IBM(US:IBM)2024-02-25 16:00Economic Environment and Market Conditions - IBM's revenue and profit could be impacted by a downturn in the economic environment and client spending budgets[19] - Approximately 60% of IBM's revenues are derived from sales outside the United States, making it susceptible to global economic and political changes[27] - The company's financial results are difficult to predict due to factors such as new product introductions and competitive market conditions[26] - Adverse financial market conditions could negatively impact the company's pension plans, potentially requiring additional funding and affecting financial flexibility[49] - The company is exposed to currency and financing risks that could impact its revenue, as a significant portion of its operations is conducted in non-U.S. currencies[50] - The company's financial performance may be affected by changes in market liquidity conditions and customer credit risk, necessitating ongoing credit evaluations[51] Cybersecurity Risks - Cybersecurity threats are evolving, and the company is at risk of security breaches that could adversely affect operations[39] - The company faces significant cybersecurity risks, including potential liabilities, litigation, and regulatory actions, which could lead to financial losses and damage to its brand and reputation[42] - Cybersecurity incidents could result in operational disruptions, financial losses, and potential liability for the company and its customers, despite ongoing mitigation efforts[43] - The regulatory environment regarding cybersecurity, privacy, and data protection is increasingly complex, leading to higher compliance costs and potential impacts on the company's business operations[44] - The Cybersecurity Advisory Committee (CAC) oversees the management of cybersecurity risks, including governance structure and incident reviews[64] - IBM's management team includes senior leaders with significant experience in cybersecurity, contributing to the company's risk management strategies[65] - The Audit Committee receives regular updates on cybersecurity risks, threat intelligence, and emerging global policies from the Chief Information Security Officer (CISO)[66] Talent and Employee Management - IBM's reliance on skilled employees is critical, and a shortage of talent could impact its future success[33] - The company continues to invest significantly in strategic areas to drive revenue growth, but client adoption rates remain uncertain[22] - IBM's Annual Incentive Program was effective from January 1, 2023, enhancing employee performance incentives[105] - The company has incorporated multiple forms of LTPP equity award agreements effective from various dates, including stock options and performance share units[104] - IBM's governance includes a comprehensive Director Compensation plan to be detailed in the Proxy Statement for the Annual Meeting of Stockholders on April 30, 2024[105] Legal and Regulatory Risks - The company faces risks from acquisitions, including integration challenges and the assumption of liabilities[25] - The company is involved in various legal proceedings that could pose risks to its operations and financial condition, although it believes it has appropriate risk management programs in place[48] - Changes in tax laws and regulations could adversely affect the company's income tax liabilities and financial condition, particularly with the OECD's evolving guidelines[47] - The company is subject to potential climate-related risks and costs, including severe weather events and new regulations, which could incur substantial cleanup costs and fines[45] Financial Performance and Reporting - The company's internal controls over financial reporting may not prevent misstatements, which could harm business results[30] - The company has not reported any changes in internal control over financial reporting that materially affect its operations during the fourth fiscal quarter[74] - IBM's consolidated income statement for the year ended December 31, 2023, is included in the annual report[90] - The consolidated balance sheet at December 31, 2023, shows significant financial metrics, which are detailed in the annual report[90] - The consolidated statement of cash flows for the year ended December 31, 2023, is provided in the annual report[90] - The report of independent registered public accounting firm is included, ensuring the accuracy of financial statements[90] - The audit committee's report and details on audit and non-audit fees will be filed in the definitive proxy statement[89] - The financial statement schedule required by Item 8 is included, detailing valuation and qualifying accounts for the years ended December 31, 2023, 2022, and 2021[91] - The company has various debt instruments with specific interest rates and due dates, which are detailed in the exhibits[93][94][95] - The instruments defining the rights of security holders for multiple notes and debentures are incorporated by reference, ensuring transparency[96][97][98] - IBM's financial statements are audited by PricewaterhouseCoopers LLP, ensuring compliance and accuracy in reporting[116] - The company has incorporated various noncompetition agreements over the years, ensuring protection of its business interests[105] Allowance and Provisions - Current allowance for credit losses at the end of 2023 is $431 million, down from $467 million in 2022, reflecting a decrease of 7.7%[119] - Allowance for inventory losses increased to $658 million in 2023 from $631 million in 2022, representing an increase of 4.3%[119] - Revenue-based provisions at the end of 2023 stand at $480 million, up from $424 million in 2022, indicating a rise of 13.2%[119] - Additions to current allowance for credit losses in 2023 were $13 million, compared to $59 million in 2022, showing a significant decrease of 78.0%[119] - Write-offs for current allowance for credit losses in 2023 totaled $97 million, compared to $55 million in 2022, an increase of 76.4%[119] - The company recorded $201 million in additions to the allowance for inventory losses in 2023, compared to $162 million in 2022, marking an increase of 24.0%[119] - The total write-offs for revenue-based provisions in 2023 were $456 million, a decrease from $629 million in 2022, reflecting a reduction of 27.5%[119] - The balance of noncurrent allowance for credit losses at the end of 2023 is $27 million, slightly down from $28 million in 2022[119] - The company reported a total of $500 million in additions to revenue-based provisions in 2023, compared to $620 million in 2022, indicating a decrease of 19.4%[119] - The total allowance for inventory losses at the end of 2023 is $658 million, which is higher than the $633 million recorded in 2021, showing a growth of 3.9%[119] Corporate Governance and Shareholder Matters - The Board of Directors will hold the Annual Meeting of Stockholders on April 30, 2024, where various governance and compensation matters will be discussed[76] - The governance and board-related information will be incorporated by reference in the proxy statement for the annual meeting on April 30, 2024[88] - The company has long-term performance plans related to acquisitions, which are detailed in the registration statements[101] - IBM's Board of Directors has approved various compensatory plans, including amendments to the Deferred Compensation and Equity Award Plan effective January 1, 2014, and subsequent amendments[105] - The company confirmed a $2,500,000,000 Three-Year Credit Agreement dated June 22, 2021, with an extension confirmed on June 15, 2023[107] - IBM has a $7,500,000,000 Five-Year Credit Agreement dated June 22, 2021, with an extension confirmed on June 15, 2023[107]