1st Quarter Results - part 2
ABB Ltd
25 April 2002
Version: 5
CONFIDENTIAL
Summary financial information
Three Months Ended March 2002
of
ABB Ltd
and Consolidated Subsidiaries
ABB Ltd
Summary Consolidated Income Statements
January - March
2002 2001
(Unaudited)
(in millions, except per share data)
Revenues $ 5,149 $ 5,380
Cost of sales (3,913) (3,982)
Gross profit 1,236 1,398
Selling, general and administrative expenses (1,007) (1,054)
Amortization expense (12) (58)
Other income, net 18 48
Earnings before interest and taxes 235 334
Interest and dividend income 102 142
Interest and other finance expense (151) (180)
Income from continuing operations before taxes and minority interest 186 296
Provision for taxes (57) (87)
Minority interest (21) (8)
Income from continuing operations 108 201
Extraordinary gain on debt extinguishment, net of tax 6 ---
Cumulative effect of change in accounting principles (SFAS 133), net of tax --- (63)
Net income $ 114 $ 138
Weighted average shares outstanding 1,113 1,172
Dilutive potential shares --- 5
Diluted weighted average shares outstanding 1,113 1,177
Basic earnings per share:
Income from continuing operations $ 0.10 $ 0.17
Net income $ 0.10 $ 0.12
Diluted earnings per share:
Income from continuing operations $ 0.10 $ 0.17
Net income $ 0.10 $ 0.12
ABB Ltd
Summary Consolidated Balance Sheets
At March 31, At December 31,
2002 2001
(Unaudited) (Audited)
(in millions)
Cash and equivalents $ 3,992 $ 2,767
Marketable securities 2,591 2,946
Receivables, net 8,277 8,368
Inventories, net 3,201 3,075
Prepaid expenses and other 1,973 2,358
Total current assets 20,034 19,514
Financing receivables, non-current 4,399 4,263
Property, plant and equipment, net 3,045 3,003
Goodwill and other intangible assets, net 3,284 3,299
Investments and other 2,277 2,265
Total assets $ 33,039 $ 32,344
Accounts payable, trade $ 3,916 $ 3,991
Accounts payable, other 2,442 2,710
Short-term borrowings and current maturities of long-term borrowings 6,683 4,747
Accrued liabilities and other 7,091 7,587
Total current liabilities 20,132 19,035
Long-term borrowings 4,387 5,043
Pension and other related benefits 1,687 1,688
Deferred taxes 1,387 1,360
Other liabilities 2,990 2,989
Total liabilities 30,583 30,115
Minority interest 217 215
Capital stock and additional paid-in capital (1,280,009,432 shares 2,028 2,028
authorized, 1,200,009,432 shares issued)
Retained earnings 3,549 3,435
Accumulated other comprehensive income (1,588) (1,699)
Treasury stock, at cost (86,875,616 shares at March 31, 2002) (1,750) (1,750)
Total stockholders' equity 2,239 2,014
Total liabilities and stockholders' equity $ 33,039 $ 32,344
ABB Ltd
Summary Consolidated Statements of Cash Flows
January - March
2002 2001
(Unaudited)
(in millions)
Operating activities
Income from continuing operations $ 108 $ 201
Adjustments to reconcile income from continuing operations to net cash
provided by operating activities:
Depreciation and amortization 152 190
Restructuring provisions 24 (8)
Pension and post-retirement benefits 1 1
Deferred taxes 6 26
Net gain from sale of property, plant and equipment (3) (2)
Other (40) (61)
Changes in operating assets and liabilities
Marketable securities (trading) 66 (36)
Trade receivables 347 83
Inventories (164) (342)
Trade payables (33) 100
Other assets and liabilities, net (602) (369)
Net cash used in operating activities $ (138) $ (217)
Investing activities
Changes in financing receivables (153) (540)
Purchases of marketable securities (other than trading) (836) (890)
Purchases of property, plant and equipment (152) (189)
Acquisitions of businesses (net of cash acquired) (10) (19)
Proceeds from sales of marketable securities (other than trading) 1,103 1,022
Proceeds from sales of property, plant and equipment 23 23
Proceeds from sales of businesses (net of cash disposed) 170 8
Net cash provided by (used in) investing activities $ 145 $ (585)
Financing activities
Changes in borrowings 1,336 2,476
Treasury and capital stock transactions --- (579)
Dividends paid --- (502)
Other (69) (24)
Net cash provided by financing activities $ 1,267 $ 1,371
Net cash used in discontinued operations (43) (62)
Effects of exchange rate changes on cash and equivalents (6) (44)
Net change in cash and equivalents 1,225 463
Cash and equivalents (beginning of year) 2,767 1,397
Cash and equivalents (end of period) $ 3,992 $ 1,860
Interest paid $ 137 $ 177
Taxes paid $ 43 $ 122
ABB Ltd notes to summary consolidated financial statements (Unaudited)
(US$ in millions, except per share amounts)
Note 1 Developments in the three months ended:
• Annual general meeting
At the Company's annual general meeting held on March 12, 2002, the
Company's shareholders approved the resolution to not pay a dividend in
2002. In addition, shareholders approved the resolution to not effect a
capital reduction of 24 million shares purchased during the first half of
2001, as a result of changed market conditions.
• Restructuring program
In July 2001, the Company announced a restructuring program anticipated to
extend over 18 months. This restructuring program was initiated in an effort
to simplify product lines, reduce multiple location activities and perform
other downsizing in response to consolidation of major customers in certain
industries.
As of March 31, 2002, the Company recognized charges of $47 million relating
to workforce reductions and $6 million relating to lease terminations and
other exit costs associated with the restructuring program. These costs are
included in other income (expense), net. Based on analysis, Management's
estimate has been revised resulting in a $10 million reduction in the
amounts accrued for lease terminations and other exit costs. This revision
is recognized as a component of other income (expense), net. Termination
benefits of $24 million were paid in the first quarter of 2002 to
approximately 600 employees and $8 million was paid to cover costs
associated with lease terminations and other exit costs. Workforce
reductions include production, managerial and administrative employees. At
March 31, 2002, accrued liabilities included $102 million for termination
benefits and $28 million for lease terminations and other exit costs.
As a result of the Company's restructuring, certain assets have been
identified as impaired or will no longer be used in continuing operations.
The Company recorded $12 million to write down these assets to net
realizable value. These costs are included in other income (expense), net.
• Borrowings
The Company's total borrowings outstanding at December 31, 2001, amounted to
$9,790 million, of which $3,297 million was in the form of commercial paper
with an average interest rate of 2.7%. In March 2002, the Company drew down
$2,845 million, at an interest rate of 4.72%, from a $3 billion committed
bank facility established in December 2001, reducingusing a portion of these
proceeds to reduce its outstanding commercial paper borrowings to $1,536
million at March 31, 2002.
• Commitments and contingencies
Asbestos related claims
A subsidiary of the Company has followed a practice of maintaining a reserve
to cover its estimated settlement costs for asbestos claims and an asset
representing estimated insurance reimbursement. The reserve represents an
estimate of the costs associated with asbestos claims, including defense
costs, based upon historical claims trends, available industry information
and incidence rates of new claims. At December 31, 2001, the subsidiary had
reserved approximately $940 million, for asbestos-related claims. The
subsidiary also recorded receivables of approximately $150 million at
December 31, 2001, for probable insurance recoveries. Allowances against the
insurance receivables are established at such time as it becomes likely that
insurance recoveries are not probable. New claims filed during the first
three months of 2002 were approximately 14,300, a decrease of 5% compared to
the fourth quarter of 2001. Of the approximately 13,400 claims settled
during the period, more than 50% were settled without payment. Settlement
costs prior to insurance reimbursement were $51 million, up from $37 million
in the first three months of 2001. As a result of intensified efforts to
identify and settle valid claims and dispute claims that appear baseless,
the number of pending claims remained at approximately 94,000 at the end
March 2002. Trends as regards new claim filings, claims settled and cash
settlements cannot be estimated reliably based on the first quarter
developments, and consequently no additional charges have been recorded.
Note 2 Significant Accounting Policies
The summary consolidated financial information is prepared on the basis of
United States (U.S.) generally accepted accounting principles (USGAAP) and is
presented in U.S. dollars ($) unless otherwise stated. Data for orders and
number of employees are shown for purposes of presenting additional disclosure
and are not required disclosure under USGAAP.
Par value of capital stock is denominated in Swiss francs (CHF). The summary
financial information as of March 31, 2002 should be read in conjunction with
the December 31, 2001 financial statements contained in the Company's Annual
Report.
At the Company's annual general meeting held on March 20, 2001, the Company's
shareholders approved a four-for-one share split. The share split became
effective as of May 7, 2001. All per share amounts in the consolidated financial
statements have been presented as if the share split had occurred as of the
earliest period presented.
New accounting standardsChange in accounting principles
The Company accounted for the adoption of Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging Activities,
as amended, as a change in accounting principle. Based on the Company's
derivative positions at January 1, 2001, the Company recognized the cumulative
effect of the accounting change as a loss of $63 million, net of tax, in the
consolidated income statement and a reduction of $41 million, net of tax, in
accumulated other comprehensive income (loss).
Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, Business Combinations, and Statement of
Financial Accounting Standards No. 142 (SFAS 142), Goodwill and Other Intangible
Assets, which modify the accounting for business combinations, goodwill and
identifiable intangible assets. All business combinations initiated after June
30, 2001, must be accounted for by the purchase method. Goodwill from
acquisitions completed after that date will not be amortized. The Company is
required to test all goodwill for impairment as of January 1, 2002, and record a
transition adjustment if impairment exists. The Company does not expect to
record a material transition adjustment in connection with such impairment
testing in 2002. As of January 1, 2002, goodwill has no longer been amortized
but will be charged to operations when specified tests indicate that the
goodwill is impaired. The Company recognized goodwill amortization expense of
$46 million in the three months ended March 31, 2001. Accordingly, income from
continuing operations and net income would have been $247 million ($0.21 per
share) and $184 million ($0.16 per share), respectively, in the three months
ended March 31, 2001, if the Company had not recognized amortization expense for
goodwill that is no longer being amortized in accordance with SFAS 142.
In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144 (SFAS 144), Accounting for the Impairment
or Disposal of Long-Lived Assets. This Statement supersedes Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-lived Assets to Be Disposed Of, while retaining
many of its requirements regarding impairment loss recognition and measurement.
In addition, the new Statement requires the use of one accounting model for
long-lived assets to be disposed of by sale and broadens the presentation of
discontinued operations to include more disposal transactions. The Company
adopted this statement on January 1, 2002. The impact of adopting SFAS 144 was
not material, although the Company expects to present more disposals as
discontinued operations as a result of adopting SFAS 144.
Note 3 Summary of Consolidated Stockholders' Equity
Stockholders' equity at January 1, 2002 $ 2,014
Comprehensive income:
Net income 114
Foreign currency translation adjustments 69
Unrealized gain on available-for-sale securities, net of tax 10
Derivatives qualifying as hedges (SFAS 133), net of tax 32
Total comprehensive income 225
Stockholders' equity at March 31, 2002 $ 2,239
Note 4 Segment and Geographic Data
During 2001, the Company realigned its worldwide enterprise around customer
groups, replacing its former business segments with four end-user divisions, two
channel partner divisions, and a financial services division. The four end-user
divisions - Utilities, Process Industries, Manufacturing and Consumer
Industries, and Oil, Gas and Petrochemicals - serve end-user customers with
products, systems and services. The two channel partner divisions - Power
Technology Products and Automation Technology Products - serve external channel
partners such as wholesalers, distributors, original equipment manufacturers and
system integrators directly and end-user customers indirectly through the
end-user divisions. The Financial Services division provides services and
project support for the Company as well as for external customers.
• The Utilities division serves electric, gas and water utilities - whether
state-owned or private, global or local, operating in liberalized or
regulated markets - with a portfolio of products, services and systems. The
division's principal customers are generators of power, owners and operators
of power transmission systems, energy traders and local distribution
companies.
• The Process Industries division serves the chemical, gas, life sciences,
marine, metals, minerals, mining, cement, paper, petroleum, printing and
turbocharging industries with process-specific products and services
combined with the Company's power and automation technologies.
• The Manufacturing and Consumer Industries division sells products,
solutions and services that improve customer productivity and
competitiveness in areas such as automotive industries, telecommunications,
consumer goods, food and beverage, product and electronics manufacturing,
airports, parcel and cargo distribution, and public, industrial and
commercial buildings.
• The Oil, Gas and Petrochemicals division supplies a comprehensive range of
products, systems and services to the global oil, gas and petrochemicals
industries, from the development of onshore and offshore exploration
technologies to the design and supply of production facilities, refineries
and petrochemicals plants.
• The Power Technology Products division covers the entire spectrum of
technology for power transmission and power distribution including
transformers, switchgear, breakers, capacitors and cables as well as other
products, platforms and technologies for high- and medium-voltage
applications. Power technology products are used in industrial, commercial
and utility applications. They are sold through the Company's end user
divisions as well as through external channel partners, such as
distributors, contractors and original equipment manufacturers and system
integrators.
• The Automation Technology Products division provides products, software
and services for the automation and optimisation of industrial and
commercial processes. Key technologies include measurement and control,
instrumentation, process analysis, drives and motors, power electronics,
robots, and low-voltage products, all geared toward one common industrial IT
architecture for real-time automation and information solutions throughout a
business. These technologies are sold to customers through the end-user
divisions as well as through external channel partners such as wholesalers,
distributors, original equipment manufacturers and system integrators.
• The Financial Services division supports the Company's business and
customers with financial solutions in structured finance, leasing, project
development and ownership, financial consulting, insurance and treasury
activities.
The Company evaluates performance of its divisions based on earnings before
interest and taxes (EBIT), which excludes interest and dividend income, interest
expense, provision for taxes, minority interest, and income from discontinued
operations, net of tax. In accordance with Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise and Related
Information, the Company presents division revenues, depreciation and
amortization, EBIT, and net operating assets, all of which have been restated to
reflect the changes to the Company's internal structure, including the effect of
increased inter-division transactions. Accordingly, division revenues and EBIT
are presented as if certain historical third-party sales by subsidiaries in the
product divisions had been routed through other divisions as they would have
been under the new customer-centric structure. Management has restated
historical division financial information in this way to allow analysis of
trends in division revenues and margins on a basis consistent with the Company's
new internal structure and transaction flow.
Recent developments
In line with the Company's strategy to focus on power and automation
technologies for utility and industry customers, the Company announced it
intends to divest the Building Systems business area, currently part of the
Manufacturing and Consumer Industries division. The other three business areas
in the Manufacturing and Consumer Industries division will be combined with the
Process Industries division into a new Industries division.
Segment data
Orders received Revenues
January - March January - March
2002 2001 2002 2001
Utilities $ 1,455 $ 1,700 $ 1,075 $ 1,196
Process Industries 808 1,055 633 775
Mfg and Consumer Industries 959 1,337 841 1,163
Oil, Gas and Petrochemicals 627 961 972 769
Power Technology Products 1,133 1,105 992 855
Automation Technology 1,320 1,419 1,221 1,276
Products
Financial Services 336 479 336 479
Corporate/ Other (1) (1,115) (1,270) (921) (1,133)
Total $ 5,523 $ 6,786 $ 5,149 $ 5,380
EBIT (operating income) Depreciation and amortization
January - March January - March
2002 2001 2002 2001
Utilities $ 32 $ 40 $ 12 $ 18
Process Industries 30 35 9 17
Mfg and Consumer Industries (6) 37 6 12
Oil, Gas and Petrochemicals 45 41 11 17
Power Technology Products 66 64 32 29
Automation Technology 81 112 41 61
Products
Financial Services 82 84 4 6
Corporate/Other (1) (95) (79) 37 30
Total $ 235 $ 334 $ 152 $ 190
Net operating assets (2) Number of employees
March 31, 2002 December 31, 2001 March 31, 2002 December 31, 2001
Utilities $ 909 $ 795 16,265 15,745
Process Industries 866 738 15,895 15,937
Mfg and Consumer Industries 258 249 25,426 29,455
Oil, Gas and Petrochemicals 448 315 13,490 13,471
Power Technology Products 1,454 1,311 28,060 27,555
Automation Technology Products 2,643 2,558 39,283 39,834
Financial Services 11,389 10,926 1,230 1,220
Corporate/Other (1) (3,689) (3,114) 12,180 13,648
Total $ 14,278 $ 13,778 151,829 156,865
(1) Includes adjustments to eliminate inter-division transactions.
(2) Net operating assets is calculated based upon total assets
(excluding cash and equivalents, marketable securities, current loans
receivable, taxes and deferred charges) less current liabilities (excluding
borrowings, taxes, provisions and pension-related liabilities).
Geographic Information
Orders received 1) Revenues 1)
January - March January - March
2002 2001 2002 2001
Europe $ 2,795 $ 3,699 $ 2,631 $ 2,940
The Americas 1,652 1,828 1,222 1,400
Asia 617 685 635 564
Middle East and Africa 459 574 661 476
Total $ 5,523 $ 6,786 $ 5,149 $ 5,380
1) Orders received and revenues have been reflected in the regions based on the
location of the customer.
Note 5 Summary balance sheets of ABB Ltd Consolidated, ABB Group and Financial
Services (unaudited)
In the balance sheet data appearing on this page, 'ABB Ltd Consolidated' means
the accounts of ABB Ltd and all its subsidiaries presented in a summarized form
on the basis of US GAAP, with all significant intercompany balances eliminated
in consolidation.The balance sheet data for 'Financial Services' and 'ABB Group'
is reported on the same basis as management uses to evaluate segment performance
which includes the following adjustments:
- 'Financial Services' represents the accounts of all subsidiaries in the
Company's Financial Services division, with net intercompany balances and
certain capital contributions received from other subsidiaries of the Company
presented on a one-line basis.
- 'ABB Group' represents the accounts of ABB Ltd and all its subsidiaries other
than those in the Company's Financial Services division, with net intercompany
balances and the Company's investment in its Financial Services division
presented on a one-line basis. For the purposes of this presentation, the
Company's investment in its Financial Services division is accounted for under
the equity method of accounting.
ABB Ltd Consolidated ABB Group 1) Financial Services
US $ in millions
Mar 31, Dec 31, Mar 31, Dec 31, Mar 31, Dec 31,
2002 2001 2002 2001 2002 2001
Cash and equivalents and marketable $ 6,583 $ 5,713 $ 2,699 $ 1,667 $ 3,884 $ 4,046
securities
Receivables, net 8,277 8,368 5,847 5,810 2,430 2,558
Inventories, net 3,201 3,075 3,200 3,074 1 1
Prepaid expenses and other 1,973 2,358 1,114 1,169 859 1,189
Total current assets 20,034 19,514 12,860 11,720 7,174 7,794
Financing receivables, non-current 4,399 4,263 545 452 3,854 3,811
Property, plant and equipment, net 3,045 3,003 2,967 2,938 78 65
Goodwill and other intangible assets, net 3,284 3,299 3,201 3,217 83 82
Investments and other 2,277 2,265 1,585 1,601 692 664
Net intercompany balances - - 634 - 940 2,106
Total assets $ 33,039 $ 32,344 $ 21,792 $ 19,928 $ 12,821 $ 14,522
Accounts payable, trade $ 3,916 $ 3,991 $ 3,890 $ 3,956 $ 26 $ 35
Accounts payable, other 2,442 2,710 1,457 1,641 985 1,069
Short-term borrowings 2) 6,683 4,747 3,288 240 3,395 4,507
Accrued liabilities and other 7,091 7,587 4,060 4,285 3,031 3,302
Total current liabilities 20,132 19,035 12,695 10,122 7,437 8,913
Long-term borrowings 4,387 5,043 1,774 2,020 2,613 3,023
Pension and other related benefits 1,687 1,688 1,680 1,681 7 7
Deferred taxes 1,387 1,360 664 575 723 785
Other liabilities 2,990 2,989 2,523 2,529 467 460
Net intercompany balances - - - 773 - -
Total liabilities 30,583 30,115 19,336 17,700 11,247 13,188
Minority interest 217 215 217 214 - 1
Total stockholders' equity 2,239 2,014 2,239 2,014 1,574 1,333
Total liabilities and stockholders' equity $ 33,039 $ 32,344 $ 21,792 $ 19,928 $ 12,821 $ 14,522
1) ABB Industrial operations/holdings with equity accounting of participation in
Financial Services
2) Includes current maturities of long-term borrowings
3) Certain amounts reclassified to conform to the Company's current year
presentation
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