UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 1 0 - Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1995
1-2360
______________________
(Commission file number)
INTERNATIONAL BUSINESS MACHINES CORPORATION
____________________________________________________
(Exact name of registrant as specified in its charter)
New York 13-0871985
______________________ __________________________________
(State of incorporation) (IRS employer identification number)
Armonk, New York 10504
______________________________________ ________
(Address of principal executive offices) (Zip Code)
914-765-1900
_____________________________
(Registrant's telephone number)
The registrant has 580,663,853 shares of common stock outstanding at
March 31, 1995.
Indicate by check mark whether the registrant (1) has filed all re-
ports required to be filed by Section l3 or l5(d) of the Securities Ex-
change Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES X NO
________ ________.
<PAGE>
INDEX
_____
Page
____
Part I - Financial Information:
Item 1. Consolidated Financial Statements
Consolidated Statement of Operations for the three months
ended March 31, 1995 and 1994 . . . . . . . . . . . . . 1
Consolidated Statement of Financial Position at
March 31, 1995 and December 31, 1994 . . . . . . . . . . 2
Consolidated Statement of Cash Flows for the three months
ended March 31, 1995 and 1994. . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements . . . . . . . . 5
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition . . 5
Part II - Other Information . . . . . . . . . . . . . . . . . . 14
<PAGE>
ITEM 1.
INTERNATIONAL BUSINESS MACHINES CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31:
(UNAUDITED)
(Dollars in millions except for per share amounts) 1995 1994
Revenue: _______ _______
Hardware sales $ 7,727 $ 6,268
Software 2,873 2,583
Services 2,445 1,836
Maintenance 1,821 1,768
Rentals and financing 869 918
_______ _______
Total revenue 15,735 13,373
Cost:
Hardware sales 4,795 4,379
Software 1,005 1,260
Services 1,974 1,557
Maintenance 900 871
Rentals and financing 397 366
_______ _______
Total cost 9,071 8,433
_______ _______
Gross profit 6,664 4,940
Operating expenses:
Selling, general and administrative 3,633 3,149
Research, development and engineering 913 1,100
_______ _______
Total operating expenses 4,546 4,249
_______ _______
Operating income 2,118 691
Other income, principally interest 246 408
Interest expense 180 414
_______ _______
Earnings before income taxes 2,184 685
Income tax provision 895 293
_______ _______
Net earnings 1,289 392
Preferred stock dividends and transaction costs 47 21
_______ _______
Net earnings applicable to
common shareholders $ 1,242 $ 371
======= =======
Net earnings per share of common stock $ 2.12 $ .64
Average number of common shares
outstanding (millions) 585.2 582.1
Cash dividends per common share $ .25 $ .25
(The accompanying notes are an integral part of the financial statements.)
- 1 -
<PAGE>
INTERNATIONAL BUSINESS MACHINES CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
ASSETS
(Dollars in millions) At March 31 At December 31
1995 1994
___________ ______________
Current assets:
Cash $ 1,042 $ 1,240
Cash equivalents 8,030 6,682
Marketable securities - at cost, which
approximates market 1,418 2,632
Notes and accounts receivable - net
of allowances 14,070 15,182
Sales-type leases receivable 6,693 6,351
Inventories, at lower of average cost or market
Finished goods 878 1,442
Work in process 5,032 4,636
Raw materials 301 256
________ ________
Total inventories 6,211 6,334
Prepaid expenses and other current assets 3,567 2,917
________ ________
Total current assets 41,031 41,338
________ ________
Plant, rental machines and other property 45,604 44,820
Less: accumulated depreciation 28,780 28,156
________ ________
Plant, rental machines and other property - net 16,824 16,664
________ ________
Investments and other assets:
Software, less accumulated amortization
(1995, $10,898; 1994, $10,793) 2,782 2,963
Investments and sundry assets 20,243 20,126
________ ________
Total investments and other assets 23,025 23,089
________ ________
Total Assets $ 80,880 $ 81,091
======== ========
(The accompanying notes are an integral part of the financial statements.)
- 2 -
<PAGE>
INTERNATIONAL BUSINESS MACHINES CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION - (CONTINUED)
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
(Dollars in millions) At March 31 At December 31
1995 1994
___________ _____________
Current liabilities:
Taxes $ 1,937 $ 1,771
Accounts payable and accruals 15,847 17,885
Short-term debt 10,106 9,570
_________ ________
Total current liabilities 27,890 29,226
Long-term debt 12,519 12,548
Other liabilities 14,381 14,023
Deferred income taxes 2,004 1,881
_________ ________
Total liabilities 56,794 57,678
Stockholders' equity:
Preferred stock - par value $.01 per share 255 1,081
Shares authorized - 150,000,000
Shares issued: 1995 - 2,624,961
1994 - 11,145,000
Common stock - par value $1.25 per share 7,276 7,342
Shares authorized - 750,000,000
Shares issued: 1995 - 582,925,033
1994 - 588,180,244
Retained earnings 12,976 12,352
Translation and other adjustments 3,579 2,638
_________ ________
Total stockholders' equity 24,086 23,413
_________ ________
Total liabilities and stockholders' equity $ 80,880 $ 81,091
========= ========
- 3 -
<PAGE>
INTERNATIONAL BUSINESS MACHINES CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31:
UNAUDITED)
(Dollars in millions) 1995 1994
_______ _______
Cash flow from operating activities:
Net earnings $ 1,289 $ 392
Adjustments to reconcile net earnings to
cash provided from operating activities:
Effect of restructuring charges (864) (680)
Depreciation 1,033 1,093
Amortization of software 417 733
Changes in operating assets and liabilities 597 805
Gain on disposition of investment assets (7) (264)
_______ _______
Net cash provided from operating activities 2,465 2,079
_______ _______
Cash flow from investing activities:
Payments for plant, rental machines
and other property, net of proceeds (567) (503)
Investment in software (236) (293)
Purchases of marketable securities and
other investments (399) (472)
Proceeds from marketable securities and
other investments 1,574 972
Proceeds from sale of Federal Systems Company -- 1,503
_______ _______
Net cash provided from investing activities 372 1,207
_______ _______
Cash flow from financing activities:
Proceeds from new debt 929 1,808
Payments to settle debt (1,915) (3,072)
Short-term borrowings less
than 90 days - net 572 398
Preferrred stock transcations - net (826) --
Common stock transactions - net (627) 82
Cash dividends paid (152) (159)
_______ _______
Net cash used in financing activities (2,019) (943)
_______ _______
Effect of exchange rate changes
on cash and cash equivalents 332 (93)
_______ _______
Net change in cash and cash equivalents 1,150 2,250
Cash and cash equivalents at January 1 7,922 5,861
_______ _______
Cash and cash equivalents at March 31 $ 9,072 $ 8,111
======= =======
(The accompanying notes are an integral part of the financial statements.)
- 4 -
<PAGE>
Notes to Consolidated Financial Statements
__________________________________________
1. In the opinion of the management of International Business Machines
Corporation (the company), all adjustments necessary to a fair statement
of the results for the unaudited three month period have been made. In
addition to the adjustments for normal recurring accruals, in the first
quarter of 1994, the company recorded charges of $296 million for software
writedowns, and an after-tax gain of $248 million for the sale of its Fed-
eral Systems Company (FSC).
2. The company implemented Statement of Financial Accounting Standards
(SFAS) 116, "Accounting for Contributions Received and Contributions
Made," effective January 1, 1995. This standard requires that contrib-
utions made, including unconditional promises to give, are recognized as
expenses in the period, at their fair values. The implementation of this
standard did not have a material effect on the company's financial posi-
tion or results of operations.
3. The translation and other adjustments line of Stockholders' Equity
includes equity translation adjustments of $3,734 million at March 31,
1995, and $2,742 million at December 31, 1994.
4. The Consolidated Statement of Financial Position at March 31, 1995
includes balances relative to restructuring programs in accounts payable
and accruals of approximately $.4 billion, and $.9 billion in plant,
rental machines and other property provided for capacity related actions.
At December 31, 1994, the approximate restructuring balances were $1.3
billion in accounts payable and accruals, $.1 billion in other liabil-
ities, and $.9 billion in plant, rental machines and other property. Al-
though utilization of restructuring reserves in the first quarter of 1995
was slightly lower than anticipated, the company has determined that the
restructuring reserve balances are adequate to cover committed restructur-
ing actions and will be fully utilized prior to December 31, 1995.
5. A supplemental Consolidated Statement of Operations schedule has been
provided for informational purposes only, to exclude the effects of the
FSC sale and software writedowns recorded in the first quarter of 1994.
This supplemental statement is shown in Exhibit 99 on page 16. This in-
formation is presented voluntarily and is provided solely to assist in
understanding the effects of these items on the Consolidated Statement of
Operations.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
____________________________________
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
________________________________________________
FOR THE THREE MONTHS ENDED MARCH 31, 1995
_________________________________________
The company's first quarter results were strong as revenue, earnings,
and earnings per share showed significant improvement over the first quar-
ter of 1994. The overall gross profit margin rose to 42.4 percent and has
remained stable for 10 straight quarters. The balance sheet continued to
strengthen as the company completed the quarter with $10.5 billion in
cash, despite spending $1.4 billion for common and preferred stock
buybacks and approximately $.9 billion in restructuring costs. Although
the first quarter results are encouraging, it's important to remember that
the first quarter of last year was relatively weak, which makes this
year's first quarter performance look especially strong. The results also
benefited from the strength of some currencies versus the U.S. dollar.
The company's hardware offerings remain under price and competitive pres-
sure.
- 5 -
<PAGE>
Results of Operations
_____________________
(Dollars in millions) Three Months Ended
March 31
__________________
1995 1994
________ _______
Revenue $ 15,735 $ 13,373
Cost 9,071 8,433
________ ________
Gross profit $ 6,664 $ 4,940
Gross profit margin 42.4% 36.9%
Net earnings $ 1,289 $ 392
The company recorded first quarter 1995 earnings of $1.3 billion or
$2.12 per common share, compared with $.4 billion or $.64 per common share
in the first quarter of 1994. The company's first quarter 1994 results
included an after-tax gain of $248 million ($.43 per common share) from
the sale of the Federal Systems Company and an after-tax writedown of $192
million ($.33 per common share) relating to a change in software amorti-
zation periods. Excluding these items, the company's adjusted earnings
per common share was $.54. Total revenue was $15.7 billion, an increase
of 17.7 percent over the same period last year. The average number of
common shares outstanding for the period was 585.2 million in 1995 versus
582.1 million in 1994.
Reported revenue grew in all geographic areas in the first quarter.
Revenue from the United States totaled $6.1 billion, an increase of 15.8
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 compa-
rable period of last year, while revenue from Asia-Pacific was $1.9
billion, an increase of 26.4 percent. Revenue from Latin America totaled
$.7 billion, a year-over-year increase of 8.4 percent. Revenue from
Canada was $.6 billion, an increase of 24.5 percent over first quarter
1994.
Changes in currency exchange rates contributed approximately 6 per-
centage points to the 17.7 percent revenue improvement over the first
quarter of 1994, although the revenue gains were largely offset by corre-
sponding increases in costs and expenses due to currency.
IBM's overall gross profit margin was 42.4 percent in the first quar-
ter compared with 36.9 percent in the first quarter of 1994, and 39.2 per-
cent 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 compa-
ny's $8 billion expense reduction goal.
- 6 -
<PAGE>
Results of Operations - (continued)
___________________________________
Hardware Sales
______________
(Dollars in millions) Three Months Ended
March 31
__________________
1995 1994
_______ _______
Total revenue $ 7,727 $ 6,268
Total cost 4,795 4,379
________ _______
Gross profit $ 2,932 $ 1,889
Gross profit margin 37.9% 30.1%
Revenue from hardware sales increased 23.3 percent from the compara-
ble period of 1994, with about a 6 percentage point benefit from currency
in 1995.
System/390* revenue growth was particularly strong in the quarter and
demand for this product line remains strong. AS/400* revenue also experi-
enced significant growth in the first quarter and RISC System/6000* pro-
ducts had double-digit revenue growth over first quarter 1994 levels.
Personal computers increased revenue year over year and were particularly
strong in Asia-Pacific and Latin America, while improving in the U.S. and
weakening in Europe.
The company's storage products revenue had solid growth year over
year driven by high-end shipments of its RAMAC product. Original Equip-
ment Manufacturer (OEM) products continued strong growth in all areas com-
pared to first quarter 1994.
Hardware sales gross profit dollars increased 55.2 percent when com-
pared to first quarter 1994. The increase was driven by cost improvements
as a result of prior restructuring actions and increased revenue growth in
all key product areas. Although margins increased, they continue to be
affected by competitive pricing pressures on high-end products and per-
sonal computers.
Software
________
(Dollars in millions) Three Months Ended
March 31
__________________
1995 1994
_______ _______
Total revenue $ 2,873 $ 2,583
Total cost 1,005 1,260
_______ _______
Gross profit $ 1,868 $ 1,323
Gross profit margin 65.0% 51.2%
Revenue from software increased 11.2 percent from the first quarter
of 1994, with about a 6 percentage point benefit from currency. The in-
crease was primarily driven by higher one-time-charge revenue in distrib-
uted software associated with the strong AS/400 shipments in the quarter,
and strong sales of desktop software.
- 7 -
<PAGE>
Results of Operations - (continued)
___________________________________
Software gross profit dollars increased 41.2 percent
from the first quarter of 1994. The first quarter 1994 gross profit and
gross profit margin was affected by the accounting charges relating to the
change in software amortization periods. Excluding the effects of this
change, 1995 gross profit dollars would have increased 15.4 percent and
gross profit margin would have increased 2.3 points over 1994 first quar-
ter levels.
Services Other Than Maintenance
_______________________________
(Dollars in millions) Three Months Ended
March 31
__________________
1995 1994
_______ _______
Total revenue $ 2,445 $ 1,836
Total cost 1,974 1,557
_______ _______
Gross profit $ 471 $ 279
Gross profit margin 19.3% 15.2%
Services revenue increased 33.2 percent, or about 27 percent at
constant currency, when compared to the first quarter of 1994. The
increase was primarily driven by strong growth in managed operations
for both systems and networking activity. Services gross profit dollars
increased 68.8 percent over the first quarter of 1994.
Maintenance
___________
(Dollars in millions) Three Months Ended
March 31
__________________
1995 1994
_______ _______
Total revenue $ 1,821 $ 1,768
Total cost 900 871
_______ _______
Gross profit $ 921 $ 897
Gross profit margin 50.6% 50.7%
Maintenance revenue increased 3.0 percent from the first quarter of
1994 and was benefited by about 5 percentage points from currency. The
gross profit dollars were essentially flat when compared to the first
quarter of 1994.
- 8 -
<PAGE>
Results of Operations - (continued)
___________________________________
Rentals and Financing
_____________________
(Dollars in millions) Three Months Ended
March 31
__________________
1994 1995
_______ _______
Total revenue $ 869 $ 918
Total cost 397 366
_______ _______
Gross profit $ 472 $ 552
Gross profit margin 54.3% 60.1%
Rentals and financing revenue decreased 5.3 percent from the compara-
ble period of 1994, and had a benefit of about 4 percentage points due to
currency. This rate of decline shows an improvement over last year as new
financing originations were up substantially in the first quarter of 1995.
Gross profit dollars decreased 14.5 percent from the first quarter of
1994, due primarily to declining margins in rentals which reflects pricing
pressures on the high-end products in recent years.
Expenses
________
(Dollars in millions) Three Months Ended
March 31
__________________
1995 1994
_______ _______
Selling, general and
administrative $ 3,633 $ 3,149
Percentage of revenue 23.1% 23.5%
________ _______
Research, development and
engineering $ 913 $ 1,100
Percentage of revenue 5.8% 8.2%
Selling, general and administrative expense increased 15.4 percent
from first quarter 1994. The first quarter 1994 results included the $382
million gain from the sale of FSC. Excluding this gain and the effects of
currency (approximately $200M), selling, general and administrative ex-
pense would have decreased by about $100M. Research, development and en-
gineering expense, which is performed primarily in the United States,
decreased 17 percent from the first quarter of 1994. These decreases re-
flect the company's focus on productivity and expense controls.
Other income, principally interest, and interest expense decreased
from 1994 first quarter levels due primarily to the switch to the REAL
currency in Brazil in July 1994. This change lowered the company's inter-
est income and interest expense, as well as the exchange gains and losses
associated with the local currency cash deposits and borrowings, which are
a component of selling, general and administrative expense.
- 9 -
<PAGE>
Results of Operations - (continued)
___________________________________
The company's interest expense, in addition to the effect of the new
Brazilian monetary policy, also declined year over year due to the re-
duction of both "core" debt and debt to support the company's worldwide
customer financing operations.
Interest on total borrowings of the company and its subsidiaries,
which includes interest expense and interest costs associated with rentals
and financing, amounted to $389 million for the first quarter of 1995. Of
this amount, $4 million was capitalized.
The effective tax rate for the three months of 1995 was 41.0 percent
versus 42.8 percent for the same period in 1994. This decrease was due to
a number of factors, including the mix of earnings and weighting of tax
rates on a country-by-country basis.
Financial Condition
___________________
The company's financial condition continued to strengthen during the
first quarter of 1995. The total of cash, cash equivalents, and
marketable securities at March 31, 1995 was virtually flat from year-end
levels of $10.5 billion, despite spending $1.4 billion in common and pre-
ferred stock buybacks and $.9 billion in restructuring costs.
Working Capital
_______________
(Dollars in millions) At March 31 At December 31
1995 1994
____________ ______________
Current assets $ 41,031 $ 41,338
Current liabilities 27,890 29,226
________ ________
Working capital $ 13,141 $ 12,112
Working capital at March 31, 1995 was $13.1 billion compared to $12.1
billion at December 31, 1994. Total current assets declined $.3 billion
from year-end 1994 with decreases in accounts receivable of $.8 billion
and $.1 billion in inventories, offset by an increase in prepaid expenses
of $.6 billion. The decrease in accounts receivable largely results from
the normally lower volumes associated with the first quarter. The decline
in inventories reflects the company's continuing efforts to improve man-
agement of inventories, particularly personal computer inventories. The
increase in prepaid expenses results primarily from the normal increase in
deferred account activity from year-end levels.
Current liabilities declined $1.3 billion from December 31, 1994, due
to a decrease in accounts payable and accruals of $2.0 billion, offset by
increases in taxes of $.2 billion and short-term debt of $.5 billion. The
decrease in accounts payable and accruals relates to the normal seasonal
decline in accounts payable from their year-end levels, as well as lower
restructuring accrual balances resulting from implementation of the compa-
ny's restructuring programs. Most of the increase in taxes and short-term
debt results from the impact of currency fluctuation on these balances
from December 31, 1994.
- 10 -
<PAGE>
Financial Condition - (continued)
_________________________________
Investments
___________
The company's capital expenditures for plant, rental machines and
other property were approximately $.8 billion for the first quarters of
both 1995 and 1994.
In addition to software development expense included in research, de-
velopment and engineering expense, the company capitalized $.2 billion of
software costs during the first quarter of 1995, down $.1 billion from the
comparable 1994 period. Amortization of capitalized software costs
amounted to $.4 billion in the first quarter of 1995 and $.7 billion for
the comparable 1994 period (including $.3 billion in accelerated amorti-
zation resulting from the software amortization change implemented in the
first quarter of 1994).
Long Term Liabilities and Stockholders' Equity
______________________________________________
Long-term debt was $12.5 billion at March 31, 1995, remaining virtu-
ally flat from year-end 1994. Other non-current liabilities at $14.4
billion increased $.4 billion from December 31, 1994, principally the re-
sult of the currency impact of a weaker U.S. dollar versus the majority of
worldwide currencies.
Stockholders' equity increased from $23.4 billion at December 31,
1994 to $24.1 billion at March 31, 1995, as a result of increases in net
retained earnings of $.6 billion, and equity translation adjustments of
$1.0 billion due to the majority of worldwide currencies strengthening
versus the U.S. dollar during the period. Preferred and common stock is-
sued declined $.9 billion due to implementation of the stock buyback pro-
grams announced in in January of 1995.
Cash Flow
_________
(Dollars in millions) Three Months Ended
March 31
__________________
1995 1994
_______ _______
Net cash provided from (used in):
Operating activities $ 2,465 $ 2,079
Investing activities 372 1,207
Financing activities (2,019) (943)
Effect of exchange rate changes
on cash and cash equivalents 332 (93)
_______ _______
Net change in cash and cash equivalents $ 1,150 $ 2,250
_______ _______
- 11 -
<PAGE>
Financial Condition - (continued)
_________________________________
For the three months ended March 31, 1995, the company had an overall
net increase in cash and cash equivalents of $1.2 billion compared to a
net increase of $2.3 billion for the same period in 1994.
Net cash provided from operating activities was $2.5 billion for the
first three months of 1995, versus $2.1 billion in the comparable 1994 pe-
riod. The period-to-period improvement in cash flow from operations is
mainly driven by the improvement in net earnings and lower accounts
receivable balances, offset by a decrease in liabilities resulting from
implementation of the company's restructuring plans.
Net cash provided from investing activities was $.4 billion for the
first three months of 1995, compared to a net source of funds in the
amount of $1.2 billion in the same period of 1994. The decreased cash
flow from investing activities compared to the 1994 period is attributable
to the proceeds derived from the sale of FSC in March 1994, partially off-
set by significant cash inflows during the first quarter of 1995 from the
sale of marketable securities.
Net cash used in financing activities amounted to $2.0 billion for
the three months ended March 31, 1995, an increase of $1.0 billion from
the comparable 1994 period, principally the result of the company's
buyback of preferred and common stock on the open market.
Liquidity
_________
During the first quarter of 1995, the company received total cash
proceeds of approximately $1.1 billion from the sale and securitization of
receivables, primarily trade. At March 31, 1995, the company had a net
balance of $1.4 billion in assets under management from the securitization
of lease and trade receivables, a decline of $.4 billion from December 31,
1994.
On January 11, 1995 the company commenced a tender offer to purchase
for cash any and all of the Series A 7 1/2 percent preferred stock repres-
ented by 44.6 million outstanding depositary shares for a price of $25.00
net per depositary share. Under this offer, depositary shares tendered
and purchased by the company were not entitled to the regular quarterly
dividend, or any accrued dividends for the first quarter of 1995. This
offer and withdrawal rights expired on February 8, 1995. Through February
8, 1995, the company purchased 34.1 million depositary shares under this
offer.
On February 28, 1995, the company's Board of Directors authorized IBM
to repurchase any of its remaining 10.5 million outstanding Series A 7 1/2
percent preferred stock depositary shares from time to time in the open
market and in private transactions, depending on market conditions.
- 12 -
<PAGE>
Financial Condition - (continued)
_________________________________
On January 31, 1995, the Board of Directors authorized the company to
repurchase up to $2.5 billion of IBM common shares on the open market.
The company plans to purchase the shares from time to time, depending on
market conditions. Through March 31, 1995, the company repurchased ap-
proximately 6.9 million shares of IBM common stock for approximately $540
million under this program.
On March 15, 1995, the company announced it will call on May 1, 1995
all of the outstanding 9 percent notes due May 1998, at a redemption price
of 100 percent of the principal amount. IBM issued $500 million of these
notes in May 1988. Payment of the call price for the 9 percent notes, to-
gether with accrued interest thereon from the last interest payment on No-
vember 1, 1994, will be made on or after May 1, 1995.
- 13 -
<PAGE>
Part II - Other Information
___________________________
Item 6(a). Exhibits
___________________
Exhibit Number
______________
11 Statement re: computation of per share earnings.
99 Supplemental Consolidated Statement of Operations schedule.
Item 6(b). Reports on Form 8-K
No reports on Form 8-K were filed during the first quarter of 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
International Business Machines Corporation
___________________________________________
(Registrant)
Date: May 9, 1995
By:
J. B. York
_________________________________________________
J. B. York
Senior Vice President and Chief Financial Officer
* S/390, AS/400 and RISC System/6000 are trademarks of the
International Business Machines Corporation.
- 14 -
EXHIBIT 11
COMPUTATION OF FULLY DILUTED EARNINGS PER
SHARE UNDER TREASURY STOCK METHOD SET FORTH
IN ACCOUNTING PRINCIPLES BOARD OPINION NO. 15
For Three Months Ended
-------------------------------
March 31, 1995 March 31, 1994
-------------- --------------
Number of shares on which earnings
per share is based:
Average outstanding during period 585,226,523 582,067,170
Add - Incremental shares under stock
option and stock purchase plans 6,909,834 2,184,080
- Incremental shares
related to 5 3/4% CGI convertible
bonds (average) 7,715,388 7,715,400
-------------- --------------
Number of shares on which fully diluted
earnings per share is based 599,851,745 591,966,650
============== ==============
Net earnings applicable to
common shareholders (millions) $ 1,242 $ 371
- Net earnings effect of
interest on 5 3/4% CGI convertible
bonds (millions) 4 4
-------------- --------------
Net earnings on which fully
diluted earnings per share
is based (millions) $ 1,246 $ 375
============== ==============
Fully diluted earnings per share $ 2.08 $ .63
Published earnings per share $ 2.12 $ .64
- 15 -
EXHIBIT 99
INTERNATIONAL BUSINESS MACHINES CORPORATION
AND SUBSIDIARY COMPANIES
SUPPLEMENTAL CONSOLIDATED STATEMENT OF OPERATIONS (1)
FOR THE THREE MONTHS ENDED MARCH 31:
(UNAUDITED)
(Dollars in millions except for per share amounts) 1995 1994
Revenue: _______ _______
Hardware sales $ 7,727 $ 6,268
Software 2,873 2,583
Services 2,445 1,836
Maintenance 1,821 1,768
Rentals and financing 869 918
_______ _______
Total revenue 15,735 13,373
Cost:
Hardware sales 4,795 4,379
Software 1,005 964
Services 1,974 1,557
Maintenance 900 871
Rentals and financing 397 366
_______ _______
Total cost 9,071 8,137
_______ _______
Gross profit 6,664 5,236
Operating expenses:
Selling, general and administrative 3,633 3,531
Research, development and engineering 913 1,100
_______ _______
Total operating expenses 4,546 4,631
_______ _______
Operating income 2,118 605
Other income, principally interest 246 408
Interest expense 180 414
_______ _______
Earnings before income taxes 2,184 599
Income tax provision 895 263
_______ _______
Net earnings 1,289 336
Preferred stock dividends and transaction costs 47 21
_______ _______
Net earnings applicable to
common shareholders $ 1,242 $ 315
======= =======
Net earnings per share of common stock $ 2.12 $ .54
Average number of common shares
outstanding (millions) 585.2 582.1
(1) Supplemental information provided for comparative purposes: 1994 excludes
effects of the FSC sale and accounting charges for writedown of software.
Printed on Recycled Paper
- 16 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
IBM CORPORATION'S FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED
MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 9,072
<SECURITIES> 1,418
<RECEIVABLES> 12,596
<ALLOWANCES> 0
<INVENTORY> 6,211
<CURRENT-ASSETS> 41,031
<PP&E> 45,604
<DEPRECIATION> 28,780
<TOTAL-ASSETS> 80,880
<CURRENT-LIABILITIES> 27,890
<BONDS> 0
<COMMON> 7,276
0
255
<OTHER-SE> 16,555
<TOTAL-LIABILITY-AND-EQUITY> 80,880
<SALES> 7,727
<TOTAL-REVENUES> 15,735
<CGS> 4,795
<TOTAL-COSTS> 9,071
<OTHER-EXPENSES> 4,546
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 180
<INCOME-PRETAX> 2,184
<INCOME-TAX> 895
<INCOME-CONTINUING> 1,289
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,289
<EPS-PRIMARY> 2.12
<EPS-DILUTED> 2.08
</TABLE>
