Supplemental financial information September 30, 2013 ABB presents the following financial measures to supplement its Interim Consolidated Financial Information (unaudited) which is prepared in accordance with United States generally accepted accounting principles (U.S. GAAP). These supplemental 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 nine and three months ended September 30, 2013. Operational EBITDA margin Definition Operational EBITDA Operational EBITDA represents income from operations excluding depreciation and amortization, restructuring and restructuring-related expenses, and acquisition-related expenses and certain nonoperational items, as well as foreign exchange/commodity timing differences in income from operations consisting of: (i) unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives), (ii) realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized, and (iii) unrealized foreign exchange movements on receivables/payables (and related assets/liabilities). Operational revenues 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 EBITDA margin Operational EBITDA margin is Operational EBITDA as a percentage of Operational revenues. Page 1 of 10 Supplemental financial information September 30, 2013 Reconciliation Nine months ended September 30, 2013 Corporate and Other and Intersegment elimination Consolidated Discrete Automation and Motion Low Voltage Products Process Automation Total revenues Foreign exchange/commodity timing differences in total revenues Unrealized gains and losses on derivatives Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized Unrealized foreign exchange movements on receivables (and related assets) 7,228 5,707 6,236 7,962 6,075 (9) 4 6 3 (7) - (3) - - 9 5 (4) - 10 1 (2) (4) (16) 6 - (15) Operational revenues 7,220 5,709 6,247 7,954 6,070 (2,733) 30,467 Income from operations 1,101 809 727 975 340 (388) 3,564 204 241 65 163 135 158 966 7 17 14 38 16 2 94 19 9 2 10 1 51 92 (15) 7 (12) (12) (28) (7) (67) 1 - 4 4 (3) - 6 3 (1) - (8) 8 - 2 Operational EBITDA 1,320 1,082 800 1,170 469 (184) 4,657 Operational EBITDA margin (%) 18.3% 19.0% 12.8% 14.7% 7.7% - 15.3% ($ in millions, except Operational EBITDA margin in %) Depreciation and amortization Restructuring and restructuringrelated expenses Acquisition-related expenses and certain nonoperational items Foreign exchange/commodity timing differences in income from operations Unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives) Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized Unrealized foreign exchange movements on receivables/payables (and related assets/liabilities) Page 2 of 10 Power Products Power Systems (2,733) 30,475 Supplemental financial information September 30, 2013 Nine months ended September 30, 2012 Corporate and Other and Intersegment elimination Consolidated Discrete Automation and Motion Low Voltage Products Process Automation Total revenues Foreign exchange/commodity timing differences in total revenues Unrealized gains and losses on derivatives Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized Unrealized foreign exchange movements on receivables (and related assets) 6,916 4,668 5,926 7,649 5,580 (2,424) 28,315 5 (13) (22) (22) (91) (1) (144) (1) - (3) 2 40 1 39 (3) 6 1 21 7 1 33 Operational revenues 6,917 4,661 5,902 7,650 5,536 (2,423) 28,243 Income from operations 1,098 597 690 949 197 (336) 3,195 192 159 60 155 129 146 841 5 10 7 27 3 3 55 7 104 1 1 3 4 120 (2) (28) (22) (37) (37) 1 (125) (1) - 3 6 41 1 50 1 7 5 23 9 1 46 Operational EBITDA 1,300 849 744 1,124 345 (180) 4,182 Operational EBITDA margin (%) 18.8% 18.2% 12.6% 14.7% 6.2% - 14.8% ($ in millions, except Operational EBITDA margin in %) Depreciation and amortization Restructuring and restructuringrelated expenses Acquisition-related expenses and certain nonoperational items Foreign exchange/commodity timing differences in income from operations Unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives) Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized Unrealized foreign exchange movements on receivables/payables (and related assets/liabilities) Page 3 of 10 Power Products Power Systems Supplemental financial information September 30, 2013 Three months ended September 30, 2013 Corporate and Other and Intersegment elimination Consolidated Discrete Automation and Motion Low Voltage Products Process Automation Total revenues Foreign exchange/commodity timing differences in total revenues Unrealized gains and losses on derivatives Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized Unrealized foreign exchange movements on receivables (and related assets) 2,539 2,001 2,128 2,692 2,062 (20) (4) (13) (19) (71) - (127) (1) - 5 - (6) - (2) 8 4 1 (3) 28 1 39 Operational revenues 2,526 2,001 2,121 2,670 2,013 (886) 10,445 403 315 270 346 127 (137) 1,324 74 80 23 53 45 52 327 3 11 2 11 11 2 40 12 4 1 10 - 33 60 (21) (18) (11) (30) (61) (3) (144) (1) - 3 (1) (6) - (5) 6 3 1 - 25 1 36 Operational EBITDA 476 395 289 389 141 (52) 1,638 Operational EBITDA margin (%) 18.8% 19.7% 13.6% 14.6% 7.0% - 15.7% ($ in millions, except Operational EBITDA margin in %) Income from operations Depreciation and amortization Restructuring and restructuringrelated expenses Acquisition-related expenses and certain nonoperational items Foreign exchange/commodity timing differences in income from operations Unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives) Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized Unrealized foreign exchange movements on receivables/payables (and related assets/liabilities) Page 4 of 10 Power Products Power Systems (887) 10,535 Supplemental financial information September 30, 2013 Three months ended September 30, 2012 Corporate and Other and Intersegment elimination Consolidated Discrete Automation and Motion Low Voltage Products Process Automation Total revenues Foreign exchange/commodity timing differences in total revenues Unrealized gains and losses on derivatives Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized Unrealized foreign exchange movements on receivables (and related assets) 2,306 1,880 1,904 2,526 1,901 (772) 9,745 2 (8) (12) (19) (90) 1 (126) (1) - (6) 2 19 1 15 1 4 3 16 17 - 41 Operational revenues 2,308 1,876 1,889 2,525 1,847 (770) 9,675 362 278 224 324 72 (114) 1,146 66 78 20 51 45 47 307 9 5 (1) 8 (1) 1 21 2 20 1 1 - 25 49 (3) (17) (14) (28) (49) 2 (109) - (1) (1) 3 20 3 24 1 3 4 15 22 - 45 Operational EBITDA 437 366 233 374 109 (36) 1,483 Operational EBITDA margin (%) 18.9% 19.5% 12.3% 14.8% 5.9% - 15.3% ($ in millions, except Operational EBITDA margin in %) Income from operations Depreciation and amortization Restructuring and restructuringrelated expenses Acquisition-related expenses and certain nonoperational items Foreign exchange/commodity timing differences in income from operations Unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives) Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized Unrealized foreign exchange movements on receivables/payables (and related assets/liabilities) Page 5 of 10 Power Products Power Systems Supplemental financial information September 30, 2013 Operational EPS Definition Operational net income Operational net income is calculated as Net income attributable to ABB adjusted for the net-of-tax impact (using the Group’s effective tax rate) of: i) restructuring and restructuring-related expenses, ii) acquisition-related expenses and certain non-operational items, iii) foreign exchange/commodity timing differences in Income from operations consisting of: (a) unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives), (b) realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized, and (c) unrealized foreign exchange movements on receivables/payables (and related assets/liabilities), and iv) amortization related to acquisitions. Amortization related to acquisitions Amortization expense on intangibles arising upon acquisitions. Operational EPS Operational EPS is calculated as Operational net income divided by the weighted-average number of shares used in determining Basic EPS. Reconciliation ($ in millions, except per share data in $) Net income (attributable to ABB) (2) Restructuring and restructuring-related expenses Acquisition-related expenses and certain non-operational items(2) FX/commodity timing differences in Income from operations(2) (2) Amortization related to acquisitions Operational net income ($ in millions, except per share data in $) Net income (attributable to ABB) Restructuring and restructuring-related expenses (2) Acquisition-related expenses and certain non-operational items(2) (2) FX/commodity timing differences in Income from operations (2) Amortization related to acquisitions Operational net income Nine months ended September 30, 2013 September 30, 2012 (1) (1) EPS EPS 2,262 0.99 2,100 0.92 67 0.03 40 0.02 66 0.03 87 0.04 (42) (0.02) (21) (0.01) 205 0.09 183 0.08 2,558 1.11 2,389 1.04 Three months ended September 30, 2013 September 30, 2012 (1) (1) EPS EPS 835 0.36 759 0.33 29 0.01 16 0.01 43 0.02 36 0.02 (82) (0.04) (30) (0.01) 72 0.03 77 0.03 897 0.39 858 0.37 (1) EPS amounts are computed separately, therefore the sum of the per share amounts shown may not equal to the total. (2) Net of tax at Group effective tax rate. Page 6 of 10 Supplemental financial information September 30, 2013 Net debt Definition Net debt Net debt is defined as Total debt less Cash and marketable securities. Total debt Total debt is the sum of Short-term debt and current maturities of long-term debt, and Long-term debt. Cash and marketable securities Cash and marketable securities is the sum of Cash and equivalents and Marketable securities and shortterm investments. Reconciliation September 30, 2013 567 7,553 8,120 December 31, 2012 2,537 7,534 10,071 Cash and equivalents Marketable securities and short-term investments Cash and marketable securities 4,296 380 4,676 6,875 1,606 8,481 Net debt 3,444 1,590 ($ in millions) Short-term debt and current maturities of long-term debt Long-term debt Total debt Page 7 of 10 Supplemental financial information September 30, 2013 Net debt to EBITDA Definition Net debt to EBITDA is calculated as Net debt divided by Income from operations adjusted to exclude depreciation and amortization for the trailing twelve months. Reconciliation September 30, 2013 ($ in millions) Net debt (as defined above) EBITDA Income from operations for the three months ended: September 30, 2013 June 30, 2013 March 31, 2013 December 31, 2012 September 30, 2012 June 30, 2012 March 31, 2012 Depreciation and amortization for the three months ended: September 30, 2013 June 30, 2013 March 31, 2013 December 31, 2012 September 30, 2012 June 30, 2012 March 31, 2012 Total EBITDA for the trailing twelve months Net debt to EBITDA Page 8 of 10 December 31, 2012 3,444 1,590 1,324 1,188 1,052 863 - 863 1,146 1,001 1,048 327 318 321 341 5,734 341 307 281 253 5,240 0.6 0.3 Supplemental financial information September 30, 2013 Net working capital as a percentage of revenues Definition 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, vii) non-trade payables, and viii) accrued expenses and deferred income. 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 estimate the impact of annualizing revenues of certain acquisitions which were completed in the same trailing twelve month period. 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. Reconciliation September 30, 2013 2012 ($ in millions) Net working capital: Receivables, net Inventories, net Prepaid expenses Accounts payable, trade Billings in excess of sales Advances from customers (1) Non-trade payables (1) Accrued expenses and deferred income Net working capital 12,632 6,634 330 (5,103) (1,746) (1,770) (1,371) (2,228) 7,378 11,626 6,659 322 (4,697) (1,924) (1,795) (1,390) (2,098) 6,703 Total revenues for the three months ended: September 30, 2013 / 2012 June 30, 2013 / 2012 March 31, 2013 / 2012 December 31, 2012 / 2011 (2) Adjustment to annualize revenues of certain acquisitions Adjusted revenues for the trailing twelve months 10,535 10,225 9,715 11,021 41,496 9,745 9,663 8,907 10,571 1,519 40,405 Net working capital as a percentage of revenues 17.8% 16.6% (1) Amount is included within Other current liabilities at September 30, 2013. (2) Thomas & Betts, acquired in May 2012. Page 9 of 10 Supplemental financial information September 30, 2013 Finance net Definition Finance net is calculated as Interest and dividend income less Interest and other finance expense. Reconciliation Nine months ended September 30, 2013 2012 50 55 (299) (238) (249) (183) ($ in millions) Interest and dividend income Interest and other finance expense Finance net Three months ended September 30, 2013 2012 15 17 (122) (94) (107) (77) ($ in millions) Interest and dividend income Interest and other finance expense Finance net Book-to-bill ratio Definition Book-to-bill ratio is calculated as Orders received divided by Total revenues. Reconciliation Nine months ended September 30, 2013 28,893 30,475 ($ in millions) Orders received Total revenues Book-to-bill ratio 0.95 Page 10 of 10