IBM ANNOUNCES 1995 FIRST QUARTER RESULTS
ARMONK, N.Y., April 20, 1995 . . . IBM today reported first quarter 1995 earnings of $1.3 billion, or $2.12 per common share, compared with an adjusted $.54 in the first quarter of 1994. Total revenue was $15.7 billion, an increase of 17.7 percent over the same period of last year. The revenue, earnings, and earnings-per-share results were all records for a first quarter.
IBM Chairman and Chief Executive Officer Louis V. Gerstner, Jr., said: "We had a strong quarter. The strategic priorities we put in place 18 months ago -- technology and marketing strategies as well as cost reduction -- were important factors. Cost reductions have benefited us for more than a year, but now our revenue growth indicates that our technology and marketing strategies are taking hold and beginning to produce fundamental gains.
"Revenue increased significantly in all key product areas, including personal computers, RISC System/6000s, AS/400s, storage, and mainframes. Our personal computer business made substantial progress in the quarter, although a lot of work remains to be done before we're satisfied with our performance in this part of the company. In addition, we showed good growth in distributed software, led by very strong growth of OS/2 Warp. Services revenue grew by more than 30 percent.
"IBM's balance sheet continued to strengthen in the first quarter," Mr. Gerstner said. "We completed the quarter with $10.5 billion in cash -- virtually flat with the previous quarter despite spending $1.4 billion for common and preferred stock buybacks and about $900 million in restructuring costs.
"Although the signs are encouraging, it's important to put our first quarter results into perspective. The first quarter of last year was relatively weak, which makes this year's first quarter performance look especially strong. Our results also benefited from the strength of some currencies. Nevertheless, we believe that the transformation of IBM is gathering momentum."
Revenue grew in all geographic areas in the first quarter. Revenue from North America totaled $6.7 billion, an increase of 16.6 percent from last year's first quarter. Revenue from Europe/Middle East/Africa was $5.4 billion, an increase of 15.8 percent over the comparable period of last year, while revenue from Asia-Pacific was $2.9 billion, an increase of 26.4 percent. Revenue from Latin America totaled $657 million, a year-over-year increase of 8.4 percent.
Currency improved the company's revenue results by approximately 6 percentage points, although the revenue gains were largely offset by corresponding increases in costs and expenses due to currency.
Total hardware sales were $7.7 billion in the first quarter, an increase of 23.3 percent from the year-earlier period. Overall software revenue was $2.9 billion, an increase of 11.2 percent compared with the same period of last year, while services revenue grew 33.2 percent to $2.4 billion. Maintenance revenue increased 3.0 percent year over year to $1.8 billion, and rentals and financing revenue declined 5.4 percent to $869 million.
Revenue from original equipment manufacturer (OEM) sales continued to grow robustly in the first quarter, primarily as a result of significant growth from semiconductor products. IBM's overall gross profit margin was 42.4 percent in the first quarter compared with 39.2 percent in the first quarter of 1994 after adjusting for $296 million in software accounting charges.
Total expenses declined 3.4 percent in the first quarter (7.9 percent on a constant currency basis). From year-end 1992 through March 31, 1995, expenses have been reduced by a cumulative $6.5 billion toward the company's $8 billion expense reduction goal.
IBM's "core" debt -- debt in support of operations, excluding customer financing -- remained virtually flat in the first quarter at a total of $2.9 billion. During the same period, debt to support the company's worldwide credit operations increased slightly to a total of $19.7 billion.
INTERNATIONAL BUSINESS MACHINES CORPORATION
SUPPLEMENTAL SCHEDULE - COMPARATIVE FINANCIAL RESULTS (1)
(EXCLUDES EFFECTS OF FSC SALE, RESTRUCTURING CHARGE,
AND ACCOUNTING CHANGES)
Three months ended March 31
Percent
1995 1994 Change
------- ------- -------
Revenue:
Hardware sales $7,727 $6,268 23.3%
Gross profit % 37.9% 30.1%
Software 2,873 2,583 11.2%
Gross profit % 65.0% 62.7%
Services 2,445 1,836 33.2%
Gross profit % 19.3% 15.3%
Maintenance 1,821 1,768 3.0%
Gross profit % 50.6% 50.7%
Rentals and financing 869 918 -5.4%
Gross profit % 54.4% 60.2%
Total revenue 15,735 13,373 17.7%
Gross profit 6,664 5,236 27.3%
Gross profit % 42.4% 39.2%
Operating expenses:
S,G&A 3,633 3,531 2.9%
% of revenue 23.1% 26.4%
R,D&E 913 1,100 -17.0%
% of revenue 5.8% 8.2%
Operating income 2,118 605 250.4%
Other income 246 408 -39.7%
Interest expense 180 414 -56.5%
Earnings before
income taxes 2,184 599 264.9%
Pre-tax margin 13.9% 4.5%
Provision for
income taxes 895 263 240.6%
Effective tax rate 41.0% 43.9%
Net earnings $1,289 $336 283.9%
====== ======
Net margin 8.2% 2.5%
Preferred stock
dividends and
transaction costs 47 21
Net earnings
applicable to common
shareholders $1,242 $315 294.9%
====== ======
Net earnings per
share of common stock $2.12 $0.54 292.6%
====== ======
Average number
of common shares
outstanding (M's) 585.2 582.1
(1) Supplemental information provided for comparative purposes:
1994 excludes effects of FSC sale and accounting charges
for writedown of software.
INTERNATIONAL BUSINESS MACHINES CORPORATION
COMPARATIVE FINANCIAL RESULTS
(Unaudited; Dollars in millions except per share amounts)
Three months ended March 31
Percent
1995 1994 Change
------- ------- -------
Revenue:
Hardware sales $7,727 $6,268 23.3%
Gross profit % 37.9% 30.1%
Software 2,873 2,583 11.2%
Gross profit % 65.0% 51.2%
Services 2,445 1,836 33.2%
Gross profit % 19.3% 15.3%
Maintenance 1,821 1,768 3.0%
Gross profit % 50.6% 50.7%
Rentals and financing 869 918 -5.4%
Gross profit % 54.4% 60.2%
Total revenue 15,735 13,373 17.7%
Gross profit 6,664 4,940 34.9%
Gross profit % 42.4% 36.9%
Operating expenses:
S,G&A 3,633 3,149 15.3%
% of revenue 23.1% 23.5%
R,D&E 913 1,100 -17.0%
% of revenue 5.8% 8.2%
Operating income 2,118 691 206.7%
Other income 246 408 -39.7%
Interest expense 180 414 -56.5%
Earnings before
income taxes 2,184 685 219.1%
Pre-tax margin 13.9% 5.1%
Provision for
income taxes 895 293 205.6%
Effective tax rate 41.0% 42.8%
Net earnings $1,289 $392 229.1%
====== ======
Net margin 8.2% 2.9%
Preferred stock
dividends and
transaction costs 47 21
Net earnings
applicable to common
shareholders $1,242 $371 235.3%
====== ======
Net earnings per
share of common stock $2.12 $0.64 231.3%
====== ======
Average number
of common shares
outstanding (M's) 585.2 582.1
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited; Dollars in millions)
At At
March 31 December 31 Percent
1995 1994 Change
--------- ----------- -------
Assets:
Cash, cash equivalents,
and marketable securities $10,490 $10,554 -0.6%
Receivables - net, inventories,
and prepaid expenses 30,541 30,784 -0.8%
Plant, rental machines,
and other property - net 16,824 16,664 1.0%
Investments and other assets 23,025 23,089 -0.3%
------- -------
Total assets $80,880 $81,091 -0.3%
======= =======
Liabilities and Stockholders' Equity:
Short-term debt $10,106 $9,570 5.6%
Long-term debt 12,519 12,548 -0.2%
------- -------
Total debt 22,625 22,118 2.3%
Accounts payable, taxes,
and accruals 17,784 19,656 -9.5%
Other liabilities and
deferred income taxes 16,385 15,904 3.0%
------- -------
Total liabilities 56,794 57,678 -1.5%
Stockholders' equity 24,086 23,413 2.9%
------- -------
Total liabilities and
stockholders' equity $80,880 $81,091 -0.3%
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