Solutions
10%Storage
15%System x
Revenue Growth
12%Power Systems
61%System z
Revenue Growth
10%17%Total Software
12%19%Other Software/Services
9%16%Operating Systems
10%17%Total Middleware
Flat5%Other Middleware
14%21%Key Branded Middleware
(2%)4%Rational
4%12%Lotus
@CCYr/YrSoftware
3%9%Tivoli
11%18%Information Management
47%55%WebSphere Family
Supplemental Materials
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25%40%
19% 10% 4% 2%0%
10%
20%
30%
40%
50%
Aaa-A3 Baa1-Baa3 Ba1-Ba2 Ba3-B1 B2-B3 Caa-D
Investment Grade65%
Non-Investment Grade35%
2Q11 1Q11 2Q10Identified Loss Rate 1.0% 1.2% 1.8%Anticipated Loss Rate 0.3% 0.3% 0.3%Reserve Coverage 1.3% 1.5% 2.1%
Client Days Delinquent Outstanding 2.4 3.3 3.7Commercial A/R > 30 Days $32M $25M $27M
Global Financing PortfolioGlobal Financing Portfolio2Q11 2Q11 –– $24.4B Net External Receivables $24.4B Net External Receivables
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5%12%$26.7Total IBM
8%16%5.4General Business
2Q11
10%16%2.7Communications
3%9%2.6Distribution
1%9%2.6Industrial
Flat6%4.0Public
8%17%$7.8Financial Services
B/(W) Yr/Yr Rptd @CC
Revenue by Key Industry Sales UnitRevenue by Key Industry Sales Unit
$ in Billions
GeneralBusiness
Comms
Distribution
Industrial Public
Financial Services
Supplemental Materials
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Cash Flow (FAS 95)Cash Flow (FAS 95)
$1.1
0.3
(7.2)
1.6
(8.0)
(1.7)
1.0
(0.1)
2.1
(0.2)
0.0
(2.0)
8.1
1.9
(3.1)
0.3
2.4
$6.5
YTD1H11
($1.0)
0.2
(4.9)
0.7
(4.0)
(0.9)
(0.7)
(0.6)
0.5
(0.1)
0.0
(1.0)
4.3
0.0
(0.7)
0.2
1.2
$3.7
QTD2Q11
($1.9)
(0.3)
(7.1)
1.8
(8.1)
(1.6)
0.7
(2.6)
0.2
(1.0)
0.0
(1.9)
8.2
1.9
(2.4)
0.3
2.4
$6.0
YTD1H10
($2.1)
(0.2)
(3.7)
0.9
(4.1)
(0.8)
0.2
(1.9)
(0.8)
(0.2)
0.0
(1.0)
3.8
(0.2)
(0.7)
0.2
1.2
$3.4
QTD2Q10
Net Change in Cash & Cash Equivalents
Working Capital / Other
Effect of Exchange Rate changes on Cash
Net Cash used in Financing Activities
Common Stock Transactions - Other
Common Stock Repurchases
Dividends
Debt, net of payments & proceeds
Net Cash used in Investing Activities
Marketable Securities / Other Investments, net
Acquisitions, net of cash acquired
Divestitures, net of cash transferred
Capital Expenditures, net of payments & proceeds
Net Cash provided by Operating Activities
Global Financing A/R
Stock-based Compensation
Depreciation / Amortization of Intangibles
Net Income from Operations
$ in Billions
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NonNon--GAAP Supplementary MaterialsGAAP Supplementary MaterialsIn an effort to provide investors with additional information regarding the company's results as determined by generally accepted accounting principles (GAAP), the company also discusses, in its earnings press release and earnings presentation materials, the following Non-GAAP information which management believes provides useful information to investors.
Operating (Non-GAAP) Earnings Per Share and Related Income Statement ItemsManagement presents certain financial measures excluding the effects of certain acquisition-related charges, non-operating retirement-related costs, and any related tax impacts. Management uses the term "operating" to describe this view of the company's financial results and other financial information. For acquisitions, these measures exclude the amortization of purchased intangible assets and acquisition-related charges such as in-process research and development, transaction costs, applicable restructuring and related expenses, and tax charges related to acquisition integration. For retirement-related costs, the company has characterized certain items as operating and others as non-operating. The company includes service cost, amortization of prior service cost and the cost of defined contribution plans in its operating results. Non-operating retirement-related costs include interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements, multi-employer plan costs, pension insolvency costs, and other costs. Non-operating costs primarily relate to changes in pension plan assets and liabilities which are tied to market performance, and management considers these costs to be outside the operational performance of the business. Management’s calculation of these operating measures, as presented, may differ from similarly titled measures reported by other companies.
Overall, management believes that providing investors with an operating view as described above provides increased transparency and clarity into both the operational results of the business and the performance of the company’s pension plans, improves visibility to management decisions and their impacts on operational performance, enables better comparison to peer companies, and allows the company to provide a long term strategic view of the business going forward. For the 2015 earnings per share roadmap, the company is utilizing an operating view to establish its objectives and track its progress. Effective January 1, 2011, the company’s segment financial results and performance reflect operating earnings, consistent with the company’s management and measurement system.
Constant Currency Management refers to growth rates at constant currency or adjusting for currency so that certain financial results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of the company's business performance. Financial results adjusted for currency are calculated by translating current period activity in local currency using the comparable prior year period’s currency conversion rate. This approach is used for countries where the functional currency is the local currency. Generally, when the dollar either strengthens or weakens against other currencies, the growth at constant currency rates or adjusting for currency will be higher or lower than growth reported at actual exchange rates.
Supplemental Materials
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NonNon--GAAP Supplementary MaterialsGAAP Supplementary MaterialsCash FlowManagement uses a free cash flow measure to evaluate the company’s operating results, plan share repurchase levels, evaluate strategic investments and assess the company’s ability and need to incur and service debt. The entire free cash flow amount is not necessarily available for discretionary expenditures. The company defines free cash flow as net cash from operating activities less the change in Global Financing receivables and net capital expenditures, including the investment in software. A key objective of the Global Financing business is to generate strong returns on equity, and increasing receivables is the basis for growth. Accordingly, management considers Global Financing receivables as a profit-generating investment, not as working capital that should be minimized for efficiency. Therefore, management includes presentations of both free cash flow and cash flow from operations that exclude the effect of Global Financing receivables.
Debt-to-Capital RatioManagement presents its debt-to-capital ratio excluding the Global Financing business. A financing business is managed on a leveraged basis. The company funds its Global Financing segment using a debt-to-equity ratio target of approximately 7 to 1. Given this significant leverage, the company presents a debt-to-capital ratio which excludes the Global Financing segment debt and equity because the company believes this is more representative of the company’s core business operations.
Current Item (Workforce Rebalancing)Management presents certain financial results excluding the effects of certain charges in connection with workforce rebalancing actions. Management believes that presenting certain financial information without this item is more representative of the company’s operational performance and provides additional insight into, and clarifies the basis for, historical and/or future performance, which may be more useful for investors.
Supplemental Materials
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Non-GAAP Supplementary MaterialsReconciliation of Operating Earnings Per Share
NonNon--GAAP Supplementary MaterialsGAAP Supplementary MaterialsReconciliation ofReconciliation of Operating Earnings Per ShareOperating Earnings Per Share
IBM Operating EPS (Non-GAAP)
Acquisition-Related Charges *Amortization of Purchased Intangibles
Other Acquisition-Related Charges
Non-Operating Retirement-Related Items
IBM GAAP EPS
Adjustments
2011 Expectations
$12.87+$13.25+
$0.40$0.39
$0.01
($0.02)* Includes acquisitions as of 6/30/2011
The above serves to reconcile the Non-GAAP financial information contained in the “2Q 2011 Highlights” and “2Q 2011 Summary” discussion in the company’s earnings presentation. See Slide 23 of this presentation for additional information on the use of these Non-GAAP financial measures.
Supplemental Materials
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NonNon--GAAP Supplementary MaterialsGAAP Supplementary MaterialsGAAP to Operating (NonGAAP to Operating (Non--GAAP) Bridge GAAP) Bridge –– 2Q 20112Q 2011
960(1)97Other Income & Expense
7,44118(77)7,500Total Operating Expense & Other Income
1,2590381,221Tax ***
$3.09($0.01)$0.10$3.00Diluted Earnings Per Share
3,777(13)1263,664Net Income
5,036(12)1634,885Pre-Tax Income
1,5932401,569RD&E
5,950(5)(76)6,030SG&A
$12,477$6$87$12,385Gross Profit
Operating(Non-GAAP)
Retirement-related Adjustments**
Acquisition-related Adjustments*GAAP
$ in Millions, except EPS
* Includes amortization of purchased intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, and deal costs** Includes retirement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition assets, other settlements, curtailments,
multi-employer plans and insolvency insurance***The tax impact on the Operating (Non-GAAP) Pre-Tax Income is calculated under the same accounting principles applied to the As Reported Pre-Tax Income under ASC 740,
which employs an annual effective tax rate method to the results.
The above serves to reconcile the Non-GAAP financial information contained in the “2Q 2011 Highlights,” “Key Financial Metrics” and “Expense Summary” discussion in the company’s earnings presentation. See Slide 23 of this presentation for additional information on the use of these Non-GAAP financial measures.
Supplemental Materials
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NonNon--GAAP Supplementary MaterialsGAAP Supplementary MaterialsGAAP to Operating (NonGAAP to Operating (Non--GAAP) Bridge GAAP) Bridge –– 2Q 20102Q 2010
(97)0(3)(95)Other Income & Expense
6,22757(64)6,234Total Operating Expense & Other Income
1,183(45) 381,190Tax ***
$2.62($0.05)$0.06$2.61Diluted Earnings Per Share
3,402(68)843,386Net Income
4,584(113)1224,575Pre-Tax Income
1,5073201,475RD&E
5,02425(62)5,061 SG&A
$10,811($56)$58$10,809Gross Profit
Operating(Non-GAAP)
Retirement-related Adjustments**
Acquisition-related Adjustments*GAAP
$ in Millions, except EPS
* Includes amortization of purchased Intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, and deal costs** Includes retirement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition assets, other settlements, curtailments,
multi-employer plans and insolvency insurance***The tax impact on the Operating (Non-GAAP) Pre-Tax Income is calculated under the same accounting principles applied to the As Reported Pre-Tax Income under ASC 740,
which employs an annual effective tax rate method to the results.
The above serves to reconcile the Non-GAAP financial information contained in the “2Q 2011 Highlights,” “Key Financial Metrics” and “Expense Summary” discussion in the company’s earnings presentation. See Slide 23 of this presentation for additional information on the use of these Non-GAAP financial measures.
Supplemental Materials
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NonNon--GAAP Supplementary MaterialsGAAP Supplementary Materials
$16.0Free Cash Flow (excluding GF Receivables)
(4.1)Net Capital Expenditures
12 months ended 6/30/11
20.1Net Cash from Operations (excluding GF Receivables)
(0.7)Less: Global Financing Receivables
$19.4Net Cash from Operations
$ in Billions
Reconciliation of Free Cash Flow (excluding GF Receivables)Reconciliation of Free Cash Flow (excluding GF Receivables)
The above serves to reconcile the Non-GAAP financial information contained in the “Key Financial Metrics” discussion in the company’s earnings presentation. See Slide 24 of this presentation for additional information on the use of these Non-GAAP financial measures.
Supplemental Materials
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NonNon--GAAP Supplementary MaterialsGAAP Supplementary MaterialsReconciliation of Geography Revenue GrowthReconciliation of Geography Revenue Growth
@CCAs Rptd
11%(5%)12%
24%39%10%
18%7%22%
30%50%22%
CanadaJapanAsia Pacific, other than Japan
Growth MarketsHardwareWebSphereServices
2Q11 Yr/Yr
The above serves to reconcile the Non-GAAP financial information contained in the "Revenue by Geography” discussion in the company’s earnings presentation. See Slide 23 of this presentation for additional information on the use of these Non-GAAP financial measures.
Supplemental Materials
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NonNon--GAAP Supplementary MaterialsGAAP Supplementary MaterialsReconciliation of Segment Revenue GrowthReconciliation of Segment Revenue Growth
@CCAs Rptd
10%14%
10%(1%)
24%7%27%
23%23%
21%7%
29%12%35%
Global Technology ServicesOutsourcing – Growth MarketsIntegrated Technology Services – Growth Markets
Global Business ServicesGrowth MarketsMajor Markets
Systems and TechnologyGrowth MarketsMajor MarketsSystem x – Growth Markets
2Q11 Yr/Yr
The above serves to reconcile the Non-GAAP financial information contained in the “Services Segments,” and “Systems and Technology Segment” discussion in the company’s earnings presentation. See Slide 23 of this presentation for additional information on the use of these Non-GAAP financial measures.
Supplemental Materials
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NonNon--GAAP Supplementary MaterialsGAAP Supplementary MaterialsReconciliation of Revenue GrowthReconciliation of Revenue Growth
9%9%Growth Markets vs. Major Markets
@CCAs RptdAverage 1Q 2008 to 2Q 2011
The above serves to reconcile the Non-GAAP financial information contained in the “Revenue by Geography” discussion in the company’s earnings presentation. See Slide 23 of this presentation for additional information on the use of these Non-GAAP financial measures.
Supplemental Materials
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(3 pts)0 pts(3 pts)Currency
(5 pts)0 pts(5 pts)Acquisitions
2 pts1 pt2 ptsBase
Operating Expense & Other Income
(10 pts)0 pts(10 pts)Currency
(4 pts)0 pts(5 pts)Acquisitions
SG&A
(8 pts)0 pts(8 pts)Currency
(4 pts)0 pts(4 pts)Acquisitions
(7 pts)0 pts(7 pts)Base
RD&E
(6 pts)0 pts(6 pts)Base
Operating(Non-GAAP)
Non-GAAP AdjustmentsGAAP
NonNon--GAAP Supplementary MaterialsGAAP Supplementary MaterialsReconciliation of Yr/Yr Expense DriversReconciliation of Yr/Yr Expense Drivers
The above serves to reconcile the Non-GAAP financial information contained in the “Expense Summary” discussion in the company’s earnings presentation. See Slide 23 of this presentation for additional information on the use of these Non-GAAP financial measures.
Supplemental Materials
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Reconciliation of DebtReconciliation of Debt--toto--Capital RatioCapital Ratio
23%
56%
2Q10
23%
55%
FY102Q11
24%
56%
Non-Global Financing Debt / Capital
IBM Consolidated Debt / Capital
The above serves to reconcile the Non-GAAP financial information contained in the “Balance Sheet” discussion regarding the non-Global Financing debt to capital ratio in the company’s earnings presentation. See Slide 24 of this presentation for additional information on the use of these Non-GAAP financial measures.
NonNon--GAAP Supplementary MaterialsGAAP Supplementary Materials
Supplemental Materials
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* Includes amortization of purchased intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, deal costs** Includes retirement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition assets, other settlements, curtailments, multi-employer plans and insolvency insurance
NonNon--GAAP Supplementary MaterialsGAAP Supplementary MaterialsReconciliation of Operating EPS Bridge 2Q10 to 2Q11Reconciliation of Operating EPS Bridge 2Q10 to 2Q11
The above serves to reconcile the Non-GAAP financial information contained in the “Operating EPS Bridge – 2Q10 to 2Q11” discussion in the company’s earnings presentation. See Slide 23 of this presentation for additional information on the use of these Non-GAAP financial measures.
$3.09($0.01)$0.10$3.002Q11 EPS
0.180.000.010.17Share repurchases
(0.04)0.040.02(0.10)Margin expansion
0.330.000.010.32Revenue growth @ actual
$2.62($0.05)$0.06$2.612Q10 EPS
Operating(Non-GAAP)
Retirement-related Adjustments**
Acquisition-related
Adjustments*GAAP
Supplemental Materials
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