Forbo Annual Report 2012

connect.
Forbo Holding Ltd
Lindenstrasse 8
CH-6340 Baar
Forbo International SA
Lindenstrasse 8
CH-6340 Baar
Phone + 41 58 787 25 25
Fax + 41 58 787 20 25
info@forbo.com
www.forbo.com

connect.
Annual Report 2012

Individuality.
Interface.
Forbo –
in everyday lifeBeauty is in the eye of the beholder. That
is why we design our premium-quality
designer floors to meet the wishes and needsof our customers.

Publisher: Forbo Holding Ltd, Baar/Concept and design: Hotz Brand Consultants, Steinhausen/Zug
Photos: Luxwerk, Zurich/Layout, lithography and printing: Neidhart + Schön AG, Zurich
Our Annual Report appears in German language and in English translation and can be downloaded fromour website www.forbo.com. The printed German version is authoritative.
All statements in this report that do not refer to historical facts are forward-looking statements which areno guarantee of future performance. They are based on assumptions and involve risks and uncertainties aswell as other factors beyond the control of the company.

1

INDI­
VIDUALITY

2

INTERFACE

3

In strong partnerships, reliability doesn’t
keep office hours. Our conveyor belts
are in service around the clock, all over
the world.

4

Dr. Albert Gnägi

This E. Schneider

Chairman of the Board of Directors

Delegate of the Board of Directors and CEO‘As expected, 2012 was marked by chal­lenging economic conditions that ­demanded
great efforts on our part. By consistently­implementing our strategic ­ac­tivities and­initiatives, we further strengthened ourmarket position, displaying customer focus,
innovation, and flexibility.’Forbo Annual Report 2012 – Letter to shareholders

5

To ourshareholders
Dear Madam, dear Sir,
As expected, 2012 proved to be a very challenging business year owing to the difficult economic environment. Business conditions, in particular efforts to cut public spending and uncertainties in the markets,
demanded flexibility from us and even faster implementation of our strategic projects. Since a major part ofForbo’s business is in Europe and is, directly or indirectly, a function of public spending, cost-cutting mea­sures, especially in the euro zone, left their mark on the Group’s results in the year under review. Spendingon schools, hospitals, retirement homes, and public buildings was cut back massively, resulting in a decreasein sales and earnings at Flooring Systems.
However, we were able to offset a large part of these decreases by accelerating penetration efforts in newmarkets and market segments and by expanding our existing distribution channels. Our innovative productportfolio and our customer-driven services enabled us to build new market segments and to further
strengthen our position, particularly in growth markets.

Strategy confirmed
Focus on leading market positions
In December 2011, Forbo announced the sale of its industrial adhesives activity, including synthetic polymers,
which was part of the Bonding Systems division, to H.B. Fuller Company. The transaction was closed successfullyon March 5, 2012. The remaining Bonding Systems activity, building and construction adhesives, will now befurther developed within the flooring business of the Flooring Systems division. Our aim is to fully exploit its
potential and also the synergies with the flooring business.
Following this portfolio adjustment, the Forbo Group now consists of two strong divisions, each with globallyleading market positions: Flooring Systems and Movement Systems. Both divisions thus match our strategic
principles.

Net sales at previous year’s level
Public spending cutbacks impact sales growth
In the year under review, Forbo generated net sales of CHF 1,201.1 million, broadly in line with previous year
(2011: CHF 1,203.8 million). This equates to a minor 0.2% decline (– 1.1% in local currencies) versus previous year.
Net sales at Flooring Systems, which were significantly impacted by measures to curtail public spending, were
CHF 873.9 million (previous year: CHF 886.5 million), equivalent to a slight decline of 1.4% versus 2011 (– 1.7% in
local currencies). Movement Systems generated net sales of CHF 327.2 million (previous year: CHF 317.3 million)
in a very ambiguous market environment. This represents an increase of 3.1% (+ 0.5% in local currencies).

6

Forbo Annual Report 2012 – Letter to shareholders

Strategic initiatives impact bottom line
Accelerated implementation of strategic projects impacts bottom line
In order to reduce our dependence on public spending and to exploit the potential of growth markets, various
strategic projects have been launched in recent years. For one thing, the Group made concerted efforts to
expand the product portfolio and to open new distribution channels; for another, we forged ahead with rein­­forcing our position in growth markets. The related expenses had an additional impact on the result in theyear under review.
The conversion of our most important pension plan in the Netherlands from a defined benefit to a defined
contribution plan resulted, in accordance with applicable IFRS rules, in one-time extraordinary pretax gain of
CHF 45.4 million. This had a significant effect both on the operating profit of the Flooring Systems divisionand on consolidated Group profit. This effect must, therefore, be neutralized when assessing operating profit.
Without factoring in this extraordinary gain, earnings before depreciation and amortization (EBITDA) decreased
by 15.0% to CHF 160.6 million (previous year: CHF 189.0 million). The Group’s operating profit (EBIT) declined by
21.3% from CHF 148.9 million the previous year to CHF 117.2 million. The EBITDA margin d­ ecreased from 15.7%
to 13.4% year-on-year, and the EBIT margin was down from 12.4% to 9.8%.
Including above-mentioned special items, EBITDA rose by 9.1% to CHF 206.0 million (previous year: CHF 189.0
million) and EBIT increased by 9.3% to CHF 162.6 million (previous year: CHF 148.9 million). The EBITDA marginrose from 15.7% to 17.2% year-on-year, while the EBIT margin increased from 12.4% to 13.5%.

Decline in net income from operations
Group profit affected by two factors
Adjusted net income from operations was CHF 90.1 million (previous year: CHF 115.0 million), equivalent toa decrease of 21.7%. This decline is explained by the challenging market conditions, investments in growth markets, and a higher tax rate.
In addition, two non-recurring special factors had a major impact on Group profit: for one thing, the Group
posted extraordinary net income of CHF 73.1 million stemming from the sale of the industrial adhesives
activity, including synthetic polymers. For another, the conversion of the pension plan in the Netherlands froma defined benefit to a defined contribution plan resulted, in accordance with applicable IFRS rules, in extra­
ordinary gain of CHF 34.0 million after tax in the 2012 consolidated financial statements.
This resulted in total Group profit of CHF 197.2 million in the year under review. In the previous year, Forbo
had posted Group profit of CHF 146.5 million, a result that included extraordinary financial income of CHF 22.4
million after tax from the sale of Rieter shares. A year-on-year comparison of Group profit is therefore notvery meaningful.

7Considerably stronger balance sheet
Net cash significantly higher
In the year under review, the Ordinary General Meeting of April 2011 approved the repurchase of some of thecompany’s own stock. Despite the share buyback, shareholders’ equity rose slightly to CHF 817.4 million as at
the end of December 2012 (previous year: CHF 815.3 million). The equity ratio – the ratio of total shareholders’equity to total assets – once again improved significantly from 54.3% to 61.3%.
As at December 31, 2012, Forbo had liquidity and short-term financial instruments amounting to CHF 393.4
million (previous year: CHF 192.5 million) plus 197,260 treasury shares (excluding the shares that were sub­sequently cancelled in January 2013 from the share buyback program concluded in 2012), which had a valueof CHF 115.4 million at year-end share price. Net cash was CHF 258.3 million (previous year: CHF 0.5 million).
With our market leadership, strong balance sheet, and proven strategy, we are able to drive expansion in
growth markets and take advantage of external opportunities for growth in order to consolidate our position.
However, we will not make acquisitions unless they can create added value for our shareholders. We will
therefore use our liquidity as a strategic reserve for the time being.
The high level of liquidity plus cash generated by future trading enable the Board of Directors to make further
share repurchases without restricting the Group’s scope for future acquisitions. The Extra­ordinary General
Meeting of November 5, 2012 granted the Board of Directors such scope for share buybacks. In the frameworkof this new program, the Board of Directors was authorized to repurchase further shares amounting to up
to 10 percent of the share capital within a period of three years via a dedicated second trading line on the SIX
Swiss Exchange or by another means in order to reduce capital.

Proposals to the Ordinary General Meeting
Dividend of CHF 12.00
The Board of Directors will propose to the Ordinary General Meeting the distribution of a dividend of CHF 12.00
per share for 2012, unchanged from the previous year. This dividend will be paid out to shareholders as a taxexempt distribution from capital contribution reserves.
Re-elections to the Board of Directors
Dr. Albert Gnägi, who has been Chairman of the Board of Directors for eight years, will stand for re-election
for a further year at the Ordinary General Meeting. In order to ensure long-term succession planning, it isenvisaged that This E. Schneider, who has been Delegate of the Board of Directors for nine years, will take overfrom Dr. Albert Gnägi in the spring of 2014 as Executive Chairman.
Furthermore, the Board of Directors will propose to the Ordinary General Meeting the re-election of its Vice
Chairman, Michael Pieper, for a further three-year term of office.

8

Forbo Annual Report 2012 – Letter to shareholders

Well-positioned for 2013
Strengthening competitiveness and worldwide presence
In the coming business year, we expect economic conditions to be similar to 2012. The steady stream ofcost-cutting measures in the public sector announced in recent years will impact business in Flooring Systems
with a time lag. However, we will do everything we possibly can to offset sales losses with new products,
stronger presence in new market segments, and business activities in growth markets. We are well positioned
with our two divisions and will continue to implement our strategy as planned.
Assuming no significant change in the current economic conditions, especially with regard to exchange rates
and raw material prices, we expect a slight increase in net income from operations in the 2013 business year.

Thank youThanks to employees, business partners, and investors
Our confidence is boosted by the motivation and commitment of our highly qualified employees, our efficientand market-driven organization, and the professional and close cooperation with our business partners.
This makes it possible for us to continue to increase both the quality and the added value of our products andservices.
Dear shareholders, on behalf of the Board of Directors and the Executive Board, we would like to thank you forthe trust and loyalty you have in our company.

Baar, March 2013

Dr. Albert Gnägi
Chairman of the Board of Directors

This E. Schneider
Delegate of the Board of Directors and CEO

Financial calendar
Ordinary General Meeting:
Publication of Half-Year Report 2013:
Publication of Annual Report 2013:

April 26, 2013
August 20, 2013
March 18, 2014

9

Annual report2012
At a glance
Forbo in figuresWell-positioned for 2013
Sustainable value creation

11
14
18
24

Activity report
Two divisions – leading market positions
Flooring Systems:
Market conditions remain difficult
Movement Systems:
Focus on strategic activities

27
29
30

Executive BoardGroup structure 
Board of Directors

Organization

43
44
47
48

The Forbo share

51

Corporate governance report

55

Forbo Group financial report

73
74
75
76
77
78
79
93
130
134
136
137

Financial statements for Forbo Holding Ltd

139
140
141
142
149
150

Consolidated balance sheetConsolidated income statementComprehensive income statement
Consolidated shareholders’ equity
Consolidated cash flow statementNotes – accounting principles
Notes
Group companies
Report of the statutory auditor
Consolidated income statements 2008 – 2012
Consolidated balance sheets 2008 – 2012

Income statement
Balance sheet
Notes to the financial statements
Proposal for appropriation of available earnings
Report of the statutory auditor

36

10

11

At a glance

Forbo in figuresWell-positioned for 2013
Sustainable value creation

14
18
24

12

2012 at a glance

13

FORBO IS A LEADINGPRODUCER OF FLOOR
COVERINGS, build­ing and CONSTRUC­
TION ADHESIVES,AS WELL AS POWER
TRANSMISSION AND
CONVEYOR BELT­SOLUTIONS.

The company employs 5,000 people and has an international network of 24 production and distribution­companies, 6 assembly operations and 37 sales organizations in a total of 34 countries. Forbo is headquar­
tered in Baar in the canton of Zug, Switzerland.
Forbo announced in December 2011 that it would sell its industrial adhesives activity, including synthetic polymers, which had beenpart of the Bonding Systems division, to H.B. Fuller Company. On fulfillment of all conditions, the transaction was successfully closed on
March 5, 2012. Following this sale, Forbo reviewed the strategic options for the building and construction adhesives activity, theremaining unit of the Bonding Systems division, and decided that it would further develop this business within the floor coverings
activities of Flooring Systems in order to maximize its potential.

14

Forbo Annual Report 2012 – At a glance

Forbo in figures

Forbo is a global player, and its two divi­
sions supply a wide range of industries.
The Group’s global reach means that itis close to dynamic markets, making Forbo
the first choice as a local partner for cus­
tomers that have similar global require­ments. The quality, longevity, and perfor­
mance of our products and systems reflect
the quality and stability of our relations
with our business partners.

Flooring Systems
15 production facilities in 6 countries and distribution
companies in over 20 countries. Sales offices in
Europe, North, Central and South America as well
as Asia/Pacific.
Floor coverings
Building and construction adhesives
Movement Systems
9 production sites and 6 assembly operations in 9
countries and distribution companies in over 25
countries. 300 sales and service offices worldwide
Production facilities
Assembly operations Production facilities andassembly operations

Without special items:
Net sales
EBIT
EBIT marginNet income from operationsCHF 1,201.1 m
CHF 117.2 m
9.8%
CHF 90.1 m

Forbo Annual Report 2012 – At a glance

Net sales
EBIT 		EBIT margin
Group profit






15

CHF 1,201.1 m
CHF 162.6 m
13.5%
CHF 197.2 m

16Forbo Annual Report 2012 – At a glance

Net sales by division
Change on previous year
CHF m 2012
873.9
327.2
1,201.1

Flooring Systems
Movement Systems
Total

in %
– 1.4
3.1
– 0.2

in localcurrencies in %
– 1.7
0.5
– 1.1

In % of total
72.8
27.2
100.0

27.2%
72.8%

Movement Systems

Flooring Systems

Employees by division

Number 2012
3,034
1,925
41
5,000

Flooring Systems
Movement Systems
Corporate Functions
Total

38.5%
60.7%

Movement Systems

Flooring Systems

0.8%
Corporate Functions

Change onprevious year in %
1.8
3.5
0
2.4

In % of total
60.7
38.5
0.8
100.0

Forbo Annual Report 2012 – At a glance

17

Financial overview Group

Income statement
Net sales
Flooring Systems5)
Movement Systems
EBITDAEBITDA without special items
EBIT
EBIT without special items
Group profit5)
Net income from operations5) without special items

2012
CHF m
1,201.1
873.9
327.2
206.0
160.6
162.6
117.2
197.2
90.1

20115)
CHF m
1,203.8
886.5
317.3
189.0
189.0
148.9
148.9
146.5
115.0

2012
EUR m1)
996.6
725.1
271.5
170.9
133.3
134.9
97.2
163.6
74.8

20115)
EUR m1)
976.4
719.0
257.4
153.3
153.3
120.8
120.8
118.8
93.3

Balance sheet
Total assets
Operating assets5)
Shareholders’ equity
Net cash5)

CHF m
1,333.9
913.7
817.4
258.3

CHF m
1,501.9
961.6
815.3
0.5

EUR m1)
1,106.8
758.1
678.2
214.3

EUR m1)
1,218.2
779.9
661.3
0.4

Cash flow statement
Cash flow from operating activities
Cash flow from investing activities7)
Free cash flow

CHF m
106.3
183.5
289.8

CHF m
141.5
19.1
160.6

EUR m1)
88.2
152.3
240.5

EUR m1)
114.8
15.5
130.3

Key ratios
ROS (EBITDA/net sales)5)
ROS (EBITDA/net sales)5) without special items
Equity ratio (shareholders’ equity/total assets)
Gearing (net debt/shareholders’ equity)

%
17.2
13.4
61.3
– 31.6

%
15.7
15.7
54.3
0.0

Employees (as at December 31)
Total employees

Number5,000

Number4,882

Ratios per share
Earnings per share (undiluted)5) 6)
Equity (undiluted)
Dividend

CHF
56.06
369.3
12.02)

CHF
58.88
349.4
12.03)

EUR1)
46.51
306.4
10.0

EUR1)
47.76
283.4
9.7

Stock market capitalization (as at December 31)
Stock market capitalization4)

CHF m
1,200.9

CHF m
1,133.3

EUR m1)
996.4

EUR m1)919.2

1) Euro values translated at the average annual exchange rate of
CHF 1.2052/1 EUR (2012) and CHF 1.2329/1 EUR (2011).

4) Total number of shares in circulation, multiplied by year-end
share price.

2) The Board of Directors proposes to the Ordinary General Meetingof April 26, 2013 the distribution of a dividend in the amount of
CHF 12.00 per registered share.

5) Previous year’s figures adjusted for continuing operations.

3) Approval of a dividend of CHF 12.00 per registered share at theOrdinary General Meeting of April 27, 2012.

6) See note 15 ‘Earnings per share’ on page 101 of the financial ­report.
7) As of 2012, ‘Cash flow from investing activities’ also contains interest received. The figure for the previous year has been adjusted
accordingly.

18

Forbo Annual Report 2012 – At a glanceWell-positioned
for 2013
The 2012 business year was a demanding
one for Forbo in many ways. The difficult
economic conditions, particularly in theeuro zone, along with huge cuts in govern­
ment spending, impacted on the company’s
performance because Forbo generates thelion’s share of its sales in Europe and be­cause the sales of Flooring Systems largely depend directly or indirectly on public
spending. Forbo was able to counter thiswith strategic activities initiated a few years
ago, including developing and expanding
business in growth markets, tapping into
new market segments – especially in theprivate commercial market segment – andfocusing on the expansion of its productportfolio.
In order to reduce dependence on public
spending and take even greater advantageof the potential in growth markets, Forbo
set about implementing various strategic
projects in the year under review. The ex­penses for these projects impacted on thecompany’s operating profit. However, theextraordinary income from the sale of theindustrial adhesives activity, ­including syn­thetic polymers, along with the conversion
of a pension plan in the Netherlands had asignificant positive effect on Group profit.
Forbo considerably strengthened its bal­ance sheet in the year under review. With
another significant increase in net cash,
the company is well-positioned to further
drive expansion in growth markets and tostrengthen its market position in 2013.

Focus on leading market positions
In December 2011, Forbo announced that it would sell
its industrial adhesives activity, including synthetic poly­mers, which was part of the Bonding Systems division,
to H.B. Fuller Company. The transaction was closed successfully on March 5, 2012. The remaining Bonding Systems activity, building and construction adhesives, will
now be further developed within the flooring businessof the Flooring Systems division. In the following reports and charts, all previous year figures have been
­adjusted in relation to the consolidated income statement. Thus, the previous year’s figures only report the
numbers of continuing operations. In accordance withIFRS 5, the previous year balance sheet has not been
restated.
Net Sales at previous year’s level
In the year under review, Forbo generated net sales of
CHF 1,201.1 million, nearly maintaining the previous
year’s figure (2011: CHF 1,203.8 million). This equates toa minor 0.2% decline (– 1.1% in local currencies) versus
the previous year.
The Flooring Systems division generated net sales of
CHF 873.9 million in 2012 (previous year: CHF 886.5­million), which comes to a slight decline of 1.4% yearon-year. Positive exchange rates had an additional­minor impact of 0.3%, resulting in a decrease of 1.7%
in ­local currencies. High levels of government debt
and associated large cuts in public spending impacted
many markets adversely.
The Movement Systems division generated net salesof CHF 327.2 million in the year under review (previous
year: CHF 317.3 million), which marked a year-on-yearincrease of 3.1% or a slight increase in sales of 0.5% in
local currencies. Sales trends in the different regions
and customer segments show a very mixed picture.

19

Net sales by geographic area
Change on previous year

North, Central, and South America
FranceAsia/Pacific and Africa
Benelux
Germany
Great Britain/Ireland
Scandinavia
Eastern Europe
Southern Europe
Switzerland
Total

%
18.4
14.1
13.8
11.8
11.4
9.7
9.4
5.1
4.1
2.2
100.0

in %
5.7
3.3
1.1
– 7.7
– 6.7
2.2
– 0.3
12.6
– 9.2
– 13.6– 0.2

in local currencies in %
1.0
5.7
– 3.5
– 5.7
– 4.6
– 1.7
– 0.8
13.9
– 7.2
– 13.6– 1.1

Accelerated implementation of strategic­initiatives impacts on operating profit
In order to reduce dependence on public spending
and take even greater advantage of the potential in
the growth markets, Forbo accelerated the implementation of various strategic projects in the year underreview. This included tapping into market segments
outside the public sector, focusing on expansion of
the product portfolio, and developing and expanding­activities in growth markets. The expenses related tothese projects impacted on the company’s operating
profit. However, the conversion of our most important
pension plan in the Netherlands from a defined bene­fit
to a defined contribution plan resulted, in accordancewith applicable IFRS rules, in one-time extra­ordinary
pretax gain of CHF 45.4 million. This had a substantial
effect both on the operating profit of the Flooring­Systems division and on consolidated Group profit. Thiseffect, therefore, must be neutralized when assessing
operating profit.

CHF m
2012
221.2
169.4
165.4
141.9
136.7
116.1
112.6
61.3
49.8
26.7
1,201.1

25

50

75

100

125

150

175

200

225

Factoring out this positive effect, earnings before­depreciation and amortization (EBITDA) of the entire­Forbo Group decreased by 15.0% to CHF 160.6 million(previous year: CHF 189.0 million). The EBITDA margin
declined to 13.4% from 15.7% the previous year. The
EBITDA of Flooring Systems decreased by 12.6% to
CHF 134.1 million (previous year: CHF 153.5 million),while that of Movement Systems was down by 12.0%
to CHF 38.7 million (previous year: CHF 44.0 million).
The EBITDA margin of Flooring Systems declined from
17.3% to 15.3%, that of Movement Systems from 13.9%
to 11.8%.
If the before mentioned special item is factored in,
however, EBITDA of the entire Forbo Group rose by
8.9% to CHF 206.0 ­million (previous year: CHF 189.0 million). The EBITDA margin increased to 17.2% from 15.7%
the previous year. The EBITDA of Flooring Systems roseby 16.9% to CHF 179.5 million (previous year: CHF 153.5
million), and the EBITDA margin was up from 17.3%
to 20.5%.

20

Forbo Annual Report 2012 – At a glance

EBITDA by division
Flooring Systems
Flooring Systems
without special items
Movement Systems
Corporate

CHF m
2012
179.5
134.1

Change onpre­vious year in % – 25
16.9
– 12.638.7– 12.2Compared with previous year, depreciation and amortization rose by a total of CHF 3.3 million in 2012
to CHF 43.4 million (previous year: CHF 40.1 million).
Factoring out the special effect from the conversion of
the pension plan, the Group’s operating profit (EBIT)
was 21.3% lower at CHF 117.2 million (previous year:
CHF 148.9 million), while the EBIT margin declined to
9.8% (previous year: 12.4%). The special effect factoredin, though, EBIT increased by 9.2% to CHF 162.6 million,
and the EBIT margin rose to 13.5%.
Net income from operations of CHF 90.1 million isbased on the Group profit from continuing operations
adjusted for special items, including the related tax­effects.

0

25

50

75

100

125

150

175

200

75

100

125

– 12.0– 43.5

Taxes and financial income
The effective tax rate rose to 21.0% compared to 17.9%
the previous year. This increase was due primarily to thegreater impact of countries with higher tax rates onGroup profit and to special effects.
Financial expenses declined slightly by CHF 0.5 million
to CHF 11.2 million, owing in particular to the repayment of the US private placement in November 2012.
The Forbo Group reported financial income amounting
to CHF 5.7 million, a result that can be ascribed in particular to the investment of the liquidity generated by
the sale of the industrial adhesives activity.

Group profit from operations 2012,
without special items
Group profit 2012 from continuing operations. /. special effect from conversion of pension plan
+ related taxes
Net income from operations 2012, without special items

CHF m – 50
124.1
– 45.4+ 11.4
90.1

– 25

0

25

50

21

Free cash flow
Cash flow from operating activities
Cash flow from investing activities
Free cash flow

CHF m
2012
106.3
183.5
289.8

CHF m
2011 0
141.5
19.1
160.6

Significantly higher free cash flow
Cash flow from operating activities came to CHF 106.3
million in the year under review, which was consider­ably lower than the previous year. This was due pri­marily to the lower EBITDA without special items. Cashflow from investing activities came to CHF 183.5 million, a significantly higher figure than the previous year.
This stems from the net effect of the sale of the industrial adhesives activity less the acquisition of short-term­financial instruments. Free cash flow thus came to
CHF 289.8 million (previous year: CHF 160.6 million).
This strong position enables Forbo to further drive development and expansion in growth markets and also
to take advantage of external growth opportunities.

50

100

150

200

250

300

Considerably stronger balance sheet
Total assets as at December 31, 2012 stood at CHF
1,333.9 million (previous year: CHF 1,501.9 million).
Net cash came to CHF 258.3 million (previous year:
CHF 0.5 million). Despite the share buyback, shareholders’ equity as at the end of December 2012 roseslightly to CHF 817.4 million (previous year: CHF 815.3
million). The equity ratio thus further increased significantly from 54.3% the previous year to 61.3% in theyear under review.

22

Forbo Annual Report 2012 – At a glance

Capital expenditures focus on strategic activities
The Group’s capital expenditures this past year wasagain adapted to economic conditions and concentrated on important operations and strategic projects
designed to support market expansion, product technology, and efficiency gains. Accordingly, investments
in fixed assets in 2012 came to CHF 33.7 million, an­increase of 6.6% over the previous year (CHF 31.6 million). In the ­reporting period, Flooring Systems invested
CHF 23.7 million, slightly less than the previous year
(CHF 24.0 million). The division invested in the expan-

sion of a production plant for the manufacture of linoleum flooring and in the renovation of drying and­manufacturing ­facilities for the purpose of increasing
efficiency. At Movement Systems, investments cameto CHF 9.2 million, which was about a quarter higher
than the previous year (CHF 7.3 million). The funds werespent primarily on developing and expanding newmarkets and customer segments, developing innovative products, and expanding and renovating production plants.

Investments 2008 – 2012

2012
2011
2010
2009
2008

Flooring
Systems
CHF m

Movement
Systems
CHF m

Corporate
CHF m

Total
CHF m

24
24
22
19
31

9
7
6
12
17

1
1
0
1
1

34
32
28
32
49

10

20

30

40

50

23

Payroll development
At year-end 2012, the Forbo Group had 5,000 employees on its payroll which is 118 employees more thanin the previous year. The slight decrease in headcountin the Netherlands, Switzerland, the UK, France, andSouthern Europe is a result of structural adjustmentsin these markets. The higher-than-average increases in

Asia/­Pacific and Eastern Europe stemmed mainly fromthe expansion of the sales and distribution organizations in these regions. The increase in North America
is due essentially to the takeover of the business operations of Phoenix Floor & Wall Products Inc. in Canada, aprevious distribution partner of Flooring Systems, andto market expansion in Mexico.

Employees by geographic area
Benelux
North, Central, and South America
Great Britain/Ireland
Asia/Pacific and Africa
Germany
FranceEastern Europe
Switzerland
Scandinavia
Southern Europe
Total

%
22.2
13.7
12.5
12.5
12.3
9.1
8.0
3.9
3.4
2.4
100.0

Change onpre­vious year in %
– 2.1
9.2
– 0.6
11.2
0.8
– 0.9
7.8
– 3.6
1.5
– 0.4
2.4

2012
1,110
687
626
625
614
456
401
193
170
118
5,000

200

400

600

800

1,000

1,200

24

Forbo Annual Report 2012 – At a glance

Sustainablevalue creation
Social responsibility and protecting the en­
vironment are fundamental Forbo values.
We are committed to protecting the en­
vironment and investing in a sustainablef­uture. As a responsible manufacturer andemployer, Forbo sets very high standards
in occupational health and safety, environ­mental protection, and quality assurance.
Social dimension
In the past year, Forbo successfully continued the­in­ternal management training program that was
launched two years ago. In conjunction with the University of St. Gallen, other external partners, and internal specialists, a practice-driven training program forsenior managers and employees in key positions consisting of various modules in management, sales, marketing, and oper­ations was established. The new leadership program, a module added in 2012, is aimed at
the current participants and focuses on strategic implementation topics and leadership issues such as dealing
with organizational and team changes as well as per-formance management. Also at the divisional levelcourses were held on a wide range of topics spanning
products and applications, sales, finance, operations,project management as well as the Forbo values.
Ecological dimension
Protecting the environment and generating ecological
added value are decisive factors in all Forbo’s developments and investments. Minimizing Forbo’s environmental footprint is a top priority, and both divisions are
fully committed to optimizing production processes
so as to minimize water and energy consumption, reduce emissions, and reuse heat generated in production processes as well as to reduce and, wherever possible, recycle used materials. In the year under review,
a number of initiatives in these areas were implemented, and ­investments were made to develop environmentally friendly products. In 2012, the responsible
use of energy resources, especially at assembly andproduction sites, was forefront priority for both Forbo
divisions. Lighting was significantly improved by installing solar spot systems in order to make greateruse of daylight or by fitting high-performance mirror
lamps that provide brighter light. Energy-saving sen-25sors were installed for lighting purposes and as motion
detectors. Movement Systems in Germany was certified to ISO 50001 in the year under review. This norm
aims at continuous improvement in energy management and covers virtually all areas of a company’s activities. The division plans to have other sites certified
as well.
A pilot project that got off the ground in the Netherlands in 2011 is now in full swing: Flooring Systems
is the first company in the Netherlands to collect lino­
leum waste cuttings from customers and reuse thewaste to manufacture new floorings. By the end of
2012, customers had returned a total of 75,000 kg
linoleum that can now be recycled in our production
process.
A big priority at Forbo is safety at work. Occu­pationalsafety is founded on three pillars: working methods,
processes, and people. Various initiatives were launchedon this front in the year under review in order to increase awareness of a range of safety issues. For instance, plants now also report minor incidents or near
accidents as these indicate where risks and possible

sources of danger lie which need to be addressed. This
allows the organization to take appropriate measures
to effectively prevent accidents from happening. Our
US organization received an official award for exem­
plary efforts to improve occupational safety.
Economic dimension
As a listed company, Forbo concernes itself with theeconomic aspects of sustainability on a daily basis.
Compliance is of enormous importance for the reputation and positioning of a company. Forbo continued
its ­efforts in this area in the year under review, for example by training employees in the Code of Conduct,
competition law as well as anti-corruption principles,and continued to strengthen its risk management
processes.

26

27

Activity report

Two divisions – leading market positions
Flooring Systems:
Market conditions remain difficult
Movement Systems:
Focus on strategic activities

29
30
36

28

INDIVIDUALITY

INTERFACEForbo Annual Report 2012 – Activity report

29

Two divisions –leading market
positions
Forbo aims to operate in business areas inwhich it can achieve a leading global market position – something it has achievedfor both Flooring Systems and Movement
Systems.

Flooring Systems
The Flooring Systems division offers a broad and attractive range of environmentally friendly linoleum, highquality vinyl floors, entrance flooring systems for cleaning and drying shoes, carpet tiles, needle felt, andFlotex, the washable textile flooring. Thanks to their­excellent technical properties and attractive design,these flooring products are invariably the first choicefor public buildings, department stores, hospitals andother healthcare facilities, schools, libraries, commercial
and office spaces, leisure centers, shops, hotels, restaurants, and cafeterias as well as for applications in theresidential market. With a market share of over 65 percent, Forbo is the world leader in linoleum.
Flooring Systems also provides ready-made adhesives
for flooring installations and ceramic tiles as well as leveling compounds for the construction industry under
the trade name Eurocol.

Movement Systems
Movement Systems is a global industry leader for topquality power transmission belts, sophisticated con­veyor and processing belts, synthetic modular belts
as well as timing and flat belts made of synthetic materials. These products are known under the brandname Siegling. They are used in a wide range of applications in industry, trade, and the service sector, including conveyor and processing belts in the food­industry, treadmill belts in fitness studios, and flat belts
in mail distribution centers.

Implementing the strategy
To ensure that the Group remains successful in themarket place despite its operations having distingt­activities, the two divisions act independently andflexibly, but always in line with the following strategic
principles that govern the entire Group. The Group’s
strategy is to:–– have a leading position in clearly defined market
segments based on customer focus, a high service
level, and innovation–– strengthen and develop the Group’s presence ingrowth markets–– make targeted acquisitions that generate added
value for shareholders through greater geographic
reach, product extensions, and market consolidation–– support and promote employees through ongoingtraining and the exchange of ideas at all levels–– reinforce the strong Forbo umbrella brand globally

30

Flooring
Systems

31

Individuality

A SPACE JUST
LIKE YOUR
COMPANY
Appearance counts: its offices are a company’s callingcard. Offices tell visitors a lot about what they can expect from the place they are visiting. Our high-quality
collections offer customers an inspiring selection ofcolors and structures for linoleum, vinyl or carpet tile
floorings. The individual spaces they create underpin
the cor­porate image aesthetically and provide a stim­
ulating working atmosphere.

32

Forbo Annual Report 2012 – Activity report

Flooring Systems:

Market conditions remain difficult‘The challenges we faced in the previous
year became even tougher in the course of
2012. Massive cuts to public spending inmany of Forbo’s key markets continued to
put a damper on ­investments in new buildings and reno­vations, which particularly­affected the high-volume customer segments in the health­care and education sectors. While we were able to continuously
raise both sales and earnings by focusing
on the commercial market segment andthe public sector in the past, the change in­market conditions has created an entirely
new situation. We managed to offset partof the decline in demand because we hadalready made efforts in the past to adjust
our strategy and to strengthen the focus
on new market segments outside the public
sector. Increased investments in growthmarkets and in marketing and distribution
activities aimed at developing new cus­
tomer segments in the commercial market
segment reduced operating profit despite
good expense management. We reinforced
our market position as a leading systemprovider for the commercial market segment by making wide-ranging investments
in new designs, collections, and productspecifications.’
The Flooring Systems division generated net sales of
CHF 873.9 million in 2012 (previous year: CHF 886.5
million), which comes to a slight decline of 1.4% yearon-year. Positive currency effects had a marginal impact of 0.3%, which results in a decrease of 1.7% in
local currencies. The division’s share of Group sales
came to 72.8%. The government debt challenge coupled with the euro crisis had a negative effect on anumber of markets and resulted in declining sales inmost European markets as well as in North America.
Some countries in Europe, Forbo’s largest region, were
hit by the ongoing weakness of the construction sec-

Jens Schneider
Executive Vice President
Flooring Systems

tor. The trend to weaker demand in North America,
which had been taking shape towards the end of
the previous year, was confirmed in the year under­review. Sales trends in Asia/Pacific were very mixed.
The conversion of the pension plan in the Netherlands
from a defined benefit to a defined contribution plan
resulted, in accordance with applicable IFRS rules, in
one-time extraordinary pretax gain of CHF 45.4 million, which had a significant impact on operating profit. ­Accordingly, operating profit (EBIT) rose by 17.7%
to CHF 149.0 million, and the EBIT margin was up by
17.0%. Excluding this special item, EBIT decreased by
18.2% to CHF 103.6 million (previous year: CHF 126.7
million). This decline was due on the one hand to­investments made in growth markets and sales andmarketing activities, and on the other to an impairment of intangible assets amounting to CHF 4.0 million reported in the annual figures. The EBIT margindecreased to 11.8% (previous year: 14.2%).
Sales strongly affected by public sector
spending cuts
Since Flooring Systems’ main customer segments areschools, hospitals, retirement homes, and public buildings, the division is highly dependent on public sector
spending for its flooring business. Efforts to adjust thestrategy to the changed circumstances – by reinforcing distribution channels and entering new customer
segments outside the public sector such as shop fittings, offices, hotels, and restaurants – are beginningto show results.

33

In Europe, Russia and France performed very wellthanks to a greater focus on growth segments and astrong position in all relevant distri­bution channels.
Many European countries reported a ­decline in sales,due mostly to weak demand and ongoing sluggishness in the construction industry. North America, too,
increasingly felt the pinch of reduced spending insome of Forbo’s key customer segments such as education and healthcare. The situation was aggravated by
the wait-and-see stance on healthcare reform in the
run-up to the US presidential elections. The implemented strategy to accelerate development in growth markets resulted in strong growth in Brazil and Russia, withthe latter also benefiting from a generally favorable
economic environment.
The building and construction adhesives activity in
Russia posted very good sales growth, but the Benelux
countries, which account for the largest portion of sales
in this activity, had to contend with the ongoing weakness in the construction sector. On balance, sales ofbuilding and construction adhesives in Germany remained at the previous year’s level, as did the overallsales for the whole building and construction adhesives activity.
High-end vinyl designer floors post strong growthWithin the product portfolio with its very extensive
flooring collections mixed trends were seen. The Allura
collection, a range of high-end vinyl designer floorings
launched the previous year is currently the fastestgrowing product category. Available as either planks
or tiles, it is in high demand for shop fittings as well as
in the hotel and restaurant segments. The collection
generates double-digit growth rates. This success confirms that the implementation of the growth strategy
in the private commercial market segment, designed
to decrease dependence on public spending, is bearing fruit. Sales of hetero­geneous vinyl floorings for thecommercial market segment and of high-end carpet
tiles for office spaces performed well also.
Since linoleum is widely used in the high-volume
healthcare and education customer segments, where
massive spending cuts have been made because of­severe budgetary constraints, this product group saw
an overall decline in demand. Demand for Flotex – thewashable textile flooring that is as comfortable as a carpet and as easy to care for as resilient flooring – and forentrance flooring systems also declined slightly. Owing
to strategic portfolio adjustments, sales of flooring forthe residential market segment again decreased marginally in the year under review.
New global linoleum collection
A new surface technology for linoleum was launchedin 2012. It provides significantly better resistance to dirt,
scratches, and wear and tear and was well received bycustomers, especially for applications in the healthcare
sector. Forbo also developed a new, next-generation
global linoleum collection that will be launched in
the first quarter of 2013. The collection features new
designs geared specifically to the private commercial
market segment as well as a modular sampling concept.
For the high-end vinyl designer floorings in the Allura
collection, Forbo developed new forms and formats
that enlarge the scope for design freedom. New designs for the Flotex product group were introduced,­increasing its attractiveness for European markets, particularly in highly frequented areas such as leisure centers, restaurants, retirement and nursing homes, as wellas public transport.
Sales growth remains the challenge
Flooring Systems is assuming that investment in the
public sector will continue to be muted. The division
will take a number of targeted growth measures andengage in marketing and sales activities to counter
this trend. We expect sales to remain very solid in the­private commercial market segment and see further
potential for the recently launched global linoleum collection.
The expansion of activities in growth markets will remain important in 2013. The division expects additional sales growth as a result of greater penetration of
the North American market and its direct market engagement in Canada following the acquisition of thebusiness operations of Phoenix Floor & Wall Products
Inc., our previous distribution partner.

34

Forbo Annual Report 2012 – Activity report

Fireworks of colors
and structures
With every change to the product line andevery new development, Flooring Systems
focuses on making its products and processes more sustainable and environmentally friendly. Forbo floorings combine attractive and innovative design with a longlife and high product quality. In the year
under review, Forbo once again set trends
with its new and diverse range of products.

A new generation of linoleum
To mark the 150th anniversary of linoleum, Flooring­Systems worked towards a new modern generation oflinoleum throughout the year under review. The result:a new global linoleum collection that will be launchedin the first quarter of 2013. The flooring classic has­always been a favorite in terms of functionality as its
formulation lends it a whole raft of positive material
properties. Product innovations such as the doublelayered, water-based, dual UV-cured surface coating
Topshield 2 make it ideally suited to everyday use inhigh-intensity contexts, reduce maintenance, and extend the product’s life cycle. Its outstanding material
and in-use properties, natural composition, and ideal
ecological profile make it one of the most-used commercial floorings and the undisputed number one
choice in both ecological and economic terms. The

35

broad range of new design options coupled with animpressive palette of colors opens up a host of new
applications in shop fittings, ­offices, hotels, restaurants, and leisure facilities as well as in the traditional
areas of education and healthcare.
New sound-absorbing vinyl collection
sets design trend in France
One of the reasons for the strong sales performance ofFlooring Systems in France is certainly the new soundabsorbing vinyl collection Sarlon Trafic – an all-purpose collection of acoustic floorings developed especially for France and southern Europe. This collection
focuses on the two customer segments educationaland senior citizen facilities. Two distinct design lines
were launched in order to meet the differing needs ofthe target groups: ‘Expression’ is geared to retirement
homes and multipurpose facilities, while ‘Vision’ is attractive for the educational sector owing to its trendy
designs and cheerful colors. Our customers and users
regard the new collection as the leader particularly inthese segments. Some of the designs have now been

included in the international range of acoustic floorings.
Thanks to an additional dirt-repellent surface treatment
this floor covering is simpler to maintain and does not
require spraying for metallization or maintenance purposes during the product’s entire life. It is antistatic andvery resistant to chemicals and greasy substances. In
addition, the new collection has the best indentation
performance of all 19dB products on the market.

‘BOLD DESIGNSSET NEW TREND’36

Movement
Systems37

Interface

CONNECTINGPROCESSESEFFICIENTLY
International courier companies and national post offices rely on our conveyor and processing belts. Thanks
to our reliable products and close cooperation our customers can rely on efficient material flows in both large
distribution centers and local sorting offices.

38

Forbo Annual Report 2012 – Activity report

Movement Systems:
Focus on strategic activities‘In the year under review, we focused on
systematically implementing our strategic
activities and initiatives. We continued to
optimize global, cross-organizational pro­
cesses and structures in specific core functions to achieve technical excellence andincrease efficiency. We stepped up theworldwide marketing of synthetic modular belts and consequently gained market
share with the further expansion of our
product and services portfolio. We concentrated on developing activities in growthmarkets by building local teams and opening new assembly operations. Building on
this strategy and drawing on the wideranging investments in new product specifications and applications, we are confident
that we can further strengthen our market
position.’
The Movement Systems division generated net salesof CHF 327.2 million in the year under review (previous
year: CHF 317.3 million), which marked a year-on-year
gain of 3.1% or a slight increase in sales of 0.5% in local
currencies. The division’s share of Group sales came
to 27.2%. Sales trends in the different regions and customer segments were ambiguous. Owing to aboveaverage investments in growth markets, operating
profit (EBIT) declined by 16.2% to CHF 27.0 million(previous year: CHF 32.2 million) despite the slight­upturn in sales. The EBIT margin accordingly decreased
to 8.2% (previous year: 10.1%).
Sales trends were mixed
Although sales were somewhat higher on balance
than in the previous year, trends in the various markets
were very mixed. In the America region, the strong
performance seen in the fourth quarter of 2011 was
confirmed in the year under review, with sales rising
substantially in 2012 despite difficult market conditions. In Europe, government indebtedness and theeuro crisis had a negative impact on demand, a trendthat had already been apparent in the fourth quarterof the previous year. The result was a decline in sales

Matthias P. Huenerwadel
Executive Vice President
Movement Systems

in most European markets, with demand declining
strongly especially in the central and southern European countries. Asia/Pacific managed to keep sales atapproximately the same level overall as in the previous
year. Core markets such as Japan and Australia were
weaker amid the economic downturn, and China did
not succeed in meeting its ambitious growth targets.
India was the best-performing market with sales
growth in the double-digits.
Strategic and long-term organizational expansion anddevelopment were pursued intensively in the year under review. The new organization established in Turkey
in the previous year was expanded, while new assembly operations were put into service in India and South
Korea. Mexico posted impressive double-digit sales
growth after opening additional service centers.
New product groups report double-digit growth
Two product groups for which development had beenprioritized in the past two years – the Prolink synthetic
modular belts and the rip and tear-free Transtex conveyor belts – posted double-digit sales growth in thepast year. Following the global sales rollout the previous year, a convincing offering was developed in new
customer segments in the field of logistics, in facilities
with harsh production conditions, and in the transportof raw materials, very heavy cargoes or parts with sharpedges.

39

This expansion of the product range with impressively
innovative and high-quality properties is also indirectlyreflected in the sustainable and disproportionately
high sales growth achieved in the strategic customer
segments logistics and industrial production. The customer segments food processing and textiles, which
had grown strongly the previous year, also developed
positively. In paper and printing, sales were up againslightly despite ongoing market weakness in the printing industry. In the highly competitive sports treadmill
market, demand faltered after a number of successful
years with above-average growth rates.

an innovative high-grip coating was developed for awide range of conveyor and processing belts as well
as for special applications in the customer segments
food, logistics, printing and paper converting as wellas industrial production.

Investments focused on strategic projects
and innovation
This past year the division again made significant investments in order to expand its position in the growthmarkets and to develop and round off its product portfolio of synthetic modular belts. New series have beendeveloped especially for the food industry to transport
medium-weight goods in hygiene-sensitive areas, including for the processing of meat, fruit, and vege­
tables, and to convey goods requiring small end radiuses or sticky products (for instance, baked goods andconfectionery) for which the belt’s release propertiesare very important. These properties are also an important sales argument in the tire industry and in rubber
processing.

Ambitious growth targets to achievemarket leadership
In the 2013 business year, the division will continue topress ahead with its strategic initiatives. Now that theorganization has been remodeled along global functional lines, these internal global processes will be further reinforced and strengthened with dedicated resources and industry expertise. Movement Systems will
attach great importance in the coming year to further
expanding its activities in growth markets. The primary
focus will be on Russia, Turkey, Mexico, and Asia/Pacific,
where the division will establish sales and service teams
and develop its assembly competencies.

Working closely together with partners in the manufacture and processing of gypsum plasterboards andgypsum fiberboards, Forbo has developed new highperformance forming belts that ensure a smooth flowof materials from the belt to the packaging line. Wallboards are manufactured primarily for interior anddrywall construction, where they are used for instanceas light, non-bearing walls or for cladding under sloping roofs or in attics. These energy-saving belts arethinner but stronger than before thanks to their special double-layer cover material made of high-techfabric and their thermoplastic, abrasion-resistant PVC
coating ensures even wallboard surfaces.
Wherever differences in height need to be overcome
in production, Forbo supplies slope conveyors thatmaster gradients of up to 20 degrees without any additional surface elements. To avoid spillage or breakage, the belt’s surface grip must ensure very reliable
conveyance of the goods. In the year under review,

In the operational field, various global projects were
implemented in connection with the new functionalorganization. The aim was to establish globally efficient organizational structures and workflows for allsites in order to drive competitive core processes
along the entire value chain.

The investments made in previous years in extended
product portfolios and developing innovative products
and application specifications will be pursued intensively in the coming year.

40

Forbo Annual Report 2012 – Activity report

A leader ininnovation
Though not always visible, Movement Systems is present almost everywhere, en­suring optimum process reliability. Forbostood out again in the year under review
as a professional partner in the devel­
opment of sector-specific, future-oriented
solutions for drives, transport, and manufacturing.

First sustainable conveyor belt
In the year under review, Movement Systems presented a world premiere: the first sustainable conveyor andprocessing belt that makes a very positive contribution
to the environment. The belt is made of renewable,­biodegradable raw materials, saves energy, yet provides the same performance as traditional conveyor
belts. It is available in different versions, either with asmooth surface or with longitudinal grooves for inclined conveying. The interest in sustainable conveyor
belts is increasing, but there have been none on themarket to date. As an innovation leader, we have pulled
out all the stops to find solutions that stand the testof real-world conditions. The belt’s technical specifications are the same and the joint technology is identical.
Customers can continue to use all the components
from traditional belts such as drums, tracking systems,
and drives. The international development team replaced oil-based raw materials with renewable plantbased materials. Biobelts can be coated with a pat­
ented special impregnation that saves the customer up

41

to 40 ­percent in energy costs (the Amp Miser concept).
This version has been a success on the market forsome years now – an ideal and logical combination
with the Biobelt. If the belt has to be exchanged after anumber of years, it is biodegradable. Biobelts are a distinct ­improvement that put the cradle-to-cradle prin­ciple into practice: waste is turned into new products,
and a sustained and environmentally friendly cycle isper­petuated.

‘BIOBELT, THE
ENVIRONMENTALLY FRIENDLY
ALTERNATIVE’
Expanded product portfolioof synthetic modular belts
Owing to their design, conventional conveyor belts
are not always completely suitable for conveyor andprocessing tasks. To make up for this, Movement Systems is expanding its product range specifically inthe area of synthetic modular belts used particularly

in food processing facilities. In the year under review,the division focused on expanding the product range
in line with its strategic orientation.
For transporting sticky products, new series 4.1 modules were developed for belts with a small end radius.
Their novel surface structure ensures excellent product release properties (meaning minimal product loss)
and resistance to oil and grease. They are the ideal­solution for processing dough, baked goods and confectionery as well as in rubber manufacturing and thetire industry.
New series 6.1 modules were developed for conveying light to medium-weight goods, including for the
food industry. They are designed to allow good air­circulation and water drainage and at the same time
have confirmed resistance to hot water, cleaning
agents, and disinfectants.
They comply with the most stringent demands of various regulations governing food standards. Their blue
color makes it easier to identify dirt, improves working
conditions by reducing light reflection, and is suited
for use in optical sorting facilities.

42

43

Organization

Executive BoardGroup structure
Board of Directors

44
47
48

44

Forbo Annual Report 2012 – Organization

Executive Board

Matthias P. Huenerwadel, Jörg Riboni, Jens Schneider, This E. Schneider, Daniel Keist

45

This E. Schneider

Jörg Riboni

This E. Schneider, born 1952, is a Swiss citizen. He studied economics at the University of St. Gallen (lic. oec.
HSG) and at the Graduate School of Business, Stanford
University, California, USA. After various management
functions in Europe and the US, he joined the Executive Board of Schmidt Agency, where he was responsible for strategic planning, operations, and logistics
from 1984 to 1990. From 1991 to 1993 he was Chairman and CEO of the publicly listed company SAFAA,
Paris. In 1994, he became a member of the Executive
Board of Valora, with responsibility for the canteen andcatering division. From 1997 to 2002, he was Delegate
and Vice President of the Board of Directors of SelectaGroup. This E. Schneider has been Delegate of theBoard of Directors and CEO of the Forbo Group since
March 2004. He is also a member of the Board of Directors of Galenica SA, Rieter Holding AG, and Autoneum
Holding AG.

Jörg Riboni, born 1957, is a Swiss citizen. He studied
economics at the University of St. Gallen (lic. oec. HSG)
and is a Swiss certified public accountant. After holding various positions in the auditing and consultancy
sector, Jörg Riboni joined the Cosa Liebermann Group
where he was Head of Controlling and Finances for
the European Division. In 1995, he was appointed
Chief ­Financial Officer of Jelmoli AG, which was sold at
the end of 1996. From 1997 to December 2005, he was
Chief Financial Officer of Sarna Kunststoff Holding AG
in Sarnen. Jörg Riboni joined the Forbo Group in Jan­uary 2006 as a member of the Executive Board andChief Financial Officer. He left the company on December 31, 2012.

Delegate of the Board of Directors and CEO

Chief Financial Officer, Executive Vice President

Daniel Keist

Head Corporate Center, Executive Vice President
Daniel Keist, born 1957, is a Swiss citizen. He studied
economics at the University of St. Gallen (lic. oec. HSG)
and joined UBS in Zurich in 1984, where he was Managing Director and Co-Head of the Corporate Finance
Equity Advisory unit. From 1998 to 2001 he was a member of the Executive Committee and CFO of the SelectaGroup. He was then a partner at Ernst & Young Corporate Finance in Zurich until 2003, where he acted as aconsultant in various M & A, restructuring and ­financing
transactions. Until the summer of 2007, he was a member of the Executive Committee of SIX Swiss Exchange
and headed the Admissions Division. Daniel Keistjoined the Forbo Group in August 2007 as a memberof the Executive Board with responsibility for the Cor­
porate Center. He left the company on ­December 31,
2012.

46

Jens Schneider

Executive Vice President Flooring Systems
Jens Schneider, born in 1956, is a German citizen. He
completed his BSc. Hons in geology and chemistry at
the University of the Witwatersrand in Johannesburg
in 1978 and then did his Master of Science at Imperial
College London in 1984. After working in the mining
industry in South Africa and Europe, he joined S.G.
Warburg Securities in London in 1987 as a financial
analyst for two years. From 1989 on, he headed international investment projects for the Frankfurt-based
corporation Metallgesellschaft. In 1995 he moved to
the Preussag Corporation, where he held various senior positions, among others in the Building Technology
unit. Jens Schneider joined the Forbo Group at the endof December 2005 where he took over responsibility
for Finance and Administration in the Flooring Systems ­division. He was appointed Executive Vice President Flooring Systems and member of the Executive
Board of Forbo as of April 1, 2010. Jens Schneider leftthe ­Executive Board on December 31, 2012 and will
now support Forbo Group in strategic projects.

Matthias P. Huenerwadel
Executive Vice President Movement Systems

Matthias P. Huenerwadel, born 1968, is a Swiss citizen.
He studied engineering at the Federal Institute ofTechnology, specializing in manufacturing technologies and technology management. He began his professional career as assistant to the Executive Boardof Franke Holding AG. In 1996, he moved to the US,
where he was responsible for logistics, information
technology, and customer service with Federal Home
Products, Ruston. From 1999, he held various mana­
gerial positions for Franke Foodservice Systems andmanaged its European operations from 2002 to 2005.
Matthias P. Huenerwadel took over management of
the Movement Systems division in October 2005 andis a member of the Executive Board of Forbo. As ofJanuary 1, 2013, he is the Head of the Flooring Systems
division.

Changes on the
Executive Board
As a result of the sale of the industrial adhesives activity – including synthetic polymers – the size of theGroup has been reduced by about a third.
For this reason the Executive Board has also beenstreamlined. The divisions now report directly to theCEO, and the functions of the CFO and Head Corporate
Center have been merged by and large. Tom Kaiser,
COO, Jörg Riboni, CFO, and Daniel Keist, Head Corporate Center, as well as the Head of the ­divested Bonding Systems division, Michel Riva, left the company
in the course of, respectively during the year under review.
Matthias P. Huenerwadel, who headed the Movement
Systems division with great success for seven years,
took over the Flooring Systems division from Jens
­Schneider on January 1, 2013. Jens Schneider will assume new duties within the Group. The new Head ofMovement Systems is Jean-Michel Wins, and Andreas
Spreiter took over the expanded CFO function as ofJanuary 1, 2013.

Forbo Annual Report 2012 – Organization

Group structureThis E. Schneider
Delegate of the Board of Directors and CEO

Jens Schneider

Matthias P.
Huenerwadel

Jörg Riboni

Daniel Keist

Flooring Systems

Movement Systems

Corporate FinanceCorporate Center

Sales & Marketing

North, Central, andSouth America

Controlling

Legal Services

EuropeTreasury

Asia/PacificTax

Mergers &Acquisitions

Plastic Modular Belts

IT

Global Production

Pensions
International

Supply Chain

Innovation &Product Management

Global Research &Development

Finance & Services

Global Business
Development

Building andConstruction Adhesives

Investor Relations

Internal Audit
Risk Management
Communications
Human Resources/
Pensions Switzerland

47

48

Forbo Annual Report 2012 – Organization

Board of Directors

Dr. Reto Müller, Vincent Studer, Michael Pieper, Dr. Albert Gnägi, This E. Schneider, Dr. Peter Altorfer

49

Dr. Albert Gnägi
Chairman/Elected until 2013.

Member and until 2010 Chairman of the Board of Trustees of the Sanitas Hospital, Kilchberg.
Chairman of the Board of Directors of SAM Group Holding AG, Zurich.
Member of other Boards of Directors or Boards of Trustees.

Michael Pieper

Vice Chairman/Elected until 2013.
Owner of the Franke Artemis Holding AG, Aarburg.
Chief Executive Officer of Franke Artemis Management AG, Aarburg.
Member of the Board of Directors of Hero AG, Lenzburg.
Member of the Board of Directors of advalTech Holding AG, Niederwangen near Berne.
Member of the Board of Directors of Berenberg Bank (Schweiz) AG, Zurich.
Member of the Board of Directors of Rieter Holding AG, Winterthur.
Member of the Board of Directors of Autoneum Holding AG, Winterthur.

This E. Schneider

Delegate and CEO/Elected until 2014.
Member of the Board of Directors of Galenica SA, Berne.
Member of the Board of Directors of Rieter Holding AG, Winterthur.
Member of the Board of Directors of Autoneum Holding AG, Winterthur.

Dr. Peter Altorfer
Member/Elected until 2014.

Partner at the law firm Wenger & Vieli AG, Zurich.
Member of the Board of Directors of Huber + Suhner AG, Herisau.
Member of the Board of Directors of agta record ag, Fehraltorf.
Member of the Board of Directors of Abegg Holding AG, Zurich.
Member of the Board of Directors of Altin AG, Baar.
Member of the Board of Trustees of Werner Abegg Fonds, Zurich.
Member of the Board of other private and foreign banks and non-listed investment companies in Switzerland.

Dr. Reto Müller
Member/Elected until 2015.

Full-time Chairman of the Board of Directors of Helbling Holding AG, Zurich.
Member of the Council of SWISSMEM, Zurich.
Member of other Boards of Directors.

Vincent Studer
Member/Elected until 2015.

Partner and member of Management of T + R AG, Gümligen near Berne.
Member of the Board of Directors of Bank EEK AG, Berne.
Member of other Boards of Directors or Boards of Trustees.

50

51

The Forbo share

52

Forbo Annual Report 2012 – The Forbo share

The Forbo share

On the whole, the year 2012 was a very good one for the stock market. After a negative performance in 2011(– 7.7%), the Swiss Performance Index (SPI) got off to a good start in 2012, despite the ongoing euro crisis, andby mid-March had gained almost 9%. However, the renewed flare-up of recessionary fears both in Europe
and on the other side of the Atlantic, coupled with subdued growth in Asia, led to a downturn in May; and by
the beginning of June the SPI turned slightly negative. The market then rallied, and the SPI continued to makesignificant gains until the end of the year, ultimately closing 2012 with a surprising 17.7% gain.
The Forbo share price rose from CHF 493 at year-end 2011 to CHF 685 shortly before the end of March 2012.
In the wake of the downturn on the SPI the share price then dipped, but then recovered again in late ­August,ultimately closing 2012 with a gain of 18.7%.

The Forbo share in comparison to the SPIForbo share
SPI
750
700
650
600
550
500
450
400
350
300
250
200
150
100

285%
259%
233%
208%
182%
156%
131%
105%
79%
54%
28%
3%
– 23%
– 49%
31.12.2009

31.12.2010

31.12.2011

31.12.2012

53

Share capital
Issued registered shares1)
Thereof:
Shares outstanding
Share buyback second line
Other treasury shares
Reserve shares (without dividend rights)

2012
Number2,500,000

2011
Number2,500,000

2010
Number2,713,152

2009
Number2,713,152

2008
Number2,713,152

2,052,740
250,000
175,841
21,4192,298,758
179,823
21,4192,339,162
213,152
139,419
21,4192,266,593
213,152
211,988
21,4192,230,729
213,152
247,852
21,419CHF
250,000

CHF
250,000

CHF
271,315

CHF
271,315

CHF
10,852,608

205,274
25,00017,5842,142

229,876
17,982
2,142

233,916
21,315
13,942
2,142

226,659
21,31521,1992,142

8,922,916
852,608
991,408
85,676

CHF
369
89,1
12,03)
1,85)
2,55)
13

CHF
349
62,8
12,0
1,75)
3,55)
19

CHF
320
71,6
12,0
2,05)
3,55)
17

CHF
301
33,7
6,0
1,85)
4,35)
18

CHF
250
6,9
3,9
0,64)
2,14)
57

CHF
685
484
585
1,406
994
1,201

CHF
713
343
493
1,639
788
1,133

CHF
595
343
590
1,392
802
1,380

CHF
343
140
340
777
317
771

CHF
705
188
195
1,573
420
435

Issued nominal capital
Total
Thereof:
Shares outstanding
Share buyback second line
Other treasury shares
Reserve shares (without dividend rights)

Data per share
Group shareholders’ equity per share7)
Group profit per share2) 7)
Gross dividend and cash distribution
Gross dividend yield (in %)

High
Low

Payout ratio6) (in %)Stock market statistics
Share priceMarket capitalization (m)8)

1)
2)
3)
4)
5)
6)
7)

High
Low
Year-end
High
Low
Year-end

Par value per share in 2012, 2011, 2010, and 2009: CHF 0.10; 2008: CHF 4.
See note 15 ‘Earnings per share‘ on page 101 of the financial report.
Proposal of the Board of Directors to the Ordinary General Meeting.
Calculated on the basis of a cash distribution in the form of a reduction in par value.
Calculated on the basis of a cash distribution in the form of a dividend.
Gross cash distribution as a percentage of Group profit.
Based on the weighted average of the number of shares as set out in note 15‘Earnings per share’ on page 101 of the financial report.
8) Total number of shares outstanding, multiplied by year-end share price.

Forbo Annual Report 2012 – Corporate governance reportCorporate
governance report

56

Forbo Annual Report 2012 – Corporate governance report

Corporate
governance report
At Forbo, the concept of corporate governance encompasses the entire set of principles andrules on organization, conduct and transparency designed to protect shareholders’ inter­ests. Forbo’s aim is to strike a careful balance between management and control. The cen­tral rules are contained in the Articles of Association, the Organizational Regulations, andthe regulations of the committees of the Board of Directors. The following information isset out in line with the Directive on Information relating to Corporate Governance (Direc­
tive on Corporate Governance ‘DCG’) and the relevant publications of SIX Swiss Exchange.

Group structure and shareholders
Group structure
Forbo Holding Ltd, domiciled at Lindenstrasse 8, 6340 Baar, is a limited company under Swiss law. The holding
company holds all subsidiaries, directly or indirectly, that belong to the Forbo Group. The operational structure of
the Group is shown in the organizational chart on page 47. The scope of consolidation of Forbo Holding Ltd does
not include any listed companies. The unlisted companies within the scope of consolidation of Forbo Holding Ltd
are listed under ‘Group companies’ starting on page 130 of the financial report. The company name and domicile,share capital and percentage of participation along with information relating to the allocation of the Group com­pany to the Group’s businesses can also be found in that section of this Annual Report.
Significant shareholders
As of December 31, 2012, 2,164 shareholders were listed in the share register of Forbo Holding Ltd, or 157 (7%)
fewer than in the previous year. At December 31, 2012, Forbo Holding Ltd knew of the following significant share­
holders with a holding of more than 3%:

Michael Pieper1)
Forbo Holding Ltd2)This E. Schneider

31.12.2012
as a percentage
27.27
17.89
3.10

1) Michael Pieper holds his interest directly and indirectly through Artemis Beteiligungen I AG.
2) – First trading line 7.89%, second trading line 10.00%.
– Forbo Holding Ltd holds its interest directly and indirectly through Forbo International SA and Forbo Finanz AG.

Disclosure of significant shareholders and significant shareholder groups and their holdings is effected in accor­
dance with the disclosures made in the year under review pursuant to Article 20 of the Federal Act on Stock­Exchanges and Securities Trading (SESTA) and the provisions of the Ordinance of the Swiss Financial Market­Supervisory Authority on Stock Exchanges and Securities Trading (SESTO-FINMA).
Forbo Holding Ltd reported on May 23, 2012 that it had exceeded the threshold of 10% and on October 9, 2012that it had exceeded the threshold of 15% of the voting shares as at October 4, 2012 through the purchase of
its own shares via the second trading line on the SIX Swiss Exchange as part of the share buyback program it
had previously announced. It reported that it held, directly or indirectly, via Forbo International SA, Baar (CH), andForbo Finanz AG, Baar (CH), 375,477 of its own shares, corresponding to 15.019% of the voting rights. In addition,
Forbo Holding Ltd has granted 31,744 purchase rights for 31,744 registered shares of Forbo Holding Ltd, corre­
sponding to voting rights of 1.270% of the total.

57

No other disclosures were made in 2012.
For further information on significant shareholders or shareholder groups, we refer the reader to the table on thefacing page and to page 144 of the financial report (duty of disclosure pursuant to Article 663c, Swiss Code ofObligations).
Cross-shareholdings
Forbo Holding Ltd has not entered into any cross-shareholdings with mutual capital shareholdings or voting
rights.

Capital structure
Share capital
As of December 31, 2012, Forbo Holding Ltd had a fully paid up share capital of CHF 250,000, which was divided
into 2,500,000 listed registered shares, each with a par value of CHF 0.10. Of this amount:–– 63.84% were registered in the name of 2,136 shareholders with voting rights–– 29.88% were shares of banks or of SIX SIS AG pending registration of transfer–– 6.29% were registered in the share register without voting rights
The shares of Forbo Holding Ltd (security number 000354151/ISIN CH0003541510) are listed on SIX Swiss­Exchange. No different categories of shares exist. Each share entitles the owner to one vote. Further informationon the Forbo share can be found on pages 52 and 53. Further information on the rights of participation associ­ated with the share can be found on page 68 of this Annual Report.
At the Annual General Meeting of Shareholders of Forbo Holding AG held on April 29, 2011, the Board of Directors
was authorized to buy back company’s own shares, for the purpose of extinguishing the share certificates at alater stage, up to a maximum of 10% of the share capital over a period of three years through a second tradingline on the SIX Swiss Exchange. By November 1, 2012, Forbo Holding Ltd had repurchased 250,000 shares via thesecond trading line. At the Extraordinary General Meeting of Forbo Holding Ltd held on November 5, 2012, it was
decided to extinguish the shares that had been repurchased.
At the Extraordinary General Meeting of Shareholders of Forbo Holding Ltd of November 5, 2012, the Board of
Directors was authorized to buy back company’s own shares either on the SIX Swiss Exchange or in another man­ner, with the purpose of extinguishing them at a later stage, up to a maximum of 10% of the share capital over a
period of three years through a second trading line. The Board reserves the right to interrupt or stop the sharebuyback program if this should become necessary in order to finance external growth. The Board opted for a
two-stage procedure in which the shareholders took the basic decision at the Extraordinary General Meeting of
Forbo Holding Ltd on November 5, 2012 and will be asked to approve the cancellation of the repurchased sharesat one of the forthcoming annual general meetings. By December 31, 2012, Forbo Holding Ltd had repurchased
no shares via the second trading line.
Conditional and authorized capital
Pursuant to paragraph 6 of the Articles of Association, Forbo Holding Ltd has a maximum conditional capital of
CHF 16,645, corresponding to 166,450 registered shares to be paid up in full with a par value of CHF 0.10 each.
The capital increase takes place in accordance with the Articles of Association through the exercise of option andconvertible rights which are granted in connection with the bonds issued by the company or one of its subsidiar­ies or through the exercise of option rights which are granted to the shareholders. Except for shareholder options,

58

Forbo Annual Report 2012 – Corporate governance reportshareholders have no right of subscription. Holders of option or convertible rights are entitled to subscribe to
new share issues. The registration of new shares is subject to the general restriction set out in paragraph 4 of the
Articles of Association, which stipulates that shareholders are entered in the share register with voting rights only
if they declare expressly that they have acquired the shares in their own name and for their own account.
There is no authorized capital.
Changes in capital
The Extraordinary General Meeting of Forbo Holding Ltd on November 5, 2012 decided, based on the audit­report of an accredited auditor, to reduce the ordinary share capital of the company by CHF 25,000 from
CHF 250,000 to CHF 225,000 by extinguishing 250,000 shares with a par value each of CHF 0.10. It was further
decided to amend the Articles of Association accordingly.
The Ordinary General Meeting of Forbo Holding Ltd on April 29, 2011 decided, based on the audit report of an
accredited auditor, to reduce the ordinary share capital of the company by CHF 21,315.20 from CHF 271,315.20
to CHF 250,000 by cancelling 213,152 shares with a par value each of CHF 0.10. It was further decided to amend
the Articles of Association accordingly.
No changes to the capital of Forbo Holding Ltd were made in 2010.
Participation certificates and ‘Genussscheine’ (non-voting equity securities)
Forbo Holding Ltd has issued neither participation certificates nor non-voting equity securities.
Limitations on transferability and nominee registrations
Forbo Holding Ltd does not have any percentage limitations on voting rights. The Board of Directors may only
refuse to register stock in the share register if the purchaser of the stock does not expressly declare at the com­pany’s request that he has acquired the shares in his own name and for his own account.
Pursuant to paragraph 4 of the Articles of Association, nominees may be entered in the share register with voting
rights for up to a maximum of 0.3% of the registered share capital entered in the Commercial Register. Over andabove this limit, nominees are only entered provided the name, address and shareholding of those persons aredisclosed for whose account the nominee holds a total of 0.3% or more of the registered share capital entered in
the Commercial Register.
Resolutions on the amendment or abrogation of the clause on the registration of registered shares require amajority of two-thirds of the votes represented at the General Meeting and the absolute majority of the parvalue of the shares represented.
No statutory privileges exist and there is no restriction on the transferability of the shares of Forbo Holding Ltd.
Convertible bonds and warrants/options
Forbo Holding Ltd has no outstanding convertible bonds nor has it issued any marketable warrants/options.
­Information on the option program available to the Executive Board can be found on page 67, as well as on
pages 109 and 110 of this Annual Report.

59

Board of Directors
Members of the Board of Directors
The cutoff date for the following information is December 31, 2012.
With the exception of This E. Schneider, Delegate of the Board of Directors and CEO, none of the members of
the Board of Directors listed below has or has had any operational management tasks for Forbo Holding Ltd or its
Group companies. With the exception of This E. Schneider, none of the members of the Board of Directors sat on
the Executive Board of Forbo Holding Ltd or the management of its Group companies in the three business years
preceding the period under review. There are no essential business relationships between the members of theBoard of Directors and Forbo Holding Ltd or its Group companies.
Dr. Albert Gnägi, Chairman
Albert Gnägi, born in 1944, is a Swiss citizen. He studied law at the Universities of Zurich and Rome and holds a
doctorate in law (Dr. iur.). He practices law in Zurich, specializing in commercial, company, and inheritance law.
He was Chairman of the Board of Selecta Group from the IPO in 1997 until the takeover by the British company
Compass Group in early 2001. From 1982 to 1997, he was a member and Chairman of the Board of Directorsof Immuno International AG, a manufacturer of biological pharmaceuticals which went public in Zurich in 1989.
Albert Gnägi has been a member of the Board of Trustees of the Sanitas Hospital in Kilchberg since 1980 and was
its Chairman until 2010. He has been Chairman of the Board of Directors of SAM Group Holding AG, Zurich, since2007. He holds additional board memberships in other companies and foundations. He has been Chairman of
the Board of Directors of Forbo Holding Ltd since March 2005.
Michael Pieper, Vice Chairman
Michael Pieper, born in 1946, is a Swiss citizen. Michael Pieper took a degree in economics (lic. oec. HSG) at
the University of St. Gallen. He has been with the Franke Artemis Group since 1988 and its owner and CEO since1989. He is a member of the Board of Directors of Hero AG, advalTech Holding AG, Berenberg Bank (Schweiz) AG,
Autoneum Holding AG, and Rieter Holding AG. He was first elected to the Board of Directors of Forbo Holding Ltd
in 2000.
This E. Schneider, Delegate and CEO
For the curriculum vitae of This E. Schneider, please see page 45 of this report.
Dr. Peter AltorferPeter Altorfer, born in 1953, is a Swiss citizen. He studied law at the University of Zurich and holds a doctorate
in law (Dr. iur.). He attended the PED program at the IMD, Lausanne. Until 1988, he worked at Bank Leu AG
and subsequently joined the law firm Wenger & Vieli in Zurich, where he is now a partner, specializing in bankand company law. Peter Altorfer is a member of the Board of Directors of various companies, including Huber +Suhner AG in Herisau, agta record ag in Fehraltorf, Abegg Holding AG in Zurich, Altin AG in Baar, Werner Abegg
Fonds in Zurich and of several private and foreign banks and unlisted investment companies in Switzerland. He
has been a member of the Board of Directors of Forbo Holding Ltd since March 2005.
Dr. Reto Müller
Reto Müller, born in 1951, is a Swiss citizen. He took a first degree in economics and completed his doctorate(Dr. oec. HSG) at the University of St. Gallen. He also completed the Stanford Executive Program and additional
training at IMD, INSEAD, and the Harvard Business School. He is a founding partner of the Helbling Group, forwhich he has worked since 1984, from 2000 to 2011 as Chairman of the Board and CEO. In July 2011, he was­appointed full-time Chairman of the Board of Helbling Holding AG. Between 2002 and 2010, Reto Müller was

60

Forbo Annual Report 2012 – Corporate governance reporte­ ither a member or Chairman of the Zurich Regional Economic Advisory Board (Zurich) of the Swiss National
Bank. He has been a member of the Council of SWISSMEM since 2008 and he holds additional board member­ships in other companies. He became a member of the Board of Directors of Forbo Holding Ltd in 2011.
Vincent Studer
Vincent Studer, born in 1962, is a Swiss citizen. He completed the Advanced School of Economics and Business
Administration in Berne and trained as a Swiss certified public accountant. In addition, he has attended various
national and international training courses. From 1991 to 2008, Vincent Studer worked at Ernst & Young AG in
Berne as an external auditor and was head auditor for the statements of national and international companies
in various industries. In 2001 he was appointed a partner in the area of auditing. Since 2008 he has been a partnerand member of the management of the accountancy and auditing firm T + R AG, Gümligen/Berne, where heheads the Auditing business unit. Vincent Studer is a member of the Board of Directors of Bank EEK AG in Berneand holds additional board memberships in other companies and foundations. He has been a member of theBoard of Directors of Forbo Holding Ltd since April 2009.

Board of Directors of Forbo Holding Ltd
at December 31, 2012
First
electedElecteduntil OGM

AFC

HRC

Chairman
Dr. Albert Gnägi
Non-executive director

2005

2013

M

C

Vice Chairman
Michael Pieper
Non-executive director

2000

2013

–

M

2004

2014

–

–

2005

2014

M

M

2011

2015

M

–

2009

2015

C

–

Members
This E. Schneider
Delegate of the Board of Directors and executive director
Dr. Peter Altorfer
Non-executive director
Dr. RETO MÜLLER
Non-executive director
Vincent Studer
Non-executive director
Secretary of the Board
Nicole GRAF-Häfeli
Non-member
OGM: Ordinary General Meeting
AFC: Audit and Finance Committee
HRC: Committee for Human Resources and Remuneration
C: 		 Chair
M: 		 Member

61Elections and terms of office
The members are elected by the General Meeting for a term of three years. A year is defined as the period­between two Ordinary General Meetings. The first term of office after the first election of a member to the Boardof Directors is designed so that every year roughly one-third of all members have to be elected or re-elected.
Members may be re-elected several times. At the Ordinary General Meeting on April 27, 2012, Dr. Reto Müller andVincent Studer were re-elected for a three-year term of office in a single vote. Further details on the terms of­office of the other members of the Board of Directors are contained in the table on page 60. In accordance with
the Organizational Regulations of Forbo Holding Ltd, members who have reached the age of 70 resign from theBoard of Directors at the Ordinary General Meeting of the following year. The average age of the incumbent
members of the Board is 61. In determining the composition of the Board of Directors, importance is ­attachedto the election of independent individuals with international experience in industrial companies as well as in thefinancial and consultancy sectors.
Internal organizational structure
The allocation of tasks within the Board of Directors and the composition of the Board committees are shown in
the table on page 60.
Decisions are as a general rule taken by the full Board of Directors. The Board constitutes two standing commit­
tees from its own ranks – the Audit and Finance Committee (AFC) and the Committee for Human Resources andRemuneration (HRC) – to deal with clearly defined subject areas of overriding importance. These two committees
have mainly advisory and control functions. In addition, the HRC is empowered to determine the compensation
paid to members of the Executive Board. The compensation of the Delegate of the Board of Directors and CEO isdetermined by the full Board of Directors. The members of these two committees are elected by the Board of
Directors on an annual basis and can be dismissed at any time.
As a rule, the Chairman of the Board of the Directors chairs the meetings of the Board and the General Meeting.
He plans and conducts the meetings of the Board and the General Meeting. The meetings of the Board and therelevant items on the agenda are prepared by the Chairman in consultation with the CEO. The Chairman moni­
tors the execution of the measures adopted by the Board and is in regular contact with the CEO for this purpose.
He is the direct superior of the CEO. In addition, the Chairman, in consultation with the CEO, represents the Board
vis-à-vis the public, the authorities, and the shareholders.
The Vice Chairman is tasked with deputizing for the Chairman should the latter be prevented from attending
for any reason whatsoever. In accordance with the Organizational Regulations and actual practice, the Vice Chair­
man has no further duties.
The Delegate of the Board of Directors is also CEO and as such is responsible for the operational management of
the company and for the tasks delegated to him by the Board of Directors. The CFO, the Head Corporate Centerand the Executive Vice Presidents of the two divisions report to him for this function.
The Chairman, Vice Chairman, and Delegate (CEO) are elected by the Board of Directors.
The Board of Directors meets on being convened by the Chairman as often as business requires but at least fourtimes a year. When the Board is convened, the items on the agenda must be announced at least five working days
before the day of the meeting. This notification period may be shortened in urgent cases. In 2012, the Board of
Directors met seven times, the meetings usually lasting a whole day.

62

Forbo Annual Report 2012 – Corporate governance report

After mutual consultation, the Chairman and the CEO may invite members of the Executive Board or other senior
employees to attend Board meetings for individual items. Regular use is made of this option. External consultants
participate in the meetings of the Board of Directors, the AFC or the HRC only in exceptional circumstances todeal with particular items. As a rule, however, the meetings are held without external consultants.
Audit and Finance Committee
The Audit and Finance Committee (AFC) advises the Board of Directors in respect of its duties on behalf of thecompany in the areas of financial reporting, the accounting standards and systems used, and decisions withsignificant financial implications. The AFC monitors the activities of the internal auditors and the external audi­
tors. Moreover, it establishes the audit program of the internal auditors and proposes to the Board of Directors the
choice of the external auditors for the attention of the General Meeting. The CEO, CFO, and Head Corporate
Center are regularly requested to attend meetings in an advisory capacity, while the internal and external audi­
tors may attend on special invitation.
The AFC convenes as often as business requires, but at least twice a year. In the 2012 business year, four meetings
were held, each lasting about half a day. The external auditors were present for some items on the agenda of the
AFC’s meeting on the financial statements, while the Ernst & Young representatives responsible for internal audit­
ing attended two meetings held to discuss the internal audit reports.
Committee for Human Resources and Remuneration
The Committee for Human Resources and Remuneration (HRC) advises the Board of Directors in respect of its
human resources duties on behalf of the Group, in particular as regards the Board itself and senior management
personnel. The HRC prepares proposals for the attention of the Board of Directors regarding the selection of themembers of the Board and of the CEO, and it assesses and approves the proposals of the CEO regarding theemployment of the Executive Board members. It prepares recommendations for the Board of Directors regarding
the compensation of the Board, the Chairman, the Committee members, and the CEO. The CEO is regularly­involved in an advisory capacity. Agenda items and matters affecting the function or the person of the CEO are
deliberated in his absence.
The HRC convenes as often as business requires. In the 2012 business year, two meetings were held, each lasting
about half a day.
Areas of responsibility
The Board of Directors bears ultimate responsibility for the management of Forbo Holding Ltd. The main dutiesof the Board are the following non-transferable and inalienable tasks pursuant to the Swiss Code of Obligations
and the Articles of Association:–– ultimate management of the company and issuing the necessary directives–– defining the organization–– organization of accounting, financial controlling, and financial planning–– appointment and dismissal of persons entrusted with the management of the company–– preparation of the Annual Report and of the General Meeting and implementation of its resolutions–– notification of the court in the event of over indebtedness

63

The Board of Directors bears ultimate responsibility for supervising and monitoring the management of thecompany and is responsible for the corporate strategy. It issues guidelines for business policy and is regularly
briefed on the current state of business.
Business to be dealt with by the Board of Directors is regularly submitted in advance to the AFC, HRC, ad hoc
committees or individual members, depending on the subject, for review or an opinion. With the exception of
its non-transferable and inalienable tasks, the Board of Directors may transfer tasks and responsibilities in full or inpart to individual members of the Board or to third parties.
The Board of Directors is empowered to take decisions on all matters which are not reserved or transferred to theGeneral Meeting or another body of Forbo by law, the Articles of Association or regulations.
Management of the company has been delegated entirely to the CEO. Accordingly, the CEO is responsible for theoperational management of the Group.
In carrying out his tasks, the CEO is supported by the members of the Executive Board, who report to him. The
Executive Board comprises the CEO, CFO, Head Corporate Center, and the Executive Vice Presidents of the twodivisions. It is responsible for the long-term success and market-driven management of the Forbo Group. This
involves preparing the bases for decision-making for the Board of Directors regarding:–– corporate strategy, corporate targets, business policy, medium-term plans, and budgets–– corporate organization–– organization of accounting, financial controlling, and financial planning–– financing and treasury principles–– human resources and compensation policy
The members of the Executive Board are responsible for their particular area of activity and also bear co-respon­
sibility for safeguarding the interests of the Group and achieving the financial Group result.
Information and control instruments vis-à-vis the Executive Board
The Executive Board meets as often as business requires, normally once a month. In the 2012 business year,
eleven meetings were held, each lasting from half a day to a full day.
At the meetings of the Board of Directors, any member may request information about all matters concerning
the Forbo Group. Outside the meetings, such requests for information are to be addressed to the Chairman. The
CEO and the other members of the Executive Board inform the Board of Directors at each regular meeting about
the current state of business, important business events, and significant deviations from the budget.
The Chairmen of the AFC and HRC report at the Board meetings on the activities of their committees and express
the opinions and recommendations of the AFC or HRC on the business items on which decisions are to be taken.
Each member of the Board of Directors has the right to inspect the minutes of the AFC and HRC meetings. The
Executive Board reports to the AFC through the CFO and the Head Corporate Center in consultation with theCEO; it reports to the HRC through the CEO.

64

Forbo Annual Report 2012 – Corporate governance report

The Board is also regularly briefed outside meetings about events and challenges facing the Group and the gen­eral performance of the divisions. In addition, the Chairman, Vice Chairman, and CEO are in regular contact when
essential policy issues are involved. For important, particularly urgent events, the CEO informs the Chairman andthe other members of the Board immediately.
The Delegate of the Board, who is at the same time CEO, conducts the meetings of the Executive Board. For­details concerning the participation of members of the Executive Board in meetings of the Board of Directors andits committees, see the sections on internal organization, the AFC, and the HRC on pages 61 and 62.
The Board of Directors furthermore fulfills its supervisory and monitoring obligations by means of financial­reporting and its role in the planning cycle. The internal and external auditors also assist the Board in this task.
Neither the external auditors nor the internal auditors, however, were invited to any meetings of the Board of
Directors in 2012 as there were no special incidents or topics for discussion.
As part of financial reporting, the Board of Directors is informed as a rule once a month in writing about the­company’s current business performance and earnings situation by means of annotated income statements, key
ratios, and deviation analyses.
The Board of Directors is, moreover, involved in the company’s planning cycle. As a rule, the existing strategy
is subjected to a thorough review by the Board of Directors in the first half of the year. The revised strategy isquantified in the three-year medium-term plan, which is approved at mid-year by the Board of Directors. Basedon the medium-term plan, the Board of Directors sets the budget objectives for the coming business year. Thesebudget objectives are the basis for the detailed budget, which is discussed and adopted by the Board of Directors
in the fourth quarter.
The current business year is assessed in a first estimate always at the end of April and in a second estimate at theend of September. On completion of the business year, the extent to which the budget has been reached ischecked and deviations are analyzed. This analysis is used to derive appropriate measures, which are then imple­
mented in the next planning cycle.
Internal auditing is effected by Ernst & Young, which has been commissioned for this purpose. Internal auditing
is administratively subordinated to the Head Corporate Center and is functionally independent. It reports to
the AFC.
The audits are conducted in accordance with an annual plan approved by the AFC. A distinction is made ­between
ordinary and special engagement audits. The latter consist of limited reviews, follow-up reviews, compliance
audits, and other special engagements. Where necessary, the risks and weaknesses identified in these audits areminimized or eliminated by measures adopted by management and are constantly monitored.
In 2012, a total of six internal audits were conducted. The internal audits were restricted to individual businessprocesses. In its review of audited Group companies, Internal Audit included any issues that had been definedin the framework of the internal control system (ICS). Internal audits also involved various compliance reviews
related to these processes. Lastly, additional risks and controls in connection with the above-mentioned businessprocesses were analyzed in the audit. At least one company in each division was audited in the course of the­internal audits.

65

By means of self-assessments and management controls by division management, the implementation and reli­ability of the controls introduced with the ICS were examined to ensure that deviations were identified and thatappropriate corrective measures were implemented.
Risk management
The ongoing and systematic evaluation of current and future risks invariably involves identifying and capitalizingon opportunities. Forbo regards risk management as a managerial and working tool designed, among otherthings, to safeguard the tangible and intangible assets of the company.
Forbo has a risk-based insurance coverage in line with industry practice and has appropriately insured in particu­
lar operational risks such as property damage, business interruption, and liability. The risks specifically in the areasof property damage, business interruption, and liability are examined in the context of periodic risk engineering
reports by external experts. For this purpose, production companies are visited at regular intervals, and compre­
hensive surveys are worked through with local management. Action plans are drawn up and implemented
based on the risks identified. These risk engineering audits have been prepared since 1990.
As regards business risks, Forbo addresses strategic risks as well as market and financial risks. In the area of market
risks, interest and currency risks are monitored centrally and hedged in certain cases. The liquidity and financing
of subsidiaries are also monitored centrally. Please also refer to pages 125 to 129 of the financial report for more
information on this subject.
With regard to the risk management process pursuant to Article 663b section 12 of the Swiss Code of Obligations,the reader is referred to the relevant explanations on page 105 (note 18 ‘Risk assessment’) and on pages 125 to
129 (note 38 ‘Risk assessment and financial risk management’).

Executive Board
Members of the Executive Board, other activities, and vested interests
The members of the Executive Board, their nationality, function, training and professional career as well as otheractivities, and vested interests are set out on pages 45 and 46 of this Annual Report.
Changes on the Executive Board
As a result of the sale of the industrial adhesives activity – including synthetic polymers – the size of the Grouphas been reduced by about a third.
For this reason the Executive Board has also been streamlined. The divisions now report directly to the CEO,and the functions of the CFO and Head Corporate Center have been merged by and large. Tom Kaiser, COO,
Jörg Riboni, CFO, and Daniel Keist, Head Corporate Center, as well as the Head of the divested Bonding Systems
division, Michel Riva, left the company in the course of, respectively during the year under review.
Matthias P. Huenerwadel, who headed the Movement Systems division with great success for seven years, took
over the Flooring Systems division from Jens Schneider on January 1, 2013. Jens Schneider will assume new­duties within the Group. The new Head of Movement Systems is Jean-Michel Wins, and Andreas Spreiter took
over the expanded CFO function as of January 1, 2013.
Management contracts
Forbo Holding Ltd has concluded no management contracts with third parties.

66

Forbo Annual Report 2012 – Corporate governance report

Compensation, shareholdings, and loans
CONTENT AND METHODOLOGY OF DETERMINING THE COMPENSATION
AND THE SHAREHOLDING PROGRAMS
Board of Directors
The amount of compensation paid to the Board of Directors is worked out by the HRC in the spring for the­current year and submitted to the full Board of Directors at its April meeting for approval. In order to determine
the remuneration, the compensation paid to Board members of Forbo Holding Ltd is compared with that paid
to Board members of comparable industrial companies based on information that is available from publicly­accessible sources or is known to Board members from their experience of office in similar companies. Industrial
companies are regarded as comparable if and when they are similar to Forbo in terms of sector, structure, size,and complexity. No external consultants are co-opted for determining the compensation.
The members of the Board of Directors receive a fixed compensation, the amount of which is gradated according
to whether the member is Chairman or a simple member of the Board and whether he is a member of the AFC
or HRC. 40 percent of the consideration is distributed to the Board of Directors as Forbo stock. These shares havea vesting period of three years. The shares are valued by taking the average price in the ten trading days after
distribution of a dividend or repayment of par value. If no dividend is distributed or no repayment of par value ismade, the average price during the first ten trading days in June of the relevant business year applies. Payment
and distribution of the shares takes place in December.
The amount of compensation for each Board member in the year under review, along with the details of thevaluation of the shares, can be found on pages 124 and 145 of the financial report.
Executive Board
The amounts of the fixed compensation and the target bonus for the Executive Board are set by the HRC in thefall for the following year; members of the Executive Board are excluded from the deliberations. In determining
the compensation, the HRC takes into consideration criteria such as function, responsibility, and experience andit compares the compensation paid to Forbo Executive Board members with that paid to executive board mem­bers in comparable industrial companies based on information that is available from publicly accessible sources
or is known to the members from their experience of office in similar companies. Industrial companies are­regarded as comparable which are similar to Forbo in terms of sector, structure, size, and complexity. No external
consultants are co-opted for determining the compensation.
The compensation of the members of the Executive Board consists of a fixed base salary plus a performance-­
related bonus, which is determined in March on completion of the business year, on the basis of individual andcompany target achievement.
The variable component (performance-related bonus) is tied to financial (quantitative) and qualitative targets
which are defined in accordance with the responsibility of the Executive Board member in question. The qualita­
tive targets are geared to the company’s long-term sustainable development and may account for up to 30% of
the total variable component; the remaining portion of the variable component is a function of the achievementof financial (quantitative) targets. Depending on the function of the Executive Board member in question, these
may be Group and/or divisional objectives and refer in particular to net sales, EBITDA, EBIT, current assets, and net

67

income. The main financial (quantitative) targets for Executive Board members who are in charge of a division are
net sales, EBITDA, EBIT, and the net current assets of the division, as well as EBITDA and EBIT at Group level. The
main financial (quantitative) targets of Executive Board members with corporate functions are consolidated net
sales, EBITDA, EBIT, and Group profit as well as net current assets of the Group. The variable component can be a
maximum of 125% of the fixed compensation, depending on the individual’s target achievement.
The bonus payment is linked to the Management Investment Plan (MIP), which was introduced in 2006 and­revised in 2012. According to this plan, at least 50% of the annual bonus of Executive Board members is paid
into the MIP. Under the previous plan, 25% of the payments were invested in options and 75% in shares of Forbo
Holding Ltd. The shares and options were vested for a period of three years, and the lifetime of the options wasfive years. As can be seen from the table below, the options issued in connection with the MIP come to maturity
no later than April 21, 2017. Following the revision of the MIP, the sums paid into it will be fully invested in sharesof Forbo Holding Ltd as of January 1, 2013. These shares will also be vested for a period of three years.
Of special note with regard to the options issued before the revision of the MIP is the treatment of these optionsin the event of termination of the employment contract, disability or retirement. If notice is given terminating theemployment contract during the vesting period, the MIP participants may either buy back the options (the repur­
chase price then corresponds to the difference between the strike price of the option and the average price ofthe shares during the last five trading days before the employment contract was terminated) or they may keep
the options and sell or exercise them after the vesting period during their remaining lifetime. In the event of dis­ability or retirement (including early retirement), the options – regardless of whether or not they are still subject
to a vesting period – may be sold during the entire remaining period to maturity from the moment the disabilityor retirement begins.
As of the balance-sheet date of December 31, 2012, the Executive Board held the following options:

Allocation
2008
2010
2011
2012

No. ofregisteredshares
3,888
2,696
7,112
6,551

Term
19.03.2008 – 19.03.2013
15.03.2010 – 16.03.2015
01.04.2011 – 02.04.2016
20.04.2012 – 21.04.2017

Vested until
19.03.2011
15.03.2013
01.04.2014
20.04.2015

Subscription ratio
1:1
1:1
1:1
1:1

Strike price (CHF)
822.00434.75733.25616.33

The amount of the compensation for the Executive Board in the year under review, along with the details of thevaluation and distribution of the shares and options, can be found on pages 124 and 145 of the financial report.
This compensation consists of the base salary, a performance-related bonus, private use of the company car,employer contributions to the pension funds and to AHV/ALV (old-age and unemployment insurance), and­accident and company sick payment insurance.
No severance payments have been agreed with Executive Board members.

68

Forbo Annual Report 2012 – Corporate governance report

Delegate of the Board of Directors and CEO
The Delegate of the Board of Directors and CEO has a separate compensation model which is independent ofthat of the Board of Directors and Executive Board; he is also not a participant in the Management Investment
Plan (MIP).
With effect from January 2009, the employment contract with the Delegate of the Board of Directors and CEO
was extended until April 30, 2013. Compensation is being paid mainly in stock. These shares are vested until­December 31, 2013. The modalities are similar to a very large extent to the provisions of the first contract. In­addition to the share package, the Delegate of the Board of Directors and CEO draws an annual cash compensa­
tion, which is used for settlement of employee contributions to the pension fund and to social security. With theshare package and the cash remuneration, all compensations such as bonuses, inflation, adjustments, options,etc. are settled. No severance payment was agreed.
The employment contract with the Delegate of the Board of Directors and CEO, which ends on April 30, 2013, wasextended until December 31, 2016. The bulk of the compensation will again be paid in vested shares which havea vesting period of three, four, and five years respectively, and in a cash payment for taxes and for employee­contributions to social security. The share package and the cash remuneration are deemed to cover all compen­
sations such as bonuses, options, salary adjustments, inflation, etc. This share package may not be either pledged
or assigned. No severance payment or compensation in the event of a change of control was agreed.
The relevant figures for this compensation model are found on pages 124 and 145 of the financial report.

Shareholders’ participation
Voting right restriction and representation
The registration of shares with voting rights in the share register requires the consent of the Board of Directors.
Such consent may be withheld if the purchaser does not expressly declare that he has acquired and is holding
the shares in his own name and for his own account. Pursuant to the Articles of Association, nominees may beentered in the share register with voting rights for up to a maximum of 0.3% of the registered share capital­entered in the Commercial Register. The restriction also applies to shares that are subscribed or acquired throughexercise of a subscription, option or convertible right. Resolutions on the amendment or abrogation of the clauseon the registration of registered shares require a majority of two-thirds of the votes represented at the General
Meeting and the absolute majority of the par value of the shares represented.
Deviating from Article 689, Paragraph 2, Swiss Code of Obligations, shareholders who are unable to attend theGeneral Meeting in person may not be represented by any third party of their choosing. They may only be repre­
sented by a member of a corporate body of the company, the independent proxy or another shareholder who isregistered in the share register.
Statutory quorums
Pursuant to paragraph 13 of the Articles of Association, resolutions on the amendment or abrogation of the­provisions regarding the moving of the company’s domicile, conversion of registered shares into bearer shares,
registration of registered shares, representation of shares at the General Meeting, the dissolution or merger of thecompany, and amendment of paragraph13 section 4 of the Articles of Association require the approval of twothirds of the votes represented at the General Meeting and the absolute majority of the par value of the shares
represented.

69

Convening of the General Meeting
The General Meeting is convened in accordance with the statutory provisions.
AgendaShareholders who represent shares with a par value of at least 1% of the share capital may request that an item
be placed on the agenda. This request must be communicated to the Board of Directors in writing, indicating the
proposals, at least 45 days before the date of the General Meeting.
Entry in the share register
Pursuant to the Articles of Association, shareholders’ rights of participation and representation at the General
Meeting are determined by the status of the share register on the fourth day before the General Meeting.

Changes in control and defense measures
Duty to make an offer
The Articles of Association of Forbo Holding Ltd do not contain an opting-up clause or an opting-out clausepursuant to Article 32 and 22 SESTA. However, as regards the determination of the minimum price, the Articles of
Association deviate from Article 32, paragraph 4 SESTA in that, in the event of a compulsory offer, the offer pricemust at least correspond to the share price and may not be lower than the highest price which the bidder paidin the last twelve months for shares of the company.
Clause on changes of control
As per year-end 2012, no clauses on changes of control existed in agreements or plans involving members of theBoard of Directors, the Executive Board or other members of management.

Auditors
Duration of the mandate and term of office of the head auditor
PricewaterhouseCoopers has been the Forbo Group’s auditors since 1987. The predecessor company of Price­waterhouseCoopers had been Forbo’s auditors since 1928. The auditors are elected every year by the Ordinary
General Meeting on a proposal by the Board of Directors. As the Auditor in Charge has to be changed at least
every seven years, Daniel Ketterer took over the function of Auditor in Charge as of the 2009 business year.
Auditing fees
The auditing fees levied by the Group’s auditors for auditing the consolidated financial statements, including thestatutory audit of the individual financial statements of the holding company and the consolidated subsidiaries,
amounted to CHF 0.9 million in the year under review.

70

Forbo Annual Report 2012 – Corporate governance report

Additional fees
The additional consultancy fees that were invoiced by the auditing company amounted to CHF 0.9 million in
2012. These fees consist in the main of tax consulting work in connection with a restructuring in North America(CHF 0.3 million), the sale of the industrial adhesives activity, including synthetic polymers (CHF 0.2 million), andgeneral tax advice (CHF 0.4 million).
Information instruments of the external auditors
The external auditors prepare for the CEO, the CFO and the Head Corporate Center an annual management letteron their work and the results of their audit at Group level in the year under review. The key points are submitted
to the Board of Directors in the form of a comprehensive report. The external auditors also prepare management
letters on the subsidiaries they have audited. The AFC assesses and evaluates the proposals and statements it hasreceived and appraises the corrective measures taken by management. At the AFC’s invitation, representatives ofthe external auditors attend the AFC meetings in an advisory capacity. The Chairman of the AFC reports on theactivities of the AFC and its assessment of the external auditors at the meetings of the Board of Directors. Any
member of the Board of Directors may inspect the minutes of the AFC meetings.
At its meetings, the AFC assesses the performance and fees of the external auditors as well as their independence
in both their auditing and their non-auditing capacities. This evaluation is based on the documents prepared by
the external auditors and the discussions held with the external auditors in the meetings. It also draws on theevaluation of the CFO, who obtains the opinion of local management with regard to the audit work for the sub­sidiaries. The criteria for the evaluation of the external auditors are, in particular, their technical and operational
competency, their independence and objectivity, delivery of the audit reports on time, scope and focus of theaudits, and the ability to provide effective and practical recommendations. This assessment by the AFC forms thebasis for the proposal made by the Board of Directors to the Ordinary General Meeting regarding the choice ofthe external auditors.

Information policy
Transparency for investors
Forbo provides objective and periodic communication with shareholders, the capital market, the media, and the
public by reporting in timely fashion on business trends and activities relevant to the company. Both the Chair­man of the Board of Directors and the CEO can be contacted directly for such information.
Shareholders receive summary reports on the business year as well as half-year reports. The Annual Report, likeall other published documents, is available in printed form as well as on the Internet at www.forbo.com. The
General Meeting is an additional source of information. Periodic publication of media releases, the annual media
and analysts’ conference, as well as road shows are further information tools for the media and the capital market.

71

Ad hoc communication
The push and pull links for the dissemination of ad hoc releases in accordance with the guideline on ad hoc
publicity of the SIX Swiss Exchange are available at the following addresses:
www.forbo.com � Medien Center � Medienmitteilungen � Subscription Service
www.forbo.com � Media Center � Media Releases � Subscription Service
Communications to registered shareholders are sent by ordinary mail to the addresses stated in the share register.
The company’s official publication is the Swiss Commercial Gazette.
A financial calendar with the key dates can be found on page 8 of this Annual Report. Further information on the
Forbo share is printed on pages 52 and 53 of this Annual Report.
Publications may be ordered by e-mail, fax or telephone.
E-mail: communications@forbo.com
Phone + 41 58 787 25 25
Fax + 41 58 787 20 25
The contact address for Investor Relations is:
Forbo International SA
Urs Christen, Head Corporate Development & Investor Relations
Lindenstrasse 8
P.O. Box 1041
CH-6341 Baar
Phone + 41 58 787 25 25
The contact address for press information is:
Forbo International SA
Karin Marti, Head Corporate Communications
Lindenstrasse 8
P.O. Box 1041
CH-6341 Baar
Phone + 41 58 787 25 25

Financial report

Forbo Group financial reportConsolidated balance sheetConsolidated income statementComprehensive income statement
Consolidated shareholders’ equity
Consolidated cash flow statementNotes – accounting principles
Notes
Group companies
Report of the statutory auditor
Consolidated income statements 2008 – 2012
Consolidated balance sheets 2008 – 2012

73
74
75
76
77
78
79
93
130
134
136
137

Financial statements for Forbo Holding Ltd
Income statement
Balance sheet
Notes to the financial statements
Proposal for appropriation of available earnings
Report of the statutory auditor

139
140
141
142
149
150

74

Forbo Annual Report 2012 – Consolidated financial statements

Consolidated balance sheet

Assets
CHF m
Non-current assets
Property, plant, and equipment
Intangible assets
Deferred tax assets
Investments in associates and other non-current assets
Current assets
Assets held for sale
Inventories
Trade receivables
Other receivables
Deferred income and prepaid charges
Other current financial instruments
Cash and cash equivalents
Total assets
Shareholders’ equity and liabilities
CHF m
Shareholders’ equity
Share capital
Treasury shares
Reserves and retained earnings
Non-current liabilities
Non-current financial debt
Employee benefit obligations
Non-current provisions
Deferred tax liabilities
Current liabilities
Trade payables
Current provisions
Accrued expenses
Current financial debt
Current tax liabilities
Other current liabilities
Liabilities directly associated with assets held for sale
Total liabilities
Total shareholders’ equity and liabilities

The accompanying notes are an integral part of the consolidated financial statements.

31.12.2012

31.12.2011

530.9
355.0
149.2
26.5
0.2
803.0

536.4
359.8
153.5
21.9
1.2
965.5
361.4
219.6
159.2
24.8
8.0
0.1
192.4
1,501.9

Note

16
17
14
18
32
19
20

21
22

218.6
150.2
28.9
11.9
142.1
251.3
1,333.9

Note

24

26
27
28
14
29
28
30
31

817.4
0.3
– 0.1
817.2
137.4
2.6
54.8
35.8
44.2
379.1
84.7
16.4
96.5
132.5
26.6
22.4

32
516.5
1,333.9

815.3
0.3
– 0.1
815.1
276.2
144.5
42.7
39.5
49.5
410.4
86.1
18.3
106.7
47.5
27.6
26.6
97.6
686.6
1,501.9

Forbo Annual Report 2012 – Consolidated financial statements

75

Consolidated income statement

2012

2011

1,201.1– 763.2
437.9– 16.3– 194.1– 103.4– 25.3
63.8
162.6
5.7
– 11.2157.1– 33.0
124.1
73.1
197.2

1,203.8– 745.1
458.7– 16.0– 192.5– 96.6– 17.8
13.1
148.9
30.1
– 11.7167.3– 29.9
137.4
9.1
146.5

15
15

89.08
89.04

62.78
62.61

Earnings per share from continuing operations
CHF
Basic earnings per share
Diluted earnings per share

15
15

56.06
56.03

58.88
58.72

Earnings per share from discontinued operations
CHF
Basic earnings per share
Diluted earnings per share

15
15

33.02
33.01

3.90
3.89

CHF m
Continuing operations
Net sales
Cost of goods sold
Gross profit
Development costs
Marketing and distribution costs
Administrative costs
Other operating expenses
Other operating income
Operating profit
Financial income
Financial expenses
Group profit before taxes
Income taxes
Group profit for the year from continuing operations
Group profit for the year from discontinued operations after taxes
Group profit for the year
Earnings per share, total
CHF
Basic earnings per share
Diluted earnings per share

The accompanying notes are an integral part of the consolidated financial statements.

Note

6

7
8
9
10
12
13
14
32

Note

76

Forbo Annual Report 2012 – Consolidated financial statements

Comprehensive income statement

CHF mGroup profit for the year
Components of other comprehensive income:Translation differences
Translation differences reclassified to the income statement
Proceeds from the sale of financial instruments available-for-sale;reclassification to the income statement
Changes in revaluation reserves for property, plant, and equipment
Actuarial loss (–)/gain on pension liabilities
Fair value adjustments of cash flow hedges
Other comprehensive income for the year, net of tax
Total comprehensive income

The items under ‘Other comprehensive income forthe year, net of tax’ include income tax effects which
are described in note 14 ‘Income taxes’.

2012

2011

197.2

146.5

– 6.9
41.2

– 6.2
– 18.6– 57.7
1.7– 21.7175.5

The accompanying notes are an integral part of theconsolidated financial statements.

– 1.2
8.6
– 1.7
– 19.1127.4

Forbo Annual Report 2012 – Consolidated financial statements

77

Consolidated shareholders’ equity

2012

CHF m
December 12, 2011
Group profit for the year
Other comprehensive
income for the year, net of tax
Total comprehensive income
Change in scope of consolidation
Share-based payments
Treasury shares
Dividend payment
December 31, 2012

Share
capitalTreasuryshares

0.3

– 0.1

0.3

– 0.1

Reserves

978.2
197.2
– 57.7

Revaluation
reserve

Assetsavailablefor-saleReserves
fromcash flow
hedgesTranslationdifferences

128.0

0.0

– 1.7

– 289.4

1.7

34.3

1.7

34.3
2.7

139.5
14.3
2.0
– 147.9– 27.5
958.6

111.0

0.0

0.0

– 252.4

Reserves

Revaluation
reserve

Assetsavailablefor-saleReserves
fromcash flow
hedgesTranslationdifferences

864.9
146.5
8.6

129.2

18.6

0.0

– 283.2– 1.2– 18.6

– 1.7

– 6.2

155.1
5.0
– 18.5– 28.3
978.2

– 1.2

– 18.6

– 1.7

– 6.2

128.0

0.0

– 1.7

– 289.4– 17.0

Total

815.3
197.2
– 21.7175.5
2.0– 147.9– 27.5
817.4

2011

CHF m
As at December 31, 2010
Group profit for the year
Other comprehensive
income for the year, net of tax
Total comprehensive income
Share-based payments
Treasury shares
Dividend payment
December 31, 2011

SharecapitalTreasuryshares

0.3

– 0.1

0.0
0.3

– 0.1

The accompanying notes are an integral part of the consolidated financial statements.

Total

729.7
146.5
– 19.1127.4
5.0– 18.5– 28.3815.3

78

Forbo Annual Report 2012 – Consolidated financial statements

Consolidated cash flow statement

Cash flow from operating activities
CHF mGroup profit for the year
Tax expense
Group profit before taxes
Financial result
Depreciation and impairment of property, plant, and equipment
Amortization and impairment of intangible assets
Profit from the sale of non-current assets
Profit from disposal of discontinued operations
Share-based payments
Income tax paid
Decrease (–)/increase in provisions and employee benefit obligations
Increase in other current assets
Decrease/increase (–) in net operating working capital1)
Net cash flow from operating activities
Cash flow from investing activities
CHF m
Purchase of business operations net of cash acquired
Sale of Group companies net of cash disposed ofPurchase of non-current assets
Proceeds from the disposal of non-current assets
Decline in current financial liabilities
Purchase of current financial instruments
Sale of current financial instruments
Interest received2
Net cash flow from investing activities

2012

2011

197.2
33.0
230.2
5.5
36.1
7.3

146.5
29.8
176.3
– 17.5
44.8
4.9
– 0.1

– 73.1
2.0– 30.5– 68.4– 16.713.9
106.3– 12.4368.0– 32.70.3

5.2– 29.813.1– 1.3– 54.1141.5– 39.70.4
4.4– 141.6
1.9
183.5

53.0
1.0
19.1

Cash flow from financing activities
CHF m
Repayment of current financial debt
Repayment of non-current financial debt
Interest paid
Purchase of treasury shares
Proceeds from sale of treasury shares
Dividend payment
Net cash flow from financing activities– 46.2– 12.7– 8.8– 162.0
13.1– 27.5– 244.1– 64.6– 6.0– 10.3– 42.228.7– 28.3– 122.7

Change in cash and cash equivalents
CHF m
Increase in cash and cash equivalents
Translation differences on cash and cash equivalents
Total cash and cash equivalents at beginning of year
Total cash and cash equivalents at year-end

45.7
0.3
205.3
251.3

37.9
– 4.0
171.4
205.3

Total cash and cash equivalents discontinued operations
Total cash and cash equivalents continuing operations
Total cash and cash equivalents at year-end

251.3
251.3

12.9
192.4
205.3

1) Net operating working capital includes the items ‘Trade receivables’, ‘Inventories’, and ‘Trade payables’.
2) In the year under review, interest received is shown for the first time as cash flow from investing activities. The information for the previous year has been restated accordingly.

The accompanying notes are an integral part of the consolidated financial statements.

Forbo Annual Report 2012 – Consolidated financial statements

79

Notes – accounting principles

1 General information
Forbo Holding Ltd (the company) and its subsidiaries(together with the company constituting the Group)
manufacture floorings, construction adhesives, anddrive and conveyor technology. The Group has a global network of locations with production and distri­bution as well as pure sales companies.
The company is a public limited company under Swisslaw, domiciled in Baar, Switzerland. It is listed on the SIX
Swiss Exchange.
These financial statements were approved by the Boardof Directors on March 13, 2013 and released for pub­lication on March 19, 2013. The report is subject to­approval by the Ordinary General Meeting of April 26,
2013.
2 Summary of significant accounting policies
The principal accounting policies applied in the prep­
aration of these consolidated financial statements are
set out below. These policies have been consistently
applied to all the years presented, unless otherwise
stated.
Basis of preparation
The consolidated financial statements of Forbo Holding Ltd were prepared in accordance with the Inter­national Financial Reporting Standards (IFRS) and incompliance with Swiss law. They were drawn up on
the basis of the audited financial statements of thesubsidiaries prepared according to uniform corporate
accounting policies. The reporting date for all Group
companies is December 31.

The consolidated statements were prepared in accordance with the principle of historical purchaseand production costs with the exception of availablefor-sale financial assets (securities), non-consolidated
investments, land and buildings, and derivative financial instruments, which are measured at fair value. The
preparation of the consolidated financial statements
requires management to make estimates and assumptions that can affect reported revenues, expenses, assets, liabilities, and contingent assets and ­liabilities atthe date of the financial statements. If the estimatesand assumptions made by management at the dateof the financial statements to the best of their knowledge differ from the actual circumstances, the original estimates and assumptions will be adjusted in
the reporting year in which the circumstances havechanged. The comparable data from the consolidated
financial statements of the prior year were, where necessary, ­restated, supplemented, and the presentation
adjusted.
Scope and principles of consolidation
The subsidiaries of Forbo Holding Ltd are all domestic
and foreign companies in which the company holds,
directly or indirectly, more than 50% of voting rights
or in which it bears managerial responsibility for theiroperations and financial policies. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are deconsolidated from thedate that control ceases.

80

Forbo Annual Report 2012 – Consolidated financial statements

The purchase method of accounting is used to account for the acquisition of subsidiaries. The value ofthe transferred consideration in a business combination is recognized at the fair value on the acquisition
date. The consideration includes cash payments andthe fair value of the assets transferred, liabilities incurred or assumed, and equity instruments issued by
the acquirer on the transaction date. Liabilities dependent on future events which are based on agreements on contingent considerations are accounted forat their fair value in the accounting treatment of theacquisition. Directly distributable acquisition costs arereported in the income statement in the period inwhich they are incurred. At the acquisition date, theacquirer recognizes the acquired identifiable assets,­liabilities, and any non-controlling interest in the acquiree. The acquired identifiable assets and liabilities
assumed are recognized at their fair value. Provided
the acquirer does not acquire a 100% share in the acquiree, the non-controlling interest is as a general rule
recognized as the proportionate share of the fair valueof the net assets acquired on a case by case decision,
this interest can be assessed at fair value on the dateof acquisition. Goodwill is the excess of the consider­ation of the business combination and the amount of
the non-controlling interest over the identifiable net
assets assessed at fair value. If the accounting for abusiness combination can be determined only provisionally by the end of the period in which the combination is ­effected, provisional values are used. During
the measurement period, the provisional values areadjusted retroactively. Further assets and liabilities canbe recognized in order to include new information
about facts and circumstances at the acquisition date
which would have influenced the measurement of
the amounts recognized had they been known at thetime. The measurement period does not last morethan twelve months from the date of acquisition.
Goodwill is not written off but is tested for impairment
at least after each reporting date or earlier if there are
any indications of a possible impairment.

Inter-company transactions, balances, and unrealized
gains or losses on transactions between Group companies are eliminated. Accounting policies of subsid­
iaries have been changed, where necessary, to ensure
consistency with the policies adopted by the Group.
Associates are all entities over which the Group has
sig­­nificant influence but not control, generally accom­
panied by a shareholding of between 20% and 50%of the voting rights. Investments in asso­ciates are accounted for using the equity method of accounting
and are initially recognized at cost. The Group’s in­vestments in associates include goodwill identified on­acquisition, net of any accumulated impairment loss.
The Group’s share of its associates’ post-acquisition
profits or losses is recognized in the income statement,
and its share of post-acquisition changes in reserves isrecognized in reserves. The cumulative post-acquisition movements are offset against the carrying amountof the investment. When the Group’s share of losses
in an associate equals or exceeds its interest in theasso­ciate, the Group does not recognize further losses,
unless it has incurred obligations or made paymentson behalf of the associate.
The subsidiaries included in the group of consolidated
companies are listed under ‘Group companies’ (frompage 130 of this report).

Forbo Annual Report 2012 – Consolidated financial statements

Foreign currency translation
The individual companies generally prepare their financial statements in their functional currency, which
generally corresponds to the local currency. The functional currency is the currency of the primary economic environment in which the company operates.
Foreign currency transactions are translated into thefunctional currency using the exchange rates prevailing at the dates of transaction or the dates of valuation
where items are remeasured. Foreign exchange gains
and losses resulting from the settlement of such transactions and from the translation at year-end exchange
rates of monetary assets and liabilities denominatedin foreign currencies are recognized in the income
statement, unless recognized in other comprehensive
income as qualifying cash flow hedges and qualifying net investment hedges. Translation differences on
non-monetary financial assets and liabilities whosechanges in fair value are recognized in income are reported in the income statement. However, translationdifferences on non-monetary financial assets whosechanges in fair value are recognized in comprehensive
income are taken to ‘Other comprehensive income’.

81

The consolidated financial statements are prepared in
Swiss francs. Unless otherwise noted, all sums are stated in millions of Swiss francs (CHF m) and are generallyrounded to one decimal place. The annual statementsof foreign Group companies stated in foreign currencies are translated into Swiss francs as follows: assets
and liabilities at year-end exchange rates; the income
statement and cash flow statement at average exchange rates for the year. Currency translation differences arising from the different translation of balance
sheets and income statements and from equity capitaltransactions are recognized in other comprehensive
income and taken to profit or loss for the period (reclassified) in the event the company is disposed of.
On consolidation, exchange differences arising fromthe translation of net investment in independent foreign operations are recognized in other comprehensive income. The same applies to borrowings and other currency instruments designated as hedges of suchinvestments. When a foreign operation is disposedof, these exchange differences in profit or loss for the­period are transferred to the income statement as partof the gain or loss on sale.
The following exchange rates have been applied forthe most important currencies concerned:
Income statement (averageexchange rates for the year)

Currency
CHF
Euro zone
USA
Great Britain
Japan
China
Sweden

EUR
USD
GBP
JPY
CNY
SEK

1
1
1
100
100
100

Balance sheet(year-end exchange rates)

2012

2011

2012

2011

1.21
0.94
1.49
1.18
14.86
13.85

1.23
0.89
1.42
1.11
13.72
13.66

1.21
0.91
1.47
1.06
14.60
14.01

1.22
0.94
1.46
1.22
14.88
13.66

82

Forbo Annual Report 2012 – Consolidated financial statements

Current and non-current classification
Assets are designated current assets if they are realized or consumed in the Group’s ordinary businesscycle within one year or if they are held for trading
purposes. All other assets are assigned to non-current
assets.
All obligations which the Group intends to settle within the ordinary business cycle using operating cash
flows or which are due within one year of the reporting date are assigned to current liabilities. All otherobligations are assigned to non-current lia­bilities.
Segment information
Segment reporting discloses financial and descriptive
information on the reportable segments. The reportable segments are operating segments and combinations of operating segments that meet specific criteria.
Operating segments are components of a company
for which separate financial information is available
that is regularly reviewed by the chief operating decision-maker concerned in order to determine how resources are to be allocated and performance assessed.
Generally speaking, financial information must be reported on the basis of internal controlling throughwhich the performance of the operating segments is
assessed and decisions are taken on how to allocate
the resources to the operating segments.
The reportable segments apply the same accounting
policies as the Group. The provision of services among
the reportable segments is transacted at arm’s length,
and the prices applied are therefore comparable tothose that would have applied in a transaction with athird party.
Segment result is determined on operating profit level(EBIT). Allocation of interest and taxes to the individual
divisions and Corporate is not appropriate owing to
the highly centralized functions Finance and Tax functions.

Discontinued operations
Discontinued operations are recognized separately if
a component of the Group has either already been discontinued or been classified as held for sale. A com­ponent of the Group is either a separate major line ofbusiness, a geographic area of operations, or is part ofa single coordinated plan to dispose of a separate major line of business or geographic area of operations,or a subsidiary acquired exclusively with a view to resale. A component of the Group can be clearly distinguished from the rest of the Group, both operationallyand for accounting purposes. Discontinued operations
are presented separately in the consolidated income
statement. The prior-year figures affecting the income
statement are adjusted accordingly (as if the operation
had been discontinued at the beginning of the prioryear) and are also presented separately. Associated assets are carried in the balance sheet under ‘Assets held
for sale’ and associated liabilities under ‘Liabilities directly associated with assets held for sale’. In accordance with IFRS 5, however, no adjustment was made to
the prior year for these items. Information associatedwith the discontinued operation is disclosed separately in the notes.
Net sales and revenue recognition
Sales revenue includes the fair value of the consideration received or to be received for the sale of goods
and services as part of ordinary business activity. Sales
revenue is reported net of sales tax, returns, discounts,
and rebates and after elimination of intra-Group sales.
The Group recognizes sales revenue when the amountof the revenue can be reliably determined and when
it is sufficiently likely that the company will derive an
economic benefit. The amount of the revenue can bereliably determined when all contingencies concerning the sale have been settled. The Group makes estimates on the basis of historical data, taking into account features specific to customers, transactions, andagreements. Appropriate provisions are made for expected warranty claims.

Forbo Annual Report 2012 – Consolidated financial statements

Research and development
All research costs are posted directly to the income
statement in the period in which they are incurred.
­Development costs must be capitalized if all the recognition criteria have been met, the research phase canbe clearly distinguished from the development phase,and costs can be clearly allocated to individual project
phases without any overlap. Development expenses
that do not meet these criteria are taken to the income
statement.
Share-based payments
Equity-settled share-based payments to employees
are valued at the fair value of the equity instrument on
the date on which the instruments are granted. The fairvalue of the share options is determined by the BlackScholes model. The anticipated life of the option usedin the model is adjusted on the basis of best estimateswith regard to the effects of non-transferability, restrictions on exercise, and conduct. Further information
on determining the fair value of the share options isprovided in note 25 ‘Employee participation plan’. The
fair value determined on granting equity-settled sharebased payments is recognized in the income statement over the vesting period and is included in personnel expenses.
Income taxes
Income taxes constitute the total of current and deferred income taxes.
Current income taxes are determined on the basis oftaxable profits and the applicable tax laws of the individual countries. They are recognized as an expense in
the accounting period in which the profits are made.
The profit on which taxes are to be paid differs fromthe profit or loss for the year in the income statement
since it excludes expenses and revenues that will only
be taxable or tax-deductible in subsequent years if at
all. The Group’s liability for current income taxes is calculated on the basis of applicable tax rates.

83

Deferred tax liabilities are recognized for temporary
differences between assets and liabilities in the balance sheet, and their tax bases if they will result in taxable income in future. Deferred tax assets are reported
for temporary differences that will result in deductible
amounts in future periods and for tax effects from unused tax losses and tax credits, but only to the extent
as it is probable that sufficient taxable profits will beavailable against which these differences can be offset.
Deferred tax liabilities are not recognized if temporary
differences arise from the initial recognition of goodwill. For temporary differences from the initial recog­
nition of assets or liabilities in a transaction, which is
not a business combination and affects neither taxable­income nor the profit for the year, no deferred taxes arerecognized.
Deferred tax assets and tax liabilities are measured at
the tax rates that are expected to apply in the period inwhich the asset will be realized or the liability will besettled based on enacted rates. Current and deferred
tax assets and liabilities are offset when they arise fromthe same tax reporting group, relate to the same tax
authority, the legal right to offset exists, and they areintended to be settled net or realized simultaneously.
The carrying amounts of the deferred tax assets are­reviewed each year on the reporting date and reduced
if it is no longer probable that sufficient taxable profits
are available to realize the assets either wholly or inpart.
Current and deferred income taxes are recognized as
an income tax benefit or expense in the income statement, with the exception of items posted directly toequity or recognized in other comprehensive income.
In this case, the corresponding tax effect is also to berecognized directly in shareholders’ equity or in othercomprehensive income.
Deferred income tax is recognized on temporary differences arising on investments in subsidiaries and­associates, except where the timing of the reversal of
the temporary difference is controlled by the Groupand it is probable that the temporary difference will
not reverse in the foreseeable future.

84

Forbo Annual Report 2012 – Consolidated financial statements

Property, plant, and equipment
Land and buildings are carried on the balance sheet
at their revaluation amount, which corresponds to thefair value at the date of revaluation less accumulated
depreciation and impairment losses. The revaluations
are conducted regularly, at least every five years, by independent external valuers to ensure that the carrying
amount does not differ materially from the carrying
amounts determined on the basis of the fair value
at the reporting date. All accumulated depreciation is
offset against the gross carrying amounts of the assets
on the revaluation date. The net amount is adjusted
to the revalued amount. All other property, plant, andequipment are reported at cost less accumulated depreciations and recognized impairments.
Subsequent costs, for instance for expansion or replacement investments, are recognized as part of theasset’s costs or as a separate asset only when it is probable that future economic benefits will accrue to theGroup as a result and when the cost of the item can bemeasured reliably. Expenses for repairs and maintenance which do not constitute a significant replacement investment are posted to the income statement
as expenses in the year in which they are incurred.
Increases in the carrying amount arising on revaluationof land and buildings are credited to the revaluation
reserve in shareholders’ equity. This does not apply if
the revaluation reserve for the same assets has been
reduced with an effect on income. In such a case, theincrease is recognized as income up to the amount of
the previous decrease. Decreases that offset previous
increases in the same asset are charged against the­revaluation reserves directly in other comprehensive
income. All further decreases are posted to the income
statement.

Land is not depreciated. Depreciation of other assets is
calculated on the basis of their cost or their revalued
amounts (with the exception of assets under construction) using the straight-line method over theirestimated useful lives. The estimated useful life is usually 33 years for buildings used in operations and 5 to
10 years for plant and equipment. Other operating assets are depreciated over three to ten years. Where
components of larger assets have different useful lives,
they are depreciated as separate items. Useful lives
and ­residual values are reviewed annually at the reporting date, and any necessary changes are taken
into account prospectively.
If the carrying amount of an asset is greater than its
estimated recoverable amount, it is written down immediately to the recoverable amount (see note 16‘Property, plant, and equipment’).
Assets that are held in finance lease arrangements are
depreciated over their estimated useful life in the same
way as assets owned by the company or, if this is
shorter, over the term of the underlying lease agreement.
The profit or loss arising from the sale of property,
plant, and equipment is defined as the difference between the sale proceeds and the carrying amount of
the asset and is recognized in income.
Intangible assets
Goodwill is the excess of the consideration paid or payable of a business combination and the amount of the
non-controlling interest over the identifiable net assets
assessed at fair value. Goodwill derived in a businesscombination is included in ‘Intangible assets’. Goodwill
is tested at least annually for impairment and carried atcost less accumulated impairment losses. Impairment
losses on goodwill may not be reversed. Gains andlosses on the disposal of an entity include the carrying
amount of goodwill relating to the entity that is disposed of.

Forbo Annual Report 2012 – Consolidated financial statements

For the purpose of impairment testing, goodwill is­allocated to cash-generating units. The allocation ismade to those cash-generating units or groups ofcash-generating units that are expected to benefit
from the business combination in which the goodwill
arose.
Trademarks, licenses, customer relationships, and technologies acquired in a business combination are recognized at fair value at the acquisition date. Trademarks carried in the balance sheet with an indefinite
useful life are not subject to amortization but are tested for impairment at least annually. Any impairment
is recognized as an expense in the income statement.
Certain trademarks, licenses, customer relationships,
and technologies have a finite useful life and are carried at cost less accumulated amortization. Amortization is calculated using the straight-line method: trademarks 20 years, customer relations between 5 and 25
years, and technologies 30 years.
Acquired computer software licenses are capitalizedon the basis of the costs incurred to acquire and bringto use the specific software. These costs are amortizedover an estimated useful life of three years.
Development costs that are directly attributable to thedesign and testing of identifiable software products
controlled by the Group generally do not meet the­criteria for intangible assets on the balance sheet.
These costs are recognized as an expense in the period
in which they are incurred. Development costs previously recognized as an expense are not capitalized in a
subsequent period.

85

Impairment of non-financial assets
Assets that have an indefinite useful life, for example
goodwill and certain trademarks, are not subject toregular amortization. They are tested for impairment
at least annually. Assets that are subject to amortization are reviewed for impairment whenever events orchanges in circumstances indicate that the carrying
amount may no longer be recoverable. An impairment
loss is recognized for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposesof assessing impairment, assets are grouped at thelowest levels for which there are separately identifiable
cash flows (cash-generating units). Non-financial assets other than goodwill that have suffered an impairment in the past are reviewed for possible reversal of
the impairment at each reporting date.
Financial assets
CLASSIFICATION
Financial assets are classified in the following categories: financial assets at fair value through profit or loss,
loans and receivables, and financial assets availablefor-sale. The classification depends on the purpose forwhich the financial assets were acquired. Management
determines the classification of its financial assets at
initial recognition.
(a) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss arefinancial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are alsoclassified in this category unless they are designated ashedges. Assets in this category are classified as ‘Other
receivables’.

86

Forbo Annual Report 2012 – Consolidated financial statements(b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are notquoted in an active market. They are included in current assets except for maturities greater than twelve
months after the end of the reporting year, in whichcase they are classified as non-current assets. The
Group’s loans and receivables are reported in the balance sheet under ‘Trade receivables’, ‘Other receivables’,and ‘Cash and cash equivalents’.
(c) Financial assets available-for-sale
Available-for-sale financial assets are non-derivative
financial assets that are either designated in this category or not classified in any of the other categories.
The Group’s available-for-sale financial assets and other assets are reported under ‘Marketable securities’ inthe balance sheet.
RECOGNITION AND MEASUREMENT
Purchases and sales of financial assets are basically recognized as soon as Forbo becomes a contractual party.
In the case of regular purchases or sales (purchases orsales under a contract whose terms require delivery of
the asset within the time frame generally establishedby regulation or convention in the market concerned),the settlement date is relevant for the initial recog­
nition and derecognition. This is the day on which theasset is delivered to or by Forbo. Financial assets notclassified as being at fair value through profit or loss are
initially recognized at fair value plus transaction costs.
Financial assets which are carried at fair value throughprofit or loss are initially recognized at fair value, andtransaction costs are expensed in the income statement. Financial assets are derecognized when therights to receive cash flows from the investments have
expired or have been transferred and the Group has
transferred substantially all risks and rewards incidential to ownership.

Available-for-sale financial assets and assets in the category ‘Financial assets at fair value through profit orloss’ are carried at fair value after their initial recognition. Loans and receivables are carried at amortizedcost using the effective interest method.
Gains or losses arising from financial assets in the category ‘Financial assets at fair value through profit orloss’ are recognized in the income statement in the­period in which they are incurred. Dividend income
from financial assets classified as at fair value throughprofit or loss is recognized in the income statement
when the Group’s right to receive payments is established.
Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognized in other comprehensive income. When securities classified as available-for-sale are sold or impaired,
the accumulated fair value adjustments previously
recognized in other comprehensive income are reclassified in the income statement. Dividends on available-for-sale financial assets are recognized in the income statement when the Group’s right to receive
payments is established. The fair value of listed sharesis determined by the current stock market price.
The Group assesses at the end of each reporting year
whether there is objective evidence that a financial
asset or a group of financial assets is impaired. In thecase of equity investments classified as available-forsale financial assets, a significant or prolonged decline
in the fair value of the equity investments below theircost is also regarded as evidence that the equity investments are impaired. If any such evidence exists
for available-for-sale financial assets, the cumulativeloss – measured as the difference between the acquisition cost and the current fair value, less any previous
impairment losses on that financial asset – is reclassified in the income statement. Impairment losses on
equity instruments recognized in the income statement are not reversed through profit and loss. Impairment testing of trade receivables is described in note
20 ‘Trade receivables’.

Forbo Annual Report 2012 – Consolidated financial statements

Derivative financial instruments
and hedging activities
The Group uses derivative financial instruments solely
to manage financial risks and not for the purpose of
speculation.
Derivatives are initially recognized at the fair value
they are attributed on the date a derivative contract isentered into. This may be positive or negative. Subsequent measurement is also effected at the fair value
applicable on the reporting date. The method of recognizing the resulting gain or loss depends on whether the derivative was designated as a hedging instrument and, if so, the nature of the item being hedged.
The Group designates certain derivatives as either:–– hedges of the exposure to changes in fair value of arecognized asset or liability or an unrecognized firm
commitment (fair value hedge);–– hedges of a particular risk of variability of cash
flows associated with a recognized asset or liability
or a highly probable forecast transaction (cash flow
hedge); or–– hedges of a net investment in a foreign operation(net investment hedge).
The Group documents at the conclusion of the transaction the relationship between the hedging instruments and the hedged items, as well as its risk management objectives and the underlying strategy for
effecting various hedging transactions. The Group also
assesses and documents, both at hedge inception andsubsequently, whether the derivatives that are usedin hedging transactions are likely to be highly effective
in offsetting changes in fair values or cash flows ofhedged items.

87

The fair values of various derivative instruments used
for hedging purposes are disclosed in note 35 ‘Ad­
ditional information on financial instruments’. Movements in the hedging reserve for cash flow hedges arereported in the statement of comprehensive income.
The full fair value of a hedging derivative is classified
as a non-current asset or liability when the remaining
maturity of the hedged item is more than twelve
months after the reporting date, and as a current asset
or non-current liability when the remaining maturity of
the hedged item is less than twelve months. Trading
derivatives are classified as current assets or liabilities if
the remaining maturity on the reporting date is shorter
than 12 months.
(a) Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges of a recognizedasset or a commitment are recorded in the income
statement, together with any changes in the fair valueof the hedged asset or liability that are attributable tothe hedged risk. The Group only uses fair value hedges to hedge the fixed interest risk on borrowings andto hedge currency risks in connection with short-termor medium-term loans. The gain or loss relating to theeffective portion of the hedging instrument is recognized in the income statement under ‘Financial result’.
The gain or loss relating to the ineffective portion isrecognized in the income statement under ’Financial
result’. Changes in the fair value of the hedged underlyings, which are attributable to interest rate risk orcurrency risk, are recognized in the income statement
under ‘Financial income/financial expenses’.
If the hedge no longer meets the criteria for hedge
accounting, and the previously designated underlying transaction is measured using the effective interest method, the required adjustment of the carrying
amount is implemented over the remaining term tomaturity.

88

Forbo Annual Report 2012 – Consolidated financial statements(b) Cash flow hedge
The effective portion of changes in the fair value ofderivatives that are designated and qualify as cash
flow hedges is recognized in other comprehensive income. The ineffective portion of such changes in fairvalue, however, is recognized directly in the income
statement.
Changes in value accumulated in other comprehensive income are reclassified to profit or loss and are recognized as income or expense in the period in which
the hedged item affects profit or loss (for example,
when the forecast sale that has been hedged takes
place). The gain or loss from the effective portion ofinterest rate swaps that hedge variable rate borrowings is recognized in the income statement. The gainor loss from the ineffective portion is also recognizedin the income statement. However, when the forecast
transaction that is hedged results in the recognition ofa non-financial ­asset (for example, inventories or property, plant, and equipment) or a non-financial liability,
the cumulative gains or losses previously deferred inother comprehensive income are included in the initial
measurement of the cost of the asset or liability. The
deferred amounts are ultimately recognized in the costof goods sold in the case of inventories or in depreciation in the case of property, plant, and equipment.
When a hedging instrument expires, is sold, or ceases
to meet the criteria for hedge accounting, any cumulative gain or loss existing in other comprehensive income at that time remains in equity and is recognizedin the income statement only when the originallyhedged forecast transaction actually occurs. If a forecast transaction is no longer expected to occur, thecumulative gain or loss that was reported in equity isimmediately reclassified to the income statement.
(c) Net investment hedge
Hedges of net investments in foreign operations serve
to hedge translation differences of foreign business
operations and are accounted for similarly to cash flow
hedges. Any gain or loss on the effective portion of
the hedging instrument is recognized in other comprehensive income; the gain or loss relating to the in­
effective portion is recognized immediately in profit
or loss. Gains or losses accumulated in equity are transferred to the income statement when the foreign operation is sold off in full or in part.

(d) Derivatives measured at fair value
through profit or loss
Certain derivative financial instruments are not suitable for hedge accounting. Changes in the fair value ofsuch derivatives are recognized directly in the income
statement.
Until repayment in November 2012, the Group employed hedge accounting in connection with thehedging of periodic interest payments and the repayment of the nominal amount of the US private placement. Some of the derivatives employed were recognized as a cash flow hedge in order to hedge the future
cash flows from the US private placement against fluctuations. The effective portion of the change in market
value of the hedging instrument was recognized inother comprehensive income, until the gain or loss on
the hedged item was realized; the ineffective portionof the change in market value of the hedging instrument was recognized in profit or loss. The cumulativechanges in fair value were reclassified to the income
statement when future firm commitments were recognized in the income statement.
Assets held for sale and liabilities directly
associated with assets held for sale
Current and non-current financial assets and directly
associated liabilities are classified as ‘held for sale’ andrecognized separately in the balance sheet under ‘Assets held for sale’ and ‘Liabilities directly associated withassets held for sale’ if their carrying amount is more
likely to be realized by sale than by use. This is conditional upon the sale being highly probable and the assets being ready for immediate sale on the reporting
date. For a sale to be classified as highly probable, thefollowing criteria must be met: management is committed to a plan to sell the asset, the asset is marketed
for sale at a price that is reasonable in relation to its
current fair value, and the completion of the sale is expected to occur within twelve months. Assets held forsale are measured at the lower of their carrying amountor the fair value less costs to sell.

Forbo Annual Report 2012 – Consolidated financial statements

Inventories
Inventories are stated at the lower of cost or net real­izable value. Cost includes direct material and, if applicable, other direct costs and related production overheads to the extent that they are incurred in bringing
the inventories to their present location and condition.
The net realizable value constitutes the estimated sales
price less all estimated costs up to completion, as wellas the costs of marketing, sales, and distribution.
Inventories are for the greater part measured at average cost. Adjustments are made for unsaleable inventories and inventories with insufficient turnover.
Trade receivables
Current trade receivables are stated at amortized cost,which generally corresponds to the nominal value. Allowances for doubtful risks are established based on
the maturity structure and discernible solvency risks.
In addition to individual allowances for specific identifiable risks, allowances are also made on the basis ofstatistically determined default risks.
Cash and cash equivalents
Cash and cash equivalents are stated at nominal value.
They include cash on hand, postal and bank accounts,and fixed-term deposits with an original maturity of up
to 90 days.
Shareholders’ equity
Registered shares are classified as share capital at theirpar value. Payments by shareholders above the parvalue are credited to reserves.
Treasury shares are deducted at their par value fromshare capital. The acquisition costs in excess of parvalue arising on the acquisition of treasury shares aredebited to reserves. On the sale of treasury shares,
gains or losses compared with the par value are credited or debited to reserves.

89

Dividends are debited to equity in the period in which
the resolution on their distribution is adopted.
Current and non-current financial debt
Current and non-current financial debt consists mainlyof private placements, bonds, bank loans, and financelease obligations. It is stated at amortized cost (lesstransaction costs). Borrowing costs are recognized in
the income statement, using the effective interest
method.
Financial debt is assigned to current debt, except if
the Group has to settle the obligation twelve months
after the reporting date or enjoys unlimited right topostpone payment of the debt by at least twelve
months after the reporting date.
Employee pension plans
The Group maintains various pension plans designed
as defined contribution and defined benefit plans.
These pension plans are established in accordancewith the local conditions in each country. The plans are
funded either by contributions to legally autonomous
pension funds/insurance plans or by recognition of
the pension plan liabilities in the financial statementsof the respective companies.
For defined contribution plans, the costs incurred in
the relevant period correspond to the agreed employer contributions.
For defined benefit plans, the pension liabilities are assessed annually by independent actuaries according
to the projected unit credit method. The liabilities correspond to the present value of the expected future
cash flows. The plan assets are stated at market value.
Current service costs incurred in the relevant period,
less employee contributions, are stated as personnel
expenses in the income statement. Past service costs
resulting from changes in pension plans are recognized in the income statement on a straight-line basis
over the remaining average period until an active employee acquires a vested pension right, or are immediately posted to the income statement if the employee
has already retired. Profits resulting from pension plancurtailments or settlements are immediately taken to
the income statement.

90

Forbo Annual Report 2012 – Consolidated financial statements

Actuarial gains and losses are reported in the statement of comprehensive income under ‘Other com­prehensive income for the year, net of tax’, with due­account being taken of deferred taxes.
Provisions
Provisions are recognized if the Group has a current
legal or constructive obligation as a result of a past
event, it is probable that an outflow of resources will
be required to settle the obligation, and a reliable estimate of the amount can be made. No provisions are
made for future operating losses. The provision is thebest estimate on the reporting date of the amount­required to meet the current obligation, taking into
­account the risks and uncertainties underlying the­obligation.
A provision for restructuring expenses is reported if theGroup has defined a detailed, formalized restructuring
plan which has created a valid expectation among
those affected that the restructuring will be carried out
as a result of the plan’s implementation being initiatedor essential parts being announced. Measurement ofa restructuring provision only takes account of direct
expenses for the restructuring. Only those expenses
are included, therefore, that are caused by the restructuring and are not related to the company’s ongoing
business activities.
Trade payables
Trade payables are non-interest-bearing and are disclosed at nominal value.
3 Changes in accounting principles
In the reporting year, the following new and revised
standards and interpretations of the International Accounting Standards Board (IASB) and IFRS Interpretations Committee (IFRIC) came into force:–– IFRS 7 (revised) – ‘Financial instruments: disclosures’–– IAS 12 (revised) – ‘Income taxes’

These standards and interpretations have been applied provided they are relevant for the Group’s business activities. The application of these standards,
however, has no significant effect on the Group’s disclosures, equity, profits or cash flows.
4 Critical judgements, estimatesand appraisals by management
Critical assumptions and estimates
regarding accounting and measurement
The application of the measurement and accounting
principles requires that circumstances and estimates
be assessed and assumptions be made with respect tothe carrying amounts of assets and liabilities. The estimates and the underlying assumptions are based on
past experience and other factors regarded as relevant,including expectations of future events that appear
reasonable in the given circumstances. The actual results may, of course, deviate from the estimates andassumptions of management.
The following are the main areas in which a significant
risk exists in the coming business year involving a significant adjustment of the carrying value of assets andliabilities.
Impairment of non-financial assets
Along with the regular periodic review of goodwill
and intangible assets with an indefinite useful life, thecarrying amounts of fixed and intangible assets witha ­finite useful life are also always reviewed if theseamounts can no longer be realized due to changed
circumstances or events. If such a situation occurs, therecoverable amount is determined based on expected
future revenues. This corresponds to either the discounted expected values in use or the expected net
sales price. If these are less than the current carrying
amount, the value is impaired to the recalculated figure. This impairment is recognized as an expense in theincome statement.
Important assumptions in these calculations include
growth rates, margins, estimates and management’s
experience of the future development of net working
capital, and discount rates. The actual cash flows may
deviate significantly from the planned discounted­future values. Likewise, the useful lives may be shortened or non-current assets impaired in the event ofa change in the use of buildings, machinery and facil­
ities, change or abandonment of locations, or lowerthan-expected revenues over the medium term. Further information on this topic can be found in note 16‘Property, plant, and equipment’ and note 17 ‘Intan­
gible assets’.

Forbo Annual Report 2012 – Consolidated financial statements

91

Employee pension schemes
Various employee pension plans and schemes exist for
employees of the Group. In order to measure liabilities
and costs, it is first of all necessary to determine whether a plan is a defined contribution or a defined benefit
plan from an economic perspective. In the case of defined benefit plans, actuarial assumptions are made toestimate future developments. These include assumptions and estimates relating to the discount rate, theexpected return on plan assets in individual countries,
and future wage trends. In their actuarial calculations
for determining employee benefit obligations, the actuaries also use statistical information such as mortality
tables and staff turnover rates. If these parameterschange owing to a change in the economic situationor market conditions, the subsequent results may deviate considerably from the actuarial reports and calculations. These deviations may have a significant medium-term effect on expenses and income from theemployee pension schemes and on the comprehensive income statement. Further information on this
topic can be found in note 27 ‘Employee benefit obligations’.

Income taxes
The Group is obliged to pay income taxes in various
countries. Certain key assumptions are necessary in order to determine income tax in the relevant countries.
There are business events which have an impact on
taxation and taxable profit. Hence, the amount of the
final taxation cannot be determined definitively. The
measurement of current tax liabilities is subject to theinterpretation of tax regulations in the relevant countries. The adequacy of this interpretation is assessed by
the tax authorities in the course of the final assessment
or tax audits. This may result in material changes to tax
expenses. Where the definitive taxation of these business events deviates from the previous assumptions,this will have an impact on the current and deferredtaxes in the period in which the taxation is definitively
determined. Furthermore, determining whether tax
losses carried forward can be capitalized requires a
critical estimate of the probability that they can be offset against future profits. This assessment depends ona number of different factors and developments. Further information on this topic can be found in note 14‘Income taxes’.

Provisions
In the conduct of ordinary business activities, a liabilityof uncertain timing and/or amount may arise. Pro­
visions are determined using available information
based on reasonably expected cash outflows. Claims
against the Group may arise that may not be covered,or are covered only in part, by provisions or insurance
benefits. Further information on this topic can befound in note 28 ‘Provisions’.

CRITICAL Judgement IN THE APPLICATIONOF ACCOUNTING PRINCIPLES
Cash-generating units
If a non-financial asset itself does not generate independent cash flows, the impairment test must be performed for the cash-generating unit that contains thisasset. A cash-generating unit is defined as the smallest
identifiable group of assets generating cash flows thatare largely independent of the cash flows of other assets or other groups of assets. In particular, the goodwill acquired with a business combination does not
generate cash flows that are independent from otherassets or groups of assets. The identification and definition of cash-generating units requires judgement bymanagement. As a rule, the Group defines the cashgenerating units on the basis of geographically cohesive markets, the technologies used, or the sales generated by the brands concerned.

92

Forbo Annual Report 2012 – Consolidated financial statements

Currency translation of intercompany
financial items
The Group finances its Group companies with intercompany loans. Balances that are denominated in­another currency than the functional currency of the­reporting unit have to be translated at the exchange
rate on the balance-sheet date. The recognition of­currency differences to profit and loss or to other comprehensive income depends on management’s assessment as to whether these loans are to be consideredpart of net investment or not. A monetary item forwhich repayment is neither planned nor likely in theforeseeable future constitutes part of the net investment in a foreign operation. Therefore, management
must make an appraisal judgement of intercompany
loans with regard to whether repayment is planned or
likely.

5 Standards issued but not yet effective
The following new and revised standards and interpretations had been published, though they had not
yet become effective by the time the consolidated­financial statements were approved by the Board of
Directors. Since their impact on the consolidated financial statements has not yet been systematicallyanalyzed, the anticipated effects shown in the notes
to the table below represent an initial estimate bymanagement.

Standards
Standard/Interpretation
IAS 1 (revised) – ‘Presentation of financial statements’IAS 19 (revised) – ‘Employee benefits’
IFRS 10 (new) – ‘Consolidated financial statements’
IFRS 11 (new) – ‘Joint arrangements’
IFRS 12 (new) – ‘Disclosure of interests in other entities’
IFRS 13 (new) – ‘Fair value measurement’
IFRS 7 (revised) – ‘Offsetting financial assets and financial liabilities’
IAS 32 – ‘Offsetting financial assets and financial liabilities’
IFRS 9 (new) – ‘Financial instruments’

*
*
**
*
*
**
*
*
**

Date effective
July 1, 2012
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2014
January 1, 2015

* No significant impact on the consolidated financial statements is expected.
** The impact on the consolidated financial statements cannot yet be determined with sufficient certainty.

Moreover, various adjustments to the standards were
published as part of the Annual Improvement Projectthat will be applied for the first time in the businessyear beginning on January 1, 2013. Since they havelittle impact on the financial statements, no detailed
list of the changes is given.

Management is currently assessing the impact of applying IAS 19 (2011) for the first time. Since the Groupalready reports all actuarial gains and losses in theyear in which they are incurred in other comprehensive income under the current IAS 19, the retroactive
application of IAS 19 (2011) will probably only have aminor impact on the Group’s equity as at January 1,
2012. Replacement of the concept of expected returnon plan assets by net interest costs, i.e. by applying
a uniform discount rate to the net pension liabilities
would have only had an insignificant impact on employee benefit expense for 2012.

Plannedapplication2013 business year
2013 business year
2013 business year
2013 business year
2013 business year
2013 business year
2013 business year
2014 business year
2015 business yearForbo Annual Report 2012 – Consolidated financial statements

93

Notes

6 Segment reporting
Forbo is a global producer of Flooring Systems andMovement Systems. The divisions correspond to theinternal management structure and are run separately
because the products they manufacture, distribute,and sell differ fundamentally in terms of production,
distribution, and marketing.
Flooring Systems develops, produces, and sells linoleum, vinyl floorings, clean-off systems, carpet tiles, andneedle felt floor coverings as well as the various accessory products required for laying, processing, cleaning,and care of flooring. The construction adhesives activity was integrated into the Flooring Systems division
during the reporting year; in the previous year it had
been part of the Bonding Systems division. As a resultof the sale of the industrial adhesives activity, including
synthetic polymers, and the integration of the construction adhesives activity into the Flooring Systems

division, the Bonding Systems division now no longer
exists. The previous year’s figures have been restated toreflect the new internal management structure. Forbo’s
Movement Systems division develops, produces, andsells high-quality processing belts, synthetic module
belts, as well as timing and flat belts made of synthetics.
Corporate includes the costs of the Group headquarters and certain items of income and expenses which
are not directly attributable to a specific business.
The Flooring Systems and the Movement Systems di­visions are reportable segments. The identification of
the reportable segments is based on internal management reporting to the Chief Executive Officer of theGroup and hence on the financial information used toreview the performance of the operational units in order to reach a decision on the allocation of resources.
Segment information on the reportable segments forthe reporting year:

2012
CHF m
Total net sales
Inter-segment sales
Net sales to third parties
EBIT before special items
Special items
EBIT
Operating assets
Number of employees (December 31)

Flooring
Systems
874.3
– 0.4
873.9
103.6
45.4
149.0
665.5
3,034

The special items in the Flooring Systems division contain the gain on settlement of the Dutch pension planamounting to CHF 45.4 million. For ­further details, seenote 27 ‘Employee benefit obligations’. In addition, theMovement
Systems
327.2

Corporate

327.2
27.0

– 13.4

27.0
225.1
1,925

– 13.423.1
41

Elimination
– 0.4
0.4

Total
1,201.1
1,201.1
117.2
45.4
162.6
913.7
5,000

segment result for Flooring Systems (EBIT) contains
impairment charges for goodwill and intangible assets
amounting to CHF 4.0 million (see note 17 ‘Intangible
assets’).

94

Forbo Annual Report 2012 – Consolidated financial statements

Segment information on the reportable segments forthe prior year:
2011
CHF m
Total net sales
Inter-segment sales
Net sales to third parties
EBIT
Operating assets
Number of employees (December 31)

Management reporting and the internal control system are based on the same accounting principles asexternal reporting.
The Chief Executive Officer assesses the performanceof the reportable segments based on their operating
result (EBIT). The net financial result is not allocated tothe segments since it is Corporate Treasury that mainly
exercises central control over the financial result.

CHF m
Segment result (EBIT)
Financial result
Group profit before taxes

CHF m
Total operating assets, continuing operations
Total operating assets, discontinued operations
Operating assets
Non-operating assets
Total assets

Flooring
Systems
889.5
– 3.0
886.5
126.7
705.4
2,980

Movement
Systems
317.3
317.3
32.2
235.0
1,861

Corporate

Elimination
– 3.0
3.0

Total
1,203.8
1,203.8
148.9
961.6
4,882

– 10.021.2
41Inter-segment sales are transacted at arm’s length. The
segments apply the same accounting principles as
the Group. Sales to third parties, as they are reported
to the Chief Executive Officer, are identical with thesales reported in the income statement.
Reconciliation of segment results to the income statement and balance sheet:

2012

2011

162.6
– 5.5
157.1

148.9
18.4
167.3

31.12.2012

31.12.2011

913.7

961.6
305.9
1,267.5
234.4
1,501.9

913.7
420.2
1,333.9

Forbo Annual Report 2012 – Consolidated financial statements

95

Third-party sales and operating assets broken down by
region in the reporting year and the prior year:

CHF m
Switzerland (domicile)
FranceBenelux
Germany
Great Britain and Ireland
Scandinavia
Southern Europe
Eastern Europe
EuropeNorth, Central, and South America
Asia/Pacific and Africa
Total net sales to third parties and operating assets

CHF m
Switzerland (domicile)
FranceBenelux
Germany
Great Britain and Ireland
Scandinavia
Southern Europe
Eastern Europe
EuropeNorth, Central, and South America
Asia/Pacific and Africa
Total net sales to third parties and operating assets

In the reporting year, no customer accounted for sales
that exceeded 10% of the Group’s total sales.
7 Development costs‘Development costs’, which mainly comprise productdevelopment, amounted to CHF 16.3 million in thereporting year (2011: CHF 16.0 million).

2012
Third-party sales

31.12.2012
Operating assets

26.7
169.4
141.9
136.7
116.1
112.6
49.8
61.3
814.5
221.2
165.4
1,201.1

62.2
87.9
268.9
88.5
163.9
27.2
19.4
27.9
745.9
91.7
76.1
913.7

2011
Third-party sales

31.12.2011
Operating assets

30.9
164.0
153.7
146.5
113.6
112.9
54.8
54.5
830.9
209.3
163.6
1,203.8

83.6
101.1
272.8
94.0
173.4
29.0
28.4
28.3
810.6
65.7
85.3
961.6

9 Other operating expenses‘Other operating expenses’ comprises primarily environmental expenditure, recruting measures, legal costs,
warranties, costs for consulting and auditing, insurance costs, taxes on capital, and levies based on local
legislation.
10 Other operating income

8 Administrative costs
This item consists of the usual expenses related to­administrative activities.

‘Other operating income’ includes, in addition to thegain on settlement of the Dutch pension plan amounting to CHF 45.4 million (note 27 ‘Employee benefit­obligations’), in particular income from insurance payments received, from the sale of material for recycling,
and from the release of provisions.

96

Forbo Annual Report 2012 – Consolidated financial statements

11 Personnel expenses

Personnel expenses
CHF mSalaries and wages
Social security contributions
Employee benefit expenses
Total personnel expenses

As at December 31, 2012, the headcount of the continuing operations was 5,000 (2011: 4,882). The average headcount over the year was 4,990 (2011: 4,884).
Salaries and wages include share-based payments expenses of CHF 2.0 million (2011: CHF 5.0 million).

2012

2011

276.2
57.8
18.6
352.6

275.3
54.2
18.3
347.8

A bonus program is available for around 100 managersof the continuing operations, which is linked to achieving financial targets set for the Group, the divisions,and individual objectives.

12 Financial income

Financial income
CHF mInterest income1)
Gains on sale of available-for-sale financial assets
Increase in fair value of financial assets classified as being at fair value through profit and loss
Total financial income

1) In particular interest income from cash and cash equivalents.

2012

2011

1.9
1.3
2.5
5.7

1.0
29.1
30.1

Forbo Annual Report 2012 – Consolidated financial statements

97

13 Financial expenses

Financial expenses
CHF mInterest expenditure from financial liabilities valued at amortized cost
Reduction in fair value of financial assets classified as being at fair value through profit and loss
Amortization of issuance costs for private placement and bondForeign exchange losses net
Foreign exchange gains (–) on financial assets or liabilities at fair value through profit or loss
Loss from repurchase of own bondTotal financial expenses

2012

2011

8.9
0.9
0.3
0.5

9.9

0.6
11.2

0.4
1.4
– 0.3
0.3
11.7

2012

2011

37.3
– 4.3
33.0

30.8
– 0.9
29.9

The average interest rate on interest-bearing debt
(private placements, bonds, non-current bank debt,
and current bank debt) in 2012 was 4.5% (2011: 4.5%).

14 Income taxes

Income taxes
CHF mCurrent income taxes
Deferred income taxes
Total income taxes

98

Forbo Annual Report 2012 – Consolidated financial statements

Analysis of tax expense
The following key elements explain the difference between the expected and the effective tax expense.

CHF mGroup profit before taxes
Tax expense at the expected tax rate
Tax effects of:
Non-tax-deductible expenses and tax-exempt income
Tax losses and temporary differences for which no deferred tax assets have been recognized yet
Write-off of deferred tax assets
Utilization of tax losses not capitalized or revalued in previous years
Previous-year and other positions
Total income taxes

Since the Group operates in various countries with different tax laws and rates, the expected and effective
tax expense depends every year on the origin of theincome or losses in each country. The expected tax­expense is the sum of the expected individual tax income/expense of all subsidiaries. The expected individual tax income/expense in a country is calculated

2012

2011

157.1
– 41.0167.3– 40.3

– 0.6
1.7

– 0.2
– 0.6
– 2.5
7.7
6.0
– 29.913.8– 6.9– 33.0by multiplying the individual profit/loss by the tax rateapplicable in the country concerned. The expected tax
rate in the reporting year was 26.1% (2011: 24.1%). The
expected tax rate is higher than in the previous year
due to countries with higher tax rates having a stron­
ger impact on Group profit.

Forbo Annual Report 2012 – Consolidated financial statements

99

Tax loss carry forwards not capitalized and capitalized
as deferred income tax assets, broken down by expiry
dates:2012
CHF m
Expiry after:
1 year
2 years
3 years
4 years
5 years
More than 5 years
Total tax loss carry forwards

2011
CHF m
Expiry after:
1 year
2 years
3 years
4 years
5 years
More than 5 years
Total tax loss carry forwards

In 2012, CHF 3.7 million (2011: CHF 1.8 million) of unused tax loss carry forwards expired.

CHF mDeferred tax assets
Deferred tax liabilities
Deferred tax liabilities, net

Not capitalized

Capitalized

Total

0.1
0.2
0.2
0.3
0.4
77.3
78.5

2.2
1.9

34.8
38.9

2.3
2.1
0.2
0.3
0.4
112.1
117.4

Not capitalized

Capitalized

Total

3.7
0.2
0.5
0.4
0.3
89.9
95.0

2.3
2.2
1.9
0.0
0.0
29.1
35.5

6.0
2.4
2.4
0.4
0.3
119.0
130.5

Deferred income tax assets and liabilities are offset
when they relate to the same tax jurisdiction, provided
that the legal right to offset exists, and they are intended either to be settled net or to be realized simulta­
neously. The following amounts are shown in the balance sheet:
31.12.2012

31.12.2011

26.5– 44.2– 17.721.9– 49.5– 27.6

100 Forbo Annual Report 2012 – Consolidated financial statements

Deferred tax assets and liabilities, tax credits, and tax
charges from deferred taxes (prior to netting):
Deferred tax assets

Inventories
5.9
0.5
6.4

Property,plant, andequipment
3.0
– 0.5
2.5

Provisions
15.0
9.7
24.7

Inventories
– 3.7
0.3
– 3.4

Property,plant, andequipment– 33.90.7– 33.2

Provisions– 14.2
6.9– 7.3

Deferred tax assets/liabilities (–), net
as at December 31, 2011

2.2

– 30.90.8

Deferred tax assets/liabilities (–), net
as at December 31, 2012

3.0

– 30.717.4

CHF m
As at December 31, 2011
Increase/decrease (–) in deferred tax assets
As at December 31, 2012

Loss carryforwards
13.3
– 2.7
10.6

Other
11.6
– 2.5
9.1

Total
48.8
4.5
53.3

Other
– 24.6– 2.5– 27.1

Total– 76.4
5.4
71.0

13.3

– 13.0– 27.6

10.6– 18.0– 17.7

Deferred tax liabilities

CHF m
As at December 31, 2011
Decrease/increase (–) in deferred tax liabilities
As at December 31, 2012

Loss carryforwards

Decrease in deferred tax liabilities, net
Of which recognized in other comprehensive income
Of which recognized in the income statement
Of which deferred tax expense of discontinued operations

9.9
17.2
4.3
– 11.6

Tax expense and income recognized directly in theother comprehensive income statement:
2012
Before tax

Tax expense(–)/income

After tax

CHF mGain from sale of financial instruments
available-for-sale; transfer to income statement
Changes in revaluation reserve for property,
plant, and equipment
Actuarial losses (–)/gains on pension obligations
Cash flow hedges
Translation differences
Other comprehensive income– 76.71.7
36.1– 38.9

19.0
– 1.8
17.2

– 57.71.7
34.3– 21.72011
Before tax

Tax expense(–)/income

After tax

– 23.44.8– 18.6

– 1.6

0.4

– 1.2

15.7
– 1.7
– 4.4
– 15.4

– 7.1

8.6
– 1.7
– 6.2
– 19.1

– 1.8
– 3.7

Forbo Annual Report 2012 – Consolidated financial statements 101

15 Earnings per share
Undiluted earnings per share are calculated by di­viding the net profit or loss for the year attributableto registered shareholders by the weighted average
number of registered shares issued and outstanding
during the year, less the average number of treasury
shares. The 213,152 registered shares cancelled in theprevious year as part of the reduction in share capital
had no effect on earnings per share, as this stock was
already included in treasury shares in the prior year.
The figure for diluted earnings per share also takes
into account the potential dilution effects if all issued
and in-the-money share options were to be exercised.

The calculations are based on the following share information:

Weighted average number of shares
Amount of shares adjusted for stock option plans
Weighted average number of shares used to calculate diluted earnings per share2012
2,213,669
1,125
2,214,794

2011
2,333,621
6,100
2,339,721

102 Forbo Annual Report 2012 – Consolidated financial statements

16 Property, plant, and equipment

Fair value or cost on acquisition
CHF m
As at December 31, 2010
Additions
Disposals
Revaluation
Transfers
Translation differences
Transfer to assets held for sale
As at December 31, 2011
Acquisition
Additions
Disposals
Revaluation
Transfers
Translation differences
As at December 31, 2012

Machineryandequipment

Other
property,plant, andequipment

779.4
14.2
– 7.3

139.5
2.8
– 3.5

11.6
20.3

3.1
– 2.7
– 18.7
120.5
0.1
3.2
– 2.6

– 16.3
– 0.1
– 4.9
10.6

3.3
– 0.3

10.0
– 14.1– 121.2
661.0
0.2
6.7
– 1.8

1.8
– 5.1
260.9

14.3
– 4.3
676.1

3.8
– 1.0
124.0

– 19.9Land andbuildings

Machineryandequipment

Other
property,plant, andequipment

3.7
12.5
– 0.4
6.3
– 5.8
– 0.8
15.5
9.9
– 0.3

665.0
27.1
– 7.2
– 6.4
– 18.1– 95.7
564.7
21.9
– 1.6

– 3.2
21.9

245.7
239.0

Land andbuildings

317.7
2.1
– 0.5
– 1.6
3.9
– 8.6
– 51.8
261.2

Accumulated depreciation and impairments
CHF m
As at December 31, 2010
Depreciation
Disposals
Transfers
Translation differences
Transfer to assets held for sale
As at December 31, 2011
Depreciation
Disposals
Transfers
Translation differences
As at December 31, 2012
Net carrying amountAs at December 31, 2011
As at December 31, 2012

Assets underconstruction

20.5

Total
property,plant, andequipment

1,248.2
39.4– 11.3– 1.6
0.7– 25.5– 196.6
1,053.3
0.3
33.7
– 4.7

11.2

– 10.4
1,072.2

Assets underconstruction

Total
property,plant, andequipment

1.4

– 3.8
581.2

127.9
5.2
– 3.4
0.8
– 2.6
– 16.2
111.7
4.3
– 2.5
– 0.2
– 0.8
112.5

1.6

798.0
44.8
– 11.00.7– 26.3– 112.7
693.5
36.1
– 4.4
– 0.2
– 7.8
717.2

96.3
94.9

8.8
11.5

9.0
9.6

359.8
355.0

0.2
0.0
1.6

Forbo Annual Report 2012 – Consolidated financial statements 103

Land and buildings are valued in the balance sheet asat the revaluation date at fair value less accumulated
depreciation and impairments. Property and buildings were last systematically revalued by independent­experts on July 1, 2008. The methods used for the revaluation in 2008 were fair value, capitalized value, andcost-oriented valuation. In applying the capitalized
value method, the fair value was determined using
the discounted cash flow (DCF) method. In the costoriented valuation, the fair value was ascertained bymeans of the depreciated replacement cost method.

CHF m
Cost on acquisition/production cost
Cumulative depreciation
Net carrying amount

Property, plant, and equipment also include leased
assets with a net carrying amount of CHF 1.3 million(2011: CHF 0.2 million).
The sum insured for property damage for buildings,
machinery, equipment, and inventories came to
CHF 1,668.4 million (2011: CHF 1,650.7 million).

The increase in net value was recognized in the revaluation reserve in equity, taking into account deferredtaxes. The value of a property in Switzerland was adjusted by CHF 1.6 million in the previous year as theresult of a revaluation. The adjustment has been recognized in other comprehensive income.
If land and buildings were carried at amortized cost on
acquisition or production cost, the figures would be as
follows:

2012

2011

319.5
– 192.9
126.6

319.2
– 188.2
131.0

Maintenance and repair costs amounted to CHF 21.4
million (2011: CHF 22.0 million). Depreciation totaling
CHF 36.1 million (2011: CHF 36.0 million) has beenposted under ‘Cost of goods sold’, ‘Development costs’,‘Marketing and distribution costs’, and ‘Administrative
costs’.

104 Forbo Annual Report 2012 – Consolidated financial statements

17 Intangible assets

Cost on acquisition
CHF m
As at December 31, 2010
Additions
Disposals
Transfers
Translation differences
Transfer to assets held for sale
As at December 31, 2011
Acquisition
Additions
Disposals
Transfers
Translation differences
As at December 31, 2012

Accumulated amortization and impairments
CHF m
As at December 31, 2010
Amortization
Disposals
Transfers
Translation differences
Transfer to assets held for sale
As at December 31, 2011
Amortization
Impairments
Disposals
Transfers
Translation differences
As at December 31, 2012
Net carrying amountAs at December 31, 2011
As at December 31, 2012

Intangible assets with an indefinite useful life (goodwill and trademarks) are subject to an annual impairment test at cash-generating unit level. The test is carried out using a standardized method with discounted
cash flows for calculating the value in use. Cash flows
for the first five years are estimated on the basis of
the plan approved by management (detailed planning­period). Cash flows after the detailed planning period
are extrapolated to the terminal value using sustain­

Goodwill

Trademarks

185.0

62.8

– 2.9
– 89.692.5– 0.1– 25.037.7

Otherintangible assets

Total

90.2
0.3
– 0.1
0.2
– 0.3
– 6.6
83.7
1.7
0.5

338.0
0.3
– 0.1
0.2
– 3.3
– 121.2
213.9
1.7
0.5
– 3.8
0.5
212.8

– 3.8
– 0.3
92.2

0.1
34.0

0.7
86.6

Goodwill

Trademarks

Otherintangible assets

10.2

32.6

– 0.2
– 1.8
8.2

– 3.5
29.1

Total

24.8
4.9
– 0.1
0.1
– 0.3
– 6.3
23.1
3.3
1.7

67.6
4.9
– 0.1
0.1
– 0.5
– 11.6
60.4
3.3
4.0
– 3.8

1.8

0.5
– 3.8

– 0.4
9.6

0.0
25.8

0.1
28.2

– 0.3
63.6

84.3
82.6

8.6
8.2

60.6
58.4

153.5
149.2

able normalized earnings without applying a growthrate. Relatively constant EBITDA margins are assumed
during the detailed planning period of around 17%
for Flooring Systems and around 6% for Movement
Systems. The discount rate corresponds to the total
weighted cost of capital before taxes including an average risk charge estimated by management, whichlies between 8.0% and 12.1%.

Forbo Annual Report 2012 – Consolidated financial statements 105

Goodwill is distributed among the following groups ofcash-generating units:31.12.2012
78.5
4.1
82.6

Flooring Systems
Movement Systems

The goodwill in Flooring Systems as at December 31,
2012 comprises mainly the goodwill acquired in connection with the acquisition of Bonar Floors in 2008.
As at December 31, 2012, the item ‘Brands’ includes
mainly the trademarks acquired as part of the acquisition of Bonar Floors. ‘Other intangible assets’ consists
mainly of the customer relations and technologies, aswell as software, acquired as part of the acquisition of
Bonar Floors.
The annual impairment test of goodwill yielded a value in use that was greater than the carrying amount.
The discount rate applied was 8.0%. Due to lower­expectations regarding sales and margins the impairment test was conducted at the half-year mark andshowed that the carrying amount exceeded the recoverable amount of the cash-generating unit by CHF 1.8
million. Accordingly, an impairment charge of CHF 1.8
million was taken for the goodwill allocated to this31.12.2011
80.2
4.1
84.3

cash-generating unit. The impairment expense is contained under ‘Other operating expenses’ in the consol­
idated income statement.
The intangible assets acquired were also tested for­impairment by means of sensitivity analyses. The impairment made in connection with trademarks isbased on sales made with these trademarks. The discount interest rate applied in the impairment tests
for trademarks is 12.1%. Expectations regarding future
sales that could be made with the trademarks Westbond and the related adhesive technology were lower
in the first half of the year, producing an impairment of
CHF 2.2 million, which is reflected in the income statement under ‘Other operating expenses’.
The entire impairment expenditure amounting to
CHF 4.0 million is contained in the Flooring Systems
division.

18 Investments in associates
and other non-current assets

Investments in associates and other non-current assets
CHF m
Investments in associates
Other non-current financial assets
Total investments in associates and other non-current assets

31.12.2012

31.12.2011

0.0
0.2
0.2

0.9
0.3
1.2

106 Forbo Annual Report 2012 – Consolidated financial statements

19 Inventories

Inventories
CHF m
Raw materials and supplies
Work in progress
Finished goods
Valuation allowance for inventories
Total inventories

31.12.2012

31.12.2011

42.3
66.4
138.9
– 29.0
218.6

43.6
65.4
135.6
– 25.0219.6

31.12.2012

31.12.2011

134.2
23.0
– 7.0
150.2

144.4
22.9
– 8.1
159.2

Valuation allowance for inventories amounted to CHF
29.0 million (2011: CHF 25.0 million). Expenses for inventories (cost of goods sold) recognized in the reporting year came to CHF 498.7 million (2011: CHF 488.6
million).

20 Trade receivables

Trade receivables
CHF m
Accounts receivable
Notes receivable
Allowance for doubtful trade receivables
Total trade receivables

As a rule, no default interest is charged for receivables
past due. As at the reporting date, there was no indi­
cation that debtors would fail to meet their payment
obligations in respect of trade receivables for which
no allowance was made or which were past due. Allowances are made in the form of a specific valuation
allowance for losses. A specific valuation allowance isrequired if the debtor is unable to pay, if the debt has
been past due for more than 90 days, or if the debtor
has given notice of payment difficulties. Valuation al-

lowances take due account of default risks. In addition
to the specific allowance, a portfolio allowance may bemade. For this purpose, trade receivables with similarrisk characteristics for which an additional allowance
may be necessary are grouped together and ­reviewed.
Where appropriate, such an allowance is made. The
decision whether to make a portfolio allowance in­addition to a specific valuation allowance depends onwhether past loss experience indicates that an allowance might be required.

Forbo Annual Report 2012 – Consolidated financial statements 107

Trade receivables recognized as at the balance sheet
date:

CHF m
Total trade receivables, gross
Of which not due
Of which past due for:Less than 30 days
Between 31 and 90 days
Between 91 and 180 days
Between 181 days and 1 year
Over 1 year
Allowance for doubtful trade receivables
Total trade receivables

Of the total of CHF 24.3 million in trade receivables
past due as at December 31, 2012, for trade receiv­
ables with a nominal value of CHF 19.8 million (2011:
CHF 18.2 million) no impairment charges were recog-

31.12.2012

31.12.2011

157.2
132.9

167.3
143.9

12.9
5.8
3.4
2.0
0.2
– 7.0
150.2

11.0
5.9
4.0
2.3
0.2
– 8.1
159.2

nized. Overall, trade receivables with a nominal valueof CHF 29.4 million (2011: CHF 30.1 million) were impaired.

Gross value of trade receivables by currency:

CHF m
CHF
EUR
USD
JPY
GBP
CNY
SEK
Other
Total trade receivables, gross31.12.2012

31.12.2011

1.3
74.1
15.9
15.5
13.4
8.1
5.9
23.0
157.2

1.0
83.7
20.0
17.3
14.5
7.8
7.0
16.0
167.3

2012

2011

– 8.1
– 1.5
0.8
1.6
0.2
– 7.0

– 14.9
– 1.2
5.3
2.6
0.1
– 8.1

Changes in valuation allowances for doubtful trade­receivables during the reporting year:

CHF m
As at January 1
Additions
ReleaseUse
Translation differences
As at December 31

108 Forbo Annual Report 2012 – Consolidated financial statements

Allowances of CHF 2.0 million were made for trade receivables not yet due and of CHF 5.0 million for tradereceivables past due.
The creation and release of allowances for doubtful
trade receivables are included in ‘Marketing and distribution costs’ in the income statement.

21 Other current financial instruments
The item ‘Other current financial instruments’ contains
mainly securities (stocks, bonds, and funds) as well as
fixed-term deposits with a maturity greater than threemonths. For further details, see note 35 ‘Additional­information on financial instruments’.

22 CashCash and cash equivalents
CHF m
Cash
Bank accounts
Short-term deposits with banks
Total cash and cash equivalents

The change in cash and cash equivalents can be foundin the consolidated cash flow statement.
23 Pledged or assigned assets
There were no significant pledged or assigned assets.

31.12.2012

31.12.2011

0.2
157.6
93.5
251.3

0.2
130.1
62.1
192.4

24 Share capital
The share capital of Forbo Holding Ltd stood at CHF
250,000 on December 31, 2012 (2011: CHF 250,000)
and was divided into 2,500,000 registered shares witha par value of CHF 0.10 each. Of these, 21,419 registered shares without voting and dividend rights are at
the disposal of the Board of Directors. Consequently,
2,478,581 registered shares were eligible for dividends
as at December 31, 2012.

Change of shares issued and outstanding:

Total shares outstanding
Treasury shares
Shares with dividend rights:
Treasury shares
Share buyback program 2011
Shares with no dividend rights
Total treasury shares
Total shares issued and outstanding

At the Ordinary General Meeting of April 29, 2011,
shareholders voted to reduce the share capital of
CHF 271,315.20 to CHF 250,000 by cancellation of
the 213,152 registered shares repurchased throughthe share buyback program approved at the Ordinary

31.12.2012
Number2,500,000

ChangeNumber

31.12.2011
Number2,500,000

175,841
250,000
21,419447,260
2,052,740– 3,982
250,000

179,823

246,018– 246,018

General Meeting of April 25, 2008. The capital reduction was completed with the entry in the Commercial
Register of the canton of Zug on July 11, 2011 and was
published in the SHAB on July 14, 2011. The exchange
adjustment took place on the same day.

21,419201,2422,298,758

Forbo Annual Report 2012 – Consolidated financial statements 109

At the Extraordinary General Meeting of Forbo Holding Ltd held on November 5, 2012, the shareholders
approved a capital reduction of CHF 250,000 to CHF
225,000 by cancellation of the shares acquired in connection with the share buyback program approvedat the Ordinary General Meeting of April 29, 2011, andalso approved the necessary amendment to the Articles of Association. Owing to the legally mandatory

notice to creditors, the capital reduction had not yet
been entered in the Commercial Register on December 31, 2012. Furthermore, a motion was approved
to repurchase further shares amounting to up to 10%of the share capital via a second trading line on the
SIX Swiss Exchange or by another means in order toreduce capital.

25 Employee participation plandays in January of the current year. The options are­issued on the basis of a valuation by an independentbank, whereby the valuation is based on the average
market price of the shares in the first 14 trading days in
January of the current year. Shares and options are
subject to a three-year vesting period. The term of theoptions is five years. The shares and options issued
under the MIP are equity-settled.

On March 15, 2006, the Board of Directors approved
the introduction of the Management Investment Plan
(MIP). Members of the Board of Directors are not party
to the MIP. Under the MIP, participants receive at least
50% of the variable component of their compensationin the form of shares and options. The share-based
portion of the variable compensation is recognized atfair value, offset by equity instruments and entered asa corresponding increase in equity. The shares are issued at the average market price for the first 14 trading

Options
Change in the number of outstanding options andtheir weighted average strike price:
2012

Options outstanding as at January 1
GrantedExercised
ExpiredOptions outstanding as at December 31

Weighted
averagestrike pricein CHF

Numberof options

568
616
232
565
675

32,4389,047– 8,823– 918
31,744The expense for equity-settled options charged to theincome statement in application of IFRS 2 amounted
to CHF 1.2 million (2011: CHF 1.9 million).

2011
Weighted
averagestrike pricein CHF

484
733
546
568

Numberof options

25,594
12,194– 5,350
032,438Of the outstanding 31,744 options (2011: 32,438),
6,044 were exercisable as at December 31, 2012 (2011:
6,962). The exercise of 8,823 options (2011: 5,350) resulted in the issue of 8,823 Forbo Holding Ltd shares(2011: 5,350) at a weighted average strike price of
CHF 232 (2011: CHF 546). The weighted average shareprice on the exercise days was CHF 628 (2011: CHF
699).

110 Forbo Annual Report 2012 – Consolidated financial statements

Information on the outstanding options as at December 31, 2012:

Series
2008
2010
2011
2012
Total options outstanding

In the reporting year, a total of 9,047 equity-settled­options (2011: 12,194) were issued under the MIP. The
fair value of these options amounted to CHF 186.4(2011: CHF 149.9). The options were valued in accordance with the Black-Scholes model using the following
input factors: share price at issue date CHF 630 (2011:
CHF 690), strike price CHF 616 (2011: CHF 733), vola­
tility 31.8% (2011: 29.0%), expected life to maturity 4.1
years (2011: 4.1 years), dividend yield 2.3% (2011: 1.7%),
and risk-free interest rate 0.548% (2011: 1.7%). The expected volatility is based on adjusted historical market
data over a period comparable to the expected lifetime of the options. The expected term applied in thecalculation model has been adapted using the best
possible estimates to allow for restrictions on exercise
rights and possible behavior patterns.

Strike price
(CHF)

822
435
733
616

Numberof outstanding
options

Averageremainingterm (years)

Numberof exercisable
options

6,044
4,459
12,194
9,047
31,744

0.2
2.2
3.3
4.4
1.6

6,044

SharesUnder the MIP, 1,213 shares in Forbo Holding Ltd were
issued in the reporting year (2011: 2,232). The shareprice at valuation date was CHF 630 (2011: CHF 690).
The Delegate of the Board of Directors and CEO is remunerated primarily with shares. With effect from January 2009, the employment contract with the Delegate of the Board of Directors and CEO was extended
to run until the end of April 2013. Compensation isagain being paid mainly in shares, which in accordance with IFRS 2 had to be recognized on a pro rata
basis.
In the reporting year, the total amount charged to theincome statement in accordance with IFRS 2 for sharesissued to the Executive Board and Board of Directors
came to CHF 0.8 million (2011: CHF 3.1 million).

Forbo Annual Report 2012 – Consolidated financial statements 111

26 Non-current financial debt

CHF m
Outstanding private placement and bondUnamortized issuance cost
Total outstanding private placement and bondBank debt
Lease obligations
Less current portion
Total non-current financial debt

Maturities of non-current financial debt
CHF m
After 1 year
After 2 years
After 3 years
5+ yearsUnamortized costs
Total non-current financial debt

Forbo Holding Ltd issued a CHF 150.0 million four-yearbond on July 6, 2009 (maturity: July 31, 2013). The
bond has a coupon of 4 1/8% and has been traded on
the SIX Swiss Exchange since July 20, 2009. In the year
under review, Forbo Holding Ltd repurchased bonds
with a nominal value totaling CHF 12.0 million (2011:
CHF 5.6 million). The resulting loss of CHF 0.6 million
is reported under financial expenses (note 13 ‘Financial
expenses’).

31.12.2012

31.12.2011

132.4
– 0.2
132.2

191.3
– 0.5
190.8

2.6
– 132.2
2.6

0.7– 47.0144.5

31.12.2012

31.12.2011

1.2
0.2
0.1
1.1

144.5
0.5

2.6

– 0.5
144.5

The USD 50.0 million private placement of Forbo NL
Holding B.V., which was guaranteed by Forbo Holding
Ltd, fell due on November 21, 2012 and was repaid infull on that date.
The carrying amount of the liabilities from non-current financing is approximately equivalent to their fairvalue.

Derivatives:
Financial derivatives

Derivative financial instruments as at December 31, 2011
Derivative financial instruments as at December 31, 2012

Numberof contracts

Gross value
hedgedCHF mUnrealized
gain/loss (–)
CHF m

70
6

84.7
1.9

– 2.3
0.0

112 Forbo Annual Report 2012 – Consolidated financial statements

Financial covenants
The bond and bank debt are unsecured and containstandard covenants and standard events of default.

27 Employee benefit obligations
The Group has established several pension plans on
the basis of the specific requirements of the countries
in which it operates. The Group has both defined contribution and defined benefit plans. The liabilities andassets under the main defined benefit plans are assessed annually by independent actuaries using the
projected unit credit method. The Group’s largest pension plans are in the Netherlands and the United Kingdom.
Pension costs of continuing operations for defined
benefit plans:

Actuarial net periodic pension costs
CHF mCurrent service cost, net
Interest costs
Expected return on plan assets
Curtailments and settlements
Total actuarial net periodic pension income/costs

2012

2011

10.6
28.8
– 20.8– 45.4– 26.810.5
29.0– 21.218.3

Forbo Annual Report 2012 – Consolidated financial statements 113

Changes in defined benefit obligations under the­defined benefit plans:

CHF m
As at January 1
Current service cost, net
Employee contributions
Interest costs
Benefits paid
Actuarial losses
Curtailments and settlements
Translation differences
Transfer to liabilities directly associated with assets held for sale
As at December 31

2012

2011

584.3
10.6
4.5
28.8
– 28.4114.9– 378.0
– 2.6

599.9
10.9
4.4
30.5
– 22.2
6.1

334.1– 11.8– 33.5
584.3

2012

2011

541.6
20.8
35.9
4.5
38.2
– 28.4– 332.6
– 0.7

525.2
22.4
12.8
4.4
21.8
– 22.2

Changes in expected plan assets of the defined­benefit plans at fair value:

CHF m
As at January 1
Expected return on plan assets
Employer contributions
Employee contributions
Actuarial gains
Benefits paid
Curtailments and settlements
Translation differences
Transfer to liabilities directly associated with assets held for sale
As at December 31

With effect from January 1, 2013, the defined benefit
plan in the Netherlands was converted into a defined
contribution plan. As a result, the Group will in future
no longer incur any actuarial risks from this plan. Afterderecognition of the liability and the related plan as-

279.3

– 3.2
– 19.6541.6

sets and after inclusion of the lump-sum payment of
CHF 18.0 million (EUR 15.0 million) made in connection with the conversion, a gain of CHF 45.4 million
was recognized that was presented in ‘Other operating income’.

114 Forbo Annual Report 2012 – Consolidated financial statements

The present value of defined benefit pension liabilities
and plan assets as at year-end:

CHF m
Present value of defined benefit liabilities
Fair value of plan assets
Net liabilities recognized in the balance sheet

31.12.2012

31.12.2011

31.12.2010

31.12.2009

31.12.2008

334.1– 279.3
54.8

584.3– 541.6
42.7

599.9– 525.2
74.7

635.5– 566.9
68.6

575.1– 516.5
58.6

2012

2011

2010

2009

2008

7.2
2.2%

0.4
0.1%

– 7.7
– 1.2%

8.8
1.5%

0.6
0.0%

38.2
13.7%

23.4
4.5%

15.9
2.8%

27.0
5.2%

– 96.9– 12.9%Actuarial gains and losses linked to experience adjustments used to value the defined benefit plan assets
and liabilities:

Experience adjustments
CHF m
Plan liabilities
Actuarial gains/losses (–)
Percentage of plan liabilities
Plan assets
Actuarial gains/losses (–)
Percentage of plan assets

The data in the reporting year and the previous year
refer to the continuing operations. Actuarial gains andlosses are recognized in the balance sheet under ‘Pension liabilities’ and are presented directly in the othercomprehensive income.

Most of the pension plans are financed in full or inpart via separate funds. Pension liabilities amounting
to CHF 33.4 million (2011: CHF 32.1 million) of a totalof CHF 334.1 million (2011: CHF 584.3 million) are unfunded.

Forbo Annual Report 2012 – Consolidated financial statements 115

Changes in the net liabilities of defined benefit plans
recognized in the balance sheet:

CHF m
Net liabilities as at January 1
Pension income/costs
Employer contributions
Actuarial losses/gains (–)
Translation differences
Transfer to liabilities directly associated with assets held for sale
Net liabilities as at December 31

The pension expenses of the continuing operations
are included in personnel expenses, while those of the
discontinued operations are reported in Group profit
for the year from discontinued operations, after taxes.

Cumulative recognized gains and losses
CHF mActuarial losses as at January 1
Actuarial losses (–)/gains in the current period
Translation differences
Total actuarial gains/losses (–) as at December 31

The actuarial loss in the reporting year comprised again of CHF 31.0 million (2011: gain of CHF 23.7 million
linked to past experience adjustments and a loss of
CHF 107.7 million (2011: CHF 8.0 million) caused bychanges in assumptions.

%
Discount rate
Expected return on plan assets
Future salary increases
Inflation

The expected return on plan assets is derived fromlong-term government bonds in the respective currency zones.

2012

2011

42.7
– 26.8– 35.9
76.7
– 1.9

74.7
19.0
– 12.8– 15.7– 8.6– 13.942.7

54.8

Actuarial gains and losses on defined benefit plans of
all operations recognized in the comprehensive income statement:

2012

2011

9.8
– 76.71.7– 65.2– 14.6
15.7
8.7
9.8

The principal actuarial assumptions used for accounting purposes for defined benefit plans (expressed asweighted averages):

2012

2011

3.8
3.3
3.2
2.4

5.2
4.2
3.2
2.3

116 Forbo Annual Report 2012 – Consolidated financial statements

Weighted average asset allocation of the defined
benefit plan assets as at December 31:%
Shares
Bonds
Real estate
Cash and other investments
Total plan assets as at December 31

Future contributions to defined benefit plans are estimated in the following year on the basis of the reporting year.

2012

2011

3.4
75.8
2.9
17.9
100.0

20.7
76.7
1.6
1.0
100.0

The cost of the contributions to defined contributionplans of continuing operations, which is included inpersonnel expenses, amounted to CHF 4.3 million(2011: CHF 2.5 million).

28 Provisions

Provisions
CHF m
As at January 1
Additions
Used during the year
Reversed during the year
Translation differences
Reclassification to liabilities in connection
with assets held for sale

Provisions
for legal
claims

Personnel
provisions

Other
provisions

Total
2012

Total
2011

– 0.8

16.3
3.7
– 2.3
– 2.0

12.7
0.6
– 0.5
– 5.0

57.8
7.9
– 4.6
– 8.9

57.2
33.2
– 20.6
– 9.2
– 0.3
– 2.5

Warranty
provisions

Environmental
provisions

1.7
1.8
– 1.8

12.5

14.6
1.8

– 1.1

As at December 31

1.7

11.4

15.6

15.7

7.8

52.2

57.8

Of which current provisions
Of which non-current provisions

1.4
0.3

11.4

1.5
14.1

10.8
4.9

2.7
5.1

16.4
35.8

18.3
39.5

Warranty provisions are linked to product sales andare based on past experience. The provisions for legal
claims relate mainly to product liability claims in which
the Group is involved in the course of its normal business. The personnel provisions comprise the bonus
programs, provisions for paid leave, and severance
payments in connection with restructuring measures.
In connection with the sale of the industrial adhesives
activity, including synthetic polymers, there are provisions of CHF 21.0 million that are all classified as longterm. They are kept for anticipated cash outflows inconnection with risks in the areas of environmental
protection (CHF 7.0 million), litigation (CHF 6.0 million),

personnel (CHF 3.0 million), and other (CHF 5.0 million). In connection with the continuing operations of
Bonding Systems environmental provisions of CHF 5.5
million were set aside the previous year, of which CHF
1.1 million was released in the year under review basedon revised estimates. This provision of CHF 4.4 million
corresponds to the anticipated cash outflow necessary
for the decontamination of a production site. The item
‘Other provisions’ includes the use of restructuring­provisions and provisions for structural adjustments
formed the previous year. Provisions no longer needed
for completed restructuring measures were released
because the costs were lower than anticipated.

Forbo Annual Report 2012 – Consolidated financial statements 117

29 Trade payables

Trade payables
CHF m
Accounts payable
Notes payable
Total trade payables

31.12.2012

31.12.2011

84.7
84.7

85.9
0.2
86.1

31.12.2012

31.12.2011

40.7
55.8
96.5

43.3
63.4
106.7

30 Accrued expenses

Accrued expenses
CHF m
Accrued expenses for compensation and employee benefits
Other accrued expenses
Total accrued expenses

Accrued expenses for compensation and employee
benefits mainly comprise overtime accruals and pro­visions. Other accrued expenses include accrued vol-ume rebates, commissions, premiums, interest andaccrued warranty costs, and similar items.

31 Current financial debt

Current financial debt
CHF mCurrent bank loans and overdrafts
Current portion of non-current debt
Total current financial debt

For information on covenants, see note 26 ‘Non-current financial debt’.

31.12.2012

31.12.2011

0.3
132.2
132.5

0.5
47.0
47.5

118 Forbo Annual Report 2012 – Consolidated financial statements

32 Discontinued operations and assets held forsale as well as liabilities directly associated withassets held for sale
On December 21, 2011, Forbo signed an agreementwith H.B. Fuller Company regarding the sale of the­industrial adhesives operation, including synthetic
polymers, of the Bonding Systems division. This trans­
action excludes the operations of the building andconstruction adhesives business unit. The sale price
was CHF 384.7 million. After fulfillment of all conditions, the transaction was closed on March 5, 2012.

In the consolidated balance sheet the assets and liabilities of the discontinued operations were recognizedin the previous year under ‘Assets held for sale’ and‘Liabilities directly associated with assets held for sale’.
For movement tables related to assets and liabilities,
discontinued operations were transferred at the closing values of the reporting period in the previous
year’s data. The consolidated cash flow statement includes the cash flows from discontinued operations.
This note provides a summary of these cash flows­related to the discontinued operations separately.

Cash flows from discontinued operations:

CHF mCash flow from operating activities
Cash flow from investment activities
Cash flow from financing activities

2012

2011

4.4
– 2.2
0.1

– 0.4
– 7.9
2.3

In the previous year the assets related to the sale ofthe industrial adhesives activity, including synthetic
polymers, were reported under assets held for sale:
2011
CHF m
Property, plant, and equipment
Intangible assets
Deferred taxes
Investments and other non-current assets
Inventories
Trade receivables
Other receivables
Deferred income and prepaid expenses
Cash and cash equivalents
Total assets of discontinued operations

83.9
109.6
5.5
0.1
63.1
81.0
3.3
2.0
12.9
361.4

Forbo Annual Report 2012 – Consolidated financial statements 119

In the prior year, the liabilities directly associated withthe assets held for sale were as follows:
2011
CHF m
Employee benefit obligations
Non-current provisions
Deferred taxes
Trade payables
Accrued expenses
Current tax liabilities
Other current liabilities
Total liabilities directly associated with assets held for sale

13.9
2.5
17.3
42.3
15.8
1.1
4.7
97.6

Net profit/loss from discontinued operations:

CHF m
Net sales
Cost of goods sold
Gross profit
Other functional costs and other operating expenses
Operating profit
Financial profit
Profit before taxes
Related income taxes
Profit after taxes
Profit from the sale of the discontinued operations before taxes
Related income taxes
Profit from the sale of the discontinued operations after taxes
Group profit from discontinued operations

2012

2011

90.2
– 73.616.6– 11.15.5

503.4– 424.7
78.7– 68.8
9.9
– 0.9
9.0
0.1
9.1

5.5
– 0.5
5.0
73.6
– 5.5
68.1
73.1

9.1

120 Forbo Annual Report 2012 – Consolidated financial statements

The profit from the sale can be determined as follows:
2012
CHF m
Sales price in cash
Compensation for loans to discontinued operations
Net assets disposed of
Cumulative translation differences
Transaction costs
Profit from sale before taxes

384.7– 186.0– 81.1– 41.2– 2.8
73.6

The outgoing net assets are distributed among the following asset categories:
2012
CHF m
Property, plant, and equipment
Intangible assets
Other non-current assets
Inventories
Receivables and other current assets
Cash and cash equivalents
Total assets of discontinued operations
Financial debt
Employee benefit liabilities, provisions, and other non-current liabilities
Trade payables
Provisions and other current liabilities
Total liabilities in connection with discontinued operations
Total net assets of the discontinued operations

The sale resulted in an inflow of CHF 368.0 million,
which is made up of the difference between the sales
price in cash amounting to CHF 383.2 million on the
one hand and cash and cash equivalents of the di-vested subsidiaries (CHF 15.2 million) on the other. As
at December 31, 2012, Forbo still had a receivable of
CHF 1.5 million from H.B. Fuller Company arising fromthe sale.

81.6
107.1
13.1
68.2
90.5
15.2
375.7
186.0
32.8
54.4
21.4
294.6
81.1

Forbo Annual Report 2012 – Consolidated financial statements 121

33 Contingent liabilities

CHF mContingent liabilities

31.12.2012

31.12.2011

2.2

1.5

2012

2011

8.4
18.9
2.9
30.2

7.5
17.5
5.6
30.6

The item ‘Contingent liabilities’ refers to sureties andguarantees in favor of third parties.

34 Leasing

Leasing
CHF mOperating leasing liabilities:
Up to 1 year
2 – 5 years
More than 5 years
Total operating leasing liabilities

Expenses for operating leasing and rentals charged
to the 2012 income statement totaled CHF 20.4 million (2011: CHF 18.5 million). The Group has no individually significant operational leasing contracts.

Finance lease liabilities stood at CHF 2.6 million at
year-end 2012 (2011: CHF 0.7 million) and appear under ‘Non-current financial debt’.

122 Forbo Annual Report 2012 – Consolidated financial statements

35 Additional information
on financial instruments
The financial instruments held at the balance sheet
date fall into the following categories:
As at December 31, 2012
CHF m
AssetsTrade receivables and other receivables
Other financial non-current assets
Cash and cash equivalents
Other current financial instruments
Derivative financial instruments
Total assets

Cash andcash equivalents

Loans andreceivables

Derivatives used
for hedging

Financial assets
available-for-sale

179.2
251.3
142.1
251.3

CHF m
Liabilities
Interest-bearing debt
Derivative financial instruments
Trade payables and other payables1)
Total liabilities

179.2

0.1
0.1

142.1

Financial liabilities
at amortized costs

Derivatives used
for hedging

Financial
instruments held
for trading

Derivatives used
for hedging

Financial assets
available-for-sale

135.2
95.4
230.6

As at December 31, 2011
CHF m
AssetsTrade receivables and other receivables
Other financial non-current assets
Cash and cash equivalents
Marketable securities
Derivative financial instruments
Total assets

CHF m
Liabilities
Interest-bearing debt
Derivative financial instruments
Trade payables and other payables1)
Total liabilities

1) Excluding sales tax.

Cash andcash equivalents

Loans andreceivables

183.9
0.2
192.4
0.1
192.4

184.1

0.3
0.3

0.1

Financial liabilities
at amortized costs

Derivatives used
for hedging

Financial
instruments held
for trading

191.7
2.5
98.5
290.2

2.5

Forbo Annual Report 2012 – Consolidated financial statements 123

The following table classifies the financial instrumentsthat are valued at fair value in a three-level hierarchy:–– Level 1: listed market prices in an active market for
identical assets and liabilities.

As at December 31, 2012
CHF m
Financial instruments held for trading purposes
Derivative financial instruments
Total assets
Derivative financial instruments
Total liabilities

As at December 31, 2011
CHF m
Financial assets available-for-sale
Derivative financial instruments
Total assets
Derivative financial instruments
Total liabilities

Level 1
142.1
142.1

Level 10.1
0.1

36 Acquisition of operations
In the year under review, Forbo acquired the operations of Phoenix Floor & Wall Products Inc., Canada­(asset deal), a distributor of Flooring Systems. The purchase price totaling CHF 12.4 million was paid entirely in cash. The acquired identifiable assets and theassumed debts recognized at fair value on the dateof acquisition consist primarily of trade receivables(CHF 4.1 million), inventories (CHF 5.9 million), intangible assets (CHF 1.7 million), property, plant, and equipment (CHF 0.2 million), and debts (CHF 0.3 million). No
goodwill was generated. The purchase price and val­uations of the acquired asset are definitive. The trans­
action costs arising from the acquisition were recognized in the income statement.

–– Level 2: input factors other than market prices included in level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices).
–– Level 3: input factors for the asset or liability that are
not based on observable market data (non-observ­
able inputs).

Level 2

Level 3

Total
142.1
0.1
142.2

Level 3

Total
0.1
0.3
0.4
2.5
2.5

0.1
0.1

Level 2
0.3
0.3
2.5
2.5

The acquisition took place on November 1, 2012, andhas only had a minor impact on the results of theGroup. Had the acquisition took place at the beginningof the year, Group sales and profit would have been
affected insignificantly.

124 Forbo Annual Report 2012 – Consolidated financial statements

37 Related party transactions
Compensation paid to members of the Board of­Directors and Executive Board:
Executive Board
CHF mRemuneration
Employer contributions to the pension scheme
Share-based payments
Total payments

2012
2.2
0.4
0.2
2.8

2011
4.8
0.4
3.1
8.3

Board of Directors
2012
0.9
0.2
1.5
2.61)

2011
0.9
0.2
1.5
2.61)

1) This sum includes the payments to the Board of Directors and to
the Delegate of the Board of Directors and CEO.

The compensation paid to the Executive Board in thereporting year consists of the gross base salary, special
bonuses, private use of the company car, and social
security payments made by the company. The reduction versus the previous year is due to special bonuses
paid in 2011 in connection with the sale of the industrial adhesives activity. Employer contributions to thepension fund are reported separately. Share-based
payments to the Executive Board consist of an estimated performance-based variable remuneration within
the framework of the MIP (see note 25 ‘Employee participation plan’) for the reporting year, amounting to
CHF 0.8 million (payable in spring 2013) less the difference, amounting to CHF 0.6 million, between the bonuses deferred at the end of the previous year (payablein equity instruments) and the value of the equity instruments actually issued in the year under review.
The compensation paid to the Board of Directors included CHF 0.3 million (2011: CHF 0.3 million) for theDelegate of the Board of Directors and CEO. This includes annual amounts of CHF 0.15 million (2011: CHF
0.15 million) for payment of employee contributions to
the pension fund and social security, and of CHF 0.15
million (2011: CHF 0.15 million) for private use of thecompany car, employer contributions to the pension
fund and to the AHV/ALV (old-age and unemployment
insurance), plus accident and daily benefits insurance. Employer contributions to the pension fund arereported separately. Current payment benefits for nonexecutive Board members of Forbo Holding Ltd totaled CHF 0.6 million (2011: CHF 0.6 million).

With effect from January 2009, the employment contract with the Delegate of the Board of Directors and
CEO was extended to run until the end of April 2013.
Compensation is again being paid mainly in shares.
The modalities are very similar to the provisions of
the first contract. The 29,775 shares are restricted until
December 31, 2013. The share-based payments madeto the Board of Directors include the annual portion of
the shares of Forbo Holding Ltd allocated to the Delegate of the Board of Directors and CEO totaling CHF 1.1
million (2011: CHF 1.1 million) pursuant to the extension of the employment contract until the end of April
2013. In accordance with IFRS 2, these shares havebeen recognized on a pro rata basis.
The employment contract with the Delegate of theBoard of Directors and CEO, which ends on April 30,
2013, was extended until December 31, 2016. The bulkof the compensation will again be paid in vested
shares which have a vesting period of three, four, andfive years respectively, and in an annual cash paymentof CHF 310,000 to be used for taxes and for employee
contributions to the pension fund and social security.
The last third of the share-based compensation will
not be available until May 1, 2018 at the earliest. The
underlying share price used to calculate the numberof shares is the weighted average price of the first andlast five days on which Forbo Holding shares weretraded on the stock market in 2012 (CHF 522.12), lessthe reduced value as a result of vesting of the shares.
The share package corresponds to annual compensation of about CHF 2,200,000 (5,314 shares per annum).
The share package and the cash remuneration are
deemed to cover all compensations such as bonuses,
options, salary adjustments, inflation, etc. This share
package may not be either pledged or assigned. No
severance payment or compensation in the event of achange of control was agreed.

Total
2012
3.1
0.6
1.7
5.4

2011
5.7
0.6
4.6
10.9

Forbo Annual Report 2012 – Consolidated financial statements 125

Moreover, the share-based payments made to theBoard of Directors include 588 Forbo Holding Ltd
shares allocated to the non-executive Board members in 2012 (2011: 508 shares) with a market valueof CHF 0.4 million (2011: CHF 0.4 million).
Further details relating to the compensation paid to
the Executive Board and the Board of Directors canbe found in note 17 ‘Disclosure of compensation to
the Board of Directors and the Executive Board pur­suant to Article 663bbis and Article 663c of the Swiss
Code of Obligations’ in the financial statements for
Forbo Holding Ltd.
As at December 31, 2012 and 2011, Forbo had no significant receivables due from or liabilities to relatedparties.
38 Risk assessment and financial
risk management
The tasks of the Board of Directors include identifying
risks, determining suitable measures, and implementing those measures or having them implemented. The
Board of Directors of Forbo Holding Ltd conducted aGroup-wide risk assessment in the reporting year andalso determined the risks to be managed by particularmanagement levels. The Board of Directors is closely
involved in the assessment of strategic risks and, in
consultation with the Executive Board, ensures that
operational risks are dealt with appropriately and thatthey are duly reported. This approach gives the Board
a complete overview of the key risks and measures.
This broad overview enables the Group to set priorities
and allocate the necessary resources.

Financial risk management
In its day-to-day operations, the Forbo Group uses
­derivative and non-derivative financial instruments tomanage the risks and opportunities arising from fluctuations in exchange rates and interest rates. The various risks associated with existing assets and liabilities
as well as planned and anticipated transactions aremonitored and managed centrally – with due regard
to the Group’s overall risk exposure. In line with theGroup’s hedging policy, Corporate Treasury constantly
monitors both the risk exposure and the effectivenessof the hedging instruments and issues recommendations with regard to partial or complete hedging ofexisting risks.
The Group’s financial risk management policy does
not permit the use of derivative financial instruments
for speculation. In order to manage counterparty risk,
derivative financial transactions are concluded onlywith first-class banks. The creditworthiness of these
institutions is assessed on the basis of evaluations byleading rating agencies.
Derivatives include instruments used by the company
to manage foreign currency and interest risks or combinations thereof.

126 Forbo Annual Report 2012 – Consolidated financial statements

Foreign exchange risk management
Risks arising from short-term currency exposure cre­ated by purchases and sales of goods and services(transaction risks) are identified, and selective hedging
strategies are implemented in line with an on­going­assessment of exchange rate movements. The Group
uses only foreign exchange forward and option contracts with maturities of up to twelve months to hedge
against transaction risk.

Sensitivity analysis of existing foreignexchange positions on the balance sheet date
The following table shows the sensitivity of profit before tax and of equity to changes in the exchange rateof the US dollar, the euro, the pound sterling and
the Swiss franc. The table illustrates the sensitivity inrelation to transaction risks from financial instruments.
Translation risks, the effects of loans that qualify as net
investments, and net investment hedges are not taken into account.

Furthermore, risks associated with the translation ofassets and liabilities denominated in foreign currencies (translation risks) are managed by establishing anappropriate financing policy that includes net investment hedges.
2012
Changein exchange rate5%
– 5%

Impact on profit
before tax
0.4
– 0.4

USD/CHF

5%
– 5%

0.1
– 0.1

EUR/USD

5%
– 5%

0.0
0.0

GBP/USD

5%
– 5%

0.0
0.0

Changein exchange rate5%
– 5%

Impact on profit
before tax
0.3
– 0.3

Impact on
shareholders’ equity
0.0
0.0

USD/CHF

5%
– 5%

0.4
– 0.4

– 0.1
0.1

EUR/USD

5%
– 5%

0.0
0.0

1.4
– 1.4

GBP/USD

5%
– 5%

– 0.2
0.2

1.1
– 1.1

CHF m
EUR/CHF

Impact on
shareholders’ equity

2011
CHF m
EUR/CHF

Forbo Annual Report 2012 – Consolidated financial statements 127

Management of interest rate risks
Interest rate risks arise from changes in the fair value ofinterest-bearing assets and liabilities caused by fluc­tuations in interest rates. Since these risks may have anegative effect on net financial profit and shareholders’equity, the Group uses derivatives to manage them ona case-by-case basis. The table below shows the sensitivity of profit before tax and of shareholders’ equity to
the stated changes in interest rates for cash and cash

equivalents, interest-bearing debt, and financial derivatives.
An average figure has been used for cash and cash
equivalents as the final amount is not significant forcalculating interest rate sensitivity. The average was arrived at by taking the arithmetic mean of the initial andfinal amounts.

2012
Changein interest rate
50bp
– 50bpImpact on profit
before tax
0.2
– 0.2

USD

50bp
– 50bp

0.0
0.0

CHF

50bp
– 50bp0.5– 0.5

Changein interest rate
50bp
– 50bpImpact on profit
before tax
0.3
– 0.3

Impact on
shareholders’ equity
0.0
0.0

USD

50bp
– 50bp

0.0
0.0

0.0
0.0

CHF

50bp
– 50bp

0.2
– 0.2

0.0
0.0

CHF m
EUR

Impact on
shareholders’ equity

2011
CHF m
EUR

128 Forbo Annual Report 2012 – Consolidated financial statements

Management of liquidity risksGroup companies need sufficient cash in order tomeet their liabilities. Corporate Treasury is responsible
for managing liquidity surpluses. The share of the­aggregate cash and cash equivalents and securities
managed by Corporate Treasury was around 75% on
December 31, 2012. The Group has sufficient liquidity
reserves (as at December 31, 2012, these stood at
CHF 251.3 million in cash and cash equivalents and
CHF 142.0 million in securities and fixed-term deposits) to be able to meet its commitments at any time.

At present, the Group regards a cash level of roughly
CHF 65 million as sufficient to meet its payment obligations at all times.
The maturity structure of the existing financial liabilities is shown in the following table. These liabilities correspond to contractually agreed maturities and rep­resent nominal payment outflows. Inflows and outflows of funds from derivative financial instruments areshown separately.

As at December 31, 2012

CHF m
Interest-free liabilities
Leasing contract liabilities
Liabilities from bonds
Cash outflow from financial derivatives
Cash inflow from financial derivatives

Remaining term
to maturity up to
1 year
95.1
1.3
137.8
1.9
2.0

Remaining term
to maturity
1 – 2 years
0.2
0.2

Remaining term
to maturity
2 – 5 years

Remaining term
to maturity up to
1 year
0.5
98.3
0.2
55.9
84.4
82.3

Remaining term
to maturity
1 – 2 years

Remaining term
to maturity
2 – 5 years

0.1
0.2
150.3

0.5

Remaining term
to maturity
over 5 years
0.1

1.5

As at December 31, 2011

CHF m
Liabilities to banks
Interest-free liabilities
Leasing contract liabilities
Liabilities from private placements and bonds
Cash outflow from financial derivatives
Cash inflow from financial derivatives

Management of credit risks
Credit risks arise from the possibility that customers
may not be able to meet their agreed commitments.
To manage this risk adequately, the financial creditworthiness of various customers is constantly monitored. Credit risks are diversified by the company’s
broad customer base in various business segments

Remaining term
to maturity
over 5 years
0.1

and geographic regions. With regard to counterparty
risk exposure to banks, Group-wide directives stipulatethat financial investments and other financial transactions are to be made only with first-class banks. Given
the credit ratings of these counterparties, the Group
does not anticipate any defaults.

Forbo Annual Report 2012 – Consolidated financial statements 129

Capital management
For the Group, capital management means both optimizing the capital employed and managing consolidated shareholders’ equity, which consists of paid-up
share capital, treasury shares, reserves, and translationdifferences. As at December 31, 2012, shareholders’ equity stood at CHF 817.4 million. The objectives of capital management are to ensure that the Group remains
a going concern, to preserve its financial flexibility forinvestments, and to achieve a risk-adjusted return on
equity for investors.
Changes in economic conditions may require adjustments to the Group’s shareholders’ equity. These adjustments can take the form of dividend distributions,capital repayments or increases, or share buybacks.

39 Events after the balance sheet date
At the Extraordinary General Meeting of Forbo Holding Ltd held on November 5, 2012, the shareholders­approved a capital reduction of CHF 250,000 to
CHF 225,000 in connection with the share buyback
program approved at the Annual General Meetingof April 29, 2011, and also approved the necessary
amendment to the Articles of Association. Owing tothe ­legally mandatory notice to creditors, the capital
reduction had not yet been entered in the Com­
mercial Register on December 31, 2012. The entry was
made after the balance sheet date on January 17,2013.

130 Forbo Annual Report 2012 – Consolidated financial statements

Group companies(as at December 31, 2012)

Currency

Share capital

Equityinterest

AUD
AUD

1,400,000
6,000,000

100%
100%

S

ViennaViennaEUR
EUR

73,000330,000

100%
100%

S

Belgium
Forbo Flooring N.V.

Groot-Bijgaarden

EUR

250,000

100%

S

BrazilForbo Pisos Ltda.
Forbo Siegling Brasil Ltda.

São PauloSão Paulo

BRL
BRL

2,000,000
7,008,746

100%
50%

S

CanadaForbo Flooring Canada Corp.
Forbo Siegling Canada Corp.

Halifax
Halifax

CAD
CAD

500,000
501,000

100%
100%

S

Chile
Forbo Siegling Chile S.A.

Santiago

CLP

335,631,092

50%

Czech Republic
Forbo Siegling Ceska republika s.r.o.
Forbo s.r.o.

Liberec
PragueCZK
CZK100,000
500,000

100%
100%

Denmark
Forbo Flooring A/SForbo Siegling Danmark A/S

Glostrup
Brøndby

DKK
DKK

500,000
32,200,000

100%
100%

Finland
Forbo Flooring Finland Oy

HelsinkiEUR

33,638

100%

FranceForbo Château Renault S.A.S.
Forbo Participations S.A.S.
Forbo Reims SNC
Forbo Sarlino S.A.S.
Forbo Siegling France S.A.S.

Château-Renault
Reims
Reims
Reims
Lomme

EUR
EUR
EUR
EUR
EUR

1,000,000
5,000,000
3,879,810
6,400,000
819,000

100%
100%
100%
100%
100%

Company

Registered office

Australia
Forbo Floorcoverings Pty. Ltd.
Forbo Siegling Pty. Ltd.

Wetherill Park, NSW
Wetherill Park, NSW

Austria
Forbo Flooring Austria GmbH
Forbo Siegling Austria Ges.m.b.H.

S Sales
MS Manufacturing and Sales
H Holding/Services
N Not consolidated as at December 31, 2012
D Direct participation of Forbo Holding Ltd

D

N

N

D

Flooring
Systems

Movement
Systems

Holding/Services

S

S

MS

S

MS

S
S

S
MS

H

MS
H
MS
S
S

Forbo Annual Report 2012 – Consolidated financial statements 131

Currency

Share capital

EUR
EUR
EUR
EUR
EUR

15,400,000
2,050,000
500,000
10,230,000
100,000

100%
100%
100%
100%
100%

Hong Kong

HKD

1

100%

Pune

INR

26,000,000

100%

DublinEUR127,000

100%

S

Segrate (Milan)
Paderno Dugnano(Milan)EUR
EUR

60,000120,000

100%
100%

S

Japan
Forbo Siegling Japan Ltd.

Tokyo

JPY

330,000,000

100%

Jersey, C.I.
Forbo Invest Ltd.

Saint Helier

GBP

25,000100%

Malaysia
Forbo Siegling SDN. BHD.

Johor Bahru

MYR

2,500,002

100%

S

MexicoForbo Siegling, S.A. de C.V.

Tlalnepantla

MXN

24,676,404

100%

MS

Netherlands
Forbo Eurocol B.V.
Forbo Flooring B.V.
Forbo Flooring Coral N.V.
Forbo NL Holding B.V.
Forbo-Novilon B.V.
Forbo Siegling Nederland B.V.

Zaanstad
Krommenie
Krommenie
Krommenie
Coevorden
Spankeren

EUR
EUR
EUR
EUR
EUR
EUR

454,000
11,350,000
1,944,500
13,500,000
3,624,000
113,445

100%
100%
100%
100%
100%
100%

Company

Registered office

Germany
Forbo Beteiligungen GmbH
Forbo Erfurt GmbH
Forbo Flooring GmbH
Forbo Siegling GmbH
Realbelt GmbH

LörrachErfurtPaderborn
Hanover
LörrachHong Kong
Forbo International Hong Kong Ltd.
India
Forbo Siegling Movement Systems
India Pvt. Ltd.
Ireland
Forbo Ireland Ltd.
Italy
Forbo Resilienti S.r.l.
Forbo Siegling Italia S.p.A.

S Sales
MS Manufacturing and Sales
H Holding/Services
N Not consolidated as at December 31, 2012
D Direct participation of Forbo Holding Ltd

D

D

Flooring
Systems

Movement
Systems

Equityinterest

Holding/Services

H
MS
S
MS
S

H

S

S

MS

H

MS
MS
MS
H
MS
S

132 Forbo Annual Report 2012 – Consolidated financial statements

Currency

Share capital

Equityinterest

NZD

650,000

100%

NOK

1,000,000

100%

S

Shanghai
Shenyang

CHF
USD

4,000,000
16,221,000

100%
100%

S

Portugal
Forbo-Revestimentos, S.A.

Maia (Porto)

EUR

74,850100%

S

Romania
Forbo Siegling Romania S.R.L.

Bucharest

RON

38,000100%

RussiaOOO ‘Forbo Flooring‘
OOO ‘Forbo Kaluga‘
OOO ‘Forbo Stroitech‘
ZAO ‘Forbo Siegling‘

Moscow
Moscow
Stary Oskol
Saint Petersburg

RUB
RUB
RUB
RUB

500,000
158,313,780
144,181,000
400,000

100%
100%
100%
100%

Slovakia
Forbo Siegling s.r.o.

Malacky

EUR

15,281,639

100%

South Korea
Forbo Korea Ltd.

Seoul

KRW

900,000,000

100%

S

Barcelona
Montcada i Reixac(Barcelona)

EUR
EUR

60,101
1,532,550

100%
100%

S

SEK
SEK
SEK

8,000,000
50,000,000
1,000,000

100%
100%
100%

S

Company

Registered office

New Zealand
Forbo Siegling Ltd.

AucklandNorwayForbo Flooring AS

Asker

People’s Republic of China
Forbo Shanghai Co., Ltd.
Forbo Siegling (China) Co., Ltd.

Spain
Forbo Pavimentos, S.A.
Forbo Siegling Iberica, S.A.

SwedenForbo Flooring AB
Forbo Project Vinyl AB
Forbo Siegling Svenska AB

S Sales
MS Manufacturing and Sales
H Holding/Services
N Not consolidated as at December 31, 2012
D Direct participation of Forbo Holding Ltd

Gothenburg
GothenburgKållered (Gothenburg)

D

D
D

Flooring
Systems

Movement
Systems

Holding/Services

S

MS
MS

S

S
MS
MS
S

MS

S

S

H
S

Forbo Annual Report 2012 – Consolidated financial statements 133

Currency

Share capital

Equityinterest

CHF
CHF
CHF
CHF
CHF

100,000
10,000,000
250,000
100,000
100,000

100%
100%
100%
100%
100%

Istanbul

TRY

10,000100%

United Kingdom
Forbo Flooring UK Ltd.
Forbo-Nairn Ltd.
Forbo Siegling (UK) Ltd.
Forbo UK Ltd.
Westbond Ltd.

Kirkcaldy
LondonDunkinfield
LondonDerbyshire

GBP
GBP
GBP
GBP
GBP

3,609,990
8,000,000
50,77449,500,000
400,000

100%
100%
100%
100%
100%

USA
Forbo America Inc.
Forbo America Services Inc.
Forbo Flooring, Inc.
Forbo Siegling, LLC

Wilmington, DE
Wilmington, DE
Wilmington, DE
Wilmington, DE

USD
USD
USD
USD

19,957,259
50,0003,517,000
15,455,000

100%
100%
100%
100%

Company

Registered office

Switzerland
Forbo Financial Services AG
Forbo Finanz AG
Forbo Finanz II AG
Forbo-Giubiasco SA
Forbo International SA

Baar
Baar
Baar
Giubiasco
Baar

TurkeyForbo Siegling Hareket Sistemleri Ticaret
Limited Çirketi

S Sales
MS Manufacturing and Sales
H Holding/Services
N Not consolidated as at December 31, 2012
D Direct participation of Forbo Holding Ltd

D
D
D
D
D

D

Flooring
Systems

Movement
Systems

Holding/Services

H
H
H
MS
MS

H

S

MS

H
H
S
H
H

H
H
S
MS

134 Forbo Annual Report 2012 – Consolidated financial statements

Report of the statutory auditor

Report of the statutory auditor to the General Meetingof Forbo Holding Ltd, Baar
Report of the statutory auditor on the consolidated financial statements
As statutory auditor, we have audited the consolidated financial statements of Forbo Holding Ltd, which ­comprisethe consolidated balance sheet, consolidated income statement, comprehensive income statement, consolidated shareholder’s equity, consolidated cash flow statement, and notes (pages 74 to 129), for the year ended
December 31, 2012.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial­statements in accordance with the International Financial Reporting Standards (IFRS) and the requirements ofSwiss law. This responsibility includes designing, implementing, and maintaining an internal control system­relevant to the preparation and fair presentation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with Swiss law and Swiss Auditing Standards as well as the International
Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due tofraud or error. In making those risk assessments, the auditor considers the internal control system relevant to theentity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of theaccounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements for the year ended December 31, 2012 give a true and fairview of the financial position, the results of operations and the cash flows in accordance with the International
Financial Reporting Standards (IFRS) and comply with Swiss law.

Forbo Annual Report 2012 – Consolidated financial statements 135

Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) andindependence (Article 728 CO and Article 11 AOA) and that there are no circumstances incompatible with our
independence.
In accordance with Article 728a Paragraph 1 Item 3 CO and Swiss Auditing Standard 890, we confirm that an­internal control system exists which has been designed for the preparation of consolidated financial statements
according to the instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
PricewaterhouseCoopers AG

Daniel Ketterer
Audit expert
Auditor in charge

Zurich, March 13, 2013

Reto Tognina
Audit expert

136 Forbo Annual Report 2012 – Consolidated financial statements

Consolidated income statements
2008 – 2012
CHF m
Net sales
Cost of goods sold
Gross profit
Development costs
Marketing and distribution costs
Administrative costs
Other operating expenses
Other operating income
Operating profit
Financial income
Financial expenses
Group profit before taxes
Income taxes
Group profit for the year from continuing operations
Group profit for the year from discontinued operations after taxes
Group profit for the year

The distinction between continuing and discontinued
operations is only drawn for the period from 2010 to
2012.

2012

2011

2010

2009

2008

1,201.1– 763.2
437.9– 16.3– 194.1– 103.4– 25.3
63.8
162.6
5.7
– 11.2157.1– 33.0
124.1
73.1
197.2

1,203.8– 745.1
458.7– 16.0– 192.5– 96.6– 17.8
13.1
148.9
30.1
– 11.7167.3– 29.9
137.4
9.1
146.5

1,291.2– 785.6505.6– 17.6– 213.3– 103.9– 12.1
10.0
168.7
44.3
– 15.0198.0– 48.8
149.2
14.1
163.3

1,782.4– 1,200.4
582.0– 27.9– 270.0– 128.3– 46.4
12.4
121.8
4.3
– 24.7101.4– 25.3

1,918.7– 1,325.0
593.7– 29.9– 282.7– 137.9– 50.0
23.9
117.1
9.2
– 104.9
21.4
– 5.4

76.1

16.0

The consolidated income statements for the period
from 2008 and 2009 therefore include both the continuing and the discontinued operations.

Forbo Annual Report 2012 – Consolidated financial statements 137

Consolidated balance sheets
2008 – 2012
Assets
CHF m
Non-current assets
Property, plant, and equipment
Intangible assets
Deferred tax assets
Investments in associates and other non-current assets
Current assets
Assets held for sale
Inventories
Trade receivables
Other receivables
Deferred income and prepaid charges
Other current financial instruments
Cash and cash equivalents
Total assets

Shareholders’ equity and liabilities
CHF m
Shareholders’ equity
Share capital
Treasury shares
Reserves and retained earnings
Non-current liabilities
Non-current financial debt
Employee benefit obligations
Non-current provisions
Deferred tax liabilities
Current liabilities
Trade payables
Current provisions and accrued expenses
Current financial debt
Current tax liabilities
Other current liabilities
Liabilities directly associated with assets held for sale
Total liabilities
Total shareholders’ equity and liabilities

31.12.2012

31.12.2011

31.12.2010

31.12.2009

31.12.2008

530.9
355.0
149.2
26.5
0.2
803.0

743.9
450.2
270.4
17.6
5.7
750.3

885.7
549.9
309.1
20.5
6.2
859.7

928.7
586.3
311.7
28.8
1.9
909.1

218.6
150.2
28.9
11.9
142.1
251.3
1,333.9

536.4
359.8
153.5
21.9
1.2
965.5
361.4
219.6
159.2
24.8
8.0
0.1
192.4
1,501.9

260.9
220.8
28.4
21.4
47.4
171.4
1,494.2

261.0
237.1
33.1
30.1
100.2
198.2
1,745.4

298.3
265.8
32.2
23.6
73.6
215.6
1,837.8

31.12.2012

31.12.2011

31.12.2010

31.12.2009

31.12.2008

817.4
0.3
– 0.1
817.2
137.4
2.6
54.8
35.8
44.2
379.1
84.7
112.9
132.5
26.6
22.4

815.3
0.3
– 0.1
815.1
276.2
144.5
42.7
39.5
49.5
410.4
86.1
125.0
47.5
27.6
26.6
97.6
686.6
1,501.9

729.7
0.3
– 0.1
729.5
360.8
196.5
74.7
35.3
54.3
403.7
135.7
140.3
65.9
31.0
30.8

679.6
0.3
– 0.1
679.4
720.2
550.1
68.6
38.8
62.7
345.6
123.3
158.2
3.4
24.7
36.0

584.4
10.9
– 2.0
575.5
676.6
512.4
58.6
37.0
68.6
576.8
144.5
149.0
181.3
25.3
76.7

764.5
1,494.2

1,065.8
1,745.4

1,253.4
1,837.8

516.5
1,333.9

Financial report

Financial statements for Forbo Holding Ltd
Income statement
Balance sheet
Notes to the financial statements
Proposal for appropriation of available earnings
Report of the statutory auditor

139
140
141
142
149
150

140 Forbo Annual Report 2012 – Annual statements for the holding company

Income statementfor Forbo Holding Ltd
IncomeCHF
Financial income:From investments in and advances to Group companies
From securities and short-term investments
Other income
Total income

Expenses
CHF
Administrative expenses
Financial expenses
Taxes
Total expenses
Net profit for the year

2012

2011

77,450,515
13,166,813
24,097,417
114,714,745

65,883,284
3,497,813
412,203
69,793,300

2012

2011

5,479,595
13,541,862
2,573,682
21,595,139
93,119,606

3,903,605
17,884,349
9,542
21,797,496
47,995,804

Note

1
2
3

Note

4

Forbo Annual Report 2012 – Annual statements for the holding company 141

Balance sheet for Forbo Holding Ltd(before appropriationof available earnings)
AssetsCHF
Non-current assets
Shareholdings in Group companies
Advances to Group companies
Current assets
Other receivables from Group companies
Other receivables from third parties
Deferred income and prepaid expenses
Marketable securities
Cash and cash equivalents
Total assets

Shareholders’ equity and liabilities
CHF
Shareholders’ equity
Share capital
Statutory capital contribution reserves:
Thereof general reserves
Thereof reserves for treasury shares
Other statutory reserves:
Thereof general reserves
Thereof reserves for treasury shares
Other reserves
Available earnings:
Retained earnings
Net profit for the year
Liabilities
Bond
Advances from Group companies
Other liabilities to Group companies
Current liabilities to third parties
Accrued expenses
Total shareholders’ equity and liabilities

31.12.2012

31.12.2011

478,600,868
385,089,092
93,511,776
288,215,153
1,220,310
342,320
289,547
229,051,468
57,311,508
766,816,021

634,888,337
479,665,053
155,223,284
119,493,164
2,246,365
115,053
2,743,557
57,169,149
57,219,040
754,381,501

31.12.2012

31.12.2011

9541,720,769
250,000

476,912,175
250,000

12
11

72,064,159
55,610,149

122,225,827
33,759,493

12
11

15,600,000
172,575,649
19,542,995

15,600,000
45,696,901
0

112,958,211
93,119,606
225,095,251
150,000,000

211,384,150
47,995,804
277,469,326
150,000,000
17,762,290
104,528,059
17,8305,161,147
754,381,501

Note

5
6

7
8

Note

13
14

70,177,261
20,422
4,897,568
766,816,021

142 Forbo Annual Report 2012 – Annual statements for the holding company

Notes to the financial statements
for Forbo Holding Ltd
1 Financial income from investments inand advances to Group companies
Income from investments in and advances to Group
companies amounts to CHF 77.5 million (2011: CHF
65.9 million) and consists of interest and dividend income.

3 Other income
This item includes income from the sale of the investments and trademarks (CHF 24.0 million) belonging
to the industrial adhesives activity, including synthetic
polymers.
4 Financial expenses

2 Financial income from securities
and short-term investments
This item totaling CHF 13.2 million (2011: CHF 3.5 million) includes income from securities and derivatives
and interest income from banks.

This item relates mainly to losses on foreign exchange
accounts, losses from forward currency contracts, losses from securities transactions, plus interest costs for
current bank debt.
5 Investments in Group companies
As at December 31, 2012, Forbo Holding Ltd held thefollowing direct investments:

Investments in Group companies
Currency

Share capitalin 1,000

Equityinterest

Holding/Services
Holding/Services
Services
Holding/Services
Holding/Services
Sales
Sales
Sales
Manufacturing and Sales
Services, Manufacturing,and Sales

USD
EUR
CHF
CHF
CHF
AUD
SEK
NOK
CHF
CHF

19,957
15,400100
10,000
250
1,400
8,000
1,000
100
100

100%
100%
100%
100%
53.60%
100%
100%
100%
100%
100%

JE-Saint Helier
FR-Reims
SE-Gothenburg

Services
Holding/Services
Services

GBP
EUR
SEK

25
5,000
50,000

50%
100%
100%

The holdings in the companies Forbo Adhesives UK
Ltd. and Paul Heinicke GmbH & Co. KG were eliminatedfrom the Group as at March 6, 2012, following the saleof the industrial adhesives activity, including synthetic
polymers, to H.B. Fuller Company.

7 Marketable securities

Company

Registered office

Activity

Forbo America Inc.
Forbo Beteiligungen GmbH
Forbo Financial Services AG
Forbo Finanz AG
Forbo Finanz II AG
Forbo Floorcoverings Pty. Ltd
Forbo Flooring AB
Forbo Flooring AS
Forbo-Giubiasco SA
Forbo International SA

US-Wilmington, DE
DE-Lörrach
CH-Baar
CH-Baar
CH-Baar
AU-Wetherill Park, NSW
SE-Gothenburg
NO-Asker
CH-Giubiasco
CH-BaarForbo Invest Ltd.
Forbo Participations S.A.S.
Forbo Project Vinyl AB

6 Advances to Group companies
Advances to Group companies are denominated in
Swiss francs and foreign currencies.

The item ‘Marketable securities’ includes treasury
shares in Forbo Holding Ltd. This balance sheet item
was valued at fair value as at December 31, 2012.
This item also includes repurchased bonds of Forbo
Holding Ltd.

Forbo Annual Report 2012 – Annual statements for the holding company 143

8 Cash and cash equivalents
This item consists of bank deposits and cash equivalents with initial maturities of three months or less.

r­ epurchase the company’s own shares, via a second
trading line on the SIX Swiss Exchange amounting to
up to a maximum of 10% of the share capital over a­period of three years in order to reduce the capital.

9 Share capital

10 Conditional capital

As at December 31, 2012, the share capital of Forbo
Holding Ltd totaled CHF 250,000 (2011: CHF 250,000),
divided into 2,500,000 registered shares with a par value of CHF 0.10 each. 21,419 registered shares without
voting and dividend rights are at the disposal of theBoard of Directors.

Originally, conditional capital of CHF 8,500,000 for the
exercise of shareholder options and warrants in connection with a bond issue was created by a resolutionof the Ordinary General Meeting held on April 27,
1994. Following the exercise of options in 1994, 1995,
and 1997 and reductions in the par value by CHF 22
per share in 2003, CHF 8 per share in 2004, CHF 6 pershare in 2007, CHF 10 per share in 2008, and CHF 3.90
per share in 2009, the conditional capital on December 31, 2012 remained unchanged against the prioryear at CHF 16,645.

At the Ordinary General Meeting of April 29, 2011, theshareholders of Forbo Holding Ltd voted to reduce theshare capital of CHF 271,315.20 to CHF 250,000 by cancellation of the 213,152 registered shares repurchased
through the share buyback program approved at theOrdinary General Meeting of April 25, 2008. The capital
reduction was completed with the entry in the Commercial Register of the canton of Zug on July 11, 2011
and was published in the SHAB on July 14, 2011. The
exchange adjustment took place on the same day.
Furthermore, at the Ordinary General Meeting ofApril 29, 2011, the shareholders of Forbo Holding Ltd
approved the proposal of the Board of Directors toTreasury shares
As at January 1, 2012
Additions
Disposals
As at December 31, 2012

11 Reserve for treasury shares
The ‘Reserve for treasury shares’ amounting to CHF
172.6 million and the capital contribution reserves
amounting to CHF 55.6 million relate to treasury
shares held at year-end by Forbo Holding Ltd and its
subsidiaries valued at cost of CHF 228.2 million (prioryear: CHF 79.5 million). The treasury shares developed
as follows over the reporting year:

Cost
CHF
79,456,395
161,951,757
13,222,353
228,185,799

Number ofregistered shares
201,242
274,675
28,657447,260

144 Forbo Annual Report 2012 – Annual statements for the holding company

12 General reserves

14 Other advances from Group companies

General reserves totaled CHF 87.7 million (prior year:
CHF 137.8 million) and consist of general reserves(CHF 15.6 million) and general capital contribution reserves (CHF 72.1 million). The statutory capital contribution reserves total CHF 127.7 million and consist ofgeneral reserves (CHF 72.1 million) and reserves fortreasury shares (CHF 55.6 million).

‘Other liabilities to Group companies’ as at December 31, 2012 include in particular advances from­Forbo Finanz AG in connection with its cash pool.

13 Bond
Forbo Holding Ltd issued a CHF 150.0 million four-yearbond on July 6, 2009 (maturity: July 31, 2013). The
bond has a coupon of 4 1/8%. It has been traded on
the SIX Swiss Exchange since July 20, 2009. By December 31, 2012, Forbo Holding Ltd repurchased bonds
with a nominal value totaling CHF 17.6 million. Thesebonds are included under the item ‘Marketable secu­
rities’.

15 Contingent liabilities
Guarantees and letters of comfort to third parties
in favor of Group companies amounted to CHF 8.2
million at year-end (2011: CHF 52.5 million), of which
CHF 3.1 million (2011: CHF 47.3 million) was utilized.
The reduction versus the prior year was due to the­repayment of the US private placement in November
2012. In the previous year guarantees had been given
to investors in connection with the US private placement.
16 Significant shareholders
According to information available to the Board of­Directors, the following shareholders or groups ofshareholders with restricted voting rights constituted
significant shareholders in the company pursuant to
Article 663c Swiss Code of Obligations as at the reporting date:

Michael Pieper, Hergiswil, and Artemis Beteiligungen I AG, Hergiswil
Forbo Holding Ltd, Baar, together with its two subsidiaries
Forbo International SA, Baar, and Forbo Finanz AG, Baar

Number of shares
681,628
447,260

As percentage
27.27%
17.89%

Forbo Annual Report 2012 – Annual statements for the holding company 145

17 Disclosure of compensation to the Boardof Directors and Executive Board pursuant
to Article 663bbis and Article 663c of the Swiss
Code of Obligations
Compensation
For the year 20121)
Base compensation

Variablecompensation

SharesCash, shares,
options
CHF

Cash
Name and function

Dr. Albert Gnägi, Chairman
Michael Pieper, Vice Chairman
Dr. Peter Altorfer, member
Dr. Reto Müller, member
Vincent Studer, member
Non-executive members of the Board of Directors2)
This E. Schneider,
Delegate of the Board of Directors and CEO3)4)
Board of Directors
Executive Board5)

CHF

NumberCHF

231,230
81,212
86,782
71,90786,782557,913150,000

243
85
92
76
92
588
12,761

153,770
53,78858,21848,09358,218372,087
2,015,855

707,913
1,871,343

13,34902,387,942
0760,812

Other
compensation

Total

CHF

CHF

30,11913,73014,39012,647
7,765
78,651
332,791

415,119
148,730
159,390
132,647
152,765
1,008,651
2,498,646

411,442
615,5093,507,297
3,247,664

1) The amounts shown in the table are based on valuation models
used and disclosed in the consolidated financial statements. The
table therefore shows the entire compensation that was grantedin the year under review, including compensation for which thepayment date or definitive legal title will occur after December 31,
2012.

members. The total compensation for the Delegate of the Boardof Directors and CEO for the financial year comes to CHF 2,498,646.
This figure, reported under ‘Other compensation’, includes private
use of a company car, employer contributions to the pension plan,and to the AHV/ALV (old-age and unemployment insurance), plus
accident and daily sickness benefits insurance.

2) The non-executive members of the Board of Directors receive a
fixed fee, the amount of which is determined according to whether the member is Chairman or a simple member of the Board or amember of the AFC or HRC. The cash compensation is shown asa gross amount before deduction of social security contributions.
40% of the compensation is paid to the directors in the form ofshares of Forbo Holding Ltd. The shares are valued at fair valueon the grant date. The total compensation for the non-executive
members of the Board of Directors also includes a lump-sum
for expenses plus employer contributions to the AHV/ALV (oldage and unemployment insurance). These are reported in thecolumn ‘Other compensation’.

The employment contract with the Delegate of the Board of­Directors and CEO, which ends on April 30, 2013, was extended
until December 31, 2016. The bulk of the compensation will again
be paid in vested shares which have a vesting period of three,four, and five years respectively, and in an annual cash payment of
CHF 310,000 to be used for taxes and for employee contributions
to the pension fund and social security. The last third of the sharebased compensation will not be available until May 1, 2018 at theearliest. The underlying share price used to calculate the numberof shares is the weighted average price of the first and last fivedays on which Forbo Holding shares were traded on the stock
market in 2012 (CHF 522.12), less the reduced value as a result ofvesting of the shares. The share package corresponds to annualcompensation of about CHF 2,200,000 (5,314 shares per annum).
The share package and the cash remuneration are deemed to cover all compensations such as bonuses, options, salary adjustments,
inflation, etc. This share package may not be either pledged or­assigned. No severance payment or compensation in the event ofa change of control was agreed.

3) The compensation paid to the Delegate of the Board of Directors
and CEO is disclosed separately and included under total compensation to the Board of Directors. It is not possible to clearly
allocate the total compensation paid to the two functions.
4) With effect from January 2009, the employment contract with the
Delegate of the Board of Directors and CEO was extended to encompass the period from January 1, 2011 to April 30, 2013. The
remuneration was again mainly in shares. The modalities are very
similar to the provisions of the first contract. In lieu of salary payments, for the contractual period of employment until April 30,
2013, he was allocated 29,775 shares at the market value on conclusion of the agreement, i.e. CHF 158 each, for the entire term of
the agreement. These shares were time-vested until December 31,
2013 and freely available only as of January 1, 2014. In addition to
the share package, the Delegate of the Board of Directors and CEO
draws an annual sum of CHF 150,000, which is used to make employee contributions to the pension fund and for social security
contributions. The share package and the cash remuneration are
deemed to cover all compensations such as bonuses, inflation, options, etc. The corresponding personnel expenses are charged tothe income statement over the entire contractual period on a pro
rata basis (see note 25 ‘Employee participation plan’ to the consolidated financial statements). The Delegate of the Board of Directors
and CEO does not benefit from the Management Investment Plan
(MIP) or the share-based payments for the non-exe­cutive Board

5) The total compensation paid to the members of the Executive
Board (excluding the Delegate of the Board of Directors and CEO)was CHF 3,247,664 million in the year under review. It compriseda gross basic salary and a performance-related bonus, which is
set in March of the year following the business year in question
and is determined by the achievement of the individual and theGroup targets. The performance-related component is paid in accordance with the rules of the Management Investment Plan (MIP)(see note 25 ‘Employee participation plan’ to the consolidated­financial statements). The total compensation paid to the members of the Executive Board also includes private use of a company
car, employer contributions to the pension plan, and to the AHV/
ALV (old-age and unemployment insurance) plus accident anddaily sickness benefits insurance, which are shown separately inthe column ‘Other compensation’.

146 Forbo Annual Report 2012 – Annual statements for the holding company

Compensation
For the year 20111)
Base compensation

Variablecompensation

SharesCash, shares,
options
CHF

Cash
Name and function

Dr. Albert Gnägi, Chairman
Michael Pieper, Vice Chairman
Dr. Peter Altorfer, member
Dr. Reto Müller, member6)
Vincent Studer, member
Non-executive members of the Board of Directors2)
This E. Schneider,
Delegate of the Board of Directors and CEO3)4)
Board of Directors
Executive Board5)

1) The amounts shown in the table are based on valuation models used and disclosed in the consolidated financial statements.
The table therefore shows the entire compensation issued in thereporting year, including compensation for which the payment
date or ­definitive legal title will occur after December 31, 2011.
2) The non-executive members of the Board of Directors receive a
fixed fee, the amount of which is determined according to whether the member is Chairman or a simple member of the Board ora member of the AFC or HRC. The cash compensation is shown
as a gross amount before deduction of social security contributions. 40% of the compensation is paid to the directors in the formof shares of Forbo Holding Ltd. The shares are valued at fair valueon the grant date. The total compensation for the non-executive
members of the Board of Directors also includes a lump-sum
for expenses plus employer contributions to the AHV/ALV (old-age
and unemployment insurance). These are reported in the column‘Other compensation’.
3) The compensation paid to the Delegate of the Board of Directors
and CEO is disclosed separately and included under total compensation to the Board of Directors. It is not possible to clearly
allocate the total compensation paid to the two functions.
4) With effect from January 2009, the employment contract with
the Delegate of the Board of Directors and CEO was extended
to ­encompass the period from January 1, 2011 to April 30, 2013.
Compensation is again being paid mainly in shares. The modalities
are very similar to the provisions of the first contract. In lieu of salary payments, for the contractual period of employment until April
30, 2013, he was allocated 29,775 shares at the market value on
conclusion of the agreement, i.e. CHF 158 each, for the entire termof the agreement. These shares are restricted until December 31,
2013 and freely available only as of January 1, 2014. In addition
to the share package, the Delegate of the Board of Directors and
CEO draws an annual sum of CHF 150,000, which is used to makeemployee contributions to the pension fund and for social security contributions. The share package and the cash remuneration
are deemed to cover all compensations such as bonuses, inflation,

CHF

NumberCHF

230,934
80,83186,60947,63986,609532,622150,000

219
77
83
46
83
508
12,761

154,066
54,16958,39132,361
58,391
357,378
2,015,855

682,6224,229,999

13,26902,373,233
50,000

Other
compensation

2,708,000

options, etc. The corresponding personnel expenses are charged
to the income statement over the entire contractual period on
a pro rata basis (see note 25 ‘Employee participation plan’ to theconsolidated financial statements). The Delegate of the Board of
Directors and CEO does not benefit from the Management Investment Plan (MIP) or the share-based payments for the non-exe­
cutive Board members. The total compensation for the Delegateof the Board of Directors and CEO for 2011 came to CHF 2,497,194.
This figure, reported under ‘Other compensation’, includes private
use of a company car, employer contributions to the pension plan,and to the AHV/ALV (old-age and unemployment insurance), plus
accident and daily sickness benefits insurance.
5) The total compensation paid to the members of the Executive
Board (excluding the Delegate of the Board of Directors and CEO)was CHF 7,968,619 in 2011. It comprised a gross basic salary anda performance-related bonus, which is set in March of the year
following the business year in question and is determined by theachievement of the individual and the Group targets. The performance-related component is paid in accordance with the rulesof the Management Investment Plan (MIP) (see note 25 ‘Employee
participation plan’ to the consolidated financial statements). The
total compensation paid to the members of the Executive Board
also includes private use of a company car, employer contributions to the pension plan, and to the AHV/ALV (old-age and unemployment insurance) plus accident and daily sickness benefits
insurance, which are shown separately in the column ‘Other compensation’.
6) Dr. Reto Müller was elected as a new member of the Board of­Directors at the Ordinary General Meeting of April 29, 2011.

Total

CHF

CHF

30,116
13,726
14,3888,428
7,776
74,434331,339

415,116
148,726
159,388
88,428
152,776
964,434
2,497,194

405,773
980,620

3,461,628
7,968,619

Forbo Annual Report 2012 – Annual statements for the holding company 147

Advances and loans
As at December 31, 2012, no advances or loans tomembers of the Board of Directors or members of the
Executive Board were outstanding.

Investments in Group companies
IN 2012
As at December 31, 2012, the individual membersof the Board of Directors and the Executive Board (including related parties) held the following number ofshares in Forbo Holding Ltd:

Investments 2012
SharesName and function
Dr. Albert Gnägi, Chairman
Michael Pieper, Vice Chairman
Dr. Peter Altorfer, member
Vincent Studer, member
Dr. Reto Müller, member
Non-executive membersof the Board of Directors

Options1)5)Series 2012
1:12)

Series 2011
1:12)

Series 2010
1:12)

Series 2008
1:12)

4,903
681,628857
533
322
688,243

This E. Schneider, Delegateof the Board of Directors and CEO3)4)

77,653

Board of Directors
Matthias P. Huenerwadel, Executive
Vice President Movement Systems

765,806
2,095

3,051

2,033

565

1,157

Daniel Keist, Head Corporate Center
Jörg Riboni, Chief Financial Officer
Jens Schneider, Executive
Vice President Flooring Systems

901
660
242

1,647
1,243
610

2,707
1,465
907

988
1,143

783
1,948

3,898

6,551

7,112

2,696

3,888

Executive Board

Tradable
options

1) The details of the options are described in note 25 ‘Employee participation plan’ to the consolidated financial statements.
2) Subscription ratio.
3) With effect from January 2009, the employment contract with
the Delegate of the Board of Directors and CEO was extended
to ­encompass the period from January 1, 2011 to April 30, 2013.
The remuneration was again mainly in shares. The modalities arevery similar to the provisions of the first contract. The 29,775 sharesare contained in the amount shown and are vested until December 31, 2013.

4) The Delegate of the Board of Directors and CEO’s shareholdings
are disclosed separately and are included under the Board of­Directors’ total.
5) Since participation in the MIP and option ownership is not limited
to the above-mentioned members of the Executive Board, thenumber of outstanding options shown here as at December 31,
2012, differs from the figures in note 25 ‘Employee participation
plan’ to the consolidated financial statements.

148 Forbo Annual Report 2012 – Annual statements for the holding company

IN 2011
As at December 31, 2011, the current and former
members of the Board of Directors and the Executive
Board (including related parties) held the following
number of shares in Forbo Holding Ltd:
Investments 2011
SharesName and function
Dr. Albert Gnägi, Chairman
Michael Pieper, Vice Chairman
Dr. Peter Altorfer, member
Vincent Studer, member
Dr. Reto Müller, member
Non-executive membersof the Board of Directors

Options1)5)Series 2011
1:12)

Series 2010
1:12)

Series 2009
1:12)

Series 2008
1:12)

Series 2007
1:12)

4,660
681,543765
441
246
687,655

This E. Schneider, Delegateof the Board of Directors and CEO3)4)

114,039

Board of Directors
Matthias P. Huenerwadel, Executive
Vice President Movement Systems

801,694
1,686

2,033

565

1,496

1,157

Tom Kaiser, Chief Operating Officer
Daniel Keist, Head Corporate Center
Jörg Riboni, Chief Financial Officer
Michel Riva, Executive
Vice President Bonding Systems

1,213
1,091
740
817

2,684
2,707
1,465
872

1,058
988
1,143
706

2,179
2,034
1,220
99

1,073
783
1,948
485

697

Jens Schneider, Executive
Vice President Flooring Systems

160

907

5,707

10,668

4,460

7,028

5,446

697

Executive Board

1) The details of the options are described in note 25 ‘Employee participation plan’ to the consolidated financial statements.
2) Subscription ratio.

4) The Delegate of the Board of Directors and CEO’s shareholdings
are disclosed separately and are included under the Board of­Directors’ total.

3) The number of shares reported includes the 47,395 shares vested
until end-2010. With effect from January 2009, the employment
contract with the Delegate of the Board of Directors and CEO was
extended to encompass the period from January 1, 2011 to April
30, 2013. The remuneration is mainly in shares. The modalities
are very similar to the provisions of the first contract. The 29,775
shares are contained in the amount reported and are vested until
December 31, 2013.

5) Since participation in the MIP and option ownership is not limited
to the above-mentioned members of the Executive Board, thenumber of outstanding options shown here as at December 31,
2011, differs from the figures in note 25 ‘Employee participation
plan’ to the consolidated financial statements.

18 Risk assessment

19 Events after the balance sheet dateWith respect to the risk management process conducted pursuant to Article 663b item 12 of the Swiss
Code of Obligations, please refer to the comments innote 38 ‘Risk assessment and financial risk management’ to the consolidated financial statements.

At the Extraordinary General Meeting of Forbo Holding
Ltd of November 5, 2012, the shareholders approved
a reduction in capital by CHF 250,000 to CHF 225,000
by cancellation of the shares acquired as a result of
the share buyback program approved by the Ordinary
General Meeting of April 29, 2011, and the corresponding changes in the Articles of Association. Owing to
the legally mandatory notice to creditors, the capital
reduction had not yet been entered in the Commercial
Register on December 31, 2012. The entry took place
on January 17, 2013.

Tradable
options

Forbo Annual Report 2012 – Annual statements for the holding company 149

Proposal for appropriation of avail­able earnings of Forbo Holding Ltd
The Board of Directors proposes to the Ordinary­General Meeting that the available retained earnings,
consisting of:

CHF
Net profit
Retained earnings
Capital reduction
Release of general capital contribution reserves1)
Total at the shareholders’ meeting’s disposal

2012

2011

93,119,606
112,958,211
24,632,880
230,710,697

47,995,804
242,047,247– 30,663,097
27,585,096
286,965,050

2012

2011

24,632,880
206,077,817
230,710,697

27,585,096
259,379,954
286,965,050

be appropriated as follows:

CHF
Withholding tax-free distribution2)
To be carried forward
Total at the shareholders’ meeting’s disposal

1) The definitive amount to be distributed depends on the amountof the tax-free distribution as described below in footnote 2).

2) At the Ordinary General Meeting of April 26, 2013, the Board of
Directors will propose a dividend payment of CHF 12.00 (2011:
CHF 12.00) per registered share out of the capital contribution
reserves, with the exception of the treasury shares held by Forbo
Holding Ltd, for which no dividend is paid. The definitive amount
may therefore still change.

150 Forbo Annual Report 2012 – Annual statements for the holding company

Report of the statutory auditor

Report of the statutory auditor to the General Meetingof Forbo Holding Ltd, Baar
Report of the statutory auditor on the financial statements
As statutory auditor, we have audited the financial statements of Forbo Holding Ltd, which comprise the income
statement, balance sheet, and notes (pages 140 to 148), for the year ended December 31, 2012.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation of the financial statements in accordance with the­requirements of Swiss law and the company’s articles of incorporation. This responsibility includes designing,
implementing, and maintaining an internal control system relevant to the preparation of financial statementsthat are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are­reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our
audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and­perform the audit to obtain reasonable assurance whether the financial statements are free from material­misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the­financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of
the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers the internal control system relevant to the entity’s preparation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purposeof expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes eval­uating the appropriateness of the accounting policies used and the reasonableness of accounting estimates
made, as well as evaluating the overall presentation of the financial statements. We believe that the audit­evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the financial statements for the year ended December 31, 2012 comply with Swiss law and thecompany’s articles of incorporation.

Forbo Annual Report 2012 – Annual statements for the holding company 151

Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) andindependence (Article 728 CO and Article 11 AOA) and that there are no circumstances incompatible with our
independence.
In accordance with Article 728a Paragraph 1 Item 3 CO and Swiss Auditing Standard 890, we confirm that an­internal control system exists which has been designed for the preparation of financial statements according to
the instructions of the Board of Directors.
We further confirm that the proposed appropriation of available earnings complies with Swiss law and the­company’s articles of incorporation. We recommend that the financial statements submitted to you be approved.
PricewaterhouseCoopers AG

Daniel Ketterer
Audit expert
Auditor in charge

Zurich, March 13, 2013

Reto Tognina
Audit expert

Beauty is in the eye of the beholder. That
is why we design our premium-quality
designer floors to meet the wishes and needsof our customers.

Publisher: Forbo Holding Ltd, Baar/Concept and design: Hotz Brand Consultants, Steinhausen/Zug
Photos: Luxwerk, Zurich/Layout, lithography and printing: Neidhart + Schön AG, Zurich
Our Annual Report appears in German language and in English translation and can be downloaded fromour website www.forbo.com. The printed German version is authoritative.
All statements in this report that do not refer to historical facts are forward-looking statements which areno guarantee of future performance. They are based on assumptions and involve risks and uncertainties aswell as other factors beyond the control of the company.

Forbo Annual Report 2012

connect.
Forbo Holding Ltd
Lindenstrasse 8
CH-6340 Baar
Forbo International SA
Lindenstrasse 8
CH-6340 Baar
Phone + 41 58 787 25 25
Fax + 41 58 787 20 25
info@forbo.com
www.forbo.com

connect.
Annual Report 2012

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