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, 1996
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 539,671,178 shares of common stock outstanding at
March 31, 1996.
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, 1996 and 1995 . . . . . . . . . . . . . 1
Consolidated Statement of Financial Position at
March 31, 1996 and December 31, 1995 . . . . . . . . . . 2
Consolidated Statement of Cash Flows for the three months
ended March 31, 1996 and 1995. . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements . . . . . . . . 5
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition . . 6
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) 1996 1995
Revenue: _______ _______
Hardware sales $ 7,708 $ 7,727
Services 3,198 2,445
Software 3,037 2,873
Maintenance 1,749 1,821
Rentals and financing 867 869
_______ _______
Total revenue 16,559 15,735
Cost:
Hardware sales 5,005 4,795
Services 2,577 1,974
Software 911 1,005
Maintenance 912 900
Rentals and financing 385 397
_______ _______
Total cost 9,790 9,071
_______ _______
Gross profit 6,769 6,664
Operating expenses:
Selling, general and administrative 3,697 3,633
Research, development and engineering 1,091 913
Purchased in-process research and development 435 -
_______ _______
Total operating expenses 5,223 4,546
_______ _______
Operating income 1,546 2,118
Other income, principally interest 150 246
Interest expense 149 180
_______ _______
Earnings before income taxes 1,547 2,184
Income tax provision 773 895
_______ _______
Net earnings 774 1,289
Preferred stock dividends and transaction costs 5 47
_______ _______
Net earnings applicable to
common shareholders $ 769 $ 1,242
======= =======
Net earnings per share of common stock $ 1.41 $ 2.12
Average number of common shares
outstanding (millions) 544.3 585.2
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
1996 1995
___________ ______________
Current assets:
Cash $ 1,449 $ 1,746
Cash equivalents 4,504 5,513
Marketable securities - at cost, which
approximates market 443 442
Notes and accounts receivable - net
of allowances 16,120 17,441
Sales-type leases receivable 5,848 5,961
Inventories, at lower of average cost or market
Finished goods 1,651 1,241
Work in process 5,228 4,990
Raw materials 79 92
________ ________
Total inventories 6,958 6,323
Prepaid expenses and other current assets 3,532 3,265
________ ________
Total current assets 38,854 40,691
Plant, rental machines and other property 43,235 43,981
Less: accumulated depreciation 27,028 27,402
________ ________
Plant, rental machines and other property - net 16,207 16,579
Software, less accumulated amortization
(1996, $11,335; 1995, $11,276) 2,214 2,419
Investments and sundry assets 20,491 20,603
________ ________
Total assets $ 77,766 $ 80,292
======== ========
- 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
1996 1995
___________ _____________
Current liabilities:
Taxes $ 2,134 $ 2,634
Accounts payable and accruals 15,855 17,445
Short-term debt 12,343 11,569
_________ ________
Total current liabilities 30,332 31,648
Long-term debt 9,604 10,060
Other liabilities 14,156 14,354
Deferred income taxes 1,854 1,807
_________ ________
Total liabilities 55,946 57,869
Stockholders' equity:
Preferred stock - par value $.01 per share 253 253
Shares authorized - 150,000,000
Shares issued: 1996 - 2,610,711
1995 - 2,610,711
Common stock - par value $1.25 per share 7,816 7,488
Shares authorized - 750,000,000
Shares issued: 1996 - 552,000,959
1995 - 548,199,013
Retained earnings 12,229 11,630
Translation adjustments 2,768 3,036
Treasury stock - at cost (1,354) (41)
Shares: 1996 -12,329,781
1995 - 424,583
Net unrealized gain on marketable securities 108 57
_________ ________
Total stockholders' equity 21,820 22,423
_________ ________
Total liabilities and stockholders' equity $ 77,766 $ 80,292
========= ========
(The accompanying notes are an integral part of the financial statements.)
- 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) 1996 1995
_______ _______
Cash flow from operating activities:
Net earnings $ 774 $ 1,289
Adjustments to reconcile net earnings to
cash provided from operating activities:
Effect of restructuring charges (536) (864)
Depreciation 891 1,033
Amortization of software 323 417
Purchased in-process research and development 435 --
Gain on disposition of fixed and other assets (110) (7)
Changes in operating assets and liabilities (616) 597
_______ _______
Net cash provided from operating activities 1,161 2,465
Cash flow from investing activities:
Payments for plant, rental machines
and other property, net of proceeds (600) (567)
Investment in software (62) (236)
Purchases of marketable securities and
other investments (494) (399)
Proceeds from marketable securities and
other investments 137 1,574
Acquisition of Tivoli Systems, Inc. - net (716) --
_______ _______
Net cash (used in) provided from investing activities (1,735) 372
_______ _______
Cash flow from financing activities:
Proceeds from new debt 963 929
Payments to settle debt (1,458) (1,915)
Short-term borrowings less
than 90 days - net 977 572
Preferred stock transactions-net -- (826)
Common stock transactions - net (1,014) (627)
Cash dividends paid (141) (152)
_______ _______
Net cash used in financing activities (673) (2,019)
_______ _______
Effect of exchange rate changes
on cash and cash equivalents (59) 332
_______ _______
Net change in cash and cash equivalents (1,306) 1,150
Cash and cash equivalents at January 1 7,259 7,922
_______ _______
Cash and cash equivalents at March 31 $ 5,953 $ 9,072
======= =======
(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.
2. Earnings per share amounts were computed by dividing earnings after
deduction of preferred stock dividends by the average number of common
shares outstanding.
3. On March 1, 1996 the company acquired all outstanding shares of
Tivoli Systems Inc. for approximately $800 million ($716 million in net
cash). The company engaged a nationally recognized, independent appraisal
firm to express an opinion on the fair market value of the assets acquired
to serve as a basis for allocation of the purchase price to the various
classes of assets. The company allocated the total purchase price as fol-
lows:
(Dollars in millions)
Tangible net assets $ 41
Identifiable intangible assets 60
Current software products 39
Purchased in-process research and development 417
Goodwill 280
Deferred tax liabilities related to identifiable
intangible assets (37)
-----
Total $ 800
=====
Purchased in-process research and development included the value of soft-
ware products still in development stage and not considered to have
reached technological feasibility. As a result of the valuation, the
fairmarket value of the in-process research and development was determined
to be $417 million.
In addition, an acquisition of Object-Technology International, Inc., re-
sulted in a valuation of purchased in-process research and development
amounting to $18 million, bringing the total amount of purchased in-
process research and development to $435 million. In accordance with ap-
plicable accounting rules, the $435 million was expensed upon acquisition
in the first-quarter of 1996.
4. A supplemental Consolidated Statement of Operations schedule has been
provided for informational purposes only, to exclude the effects of the
write-offs of purchased in-process research and development associated
with the Tivoli Systems Inc. and Object Technology International Inc. ac-
quisitions and the work force separations recorded in the first quarter of
1996. This information is presented voluntarily and is provided solely to
assist in understanding the effects of these items on the Consolidated
Statement of Operations.
5. Subsequent Events: On April 17, 1996, the company announced that the
board of directors had approved a quarterly dividend increase to $.35 per
common share from $.25 per common share, payable June 10, 1996 to holders
of record May 10, 1996.
- 5 -
<PAGE>
On April 18, 1996, the company filed a prospectus supplement with the Se-
curities and Exchange Commission to the original prospectus dated February
7, 1996. More information concerning this filing can be found on page 13
of this Form 10-Q.
On April 30, 1996, the company's board of directors authorized the company
to repurchase up to an additional $2.5 billion of IBM common stock shares.
The company plans to buy shares on the open market from time to time, de-
pending on market conditions. Since January 31, 1995, the company has re-
purchased approximately $6.5 billion of its common stock under prior
repurchase authorizations totaling $7.5 billion.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
____________________________________
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
________________________________________________
FOR THE THREE MONTHS ENDED MARCH 31, 1996
_________________________________________
The company's first quarter results were good but demonstrated uneven
performance. On the positive side, revenue grew in all geographic areas.
Services revenue increased 31 percent, continuing to show strong growth.
The company completed its merger with Tivoli Systems, Inc., which is a
critical part of its software strategy. Shipments of Lotus Notes seats
more than tripled over the same period of last year.
At the same time, the company's hardware revenue and gross profit
margin were disappointing, mainly because of product transition in its
System/390* and AS/400* product lines. Also, there was weak demand for
personal computers in the United States and price pressures in many areas,
including semiconductors and storage products.
Results of Operations
_____________________
(Dollars in millions) Three Months Ended
March 31
__________________
1996 1995
________ _______
Revenue $ 16,559 $ 15,735
Cost 9,790 9,071
________ ________
Gross profit $ 6,769 $ 6,664
Gross profit margin 40.9% 42.4%
Net earnings $ 774 $ 1,289
- 6 -
<PAGE>
Results of Operations - (continued)
___________________________________
The company recorded first-quarter 1996 earnings of $774 million or
$1.41 per common share, compared with $1,289 million or $2.12 per common
share in the first quarter of 1995. The company's first-quarter 1996 re-
sults included a charge of $236 million ($.27 per common share) for work
force separation costs and a charge of $435 million ($.80 per common
share) relating to a non-recurring, non-tax deductible charge for pur-
chased in-process research and development in connection with the acquisi-
tion of Tivoli Systems Inc. ($417 million) and Object Technology
International Inc. ($18 million). Excluding these items, the company's ad-
justed earnings per common share was $2.48. The average number of common
shares outstanding for the period was 544.3 million in 1996 versus 585.2
million in 1995.
Reported revenue grew in all geographic areas in the first quarter.
Revenue from the United States totaled $6.2 billion, an increase of 1.7
percent from last year's first quarter. Revenue from Europe/Middle
East/Africa was $5.6 billion, an increase of 3.9 percent over the compara-
ble period of last year, while revenue from Asia-Pacific was $3.3 billion,
an increase of 11.4 percent. Revenue from Latin America totaled $684
million, a year-over-year increase of 4.1 percent. Revenue from Canada
was $755 million, an increase of 23.0 percent over first quarter 1995.
Currency had an approximately 1-percentage-point negative effect on
revenue results in the first quarter. This negative effect was princi-
pally a result of the U.S. dollar strengthening against the Japanese yen
year over year.
Total expenses increased 16.6 percent year over year, largely as a
result of charges for work force separations and the software acquisi-
tions.
Hardware Sales
______________
(Dollars in millions) Three Months Ended
March 31
__________________
1996 1995
_______ _______
Total revenue $ 7,708 $ 7,727
Total cost 5,005 4,795
_______ _______
Gross profit $ 2,703 $ 2,932
Gross profit margin 35.1% 37.9%
- 7 -
<PAGE>
Results of Operations - (continued)
___________________________________
Personal computer client revenue increased year over year, with
growth in Europe and Asia partially offset by weakness in the United
States. The weakness in the United States was partially due to rebalanc-
ing of inventories between dealers and the company. The rebalancing re-
sulted in lower inventory levels for the dealers due to less restocking
and therefore lower revenue for the company during the first quarter of
1996. RISC System/6000* revenue also increased compared with the first
quarter of last year. OEM revenue grew, but at a much lower rate than the
first quarter of 1995. The semiconductor products faced steep drops in
memory prices and low-end storage products are facing capacity con-
straints. AS/400 server revenue declined from the year-earlier period due
to continuing transitions to new models. System/390 server revenue de-
clined primarily as a result of year-over-year price and volume reductions
in older bipolar technology. Storage product revenue also fell from the
same period of last year.
Hardware sales gross profit dollars decreased 7.8 percent when com-
pared to the first quarter of 1995. The decrease was primarily driven by
a change in the mix of products being sold, away from System/390 server
content to more revenue from consumer personal computers which have a
lower gross profit margin. In addition, downward price pressures contin-
ued on System/390 servers, RAMAC* 2 storage product and personal comput-
ers.
Services Other Than Maintenance
_______________________________
(Dollars in millions) Three Months Ended
March 31
__________________
1996 1995
_______ _______
Total revenue $ 3,198 $ 2,445
Total cost 2,577 1,974
_______ _______
Gross profit $ 621 $ 471
Gross profit margin 19.4% 19.3%
Services revenue increased 30.8 percent, when compared to the first
quarter of 1995. The increase was driven by strong growth across all cat-
egories of service offerings. Services gross profit dollars increased
31.8 percent over the first quarter of 1995.
Software
________
(Dollars in millions) Three Months Ended
March 31
__________________
1996 1995
_______ _______
Total revenue $ 3,037 $ 2,873
Total cost 911 1,005
_______ _______
Gross profit $ 2,126 $ 1,868
Gross profit margin 70.0% 65.0%
- 8 -
<PAGE>
Results of Operations - (continued)
___________________________________
Revenue from software increased 5.7 percent from the first quarter
of 1995. The increase was primarily driven by products offered by Lotus
whose revenue was included in the first quarter of 1996 results, but not
the first-quarter 1995 results.
Software gross profit dollars increased 13.8 percent from the first
quarter of 1995. This increase was primarily driven by the company's
shift towards a more iterative software development process which results
in expensing a larger percentage of software development spending and cap-
italizing less. This also results in lower amortization costs and im-
proved software margins, with a corresponding increase in research,
development and engineering expense.
Maintenance
___________
(Dollars in millions) Three Months Ended
March 31
__________________
1996 1995
_______ _______
Total revenue $ 1,749 $ 1,821
Total cost 912 900
_______ _______
Gross profit $ 837 $ 921
Gross profit margin 47.8% 50.6%
Maintenance revenue decreased 4.0 percent from the first quarter of
1995. The gross profit dollars decreased 9.1 percent when compared to the
first quarter of 1995. Maintenance revenue and gross profit margins con-
tinue to be adversely affected by the competitive environment and result-
ing pricing pressures on maintenance offerings.
Rentals and Financing
_____________________
(Dollars in millions) Three Months Ended
March 31
__________________
1996 1995
_______ _______
Total revenue $ 867 $ 869
Total cost 385 397
_______ _______
Gross profit $ 482 $ 472
Gross profit margin 55.6% 54.4%
Rentals and financing revenue was essentially flat when compared to
the same period in 1995. Gross profit dollars increased 2.1 percent from
the first quarter of 1995.
- 9 -
<PAGE>
Results of Operations - (continued)
___________________________________
Expenses
________
(Dollars in millions) Three Months Ended
March 31
__________________
1996 1995
_______ _______
Selling, general and
administrative $ 3,697 $ 3,633
Percentage of revenue 22.3% 23.1%
________ _______
Research, development and
engineering $ 1,091 $ 913
Percentage of revenue 6.6% 5.8%
Selling, general and administrative expense increased 1.8 percent
from first quarter 1995. The first-quarter 1996 results included a $236
million charge for work force separation charges. Excluding this charge,
selling, general and administrative expense would have decreased by 4.8
percent.
Research, development and engineering expense increased 19.4 percent
from the first quarter of 1995. This increase was due to the acquisition
of Lotus and its expenses being included in the first quarter 1996 re-
sults, as well as lower capitalization rates for software development in
1996 versus 1995, which increases research, development and engineering
expense, while improving the software gross profit margin.
The first-quarter 1996 results included a non-tax deductible charge
of $435 million for purchased-in process research and development expense
associated with the acquisition of Tivoli Systems Inc. and Object Technol-
ogy International, Inc. This amount has been separately identified on the
company's Consolidated Statement of 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 $374 million for the first quarter of 1996. Of
this amount, $7 million was capitalized.
The effective tax rate for the three months of 1996 was 50.0 percent
versus 41.0 percent for the same period in 1995. This increase was a re-
sult of the $435 million charge associated with the Tivoli Systems Inc.
and Object Technology International Inc. acquisitions, which does not give
rise to a tax benefit. Excluding this charge, the effective tax rate from
operations would have been 39.0 percent for the first quarter of 1996.
This was a decline of 2.0 points from the prior year and was primarily the
result of the mix of earnings and corresponding weighting of tax rates on
a country-by-country basis.
- 10 -
<PAGE>
Financial Condition
___________________
The Consolidated Statement of Financial Position at March 31, 1996
was impacted by a number of actions taken by the company during the first
quarter of 1996, including expenditures of $1.3 billion for the repurchase
of common stock, $1.0 billion net cash for the acquisitions of Tivoli Sys-
tems Inc., Object Technology International, Inc., Data Sciences Limited
and others, and $.5 billion in work force separation payments relating to
restructuring programs announced in prior years.
Working Capital
_______________
(Dollars in millions) At March 31 At December 31
1996 1995
____________ ______________
Current assets $ 38,854 $ 40,691
Current liabilities 30,332 31,648
________ ________
Working capital $ 8,522 $ 9,043
Total current assets declined $1.8 billion from year-end 1995 with
declines in total cash, cash equivalents, and marketable securities of
$1.3 billion and accounts receivable of $1.4 billion, offset by increases
of $.6 billion in inventories and $.3 billion in prepaid expenses. The
decline in total cash, cash equivalents, and marketable securities results
primarily from the stock repurchases, strategic acquisitions, and work
force separation payments, offset by cash generated from operations. The
decrease in accounts receivable is attributable to the lower volumes
normally associated with the first quarter. Inventories have generally
increased to meet anticipated second quarter demand, primarily in microe-
lectronics; while the increase in prepaid expenses is due to the normal
increase in deferred account and prepaid activity from year-end levels.
Total current liabilities declined $1.3 billion from December 31,
1995, with declines of $2.1 billion in accruals, taxes and accounts paya-
ble, offset by an increase of $.8 billion in short-term debt. The de-
crease in accruals, taxes and accounts payable relates to the seasonal
decline in these balances from their normally higher year-end levels. The
increase in short-term debt results largely from the reclassification of
long-term debt, as well as an increase in debt to maintain a constant lev-
erage within customer financing.
Investments
___________
The company's capital expenditures for plant, rental machines and
other property were approximately $1.0 billion for the three months ended
March 31, 1996, an increase of approximately $.2 billion from the compara-
ble 1995 period.
In addition to software development expense included in research, de-
velopment and engineering expense, the company capitalized $.1 billion of
software costs during the three months ended March 31, 1996, down $.1
billion from the amount capitalized in the comparable 1995 period.
Amortization of capitalized software costs amounted to $.3 billion during
first quarter of 1996 versus $.4 billion for the comparable 1995 period.
- 11 -
<PAGE>
Financial Condition - (continued)
_________________________________
Investments and sundry assets were $20.5 billion at March 31, 1996, a
decrease of $.1 billion from December 31, 1995, resulting from a decrease
of $.7 billion in non-current sales-type leases, offset by increases of
$.3 billion in investments in business alliances and $.3 billion in good-
will relative to the acquisition of Tivoli Systems, Inc.
Long Term Liabilities and Stockholders' Equity
______________________________________________
Long-term debt was $9.6 billion at March 31, 1996, a decrease of $.5
billion from year-end 1995, due to the reclassification of long-term debt
to short-term. Other non-current liabilities at March 31, 1996, of $14.2
billion decreased $.2 billion from December 31, 1995, primarily the re-
sults of a stronger U.S. dollar versus the majority of worldwide curren-
cies.
Stockholders' equity declined from $22.4 billion at December 31, 1995
to $21.8 billion, resulting from $1.3 billion in common stock repurchases
and a $.2 billion decline in equity translation adjustments, offset by $.3
billion in the exercise of stock options and an increase of $.6 billion in
retained earnings.
Cash Flow
_________
(Dollars in millions) Three Months Ended
March 31
__________________
1996 1995
_______ _______
Net cash provided from (used in):
Operating activities $ 1,161 $ 2,465
Investing activities (1,735) 372
Financing activities (673) (2,019)
Effect of exchange rate changes
on cash and cash equivalents (59) 332
_______ _______
Net change in cash and cash equivalents $(1,306) $ 1,150
_______ _______
For the three months ended March 31, 1996, the company had an overall
net decrease in cash and cash equivalents of $1.3 billion compared to a
net increase of $1.2 billion for the same period in 1995.
- 12 -
<PAGE>
Financial Condition - (continued)
_________________________________
Net cash provided from operating activities was $1.2 billion
for the three months ended March 31, 1996, versus $2.5 billion in
the comparable period of 1995. The period-to-period decrease in
cash flow from operations is primarily a result of lower cash in-
flows relative to net changes in operating assets and liabilities in
the 1996 period, partially offset by lower work force separation
payments in the first quarter of 1996.
Net cash used in investing activities was $1.7 billion for the
three month period ended March 31, 1996, compared to a $.4 billion
net source of funds in the comparable 1995 period. The increase in
funds utilized in investing activities is attributable to the compa-
ny's strategic acquisitions (including Tivoli Systems, Inc., Object
Technology International, Inc., and Data Sciences Limited), and
lower capitalization of software development in the 1996 period.
Additionally, there were substantially less proceeds from the sale
of marketable securities and other investments during the first
quarter of 1996 versus the comparable 1995 period.
Net cash used in financing activities amounted to $.7 billion
for the three months ended March 31, 1996. This decrease of $1.3
billion from the comparable 1995 period was the result of decreased
preferred stock repurchase activity partially offset by increased
common stock transactions in the 1996 period. Additionally, overall
debt financing activities provided $.5 billion in cash during the
first quarter of 1996 versus cash utilization of $.4 billion during
the comparable 1995 period.
Liquidity
_________
At March 31, 1996, the company had a net balance of $1.1
billion in assets under management from the securitization of lease
and trade receivables.
On February 7, 1996, a universal shelf registration filed by
the company with the Securities and Exchange Commission to register
up to $2.0 billion of debt and equity securities became effective.
Subsequently, on April 18, 1996, the company filed a prospectus sup-
plement to the original prospectus dated February 7, 1996, permit-
ting the company to offer up to $2.0 billion of such securities as
medium-term notes due one year or more from the date of issue. The
company intends to use the net proceeds from the sale of these secu-
rities, if and when issued, for general corporate purposes.
- 13 -
<PAGE>
Part II - Other Information
___________________________
Item 6(a). Exhibits
___________________
Exhibit Number
______________
10 IBM Extended Tax Deferred Savings Plans amended and restated
effective January 1, 1996.
11 Statement re: computation of per share earnings.
12 Statement re: computation of ratios.
99 Supplemental Consolidated Statement of Operations schedule.
Item 6(b). Reports on Form 8-K
A Form 8-K dated February 8, 1996, was filed to incorporate by
reference into Registration Statement No. 33-65119 on Form S-3, ef-
fective February 7, 1996, the Form of the Floating Non-Redeemable
Medium Term Note, the Form of the Floating Redeemable Medium Term
Note, the Form of the Fixed Rate Redeemable Medium Term Note, the
Form of the Floating Non-Redeemable Medium Term Note and the Form of
the Fixed Rate Redeemable Medium Term Note as they relate to the
$2,000,000,000 aggregate initial offering price of Medium Term Notes
of the Registrant. No financial statements were filed with the Form
8-K.
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 14, 1996
By:
G. Richard Thoman
_________________________________________________
G. Richard Thoman
Senior Vice President and Chief Financial Officer
* S/390, AS/400, RISC System/6000 and RAMAC are trademarks of the
International Business Machines Corporation.
- 14 -
EXHIBIT 10
IBM EXTENDED TAX DEFERRED SAVINGS PLAN
Amended and Restated Effective January 1, 1996
<PAGE>
INTRODUCTION
The IBM Extended Tax Deferred Savings Plan has been authorized
by the Board of Directors of International Business Machines to
be applicable effective on and after January 1, 1995. The Plan
has been amended effective January 1, 1996 by the Executive
Compensation and Management Resources Committee and is restated
as amended herein. The purpose of this Plan is to attract and
retain executives by providing a means for making compensation
deferrals and matching company contributions for those
employees eligible to participate in the International Business
Machines Tax Deferred Savings Plan with respect to whom
compensation deferrals and company contributions under the TDSP
are or would be limited by application of the limitations
imposed on qualified plans by Sections 401(a)(17), 401(a)(30),
and 415 of the Internal Revenue Code.
This Plan is intended to constitute an unfunded deferred
compensation plan for a select group of management or highly
compensated employees under Sections 201(2), 301(a)(2),
401(a)(1), and 4021(b)(6) of the Employee Retirement Income
Security Act of 1974, as amended. All benefits payable under
the Plan shall be paid out of the general assets of the
Company.
<PAGE>
IBM EXTENDED TAX DEFERRED SAVINGS PLAN
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS Page 1
ARTICLE 2. PARTICIPATION Page 4
2.01 Eligibility Page 4
2.02 Participation Page 4
ARTICLE 3. CONTRIBUTIONS Page 5
3.01 Amount of Deferral Contributions Page 5
3.02 Matching Contributions Page 5
3.03 Additional Company Contributions Page 5
3.04 Investment of Accounts Page 6
3.05 Vesting of Accounts Page 6
3.06 Individual Accounts Page 6
ARTICLE 4. INVESTMENT OF DEFERRALS AND DEFERRAL ACCOUNTS Page 7
4.01 Deemed TDSP Investments; Participant Control Page 7
4.02 Change of Investment Selection on Future Deferrals
Page 8
4.03 Change of Investment Selection on Existing Deferral
Accounts Page 8
ARTICLE 5. PAYMENT OF ACCOUNTS Page 9
5.01 Commencement of Deferral Payments Page 9
5.02 Method of Payment Page 9
5.03 Designation of Beneficiary Page 9
ARTICLE 6. GENERAL PROVISIONS Page 11
6.01 Funding Page 11
6.02 No Contract of Employment Page 11
6.03 Facility of Payment Page 12
6.04 Withholding Taxes Page 12
6.05 Nonalienation Page 12
6.06 Administration Page 12
6.07 Construction Page 13
ARTICLE 7. MANAGEMENT AND ADMINISTRATION Page 14
7.01 Amendment or Termination Page 14
7.02 Responsibilities Page 14
ARTICLE 8. CLAIMS PROCEDURE Page 16
<PAGE>
ARTICLE 1. DEFINITIONS
The following words and phrases as used herein have the
following meanings unless a different meaning is required by
the context:
1.01 "Accounts" shall mean the Company Account and the Deferral
Account.
1.02 "Beneficiary" shall mean a person other than a Participant
who is designated by a Participant or by the terms of the
Plan to receive a benefit under the Plan by reason of the
death of the Participant.
1.03 "Board" shall mean the Board of Directors of IBM.
1.04 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time. All citations to sections of
the Code are to such sections as they may from time to
time be amended or renumbered.
1.05 "Committee" shall mean the Executive Compensation and
Management Resources Committee appointed by the Board.
1.06 "Company" shall mean International Business Machines
Corporation ("IBM"), a New York corporation having its
principal place of business at Armonk, New York, and its
Domestic Subsidiaries, excluding Foreign Branches of the
Company except as may be otherwise provided in these
Articles.
1.07 "Company Account" shall mean, with respect to a
Participant, all amounts credited to the Participant under
Articles 3.02 and 3.03, and earnings, gains, or losses on
those amounts pursuant to Article 3.04.
1.08 "Company Contributions" shall mean the amount credited to
a Participant under Articles 3.02 and 3.03.
1.09 "Compensation" shall mean the Participant's salary and
annual incentive payment for a calendar year which would
be payable to a Participant for services rendered to the
Company after the Participant is no longer able to
actively participate in the TDSP (or would have been
unable to actively participate in the TDSP if the
Participant was not an active participant in the TDSP)
during the calendar year by reason of Code Section
401(a)(17) or Code Section 401(a)(30). A Participant's
Compensation will be determined without regard to a
Participant's election to make compensation reduction
contributions under the TDSP (or under a cafeteria plan
pursuant to Code Section 125) or to make Deferrals under
this Plan.
<PAGE>
1.10 "DCP Participant" shall mean a Participant who, for a
calendar year, was offered the opportunity by the Company
to defer up to 100% of his or her annual incentive payment
payable for that calendar year.
1.11 "Deferral Account" shall mean, with respect to a
Participant, the Participant's account balance under the
Deferred Compensation Plan that has been transferred to
this Plan, all amounts credited to a Participant under
Article 3.01 and earnings, gains, or losses on those
amounts pursuant to Article 3.04.
1.12 "Deferral Election Agreement" shall mean the agreement
entered into by the Participant pursuant to Article 2.02
under which he or she elects to defer a portion of his or
her Compensation under this Plan.
1.13 "Deferrals" shall mean the amount credited to a
Participant under Article 3.01.
1.14 "Deferred Compensation Plan" shall mean the incentive
compensation deferral program established by IBM in
November 1993.
1.15 "Domestic Subsidiary" shall mean a Subsidiary organized
and existing under the laws of the United States or any
state, territory, or possession thereof; provided however,
that the Plan shall not be deemed to cover the employees
of any Domestic Subsidiary unless authorized by the
Company's chief human resources officer.
1.16 "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time.
1.17 "Effective Date" shall mean January 1, 1995.
1.18 "Eligible Employee" shall mean, for a calendar year, a
domestic executive employee of the Company who is eligible
for the IBM Retirement Plan and who (a) has an annual rate
of salary and annual incentive payment which is expected
to exceed $150,000, as provided in Article 2.01, or such
other amount as determined by the chief human resources
officer of the Company in his or her sole discretion, or
(b) is a member of the Company's Senior Management Group
as determined by the chief human resources officer of the
Company in the relevant year.
1.19 "IBM" shall mean International Business Machines
Corporation, any predecessor, or any successor by merger,
purchase, or otherwise.
1.20 "Participant" shall mean each Eligible Employee who has
made the election described in Article 2.02(a), is
credited with an amount under Article 3.03, or whose
<PAGE>
account balance under the Deferred Compensation Plan has
been transferred to the employee's Deferral Account under
this Plan.
1.21 "Plan" shall mean this IBM Extended Tax Deferred Savings
Plan, as now in effect or as hereafter amended.
1.22 "Plan Administrator" shall mean a person or a committee
appointed pursuant to Article 7 which shall be responsible
for reporting, recordkeeping, and related administrative
requirements. If appointed as a committee, any one of the
members of the committee may act individually on behalf of
the committee to fulfill the committee's duties. As of
the Effective Date, the Director of Executive Compensation
has been appointed as the Plan Administrator.
1.23 "Plan Year" shall mean the calendar year with the first
Plan Year commencing on January 1, 1995.
1.24 "Subsidiary" shall mean a corporation or other form of
business organization the majority interest of which is
owned, directly or indirectly, by the Company.
1.25 "TDSP" shall mean the International Business Machines Tax
Deferred Savings Plan, established by the Company by
resolution of its Retirement Plans Committee, effective
July 1, 1983, as amended from time to time.
ARTICLE 2. PARTICIPATION
2.01 Eligibility
Eligibility is limited to US executive level Eligible
Employees of IBM and selected Domestic Subsidiaries whose
rate of annual Compensation (defined as salary and annual
incentive rate) is $150,000 as of November 1 of the
calendar year prior to the calendar year in which the
deferral would be effective (adjusted periodically based
on industry trends and government guidelines) or who are
members of the Company's Senior Management Group
regardless of rate of annual Compensation. For this
purpose, the defining of "selected Domestic Subsidiaries",
the "executive level" and "Senior Management Group", as
well as the ability to change the rate of annual
Compensation threshold are delegated to the chief human
resources officer of the Company in his or her sole
discretion and are subject to change. The Committee shall
notify employees of their eligibility for participation in
the Plan as soon as practicable after the chief human
resources officer has made its determination that such
<PAGE>
employees qualify as Eligible Employees for a calendar
year.
2.02 Participation
(a) No later than one month before the first day of the
calendar year during which an Eligible Employee desires to
have contributions credited on his or her behalf pursuant
to Article 3.01, an Eligible Employee must execute a
Deferral Election Agreement authorizing Deferrals under
this Plan for such year in accordance with the provisions
of Article 3.01.
(b) If an Eligible Employee becomes an employee of the Company
during a calendar year, he or she may execute a Deferral
Election Agreement as soon as practical after his or her
date of hire. The Deferral Election Agreement shall apply
to Compensation earned by the Eligible Employee in the
payroll periods beginning after such agreement is
submitted to the Committee.
(c) Each Deferral Election Agreement under the Plan shall be
irrevocable for the calendar year to which it relates.
(d) Irrespective of whether an employee has made the election
described above, any employee who has been selected by the
Committee to have Company Contributions credited on his or
her behalf pursuant to Article 3.03 shall be a
Participant.
(e) As a condition to participation in the Plan, a Participant
may also be required by the Committee to provide such
other information as the Committee may deem necessary to
properly administer the Plan.
ARTICLE 3. CONTRIBUTIONS
3.01 Amount of Deferral Contributions
For each payroll period that an Eligible Employee has
Compensation beginning on or after the effective date of
an Eligible Employee's Deferral Election Agreement, his or
her Deferral Account shall be credited with an amount of
Deferrals. The amount of Deferrals shall be equal to the
designated percentage of Compensation elected by the
Participant in his or her Deferral Election Agreement.
Under the Deferral Election Agreement, the Eligible
Employee may elect to forego receipt of amounts equivalent
to 1%, 2%, 3%, 4%, 5%, 6%, 7%, 8%, 9%, 10%, 11%, or 12% of
the Employee's Compensation for each pay period during
<PAGE>
which the election is in effect, and in the event an
Eligible Employee is a DCP Participant for the calendar
year, he or she may defer up to 100% of his or her annual
incentive payment for the calendar year. In addition, any
corporate officer who is subject to 162(m) of the Internal
Revenue Code may defer up to 100% of his or her salary.
Deferrals shall be made under this Article 3.01 shall
commence for payroll periods for a calendar year at such
time as the Participant may no longer actively participate
in the TDSP for the calendar year (or would have been
unable to actively participate in the TDSP if the
Participant was an active participant in the TDSP for the
calendar year) by reason of Code Section 401(a)(17) or
Code Section 401(a)(30) and has Compensation. No
Deferrals may be made hereunder prior to such time, except
for the deferral of a DCP Participant's annual incentive
payment.
3.02 Matching Contributions
The amount of Company Matching Contributions credited to a
Participant for each payroll period shall be equal to 50%
of the Participant's Deferrals for the payroll period;
provided however, that no Company Matching Contributions
will be made for a Participant's Deferrals in excess of 6%
of the Participant's Compensation for that payroll period.
Company Matching Contributions will be made in units of
IBM Stock with no right to transfer such units, except as
otherwise provided in this Plan.
3.03 Additional Company Contributions
IBM may cause the Committee to credit on behalf of any
Participant or any Eligible Employee who is not otherwise
a Participant for a particular calendar year an additional
amount of Company Matching Contributions or other Company
Contributions, which will be made only in units of IBM
Stock with no right to transfer such units, except as
otherwise provided in this Plan.
3.04 Investment of Accounts
A Participant's Deferral Account shall be treated as if
the Participant had invested it in certain TDSP Investment
Funds in accordance with Article 4. A Participant's
Company Account shall be treated as if it had been
invested in the IBM Stock Fund under the TDSP; provided
however, that in the event a Participant retires from the
Company and does not elect to have the entire amount of
<PAGE>
his or her Accounts then paid to him or her, any amounts
credited to the Participant's Company Account after
retirement will be treated as if they were transferred to
the Participant's Deferral Account for purposes of this
Article 3.04 and Article 4.
3.05 Vesting of Accounts
A Participant always shall be fully vested in his or her
Accounts.
3.06 Individual Accounts
The Committee shall maintain, or cause to be maintained,
records showing the individual balances of each
Participant's Accounts. Periodically, each Participant
shall be furnished with a statement setting forth the
value of his or her Accounts.
ARTICLE 4. INVESTMENT OF DEFERRALS AND DEFERRAL ACCOUNTS
4.01 Deemed TDSP Investments; Participant Control
A Participant shall designate the proportions in which his
or her Deferrals shall be treated as if they had been
allocated among certain Investment Funds under the TDSP.
Those Investment Funds are:
(a) The Fixed Income Fund
This fund's objective is to preserve principal (the
amount invested) and to provide a relatively stable
rate of interest. Under TDSP, the fund invests in
interest-bearing instruments, including contracts
with highly rated insurance companies, banks, and
other financial institutions.
(b) The Large Company Index Fund
This fund is for investors seeking long-term growth
of capital by achieving a market rate of return from
a diversified group of large-and medium-sized company
common stocks in the United States. Under TDSP, the
fund invests in a broad range of common stocks to
produce investment results approximating the price
and yield performance of Standard& Poor's 500 Index.
(c) The Small Company Stock Fund
<PAGE>
Investors who would like to pursue long-term capital
growth from a diversified group of small- and
medium-sized company common stocks in the United
States may want to consider this fund. Under TDSP,
the fund seeks to produce results that substantially
duplicate the price and yield performance of small-
and medium-sized company stocks generally not
represented in the Standard& Poor's 500 Index.
(d) The International Stock Fund
This fund is for aggressive investors seeking
long-term capital appreciation and diversification
through investments in stocks based outside of the
United States. Under TDSP, the fund invests in
equity market investments outside North America,
based on the Morgan Stanley Capital International
Europe, Australia, and Far East (EAFE) Index, with a
modified country weighting that limits investments in
securities of any one country to approximately 25% of
the fund.
(e) The IBM Stock Fund
The IBM Stock Fund will appeal to aggressive
investors looking for capital appreciation from a
single stock investment. The objective of the fund
is participation in IBM's future stock performance.
IBM corporate officers who elect this investment are
subject to such restrictions which are necessary for
compliance with securities laws, including the
requirement that any investment in this fund by an
officer subject to Section 16(b) of the Securities
Exchange Act of 1934 cannot be transferred out of
this fund until after employment has terminated.
.
The Committee may, in its discretion (which discretion may
be delegated to the Treasurer or other executive officer
of IBM), from time to time make additional TDSP Investment
Funds available as an investment measure under this Plan
and may determine that any TDSP Investment Fund, including
any of the Funds described above, may be terminated as an
investment measure under this Plan.
A Participant may elect to invest his or her Deferrals
entirely in any one of the funds or may elect any
combination in 5% multiples.
4.02 Change of Investment Selection on Future Deferrals
<PAGE>
A Participant may elect to change his or her investment
selection for future Deferrals once per month. The
Participant must make this election in the manner
prescribed by the Committee.
4.03 Change of Investment Selection on Existing Deferral
Accounts
With regard to a Participant's existing Deferral Account
balance, a Participant may elect to transfer balances
among the Investment Funds once per month; provided
however, that the portion of the Deferral Account of a
Company officer that is allocated to the IBM Stock Fund
may not be transferred to another Investment Fund while
the officer remains in Company employment. Any
permissible transfers, if among more than one Investment
Fund, must be made in 5% multiples. The Participant must
make this election in the manner prescribed by the
Committee, and the Committee may impose such additional
rules and limitations upon transfers between Investment
Funds as the Committee may consider necessary or
appropriate.
ARTICLE 5. PAYMENT OF ACCOUNTS
5.01 Commencement of Deferral Payments
A Participant shall be entitled to receive payment of his
or her Accounts upon the Participant's (1) termination of
employment from the Company for any reason other than
retirement from the Company or (2) retirement from the
Company with a balance of less than $25,000 in his or her
Accounts. Any other Participant who is a DCP Participant
and who has a termination of employment from the Company
while a DCP Participant or any other Participant who
retires from the Company shall be entitled to receive
payment of his or her Accounts during the January
following the calendar year during which the Participant
had a termination of employment from the Company.
5.02 Method of Payment
Payment of Accounts shall be made in a single lump sum
payment. Notwithstanding the foregoing, a Participant with
a balance of at least $25,000 in his or her Accounts who
retires from the Company may elect to receive (1) a lump
sum payment upon his or her termination of employment from
the Company or (2) up to ten ratable annual installment
payments of the balance in his or her Accounts commencing
during the January following the calendar year during
<PAGE>
which the Participant had a termination of employment from
the Company. For this election to be effective, at least
one full calendar year must pass between the calendar year
the Participant makes the election and the calendar year
the Participant has a termination of employment from the
Company. The Participant must make this election in the
manner prescribed by the Committee.
Upon application of a Participant, the Committee may
authorize earlier payment to the Participant after
termination of employment with the Company of an amount
reasonably needed to satisfy the emergency need caused by
an unforeseeable emergency that causes severe financial
hardship to the Participant. If a Participant dies before
payment of the entire balance of his or her Accounts, an
amount equal to the unpaid portion thereof as of the date
of his or her death shall be payable in one lump sum to
his or her Beneficiary.
5.03 Designation of Beneficiary
Each Participant's Beneficiary under this Plan shall
automatically be the person or persons designated as the
Participant's beneficiary under the TDSP even if such
designation is found to be invalid under the provisions of
ERISA or the Code. Such Beneficiary shall be entitled to
receive the lump sum amount, if any, payable under the
Plan upon the Participant's death pursuant to this Article
5.03 (except if that Participant was a DCP Participant and
had made an election pursuant to Article 5.02); provided
however, that the beneficiary is alive at the time of the
Participant's death. If no such Beneficiary designation
is in effect at the time of the Participant's death, or if
no designated Beneficiary survives the Participant, the
Participant's Beneficiary shall be deemed to be the
Participant's beneficiary under IBM's Group Life Insurance
Plan.
ARTICLE 6. GENERAL PROVISIONS
6.01 Funding
(a) All amounts payable in accordance with this Plan shall
constitute a general unsecured obligation of the Company.
Such amounts, as well as any administrative costs relating
to the Plan, shall be paid out of the general assets of
the Company, to the extent not paid by a grantor trust
established pursuant to paragraph(b) below. In the sole
discretion of the Committee, a Participant's Accounts may
be reduced to reflect allocable administrative expense.
<PAGE>
(b) IBM may, for administrative reasons, establish a grantor
trust for the benefit of Participants participating in the
Plan. The assets of said trust will be held separate and
apart from other Company funds and shall be used
exclusively for the purposes set forth in the Plan and the
applicable trust agreement, subject to the following
conditions:
(i) The creation of said trust shall not cause the Plan
to be other than "unfunded" for purposes of Title I
of the Employee Retirement Income Security Act of
1974, as amended;
(ii) The Company shall be treated as "grantor" of said
trust for purposes of Section 677 of the Code; and
(iii) Said trust agreement shall provide that its assets
may be used to satisfy claims of the Company's general
creditors in the event of its insolvency, and the rights
of such general creditors are enforceable by them under
federal and state law.
(c) Neither the Company nor the Committee guarantees the
investment alternatives available under the Plan in any
manner against loss or depreciation.
6.02 No Contract of Employment
Nothing herein contained shall be deemed to give any
employee the right to be retained in the service of the
Company or an Affiliate or to interfere with the right of
the Company or an Affiliate to discharge any employee at
any time without regard to the effect that such discharge
may have upon the employee under the Plan. Nothing
appearing in or done pursuant to the Plan shall be held or
construed to create a contract of employment with the
Company, to obligate the Company to continue the services
of any Employee, or to affect or modify any Employee's
terms of employment in any way or to give any person any
legal or equitable right or interest in the Plan or any
part thereof or distribution therefrom or against the
Company except as expressly provided herein.
6.03 Facility of Payment
In the event the Plan Administrator determines that any
Participant or Beneficiary receiving or entitled to
receive benefits under the Plan is incompetent to care for
his or her affairs and in the absence of the appointment
of a legal guardian of the property of the incompetent,
benefit payments due under the Plan (unless prior claim
<PAGE>
thereto has been made by a duly qualified guardian,
committee, or other legal representative) may be made to
the spouse, parent, brother or sister, or other person,
including a hospital or other institution, deemed by the
Plan Administrator to have incurred or to be liable for
expenses on behalf of such incompetent. In the absence of
the appointment of a legal guardian of the property of a
minor, any minor's share of benefits payable under the
Plan may be paid to such adult or adults as in the opinion
of the Plan Administrator have assumed the custody and
principal support of such minor.
The Plan Administrator, however, in its sole discretion,
may require that a legal guardian for the property of any
such incompetent or minor be appointed before authorizing
the payment of benefits in such situation. Benefit
payments made under the Plan in accordance with
determinations of the Plan Administrator pursuant to this
Article 6 shall be a complete discharge or any obligation
arising under the Plan with respect to such benefit
payments.
6.04 Withholding Taxes
The Plan Administrator shall have the right to withhold
all applicable taxes or other payments from benefits
hereunder and to report information to government agencies
when required to do so by law.
6.05 Nonalienation
No benefits payable under the Plan shall be subject to
alienation, sale, transfer, assignment, pledge,
attachment, garnishment, lien, levy, or like encumbrance.
No benefit under the Plan shall in any manner be liable
for or subject to the debts or liabilities of any person
entitled to benefits under the Plan.
6.06 Administration
All decisions, determinations, or interpretations the
Board, the Committee, the Plan Administrator, the Company
or any member, officer or employee thereof are authorized
to make under the Plan (including the delegation of any
authority hereunder to another party) shall be made in
that party's sole discretion and shall be final, binding,
and conclusive on all interested persons.
6.07 Construction
<PAGE>
The Plan is intended to constitute an unfunded deferred
compensation arrangement for a select group of management
or highly compensated employees, and all rights hereunder
shall be governed by and construed in accordance with the
laws of the State of New York to the extent not governed
by the Employee Retirement Income Security Act of 1974, as
amended.
ARTICLE 7. MANAGEMENT AND ADMINISTRATION
7.01 Amendment or Termination
This Plan may be amended from time to time for any purpose
permitted by law or terminated at any time by written
resolution of the Board or the Committee, but only if the
Committee's action is not materially inconsistent with a
prior action of the Board.
The authority to amend or terminate the Plan shall include
the authority to amend the procedure for amending or
terminating the Plan and the authority to amend or
terminate any related instrument or agreement.
7.02 Responsibilities
(a) The following persons and groups of persons shall
severally have the authority to control and manage the
operation and administration of the Plan as herein
delineated:
(i) the Board,
(ii) the Committee,
(iii) the chief human resources officer, and
(iv) the Plan Administrator and each person on any
committee serving as the Plan Administrator.
Each person or group of persons shall be responsible for
discharging only the duties assigned to it by the terms of
the Plan.
(b) The Board shall be responsible only for designating those
persons who will serve on the Committee and for approval
of any resolution to amend or terminate the Plan.
(c) The Committee may, pursuant to a duly adopted resolution,
delegate to the chief financial officer or the chief human
resources officer, the Treasurer, the Plan Administrator
or any other officer or employee of IBM, authority to
carry out any decision, directive, or resolution of the
Committee.
<PAGE>
(d) The Committee shall appoint one or more executives
employed by IBM to serve as Plan Administrator or as a
committee to fulfill the function of Plan Administrator.
In the sole discretion of the Plan Administrator, the Plan
Administrator shall have the full power and authority to:
(i) promulgate and enforce such rules and regulations as
shall be deemed be necessary or appropriate for the
administration of the Plan;
(ii) adopt any amendments to the Plan that are required by
law;
(iii) interpret the Plan consistent with the terms and
intent thereof;
and
(iv) resolve any possible ambiguities, inconsistencies,
and omissions.
All such determinations and interpretations shall be in
accordance with the terms and intent of the Plan, and the
Plan Administrator shall report such actions to the
Committee on a regular basis. Additionally, the chief
human resources officer shall appoint and designate such
other IBM employees as may be needed to provide adequate
staff services to the Committee and the Plan
Administrator.
(e) The Committee and the Plan Administrator may engage the
services of accountants, attorneys, actuaries, investment
consultants, and such other professional personnel as are
deemed necessary or advisable to assist them in fulfilling
their responsibilities under the Plan. The Committee, the
Plan Administrator, and their delegates and assistants
will be entitled to act on the basis of all tables,
valuations, certificates, opinions, and reports furnished
by such professional personnel.
ARTICLE 8. CLAIMS PROCEDURE
IBM's Executive Compensation Department is responsible for
advising Participants and Beneficiaries of their benefits under
the Plan. In the event a Participant or Beneficiary believes
he or she is entitled to benefits and has not received them,
the Participant or Beneficiary must submit a claim to the
Director of Executive Compensation, IBM Corporation, Old
Orchard Road, Armonk, New York 10504. A written decision
setting forth its conclusions will be furnished by the Plan
Administrator to the Participant or Beneficiary within 60 days
after the request for review is received. Failure of the Plan
Administrator to follow this procedure shall not, in and of
itself, give rise to a cause of action for benefits hereunder.
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, 1996 March 31, 1995
-------------- --------------
Number of shares on which earnings
per share is based:
Average outstanding during period 544,303,522 585,226,523
Add - Incremental shares under stock
option and stock purchase plans 11,062,480 6,909,834
- Incremental shares
related to 5 3/4% CGI convertible
bonds* (average) - 7,715,388
-------------- --------------
Number of shares on which fully diluted
earnings per share is based 555,366,002 599,851,745
============== ==============
Net earnings applicable to
common shareholders (millions) $ 769 $1,242
- Net earnings effect of
interest on 5 3/4% CGI convertible
bonds* (millions) - 4
-------------- --------------
Net earnings on which fully
diluted earnings per share
is based (millions) $ 769 $1,246
============== ==============
Fully diluted earnings per share $ 1.38 $ 2.08
Published earnings per share $ 1.41 $ 2.12
* The 5 3/4% CGI convertible bonds were all redeemed as of December 31,
1995.
EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
FOR THREE MONTHS ENDED MARCH 31:
(UNAUDITED)
(Dollars in millions)
1996 1995
________ ________
Earnings before income taxes(1) $ 1,554 $ 2,198
Add:
Fixed charges, excluding capitalized interest 252 279
________ ________
Earnings as adjusted $ 1,806 $ 2,477
======== ========
Fixed charges:
Interest expense 153 184
Capitalized interest 7 5
Portion of rental expense representative of
interest 99 95
________ ________
Total fixed charges $ 259 $ 284
======== ========
Preferred stock dividends(2) 10 8
________ ________
Combined fixed charges and preferred stock
dividends $ 269 $ 292
======== ========
Ratio of earnings to fixed charges 6.97 8.72
Ratio of earnings to combined fixed charges and
preferred stock dividends 6.71 8.48
(1) Earnings before income taxes excludes the company's share in the
income and losses of less-than-fifty percent-owned affiliates.
(2) The company reported preferred stock dividends and transaction costs
of $5 million and $47 million for the quarter ended March 31, 1996
and 1995, respectively. Excluded from the ratio computation for the
quarter ended March 31, 1995 are transaction costs of $42 million
relating to the repurchase of Series A 7 1/2 percent preferred stock
depositary shares. Included are preferred stock dividends of
$5 million, for the quarter ended March 31, 1996 and 1995 or
$10 million and $8 million representing the pre-tax earning
which would be required to cover such dividend requirements based
on the company's effective income tax rate for the quarter ended
March 31, 1996 and 1995, respectively.
EXHIBIT 99
INTERNATIONAL BUSINESS MACHINES CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS*
SUPPLEMENTAL SCHEDULE
FOR THE THREE MONTHS ENDED MARCH 31: (UNAUDITED)
(Dollars in millions except for per share amounts) 1996 1995
Revenue: _______ _______
Hardware sales $ 7,708 $ 7,727
Services 3,198 2,445
Software 3,037 2,873
Maintenance 1,749 1,821
Rentals and financing 867 869
_______ _______
Total revenue 16,559 15,735
Cost:
Hardware sales 5,005 4,795
Services 2,577 1,974
Software 911 1,005
Maintenance 912 900
Rentals and financing 385 397
_______ _______
Total cost 9,790 9,071
_______ _______
Gross profit 6,769 6,664
Operating expenses:
Selling, general and administrative 3,461 3,633
Research, development and engineering 1,091 913
_______ _______
Total operating expenses 4,552 4,546
_______ _______
Operating income 2,217 2,118
Other income, principally interest 150 246
Interest expense 149 180
_______ _______
Earnings before income taxes 2,218 2,184
Income tax provision 865 895
_______ _______
Net earnings 1,353 1,289
Preferred stock dividends and transaction costs 5 47
_______ _______
Net earnings applicable to
common shareholders $ 1,348 $ 1,242
======= =======
Net earnings per share of common stock $ 2.48 $ 2.12
* Supplemental information provided for comparative purposes:
(1) 1996 excludes a pre-tax charge of $236 million ($144 million after
tax, $.27 per common share) for work force separations.
(2) 1996 excludes a non-recurring, non-tax deductible charge of
$435 million ($.80 per common share) for purchased in-process
research and development in connection with the acquisitions of
Tivoli Systems, Inc. and Object Technology International, Inc.
- 17 -
<PAGE>
Exhibits Omitted From This Copy
_______________________________
IBM Extended Tax Deferred Savings Plan amended and restated
effective January 1, 1996.
Copies of this exhibit may be obtained without charge from the
First Chicago Trust Company of New York, Suite 4688, P.O. Box 2530
Jersey City, New Jersey 07303-2530
Printed on Recycled Paper
<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, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,953
<SECURITIES> 443
<RECEIVABLES> 16,120
<ALLOWANCES> 0
<INVENTORY> 6,958
<CURRENT-ASSETS> 38,854
<PP&E> 43,235
<DEPRECIATION> 27,028
<TOTAL-ASSETS> 77,766
<CURRENT-LIABILITIES> 30,332
<BONDS> 0
<COMMON> 7,816
0
253
<OTHER-SE> 13,751
<TOTAL-LIABILITY-AND-EQUITY> 77,766
<SALES> 7,708
<TOTAL-REVENUES> 16,559
<CGS> 5,005
<TOTAL-COSTS> 9,790
<OTHER-EXPENSES> 5,223
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 149
<INCOME-PRETAX> 1,547
<INCOME-TAX> 773
<INCOME-CONTINUING> 774
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 774
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.38
</TABLE>
