UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of April 2012
Commission File Number 001-16429
ABB Ltd
(Translation of registrants name into English)
P.O. Box 1831, Affolternstrasse 44, CH-8050, Zurich, Switzerland
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F x |
Form 40-F o |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indication by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrants home country), or under the rules of the home country exchange on which the registrants securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrants security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes o |
No x |
If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-
This Form 6-K consists of the following:
1. Press release issued by ABB Ltd dated April 25, 2012.
2. Agenda and Resolutions from the ABB Ltd General Meeting of Shareholders held on April 26, 2012.
3. Press release issued by ABB Ltd dated April 26, 2012.
4. Announcements regarding transactions in ABB Ltds Securities made by the directors or the members of the Executive Committee.
The information provided by Item 1 above is deemed filed for all purposes under the Securities Exchange Act of 1934.
Press Release |
Top-line growth in a challenging environment
· Orders up 2%(1) (unchanged organic(2)), revenues up 8% (6% organic) vs Q1 2011
· Order backlog at a near-record $29.9 billion
· Operational EBITDA(3) 7% lower on negative mix and pricing
· Net income up 5%
Zurich, Switzerland, April 25, 2012 ABB reported higher orders and revenues in the first quarter of 2012, led by growth in North America. Operational EBITDA declined 7 percent compared to the same quarter a year earlier while net income was up 5 percent.
Orders were 2 percent above the very high levels in the first quarter of 2011, driven mainly by utility investments in power distribution and industrial demand for automation solutions that increase productivity. Order growth mirrored regional economic trends and was weakest in China and southern Europe. Service orders were up 9 percent and represented 20 percent of total orders, reflecting progress in implementing the service growth strategy.
Revenues increased in all divisions and were 8 percent higher than the same quarter a year earlier, led by 21-percent growth in Discrete Automation and Motion (15 percent organic) and 9 percent in Power Products. Revenues were also supported by the strong order backlog, which continued to grow in the first quarter and is now at a near-record $29.9 billion. Service revenues grew 12 percent.
Operational EBITDA was $1.2 billion with an operational EBITDA margin of 13.9 percent, down 1.8 percentage points versus Q1 2011 on continuing mix and price pressure that were partly offset by positive volume impacts and cost savings of approximately $260 million.
ABB once again demonstrated its resilience, with good growth despite the tough comparison with a great first quarter last year and continued macroeconomic uncertainty in many markets, said ABB Chief Executive Officer Joe Hogan. Our diverse business and geographic scope and growing service business helped mitigate that uncertainty, while our strong order backlog supported revenues.
As we guided after Q4, there was continued price pressure on revenues coming out of the order backlog and mix effects that impacted profitability, but we could mitigate most of that through cost savings, Hogan said. We saw improved profitability in several businesses compared to the end of last year, and we intend to build on that momentum to tap the many opportunities we see for profitable growth over the rest of the year.
Q1 2012 key figures
|
|
|
|
|
|
Change |
| ||
$ millions unless otherwise indicated |
|
Q1 12 |
|
Q1 11 |
|
US$ |
|
Local |
|
Orders |
|
10368 |
|
10357 |
|
0 |
% |
2 |
% |
Order backlog (end March) |
|
29910 |
|
29265 |
|
2 |
% |
6 |
% |
Revenues |
|
8907 |
|
8402 |
|
6 |
% |
8 |
% |
EBIT |
|
1048 |
|
1013 |
|
3 |
% |
|
|
as % of revenues |
|
11.8 |
% |
12.1 |
% |
|
|
|
|
Operational EBITDA(3) |
|
1228 |
|
1319 |
|
-7 |
% |
|
|
as % of operational revenues(3) |
|
13.9 |
% |
15.7 |
% |
|
|
|
|
Net income attributable to ABB |
|
685 |
|
655 |
|
5 |
% |
|
|
Basic net income per share ($) |
|
0.30 |
|
0.29 |
|
|
|
|
|
Cash flow from operating activities |
|
(22 |
) |
236 |
|
|
|
|
|
(1) Management discussion of orders and revenues focuses on local currency changes. U.S. dollar changes are reported in the results tables.
(2) Organic changes exclude the acquisition of Baldor at the end of January, 2011
(3) See reconciliation of operational EBITDA in Note 13 to the Interim Consolidated Financial Information (unaudited)
Summary of Q1 2012 results
Orders received and revenues
Orders grew modestly in the first quarter compared to a strong first quarter in 2011 in a demand environment that varied widely by business and region.
Power Products orders increased 11 percent, driven largely by demand from the power distribution and industrial sectors, while orders were 3 percent higher in Power Systems on continued demand from both utility and process industry customers. Macroeconomic uncertainty, mainly in Europe, continues to impact the timing of large project investments in the power transmission sector.
Orders in the Discrete Automation and Motion division grew 15 percent (9 percent organic) compared to the same quarter in 2011 and were up in all regions, fuelled by customer needs to increase industrial productivity and a strong contribution from Baldor. Low Voltage Products orders declined 3 percent, reflecting this businesss exposure to weak short-term economic cycles in several key country markets. Process Automation orders were steady versus a strong first quarter in 2011. Demand growth in sectors like oil and gas, mining and marine remained resilient at high levels.
Regionally, orders rose 27 percent in the Americas (23 percent organic), including orders for a mining development in South America and power quality equipment in the U.S. Orders were also slightly higher in the Middle East and Africa and flat in Europe versus a strong first quarter in 2011. European orders were mixed, with robust demand in northern and central European offset by weakness in the Mediterranean region, especially Italy. Orders declined in Asia, mainly China. This was partly a reflection of several large power orders with a total value of more than $300 million in the prior-year period, and partly of weaker demand in key end markets, such as construction and transportation.
Base orders (below $15 million) rose 4 percent (2 percent organic) in the quarter compared to the same quarter a year ago. Large orders (above $15 million) decreased 11 percent and represented 14 percent of the total orders in the quarter, compared to 16 percent in the year-earlier period.
For the Group, service orders grew by 9 percent in the quarter and comprised 20 percent of total orders, a slight increase compared to the same period a year ago.
The order backlog at the end of March was $29.9 billion, a local-currency increase of 6 percent compared with both the end of the first quarter in 2011 and the end of the fourth quarter of 2011.
Revenues grew in all divisions, supported in large part by execution of the order backlog. Organic revenue growth was 6 percent. Service revenues grew 12 percent and represented 17 percent of total revenues compared to 16 percent in the year-earlier period.
Earnings and net income
The decrease in operational EBITDA and operational EBITDA margin in the first quarter was due to the delivery of lower-margin products and projects out of the order backlogreflecting mainly the weak pricing environment in powerand the lower share of sales from early-cycle products that typically carry higher margins, especially in some large markets in Asia and Europe. More than half of the Groups profitability decline versus the first quarter of 2011 was attributable to the challenging demand environment in China, especially in the construction and transportation sectors.
As part of the companys ongoing cost management initiative, savings of approximately $260 million were achieved in the quarter, of which about 60 percent were derived from optimized sourcing, approximately 35 percent from productivity and quality improvements, and the remainder from
measures to adjust ABBs global manufacturing and engineering footprint to shifts in customer demand. Costs associated with the program in the first quarter were approximately $20 million.
Net income for the quarter increased 5 percent to $685 million. Basic earnings per share were $0.30.
Balance sheet and cash flow
In January 2012, ABB Ltd issued a CHF 350-million six-year bond. In March, a subsidiary of ABB Ltd issued a 1.25 billion seven-year bond. This bond was guaranteed by ABB Ltd, which also intends to guarantee the two U.S.-dollar bonds issued last year by a U.S. subsidiary with the benefit of a keep-well agreement.
As a result, total debt amounted to $6.2 billion at the end of March 2012 compared to $4.0 billion at the end of 2011.
Net cash at the end of the first quarter was $1.4 billion compared with $1.8 billion at the end of 2011. Cash out from operations amounted to about $20 million, mainly the result of an increase in net working capital and higher tax payments pertaining to the previous years income.
Acquisitions
ABB announced in January 2012 an agreed offer to acquire U.S. low-voltage equipment manufacturer Thomas & Betts for a total cash consideration of $3.9 billion. The transaction is expected to be closed in the second quarter of 2012, pending approval of the deal by Thomas & Betts shareholders and customary regulatory approvals.
In accordance with the terms of the $4-billion bridge financing arranged for the planned acquisition, the bond issued in March 2012 reduced the available commitments under the bridge financing to about $3.9 billion. The company intends to make a voluntary cancellation to further reduce the commitments to $2 billion.
Management changes
In April 2012, ABB announced the appointment of Prith Banerjee to ABBs Executive Committee (EC) as Chief Technology Officer, starting midyear 2012. As previously communicated, Greg Scheu will join ABBs EC as head of Marketing and Customer Solutions effective May 1, 2012.
Outlook
The long-term outlook for ABB remains positive, with utilities continuing to invest in grid upgrades and industries spending more on automation solutions to increase energy efficiency and productivity.
The macroeconomic volatility seen in late 2011 is continuing and makes short-term forecasts more challenging. There are clearer signs of recovery in the North American economy since the fourth quarter of 2011, but uncertainty around government budget deficits in Europe remains high, which weighs on demand in markets like Italy and Spain. Emerging markets continue to outgrow mature markets overall, but demand in certain sectors that are important for ABB, such as construction and transportation in China, remains at low levels and it is unclear when this demand will recover.
Against this background, management expects revenues in most of its early-cycle businesses to remain steady or to grow at low single-digit rates compared to 2011 levels until confidence in the macroeconomic outlook improves. Revenues in mid- to later-cycle businesses with strong order backlogs and exposure to sectors with continuing good demand, such as oil and gas, minerals, power distribution and discrete automation, are expected to continue to grow. The companys exposure to faster-growing emerging markets is also expected to support growth, while the businesses in North
America and north and central Europe should benefit from the ongoing positive economic developments in those regions.
Price pressure is expected to continue in parts of the power business, in line with the companys previous guidance, but ABB aims to offset this with ongoing cost and productivity improvements. The continuation of the unfavorable mix seen in recent quarters will depend mainly on economic developments in China, as well as in southern Europe. However, management believes that overall demand will provide ample opportunities for profitable growth in 2012 and confirms its longer-term Group and divisional targets.
Divisional performance
Power Products
|
|
|
|
|
|
Change |
| ||
$ millions unless otherwise indicated |
|
Q1 12 |
|
Q1 11 |
|
US$ |
|
Local |
|
Orders |
|
3117 |
|
2860 |
|
9 |
% |
11 |
% |
Order backlog (end March) |
|
8859 |
|
8850 |
|
0 |
% |
3 |
% |
Revenues |
|
2513 |
|
2327 |
|
8 |
% |
9 |
% |
EBIT |
|
323 |
|
350 |
|
-8 |
% |
|
|
as % of revenues |
|
12.9 |
% |
15.0 |
% |
|
|
|
|
Operational EBITDA |
|
363 |
|
404 |
|
-10 |
% |
|
|
as % of operational revenues |
|
14.5 |
% |
17.3 |
% |
|
|
|
|
Cash flow from operating activities |
|
123 |
|
160 |
|
-23 |
% |
|
|
Orders increased across all business units compared to a strong first quarter in 2011. Growth was driven primarily by demand from the power distribution and industrial sectors. This was supported by a selective approach to projects in power transmission, where uncertainty continues to impact the timing of capital investments by utilities. Orders were higher in the Americas and the Middle East and Africa but declined in southern Europe on ongoing economic challenges. Orders in China were impacted by the weak rail, nuclear and real-estate sectors.
Revenues saw continued growth in all business units driven by the order backlog and higher service volumes.
The lower operational EBITDA and operational EBITDA margin for the quarter resulted mainly from the execution of lower margin orders from the backlog, reflecting the pricing environment. Margins were also affected by a less favorable product mix. Cost savings from ongoing sourcing initiatives, operational improvements and footprint efforts partially compensated the margin pressure.
Power Systems
|
|
|
|
|
|
Change |
| ||
$ millions unless otherwise indicated |
|
Q1 12 |
|
Q1 11 |
|
US$ |
|
Local |
|
Orders |
|
1958 |
|
1937 |
|
1 |
% |
3 |
% |
Order backlog (end March) |
|
12115 |
|
11498 |
|
5 |
% |
10 |
% |
Revenues |
|
1807 |
|
1833 |
|
-1 |
% |
1 |
% |
EBIT |
|
88 |
|
105 |
|
-16 |
% |
|
|
as % of revenues |
|
4.9 |
% |
5.7 |
% |
|
|
|
|
Operational EBITDA |
|
117 |
|
132 |
|
-11 |
% |
|
|
as % of operational revenues |
|
6.6 |
% |
7.3 |
% |
|
|
|
|
Cash flow from operating activities |
|
(48 |
) |
(49 |
) |
2 |
% |
|
|
An increase in large orders supported by a number of substation projects and an HVDC contract in the U.S. resulted in higher order intake than in the first quarter of 2011. Regionally, orders increased
in the Americas and the Middle East and Africa, mainly from grid upgrades. Asia and Europe saw lower activity due to market uncertainty which impacted the timing of utility investments.
Revenues were stable, reflecting the execution of projects from the order backlog.
Operational EBITDA and operational EBITDA margin in the first quarter declined mainly as a result of higher R&D spending and execution of lower margin orders from the backlog. Cost savings largely offset this impact.
Discrete Automation & Motion
|
|
|
|
|
|
Change |
| ||
$ millions unless otherwise indicated |
|
Q1 12 |
|
Q1 11 |
|
US$ |
|
Local |
|
Orders |
|
2678 |
|
2344 |
|
14 |
% |
15 |
% |
Order backlog (end March) |
|
4675 |
|
4117 |
|
14 |
% |
16 |
% |
Revenues |
|
2242 |
|
1880 |
|
19 |
% |
21 |
% |
EBIT |
|
354 |
|
225 |
|
57 |
% |
|
|
as % of revenues |
|
15.8 |
% |
12.0 |
% |
|
|
|
|
Operational EBITDA |
|
417 |
|
378 |
|
10 |
% |
|
|
as % of operational revenues |
|
18.6 |
% |
20.1 |
% |
|
|
|
|
Cash flow from operating activities |
|
103 |
|
104 |
|
-1 |
% |
|
|
Orders were steady to higher across all businesses compared to the same quarter in 2011, and increased in all regions. The improvement was driven by demand for industrial products to increase energy efficiency and productivitysuch as industrial motors and robotsmainly in North America and emerging markets. Order growth reached a double-digit pace in Europe. Orders excluding Baldor, which was consolidated from the end of January 2011, grew approximately 9 percent in local currencies compared with the same period a year ago.
Strong revenue growth in the quarter mainly reflects execution of the strong order backlog in robotics, motors and generators, and power electronics.
Operational EBITDA increased on higher revenues and the contribution from Baldor. Operational EBITDA margin declined compared to first quarter 2011 due to less favorable product and business mix and continued high investments in business development, sales, and R&D.
Low Voltage Products
|
|
|
|
|
|
Change |
| ||
$ millions unless otherwise indicated |
|
Q1 12 |
|
Q1 11 |
|
US$ |
|
Local |
|
Orders |
|
1337 |
|
1409 |
|
-5 |
% |
-3 |
% |
Order backlog (end March) |
|
1049 |
|
1108 |
|
-5 |
% |
-3 |
% |
Revenues |
|
1192 |
|
1195 |
|
0 |
% |
2 |
% |
EBIT |
|
180 |
|
235 |
|
-23 |
% |
|
|
as % of revenues |
|
15.1 |
% |
19.7 |
% |
|
|
|
|
Operational EBITDA |
|
197 |
|
262 |
|
-25 |
% |
|
|
as % of operational revenues |
|
16.6 |
% |
21.9 |
% |
|
|
|
|
Cash flow from operating activities |
|
45 |
|
14 |
|
221 |
% |
|
|
Orders declined compared to a near-record first quarter in 2011 on weaker demand in industrial and construction sectors in several of ABBs largest markets, such as China and Italy. Orders improved in northern Europe, Asia excluding China, and the Americas. Orders in most product businesses decreased but continued to grow at a double-digit pace (up 29 percent in the quarter) in the low-voltage systems business which produces large electrical panels used in a variety of industrial applications. Service orders grew at a high single-digit pace.
Revenues increased, reflecting execution of the strong order backlog in the low-voltage systems business, which more than compensated for lower revenues in the product businesses.
Operational EBITDA and operational EBITDA margin both declined in the quarter as a result of the lower share of product revenues as a proportion of total revenues, and from lower volumes, especially in China.
Process Automation
|
|
|
|
|
|
Change |
| ||
$ millions unless otherwise indicated |
|
Q1 12 |
|
Q1 11 |
|
US$ |
|
Local |
|
Orders |
|
2540 |
|
2606 |
|
-3 |
% |
-1 |
% |
Order backlog (end March) |
|
6483 |
|
6447 |
|
1 |
% |
4 |
% |
Revenues |
|
1970 |
|
1900 |
|
4 |
% |
6 |
% |
EBIT |
|
234 |
|
251 |
|
-7 |
% |
|
|
as % of revenues |
|
11.9 |
% |
13.2 |
% |
|
|
|
|
Operational EBITDA |
|
243 |
|
246 |
|
-1 |
% |
|
|
as % of operational revenues |
|
12.4 |
% |
13.0 |
% |
|
|
|
|
Cash flow from operating activities |
|
(18 |
) |
77 |
|
n.a. |
|
|
|
Orders were steady compared to the very high levels of the previous year on an increase in customer spending in the oil and gas, mining and marine sectors, plus strong demand for lifecycle services and measurement products. This was offset by a decline in total service orders as ABB continued to refocus its full service portfolio.
Regionally, growth was led by South America on higher customer investments in minerals and oil and gas, followed by Europe where demand increased in the marine and minerals sectors. Orders decreased slightly in Asia as growth in China was offset by lower orders in India and the timing of large order awards compared to the year-earlier period. The Middle East and Africa was lower compared to the strong first quarter in 2011 that included a $150-million oil and gas order in Africa.
The revenue increase was driven by the execution of the strong order backlog, mainly in the systems businesses, as well as higher sales of products and lifecycle services.
The lower operational EBITDA and operational EBITDA margin reflects a higher share of lower margin systems orders executed out of the backlog, as well as the impact of the strong Swiss franc on the turbocharging business.
More information
The 2012 Q1 results press release is available from April 25, 2012, on the ABB News Center at www.abb.com/news and on the Investor Relations homepage at www.abb.com/investorrelations, where a presentation for investors will also be published.
A video from Chief Executive Officer Joe Hogan on ABBs first-quarter 2012 results will be available at 06:30 am today at www.youtube.com/abb.
ABB will host a media call starting at 12:00 noon Central European Time (CET). U.K. callers should dial +44 203 059 58 62. From Sweden, +46 8 5051 00 31, and from the rest of Europe, +41 91 610 56 00. Lines will be open 15 minutes before the conference starts. Playback of the call will start 1 hour after the call ends and will be available for 24 hours: Playback numbers: +44 20 7108 6233 (U.K.), +41 91 612 4330 (rest of Europe) or +1 866 416 2558 (U.S./Canada). The code is 15871, followed by the # key. The recorded session will also be available as a podcast 1 hour after the end of the call and can be downloaded from www.abb.com/news.
A conference call for analysts and investors is scheduled to begin today at 2:00 p.m. CET (1:00 p.m. in the UK, 8:00 a.m. EDT). Callers should dial +1 866 291 4166 from the U.S./Canada (toll-free), +44 203 059 5862 from the U.K., or +41 91 610 56 00 from the rest of the world. Callers are requested to phone in 15 minutes before the start of the call. The recorded session will be available as a podcast one hour after the end of the conference call and can be downloaded from our website. You will find the link to access the podcast at www.abb.com.
Investor calendar 2012 |
|
|
Annual General Meeting, Zurich, Switzerland |
|
April 26, 2012 |
Annual Information Meeting, Västerås, Sweden |
|
April 27, 2012 |
Second-quarter 2012 results |
|
July 26, 2012 |
Capital Markets Day 2012, London, UK |
|
September 12, 2012 |
Third-quarter 2012 results |
|
October 25, 2012 |
ABB (www.abb.com) is a leader in power and automation technologies that enable utility and industry customers to improve performance while lowering environmental impact. The ABB Group of companies operates in around 100 countries and employs about 135,000 people.
Zurich, April 25, 2012
Joe Hogan, CEO
Important notice about forward-looking information
This press release includes forward-looking information and statements as well as other statements concerning the outlook for our business. These statements are based on current expectations, estimates and projections about the factors that may affect our future performance, including global economic conditions, the economic conditions of the regions and industries that are major markets for ABB Ltd. These expectations, estimates and projections are generally identifiable by statements containing words such as expects, believes, estimates, targets, plans, intends or similar expressions. However, there are many risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking information and statements made in this press release and which could affect our ability to achieve any or all of our stated targets. The important factors that could cause such differences include, among others, business risks associated with the volatile global economic environment and political conditions, costs associated with compliance activities, raw materials availability and prices, market acceptance of new products and services, changes in governmental regulations and currency exchange rates and such other factors as may be discussed from time to time in ABB Ltds filings with the U.S. Securities and Exchange Commission, including its Annual Reports on Form 20-F. Although ABB Ltd believes that its expectations reflected in any such forward-looking statement are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved.
For more information please contact: |
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|
|
|
|
Media Relations: |
Investor Relations: |
ABB Ltd |
Thomas Schmidt, Antonio Ligi |
Switzerland: Tel. +41 43 317 7111 |
Affolternstrasse 44 |
(Zurich, Switzerland) |
USA: Tel. +1 203 750 7743 |
CH-8050 Zurich, Switzerland |
Tel: +41 43 317 6568 |
investor.relations@ch.abb.com |
|
Fax: +41 43 317 7958 |
|
|
media.relations@ch.abb.com |
|
|
ABB first-quarter (Q1) 2012 key figures
|
|
|
|
|
|
|
|
Change |
| ||
$ millions unless otherwise indicated |
|
Q1 12 |
|
Q1 11 |
|
US$ |
|
Local |
| ||
Orders |
|
Group |
|
10368 |
|
10357 |
|
0 |
% |
2 |
% |
|
|
Power Products |
|
3117 |
|
2860 |
|
9 |
% |
11 |
% |
|
|
Power Systems |
|
1958 |
|
1937 |
|
1 |
% |
3 |
% |
|
|
Discrete Automation & Motion |
|
2678 |
|
2344 |
|
14 |
% |
15 |
% |
|
|
Low Voltage Products |
|
1337 |
|
1409 |
|
-5 |
% |
-3 |
% |
|
|
Process Automation |
|
2540 |
|
2606 |
|
-3 |
% |
-1 |
% |
|
|
Corporate and other (inter-division eliminations) |
|
(1262 |
) |
(799 |
) |
|
|
|
|
Revenues |
|
Group |
|
8907 |
|
8402 |
|
6 |
% |
8 |
% |
|
|
Power Products |
|
2513 |
|
2327 |
|
8 |
% |
9 |
% |
|
|
Power Systems |
|
1807 |
|
1833 |
|
-1 |
% |
1 |
% |
|
|
Discrete Automation & Motion |
|
2242 |
|
1880 |
|
19 |
% |
21 |
% |
|
|
Low Voltage Products |
|
1192 |
|
1195 |
|
0 |
% |
2 |
% |
|
|
Process Automation |
|
1970 |
|
1900 |
|
4 |
% |
6 |
% |
|
|
Corporate and other (inter-division eliminations) |
|
(817 |
) |
(733 |
) |
|
|
|
|
EBIT |
|
Group |
|
1048 |
|
1013 |
|
3 |
% |
|
|
|
|
Power Products |
|
323 |
|
350 |
|
-8 |
% |
|
|
|
|
Power Systems |
|
88 |
|
105 |
|
-16 |
% |
|
|
|
|
Discrete Automation & Motion |
|
354 |
|
225 |
|
57 |
% |
|
|
|
|
Low Voltage Products |
|
180 |
|
235 |
|
-23 |
% |
|
|
|
|
Process Automation |
|
234 |
|
251 |
|
-7 |
% |
|
|
|
|
Corporate and other (inter-division eliminations) |
|
(131 |
) |
(153 |
) |
|
|
|
|
EBIT % |
|
Group |
|
11.8 |
% |
12.1 |
% |
|
|
|
|
|
|
Power Products |
|
12.9 |
% |
15.0 |
% |
|
|
|
|
|
|
Power Systems |
|
4.9 |
% |
5.7 |
% |
|
|
|
|
|
|
Discrete Automation & Motion |
|
15.8 |
% |
12.0 |
% |
|
|
|
|
|
|
Low Voltage Products |
|
15.1 |
% |
19.7 |
% |
|
|
|
|
|
|
Process Automation |
|
11.9 |
% |
13.2 |
% |
|
|
|
|
Operational EBITDA* |
|
Group |
|
1228 |
|
1319 |
|
-7 |
% |
|
|
|
|
Power Products |
|
363 |
|
404 |
|
-10 |
% |
|
|
|
|
Power Systems |
|
117 |
|
132 |
|
-11 |
% |
|
|
|
|
Discrete Automation & Motion |
|
417 |
|
378 |
|
10 |
% |
|
|
|
|
Low Voltage Products |
|
197 |
|
262 |
|
-25 |
% |
|
|
|
|
Process Automation |
|
243 |
|
246 |
|
-1 |
% |
|
|
Operational EBITDA % |
|
Group |
|
13.9 |
% |
15.7 |
% |
|
|
|
|
|
|
Power Products |
|
14.5 |
% |
17.3 |
% |
|
|
|
|
|
|
Power Systems |
|
6.6 |
% |
7.3 |
% |
|
|
|
|
|
|
Discrete Automation & Motion |
|
18.6 |
% |
20.1 |
% |
|
|
|
|
|
|
Low Voltage Products |
|
16.6 |
% |
21.9 |
% |
|
|
|
|
|
|
Process Automation |
|
12.4 |
% |
13.0 |
% |
|
|
|
|
* See reconciliation of operational EBITDA in Note 13 to the Interim Consolidated Financial Information (unaudited)
ABB Q1 2012 orders received and revenues by region
|
|
Orders received |
|
Change |
|
Revenues |
|
Change |
| ||||||||
$ millions |
|
Q1 12 |
|
Q1 11 |
|
US$ |
|
Local |
|
Q1 12 |
|
Q1 11 |
|
US$ |
|
Local |
|
Europe |
|
3894 |
|
4090 |
|
-5 |
% |
-1 |
% |
3386 |
|
3291 |
|
3 |
% |
6 |
% |
Americas |
|
2695 |
|
2164 |
|
25 |
% |
27 |
% |
2326 |
|
2008 |
|
16 |
% |
17 |
% |
Asia |
|
2766 |
|
3097 |
|
-11 |
% |
-11 |
% |
2323 |
|
2113 |
|
10 |
% |
10 |
% |
Middle East and Africa |
|
1013 |
|
1006 |
|
1 |
% |
2 |
% |
872 |
|
990 |
|
-12 |
% |
-10 |
% |
Group total |
|
10368 |
|
10357 |
|
0 |
% |
2 |
% |
8907 |
|
8402 |
|
6 |
% |
8 |
% |
Operational EBITDA 01 2012 vs 01 2011
|
|
ABB |
|
Power |
|
Power |
|
Discrete Automation |
|
Low Voltage |
|
Process Automation |
| ||||||||||||
|
|
Q1 12 |
|
Q1 11 |
|
Q1 12 |
|
Q1 11 |
|
Q1 12 |
|
Q1 11 |
|
Q1 12 |
|
Q1 11 |
|
Q1 12 |
|
Q1 11 |
|
Q1 12 |
|
Q1 11 |
|
Operational revenues |
|
8844 |
|
8387 |
|
2497 |
|
2340 |
|
1780 |
|
1818 |
|
2240 |
|
1881 |
|
1186 |
|
1194 |
|
1960 |
|
1888 |
|
FX/commodity timing differences on Revenues |
|
63 |
|
15 |
|
16 |
|
(13 |
) |
27 |
|
15 |
|
2 |
|
(1 |
) |
6 |
|
1 |
|
10 |
|
12 |
|
Revenues (as per Financial Statements) |
|
8907 |
|
8402 |
|
2513 |
|
2327 |
|
1807 |
|
1833 |
|
2242 |
|
1880 |
|
1192 |
|
1195 |
|
1970 |
|
1900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational EBITDA |
|
1228 |
|
1319 |
|
363 |
|
404 |
|
117 |
|
132 |
|
417 |
|
378 |
|
197 |
|
262 |
|
243 |
|
246 |
|
Depreciation |
|
(166 |
) |
(152 |
) |
(42 |
) |
(41 |
) |
(16 |
) |
(14 |
) |
(33 |
) |
(28 |
) |
(26 |
) |
(25 |
) |
(16 |
) |
(15 |
) |
Amortization |
|
(87 |
) |
(79 |
) |
(10 |
) |
(6 |
) |
(25 |
) |
(16 |
) |
(28 |
) |
(35 |
) |
(2 |
) |
(2 |
) |
(4 |
) |
(5 |
) |
Acquisition-related expenses and certain non-operational items |
|
19 |
|
(92 |
) |
|
|
|
|
|
|
|
|
(4 |
) |
(92 |
) |
(3 |
) |
|
|
|
|
|
|
FX/commodity timing differences on EBIT |
|
71 |
|
18 |
|
25 |
|
(9 |
) |
14 |
|
8 |
|
3 |
|
2 |
|
14 |
|
|
|
11 |
|
23 |
|
Restructuring-related costs |
|
(17 |
) |
(1 |
) |
(13 |
) |
2 |
|
(2 |
) |
(5 |
) |
(1 |
) |
|
|
|
|
|
|
|
|
2 |
|
EBIT (as per Financial Statements) |
|
1048 |
|
1013 |
|
323 |
|
350 |
|
88 |
|
105 |
|
354 |
|
225 |
|
180 |
|
235 |
|
234 |
|
251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational EBITDA margin (%) |
|
13.9 |
% |
15.7 |
% |
14.5 |
% |
17.3 |
% |
6.6 |
% |
7.3 |
% |
18.6 |
% |
20.1 |
% |
16.6 |
% |
21.9 |
% |
12.4 |
% |
13.0 |
% |
Reconciliation of non-GAAP measures
|
|
Mar. 31, |
|
Dec. 31, |
|
($ in millions) |
|
2012 |
|
2011 |
|
Net Cash |
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents |
|
5751 |
|
4819 |
|
Marketable securities and short-term investments |
|
1837 |
|
948 |
|
Cash and marketable securities |
|
7588 |
|
5767 |
|
Short-term debt and current maturities of long-term debt |
|
812 |
|
765 |
|
Long-term debt |
|
5364 |
|
3231 |
|
Total debt |
|
6176 |
|
3996 |
|
Net Cash |
|
1412 |
|
1771 |
|
ABB Ltd Interim Consolidated Income Statements (unaudited)
|
|
Three months ended |
| ||
($ in millions, except per share data in $) |
|
Mar. 31, 2012 |
|
Mar. 31, 2011 |
|
|
|
|
|
|
|
Sales of products |
|
7,423 |
|
7,053 |
|
Sales of services |
|
1,484 |
|
1,349 |
|
Total revenues |
|
8,907 |
|
8,402 |
|
Cost of products |
|
(5,263 |
) |
(4,973 |
) |
Cost of services |
|
(954 |
) |
(856 |
) |
Total cost of sales |
|
(6,217 |
) |
(5,829 |
) |
Gross profit |
|
2,690 |
|
2,573 |
|
Selling, general and administrative expenses |
|
(1,322 |
) |
(1,263 |
) |
Non-order related research and development expenses |
|
(346 |
) |
(306 |
) |
Other income (expense), net |
|
26 |
|
9 |
|
Earnings before interest and taxes |
|
1,048 |
|
1,013 |
|
Interest and dividend income |
|
19 |
|
18 |
|
Interest and other finance expense |
|
(57 |
) |
(51 |
) |
Income before taxes |
|
1,010 |
|
980 |
|
Provision for taxes |
|
(298 |
) |
(284 |
) |
Net income |
|
712 |
|
696 |
|
Net income attributable to noncontrolling interests |
|
(27 |
) |
(41 |
) |
Net income attributable to ABB |
|
685 |
|
655 |
|
|
|
|
|
|
|
Amounts attributable to ABB shareholders: |
|
|
|
|
|
Net income |
|
685 |
|
655 |
|
|
|
|
|
|
|
Basic earnings per share attributable to ABB shareholders: |
|
|
|
|
|
Net income |
|
0.30 |
|
0.29 |
|
|
|
|
|
|
|
Diluted earnings per share attributable to ABB shareholders: |
|
|
|
|
|
Net income |
|
0.30 |
|
0.29 |
|
|
|
|
|
|
|
Weighted-average number of shares outstanding (in millions) used to compute: |
|
|
|
|
|
Basic earnings per share attributable to ABB shareholders |
|
2,292 |
|
2,284 |
|
Diluted earnings per share attributable to ABB shareholders |
|
2,294 |
|
2,289 |
|
See Notes to the Interim Consolidated Financial Information
ABB Ltd Interim Condensed Consolidated Statements of Comprehensive Income (unaudited)
|
|
Three months ended |
| ||
($ in millions) |
|
Mar. 31, 2012 |
|
Mar. 31, 2011 |
|
|
|
|
|
|
|
Total comprehensive income, net of tax |
|
1,142 |
|
1,125 |
|
Total comprehensive income attributable to noncontrolling interests, net of tax |
|
(35 |
) |
(44 |
) |
Total comprehensive income attributable to ABB shareholders, net of tax |
|
1,107 |
|
1,081 |
|
See Notes to the Interim Consolidated Financial Information
ABB Ltd Interim Consolidated Balance Sheets (unaudited)
($ in millions, except share data) |
|
Mar. 31, 2012 |
|
Dec. 31, 2011 |
|
|
|
|
|
|
|
Cash and equivalents |
|
5,751 |
|
4,819 |
|
Marketable securities and short-term investments |
|
1,837 |
|
948 |
|
Receivables, net |
|
11,157 |
|
10,773 |
|
Inventories, net |
|
6,356 |
|
5,737 |
|
Prepaid expenses |
|
288 |
|
227 |
|
Deferred taxes |
|
951 |
|
932 |
|
Other current assets |
|
420 |
|
351 |
|
Total current assets |
|
26,760 |
|
23,787 |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
5,121 |
|
4,922 |
|
Goodwill |
|
7,424 |
|
7,269 |
|
Other intangible assets, net |
|
2,247 |
|
2,253 |
|
Prepaid pension and other employee benefits |
|
147 |
|
139 |
|
Investments in equity-accounted companies |
|
254 |
|
156 |
|
Deferred taxes |
|
296 |
|
318 |
|
Other non-current assets |
|
759 |
|
804 |
|
Total assets |
|
43,008 |
|
39,648 |
|
|
|
|
|
|
|
Accounts payable, trade |
|
4,738 |
|
4,789 |
|
Billings in excess of sales |
|
1,999 |
|
1,819 |
|
Employee and other payables |
|
1,430 |
|
1,361 |
|
Short-term debt and current maturities of long-term debt |
|
812 |
|
765 |
|
Advances from customers |
|
1,905 |
|
1,757 |
|
Deferred taxes |
|
318 |
|
305 |
|
Provisions for warranties |
|
1,342 |
|
1,324 |
|
Provisions and other current liabilities |
|
2,276 |
|
2,619 |
|
Accrued expenses |
|
1,722 |
|
1,822 |
|
Total current liabilities |
|
16,542 |
|
16,561 |
|
|
|
|
|
|
|
Long-term debt |
|
5,364 |
|
3,231 |
|
Pension and other employee benefits |
|
1,492 |
|
1,487 |
|
Deferred taxes |
|
586 |
|
537 |
|
Other non-current liabilities |
|
1,500 |
|
1,496 |
|
Total liabilities |
|
25,484 |
|
23,312 |
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
Capital stock and additional paid-in capital (2,314,743,264 issued shares at March 31, 2012, and December 31, 2011) |
|
1,631 |
|
1,621 |
|
Retained earnings |
|
17,673 |
|
16,988 |
|
Accumulated other comprehensive loss |
|
(1,986 |
) |
(2,408 |
) |
Treasury stock, at cost (21,417,432 and 24,332,144 shares at March 31, 2012, and December 31, 2011, respectively) |
|
(373 |
) |
(424 |
) |
Total ABB stockholders equity |
|
16,945 |
|
15,777 |
|
Noncontrolling interests |
|
579 |
|
559 |
|
Total stockholders equity |
|
17,524 |
|
16,336 |
|
Total liabilities and stockholders equity |
|
43,008 |
|
39,648 |
|
See Notes to the Interim Consolidated Financial Information
ABB Ltd Interim Consolidated Statements of Cash Flows (unaudited)
|
|
Three months ended |
| ||
($ in millions) |
|
Mar. 31, 2012 |
|
Mar. 31, 2011 |
|
|
|
|
|
|
|
Operating activities: |
|
|
|
|
|
Net income |
|
712 |
|
696 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
253 |
|
231 |
|
Pension and other employee benefits |
|
(17 |
) |
(7 |
) |
Deferred taxes |
|
39 |
|
(3 |
) |
Net gain from sale of property, plant and equipment |
|
(3 |
) |
(9 |
) |
Loss from equity-accounted companies |
|
4 |
|
|
|
Other |
|
25 |
|
20 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
Trade receivables, net |
|
(74 |
) |
15 |
|
Inventories, net |
|
(388 |
) |
(500 |
) |
Trade payables |
|
(184 |
) |
135 |
|
Billings in excess of sales |
|
120 |
|
(100 |
) |
Provisions, net |
|
(157 |
) |
(178 |
) |
Advances from customers |
|
101 |
|
(36 |
) |
Other assets and liabilities, net |
|
(453 |
) |
(28 |
) |
Net cash provided by (used in) operating activities |
|
(22 |
) |
236 |
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
Purchases of marketable securities (available-for-sale) |
|
(876 |
) |
(586 |
) |
Purchases of short-term investments |
|
(25 |
) |
(140 |
) |
Purchases of property, plant and equipment and intangible assets |
|
(236 |
) |
(139 |
) |
Acquisition of businesses (net of cash acquired) and changes in cost and equity investments |
|
(196 |
) |
(3,102 |
) |
Proceeds from sales of marketable securities (available-for-sale) |
|
21 |
|
2,084 |
|
Proceeds from maturity of marketable securities (available-for-sale) |
|
|
|
134 |
|
Proceeds from short-term investments |
|
2 |
|
378 |
|
Proceeds from sales of property, plant and equipment |
|
5 |
|
6 |
|
Proceeds from sales of businesses and equity-accounted companies (net of cash disposed) |
|
3 |
|
|
|
Changes in financing and other non-current receivables, net |
|
(19 |
) |
(9 |
) |
Net cash used in investing activities |
|
(1,321 |
) |
(1,374 |
) |
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
Net changes in debt with original maturities of 90 days or less |
|
91 |
|
51 |
|
Increase in debt |
|
2,172 |
|
37 |
|
Repayment of debt |
|
(185 |
) |
(1,299 |
) |
Transactions in treasury shares |
|
46 |
|
4 |
|
Dividends paid to noncontrolling shareholders |
|
(8 |
) |
(1 |
) |
Other |
|
15 |
|
(37 |
) |
Net cash provided by (used in) financing activities |
|
2,131 |
|
(1,245 |
) |
|
|
|
|
|
|
Effects of exchange rate changes on cash and equivalents |
|
144 |
|
135 |
|
|
|
|
|
|
|
Net change in cash and equivalents - continuing operations |
|
932 |
|
(2,248 |
) |
|
|
|
|
|
|
Cash and equivalents, beginning of period |
|
4,819 |
|
5,897 |
|
Cash and equivalents, end of period |
|
5,751 |
|
3,649 |
|
|
|
|
|
|
|
Supplementary disclosure of cash flow information: |
|
|
|
|
|
Interest paid |
|
24 |
|
33 |
|
Taxes paid |
|
341 |
|
298 |
|
See Notes to the Interim Consolidated Financial Information
ABB Ltd Interim Consolidated Statements of Changes in Stockholders Equity (unaudited)
|
|
|
|
|
|
Accumulated other comprehensive loss |
|
|
|
|
|
|
| ||||||||||
($ in millions) |
|
Capital |
|
Retained |
|
Foreign |
|
Unrealized |
|
Pension |
|
Unrealized |
|
Total |
|
Treasury |
|
Total ABB |
|
Noncontrolling |
|
Total |
|
Balance at January 1, 2011 |
|
1,454 |
|
15,389 |
|
(707 |
) |
18 |
|
(920 |
) |
92 |
|
(1,517 |
) |
(441 |
) |
14,885 |
|
573 |
|
15,458 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
655 |
|
|
|
|
|
|
|
|
|
|
|
|
|
655 |
|
41 |
|
696 |
|
Foreign currency translation adjustments |
|
|
|
|
|
450 |
|
|
|
|
|
|
|
450 |
|
|
|
450 |
|
3 |
|
453 |
|
Effect of change in fair value of available-for-sale securities, net of tax |
|
|
|
|
|
|
|
(8 |
) |
|
|
|
|
(8 |
) |
|
|
(8 |
) |
|
|
(8 |
) |
Unrecognized income (expense) related to pensions and other postretirement plans, net of tax |
|
|
|
|
|
|
|
|
|
(31 |
) |
|
|
(31 |
) |
|
|
(31 |
) |
|
|
(31 |
) |
Change in derivatives qualifying as cash flow hedges, net of tax |
|
|
|
|
|
|
|
|
|
|
|
15 |
|
15 |
|
|
|
15 |
|
|
|
15 |
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,081 |
|
44 |
|
1,125 |
|
Changes in noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5 |
) |
(5 |
) |
Dividends paid to noncontrolling shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
(3 |
) |
Treasury stock transactions |
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
8 |
|
4 |
|
|
|
4 |
|
Share-based payment arrangements |
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 |
|
|
|
15 |
|
Balance at March 31, 2011 |
|
1,465 |
|
16,044 |
|
(257 |
) |
10 |
|
(951 |
) |
107 |
|
(1,091 |
) |
(433 |
) |
15,985 |
|
609 |
|
16,594 |
|
|
|
|
|
|
|
Accumulated other comprehensive loss |
|
|
|
|
|
|
| ||||||||||
($ in millions) |
|
Capital |
|
Retained |
|
Foreign |
|
Unrealized |
|
Pension |
|
Unrealized |
|
Total |
|
Treasury |
|
Total ABB |
|
Noncontrolling |
|
Total |
|
Balance at January 1, 2012 |
|
1,621 |
|
16,988 |
|
(968 |
) |
20 |
|
(1,472 |
) |
12 |
|
(2,408 |
) |
(424 |
) |
15,777 |
|
559 |
|
16,336 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
685 |
|
27 |
|
712 |
|
Foreign currency translation adjustments |
|
|
|
|
|
433 |
|
|
|
|
|
|
|
433 |
|
|
|
433 |
|
8 |
|
441 |
|
Effect of change in fair value of available-for-sale securities, net of tax |
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
Unrecognized income (expense) related to pensions and other postretirement plans, net of tax |
|
|
|
|
|
|
|
|
|
(35 |
) |
|
|
(35 |
) |
|
|
(35 |
) |
|
|
(35 |
) |
Change in derivatives qualifying as cash flow hedges, net of tax |
|
|
|
|
|
|
|
|
|
|
|
25 |
|
25 |
|
|
|
25 |
|
|
|
25 |
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,107 |
|
35 |
|
1,142 |
|
Changes in noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
3 |
|
Dividends paid to noncontrolling shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18 |
) |
(18 |
) |
Treasury stock transactions |
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
51 |
|
46 |
|
|
|
46 |
|
Share-based payment arrangements |
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 |
|
|
|
13 |
|
Other |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
2 |
|
Balance at March 31, 2012 |
|
1,631 |
|
17,673 |
|
(535 |
) |
19 |
|
(1,507 |
) |
37 |
|
(1,986 |
) |
(373 |
) |
16,945 |
|
579 |
|
17,524 |
|
See Notes to the Interim Consolidated Financial Information
Notes to the Interim Consolidated Financial Information (unaudited)
Note 1. The Company and basis of presentation
ABB Ltd and its subsidiaries (collectively, the Company) together form a leading global company in power and automation technologies that enable utility and industry customers to improve their performance while lowering environmental impact. The Company works with customers to engineer and install networks, facilities and plants with particular emphasis on enhancing efficiency, reliability and productivity for customers who generate, convert, transmit, distribute and consume energy.
The Companys Interim Consolidated Financial Information is prepared in accordance with United States of America generally accepted accounting principles (U.S. GAAP) for interim financial reporting. As such, the Interim Consolidated Financial Information does not include all the information and notes required under U.S. GAAP for annual consolidated financial statements. Therefore, such financial information should be read in conjunction with the audited consolidated financial statements in the Companys Annual Report for the year ended December 31, 2011.
The preparation of financial information in conformity with U.S. GAAP requires management to make assumptions and estimates that directly affect the amounts reported in the Interim Consolidated Financial Information. The most significant, difficult and subjective of such accounting assumptions and estimates include:
· assumptions and projections, principally related to future material, labor and project-related overhead costs, used in determining the percentage-of-completion on projects,
· estimates of loss contingencies associated with litigation or threatened litigation and other claims and inquiries, environmental damages, product warranties, regulatory and other proceedings,
· assumptions used in the calculation of pension and postretirement benefits and the fair value of pension plan assets,
· recognition and measurement of current and deferred income tax assets and liabilities (including the measurement of uncertain tax positions),
· growth rates, discount rates and other assumptions used in testing goodwill for impairment,
· assumptions used in determining inventory obsolescence and net realizable value,
· estimates and assumptions used in determining the fair values of assets and liabilities assumed in business combinations,
· growth rates, discount rates and other assumptions used to determine impairment of long-lived assets, and
· assessment of the allowance for doubtful accounts.
The actual results and outcomes may differ from the Companys estimates and assumptions.
A portion of the Companys activities (primarily long-term construction activities) has an operating cycle that exceeds one year. For classification of current assets and liabilities related to such activities, the Company elected to use the duration of the individual contracts as its operating cycle. Accordingly, there are accounts receivable, inventories and provisions related to these contracts which will not be realized within one year that have been classified as current.
In the opinion of management, the unaudited Interim Consolidated Financial Information contains all necessary adjustments to present fairly the financial position, results of operations and cash flows for the reported interim periods. Management considers all such adjustments to be of a normal recurring nature.
The Interim Consolidated Financial Information is presented in United States dollars ($) unless otherwise stated. Certain amounts reported for prior periods in the Interim Consolidated Financial Information have been reclassified to conform to the current years presentation. These changes primarily relate to the reclassification from operating activities to investing activities in the Consolidated Statement of Cash Flows of cash paid in relation to the settlement of stock options held by Baldor employees at the acquisition date.
Notes to the Interim Consolidated Financial Information (unaudited)
Note 2. Recent accounting pronouncements
Applicable in current period
Amendments to achieve common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs
In January 2012, the Company adopted an accounting standard update which provides guidance that results in common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards. These amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the amendments in this update are not intended to result in a change in the application of the requirements of U.S. GAAP. Some of the amendments clarify the application of existing fair value measurement requirements, while other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The adoption of this update did not have a significant impact on the consolidated financial statements.
Presentation of comprehensive income
In January 2012, the Company adopted two accounting standard updates regarding the presentation of comprehensive income. Under the updates, the Company is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income and a total amount for comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. These updates are effective retrospectively and resulted in the Company presenting two separate but consecutive statements.
Testing goodwill for impairment
In January 2012, the Company adopted an accounting standard update regarding the testing of goodwill for impairment under which the Company has elected the option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Consequently, the Company is not required to calculate the fair value of a reporting unit unless it determines, based on the qualitative assessment, that it is more likely than not that the reporting units fair value is less than its carrying amount. The adoption of this update did not have a significant impact on the consolidated financial statements.
Applicable for future periods
Disclosures about offsetting assets and liabilities
In December 2011, an accounting standard update was issued regarding disclosures about amounts of financial and derivative instruments recognized in the statement of financial position that are either (i) offset or (ii) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset. The scope of the update includes derivatives, sale and repurchase agreements and reverse sale and repurchase agreements, and securities borrowing and securities lending arrangements. This update is effective for the Company for annual and interim periods beginning January 1, 2013, and is applicable retrospectively. The Company is currently evaluating the impact of these additional disclosures.
Notes to the Interim Consolidated Financial Information (unaudited)
Note 3. Acquisitions
Acquisitions were as follows:
|
|
Three months ended |
| ||
($ in millions, except number of acquired businesses) (1) |
|
2012 |
|
2011 |
|
Acquisitions (net of cash acquired)(2) |
|
164 |
|
3,055 |
|
Aggregate excess of purchase price over fair value of net assets acquired(3) |
|
92 |
|
2,794 |
|
|
|
|
|
|
|
Number of acquired businesses |
|
1 |
|
3 |
|
(1) Amounts include adjustments arising during the measurement period of the acquisitions.
(2) Excluding changes in cost and equity investments.
(3) Recorded as goodwill.
For the three months ended March 31, 2011, the Acquisitions and Aggregate excess of purchase price over fair value of net assets acquired amounts in the table above relate primarily to the acquisition of Baldor.
Acquisitions of controlling interests have been accounted for under the acquisition method and have been included in the Companys Interim Consolidated Financial Information since the date of acquisition.
While the Company uses its best estimates and assumptions as part of the purchase price allocation process to value assets acquired and liabilities assumed at the acquisition date, the purchase price allocation for acquisitions is preliminary for up to 12 months after the acquisition date and is subject to refinement as more detailed analyses are completed and additional information about the fair values of the assets and liabilities becomes available.
On January 26, 2011, the Company acquired 83.25 percent of the outstanding shares of Baldor Electric Company (Baldor) for $63.50 per share in cash. On January 27, 2011, the Company exercised its top-up option contained in the merger agreement, bringing its shareholding in Baldor to 91.6 percent, allowing the Company to complete a short-form merger under Missouri, United States, law. On the same date, the Company completed the purchase of the remaining 8.4 percent of outstanding shares. The resulting cash outflows for the Company amounted to $4,276 million, representing $2,966 million for the purchase of the shares, net of cash acquired, $70 million related to cash settlement of Baldor options held at acquisition date and $1,240 million for the repayment of debt assumed upon acquisition.
Baldor markets, designs and manufactures industrial electric motors, mechanical power transmission products, drives and generators. The acquisition broadens the product offering of the Companys Discrete Automation and Motion operating segment, closing the gap in the Companys automation portfolio in North America by adding Baldors NEMA (National Electrical Manufacturers Association) motors product line as well as adding Baldors growing mechanical power transmission business.
In the three months ended March 31, 2011, acquisitions (net of cash acquired) totaled $19 million, excluding Baldor.
Notes to the Interim Consolidated Financial Information (unaudited)
The final allocation of the purchase consideration for the Baldor acquisition is as follows:
($ in millions) |
|
Allocated amounts |
|
Weighted-average |
|
Customer relationships |
|
996 |
|
19 years |
|
Technology |
|
259 |
|
7 years |
|
Trade name |
|
121 |
|
10 years |
|
Order backlog |
|
15 |
|
2 months |
|
Other intangible assets |
|
15 |
|
5 years |
|
Intangible assets |
|
1,406 |
|
16 years |
|
Fixed assets |
|
382 |
|
|
|
Debt acquired |
|
(1,241 |
) |
|
|
Deferred tax liabilities |
|
(693 |
) |
|
|
Inventories |
|
422 |
|
|
|
Other assets and liabilities, net(1) |
|
51 |
|
|
|
Goodwill(2) |
|
2,728 |
|
|
|
Total consideration (net of cash acquired) (3) |
|
3,055 |
|
|
|
(1) Gross receivables totaled $266 million; the fair value of which was $263 million after allowance for estimated uncollectable receivables.
(2) Goodwill recognized is not deductible for income tax purposes.
(3) Cash acquired totaled $48 million. Additional consideration included $70 million related to the cash settlement of stock options held by Baldor employees at the acquisition date and $19 million representing the fair value of replacement vested stock options issued to Baldor employees at the acquisition date. The fair value of these stock options was estimated using a Black-Scholes model.
The Companys Consolidated Income Statements for the three months ended March 31, 2012 and 2011, include total revenues of $535 million and $371 million, respectively, and net income of $70 million and net loss (including acquisition-related charges) of $27 million, respectively, related to Baldor since the date of acquisition.
The unaudited pro forma financial information in the table below summarizes the combined pro forma results of the Company and Baldor for the three months ended March 31, 2011, as if Baldor had been acquired on January 1, 2010.
($ in millions) |
|
Three months ended |
|
Total revenues |
|
8,512 |
|
Net income |
|
781 |
|
The pro forma results are for information purposes only and do not include any anticipated cost synergies or other effects of the integration of Baldor. Accordingly, such pro forma amounts are not necessarily indicative of the results that would have occurred had the acquisition been completed on the date indicated, nor are they indicative of the future operating results of the combined company.
Notes to the Interim Consolidated Financial Information (unaudited)
The unaudited pro forma results above include certain adjustments related to the Baldor acquisition. The table below summarizes the adjustments necessary to present the pro forma financial information of the combined entity for the three months ended March 31, 2011, as if Baldor had been acquired on January 1, 2010.
|
|
Adjustments |
|
($ in millions) |
|
Three months ended |
|
Impact on cost of sales from additional amortization of intangible assets (excluding order backlog capitalized upon acquisition) |
|
(6 |
) |
Impact on cost of sales from amortization of order backlog capitalized upon acquisition |
|
15 |
|
Impact on cost of sales from fair valuing acquired inventory |
|
63 |
|
Interest expense on Baldors debt |
|
11 |
|
Baldor stock-option plans adjustments |
|
66 |
|
Impact on selling, general and administrative expenses from acquisition-related costs |
|
60 |
|
Taxation adjustments |
|
(66 |
) |
Total pro forma adjustments |
|
143 |
|
Changes in total goodwill were as follows:
($ in millions) |
|
Total goodwill |
|
Balance at January 1, 2011 |
|
4,085 |
|
Additions during the period(1) |
|
3,261 |
|
Exchange rate differences |
|
(74 |
) |
Other |
|
(3 |
) |
Balance at December 31, 2011 |
|
7,269 |
|
Additions during the period(2) |
|
92 |
|
Exchange rate differences |
|
63 |
|
Other |
|
|
|
Balance at March 31, 2012 |
|
7,424 |
|
(1) Includes primarily goodwill of $2,728 million in respect of Baldor, acquired in January 2011, which has been allocated to the Discrete Automation and Motion operating segment and goodwill in respect of Mincom, acquired in July 2011, which has been allocated to the Power Systems operating segment.
(2) Includes goodwill in respect of Newave, acquired in February 2012, which has been allocated to the Discrete Automation and Motion operating segment.
ABB to acquire Thomas & Betts Corporation
On January 30, 2012, the Company announced that it had reached an agreement to acquire the Thomas & Betts Corporation. Thomas & Betts designs, manufactures and markets essential components used to manage the connection, distribution, transmission and reliability of electrical power in industrial, construction and utility applications. The anticipated cash outflows for the Company upon closing the transaction amount to approximately $3.9 billion, based on a purchase price of $72 per share for the acquisition of the outstanding shares. The transaction is subject to approval by Thomas & Betts shareholders on May 2, 2012, as well as to customary regulatory approvals, and is expected to close by the middle of 2012.
Notes to the Interim Consolidated Financial Information (unaudited)
Note 4. Cash and equivalents, marketable securities and short-term investments
Current assets
Cash and equivalents, marketable securities and short-term investments consisted of the following:
|
|
March 31, 2012 |
| ||||||||||
($ in millions) |
|
Cost basis |
|
Gross |
|
Gross |
|
Fair value |
|
Cash and |
|
Marketable |
|
Cash |
|
1,813 |
|
|
|
|
|
1,813 |
|
1,813 |
|
|
|
Time deposits |
|
3,671 |
|
|
|
|
|
3,671 |
|
3,671 |
|
|
|
Other short-term investments |
|
25 |
|
|
|
|
|
25 |
|
|
|
25 |
|
Debt securities available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government obligations |
|
753 |
|
7 |
|
(1 |
) |
759 |
|
|
|
759 |
|
Other government obligations |
|
3 |
|
|
|
|
|
3 |
|
|
|
3 |
|
Corporate |
|
382 |
|
9 |
|
|
|
391 |
|
267 |
|
124 |
|
Equity securities available-for-sale |
|
918 |
|
10 |
|
(2 |
) |
926 |
|
|
|
926 |
|
Total |
|
7,565 |
|
26 |
|
(3 |
) |
7,588 |
|
5,751 |
|
1,837 |
|
|
|
December 31, 2011 |
| ||||||||||
($ in millions) |
|
Cost basis |
|
Gross |
|
Gross |
|
Fair value |
|
Cash and |
|
Marketable |
|
Cash |
|
1,655 |
|
|
|
|
|
1,655 |
|
1,655 |
|
|
|
Time deposits |
|
2,986 |
|
|
|
|
|
2,986 |
|
2,984 |
|
2 |
|
Debt securities available-for-sale: |
|
|
|