Note 19 Stockholders’ equity
At both December 31, 2014 and 2013, the Company had 2,819 million authorized shares, of which 2,315 million were registered and issued.
At the Annual General Meeting of Shareholders (AGM) held in April 2014, at the AGM held in April 2013 and at the AGM held in April 2012, shareholders approved the payment of a dividend of 0.70 Swiss francs per share, 0.68 Swiss francs per share and 0.65 Swiss francs per share, respectively, out of the capital contribution reserve in stockholders’ equity of the unconsolidated statutory financial statements of ABB Ltd, prepared in accordance with Swiss law. The dividends were paid in May 2014 (amounting to $1,841 million), May 2013 (amounting to $1,667 million) and May 2012 (amounting to $1,626 million), respectively.
In the second quarter of 2014, the Company purchased on the open market an aggregate of 12.0 million of its own shares to be available for delivery under its employee share programs. These transactions resulted in an increase in “Treasury stock” of $282 million.
Furthermore, in September 2014, the Company announced a share buyback program for the purchase of up to $4 billion of its own shares over a period ending no later than September 2016. The Company intends that approximately three quarters of the shares to be purchased will be held for cancellation (after approval from shareholders) and the remainder will be purchased to be available for its employee share programs. Shares acquired for cancellation are acquired through a separate trading line on the SIX Swiss Exchange (on which only the Company can purchase shares), while shares acquired for delivery under employee share programs are acquired through the ordinary trading line. As of December 31, 2014, under the announced share buyback program, the Company had purchased 26.0 million shares for cancellation and 6.8 million shares to support its employee share programs. These transactions resulted in an increase in “Treasury stock” of $733 million. Subsequent to December 31, 2014, and up to February 28, 2015, the Company purchased, under the announced share buyback program, an additional 11.8 million shares, for approximately $250 million.
Upon and in connection with each launch of the Company’s MIP, the Company sold call options to a bank at fair value, giving the bank the right to acquire shares equivalent to the number of shares represented by the MIP warrant and WAR awards to participants. Under the terms of the agreement with the bank, the call options can only be exercised by the bank to the extent that MIP participants have either sold or exercised their warrants or exercised their WARs. In 2014 and 2012, the bank exercised certain of the call options it held. As a consequence, in 2014 and 2012, the Company delivered 1.3 million and 2.7 million shares, respectively, out of treasury stock. No call options were exercised by the bank in 2013. At December 31, 2014, such call options representing 9.1 million shares and with strike prices ranging from 15.75 to 21.50 Swiss francs (weighted-average strike price of 19.34 Swiss francs) were held by the bank. The call options expire in periods ranging from May 2015 to August 2020. However, only 0.5 million of these instruments, with strike prices ranging from 15.75 to 21.50 Swiss francs (weighted-average strike price of 19.72 Swiss francs), could be exercised at December 31, 2014, under the terms of the agreement with the bank.
In addition to the above, at December 31, 2014, the Company had further outstanding obligations to deliver:
- up to 4.5 million shares relating to the options granted under the 2009 launch of the MIP, with a strike price of 19.00 Swiss francs, vested in May 2012 and expiring in May 2015,
- up to 7.3 million shares relating to the options granted under the 2010 launch of the MIP, with a strike price of 22.50 Swiss francs, vested in May 2013 and expiring in May 2016,
- up to 8.6 million shares relating to the options granted under the 2011 launch of the MIP, with a strike price of 25.50 Swiss francs, vesting in May 2014 and expiring in May 2017,
- up to 15.1 million shares relating to the options granted under the 2012 launches of the MIP, with a weighted-average strike price of 16.09 Swiss francs, vesting in May 2015 and expiring in May 2018,
- up to 17.0 million shares relating to the options granted under the 2013 launch of the MIP, with a strike price of 21.50 Swiss francs, vesting in May 2016 and expiring in May 2019,
- up to 15.9 million shares relating to the options granted under the 2014 launch of the MIP, with a strike price of 21.00 Swiss francs, vesting in August 2017 and expiring in August 2020,
- up to 3.9 million shares relating to the ESAP, vesting and expiring in November 2015,
- up to 1.7 million shares to Eligible Participants under the 2014, 2013 and 2012, launches of the LTIP, vesting and expiring in August 2017, June 2016 and May 2015, respectively, and
- up to 1.1 million shares in connection with certain other share-based payment arrangements with employees.
See Note 18 for a description of the above share-based payment arrangements.
In November 2014, 2013 and 2012, the Company delivered 0.6 million, 3.7 million and 2.3 million shares, respectively, from treasury stock, under the ESAP.
Amounts available to be distributed as dividends to the stockholders of ABB Ltd are based on the requirements of Swiss law and ABB Ltd’s Articles of Incorporation, and are determined based on amounts presented in the unconsolidated financial statements of ABB Ltd, prepared in accordance with Swiss law. At December 31, 2014, the total unconsolidated stockholders’ equity of ABB Ltd was 9,651 million Swiss francs ($9,752 million), including 2,384 million Swiss francs ($2,409 million) representing share capital, 8,446 million Swiss francs ($8,535 million) representing reserves and 1,179 million Swiss francs ($1,192 million) representing a reduction of equity for own shares (treasury stock). Of the reserves, 1,179 million Swiss francs ($1,192 million) relating to own shares and 477 million Swiss francs ($482 million) representing 20 percent of share capital, are restricted and not available for distribution.
In February 2015, the Company announced that a proposal will be put to the 2015 AGM for approval by the shareholders to distribute 0.72 Swiss francs per share to shareholders, comprising of a dividend of 0.55 Swiss francs paid out of ABB Ltd’s capital contribution reserves and a distribution of 0.17 Swiss francs by way of a nominal value reduction (reduction in the par value of each share by 0.17 Swiss francs from 1.03 Swiss francs to 0.86 Swiss francs).