UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of April 2018

 

Commission File Number 001-16429

 

ABB Ltd

(Translation of registrant’s name into English)

 

P.O. Box 1831, Affolternstrasse 44, CH-8050, Zurich, Switzerland

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F ☒ 

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.

 

Yes ⬜ 

No ☒ 

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-

 

 

 

 


 

 

This Form 6-K consists of the following:

 

1.              Press release issued by ABB Ltd dated April 19, 2018, titled “Profitable growth”.

2.              Q1 2018 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 hereby incorporated by reference into the Registration Statements on Form F-3 of ABB Ltd and ABB Finance (USA) Inc. (File Nos. 333-223907 and 333-223907-01) 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.

  

 


 

 

 

ZURICH, SWITZERLAND, APRIL 19, 2018: FIRST QUARTER HIGHLIGHTS

Profitable growth

 

     Total orders +6%1; up in all divisions

     Base orders +5%; up in all regions

     Revenues +1%; impacted by lower opening backlog

     Book-to-bill ratio2 at 1.13x

     Operational EBITA margin2 up 20bps to 12.3%

     Net income $572 million; up excluding the gain on the cables divestment in 2017

     Cash flow from operating activities -$518 million; solid cash delivery for the full year expected

 

“We started 2018 with order growth in all divisions, improved revenues and operating results. The integration of B&R is well on track and we are preparing diligently for the closing and subsequent integration of GE Industrial Solutions which we expect to happen in Q2 2018,” said ABB CEO Ulrich Spiesshofer.

“We are continuing to invest in sales, R&D and our leading digital solutions portfolio ABB Ability. With our streamlined and strengthened ABB and the transition year 2017 behind us, we have our focus firmly on our customers and relentless execution,” he added.

Key figures

 

 

ChangE

$ in millions, unless otherwise indicated

Q1 2018

Q1 2017

US $

Comparable1

Orders

9,772

8,403

+16%

+6%

Revenues

8,627

7,854

+10%

+1%

Operational EBITA2

1,060

943

+12%

+4%3

as % of operational revenues

12.3%

12.1%

+0.2pts

 

Net Income

572

724

-21%4

 

Basic EPS ($)

0.27

0.34

-21%5

 

Operational EPS  ($)2

0.31

0.28

+11%5

+6%5

Cash flow from operating activities

-518

509

n.a.

 

Short-term outlook

Macroeconomic signs are trending positively in Europe and the United States, with growth expected to continue in China. The overall global market is back to growth whilst still impacted by uncertainties in various parts of the world. Oil prices and foreign exchange translation effects are expected to continue to influence the company’s results.

______

1 Growth rates for orders, base orders and revenues are on a comparable basis (local currency adjusted for acquisitions and divestitures). US$ growth rates are presented in Key Figures table.

2 For non-GAAP measures, see the “Supplemental Financial Information” attachment to the press release.

3 Constant currency (not adjusted for portfolio changes).

4 Operational net income +10% year on year at $669 million in Q1 2018 compared to $607 million in prior year period.

5 EPS growth rates are computed using unrounded amounts. Comparable operational earnings per share is in constant currency (2014 exchange rates not adjusted for changes in the business portfolio).

 

 

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Q1 2018 Group results

Orders

Total orders rose 6 percent (16 percent in US dollars), up in all divisions in the first quarter compared with a year ago. Base orders (base orders are classified as orders below $15 million) increased 5 percent (15 percent in US dollars), reflecting growth across all regions. Large orders represented 10 percent of total orders, the same level as a year ago.

Change in US dollar exchange rates versus the prior year period resulted in a positive translation impact of 7 percent on reported orders. Changes in the business portfolio related to the acquisition of B&R off-set by divestments made in 2017 had a net positive impact of 3 percent on total reported orders. The book-to-bill ratio was 1.13x compared with 1.07x in the first quarter of 2017.

Total services orders grew 8 percent (15 percent in US dollars), representing 19 percent of total orders.

Market overview 

Regional demand patterns were mainly positive in the first quarter:

      Orders in Europe benefited from rail, specialty vessel and process industry orders. Total orders in Europe were 3 percent lower (15 percent higher in US dollars), with growth in Switzerland, Norway, Spain and Germany offset by declines in France, the UK, Finland and Sweden. Base orders rose 2 percent (21 percent in US dollars).

      In the Americas total orders were stable (1 percent higher in US dollars), driven by increased demand from general industries and some improvement in process industries. Total orders in the United States were steady and orders from Brazil rose while order activity in Canada and Mexico was more muted. Base orders increased 1 percent (3 percent in US dollars).

      In Asia, Middle East and Africa (AMEA) total orders increased 20 percent (30 percent in US dollars). Base orders grew 12 percent (19 percent in US dollars). Both large and base orders developed positively in China, India and the United Arab Emirates.

In ABB’s key customer segments, the following trends were observed:

      Utility customers continued to invest in grid integration, grid automation and HV products, particularly in the AMEA region.

      In industry, ABB saw steady demand for robotics and shorter cycle products, and gained traction with power grids products such as transformers. Process industries, including oil and gas and mining, improved, with higher demand for products supported by the current commodity price outlook. Large project orders in process remained subdued. An ongoing focus on select industries such as Food & Beverage, automotive and 3C (Computers, communications and consumer electronics), proved beneficial for order momentum, particularly for robotics solutions.

      Transport & infrastructure demand was solid, with good orders received for rail electrification. Selective investments were made by specialty vessel customers. Demand for building automation solutions remained healthy, supported by a number of innovative product launches. Data centers and electric vehicle charging orders continue to be strong.

Revenues

Revenues grew 1 percent (10 percent in US dollars) year on year. In the Robotics and Motion and Electrification Products divisions, revenues were well-supported by continued solid order growth. This was tempered by steady revenues in Industrial Automation and lower revenues in Power Grids due to the lower order backlog at the end of 2017 in these divisions.

Service revenues were 8 percent higher (15 percent in US dollars) and represented 18 percent of total revenues, compared with 18 percent a year ago.

PROFITABLE GROWTH

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Change in US dollar exchange rates versus the prior year period resulted in a positive translation impact on reported revenues of 7 percent. Changes in the business portfolio related to the acquisitions of B&R and the divestments made in 2017 had a net positive effect of 2 percent on total reported revenues.

Operational EBITA

Operational EBITA was $1,060 million, 4 percent higher in local currencies (12 percent in US dollars). The operational EBITA was supported by net savings and positive volume and mix, partly offset by commodity prices. ABB continued to reinvest savings in growth over the quarter. The reported operational EBITA margin for the quarter improved to 12.3 percent, an expansion of 20 basis points when compared to the prior year period.

Net income, basic and operational earnings per share

Net income was $572 million, 21 percent lower in US dollars. Excluding non-operating items, which in the first quarter of 2017 included a gain from the divestment of the cables business, ABB’s operational net income2 was $669 million, an increase of 10 percent in US dollars. Basic earnings per share of $0.27 was 21 percent lower compared with the first quarter of 2017. Operational earnings per share of $0.31 was 11 percent higher, and 6 percent higher in constant currency terms5.

Cash flow from operating activities 

Cash flow from operating activities was -$518 million, compared to $509 million in the prior year period. The lower outcome relative to a year ago was mainly driven by the timing of employee incentive payments, which in 2017 were paid in the second quarter, timing of cash flows for large projects, payables and receivables, as well as the timing of tax payments. ABB expects strong cash flow from operating activities in the second quarter and solid cash delivery for the full year.

Q1 divisional performance

 ($ in millions, unless otherwise indicated)

Orders

Change

3rd party base orders

Change

Revenues

Change

Op EBITA %

CHANGE

US$

Comparable1

US$

Comparable1

US$

Comparable1

Power Grids

2,480

+7%

+1%

1,992

+13%

+7%

2,385

+1%

-4%

9.7%

-0.2pts

Electrification Products

2,786

+10%

+3%

2,647

+12%

+5%

2,494

+9%

+2%

15.2%

+1.1pts

Industrial Automation

2,117

+26%

+4%

1,787

+24%

+0%

1,859

+23%

0%

14.1%

+0.4pts

Robotics and Motion

2,579

+18%

+11%

2,313

+16%

+9%

2,209

+15%

+8%

15.3%

+0.5pts

Corporate & other (incl. inter-division elimination)

-190

 

 

12

 

 

-320

 

 

 

 

ABB Group

9,772

+16%

+6%

8,751

+15%

+5%

8,627

+10%

+1%

12.3%

+0.2pts

Effective January 1, 2018, management responsibility and oversight of certain remaining engineering, procurement and construction (EPC) business, previously included in the Power Grids, Industrial Automation, Robotics and Motion operating segments, were transferred to a new non-core operating business within Corporate and Other. Previously reported amounts have been reclassified consistent with this new structure.

Power Grids

Third-party base order momentum continued, increasing 7 percent (13 percent in US dollars). Service orders also grew, contributing to total order growth of 1 percent (7 percent in US dollars). The division booked several large orders which partially offset a tough comparable from the prior year, which included a very large order for an HVDC link between the UK and France. Revenues were 4 percent lower (1 percent higher in US dollars) impacted by the lower order backlog at the end of 2017. The operational EBITA margin of 9.7 percent for the quarter was 20 basis points lower year-on-year, reflecting lower revenue and mix effects in addition to ongoing investment in the division’s Power Up transformation initiatives.

PROFITABLE GROWTH

3/6

 

 


 

 

Electrification Products

Total orders improved 3 percent (10 percent in US dollars) and third-party base orders rose 5 percent (12 percent in US dollars), despite two fewer working days in certain key markets during the quarter. Revenues increased 2 percent (9 percent in US dollars) compared to the same period in 2017. Operational EBITA increased 6 percent, with the margin expanding 110 basis points year on year to 15.2 percent, driven mainly by volume growth, pricing improvements and sustained cost control.

Industrial Automation

Total orders improved 4 percent on a comparable basis driven by service and selective investment for mining and specialty marine vessel solutions. Third-party base orders were steady in the quarter from the high level in the first quarter of 2017. Including B&R and currency effects, total order growth was 26 percent and third-party base order growth was 24 percent compared to the prior year period. Revenues reflect strong base business performance which mitigated the order backlog in the quarter. The operational EBITA margin of 14.1 percent, up 40 basis points, improved primarily due to positive mix, successful project execution and cost savings.

Robotics and Motion

Order growth was reported across all segments and regions in the quarter. Total orders increased 11 percent (18 percent in US dollars) and third-party base orders improved 9 percent (16 percent in US dollars). Revenues increased 8 percent (15 percent in US dollars) on strong execution of the order backlog. Operational EBITA margin was 15.3 percent, up 50 basis points year on year. Improved volumes and mix were aided by focused growth efforts and stronger markets, which in turn improved  under-absorption along with better cost control.

Next Level strategy

ABB has been executing its Next Level strategy since 2014 through the three focus areas of profitable growth, relentless execution and business-led collaboration. During this time ABB has transitioned its portfolio and operations into a market-orientated, focused, leaner company. ABB today offers two clear value propositions, bringing electricity from any power plant to any plug and automating industries from natural resources to finished products. ABB is driving profitable growth through four entrepreneurial divisions, continuing to invest in sales, R&D and its leading digital solutions portfolio, ABB Ability™. ABB’s operating model puts the focus of ABB’s divisions firmly on operational execution, with stronger links between compensation and delivery of operational performance. Along with improving market dynamics, ABB is better positioned in a better market.

Profitable growth

As part of the drive towards profitable growth ABB continues to expand its ABB Ability™ solutions portfolio, which currently includes more than 210 ABB Ability™ solutions. During the quarter, ABB secured multiple new orders utilizing ABB Ability™ solutions including an order to upgrade two critical HVDC links in Australia and an order from the City of Trondheim in Norway for an electric vehicle charging solution.

ABB aims to create value through ongoing portfolio management. The integration of B&R into ABB’s Industrial Automation division to form its global Machine & Factory Automation business unit is now well advanced and on track to increase mid-term revenues in the business unit to a target of more than $1 billion. Building on the integration of B&R, ABB has announced a €100 million investment to build a state-of-the-art research center in Eggelsberg, Austria. The new campus will go into operation during 2020.

Work to secure regulatory approvals to acquire GE Industrial Solutions (GE-IS) continues and the transaction is on track to close by the end of the second quarter.

PROFITABLE GROWTH

4/6

 

 

 


 

 

Relentless execution

Further to the completion of the business model change for EPC a Non-Core business unit has been established within Corporate & Other effective January 1, 2018, reporting directly to the CFO to manage the resolution of remaining EPC activities.

ABB is building on the achievements of the 1,000-day programs that were completed at the end of 2017 with a continued strong focus on Supply Chain Management and Operations Quality. The group continues to deliver net cost savings, outpacing commodity effects and supporting the group’s ongoing aim of offsetting three to five per cent of the group’s cost of sales each year. The group efforts on quality and operations continue with a focus on world-class efficiency and effectiveness across ABB, including supporting ABB’s divisions to implement the extensive program of Lean Six Sigma projects under way across ABB.

Business-led collaboration

ABB continues to strengthen its brand. Effective March 1, 2018, ABB integrated Baldor Electric Company into its global ABB brand as part of the strategy to create a unified brand.

In January, ABB announced a ground breaking partnership agreement with the Formula E electric car motor racing series, now known as the “ABB FIA Formula E Championship”. Formula E serves as a competitive platform to develop and test e-mobility-relevant electrification and digitalization technologies.

Bond issuance

To maintain the efficiency of its capital funding structure, ABB closed a $1.5 billion bond issue in the United States on April 3, 2018, consisting of three tranches with maturities of 2, 5 and 10 years. Net proceeds of the issue are planned to be used for general corporate purposes, including the funding of the GE-IS transaction.

Short- and long-term outlook

Macroeconomic signs are trending positively in Europe and the United States, with growth expected to continue in China. The overall global market is back to growth whilst still impacted by uncertainties in various parts of the world. Oil prices and foreign exchange translation effects are expected to continue to influence the company’s results.

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.

More information

The Q1 2018 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 media call 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. The media conference call dial-in numbers are:
UK +44 207 107 0613
Sweden +46 85 051 00 31
Rest of Europe, +41 58 310 50 00
US and Canada +1
866 291 41  66 (toll-free) or +1  631  570 56 13 (long-distance charges)
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. EST). Callers are requested to phone in 10 minutes before the start of the call.  The analyst and investor conference call dial-in numbers are:
UK +44 207 107 0613

PROFITABLE GROWTH

5/6

 


 

 


Sweden +46 85 051 00 31
Rest of Europe, +41 58 310 50 00
US and Canada +1
866 291 41  66 (toll-free) or +1  631  570 56 13 (long-distance charges) 

The call will also be accessible  on  the ABB website at: http://new.abb.com/investorrelations/first-quarter-2018-results-webcast. 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. 

 

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 a history of innovation spanning more than 130 years, ABB today is writing the future of industrial digitalization with two clear value propositions: bringing electricity from any power plant to any plug and automating industries from natural resources to finished products. As title partner of Formula E, the fully electric international FIA motorsport class, ABB is pushing the boundaries of e-mobility to contribute to a sustainable future. ABB operates in more than 100 countries with about 135,000 employees. www.abb.com

 

 

Investor calendar 2018/2019

Second quarter 2018 results

July 19, 2018

Third quarter 2018 results

October 25, 2018

Fourth quarter and full year 2018 results

February 2019

 

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”, “Next Level strategy” and “Short- and long-term outlook”. 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”, “is on track” 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, April 19, 2018

Ulrich Spiesshofer, CEO

 

 


For more information, please contact:

Media Relations
Phone: +41 43 317 71 11
E-mail: media.relations@ch.abb.com

Investor Relations
Phone: +41 43 317 71 11
E-mail: investor.relations@ch.abb.com

ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland

 

 

 

 

 

PROFITABLE GROWTH

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1              Q1 2018 Financial Information 


 

  

2              Q1 2018 Financial Information 


 

 

Key Figures

 

 

 

 

 

CHANGE

 

($ in millions, unless otherwise indicated)

Q1 2018

Q1 2017

US$

Comparable(1)

 

Orders

9,772

8,403

16%

6%

 

Order backlog (end March)

23,737

23,084

3%

-3%

 

Revenues

8,627

7,854

10%

1%

 

Operational EBITA(1)

1,060

943

12%

4%(2)

 

 

as % of operational revenues(1)

12.3%

12.1%

+0.2 pts

 

 

Net income attributable to ABB

572

724

-21%

 

 

Basic earnings per share ($)

0.27

0.34

-21%(3)

 

 

Operational earnings per share(1) ($)

0.31

0.28

11%(3)

6%(3)

 

Cash flow from operating activities

(518)

509

n.a

 

 

(1)  For a reconciliation of non-GAAP measures see “Supplemental Reconciliations and Definitions” on page 31.

(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              Q1 2018 Financial Information 


 

 

 

 

 

CHANGE

 

($ in millions, unless otherwise indicated)

Q1 2018

Q1 2017

US$

Local

Comparable

 

Orders

ABB Group

9,772

8,403

16%

9%

6%

 

 

Power Grids

2,480

2,324

7%

1%

1%

 

 

Electrification Products

2,786

2,528

10%

3%

3%

 

 

Industrial Automation

2,117

1,674

26%

17%

4%

 

 

Robotics and Motion

2,579

2,177

18%

11%

11%

 

 

Corporate and Other

 

 

 

 

 

 

 

(incl. inter-division eliminations)

(190)

(300)

 

 

 

 

Third-party base orders

ABB Group

8,751

7,598

15%

8%

5%

 

 

Power Grids

1,992

1,763

13%

7%

7%

 

 

Electrification Products

2,647

2,365

12%

5%

5%

 

 

Industrial Automation

1,787

1,441

24%

15%

0%

 

 

Robotics and Motion

2,313

1,991

16%

9%

9%

 

 

Corporate and Other

12

38

 

 

 

 

Order backlog (end March)

ABB Group

23,737

23,084

3%

-3%

-3%

 

 

Power Grids

10,700

10,890

-2%

-7%

-7%

 

 

Electrification Products

3,441

3,157

9%

3%

3%

 

 

Industrial Automation

5,595

5,456

3%

-6%

-8%

 

 

Robotics and Motion

4,261

3,818

12%

4%

4%

 

 

Corporate and Other

 

 

 

 

 

 

 

(incl. inter-division eliminations)

(260)

(237)

 

 

 

 

Revenues

ABB Group

8,627

7,854

10%

3%

1%

 

 

Power Grids

2,385

2,351

1%

-4%

-4%

 

 

Electrification Products

2,494

2,293

9%

2%

2%

 

 

Industrial Automation

1,859

1,513

23%

14%

0%

 

 

Robotics and Motion

2,209

1,920

15%

8%

8%

 

 

Corporate and Other

 

 

 

 

 

 

 

(incl. inter-division eliminations)

(320)

(223)

 

 

 

 

Operational EBITA

ABB Group

1,060

943

12%

4%

 

 

 

Power Grids

232

231

0%

-5%

 

 

 

Electrification Products

377

322

17%

6%

 

 

 

Industrial Automation

262

206

27%

18%

 

 

 

Robotics and Motion

338

282

20%

11%

 

 

 

Corporate and Other

 

 

 

 

 

 

 

(incl. inter-division eliminations)

(149)

(98)

 

 

 

 

Operational EBITA %

ABB Group

12.3%

12.1%

 

 

 

 

 

Power Grids

9.7%

9.9%

 

 

 

 

 

Electrification Products

15.2%

14.1%

 

 

 

 

 

Industrial Automation

14.1%

13.7%

 

 

 

 

 

Robotics and Motion

15.3%

14.8%

 

 

 

 

Income from operations

ABB Group

895

1,023

 

 

 

 

 

Power Grids

193

211

 

 

 

 

 

Electrification Products

318

307

 

 

 

 

 

Industrial Automation

237

211

 

 

 

 

 

Robotics and Motion

313

261

 

 

 

 

 

Corporate and Other

 

 

 

 

 

 

 

(incl. inter-division eliminations)

(166)

33

 

 

 

 

Income from operations %

ABB Group

10.4%

13.0%

 

 

 

 

 

Power Grids

8.1%

9.0%

 

 

 

 

 

Electrification Products

12.8%

13.4%

 

 

 

 

 

Industrial Automation

12.7%

13.9%

 

 

 

 

 

Robotics and Motion

14.2%

13.6%

 

 

 

 

Cash flow from operating activities

ABB Group

(518)

509

 

 

 

 

 

Power Grids

(250)

190

 

 

 

 

 

Electrification Products

81

205

 

 

 

 

 

Industrial Automation

79

120

 

 

 

 

 

Robotics and Motion

73

263

 

 

 

 

 

Corporate and Other

(501)

(269)

 

 

 

4              Q1 2018 Financial Information 


 

Operational EBITA

 

 

 

Power

Electrification

Industrial

Robotics

 

($ in millions, unless otherwise indicated)

ABB

Grids

Products

Automation

and Motion

 

 

Q1 18

Q1 17

Q1 18

Q1 17

Q1 18

Q1 17

Q1 18

Q1 17

Q1 18

Q1 17

 

Revenues

8,627

7,854

2,385

2,351

2,494

2,293

1,859

1,513

2,209

1,920

 

FX/commodity timing

 

 

 

 

 

 

 

 

 

 

 

differences in total revenues

12

(79)

14

(28)

(6)

(11)

(1)

(13)

1

(12)

 

Operational revenues

8,639

7,775

2,399

2,323

2,488

2,282

1,858

1,500

2,210

1,908

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

895

1,023

193

211

318

307

237

211

313

261

 

Acquisition-related amortization

73

59

10

8

20

26

23

2

16

18

 

Restructuring and

 

 

 

 

 

 

 

 

 

 

 

restructuring-related expenses(1)

11

48

4

3

4

2

4

4

10

 

Changes in retained obligations of

 

 

 

 

 

 

 

 

 

 

 

divested businesses

94

 

Gains and losses from sale of businesses

6

(338)

3

 

Acquisition-related expenses and

 

 

 

 

 

 

 

 

 

 

 

integration costs

33

6

1

(1)

31

1

3

 

Certain other non-operational items

22

102

15

28

(2)

4

1

 

FX/commodity timing

 

 

 

 

 

 

 

 

 

 

 

differences in income from operations

20

(51)

9

(18)

6

(15)

(4)

(14)

4

(7)

 

Operational EBITA

1,060

943

232

231

377

322

262

206

338

282

 

 

 

 

 

 

 

 

 

 

 

 

 

Operational EBITA margin (%)

12.3%

12.1%

9.7%

9.9%

15.2%

14.1%

14.1%

13.7%

15.3%

14.8%

 

(1) Amounts in 2017 also include the incremental implementation costs in relation to the White Collar Productivity program.



Depreciation and Amortization

 

 

 

Power

Electrification

Industrial

Robotics

 

($ in millions)

ABB

Grids

Products

Automation

and Motion

 

 

Q1 18

Q1 17

Q1 18

Q1 17

Q1 18

Q1 17

Q1 18

Q1 17

Q1 18

Q1 17

 

Depreciation

193

184

45

43

52

50

17

12

35

34

 

Amortization

92

79

17

15

23

29

24

3

17

21

 

including total acquisition-related amortization of:

73

59

10

8

20

26

23

2

16

18



Orders received and revenues by region

 

($ in millions, unless otherwise indicated)

Orders received

CHANGE

Revenues

CHANGE

 

 

 

 

 

 

Com-

 

 

 

 

Com-

 

 

Q1 18

Q1 17

US$

Local

parable

Q1 18

Q1 17

US$

Local

parable

 

Europe

3,582

3,127

15%

2%

-3%

3,149

2,694

17%

4%

-1%

 

The Americas

2,391

2,362

1%

1%

0%

2,390

2,332

2%

2%

1%

 

Asia, Middle East and Africa

3,799

2,914

30%

23%

20%

3,088

2,828

9%

3%

3%

 

ABB Group

9,772

8,403

16%

9%

6%

8,627

7,854

10%

3%

1%

5              Q1 2018 Financial Information 


 

 

 

 

Interim Consolidated Financial Information

 

 

  

 

 

ABB Ltd Interim Consolidated Income Statements (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

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

 

 

Mar. 31, 2018

Mar. 31, 2017

 

Sales of products

 

 

7,036

6,469

 

Sales of services and other

 

 

1,591

1,385

 

Total revenues

 

 

8,627

7,854

 

Cost of sales of products

 

 

(4,972)

(4,667)

 

Cost of services and other

 

 

(947)

(819)

 

Total cost of sales

 

 

(5,919)

(5,486)

 

Gross profit

 

 

2,708

2,368

 

Selling, general and administrative expenses

 

 

(1,470)

(1,313)

 

Non-order related research and development expenses

 

 

(353)

(291)

 

Other income (expense), net

 

 

10

259

 

Income from operations

 

 

895

1,023

 

Interest and dividend income

 

 

23

17

 

Interest and other finance expense

 

 

(108)

(79)

 

Non-operational pension (cost) credit

 

 

30

7

 

Income from continuing operations before taxes

 

 

840

968

 

Provision for taxes

 

 

(235)

(208)

 

Income from continuing operations, net of tax

 

 

605

760

 

Loss from discontinued operations, net of tax

 

 

(5)

(2)

 

Net income

 

 

600

758

 

Net income attributable to noncontrolling interests

 

 

(28)

(34)

 

Net income attributable to ABB

 

 

572

724

 

 

 

 

 

 

 

Amounts attributable to ABB shareholders:

 

 

 

 

 

Income from continuing operations, net of tax

 

 

577

726

 

Net income

 

 

572

724

 

 

 

 

 

 

 

Basic earnings per share attributable to ABB shareholders:

 

 

 

 

 

Income from continuing operations, net of tax

 

 

0.27

0.34

 

Net income

 

 

0.27

0.34

 

 

 

 

 

 

 

Diluted earnings per share attributable to ABB shareholders:

 

 

 

 

 

Income from continuing operations, net of tax

 

 

0.27

0.34

 

Net income

 

 

0.27

0.34

 

 

 

 

 

 

 

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

 

 

 

 

 

Basic earnings per share attributable to ABB shareholders

 

 

2,134

2,140

 

Diluted earnings per share attributable to ABB shareholders

 

 

2,145

2,148

 

Due to rounding, numbers presented may not add to the totals provided.

 

 

 

 

 

 

 

 

 

 

 

See Notes to the Interim Consolidated Financial Information

 

 

 

 

6              Q1 2018 Financial Information 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ABB Ltd Interim Condensed Consolidated Statements of Comprehensive

 

Income (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

($ in millions)

 

 

Mar. 31, 2018

Mar. 31, 2017

 

Total comprehensive income, net of tax

 

 

792

956

 

Total comprehensive income attributable to noncontrolling interests, net of tax

 

 

(44)

(43)

 

Total comprehensive income attributable to ABB shareholders, net of tax

 

 

748

913

 

Due to rounding, numbers presented may not add to the totals provided.

 

 

 

 

 

 

 

 

 

 

 

See Notes to the Interim Consolidated Financial Information

 

 

 

 

7              Q1 2018 Financial Information 


 

 

 

 

 

ABB Ltd Interim Consolidated Balance Sheets (unaudited)

 

 

 

 

 

 

 

 

 

 

 

($ in millions, except share data)

Mar. 31, 2018

Dec. 31, 2017

 

Cash and equivalents

4,162

4,526

 

Marketable securities and short-term investments

740

1,102

 

Receivables, net

8,503

8,267

 

Contract assets

2,369

2,149

 

Inventories, net

5,609

5,255

 

Prepaid expenses

321

189

 

Other current assets

607

647

 

Total current assets

22,311

22,135

 

 

 

 

 

Property, plant and equipment, net

5,440

5,363

 

Goodwill

11,266

11,199

 

Other intangible assets, net

2,575

2,622

 

Prepaid pension and other employee benefits

161

144

 

Investments in equity-accounted companies

166

158

 

Deferred taxes

1,060

1,250

 

Other non-current assets

590

587

 

Total assets

43,569

43,458

 

 

 

 

 

Accounts payable, trade

5,301

5,419

 

Contract liabilities

2,838

2,908

 

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

2,476

738

 

Provisions for warranties

1,223

1,231

 

Dividends payable to shareholders

1,735

 

Other provisions

1,800

1,882

 

Other current liabilities

3,999

4,291

 

Total current liabilities

19,372

16,469

 

 

 

 

 

Long-term debt

5,285

6,709

 

Pension and other employee benefits

1,867

1,882

 

Deferred taxes

1,083

1,099

 

Other non-current liabilities

2,018

1,950

 

Total liabilities

29,625

28,109

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

Capital stock

 

 

 

(2,168,148,264 issued shares at March 31, 2018, and December 31, 2017)

188

188

 

Additional paid-in capital

39

29

 

Retained earnings

18,239

19,594

 

Accumulated other comprehensive loss

(4,178)

(4,345)

 

Treasury stock, at cost

 

 

 

(39,383,448 and 29,541,775 shares at March 31, 2018, and December 31, 2017, respectively)

(893)

(647)

 

Total ABB stockholders’ equity

13,395

14,819

 

Noncontrolling interests

549

530

 

Total stockholders’ equity

13,944

15,349

 

Total liabilities and stockholders’ equity

43,569

43,458

 

Due to rounding, numbers presented may not add to the totals provided.

 

 

 

 

 

 

 

See Notes to the Interim Consolidated Financial Information

 

 

8              Q1 2018 Financial Information 


 

 

 

 

 

 

 

ABB Ltd Interim Consolidated Statements of Cash Flows (unaudited)

 

 

 

 

 

 

 

 

 

Three months ended

 

($ in millions)

 

 

Mar. 31, 2018

Mar. 31, 2017

 

Operating activities:

 

 

 

 

 

Net income

 

 

600

758

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

Depreciation and amortization

 

 

285

263

 

Deferred taxes

 

 

(4)

(8)

 

Net loss (gain) from derivatives and foreign exchange

 

 

73

(15)

 

Net loss (gain) from sale of property, plant and equipment

 

 

(27)

(6)

 

Net loss (gain) from sale of businesses

 

 

6

(338)

 

Share-based payment arrangements

 

 

12

12

 

Other

 

 

8

 

Changes in operating assets and liabilities:

 

 

 

 

 

Trade receivables, net

 

 

3

94

 

Contract assets and liabilities

 

 

(307)

(149)

 

Inventories, net

 

 

(249)

(244)

 

Trade payables

 

 

(214)

(11)

 

Accrued liabilities

 

 

(272)

202

 

Provisions, net

 

 

(131)

54

 

Income taxes payable and receivable

 

 

(38)

26

 

Other assets and liabilities, net

 

 

(255)

(137)

 

Net cash provided by (used in) operating activities

 

 

(518)

509

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

Purchases of marketable securities (available-for-sale)

 

 

(17)

(121)

 

Purchases of short-term investments

 

 

(53)

 

Purchases of property, plant and equipment and intangible assets

 

 

(238)

(192)

 

Acquisition of businesses (net of cash acquired) and increases in cost- and equity-accounted companies

(4)

(15)

 

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

 

 

15

13

 

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

 

 

124

100

 

Proceeds from short-term investments

 

 

262

821

 

Proceeds from sales of property, plant and equipment

 

 

26

20

 

Proceeds from sales of businesses (net of transaction costs and cash disposed) and cost- and

 

 

 

equity-accounted companies

 

 

(10)

658

 

Net cash from settlement of foreign currency derivatives

 

 

5

17

 

Other investing activities

 

 

(8)

14

 

Net cash provided by investing activities

 

 

155

1,262

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

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

 

 

213

10

 

Increase in debt

 

 

7

47

 

Repayment of debt

 

 

(44)

(19)

 

Delivery of shares

 

 

2

83

 

Purchase of treasury stock

 

 

(250)

 

Dividends paid to noncontrolling shareholders

 

 

(7)

(9)

 

Other financing activities

 

 

15

(6)

 

Net cash provided by (used in) financing activities

 

 

(64)

106

 

 

 

 

 

 

 

Effects of exchange rate changes on cash and equivalents

 

 

63

41

 

Net change in cash and equivalents – continuing operations

 

 

(364)

1,918

 

 

 

 

 

 

 

Cash and equivalents, beginning of period

 

 

4,526

3,644

 

Cash and equivalents, end of period

 

 

4,162

5,562

 

 

 

 

 

 

 

Supplementary disclosure of cash flow information:

 

 

 

 

 

Interest paid

 

 

62

52

 

Taxes paid

 

 

294

201

 

Due to rounding, numbers presented may not add to the totals provided.

 

 

 

 

 

 

 

 

 

 

 

See Notes to the Interim Consolidated Financial Information

 

 

 

 

9              Q1 2018 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, 2017

192

24

19,925

(5,187)

(1,559)

13,395

502

13,897

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

Net income

 

 

724

 

 

724

34

758

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

adjustments, net of tax of $(1)

 

 

 

189

 

189

9

198

 

Unrecognized income (expense)

 

 

 

 

 

 

 

 

 

related to pensions and other

 

 

 

 

 

 

 

 

 

postretirement plans,

 

 

 

 

 

 

 

 

 

net of tax of $1

 

 

 

1

 

1

 

1

 

Change in derivatives qualifying as

 

 

 

 

 

 

 

 

 

cash flow hedges, net of tax of $0

 

 

 

(1)

 

(1)

 

(1)

 

Total comprehensive income

 

 

 

 

 

913

43

956

 

Changes in noncontrolling interests

 

 

 

 

 

5

5

 

Dividends to

 

 

 

 

 

 

 

 

 

noncontrolling shareholders

 

 

 

 

 

(18)

(18)

 

Share-based payment arrangements

 

12

 

 

 

12

 

12

 

Delivery of shares

 

(20)

 

 

103

83

 

83

 

Balance at March 31, 2017

192

16

20,649

(4,998)

(1,456)

14,403

532

14,935

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2018

188

29

19,594

(4,345)

(647)

14,819

530

15,349

 

Cumulative effect of changes in

 

 

 

 

 

 

 

 

 

accounting principles

 

 

(192)

(9)

 

(201)

 

(201)

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

Net income

 

 

572

 

 

572

28

600

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

adjustments, net of tax of $(1)

 

 

 

180

 

180

16

196

 

Effect of change in fair value of

 

 

 

 

 

 

 

 

 

available-for-sale securities,

 

 

 

 

 

 

 

 

 

net of tax of $(1)

 

 

 

(4)

 

(4)

 

(4)

 

Unrecognized income (expense)

 

 

 

 

 

 

 

 

 

related to pensions and other

 

 

 

 

 

 

 

 

 

postretirement plans,

 

 

 

 

 

 

 

 

 

net of tax of $(3)

 

 

 

10

 

10

 

10

 

Change in derivatives qualifying as

 

 

 

 

 

 

 

 

 

cash flow hedges, net of tax of $(3)

 

 

 

(10)

 

(10)

 

(10)

 

Total comprehensive income

 

 

 

 

 

748

44

792

 

Changes in noncontrolling interests

 

 

 

 

 

(18)

(18)

 

Dividends to

 

 

 

 

 

 

 

 

 

noncontrolling shareholders

 

 

 

 

 

(7)

(7)

 

Dividends declared to shareholders

 

 

(1,735)

 

 

(1,735)

 

(1,735)

 

Share-based payment arrangements

 

12

 

 

 

12

 

12

 

Purchase of treasury stock

 

 

 

 

(249)

(249)

 

(249)

 

Delivery of shares

 

(1)

 

 

3

2

 

2

 

Balance at March 31, 2018

188

39

18,239

(4,178)

(893)

13,395

549

13,944

 

Due to rounding, numbers presented may not add to the totals provided.

 

 

 

 

 

 

 

 

 

 

 

See Notes to the Interim Consolidated Financial Information

10              Q1 2018 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, 2017.

 

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,

·          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,

·          assessment of the allowance for doubtful accounts, and

·          the estimated effective annual tax rate applicable to the interim financial information.

 

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, contract assets, inventories and provisions related to these contracts which will not be realized within one year that have been classified as current.

 

Basis of presentation

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 Company has retained obligations (primarily for environmental and taxes) related to businesses disposed or otherwise exited that qualified as discontinued operations. Changes to these retained obligations are recorded in income/loss from discontinued operations, net of tax.

 

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.

 

Reclassifications

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 15), and

·          as a result of the adoption of a number of accounting pronouncements (see Note 2):

(i) the reclassification of Unbilled receivables from Receivables to Contract assets,

(ii) the reclassification of Billings in excess of sales, Advances from customers, certain advances to customers previously reported as a reduction in Inventories, and deferred revenues previously reported in Other current liabilities, to Contract liabilities, and

(iii) the reclassification of certain net periodic pension and postretirement benefits costs/credits from Total cost of sales, Selling, general and administrative expenses and Non-order related research and development expenses to Non-operational pension (cost) credit.



11              Q1 2018 Financial Information 


 

Note 2

Recent accounting pronouncements

 

Applicable for current periods

Revenue from contracts with customers

As of January 1, 2018, the Company adopted a new accounting standard for recognizing revenues from contracts with customers. The new standard, which supersedes substantially all previously 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. The adoption of this standard resulted in only immaterial differences between the identification of performance obligations and the current unit of accounting determination. Therefore, the cumulative effect of initially applying this standard, retrospectively, on retained earnings was not material, however total assets and total liabilities increased by $196 million due to the reclassification of certain advances from customers, previously reported as a reduction in Inventories, to liabilities.

 

While comparative information has not been restated and continues to be measured and reported under the accounting standards in effect for those periods presented, the following prior period amounts have been reclassified in the Consolidated Balance Sheets to conform to the presentation requirements of the new standard:

  

 

December 31, 2017

 

 

 

Previously

 

 

 

 

Previously

 

 

($ in millions)

 

reported

Restated

 

 

 

reported

Restated

 

Consolidated Balance Sheet

 

 

 

 

 

 

Current assets

 

 

 

 

Current liabilities

 

 

 

 

Receivables, net(1)

 

10,416

8,267

 

Contract liabilities(2), (3), (4)

 

2,908

 

Contract assets(1)

 

2,149

 

Billings in excess of sales(2)

 

1,251

 

Inventories, net(3)

 

5,059

5,255

 

Advances from customers(2), (3)

 

1,367

 

 

 

 

 

 

Other current liabilities(4)

 

4,385

4,291

 

Total assets

 

43,262

43,458

 

Total liabilities

 

27,913

28,109

 

(1) $2,149 million of unbilled receivables previously included in Receivables, have been reclassified to Contract assets.

(2) Amounts previously presented as billings in excess of sales and advances from customers, have been reclassified to Contract liabilities.

(3) $196 million of advances from customers, previously recorded net within Inventories, have been reclassified to advances from customers and recorded within Contract liabilities.

(4) Certain amounts recorded as deferred revenues totalling $94 million, have been reclassified from Other current liabilities to Contract liabilities.

 

Other than the reclassifications of 2017 balances in the table above and the additional disclosure requirements, the impact of the adoption on the Company’s Interim Consolidated Financial Information for the three months ended March 31, 2018, was not significant.

 

Income taxes – Intra-entity transfers of assets other than inventory

In January 2018, the Company adopted an accounting standard update requiring it 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 was applied on a modified retrospective basis and resulted in a net reduction in deferred tax assets of $201 million with a corresponding reduction in retained earnings.

 

Improving the presentation of net periodic pension cost and net periodic postretirement benefit cost

In January 2018, the Company adopted an accounting standard update 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 is 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 periodic benefit cost are 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 current service cost component is allowed to be capitalized as a cost of internally manufactured inventory or a self-constructed asset. This update was applied retrospectively for the presentation requirements, and prospectively for the capitalization of the current service cost component requirements. The Company has used the practical expedient, as the amount of other components of net periodic benefit cost capitalized in inventory for prior periods is not significant.

 

For the three months ended March 31, 2017, the Company reclassified $7 million of income and presented it outside of income from operations relating to net periodic pension costs.

 

Recognition and measurement of financial assets and financial liabilities

In January 2018, the Company adopted two accounting standard updates enhancing the reporting model for financial instruments, which include amendments to address aspects of recognition, measurement, presentation and disclosure. The Company is 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. The adoption of this update resulted in the reclassification of the net cumulative unrealized gains on available-for-sale equity securities of $9 million (net of tax) at December 31, 2017 from Total accumulated comprehensive loss to Retained earnings on January 1, 2018.

 

12              Q1 2018 Financial Information 


 

Classification of certain cash receipts and cash payments in the statement of cash flows

In January 2018, the company adopted an accounting standard update 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 was applied retrospectively and did not have a significant impact on the consolidated financial statements.

 

Statement of cash flows - Restricted cash

In January 2018, the Company adopted an accounting standard update 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 did not have a significant impact on the consolidated financial statements.

 

Clarifying the definition of a business

In January 2018, the Company adopted an accounting standard update 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 was applied prospectively and did not have a significant impact on the consolidated financial statements.

 

Clarifying the scope of asset derecognition guidance and accounting for partial sales of nonfinancial assets

In January 2018, the Company adopted an accounting standard update 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. This update was applied retrospectively and did not have a significant impact on the consolidated financial statements.

 

Compensation—Stock Compensation

In January 2018, the Company adopted an accounting standard update 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 was applied prospectively and did not have a significant impact on the consolidated financial statements.

 

Applicable for future periods

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.

 

Derivatives and Hedging—Targeted Improvements to Accounting for Hedging Activities

In August 2017, an accounting standard update was issued which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. This update is effective for the Company for annual and interim periods beginning January 1, 2019. For cash flow and net investment hedges as of the adoption date, the guidance requires a modified retrospective approach. The amended presentation and disclosure guidance is required only prospectively. The Company will adopt this update as of January 1, 2019, and is currently evaluating the impact of this update on its consolidated financial statements.

 

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, an accounting standard update was issued which allows a reclassification of the stranded tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act of 2017 to retained earnings. This update is effective for the Company for annual and interim periods beginning January 1, 2019, with early adoption in any interim period permitted. The updated guidance is to be applied in the period of adoption or retrospectively to each period in which the effect of the Tax Cuts and Jobs Act related to items remaining in accumulated other comprehensive income are recognized. The Company is currently evaluating the impact of this update on its consolidated financial statements.



13              Q1 2018 Financial Information 


 

Note 3

Acquisitions and divestments

  

Business divestments

There were no significant gains or losses recognized relating to divestments in the three months ended March 31, 2018. For the three months ended March 31, 2017, the Company recorded a net gain (including transaction costs) of $334 million in “Other income (expense), net” and a tax expense of $28 million in “Provision for taxes” relating to the divestment of its high-voltage cable system and cable accessories businesses (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 in the three months ended March 31, 2017, 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).

 

Planned acquisition of GE Industrial Solutions

On September 25, 2017, the Company announced that it had reached an agreement to acquire GE Industrial Solutions, GE’s global electrification solutions business, for $2.6 billion. The acquisition will strengthen the Company’s global position in electrification and expand its access to the North American market through strong customer relationships, large installed base and extensive distribution networks. GE Industrial Solutions is headquartered in the United States. The Company expects to complete the acquisition of GE Industrial Solutions in the second quarter of 2018 following the receipt of customary regulatory approvals.



Note 4

Cash and equivalents, marketable securities and short-term investments

 

Cash and equivalents, marketable securities and short-term investments consisted of the following:

  

 

 

 

March 31, 2018

 

 

 

 

 

 

 

 

Marketable

 

 

 

 

Gross

Gross

 

 

securities

 

 

 

 

unrealized

unrealized

 

Cash and

and short-term

 

($ in millions)

Cost basis

gains

losses

Fair value

equivalents

investments

 

Cash

1,925

 

 

1,925

1,925

 

Time deposits

2,278

 

 

2,278

2,237

41

 

Other short-term investments

314

 

 

314

314

 

Debt securities available-for-sale:

 

 

 

 

 

 

 

 

U.S. government obligations

130

(4)

126

126

 

 

Corporate

93

1

(2)

92

92

 

Equity securities available-for-sale

153

14

167

167

 

Total

4,893

15

(6)

4,902

4,162

740



 

 

 

 

December 31, 2017

 

 

 

 

 

&nbs