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 registrant’s 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 registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s 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 registrant’s 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 Ltd’s 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.

 

2



 

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

 

10’368

 

10’357

 

0

%

2

%

Order backlog (end March)

 

29’910

 

29’265

 

2

%

6

%

Revenues

 

8’907

 

8’402

 

6

%

8

%

EBIT

 

1’048

 

1’013

 

3

%

 

 

as % of revenues

 

11.8

%

12.1

%

 

 

 

 

Operational EBITDA(3)

 

1’228

 

1’319

 

-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)

 

3



 

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 business’s 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 backlog—reflecting mainly the weak pricing environment in power—and 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 Group’s 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 company’s 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

 

4



 

measures to adjust ABB’s 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 year’s 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 ABB’s Executive Committee (EC) as Chief Technology Officer, starting midyear 2012. As previously communicated, Greg Scheu will join ABB’s 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 company’s exposure to faster-growing emerging markets is also expected to support growth, while the businesses in North

 

5



 

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 company’s 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

 

3’117

 

2’860

 

9

%

11

%

Order backlog (end March)

 

8’859

 

8’850

 

0

%

3

%

Revenues

 

2’513

 

2’327

 

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

 

1’958

 

1’937

 

1

%

3

%

Order backlog (end March)

 

12’115

 

11’498

 

5

%

10

%

Revenues

 

1’807

 

1’833

 

-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

 

6



 

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

 

2’678

 

2’344

 

14

%

15

%

Order backlog (end March)

 

4’675

 

4’117

 

14

%

16

%

Revenues

 

2’242

 

1’880

 

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 productivity—such as industrial motors and robots—mainly 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

 

1’337

 

1’409

 

-5

%

-3

%

Order backlog (end March)

 

1’049

 

1’108

 

-5

%

-3

%

Revenues

 

1’192

 

1’195

 

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 ABB’s 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.

 

7



 

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

 

2’540

 

2’606

 

-3

%

-1

%

Order backlog (end March)

 

6’483

 

6’447

 

1

%

4

%

Revenues

 

1’970

 

1’900

 

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.

 

8



 

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 ABB’s 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 Ltd’s 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:

 

 

 

 

 

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

 

 

 

9



 

ABB first-quarter (Q1) 2012 key figures

 

 

 

 

 

 

 

 

 

Change

 

$ millions unless otherwise indicated

 

Q1 12

 

Q1 11

 

US$

 

Local

 

Orders

 

Group

 

10’368

 

10’357

 

0

%

2

%

 

 

Power Products

 

3’117

 

2’860

 

9

%

11

%

 

 

Power Systems

 

1’958

 

1’937

 

1

%

3

%

 

 

Discrete Automation & Motion

 

2’678

 

2’344

 

14

%

15

%

 

 

Low Voltage Products

 

1’337

 

1’409

 

-5

%

-3

%

 

 

Process Automation

 

2’540

 

2’606

 

-3

%

-1

%

 

 

Corporate and other (inter-division eliminations)

 

(1’262

)

(799

)

 

 

 

 

Revenues

 

Group

 

8’907

 

8’402

 

6

%

8

%

 

 

Power Products

 

2’513

 

2’327

 

8

%

9

%

 

 

Power Systems

 

1’807

 

1’833

 

-1

%

1

%

 

 

Discrete Automation & Motion

 

2’242

 

1’880

 

19

%

21

%

 

 

Low Voltage Products

 

1’192

 

1’195

 

0

%

2

%

 

 

Process Automation

 

1’970

 

1’900

 

4

%

6

%

 

 

Corporate and other (inter-division eliminations)

 

(817

)

(733

)

 

 

 

 

EBIT

 

Group

 

1’048

 

1’013

 

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

 

1’228

 

1’319

 

-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)

 

10



 

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

 

3’894

 

4’090

 

-5

%

-1

%

3’386

 

3’291

 

3

%

6

%

Americas

 

2’695

 

2’164

 

25

%

27

%

2’326

 

2’008

 

16

%

17

%

Asia

 

2’766

 

3’097

 

-11

%

-11

%

2’323

 

2’113

 

10

%

10

%

Middle East and Africa

 

1’013

 

1’006

 

1

%

2

%

872

 

990

 

-12

%

-10

%

Group total

 

10’368

 

10’357

 

0

%

2

%

8’907

 

8’402

 

6

%

8

%

 

Operational EBITDA 01 2012 vs 01 2011

 

 

 

ABB

 

Power
Products

 

Power
Systems

 

Discrete Automation
& Motion

 

Low Voltage
Products

 

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

 

8’844

 

8’387

 

2’497

 

2’340

 

1’780

 

1’818

 

2’240

 

1’881

 

1’186

 

1’194

 

1’960

 

1’888

 

FX/commodity timing differences on Revenues

 

63

 

15

 

16

 

(13

)

27

 

15

 

2

 

(1

)

6

 

1

 

10

 

12

 

Revenues (as per Financial Statements)

 

8’907

 

8’402

 

2’513

 

2’327

 

1’807

 

1’833

 

2’242

 

1’880

 

1’192

 

1’195

 

1’970

 

1’900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operational EBITDA

 

1’228

 

1’319

 

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)

 

1’048

 

1’013

 

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 plus marketable securities and short-term investments, less total debt)

 

 

 

 

 

 

 

 

 

 

 

Cash and equivalents

 

5’751

 

4’819

 

Marketable securities and short-term investments

 

1’837

 

948

 

Cash and marketable securities

 

7’588

 

5’767

 

Short-term debt and current maturities of long-term debt

 

812

 

765

 

Long-term debt

 

5’364

 

3’231

 

Total debt

 

6’176

 

3’996

 

Net Cash

 

1’412

 

1’771

 

 

11



 

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

 

12



 

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

 

13



 

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

 

14



 

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

 

15



 

ABB Ltd Interim Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

 

 

 

 

 

 

 

Accumulated other comprehensive loss

 

 

 

 

 

 

 

($ in millions)

 

Capital
stock and
additional
paid-in
capital

 

Retained
earnings

 

Foreign
currency
translation
adjustment

 

Unrealized
gain (loss)
on
available-
for-
sale
securities

 

Pension
and other
postretirement
plan
adjustments

 

Unrealized
gain (loss)
of cash
flow hedge
derivatives

 

Total
accumulated
other
comprehensive
loss

 

Treasury
stock

 

Total ABB
stockholders’
equity

 

Noncontrolling
interests

 

Total
stockholders’
equity

 

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
stock and
additional
paid-in
capital

 

Retained
earnings

 

Foreign
currency
translation
adjustment

 

Unrealized
gain (loss)
on
available-
for-
sale
securities

 

Pension
and other
postretirement
plan
adjustments

 

Unrealized
gain (loss)
of cash
flow hedge
derivatives

 

Total
accumulated
other
comprehensive
loss

 

Treasury
stock

 

Total ABB
stockholders’
equity

 

Noncontrolling
interests

 

Total
stockholders’
equity

 

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

 

16



 

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 Company’s 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 Company’s 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 Company’s estimates and assumptions.

 

A portion of the Company’s 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 year’s 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.

 

17



 

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 unit’s 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.

 

18



 

Notes to the Interim Consolidated Financial Information (unaudited)

 

Note 3. Acquisitions

 

Acquisitions were as follows:

 

 

 

Three months ended
March 31,

 

($ 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 Company’s 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 Company’s Discrete Automation and Motion operating segment, closing the gap in the Company’s automation portfolio in North America by adding Baldor’s NEMA (National Electrical Manufacturers Association) motors product line as well as adding Baldor’s growing mechanical power transmission business.

 

In the three months ended March 31, 2011, acquisitions (net of cash acquired) totaled $19 million, excluding Baldor.

 

19



 

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
useful life

 

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 Company’s 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
March 31, 2011

 

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.

 

20



 

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
March 31, 2011

 

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 Baldor’s 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.

 

21



 

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
unrealized
gains

 

Gross
unrealized
losses

 

Fair value

 

Cash and
equivalents

 

Marketable
securities
and
short-term
investments

 

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
unrealized
gains

 

Gross
unrealized
losses

 

Fair value

 

Cash and
equivalents

 

Marketable
securities
and
short-term
investments

 

Cash

 

1,655

 

 

 

 

 

1,655

 

1,655

 

 

Time deposits

 

2,986

 

 

 

 

 

2,986

 

2,984

 

2

 

Debt securities available-for-sale: