UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT
TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of July 2017
Commission File Number 001-16429
ABB Ltd
(Translation of registrant’s name into English)
P.O. Box 1831,
Affolternstrasse 44, CH-8050, Zurich, Switzerland
(Address of principal executive office)
Indicate
by check mark whether the registrant files or will file annual reports under
cover of Form 20-F or Form 40-F.
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1):
⬜
Note:
Regulation S-T
Rule 101(b)(1) only permits the submission in paper of a Form 6-K if
submitted solely to provide an attached annual report to security holders.
Indication
by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7):
⬜
Note:
Regulation S-T
Rule 101(b)(7) only permits the submission in paper of a
Form 6-K if submitted to furnish a report or other document that the
registrant foreign private issuer must furnish and make public under the laws
of the jurisdiction in which the registrant is incorporated, domiciled or
legally organized (the registrant’s “home country”), or under the rules of
the home country exchange on which the registrant’s securities are traded, as
long as the report or other document is not a press release, is not required to
be and has not been distributed to the registrant’s security holders, and, if
discussing a material event, has already been the subject of a Form 6-K
submission or other Commission filing on EDGAR.
Indicate
by check mark whether the registrant by furnishing the information contained in
this Form is also thereby furnishing the information to the Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
If
“Yes” is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-
This
Form 6-K consists of the following:
1.
Press
release issued by ABB Ltd dated July 20, 2017 titled “ABB: Building growth
momentum”.
2.
Q2
2017 Financial Information.
3. Announcements
regarding transactions in ABB Ltd’s Securities made by the directors or the
members of the Executive Committee.
The
information provided by Item 2 above is incorporated by reference into ABB
Ltd's registration statement on Form F-3 (File No. 333-180922) and registration
statements on Form S-8 (File Nos. 333-190180, 333-181583, 333-179472,
333-171971 and 333-129271) each of which was previously filed with the Securities
and Exchange Commission.
2
Zurich,
Switzerland, July 20, 2017: Second quarter highlights
ABB:
Building growth momentum
−
Total and base
orders grew 3%
1
; higher orders in all regions
−
Revenues up 1%
−
Operational EBITA margin
2
12.4%, dampened this
quarter by commodity prices and some overcapacity
−
Net income $525
million
−
Cash
flow from operating activities $467 million reflects timing of short-term
incentive payments
−
Net
working capital as a percentage of revenues 14.1%, reduced 90 bps on an annual
basis
−
Active portfolio management: B&R acquisition closed
July 6, KEYMILE’s communication business to be acquired Q3
“In Q2, ABB
continued to build its growth momentum as our targeted initiatives are
delivering. Order growth was broad-based and across all regions,” said ABB CEO
Ulrich Spiesshofer. “Our industry-leading digital offering, ABB Ability, is
taking off and starting to contribute to growth.”
“Operational
performance in the Power Grids and Industrial Automation divisions was solid in
the quarter. Electrification Products and Robotics and Motion improved margins
sequentially, but were not able to fully compensate commodity price headwinds
and overcapacity during the quarter,” he said. “While we are pleased with the
growth momentum, especially the double-digit order growth in Robotics and
Motion, we remain firmly focused on further improving operational execution and
our cost base.”
“The successful
completion of the B&R acquisition and the handover of our last legacy
off-shore wind project, Dolwin 2, are solid examples of the disciplined
execution of our Next Level strategy.”
Key Figures
|
|
|
Change
|
|
|
Change
|
($
in millions, unless otherwise indicated)
|
Q2 2017
|
Q2 2016
|
US$
|
Comparable
1
|
H1 2017
|
H1 2016
|
US$
|
Comparable
1
|
Orders
|
8,349
|
8,316
|
0%
|
+3%
|
16,752
|
17,569
|
-5%
|
0%
|
Revenues
|
8,454
|
8,677
|
-3%
|
+1%
|
16,308
|
16,580
|
-2%
|
+2%
|
Operational
EBITA
2
|
1,042
|
1,120
|
-7%
|
-5%
3
|
1,985
|
2,071
|
-4%
|
-2%
3
|
as
% of operational revenues
|
12.4%
|
12.9%
|
-0.5pts
|
|
12.3%
|
12.5%
|
-0.2pts
|
|
Net
income
|
525
|
406
|
29%
|
|
1,249
|
906
|
38%
|
|
Basic
EPS ($)
|
0.25
|
0.19
|
30%
4
|
|
0.58
|
0.42
|
39%
4
|
|
Operational
EPS
2
($)
|
0.30
|
0.35
|
-15%
4
|
-11%
4
|
0.58
|
0.64
|
-9%
4
|
-6%
4
|
Cash
flow from operating activities
|
467
|
1,082
|
-57%
|
|
976
|
1,334
|
-27%
|
|
Short-term
outlook
Macroeconomic
and geopolitical developments are signaling a mixed picture with continued
uncertainty. Some macroeconomic signs in the US remain positive and growth in
China is expected to continue. The overall global market remains impacted by
modest growth and increased uncertainties, e.g., Brexit in Europe and
geopolitical tensions in various parts of the world. Oil prices and foreign
exchange translation effects are expected to continue to influence the
company’s results. With this and the ongoing transformation of ABB, we expect
2017 to be a transitional year.
______
1
Growth rates for
orders, base orders, revenues and order backlog are on a comparable basis
(local currency adjusted for acquisitions and divestitures). US$ growth rates
are presented in Key Figures table
2
For a
reconciliation of non-GAAP measures, see “Supplemental Reconciliations and
Definitions” in the attached Q2 2017 Financial Information
3
Constant currency
(not adjusted for portfolio changes)
4
EPS growth rates
are computed using unrounded amounts. Comparable operational earnings per share
is in constant currency (2014 exchange rates and not adjusted for changes in
the business portfolio)
1/6
Q2 2017
Group results
Orders
Total
orders were 3 percent higher (stable in US dollars) compared with the second
quarter a year ago, as the significant increase in Robotics and Motion and
Industrial Automation more than offset the decline in Electrification Products
and Power Grids. Large orders grew 5 percent (1 percent in US dollars) and
represented 8 percent of the total orders, unchanged compared with the same
quarter a year ago. A
stronger US dollar versus the prior year period resulted in a negative
translation impact on reported orders of 3 percent.
Base
orders (below $15 million) increased 3 percent (stable in US dollars), improving
in Robotics and Motion, Industrial Automation and Power Grids. Electrification
Products decreased 1 percent (4 percent in US dollars), impacted primarily by
fewer trading days in the quarter compared with the same period a year ago.
Total
service and software orders rose 8 percent (5 percent in US dollars) and
increased to 20 percent of total orders compared with 19 percent a year ago.
The
order backlog at the end of June 2017 amounted to $23.6 billion, 1 percent
lower (7 percent in US dollars) compared with the end of the second quarter a
year ago. The book-to-bill
2
ratio in the second quarter was 0.99x
compared with 0.96x in the second quarter of 2016.
Market
overview
Demand
patterns in all of ABB’s
regions were
positive in the quarter:
•
Europe
benefited from positive market
developments in industry, transport and infrastructure and timing of large
capital investments. Total orders improved 6 percent (1 percent in US dollars)
with positive contributions from the
United
Kingdom,
Finland, Turkey and Spain more than offsetting declines in
Norway and France. Base orders improved 1 percent
(4
percent lower in US
dollars) with Spain, Sweden and Turkey as the main contributors.
•
The Americas
was positive, driven by the need for energy-efficient solutions for industry,
transport and infrastructure and increased demand for automation in general.
Total orders grew 2 percent in the quarter (2 percent in US dollars) on
increased large order awards. Base orders declined 2 percent (2 percent in US dollars)
as higher demand in the United States and Brazil could not offset declines in
Canada. The United States grew 7 percent overall (6 percent in US dollars) and
1 percent in base orders (stable in US dollars).
•
Asia, Middle
East and Africa (AMEA) grew due to
increased demand in industry, transport and infrastructure for energy-efficient
and automation solutions. Utilities made selective investments in the quarter.
Total orders increased 2 percent (2 percent lower in US dollars) driven
primarily by substantial growth in India, Saudi Arabia and South Africa. Total
orders in China declined, as higher base orders could not offset lower large
order awards. Increased demand in India reflects the continuing need for
industrial automation and reliable power solutions. Base
orders for the region increased 9 percent (6 percent in US
dollars) with positive contributions from China and India.
Demand
patterns in ABB’s three major customer sectors were mixed:
•
Utilities
continued their selective investments, adding new capacity in emerging markets,
upgrading the aging power infrastructure in mature markets and integrating
renewable energy globally. They are also investing in automation and control
solutions to enhance the stability of the grid.
•
In industry,
investments in robotics solutions
and
the automotive and food and beverage
sectors remained positive. Investments in process industries, especially
offshore
oil and gas, remained
subdued. Selective investments in mining, exploration and downstream oil and
gas are expected to continue.
•
Transport &
infrastructure
demand
has been mixed. Demand for
building automation solutions
as well as
solutions involving energy efficiency for
rail
transport remained strong while the marine
sector, except for cruise ships, suffered from a sharp decline due to the
subdued oil and gas sector. Electric Vehicle charging remained a highlight in
the quarter.
2/6
Revenues
Revenues
increased 1 percent (3 percent lower in US dollars) in the
second quarter and were higher in Electrification
Products and Robotics and Motion. Power Grids was stable and Industrial
Automation was lower on the reduced order backlog. Total services and software
revenues were stable
(2
percent lower in US dollars) and
represented 17
percent
of total
revenues, unchanged compared
with
a
year
ago.
Operational
EBITA
Operational
EBITA
was $1,042 million, 5 percent lower in constant currencies (7 percent lower in
US dollars). Operational EBITA margin was 12.4 percent, 0.5 percent lower
compared with the same period a year ago.
Operational EBITA margin improved in Industrial Automation and Power Grids but
decreased in the Electrification Products and Robotics and Motion divisions.
Operational EBITA was impacted by commodity price increases and overcapacity in
some businesses which could not offset the positive net savings effect.
Net income,
Basic and Operational
earnings per
share
Net
income increased to $525 million from $406 million and basic earnings per share
was $0.25 compared with $0.19 for the same quarter of 2016. This result was
impacted by lower restructuring and restructuring-related expenses and a higher
tax rate of 30% versus 25.1% compared with the same period a year ago.
Operational EPS was $0.30 compared to $0.35 for the same quarter of 2016, a
decrease of 11 percent in constant currencies
2
.
Cash
flow from operating
activities
Cash
flow
from operating activities was
$467 million compared with $1,082 million in 2016 due to the change in timing
of short-term incentive payments to the second quarter from the first quarter
in 2017. It was also impacted by timing of tax payments, delays in payment from
Middle Eastern customers and the positive cash contribution in the previous
year from the recently divested cables business.
Share
cancelation
In July
2017, based on the shareholders’ vote at the company’s annual general meeting
on April 13, 2017, ABB canceled 46.6 million shares. This will be reflected in
the third quarter.
Executive
Committee changes
Effective April 1, 2017, Timo Ihamuotila
joined ABB from Nokia as Chief Financial Officer and a member of the Executive
Committee. Effective July 1, 2017, Chunyuan Gu, Managing Director of ABB in
China, became President of the Asia, Middle East and Africa (AMEA) region and a
member of the Executive Committee. Chunyuan takes over AMEA from Frank Duggan,
who was appointed President of the Europe region, succeeding Bernhard Jucker,
who retired on June 30 after a long and distinguished career at ABB.
3/6
Q2
divisional
performance
($ in millions, unless otherwise indicated)
|
Orders
|
Change
|
Revenues
|
Change
|
Operational EBITA %
|
CHANGE
|
US$
|
Comparable
1
|
US$
|
Comparable
1
|
Electrification Products
|
2,512
|
-4%
|
-1%
|
2,509
|
-1%
|
+2%
|
15.0%
|
-0.8pts
|
Robotics and Motion
|
2,219
|
+12%
|
+14%
|
2,087
|
+3%
|
+5%
|
14.9%
|
-1.3pts
|
Industrial Automation
|
1,499
|
+6%
|
+8%
|
1,608
|
-9%
|
-7%
|
12.7%
|
+0.3pts
|
Power Grids
|
2,484
|
-6%
|
-3%
|
2,647
|
-3%
|
0%
|
9.8%
|
+0.5pts
|
Corporate & other (incl.
inter-division elimination)
|
-365
|
|
|
-397
|
|
|
|
|
ABB Group
|
8,349
|
0%
|
+3%
|
8,454
|
-3%
|
+1%
|
12.4%
|
-0.5
pts
|
Electrification
Products
Total
orders were impacted by fewer trading days in the second quarter versus the
second quarter of 2016; total orders for the first half of 2017 were up 1
percent (2 percent lower in US dollars). Revenues grew 2 percent in the quarter
(1 percent lower in US dollars). Operational EBITA margin improved sequentially
but was lower in the quarter versus a year ago mainly due to higher material
costs, which more than offset productivity and cost savings.
Robotics
and
Motion
Total orders were 14 percent higher (12 percent in US dollars) as
all regions and business units contributed to the significant growth.
Third-party base orders increased 10 percent (8 percent in US dollars) on
continued strong growth in robotics and light industry. Revenues improved 5
percent (3 percent in US dollars). Operational EBITA margin was impacted by
product mix, significantly higher commodity prices and under absorption, which
more than offset the cost-out measures.
Industrial
Automation
Total orders grew 8 percent (6 percent in US dollars)
due to selective capital expenditure investments in oil and gas and in mining.
Third party base orders continued to be positive.
Revenues were 7 percent lower (9
percent in US dollars), reflecting the execution of a lower order backlog.
Operational EBITA margin increased slightly as cost and productivity savings
offset the lower revenue contribution.
Power Grids
Third party base
orders grew 2 percent (stable in US dollars) on investments in emerging markets
while total orders were impacted by the timing of large order awards. Revenues
were steady (3 percent lower in US dollars) on solid order backlog execution.
Operational EBITA margin increased 50 basis points to 9.8 percent, reflecting
improved productivity, project execution and continued cost savings.
The division’s ‘Power Up’ program to drive
transformation and value creation is underway and the company will continue to
invest in this initiative in the coming quarters.
4/6
Next
Level
strategy – Stage 3
ABB
continued the implementation of its Next Level strategy during the quarter by
further shifting its center of gravity to higher growth segments, strengthening
its competitiveness and de-risking the portfolio.
On July 6, ABB announced the completion of its acquisition of
B&R (Bernecker + Rainer Industrie-Elektronik GmbH), the largest independent
provider focused on product- and software-based, open-architecture solutions
for machine and factory automation worldwide. This acquisition closes ABB’s
historic gap in machine and factory automation and will create a uniquely
comprehensive automation portfolio for customers globally. This all-cash
acquisition is expected to be EPS-accretive in the first year.
ABB successfully launched its new industry-leading digital
offering, ABB Ability, at its customer events in Houston, Hanover and Hangzhou.
With more than 180 solutions, across all customer segments, ABB Ability has
seen very positive customer response and is contributing to sustainable growth.
On July 3, ABB announced that it had agreed to acquire the
mission-critical communication network business from the KEYMILE Group to
strengthen its portfolio and further enhance ABB Ability. It will add reliable
communications technologies that are essential to maintain today’s dynamic and
complex digital electrical grids. The acquisition will bring with it products,
software and service solutions, as well as research and development expertise.
It is expected to close during the third quarter of 2017.
ABB continues to build on its existing
momentum and is further accelerating its operational performance.
The company’s White-Collar Productivity
savings program has exceeded expectations since its launch in 2015. ABB is on
track to achieve the program’s increased cost reduction target of $1.3 billion
within the initially announced timeframe and approximately $200 million lower
combined restructuring program and implementation costs than initially
announced. ABB is continuing its regular cost-savings programs, leveraging
operational excellence and world-class supply chain management to achieve
savings equivalent to 3-5 percent of cost of sales each year.
ABB reaffirms the target of its Net
Working Capital program to free up approximately $2 billion by the end of 2017.
The program is on track; Net Working Capital as a percentage of revenues
decreased 90 bps compared with the same period a year ago.
Outlook
Macroeconomic
and geopolitical developments are signaling a mixed picture with continued
uncertainty. Some macroeconomic signs remain positive in the United States and
growth in China is expected to continue. The overall global market remains
impacted by modest growth and increased uncertainties, e.g., Brexit in Europe
and geopolitical tensions in various parts of the world. Oil prices and foreign
exchange translation effects are expected to continue to influence the
company’s results. With this and the ongoing transformation of ABB, we expect
2017 to be a transitional year.
The
attractive
long-term
demand
outlook
in ABB’s three
major
customer
sectors — utilities, industry and
transport &
infrastructure
—
is
driven by the
Energy and
Fourth Industrial Revolutions.
ABB is
well-positioned to tap into these opportunities for long-term profitable growth
with its strong market presence, broad geographic and business scope,
technology leadership and financial strength.
5/6
More
information
The
Q2 2017 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 press conference
today
starting at 10:00 a.m. Central European Time
(CET) (9:00 a.m. BST, 4:00 a.m. EDT). The
event will be
accessible
by conference call. Callers from the
UK should dial +44 203 059 58
62.
From
Sweden,
the
number to dial is +46 85 051
00
31, and from
the
rest
of
Europe,
+41
58
310 50 00. Callers
from the
US and Canada should
dial +1
866 291
41
66 (toll-free) or
+1
631
570 56 13 (long-distance
charges apply). Lines will be open 10-15
minutes before
the start of the
call.
A
conference
call
and webcast
for
analysts and investors is scheduled
to begin
today at 2:00
p.m. CET
(1:00 p.m. BST, 8:00 a.m.
EDT). Callers from the
UK should dial
+44 203 059 58
62.
From Sweden,
the
number to dial is
+46 85 051
00 31, and from
the
rest
of Europe,
+41
58
310 50 00. Callers from the
US and Canada should
dial +1
866 291
41
66 (toll-free) or
+1
631
570 56 13 (long-distance
charges apply). 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. www.abb.com/investorrelations
ABB
(ABBN: SIX Swiss
Ex) is a pioneering technology leader in electrification products, robotics and
motion, industrial automation and power grids, serving customers in utilities,
industry and transport & infrastructure globally. Continuing more than a 125-year
history of innovation, ABB today is writing the future of industrial
digitalization and driving the Energy and Fourth Industrial Revolutions. ABB
operates in more than 100 countries with about 132,000 employees. www.abb.com
|
|
Investor
calendar 2017
|
Innovation
and Technology Day
|
September
6, 2017
|
Third
quarter 2017 results
|
October
26, 2017
|
Fourth
quarter and full year 2017 results
|
February
8, 2018
|
Annual
General Meeting
|
March
29, 2018
|
Important
notice about
forward-looking
information
This
press release
includes
forward-looking information
and
statements as well as other
statements
concerning the
outlook
for
our
business,
including those
in the
sections of this release
titled “Short-term outlook”, “Outlook”, and
“Next Level strategy – Stage
3”.
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”, “intends”
or
similar
expressions. However, there
are
many
risks and uncertainties, many of which
are
beyond our
control, that could
cause
our
actual
results to differ
materially from the
forward-looking information and statements
made
in this press release
and which
could affect
our
ability to achieve
any or
all
of our
stated
targets. The
important
factors that could
cause
such differences include, among
others, business risks associated with the
volatile global
economic environment and political conditions, costs associated with
compliance
activities, 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,
July 20, 2017
Ulrich
Spiesshofer, CEO
—
For more information please contact:
|
Media Relations
Phone: +41 43 317 65 68
Email: media.relations@ch.abb.com
|
Investor
Relations
Phone: +41 43 317 71 11
Email: investor.relations@ch.abb.com
|
ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland
|
6/6
1
Q2
2017 Financial Information
2
Q2
2017 Financial Information
—
Key Figures
|
|
|
|
|
CHANGE
|
|
($ in millions, unless otherwise indicated)
|
Q2
2017
|
Q2
2016
|
US$
|
Comparable
(1)
|
|
Orders
|
8,349
|
8,316
|
0%
|
3%
|
|
Order backlog (end June)
|
23,553
|
25,338
|
-7%
|
-1%
|
|
Revenues
|
8,454
|
8,677
|
-3%
|
1%
|
|
Operational EBITA
(1)
|
1,042
|
1,120
|
-7%
|
-5%
(2)
|
|
|
as % of operational revenues
(1)
|
12.4%
|
12.9%
|
-0.5
pts
|
|
|
Net income
|
525
|
406
|
29%
|
|
|
Basic earnings per share ($)
|
0.25
|
0.19
|
30%
(3)
|
|
|
Operational earnings per share
(1)
($)
|
0.30
|
0.35
|
-15%
(3)
|
-11%
(3)
|
|
Cash flow from operating activities
|
467
|
1,082
|
-57%
|
|
|
|
|
|
|
CHANGE
|
|
($ in millions, unless otherwise indicated)
|
H1
2017
|
H1
2016
|
US$
|
Comparable
(1)
|
|
Orders
|
16,752
|
17,569
|
-5%
|
0%
|
|
Revenues
|
16,308
|
16,580
|
-2%
|
2%
|
|
Operational EBITA
(1)
|
1,985
|
2,071
|
-4%
|
-2%
(2)
|
|
|
as % of operational revenues
(1)
|
12.3%
|
12.5%
|
-0.2
pts
|
|
|
Net income
|
1,249
|
906
|
38%
|
|
|
Basic earnings per share ($)
|
0.58
|
0.42
|
39%
(3)
|
|
|
Operational earnings per share
(1)
($)
|
0.58
|
0.64
|
-9%
(3)
|
-6%
(3)
|
|
Cash flow from operating activities
|
976
|
1,334
|
-27%
|
|
(1) For
a reconciliation of non-GAAP measures see “
Supplemental Reconciliations and
Definitions
” on
page 33.
(2) Constant
currency (not adjusted for portfolio changes).
(3) Earnings
per share growth rates are computed using unrounded amounts. Comparable
Operational earnings per share growth is in constant currency (2014 foreign
exchange rates and not adjusted for changes in the business portfolio).
3
Q2
2017 Financial Information
|
|
|
|
CHANGE
|
|
($ in millions, unless otherwise indicated)
|
Q2
2017
|
Q2
2016
|
US$
|
Local
|
Comparable
|
|
Orders
|
ABB Group
|
8,349
|
8,316
|
0%
|
3%
|
3%
|
|
|
Electrification Products
|
2,512
|
2,624
|
-4%
|
-1%
|
-1%
|
|
|
Robotics and Motion
|
2,219
|
1,978
|
12%
|
14%
|
14%
|
|
|
Industrial Automation
|
1,499
|
1,419
|
6%
|
8%
|
8%
|
|
|
Power Grids
|
2,484
|
2,632
|
-6%
|
-3%
|
-3%
|
|
|
Corporate and Other
|
|
|
|
|
|
|
(incl. inter-division eliminations)
|
(365)
|
(337)
|
|
Third-party base orders
|
ABB Group
|
7,681
|
7,657
|
0%
|
3%
|
3%
|
|
|
Electrification Products
|
2,393
|
2,494
|
-4%
|
-1%
|
-1%
|
|
|
Robotics and Motion
|
1,967
|
1,826
|
8%
|
10%
|
10%
|
|
|
Industrial Automation
|
1,327
|
1,325
|
0%
|
2%
|
2%
|
|
|
Power Grids
|
1,977
|
1,980
|
0%
|
2%
|
2%
|
|
|
Corporate and Other
|
17
|
32
|
|
|
|
|
Order backlog (end June)
|
ABB Group
|
23,553
|
25,338
|
-7%
|
-6%
|
-1%
|
|
|
Electrification Products
|
3,220
|
3,452
|
-7%
|
-5%
|
-5%
|
|
|
Robotics and Motion
|
4,188
|
4,025
|
4%
|
4%
|
4%
|
|
|
Industrial Automation
|
5,710
|
6,165
|
-7%
|
-7%
|
-7%
|
|
|
Power Grids
|
11,860
|
12,286
|
-3%
|
-3%
|
-2%
|
|
|
Corporate and Other
|
|
|
|
|
|
|
(incl. inter-division eliminations)
|
(1,425)
|
(590)
|
|
Revenues
|
ABB Group
|
8,454
|
8,677
|
-3%
|
0%
|
1%
|
|
|
Electrification Products
|
2,509
|
2,536
|
-1%
|
2%
|
2%
|
|
|
Robotics and Motion
|
2,087
|
2,033
|
3%
|
5%
|
5%
|
|
|
Industrial Automation
|
1,608
|
1,770
|
-9%
|
-7%
|
-7%
|
|
|
Power Grids
|
2,647
|
2,717
|
-3%
|
0%
|
0%
|
|
|
Corporate and Other
|
|
|
|
|
|
|
(incl. inter-division eliminations)
|
(397)
|
(379)
|
|
Operational EBITA
|
ABB Group
|
1,042
|
1,120
|
-7%
|
-5%
|
|
|
|
Electrification Products
|
373
|
400
|
-7%
|
-4%
|
|
|
|
Robotics and Motion
|
312
|
329
|
-5%
|
-2%
|
|
|
|
Industrial Automation
|
205
|
220
|
-7%
|
-5%
|
|
|
|
Power Grids
|
257
|
254
|
1%
|
4%
|
|
|
|
Corporate and Other
|
|
|
|
|
|
|
(incl. inter-division eliminations)
|
(105)
|
(83)
|
|
Operational EBITA %
|
ABB Group
|
12.4%
|
12.9%
|
|
|
|
|
|
Electrification Products
|
15.0%
|
15.8%
|
|
|
|
|
|
Robotics and Motion
|
14.9%
|
16.2%
|
|
|
|
|
|
Industrial Automation
|
12.7%
|
12.4%
|
|
|
|
|
|
Power Grids
|
9.8%
|
9.3%
|
|
|
|
|
Income from operations
|
ABB Group
|
884
|
647
|
|
|
|
|
|
Electrification Products
|
333
|
303
|
|
|
|
|
|
Robotics and Motion
|
280
|
250
|
|
|
|
|
|
Industrial Automation
|
203
|
123
|
|
|
|
|
|
Power Grids
|
231
|
149
|
|
|
|
|
|
Corporate and Other
|
|
|
|
|
|
|
(incl. inter-division eliminations)
|
(163)
|
(178)
|
|
Income from operations %
|
ABB Group
|
10.5%
|
7.5%
|
|
|
|
|
|
Electrification Products
|
13.3%
|
11.9%
|
|
|
|
|
|
Robotics and Motion
|
13.4%
|
12.3%
|
|
|
|
|
|
Industrial Automation
|
12.6%
|
6.9%
|
|
|
|
|
|
Power Grids
|
8.7%
|
5.5%
|
|
|
|
|
Cash flow from operating activities
|
ABB Group
|
467
|
1,082
|
|
|
|
|
|
Electrification Products
|
259
|
325
|
|
|
|
|
|
Robotics and Motion
|
213
|
289
|
|
|
|
|
|
Industrial Automation
|
143
|
270
|
|
|
|
|
|
Power Grids
|
75
|
241
|
|
|
|
|
|
Corporate and Other
|
(223)
|
(43)
|
|
|
|
4
Q2
2017 Financial Information
|
|
|
|
CHANGE
|
|
($ in millions, unless otherwise indicated)
|
H1
2017
|
H1
2016
|
US$
|
Local
|
Comparable
|
|
Orders
|
ABB Group
|
16,752
|
17,569
|
-5%
|
-2%
|
0%
|
|
|
Electrification Products
|
5,040
|
5,130
|
-2%
|
1%
|
1%
|
|
|
Robotics and Motion
|
4,396
|
4,066
|
8%
|
10%
|
10%
|
|
|
Industrial Automation
|
3,181
|
3,257
|
-2%
|
0%
|
0%
|
|
|
Power Grids
|
4,863
|
5,597
|
-13%
|
-11%
|
-11%
|
|
|
Corporate and Other
|
|
|
|
|
|
|
(incl. inter-division eliminations)
|
(728)
|
(481)
|
|
|
|
|
Third-party base orders
|
ABB Group
|
15,279
|
15,300
|
0%
|
2%
|
2%
|
|
|
Electrification Products
|
4,758
|
4,845
|
-2%
|
1%
|
1%
|
|
|
Robotics and Motion
|
3,958
|
3,629
|
9%
|
11%
|
11%
|
|
|
Industrial Automation
|
2,772
|
2,777
|
0%
|
2%
|
2%
|
|
|
Power Grids
|
3,759
|
3,996
|
-6%
|
-4%
|
-4%
|
|
|
Corporate and Other
|
32
|
53
|
|
|
|
|
Order backlog (end June)
|
ABB Group
|
23,553
|
25,338
|
-7%
|
-6%
|
-1%
|
|
|
Electrification Products
|
3,220
|
3,452
|
-7%
|
-5%
|
-5%
|
|
|
Robotics and Motion
|
4,188
|
4,025
|
4%
|
4%
|
4%
|
|
|
Industrial Automation
|
5,710
|
6,165
|
-7%
|
-7%
|
-7%
|
|
|
Power Grids
|
11,860
|
12,286
|
-3%
|
-3%
|
-2%
|
|
|
Corporate and Other
|
|
|
|
|
|
|
(incl. inter-division eliminations)
|
(1,425)
|
(590)
|
|
Revenues
|
ABB Group
|
16,308
|
16,580
|
-2%
|
1%
|
2%
|
|
|
Electrification Products
|
4,802
|
4,825
|
0%
|
2%
|
2%
|
|
|
Robotics and Motion
|
4,013
|
3,906
|
3%
|
5%
|
5%
|
|
|
Industrial Automation
|
3,157
|
3,434
|
-8%
|
-6%
|
-6%
|
|
|
Power Grids
|
5,052
|
5,170
|
-2%
|
0%
|
2%
|
|
|
Corporate and Other
|
|
|
|
|
|
|
(incl. inter-division eliminations)
|
(716)
|
(755)
|
|
Operational EBITA
|
ABB Group
|
1,985
|
2,071
|
-4%
|
-2%
|
|
|
|
Electrification Products
|
695
|
707
|
-2%
|
1%
|
|
|
|
Robotics and Motion
|
586
|
615
|
-5%
|
-2%
|
|
|
|
Industrial Automation
|
409
|
422
|
-3%
|
-2%
|
|
|
|
Power Grids
|
502
|
437
|
15%
|
19%
|
|
|
|
Corporate and Other
|
|
|
|
|
|
|
(incl. inter-division eliminations)
|
(207)
|
(110)
|
|
Operational EBITA %
|
ABB Group
|
12.3%
|
12.5%
|
|
|
|
|
|
Electrification Products
|
14.6%
|
14.7%
|
|
|
|
|
|
Robotics and Motion
|
14.6%
|
15.8%
|
|
|
|
|
|
Industrial Automation
|
13.0%
|
12.2%
|
|
|
|
|
|
Power Grids
|
10.0%
|
8.5%
|
|
|
|
|
Income from operations
|
ABB Group
|
1,914
|
1,431
|
|
|
|
|
|
Electrification Products
|
640
|
565
|
|
|
|
|
|
Robotics and Motion
|
532
|
506
|
|
|
|
|
|
Industrial Automation
|
409
|
300
|
|
|
|
|
|
Power Grids
|
453
|
322
|
|
|
|
|
|
Corporate and Other
|
|
|
|
|
|
|
(incl. inter-division eliminations)
|
(120)
|
(262)
|
|
|
|
|
Income from operations %
|
ABB Group
|
11.7%
|
8.6%
|
|
|
|
|
|
Electrification Products
|
13.3%
|
11.7%
|
|
|
|
|
|
Robotics and Motion
|
13.3%
|
13.0%
|
|
|
|
|
|
Industrial Automation
|
13.0%
|
8.7%
|
|
|
|
|
|
Power Grids
|
9.0%
|
6.2%
|
|
|
|
|
Cash flow from operating activities
|
ABB Group
|
976
|
1,334
|
|
|
|
|
|
Electrification Products
|
464
|
349
|
|
|
|
|
|
Robotics and Motion
|
467
|
407
|
|
|
|
|
|
Industrial Automation
|
253
|
322
|
|
|
|
|
|
Power Grids
|
229
|
267
|
|
|
|
|
|
Corporate and Other
|
(437)
|
(11)
|
|
|
|
5
Q2
2017 Financial Information
Operational EBITA
|
|
|
Electrification
|
Robotics
|
Industrial
|
Power
|
|
($ in millions, unless otherwise indicated)
|
ABB
|
Products
|
and
Motion
|
Automation
|
Grids
|
|
|
Q2 17
|
Q2 16
|
Q2 17
|
Q2 16
|
Q2 17
|
Q2 16
|
Q2 17
|
Q2 16
|
Q2 17
|
Q2 16
|
|
Revenues
|
8,454
|
8,677
|
2,509
|
2,536
|
2,087
|
2,033
|
1,608
|
1,770
|
2,647
|
2,717
|
|
FX/commodity timing
|
|
|
|
|
|
|
|
|
|
|
|
differences in total revenues
|
(26)
|
37
|
(16)
|
2
|
4
|
1
|
1
|
6
|
(13)
|
17
|
|
Operational revenues
|
8,428
|
8,714
|
2,493
|
2,538
|
2,091
|
2,034
|
1,609
|
1,776
|
2,634
|
2,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
884
|
647
|
333
|
303
|
280
|
250
|
203
|
123
|
231
|
149
|
|
Acquisition-related amortization
|
56
|
71
|
26
|
31
|
16
|
24
|
2
|
3
|
9
|
9
|
|
Restructuring and
|
|
|
|
|
|
|
|
|
|
|
|
restructuring-related expenses
(1)
|
84
|
367
|
13
|
52
|
17
|
52
|
5
|
89
|
18
|
76
|
|
Non-operational pension cost
|
(7)
|
–
|
1
|
1
|
(1)
|
–
|
–
|
–
|
(1)
|
(1)
|
|
Changes in retained obligations of
|
|
|
|
|
|
|
|
|
|
|
|
divested businesses
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Changes in pre-acquisition estimates
|
–
|
14
|
–
|
14
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Gains and losses from sale of businesses
|
7
|
–
|
–
|
–
|
–
|
–
|
(2)
|
–
|
–
|
–
|
|
Acquisition-related expenses and certain
|
|
|
|
|
|
|
|
|
|
|
|
non-operational items
|
58
|
9
|
14
|
–
|
–
|
–
|
5
|
–
|
25
|
2
|
|
FX/commodity timing
|
|
|
|
|
|
|
|
|
|
|
|
differences in income from operations
|
(40)
|
12
|
(14)
|
(1)
|
–
|
3
|
(8)
|
5
|
(25)
|
19
|
|
Operational EBITA
|
1,042
|
1,120
|
373
|
400
|
312
|
329
|
205
|
220
|
257
|
254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational EBITA margin (%)
|
12.4%
|
12.9%
|
15.0%
|
15.8%
|
14.9%
|
16.2%
|
12.7%
|
12.4%
|
9.8%
|
9.3%
|
|
|
|
Electrification
|
Robotics
|
Industrial
|
Power
|
|
($ in millions, unless otherwise indicated)
|
ABB
|
Products
|
and
Motion
|
Automation
|
Grids
|
|
|
H1 17
|
H1 16
|
H1 17
|
H1 16
|
H1 17
|
H1 16
|
H1 17
|
H1 16
|
H1 17
|
H1 16
|
|
Revenues
|
16,308
|
16,580
|
4,802
|
4,825
|
4,013
|
3,906
|
3,157
|
3,434
|
5,052
|
5,170
|
|
FX/commodity timing
|
|
|
|
|
|
|
|
|
|
|
|
differences in total revenues
|
(105)
|
18
|
(27)
|
(7)
|
(7)
|
(2)
|
(12)
|
21
|
(38)
|
(3)
|
|
Operational revenues
|
16,203
|
16,598
|
4,775
|
4,818
|
4,006
|
3,904
|
3,145
|
3,455
|
5,014
|
5,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
1,914
|
1,431
|
640
|
565
|
532
|
506
|
409
|
300
|
453
|
322
|
|
Acquisition-related amortization
|
115
|
142
|
52
|
62
|
34
|
47
|
4
|
6
|
17
|
18
|
|
Restructuring and
|
|
|
|
|
|
|
|
|
|
|
|
restructuring-related expenses
(1)
|
132
|
436
|
13
|
57
|
27
|
59
|
9
|
93
|
21
|
94
|
|
Non-operational pension cost
|
(14)
|
–
|
1
|
2
|
(1)
|
–
|
1
|
–
|
(2)
|
(2)
|
|
Changes in retained obligations of
|
|
|
|
|
|
|
|
|
|
|
|
divested businesses
|
94
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Changes in pre-acquisition estimates
|
–
|
22
|
–
|
22
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Gains and losses from sale of businesses
|
(331)
|
–
|
–
|
–
|
–
|
–
|
(2)
|
–
|
–
|
–
|
|
Acquisition-related expenses and certain
|
|
|
|
|
|
|
|
|
|
|
|
non-operational items
|
166
|
11
|
18
|
–
|
–
|
–
|
7
|
–
|
52
|
4
|
|
FX/commodity timing
|
|
|
|
|
|
|
|
|
|
|
|
differences in income from operations
|
(91)
|
29
|
(29)
|
(1)
|
(6)
|
3
|
(19)
|
23
|
(39)
|
1
|
|
Operational EBITA
|
1,985
|
2,071
|
695
|
707
|
586
|
615
|
409
|
422
|
502
|
437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational EBITA margin (%)
|
12.3%
|
12.5%
|
14.6%
|
14.7%
|
14.6%
|
15.8%
|
13.0%
|
12.2%
|
10.0%
|
8.5%
|
(1)
Amounts also include the incremental implementation costs in relation to the
White Collar Productivity program.
6
Q2
2017 Financial Information
Depreciation and Amortization
|
|
|
Electrification
|
Robotics
|
Industrial
|
Power
|
|
($ in millions)
|
ABB
|
Products
|
and
Motion
|
Automation
|
Grids
|
|
|
Q2 17
|
Q2 16
|
Q2 17
|
Q2 16
|
Q2 17
|
Q2 16
|
Q2 17
|
Q2 16
|
Q2 17
|
Q2 16
|
|
Depreciation
|
180
|
194
|
50
|
54
|
34
|
35
|
12
|
15
|
43
|
45
|
|
Amortization
|
78
|
93
|
29
|
34
|
19
|
27
|
3
|
5
|
15
|
16
|
|
including total acquisition-related amortization of:
|
56
|
71
|
26
|
31
|
16
|
24
|
2
|
3
|
9
|
9
|
|
|
|
Electrification
|
Robotics
|
Industrial
|
Power
|
|
($ in millions)
|
ABB
|
Products
|
and Motion
|
Automation
|
Grids
|
|
|
H1 17
|
H1 16
|
H1 17
|
H1 16
|
H1 17
|
H1 16
|
H1 17
|
H1 16
|
H1 17
|
H1 16
|
|
Depreciation
|
364
|
381
|
100
|
107
|
68
|
70
|
25
|
29
|
86
|
89
|
|
Amortization
|
157
|
186
|
58
|
68
|
40
|
54
|
6
|
9
|
30
|
32
|
|
including total acquisition-related amortization of:
|
115
|
142
|
52
|
62
|
34
|
47
|
4
|
6
|
17
|
18
|
Orders received and revenues by
region
|
($ in millions, unless otherwise indicated)
|
Orders
received
|
CHANGE
|
Revenues
|
CHANGE
|
|
|
|
|
|
|
Com-
|
|
|
|
|
Com-
|
|
Q2 17
|
Q2 16
|
US$
|
Local
|
parable
|
Q2 17
|
Q2 16
|
US$
|
Local
|
parable
|
|
Europe
|
2,843
|
2,802
|
1%
|
5%
|
6%
|
2,813
|
2,949
|
-5%
|
-1%
|
1%
|
|
The Americas
|
2,441
|
2,401
|
2%
|
2%
|
2%
|
2,472
|
2,519
|
-2%
|
-1%
|
-1%
|
|
Asia, Middle East and Africa
|
3,065
|
3,113
|
-2%
|
2%
|
2%
|
3,169
|
3,209
|
-1%
|
1%
|
1%
|
|
ABB Group
|
8,349
|
8,316
|
0%
|
3%
|
3%
|
8,454
|
8,677
|
-3%
|
0%
|
1%
|
|
($ in millions, unless otherwise indicated)
|
Orders
received
|
CHANGE
|
Revenues
|
CHANGE
|
|
|
|
|
|
|
Com-
|
|
|
|
|
Com-
|
|
H1 17
|
H1 16
|
US$
|
Local
|
parable
|
H1 17
|
H1 16
|
US$
|
Local
|
parable
|
|
Europe
|
5,970
|
6,348
|
-6%
|
-2%
|
4%
|
5,507
|
5,566
|
-1%
|
3%
|
6%
|
|
The Americas
|
4,803
|
4,656
|
3%
|
3%
|
3%
|
4,804
|
4,816
|
0%
|
0%
|
0%
|
|
Asia, Middle East and Africa
|
5,979
|
6,565
|
-9%
|
-6%
|
-6%
|
5,997
|
6,198
|
-3%
|
-1%
|
-1%
|
|
ABB Group
|
16,752
|
17,569
|
-5%
|
-2%
|
0%
|
16,308
|
16,580
|
-2%
|
1%
|
2%
|
7
Q2
2017 Financial Information
—
Interim Consolidated Financial Information
|
ABB Ltd Interim Consolidated Income
Statements (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
months ended
|
Three
months ended
|
|
($ in millions, except per share data in $)
|
Jun.
30, 2017
|
Jun.
30, 2016
|
Jun.
30, 2017
|
Jun.
30, 2016
|
|
Sales of products
|
13,451
|
13,675
|
6,982
|
7,172
|
|
Sales of services and software
|
2,857
|
2,905
|
1,472
|
1,505
|
|
Total revenues
|
16,308
|
16,580
|
8,454
|
8,677
|
|
Cost of sales of products
|
(9,643)
|
(10,069)
|
(4,981)
|
(5,358)
|
|
Cost of services and software
|
(1,693)
|
(1,738)
|
(874)
|
(904)
|
|
Total cost of sales
|
(11,336)
|
(11,807)
|
(5,855)
|
(6,262)
|
|
Gross profit
|
4,972
|
4,773
|
2,599
|
2,415
|
|
Selling, general and administrative expenses
|
(2,678)
|
(2,675)
|
(1,367)
|
(1,405)
|
|
Non-order related research and development expenses
|
(610)
|
(648)
|
(319)
|
(343)
|
|
Other income (expense), net
|
230
|
(19)
|
(29)
|
(20)
|
|
Income from operations
|
1,914
|
1,431
|
884
|
647
|
|
Interest and dividend income
|
35
|
38
|
18
|
20
|
|
Interest and other finance expense
|
(153)
|
(146)
|
(74)
|
(74)
|
|
Income from continuing operations before
taxes
|
1,796
|
1,323
|
828
|
593
|
|
Provision for taxes
|
(456)
|
(350)
|
(248)
|
(149)
|
|
Income from continuing operations, net
of tax
|
1,340
|
973
|
580
|
444
|
|
Income (loss) from discontinued operations, net of tax
|
(1)
|
(2)
|
1
|
(1)
|
|
Net income
|
1,339
|
971
|
581
|
443
|
|
Net income attributable to noncontrolling interests
|
(90)
|
(65)
|
(56)
|
(37)
|
|
Net income attributable to ABB
|
1,249
|
906
|
525
|
406
|
|
|
|
|
|
|
|
Amounts attributable to ABB
shareholders:
|
|
|
|
|
|
Income from continuing operations, net of tax
|
1,250
|
908
|
524
|
407
|
|
Net income
|
1,249
|
906
|
525
|
406
|
|
|
|
|
|
|
|
Basic earnings per share attributable to
ABB shareholders:
|
|
|
|
|
|
Income from continuing operations, net of tax
|
0.58
|
0.42
|
0.24
|
0.19
|
|
Net income
|
0.58
|
0.42
|
0.25
|
0.19
|
|
|
|
|
|
|
|
Diluted earnings per share attributable
to ABB shareholders:
|
|
|
|
|
|
Income from continuing operations, net of tax
|
0.58
|
0.42
|
0.24
|
0.19
|
|
Net income
|
0.58
|
0.42
|
0.24
|
0.19
|
|
|
|
|
|
|
|
Weighted-average number of shares
outstanding (in millions) used to compute:
|
|
|
|
|
|
Basic earnings per share attributable to ABB shareholders
|
2,140
|
2,165
|
2,140
|
2,149
|
|
Diluted earnings per share attributable to ABB shareholders
|
2,149
|
2,169
|
2,151
|
2,154
|
|
Due to rounding, numbers presented may not add to the totals
provided.
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to the Interim Consolidated Financial Information
|
|
|
|
|
8
Q2
2017 Financial Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
ABB Ltd Interim Condensed Consolidated
Statements of Comprehensive
|
|
Income (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
months ended
|
Three
months ended
|
|
($ in millions)
|
Jun.
30, 2017
|
Jun.
30, 2016
|
Jun.
30, 2017
|
Jun.
30, 2016
|
|
Total comprehensive income, net of tax
|
1,872
|
1,175
|
916
|
302
|
|
Total comprehensive income attributable to noncontrolling
interests, net of tax
|
(103)
|
(65)
|
(60)
|
(32)
|
|
Total comprehensive income attributable
to ABB shareholders, net of tax
|
1,769
|
1,110
|
856
|
270
|
|
Due to rounding, numbers presented may not add to the totals
provided.
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to the Interim Consolidated Financial Information
|
|
|
|
|
9
Q2
2017 Financial Information
|
—
|
|
|
|
ABB Ltd Interim Consolidated Balance
Sheets (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions, except share data)
|
Jun.
30, 2017
|
Dec.
31, 2016
|
|
Cash and equivalents
|
5,018
|
3,644
|
|
Marketable securities and short-term investments
|
909
|
1,953
|
|
Receivables, net
|
10,305
|
9,696
|
|
Inventories, net
|
4,953
|
4,347
|
|
Prepaid expenses
|
268
|
176
|
|
Other current assets
|
636
|
688
|
|
Assets held for sale
|
–
|
548
|
|
Total current assets
|
22,089
|
21,052
|
|
|
|
|
|
Property, plant and equipment, net
|
4,980
|
4,743
|
|
Goodwill
|
9,708
|
9,501
|
|
Other intangible assets, net
|
1,930
|
1,996
|
|
Prepaid pension and other employee benefits
|
97
|
90
|
|
Investments in equity-accounted companies
|
157
|
170
|
|
Deferred taxes
|
1,006
|
1,118
|
|
Other non-current assets
|
511
|
532
|
|
Total assets
|
40,478
|
39,202
|
|
|
|
|
|
Accounts payable, trade
|
4,888
|
4,446
|
|
Billings in excess of sales
|
1,200
|
1,241
|
|
Short-term debt and current maturities of long-term debt
|
914
|
1,003
|
|
Advances from customers
|
1,542
|
1,398
|
|
Provisions for warranties
|
1,193
|
1,142
|
|
Other provisions
|
1,759
|
1,765
|
|
Other current liabilities
|
3,711
|
3,936
|
|
Liabilities held for sale
|
–
|
218
|
|
Total current liabilities
|
15,207
|
15,149
|
|
|
|
|
|
Long-term debt
|
6,909
|
5,800
|
|
Pension and other employee benefits
|
1,878
|
1,834
|
|
Deferred taxes
|
843
|
918
|
|
Other non-current liabilities
|
1,757
|
1,604
|
|
Total liabilities
|
26,594
|
25,305
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
Capital stock
|
|
|
|
(2,214,743,264 issued shares at June 30, 2017, and December 31,
2016)
|
192
|
192
|
|
Additional paid-in capital
|
27
|
24
|
|
Retained earnings
|
19,552
|
19,925
|
|
Accumulated other comprehensive loss
|
(4,667)
|
(5,187)
|
|
Treasury stock, at cost
|
|
|
|
(80,747,598 and 76,036,429 shares at June 30, 2017, and December
31, 2016, respectively)
|
(1,701)
|
(1,559)
|
|
Total ABB stockholders’ equity
|
13,403
|
13,395
|
|
Noncontrolling interests
|
481
|
502
|
|
Total stockholders’ equity
|
13,884
|
13,897
|
|
Total liabilities and stockholders’
equity
|
40,478
|
39,202
|
|
Due to rounding, numbers presented may not add to the totals
provided.
|
|
|
|
|
|
|
|
See Notes to the Interim Consolidated Financial Information
|
|
|
10
Q2
2017 Financial Information
|
—
|
|
|
|
|
|
ABB Ltd Interim Consolidated Statements
of Cash Flows (unaudited)
|
|
|
|
|
|
|
|
|
Six
months ended
|
Three
months ended
|
|
($ in millions)
|
Jun.
30, 2017
|
Jun.
30, 2016
|
Jun.
30, 2017
|
Jun.
30, 2016
|
|
Operating activities:
|
|
|
|
|
|
Net income
|
1,339
|
971
|
581
|
443
|
|
Adjustments to reconcile net income to
net cash provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
521
|
567
|
258
|
287
|
|
Deferred taxes
|
43
|
(127)
|
51
|
(142)
|
|
Net loss (gain) from derivatives and foreign exchange
|
(29)
|
48
|
(14)
|
26
|
|
Net loss (gain) from sale of businesses
|
(331)
|
–
|
7
|
–
|
|
Share-based payment arrangements
|
27
|
27
|
15
|
14
|
|
Other
|
27
|
34
|
25
|
30
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Trade receivables, net
|
(254)
|
(231)
|
(187)
|
(304)
|
|
Inventories, net
|
(250)
|
(204)
|
10
|
(39)
|
|
Trade payables
|
229
|
167
|
240
|
273
|
|
Accrued liabilities
|
(133)
|
(165)
|
(335)
|
80
|
|
Billings in excess of sales
|
(68)
|
9
|
(8)
|
75
|
|
Provisions, net
|
(21)
|
107
|
(75)
|
221
|
|
Advances from customers
|
86
|
(22)
|
(2)
|
22
|
|
Income taxes payable and receivable
|
(7)
|
121
|
(33)
|
89
|
|
Other assets and liabilities, net
|
(203)
|
32
|
(66)
|
7
|
|
Net cash provided by operating
activities
|
976
|
1,334
|
467
|
1,082
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
Purchases of marketable securities (available-for-sale)
|
(274)
|
(411)
|
(153)
|
(12)
|
|
Purchases of short-term investments
|
(74)
|
(1,369)
|
(21)
|
(944)
|
|
Purchases of property, plant and equipment and intangible assets
|
(417)
|
(348)
|
(225)
|
(178)
|
|
Acquisition of businesses (net of cash acquired)
|
|
|
|
|
|
and increases in cost- and equity-accounted companies
|
(18)
|
(19)
|
(3)
|
(16)
|
|
Proceeds from sales of marketable securities
(available-for-sale)
|
490
|
38
|
477
|
10
|
|
Proceeds from maturity of marketable securities
(available-for-sale)
|
100
|
539
|
–
|
250
|
|
Proceeds from short-term investments
|
874
|
533
|
53
|
425
|
|
Proceeds from sales of property, plant and equipment
|
30
|
28
|
10
|
16
|
|
Proceeds from sales of businesses (net of transaction costs
|
|
|
|
|
|
and cash disposed) and cost- and equity-accounted companies
|
673
|
–
|
15
|
–
|
|
Net cash from settlement of foreign currency derivatives
|
33
|
(21)
|
16
|
14
|
|
Other investing activities
|
22
|
10
|
8
|
13
|
|
Net cash provided by (used in) investing
activities
|
1,439
|
(1,020)
|
177
|
(422)
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
Net changes in debt with original maturities of 90 days or less
|
410
|
291
|
400
|
208
|
|
Increase in debt
|
890
|
852
|
843
|
831
|
|
Repayment of debt
|
(590)
|
(664)
|
(571)
|
(651)
|
|
Delivery of shares
|
86
|
1
|
3
|
1
|
|
Purchase of treasury stock
|
(251)
|
(1,197)
|
(251)
|
(749)
|
|
Dividends paid
|
(1,635)
|
–
|
(1,635)
|
–
|
|
Dividends paid to noncontrolling shareholders
|
(116)
|
(107)
|
(107)
|
(97)
|
|
Other financing activities
|
(15)
|
(12)
|
(9)
|
(21)
|
|
Net cash used in financing activities
|
(1,221)
|
(836)
|
(1,327)
|
(478)
|
|
|
|
|
|
|
|
Effects of exchange rate changes on cash and equivalents
|
180
|
42
|
139
|
(63)
|
|
Net change in cash and equivalents –
continuing operations
|
1,374
|
(480)
|
(544)
|
119
|
|
|
|
|
|
|
|
Cash and equivalents, beginning of period
|
3,644
|
4,565
|
5,562
|
3,966
|
|
Cash and equivalents, end of period
|
5,018
|
4,085
|
5,018
|
4,085
|
|
|
|
|
|
|
|
Supplementary disclosure of cash flow information:
|
|
|
|
|
|
Interest paid
|
115
|
123
|
63
|
71
|
|
Taxes paid
|
443
|
361
|
242
|
211
|
|
Due to rounding, numbers presented may not add to the totals
provided.
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to the Interim Consolidated Financial Information
|
|
|
|
|
11
Q2
2017 Financial Information
|
—
|
|
|
|
|
|
|
|
|
|
ABB Ltd Interim Consolidated Statements
of Changes in Stockholders’ Equity (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
Capital
stock
|
Additional
paid-in capital
|
Retained
earnings
|
Total
accumu-
lated
other comprehensive loss
|
Treasury
stock
|
Total
ABB
stockholders’
equity
|
Non-
controlling
interests
|
Total
stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2016
|
1,440
|
4
|
20,476
|
(4,858)
|
(2,581)
|
14,481
|
507
|
14,988
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
906
|
|
|
906
|
65
|
971
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
adjustments, net of tax of $10
|
|
|
|
129
|
|
129
|
|
129
|
|
Effect of change in fair value of
|
|
|
|
|
|
|
|
|
|
available-for-sale securities,
|
|
|
|
|
|
|
|
|
|
net of tax of $1
|
|
|
|
9
|
|
9
|
|
9
|
|
Unrecognized income (expense)
|
|
|
|
|
|
|
|
|
|
related to pensions and other
|
|
|
|
|
|
|
|
|
|
postretirement plans,
|
|
|
|
|
|
|
|
|
|
net of tax of $18
|
|
|
|
63
|
|
63
|
|
63
|
|
Change in derivatives qualifying as
|
|
|
|
|
|
|
|
|
|
cash flow hedges, net of tax of $2
|
|
|
|
3
|
|
3
|
|
3
|
|
Total comprehensive income
|
|
|
|
|
|
1,110
|
65
|
1,175
|
|
Dividends to
|
|
|
|
|
|
|
|
|
|
noncontrolling shareholders
|
|
|
|
|
|
–
|
(132)
|
(132)
|
|
Reduction in nominal value of common
|
|
|
|
|
|
|
|
|
|
shares payable to shareholders
|
(1,224)
|
|
(396)
|
|
|
(1,620)
|
|
(1,620)
|
|
Purchase of treasury stock
|
|
|
|
|
(1,280)
|
(1,280)
|
|
(1,280)
|
|
Delivery of shares
|
|
(13)
|
|
|
14
|
1
|
|
1
|
|
Share-based payment arrangements
|
|
27
|
|
|
|
27
|
|
27
|
|
Balance at June 30, 2016
|
216
|
18
|
20,986
|
(4,654)
|
(3,847)
|
12,719
|
440
|
13,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2017
|
192
|
24
|
19,925
|
(5,187)
|
(1,559)
|
13,395
|
502
|
13,897
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
1,249
|
|
|
1,249
|
90
|
1,339
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
adjustments, net of tax of $(1)
|
|
|
|
564
|
|
564
|
13
|
577
|
|
Effect of change in fair value of
|
|
|
|
|
|
|
|
|
|
available-for-sale securities,
|
|
|
|
|
|
|
|
|
|
net of tax of $0
|
|
|
|
2
|
|
2
|
|
2
|
|
Unrecognized income (expense)
|
|
|
|
|
|
|
|
|
|
related to pensions and other
|
|
|
|
|
|
|
|
|
|
postretirement plans,
|
|
|
|
|
|
|
|
|
|
net of tax of $(13)
|
|
|
|
(51)
|
|
(51)
|
|
(51)
|
|
Change in derivatives qualifying as
|
|
|
|
|
|
|
|
|
|
cash flow hedges, net of tax of $2
|
|
|
|
5
|
|
5
|
|
5
|
|
Total comprehensive income
|
|
|
|
|
|
1,769
|
103
|
1,872
|
|
Changes in noncontrolling interests
|
|
|
|
|
|
–
|
3
|
3
|
|
Dividends to
|
|
|
|
|
|
|
|
|
|
noncontrolling shareholders
|
|
|
|
|
|
–
|
(127)
|
(127)
|
|
Dividends paid to shareholders
|
|
|
(1,622)
|
|
|
(1,622)
|
|
(1,622)
|
|
Purchase of treasury stock
|
|
|
|
|
(251)
|
(251)
|
|
(251)
|
|
Delivery of shares
|
|
(23)
|
|
|
109
|
86
|
|
86
|
|
Share-based payment arrangements
|
|
27
|
|
|
|
27
|
|
27
|
|
Balance at June 30, 2017
|
192
|
27
|
19,552
|
(4,667)
|
(1,701)
|
13,403
|
481
|
13,884
|
|
Due to rounding, numbers presented may not add to the totals
provided.
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to the Interim Consolidated Financial Information
|
12
Q2
2017 Financial Information
—
Notes to the Interim Consolidated
Financial Information (unaudited)
─
Note 1
The Company and basis of presentation
ABB Ltd and its
subsidiaries (collectively, the Company) together form a pioneering technology
leader in electrification products, robotics and motion, industrial automation
and power grids serving customers in utilities, industry and transport &
infrastructure globally.
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, 2016.
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:
·
estimates
used to record expected costs for employee severance in connection with
restructuring programs,
·
estimates
used to record warranty obligations,
·
assumptions
and projections, principally related to future material, labor and project
related overhead costs, used in determining the percentage of completion on
projects,
·
estimates
of loss contingencies associated with litigation or threatened litigation and
other claims and inquiries, environmental damages, product warranties,
self-insurance reserves, regulatory and other proceedings,
·
assumptions
used in the calculation of pension and postretirement benefits and the fair
value of pension plan assets,
·
estimates
to determine valuation allowances for deferred tax assets and amounts recorded
for uncertain tax positions,
·
growth
rates, discount rates and other assumptions used to determine impairment of
long lived assets and in testing goodwill for impairment,
·
assumptions
used in determining inventory obsolescence and net realizable value,
·
estimates
and assumptions used in determining the fair values of assets and liabilities
assumed in business combinations, and
·
assessment
of the allowance for doubtful accounts.
The actual results and outcomes may
differ from the Company’s estimates and assumptions.
A portion of the Company’s activities
(primarily long-term construction activities) has an operating cycle that
exceeds one year. For classification of current assets and liabilities related
to such activities, the Company elected to use the duration of the individual
contracts as its operating cycle. Accordingly, there are accounts receivable,
inventories and provisions related to these contracts which will not be
realized within one year that have been classified as current.
In the opinion of management, the
unaudited Interim Consolidated Financial Information contains all necessary
adjustments to present fairly the financial position, results of operations and
cash flows for the reported interim periods. Management considers all such
adjustments to be of a normal recurring nature.
The Interim Consolidated Financial
Information is presented in United States dollars ($) unless otherwise stated. Due
to rounding, numbers presented in the Interim Consolidated Financial
Information may not add to the totals provided. Certain amounts reported in the
Interim Consolidated Financial Information for prior periods have been
reclassified to conform to the current year’s presentation. These changes
primarily relate to the reorganization of the Company’s operating segments (see
Note 14) and to the reclassification and netting of deferred tax assets and
liabilities, as a result of the adoption of an accounting standard update on
the classification of deferred taxes (see Note 2).
─
Note 2
Recent accounting pronouncements
Applicable for current periods
Balance
sheet classification of deferred taxes
As of January 1, 2017, the Company adopted an accounting
standard update removing the requirement to separate deferred tax liabilities
and assets into current and noncurrent amounts and instead requiring all such
amounts, as well as any related valuation allowance, to be classified as
noncurrent in the consolidated balance sheets. This update was applied retrospectively
and resulted in a decrease of $297 million in both the total deferred tax
assets and total deferred tax liabilities at December 31, 2016, due to
additional netting impacts.
Simplifying
the transition to the equity method of accounting
As of January 1, 2017, the Company adopted an accounting
standard update eliminating the retroactive adjustments to an investment upon
it qualifying for the equity method of accounting as a result of an increase in
the level of ownership interest or degree of influence by the investor. It
requires that the equity method investor add the cost of acquiring the
additional interest in the investee to the current basis of the investor’s
previously held interest and adopt the equity method of accounting as of the
date the investment qualifies for equity method accounting. This update was
applied prospectively and did not have a significant impact on the consolidated
financial statements.
Improvements
to employee share-based payment accounting
As of January 1, 2017, the Company adopted an accounting
standard update which changed the accounting for certain aspects of share-based
payment awards to employees, including the accounting for income taxes,
forfeitures, and statutory tax withholding requirements, as well as the
classification in the statement of cash flows. This update did not have a
significant impact on the consolidated financial statements.
13
Q2
2017 Financial Information
Simplifying the test for goodwill impairment
As of January 1, 2017, the Company early-adopted an accounting
standard update eliminating the requirement to calculate the implied fair value
of goodwill when measuring a goodwill impairment loss. Instead the Company is now
required to record an impairment loss based on the excess of a reporting unit’s
carrying amount over its fair value provided that the loss recognized does not
exceed the total amount of goodwill allocated to that reporting unit. This
update was applied prospectively and did not have a significant impact on the
consolidated financial statements.
Applicable
for future periods
Revenue from
contracts with customers
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. Further updates were issued in 2016 to clarify the guidance on
identifying performance obligations, licensing and contract costs, to enhance
the implementation guidance on principal versus agent considerations and to add
other practical expedients.
In
August 2015, the effective date for the update was deferred and the update is
now effective for the Company for annual and interim periods beginning January 1,
2018, 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). Early adoption of the standard is permitted for annual reporting
periods beginning after December 15, 2016, including interim reporting periods
within that reporting period.
The
Company will adopt these updates as of January 1, 2018, pursuant to the
aforementioned adoption method (ii) and, apart from additional disclosures,
currently does not anticipate these updates will have a significant impact on
its consolidated financial statements. The Company’s analysis of contracts
performed in 2016 resulted in immaterial differences in the identification of
performance obligations compared to the current unit of accounting
determination. Except for a limited number of contracts where the required criteria
are not met, the analysis supports the recognition of revenue over time
following the cost-to-cost method under the new revenue recognition standard
for those contracts which are following the cost-to-cost method under the
current revenue recognition model. The Company continues to evaluate the
expected impacts of the adoption of these updates and the expected impacts are
subject to change.
Recognition
and measurement of financial assets and financial liabilities
In January 2016, an accounting standard update was issued to
enhance the reporting model for financial instruments, which includes
amendments to address aspects of recognition, measurement, presentation and
disclosure. For example, the Company would be required to measure equity
investments (except those accounted for under the equity method) at fair value
with changes in fair value recognized in net income and to present separately
financial assets and financial liabilities by measurement category and form of
financial asset. This update is effective for the Company for annual and
interim periods beginning January 1, 2018, with early adoption permitted
for certain provisions. The Company is currently evaluating the impact of this
update on its consolidated financial statements.
Leases
In February 2016, an accounting standard update was issued that
requires lessees to recognize lease assets and corresponding lease liabilities
on the balance sheet for all leases with terms of more than 12 months. The
update, which supersedes existing lease guidance, will continue to classify
leases as either finance or operating, with the classification determining the
pattern of expense recognition in the income statement. This update is
effective for the Company for annual and interim periods beginning January 1,
2019, with early adoption permitted, and is applicable on a modified
retrospective basis with various optional practical expedients. The Company is
currently evaluating the impact of this update on its consolidated financial
statements.
Measurement
of credit losses on financial instruments
In June 2016, an accounting standard update was issued which
replaces the existing incurred loss impairment methodology for most financial
assets with a new “current expected credit loss” model. The new model will
result in the immediate recognition of the estimated credit losses expected to
occur over the remaining life of financial assets such as trade and other
receivables, held-to-maturity debt securities, loans and other instruments.
Credit losses relating to available-for-sale debt securities will be measured
in a manner similar to current GAAP, except that the losses will be recorded
through an allowance for credit losses rather than as a direct write-down of
the security.
This
update is effective for the Company for annual and interim periods beginning January 1,
2020, with early adoption permitted for annual and interim periods beginning January 1,
2019. The Company is currently evaluating the impact of this update on its
consolidated financial statements.
Classification
of certain cash receipts and cash payments in the statement of cash flows
In August 2016, an accounting standard update was issued which
clarifies how certain cash receipts and cash payments, including debt
prepayment or extinguishment costs, the settlement of zero coupon debt
instruments, contingent consideration paid after a business combination,
proceeds from insurance settlements, distributions from certain equity method
investees and beneficial interests obtained in a financial asset
securitization, should be presented and classified in the statement of cash
flows. This update is effective for the Company for annual and interim periods
beginning January 1, 2018 on a retrospective basis, with early adoption
permitted. The Company does not believe that this update will have a
significant impact on its consolidated financial statements.
Income taxes
– Intra-entity transfers of assets other than inventory
In
October 2016, an accounting standard update was issued that requires the
Company to recognize the income tax consequences of an intra-entity transfer of
an asset other than inventory when the transfer occurs instead of when the
asset has been sold to an outside party. This update is effective for the
Company for annual and interim periods beginning January 1, 2018, with
early adoption permitted, and is applicable on a modified retrospective basis
through a cumulative-effect adjustment directly to retained earnings as of the
beginning of the period of adoption. The Company is currently evaluating the
impact of this update on its consolidated financial statements.
Statement of
cash flows - Restricted cash
In November 2016, an accounting standard update was issued which
clarifies the classification and presentation of changes in restricted cash on
the statement of cash flows. It requires the inclusion of cash and cash
equivalents that have restrictions on withdrawal or use in total cash and cash
equivalents on the statement of cash flows. This update is effective for the
Company for annual and interim periods beginning January 1, 2018 on a
retrospective basis, with early adoption permitted. The Company does not
believe that this update will have a significant impact on its consolidated
financial statements.
14
Q2
2017 Financial Information
Clarifying the definition of a business
In January 2017, an accounting standard update was issued which narrows
the definition of a business. It also provides a framework for determining
whether a set of transferred assets and activities involves a business. This
update is effective for the Company for annual and interim periods beginning January 1,
2018 on a prospective basis, with early adoption permitted. The Company does
not believe that this update will have a significant impact on its consolidated
financial statements.
Clarifying
the scope of asset derecognition guidance and accounting for partial sales of
nonfinancial assets
In February 2017, an accounting standard update was issued which
clarifies the scope of asset derecognition guidance, adds guidance for partial
sales of nonfinancial assets and clarifies recognizing gains and losses from
the transfer of nonfinancial assets in contracts with noncustomers. The Company
plans to adopt this update retrospectively as of January 1, 2018, with the
cumulative effect of initially applying the update recognized at the date of
adoption in retained earnings. The Company does not believe that this update will
have a significant impact on its consolidated financial statements.
Improving
the presentation of net periodic pension cost and net periodic postretirement benefit
cost
In March 2017, an accounting standard update was issued which
changes how employers that sponsor defined benefit pension plans and other
postretirement plans present the net periodic benefit cost in the income statement.
Under this standard, the Company will be required to report the service cost
component in the same line item or items as other compensation costs arising
from services rendered by the pertinent employees during the period. Other
components of net benefit will be required to be presented in the income
statement separately from the service cost component and outside the subtotal
of income from operations. Under the amendment only the service cost component is
allowed to be capitalized. This update is effective for the Company for annual
and interim periods beginning January 1, 2018 on a retrospective basis for the
presentation requirements and on a prospective basis for the capitalization of
the service cost component requirements. The Company will adopt this update as
of January 1, 2018, and does not believe that this update will have a
significant impact on its consolidated financial statements.
Compensation—Stock
Compensation
In May 2017, an accounting standard update was
issued which clarifies when to account for a change to the terms or conditions
of a share‑based payment award as a modification. Under this update,
modification accounting is required only if the fair value, the vesting
conditions, or the classification of the award (as equity or liability) changes
as a result of the change in terms or conditions. This update is effective
prospectively and will apply to awards modified on or after January 1,
2018. The Company does not believe that this update will have a significant
impact on its consolidated financial statements.
─
Note 3
Acquisitions and Divestments
Divestment of the high-voltage cable system business
For
the six and three months ended June 30, 2017, the Company recorded net gains
(including transaction costs) of $331 million and net losses (including
transaction costs) of $7 million, respectively, in “Other income
(expense), net”. For the six months ended June 30, 2017, an associated tax
expense of $28 million relating to the divestment of consolidated businesses
was recorded in “Provision for taxes”. These are primarily due to the
divestment in March 2017, of the Company’s high-voltage cable system business
(the Cables business).
The Company has retained certain obligations of the Cables
business and thus the Company remains directly or indirectly liable for these
liabilities which existed at the date of the divestment. Subsequent to the
divestment, the Company recorded a loss of $94 million for changes in the
amounts recorded for these obligations. In addition, the Company has provided certain
performance guarantees to third parties which guarantee the performance of the
buyer under existing contracts with customers as well as for certain capital
expenditures of the divested business (see Note 7).
There were no significant gains or losses recognized relating to
divestments in the six and three months ended June 30, 2016.
Acquisition of B&R
On July 6, 2017, the Company acquired the shares of Bernecker + Rainer
Industrie-Elektronik GmbH (B&R). B&R is a worldwide provider
of product- and software-based, open-architecture solutions for machine and
factory automation. To complete the transaction, the Company’s cash outflows
amounted to approximately $2 billion. This acquisition closes a gap in the
Company’s industrial automation portfolio. The initial accounting and
disclosures for this acquisition are incomplete as B&R was only recently
acquired.
15
Q2
2017 Financial Information
─
Note 4
Cash and equivalents, marketable securities and
short-term investments
Cash and equivalents, marketable securities and short-term
investments consisted of the following:
|
|
|
June
30, 2017
|
|
|
|
|
|
|
|
|
Marketable
|
|
|
|
|
Gross
|
Gross
|
|
|
securities
|
|
|
|
|
unrealized
|
unrealized
|
|
Cash
and
|
and
short-term
|
|
($ in millions)
|
Cost
basis
|
gains
|
losses
|
Fair
value
|
equivalents
|
investments
|
|
Cash
|
1,597
|
|
|
1,597
|
1,597
|
–
|
|
Time deposits
|
3,463
|
|
|
3,463
|
3,421
|
42
|
|
Other short-term investments
|
294
|
|
|
294
|
–
|
294
|
|
Debt securities available-for-sale:
|
|
|
|
|
|
|
|
|
U.S. government obligations
|
206
|
1
|
(2)
|
205
|
–
|
205
|
|
|
European government obligations
|
20
|
–
|
–
|
20
|
–
|
20
|
|
|
Other government obligations
|
2
|
–
|
–
|
2
|
–
|
2
|
|
|
Corporate
|
208
|
2
|
(1)
|
209
|
–
|
209
|
|
Equity securities available-for-sale
|
125
|
12
|
–
|
137
|
–
|
137
|
|
Total
|
5,915
|
15
|
(3)
|
5,927
|
5,018
|
909
|
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
Marketable
|
|
|
|
|
Gross
|
Gross
|
|
|
securities
|
|
|
|
|
unrealized
|
unrealized
|
|
Cash
and
|
and
short-term
|
|
($ in millions)
|
Cost
basis
|
gains
|
losses
|
Fair
value
|
equivalents
|
investments
|
|
Cash
|
1,704
|
|
|
1,704
|
1,704
|
–
|
|
Time deposits
|
2,764
|
|
|
2,764
|
1,940
|
824
|
|
Other short-term investments
|
271
|
|
|
271
|
–
|
271
|
|
Debt securities available-for-sale:
|
|
|
|
|
|
|
|
|
U.S. government obligations
|
221
|
1
|
(2)
|
220
|
–
|
220
|
|
|
Other government obligations
|
2
|
–
|
–
|
2
|
–
|
2
|
|
|
Corporate
|
95
|
1
|
(1)
|
95
|
–
|
95
|
|
Equity securities available-for-sale
|
530
|
11
|
–
|
541
|
–
|
541
|
|
Total
|
5,587
|
13
|
(3)
|
5,597
|
3,644
|
1,953
|
Included in Other short-term investments at June 30, 2017, and
December 31, 2016, are receivables of $291 million and $268 million,
respectively, representing reverse repurchase agreements. These collateralized
lendings, made to a financial institution, have maturity dates of less than one
year.
─
Note 5
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 contracts 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.
16
Q2
2017 Financial Information
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 instruments as hedges.
Equity risk
The Company is exposed to fluctuations in the fair value of its
warrant appreciation rights (WARs) issued under its management 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, indexed to the shares of
the Company, 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 at
|
|
($ in millions)
|
June
30, 2017
|
December
31, 2016
|
June
30, 2016
|
|
Foreign exchange contracts
|
16,387
|
15,353
|
17,110
|
|
Embedded foreign exchange derivatives
|
2,089
|
2,162
|
3,066
|
|
Interest rate contracts
|
5,197
|
3,021
|
3,913
|
Derivative commodity contracts
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 at
|
|
|
|
June
30, 2017
|
December
31, 2016
|
June
30, 2016
|
|
Copper swaps
|
metric tonnes
|
39,292
|
47,425
|
55,506
|
|
Aluminum swaps
|
metric tonnes
|
5,550
|
4,650
|
5,025
|
|
Nickel swaps
|
metric tonnes
|
12
|
–
|
6
|
|
Lead swaps
|
metric tonnes
|
175
|
15,100
|
17,200
|
|
Zinc swaps
|
metric tonnes
|
275
|
150
|
200
|
|
Silver swaps
|
ounces
|
1,604,444
|
1,586,395
|
1,796,109
|
|
Crude oil swaps
|
barrels
|
153,067
|
121,000
|
121,000
|
Equity
derivatives
At June 30, 2017, December 31, 2016, and June 30, 2016, the
Company held 37 million, 47 million and 44 million cash-settled
call options indexed to ABB Ltd shares (conversion ratio 5:1) with a total fair
value of $32 million, $23 million and $12 million, respectively.
Cash flow hedges
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 June 30, 2017, and December 31, 2016, “Accumulated other
comprehensive loss” included net unrealized gains of $4 million and net
unrealized losses of $1 million, respectively, net of tax, on derivatives
designated as cash flow hedges. Of the amount at June 30, 2017, net gains of $6 million
are expected to be reclassified to earnings in the following 12 months. At June
30, 2017, the longest maturity of a derivative classified as a cash flow hedge
was 33
months.
The amount of gains or losses, net of tax, reclassified into
earnings due to the discontinuance of cash flow hedge accounting and the amount
of ineffectiveness in cash flow hedge relationships directly recognized in
earnings were not significant in the six and three months ended June 30, 2017
and 2016.
The pre-tax effects of derivative instruments, designated and
qualifying as cash flow hedges, on “Accumulated other comprehensive loss” (OCI)
and the Consolidated Income Statements were as follows:
|
|
Gains
(losses) recognized in OCI
|
|
|
Gains
(losses) reclassified from OCI
|
|
($ in millions)
|
on
derivatives (effective portion)
|
|
|
into
income (effective portion)
|
|
Six months ended June 30,
|
2017
|
2016
|
|
|
2017
|
2016
|
|
Type of derivative
|
|
|
|
Location
|
|
|
|
Foreign exchange contracts
|
10
|
–
|
|
Total revenues
|
(3)
|
(6)
|
|
|
|
|
|
Total cost of sales
|
3
|
7
|
|
Commodity contracts
|
2
|
1
|
|
Total cost of sales
|
4
|
(3)
|
|
Cash-settled call options
|
12
|
3
|
|
SG&A expenses
(1)
|
9
|
1
|
|
Total
|
24
|
4
|
|
|
13
|
(1)
|
17
Q2
2017 Financial Information
|
|
Gains
(losses) recognized in OCI
|
|
|
Gains
(losses) reclassified from OCI
|
|
($ in millions)
|
on
derivatives (effective portion)
|
|
|
into income
(effective portion)
|
|
Three months ended June 30,
|
2017
|
2016
|
|
|
2017
|
2016
|
|
Type of derivative
|
|
|
|
Location
|
|
|
|
Foreign exchange contracts
|
8
|
(4)
|
|
Total revenues
|
(1)
|
(3)
|
|
|
|
|
|
Total cost of sales
|
–
|
3
|
|
Commodity contracts
|
–
|
–
|
|
Total cost of sales
|
2
|
(1)
|
|
Cash-settled call options
|
4
|
3
|
|
SG&A expenses
(2)
|
3
|
2
|
|
Total
|
12
|
(1)
|
|
|
4
|
1
|
(1) SG&A
expenses
represent
“Selling,
general
and
administrative
expenses”.
The
amounts in respect of gains (losses) recognized in income for hedge
ineffectiveness and amounts excluded from effectiveness testing were not
significant for the six and three months ended June 30, 2017 and 2016.
Net
derivative gains of $10 million, net of tax, were reclassified from
“Accumulated other comprehensive loss” to earnings during the six months ended
June 30, 2017. During the six months ended June 30, 2016, the amounts
reclassified were not significant. During the three months ended June 30, 2017
and 2016, net derivative gains of $3 million and $1
million,
both net of tax, respectively, were reclassified from “Accumulated other
comprehensive loss” to earnings.
Fair value hedges
To reduce its interest rate exposure arising primarily from its debt
issuance activities, the Company uses interest rate swaps. Where such
instruments are designated as fair value hedges, the changes in the fair value
of these instruments, as well as the changes in the fair value of the risk
component of the underlying debt being hedged, are recorded as offsetting gains
and losses in “Interest and other finance expense”. Hedge ineffectiveness of
instruments designated as fair value hedges for the six and three months ended
June 30, 2017 and 2016, was not significant.
The effect of interest rate contracts, designated and qualifying
as fair value hedges, on the Consolidated Income Statements was as follows:
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
|
($ in millions)
|
2017
|
2016
|
2017
|
2016
|
|
Gains (losses) recognized in Interest and other finance expense:
|
|
|
|
|
|
- on derivatives designated as fair value hedges
|
–
|
48
|
(1)
|
11
|
|
- on hedged item
|
3
|
(47)
|
3
|
(10)
|
Derivatives not designated in hedge relationships
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
|
Gains
(losses) recognized in income
|
|
designated as a hedge
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
|
($ in millions)
|
Location
|
2017
|
2016
|
2017
|
2016
|
|
Foreign exchange contracts
|
Total revenues
|
167
|
23
|
60
|
(110)
|
|
|
Total cost of sales
|
(26)
|
(59)
|
34
|
2
|
|
|
SG&A expenses
(1)
|
(10)
|
(5)
|
(7)
|
7
|
|
|
Non-order related research
|
|
|
|
|
|
|
and development
|
–
|
(1)
|
2
|
(1)
|
|
|
Other income (expense), net
|
(1)
|
–
|
–
|
–
|
|
|
Interest and other finance expense
|
13
|
(48)
|
19
|
(1)
|
|
Embedded foreign exchange
|
Total revenues
|
(23)
|
(49)
|
(2)
|
3
|
|
contracts
|
Total cost of sales
|
–
|
6
|
(1)
|
–
|
|
|
SG&A expenses
(1)
|
5
|
1
|
3
|
(2)
|
|
Commodity contracts
|
Total cost of sales
|
18
|
10
|
(8)
|
8
|
|
Other
|
Interest and other finance expense
|
(3)
|
(1)
|
2
|
(1)
|
|
Total
|
|
140
|
(123)
|
102
|
(95)
|
(1)
SG&A
expenses
represent
“Selling,
general
and
administrative
expenses”.
18
Q2
2017 Financial Information
The fair values of derivatives included in the
Consolidated Balance Sheets were as follows:
|
|
June
30, 2017
|
|
|
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
|
6
|
1
|
|
3
|
1
|
|
Commodity contracts
|
2
|
–
|
|
–
|
–
|
|
Interest rate contracts
|
2
|
65
|
|
–
|
3
|
|
Cash-settled call options
|
15
|
16
|
|
–
|
–
|
|
Total
|
25
|
82
|
|
3
|
4
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging
instruments:
|
|
|
|
|
|
|
Foreign exchange contracts
|
172
|
23
|
|
140
|
44
|
|
Commodity contracts
|
23
|
1
|
|
5
|
–
|
|
Cross-currency interest rate swaps
|
–
|
–
|
|
–
|
1
|
|
Cash-settled call options
|
–
|
1
|
|
–
|
–
|
|
Embedded foreign exchange derivatives
|
38
|
16
|
|
35
|
10
|
|
Total
|
233
|
41
|
|
180
|
55
|
|
Total fair value
|
258
|
123
|
|
183
|
59
|
|
|
December
31, 2016
|
|
|
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
|
5
|
–
|
|
6
|
5
|
|
Commodity contracts
|
2
|
–
|
|
–
|
–
|
|
Interest rate contracts
|
2
|
62
|
|
–
|
–
|
|
Cash-settled call options
|
13
|
9
|
|
–
|
–
|
|
Total
|
22
|
71
|
|
6
|
5
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging
instruments:
|
|
|
|
|
|
|
Foreign exchange contracts
|
169
|
29
|
|
257
|
77
|
|
Commodity contracts
|
29
|
2
|
|
6
|
1
|
|
Cross-currency interest rate swaps
|
–
|
2
|
|
–
|
–
|
|
Cash-settled call options
|
–
|
1
|
|
–
|
–
|
|
Embedded foreign exchange derivatives
|
58
|
21
|
|
35
|
18
|
|
Total
|
256
|
55
|
|
298
|
96
|
|
Total fair value
|
278
|
126
|
|
304
|
101
|
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 June 30, 2017, and December 31, 2016, have been presented on
a gross basis.
The Company’s netting agreements and other similar arrangements
allow net settlements under certain conditions. At June 30, 2017, and December
31, 2016, information related to these offsetting arrangements was as follows:
|
($ in millions)
|
June
30, 2017
|
|
|
Gross
amount
|
Derivative
liabilities
|
Cash
|
Non-cash
|
|
|
Type of agreement or
|
of
recognized
|
eligible
for set-off
|
collateral
|
collateral
|
Net
asset
|
|
similar arrangement
|
assets
|
in
case of default
|
received
|
received
|
exposure
|
|
Derivatives
|
327
|
(159)
|
–
|
–
|
168
|
|
Reverse repurchase agreements
|
291
|
–
|
–
|
(291)
|
–
|
|
Total
|
618
|
(159)
|
–
|
(291)
|
168
|
19
Q2
2017 Financial Information
|
($ in millions)
|
June
30, 2017
|
|
|
Gross
amount
|
Derivative
liabilities
|
Cash
|
Non-cash
|
|
|
Type of agreement or
|
of
recognized
|
eligible
for set-off
|
collateral
|
collateral
|
Net
liability
|
|
similar arrangement
|
liabilities
|
in
case of default
|
pledged
|
pledged
|
exposure
|
|
Derivatives
|
197
|
(159)
|
–
|
–
|
38
|
|
Total
|
197
|
(159)
|
–
|
–
|
38
|
|
($ in millions)
|
December
31, 2016
|
|
|
Gross
amount
|
Derivative
liabilities
|
Cash
|
Non-cash
|
|
|
Type of agreement or
|
of
recognized
|
eligible
for set-off
|
collateral
|
collateral
|
Net
asset
|
|
similar arrangement
|
assets
|
in
case of default
|
received
|
received
|
exposure
|
|
Derivatives
|
325
|
(190)
|
–
|
–
|
135
|
|
Reverse repurchase agreements
|
268
|
–
|
–
|
(268)
|
–
|
|
Total
|
593
|
(190)
|
–
|
(268)
|
135
|
|
($ in millions)
|
December
31, 2016
|
|
|
Gross
amount
|
Derivative
liabilities
|
Cash
|
Non-cash
|
|
|
Type of agreement or
|
of
recognized
|
eligible
for set-off
|
collateral
|
collateral
|
Net
liability
|
|
similar arrangement
|
liabilities
|
in
case of default
|
pledged
|
pledged
|
exposure
|
|
Derivatives
|
352
|
(190)
|
–
|
–
|
162
|
|
Total
|
352
|
(190)
|
–
|
–
|
162
|
─
Note 6
Fair values
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:
Level 1:
Valuation
inputs consist of quoted prices in an active market for identical assets or
liabilities (observable quoted prices). Assets and liabilities valued using
Level 1 inputs include certain actively traded debt securities.
Level 2:
Valuation
inputs consist of observable inputs (other than Level 1 inputs) such as
actively quoted prices for similar assets, quoted prices in inactive markets
and inputs other than quoted prices such as interest rate yield curves, credit
spreads, or inputs derived from other observable data by interpolation,
correlation, regression or other means. The adjustments applied to quoted
prices or the inputs used in valuation models may be both observable and
unobservable. In these cases, the fair value measurement is classified as Level
2 unless the unobservable portion of the adjustment or the unobservable input
to the valuation model is significant, in which case the fair value measurement
would be classified as Level 3. Assets and liabilities valued or disclosed
using Level 2 inputs include investments in certain funds, reverse repurchase
agreements, certain debt securities that are not actively traded, interest rate
swaps, commodity swaps, cash-settled call options, forward foreign exchange
contracts, foreign exchange swaps and forward rate agreements, time deposits,
as well as financing receivables and debt.
Level 3:
Valuation
inputs are based on the Company’s assumptions of relevant market data
(unobservable input).
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.
20
Q2
2017 Financial Information
Recurring fair value measures
The fair values of financial assets and liabilities measured at
fair value on a recurring basis were as follows:
|
|
June
30, 2017
|
|
($ in millions)
|
Level
1
|
Level
2
|
Level
3
|
Total
fair value
|
|
Assets
|
|
|
|
|
|
Available-for-sale securities in “Marketable securities and
short-term investments”:
|
|
|
|
|
|
Equity securities
|
–
|
137
|
–
|
137
|
|
Debt securities—U.S. government obligations
|
205
|
–
|
–
|
205
|
|
Debt securities—European government obligations
|
20
|
–
|
–
|
20
|
|
Debt securities—Other government obligations
|
–
|
2
|
–
|
2
|
|
Debt securities—Corporate
|
–
|
209
|
–
|
209
|
|
Derivative assets—current in “Other current assets”
|
–
|
258
|
–
|
258
|
|
Derivative assets—non-current in “Other non-current assets”
|
–
|
123
|
–
|
123
|
|
Total
|
225
|
729
|
–
|
954
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Derivative liabilities—current in “Other current liabilities”
|
–
|
183
|
–
|
183
|
|
Derivative liabilities—non-current in “Other non-current
liabilities”
|
–
|
59
|
–
|
59
|
|
Total
|
–
|
242
|
–
|
242
|
|
|
December
31, 2016
|
|
($ in millions)
|
Level
1
|
Level
2
|
Level
3
|
Total
fair value
|
|
Assets
|
|
|
|
|
|
Available-for-sale securities in “Marketable securities and
short-term investments”:
|
|
|
|
|
|
Equity securities
|
–
|
541
|
–
|
541
|
|
Debt securities—U.S. government obligations
|
220
|
–
|
–
|
220
|
|
Debt securities—Other government obligations
|
–
|
2
|
–
|
2
|
|
Debt securities—Corporate
|
–
|
95
|
–
|
95
|
|
Derivative assets—current in “Other current assets”
|
–
|
278
|
–
|
278
|
|
Derivative assets—non-current in “Other non-current assets”
|
–
|
126
|
–
|
126
|
|
Total
|
220
|
1,042
|
–
|
1,262
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Derivative liabilities—current in “Other current liabilities”
|
–
|
304
|
–
|
304
|
|
Derivative liabilities—non-current in “Other non-current
liabilities”
|
–
|
101
|
–
|
101
|
|
Total
|
–
|
405
|
–
|
405
|
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:
·
Available-for-sale
securities in “Marketable securities and short-term investments”
: If quoted market
prices in active markets for identical assets are available, these are
considered Level 1 inputs; however, when markets are not active, these inputs
are considered Level 2. If such quoted market prices are not available, fair
value is determined using market prices for similar assets or present value
techniques, applying an appropriate risk-free interest rate adjusted for
nonperformance risk. The inputs used in present value techniques are observable
and fall into the Level 2 category.
·
Derivatives
: The fair values
of derivative instruments are determined using quoted prices of identical
instruments from an active market, if available (Level 1). If quoted prices are
not available, price quotes for similar instruments, appropriately adjusted, or
present value techniques, based on available market data, or option pricing
models are used. Cash-settled call options hedging the Company’s WAR liability
are valued based on bid prices of the equivalent listed warrant. The fair
values obtained using price quotes for similar instruments or valuation
techniques represent a Level 2 input unless significant unobservable inputs are
used.
Non-recurring fair value measures
There were no significant non-recurring fair
value measurements during the six and three months ended June 30, 2017 and
2016.
21
Q2
2017 Financial Information
Disclosure
about financial instruments carried on a cost basis
The fair values of financial instruments
carried on a cost basis were as follows:
|
|
June
30, 2017
|
|
($ 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
|
1,597
|
|
1,597
|
–
|
–
|
1,597
|
|
Time deposits
|
3,421
|
|
–
|
3,421
|
–
|
3,421
|
|
Marketable securities and short-term investments
|
|
|
|
|
|
|
|
(excluding available-for-sale securities):
|
|
|
|
|
|
|
|
Time deposits
|
42
|
|
–
|
42
|
–
|
42
|
|
Receivables under reverse repurchase agreements
|
291
|
|
–
|
291
|
–
|
291
|
|
Other short-term investments
|
3
|
|
3
|
–
|
–
|
3
|
|
Other non-current assets:
|
|
|
|
|
|
|
|
Loans granted
|
31
|
|
–
|
33
|
–
|
33
|
|
Restricted cash deposits
|
43
|
|
43
|
–
|
–
|
43
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Short-term debt and current maturities of long-term debt
|
|
|
|
|
|
|
|
(excluding capital lease obligations)
|
891
|
|
387
|
504
|
–
|
891
|
|
Long-term debt (excluding capital lease obligations)
|
6,784
|
|
6,300
|
753
|
–
|
7,053
|
|
|
December
31, 2016
|
|
($ 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
|
1,704
|
|
1,704
|
–
|
–
|
1,704
|
|
Time deposits
|
1,940
|
|
–
|
1,940
|
–
|
1,940
|
|
Marketable securities and short-term investments
|
|
|
|
|
|
|
|
(excluding available-for-sale securities):
|
|
|
|
|
|
|
|
Time deposits
|
824
|
|
–
|
824
|
–
|
824
|
|
Receivables under reverse repurchase agreements
|
268
|
|
–
|
268
|
–
|
268
|
|
Other short-term investments
|
3
|
|
3
|
–
|
–
|
3
|
|
Other non-current assets:
|
|
|
|
|
|
|
|
Loans granted
|
30
|
|
–
|
31
|
–
|
31
|
|
Restricted cash deposits
|
59
|
|
59
|
–
|
–
|
59
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Short-term debt and current maturities of long-term debt
|
|
|
|
|
|
|
|
(excluding capital lease obligations)
|
980
|
|
856
|
124
|
–
|
980
|
|
Long-term debt (excluding capital lease obligations)
|
5,709
|
|
5,208
|
784
|
–
|
5,992
|
The Company uses
the following methods and assumptions in estimating fair values of financial
instruments carried on a cost basis:
·
Cash
and equivalents (excluding available-for-sale securities with original
maturities up to 3 months), and Marketable securities and short-term investments
(excluding available-for-sale securities)
: The carrying amounts approximate the fair values as the
items are short-term in nature.
·
Other
non-current assets
: Includes (i) loans granted whose fair values are based on
the carrying amount adjusted using a present value technique to reflect a
premium or discount based on current market interest rates (Level 2 inputs),
and (ii) restricted cash whose fair values approximate the carrying amounts
(Level 1 inputs).
·
Short-term
debt and current maturities of long-term debt (excluding capital lease
obligations)
:
Short-term debt includes commercial paper, bank borrowings and overdrafts. The
carrying amounts of short-term debt and current maturities of long-term debt,
excluding capital lease obligations, approximate their fair values.
·
Long-term
debt (excluding capital lease obligations)
: Fair values of bonds are determined using quoted market
prices (Level 1 inputs), if available. For bonds without available quoted
market prices and other long-term debt, the fair values are determined using a
discounted cash flow methodology based upon borrowing rates of similar debt
instruments and reflecting appropriate adjustments for non-performance risk
(Level 2 inputs).
22
Q2
2017 Financial Information
─
Note 7
Commitments and contingencies
Contingencies—Regulatory, Compliance and Legal
Antitrust
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).
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. With respect to these matters, management is cooperating fully
with the authorities. 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.
Suspect
payments
As a result of an internal investigation, the Company
self-reported to the Securities and Exchange Commission (SEC) and the
Department of Justice (DoJ) in the United States as well as to the Serious
Fraud Office (SFO) in the United Kingdom concerning certain of its past
dealings with Unaoil and its subsidiaries, including alleged improper payments
made by these entities to third parties. The SFO has commenced an investigation
into this matter. The Company is cooperating fully with the authorities. At this
time, it is not possible for the Company to make an informed judgment about the
outcome of these matters.
General
In addition, the Company is aware of proceedings, or the threat of
proceedings, against it and others in respect of private 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 June 30, 2017, and December 31, 2016, the Company had aggregate
liabilities of $208 million and $150 million, included in “Other
provisions” and “Other non-current liabilities”, for the above regulatory,
compliance and legal contingencies, and none of the individual liabilities
recognized was significant. As it is not possible to make an informed judgment
on the outcome of certain matters and as it is not possible, based on
information currently available to management, to estimate the maximum
potential liability on other matters, there could be material adverse outcomes
beyond the amounts accrued.
Guarantees
General
The following table provides quantitative data regarding the
Company’s third-party guarantees. The maximum potential payments represent a
“worst‑case scenario”, and do not reflect management’s expected outcomes.
|
Maximum potential payments
($ in millions)
|
June
30, 2017
|
December
31, 2016
|
|
Performance guarantees
|
1,878
|
193
|
|
Financial guarantees
|
58
|
69
|
|
Indemnification guarantees
|
71
|
71
|
|
Total
|
2,007
|
333
|
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 June 30, 2017, and
December 31, 2016, were not significant.
The Company is party to various guarantees providing financial or
performance assurances to certain third parties. These guarantees, which have
various maturities up to 2027, mainly consist of performance guarantees whereby
(i) the Company guarantees the performance of a third party’s product or
service according to the terms of a contract and (ii) as member of a
consortium that includes third parties, the Company guarantees not only its own
performance but also the work of third parties. 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. The original maturity dates for the
majority of these performance guarantees range from one to eight years.
In conjunction with the divestment of the high-voltage cable system
business, the Company has entered into various performance guarantees with
other parties with respect to certain liabilities of the divested business. The
maximum potential payable under these guarantees amounts to $1,328 million
and these guarantees have various maturities ranging from one to ten years.
Commercial
commitments
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. At June 30, 2017, and December
31, 2016, the total outstanding performance bonds aggregated to $8.0
billion
and $7.9 billion, respectively. There have been no significant amounts
reimbursed to financial institutions under these types of arrangements in the
six and three months ended June 30, 2017 and 2016.
Product and order-related contingencies
The Company calculates its provision for product warranties based
on historical claims experience and specific review of certain contracts.
The
reconciliation of the “Provisions for warranties”, including guarantees of
product performance, was as follows:
|
($ in millions)
|
2017
|
2016
|
|
Balance at January 1,
|
1,142
|
1,089
|
|
Claims paid in cash or in kind
|
(165)
|
(155)
|
|
Net increase in provision for changes in estimates, warranties
issued and warranties expired
|
148
|
171
|
|
Exchange rate differences
|
68
|
14
|
|
Balance at June 30,
|
1,193
|
1,119
|
23
Q2
2017 Financial Information
During 2016, the Company determined that the
provision for product warranties in its solar business, acquired in 2013 as
part of the purchase of Power-One, was no longer sufficient to cover expected
warranty costs in the remaining warranty period. Due to higher than originally
expected product failure rates for certain solar inverters designed and
manufactured by Power-One, a substantial portion of which relates to products
which were delivered to customers prior to the acquisition date, the previously
estimated product warranty provision was increased during the six and three months
ended June 30, 2016 by $23 million and $15 million, respectively.
As $22 million and $14 million of these warranty costs for the six
and three months ended June 30, 2016, respectively, relate to products
which were sold prior to the acquisition date, these costs have been excluded
from the Company’s primary measure of segment performance, Operational EBITA
(See Note 14).
The information for 2016 contained in the table above has been
adjusted to correct a classification difference between Claims paid in cash and
kind and Net effect of changes in estimates, warranties issued and warranties
expired.
─
Note 8
Debt
The Company’s total debt at June 30, 2017, and December 31, 2016,
amounted to $7,823 million and $6,803 million, respectively.
Short-term debt and current maturities of long-term debt
The Company’s “Short-term debt and current maturities of long-term
debt” consisted of the following:
|
($ in millions)
|
June
30, 2017
|
December
31, 2016
|
|
Short-term debt
|
538
|
135
|
|
Current maturities of long-term debt
|
376
|
868
|
|
Total
|
914
|
1,003
|
Short-term
debt primarily represented issued commercial paper and short-term loans from
various banks. At June 30, 2017, and December 31, 2016, $452 million and $57 million,
respectively, was outstanding under the $2 billion commercial paper
program in the United States.
In May
2017, the Company repaid at maturity the USD 500 million 1.625%
Notes.
Long-term debt
The Company’s long-term debt at June 30, 2017, and December 31,
2016, amounted to $6,909 million and $5,800 million, respectively.
Outstanding bonds (including maturities within the next 12 months)
were as follows:
|
|
June
30, 2017
|
December
31, 2016
|
|
(in millions)
|
Nominal
outstanding
|
Carrying
value
(1)
|
Nominal
outstanding
|
Carrying
value
(1)
|
|
Bonds:
|
|
|
|
|
|
|
|
|
|
1.625% USD Notes, due 2017
|
|
|
|
–
|
USD
|
500
|
$
|
500
|
|
4.25% AUD Notes, due 2017
|
AUD
|
400
|
$
|
309
|
AUD
|
400
|
$
|
291
|
|
1.50% CHF Bonds, due 2018
|
CHF
|
350
|
$
|
364
|
CHF
|
350
|
$
|
342
|
|
2.625% EUR Instruments, due 2019
|
EUR
|
1,250
|
$
|
1,424
|
EUR
|
1,250
|
$
|
1,311
|
|
4.0% USD Notes, due 2021
|
USD
|
650
|
$
|
644
|
USD
|
650
|
$
|
643
|
|
2.25% CHF Bonds, due 2021
|
CHF
|
350
|
$
|
389
|
CHF
|
350
|
$
|
368
|
|
5.625% USD Notes, due 2021
|
USD
|
250
|
$
|
272
|
USD
|
250
|
$
|
274
|
|
2.875% USD Notes, due 2022
|
USD
|
1,250
|
$
|
1,264
|
USD
|
1,250
|
$
|
1,261
|
|
0.625% EUR Notes, due 2023
|
EUR
|
700
|
$
|
796
|
EUR
|
700
|
$
|
732
|
|
0.75% EUR Notes, due 2024
|
EUR
|
750
|
$
|
848
|
|
|
|
–
|
|
4.375% USD Notes, due 2042
|
USD
|
750
|
$
|
723
|
USD
|
750
|
$
|
722
|
|
Total
|
|
|
$
|
7,033
|
|
|
$
|
6,444
|
(1)
USD
carrying values include unamortized debt issuance costs, bond discounts or
premiums, as well as adjustments for fair value hedge accounting, where
appropriate.
In May 2017, the Company issued notes with an
aggregate principal of EUR 750 million, due 2024. The notes pay interest
annually in arrears at a fixed rate of 0.75 percent per annum. The Company
recorded net proceeds (after underwriting fees) of EUR 745 million
(equivalent to approximately $824 million on date of issuance).
24
Q2
2017 Financial Information
─
Note 9
Employee benefits
The Company operates defined benefit pension plans, defined
contribution pension plans, and termination indemnity plans, in accordance with
local regulations and practices. These plans cover a large portion of the
Company’s employees and provide benefits to employees in the event of death,
disability, retirement, or termination of employment. Certain of these plans
are multi-employer plans. The Company also operates other postretirement
benefit plans including postretirement health care benefits, and other employee-related
benefits for active employees including long-service award plans. The
measurement date used for the Company’s employee benefit plans is December 31.
The funding policies of the Company’s plans are consistent with the local
government and tax requirements.
Net periodic benefit cost of the Company’s defined benefit pension
and other postretirement benefit plans consisted of the following:
|
($ in millions)
|
Defined
pension benefits
|
Other
postretirement benefits
|
|
Six months ended June 30,
|
2017
|
2016
|
2017
|
2016
|
|
Service cost
|
122
|
126
|
–
|
–
|
|
Interest cost
|
125
|
142
|
2
|
3
|
|
Expected return on plan assets
|
(202)
|
(204)
|
–
|
–
|
|
Amortization of prior service cost (credit)
|
18
|
21
|
(2)
|
(6)
|
|
Amortization of net actuarial loss
|
44
|
43
|
–
|
–
|
|
Curtailments, settlements and special termination benefits
|
1
|
1
|
–
|
–
|
|
Net periodic benefit cost
|
108
|
129
|
–
|
(3)
|
|
($ in millions)
|
Defined
pension benefits
|
Other
postretirement benefits
|
|
Three months ended June 30,
|
2017
|
2016
|
2017
|
2016
|
|
Service cost
|
63
|
63
|
–
|
–
|
|
Interest cost
|
64
|
71
|
1
|
1
|
|
Expected return on plan assets
|
(103)
|
(102)
|
–
|
–
|
|
Amortization of prior service cost (credit)
|
9
|
11
|
(1)
|
(3)
|
|
Amortization of net actuarial loss
|
22
|
21
|
–
|
–
|
|
Curtailments, settlements and special termination benefits
|
1
|
1
|
–
|
–
|
|
Net periodic benefit cost
|
56
|
65
|
–
|
(2)
|
Employer contributions were as follows:
|
($ in millions)
|
Defined
pension benefits
|
Other
postretirement benefits
|
|
Six months ended June 30,
|
2017
|
2016
|
2017
|
2016
|
|
Total contributions to defined benefit pension and
|
|
|
|
|
|
other postretirement benefit plans
|
95
|
140
|
4
|
6
|
|
($ in millions)
|
Defined
pension benefits
|
Other
postretirement benefits
|
|
Three months ended June 30,
|
2017
|
2016
|
2017
|
2016
|
|
Total contributions to defined benefit pension and
|
|
|
|
|
|
other postretirement benefit plans
|
48
|
88
|
2
|
3
|
During
the six and three months ended June 30, 2016, total contributions included
available-for-sale debt securities, having a fair value at the contribution
date of $40 million, contributed to certain of the Company’s pension plans in
Germany.
The
Company expects to make contributions totaling approximately $220 million
and $13 million to its defined benefit pension plans and other postretirement
benefit plans, respectively, for the full year 2017.
25
Q2
2017 Financial Information
─
Note 10
Stockholders’ equity
Between September 2014 and September 2016, the Company executed a
share buyback program for the purchase of up to $4 billion of its own
shares and on September 30, 2016, announced that it had completed this program.
Over the period of the share buyback, the Company purchased a total of
146.595 million shares (for approximately $3 billion) for
cancellation and 24.740 million shares (for approximately
$0.5 billion) to support its employee share programs.
In October 2016, the Company announced it planned a new share
buyback program for the purchase of up to $3 billion of its own shares
from 2017 to 2019. As of June 30, 2017, no shares had been bought under this new
program.
In the second quarter of 2017, the Company purchased on the open
market an aggregate of 10 million of its own shares. These shares were
purchased outside of any share buyback program and are for use in connection
with employee share programs. These transactions resulted in an increase in
Treasury stock of $251 million.
In the
six months ended June 30, 2017, the Company delivered, out of treasury stock,
5.1 million shares for options exercised in connection with its Management
Incentive Plan.
At the
Annual General Meeting of Shareholders on April 13, 2017, shareholders approved
the proposal of the Board of Directors
to distribute 0.76 Swiss francs per share to shareholders. The
declared dividend amounted to $1,622 million and was paid in the second
quarter of 2017. At the meeting, the shareholders also approved the proposal of
the Board of Directors to reduce the share capital of the Company by cancelling
46,595,000 shares which were bought back under the share buyback program
announced in September 2014. The cancellation was completed in July 2017.
─
Note 11
Earnings per share
Basic earnings per share is calculated by dividing income by the
weighted-average number of shares outstanding during the period. Diluted
earnings per share is calculated by dividing income by the weighted-average
number of shares outstanding during the period, assuming that all potentially
dilutive securities were exercised, if dilutive. Potentially dilutive
securities comprise outstanding written call options, and outstanding options
and shares granted subject to certain conditions under the Company’s
share-based payment arrangements.
|
Basic earnings per share
|
|
|
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
|
($ in millions, except per share data in $)
|
2017
|
2016
|
2017
|
2016
|
|
Amounts attributable to ABB shareholders:
|
|
|
|
|
|
Income from continuing operations, net of tax
|
1,250
|
908
|
524
|
407
|
|
Income (loss) from discontinued operations, net of tax
|
(1)
|
(2)
|
1
|
(1)
|
|
Net income
|
1,249
|
906
|
525
|
406
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding
(in millions)
|
2,140
|
2,165
|
2,140
|
2,149
|
|
|
|
|
|
|
|
Basic earnings per share attributable to ABB shareholders:
|
|
|
|
|
|
Income from continuing operations, net of tax
|
0.58
|
0.42
|
0.24
|
0.19
|
|
Income (loss) from discontinued operations, net of tax
|
–
|
–
|
0.01
|
–
|
|
Net income
|
0.58
|
0.42
|
0.25
|
0.19
|
|
Diluted earnings per share
|
|
|
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
|
($ in millions, except per share data in $)
|
2017
|
2016
|
2017
|
2016
|
|
Amounts attributable to ABB shareholders:
|
|
|
|
|
|
Income from continuing operations, net of tax
|
1,250
|
908
|
524
|
407
|
|
Income (loss) from discontinued operations, net of tax
|
(1)
|
(2)
|
1
|
(1)
|
|
Net income
|
1,249
|
906
|
525
|
406
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding (in millions)
|
2,140
|
2,165
|
2,140
|
2,149
|
|
Effect of dilutive securities:
|
|
|
|
|
|
Call options and shares
|
9
|
4
|
11
|
5
|
|
Adjusted weighted-average number of
shares outstanding (in millions)
|
2,149
|
2,169
|
2,151
|
2,154
|
|
|
|
|
|
|
|
Diluted earnings per share attributable to ABB shareholders:
|
|
|
|
|
|
Income from continuing operations, net of tax
|
0.58
|
0.42
|
0.24
|
0.19
|
|
Income (loss) from discontinued operations, net of tax
|
–
|
–
|
–
|
–
|
|
Net income
|
0.58
|
0.42
|
0.24
|
0.19
|
26
Q2
2017 Financial Information
─
Note 12
Reclassifications out of accumulated other
comprehensive loss
The following table shows changes in “Accumulated other
comprehensive loss” (OCI) attributable to ABB, by component, net of tax:
|
|
|
Unrealized
gains
|
Pension
and
|
Unrealized
gains
|
|
|
|
Foreign
currency
|
(losses)
on
|
other
|
(losses)
of cash
|
|
|
|
translation
|
available-for-sale
|
postretirement
|
flow
hedge
|
|
|
($ in millions)
|
adjustments
|
securities
|
plan adjustments
|
derivatives
|
Total
OCI
|
|
Balance at January 1, 2016
|
(3,135)
|
7
|
(1,719)
|
(11)
|
(4,858)
|
|
Other comprehensive (loss) income
|
|
|
|
|
|
|
before reclassifications
|
136
|
9
|
18
|
3
|
166
|
|
Amounts reclassified from OCI
|
–
|
–
|
45
|
–
|
45
|
|
Changes attributable to divestments
|
(7)
|
–
|
–
|
–
|
(7)
|
|
Total other comprehensive (loss) income
|
129
|
9
|
63
|
3
|
204
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
Amounts attributable to
|
|
|
|
|
|
|
noncontrolling interests
|
–
|
–
|
–
|
–
|
–
|
|
Balance at June 30, 2016
|
(3,006)
|
16
|
(1,656)
|
(8)
|
(4,654)
|
|
|
|
Unrealized
gains
|
Pension
and
|
Unrealized
gains
|
|
|
|
Foreign
currency
|
(losses)
on
|
other
|
(losses)
of cash
|
|
|
|
translation
|
available-for-sale
|
postretirement
|
flow
hedge
|
|
|
($ in millions)
|
adjustments
|
securities
|
plan
adjustments
|
derivatives
|
Total
OCI
|
|
Balance at January 1, 2017
|
(3,592)
|
7
|
(1,601)
|
(1)
|
(5,187)
|
|
Other comprehensive (loss) income
|
|
|
|
|
|
|
before reclassifications
|
582
|
2
|
(103)
|
18
|
499
|
|
Amounts reclassified from OCI
|
–
|
–
|
46
|
(10)
|
36
|
|
Changes attributable to divestments
(1)
|
(5)
|
–
|
6
|
(3)
|
(2)
|
|
Total other comprehensive (loss) income
|
577
|
2
|
(51)
|
5
|
533
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
Amounts attributable to
|
|
|
|
|
|
|
noncontrolling interests
|
13
|
–
|
–
|
–
|
13
|
|
Balance at June 30, 2017
|
(3,028)
|
9
|
(1,652)
|
4
|
(4,667)
|
(1)
Amounts relate to the divestment of the high-voltage cable system business and are
included in the net gain from sale of the business (
see
Note
3).
The following table reflects
amounts reclassified out of OCI in respect of pension and other postretirement
plan:
|
|
|
Six
months ended
|
Three
months ended
|
|
($ in millions)
|
Location of (gains) losses
|
June
30,
|
June
30,
|
|
Details about OCI components
|
reclassified from OCI
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
|
|
|
Pension and other postretirement plan adjustments:
|
|
|
|
|
|
|
Amortization of prior service cost
|
Net periodic benefit cost
(1)
|
16
|
15
|
8
|
8
|
|
Amortization of net actuarial loss
|
Net periodic benefit cost
(1)
|
44
|
43
|
22
|
21
|
|
Total before tax
|
|
60
|
58
|
30
|
29
|
|
Tax
|
Provision for taxes
|
(14)
|
(13)
|
(7)
|
(7)
|
|
Amounts reclassified from OCI
|
|
46
|
45
|
23
|
22
|
(1)
These
components
are
included
in
the
computation
of
net
periodic
benefit
cost
(see
Note
9).
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 six and three months ended June 30, 2017 and 2016.
27
Q2
2017 Financial Information
─
Note 13
Restructuring and related expenses
White Collar Productivity program
In September 2015, the Company announced a two-year program aimed
at making the Company leaner, faster and more customer-focused. Productivity
improvements include the rapid expansion and use of regional shared service
centers as well as the streamlining of global operations and head office
functions, with business units moving closer to their respective key markets.
In the course of this program, the Company is implementing and executing
various restructuring initiatives across all operating segments and regions.
Total
expected program costs were originally estimated to be $852 million. During
2016 and the six months ended June 30, 2017, the total expected program costs
were reduced by $332 million and $46 million, respectively, to
$474 million. This was primarily due to the realization of significantly
higher than originally expected attrition and internal re-deployment rates. The
reductions were made across all operating segments as well as for corporate
functions.
Liabilities associated with the White Collar
Productivity program are primarily included in “Other provisions”. The
following table shows the activity from the beginning of the program to June
30, 2017, by expense type.
|
|
Employee
|
Contract
settlement,
|
|
|
($ in millions)
|
severance
costs
|
loss
order and other costs
|
Total
|
|
Liability at January 1, 2015
|
–
|
–
|
–
|
|
Expenses
|
364
|
5
|
369
|
|
Cash payments
|
(34)
|
(1)
|
(35)
|
|
Liability at December 31, 2015
|
330
|
4
|
334
|
|
Expenses
|
232
|
3
|
235
|
|
Cash payments
|
(106)
|
(3)
|
(109)
|
|
Change in estimates
|
(102)
|
(1)
|
(103)
|
|
Exchange rate differences
|
(23)
|
–
|
(23)
|
|
Liability at December 31, 2016
|
331
|
3
|
334
|
|
Expenses
|
14
|
1
|
15
|
|
Cash payments
|
(56)
|
(2)
|
(58)
|
|
Change in estimates
|
(60)
|
–
|
(60)
|
|
Exchange rate differences
|
18
|
–
|
18
|
|
Liability at June 30, 2017
|
247
|
2
|
249
|
The change in estimates during 2016 of $103 million is due to
significantly higher than expected rates of attrition and internal
re-deployment and a lower than expected severance cost per employee for the
employee groups affected by the first phase of restructuring initiated in 2015.
During the six months ended June 30, 2016, the change in estimate related to
restructurings initiated in 2015 of $28 million was recorded in income
from operations, primarily as reductions in Cost of sales of $13 million and in
Selling, general and administrative expenses of $12 million. During the three
months ended June 30, 2016, the change in estimate of $23 million, related
to restructurings initiated in 2015, was recorded primarily as reductions in
Cost of sales of $12 million and in Selling, general and administrative
expenses of $9 million.
The change in estimates for both the six months and three months
ended June 30, 2016, of $28 million and $23 million, respectively,
resulted in an increase in earnings per share (basic and diluted) of $0.01 in
the respective periods.
The change in estimate during the six months ended June 30, 2017,
is due to higher than expected rates of attrition and internal re-deployment
and a lower than expected severance cost per employee. The decrease in the
liability was recorded in income from operations, primarily as reductions in
Cost of sales of $29 million and in Selling, general and administrative
expenses of $24 million for the six months ended June 30, 2017. During the
three months ended June 30, 2017, the change in estimate of $29 million,
related to restructurings initiated in both 2015 and 2016, was recorded
primarily as reductions in Cost of sales of $13 million and in Selling,
general and administrative expenses of $14 million.
The change in estimates for the six months and three months ended June
30, 2017, of $60 million and $29 million, respectively, resulted in
an increase in earnings per share (basic and diluted) of $0.02 and $0.01, in
the respective periods.
The following table outlines the net costs incurred in the six and
three months ended June 30, 2017 and 2016, the cumulative net costs incurred to
date and the total amount of costs expected to be incurred under the program
per operating segment:
|
|
Net
costs incurred
(1)
|
Cumulative
net
|
Total
|
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
cost
incurred up to
|
expected
|
|
($ in millions)
|
2017
|
2016
|
2017
|
2016
|
June
30, 2017
(1)
|
costs
(1)
|
|
Electrification Products
|
(6)
|
33
|
(2)
|
32
|
83
|
85
|
|
Robotics and Motion
|
(3)
|
42
|
(3)
|
42
|
67
|
68
|
|
Industrial Automation
|
(8)
|
82
|
(4)
|
82
|
124
|
126
|
|
Power Grids
|
(11)
|
60
|
(4)
|
61
|
92
|
94
|
|
Corporate and Other
|
(17)
|
52
|
(10)
|
53
|
99
|
101
|
|
Total
|
(45)
|
269
|
(23)
|
270
|
465
|
474
|
(1)
Net costs incurred in 2016, Cumulative net costs incurred up to June 30, 2017
and Total expected costs have been recast to reflect the reorganization of the
Company’s operating segments as outlined in Note 14.
28
Q2
2017 Financial Information
The Company recorded the following expenses, net
of changes in estimates, under this program:
|
|
Six
months ended
|
Three
months ended
|
Cumulative
costs
|
|
|
June
30,
|
June
30,
|
incurred
up to
|
|
($ in millions)
|
2017
|
2016
|
2017
|
2016
|
June
30, 2017
|
|
Employee severance costs
|
(46)
|
268
|
(24)
|
270
|
448
|
|
Estimated contract settlement, loss order and other costs
|
1
|
1
|
1
|
–
|
8
|
|
Inventory and long-lived asset impairments
|
–
|
–
|
–
|
–
|
9
|
|
Total
|
(45)
|
269
|
(23)
|
270
|
465
|
Expenses, net of change in estimates, associated with this program
are recorded in the following line items in the Consolidated Income Statements:
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
|
($ in millions)
|
2017
|
2016
|
2017
|
2016
|
|
Total cost of sales
|
(23)
|
159
|
(9)
|
160
|
|
Selling, general and administrative expenses
|
(17)
|
90
|
(13)
|
90
|
|
Non-order related research and development expenses
|
(4)
|
10
|
(2)
|
10
|
|
Other income (expense), net
|
(1)
|
10
|
1
|
10
|
|
Total
|
(45)
|
269
|
(23)
|
270
|
Other restructuring-related
activities
In the six months ended June
30, 2017 and 2016, the Company executed various other restructuring‑related
activities and incurred expenses of $58 million and $67 million,
respectively. In the three months ended June 30, 2017 and 2016, these expenses
amounted to $45 million and $40 million, respectively.
These expenses mainly relate to employee severance
costs, primarily recorded in “Total cost of sales”, and long-lived asset
impairments, recorded in “Other income (expense), net”.
─
Note
14
Operating
segment data
The Chief
Operating Decision Maker (CODM) is the Chief Executive Officer. 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 Electrification Products, Robotics and Motion, Industrial Automation and
Power Grids. The remaining operations of the Company are included in Corporate
and Other.
Effective January
1, 2017, the Company re-allocated the management responsibilities for certain
businesses among the
four reported operating segments
. The primary change was the transfer
to
the
Electrification Products segment of the electric vehicle charging, solar, and
power quality businesses from the Discrete Automation and Motion segment
.
In addition, the
Discrete Automation and Motion segment was renamed the Robotics and Motion
segment while the Process Automation segment was renamed the Industrial
Automation segment
.
The segment
information for the six and three months ended June 30, 2016 and at December
31, 2016, has been recast to reflect these organizational changes. In addition,
total assets at December 31, 2016, has been adjusted to reflect the additional netting
of deferred tax assets and liabilities which resulted from the adoption of an
accounting standard update on the classification of deferred taxes.
Furthermore, the
results for the Company’s high-voltage cable system business which, prior to
its divestment in March, were included with the Power Grids operating segment,
have been reclassified within Corporate and Other for all periods presented.
A description of
the types of products and services provided by each reportable segment is as
follows:
·
Electrification
Products
:
manufactures and sells products and services including electric vehicle
charging, solar inverters, modular substation packages, switchgear, UPS
solutions, circuit breakers, control products, wiring accessories, enclosures
and cabling systems, and intelligent home and building solutions designed to
integrate and automate the lighting, heating and ventilation, and security and
data communication networks.
·
Robotics
and Motion
:
manufactures and sells robotics, motors, generators, drives, wind converters,
components and systems for railways and related services and digital solutions
for a wide range of applications in industry, transportation and
infrastructure, and utilities.
·
Industrial
Automation
:
develops and sells integrated automation and electrification systems and
solutions, a comprehensive range of services ranging from repair to advanced
services such as remote monitoring and preventive maintenance and cybersecurity
services, process and discrete control solutions, advanced process control
software and manufacturing execution systems, sensing, measurement and analytics,
electric ship propulsion systems and large turbochargers.
·
Power
Grids
:
offers a range of products, systems, service and software solutions across the
power value chain of generation, transmission and distribution, to utility,
industry, transportation and infrastructure customers. These offerings address
existing and evolving grid needs such as the integration of renewables, network
control, digital substations, microgrids and asset management. The division
portfolio includes turnkey grid integration, transmission systems and
substation solutions as well as a wide range of power, distribution and
traction transformers, and an array of high-voltage products, such as circuit
breakers, switchgear, capacitors.
·
Corporate
and Other
:
includes headquarters, central research and development, the Company’s real
estate activities, Group Treasury Operations, historical operating activities
of certain divested businesses, and other minor business activities.
29
Q2
2017 Financial Information
The Company evaluates the profitability of its segments based
on Operational EBITA, which represents income from operations excluding:
·
amortization
expense on intangibles arising upon acquisitions (acquisition-related
amortization),
·
restructuring
and restructuring-related expenses,
·
non-operational
pension cost comprising: (a) interest cost, (b) expected return on
plan assets, (c) amortization of prior service cost (credit), (d) amortization
of net actuarial loss, and (e) curtailments, settlements and special
termination benefits,
·
changes
in the amount recorded for retained obligations of divested businesses
occurring after the divestment date (changes in retained obligations of
divested businesses),
·
changes
in estimates relating to opening balance sheets of acquired businesses (changes
in pre-acquisition estimates),
·
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: (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).
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 six and three months ended June 30, 2017 and 2016, as well as
total assets at June 30, 2017, and December 31, 2016.
|
|
Six
months ended June 30, 2017
|
Six
months ended June 30, 2016
|
|
|
Third-party
|
Intersegment
|
Total
|
Third-party
|
Intersegment
|
Total
|
|
($ in millions)
|
revenues
|
revenues
|
revenues
|
revenues
|
revenues
|
revenues
|
|
Electrification Products
|
4,567
|
235
|
4,802
|
4,539
|
286
|
4,825
|
|
Robotics and Motion
|
3,769
|
244
|
4,013
|
3,639
|
267
|
3,906
|
|
Industrial Automation
|
3,084
|
73
|
3,157
|
3,344
|
90
|
3,434
|
|
Power Grids
|
4,807
|
245
|
5,052
|
4,906
|
264
|
5,170
|
|
Corporate and Other
|
81
|
713
|
794
|
152
|
904
|
1,056
|
|
Intersegment elimination
|
–
|
(1,510)
|
(1,510)
|
–
|
(1,811)
|
(1,811)
|
|
Consolidated
|
16,308
|
–
|
16,308
|
16,580
|
–
|
16,580
|
|
|
Three
months ended June 30, 2017
|
Three
months ended June 30, 2016
|
|
|
Third-party
|
Intersegment
|
Total
|
Third-party
|
Intersegment
|
Total
|
|
($ in millions)
|
revenues
|
revenues
|
revenues
|
revenues
|
revenues
|
revenues
|
|
Electrification Products
|
2,385
|
124
|
2,509
|
2,395
|
141
|
2,536
|
|
Robotics and Motion
|
1,960
|
127
|
2,087
|
1,895
|
138
|
2,033
|
|
Industrial Automation
|
1,568
|
40
|
1,608
|
1,726
|
44
|
1,770
|
|
Power Grids
|
2,525
|
122
|
2,647
|
2,586
|
131
|
2,717
|
|
Corporate and Other
|
16
|
387
|
403
|
75
|
465
|
540
|
|
Intersegment elimination
|
–
|
(800)
|
(800)
|
–
|
(919)
|
(919)
|
|
Consolidated
|
8,454
|
–
|
8,454
|
8,677
|
–
|
8,677
|
30
Q2
2017 Financial Information
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
|
($ in millions)
|
2017
|
2016
|
2017
|
2016
|
|
Operational EBITA:
|
|
|
|
|
|
Electrification Products
|
695
|
707
|
373
|
400
|
|
Robotics and Motion
|
586
|
615
|
312
|
329
|
|
Industrial Automation
|
409
|
422
|
205
|
220
|
|
Power Grids
|
502
|
437
|
257
|
254
|
|
Corporate and Other and Intersegment elimination
|
(207)
|
(110)
|
(105)
|
(83)
|
|
Consolidated Operational EBITA
|
1,985
|
2,071
|
1,042
|
1,120
|
|
Acquisition-related amortization
|
(115)
|
(142)
|
(56)
|
(71)
|
|
Restructuring and restructuring-related expenses
(1)
|
(132)
|
(436)
|
(84)
|
(367)
|
|
Non-operational pension cost
|
14
|
–
|
7
|
–
|
|
Changes in retained obligations of divested businesses
|
(94)
|
–
|
–
|
–
|
|
Changes in pre-acquisition estimates
|
–
|
(22)
|
–
|
(14)
|
|
Gains and losses from sale of businesses
|
331
|
–
|
(7)
|
–
|
|
Acquisition-related expenses and certain non-operational items
|
(166)
|
(11)
|
(58)
|
(9)
|
|
Foreign exchange/commodity timing differences in income from
operations:
|
|
|
|
|
|
Unrealized gains and losses on derivatives (foreign exchange,
|
|
|
|
|
|
commodities, embedded derivatives)
|
169
|
(35)
|
93
|
(62)
|
|
Realized gains and losses on derivatives where the underlying
hedged
|
|
|
|
|
|
transaction has not yet been realized
|
18
|
14
|
8
|
10
|
|
Unrealized foreign exchange movements on receivables/payables
(and
|
|
|
|
|
|
related assets/liabilities)
|
(96)
|
(8)
|
(61)
|
40
|
|
Income from operations
|
1,914
|
1,431
|
884
|
647
|
|
Interest and dividend income
|
35
|
38
|
18
|
20
|
|
Interest and other finance expense
|
(153)
|
(146)
|
(74)
|
(74)
|
|
Income from continuing operations before
taxes
|
1,796
|
1,323
|
828
|
593
|
(1)
Amounts also include the incremental implementation costs in relation to the
White Collar Productivity program.
|
|
Total
assets
(1)
|
|
($ in millions)
|
June
30, 2017
|
December
31, 2016
|
|
Electrification Products
|
10,175
|
9,881
|
|
Robotics and Motion
|
8,153
|
7,943
|
|
Industrial Automation
|
4,465
|
4,310
|
|
Power Grids
|
8,892
|
8,728
|
|
Corporate and Other
|
8,793
|
8,340
|
|
Consolidated
|
40,478
|
39,202
|
(1)
Total assets are after intersegment eliminations and therefore reflect third-party
assets only.
31
Q2
2017 Financial Information
32
Q2
2017 Financial Information
—
Supplemental Reconciliations and Definitions
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 six and
three months ended June 30, 2017.
Comparable growth rates
Growth rates for certain key figures may be presented and
discussed on a “comparable” basis. The comparable growth rate measures growth
on a constant currency basis. Since we are a global company, the comparability
of our operating results reported in U.S. dollars is affected by foreign
currency exchange rate fluctuations. We calculate the impacts from foreign
currency fluctuations by translating the current-year periods’ reported key
figures into U.S. dollar amounts using the exchange rates in effect for the
comparable periods in the previous year.
Comparable growth rates are also adjusted for changes in our
business portfolio. Adjustments to our business portfolio occur due to
acquisitions, divestments, or by exiting specific business activities or
customer markets. 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 comparable growth rate. Certain portfolio changes
which do not qualify as divestments under U.S. GAAP have been treated in a
similar manner to divestments. Changes in our portfolio where we have exited
certain business activities or customer markets are adjusted as if the relevant
business was divested in the period when the decision to cease business
activities was taken. We do not adjust for portfolio changes where the relevant
business has annualized revenues of less than $50 million.
The following tables provide reconciliations of reported growth
rates of certain key figures to their respective comparable growth rate.
Divisional comparable growth rate reconciliation
|
|
Q2
2017 compared to Q2 2016
|
|
|
Order
growth rate
|
|
Revenue
growth rate
|
|
|
US$
|
Foreign
|
|
|
|
US$
|
Foreign
|
|
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
Division
|
reported)
|
impact
|
changes
|
Comparable
|
|
reported)
|
impact
|
changes
|
Comparable
|
|
Electrification Products
|
-4%
|
3%
|
0%
|
-1%
|
|
-1%
|
3%
|
0%
|
2%
|
|
Robotics and Motion
|
12%
|
2%
|
0%
|
14%
|
|
3%
|
2%
|
0%
|
5%
|
|
Industrial Automation
|
6%
|
2%
|
0%
|
8%
|
|
-9%
|
2%
|
0%
|
-7%
|
|
Power Grids
|
-6%
|
3%
|
0%
|
-3%
|
|
-3%
|
3%
|
0%
|
0%
|
|
ABB Group
|
0%
|
3%
|
0%
|
3%
|
|
-3%
|
3%
|
1%
|
1%
|
|
|
H1
2017 compared to H1 2016
|
|
|
Order
growth rate
|
|
Revenue
growth rate
|
|
|
US$
|
Foreign
|
|
|
|
US$
|
Foreign
|
|
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
Division
|
reported)
|
impact
|
changes
|
Comparable
|
|
reported)
|
impact
|
changes
|
Comparable
|
|
Electrification Products
|
-2%
|
3%
|
0%
|
1%
|
|
0%
|
2%
|
0%
|
2%
|
|
Robotics and Motion
|
8%
|
2%
|
0%
|
10%
|
|
3%
|
2%
|
0%
|
5%
|
|
Industrial Automation
|
-2%
|
2%
|
0%
|
0%
|
|
-8%
|
2%
|
0%
|
-6%
|
|
Power Grids
|
-13%
|
2%
|
0%
|
-11%
|
|
-2%
|
2%
|
2%
|
2%
|
|
ABB Group
|
-5%
|
3%
|
2%
|
0%
|
|
-2%
|
3%
|
1%
|
2%
|
33
Q2
2017 Financial Information
Regional comparable growth rate reconciliation
|
|
Q2
2017 compared to Q2 2016
|
|
|
Order
growth rate
|
|
Revenue
growth rate
|
|
|
US$
|
Foreign
|
|
|
|
US$
|
Foreign
|
|
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
Region
|
reported)
|
impact
|
changes
|
Comparable
|
|
reported)
|
impact
|
changes
|
Comparable
|
|
Europe
|
1%
|
4%
|
1%
|
6%
|
|
-5%
|
4%
|
2%
|
1%
|
|
The Americas
|
2%
|
0%
|
0%
|
2%
|
|
-2%
|
1%
|
0%
|
-1%
|
|
Asia, Middle East and Africa
|
-2%
|
4%
|
0%
|
2%
|
|
-1%
|
2%
|
0%
|
1%
|
|
ABB Group
|
0%
|
3%
|
0%
|
3%
|
|
-3%
|
3%
|
1%
|
1%
|
|
|
H1
2017 compared to H1 2016
|
|
|
Order
growth rate
|
|
Revenue
growth rate
|
|
|
US$
|
Foreign
|
|
|
|
US$
|
Foreign
|
|
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
Region
|
reported)
|
impact
|
changes
|
Comparable
|
|
reported)
|
impact
|
changes
|
Comparable
|
|
Europe
|
-6%
|
4%
|
6%
|
4%
|
|
-1%
|
4%
|
3%
|
6%
|
|
The Americas
|
3%
|
0%
|
0%
|
3%
|
|
0%
|
0%
|
0%
|
0%
|
|
Asia, Middle East and Africa
|
-9%
|
3%
|
0%
|
-6%
|
|
-3%
|
2%
|
0%
|
-1%
|
|
ABB Group
|
-5%
|
3%
|
2%
|
0%
|
|
-2%
|
3%
|
1%
|
2%
|
Order backlog growth rate reconciliation
|
|
June
30, 2017 compared to June 30, 2016
|
|
|
|
US$
|
Foreign
|
|
|
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
|
Division
|
reported)
|
impact
|
changes
|
Comparable
|
|
|
Electrification Products
|
-7%
|
2%
|
0%
|
-5%
|
|
|
Robotics and Motion
|
4%
|
0%
|
0%
|
4%
|
|
|
Industrial Automation
|
-7%
|
0%
|
0%
|
-7%
|
|
|
Power Grids
|
-3%
|
0%
|
1%
|
-2%
|
|
|
ABB Group
|
-7%
|
1%
|
5%
|
-1%
|
|
Other growth rate reconciliations
|
|
Q2
2017 compared to Q2 2016
|
|
H1
2017 compared to H1 2016
|
|
|
US$
|
Foreign
|
|
|
|
US$
|
Foreign
|
|
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
|
reported)
|
impact
|
changes
|
Comparable
|
|
reported)
|
impact
|
changes
|
Comparable
|
|
Large orders
|
1%
|
4%
|
0%
|
5%
|
|
-35%
|
2%
|
12%
|
-21%
|
|
Base orders
|
0%
|
3%
|
0%
|
3%
|
|
0%
|
2%
|
0%
|
2%
|
|
Services and software orders
|
5%
|
2%
|
1%
|
8%
|
|
5%
|
2%
|
1%
|
8%
|
|
Services and software revenues
|
-2%
|
2%
|
0%
|
0%
|
|
-2%
|
2%
|
0%
|
0%
|
34
Q2
2017 Financial Information
Division realignment
Effective January 1,
2017, we
changed the composition of the business portfolio of our four
divisions
.
The
scope of the Electrification Products division was expanded to
include the electric vehicle charging, solar, and power quality businesses from
the Discrete Automation and Motion division
. In
addition, the Discrete Automation and Motion division
was renamed the Robotics and Motion division while the Process Automation
division was renamed the Industrial Automation division
. Furthermore
the
operations of certain divested businesses have been excluded from the results
of the Power Grids division (but are included in the total ABB Group as part of
Corporate and other) for the periods prior to their respective divestment. See
Note 14 to the Interim Consolidated Financial Information (unaudited) for
further details on the realignment.
The following information presents a
reconciliation of growth rates of orders and revenues for 2016 compared with
2015 to reflect these organizational changes:
Divisional comparable growth rate reconciliation
|
|
Q2
2016 compared to Q2 2015
|
|
|
Order
growth rate
|
|
Revenue
growth rate
|
|
|
US$
|
Foreign
|
|
|
|
US$
|
Foreign
|
|
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
Division
|
reported)
|
impact
|
changes
|
Comparable
|
|
reported)
|
impact
|
changes
|
Comparable
|
|
Electrification Products
|
-5%
|
3%
|
0%
|
-2%
|
|
-5%
|
2%
|
0%
|
-3%
|
|
Robotics and Motion
|
-9%
|
2%
|
0%
|
-7%
|
|
-4%
|
2%
|
0%
|
-2%
|
|
Industrial Automation
|
-21%
|
2%
|
0%
|
-19%
|
|
-9%
|
3%
|
0%
|
-6%
|
|
Power Grids
|
-3%
|
3%
|
1%
|
1%
|
|
-4%
|
3%
|
4%
|
3%
|
|
ABB Group
|
-8%
|
3%
|
1%
|
-4%
|
|
-5%
|
2%
|
2%
|
-1%
|
|
|
H1
2016 compared to H1 2015
|
|
|
Order
growth rate
|
|
Revenue
growth rate
|
|
|
US$
|
Foreign
|
|
|
|
US$
|
Foreign
|
|
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
Division
|
reported)
|
impact
|
changes
|
Comparable
|
|
reported)
|
impact
|
changes
|
Comparable
|
|
Electrification Products
|
-7%
|
4%
|
0%
|
-3%
|
|
-5%
|
4%
|
0%
|
-1%
|
|
Robotics and Motion
|
-10%
|
3%
|
0%
|
-7%
|
|
-6%
|
3%
|
0%
|
-3%
|
|
Industrial Automation
|
-21%
|
4%
|
0%
|
-17%
|
|
-8%
|
3%
|
0%
|
-5%
|
|
Power Grids
|
-4%
|
3%
|
1%
|
0%
|
|
-7%
|
4%
|
4%
|
1%
|
|
ABB Group
|
-9%
|
3%
|
2%
|
-4%
|
|
-6%
|
3%
|
1%
|
-2%
|
35
Q2
2017 Financial Information
Operational EBITA margin
Definition
Operational EBITA margin
Operational EBITA
margin is Operational EBITA as a percentage of Operational revenues.
Operational EBITA
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,
·
non-operational
pension cost (as defined below),
·
changes in the
amount recorded for retained obligations of divested businesses occurring after
the divestment date (changes in retained obligations of divested businesses),
·
changes in pre-acquisition estimates,
·
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:
(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).
Amounts relating to changes in
retained obligations of divested businesses (as defined above), were previously
included within acquisition-related expenses and certain non-operational items.
In periods prior to 2017, there were no significant amounts to warrant separate
presentation.
Operational EBITA
is our measure of segment profit but is also used by management to evaluate the
profitability of the Company as a whole.
Acquisition-related amortization
Amortization
expense on intangibles arising upon acquisitions.
Operational revenues
The Company
presents Operational revenues solely for the purpose of allowing the
computation of Operational EBITA margin. 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). Operational revenues are not intended to be
an alternative measure to Total Revenues, which represent our revenues measured
in accordance with U.S. GAAP.
Non-operational pension cost
Non-operational
pension cost comprises the total net periodic benefit cost of defined pension
benefits and other postretirement benefits but excludes the current service
cost of both components. A breakdown of the components of non-operational
pension cost is provided below.
Reconciliation
The following
tables provide reconciliations of consolidated Operational EBITA to Net Income
and Operational EBITA Margin by division.
Reconciliation of
consolidated Operational EBITA to Net Income
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
|
($ in millions)
|
2017
|
2016
|
2017
|
2016
|
|
Operational EBITA
|
1,985
|
2,071
|
1,042
|
1,120
|
|
Acquisition-related amortization
|
(115)
|
(142)
|
(56)
|
(71)
|
|
Restructuring and restructuring-related expenses
(1)
|
(132)
|
(436)
|
(84)
|
(367)
|
|
Non-operational pension cost
|
14
|
–
|
7
|
–
|
|
Changes in retained obligations of divested businesses
|
(94)
|
–
|
–
|
–
|
|
Changes in pre-acquisition estimates
|
–
|
(22)
|
–
|
(14)
|
|
Gains and losses from sale of businesses
|
331
|
–
|
(7)
|
–
|
|
Acquisition-related expenses and certain non-operational items
|
(166)
|
(11)
|
(58)
|
(9)
|
|
Foreign exchange/commodity timing differences in income from
operations:
|
|
|
|
|
|
Unrealized gains and losses on derivatives (foreign exchange,
|
|
|
|
|
|
commodities, embedded derivatives)
|
169
|
(35)
|
93
|
(62)
|
|
Realized gains and losses on derivatives where the underlying
hedged
|
|
|
|
|
|
transaction has not yet been realized
|
18
|
14
|
8
|
10
|
|
Unrealized foreign exchange movements on receivables/payables
(and
|
|
|
|
|
|
related assets/liabilities)
|
(96)
|
(8)
|
(61)
|
40
|
|
Income from operations
|
1,914
|
1,431
|
884
|
647
|
|
Interest and dividend income
|
35
|
38
|
18
|
20
|
|
Interest and other finance expense
|
(153)
|
(146)
|
(74)
|
(74)
|
|
Income from continuing operations before
taxes
|
1,796
|
1,323
|
828
|
593
|
|
Provision for taxes
|
(456)
|
(350)
|
(248)
|
(149)
|
|
Income from continuing operations, net
of tax
|
1,340
|
973
|
580
|
444
|
|
Income (loss) from discontinued operations, net of tax
|
(1)
|
(2)
|
1
|
(1)
|
|
Net income
|
1,339
|
971
|
581
|
443
|
(1)
Amounts also include the incremental implementation costs in relation to the
White Collar Productivity program.
36
Q2
2017 Financial Information
Reconciliation
of Operational EBITA margin by division
|
|
Six
months ended June 30, 2017
|
|
|
|
|
|
|
Corporate
and
|
|
|
|
|
|
|
|
Other
and
|
|
|
|
Electrification
|
Robotics
|
Industrial
|
Power
|
Intersegment
|
|
|
($ in millions, unless otherwise indicated)
|
Products
|
and
Motion
|
Automation
|
Grids
|
elimination
|
Consolidated
|
|
Total revenues
|
4,802
|
4,013
|
3,157
|
5,052
|
(716)
|
16,308
|
|
Foreign exchange/commodity timing
|
|
|
|
|
|
|
|
differences in total revenues:
|
|
|
|
|
|
|
|
Unrealized gains and losses
|
|
|
|
|
|
|
|
on derivatives
|
(42)
|
(16)
|
(24)
|
(76)
|
(21)
|
(179)
|
|
Realized gains and losses on derivatives
|
|
|
|
|
|
|
|
where the underlying hedged
|
|
|
|
|
|
|
|
transaction has not yet been realized
|
–
|
1
|
(2)
|
(13)
|
1
|
(13)
|
|
Unrealized foreign exchange movements
|
|
|
|
|
|
|
|
on receivables (and related assets)
|
15
|
8
|
14
|
51
|
(1)
|
87
|
|
Operational revenues
|
4,775
|
4,006
|
3,145
|
5,014
|
(737)
|
16,203
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
640
|
532
|
409
|
453
|
(120)
|
1,914
|
|
Acquisition-related amortization
|
52
|
34
|
4
|
17
|
8
|
115
|
|
Restructuring and
|
|
|
|
|
|
|
|
restructuring-related expenses
(1)
|
13
|
27
|
9
|
21
|
62
|
132
|
|
Non-operational pension cost
|
1
|
(1)
|
1
|
(2)
|
(13)
|
(14)
|
|
Changes in retained obligations of
|
|
|
|
|
|
|
|
divested businesses
|
–
|
–
|
–
|
–
|
94
|
94
|
|
Changes in pre-acquisition estimates
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Gains and losses from sale of businesses
|
–
|
–
|
(2)
|
–
|
(329)
|
(331)
|
|
Acquisition-related expenses and certain
|
|
|
|
|
|
|
|
non-operational items
|
18
|
–
|
7
|
52
|
89
|
166
|
|
Foreign exchange/commodity timing
|
|
|
|
|
|
|
|
differences in income from operations:
|
|
|
|
|
|
|
|
Unrealized gains and losses on derivatives
|
|
|
|
|
|
|
|
(foreign exchange, commodities,
|
|
|
|
|
|
|
|
embedded derivatives)
|
(39)
|
(15)
|
(34)
|
(88)
|
7
|
(169)
|
|
Realized gains and losses on derivatives
|
|
|
|
|
|
|
|
where the underlying hedged
|
|
|
|
|
|
|
|
transaction has not yet been realized
|
–
|
–
|
(2)
|
(13)
|
(3)
|
(18)
|
|
Unrealized foreign exchange movements
|
|
|
|
|
|
|
|
on receivables/payables
|
|
|
|
|
|
|
|
(and related assets/liabilities)
|
10
|
9
|
17
|
62
|
(2)
|
96
|
|
Operational EBITA
|
695
|
586
|
409
|
502
|
(207)
|
1,985
|
|
|
|
|
|
|
|
|
|
Operational EBITA margin (%)
|
14.6%
|
14.6%
|
13.0%
|
10.0%
|
n.a.
|
12.3%
|
(1)
Amounts also include the incremental implementation costs in relation to the
White Collar Productivity program.
37
Q2
2017 Financial Information
|
|
Six
months ended June 30, 2016
|
|
|
|
|
|
|
Corporate
and
|
|
|
|
|
|
|
|
Other
and
|
|
|
|
Electrification
|
Robotics
|
Industrial
|
Power
|
Intersegment
|
|
|
($ in millions, unless otherwise indicated)
|
Products
|
and
Motion
|
Automation
|
Grids
|
elimination
|
Consolidated
|
|
Total revenues
|
4,825
|
3,906
|
3,434
|
5,170
|
(755)
|
16,580
|
|
Foreign exchange/commodity timing
|
|
|
|
|
|
|
|
differences in total revenues:
|
|
|
|
|
|
|
|
Unrealized gains and losses
|
|
|
|
|
|
|
|
on derivatives
|
(5)
|
(2)
|
3
|
5
|
7
|
8
|
|
Realized gains and losses on derivatives
|
|
|
|
|
|
|
|
where the underlying hedged
|
|
|
|
|
|
|
|
transaction has not yet been realized
|
(3)
|
–
|
8
|
(11)
|
1
|
(5)
|
|
Unrealized foreign exchange movements
|
|
|
|
|
|
|
|
on receivables (and related assets)
|
1
|
–
|
10
|
3
|
1
|
15
|
|
Operational revenues
|
4,818
|
3,904
|
3,455
|
5,167
|
(746)
|
16,598
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
565
|
506
|
300
|
322
|
(262)
|
1,431
|
|
Acquisition-related amortization
|
62
|
47
|
6
|
18
|
9
|
142
|
|
Restructuring and
|
|
|
|
|
|
|
|
restructuring-related expenses
(1)
|
57
|
59
|
93
|
94
|
133
|
436
|
|
Non-operational pension cost
|
2
|
–
|
–
|
(2)
|
–
|
–
|
|
Changes in retained obligations of
|
|
|
|
|
|
|
|
divested businesses
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Changes in pre-acquisition estimates
|
22
|
–
|
–
|
–
|
–
|
22
|
|
Gains and losses from sale of businesses
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Acquisition-related expenses and certain
|
|
|
|
|
|
|
|
non-operational items
|
–
|
–
|
–
|
4
|
7
|
11
|
|
Foreign exchange/commodity timing
|
|
|
|
|
|
|
|
differences in income from operations:
|
|
|
|
|
|
|
|
Unrealized gains and losses on derivatives
|
|
|
|
|
|
|
|
(foreign exchange, commodities,
|
|
|
|
|
|
|
|
embedded derivatives)
|
6
|
1
|
16
|
9
|
3
|
35
|
|
Realized gains and losses on derivatives
|
|
|
|
|
|
|
|
where the underlying hedged
|
|
|
|
|
|
|
|
transaction has not yet been realized
|
(2)
|
–
|
(3)
|
(10)
|
1
|
(14)
|
|
Unrealized foreign exchange movements
|
|
|
|
|
|
|
|
on receivables/payables
|
|
|
|
|
|
|
|
(and related assets/liabilities)
|
(5)
|
2
|
10
|
2
|
(1)
|
8
|
|
Operational EBITA
|
707
|
615
|
422
|
437
|
(110)
|
2,071
|
|
|
|
|
|
|
|
|
|
Operational EBITA margin (%)
|
14.7%
|
15.8%
|
12.2%
|
8.5%
|
n.a.
|
12.5%
|
(1)
Amounts also include the incremental implementation costs in relation to the
White Collar Productivity program.
38
Q2
2017 Financial Information
|
|
Three
months ended June 30, 2017
|
|
|
|
|
|
|
Corporate
and
|
|
|
|
|
|
|
|
Other
and
|
|
|
|
Electrification
|
Robotics
|
Industrial
|
Power
|
Intersegment
|
|
|
($ in millions, unless otherwise indicated)
|
Products
|
and
Motion
|
Automation
|
Grids
|
elimination
|
Consolidated
|
|
Total revenues
|
2,509
|
2,087
|
1,608
|
2,647
|
(397)
|
8,454
|
|
Foreign exchange/commodity timing
|
|
|
|
|
|
|
|
differences in total revenues:
|
|
|
|
|
|
|
|
Unrealized gains and losses
|
|
|
|
|
|
|
|
on derivatives
|
(19)
|
1
|
(6)
|
(29)
|
1
|
(52)
|
|
Realized gains and losses on derivatives
|
|
|
|
|
|
|
|
where the underlying hedged
|
|
|
|
|
|
|
|
transaction has not yet been realized
|
–
|
1
|
(2)
|
(8)
|
(1)
|
(10)
|
|
Unrealized foreign exchange movements
|
|
|
|
|
|
|
|
on receivables (and related assets)
|
3
|
2
|
9
|
24
|
(2)
|
36
|
|
Operational revenues
|
2,493
|
2,091
|
1,609
|
2,634
|
(399)
|
8,428
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
333
|
280
|
203
|
231
|
(163)
|
884
|
|
Acquisition-related amortization
|
26
|
16
|
2
|
9
|
3
|
56
|
|
Restructuring and
|
|
|
|
|
|
|
|
restructuring-related expenses
(1)
|
13
|
17
|
5
|
18
|
31
|
84
|
|
Non-operational pension cost
|
1
|
(1)
|
–
|
(1)
|
(6)
|
(7)
|
|
Changes in retained obligations of
|
|
|
|
|
|
|
|
divested businesses
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Changes in pre-acquisition estimates
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Gains and losses from sale of businesses
|
–
|
–
|
(2)
|
–
|
9
|
7
|
|
Acquisition-related expenses and certain
|
|
|
|
|
|
|
|
non-operational items
|
14
|
–
|
5
|
25
|
14
|
58
|
|
Foreign exchange/commodity timing
|
|
|
|
|
|
|
|
differences in income from operations:
|
|
|
|
|
|
|
|
Unrealized gains and losses on derivatives
|
|
|
|
|
|
|
|
(foreign exchange, commodities,
|
|
|
|
|
|
|
|
embedded derivatives)
|
(23)
|
(6)
|
(18)
|
(53)
|
7
|
(93)
|
|
Realized gains and losses on derivatives
|
|
|
|
|
|
|
|
where the underlying hedged
|
|
|
|
|
|
|
|
transaction has not yet been realized
|
–
|
–
|
(2)
|
(8)
|
2
|
(8)
|
|
Unrealized foreign exchange movements
|
|
|
|
|
|
|
|
on receivables/payables
|
|
|
|
|
|
|
|
(and related assets/liabilities)
|
9
|
6
|
12
|
36
|
(2)
|
61
|
|
Operational EBITA
|
373
|
312
|
205
|
257
|
(105)
|
1,042
|
|
|
|
|
|
|
|
|
|
Operational EBITA margin (%)
|
15.0%
|
14.9%
|
12.7%
|
9.8%
|
n.a.
|
12.4%
|
(1)
Amounts also include the incremental implementation costs in relation to the
White Collar Productivity program.
39
Q2
2017 Financial Information
|
|
Three
months ended June 30, 2016
|
|
|
|
|
|
|
Corporate
and
|
|
|
|
|
|
|
|
Other
and
|
|
|
|
Electrification
|
Robotics
|
Industrial
|
Power
|
Intersegment
|
|
|
($ in millions, unless otherwise indicated)
|
Products
|
and
Motion
|
Automation
|
Grids
|
elimination
|
Consolidated
|
|
Total revenues
|
2,536
|
2,033
|
1,770
|
2,717
|
(379)
|
8,677
|
|
Foreign exchange/commodity timing
|
|
|
|
|
|
|
|
differences in total revenues:
|
|
|
|
|
|
|
|
Unrealized gains and losses
|
|
|
|
|
|
|
|
on derivatives
|
16
|
9
|
13
|
52
|
9
|
99
|
|
Realized gains and losses on derivatives
|
|
|
|
|
|
|
|
where the underlying hedged
|
|
|
|
|
|
|
|
transaction has not yet been realized
|
(3)
|
(1)
|
3
|
(6)
|
1
|
(6)
|
|
Unrealized foreign exchange movements
|
|
|
|
|
|
|
|
on receivables (and related assets)
|
(11)
|
(7)
|
(10)
|
(29)
|
1
|
(56)
|
|
Operational revenues
|
2,538
|
2,034
|
1,776
|
2,734
|
(368)
|
8,714
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
303
|
250
|
123
|
149
|
(178)
|
647
|
|
Acquisition-related amortization
|
31
|
24
|
3
|
9
|
4
|
71
|
|
Restructuring and
|
|
|
|
|
|
|
|
restructuring-related expenses
(1)
|
52
|
52
|
89
|
76
|
98
|
367
|
|
Non-operational pension cost
|
1
|
–
|
–
|
(1)
|
–
|
–
|
|
Changes in retained obligations of
|
|
|
|
|
|
|
|
divested businesses
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Changes in pre-acquisition estimates
|
14
|
–
|
–
|
–
|
–
|
14
|
|
Gains and losses from sale of businesses
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Acquisition-related expenses and certain
|
|
|
|
|
|
|
|
non-operational items
|
–
|
–
|
–
|
2
|
7
|
9
|
|
Foreign exchange/commodity timing
|
|
|
|
|
|
|
|
differences in income from operations:
|
|
|
|
|
|
|
|
Unrealized gains and losses on derivatives
|
|
|
|
|
|
|
|
(foreign exchange, commodities,
|
|
|
|
|
|
|
|
embedded derivatives)
|
7
|
5
|
15
|
50
|
(15)
|
62
|
|
Realized gains and losses on derivatives
|
|
|
|
|
|
|
|
where the underlying hedged
|
|
|
|
|
|
|
|
transaction has not yet been realized
|
(2)
|
–
|
(3)
|
(6)
|
1
|
(10)
|
|
Unrealized foreign exchange movements
|
|
|
|
|
|
|
|
on receivables/payables
|
|
|
|
|
|
|
|
(and related assets/liabilities)
|
(6)
|
(2)
|
(7)
|
(25)
|
–
|
(40)
|
|
Operational EBITA
|
400
|
329
|
220
|
254
|
(83)
|
1,120
|
|
|
|
|
|
|
|
|
|
Operational EBITA margin (%)
|
15.8%
|
16.2%
|
12.4%
|
9.3%
|
n.a.
|
12.9%
|
(1)
Amounts also include the incremental implementation costs in relation to the
White Collar Productivity program.
40
Q2
2017 Financial Information
Operational and non-operational pension cost
The operational pension cost reflects the ongoing service cost of
providing employee benefits to the company’s employees.
The non-operational pension cost comprises: (i) interest
cost, (ii) expected return on plan assets, (iii) amortization of
prior service cost (credit), (iv) amortization of net actuarial loss, and
(v) curtailments, settlements and special termination benefits.
The operational and non-operational pension costs together
comprise the net periodic benefit cost as disclosed in Note 9 to the Interim
Consolidated Financial Information (unaudited).
Reconciliation
|
Defined pension benefits
|
Six
months ended June 30,
|
Three
months ended June 30,
|
|
($ in millions, unless otherwise indicated)
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
|
|
Service cost
|
122
|
126
|
63
|
63
|
|
Operational pension cost
|
122
|
126
|
63
|
63
|
|
Interest cost
|
125
|
142
|
64
|
71
|
|
Expected return on plan assets
|
(202)
|
(204)
|
(103)
|
(102)
|
|
Amortization of prior service cost (credit)
|
18
|
21
|
9
|
11
|
|
Amortization of net actuarial loss
|
44
|
43
|
22
|
21
|
|
Curtailments, settlements and special termination benefits
|
1
|
1
|
1
|
1
|
|
Non-operational pension cost
|
(14)
|
3
|
(7)
|
2
|
|
Net periodic benefit cost
|
108
|
129
|
56
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other postretirement benefits
|
Six months
ended June 30,
|
Three
months ended June 30,
|
|
($ in millions, unless otherwise indicated)
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
|
|
Interest cost
|
2
|
3
|
1
|
1
|
|
Amortization of prior service cost (credit)
|
(2)
|
(6)
|
(1)
|
(3)
|
|
Non-operational pension cost
|
–
|
(3)
|
–
|
(2)
|
|
Net periodic benefit cost
|
–
|
(3)
|
–
|
(2)
|
|
|
|
|
|
|
|
Total operational pension cost
|
122
|
126
|
63
|
63
|
|
Total non-operational pension cost
|
(14)
|
–
|
(7)
|
–
|
41
Q2
2017 Financial Information
Operational EPS
Definition
Operational EPS
Operational EPS is
calculated as Operational net income divided by the weighted-average number of
shares outstanding used in determining basic earnings per share.
Operational net income
Operational net
income is calculated as Net income attributable to ABB adjusted for the
following:
(i)
acquisition-related
amortization,
(ii)
restructuring and
restructuring-related expenses,
(iii)
non-operational
pension cost,
(iv)
changes in
retained obligations of divested businesses,
(v)
changes in
pre-acquisition estimates,
(vi)
gains and losses
from sale of businesses,
(vii)
acquisition-related
expenses and certain non-operational items,
(viii)
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
(ix)
The amount of
income tax on operational adjustments either estimated using the Adjusted Group
effective tax rate or in certain specific cases, computed using the actual
income tax effects of the relevant item in (i) to (vii) above.
Acquisition-related amortization
Amortization
expense on intangibles arising upon acquisitions.
Adjusted Group effective tax rate
The Adjusted Group
effective tax rate is computed by dividing an adjusted provision for taxes by
an adjusted income from continuing operations before taxes. Certain amounts
recorded in income from continuing operations before taxes and the related
provision for taxes (primarily gains and losses from sale of businesses) are
excluded from the computation.
Constant currency Operational EPS
adjustment and Operational EPS growth rate (constant currency)
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 difference in computed
Operational net income is divided by the relevant weighted-average number of
shares outstanding to identify the constant currency Operational EPS
adjustment.
Reconciliation
|
|
Six
months ended June 30,
|
|
|
($ in millions, except per share data in $)
|
2017
|
2016
|
Growth
(3)
|
|
Net income (attributable to ABB)
|
1,249
|
906
|
|
|
Operational adjustments:
|
|
|
|
|
Acquisition-related amortization
|
115
|
142
|
|
|
Restructuring and restructuring-related expenses
(1)
|
132
|
436
|
|
|
Non-operational pension cost
|
(14)
|
–
|
|
|
Changes in retained obligations of divested businesses
|
94
|
–
|
|
|
Changes in pre-acquisition estimates
|
–
|
22
|
|
|
Gains and losses from sale of businesses
|
(331)
|
–
|
|
|
Acquisition-related expenses and certain non-operational items
|
166
|
11
|
|
|
FX/commodity timing differences in income from operations
|
(91)
|
29
|
|
|
Tax on operational adjustments
(2)
|
(76)
|
(169)
|
|
|
Operational net income
|
1,244
|
1,377
|
-10%
|
|
|
|
|
|
|
Weighted-average number of shares
outstanding (in millions)
|
2,140
|
2,165
|
|
|
|
|
|
|
|
Operational EPS
|
0.58
|
0.64
|
-9%
|
|
Constant currency Operational EPS adjustment
|
0.09
|
0.07
|
|
|
Operational EPS (constant currency basis
- 2014 exchange rates)
|
0.67
|
0.71
|
-6%
|
42
Q2
2017 Financial Information
|
|
Three
months ended June 30,
|
|
|
($ in millions, except per share data in $)
|
2017
|
2016
|
Growth
(3)
|
|
Net income (attributable to ABB)
|
525
|
406
|
|
|
Operational adjustments:
|
|
|
|
|
Acquisition-related amortization
|
56
|
71
|
|
|
Restructuring and restructuring-related expenses
(1)
|
84
|
367
|
|
|
Non-operational pension cost
|
(7)
|
–
|
|
|
Changes in pre-acquisition estimates
|
–
|
14
|
|
|
Gains and losses from sale of businesses
|
7
|
–
|
|
|
Acquisition-related expenses and certain non-operational items
|
58
|
9
|
|
|
FX/commodity timing differences in income from operations
|
(40)
|
12
|
|
|
Tax on operational adjustments
(2)
|
(46)
|
(123)
|
|
|
Operational net income
|
637
|
756
|
-16%
|
|
|
|
|
|
|
Weighted-average number of shares
outstanding (in millions)
|
2,140
|
2,149
|
|
|
|
|
|
|
|
Operational EPS
|
0.30
|
0.35
|
-15%
|
|
Constant currency Operational EPS adjustment
|
0.04
|
0.04
|
|
|
Operational EPS (constant currency basis
- 2014 exchange rates)
|
0.34
|
0.39
|
-11%
|
(1)
Amounts also include the incremental implementation costs in relation to the
White Collar Productivity program.
(2)
Tax amount is computed by applying the Adjusted Group effective tax rate to the
operational adjustments, except for gains and losses from sale of businesses
for which the actual provision for taxes resulting from the gain or loss has
been computed.
(3)
Growth is computed using unrounded EPS amounts.
Net debt
Definition
Net debt
Net debt is defined as Total debt less Cash and marketable
securities.
Total debt
Total debt is the sum of Short-term debt and current maturities of
long-term debt, and Long-term debt.
Cash and
marketable securities
Cash and marketable securities is the sum of Cash and equivalents,
and Marketable securities and short-term investments.
Reconciliation
|
($ in millions)
|
June
30, 2017
|
December
31, 2016
|
|
Short-term debt and current maturities of long-term debt
|
914
|
1,003
|
|
Long-term debt
|
6,909
|
5,800
|
|
Total debt
|
7,823
|
6,803
|
|
Cash and equivalents
|
5,018
|
3,644
|
|
Marketable securities and short-term investments
|
909
|
1,953
|
|
Cash and marketable securities
|
5,927
|
5,597
|
|
Net debt
|
1,896
|
1,206
|
43
Q2
2017 Financial Information
Net working capital as a percentage of revenues
Definition
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
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
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.
Reconciliation
|
($ in millions, unless otherwise indicated)
|
June
30, 2017
|
June
30, 2016
|
|
Net working capital:
|
|
|
|
Receivables, net
|
10,305
|
10,384
|
|
Inventories, net
|
4,953
|
5,045
|
|
Prepaid expenses
|
268
|
246
|
|
Accounts payable, trade
|
(4,888)
|
(4,536)
|
|
Billings in excess of sales
|
(1,200)
|
(1,377)
|
|
Advances from customers
|
(1,542)
|
(1,612)
|
|
Other current liabilities
(1)
|
(3,197)
|
(3,002)
|
|
Net working capital
|
4,699
|
5,148
|
|
Total revenues for the three months
ended:
|
|
|
|
June 30, 2017 / 2016
|
8,454
|
8,677
|
|
March 31, 2017 / 2016
|
7,854
|
7,903
|
|
December 31, 2016 / 2015
|
8,993
|
9,242
|
|
September 30, 2016 / 2015
|
8,255
|
8,519
|
|
Adjustment to annualize/eliminate revenues of certain
acquisitions/divestments
|
(228)
|
|
|
Adjusted revenues for the trailing
twelve months
|
33,328
|
34,341
|
|
Net working capital as a percentage of
revenues (%)
|
14.1%
|
15.0%
|
(1) Amounts
exclude $514 million and $2,505 million at June 30, 2017 and 2016,
respectively, related primarily to (a) income taxes payable, (b) current
derivative liabilities, (c) pension and other employee benefits, and (d) payables
under the share buyback program.
44
Q2
2017 Financial Information
Free cash flow conversion to net income
Definition
Free cash
flow conversion to net income
Free cash flow conversion to net income is calculated as Free cash
flow divided by Net income attributable to ABB.
Free cash
flow (FCF)
Free cash flow is calculated as net cash provided by operating
activities adjusted for: (i) purchases of property, plant and equipment and
intangible assets, (ii) proceeds from sales of property, plant and equipment,
and (iii) changes in financing and other non-current receivables, net (included
in other investing activities).
Free cash
flow for the trailing twelve months
Free cash flow for the trailing twelve months includes free cash
flow recorded by ABB in the twelve months preceding the relevant balance sheet
date.
Net income
for the trailing twelve months
Net income for the trailing twelve months includes net income
recorded by ABB in the twelve months preceding the relevant balance sheet date.
Free cash flow conversion to net income
|
|
Twelve
months to
|
|
($ in millions, unless otherwise
indicated)
|
June
30, 2017
|
December
31, 2016
|
|
Net cash provided by operating
activities
|
3,485
|
3,843
|
|
Adjusted for the effects of:
|
|
|
|
Purchases of property, plant and
equipment and intangible assets
|
(900)
|
(831)
|
|
Proceeds from sale of property, plant
and equipment
|
63
|
61
|
|
Changes in financing receivables and
other non-current receivables
|
–
|
(8)
|
|
Free cash flow
|
2,648
|
3,065
|
|
Net income attributable to ABB
|
2,242
|
1,899
|
|
Free cash flow conversion to net income
|
118%
|
161%
|
Reconciliation of the trailing
twelve months to June 30, 2017
|
|
|
Purchases
of
|
|
Changes
in
|
|
|
|
Net
cash
|
property,
plant
|
Proceeds
|
financing
|
|
|
|
provided
by
|
and
equipment
|
from
sale of
|
receivables
and
|
Net
income
|
|
|
operating
|
and intangible
|
property,
plant
|
other
non-current
|
attributable
|
|
($ in millions)
|
activities
|
assets
|
and
equipment
|
receivables
|
to
ABB
|
|
Q3 2016
|
1,081
|
(184)
|
24
|
(3)
|
568
|
|
Q4 2016
|
1,428
|
(299)
|
9
|
(4)
|
425
|
|
Q1 2017
|
509
|
(192)
|
20
|
8
|
724
|
|
Q2 2017
|
467
|
(225)
|
10
|
(1)
|
525
|
|
Total for the trailing twelve months
to June 30, 2017
|
3,485
|
(900)
|
63
|
–
|
2,242
|
45
Q2
2017 Financial Information
Finance net
Definition
Finance net is calculated as Interest and dividend income less
Interest and other finance expense.
Reconciliation
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
|
($ in millions)
|
2017
|
2016
|
2017
|
2016
|
|
Interest and dividend income
|
35
|
38
|
18
|
20
|
|
Interest and other finance expense
|
(153)
|
(146)
|
(74)
|
(74)
|
|
Finance net
|
(118)
|
(108)
|
(56)
|
(54)
|
Book-to-bill ratio
Definition
Book-to-bill ratio is calculated as Orders received divided by
Total revenues.
Reconciliation
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
|
($ in millions, unless otherwise indicated)
|
2017
|
2016
|
2017
|
2016
|
|
Orders received
|
16,752
|
17,569
|
8,349
|
8,316
|
|
Total revenues
|
16,308
|
16,580
|
8,454
|
8,677
|
|
Book-to-bill ratio
|
1.03
|
1.06
|
0.99
|
0.96
|
46
Q2
2017 Financial Information
—
ABB
Ltd
Corporate Communications
P.O.
Box
8131
805
0
Zurich
Switzerland
Tel:
+41
(0)43
317
71
11
Fax:
+41
(0)43
317
79
58
www.abb.com
47
Q2
2017 Financial Information
April —
June 2017 — Q2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ABB Ltd announces that the following
members of the
Executive Committee
or
Board of Directors
of ABB
have purchased, sold or been granted ABB’s registered shares, call options
and warrant appreciation rights (“WARs”), in the following amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Date
|
|
Description
|
|
Received *
|
|
Purchased
|
|
Sold
|
|
Price
|
Matti Alahuhta
|
|
May 11, 2017
|
|
Shares
|
|
2,637
|
|
|
|
|
|
CHF
|
23.21
|
David Constable
|
|
May 11, 2017
|
|
Shares
|
|
2,637
|
|
|
|
|
|
CHF
|
23.21
|
Frederico Curado
|
|
May 11, 2017
|
|
Shares
|
|
2,443
|
|
|
|
|
|
CHF
|
23.21
|
Louis R. Hughes
|
|
May 11, 2017
|
|
Shares
|
|
3,297
|
|
|
|
|
|
CHF
|
23.21
|
David Meline
|
|
May 11, 2017
|
|
Shares
|
|
2,720
|
|
|
|
|
|
CHF
|
23.21
|
Satish Pai
|
|
May 11, 2017
|
|
Shares
|
|
2,519
|
|
|
|
|
|
CHF
|
23.21
|
Peter Voser
|
|
May 11, 2017
|
|
Shares
|
|
24,602
|
|
|
|
|
|
CHF
|
23.21
|
Jacob Wallenberg
|
|
May 11, 2017
|
|
Shares
|
|
3,709
|
|
|
|
|
|
CHF
|
23.21
|
Ying Yeh
|
|
May 11, 2017
|
|
Shares
|
|
2,475
|
|
|
|
|
|
CHF
|
23.21
|
Louis R. Hughes
|
|
June 2, 2017
|
|
Shares
|
|
|
|
|
|
6,000
|
|
CHF
|
24.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Received instruments were delivered as part of the ABB Ltd
Director’s or Executive Committee Member’s compensation
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
ABB LTD
|
|
|
|
|
|
|
Date: July 20, 2017.
|
By:
|
/s/ Alanna Abrahamson - Haka
|
|
|
Name:
|
Alanna Abrahamson - Haka
|
|
|
Title:
|
Group Senior Vice President
and
Head of Investor Relations
|
|
|
|
|
|
|
Date: July 20,
2017.
|
By:
|
|
|
|
Name:
|
Richard A. Brown
|
|
|
Title:
|
Group Senior Vice President
and
Chief Counsel Corporate & Finance
|
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