Cash flows

In the Consolidated Statements of Cash Flows, the effects of discontinued operations are not segregated.

The Consolidated Statements of Cash Flows can be summarized as follows:

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($ in millions)

2013

2012

2011

Net cash provided by operating activities

3,653

3,779

3,612

Net cash used in investing activities

(717)

(5,575)

(3,253)

Net cash provided by (used in) financing activities

(3,856)

3,762

(1,208)

Effects of exchange rate changes on cash and equivalents

66

90

(229)

Net change in cash and equivalents – continuing operations

(854)

2,056

(1,078)

Net cash provided by operating activities

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($ in millions)

2013

2012

2011

Net income

2,907

2,812

3,315

Depreciation and amortization

1,318

1,182

995

Total adjustments to reconcile net income to net cash provided by operating activities (excluding depreciation and amortization)

(54)

196

(23)

Total changes in operating assets and liabilities

(518)

(411)

(675)

Net cash provided by operating activities

3,653

3,779

3,612

Operating activities in 2013 provided net cash of $3,653 million, a decrease from 2012 of 3.3 percent. The decrease was partially due to higher net working capital requirements, particularly for unbilled receivables for long-term projects, but mitigated partly by cash inflows resulting from improved inventory management. Although net income increased during 2013, non-cash reconciling adjustments, primarily relating to deferred income taxes, resulted in a decrease in the cash impacts of net income compared to 2012.

Operating activities in 2012 provided net cash of $3,779 million, an increase from 2011 of 4.6 percent. The increase was primarily driven by a lower increase in working capital requirements offset by the cash impacts of lower net income.

Net cash used in investing activities

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($ in millions)

2013

2012

2011

Purchases of marketable securities (available-for-sale)

(526)

(2,288)

(2,809)

Purchases of short-term investments

(30)

(67)

(142)

Purchases of property, plant and equipment and intangible assets

(1,106)

(1,293)

(1,021)

Acquisition of businesses (net of cash acquired) and changes in cost and equity investments

(914)

(3,694)

(4,020)

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

1,367

1,655

3,717

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

118

483

Proceeds from short-term investments

47

27

529

Proceeds from sales of property, plant and equipment

80

40

57

Proceeds from sales of businesses and equity-accounted companies (net of cash disposed)

62

16

8

Other investing activities

185

29

(55)

Net cash used in investing activities

(717)

(5,575)

(3,253)

Net cash used in investing activities in 2013 was an outflow of $717 million, compared to a $5,575 million outflow in 2012. The decrease in outflows is mainly attributable to lower amounts paid for the acquisition of businesses in 2013, lower purchases of property, plant and equipment, and the impact from net sales of marketable securities in 2013 compared with net purchases in 2012.

Cash paid for acquisitions (net of cash acquired) during 2013 amounted to $914 million, primarily relating to the acquisition of Power-One for $737 million.

Total cash disbursements for the purchase of property, plant and equipment and intangibles in 2013 decreased compared to 2012, as we reduced the amount of investment in capacity expansion compared to 2012. The total of $1,106 million included $776 million for construction in progress (generally for buildings and other property facilities), $206 million for the purchase of machinery and equipment, $48 million for the purchase of land and buildings, and $76 million for the purchase of intangible assets.

To obtain necessary funds to make dividend payments, bond repayments, and to fund acquisitions during the year, we reduced our amount invested in marketable securities and short-term investments, resulting in net proceeds of $976 million.

Net cash used in investing activities in 2012 increased compared to 2011 due to the sustained high level of cash outflow for the acquisition of businesses, primarily Thomas & Betts. In addition, there were net cash outflows from marketable securities and short-term investments of $673 million compared to net inflows in the prior year of $1,778 million as acquisitions in 2012 were primarily financed through new corporate bonds issued, whereas in 2011, acquisitions were funded mainly by our excess liquidity. Capital expenditures for new plant, property and equipment were also higher in 2012, to support business growth.

Total cash disbursements for the purchase of property, plant and equipment and intangibles in 2012 of $1,293 million included $885 million for construction in progress, $248 million for the purchase of machinery and equipment, $83 million for the purchase of land and buildings, and $77 million for the purchase of intangible assets.

The net cash inflow from marketable securities and short-term investments in 2011 reflected the use of our excess liquidity in funding primarily the acquisition of businesses.

Total cash disbursements for the purchase of property, plant and equipment and intangibles in 2011, included $268 million for the purchase of machinery and equipment, $128 million for the purchase of land and buildings, $57 million for the purchase of intangible assets and $568 million for construction in progress.

Acquisition of businesses (net of cash acquired) and changes in cost and equity investments in 2011, primarily related to the acquisition of Baldor, Mincom, Trasfor and Lorentzen & Wettre Group and other smaller acquisitions.

Net cash provided by (used in) financing activities

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($ in millions)

2013

2012

2011

Net changes in debt with maturities of 90 days or less

(697)

570

450

Increase in debt

492

5,986

2,580

Repayment of debt

(1,893)

(1,104)

(2,576)

Delivery of shares

74

90

110

Dividends paid

(1,667)

(1,626)

(1,569)

Acquisition of noncontrolling interests

(13)

(9)

(13)

Dividends paid to noncontrolling shareholders

(149)

(121)

(157)

Other financing activities

(3)

(24)

(33)

Net cash provided by (used in) financing activities

(3,856)

3,762

(1,208)

Our financing activities primarily include debt transactions (both from the issuance of debt securities and borrowings directly from banks), dividends paid and share transactions.

The 2013 net cash outflow from changes in debt with maturities of 90 days or less principally reflects a reduction in commercial paper outstanding. The 2012 and 2011 net cash inflow primarily reflects the net issuance of commercial paper under our commercial paper program in the United States. In 2013, the increase in debt primarily related to borrowings under borrowing facilities in various countries and issuance of commercial paper with maturities above 90 days. In 2012, the cash inflows from increases in debt primarily related to the issuance of the following bonds: EUR 1,250 million aggregate principal, $1,250 million aggregate principal, $750 million aggregate principal, $500 million aggregate principal, AUD 400 million aggregate principal and CHF 350 million aggregate principal. In 2011, the cash inflows from increases in debt principally related to the issuance of the following bonds: $600 million aggregate principal, $650 million aggregate principal, CHF 500 million aggregate principal and CHF 350 million aggregate principal.

During 2013, $1,893 million of debt was repaid, primarily reflecting the repayment at maturity of the 700 million euro bonds (equivalent to $918 million at date of repayment). Other repayments during 2013 consisted mainly of repayments of commercial paper issuances having maturities above 90 days and repayments of other short-term debt. During 2012, $1,104 million of debt was repaid, mainly reflecting the repayment of part of the debt assumed from the acquisition of Thomas & Betts (approximately $320 million) and of other debt (primarily short-term bank borrowings). During 2011, $2,576 million of bonds and other debt was repaid, primarily reflecting the repayment of $1.2 billion in debt assumed upon the acquisition of Baldor in January 2011 and the repayment at maturity of 650 million euro (equivalent to $865 million at date of repayment).