ABB Annual Report 2012 PDF - ABB Group Annual Report 2012

The principal acquisition in 2011 was Baldor ElectricCompany (Baldor), acquired in January 2011. Baldor markets,designs and manufactures industrial electric motors, mechanicalpower transmission products, drives and generators.The acquisition broadens the product offering of our DiscreteAutomation and Motion division, closing the gap in our automationportfolio in North America by adding Baldor’s NEMA(National Electrical Manufacturers Association) motorsproduct line, as well as adding Baldor’s growing mechanicalpower transmission business.The principal acquisition in 2010 was the Ventyx group(Ventyx). In June 2010, we acquired all of the shares ofVentyx Inc., Ventyx Software Inc. and Ventyx Dutch HoldingB.V., representing substantially all of the revenues, assetsand liabilities of Ventyx. Ventyx provides software solutionsto global energy, utility, communications and other assetintensive businesses and was integrated into the networkmanagement business within the Power Systems division toform a single unit for energy management software solutions.For more information on our acquisitions, see “Note 3Acquisitions and increases in controlling interests” to ourConsolidated Financial Statements.Increases and decreases in the value of the USD againstother currencies will affect the reported results of operationsin our Consolidated Income Statements and the valueof certain of our assets and liabilities in our ConsolidatedBalance Sheets, even if our results of operations or the valueof those assets and liabilities have not changed in their originalcurrency. Because of the impact foreign exchange rateshave on our reported results of operations and the reportedvalue of our assets and liabilities, changes in foreign exchangerates could significantly affect the comparability of our reportedresults of operations between periods and result insignificant changes to the reported value of our assets, liabilitiesand stockholders’ equity, as has been the case duringthe period from 2010 through 2012.While we operate globally and report our financial resultsin USD, exchange rate movements between the USD andboth the euro and the Swiss franc are of particular importanceto us due to (i) the location of our significant operations and(ii) our corporate headquarters being in Switzerland.The exchange rates between the USD and the EUR andthe USD and the CHF at December 31, 2012, 2011 and 2010,were as follows:Increase in controlling interests in IndiaIn 2010, we increased our ownership interest in ABB Limited,India (our publicly-listed subsidiary in India) from approximately52 percent to 75 percent. Cash paid in 2010, includingtransaction costs, amounted to $956 million. The offer of900 rupees per share resulted in a charge to “Capital stockand additional paid-in capital” of $838 million, includingexpenses related to the transaction.Exchange ratesWe report our financial results in U.S. dollars. Due to ourglobal operations, a significant amount of our revenues,expenses, assets and liabilities are denominated in other currencies.As a consequence, movements in exchange ratesbetween currencies may affect: (i) our profitability, (ii) thecomparability of our results between periods, and (iii) thereported carrying value of our assets and liabilities.We translate non-USD denominated results of operations,assets and liabilities to USD in our Consolidated FinancialStatements. Balance sheet items are translated to USD usingyear-end currency exchange rates. Income statement andcash flow items are translated to USD using the relevantmonthly average currency exchange rate.Exchange rates into $ 2012 2011 2010EUR 1.00 1.32 1.29 1.34CHF 1.00 1.09 1.06 1.07The average exchange rates between the USD and the EURand the USD and the CHF for the years ended December 31,2012, 2011 and 2010, were as follows:Exchange rates into $ 2012 2011 2010EUR 1.00 1.29 1.39 1.33CHF 1.00 1.07 1.13 0.97When we incur expenses that are not denominated in thesame currency as the related revenues, foreign exchangerate fluctuations could affect our profitability. To mitigate theimpact of exchange rate movements on our profitability, itis our policy to enter into forward foreign exchange contractsto manage the foreign exchange transaction risk of ouroperations.In 2012, approximately 84 percent of our consolidatedrevenues were reported in currencies other than USD.The following percentages of consolidated revenues werereported in the following currencies:– Euro, approximately 21 percent,– Chinese renminbi, approximately 10 percent,– Canadian dollar, approximately 6 percent,– Swedish krona, approximately 6 percent, and– Swiss franc, approximately 5 percent.In 2012, approximately 83 percent of our cost of sales andselling, general and administrative expenses were reported incurrencies other than USD. The following percentages ofconsolidated cost of sales and selling, general and administrativeexpenses were reported in the following currencies:– Euro, approximately 20 percent,– Chinese renminbi, approximately 9 percent,– Canadian dollar, approximately 6 percent, and– Swedish krona, approximately 5 percent.ABB Annual Report 2012 | Financial review 53