Annual Report
International Business Machine
(IBM) Corporation
Jiena Zheng
Session: Summer 2013
http://www.ibm.com/annualreport/2012/bin/assets/2012_ibm_annual.pdf
• Chief Executive Officer: Virginia M. (Ginni)
Rometty
• Home Office: International Business Machines
Corporation, 1 New Orchard Road, Armonk,
New York 10504-1722, United States
• Ending Date of last fiscal year: Dec. 31st, 2012
• Main geographical area of activity: IBM serves
customers globally across most industries,
including North American, United kingdom,
Middle East, Africa and Asia Pacific.
• IBM’s principle products and services: As the
world's top provider of computer products and
services, IBM focuses primarily on its growing
services business that accounts for more than half
of sales. Known in the field of computer hardware
as industry-leading enterprise server, IBM is also
recognized as one of the largest providers of
information technology, business services, software
units and semiconductors.
• IBM’s Independent Auditors:
PricewaterhouseCoopers LLP
• Chairman: Michael L. Eskew
• Director: David N. Farr,
• Director: James W. Owens
• Director: Joan E. Spero
• Auditors’ Evaluation of IBM: The auditors
concluded that the financial statements and
recordings of IBM accurately presents financial
position of International Business Machines
Corporations and its subsidiaries at Dec. 31, 2012
and 2011. The results of their operations and cash
flows are in agreement of accounting principles
generally accepted in the United States. Also, IBM
maintained effective internal control over financial
reporting.
• Most recent price of the company’s stock: $208.02 (May
1st,2013)
• Twelve month trading range of the company’s stock:
$181.85 – $215.90
• Dividend per share of common stock: $3.5
May 8th -Aug 8th 2012
Aug 9th - Nov 7th 2012
Nov. 8th 2012-Feb 6th 2013
Feb 6th - May 8th 2013
Total
$0.85
$0.85
$0.85
$0.95
$3.5
• Date of the above information: May 31st, 2013
• There is a relative stability in trading range of the
company’s stock. Also, according to the data provided, the
stock is in a relatively uptrend. Thus, I would buy IBM’S
stock because it’s a safe stock for investment.
Twelve months
trading range of
the company’s
stock
2011
2012
Goss Profit
$ 50,138
$ 50,298
Income from
Operations
$ 26,544
$ 26,745
Net Income
$ 15,855
$ 16,604
Note: $ in millions
It is most like a multistep format.
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According to the data above, the Gross Revenue and Net Income both increase,
which indicates that IBM has year to year growth in gain. Gross Profit and
Income from Operation of 2011 and 2012 are pretty close. Because the Income
from Operation only generated from normal operations, so we can assume that
similar income will be generated every year as operation goes on. However,
there is a lot more increase of Net Income in 2012 than 2011. Then noticing the
big gap of Other (income) and expense in 2011 and 2012, and compare with
the expense in 2010, we can conclude that the difference was mainly
influenced by the abnormal other(income) and expense account in 2012.
2011
2012
Changes
116,433
119,213
2,780
96,197
100,229
4,032
Shareholders’ Equity
20,236
18,984
(1,252)
Liabilities + Shareholders’ Equity
116,433
119,213
2780
Assets
=
Liabilities
+
Note: $ in millions
• Comparing the information above of 2011 and
2012, there is a 2,780 increase in Assets in
2012, a 4,032 increase in Liabilities and a 1252
decrease in Shareholders’ Equity.
• There is a most amount increase in liabilities,
which seems to be caused by increase in “longterm debt” and “Retirement and nonpension
postretirement benefit obligations”.
$ in millions
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Operating
Financing
Investing
2011
19,846
(13,696)
(4,396)
2012
19,586
(11,976)
(9,004)
For the past two year, the cash flows from operations were more than
net income
The company did not grow through investing activities. As the statement
of cash flow shows that there is a big 4604 million dollars loss for the
fiscal year 2012 in investing activities. Among all the investing activities,
only Divestiture of businesses, net of cash transferred increased 585 in
2012.
The company’s primary source of financing is Proceeds from new debt
There is an increase in company's cash in year 2011 and decrease in year
2012. the difference is primary caused by abnormal low purchases of
marketable securities and other investments in year 2011
The accompanying Consolidated Financial
Statements and foot- notes of the
International Business Machines
Corporation (IBM or the company) are
prepared in accordance with accounting
principles generally accepted in the United
States of America (GAAP).
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A. Significant Accounting Policies
B. Accounting Changes
C. Acquisitions/Divestitures
D. Financial Instruments
E. Inventories
F. Financing Receivables
G. Property, Plant and Equipment
H. Investments and Sundry Assets
I. Intangible Assets Including Goodwill
J. Borrowings
K. Other Liabilities
L. Equity Activity
M. Contingencies and Commitments
N. Taxes
O. Research, Development and Engineering
P. Earnings Per Share of Common Stock
Q. Rental Expense and Lease Commitments
R. Stock-Based Compensation
S. Retirement-Related Benefits
T. Segment Information
U. Subsequent Events
Ratios
2011
2012
Working Capital
8,805
5,808
Current Ratio
1.209
1.133
Receivable Turnover
9.56
9.80
Average days’ sales uncollected
38.18
37.24
Inventory Turnover
41.20
45.70
Average Days’ Inventory On Hand
8.86
7.99
Operating Cycle
47
45
Payables Turnover
12.55
13.14
Average Days Payable
29
28
IBM’s working Capital dramatically decrease almost 3000 millions in 2012.
The Current Ratio, Average days’ sales uncollected,Average Days Payable,
Average Days’ inventory on hand, and operating cycle all slightly
decreased in year 2012. The Receivable Turnover, Inventory Turnover, and
Payables Turnover slightly increased.
Reference
2011 Working Capital=Current Assets – Current Liabilities= 50,928 –42,123= 8805
2012 Working Capital=Current Assets – Current Liabilities= 49,433 –43625= 5808
2011 Current Ratio=Current Assets/Current Liabilities= 50,928 /42,123= 1.209
2012 Current Ratio=Current Assets/Current Liabilities= 49,433 /43625= 1.133
2011 Receivable Turnover=Revenue/Notes and accounts receivable=106,916/11,179=9.56
2012 Receivable Turnover=Revenue/Notes and accounts receivable=104,507/10,667 = 9.80
2011 Average days’ sales uncollected=365 / Receivables turnover =365/9.56 = 38.18
2012 Average days’ sales uncollected=365 / Receivables turnover =365/9.80 = 37.24
2011 Inventory Turnover=Revenue / Inventories=106,916/2,595=41.20
2012 Inventory Turnover=Revenue / Inventories=104,507/2,287=45.70
2011 Average Days’ Inventory On Hand= 365 / Inventory Turnover=365/41.20=8.86
2012 Average Days’ Inventory On Hand= 365 / Inventory Turnover=365/45.70=7.99
2011 Operating Cycle=Average inventory processing period + Average receivable collection
period=9+38=47
2012 Operating Cycle=Average inventory processing period + Average receivable collection
period=8+37=45
2011 Payables Turnover=Revenue / Accounts payable=106,916/8,517=12.55
2012 Payables Turnover=Revenue / Accounts payable=104,507/7,952=13.14
2011 Average Days Payable=365 / Payables Turnover=365/12.55=29
2012 Average Days Payable=365 / Payables Turnover=365/13.14=28
Ratio
2011
2012
Net Profit Margin
14.83%
15.89%
Total Asset Turnover
0.92
0.88
Return on Assets
13.62%
13.93%
Return on Equity
78.73%
88.04%
International Business Machines Corp.'s total asset
turnover improved from 2010 to 2011 but then
deteriorated significantly from 2011 to 2012.
However, there is a steady increase in Profit
Margin, Return on Assets. And almost 10%
increase in Return on Equity.
Ratio Reference
2011 Net Profit Margin=100*Net Income/Revenue=100*15,855/106,916=14.83%
2012 Net Profit Margin=100*Net Income/Revenue=100*16,604/104,507=15.89%
2011 Total Asset Turnover = Revenue / Total Assets = 106,916/116,433=0.92
2012 Total Asset Turnover = Revenue / Total Assets = 104,507 / 119,213 = 0.88
2011 Return on Assets=100 × Net Income / Total
Assets=100*15,855/116,422=13.62%
2012 Return on Assets=100 × Net Income / Total
Assets=100*16,604/119,213=13.93%
2011 Return on Equity = 100 × Net income / Total IBM stockholders' equity
= 100 ×
15,855/20,138=78.73%
2012 Return on Equity = 100 × Net income / Total IBM stockholders' equity
= 100 ×
16,604 / 18,860 = 88.04%
Ratios
2011
2012
Earnings per share
13.06
14.37
Stock Price per share
183.88
191.55
Dividend yield
1.58%
1.72%
The Price/Earning per share ratio slightly
decreased from year 2011 to 2012, the
Dividend yield on the other hand, increased by
0.14%
2011
2012
Debt to Equity
1.56
1.76
Financing Gap
18.04
17.23
The debt to equity increase in 2012 than in 2011 and the financing
gap in 2012 is slightly smaller than in 2011. Generally speaking,
IBM’S solvency ability is slightly deteriorating.
Ratio Reference
2011 Dividend Yield=Annual Dividends Per Share / Price Per Share=2.90 /
183.88=1.58%
2011 Dividend Yield=Annual Dividends Per Share / Price Per
Share=3.30/191.55=1.72%
2011 Debt to equity = Total debt / Total IBM stockholders' equity= 31,320 /
20,138 = 1.56
2012 Debt to equity = Total debt / Total IBM stockholders' equity= 33,269 /
18,860 = 1.76
2011 Operating Cycle= Days Inventory on Hand + Days Sales=8.86+38.18=47.04
2012 Operating Cycle= Days Inventory on Hand + Days Sales=7.99+37.24=45.23
2011 Financing Gap=Operating Cycle-Days Payable=47.04-29=18.04
2012 Financing Gap=Operating Cycle-Days Payable=45.23-28=17.23
As a globally integrated enterprise, IBM continuously pursue higher-value, more
profitable strategizes in technologies and marketing to satisfy clients’ needs,ensure
company’s future growth to investors, employee, and provide strong returns to
shareholders. IBM would continue developing technology in the idea of “a
smarter planet” in three core areas: Designed for Dates, Defined by Software, and
Open and Collaborative. Digital intelligence changes the way of what
people,organizations, and entire industries are doing. IBM Research is one of the
forerunners in information technology.
Reference
Continuing the 2015 Road Map
Words from CEO: In 2012, IBM accomplished 13 percent
growth in operating earnings per share, going well on track
to reach IBM’s 2015 Road Map objective of at least $20 of
operating earnings per share. This reflects IBM’s strategic
position and capabilities, the discipline of its management
systems, the dedication and expertise of more than 430,000
IBMers around the world, and more importantly, the impact
of distinct choices made in IBM’s business and technology
model.