IB.I Corporation In the SEVEN FEET : [SINCE 10 04 ), that Lou Gerstner haE reigned over TENT, the company" = earning PET Share have increased an average Of 2796 per year . This remarkable increase in gaming = haz not gone unnoticed by the Securities market :. Indeed , the company" = market value has Frown* from less than 530 billion to over $ 2010 billion during this period . USE the following financial Statement data to` . . DECOMPOSE LENT` ROE linto Profit margin . GEEEt Turnover , return on ZEEEts , and financial LEVERS= = ) For EACH Quarter and discuss the factor = ( and trend=; that contribute to BIE BLUE": Profitability . SHOW TOUR. CALCULATIONS 2 . Evaluate LENT = REVENUE growth, ELECZiTables, and GIVEE LLETELLE and over the period ( DE Sure to control for Ezzzonality in your evaluation _ _ _E. You can address the change in Sales OF calculating. (Sales in quarter # - Sales in quarter t OF THE prior Year! ! Sales in quarter + of the prior year . This would give You the= No change in Sales from one Year to the next for a particular quarter .` 2 . Evaluate IENT = Eating = per Share [basic ; and Identify the Factor: most responsible For the increase in LEVI'S Earnings* W`rite Your answers in Standard English . BE = PECific in Your REFERENCES . provide details of Your* computations , and be thorough in your Explanations . EXIL ETY TEM Selected Earnings Per Share [late For the Quarters Ended :` Mar - do EENFEE FOR E- ONE HATEIT CERONUIT` Operations* DOG-BE\\ 1.12 3:0 0- 39\\ Are Yst EXPECTS_ E=mines Fer Enare\\ 0.50 2. 30 DEY OHTerence\\ * Surprise ECOS Q. DE I. CE 9.73 36 OCE FEES 0 0 =] : 4195)All of the financial data in the tables that follow ( except " per share figures" ) . are in millions EXHIBIT 2\\ IBM Earnings per Share* Jun - 20 Mar _ OD Dec - 49 Sep - 9.9 Jun - 29 Mar - 29 DEC - 98 Sep - 98 Jun - 98 Mar - 98 DEL - 97 Earings per Share of Common Stock _ Basic\\ 5 1. 10 $ Q.BE B 1.16 5 0.97 {\\ 1.32 {\\ Q.BD 5 1. 27 0.54 $ 1. QB Average Number of Common Shares Outstanding - Basic 1, 767. 6 1 , 717. 2 1 . 793.0 1. 6:05. 2 1 , 212. 1 1. 323.8 1, 57:4.2 1. 524.0 Average Price per Share $ 109. 34{ 1, 239. 5 1. 350.4 1 1 1.00 5 102.95 123. 61 1 16. 48\\ 3.3. 20 32. 91 \\5 62.20 57. 37\\ 51.12 52.05 $ $ * All Data are Adjusted to Reflect 2 for 1\\ stock splits stock split 5/ 10/ }} EXHIBIT Z ( continued ) Sep - IT Jun - 97 Mar - 97\\ Dec - 96 Sep - 95) Earings per Share of Common Stock - Basic 5 0.73 5 0.54 {\\ 0.99 5 290 Average Number of Common Shares Outstanding - Basic 1 , 51.50.0 1 , 97.3.8 2, DOG.B 2, 053. 5 2, 0:37. 4 Average Price per Share 52.13 42.78\\ 36.45 30. 51\\ 5 31.65 * All Data are Adjusted to Reflect 2 for 1 stock stock Splits split 5/}/07EXHIBIT ?` IBM Consolidated Statements of Income* For the Quarters Ended :" Mar - OD DEC - 4} SEN - 9.9 Jun - 9.9 Mar - 9.9 Dec - 98 Sep - 98 Jun - 98 Mar - 98 DEC - 97 Total Revenues 19, 348 \\5 24, 182 21, 144 21, 205 20, 317\\ Cost of Sales 25, 131 20. 095 18 , 823 17, 6:18 23, 723 12, 3:37 15 , 2 13.530 13, 681 13, 059 15, 322 12.628 Gross Margin 564 1 1 , 67 7 3, 2:24 7, 258 9,809 T. ACT 1 1, 168 14. 20.5 9.518 Selling , General and Administrative Expenses* 7 , 01 1 3 , 70 0 4. 445 3.501 2. BAE 3.5.37 7 , 145 5, 074 4.057 5. 060 Research and Development 1 , 172 1 , 383 1 , 293 1 . 131 1.407 3, 8:12 1 , 240 1 , 220 1, 425 Total Operating Expenses 4, BTO 1 , 416 5 , 361 1 , 179 4, 8 84 4, 139 5, 118 5 , 297 3. 0 5 , 132 4, 898 6 , 485 Operating Income* 2 , 133 2, 68.0 2, 140 134 134 2, 170 Other Income ( Expense ) , net 134 4, 0.85 3.328 187 122 1, 552 3, 033 Interest EXPENSE\\ 1.629 197 4 , 043 174 194 2 , 1 2, 100 213 150 173 Income Before Taxes 2 . 5 3. 3.02 2 . 1 NO Income Tax Expense* Net Income 6:30 , 470 2.3 956 6:38 1. 494 487 1, 036 5 2,0.93 EXHIBIT ? ( continued" SEP - 97 Jun - 97 Mar - 97 DEC - 90 SED - 40 Total Revenues 18, 872 17, 303 \\5 23, 14:3 18, 062 Cost of Sales 1 1, 507 1 1 , 471 10 . 716 13, 8:22 10,804 Gross Margin 7, 0.98 7, 401 6.592 7. 258 Selling , General and Administrative EXPENSES 3.95B 3. 604 9 , 321 3.932 5, 093 4, 175 Research and Development 1. 162 1 , 221 1.069 1 , 332 1, 1 15 Total Operating Expenses 5, 0.94 5, 174 4 . 753 6, 425 5. 290 Operating Income* 2,004 2, 222 137 1. 539 2.890 1. 960 Other Income ( Expense ) , net 162 185 181 183 Interest Expense* 183 179 172 190 172 Income Before Taxes 1, 983 Income Tax Expense 624 2 , 180 1 , 852 2, 8:37 1.979\\ 6:04 1. 359 734 1 , 445 657 Net Income 1. 285 $ 1 , 195 5 2, 023EXHIBIT 4 IBM Consolidated Statements of Income For the Years Ended :" 1.9.95 19.98 1997 1996 Sales 87. 548 81 , EGT TO SUB 75, 547 Cost of Goods 5old 55. 619 50, 79 5 45, 408 Gross Margin 31. 929 30, 272 30.609 30.539 Research and Development Expense* 5, 273 5, 04E 4.877 4.654 Other Selling , General & Administrative Expenses 14 , 729 16. 6 62 16,634 16, 854 Total Operating Expenses 20, 002 21 , 708 21, 511 21, 50B Total Operating Income* 1 1 , 927 9, 164 589 9,098 9,031 Other Income ( Expense ) net 6:57 707 Interest Expense* EBT 11 . 757 9.0 716 Tax on EBT 4 , 045 3, 027 9, 022 DO N't Nico 3, 158 Net Income 7, 712 5. 854 EXHIBIT 5 IBM Common Size Statements of Income* For the Years Ended : 199.9 1958 1997 Sales . DO 1. 00 Cost of Goods Sold D.64 0 . 62 0. 61 Gross Margin 0 . 36 0. 38 0.39 0. 40 Research and Development Expense* 0. 06 O .DE Other Selling , General & Administrative Expense* 0 . 17 O . OF 0. 06 Total Operating Expenses 0.23 0 .20 0 . 27 0. 21 0 . 22 0 . 27 0 . 28 Total Operating Income* 0 . 14 0 . 11 0 . 12 0. 12 Other Income ( Expense ) net 0 . 01 0 . 01 0.01 0. 01 Interest Expense* 0 . 01 0. 01 EBT Tax on EBT 0 . 13 0. 01 0. 01 0. 1 1 0. 05 0 . 12 D.D 0. 09 0. 08 0 .04 Net Income O. OBEXHIBITE IBM Consolidated Balance Sheets For the Quarters Ended :" Mar - 00 Sep - 9.5 Jun - 9.9 Mar - 9.9 DEC - 98 Jun - 90 Mar - 98 DEC - 97 Assets Lash 855 " FReceivables , Inventory and Pre- Paids* Total Current ASSETS 35533 1, 241 2 , ^0) $ 39, 135\\ 36. 2 34, 4:45 36. 5.52 2. 41 1 32, 5 31 ,1 32. BE` 5 43. 452 39, 801 1, 933 42.360 38, 802\\ 1. 541 $5 5 18 , 865 19 , 005 37 . 012 1, 68% 37, 5 71 5 40.413\\ Property & Equipment ( net ) 1 6.950 19, 631 23, 084 21, 912 18, 453 Investments and Other ASSETS 24 , 109 21 . 647 18 , 223 18, 3:47 JNO 22. 7:34 Total ASSETS ZEEEE $ 82, 764 81 , 751 86, 10.0 79, 719 17. 1 12 12 , 150 1944 \\5 81,459 5 5 Liabilities and Shareholders' Equity Accounts Payable , TaxEs & Accruals 5 LEbat Maturing within One Year 21 TET 138:44 Total Current Liabilities 35, 611 to in in in in 5 Long Term Debt \\BERENG ! " ` ` PHONES `^` ?' I WWWD Wither Liabilities & DEFENEd TAXES Total Liabilities $ 63, 246 in Total Shareholders Equity\\ in in in in in in Total Liabilities and Shareholders' Equity* 82, 764 in 5 EXHIBIT 6 ( continued ) SEP - 97 Jun - 97 Mar - 97 Dec - 96 Lash 5 6, 486 \\in 3 DO 131 855 % FReceivables , Inventory and Pre - Paids* 31 , 704| 31 , 778 . 463 1.857 Total Current ASSETS\\ Property & Equipment ( net ) $ 38, 190 17, 921 |38.6 5 5 22 , 182 7 , 647 17.062 40 . 6 17 , 407 Investments and Other ASSETS $ 78, 293 2.53} 23. 030 Total Assets\\ "in 5 $1 , 1:32 5 Liabilities and Shareholders' Equity Accounts Payable , Taxes & Accruals 5 Debt Maturing within One Year 18, 07 . 7. 9.98 21 , 043 ` in [ Total Current Liabilities` 5 Long Term Debt Other Liabilities & Deferred TENES 1. 872 .6 32 Total Liabilities* Total Shareholders Equity\\ in 19 in Total Liabilities and Shareholders' Equity 21 , 5:28 . 132Chart 1 IBM S 98 8 8 8 980 Sep-96 Dec-9 Mar-97 Jun-97 Sep-97 Dec-97 Mar-98 Jun-98 Sep-9 Dec-9 Mar-9 Jun-9 Sep-9 Dec-99 Mar- 00 Jun-00 Common Stock Price per Share Chart 2 IBM $5.00 54.50 54.00 53.50 53.00 -ally EPB $ 52.50 'Pseudo Annual EFS 52 00 $1.50 $1.0 50.50 Nov. Jan. May Nov.S Jan. Mar.s jan- Sep.s Jan. Mar. May Earnings per share