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 2013

 

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 24, 2013.

2.              Announcements regarding transactions in ABB Ltd’s Securities made by the directors or the members of the Executive Committee.

3.              Agenda and resolutions from the ABB Ltd General Meeting of Shareholders held on April 25, 2013.

4.              Press release issued by ABB Ltd dated April 25, 2013.

 

The information provided by Item 1 above is deemed filed for all purposes under the Securities Exchange Act of 1934.

 

2



 

Press Release

 

ABB Q1: Revenue growth, improved profitability

 

·                                Improved portfolio and geographic balance generates solid results in a mixed market

·                                Revenues steady to higher in all divisions(1); Thomas & Betts on track

·                                Operational EBITDA(2) and margin higher, continued solid execution on cost savings

 

Zurich, Switzerland, April 24, 2013 — ABB today reported its first-quarter 2013 results, highlighting revenue growth and improved operational profitability2 despite a weak business environment.

 

“Given the continued uncertainties in the global economy, this is a satisfactory start to 2013,” said ABB Chief Executive Officer Joe Hogan. “We continued to execute well, successfully balancing solid cost discipline with targeted growth in businesses and regions where we have competitive advantages, especially in areas like industrial efficiency, power reliability and renewable energy.

 

“Our balanced portfolio and global footprint contributed to the resilient performance, allowing us to find and capture growth opportunities in a mixed market. For example, we won some key orders in marine, mining, and robotics, and increased emerging market orders by 10 percent. We lifted total revenues on both an organic and inorganic basis.

 

“Our execution on cost remained strong, with tight discipline on G&A expenses,” Hogan said. “Continued success in sourcing and productivity improvements saved us about $260 million.

 

“The Thomas and Betts integration and synergies are on track. We’re very pleased with this acquisition and the improved balance it gives us in the North American market.

 

“The Power Products team turned in another good performance, with an operational EBITDA margin of 14.9 percent, again within our guidance of 14.5 to 15.0 percent range for the full year, thanks to solid execution on cost and selective growth initiatives in more profitable end markets.

 

“We achieved these results despite continued demand headwinds,” Hogan said. “Growth in the US decelerated further in the quarter and industrial investments in much of Europe remained mixed. Cash flow was lower than we’d like, but it was largely expected and mainly reflects the timing of project execution, so we expect to see that recover over the coming quarters.

 

“For the rest of the year, we’ll continue to focus on the cost-growth balance. Macroeconomic indicators remain unclear, which makes it tough to predict how the early-cycle businesses will perform. However, our strong order backlog will help mitigate some of that uncertainty, and we’re confident that our better balance across businesses and regions will continue to provide us with profitable growth opportunities.”

 

2013 Q1 key figures

 

 

 

 

 

 

 

Change

 

$ millions unless otherwise indicated

 

Q1 13

 

Q1 12

 

US$

 

Local

 

Organic(3)

 

Orders

 

10’492

 

10’368

 

1

%

2

%

-4

%

Order backlog (end March)

 

29’614

 

29’910

 

-1

%

2

%

 

 

Revenues

 

9’715

 

8’907

 

9

%

10

%

3

%

EBIT

 

1’052

 

1’048

 

0

%

 

 

 

 

as % of revenues

 

10.8

%

11.8

%

 

 

 

 

 

 

Operational EBITDA

 

1’458

 

1’228

 

19

%

 

 

 

 

as % of operational revenues

 

15.0

%

13.9

%

 

 

 

 

 

 

Net income attributable to ABB

 

664

 

685

 

-3

%

 

 

 

 

Basic net income per share ($)

 

0.29

 

0.30

 

 

 

 

 

 

 

Cash flow from operating activities

 

(223

)

(22

)

n.a.

 

 

 

 

 

 


(1)  Management discussion of orders and revenues focuses on local currency changes. U.S. dollar changes are reported in results tables

(2)  See reconciliation of operational EBITDA to EBIT in Note 13 to the Interim Consolidated Financial Information (unaudited)

(3)  Organic changes are in local currencies and exclude Thomas & Betts (T&B) acquired in May 2012

 

3



 

Summary of Q1 results

 

Growth overview

 

Market conditions remained mixed, with demand in key end markets such as oil and gas, mining, marine and utilities varying by region, product and customer. In this environment, ABB’s geographic, technology and channel scope mitigated some of the market turbulence and allowed the company to tap opportunities for profitable growth.

 

For example, industrial customers continued to invest in high-efficiency production technologies to generate more from their existing assets, such as the $260-million, 9-year order to supply integrated services for offshore oil and gas facilities in Norway. Targeted capital expenditures in important end markets also continued and included an order for mine hoists from a major customer in Russia.

 

Utilities made further selective power transmission investments to expand and upgrade their grids. ABB won a $110-million order to link the Lithuanian and Poland power grids, and a $150-million order to supply ultra-high voltage direct current equipment to the world’s highest capacity power transmission link in China.

 

Overall, ABB’s orders received in the quarter declined 4 percent on an organic basis (2 percent higher including T&B) compared to the first quarter of 2012. Base orders (below $15 million) were 5 percent lower on an organic basis (2 percent higher including T&B), mainly reflecting softer demand for early-cycle products. Service orders declined by 3 percent in the quarter—partly due to the continued exit from those full service contracts having lower pull-through of high-value ABB products—and represented 19 percent of total orders. Emerging market orders increased 10 percent and represented 48 percent of total orders. Large orders (above $15 million) were up slightly in the quarter and represented 14 percent of total orders, unchanged from the year-earlier period.

 

Revenues increased in the first quarter on both an organic (up 3 percent) and inorganic basis (up 10 percent), as execution of the strong order backlog helped offset early-cycle order and revenue weakness. T&B contributed approximately $590 million to orders and revenues. Service revenues increased by 3 percent in the quarter.

 

Q1 2013 orders received and revenues by region

 

$ millions unless

 

Orders received

 

Change

 

Revenues

 

Change

 

otherwise indicated

 

Q1 13

 

Q1 12

 

US$

 

Local

 

Q1 13

 

Q1 12

 

US$

 

Local

 

Europe

 

3’884

 

3’894

 

0

%

-1

%

3’377

 

3’386

 

0

%

-1

%

The Americas

organic

 

2’798

2331

 

2’695

 

4
-14

%
%

5
-12

%
%

2’824
2’357

 

2’326

 

21
1

%
%

23
3

%%

Asia

 

2’815

 

2’766

 

2

%

2

%

2’544

 

2’323

 

10

%

10

%

Middle East and Africa

 

995

 

1’013

 

-2

%

3

%

970

 

872

 

11

%

14

%

Group total

 

10’492

 

10’368

 

1

%

2

%

9’715

 

8’907

 

9

%

10

%

 

Orders in Europe were flat as strong increases in eastern Europe—especially Russia—offset order declines in both northern and southern Europe, including Germany and Italy. On an organic basis, orders in the Americas declined, mainly the result of lower large orders in power and oil and gas. Asia orders increased on the back of 20-percent order growth in China, while the Middle East and Africa was steady, with strong demand for renewable energy solutions in South Africa offsetting a decline in large orders in the Middle East.

 

4



 

Q1 2013 orders received and revenues by division

 

$ millions unless

 

Orders received

 

Change

 

Revenues

 

Change

 

otherwise indicated

 

Q1 2013

 

Q1 2012

 

US$

 

Local

 

Q1 2013

 

Q1 2012

 

US$

 

Local

 

Discrete Automation & Motion

 

2’485

 

2’678

 

-7

%

-7

%

2’327

 

2’242

 

4

%

4

%

Low Voltage Products

 

1’934

 

1’337

 

45

%

47

%

1’777

 

1’192

 

49

%

51

%

Organic

 

1,342

 

 

 

0

%

1

%

1,185

 

 

 

-1

%

0

%

Process Automation

 

2’500

 

2’540

 

-2

%

-1

%

1’978

 

1’970

 

0

%

1

%

Power Products

 

2’859

 

3’117

 

-8

%

-8

%

2’489

 

2’513

 

-1

%

0

%

Power Systems

 

1’637

 

1’958

 

-16

%

-15

%

2’051

 

1’807

 

14

%

15

%

Corporate and other (inter-division eliminations)

 

(923

)

(1’262)

 

 

 

 

 

(907

)

(817

)

 

 

 

 

ABB Group

 

10’492

 

10’368

 

1

%

2

%

9’715

 

8’907

 

9

%

10

%

 

Discrete Automation and Motion: Higher large orders in robotics and for power conversion equipment in the rail industry could not offset order declines in motors and drives resulting from generally weaker early-cycle demand. Revenues increased on the execution of the strong order backlog, especially in robotics. Service revenues increased 5 percent.

 

Low Voltage Products: Orders and revenues were flat on an organic basis as early-cycle demand remained near the low levels seen a year-earlier in most regions. Service orders and revenues grew at a double-digit pace.

 

Process Automation: Order growth in mining and marine was offset by declines in metals and pulp and paper. Oil and gas orders were flat, with growth in base orders offset by lower large orders. Service orders decreased, mainly due to several upgrade projects booked last year which were not repeated. Higher marine revenues compensated lower revenues in other businesses. Total service revenues increased 4 percent.

 

Power Products: The change in orders received reflects continued project selectivity in a challenging market and a comparison with a strong first quarter of 2012. Revenues were unchanged from a year earlier and included a higher share of distribution and industry-related sales.

 

Power Systems: The order decline partly reflects the timing of large project awards as well as increased selectivity in project tendering in order to reduce risks and secure more value-added ABB product pull-through. Revenues were higher across all businesses in the quarter and service revenues also grew.

 

Earnings overview

 

Earnings before interest and taxes (EBIT) amounted to approximately $1.1 billion, steady compared to the same quarter in 2012. Included in EBIT are the net impacts of foreign exchange and commodity timing differences(4), which reduced EBIT in the first quarter of 2013 by $62 million and increased EBIT

 


(4)  See reconciliation of operational EBITDA to EBIT in Note 13 to the Interim Consolidated Financial Information (unaudited)

 

5



 

in the same period a year earlier by $71 million. Also included in EBIT is acquisition-related amortization of $93 million, compared to $66 million a year earlier.

 

Operational EBITDA in the first quarter of 2013 amounted to $1.5 billion, an increase of 19 percent compared to the relatively weak first quarter a year earlier. T&B contributed approximately $100 million to operational EBITDA.

 

The Group’s operational EBITDA margin increased by 1.1 percentage points compared to the same period in 2012, as sourcing initiatives and operational improvements produced cost savings of approximately $260 million compensated lower-margin orders being executed out of the power backlog. Margins were supported by improved capacity utilization and stricter discipline in selling, general and administrative (SG&A) expenses that better reflect current market conditions.

 

Q1 2013 earnings and cash flows by division

 

$ millions unless

 

Operational EBITDA

 

change in

 

Op EBITDA
margin %
(5)

 

Cash flow from
operating activities

 

change in

 

otherwise indicated

 

Q1 13

 

Q1 12

 

US$

 

Q1 13

 

Q1 12

 

Q1 13

 

Q1 12

 

US$

 

Discrete Automation and Motion

 

416

 

417

 

0

%

17.8

%

18.6

%

179

 

103

 

74

%

Low Voltage Products

 

320

 

197

 

62

%

18.0

%

16.6

%

3

 

45

 

-93

%

Organic

 

222

 

 

 

 

 

18.7

%

 

 

 

 

 

 

 

 

Process Automation

 

259

 

243

 

7

%

13.1

%

12.4

%

14

 

(18

)

n.a.

 

Power Products

 

372

 

363

 

2

%

14.9

%

14.5

%

34

 

123

 

-72

%

Power Systems

 

169

 

117

 

44

%

8.3

%

6.6

%

(188

)

(48

)

-292

%

Corporate and other

 

(78

)

(109

)

 

 

 

 

 

 

(265

)

(227

)

-17

%

ABB Group

 

1’458

 

1’228

 

19

%

15.0

%

13.9

%

(223

)

(22

)

n.a.

 

 

Discrete Automation and Motion: Stable earnings with lower margins primarily reflect a change in product mix versus the year-earlier period, driven in part by increased system revenues where margins are below the divisional average. The change in margins also reflects higher investments in selling and R&D compared to the same quarter in 2012. Higher cash from operations primarily reflects improved inventory management.

 

Low Voltage Products: The increase in operational EBITDA resulted primarily from the contribution of approximately $100 million from T&B. The operational EBITDA margin increased as a result of cost reductions and improved capacity utilization in several markets.

 

Process Automation: Higher operational EBITDA and margins primarily reflect improved project execution and lower SG&A expenses as a percentage of revenues compared to the same quarter in 2012. Profitability was also supported by strong margins in the service business.

 

Power Products: The increase in the operational EBITDA margin was mainly driven by a favorable business mix while cost savings mostly offset the price pressure from the execution of the order backlog.

 


(5)  See computation of operational EBITDA margin % in Note 13 to the Interim Consolidated Financial Information (unaudited)

 

6



 

Power Systems: Higher operational EBITDA margins mainly reflect improved project execution along with a more favorable mix of projects being executed from the order backlog compared to the same quarter a year earlier. Measures announced in the fourth quarter of 2012 to improve profitability and consistency of results continued in the first quarter but had no significant impact on earnings.

 

Net income

 

Net income for the quarter decreased 3 percent to $664 million, which included net foreign currency and derivative impacts, as well as amortization related to acquisitions as described earlier. Finance net(6) increased to $79 million from $38 million in the same quarter in 2012, reflecting the increase in total debt compared to one year ago. Basic earnings per share in the first quarter amounted to $0.29 versus $0.30 a year earlier.

 

Balance sheet and cash flow

 

Total debt amounted to $9.1 billion compared to $6.2 billion in the first quarter of 2012 and $10.1 billion at the end of 2012. The year-over-year increase primarily resulted from the issuance of approximately $3 billion of bonds in the US and Australia to secure long-term funding at attractive rates.

 

Net debt(6) was $2.1 billion at the end of March 2013 versus net cash(6) of $1.4 billion at the same time a year earlier. The net debt-to-EBITDA ratio(6) at the end of March 2013 was 0.4x, well within the range the company believes is required to maintain its single-A credit rating.

 

ABB reported cash outflows from operations of $223 million, weaker than in the first quarter in 2012, reflecting a combination of higher net working capital needed to execute large projects and the timing of customer advances, both factors related mainly to the power businesses. Net working capital as a share of revenues(6) amounted to 16.4 percent, an increase of 0.8 percentage points versus the end of the quarter a year earlier.

 

Technology and innovation

 

ABB announced a number of new products during the quarter, particularly in the area of power electronics. For example, the company launched a new 1,000 kilowatt high-efficiency solar inverter to reduce overall system costs for photovoltaic power generation, and the most compact truly modular uninterrupted power supply (UPS) on the market. A new onboard direct current (DC) power grid for marine applications allows ship operators to optimize generator speeds for lower fuel consumption as well as reducing space requirements and increasing system flexibility. In April, ABB announced the development of an innovative high voltage circuit breaker solution for power transmission with an integrated fiber optic current sensor which simplifies substation design, significantly reduces footprint requirements and is smart grid-enabled. ABB also launched the first low-voltage circuit breaker with integrated energy management functions, which has the potential to achieve annual energy savings equivalent to the electricity consumption of 1.4 million EU households per year.

 

Acquisitions

 

ABB and US-based Power-One announced earlier this week that their boards of directors have agreed to a transaction in which ABB will acquire Power-One for approximately $1 billion. The transaction would position ABB as a leading global supplier of solar inverters — the “intelligence” behind a solar photovoltaic system — to a market expected to grow by more than 10 percent per year over the

 


(6)  See reconciliation of non-GAAP measures in Appendix 1

 

7



 

medium term. The transaction expected to close in the second half of 2013, subject to shareholder and regulatory approvals.

 

Outlook

 

Our long-term growth drivers—such as the need for greater industrial productivity, more reliable and efficient power delivery and growth in renewables—remain in place. Shorter-term trends such as industrial production growth and government policy are expected to remain the key drivers of demand over the rest of 2013. There are no clear changes in demand trends visible as we head into the second quarter of 2013.

 

In a market environment in which near-term uncertainty is likely to remain, we will continue to focus on executing our large order backlog and taking advantage of our broad product and geographic scope to capture profitable growth opportunities in line with our 2011-15 targets.

 

This will be supported by our ongoing initiatives to improve margins and project selection and execution. Growing service revenues, securing the synergies from recent acquisitions, increasing customer satisfaction and successfully commercializing our pipeline of innovative technologies will remain important contributors to our growth and profitability targets.

 

We will continue to drive cost savings and productivity improvements equivalent to 3-5 percent of cost of sales every year through improved supply management, better quality and higher returns on investments in sales and R&D. We remain committed to delivering higher cash to shareholders and improving returns on our capital investments in both organic and inorganic growth.

 

8



 

More information

 

The 2013 Q1 results press release is available from April 24, 2013, 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 2013 results will be available at 06:30 am today at www.youtube.com/abb.

 

ABB will host a media conference call starting at 10:00 a.m. Central European Time (CET). Callers from the US and Canada should dial +1 866 291 41 66 ( Toll-Free). U.K. callers should dial +44 203 059 5862. From Sweden, +46 8 5051 0031, and from the rest of Europe, +41 91 610 5600. 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: +44 207 108 6233 (U.K.), +41 91 612 4330 (rest of Europe) or +1 866 416 2558 (U.S./Canada). The code is 13241, 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 3:00 p.m. CET (2:00 p.m. in the UK, 9:00 a.m. EDT). Callers should dial +1 877 270 2148 from the US/Canada (toll-free), +44 203 059 5862 from the U.K., +46 8 5051 0031 (Sweden) 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/investorrelations.

 

Investor calendar 2013

 

Annual General Meeting Zurich, Switzerland

April 25, 2013

Annual Information Meeting Västerås, Sweden

April 26, 2013

Second-quarter 2013 results

July 25, 2013

Third-quarter 2013 results

October 24, 2013

 

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 145,000 people.

 

Zurich, April 24, 2013

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” 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. +1 919 856 3827

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) 2013 key figures

 

 

 

 

 

 

 

 

 

Change

 

$ millions unless otherwise indicated

 

 

 

Q1 13

 

Q1 12

 

US$

 

Local

 

Orders

 

Group

 

10’492

 

10’368

 

1

%

2

%

 

 

Discrete Automation & Motion

 

2’485

 

2’678

 

-7

%

-7

%

 

 

Low Voltage Products

 

1’934

 

1’337

 

45

%

47

%

 

 

Process Automation

 

2’500

 

2’540

 

-2

%

-1

%

 

 

Power Products

 

2’859

 

3’117

 

-8

%

-8

%

 

 

Power Systems

 

1’637

 

1’958

 

-16

%

-15

%

 

 

Corporate and other
(inter-division eliminations)

 

(923

)

(1’262

)

 

 

 

 

Revenues

 

Group

 

9’715

 

8’907

 

9

%

10

%

 

 

Discrete Automation & Motion

 

2’327

 

2’242

 

4

%

4

%

 

 

Low Voltage Products

 

1’777

 

1’192

 

49

%

51

%

 

 

Process Automation

 

1’978

 

1’970

 

0

%

1

%

 

 

Power Products

 

2’489

 

2’513

 

-1

%

0

%

 

 

Power Systems

 

2’051

 

1’807

 

14

%

15

%

 

 

Corporate and other
(inter-division eliminations)

 

(907

)

(817

)

 

 

 

 

EBIT

 

Group

 

1’052

 

1’048

 

0

%

 

 

 

 

Discrete Automation & Motion

 

337

 

354

 

-5

%

 

 

 

 

Low Voltage Products

 

232

 

180

 

29

%

 

 

 

 

Process Automation

 

224

 

234

 

-4

%

 

 

 

 

Power Products

 

283

 

323

 

-12

%

 

 

 

 

Power Systems

 

105

 

88

 

19

%

 

 

 

 

Corporate and other
(inter-division eliminations)

 

(129

)

(131

)

 

 

 

 

EBIT %

 

Group

 

10.8

%

11.8

%

 

 

 

 

 

 

Discrete Automation & Motion

 

14.5

%

15.8

%

 

 

 

 

 

 

Low Voltage Products

 

13.1

%

15.1

%

 

 

 

 

 

 

Process Automation

 

11.3

%

11.9

%

 

 

 

 

 

 

Power Products

 

11.4

%

12.9

%

 

 

 

 

 

 

Power Systems

 

5.1

%

4.9

%

 

 

 

 

Operational EBITDA*

 

Group

 

1’458

 

1’228

 

19

%

 

 

 

 

Discrete Automation & Motion

 

416

 

417

 

0

%

 

 

 

 

Low Voltage Products

 

320

 

197

 

62

%

 

 

 

 

Process Automation

 

259

 

243

 

7

%

 

 

 

 

Power Products

 

372

 

363

 

2

%

 

 

 

 

Power Systems

 

169

 

117

 

44

%

 

 

 

 

Corporate and other
(inter-division eliminations)

 

(78

)

(109

)

 

 

 

 

Operational EBITDA margin %*

 

Group

 

15.0

%

13.9

%

 

 

 

 

 

 

Discrete Automation & Motion

 

17.8

%

18.6

%

 

 

 

 

 

 

Low Voltage Products

 

18.0

%

16.6

%

 

 

 

 

 

 

Process Automation

 

13.1

%

12.4

%

 

 

 

 

 

 

Power Products

 

14.9

%

14.5

%

 

 

 

 

 

 

Power Systems

 

8.3

%

6.6

%

 

 

 

 

 


* See reconciliation of operational EBITDA and computation of operational EBITDA margin % in Note 13 to the Interim Consolidated Financial Information (unaudited)

 

10



 

Operational EBITDA Q1 2013 vs Q1 2012

 

 

 

ABB

 

Discrete Automation
& Motion

 

Low Voltage
Products

 

Process Automation

 

Power Products

 

Power Systems

 

 

 

Q1 13

 

Q1 12

 

Q1 13

 

Q1 12

 

Q1 13

 

Q1 12

 

Q1 13

 

Q1 12

 

Q1 13

 

Q1 12

 

Q1 13

 

Q1 12

 

Operational revenues

 

9’721

 

8’844

 

2’331

 

2’240

 

1’779

 

1’186

 

1’983

 

1’960

 

2’503

 

2’497

 

2’032

 

1’780

 

FX/commodity timing differences on Revenues

 

(6

)

63

 

(4

)

2

 

(2

)

6

 

(5

)

10

 

(14

)

16

 

19

 

27

 

Revenues (as per Financial Statements)

 

9’715

 

8’907

 

2’327

 

2’242

 

1’777

 

1’192

 

1’978

 

1’970

 

2’489

 

2’513

 

2’051

 

1’807

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operational EBITDA

 

1’458

 

1’228

 

416

 

417

 

320

 

197

 

259

 

243

 

372

 

363

 

169

 

117

 

Depreciation

 

(205

)

(166

)

(34

)

(33

)

(47

)

(26

)

(16

)

(16

)

(51

)

(42

)

(20

)

(16

)

Amortization

 

(116

)

(87

)

(30

)

(28

)

(32

)

(2

)

(4

)

(4

)

(7

)

(10

)

(25

)

(25

)

including total acquisition-related amortization of

 

(93

)

(66

)

(26

)

(27

)

(30

)

(1

)

(3

)

(3

)

(5

)

(8

)

(23

)

(22

)

Acquisition-related expense and certain non-operational items

 

(4

)

19

 

(2

)

(4

)

(2

)

(3

)

 

 

 

 

 

 

FX/commodity timing differences on EBIT

 

(62

)

71

 

(12

)

3

 

(3

)

14

 

(12

)

11

 

(24

)

25

 

(14

)

14

 

Restructuring-related costs

 

(19

)

(17

)

(1

)

(1

)

(4

)

 

(3

)

 

(7

)

(13

)

(5

)

(2

)

EBIT (as per Financial Statements)

 

1’052

 

1’048

 

337

 

354

 

232

 

180

 

224

 

234

 

283

 

323

 

105

 

88

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operational EBITDA margin (%)

 

15.0

%

13.9

%

17.8

%

18.6

%

18.0

%

16.6

%

13.1

%

12.4

%

14.9

%

14.5

%

8.3

%

6.6

%

 

Appendix I

Reconciliation of non-GAAP measures

(US$ millions)

 

 

 

Three months ended March 31,

 

 

 

 

 

2013

 

2012

 

 

 

Finance Net

 

 

 

 

 

 

 

= Interest and dividend income + Interest and other finance expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

18

 

19

 

 

 

Interest and other finance expense

 

(97

)

(57

)

 

 

Finance Net

 

(79

)

(38

)

 

 

 

 

 

Mar. 31,

 

Dec. 31,

 

Mar. 31,

 

 

 

2013

 

2012

 

2012

 

Net (Debt), Net Cash

 

 

 

 

 

 

 

= Cash and equivalents plus Marketable securities and short-term investments, less Total debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and equivalents

 

5’455

 

6’875

 

5’751

 

Marketable securities and short-term investments

 

1’591

 

1’606

 

1’837

 

Cash and Marketable securities

 

7’046

 

8’481

 

7’588

 

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

 

1’683

 

2’537

 

812

 

Long-term debt

 

7’430

 

7’534

 

5’364

 

Total debt

 

9’113

 

10’071

 

6’176

 

Net (Debt), Net Cash

 

(2’067

)

(1’590

)

1’412

 

 

 

 

Mar. 31,

 

 

 

 

 

 

 

2013

 

 

 

 

 

Net Debt to EBITDA

 

 

 

 

 

 

 

= Net Debt / EBITDA for the trailing 12 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Debt (as defined above)

 

(2’067

)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before interest and taxes for the three months ended:

 

 

 

 

 

 

 

March 31, 2013

 

1’052

 

 

 

 

 

December 31, 2012

 

863

 

 

 

 

 

September 30, 2012

 

1’146

 

 

 

 

 

June 30, 2012

 

1’001

 

 

 

 

 

Depreciation and amortization for the three months ended:

 

 

 

 

 

 

 

March 31, 2013

 

321

 

 

 

 

 

December 31, 2012

 

341

 

 

 

 

 

September 30, 2012

 

307

 

 

 

 

 

June 30, 2012

 

281

 

 

 

 

 

Total EBITDA for the trailing 12 months

 

5’312

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Debt to EBITDA

 

0.4

 

 

 

 

 

 

 

 

Mar. 31,

 

Mar. 31,

 

 

 

 

 

2013

 

2012

 

 

 

Net Working Capital as a percentage of Revenues

 

 

 

 

 

 

 

= Net Working Capital / Adjusted Revenues for the trailing 12 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Receivables, net

 

11’941

 

11’157

 

 

 

Inventories, net

 

6’267

 

6’356

 

 

 

Prepaid expenses

 

322

 

288

 

 

 

Accounts payable, trade

 

(4’705

)

(4’738

)

 

 

Billings in excess of sales

 

(1’920

)

(1’999

)

 

 

Employee and other payables

 

(1’372

)

(1’430

)

 

 

Advances from customers

 

(2’002

)

(1’905

)

 

 

Accrued expenses

 

(1’878

)

(1’722

)

 

 

Net Working Capital

 

6’653

 

6’007

 

 

 

 

 

 

 

 

 

 

 

Revenues for the three months ended:

 

 

 

 

 

 

 

March 31, 2013 / 2012

 

9’715

 

8’907

 

 

 

December 31, 2012 / 2011

 

11’021

 

10’571

 

 

 

September 30, 2012 / 2011

 

9’745

 

9’337

 

 

 

June 30, 2012 / 2011

 

9’663

 

9’680

 

 

 

Adjustment to annualize revenues of certain acquisitions(1)

 

308

 

 

 

 

Adjusted Revenues for the trailing 12 months

 

40’452

 

38’495

 

 

 

 

 

 

 

 

 

 

 

Net Working Capital as a percentage of Revenues

 

16.4

%

15.6

%

 

 

 

 

 

 

 

 

 

 

 


(1) Thomas & Betts

 

11



 

ABB Ltd Interim Consolidated Income Statements (unaudited)

 

 

 

Three months ended

 

($ in millions, except per share data in $)

 

Mar. 31, 2013

 

Mar. 31, 2012

 

 

 

 

 

 

 

Sales of products

 

8,191

 

7,423

 

Sales of services

 

1,524

 

1,484

 

Total revenues

 

9,715

 

8,907

 

Cost of products

 

(5,910

)

(5,263

)

Cost of services

 

(954

)

(954

)

Total cost of sales

 

(6,864

)

(6,217

)

Gross profit

 

2,851

 

2,690

 

Selling, general and administrative expenses

 

(1,449

)

(1,322

)

Non-order related research and development expenses

 

(361

)

(346

)

Other income (expense), net

 

11

 

26

 

Earnings before interest and taxes

 

1,052

 

1,048

 

Interest and dividend income

 

18

 

19

 

Interest and other finance expense

 

(97

)

(57

)

Income from continuing operations before taxes

 

973

 

1,010

 

Provision for taxes

 

(277

)

(298

)

Income from continuing operations, net of tax

 

696

 

712

 

Income (loss) from discontinued operations, net of tax

 

(4

)

-

 

Net income

 

692

 

712

 

Net income attributable to noncontrolling interests

 

(28

)

(27

)

Net income attributable to ABB

 

664

 

685

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts attributable to ABB shareholders:

 

 

 

 

 

Income from continuing operations, net of tax

 

668

 

685

 

Net income

 

664

 

685

 

 

 

 

 

 

 

Basic earnings per share attributable to ABB shareholders:

 

 

 

 

 

Income from continuing operations, net of tax

 

0.29

 

0.30

 

Net income

 

0.29

 

0.30

 

 

 

 

 

 

 

Diluted earnings per share attributable to ABB shareholders:

 

 

 

 

 

Income from continuing operations, net of tax

 

0.29

 

0.30

 

Net income

 

0.29

 

0.30

 

 

 

 

 

 

 

Weighted-average number of shares outstanding (in millions) used to compute:

 

 

 

 

 

Basic earnings per share attributable to ABB shareholders

 

2,296

 

2,292

 

Diluted earnings per share attributable to ABB shareholders

 

2,303

 

2,294

 

 

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, 2013

 

Mar. 31, 2012

 

 

 

 

 

 

 

Total comprehensive income, net of tax

 

309

 

1,142

 

Total comprehensive income attributable to noncontrolling interests, net of tax

 

(26

)

(35

)

Total comprehensive income attributable to ABB shareholders, net of tax

 

283

 

1,107

 

 

See Notes to the Interim Consolidated Financial Information

 

13



 

ABB Ltd Interim Consolidated Balance Sheets (unaudited)

 

($ in millions, except share data)

 

Mar. 31, 2013

 

Dec. 31, 2012

 

 

 

 

 

 

 

Cash and equivalents

 

5,455

 

6,875

 

Marketable securities and short-term investments

 

1,591

 

1,606

 

Receivables, net

 

11,941

 

11,575

 

Inventories, net

 

6,267

 

6,182

 

Prepaid expenses

 

322

 

311

 

Deferred taxes

 

887

 

869

 

Other current assets

 

483

 

584

 

Total current assets

 

26,946

 

28,002

 

 

 

 

 

 

 

Property, plant and equipment, net

 

5,820

 

5,947

 

Goodwill

 

10,157

 

10,226

 

Other intangible assets, net

 

3,366

 

3,501

 

Prepaid pension and other employee benefits

 

69

 

71

 

Investments in equity-accounted companies

 

211

 

213

 

Deferred taxes

 

361

 

334

 

Other non-current assets

 

771

 

776

 

Total assets

 

47,701

 

49,070

 

 

 

 

 

 

 

Accounts payable, trade

 

4,705

 

4,992

 

Billings in excess of sales

 

1,920

 

2,035

 

Employee and other payables

 

1,372

 

1,449

 

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

 

1,683

 

2,537

 

Advances from customers

 

2,002

 

1,937

 

Deferred taxes

 

319

 

270

 

Provisions for warranties

 

1,242

 

1,291

 

Provisions and other current liabilities

 

2,364

 

2,367

 

Accrued expenses

 

1,878

 

2,096

 

Total current liabilities

 

17,485

 

18,974

 

 

 

 

 

 

 

Long-term debt

 

7,430

 

7,534

 

Pension and other employee benefits

 

2,220

 

2,290

 

Deferred taxes

 

1,280

 

1,260

 

Other non-current liabilities

 

1,545

 

1,566

 

Total liabilities

 

29,960

 

31,624

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Capital stock and additional paid-in capital (2,314,743,264 issued shares at March 31, 2013, and December 31, 2012)

 

1,688

 

1,691

 

Retained earnings

 

18,730

 

18,066

 

Accumulated other comprehensive loss

 

(2,904

)

(2,523

)

Treasury stock, at cost (18,345,908 and 18,793,989 shares at March 31, 2013, and December 31, 2012, respectively)

 

(320

)

(328

)

Total ABB stockholders’ equity

 

17,194

 

16,906

 

Noncontrolling interests

 

547

 

540

 

Total stockholders’ equity

 

17,741

 

17,446

 

Total liabilities and stockholders’ equity

 

47,701

 

49,070

 

 

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, 2013

 

Mar. 31, 2012

 

 

 

 

 

 

 

Operating activities:

 

 

 

 

 

Net income

 

692

 

712

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

 

Depreciation and amortization

 

321

 

253

 

Pension and other employee benefits

 

(11

)

(17

)

Deferred taxes

 

4

 

39

 

Net gain from sale of property, plant and equipment

 

(9

)

(3

)

Loss from equity-accounted companies, net

 

 

4

 

Other

 

14

 

25

 

Changes in operating assets and liabilities:

 

 

 

 

 

Trade receivables, net

 

(504

)

(74

)

Inventories, net

 

(248

)

(388

)

Trade payables

 

(197

)

(184

)

Billings in excess of sales

 

(71

)

120

 

Provisions, net

 

(28

)

(157

)

Advances from customers

 

75

 

101

 

Other assets and liabilities, net

 

(261

)

(453

)

Net cash used in operating activities

 

(223

)

(22

)

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

Purchases of marketable securities (available-for-sale)

 

(173

)

(876

)

Purchases of short-term investments

 

(5

)

(25

)

Purchases of property, plant and equipment and intangible assets

 

(216

)

(236

)

Acquisition of businesses (net of cash acquired) and changes in cost and equity investments

 

(26

)

(196

)

Proceeds from sales of marketable securities (available-for-sale)

 

116

 

21

 

Proceeds from short-term investments

 

32

 

2

 

Other investing activities

 

46

 

(11

)

Net cash used in investing activities

 

(226

)

(1,321

)

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

Net changes in debt with original maturities of 90 days or less

 

(507

)

91

 

Increase in debt

 

215

 

2,172

 

Repayment of debt

 

(523

)

(185

)

Delivery of shares

 

1

 

46

 

Acquisition of noncontrolling interests

 

(1

)

 

Dividends paid to noncontrolling shareholders

 

(15

)

(8

)

Other financing activities

 

(3

)

15

 

Net cash provided by (used in) financing activities

 

(833

)

2,131

 

 

 

 

 

 

 

Effects of exchange rate changes on cash and equivalents

 

(138

)

144

 

 

 

 

 

 

 

Net change in cash and equivalents - continuing operations

 

(1,420

)

932

 

 

 

 

 

 

 

Cash and equivalents, beginning of period

 

6,875

 

4,819

 

Cash and equivalents, end of period

 

5,455

 

5,751

 

 

 

 

 

 

 

Supplementary disclosure of cash flow information:

 

 

 

 

 

Interest paid

 

28

 

24

 

Taxes paid

 

331

 

341

 

 

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
adjustments

 

Unrealized gains
(losses) on
available-for-
sale securities

 

Pension and
other
postretirement
plan adjustments

 

Unrealized
gains
(losses) 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 (net of tax of $0)

 

 

 

 

 

433

 

 

 

 

 

 

 

433

 

 

 

433

 

8

 

441

 

Effect of change in fair value of available-for-sale securities (net of tax of $0)

 

 

 

 

 

 

 

(1

)

 

 

 

 

(1

)

 

 

(1

)

 

 

(1

)

Unrecognized income (expense) related to pensions and other postretirement plans (net of tax of $6)

 

 

 

 

 

 

 

 

 

(35

)

 

 

(35

)

 

 

(35

)

 

 

(35

)

Change in derivatives qualifying as cash flow hedges (net of tax of $(9))

 

 

 

 

 

 

 

 

 

 

 

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

)

Share-based payment arrangements

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

13

 

Delivery of shares

 

(5

)

 

 

 

 

 

 

 

 

 

 

 

 

51

 

46

 

 

 

46

 

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

 

 

 

 

 

 

 

 

Accumulated other comprehensive loss

 

 

 

 

 

 

 

 

 

($ in millions)

 

Capital stock
and additional
paid-in capital

 

Retained
earnings

 

Foreign currency
translation
adjustments

 

Unrealized gains
(losses) on
available-for-
sale securities

 

Pension and
other
postretirement
plan adjustments

 

Unrealized
gains
(losses) 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, 2013

 

1,691

 

18,066

 

(580

)

24

 

(2,004

)

37

 

(2,523

)

(328

)

16,906

 

540

 

17,446

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

664

 

 

 

 

 

 

 

 

 

 

 

 

 

664

 

28

 

692

 

Foreign currency translation adjustments (net of tax of $(8))

 

 

 

 

 

(475

)

 

 

 

 

 

 

(475

)

 

 

(475

)

(3

)

(478

)

Effect of change in fair value of available-for-sale securities (net of tax of $1)

 

 

 

 

 

 

 

(6

)

 

 

 

 

(6

)

 

 

(6

)

 

 

(6

)

Unrecognized income (expense) related to pensions and other postretirement plans (net of tax of $(26))

 

 

 

 

 

 

 

 

 

90

 

 

 

90

 

 

 

90

 

1

 

91

 

Change in derivatives qualifying as cash flow hedges (net of tax of $(2))

 

 

 

 

 

 

 

 

 

 

 

10

 

10

 

 

 

10

 

 

 

10

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

283

 

26

 

309

 

Changes in noncontrolling interests

 

(11

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11

)

7

 

(4

)

Dividends paid to noncontrolling shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26

)

(26

)

Share-based payment arrangements

 

14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

 

 

14

 

Delivery of shares

 

(7

)

 

 

 

 

 

 

 

 

 

 

 

 

8

 

1

 

 

 

1

 

Other

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

1

 

Balance at March 31, 2013

 

1,688

 

18,730

 

(1,055

)

18

 

(1,914

)

47

 

(2,904

)

(320

)

17,194

 

547

 

17,741

 

 

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, 2012.

 

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 period’s presentation.

 

17



 

Notes to the Interim Consolidated Financial Information (unaudited)

 

Note 2. Recent accounting pronouncements

 

Applicable in current period

 

Disclosures about offsetting assets and liabilities

 

As of January 2013, the Company adopted two accounting standard updates regarding disclosures about amounts of certain 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 these updates covers derivatives (including bifurcated embedded derivatives), repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending arrangements. These updates are applicable retrospectively and did not have a significant impact on the consolidated financial statements.

 

Reporting of amounts reclassified out of accumulated other comprehensive income

 

As of January 2013, the Company adopted an accounting standard update regarding the presentation of amounts reclassified out of accumulated other comprehensive income. Under the update, the Company is required to present, either in a single note or parenthetically on the face of the financial statements, significant amounts reclassified out of accumulated other comprehensive income by the respective income statement line item (if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the reporting period). If a component is not required to be reclassified to net income in its entirety, the Company would instead cross-reference to other U.S. GAAP required disclosures that provide additional information about the amounts. This update is applicable prospectively and resulted in the Company presenting, in a single note, significant reclassifications out of accumulated other comprehensive income (see Note 12).

 

Applicable for future periods

 

Parent’s accounting for the cumulative translation adjustment upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity

 

In March 2013, an accounting standard update was issued regarding the release of cumulative translation adjustments of a parent when it ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity (for the Company, a foreign entity is an entity having a functional currency other than U.S. dollars). Under the update, the Company would recognize cumulative translation adjustments in net income when it ceases to have a controlling financial interest in a subsidiary or group of assets within a consolidated foreign entity and if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. For foreign equity-accounted companies, a pro rata portion of the cumulative translation adjustment would be recognized in net income upon a partial sale of the equity-accounted company. This update is effective for the Company for annual and interim periods beginning January 1, 2014, and is applicable prospectively. The impact of this update on the consolidated financial statements is dependent on future transactions resulting in derecognition of foreign assets, subsidiaries or foreign equity-accounted companies completed on or after adoption.

 

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)

 

2013

 

2012

 

Acquisitions (net of cash acquired)(2)

 

14

 

164

 

Aggregate excess of purchase price over fair value of net assets acquired(3)

 

14

 

92

 

 

 

 

 

 

 

Number of acquired businesses

 

1

 

1

 

 


(1)    Amounts include adjustments arising during the measurement period of acquisitions. In the three months ended March 31, 2013 and 2012, adjustments included in “Aggregate excess of purchase price over fair value of net assets acquired” were not significant.

(2)    Excluding changes in cost and equity investments.

(3)    Recorded as goodwill.

 

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 May 16, 2012, the Company acquired all outstanding shares of Thomas & Betts Corporation (Thomas & Betts) for $72 per share in cash. The resulting cash outflows for the Company amounted to $3,700 million, representing $3,282 million for the purchase of the shares (net of cash acquired of $521 million), $94 million related to cash settlement of Thomas & Betts options held at acquisition date and $324 million for the repayment of debt assumed upon acquisition. Thomas & Betts designs, manufactures and markets components used to manage the connection, distribution, transmission and reliability of electrical power in industrial, construction and utility applications. The acquisition of Thomas & Betts supports the Company’s strategy of expanding its Low Voltage Products operating segment into new geographies, sectors and products, and consequently the goodwill acquired represents the future benefits associated with the expansion of market access and product scope.

 

19



 

Notes to the Interim Consolidated Financial Information (unaudited)

 

The aggregate preliminary allocation of the purchase consideration for Thomas & Betts is as follows:

 

($ in millions)

 

Allocated amounts

 

Weighted-average
useful life

 

Customer relationships

 

1,169

 

18 years

 

Technology

 

179

 

5 years

 

Trade names