IBM ANNOUNCES 1995 SECOND QUARTER RESULTS
ARMONK, N.Y., July 18, 1995 . . . IBM today announced record second-quarter 1995 earnings of $1.7 billion, or $2.97 per common share, compared with earnings of $689 million, or $1.14 per common share, in the second quarter of last year. Total revenues increased 14.2 percent over the same period of 1994 to $17.5 billion, also a second-quarter record.
IBM Chairman and Chief Executive Officer Louis V. Gerstner, Jr., said: "This was a very good quarter. Although our merger with Lotus has drawn a lot of attention in recent weeks, we made important strategic progress in the quarter in other areas of IBM as well. For example, we announced a number of new server products, including a PC server that can run both mainframe and personal computer applications. We introduced upgraded System/390, RISC System/6000 and AS/400 models and the Power Series -- new desktop personal computers and ThinkPads featuring the PowerPC microprocessor. We continued to make progress in turning around the PC Company. Services revenues again grew by more than 30 percent. Our gross profit margin strengthened and our balance sheet remained strong. Cash balances held at first- quarter levels of $10.5 billion despite $1.4 billion of stock repurchases and $500 million in cash restructuring costs.
"Despite everything we have accomplished, however, it's important to recognize that maintaining our momentum will require continued progress in all areas of the company," Mr. Gerstner said. "Our business improved each quarter last year, which will make year-over-year financial comparisons more difficult as we move into the second half of 1995. Also, there are a few signs that demand may be slowing and price pressures increasing in the United States, and a number of key European countries remain sluggish.
"We must implement our technology and marketing strategies -- quickly and skillfully -- and we must keep meeting our cost-reduction goals. Nevertheless, I remain pleased overall with the pace of transformation at IBM."
Revenues increased in all geographic areas in the second quarter. Revenues from North America were $7.1 billion, an increase of 8.9 percent from the same period of last year. Revenues from Europe/Middle East/Africa totaled $6.1 billion, up 11.5 percent year over year, while Asia-Pacific revenues were $3.6 billion, an increase of 30.9 percent. Revenues from Latin America were $742 million, up 19.7 percent from the second quarter of last year.
Currency had an approximately 7 percentage point favorable impact on the company's revenue results in the second quarter. Excluding the effects of currency, sales growth in North America, Latin America and Asia-Pacific ranged from satisfactory to strong, while results in Europe were disappointing.
Hardware sales totaled $8.6 billion in the second quarter, up 12.5 percent from the same period of 1994. Personal computer, RISC System/6000, AS/400 and storage product revenues increased significantly compared with the second quarter of last year. Mainframe demand remained strong, as measured in MIPS (millions of instructions per second), although overall mainframe revenues declined as expected from the same period of last year as a result of price reductions.
Total software revenues were $3.1 billion, an increase of 12.7 percent over last year's second quarter, while services revenues grew 32.6 percent to $3.0 billion. Maintenance revenues increased 4.5 percent to $1.9 billion compared with the second quarter of 1994, while revenues from rentals and financing grew 4.9 percent to $882 million.
The overall gross profit margin was 43.5 percent in the second quarter compared with 39.8 percent in the year-ago period and 42.4 percent in the first quarter of 1995.
Total expenses fell $104 million in the second quarter from the comparable period of 1994.
The company's "core" debt -- debt in support of operations, excluding financing -- declined $287 million from year-end 1994 through the second quarter to a total of $2.6 billion. Debt to support IBM's worldwide credit operations increased $1.2 billion during the same period to a total of $20.4 billion.
Net earnings for the six months ended June 30, 1995 were $3.0 billion, or $5.09 per common share, compared with earnings of $1.0 billion, or $1.68 per common share, in the first six months of 1994 (excluding the sale of IBM's Federal Systems Company and the effect of accounting charges for a change in software amortization periods recorded in the first quarter of 1994). Revenues for the six months ended June 30, 1995 were $33.3 billion, up 15.8 percent from the prior year's $28.7 billion.
INTERNATIONAL BUSINESS MACHINES CORPORATION
SUPPLEMENTAL SCHEDULE - COMPARATIVE FINANCIAL RESULTS (1)
(EXCLUDES EFFECTS OF FSC SALE AND ACCOUNTING CHARGES)
(Unaudited; Dollars in millions except per share amounts)
Three Months Six Months
Ended June 30 Ended June 30
Percent Percent
1995 1994 Change 1995 1994 Change
------- ------- ------- ------- ------- -------
Revenue:
Hardware sales $8,659 $7,695 12.5% $16,386 $13,963 17.4%
Gross profit % 40.1% 33.2% 39.1% 31.8%
Software 3,072 2,726 12.7% 5,945 5,309 12.0%
Gross profit % 65.3% 62.5% 65.2% 62.6%
Services 3,041 2,293 32.6% 5,486 4,128 32.9%
Gross profit % 21.5% 19.6% 20.5% 17.6%
Maintenance 1,877 1,796 4.5% 3,698 3,564 3.8%
Gross profit % 53.8% 49.7% 52.2% 50.2%
Rentals
and financing 882 841 4.9% 1,751 1,760 -0.5%
Gross profit % 55.7% 59.4% 55.0% 59.8%
Total revenue 17,531 15,351 14.2% 33,266 28,724 15.8%
Gross profit 7,631 6,104 25.0% 14,295 11,340 26.1%
Gross profit % 43.5% 39.8% 43.0% 39.5%
Operating expenses:
S,G&A 3,883 3,935 -1.3% 7,516 7,466 0.7%
% of revenue 22.2% 25.6% 22.6% 26.0%
R,D&E 974 1,091 -10.7% 1,887 2,192 -13.9%
% of revenue 5.6% 7.1% 5.7% 7.6%
Operating income 2,774 1,078 157.4% 4,892 1,682 190.8%
Other income 238 479 -50.4% 484 887 -45.5%
Interest expense 188 364 -48.3% 368 777 -52.6%
Earnings before
income taxes 2,824 1,193 136.6% 5,008 1,792 179.5%
Pre-tax margin 16.1% 7.8% 15.1% 6.2%
Provision for
income taxes 1,108 504 119.5% 2,003 768 161.0%
Effective tax
rate 39.2% 42.3% 40.0% 42.8%
Net earnings $1,716 $689 149.1% $3,005 $1,024 193.3%
Net margin 9.8% 4.5% 9.0% 3.6%
Preferred stock
dividends and trans-
action costs 5 21 52 42
Net earnings
applicable to common
shareholders $1,711 $668 156.2% $2,953 $982 200.6%
====== ====== ====== ======
Net earnings per
share of common
stock $2.97 $1.14 160.5% $5.09 $1.68 203.0%
====== ====== ====== ======
Average number
of common shares
outstanding(M's) 575.4 584.0 580.3 583.1
(1) Supplemental information provided for comparative purposes:
1994 excludes effects of FSC Sale and writedown of software.
INTERNATIONAL BUSINESS MACHINES CORPORATION
COMPARATIVE FINANCIAL RESULTS
(Unaudited; Dollars in millions except per share amounts)
Three Months Six Months
Ended June 30 Ended June 30
Percent Percent
1995 1994 Change 1995 1994 Change
------- ------- ------- ------- ------- -------
Revenue:
Hardware sales $8,659 $7,695 12.5% $16,386 $13,963 17.4%
Gross profit % 40.1% 33.2% 39.1% 31.8%
Software 3,072 2,726 12.7% 5,945 5,309 12.0%
Gross profit % 65.3% 62.5% 65.2% 57.0%
Services 3,041 2,293 32.6% 5,486 4,128 32.9%
Gross profit % 21.5% 19.6% 20.5% 17.6%
Maintenance 1,877 1,796 4.5% 3,698 3,564 3.8%
Gross profit % 53.8% 49.7% 52.2% 50.2%
Rentals
and financing 882 841 4.9% 1,751 1,760 -0.5%
Gross profit % 55.7% 59.4% 55.0% 59.8%
Total revenue 17,531 15,351 14.2% 33,266 28,724 15.8%
Gross profit 7,631 6,104 25.0% 14,295 11,044 29.4%
Gross profit % 43.5% 39.8% 43.0% 38.4%
Operating expenses:
S,G&A 3,883 3,935 -1.3% 7,516 7,084 6.1%
% of revenue 22.2% 25.6% 22.6% 24.7%
R,D&E 974 1,091 -10.7% 1,887 2,192 -13.9%
% of revenue 5.6% 7.1% 5.7% 7.6%
Operating income 2,774 1,078 157.4% 4,892 1,768 176.6%
Other income 238 479 -50.4% 484 887 -45.5%
Interest expense 188 364 -48.3% 368 777 -52.6%
Earnings before
income taxes 2,824 1,193 136.6% 5,008 1,878 166.7%
Pre-tax margin 16.1% 7.8% 15.1% 6.5%
Provision for
income taxes 1,108 504 119.5% 2,003 798 151.2%
Effective tax
rate 39.2% 42.3% 40.0% 42.5%
Net earnings $1,716 $689 149.1% $3,005 $1,080 178.1%
Net margin 9.8% 4.5% 9.0% 3.8%
Preferred stock
dividends and trans-
action costs 5 21 52 42
Net earnings
applicable to common
shareholders $1,711 $668 156.2% $2,953 $1,038 184.4%
====== ====== ====== ======
Net earnings per
share of common
stock $2.97 $1.14 160.5% $5.09 $1.78 186.0%
====== ====== ====== ======
Average number
of common shares
outstanding(M's) 575.4 584.0 580.3 583.1
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited; Dollars in millions)
At At
June 30 December 31 Percent
1995 1994 Change
--------- ----------- -------
Assets:
Cash, cash equivalents,
and marketable securities $10,529 $10,554 -0.2%
Receivables - net, inventories,
and prepaid expenses 31,172 30,784 1.3%
Plant, rental machines,
and other property - net 16,844 16,664 1.1%
Investments and other assets 23,056 23,089 -0.1%
-------- --------
Total Assets $81,601 $81,091 0.6%
======= =======
Liabilities and Stockholders' Equity:
Short-term debt $11,278 $9,570 17.8%
Long-term debt 11,749 12,548 -6.4%
-------- --------
Total debt 23,027 22,118 4.1%
Accounts payable, taxes,
and accruals 17,251 19,656 -12.2%
Other liabilities and
deferred income taxes 16,477 15,904 3.6%
-------- --------
Total liabilities 56,755 57,678 -1.6%
Stockholders' equity 24,846 23,413 6.1%
-------- --------
Total Liabilities and
Stockholders' Equity $81,601 $81,091 0.6%
======= =======
|
