Earnings Release • Apr 29, 2015
Earnings Release
Open in ViewerOpens in native device viewer
"We delivered a solid first quarter in which we grew net income and increased cash flow, in line with our commitment to drive profitable growth and accelerate sustainable value creation," said CEO Ulrich Spiesshofer. "In a challenging environment, we doubled large orders and kept base orders steady," he said. "We grew orders in our three largest countries—the US, China and Germany—on a like-for-like basis and won key projects due to our combined power and automation offering, reflecting our competitive advantage. We brought revenue back to growth, benefiting from our order backlog and strong focus on growth segments in a difficult market overall.
"We continued to make progress in our Power Systems 'step change' program," he said. "Mix effects and market challenges, such as oil and gas, weighed on margins in the rest of the group. We have taken decisive actions on cost and productivity to address this as part of our ongoing focus on relentless execution. In total, we delivered a steady operational EBITA margin.
"We are seeing the first benefits of our Next Level strategy, giving us confidence that we can take advantage of profitable growth opportunities. We are driving cost out and implementing additional restructuring to address market uncertainties in the quarters ahead" Spiesshofer said.
| Key Figures Change |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
| (\$ in millions, unless otherwise indicated) | Q1 2015 | Q1 2014 | US\$ | Like-for-like2 | |||||
| Orders | 10,404 | 10,358 | 0% | +15% | |||||
| Revenues | 8,555 | 9,471 | -10% | +3% | |||||
| Operational EBITA3 | 949 | 1,039 | -9% | +5% | |||||
| as % of operational revenues2 | 11.1% | 11.0% | +0.1 pts | ||||||
| Net income | 564 | 544 | +4% | ||||||
| Basic earnings per share (\$) | 0.25 | 0.24 | |||||||
| Operational earnings per share2 (\$) (constant currency basis) | 0.31 | 0.29 | |||||||
| Cash flow from operating activities | 53 | (45) | n.a. |
Like-for-like is local currency change adjusted for acquisitions and divestitures
In the short term, macroeconomic and geopolitical developments are signaling a mixed picture with increased uncertainty. Some macroeconomic signs in the US remain positive and growth in China is expected to continue but at a slower pace. The long-term demand outlook in ABB's three major customer sectors—utilities, industry, and transport and infrastructure—remains positive. Current oil prices and foreign exchange translation effects are expected to continue to influence the company's results.
Demand patterns in ABB's three major customer sectors reflected ongoing macro uncertainty and challenges in most markets. Utilities remained cautious in their capital expenditures but continued to make selective investments, such as in power transmission to link grids and integrate renewable power sources. ABB won a major order to connect the Norwegian and German power grids, as well as orders for ultra high voltage direct current (UHVDC) equipment in China and high-voltage cables in Denmark.
Demand from industrial customers varied by sector and region. Industrial demand for power and automation solutions to improve the productivity and efficiency of existing assets remained steady. Low oil prices in the quarter resulted in reduced discretionary spending by oil and gas customers. The need for flexible automation solutions in general industry was a key demand driver in the quarter, especially in the automotive as well as in the food and beverage sectors.
Demand for specialty ships and rail solutions grew in the quarter, mainly driven by the need for higher efficiency and lower environmental impact. Infrastructure and construction markets varied by region and were weaker in China.
Total orders received in the quarter were up 15 percent on a like-for-like basis (flat in US dollars). The appreciation of the US dollar in Q1 2015 versus the prior year period resulted in a negative translation impact on reported orders of 13 percent; divestitures had an impact of 2 percent.
Base orders (below \$15 million) increased in four divisions and were steady overall compared with the first quarter of 2014. Base orders declined in Process Automation, primarily reflecting lower discretionary spending in the oil and gas sector. Large orders (above \$15 million) increased more than 100 percent, led by the Power Systems and Process Automation divisions, and represented 23 percent of total orders compared with 12 percent in the same quarter a year ago.
Geographically, orders grew in all three regions—Europe, the Americas, and Asia, the Middle East and Africa (AMEA)—driven mainly by higher large orders. Lower base orders in Europe and in AMEA were compensated by base order growth in the Americas, mainly in the US and Canada. Base orders were steady in China and Germany in the quarter.
Service orders represented 15 percent of total orders compared with 18 percent a year ago, reflecting the much higher share of large orders received in the first quarter of 2015 compared with the same quarter in 2014.
The order backlog at the end of March 2015 amounted to \$25.5 billion, an increase of 10 percent (down 5 percent in US dollars) compared to the end of the same quarter in 2014.
The book-to-bill2 ratio in the first quarter increased to 1.22x compared with 1.09x in the same quarter a year earlier, and was above 1.0x in all divisions.
Revenues grew 3 percent on a like-for-like basis (down 10 percent in US dollars) in the first quarter, mainly reflecting the successful execution of the stronger order backlog in most businesses. The appreciation of the US dollar in Q1 2015 versus the prior year period resulted in a negative translation impact on reported revenues of 10 percent; divestitures had an impact of 3 percent.
Revenues were steady to higher in all divisions except Process Automation, where the lower opening order backlog in the oil and gas and mining businesses resulted in a modest revenue decline.
Total service revenues increased 6 percent (down 7 percent in US dollars) and reached 17 percent of total revenues, up from 16 percent in the same quarter a year earlier.
Operational EBITA increased on a like-for-like basis2 compared to the first quarter 2014, mainly due to better performance in Power Systems supported by progress on the 'step change' program. On a US-dollar basis, operational EBITA was down due to currency translation effects of approximately 10 percent and impacts from divestments of approximately 4 percent.
The operational EBITA margin of 11.1 percent remained stable compared to the first quarter of 2014, as improvements in Power Systems were offset by negative business and geographic mix effects in the other divisions. These included reductions in discretionary oil and gas spending and the economic downturn in countries such as Russia.
Net income for the quarter increased 4 percent to \$564 million. Basic earnings per share (EPS) amounted to \$0.25 in the first quarter compared to \$0.24 in the same quarter a year earlier. Operational EPS2 on a constant currency basis was \$0.31 versus \$0.29 in the first quarter of 2014, an increase of 5 percent.
ABB reported positive cash flow from operating activities of \$53 million in the first quarter compared with a negative cash from operations of \$45 million in the same quarter of 2014, partly the result of measures to achieve more evenly distributed cash generation through the year and timing of project cash flows in Power Systems.
In the first quarter, ABB continued to implement the Next Level strategy announced last September aimed at accelerating sustainable value creation from its leading power and automation portfolio. The strategy builds on ABB's three focus areas of profitable growth, relentless execution and business-led collaboration.
In the first quarter of 2015, ABB continued to drive growth through increased market penetration in targeted geographic and industry segments. For example, ABB grew orders in Japan at a double-digit pace for the fourth consecutive quarter, driven mainly by ABB's best-in-class solar energy offering between panel and grid. ABB also continued to grow its position in the food and beverage sector by offering a combination of robotics and motion control technologies to provide higher productivity and product safety. Combined power and automation offerings have been key to further large order wins as in Norway with Statoil.
Innovation continued to be a focus for growth and the company introduced a variety of new products, including intelligent transformer sensors, production management software for the cement industry and control products for the power generation and water industries. Earlier this month, ABB commercially launched its Yumi® collaborative dual-arm robot, aimed at the fast-growing computers, consumer electronics and communications (3C) industry and other small parts handling and packaging sectors.
Expansion into new high-growth markets is another driver of profitable growth. ABB announced in March a further expansion into the rapidly growing microgrid sector by partnering globally with Samsung SDI, the leading manufacturer of lithium-ion batteries for electrical energy storage. The partnership will enable accelerated growth in the market by making microgrids a more viable power solution in both emerging and developed economies.
ABB continues to be successful in relentlessly executing programs improving customer service and cash flow, and reducing costs across the company.
In the first quarter, ABB took additional steps to reduce structural costs. The company entered into long-term IT infrastructure agreements that are expected to reduce its IT-related operational costs significantly over five years.
The company rolled out the new compensation model to more than 60'000 employees in Q1, which links compensation more closely with individual performance parameters aimed at driving the company towards its Next Level targets.
The main objectives of business-led collaboration are to increase focus on the company's markets and customers and to simplify how the organization works together externally and internally. ABB achieved a number of project wins based on its combined power and automation offering which gives it a key competitive advantage. These included marine and rail orders where the capability to deliver integrated and optimized power and automation solutions allows customers to achieve higher overall system efficiency and reduce operating costs and environmental impacts.
ABB announced a \$4-billion share buyback program in September 2014 in line with the Next Level strategy to accelerate sustained value creation. During the first quarter of 2015, ABB purchased approximately 21.5 million shares under the program with a buyback value of approximately \$450 million. Since the program was announced, the company has purchased a total of approximately 54 million shares with a buyback value of approximately \$1.2 billion.
ABB further strengthened its portfolio in the first quarter with the acquisition of Germany-based Gomtec GmbH, a privately held company that develops robotics and mechatronic systems. The deal positions ABB among the leaders in the fast-growing area of human-robot collaboration.
The long-term demand outlook in ABB's three major customer sectors—utilities, industry, and transport and infrastructure—remains clearly positive. Key drivers are the big shift in the electricity value chain, industrial productivity improvements through the internet of things, services and people and Industry 4.0, as well as rapid urbanization and the need for energy efficiency in transport and infrastructure.
ABB is well positioned to tap these opportunities for long-term profitable growth with its strong market presence, broad geographic and business scope, technology leadership and financial strength.
In the short term, macroeconomic and geopolitical developments are signaling a mixed picture with increased uncertainty. Some macroeconomic signs in the US remain positive and growth in China is expected to continue, although at a slower pace than in 2014. At the same time, the market remains impacted by modest growth in Europe and geopolitical tensions in various parts of the world.
Current oil prices and foreign exchange translation effects are expected to continue to influence the company's results.
| (\$ in millions, | Change | Change | Operational | Cash from | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| unless otherwise indicated) |
Orders | US\$ | Like-for like |
Revenues | US\$ | Like-for like |
EBITA % | Change | operations | Change |
| Discrete Automation & Motion |
2,569 | -9% | -1% | 2,271 | -5% | +4% | 14.2% | -0.6 pts | 223 | (71) |
| Low Voltage Products |
1,703 | -14% | +2% | 1,555 | -17% | -1% | 15.6% | -0.3 pts | (10) | +17 |
| Process Automation |
1,921 | -4% | +16% | 1,579 | -19% | -4% | 12.2% | -0.4 pts | 64 | (31) |
| Power Products | 2,656 | -3% | +7% | 2,275 | -5% | +4% | 11.2% | -1.5 pts | 80 | +21 |
| Power Systems | 2,394 | +61% | +90% | 1,472 | -8% | +4% | 2.2% | +5.5 pts | (147) | +156 |
| Corporate & other (incl inter division elimination) |
(839) | (597) | (157) | +6 | ||||||
| ABB Group | 10,404 | 0% | +15% | 8,555 | -10% | +3% | 11.1% | +0.1 pts | 53 | +98 |
Base orders increased in the quarter, led by robotics. Large orders were lower than in Q1 2014 mainly due to the \$200 million Swedish rail order in 2014, thus resulting in a flat overall order development. Orders were higher in AMEA—driven in large part by robotics orders in China—and in the Americas. Revenues increased on execution of the stronger order backlog, mainly in deliveries to the rail transportation sector and robotics. The operational EBITA margin declined, reflecting a lower share of higher-margin standard products in total revenues compared with the same quarter a year ago.
Orders were steady to higher in all regions in the quarter. Orders were supported by successful initiatives to increase cross-selling of ABB and Thomas & Betts products. Construction-driven orders were down in the quarter. Revenues were flat in the quarter. The operational EBITA margin mainly reflects the revenue development and challenges in Russia.
Orders increased significantly as the result of large orders from the offshore oil and gas and marine sectors. Base orders were lower, in large part due to reduced discretionary spending by oil and gas customers in response to current oil prices. Continued demand in specialty ships supported orders in the marine business, while mining and metals remained at low levels. Revenues declined, as the result of the reduced discretionary spending of oil and gas customers and the timing of order backlog execution in the marine business. Operational EBITA and the related margin declined compared to the same quarter a year earlier principally as the result of lower revenues.
Both large and base orders increased, led primarily by selective power transmission investments and supported by industrial demand. Revenues grew in all businesses on the execution of the order backlog. The operational EBITA
margin decline largely reflects the ramp-up costs associated with the strategic production footprint alignment towards key markets, such as Saudi Arabia and India. Lower volumes in Russia also weighed on divisional results.
Total orders almost doubled, led by a strong increase in large orders in areas such as high-voltage direct current (HVDC) transmission links, cable systems and power plant automation under the new business model. The revenue growth was mainly driven by execution of the order backlog. Operational EBITA and the related margin increased, reflecting ongoing 'step change' measures and continued cost savings to return the division to higher and more consistent profitability.
The 2015 Q1 results press release and presentation slides are available on the ABB News Center at www.abb.com/news and on the Investor Relations homepage at www.abb.com/investorrelations.
ABB will host a conference call for the media starting at 10:00 a.m. Central European Time (CET) (9:00 a.m. GMT, 4:00 a.m. EST). The event will be accessible by conference call. U.K. callers should dial +44 203 059 58 62. From Sweden, the number is +46 85 051 00 31, and from the rest of Europe, +41 58 310 50 00. Callers from the US and Canada should +1 866 291 41 66 (toll-free) or +1 631 570 56 13 (local tariff). Lines will be open 15 minutes before the start of the conference. Audio playback of the call will be available one hour after the call and available for 24 hours: Playback numbers: +44 207 108 6233 (U.K.), +41 91 612 4330 (rest of Europe) or +1 631 982 4566 (U.S./Canada). The code is 12575, followed by the # key.
A conference call for analysts and investors is scheduled to begin today at 3:00 p.m. CET (2:00 p.m. GMT, 9:00 a.m. EST). Callers should dial +1 866 291 41 66 from the US/Canada (toll-free), +1 631 570 5613 (US/Canada local tariff), +44 203 059 58 62 from the U.K., +46 8 5051 00 31 from Sweden or +41 58 310 50 00 from the rest of the world. Callers are requested to phone in 10 minutes before the start of the call. The call will also be accessible on the ABB website and a recorded session will be available as a podcast one hour after the end of the conference call and can be downloaded from our website.
| First-quarter 2015 results | April 29, 2015 |
|---|---|
| Annual General Meeting (Zurich, Switzerland) | April 30, 2015 |
| Annual Information Meeting (Västerås, Sweden) | May 4, 2015 |
| Second-quarter 2015 results | July 23, 2015 |
| Third-quarter 2015 results | October 21, 2015 |
ABB (www.abb.com) is a leader in power and automation technologies that enable utility, industry, and transport and infrastructure customers to improve their performance while lowering environmental impact. The ABB Group of companies operates in roughly 100 countries and employs about 140,000 people.
This press release includes forward-looking information and statements as well as other statements concerning the outlook for our business, including those in the Next Level strategy, Outlook summary and Outlook sections of this release. 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", "is likely" 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.
Zurich, April 29, 2015 Ulrich Spiesshofer, CEO
Media Relations Thomas Schmidt, Antonio Ligi, Sandra Wiesner Tel: +41 43 317 7111 [email protected]
Investor Relations Tel. +41 43 317 71 11 [email protected] ABB Ltd Affolternstrasse 44 8050 Zurich Switzerland
1 Growth rates for orders and revenues are discussed on a like-for-like basis. US\$ growth rates are presented in the Key Figures table. Refer to "Supplemental Reconciliations and Definitions" in the attached Q1 2015 Financial Information for explanations and reconciliations of non-GAAP measures.
2 For a reconciliation of non-GAAP measures, see "Supplemental Reconciliations and Definitions" in the attached Q1 2015 Financial Information.
Supplemental Reconciliations and Definitions
| Change | ||||
|---|---|---|---|---|
| (\$ in millions, unless otherwise indicated) | Q1 2015 | Q1 2014 | US\$ | Like-for-like1 |
| Orders | 10,404 | 10,358 | 0% | +15% |
| Revenues | 8,555 | 9,471 | -10% | +3% |
| Operational EBITA2 | 949 | 1,039 | -9% | +5% |
| as % of operational revenues1 | 11.1% | 11.0% | +0.1 pts | |
| Net income | 564 | 544 | +4% | |
| Basic earnings per share (\$) | 0.25 | 0.24 | ||
| Operational earnings per share1 (\$) (constant currency basis) | 0.31 | 0.29 | ||
| Cash flow from operating activities | 53 | (45) | n.a. |
1 For a reconciliation of non-GAAP measures see Supplemental Reconciliations and Definitions on page 29.
2 For a reconciliation of Operational EBITA to Income from continuing operations before taxes see Note 11 to the Interim Consolidated Financial Information (unaudited) on page 26.
| Change | ||||||
|---|---|---|---|---|---|---|
| (\$ in millions, unless otherwise indicated) | Q1 2015 | Q1 2014 | US\$ | Local | Like-for-like | |
| Orders | ABB Group | 10,404 | 10,358 | 0% | 13% | 15% |
| Discrete Automation and Motion | 2,569 | 2,816 | -9% | -1% | -1% | |
| Low Voltage Products | 1,703 | 1,975 | -14% | -4% | 2% | |
| Process Automation | 1,921 | 2,004 | -4% | 10% | 16% | |
| Power Products | 2,656 | 2,725 | -3% | 7% | 7% | |
| Power Systems | 2,394 | 1,490 | 61% | 90% | 90% | |
| Corporate and Other | ||||||
| (incl. inter-division eliminations) | (839) | (652) | ||||
| Revenues | ABB Group | 8,555 | 9,471 | -10% | 0% | 3% |
| Discrete Automation and Motion | 2,271 | 2,381 | -5% | 4% | 4% | |
| Low Voltage Products | 1,555 | 1,882 | -17% | -8% | -1% | |
| Process Automation | 1,579 | 1,943 | -19% | -8% | -4% | |
| Power Products | 2,275 | 2,391 | -5% | 4% | 4% | |
| Power Systems | 1,472 | 1,608 | -8% | 4% | 4% | |
| Corporate and Other | ||||||
| (incl. inter-division eliminations) | (597) | (734) | ||||
| Operational EBITA | ABB Group | 949 | 1,039 | -9% | 1% | 5% |
| Discrete Automation and Motion | 318 | 352 | -10% | 0% | 0% | |
| Low Voltage Products | 243 | 299 | -19% | -8% | 1% | |
| Process Automation | 192 | 245 | -22% | -13% | -11% | |
| Power Products | 253 | 304 | -17% | -7% | -7% | |
| Power Systems | 33 | (54) | n.a. | n.a. | n.a. | |
| Corporate and Other | ||||||
| (incl. inter-division eliminations) | (90) | (107) | ||||
| Operational EBITA % | ABB Group | 11.1% | 11.0% | |||
| Discrete Automation and Motion | 14.2% | 14.8% | ||||
| Low Voltage Products | 15.6% | 15.9% | ||||
| Process Automation | 12.2% | 12.6% | ||||
| Power Products | 11.2% | 12.7% | ||||
| Power Systems | 2.2% | -3.3% | ||||
| Income from operations | ABB Group | 859 | 855 | |||
| Discrete Automation and Motion | 300 | 326 | ||||
| Low Voltage Products | 217 | 256 | ||||
| Process Automation | 186 | 219 | ||||
| Power Products | 240 | 272 | ||||
| Power Systems | 4 | (102) | ||||
| Corporate and Other | ||||||
| (incl. inter-division eliminations) | (88) | (116) | ||||
| Income from operations % | ABB Group | 10.0% | 9.0% | |||
| Discrete Automation and Motion | 13.2% | 13.7% | ||||
| Low Voltage Products | 14.0% | 13.6% | ||||
| Process Automation | 11.8% | 11.3% | ||||
| Power Products | 10.5% | 11.4% | ||||
| Power Systems | 0.3% | -6.3% | ||||
| Discrete | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (\$ in millions, unless otherwise indicated) | ABB | Automation and Motion |
Low Voltage Products |
Process Automation |
Power Products |
Power Systems |
||||||
| Q1 15 | Q1 14 | Q1 15 | Q1 14 | Q1 15 | Q1 14 | Q1 15 | Q1 14 | Q1 15 | Q1 14 | Q1 15 | Q1 14 | |
| Revenues | 8,555 | 9,471 | 2,271 | 2,381 | 1,555 | 1,882 | 1,579 | 1,943 | 2,275 | 2,391 | 1,472 | 1,608 |
| FX/commodity timing | ||||||||||||
| differences in total revenues | (37) | 5 | (34) | (6) | 4 | 1 | (7) | (4) | (17) | (4) | 16 | 19 |
| Operational revenues | 8,518 | 9,476 | 2,237 | 2,375 | 1,559 | 1,883 | 1,572 | 1,939 | 2,258 | 2,387 | 1,488 | 1,627 |
| Income (loss) from operations | 859 | 855 | 300 | 326 | 217 | 256 | 186 | 219 | 240 | 272 | 4 | (102) |
| Acquisition-related amortization | 83 | 101 | 32 | 34 | 25 | 30 | 3 | 4 | 3 | 5 | 14 | 22 |
| Restructuring and | ||||||||||||
| restructuring-related expenses | 26 | 47 | 3 | 1 | 6 | 8 | 1 | 20 | 11 | 8 | 4 | 8 |
| Gains and losses from sale of businesses, | ||||||||||||
| acquisition-related expenses and certain | ||||||||||||
| non-operational items | 11 | 11 | – | (3) | 1 | 4 | (1) | 1 | 1 | 5 | – | 1 |
| FX/commodity timing | ||||||||||||
| differences in income from operations | (30) | 25 | (17) | (6) | (6) | 1 | 3 | 1 | (2) | 14 | 11 | 17 |
| Operational EBITA | 949 | 1,039 | 318 | 352 | 243 | 299 | 192 | 245 | 253 | 304 | 33 | (54) |
| Operational EBITA margin (%) | 11.1 | 11.0 | 14.2 | 14.8 | 15.6 | 15.9 | 12.2 | 12.6 | 11.2 | 12.7 | 2.2 | -3.3 |
| (\$ in millions, unless otherwise indicated) | Orders received | Change | Revenues | Change | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Like | Like | |||||||||
| Q1 15 | Q1 14 | US\$ | Local | for-like | Q1 15 | Q1 14 | US\$ | Local | for-like | |
| Europe | 3,962 | 3,891 | 2% | 25% | 27% | 2,804 | 3,375 | -17% | 0% | 2% |
| The Americas | 2,739 | 2,763 | -1% | 4% | 9% | 2,652 | 2,732 | -3% | 2% | 8% |
| Asia, Middle East and Africa | 3,703 | 3,704 | 0% | 7% | 8% | 3,099 | 3,364 | -8% | -2% | 0% |
| ABB Group | 10,404 | 10,358 | 0% | 13% | 15% | 8,555 | 9,471 | -10% | 0% | 3% |
| Three months ended | ||
|---|---|---|
| (\$ in millions, except per share data in \$) | Mar. 31, 2015 | Mar. 31, 2014 |
| Sales of products | 7,130 | 7,937 |
| Sales of services | 1,425 | 1,534 |
| Total revenues | 8,555 | 9,471 |
| Cost of products | (5,194) | (5,794) |
| Cost of services | (860) | (950) |
| Total cost of sales | (6,054) | (6,744) |
| Gross profit | 2,501 | 2,727 |
| Selling, general and administrative expenses | (1,309) | (1,507) |
| Non-order related research and development expenses | (330) | (365) |
| Other income (expense), net | (3) | – |
| Income from operations | 859 | 855 |
| Interest and dividend income | 19 | 17 |
| Interest and other finance expense | (71) | (84) |
| Income from continuing operations before taxes | 807 | 788 |
| Provision for taxes | (230) | (225) |
| Income from continuing operations, net of tax | 577 | 563 |
| Income (loss) from discontinued operations, net of tax | 4 | (1) |
| Net income | 581 | 562 |
| Net income attributable to noncontrolling interests | (17) | (18) |
| Net income attributable to ABB | 564 | 544 |
| Amounts attributable to ABB shareholders: | ||
| Income from continuing operations, net of tax | 560 | 545 |
| Net income | 564 | 544 |
| Basic earnings per share attributable to ABB shareholders: | ||
| Income from continuing operations, net of tax | 0.25 | 0.24 |
| Net income | 0.25 | 0.24 |
| Diluted earnings per share attributable to ABB shareholders: | ||
| Income from continuing operations, net of tax | 0.25 | 0.24 |
| Net income | 0.25 | 0.24 |
| Weighted-average number of shares outstanding (in millions) used to compute: | ||
| Basic earnings per share attributable to ABB shareholders | 2,251 | 2,301 |
| Diluted earnings per share attributable to ABB shareholders | 2,256 | 2,311 |
| Mar. 31, 2015 | Mar. 31, 2014 |
|---|---|
| (84) | 489 |
| (17) | (15) |
| (101) | 474 |
| Three months ended |
| (\$ in millions, except share data) | Mar. 31, 2015 | Dec. 31, 2014 |
|---|---|---|
| Cash and equivalents | 4,471 | 5,443 |
| Marketable securities and short-term investments | 1,684 | 1,325 |
| Receivables, net | 10,599 | 11,078 |
| Inventories, net | 5,346 | 5,376 |
| Prepaid expenses | 289 | 218 |
| Deferred taxes | 843 | 902 |
| Other current assets | 767 | 644 |
| Total current assets | 23,999 | 24,986 |
| Property, plant and equipment, net | 5,298 | 5,652 |
| Goodwill | 9,789 | 10,053 |
| Other intangible assets, net | 2,582 | 2,702 |
| Prepaid pension and other employee benefits | 68 | 70 |
| Investments in equity-accounted companies | 176 | 177 |
| Deferred taxes | 469 | 511 |
| Other non-current assets | 754 | 727 |
| Total assets | 43,135 | 44,878 |
| Accounts payable, trade | 4,473 | 4,765 |
| Billings in excess of sales | 1,396 | 1,455 |
| Short-term debt and current maturities of long-term debt | 506 | 353 |
| Advances from customers | 1,503 | 1,624 |
| Deferred taxes | 243 | 289 |
| Provisions for warranties | 1,063 | 1,148 |
| Other provisions | 1,560 | 1,689 |
| Other current liabilities | 3,917 | 4,257 |
| Total current liabilities | 14,661 | 15,580 |
| Long-term debt | 7,203 | 7,338 |
| Pension and other employee benefits | 2,234 | 2,394 |
| Deferred taxes | 1,187 | 1,165 |
| Other non-current liabilities | 1,568 | 1,586 |
| Total liabilities | 26,853 | 28,063 |
| Commitments and contingencies | ||
| Stockholders' equity: | ||
| Capital stock and additional paid-in capital | ||
| (2,314,743,264 issued shares at March 31, 2015, and December 31, 2014) | 1,792 | 1,777 |
| Retained earnings | 20,503 | 19,939 |
| Accumulated other comprehensive loss | (4,906) | (4,241) |
| Treasury stock, at cost | ||
| (77,326,466 and 55,843,639 shares at March 31, 2015, and December 31, 2014, respectively) | (1,658) | (1,206) |
| Total ABB stockholders' equity | 15,731 | 16,269 |
| Noncontrolling interests | 551 | 546 |
| Total stockholders' equity | 16,282 | 16,815 |
| Total liabilities and stockholders' equity | 43,135 | 44,878 |
| Three months ended | ||
|---|---|---|
| (\$ in millions) | Mar. 31, 2015 | Mar. 31, 2014 |
| Operating activities: | ||
| Net income | 581 | 562 |
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
| Depreciation and amortization | 295 | 333 |
| Pension and other employee benefits | 14 | (28) |
| Deferred taxes | 31 | (13) |
| Net loss (gain) from sale of property, plant and equipment | (10) | (8) |
| Net loss (gain) from sale of businesses | (4) | – |
| Net loss (gain) from derivatives and foreign exchange | (4) | 54 |
| Other | 26 | 15 |
| Changes in operating assets and liabilities: | ||
| Trade receivables, net | (101) | (102) |
| Inventories, net | (360) | (223) |
| Trade payables | (21) | (191) |
| Accrued liabilities | (185) | (217) |
| Billings in excess of sales | 15 | (158) |
| Provisions, net | (73) | (99) |
| Advances from customers | (45) | 59 |
| Income taxes payable and receivable | (51) | 48 |
| Other assets and liabilities, net | (55) | (77) |
| Net cash provided by (used in) operating activities | 53 | (45) |
| Investing activities: | ||
| Purchases of marketable securities (available-for-sale) | (469) | (84) |
| Purchases of short-term investments | (459) | (438) |
| Purchases of property, plant and equipment and intangible assets | (176) | (203) |
| Acquisition of businesses (net of cash acquired) and increases in cost- and equity-accounted companies | (36) | (3) |
| Proceeds from sales of marketable securities (available-for-sale) | 12 | 14 |
| Proceeds from maturity of marketable securities (available-for-sale) | 275 | 68 |
| Proceeds from short-term investments | 176 | 23 |
| Proceeds from sales of property, plant and equipment | 6 | 10 |
| Proceeds from sales of businesses (net of transaction costs | ||
| and cash disposed) and cost- and equity-accounted companies | – | 2 |
| Other investing activities | 98 | 62 |
| Net cash used in investing activities | (573) | (549) |
| Financing activities: | ||
| Net changes in debt with original maturities of 90 days or less | 164 | 988 |
| Increase in debt | 40 | 3 |
| Repayment of debt | (14) | (13) |
| Delivery of shares | – | 1 |
| Purchases of treasury stock | (401) | – |
| Dividends paid to noncontrolling shareholders | (13) | (7) |
| Other financing activities | 7 | 9 |
| Net cash provided by (used in) financing activities | (217) | 981 |
| Effects of exchange rate changes on cash and equivalents | (235) | (6) |
| Net change in cash and equivalents – continuing operations | (972) | 381 |
| Cash and equivalents, beginning of period | 5,443 | 6,021 |
| Cash and equivalents, end of period | 4,471 | 6,402 |
| Supplementary disclosure of cash flow information: | ||
| Interest paid | 53 | 67 |
| Taxes paid | 256 | 198 |
Accumulated other comprehensive loss 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
| (\$ in millions) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at January 1, 2014 | 1,750 | 19,186 | (431) | 7 | (1,610) | 22 | (2,012) | (246) | 18,678 | 530 | 19,208 |
| Comprehensive income: | |||||||||||
| Net income | 544 | 544 | 18 | 562 | |||||||
| Foreign currency translation adjustments, net of tax of \$(3) |
(73) | (73) | (73) | (3) | (76) | ||||||
| Effect of change in fair value of available-for-sale securities, net of tax of \$0 |
2 | 2 | 2 | 2 | |||||||
| Unrecognized income (expense) related to pensions and other postretirement plans, net of tax of \$6 |
13 | 13 | 13 | 13 | |||||||
| Change in derivatives qualifying as cash flow hedges, net of tax of \$(4) |
(12) | (12) | (12) | (12) | |||||||
| Total comprehensive income (loss) |
474 | 15 | 489 | ||||||||
| Dividends paid to noncontrolling shareholders |
– | (12) | (12) | ||||||||
| Share-based payment arrangements |
20 | 20 | 20 | ||||||||
| Delivery of shares | (9) | 10 | 1 | 1 | |||||||
| Balance at March 31, 2014 | 1,761 | 19,730 | (504) | 9 | (1,597) | 10 | (2,082) | (236) | 19,173 | 533 | 19,706 |
| Balance at January 1, 2015 | 1,777 | 19,939 | (2,102) | 13 | (2,131) | (21) | (4,241) | (1,206) | 16,269 | 546 | 16,815 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Comprehensive income: | |||||||||||
| Net income | 564 | 564 | 17 | 581 | |||||||
| Foreign currency translation adjustments, net of tax of \$(1) |
(831) | (831) | (831) | (831) | |||||||
| Effect of change in fair value of available-for-sale securities, net of tax of \$0 |
3 | 3 | 3 | 3 | |||||||
| Unrecognized income (expense) related to pensions and other postretirement plans, net of tax of \$59 |
174 | 174 | 174 | 174 | |||||||
| Change in derivatives qualifying as cash flow hedges, net of tax of \$(3) |
(11) | (11) | (11) | (11) | |||||||
| Total comprehensive income (loss) |
(101) | 17 | (84) | ||||||||
| Dividends paid to noncontrolling shareholders |
– | (12) | (12) | ||||||||
| Share-based payment arrangements |
15 | 15 | 15 | ||||||||
| Purchases of treasury stock | (452) | (452) | (452) | ||||||||
| Balance at March 31, 2015 | 1,792 | 20,503 | (2,933) | 16 | (1,957) | (32) | (4,906) | (1,658) | 15,731 | 551 | 16,282 |
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, 2014.
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:
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 in the Consolidated Statements of Cash Flows reported for prior periods in the Interim Consolidated Financial Information have been reclassified to conform to the current period presentation. These reclassifications were within Net cash provided by operating activities.
In May 2014, an accounting standard update was issued to clarify the principles for recognizing revenues from contracts with customers. The update, which supersedes substantially all existing revenue recognition guidance, provides a single comprehensive model for recognizing revenues on the transfer of promised goods or services to customers in an amount that reflects the consideration that is expected to be received for those goods or services. Under the standard it is possible that more judgments and estimates would be required than under existing standards, including identifying the separate performance obligations in a contract, estimating any variable consideration elements, and allocating the transaction price to each separate performance obligation. The update also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
The update is effective for the Company for annual and interim periods beginning January 1, 2017, and is to be applied either (i) retrospectively to each prior reporting period presented, with the option to elect certain defined practical expedients, or (ii) retrospectively with the cumulative effect of initially applying the update recognized at the date of adoption in retained earnings (with additional disclosure as to the impact on individual financial statement lines affected). The Company is currently evaluating the impact of this update on its consolidated financial statements.
Note 2 Recent accounting pronouncements Applicable for future periods Note 2 Recent accounting pronouncements, continued
In April 2015, an accounting standard update was issued to simplify the presentation of debt issuance costs. Under the update, the Company would present debt issuance costs related to a recognized debt liability in the balance sheet as a direct deduction from the carrying amount of that debt liability rather than as a non-current asset. The existing recognition and measurement guidance for debt issuance costs is not affected by this accounting standard update which is effective for the Company for annual and interim periods beginning January 1, 2016, and is applicable retrospectively. Early adoption is permitted for financial statements that have not been previously issued. The Company does not believe that this update will have a material impact on its consolidated financial statements.
Cash and equivalents, marketable securities and short-term investments consisted of the following:
| March 31, 2015 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross | Gross | Marketable securities | |||||||||
| unrealized | unrealized | Cash and | and short-term | ||||||||
| (\$ in millions) | Cost basis | gains | losses | Fair value | equivalents | investments | |||||
| Cash | 1,617 | 1,617 | 1,617 | – | |||||||
| Time deposits | 3,189 | 3,189 | 2,768 | 421 | |||||||
| Other short-term investments | 227 | 227 | – | 227 | |||||||
| Debt securities available-for-sale: | |||||||||||
| U.S. government obligations | 135 | 3 | (1) | 137 | – | 137 | |||||
| Other government obligations | 2 | – | – | 2 | – | 2 | |||||
| Corporate | 658 | 4 | – | 662 | 86 | 576 | |||||
| Equity securities available-for-sale | 308 | 13 | – | 321 | – | 321 | |||||
| Total | 6,136 | 20 | (1) | 6,155 | 4,471 | 1,684 |
| December 31, 2014 | ||||||
|---|---|---|---|---|---|---|
| Gross | Gross | Marketable securities | ||||
| unrealized | unrealized | Cash and | and short-term | |||
| (\$ in millions) | Cost basis | gains | losses | Fair value | equivalents | investments |
| Cash | 2,218 | 2,218 | 2,218 | – | ||
| Time deposits | 3,340 | 3,340 | 3,140 | 200 | ||
| Other short-term investments | 225 | 225 | – | 225 | ||
| Debt securities available-for-sale: | ||||||
| U.S. government obligations | 135 | 2 | (1) | 136 | – | 136 |
| Other government obligations | 2 | – | – | 2 | – | 2 |
| Corporate | 734 | 4 | (1) | 737 | 85 | 652 |
| Equity securities available-for-sale | 98 | 12 | – | 110 | – | 110 |
| Total | 6,752 | 18 | (2) | 6,768 | 5,443 | 1,325 |
Included in Other short-term investments at March 31, 2015, and December 31, 2014, are receivables of \$220 million and \$219 million, respectively, representing reverse repurchase agreements. These collateralized lendings, made to a financial institution, have maturity dates of less than one year.
Non-current assets
Included in "Other non-current assets" are certain held-to-maturity marketable securities. At March 31, 2015, the amortized cost, gross unrecognized gain and fair value (based on quoted market prices) of these securities were \$86 million, \$25 million and \$111 million, respectively. At December 31, 2014, the amortized cost, gross unrecognized gain and fair value (based on quoted market prices) of these securities were \$95 million, \$14 million and \$109 million, respectively. These securities are pledged as security for certain outstanding deposit liabilities and the funds received at the respective maturity dates of the securities will only be available to the Company for repayment of these obligations.
| Note 4 Derivative financial instruments |
The Company is exposed to certain currency, commodity, interest rate and equity risks arising from its global operating, financing and investing activities. The Company uses derivative instruments to reduce and manage the economic impact of these exposures. |
|---|---|
| Currency risk | Due to the global nature of the Company's operations, many of its subsidiaries are exposed to currency risk in their operating activities from entering into transactions in currencies other than their functional currency. To manage such currency risks, the Company's policies require the subsidiaries to hedge their foreign currency exposures from binding sales and purchase contracts denominated in foreign currencies. For forecasted foreign currency denominated sales of standard products and the related foreign currency denominated purchases, the Company's policy is to hedge up to a maximum of 100 percent of the forecasted foreign currency denominated exposures, depending on the length of the forecasted exposures. Forecasted exposures greater than 12 months are not hedged. Forward foreign exchange con tracts are the main instrument used to protect the Company against the volatility of future cash flows (caused by changes in exchange rates) of contracted and forecasted sales and purchases denominated in foreign currencies. In addition, within its treasury operations, the Company primarily uses foreign exchange swaps and forward foreign exchange contracts to manage the currency and timing mismatches arising in its liquidity management activities. |
| Commodity risk | Various commodity products are used in the Company's manufacturing activities. Consequently it is exposed to volatility in future cash flows arising from changes in commodity prices. To manage the price risk of commodities, the Company's policies require that the subsidiaries hedge the commodity price risk exposures from binding contracts, as well as at least 50 percent (up to a maximum of 100 percent) of the forecasted commodity exposure over the next 12 months or longer (up to a maximum of 18 months). Primarily swap contracts are used to manage the associated price risks of commodities. |
| Interest rate risk | The Company has issued bonds at fixed rates. Interest rate swaps are used to manage the interest rate risk associated with certain debt and generally such swaps are designated as fair value hedges. In addition, from time to time, the Company uses instruments such as interest rate swaps, interest rate futures, bond futures or forward rate agreements to manage interest rate risk arising from the Company's balance sheet structure but does not designate such instru ments as hedges. |
| Equity risk | The Company is exposed to fluctuations in the fair value of its warrant appreciation rights (WARs) issued under its man agement incentive plan. A WAR gives its holder the right to receive cash equal to the market price of an equivalent listed warrant on the date of exercise. To eliminate such risk, the Company has purchased cash-settled call options which entitle the Company to receive amounts equivalent to its obligations under the outstanding WARs. |
| Volume of derivative activity | In general, while the Company's primary objective in its use of derivatives is to minimize exposures arising from its business, certain derivatives are designated and qualify for hedge accounting treatment while others either are not designated or do not qualify for hedge accounting. |
| Foreign exchange and interest rate derivatives The gross notional amounts of outstanding foreign exchange and interest rate derivatives (whether designated as hedges or not) were as follows: |
| Type of derivative | Total notional amounts | |||
|---|---|---|---|---|
| (\$ in millions) | March 31, 2015 | December 31, 2014 | March 31, 2014 | |
| Foreign exchange contracts | 17,871 | 18,564 | 19,060 | |
| Embedded foreign exchange derivatives | 2,972 | 3,013 | 2,958 | |
| Interest rate contracts | 4,057 | 2,242 | 6,702 |
The following table shows the notional amounts of outstanding commodity derivatives (whether designated as hedges or not), on a net basis, to reflect the Company's requirements in the various commodities:
| Type of derivative | Unit | Total notional amounts | ||
|---|---|---|---|---|
| March 31, 2015 | December 31, 2014 | March 31, 2014 | ||
| Copper swaps | metric tonnes | 53,237 | 46,520 | 43,866 |
| Aluminum swaps | metric tonnes | 5,225 | 3,846 | 3,873 |
| Nickel swaps | metric tonnes | – | – | 12 |
| Lead swaps | metric tonnes | 14,325 | 6,550 | 5,175 |
| Zinc swaps | metric tonnes | 125 | 200 | 275 |
| Silver swaps | ounces | 1,707,460 | 1,996,845 | 1,813,511 |
| Crude oil swaps | barrels | 150,700 | 128,000 | 142,000 |
At March 31, 2015, December 31, 2014, and March 31, 2014, the Company held 59 million, 61 million and 66 million cash-settled call options indexed to ABB Ltd shares (conversion ratio 5:1) with a total fair value of \$26 million, \$33 million and \$50 million, respectively.
As noted above, the Company mainly uses forward foreign exchange contracts to manage the foreign exchange risk of its operations, commodity swaps to manage its commodity risks and cash-settled call options to hedge its WAR liabilities. Where such instruments are designated and qualify as cash flow hedges, the effective portion of the changes in their fair value is recorded in "Accumulated other comprehensive loss" and subsequently reclassified into earnings in the same line item and in the same period as the underlying hedged transaction affects earnings. Any ineffectiveness in the hedge relationship, or hedge component excluded from the assessment of effectiveness, is recognized in earnings during the current period.
At March 31, 2015, and December 31, 2014, "Accumulated other comprehensive loss" included net unrealized losses of \$32 million and \$21 million, respectively, net of tax, on derivatives designated as cash flow hedges. Of the amount at March 31, 2015, net losses of \$22 million are expected to be reclassified to earnings in the following 12 months. At March 31, 2015, the longest maturity of a derivative classified as a cash flow hedge was 54 months.
The amount of gains or losses, net of tax, reclassified into earnings due to the discontinuance of cash flow hedge accounting and the amount of ineffectiveness in cash flow hedge relationships directly recognized in earnings were not significant in the three months ended March 31, 2015 and 2014.
The pre-tax effects of derivative instruments, designated and qualifying as cash flow hedges, on "Accumulated other comprehensive loss" (OCI) and the Consolidated Income Statements were as follows:
| Three months ended March 31, 2015 | ||||||
|---|---|---|---|---|---|---|
| Gains (losses) | ||||||
| recognized in OCI | Gains (losses) recognized in income | |||||
| Type of derivative | on derivatives | Gains (losses) reclassified from OCI | (ineffective portion and amount | |||
| designated as | (effective portion) | into income (effective portion) | excluded from effectiveness testing) | |||
| a cash flow hedge | (\$ in millions) | Location | (\$ in millions) | Location | (\$ in millions) | |
| Foreign exchange contracts | (22) | Total revenues | (13) | Total revenues | – | |
| Total cost of sales | 5 | Total cost of sales | – | |||
| Commodity contracts | (2) | Total cost of sales | (3) | Total cost of sales | – | |
| Cash-settled call options | (4) | SG&A expenses(1) | (3) | SG&A expenses(1) | – | |
| Total | (28) | (14) | – |
| Three months ended March 31, 2014 | |||||||
|---|---|---|---|---|---|---|---|
| Gains (losses) | |||||||
| recognized in OCI | Gains (losses) recognized in income | ||||||
| Type of derivative | on derivatives | Gains (losses) reclassified from OCI | (ineffective portion and amount | ||||
| designated as | (effective portion) | into income (effective portion) | excluded from effectiveness testing) | ||||
| a cash flow hedge | (\$ in millions) | Location | (\$ in millions) | Location | (\$ in millions) | ||
| Foreign exchange contracts | (6) | Total revenues | 1 | Total revenues | – | ||
| Total cost of sales | 3 | Total cost of sales | – | ||||
| Commodity contracts | (4) | Total cost of sales | (1) | Total cost of sales | – | ||
| Cash-settled call options | (4) | SG&A expenses(1) | (1) | SG&A expenses(1) | – | ||
| Total | (14) | 2 | – |
SG&A expenses represent "Selling, general and administrative expenses". (1)
Net derivative losses of \$11 million and net derivative gains of \$1 million, both net of tax, respectively, were reclassified from "Accumulated other comprehensive loss" to earnings during the three months ended March 31, 2015 and 2014, respectively.
Fair value hedges Note 4 Derivative financial instruments, continued
To reduce its interest rate exposure arising primarily from its debt issuance activities, the Company uses interest rate swaps. Where such instruments are designated as fair value hedges, the changes in the fair value of these instruments, as well as the changes in the fair value of the risk component of the underlying debt being hedged, are recorded as offsetting gains and losses in "Interest and other finance expense". Hedge ineffectiveness of instruments designated as fair value hedges for the three months ended March 31, 2015 and 2014, was not significant.
The effect of derivative instruments, designated and qualifying as fair value hedges, on the Consolidated Income Statements was as follows:
| Three months ended March 31, 2015 | |||||||
|---|---|---|---|---|---|---|---|
| Gains (losses) recognized in income on derivatives | Gains (losses) recognized in income | ||||||
| Type of derivative designated | designated as fair value hedges | ||||||
| as a fair value hedge | Location | (\$ in millions) | Location | (\$ in millions) | |||
| Interest rate contracts | Interest and other finance expense | 31 | Interest and other finance expense | (31) |
| Three months ended March 31, 2014 | |||||
|---|---|---|---|---|---|
| Gains (losses) recognized in income on derivatives | Gains (losses) recognized in income | ||||
| Type of derivative designated | designated as fair value hedges | on hedged item | |||
| as a fair value hedge | Location | (\$ in millions) | Location | (\$ in millions) | |
| Interest rate contracts | Interest and other finance expense | 22 | Interest and other finance expense | (22) |
Derivative instruments that are not designated as hedges or do not qualify as either cash flow or fair value hedges are economic hedges used for risk management purposes. Gains and losses from changes in the fair values of such derivatives are recognized in the same line in the income statement as the economically hedged transaction.
Furthermore, under certain circumstances, the Company is required to split and account separately for foreign currency derivatives that are embedded within certain binding sales or purchase contracts denominated in a currency other than the functional currency of the subsidiary and the counterparty.
The gains (losses) recognized in the Consolidated Income Statements on derivatives not designated in hedging relationships were as follows:
| Type of derivative not designated as a hedge | Gains (losses) recognized in income | ||||
|---|---|---|---|---|---|
| Three months ended March 31, | |||||
| (\$ in millions) | Location | 2015 | 2014 | ||
| Foreign exchange contracts | Total revenues | (78) | (23) | ||
| Total cost of sales | (66) | (10) | |||
| SG&A expenses(1) | 12 | 1 | |||
| Interest and other finance expense | 177 | 4 | |||
| Non-order related research and development | (1) | – | |||
| Embedded foreign exchange contracts | Total revenues | 27 | 10 | ||
| Total cost of sales | (17) | – | |||
| Commodity contracts | Total cost of sales | (1) | (22) | ||
| Interest rate contracts | Interest and other finance expense | (1) | – | ||
| Total | 52 | (40) |
SG&A expenses represent "Selling, general and administrative expenses". (1)
The fair values of derivatives included in the Consolidated Balance Sheets were as follows:
| March 31, 2015 | |||||
|---|---|---|---|---|---|
| Derivative assets | Derivative liabilities | ||||
| Current in | Non-current in | Current in | Non-current in | ||
| "Other current | "Other non-current | "Other current | "Other non-current | ||
| (\$ in millions) | assets" | assets" | liabilities" | liabilities" | |
| Derivatives designated as hedging instruments: | |||||
| Foreign exchange contracts | 7 | 10 | 22 | 19 | |
| Commodity contracts | – | – | 3 | – | |
| Interest rate contracts | – | 116 | – | – | |
| Cash-settled call options | 17 | 8 | – | – | |
| Total | 24 | 134 | 25 | 19 | |
| Derivatives not designated as hedging instruments: | |||||
| Foreign exchange contracts | 322 | 65 | 488 | 103 | |
| Commodity contracts | 13 | 1 | 18 | 3 | |
| Cash-settled call options | 1 | – | – | – | |
| Embedded foreign exchange derivatives | 130 | 49 | 52 | 35 | |
| Total | 466 | 115 | 558 | 141 | |
| Total fair value | 490 | 249 | 583 | 160 |
| December 31, 2014 | |||||
|---|---|---|---|---|---|
| Derivative assets | Derivative liabilities | ||||
| Current in | Non-current in | Current in | Non-current in | ||
| "Other current | "Other non-current | "Other current | "Other non-current | ||
| (\$ in millions) | assets" | assets" | liabilities" | liabilities" | |
| Derivatives designated as hedging instruments: | |||||
| Foreign exchange contracts | 9 | 9 | 20 | 16 | |
| Commodity contracts | – | – | 3 | – | |
| Interest rate contracts | – | 85 | – | – | |
| Cash-settled call options | 21 | 11 | – | – | |
| Total | 30 | 105 | 23 | 16 | |
| Derivatives not designated as hedging instruments: | |||||
| Foreign exchange contracts | 156 | 25 | 369 | 72 | |
| Commodity contracts | 4 | – | 19 | 3 | |
| Cash-settled call options | 1 | 1 | – | – | |
| Embedded foreign exchange derivatives | 98 | 58 | 27 | 17 | |
| Total | 259 | 84 | 415 | 92 | |
| Total fair value | 289 | 189 | 438 | 108 |
Close-out netting agreements provide for the termination, valuation and net settlement of some or all outstanding transactions between two counterparties on the occurrence of one or more pre-defined trigger events.
Although the Company is party to close-out netting agreements with most derivative counterparties, the fair values in the tables above and in the Consolidated Balance Sheets at March 31, 2015, and December 31, 2014, have been presented on a gross basis.
The Company's netting agreements and other similar arrangements allow net settlements under certain conditions. As of March 31, 2015, and December 31, 2014, information related to these offsetting arrangements was as follows:
| (\$ in millions) | March 31, 2015 | |||||
|---|---|---|---|---|---|---|
| Derivative liabilities | ||||||
| Type of agreement | Gross amount of | eligible for set-off in | Cash collateral | Non-cash collateral | ||
| or similar arrangement | recognized assets | case of default | received | received | Net asset exposure | |
| Derivatives | 560 | (383) | – | – | 177 | |
| Reverse repurchase | ||||||
| agreements | 220 | – | – | (220) | – | |
| Total | 780 | (383) | – | (220) | 177 |
| (\$ in millions) | March 31, 2015 | ||||||
|---|---|---|---|---|---|---|---|
| Derivative liabilities | |||||||
| Type of agreement | Gross amount of | eligible for set-off in | Cash collateral | Non-cash collateral | |||
| or similar arrangement | recognized liabilities | case of default | pledged | pledged | Net liability exposure | ||
| Derivatives | 656 | (383) | (2) | – | 271 | ||
| Total | 656 | (383) | (2) | – | 271 |
| (\$ in millions) | December 31, 2014 | ||||||
|---|---|---|---|---|---|---|---|
| Derivative liabilities | |||||||
| Type of agreement | Gross amount of | eligible for set-off in | Cash collateral | Non-cash collateral | |||
| or similar arrangement | recognized assets | case of default | received | received | Net asset exposure | ||
| Derivatives | 322 | (216) | – | – | 106 | ||
| Reverse repurchase | |||||||
| agreements | 219 | – | – | (219) | – | ||
| Total | 541 | (216) | – | (219) | 106 |
| (\$ in millions) | December 31, 2014 | |||||
|---|---|---|---|---|---|---|
| Derivative liabilities | ||||||
| Type of agreement | Gross amount of | eligible for set-off in | Cash collateral | Non-cash collateral | ||
| or similar arrangement | recognized liabilities | case of default | pledged | pledged | Net liability exposure | |
| Derivatives | 502 | (216) | (3) | – | 283 | |
| Total | 502 | (216) | (3) | – | 283 |
The Company uses fair value measurement principles to record certain financial assets and liabilities on a recurring basis and, when necessary, to record certain non-financial assets at fair value on a non-recurring basis, as well as to determine fair value disclosures for certain financial instruments carried at amortized cost in the financial statements. Financial assets and liabilities recorded at fair value on a recurring basis include foreign currency, commodity and interest rate derivatives, as well as cash-settled call options and available-for-sale securities. Non-financial assets recorded at fair value on a non-recurring basis include long-lived assets that are reduced to their estimated fair value due to impairments.
Fair value is the price that would be received when selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation techniques including the market approach (using observable market data for identical or similar assets and liabilities), the income approach (discounted cash flow models) and the cost approach (using costs a market participant would incur to develop a comparable asset). Inputs used to determine the fair value of assets and liabilities are defined by a three-level hierarchy, depending on the reliability of those inputs. The Company has categorized its financial assets and liabilities and non-financial assets measured at fair value within this hierarchy based on whether the inputs to the valuation technique are observable or unobservable. An observable input is based on market data obtained from independent sources, while an unobservable input reflects the Company's assumptions about market data.
The levels of the fair value hierarchy are as follows:
Whenever quoted prices involve bid-ask spreads, the Company ordinarily determines fair values based on mid-market quotes. However, for the purpose of determining the fair value of cash-settled call options serving as hedges of the Company's management incentive plan, bid prices are used.
When determining fair values based on quoted prices in an active market, the Company considers if the level of transaction activity for the financial instrument has significantly decreased, or would not be considered orderly. In such cases, the resulting changes in valuation techniques would be disclosed. If the market is considered disorderly or if quoted prices are not available, the Company is required to use another valuation technique, such as an income approach.
The fair values of financial assets and liabilities measured at fair value on a recurring basis were as follows:
| (\$ in millions) | Level 1 | Level 2 | Level 3 | Total fair value |
|---|---|---|---|---|
| Assets | ||||
| Available-for-sale securities in "Cash and equivalents": | ||||
| Debt securities—Corporate | – | 86 | – | 86 |
| Available-for-sale securities in "Marketable securities and short-term investments": | ||||
| Equity securities | – | 321 | – | 321 |
| Debt securities—U.S. government obligations | 137 | – | – | 137 |
| Debt securities—Other government obligations | – | 2 | – | 2 |
| Debt securities—Corporate | – | 576 | – | 576 |
| Derivative assets—current in "Other current assets" | – | 490 | – | 490 |
| Derivative assets—non-current in "Other non-current assets" | – | 249 | – | 249 |
| Total | 137 | 1,724 | – | 1,861 |
| Liabilities | ||||
| Derivative liabilities—current in "Other current liabilities" | – | 583 | – | 583 |
| Derivative liabilities—non-current in "Other non-current liabilities" | – | 160 | – | 160 |
| Total | – | 743 | – | 743 |
| December 31, 2014 | ||||
|---|---|---|---|---|
| (\$ in millions) | Level 1 | Level 2 | Level 3 | Total fair value |
| Assets | ||||
| Available-for-sale securities in "Cash and equivalents": | ||||
| Debt securities—Corporate | – | 85 | – | 85 |
| Available-for-sale securities in "Marketable securities and short-term investments": | ||||
| Equity securities | – | 110 | – | 110 |
| Debt securities—U.S. government obligations | 136 | – | – | 136 |
| Debt securities—Other government obligations | – | 2 | – | 2 |
| Debt securities—Corporate | – | 652 | – | 652 |
| Derivative assets—current in "Other current assets" | – | 289 | – | 289 |
| Derivative assets—non-current in "Other non-current assets" | – | 189 | – | 189 |
| Total | 136 | 1,327 | – | 1,463 |
| Liabilities | ||||
| Derivative liabilities—current in "Other current liabilities" | – | 438 | – | 438 |
| Derivative liabilities—non-current in "Other non-current liabilities" | – | 108 | – | 108 |
| Total | – | 546 | – | 546 |
The Company uses the following methods and assumptions in estimating fair values of financial assets and liabilities measured at fair value on a recurring basis:
Non-recurring fair value measures
There were no significant non-recurring fair value measurements during the three months ended March 31, 2015 and 2014.
The fair values of financial instruments carried on a cost basis were as follows: carried on a cost basis
| March 31, 2015 | |||||
|---|---|---|---|---|---|
| (\$ in millions) | Carrying value | Level 1 | Level 2 | Level 3 | Total fair value |
| Assets | |||||
| Cash and equivalents (excluding available-for-sale securities | |||||
| with original maturities up to 3 months): | |||||
| Cash | 1,617 | 1,617 | – | – | 1,617 |
| Time deposits | 2,768 | – | 2,768 | – | 2,768 |
| Marketable securities and short-term investments | |||||
| (excluding available-for-sale securities): | |||||
| Time deposits | 421 | – | 421 | – | 421 |
| Receivables under reverse repurchase agreements | 220 | – | 220 | – | 220 |
| Other short-term investments | 7 | 7 | – | – | 7 |
| Other non-current assets: | |||||
| Loans granted | 38 | – | 41 | – | 41 |
| Held-to-maturity securities | 86 | – | 111 | – | 111 |
| Restricted cash deposits | 182 | 60 | 137 | – | 197 |
| Liabilities | |||||
| Short-term debt and current maturities of long-term debt | |||||
| (excluding capital lease obligations) | 473 | 107 | 366 | – | 473 |
| Long-term debt (excluding capital lease obligations) | 7,097 | 6,004 | 1,428 | – | 7,432 |
| Non-current deposit liabilities in "Other non-current liabilities" | 206 | – | 245 | – | 245 |
| December 31, 2014 | |||||
|---|---|---|---|---|---|
| (\$ in millions) | Carrying value | Level 1 | Level 2 | Level 3 | Total fair value |
| Assets | |||||
| Cash and equivalents (excluding available-for-sale securities | |||||
| with original maturities up to 3 months): | |||||
| Cash | 2,218 | 2,218 | – | – | 2,218 |
| Time deposits | 3,140 | – | 3,140 | – | 3,140 |
| Marketable securities and short-term investments | |||||
| (excluding available-for-sale securities): | |||||
| Time deposits | 200 | – | 200 | – | 200 |
| Receivables under reverse repurchase agreements | 219 | – | 219 | – | 219 |
| Other short-term investments | 6 | 6 | – | – | 6 |
| Other non-current assets: | |||||
| Loans granted | 41 | – | 44 | – | 44 |
| Held-to-maturity securities | 95 | – | 109 | – | 109 |
| Restricted cash deposits | 198 | 64 | 161 | – | 225 |
| Liabilities | |||||
| Short-term debt and current maturities of long-term debt | |||||
| (excluding capital lease obligations) | 324 | 115 | 209 | – | 324 |
| Long-term debt (excluding capital lease obligations) | 7,224 | 6,148 | 1,404 | – | 7,552 |
| Non-current deposit liabilities in "Other non-current liabilities" | 222 | – | 267 | – | 267 |
The Company uses the following methods and assumptions in estimating fair values of financial instruments carried on a cost basis:
The Company is engaged in environmental clean-up activities at certain sites arising under various United States and other environmental protection laws and under certain agreements with third parties. In some cases, these environmental remediation actions are subject to legal proceedings, investigations or claims, and it is uncertain to what extent the Company is actually obligated to perform. Provisions for these unresolved matters have been set up if it is probable that the Company has incurred a liability and the amount of loss can be reasonably estimated. The lower end of an estimated range is accrued when a single best estimate is not determinable. The required amounts of the provisions may change in the future as developments occur.
If a provision has been recognized for any of these matters, the Company records an asset when it is probable that it will recover a portion of the costs expected to be incurred to settle them. Management is of the opinion, based upon information presently available, that the resolution of any such obligation and non-collection of recoverable costs would not have a further material adverse effect on the Company's consolidated financial statements.
The Company is involved in the remediation of environmental contamination at present or former facilities, primarily in the United States. The clean-up of these sites involves primarily soil and groundwater contamination. A significant portion of the provisions in respect of these contingencies reflects the provisions of acquired companies. A portion of one of the acquired companies' remediation liability is indemnified by a prior owner. Accordingly, an asset equal to that portion of the remediation liability is included in "Other non-current assets".
Environmental provisions included in the Company's Consolidated Balance Sheets were as follows:
| (\$ in millions) | March 31, 2015 | December 31, 2014 |
|---|---|---|
| Other provisions | 29 | 37 |
| Other non-current liabilities | 108 | 109 |
| Total | 137 | 146 |
Provisions for the above estimated losses have not been discounted as the timing of payments cannot be reasonably estimated.
In April 2014, the European Commission announced its decision regarding its investigation of anticompetitive practices in the cables industry and granted the Company full immunity from fines under the European Commission's leniency program. In December 2013, the Company agreed with the Brazilian Antitrust Authority (CADE) to settle its ongoing investigation into the Company's involvement in anticompetitive practices in the cables industry and the Company agreed to pay a fine of approximately 1.5 million Brazilian reals (equivalent to approximately \$1 million on date of payment). The Company's cables business remains under investigation for alleged anticompetitive practices in certain other jurisdictions. An informed judgment about the outcome of these remaining investigations or the amount of potential loss or range of loss for the Company, if any, relating to these remaining investigations cannot be made at this stage.
In Brazil, the Company's Gas Insulated Switchgear business is under investigation by the CADE for alleged anticompetitive practices. In addition, the CADE has opened an investigation into certain other power businesses of the Company, including flexible alternating current transmission systems (FACTS) and power transformers. An informed judgment about the outcome of these investigations or the amount of potential loss or range of loss for the Company, if any, relating to these investigations cannot be made at this stage.
With respect to those aforementioned matters which are still ongoing, management is cooperating fully with the antitrust authorities.
Contingencies—Regulatory, Compliance and Legal
| Note 6 Commitments and contingencies, continued |
General In addition, the Company is aware of proceedings, or the threat of proceedings, against it and others in respect of pri vate claims by customers and other third parties with regard to certain actual or alleged anticompetitive practices. Also, the Company is subject to other various legal proceedings, investigations, and claims that have not yet been resolved. With respect to the above mentioned regulatory matters and commercial litigation contingencies, the Company will bear the costs of the continuing investigations and any related legal proceedings. |
||
|---|---|---|---|
| Liabilities recognized At March 31, 2015, and December 31, 2014, the Company had aggregate liabilities of \$144 million and \$147 million, respectively, included in "Other provisions" and "Other non-current liabilities", for the above regulatory, compliance and legal contingencies, and none of the individual liabilities recognized was significant. As it is not possible to make an informed judgment on the outcome of certain matters and as it is not possible, based on information currently available to management, to estimate the maximum potential liability on other matters, there could be material adverse outcomes beyond the amounts accrued. |
|||
| Guarantees | General The following table provides quantitative data regarding the Company's third-party guarantees. The maximum potential payments represent a "worst-case scenario", and do not reflect management's expected outcomes. |
||
| Maximum potential payments (\$ in millions) | March 31, 2015 | December 31, 2014 | |
| Performance guarantees | 230 | 232 | |
| Financial guarantees | 74 | 72 |
Indemnification guarantees 50 50 Total 354 354
The carrying amount of liabilities recorded in the Consolidated Balance Sheets reflects the Company's best estimate of future payments, which it may incur as part of fulfilling its guarantee obligations. In respect of the above guarantees, the carrying amounts of liabilities at March 31, 2015, and December 31, 2014, were not significant.
Performance guarantees represent obligations where the Company guarantees the performance of a third party's product or service according to the terms of a contract. Such guarantees may include guarantees that a project will be completed within a specified time. If the third party does not fulfill the obligation, the Company will compensate the guaranteed party in cash or in kind. Performance guarantees include surety bonds, advance payment guarantees and standby letters of credit. The significant performance guarantees are described below.
The Company retained obligations for guarantees related to the Power Generation business contributed in mid-1999 to the former ABB Alstom Power NV joint venture (Alstom Power NV). The guarantees primarily consist of performance guarantees and other miscellaneous guarantees under certain contracts such as indemnification for personal injuries and property damages, taxes and compliance with labor laws, environmental laws and patents. These guarantees have no fixed expiration date. In May 2000, the Company sold its interest in Alstom Power NV to Alstom SA (Alstom). As a result, Alstom and its subsidiaries have primary responsibility for performing the obligations that are the subject of the guarantees. Further, Alstom, the parent company and Alstom Power NV, have undertaken jointly and severally to fully indemnify and hold harmless the Company against any claims arising under such guarantees. Management's best estimate of the total maximum potential amount payable of quantifiable guarantees issued by the Company on behalf of its former Power Generation business was \$65 million at both March 31, 2015, and December 31, 2014. The Company has not experienced any losses related to guarantees issued on behalf of the former Power Generation business.
The Company is engaged in executing a number of projects as a member of consortia that include third parties. In certain of these cases, the Company guarantees not only its own performance but also the work of third parties. The original maturity dates of these guarantees range from one to six years. At both March 31, 2015, and December 31, 2014, the maximum potential amount payable under these guarantees as a result of third-party non-performance was \$156 million.
Financial guarantees represent irrevocable assurances that the Company will make payment to a beneficiary in the event that a third party fails to fulfill its financial obligations and the beneficiary under the guarantee incurs a loss due to that failure.
At March 31, 2015, and December 31, 2014, the Company had a maximum potential amount payable of \$74 million and \$72 million, respectively, under financial guarantees outstanding. Of these amounts, \$12 million at both March 31, 2015, and December 31, 2014, was in respect of guarantees issued on behalf of companies in which the Company formerly had or has an equity interest. The guarantees outstanding have various maturity dates up to 2020.
In addition, in the normal course of bidding for and executing certain projects, the Company has entered into standby letters of credit, bid/performance bonds and surety bonds (collectively "performance bonds") with various financial institutions. Customers can draw on such performance bonds in the event that the Company does not fulfill its contractual obligations. The Company would then have an obligation to reimburse the financial institution for amounts paid under the performance bonds. There have been no significant amounts reimbursed to financial institutions under these types of arrangements in the three months ended March 31, 2015 and 2014.
The Company has indemnified certain purchasers of divested businesses for potential claims arising from the operations of the divested businesses. To the extent the maximum potential loss related to such indemnifications could not be calculated, no amounts have been included under maximum potential payments in the table above. Indemnifications for which maximum potential losses could not be calculated include indemnifications for legal claims. The significant indemnification guarantees for which maximum potential losses could be calculated are described below.
The Company issued to the purchasers of Lummus Global guarantees related to assets and liabilities divested in 2007. The maximum potential amount payable relating to this business, pursuant to the sales agreement, at each of March 31, 2015, and December 31, 2014, was \$50 million.
The Company calculates its provision for product warranties based on historical claims experience and specific review of certain contracts.
The reconciliation of the "Provisions for warranties", including guarantees of product performance, was as follows:
| (\$ in millions) | 2015 | 2014 |
|---|---|---|
| Balance at January 1, | 1,148 | 1,362 |
| Claims paid in cash or in kind | (70) | (79) |
| Net increase in provision for changes in estimates, warranties issued and warranties expired | 45 | 29 |
| Exchange rate differences | (60) | (5) |
| Balance at March 31, | 1,063 | 1,307 |
The Company operates defined benefit and defined contribution pension plans and termination indemnity plans, in accordance with local regulations and practices. These plans cover a large portion of the Company's employees and provide benefits to employees in the event of death, disability, retirement, or termination of employment. Certain of these plans are multi-employer plans. The Company also operates other postretirement benefit plans including postretirement health care benefits, and other employee-related benefits for active employees including long-service award plans. The measurement date used for the Company's employee benefit plans is December 31. The funding policies of the Company's plans are consistent with the local government and tax requirements and several of the plans are not required to be funded according to local government and tax requirements.
Net periodic benefit cost of the Company's defined benefit pension and other postretirement benefit plans consisted of the following:
| Defined pension | Other postretirement | |||
|---|---|---|---|---|
| (\$ in millions) | benefits | benefits | ||
| Three months ended March 31, | 2015 | 2014 | 2015 | 2014 |
| Service cost | 66 | 64 | – | – |
| Interest cost | 75 | 105 | 2 | 2 |
| Expected return on plan assets | (113) | (124) | – | – |
| Amortization of prior service cost (credit) | 9 | 7 | (2) | (2) |
| Amortization of net actuarial loss | 28 | 26 | – | – |
| Net periodic benefit cost | 65 | 78 | – | – |
Employer contributions were as follows:
| Defined pension | Other postretirement | ||||
|---|---|---|---|---|---|
| (\$ in millions) | benefits | benefits | |||
| Three months ended March 31, | 2015 | 2014 | 2015 | 2014 | |
| Total contributions to defined benefit pension and other postretirement benefit plans | 49 | 131 | 4 | 3 | |
| Of which, discretionary contributions to defined benefit pension plans | – | 75 | – | – |
During the three months ended March 31, 2014, discretionary contributions included available-for-sale debt securities, having a fair value at the contribution date of \$25 million, to certain of the Company's pension plans in the United Kingdom.
The Company expects to make contributions totaling approximately \$220 million and \$17 million to its defined benefit pension plans and other postretirement benefit plans, respectively, for the full year 2015.
Note 8 Stockholders' equity
In September 2014, the Company announced a share buyback program for the purchase of up to \$4 billion of its own shares over a period ending no later than September 2016. The Company intends that approximately three quarters of the shares to be purchased will be held for cancellation (after approval from shareholders) and the remainder will be purchased to be available for delivery to employees under its employee share programs. Shares acquired for cancellation are acquired through a separate trading line on the SIX Swiss Exchange (on which only the Company can purchase shares), while shares acquired for delivery under employee share programs are acquired through the ordinary trading line.
In the three months ended March 31, 2015, under the announced share buyback program, the Company purchased 17.4 million shares for cancellation and 4.1 million shares to support its employee share programs. These transactions resulted in an increase in "Treasury stock" of \$452 million.
As of March 31, 2015, under this program, the Company has purchased a total of approximately 43 million shares for cancellation and approximately 11 million shares to support its employee share programs.
Note 9 Earnings per share Basic earnings per share is calculated by dividing income by the weighted-average number of shares outstanding during the period. Diluted earnings per share is calculated by dividing income by the weighted-average number of shares outstanding during the period, assuming that all potentially dilutive securities were exercised, if dilutive. Potentially dilutive securities comprise outstanding written call options and outstanding options and shares granted subject to certain conditions under the Company's share-based payment arrangements.
| Three months ended March 31, | ||||
|---|---|---|---|---|
| (\$ in millions, except per share data in \$) | 2015 | 2014 | ||
| Amounts attributable to ABB shareholders: | ||||
| Income from continuing operations, net of tax | 560 | 545 | ||
| Income (loss) from discontinued operations, net of tax | 4 | (1) | ||
| Net income | 564 | 544 | ||
| Weighted-average number of shares outstanding (in millions) | 2,251 | 2,301 | ||
| Basic earnings per share attributable to ABB shareholders: | ||||
| Income from continuing operations, net of tax | 0.25 | 0.24 | ||
| Income (loss) from discontinued operations, net of tax | – | – | ||
| Net income | 0.25 | 0.24 |
| Three months ended March 31, | |||
|---|---|---|---|
| (\$ in millions, except per share data in \$) | 2015 | 2014 | |
| Amounts attributable to ABB shareholders: | |||
| Income from continuing operations, net of tax | 560 | 545 | |
| Income (loss) from discontinued operations, net of tax | 4 | (1) | |
| Net income | 564 | 544 | |
| Weighted-average number of shares outstanding (in millions) | 2,251 | 2,301 | |
| Effect of dilutive securities: | |||
| Call options and shares | 5 | 10 | |
| Adjusted weighted-average number of shares outstanding (in millions) | 2,256 | 2,311 | |
| Diluted earnings per share attributable to ABB shareholders: | |||
| Income from continuing operations, net of tax | 0.25 | 0.24 | |
| Income (loss) from discontinued operations, net of tax | – | – | |
| Net income | 0.25 | 0.24 |
The following table shows changes in "Accumulated other comprehensive loss" (OCI) attributable to ABB, by component, net of tax:
| Unrealized | Unrealized | ||||
|---|---|---|---|---|---|
| gains (losses) | Pension | gains (losses) | |||
| Foreign currency | on available | and other post | of cash flow | ||
| translation | for-sale | retirement plan | hedge | ||
| (\$ in millions) | adjustments | securities | adjustments | derivatives | Total OCI |
| Balance at January 1, 2014 | (431) | 7 | (1,610) | 22 | (2,012) |
| Other comprehensive (loss) income | |||||
| before reclassifications | (76) | 3 | (10) | (11) | (94) |
| Amounts reclassified from OCI | – | (1) | 23 | (1) | 21 |
| Total other comprehensive (loss) income | (76) | 2 | 13 | (12) | (73) |
| Less: | |||||
| Amounts attributable to noncontrolling interests | (3) | – | – | – | (3) |
| Balance at March 31, 2014 | (504) | 9 | (1,597) | 10 | (2,082) |
| Unrealized | Unrealized | ||||
|---|---|---|---|---|---|
| gains (losses) | Pension | gains (losses) | |||
| Foreign currency | on available | and other post | of cash flow | ||
| translation | for-sale | retirement plan | hedge | ||
| (\$ in millions) | adjustments | securities | adjustments | derivatives | Total OCI |
| Balance at January 1, 2015 | (2,102) | 13 | (2,131) | (21) | (4,241) |
| Other comprehensive (loss) income | |||||
| before reclassifications | (831) | 3 | 147 | (22) | (703) |
| Amounts reclassified from OCI | – | – | 27 | 11 | 38 |
| Total other comprehensive (loss) income | (831) | 3 | 174 | (11) | (665) |
| Less: | |||||
| Amounts attributable to noncontrolling interests | – | – | – | – | – |
| Balance at March 31, 2015 | (2,933) | 16 | (1,957) | (32) | (4,906) |
The following table reflects amounts reclassified out of OCI in respect of pension and other postretirement plan adjustments:
| (\$ in millions) | Three months ended March 31, | ||
|---|---|---|---|
| Details about OCI components Location of (gains) losses reclassified from OCI |
2015 | 2014 | |
| Pension and other postretirement plan adjustments: | |||
| Amortization of prior service cost | Net periodic benefit cost(1) | 7 | 5 |
| Amortization of net actuarial loss | Net periodic benefit cost(1) | 28 | 26 |
| Total before tax | 35 | 31 | |
| Tax | Provision for taxes | (8) | (8) |
| Amounts reclassified from OCI | 27 | 23 |
These components are included in the computation of net periodic benefit cost (see Note 7). (1)
The amounts in respect of unrealized gains (losses) on available-for-sale securities and unrealized gains (losses) of cash flow hedge derivatives were not significant for the three months ended March 31, 2015 and 2014.
The Chief Operating Decision Maker (CODM) is the Company's Executive Committee. The CODM allocates resources to and assesses the performance of each operating segment using the information outlined below. The Company's operating segments consist of Discrete Automation and Motion, Low Voltage Products, Process Automation, Power Products and Power Systems. The remaining operations of the Company are included in Corporate and Other.
A description of the types of products and services provided by each reportable segment is as follows:
Effective January 1, 2015, the Company changed its primary measure of segment performance from Operational EBITDA to Operational EBITA, which represents income from operations excluding amortization expense on intangibles arising upon acquisitions (acquisition-related amortization), restructuring and restructuring-related expenses, gains and losses from sale of businesses, acquisition-related expenses and certain non-operational items, as well as foreign exchange/commodity timing differences in income from operations consisting of: (i) unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives), (ii) realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized, and (iii) unrealized foreign exchange movements on receivables/payables (and related assets/liabilities).
The segment performance for the three months ended March 31, 2014, has been restated to reflect this change.
The CODM primarily reviews the results of each segment on a basis that is before the elimination of profits made on inventory sales between segments. Segment results below are presented before these eliminations, with a total deduction for intersegment profits to arrive at the Company's consolidated Operational EBITA. Intersegment sales and transfers are accounted for as if the sales and transfers were to third parties, at current market prices.
The following tables present segment revenues, Operational EBITA, and the reconciliations of consolidated Operational EBITA to income from continuing operations before taxes for the three months ended March 31, 2015 and 2014, as well as total assets at March 31, 2015, and December 31, 2014.
| Three months ended March 31, 2015 | |||||||
|---|---|---|---|---|---|---|---|
| (\$ in millions) | Third-party revenues | Intersegment revenues | Total revenues | ||||
| Discrete Automation and Motion | 2,146 | 125 | 2,271 | ||||
| Low Voltage Products | 1,476 | 79 | 1,555 | ||||
| Process Automation | 1,543 | 36 | 1,579 | ||||
| Power Products | 1,961 | 314 | 2,275 | ||||
| Power Systems | 1,418 | 54 | 1,472 | ||||
| Corporate and Other | 11 | 346 | 357 | ||||
| Intersegment elimination | – | (954) | (954) | ||||
| Consolidated | 8,555 | – | 8,555 |
| Three months ended March 31, 2014 | |||||||
|---|---|---|---|---|---|---|---|
| (\$ in millions) | Third-party revenues | Intersegment revenues | Total revenues | ||||
| Discrete Automation and Motion | 2,194 | 187 | 2,381 | ||||
| Low Voltage Products | 1,784 | 98 | 1,882 | ||||
| Process Automation | 1,891 | 52 | 1,943 | ||||
| Power Products | 1,996 | 395 | 2,391 | ||||
| Power Systems | 1,532 | 76 | 1,608 | ||||
| Corporate and Other | 74 | 411 | 485 | ||||
| Intersegment elimination | – | (1,219) | (1,219) | ||||
| Consolidated | 9,471 | – | 9,471 |
| Three months ended March 31, | ||
|---|---|---|
| (\$ in millions) | 2015 | 2014 |
| Operational EBITA: | ||
| Discrete Automation and Motion | 318 | 352 |
| Low Voltage Products | 243 | 299 |
| Process Automation | 192 | 245 |
| Power Products | 253 | 304 |
| Power Systems | 33 | (54) |
| Corporate and Other and Intersegment elimination | (90) | (107) |
| Consolidated Operational EBITA | 949 | 1,039 |
| Acquisition-related amortization | (83) | (101) |
| Restructuring and restructuring-related expenses | (26) | (47) |
| Gains and losses from sale of businesses, acquisition-related expenses and certain non-operational items | (11) | (11) |
| Foreign exchange/commodity timing differences in income from operations: | ||
| Unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives) | (16) | (55) |
| Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized | (8) | 17 |
| Unrealized foreign exchange movements on receivables/payables (and related assets/liabilities) | 54 | 13 |
| Income from operations | 859 | 855 |
| Interest and dividend income | 19 | 17 |
| Interest and other finance expense | (71) | (84) |
| Income from continuing operations before taxes | 807 | 788 |
| Total assets(1) | ||
|---|---|---|
| (\$ in millions) | March 31, 2015 | December 31, 2014 |
| Discrete Automation and Motion | 9,846 | 10,123 |
| Low Voltage Products | 7,682 | 7,978 |
| Process Automation | 4,049 | 4,268 |
| Power Products | 7,105 | 7,396 |
| Power Systems | 6,558 | 6,855 |
| Corporate and Other | 7,895 | 8,258 |
| Consolidated | 43,135 | 44,878 |
Total assets are after intersegment eliminations and therefore reflect third-party assets only. (1)
The following reconciliations and definitions include measures which ABB uses to supplement its Interim Consolidated Financial Information (unaudited) which is prepared in accordance with United States generally accepted accounting principles (U.S. GAAP). Certain of these financial measures are, or may be, considered non-GAAP financial measures as defined in the rules of the U.S. Securities and Exchange Commission (SEC).
While ABB's management believes that the non-GAAP financial measures herein are useful in evaluating ABB's operating results, this information should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with U.S. GAAP. Therefore these measures should not be viewed in isolation but considered together with the Interim Consolidated Financial Information (unaudited) prepared in accordance with U.S. GAAP as of and for the three months ended March 31, 2015.
Like-for-like growth rates also adjust for changes in our business portfolio. The adjustment for portfolio changes is calculated as follows: where the results of any business acquired or divested have not been consolidated and reported for the entire duration of both the current and comparable periods, the reported key figures of such business are adjusted to exclude the relevant key figures of any corresponding quarters which are not comparable when computing the likefor-like growth rate. In addition, certain other adjustments, which affect the business portfolio but do not qualify as a divestment, are treated in a similar manner to a divestment. We do not adjust for portfolio changes where the business acquired or divested has annual revenues of less than \$50 million.
The following tables provide reconciliations of reported growth of certain key figures to their respective like-for-like growth rate.
| Q1 2015 compared to Q1 2014 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Order growth rate | ||||||||
| US\$ | Foreign | Acquisitions | US\$ | Foreign | Acquisitions | |||
| (as | exchange | and | (as | exchange | and | |||
| Division | reported) | impact | divestments | Like-for-like | reported) | impact | divestments | Like-for-like |
| Discrete Automation and Motion | -9% | 8% | 0% | -1% | -5% | 9% | 0% | 4% |
| Low Voltage Products | -14% | 10% | 6% | 2% | -17% | 9% | 7% | -1% |
| Process Automation | -4% | 14% | 6% | 16% | -19% | 11% | 4% | -4% |
| Power Products | -3% | 10% | 0% | 7% | -5% | 9% | 0% | 4% |
| Power Systems | 61% | 29% | 0% | 90% | -8% | 12% | 0% | 4% |
| ABB Group | 0% | 13% | 2% | 15% | -10% | 10% | 3% | 3% |
| Q1 2015 compared to Q1 2014 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Order growth rate | Revenue growth rate | ||||||||
| US\$ | Foreign Acquisitions |
US\$ | Foreign | Acquisitions | |||||
| (as | exchange | and | (as | exchange | and | ||||
| Region | reported) | impact | divestments | Like-for-like | reported) | impact | divestments | Like-for-like | |
| Europe | 2% | 23% | 2% | 27% | -17% | 17% | 2% | 2% | |
| The Americas | -1% | 5% | 5% | 9% | -3% | 5% | 6% | 8% | |
| Asia, Middle East and Africa | 0% | 7% | 1% | 8% | -8% | 6% | 2% | 0% | |
| ABB Group | 0% | 13% | 2% | 15% | -10% | 10% | 3% | 3% |
| March 31, 2015 compared to March 31, 2014 | ||||||||
|---|---|---|---|---|---|---|---|---|
| US\$ | Foreign | Acquisitions and | ||||||
| (as reported) | exchange impact | divestments | Like-for-like | |||||
| Discrete Automation and Motion | -5% | 11% | 0% | 6% | ||||
| Low Voltage Products | -14% | 11% | 9% | 6% | ||||
| Process Automation | -3% | 20% | 2% | 19% | ||||
| Power Products | -5% | 12% | 0% | 7% | ||||
| Power Systems | -6% | 17% | 0% | 11% | ||||
| ABB Group | -5% | 14% | 1% | 10% |
| Q1 2015 compared to Q1 2014 | |||||||
|---|---|---|---|---|---|---|---|
| US\$ | Foreign | Acquisitions and | |||||
| (as reported) | exchange impact | divestments | Like-for-like | ||||
| Discrete Automation and Motion | -10% | 10% | 0% | 0% | |||
| Low Voltage Products | -19% | 11% | 9% | 1% | |||
| Process Automation | -22% | 9% | 2% | -11% | |||
| Power Products | -17% | 10% | 0% | -7% | |||
| Power Systems | n.a. | n.a. | n.a. | n.a. | |||
| ABB Group | -9% | 10% | 4% | 5% |
| Q1 2015 compared to Q1 2014 | ||||||||
|---|---|---|---|---|---|---|---|---|
| US\$ | Foreign Acquisitions and |
|||||||
| (as reported) | exchange impact | divestments | Like-for-like | |||||
| Large orders | 91% | 38% | 0% | 129% | ||||
| Base orders | -12% | 9% | 3% | 0% | ||||
| Service orders | -13% | 10% | 4% | 1% | ||||
| Service revenues | -7% | 9% | 4% | 6% |
In line with the updated financial targets of ABB's Next Level strategy, effective from January 1, 2015, ABB changed its measure of segment profit from Operational EBITDA to Operational EBITA.
Operational EBITA margin is Operational EBITA as a percentage of Operational revenues.
Operational earnings before interest, taxes and acquisition-related amortization (Operational EBITA) represents Income from operations excluding acquisition-related amortization (as defined below), restructuring and restructuring-related expenses, gains and losses from sale of businesses, acquisition-related expenses and certain non-operational items, as well as foreign exchange/commodity timing differences in income from operations consisting of: (i) unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives), (ii) realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized, and (iii) unrealized foreign exchange movements on receivables/payables (and related assets/liabilities).
Amortization expense on intangibles arising upon acquisitions.
Operational revenues are total revenues adjusted for foreign exchange/commodity timing differences in total revenues of: (i) unrealized gains and losses on derivatives, (ii) realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized, and (iii) unrealized foreign exchange movements on receivables (and related assets).
| Three months ended March 31, 2015 | |||||||
|---|---|---|---|---|---|---|---|
| Corporate and | |||||||
| Discrete | Low | Other and | |||||
| Automation | Voltage | Process | Power | Power | Intersegment | ||
| (\$ in millions, unless otherwise indicated) | and Motion | Products | Automation | Products | Systems | elimination Consolidated | |
| Total revenues | 2,271 | 1,555 | 1,579 | 2,275 | 1,472 | (597) | 8,555 |
| Foreign exchange/commodity | |||||||
| timing differences in total revenues: | |||||||
| Unrealized gains and losses | |||||||
| on derivatives | (13) | 7 | (12) | (17) | 16 | 1 | (18) |
| Realized gains and losses on derivatives | |||||||
| where the underlying hedged | |||||||
| transaction has not yet been realized | (29) | – | 17 | 11 | 16 | – | 15 |
| Unrealized foreign exchange movements | |||||||
| on receivables (and related assets) | 8 | (3) | (12) | (11) | (16) | – | (34) |
| Operational revenues | 2,237 | 1,559 | 1,572 | 2,258 | 1,488 | (596) | 8,518 |
| Income (loss) from operations | 300 | 217 | 186 | 240 | 4 | (88) | 859 |
| Acquisition-related amortization | 32 | 25 | 3 | 3 | 14 | 6 | 83 |
| Restructuring and | |||||||
| restructuring-related expenses | 3 | 6 | 1 | 11 | 4 | 1 | 26 |
| Gains and losses from sale of businesses, | |||||||
| acquisition-related expenses and certain | |||||||
| non-operational items | – | 1 | (1) | 1 | – | 10 | 11 |
| Foreign exchange/commodity timing | |||||||
| differences in income from operations: | |||||||
| Unrealized gains and losses on | |||||||
| derivatives (foreign exchange, | |||||||
| commodities, embedded derivatives) | 7 | 8 | 2 | 3 | 15 | (19) | 16 |
| Realized gains and losses on derivatives | |||||||
| where the underlying hedged | |||||||
| transaction has not yet been realized | (29) | – | 12 | 14 | 11 | – | 8 |
| Unrealized foreign exchange movements | |||||||
| on receivables/payables | |||||||
| (and related assets/liabilities) | 5 | (14) | (11) | (19) | (15) | – | (54) |
| Operational EBITA | 318 | 243 | 192 | 253 | 33 | (90) | 949 |
| Operational EBITA margin (%) | 14.2% | 15.6% | 12.2% | 11.2% | 2.2% | n.a. | 11.1% |
| Three months ended March 31, 2014 | |||||||
|---|---|---|---|---|---|---|---|
| Corporate and | |||||||
| Discrete | Low | Other and | |||||
| Automation | Voltage | Process | Power | Power | Intersegment | ||
| (\$ in millions, unless otherwise indicated) | and Motion | Products | Automation | Products | Systems | elimination Consolidated | |
| Total revenues | 2,381 | 1,882 | 1,943 | 2,391 | 1,608 | (734) | 9,471 |
| Foreign exchange/commodity | |||||||
| timing differences in total revenues: | |||||||
| Unrealized gains and losses | |||||||
| on derivatives | (1) | 1 | (7) | (7) | 35 | (1) | 20 |
| Realized gains and losses on derivatives | |||||||
| where the underlying hedged | |||||||
| transaction has not yet been realized | – | – | – | (1) | (10) | – | (11) |
| Unrealized foreign exchange movements | |||||||
| on receivables (and related assets) | (5) | – | 3 | 4 | (6) | – | (4) |
| Operational revenues | 2,375 | 1,883 | 1,939 | 2,387 | 1,627 | (735) | 9,476 |
| Income (loss) from operations | 326 | 256 | 219 | 272 | (102) | (116) | 855 |
| Acquisition-related amortization | 34 | 30 | 4 | 5 | 22 | 6 | 101 |
| Restructuring and | |||||||
| restructuring-related expenses | 1 | 8 | 20 | 8 | 8 | 2 | 47 |
| Gains and losses from sale of businesses, | |||||||
| acquisition-related expenses and certain | |||||||
| non-operational items | (3) | 4 | 1 | 5 | 1 | 3 | 11 |
| Foreign exchange/commodity timing | |||||||
| differences in income from operations: | |||||||
| Unrealized gains and losses on | |||||||
| derivatives (foreign exchange, | |||||||
| commodities, embedded derivatives) | 1 | 1 | 1 | 16 | 38 | (2) | 55 |
| Realized gains and losses on derivatives | |||||||
| where the underlying hedged | |||||||
| transaction has not yet been realized | (1) | – | – | (2) | (14) | – | (17) |
| Unrealized foreign exchange | |||||||
| movements on receivables/payables | |||||||
| (and related assets/liabilities) | (6) | – | – | – | (7) | – | (13) |
| Operational EBITA | 352 | 299 | 245 | 304 | (54) | (107) | 1,039 |
| Operational EBITA margin (%) | 14.8% | 15.9% | 12.6% | 12.7% | -3.3% | n.a. | 11.0% |
Operational EPS is calculated as Operational net income divided by the weighted-average number of shares used in determining basic earnings per share.
Operational net income is calculated as Net income attributable to ABB adjusted for the net-of-tax impact of: (i) restructuring and restructuring-related expenses,
(ii) gains and losses from sale of businesses, acquisition-related expenses and certain non-operational items,
(iii) foreign exchange/commodity timing differences in income from operations consisting of: (a) unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives), (b) realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized, and (c) unrealized foreign exchange movements on receivables/payables (and related assets/liabilities), and
(iv) acquisition-related amortization.
Amortization expense on intangibles arising upon acquisitions.
The Adjusted Group effective tax rate is computed by dividing the provision for income taxes by income from continuing operations before taxes. The calculation excludes the amount of gains and losses from sale of businesses and the related provision for income taxes.
In connection with ABB's 2015-2020 targets, Operational EPS growth is measured assuming 2014 as the base year and uses constant exchange rates. We compute the constant currency operational net income for all periods using the relevant monthly exchange rates which were in effect during 2014 and any income difference is divided by the relevant weighted-average number of shares outstanding to identify the constant currency Operational EPS adjustment.
| Three months ended March 31, | |||||||
|---|---|---|---|---|---|---|---|
| (\$ in millions, except per share data in \$) | 2015 | 2014 | |||||
| EPS(1) | EPS(1) | ||||||
| Net income (attributable to ABB) | 564 | 0.25 | 544 | 0.24 | |||
| Restructuring and restructuring-related expenses(2) | 19 | 0.01 | 34 | 0.01 | |||
| Gains and losses from sale of businesses, | |||||||
| acquisition-related expenses and certain non-operational items(3) | 8 | 0.00 | 8 | 0.00 | |||
| FX/commodity timing differences in income from operations(2) | (21) | (0.01) | 18 | 0.01 | |||
| Acquisition-related amortization(2) | 59 | 0.03 | 72 | 0.03 | |||
| Operational net income | 629 | 0.28 | 676 | 0.29 | |||
| Constant currency Operational EPS adjustment | 0.03 | – | |||||
| Operational EPS (constant currency basis) | 0.31 | 0.29 |
EPS amounts are computed individually, therefore the sum of the per share amounts shown may not equal to the total. (1)
Net of tax at the Adjusted Group effective tax rate.
Net of tax at the Adjusted Group effective tax rate, except for gains and losses from sale of businesses which are net of the actual related provision for taxes. (3)
Net debt / (Net cash)
Net debt / (Net cash) is defined as Total debt less Cash and marketable securities.
Total debt
Total debt is the sum of Short-term debt and current maturities of long-term debt, and Long-term debt.
Cash and marketable securities
Cash and marketable securities is the sum of Cash and equivalents, and Marketable securities and short-term investments.
| (\$ in millions) | March 31, 2015 | December 31, 2014 |
|---|---|---|
| Short-term debt and current maturities of long-term debt | 506 | 353 |
| Long-term debt | 7,203 | 7,338 |
| Total debt | 7,709 | 7,691 |
| Cash and equivalents | 4,471 | 5,443 |
| Marketable securities and short-term investments | 1,684 | 1,325 |
| Cash and marketable securities | 6,155 | 6,768 |
| Net debt / (Net cash) | 1,554 | 923 |
Net working capital as a percentage of revenues
Net working capital as a percentage of revenues is calculated as Net working capital divided by Adjusted revenues for the trailing twelve months.
Net working capital is the sum of (i) receivables, net, (ii) inventories, net, and (iii) prepaid expenses; less (iv) accounts payable, trade, (v) billings in excess of sales, (vi) advances from customers, and (vii) other current liabilities (excluding primarily: (a) income taxes payable, (b) current derivative liabilities, (c) pension and other employee benefits, and (d) payables under the share buyback program); and including the amounts related to these accounts which have been presented as either assets or liabilities held for sale.
Adjusted revenues for the trailing twelve months includes total revenues recorded by ABB in the twelve months preceding the relevant balance sheet date adjusted to eliminate revenues of divested businesses and the estimated impact of annualizing revenues of certain acquisitions which were completed in the same trailing twelve-month period.
| (\$ in millions, unless otherwise indicated) | March 31, 2015 | March 31, 2014 |
|---|---|---|
| Net working capital: | ||
| Receivables, net | 10,599 | 12,215 |
| Inventories, net | 5,346 | 6,201 |
| Prepaid expenses | 289 | 305 |
| Accounts payable, trade | (4,473) | (4,872) |
| Billings in excess of sales | (1,396) | (1,539) |
| Advances from customers | (1,503) | (1,780) |
| Other current liabilities(1) | (2,900) | (3,307) |
| Net working capital | 5,962 | 7,223 |
| Total revenues for the three months ended: | ||
| March 31, 2015 / 2014 | 8,555 | 9,471 |
| December 31, 2014 / 2013 | 10,346 | 11,373 |
| September 30, 2014 / 2013 | 9,823 | 10,535 |
| June 30, 2014 / 2013 | 10,190 | 10,225 |
| Adjustment to annualize/eliminate revenues of certain acquisitions/divestments | (372) | 204 |
| Adjusted revenues for the trailing twelve months | 38,542 | 41,808 |
| Net working capital as a percentage of revenues (%) | 15% | 17% |
Amounts exclude \$1,017 million and \$710 million at March 31, 2015 and 2014, respectively, related primarily to (a) income taxes payable, (b) current derivative liabilities, (c) pension and other employee benefits, and (d) payables under the share buyback program.
Finance net is calculated as Interest and dividend income less Interest and other finance expense.
| Three months ended March 31, | ||
|---|---|---|
| (\$ in millions) | 2015 | 2014 |
| Interest and dividend income | 19 | 17 |
| Interest and other finance expense | (71) | (84) |
| Finance net | (52) | (67) |
Book-to-bill ratio is calculated as Orders received divided by Total revenues.
| Three months ended March 31, | |||
|---|---|---|---|
| (\$ in millions, unless otherwise indicated) | 2015 | 2014 | |
| Orders received | 10,404 | 10,358 | |
| Total revenues | 8,555 | 9,471 | |
| Book-to-bill ratio | 1.22 | 1.09 |
Corporate Communications P.O. Box 8131 8050 Zurich Switzerland Tel: +41 (0)43 317 71 11 Fax: +41 (0)43 317 79 58
www.abb.com
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.