IBM ANNOUNCES 1994 FIRST QUARTER RESULTS
ARMONK, N.Y., April 21, 1994 . . . IBM today reported first-quarter 1994 net earnings of $392 million ($.64 per common share) compared with a net loss of $399 million ($.70 loss per common share) in the first quarter of 1993. First-quarter 1994 revenues were $13.4 billion, up two percent from the same period of last year.
IBM's first-quarter 1994 results include an after-tax gain of $248 million ($.43 per common share) from the sale of its Federal Systems Company (FSC) and an after-tax writedown of $192 million ($.33 per common share) relating to a change in software amortization periods. IBM's first quarter 1994 performance also does not reflect operational results from FSC, which were included in first quarter and full-year 1993 results. Excluding these three special items, overall IBM revenues grew six percent in the first quarter of 1994 compared with the same period of 1993 and net earnings were $336 million ($.54 per common share).
IBM Chairman and CEO Louis V. Gerstner, Jr., said, "Our first-quarter results were encouraging. Revenues grew in all major regions of the world. Expenses declined significantly. However, the results from one quarter do not guarantee sustained, long-term success. We've improved in many areas, but we still have a long way to go."
First-quarter 1994 revenues in the United States were $5.3 billion, up six percent over the comparable period of 1993 excluding FSC 1993 results. European revenues were $4.7 billion, up three percent from a year earlier, while revenues from Asia totaled $2.3 billion, up 13 percent from 1993's first quarter. Revenues from Latin America were $600 million, up 14 percent from 1993's first quarter.
Overall hardware sales in the first quarter were $6.3 billion, an increase of nine percent from the comparable period of last year. Within major hardware areas, personal computer, RISC System/6000, and AS/400 revenues increased over the year-earlier period. Mainframe and high-end storage product revenues decreased compared with the same period of 1993.
Software revenues were $2.6 billion in the first quarter, up two percent from first-quarter 1993 levels. Services revenues were $1.8 billion and, excluding 1993 FSC results, grew 21 percent year over year. Maintenance, rentals and financing revenues declined.
The company's overall gross profit margin, excluding the effect of the software writedown, was 39.2 percent in the first quarter of 1994 compared with an overall gross margin of 39.5 percent a year earlier. Including the software writedown, the gross margin was 36.9 percent.
The change in IBM's accounting amortization periods for software includes all IBM software. It reduces amortization lives to a maximum of four years to recognize more rapid advances in software technology and a shorter period over which to recover capitalized costs, and led to the $192 million after-tax writedown. Amortization lives formerly ranged up to six years.
Costs increased by seven percent in the quarter compared with the same period of 1993, due to expenditures associated with the continued growth of IBM's services offerings and personal computers as well as the changes in software amortization periods.
Total expenses declined by 23 percent in the first quarter compared with the same period of 1993, principally as a result of continued reductions in IBM's overall expense structure and the effect of the gain on the sale of FSC. Excluding the FSC gain, total expenses declined by 16 percent.
IBM completed the first quarter with cash and marketable securities of approximately $9.0 billion, including about $1.5 billion resulting from the FSC sale, compared with a balance of $5.8 billion a year earlier. Total debt declined by $2.9 billion from the first quarter of 1993 and $500 million from December 31 of last year, resulting in total debt of $26.9 billion as of March 31, 1994. The company's tax rate was 42.8 percent in the first quarter of 1994.
The average number of shares outstanding in the first quarter of 1994 was 582.1 million compared with 570.6 million in the same period of last year.
Three months ended March 31
(In millions except per share amounts)
% Increase
1994 1993 (Decrease)
____ ____ __________
Revenue
Hardware sales $ 6,268 $ 5,737 9.2
Gross profit margin 30.1% 29.0%
Software 2,583 2,521 2.5
Gross profit margin 51.2% 62.8%
Services 1,836 1,909 (3.8)
Gross profit margin 15.3% 21.6%
Maintenance 1,768 1,804 (2.0)
Gross profit margin 50.7% 49.1%
Rentals and financing 918 1,087 (15.5)
Gross profit margin 60.2% 56.6%
Total revenue 13,373 13,058 2.4
Gross profit 4,940 5,162 (4.3)
Gross profit margin 36.9% 39.5%
S,G&A expenses 3,149 4,076 (22.8)
Expense to revenue 23.5% 31.2%
R,D&E expenses 1,100 1,356 (18.8)
Expense to revenue 8.2% 10.4%
Operating income (loss) 691 (270) --
Other income 408 195 108.5
Interest expense 414 305 35.5
Earnings (loss) before
income taxes 685 (380) --
Pre-tax margin 5.1% (2.9)%
Provision (benefit) for
income taxes 293 (95) --
Effective tax rate 42.8% 25.0%
Earnings (loss) before effect
of change in accounting
principle 392 (285) --
Cumulative effect of change
in accounting principle (a) -- (114) --
Net earnings (loss) 392 (399) --
Preferred stock dividends 21 -- --
Net earnings (loss) available
to common shareholders $ 371 $ (399) --
________ _________
________ _________
Per share of common stock:
Before effect of change
in accounting principle $ .64 $ (.50) --
Cumulative effect of change
in accounting principle (a) -- (.20) --
Net earnings (loss) $ .64 $ (.70) --
________ _________
________ _________
Average number of common
shares outstanding 582.1 570.6
(a) 1993 cumulative effect of Statement of Financial Accounting
Standards (SFAS) 112, "Employers' Accounting for
Postemployment Benefits."
Revenue - Earnings
(In millions except per share amounts)
As Reported
1994 1993(a)
____ ____
Revenue
1st Qtr. $ 13,373 $ 13,058
2nd Qtr. 15,519
6 Mths. 28,577
3rd Qtr. 14,743
9 Mths. 43,320
4th Qtr. 19,396
Year 62,716
Earnings (Loss) Before Income Taxes
1st Qtr. 685 (380)
2nd Qtr. (8,998)
6 Mths. (9,378)
3rd Qtr. (82)
9 Mths. (9,460)
4th Qtr. 663
Year (8,797)
Net Earnings (Loss)
1st Qtr. 392 (399)
2nd Qtr. (8,036)
6 Mths. (8,435)
3rd Qtr. (48)
9 Mths. (8,483)
4th Qtr. 382
Year (8,101)
Earnings (Loss) Per Common Share (b)
1st Qtr. $ .64 $ (.70)
2nd Qtr. (14.10)
6 Mths. (14.80)
3rd Qtr. (.12)
9 Mths. (14.90)
4th Qtr. .62
Year (14.22)
(a) First quarter and year-to-date results reflect the
cumulative effect of the adoption of Statement of
Financial Accounting Standards (SFAS) 112, "Employers'
Accounting for Postemployment Benefits." Second
quarter and year-to-date results include charges of
$8.9 billion before taxes for work-force, capacity and
space reduction actions.
(b) The sum of the quarters' EPS does not equal the
year-to-date EPS due to changes in average share
calculations. This is in accordance with prescribed
reporting requirements. Also, earnings per common share
are after preferred dividends.
Please Note:
Questions about the content or currency of this press release
should be directed to your local IBM representative.
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