Forbo Annual Report 2011

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 2011

Top performance.
Uncharted territory.
Reliability.
Forbo –
in everyday life

Our floor coverings are so durable that­everyone wants them in their team.
We, too, have the stamina and enthusiasmthat keeps us working on new solutions
to ensure we offer superior quality.
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.

SC2012031305 –1

TOP PERFORMANCE2

UNCHARTEDTERRITORY

creating better environments

3

Extraordinary areas of application call for
extraordinary product solutions. That is
why our development teams never standstill and continue to redefine what is­pos­sible.

4

RELIABILITY

5

Everything we do, we do with care. It is oneof the things that make our power trans­mission and conveyor technology products
so reliable and of such high quality.

Dr. Albert Gnägi

This E. Schneider

Chairman of the Board of Directors

Delegate of the Board of Directors and CEO‘2011 was a very eventful year for Forbo.
We were proactive and flexible in our­response to various market trends, we­successfully drove forward operations
in growth markets, and we focused our­company on leading market positions.’

Forbo Annual Report 2011 – Letter to shareholders

7

To ourshareholders
Dear ladies and gentlemen,Market conditions were challenging throughout the 2011 business year. After getting off to a promising start,
the economy cooled off again slightly in the second half of the year. Government debt – and the resulting
turbulence on the financial markets – left their mark on the real economy too. Against this background, Forbo
also had to contend with the strong Swiss franc and a sharp rise in the prices of raw materials. Thanks to our
flexible structures, we were able to respond to the various developments in the individual markets quickly andto offset a large part of the raw material price rises by means of stringent cost management. The long-termview underlying our decisions and measures paid off again in this business year. In 2011, we once more succeeded in substantially increasing our sales and net income from operations in local currencies thanks to
our innovative products and our clearly strengthened position in growth markets.

Focus on leading market positions
Change in the Bonding Systems division
Forbo aims to operate in business areas in which it can achieve a leading global market position. This is currently
the case for Flooring Systems and for Movement Systems. In recent years, Bonding Systems has successfully
strengthened its position in growth markets by building-up new production sites, particularly in China andRussia. At the same time, it has launched innovative products to increase the share of specialty products in its
offering and developed high-quality applications for key market segments. Our strategic considerations haveled us to the conclusion that we can only achieve further competitive advantages and improve our margins inthis highly fragmented market by harnessing economies of scale. Following discussions with a major compet­
itor, who was willing to reward the efforts we have made in recent years to strengthen our presence in growthmarkets and to round off our product portfolio, we decided to divest the industrial adhesives and synthetic
polymers activities.
In December 2011, Forbo signed an agreement with H.B. Fuller on the sale of these two activities, industrial
adhesives and synthetic polymers, for a price of CHF 370 million. The transaction was successfully closed
on March 5, 2012 on fulfillment of all conditions. The transaction did not include the building and construction
adhesives activity, for which all strategic options are currently being reviewed.
The sale of industrial adhesives has resulted in the activities being reported in this report as both continuing
operations and discontinued operations.

Solid sales growth
Strong Swiss franc impacts on consolidated sales growth
In the reporting year, Forbo generated net sales of CHF 1,707.2 million (continuing operations: CHF 1,203.8
million), a growth of 7.5% in local currencies versus 2010. The strong Swiss franc reduced net sales by 12.1%,
resulting in an overall decline in sales of 4.6% in the corporate currency (previous year: CHF 1,789.7 million).
Forbo generates about 70 percent of its sales in the euro and dollar zones. As a result of the strong Swiss franc,
local sales declined by about CHF 216 million after translation into the corporate currency.

8

Forbo Annual Report 2011 – Letter to shareholders

Bonding Systems and Movement Systems reported a gratifying rise in sales in local currencies, growing by
14.0% (CHF 584.9 million) and 7.7% (CHF 317.3 million). Flooring Systems generated mixed sales growth, with
regional differences. The impact of cost-cutting efforts in the public sector in such important segments as
hospitals and schools resulted in sales growth in local currencies that was a moderate 3.0% (CHF 805.0 million).

Profitability impacted by currency effects
Strong Swiss franc leads to lower operating profit
Owing to the strong Swiss franc, further rises in the prices of raw materials, and exceptional expenses from thedisposal of the industrial adhesives activity, operating profit before depreciations and amortizations (EBITDA)
declined by 14.7% to CHF 208.5 million (previous year: CHF 244.3 million).
The Group’s operating profit (EBIT) decreased by 14.6% from CHF 185.9 million in 2010 to CHF 158.8 million.
Factoring out the significantly negative exchange rate effect, Forbo generated operating profit approximately
on the previous year’s level.
The EBITDA margin declined from 13.7% in the prior-year period to 12.2%, while the EBIT margin declined from
10.4% to 9.3%.
Stable return on invested capital
The return on invested capital declined from 12.5% to 11.7% owing to negative exchange rate fluctuations. The
return on invested capital of the continuing operations decreased only slightly from 15.6% to 15.2%.

Group profit steady in local currencies
Net income from operations impacted by exceptional items
Net income from operations declined by 5.3% to CHF 124.1 million (continuing operations: CHF 115.0 million),
which was lower than the prior-year result of CHF 131.1 million. After adjustment for exchange rate effects,
however, net income from operations increased.
Three factors were decisive for net income from operations. On the one hand, the strong Swiss franc andexceptional expenses from the disposal of the industrial adhesives activity had a negative impact; on theother hand, the tax rate of only 16.9%, which was significantly lower than the 24.0% rate the previous year,
had a positive effect. The lower tax rate was in part connected with the disposal of the industrial adhesives
activity; the rate will in the future be around 20% for the company’s continuing operations.
In the reporting year, as in the previous year, Forbo posted an extraordinary financial gain of CHF 22.4 million
after taxes (previous year: CHF 32.2 million) from the sale of Rieter shares. This comes out to Group profit for2011 of CHF 146.5 million (continuing operations: CHF 137.4 million), which is 10.3% lower than the previous
year (CHF 163.3 million). After adjustment for exchange rate effects, it is on a par with the previous year.

9Balance sheet significantly strengthened
Increased net cash
As at end-December 2011, shareholders’ equity stood at CHF 815.3 million (previous year: CHF 729.7 million),resulting in a steep increase in the equity ratio, which rose from 48.8% to 54.3%. As at December 31, 2011,
Forbo had cash, cash equivalents and marketable securities amounting to CHF 205.3 million (continuing ope­rations: CHF 192.5 million) plus 201,242 treasury shares valued at CHF 99.2 million at the year-end price. Net
cash stood at CHF 13.4 million (continuing operations: CHF 0.5 million). The sale of the industrial adhesives
activity for CHF 370 million will produce a significant cash inflow in 2012 in addition to the inflow of liquidityfrom operations.

Proposals to the Ordinary General Meeting
Dividend of CHF 12.00
The Group’s dividend policy is governed by its development in profits. In view of the earnings situation, theBoard of Directors will propose to the Ordinary General Meeting the distribution of a dividend of CHF 12.00 per
share for 2011, the same as in the previous year. This dividend will be paid out to shareholders again as a
tax-free distribution from capital contribution reserves.
Re-elections to the Board of Directors
At the Ordinary General Meeting, the Board of Directors will propose the re-election of its members Dr. Reto
Müller and Vincent Studer for a three-year term of office.

Stronger into 2012
Competitiveness and worldwide presence to be further strengthened
Flooring Systems, Movement Systems, and the building and construction adhesives activity are well positioned
in their markets and offer promising business opportunities. Forbo will further strengthen its competitivenessand worldwide presence in 2012 by systematically expanding and targeting our activities in growth markets inorder to drive forward expansion in these fast-growing regions. Despite the great uncertainties surrounding
the markets, we expect sales to increase again in 2012.
With our excellent market positions, strong balance sheet, and proven strategy, we are able to evaluate external
growth options that will strengthen our portfolio and enable us to reinforce our leadership positions in themarkets.
Assuming no significant deterioration in the current economic environment, particularly with regard to
exchange rates, and assuming that raw material prices remain more or less at present levels, we are aiming forGroup profit for 2012 on a par with net income from operations (from continuing operations) in 2011, though,reduced by the higher tax rate.

10

Forbo Annual Report 2011 – Letter to shareholders

Thank you
A word of thanks to our employees, customers, partners, and investors
On behalf of the Board of Directors and the Executive Board, we wish to thank all our employees for their greatcommitment. We also wish to express our gratitude to our customers, suppliers, and other business partners
for the ongoing confidence they have placed in us over the past year and to you, dear shareholders, for yourloyalty to our company.

Baar, March 2012

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 2012:
Publication of Annual Report 2012:

April 27, 2012
August 14, 2012
March 19, 2013

11

Annual report2011
At a glance
Forbo in figures
Solid development in operating profit
Sustainable value creation

13
16
20
26

Activity reportThree divisions – three areas of competenceFlooring Systems:
Stronger economic headwind
Bonding Systems:
Strategic course confirmed
Movement Systems:
Extending market leadership

29
31
32

Executive BoardGroup structure 
Board of Directors

Organization

51
52
55
56

The Forbo share

59

Corporate governance report

63

Forbo Group financial report

81
82
83
84
85
86
87
101
138
142
144
145

Financial statements for Forbo Holding Ltd

147
148
149
150
157
158

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 2007 – 2011
Consolidated balance sheets 2007 – 2011

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

38
44

12

13

At a glance

Forbo in figures
Solid development in operating profit
Sustainable value creation

16
20
26

14

2011 at a glance

15

Forbo is a leading
producer of floor
coverings, adhe­sives, as well as­power transmission
and conveyor belt
solutions.
The company employs some 6,000 people and has an international network of 41 sites with production and distribution as well
as 47 pure sales organizations in a total of 36 countries worldwide. Forbo is headquartered in Baar in the canton of Zug, Switzerland.
Following the sale on March 5, 2012 of the industrial adhesives activity, including synthetic polymers, which belonged to the Bonding
Systems division, Forbo now employs about 4,900 people in its continuing operations and has an international network of 24 sites withproduction and distribution as well as 36 pure sales organizations in a total of 33 countries worldwide.

16

Forbo Annual Report 2011 – At a glance

Forbo in figures

Forbo is a global player, and its three divi­
sions supply a wide range of industries. The
Group’s global reach means that it is close
to dynamic markets and makes it the first
choice as a local partner for customers thathave similar global ambitions. The quality,
long life, and performance of our products
and systems reflect the quality and stabilityof our relations with our business partners.

Flooring Systems
12 production facilities in 6 countries andsales offices in over 20 countries
Bonding Systems
20 production facilities in 12 countries andsales offices in over 20 countries
Continuing operations:
3 production facilities in 3 countries andsales companies in these countries
Movement Systems
9 production facilities in 8 countries andsales offices in over 25 countries

Continuing operations:
Net salesCHF 1,203.8 m
EBITCHF 148.9 m
EBIT margin
12.4%
Group profitCHF 137.4 m

Forbo Annual Report 2011 – At a glance

Net sales
EBIT 		EBIT margin
Group profit

17

CHF 1,707.2 m
CHF 158.8 m

9.3%
CHF 146.5 m

18

Forbo Annual Report 2011 – At a glance

Net sales by division
Change on previous year
CHF m 2011
805.0
584.9
81.5
503.4
317.3
1,707.2
1,203.8
503.4

Flooring Systems
Bonding Systems
Continuing operation
Discontinued operations
Movement Systems
Total
Continuing operations
Discontinued operations

in %
– 7.9
0.0
– 5.5
1.0
– 4.2
– 4.6
– 6.8
1.0

in localcurrencies in %
3.0
14.0
6.1
15.4
7.7
7.5
4.4
15.4

In % of total
47.1
34.3
4.8
29.5
18.6
100.0
70.5
29.5

34.3 %
47.1 %

Bonding Systems

Flooring Systems

18.6 %
Movement Systems

Employees by division
Number 2011
2,706
1,406
267
1,139
1,861
41
6,014
4,875
1,139

Flooring Systems
Bonding Systems
Continuing operation
Discontinued operations
Movement Systems
Corporate Functions
Total
Continuing operations
Discontinued operations

45.0 %

23.4 %
Bonding Systems

Flooring Systems

0.7 %Corporate Functions

30.9 %
Movement Systems

Change onprevious year in %
– 1.7
1.6
3.9
1.1
4.5
0.0
1.2
1.2
1.1

In % of total
45.0
23.4
4.4
19.0
30.9
0.7
100.0
81.0
19.0

Forbo Annual Report 2011 – At a glance

19

Financial overview Group1)

Income statement
Net sales
Flooring Systems
Bonding Systems
Movement Systems
EBITDA
EBITGroup profit from continuing operations
Group profit from discontinued operations after taxes
Group profit

2011
CHF m
1,203.8
805.0
81.5
317.3
189.0
148.9
137.4
9.1
146.5

2010
CHF m
1,291.2
873.9
86.2
331.1
217.1
168.7
149.2
14.1
163.3

2011
EUR m2)
976.4
652.9
66.1
257.4
153.3
120.8
111.4
7.4
118.8

2010
EUR m2)
933.8
632.0
62.3
239.4
157.0
122.0
107.9
10.2
118.1

Balance sheet
Total assets
Operating assets
Shareholders’ equity
Net cash

CHF m
1,501.9
1,267.5
815.3
13.4

CHF m
1,494.2
1,251.9729.7– 43.6

EUR m2)
1,218.2
1,028.1
661.3
10.9

EUR m2)
1,080.6
905.3
527.7– 31.5

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

CHF m
141.5
18.1
159.6

CHF m
188.0
74.3
262.3

EUR m2)
114.8
14.7
129.5

EUR m2)
136.0
53.7
189.7

%
12.2
54.3
– 1.6

%
13.7
48.8
6.0

Employees (as at December 31)
Employees in the continuing operations
Employees in the discontinued operations
Total employees

Number
4,875
1,139
6,014

Number
4,816
1,127
5,943

Ratios per share
Earnings per share from continuing anddiscontinued operations (undiluted)

CHF
62.78

CHF
71.64

EUR2)
50.92

EUR2)
51.81

Earnings per share from continuing
operations (undiluted)

58.88

65.45

47.76

47.33

Earnings per share from discontinued
operations (undiluted)

3.9

6.19

3.16

4.48

EquityDividend

349.4
12.03)

320.0
12.04)

283.4
9.7

231.4
8.7

Stock market capitalization (as at December 31)
Stock market capitalization5)

CHF m
1,133.3

CHF m
1,380.0

EUR m2)919.2

EUR m2)
998.0

Key ratios
ROS (EBITDA/net sales)
Equity ratio (shareholders’ equity/total assets)
Gearing (net debt/shareholders’ equity)

1) Forbo signed a contract with H.B. Fuller Company in December
2011 on the sale of its industrial adhesives activity, including synthetic polymers, belonging to the Bonding Systems division. The
transaction was closed on March 5, 2012. As a result of this sale,the relevant financial figures are reported as both continuing­operations and discontinued operations. In this table, all prior-year
figures have been restated in relation to the consolidated income
statement. The prior-year figures and the figures for the reporting
year show only the values from continuing operations. In accordance with IFRS 5, the prior-year figures have not been restated in
the balance sheet.

2) Euro values translated at the average annual exchange rate of
CHF 1.2329/1 EUR (2011) and CHF 1.3828/1 EUR (2010).
3) The Board of Directors proposes to the Ordinary General Meetingof April 27, 2012 the distribution of a dividend in the amount of
CHF 12.00 per registered share.
4) Approval of a dividend of CHF 12.00 per registered share at theOrdinary General Meeting of April 29, 2011.
5) Total number of shares in circulation, multiplied by year-end shareprice.

20

Forbo Annual Report 2011 – At a glance

Solid developmentin operating profit
In an economically challenging environ­ment, Forbo posted solid and sustainable
results in the 2011 business year. Raw ma­
terial supply bottlenecks, steep price rises
for raw materials, and negative exchange
rate effects put our flexibility to the test.
The persistently strong Swiss franc took
some of the shine off the solid sales growth
in local currencies and the good results inthe corporate currency. In local curren­cies, all three divisions reported gratifying
sales growth; after adjustment for curren­cy effects, Group net income from opera­
tions was higher for the year.
Net debt, which had been substantiallycut the previous year, was turned into a
net cash position at the end of the report­
ing year owing to a further reduction in­borrowing. The balance sheet, too, wassubstantially strengthened on the whole.
Forbo has thus again increased its com­
petitiveness.
Change in the Bonding Systems division
Forbo signed a contract with H.B. Fuller Company inDecember 2011 on the sale of its industrial adhesives
activity, including synthetic polymers, belonging to
the Bonding Systems division. On fulfillment of all­conditions, the transaction was successfully closed on
March 5, 2012. The building and construction adhesives activity was excluded from this transaction. As aresult of this sale, the relevant financial figures are reported as both continuing operations and discontinued operations. In the following charts in this report, all
the prior-year figures have been restated in relation to
the consolidated income statement. The prior-year figures and the figures for the reporting year show only
the values from continuing operations. In accordancewith IFRS 5, the prior-year figures have not been restated in the balance sheet.

Solid sales growth in local currencies
In the reporting year, Forbo generated net sales of
CHF 1,707.2 million (continuing operations: CHF 1,203.8
million), which was 7.5% higher than in 2010 in local
currency terms. The strong Swiss franc, however, significantly reduced top-line growth by 12.1% so thatsales in the corporate currency were down by 4.6%
(previous year: CHF 1,789.7 million).
The Flooring Systems division generated net sales of
CHF 805.0 million in 2011, equivalent to a moderateincrease in local currencies of 3.0% versus the previous
year. In Swiss francs, however, the outcome was a
7.9% drop in sales (previous year: CHF 873.9 million)
owing to strongly negative exchange rate effects that
reduced sales by 10.9%.
The Bonding Systems division generated net salesof CHF 584.9 million in 2011 (continuing operation:
CHF 81.5 million); in local currencies, this marked a­significant increase of 14.0% versus the previous year.
Owing to negative exchange rate effects on almost
the same scale, however, the result translated into amarginal sales increase of only CHF 0.2 million in thecorporate currency (previous year: CHF 584.7 million).
The Movement Systems division generated net sales of
CHF 317.3 million in 2011, equivalent to a substantial
increase of 7.7% in local currencies versus the previous
year. Owing to a strongly negative exchange rate effect of 11.9%, sales in Swiss francs declined by 4.2%
(previous year: CHF 331.1 million).

21

Net sales by geographic area
Change on previous year

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

%
17.4
13.6
13.6
12.8
12.2
9.4
9.4
4.5
4.5
2.6
100.0

in %
– 6.5
– 3.6
– 9.2
– 10.9– 8.3– 10.8– 1.5– 12.6
9.8
1.2
– 6.8

in local currencies in %
9.4
8.2
– 1.0
– 0.1
2.9
1.0
6.2
– 2.0
23.6
1.2
4.4

Profitability strongly impacted byexchange rate effects
Operating profit before depreciations and amorti­
zations (EBITDA) in local currencies was almost unchanged from the previous year; mainly because of
the strong Swiss franc, however, EBITDA declined by
14.7% to CHF 208.5 million (previous year: CHF 244.3
million). EBITDA from continuing operations came to
CHF 189.0 million (previous year: CHF 217.1 million).
The main reasons for this decline were the rise in raw
material prices and bottlenecks in the supply of im­
portant raw materials as well as the strongly negative­exchange rate ­effects. Flooring Systems and Bonding
Systems were harder hit by these effects than Movement Systems. Through strict cost management,

CHF m
2011
209.3
164.0
163.6
153.7
146.5
113.6
112.9
54.8
54.5
30.9
1,203.8

25

50

75

100

125

150

175

200

225

Flooring Systems was able to cushion the strong impact, but it was not able to pass on the higher costs
in full to customers. Bonding Systems largely offset
the increased costs by a number of measures designed
to counteract sales price increases and by new for­mulations. However, various exceptional expenses­related to the sale of the industrial adhesives and­synthetic polymers activities had a negative impact.
Movement Systems reported a significant increase in
EBITDA on the back of a gratifying sales performanceand an increase in margins. The EBITDA margin of
the entire Forbo Group decreased by 1.5 percentage
points versus the previous year from 13.7% to 12.2%(in the continuing operations this came to a declineof 1.1 percentage points from 16.8% to 15.7%).

22

Forbo Annual Report 2011 – At a glance

EBITDA by division
Flooring Systems
Bonding Systems
Movement Systems
Corporate

CHF m
2011
142.8
10.6
44.0
– 8.4

Compared with the previous year, depreciations andamortizations fell by a total of CHF 8.7 million in 2011
to CHF 49.7 million (previous year: CHF 58.4 million).
The lower depreciations and amortizations were also
due in large measure to the exchange rate effects.
­Depreciations and amortizations of continuing ope­r­ations amounted to CHF 40.1 million in 2011 (previous
year: CHF 48.4 million). Accordingly, the Forbo Group’s
operating profit (EBIT) decreased by CHF 14.6% to
CHF 158.8 million (previous year: CHF 185.9 million).
The EBIT margin declined from 10.4% to 9.3%. EBIT
from continuing operations came to CHF 148.9 million(previous year: CHF 168.7 million). In local currencies,
this figure increased by 0.9%. The EBIT margin fromcontinuing operations fell from 13.1% the previous
year to 12.4% in the reporting year.

Change onpre­vious year in %– 13.2– 55.8
14.3
16.0

– 25

0

25

50

75

Taxes and financial result
The tax rate declined strongly from 24.0% in the pre­vious year to 16.9% (continuing operations: 17.9%).
This decline was due in part to the divestment of theindustrial adhesives activity and had a correspondingly
positive impact on Group profit. The tax rate for thecontinuing operations will in future be around 20%.
Net financial expenses declined by CHF 2.8 million to
CHF 12.7 million in particular because of the decrease
in interest-bearing liabilities. The Forbo Group realized
substantial financial income amounting to CHF 30.2
million, mainly through the sale of marketable secu­
rities.

100

125

150

23

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

CHF m
2011
141.5
18.1
159.6

CHF m
2010 0
188.0
74.3
262.3

Solid free cash flow
Cash flow from operating activities came to CHF 141.5
million in the year under review, while cash flow frominvesting activities was CHF 18.1 million. The decreases
versus the previous year were due to exchange rate
­effects, the increase in operating working capital, andhigher sales of marketable securities in the previous
year. Free cash flow thus came to CHF 159.6 million(previous year: CHF 262.3 million). The cash flow enabled the company to repay substantial financial lia­
bilities, and the Forbo Group is now debt-free in net
terms.

50

100

150

200

250

300

Balance sheet much stronger
Total assets as at December 31, 2011 stood at
CHF 1,501.9 million (previous year: CHF 1,494.2 million). Net debt, which had been substantially cut
the previous year, was turned into a net cash positionof CHF 13.4 million at the end of the reporting year(pre­vious year: net debt of CHF 43.6 million) owing
to a further reduction in borrowing. Net cash from­continuing operations comes to CHF 0.5 million.
Shareholders’ equity increased in the same period to
CHF 815.3 million (previous year: 729.7 million), whichbrings the ­equity ratio to 54.3% (previous year: 48.8%).

24

Forbo Annual Report 2011 – At a glance

Innovative and sustainable investments
The Forbo Group’s investment activity was geared
to the economic circumstances and concentrated on
important operations and strategic projects designed
to support market expansion, product technology,
and efficiency gains. Accordingly, investments inproperty, plant, and equipment in 2011 came to
CHF 39.7 million, an increase in investment volume
compared with the previous year’s figure of CHF 37.3
million. In the reporting period, Flooring Systems invested CHF 21.9 million, 9.5% more than the previous
year (CHF 20.0 million). The division invested in the expansion of production facilities for the manufacture ofhigh-quality vinyl designer floors and in the renewalof production facilities in order to increase efficiency.
In the reporting period, Bonding Systems invested
CHF 10.2 million, CHF 1.2 million less than the previous year (CHF 11.4 million). This sum was spent mainlyon the expansion of production facilities in Russia,
Germany, France, and China, on the development of
new technologies, and on general measures to boost
efficiency. At Movement Systems, investments cameto CHF 7.3 million, which was around a quarter higher
than the previous year (CHF 5.9 million). The sums invested were spent primarily on the strengthening andexpansion of new markets and customer segments,
the development of innovative products, and the expansion and renewal of production facilities.

Investments 2007 – 2011

2011
2010
2009
2008
2007

Flooring
Systems
CHF m

Bonding
Systems
CHF m

Movement
Systems
CHF m

Corporate
CHF m

Total
CHF m

22
20
17
29
26

10
11
9
11
21

7
6
12
17
14

1
0
1
1
1

40
37
39
58
62

10

20

30

40

50

60

70

25

Headcount development
At year-end 2011, the Forbo Group had a headcountof 6,014 employees, which is, altogether, 71 employees
more than in the previous year. Of this number, 1,139
people moved to H.B. Fuller with the sale of the­industrial adhesives and synthetic polymers activities.
Thus, 4,875 employees will remain on the payroll in thecontinuing operations.

The percentage decrease in headcount in Scandinavia
and Great Britain resulted from structural adjustmentsin these markets. The increases in the other markets
were due in the main to the expansion of the sales anddistribution organizations.

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

%
23.2
12.9
12.9
12.5
11.5
9.4
7.6
4.0
3.5
2.5
100.0

Change onpre­vious year in %
– 0.4
7.1
– 5.3
6.1
3.3
0.2
6.3
– 1.5
– 8.7
0.0
1.2

2011
1,131
629
629
609
562
460
372
196
168
119
4,875

200

400

600

800

1,000

1,200

26

Forbo Annual Report 2011 – At a glance

Sustainablevalue creation
Social responsibility and environmental
protection 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
for health, safety, the environment, andquality. As a result, innovative ideas and­research and development are part andparcel of the forces driving our businessconcept.
Social dimension
In the reporting year, Forbo successfully establishedand developed the internal management training program launched in 2010. In conjunction with the University of St. Gallen, other external partners and internal specialists, the practice-driven training program forsenior managers, persons in key positions, and juniormanagers was fine-tuned and tailored to the various
target groups in management, sales, marketing, andoperations. The aim is to perfect their leadership andmanagement skills so that they are equipped to meetthe ever more demanding managerial challenges andmake a direct contribution to the sustainable successof Forbo.
Ecological dimension
Preserving the environment and generating ecological
added value are decisive factors in all Forbo’s devel­
opments and investments. The three divisions permanently endeavor to optimize processes as well as toreduce, and where expedient, to recycle offcuts so
as to decrease Forbo’s environmental footprint. There
were numerous such initiatives. Here are a few concrete examples:
Flooring Systems’ range includes linoleum, a highly­environmentally friendly product that is made frompurely natural and renewable raw materials. However,the sparing use of environmental resources does not
begin at the product stage, but follows naturally from
ecological principles and processes. In the reporting
period, Flooring Systems launched a strategic initiative
to reduce its impact on global warming in the coming27

years by 25 percent and started an ideas contest in­order to directly involve its employees. From the approximately 1,700 ideas submitted, 600 realizable projects were defined to save energy and offcuts and toconserve resources. To date, the division has lowered
its CO2 emissions by 26 percent and has perfectedmany product specifications and formulations.
Bonding Systems has scored both an ecological andan economic success with its switchover of cleaning
processes in the manufacture of reactive hotmelts.
The reactors are now cleaned with high-pressure water instead of with high boiling solvents. Solar cells
have been installed on the roof of a newly built warehouse for building and construction adhesives, andthey already generate over 3 percent of the local power consumed annually.
Movement Systems has developed a ‘biobelt’, a newgeneration of conveyor and processing belts that handles resources carefully and reduces CO2 emissions.
This is a technical innovation because it is the first timethat engineers have succeeded in combining materials that meet the dynamic requirements of a conveyor

belt and are made from renewable resources and/or are biodegradable. Moreover, the belts have beencoated with a patented special coating so that the user
saves up to 40 percent in energy costs; the belts canalso be used flexibly for all customer segments. An international patent application was filed in November
2011, and the new product line will be launchedworldwide in spring 2012.
Economic dimension
As a listed company, Forbo is concerned on a daily­basis with the economic aspects of sustainability, too.
Compliance is becoming increasingly important for
the reputation and positioning of a company. Forbo
reinforced its efforts in this area in the reporting year
by training employees in the Code of Conduct, competition law, and anti-corruption principles and continued to strengthen its risk management pro­cesses.

28

29

Activity reportThree divisions – three areas of competenceFlooring Systems:
Stronger economic headwind
Bonding Systems:
Strategic course confirmed
Movement Systems:
Extending market leadership

31
32
38
44

30

TOP PERFORMANCEUNCHARTED TERRITORYRELIABILITY

Forbo Annual Report 2011 – Activity report

31

Three divisions –three areas of­competence
Flooring Systems

Movement Systems

The Flooring Systems division offers a broad and attractive range of environmentally-friendly linoleum,high-quality vinyl floors, entrance flooring systems forcleaning and drying shoes, carpet tiles and needle felt.
Thanks to their excellent technical properties and attractive design, these flooring solutions are invariably
the first choice for public buildings, department stores,
hospitals and healthcare facilities, schools, libraries,
commercial offices, leisure centers, hotels, restaurants,
and cafeterias and are also used in the residential market. With a market share of over 65 percent, Forbo is
the world market leader in linoleum.

Movement Systems is a global industry leader pro­viding top-quality power transmission belts, sophisticated conveyor and processing belts, as well as plastic
modular, timing, and flat belts made of synthetic materials. These products are known under the brand name
Siegling. They are used in a wide range of applicationsin industry, trade, and the service sector, including
conveyor and processing belts in the food industry, as
treadmill belts in fitness studios, and flat belts in maildistribution centers.

Bonding Systems
Bonding Systems is among the world’s leading suppliers of industrial adhesives. Its high-performance products ensure stable and durable bonding and are suitable for a wide range of applications in key markets
such as the paper processing industry, the packaging
industry, the shoe and textile industries, the furnitureindustry, as well as for manufacturing automotive andmotor home interior trims. Bonding Systems also provides ready-made adhesives for flooring installations
and ceramic tiles, as well as welding rods and levelingcompounds for the construction industry. The third
business area is synthetic polymers which are marketed as emulsion polymers to customers in the adhesives, varnish, paint, and construction industries.
Following the sale of the industrial adhesives and­synthetic polymers activities on March 5, 2012, only
the building and construction adhesives activity willremain in the Bonding Systems division. All strategic
options are being reviewed for this activity.

32

Flooring
Systems

33

Top performanceSPACE
TO MEET
Modern event locations have to meet a variety of­requirements. They offer a contemporary, functionallyeffective platform to the people who use them. They
also showcase institutions and communities in an­appropriate way and make the public feel at home inan appealing but still purposeful environment. Forbo’s
floor coverings completely satisfy all these requirements and thus provide a valuable basis for long-term
success.

34

Forbo Annual Report 2011 – Activity report

Flooring Systems:
Stronger economic headwind‘The 2011 business year brought tougherthan-expected challenges; this was reflected in investment spending in our high-­
volume market segments – health andeducational facilities – which remainedmodest owing to budgetary constraints andspending cuts in Europe. From our broad
product portfolio we have developed an array of individualized marketing and sales
activities that are having a positive impact,
though less than expected. Despite strict
cost management, operating income declined owing to strongly negative exchange
rate effects and bigger-than-average rises
in raw material prices. With the wide-­
ranging investments we have made in new
product specifications, we are confident
that we will be able to strengthen our market position as a leading systems supplierin the commercial market segment.’

The Flooring Systems division generated net sales of
CHF 805.0 million in 2011, equivalent to top-line
growth in local currencies of 3.0% year-on-year. In
Swiss francs, however, the outcome was a 7.9% dropin sales (previous year: CHF 873.9 million) owing tostrongly negative exchange rate effects that came to
10.9%. The division’s share of Group sales was 47.1%.
Sales trends were very mixed. North America and the
BRIC growth markets reported higher-than-average
growth rates. In Europe, demand was mixed, because
the construction industry in some countries is still inthe doldrums and many authorities have to contend
with significant public sector debt. Operating profit(EBIT) declined by 12.7% to CHF 117.6 million (previous
year: CHF 134.7 million), with the bulk of this decline
caused by exchange rate effects and higher-than-average increases in raw material prices. Strict cost management offset some of the decline. The EBIT margindecreased slightly to 14.6% (previous year: 15.4%).

Jens Schneider
Executive Vice President
Flooring Systems

Sales trends were mixed
Demand in the year under review was very buoyant
especially in the growth markets. The BRIC countries
and North America posted above-average growth
rates. In Asia, China reported the largest increase in
net sales, while Eastern Europe and Russia also posted
strong double-digit sales growth figures.
Business trends were very mixed in the main Western
European markets. Scandinavia and France took advantage of the positive economic mood and turned ina good performance with both well-established andnew collections. Germany, Great Britain and Switzerland, by contrast, reported rather modest growth. One
important reason is no doubt the high level of public
debt, which has led to cuts in investments in the public
sector, affecting hospitals, educational institutions andpublic buildings. Economic instability, particularly inSouthern Europe, was a factor behind the big drop in
demand. In the Benelux countries, no clear upturn indemand is in sight owing to the weakness of the construction industry.
New designer floors a big success
The product portfolio, consisting of very large flooringcollections featuring excellent combinability in different building applications, reported varying degrees
of success. The Allura collection of high-quality vinyl
designer floors, created in 2010 and launched in 2011,is currently the fastest-growing product category in
the resilient flooring category. Available as either
planks or tiles, they are very much in demand in retail35

stores and in the hotel and restaurant segments orother modern buildings and they generate aboveaverage growth rates.
Since the environmentally friendly linoleum productgroup is widely used in the high-volume health andeducation market segments, where massive spending
cuts have been made because of severe budgetary
constraints, it generated a rather little growth on thewhole even though demand in North America remained firm. The sales of entrance matting systems
were also modest.
A number of other product groups reported buoyant
growth: heterogeneous vinyl floorings for the commercial segment, Flotex – the washable textile floor
covering that is as comfortable as a carpet and as easy
to care for as resilient flooring – and high-end carpet
tiles for office spaces.
Sales of flooring for the residential segment declined
again slightly in 2011 in the wake of strategic portfolio
adjustments.
Targeted investments ininnovative and sustainable ideas
Once again in 2011, Flooring Systems invested in new
manufacturing processes to expand its innovative
range of designs and products so as to drive future
growth. Working together with a printing specialist,
the division developed a top-quality digital printing
process that applies graphics, photographs, maps, logos and tailor-made designs to vinyl flooring up to
four meters in width. This creates a whole array of new
applications, for instance for product advertising in retail outlets. In France, a digital printing process has also
advanced design for the Flotex product group a step
forward: 16 different wood surface designs have beencreated for the new ‘Flotex natural’ collection. It is theperfect solution for high-intensity areas such as leisurecenters, restaurants, retirement and nursing homes, oralso public transportation.
All in all, many product specifications and formulations
were refined in 2011 with a view to sustainability andlife cycle analysis. Flooring Systems increased the shareof recycling material in the manufacture of its vinyl
floorings and Flotex tiles. A uniform surface finish wasintroduced for the entire vinyl range that simplifies

care and cleaning of the floor coverings. The divisionalso launched a new needle felt collection, which is an
important element in the portfolio mix especially forthe office segment in Germany and Switzerland.
Linoleum has become more attractive than ever asa natural floor covering. The new ‘unexpected nature’collection launched in 2011 is based on this naturalfeel, drawing on nature’s refreshing and varied color
combinations to complement the popular gray andbrown shades in the program. 2012 will see the launchof a new surface technology that has been developed
and tested in recent years and that provides far better
resistance to dirt, scratches, and wear and tear.
Focus on sales growth again in 2012
The division will focus on sales growth in 2012. Flooring Systems is assuming that investment in the public
sector will be very muted. A wide range of targetedmarketing and sales activities, based on the broad
product portfolio and tailored to individual customer
segments, will help generate additional growth. We
see significant potential in the private commercial­sector, for instance in retail stores, gastronomy, andthe office segment.
Sales structures in the Benelux countries were reorganized in 2011, and this is expected to generate a pos­
itive impact in 2012. Flooring Systems also expects
gratifying growth to continue in North America andthe BRIC growth markets.

36

Forbo Annual Report 2011 – Activity report

Trend toward
color and nature
Making products and processes ever moresustainable and environmentally friendly
is a priority for Flooring Systems wheneverchanges are made and new products de­veloped. Forbo products combine attractive
and innovative design with long-term du­rability and high quality. In the reporting
year, Forbo continued to set the trend withnew and innovative features.

Floor coverings enhance sense of well-being
In the 2011 financial year, Flooring Systems invested in
new manufacturing processes and refined many product specifications and formulas, always with sustainability and their positive effect on life-cycle analysis
in mind. As a systems provider, Forbo today offers anextensive range of resilient- and textile-based floor
coverings for the commercial and private market segments.
In the commercial sphere, both architects and builders
have very varied and sophisticated expectations where
designs, colors, functionality and sustainability areconcerned. They increasingly express a desire for products that promote a sense of well-being. More andmore hospitals and care facilities are making themselves places that offer their patients, staff and visitors

37

a pleasant atmosphere. That means that beige or graylinoleum and vinyl floor coverings are giving way tocarefully chosen designs and color patterns. Areas
within such facilities are also being given their own­atmosphere and a style all of their own. Waiting rooms,
cafe­terias, and reception areas are being made to look­welcoming. Their lighting, plants, furniture, and floor
coverings are being designed with a view to creating
a comfortable environment. That means that colorful
designs and surfaces for floor coverings that can be
combined in many different ways are more in demandthan ever. The same trend is also clearly present
in other market segments, such as education, officepremises and shops.

DIVERSITY MAKESFOR UNIQUE ROOMS

Colors and designs
hand in hand with sustainability
In early 2011, Flooring Systems responded to this trend
by rolling out a high-quality collection of luxury vinyl
designer floors available in planks and tiles, including
over 100 designs, seven print types and a wide rangeof colors, and making it possible to replicate wood,stone and metal very realistically. They are used very
successfully by interior designers and planners in awide variety of space concepts, especially in shops,­hotels and the hospitality industry. The range of nat­ural linoleum made from renewable raw materials has
been added to by a colorful collection designed tobring the ­experience of nature into everyday life. Inspired by the extraordinary colors and their combinations to be found in nature, a range of colors and structures reflects a modern outlook and helps architectsand ­designers create unique spaces in line with theircustomers’ wishes.

38

bonding
Systems39

Uncharted territory

WELLNESSSTARTS WITH
THE DETAIL
A swimming pool has to cope with vast quantities
of water and thousands of visitors over a period ofyears – the structures and building materials are­subjected to enormous static loads and the effects ofdamp and chemicals. Forbo products are designedwith these specific requirements in mind and are soeasy to handle that their strengths are obvious assoon as they are fitted.

40

Forbo Annual Report 2011 – Activity report

Bonding Systems:
Strategic course confirmed‘We are systematically implementing ourstrategy, and this is confirmed by the fur­ther increase in our market share. Our fo­
cus on strategic market segments, our con­centration on international customers, andthe faster pace of expansion in the growthmarkets are driving sustainable success.
The key to this growth with international
major accounts in a wide range of customer
segments is the innovative development of
new applications and technologies in pre­vious years and continuous global market­
ing. The division countered bottlenecks inthe supply of important raw materials andsteep raw material price increases by meansof price increase measures and new formu­
lations.’

The Bonding Systems division generated net salesof CHF 584.9 million in 2011 (continuing operation:
CHF 81.5 million); in local currencies, this marked a­significant increase of 14.0% versus the previous year.
Owing to negative exchange rate effects on the same
scale, however, the result translated into a marginal­increase in sales of only CHF 0.2 million in the corporate currency (previous year: CHF 584.7 million). The
division’s share of Group sales totaled 34.3%. All activities and all geographic regions helped drive this solid
growth, particularly because all customer segments
developed steadily and the growth measures introduced in recent years began to take effect. Two of
the major features of the year under review were once
again the limited availability of important raw materials worldwide and the significant rise in raw material
prices. The division offset the price increase by a number of measures designed to counteract sales price increases and by new formulations. However, exchange
rate effects and various special expenses in connection
with the sale of the industrial adhesives and synthetic
polymers activities had a negative impact on operating profit. Operating profit (EBIT) declined by 49,6% to
CHF 19.0 million ­(previous year: CHF 37.7 million). The
EBIT margin decreased from 6.4% in the previous year
to 3.1% in the reporting year.

Michel Riva
Executive Vice President
Bonding Systems

Gratifying growth in all business areas
Sales for industrial adhesives were mixed in regionalterms. North America and Asia benefited from favorable market conditions and maintained the upswing
started the previous year. Demand was also buoyant
in Europe, with the exception of southern European
countries, particularly Greece, Spain, and France. The
customer segments transport, packaging, labeling,
and the graphic industry posted higher-than-average
growth rates, due mainly to targeted support andclose relations with international key accounts and thelaunch of a number of new product groups.
Demand in the area of building and construction adhesives was stronger than in previous years against
a background of generally improved economic conditions. The Benelux countries, which account for the­lion’s share of turnover, also performed well despite
the ongoing weakness in the construction industry.
Russia reported above-average growth owing to our
successful entry in the private residential market andbuoyant conditions in the construction sector. This uptrend was supported by the launch of innovative andsustainable product groups.
Building on the recovery in the previous year, synthetic
polymers also performed strongly and reported solid
growth. Entry into new market segments and a rise indemand for VAE polymers, caused by bottlenecks inthe supply of alternative polymers, were the factors
driving this trend.

41

Creating innovative and eco-friendly applications
In the reporting year, a number of new applications
were developed in close cooperation with our customers. These applications are superior in terms of
their environmental footprint and generate added
value for our manufacturing partners. For manufacturers of bags and sacks, we developed a new, waterbased hotmelt. Its properties were geared closely tothe customers’ production processes in order to optimize flow and drying processes, eliminate additional
work in the pre-finishing stage, stabilize the production process, and reduce manufacturing costs overall.
In the field of beverage glass bottle labeling, we de­veloped a new generation of water-based adhesives.
They are designed to ensure optimum adhesion properties and water resistance especially in tough climaticconditions such as high relative humidity or high tem­
peratures. In the area of building and construction­adhesives, we launched cement-based products thatsignificantly reduce dust emissions in the atmosphere.
These products benefit both the environment and theoccupational health.
Targeted investments
Bonding Systems invested in developing new producttechnologies in the year under review in order to beat the forefront of new market developments and beable to offer innovative products for professional cooperation with key accounts. In France, the division expanded its production capacity, adjusted its plant design accordingly, and invested in a new and modern
warehouse. In Germany, a new facility for the production of thermoplastic hotmelts was started up in order
to meet rising demand in the wood industry in both
Germany and Eastern Europe. To respond to the strong
growth of reactive hotmelt systems especially for customer segments in the areas of window profile laminates, coatings and laminations, and automotive interiors, the construction of two reactors was started andthey came on stream in Germany and China in early2012.
The division’s efforts to strengthen its sales organization focused on Southeast Asia in the reporting year.
Sales offices were set up in Malaysia, Thailand and Indonesia, and a central warehouse was opened in HongKong. This will enable us to offer professional advice
and faster delivery locally to customers in Southeast
Asia.

The production capacity that has been built up andexpanded in recent years was reviewed to bring it intoline with lean manufacturing requirements. Great emphasis was placed on compliance with the 5S method,on steady incremental improvements in work process
efficiency, and onsite maintenance and upkeep.
A new era begins in 2012
In 2012 Bonding Systems will enter a new era following the sale of the industrial adhesives and synthetic
polymers activities to H.B. Fuller. On fulfillment of all­conditions, the transaction was successfully closed on
March 5, 2012.
Forbo is currently reviewing the strategic options forthe remaining activity, building and construction adhesives. The options are continued development as anindependent company, partnership with other industrial players or sale of the activity. Forbo has been contacted by various interested parties, and in the coming
months will discuss the possibility of a sale with ­viablecandidates.
For building and construction adhesives, we anticipate
solid sales performance in all relevant markets andhigher-than-average growth in Eastern Europe andRussia.

42

Forbo Annual Report 2011 – Activity report

Resource-efficient­solutions
Adhesives have been around seemingly for
ever, and complex adhesive systems havecome into being, present everywhere in everyday life without being visible. Bonding
Systems is present around the world as acapable partner working closely with customers to devise new approaches and solutions that, with the help of innovative ad­hesives, can improve production processes
and create added value for all concerned.

A high-tech solution for the automotive industry
Getting a new adhesive generally accepted in the automotive industry calls for a great deal of patience, agood image and a significant competitive advantage.
Depending on the manufacturer concerned, the tests
required can take up to three years. In 2011, Bonding
Systems was able to get a foothold in several different
application fields in the automotive industry at oncewith a state-of-the-art reactive hot-melt adhesive. Reactive hot-melt adhesives are solid at room temperature, but when heated under humid conditions become a viscous mass. As they re-solidify when cooled
down, they enable rapid production processes andshort fitting and pressing times without needing to bedried beforehand. They also make it possible to workwithout the use of solvents. What gave Forbo a decisive competitive advantage in their application for­interior trim panels inside cars was the lower tem­
perature at which the process could be carried out,

43

enabling to cut the time it took by a total of 30 percent.
This had a highly positive impact right down the production line and eventually resulted in substantiallyreduced costs and significantly increased capacities forthe customer. Following on from this success, Forboadhesives are increasingly being used for the fixing ofarm rests, door linings and other console coverings inhigh-end brand cars.

APPLI­CATIONSKNOW-HOW GIVESA ­COMPETITIVEADVANTAGE

Environmentally friendly
building and ­construction adhesives
During the year under review, Bonding Systems has
continued to invest in the development of environmentally friendly building and construction adhesives.
The preceding year had seen the rollout of the first­environmentally friendly tile adhesive, which was certified by the award of the Dutch DUBOKEURR quality
mark for sustainable building, and 2011 brought another new product: a dustless, cement-based tile adhesive capable of being used for floor and wall coverings both indoors and outside. It is resistant to both
damp and frost and its outstanding adhesive strength
makes it a winner. At least 30 percent of it is recycledmaterial such as reprocessed used glass or granulated
rubber from old car tires and it is 30 percent more economical in use. The new arrival’s success speaks for itself, as customers from the construction sector are increasingly asking for products and materials that carrya quality mark confirming that they do not harm theenvironment.

44

Movement
Systems45

Reliability

NO ROOM
FOR COMPRO­MISE ON
FRESHNESS
High-performing processing and conveyor belts arevital to the efficiency of production processes. In thefood industry in particular, hygiene is crucial in en­
suring flawless quality. Forbo’s conveyor belts, with­surfaces adapted to the areas in which they are used,
help our customers to comply with the most stringent
hygiene standards.

46

Forbo Annual Report 2011 – Activity report

Movement Systems:
Extending market leadership‘We look back on a very successful year, andthis success is reflected in our sales andearnings. Through the launch of the worldwide functional organization in January,
we have made cross-business key processes
leaner, more efficient and more global, especially in the core functions innovation,roll production, fabrication, and distribution. We are driving forward the strategic
development of the plastic modular belt
business: by harmonizing all our efforts
in development, production, assembly, anddistribution, we have expanded our portfolio of products and services and posted extremely good sales. The sustainable measures we have taken in growth markets also
provide an ever broader base for acceler­ated growth.’
The Movement Systems division generated net sales of
CHF 317.3 million in 2011, equivalent to a substantial
increase of 7.7% in local currencies versus the previous
year. In Swiss francs, however, the result was a 4.2% decline in sales (previous year: CHF 331.1 million) owing
to negative exchange rate effects of 11.9%. The division’s share of Group sales was 18.6%. All geographic
regions contributed to this gratifying growth, though
the markets performed differently from one another,
seen over the year as a whole. Despite negative exchange rate effects and higher raw material prices,­operating profit (EBIT) rose significantly by 26.3% to
CHF 32.2 million (previous year: CHF 25.5 million). The
EBIT margin rose to 10.1% in line with this increase(previous year: 7.7%). These strong results are due inparticular to the structural adjustments made in earlier
years and to the organization’s more global orientation.

Matthias P. Huenerwadel
Executive Vice President
Movement Systems

Expansion in growth markets
is having a positive impact
Sales growth in 2011 was very gratifying in all regions.
Europe turned in a better-than-average performancein the first half, especially in the OEM segment, but demand trended downwards during the second half ofthe year. America, by contrast got off to a slow startin 2011, but steadily improved its performance in thecourse of the year and closed with a strong fourth
quarter. In Asia, the good start in Japan was abruptlyinterrupted by the tsunami catastrophe and the eventsin Fukushima. The outcome was difficult to assess initially, although the situation had returned to normal
by the end of the year. China continued to post solid
growth, though it showed a slower performance thanin 2010.
The strategic and sustainable expansion and development of the organization in growth markets is increasingly having a positive impact on sales. Especially markets such as Russia, Turkey, the Middle East, Southeast
Asia, and Latin America are generating better-than-­average growth stimuli.
All core product groups
report double-digit growth
Among the key product groups, the plastic modular
belts and the Transtex conveyor belts in particular generated significant sales growth. The strategic expansion of the plastic modular belt business and the investments in its portfolio and in tools and machines for47

production and assembly in recent years are now beginning to pay off. The portfolio of rip- and tear-freeconveyor belts, which was bolstered by an acquisitionin America in 2008, achieved a worldwide breakthrough in the reporting year. This advance was due
to concerted efforts made in recent years to define
the product offering for the worldwide sales ­channel
and to harness synergies for sales growth. The division
has developed a convincing offering in new customer
segments in the field of logistics, in facilities with harsh
production conditions and in the transport of raw materials, very heavy cargoes or parts with sharp edges.

In 2011 we again made significant investments instrengthening our position in growth markets. We
built a new fabrication facility in India, opened a
new warehouse in China, and established further subsidiaries and service points in Mexico, while we entered the Turkish market with our own personnel.

Demand remains buoyant
in all customer segments
Movement Systems generated sustainable and aboveaverage sales growth in the strategic customer segments food processing and textiles, especially by adding convincing and high-quality innovative products
to its range. In logistics too, the division landed major
orders with its professional and innovative offering, forinstance its energy-saving conveyor belts. One suchvery successful major project was the baggage handling system at the Fort Worth International Airport in
Dallas, Texas. Sales in the paper and printing segmentrose despite the ongoing weakness – or rather the
long-term restructuring – of the printing industry.
Movement Systems is a world leader in sports treadmills, a fiercely competitive market.

Ambitious growth targets
to achieve market leadership
In 2012 the division will actively pursue the strategic
initiatives it launched some two years ago. After thetransformation into a worldwide functional organization, the cross-organizational processes and structuresin defined core functions are set to generate aboveaverage growth through professional excellence andefficiency gains.

Investments focused on strategic projects
In the reporting year, Movement Systems again focused its main investment activities on strategic projects. The decision to retain sales structures built up
over a long time even during a difficult economic period is now paying off. These structures are currently
being expanded and developed with dedicated resources and industry experts.
Following the creation of a worldwide functional organization, the division earmarked additional resources
for newly defined key positions and management­capacity. In order to manage these extensive crossprocess operations efficiently and link them together
globally, Movement Systems built up international
project management competencies capable of professionally handling the increased complexity.

The steadily growing success in the plastic modular
belt business prompted us to invest in injection moldtools for new series, to double machine capacity, to­expand the assembly center in Europe, and to open a
new assembly center in America.

Movement Systems attaches great importance to further expanding its activities in growth markets in 2012.
It will continue to grow the available potential especially in China and India, setting up sales and service
resources and creating additional fabrication capacity
in order to drive expansion in new regions. Estab­lishing and developing its own teams will be a focal
point of efforts in Indonesia, Thailand, South Korea,
Russia, and Turkey.
Another priority is the global commercialization ofplastic modular belts. In 2012 Movement Systems has
set itself the goal of gaining further market share in thisfast-growing product segment, especially in customer
sectors such as the food and automotive industries,
while providing complete coverage of the relevantmarkets and applications.

48

Forbo Annual Report 2011 – Activity report

Strategic expansion

Not always visibly, but with a presence­almost everywhere, Movement Systems­ensures that many steps in the production
process run smoothly. As an expert partnerin the development of future-oriented power transmission, conveyor, and manufacturing solutions specific to individual industries, Forbo has continued to perform
well in the reporting year.

Strategic expansionof plastic modular belt operations
The way they are built makes conventional conveyor
belts less than ideally suited to certain conveying andprocessing tasks. Movement Systems is concentrating
on developing its range of plastic modular products as
the ideal complement to them. They can be used especially in food processing facilities, as the modules
can be cleaned very easily – something that is particularly important in areas where hygiene is of vital importance. Water used to wash vegetables drips throughpermeable modules while the vegetables are beingtransported for further processing, and freshly caught
fish and seafood can be processed immediately on
board the vessel. Specialized curved belts are ideallysuited to drying or refrigeration where space is at apremium. The plastic modular belts are, however, alsoavailable as ski belts or for the automotive industry in
the form of worker belts. Nine models with over 35
types of modules are currently available for a variety of
applications.

49

Over recent years, Movement Systems has, in line withits business strategy, consistently invested in the development of plastic modular belt operations and has set
itself ambitious growth targets. During the year underreview, with the objective of achieving these, pro­duction and assembly capacities were deliberately expanded, new models and surface types were developed for the food industry in particular, and the sales
department was expanded on a global scale andtrained in the enlarged product range. The doubledigit growth achieved confirms the success of this strategic development.
New innovative products in 2011
The new products developed for the food industry impress through their functional design, can be cleaned
very easily and are particularly suitable for the processing of meat, fish and poultry, for many applications in
the transportation of fruit and vegetables and for the
manufacture of dairy products. They comply with all
the principal international food standards. A further­innovative model with narrow belt units is suited inparticular to the transportation of small products – inthe manufacture of bakery goods or sweets, for example – when tight corners are necessary.

As well as new products for applications involving direct contact with food, though, the year also saw therollout of a new model for the further processing ofready-packed foodstuffs and for industrial applications.
This, probably the strongest belt in its class comparedwith the competition, is capable of carrying extremely
heavy loads while running smoothly. The unique belt
design facilitates use in a wide variety of contexts ranging from the automotive and tire industries to concentration and buffer lines in the tinned goods and drinks
industries and to certain processes in the productionof pasta. The exposed surface allows optimal drainage
of water and circulation of air, while minimizing thesurface area that makes contact with the product, thelatter ensuring, for example, that rigid products such as
glass, cans or plastic containers can easily be moved inany direction on the belt.

WINNING
THROUGH
DIVERSITY OF­APPLICATIONS

50

51

Organization

Executive BoardGroup structure
Board of Directors

52
55
56

52

Forbo Annual Report 2011 – Organization

Executive Board

Matthias P. Huenerwadel, Jörg Riboni, Tom Kaiser, Jens Schneider, This E. Schneider, Daniel Keist, Michel Riva

53This 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 holding various management functions in Europe and the USA, 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 listed company SAFAA, Paris.
In 1994, he became a member of the Executive Boardof Valora, with responsibility for the canteen and ca­
tering 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. In addition, he is a member of the Boardof Directors of Galenica SA, Rieter Holding AG, and­Autoneum 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 Chief­Financial Officer of Jelmoli AG, which was sold at theend 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. He is a member of the Executive Board andChief Financial Officer.

Delegate of the Board of Directors and CEO

Tom Kaiser

Chief Operating Officer, Executive Vice President
Tom Kaiser, born 1956, is a German citizen. He completed his commercial apprenticeship in wholesale
and export sales at Stahlwerke Südwestfalen in 1978.
In 1992, he completed the International Executive Program at INSEAD, Fontainebleau, France. From 1979 to
1988, he worked for Krupp Handel GmbH in North andSouth America and other locations. From 1988 to 1998,
he held various management positions with Vaillant
GmbH. In 1998, he joined the Wolf Group as Managing
Director. From March 2004 until March 2010, Tom­Kaiser was Executive Vice President Flooring Systems
and member of the Executive Board. He was appointed as COO of the Forbo Group on April 1, 2010.

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 amember of the Executive Committee and CFO of theSelecta Group. He was then a partner at Ernst & Young
Corporate Finance in Zurich until 2003, where he was
responsible for various M & A, restructuring and financing transactions. Until the summer of 2007, he was amember of the Executive Committee of SIX Swiss Exchange and headed the Admissions division. Daniel
Keist has been a member of the Executive Board sinceAugust 2007 as Head Corporate Center.

54

Jens Schneider

Matthias P. Huenerwadel

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 corpo­
ration Metallgesellschaft. In 1995, he moved to the­Preussag Corporation, where he held various management positions, among others in the Building
Technology unit. Jens Schneider joined the ForboGroup at the end of 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 memberof the Executive Board in April 2010.

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 an assistant to the Executive Boardof Franke Holding AG. In 1996, he moved to the USA,
where he was responsible for logistics, information
technology, and customer service with Federal Home
Products, Ruston. From 1999, he held various mana­
gerial positions at Franke Foodservice Systems andmanaged its European operations from 2002 to 2005.
Matthias P. Huenerwadel took over the managementof the Movement Systems division in October 2005
and is a member of the Executive Board.

Executive Vice President Flooring Systems

Michel Riva

Executive Vice President Bonding Systems
Michel Riva, born 1964, is a Swiss citizen. He studied
economics at the University of Applied Sciences Baseland the IMD in Lausanne, where he completed hisMBA. From 1989 to 1994 he held various financial positions at Hoffmann-La Roche. Subsequently, he headed up Strapex Corporation, Charlotte, North Carolina,
USA. From 1998 to 2004, he held various Managing­Director positions within the chemical company DuPont, latterly as Business Director Europe, Middle East
and Africa for the DuPont Powder Coatings business
unit. In October 2004, Michel Riva was appointed Executive Vice President Bonding Systems and memberof the Executive Board.

Executive Vice President Movement Systems

Forbo Annual Report 2011 – Organization

55

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

Tom Kaiser

Jens Schneider

Michel Riva

Matthias P.
Huenerwadel

Jörg Riboni

Daniel Keist

Operations

Flooring Systems

Bonding Systems

Movement Systems

Corporate FinanceCorporate Center

Flooring Systems

Sales & Marketing

North America

Americas

Controlling

Mergers &Acquisitions

Treasury

Human Resources/
Pensions
Switzerland

Bonding Systems

Tax
Supply Chain

Europe 1

EuropeIT
Pensions
International

Innovation &Product
Management

Europe 2

Asia | PacificInvestor Relations

Movement Systems

Asia | PacificFinance & Services
Building &Construction­Adhesives

Communications
Legal Services
Internal Audit
Risk Management

56

Forbo Annual Report 2011 – Organization

Board of Directors

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

57

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 of the Board of Directors 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 Directors of Walter 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 2012.

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 2012.

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.

58

59

The Forbo share

60

Forbo Annual Report 2011 – The Forbo share

The Forbo share

The stock market faced a challenging year in 2011: high levels of government debt, the euro crisis this has­unleashed, the nuclear power plant catastrophe in Japan, the ‘Arab Spring’ in North Africa, and fears of recession.
The Forbo share was not spared by these events. The share price initially climbed to over CHF 700 after the publication of the gratifying figures for 2010 achieved in the face of difficult circumstances. However, the share lost
ground in the second half of 2011, dragged down by the severely negative exchange rate effects and the signifi­
cant economic uncertainties that resulted in a conservative guidance on sales and earnings for the year as awhole.
The focus on market-leading activities – as reflected in the news of the sale of industrial adhesives and synthetic
polymers in December 2011 – was received very positively by the market and gave the Forbo share a big boost.
The share closed the year 2011 at CHF 493.

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

7%
0%
– 7%
– 14%
– 21%
– 29%
– 36%
– 43%
– 50%
– 57%
– 64%
– 71%
– 79%
– 86%
31.12.2008

31.12.2009

31.12.2010

31.12.2011

Forbo share
SPI

61

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

2011
Number2,500,000

2010
Number2,713,152

2009
Number2,713,152

2008
Number2,713,152

2007
Number2,713,152

2,298,758
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
21,4192,453,379
238,354
21,419CHF
250,000

CHF
271,315

CHF
271,315

CHF
10,852,608

CHF
37,984,128

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
85,67634,347,306
3,336,956
299,866

CHF
349
62.8
12.03)
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
281
44
10
1.44)
2.24)
23

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

CHF
722
447
700
1,770
1,097
1,717

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

Data per share
Shareholders’ equity Group7)
Group profit2) 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 2011, 2010 and 2009: CHF 0.10; 2008: CHF 4; 2007: CHF 14.
See note 15 ‘Earnings per share‘ on page 109 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 109 of the financial report.
8) Total number of shares outstanding, multiplied by year-end share price.

Forbo Annual Report 2011 – Corporate governance reportCorporate
governance report

64

Forbo Annual Report 2011 – 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 (Directive 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 companies, directly or indirectly, that belong to the Forbo Group. The operational structure of
the Group is shown in the organizational chart on page 55. 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 138 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 divisions to the Group’s businesses can also be found in this list.
Significant shareholders
As of December 31, 2011, 2,321 shareholders were listed in the share register of Forbo Holding Ltd, or 164 (8%)
more than in the previous year. At December 31, 2011, Forbo Holding Ltd knew of the following significant shareholders with a holding of more than 3%:

Michael Pieper1)
Forbo Holding Ltd2)This E. Schneider

31.12.2011
as a percentage
27.26
8.05
4.56

1) Michael Pieper holds his interest directly and indirectly through Artemis Beteiligungen I AG.
2) 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 accordance 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).
This E. Schneider reported to Forbo Holding Ltd on May 11, 2011 that he had fallen below the 5% threshold andheld 4.985% of the voting rights.
Forbo Holding Ltd reported on July 16, 2011 that, as a result of the destruction of its own shares, it had fallen­below the threshold of 10% as per July 14, 2011 and that it held 137,764 of its own shares, corresponding to5.511% of voting rights, directly or indirectly, via Forbo International SA, Baar, Switzerland and Forbo Finanz AG,
Baar, Switzerland. In addition, Forbo Holding Ltd has granted 32,438 purchase rights for 32,438 registered sharesof Forbo Holding Ltd, corresponding to voting rights of 1.298% of the total.

65

No other disclosures were made in 2011.
For further information on significant shareholders or shareholder groups, we refer the reader to the table on thefacing page and to page 152 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, 2011, 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:–– 68.43% were registered in the name of 2,290 shareholders with voting rights–– 25.66% were shares of banks or of SIX SIS AG pending registration of transfer–– 5.91% 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 60 and 61. Further information on the rights of participation asso­
ciated with the share can be found on page 76 of this Annual Report.
At the Ordinary General Meeting of Shareholders of Forbo Holding Ltd of April 29, 2011, the Board of Directors
was authorized to buy back the company’s own shares, 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 share buyback program if this should become necessary inorder to finance external growth. The Board opted for a two-stage procedure in which the shareholders took
the basic decision at the Ordinary General Meeting of Forbo Holding Ltd on April 29, 2011 and will be asked toapprove the destruction of the repurchased shares at one of the forthcoming annual general meetings. By
December 31, 2011 Forbo Holding Ltd had not repurchased any 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,shareholders have no right of subscription. Holders of option or convertible rights are entitled to subscribe to
new share issues. The registration of the 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.

66

Forbo Annual Report 2011 – Corporate governance report

Changes in capital
The Ordinary General Meeting of Forbo Holding Ltd on April 29, 2011 decided, based on the audit report of an­accredited 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 destroying 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.
The Ordinary General Meeting of Forbo Holding Ltd on April 24, 2009 decided, based on the audit report of an
accredited auditor, to reduce the ordinary share capital of the company by CHF 10,581,292.80 from CHF 10,852,608
to CHF 271,315.20 by reducing the par value of the shares from CHF 4 to CHF 0.10. It was further decided toamend the Articles of Association accordingly.
Participation certificates and ‘Genussscheine’ (non-voting equity securities)
Forbo Holding Ltd has neither issued 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 requires amajority of two thirds of the votes represented at the General Meeting and the absolute majority of the par valueof 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 75, as well as on
pages 117 and 118 of this Annual Report.

Board of Directors
Members of the Board of Directors
The cutoff date for the following information is December 31, 2011.

67

With the exception of This E. Schneider, Delegate of the Board of Directors and CEO, none of the members of theBoard 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 Directors of
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 Group since 1988 and its owner and CEO since 1989. He is amember 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 53 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,
for which he has worked since 1984. In July 2011 he was appointed full-time Chairman of the Board of
Helbling Holding AG. Between 2002 and 2010 Reto Müller was either a member or Chairman of the Zurich­Regional Economic Advisory Board (Zurich) of the Swiss National Bank. He has been a member of the Councilof SWISSMEM since 2008 and he holds additional board memberships in other companies. He became a memberof the Board of Directors of Forbo Holding Ltd in 2011.

68

Forbo Annual Report 2011 – Corporate governance report

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 auditing 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 apartner and member of the management of the accountancy and auditing firm T+R AG, Gümligen/Berne, where
he heads the Auditing business unit. Vincent Studer is a member of the Board of Directors of Bank EEK AG in
Berne and holds additional board memberships in other companies and foundations. He has been a member ofthe Board of Directors of Forbo Holding Ltd since April 2009.

Board of Directors of Forbo Holding Ltd
at December 31, 2011
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

2012

M

–

2009

2012

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 Häfeli
Non-member
OGM: Ordinary General Meeting
AFC: Audit and Finance Committee
HRC: Committee for Human Resources and Remuneration
C: 		 Chair
M: 		 Member

69Elections 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 about 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 29, 2011, This E. Schneider
and Dr. Peter Altorfer were re-elected for a three-year term of office in a single vote. Dr. Reto Müller was elected
as a new member of the Board for a one-year term of office. Further details on the terms of office of the othermembers of the Board of Directors are contained in the table on page 68. In accordance with the Organizational
Regulations of Forbo Holding Ltd, members who have reached the age of 70 resign from the Board of Directors
at the Ordinary General Meeting of the following year. The average age of the incumbent members of the Board
is around 60. In determining the composition of the Board of Directors, importance is attached to the election of
independent individuals with international experience in industrial companies as well as in the financial andconsultancy 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 68.
Decisions are as a general rule taken by the full Board of Directors. The Board constitutes two standing committees 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 monitors 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 Chairman 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 Group COO report to him for this function. The Executive Vice Presidents of the three divisions report to
the Group COO.
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 2011, the Board of
Directors met four times, the meetings usually lasting a whole day.

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Forbo Annual Report 2011 – 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 auditors. 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 auditors
may attend on special invitation.
The AFC convenes as often as business requires, but at least twice a year. In the 2011 business year, three meetings were held, each lasting about half a day. The external auditors were present for some items on the agendaof the AFC’s meeting on the financial statements, while the Ernst & Young representatives responsible for internal
auditing attended the 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 regularly involved 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 2011 business year, four 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 overindebtedness

71

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, Group COO, CFO, Head Corporate Center, and the Executive Vice Presidentsof the three divisions. It is responsible for the long-term success and market-driven management of the ForboGroup. 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-responsibility 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 2011 business year, ten
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.

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Forbo Annual Report 2011 – 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 69 and 70.
The Board of Directors furthermore fulfils its supervisory and monitoring obligations by means of financial reporting 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 in2011 as there were no special incidents or discoveries.
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 as a rule in the first half of the year. The revised strategy
is quantified 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 implemented 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 madebetween 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 theseaudits are minimized or eliminated by measures adopted by management and are constantly monitored.
In 2011, a total of nine internal audits and two follow-up reviews were conducted. The internal audits were­restricted to individual business processes. In its review of audited Group companies, Internal Audit included any
issues that had been defined in 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 theabove-mentioned business processes were analyzed in the audit. At least one company in each division was
audited in the course of the internal audits.

73

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 particular 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 comprehensive 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 132 to 136 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 156 (note 18 ‘Risk assessment’) and on pages 132 to
136 (note 38 ‘Risk assessment and financial risk management’).

Executive Board
Members of the Executive Board, 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 53 and 54 of this Annual Report.
Management contracts
Forbo Holding Ltd has concluded no management contracts with third parties.
Significant changes after balance sheet date
It was announced on January 31, 2012 that Tom Kaiser, Chief Operating Officer Forbo Group, will leave the company in the first half of 2012 and that the division heads will again report directly to the Delegate of the Boardof Directors and CEO; that Jean-Michel Wins will succeed Matthias P. Huenerwadel as head of the Movement
Systems division in the second half of 2012; and that Jörg Riboni, Chief Financial Officer Forbo Group, will leave
the Group at the end of January 2013.

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Forbo Annual Report 2011 – 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 which 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% of the consideration is distributed to the Board of Directors as Forbo stock. These shares have a 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 made, theaverage 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 the compensation for each Board member in the year under review, along with the details of thevaluation of the shares, can be found on pages 131 and 153 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 are regarded 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 operational responsibility of the Executive Board member in question.
The qualitative targets are geared to the company’s long-term sustainable development and may account for
up to 15% of the total variable component; the remaining portion of the variable component depends on theachievement of the 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 income. The variable component may be as much as about 175% of the fixed compen­
sation, depending on the individual’s target achievement.

75

Payment of a bonus is linked with the Management Investment Plan (MIP) launched in 2006. According to thisplan, at least 50% of the annual bonus of Executive Board members is paid into the MIP. 25% of the sums in the
MIP are invested in options and 75% in equities of Forbo Holding Ltd. Equities and options are subject to a threeyear vesting period; the options have a maturity of five years.
Of special note with regard to the MIP is the treatment of options in the event of termination of the employment
contract, invalidity or retirement. If notice is given terminating the employment contract during the vesting­period, the options are repurchased; the repurchase price corresponds to 100% of the theoretical average valueof the option based on the share price during the last 14 trading days for the share before the employment contract was terminated. In the event of invalidity or retirement (including early retirement), the options – regardlessof whether or not they are still subject to a vesting period – may be sold during the entire remaining period tomaturity from the moment the invalidity or retirement begins.
As per the balance-sheet date December 31, 2011, the Executive Board held the following options:

Allocation
2007
2008
2009
2010
2011

No. ofregisteredshares
697
5,446
7,028
4,460
10,668Term
15.03.2007 – 15.03.2012
19.03.2008 – 19.03.2013
02.04.2009 – 02.04.2014
15.03.2010 – 16.03.2015
01.04.2011 – 02.04.2016

Vested until
15.03.2010
19.03.2011
03.04.2012
15.03.2013
01.04.2014

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

Strike price (CHF)
564.69822.00214.63434.75733.25The 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 131 and 153 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.
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).
In the fall of 2005, it was agreed with the Delegate of the Board of Directors and CEO that part of his compensation for 2005 and the compensation for the following five years (from 2006 up to and including 2010) would be
paid largely in stock, which was vested until December 31, 2010. 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 until December 31, 2013. The modalities are similar to a verylarge extent to the provisions of the first contract. No severance payment was agreed on.
With effect from January 2011, the employment contract with the Delegate of the Board of Directors and CEO
was extended prematurely. The contract extension encompasses the period from May 1, 2013 to April 30, 2016.
The modalities of the first contract were again by and large retained. No severance payment was agreed on.

76

Forbo Annual Report 2011 – Corporate governance report

In addition to the share package, the Delegate of the Board of Directors and CEO draws an annual cash com­pensation, which is used for settlement of employee contributions to the pension fund and to social security.
With the share package and the cash remuneration, all compensations such as bonuses, inflation, adjustments,
options, etc. are settled.
The relevant figures for this compensation model are found on pages 131 and 153 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 capital entered 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 requires a majority of two thirds of the votes represented at the General
Meeting and the absolute majority of the par value of 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 represented 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 ofthe company, and amendment of paragraph13 section 4 of the Articles of Association require the approval of
two thirds of the votes represented at the General Meeting and the absolute majority of the par value of theshares represented.
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.

77

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 2011, 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 1.1 million in the year under review.
Additional fees
For 2011, the auditing company invoiced additional consulting fees of CHF 0.3 million. This relates mainly to tax
consultancy.
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.

78

Forbo Annual Report 2011 – Corporate governance report

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, andthe public by reporting in timely fashion on business trends and activities relevant for 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 roadshows are further information tools for the media and the capital market.

79

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 10 of this Annual Report. Further information on
the Forbo share is printed on pages 60 and 61 of this Annual Report.
Publications may be ordered by email, fax or telephone.
Email: 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 2007 – 2011
Consolidated balance sheets 2007 – 2011

81
82
83
84
85
86
87
101
138
142
144
145

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

147
148
149
150
157
158

82

Forbo Annual Report 2011 – 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
Marketable securities
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.

31.12.2011

31.12.2010

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

743.9
450.2
270.4
17.6
5.7
750.3

Note

16
17
14
18
32
19
20

21
22

260.9
220.8
28.4
21.4
47.4
171.4
1,494.2

Note

24

26
27
28
14
29
28
30
31

32

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

729.7
0.3
– 0.1
729.5
360.8
196.5
74.7
35.3
54.3
403.7
135.7
21.9
118.4
65.9
31.0
30.8
764.5
1,494.2

Forbo Annual Report 2011 – Consolidated financial statements

83

Consolidated income statement

2011
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 profit
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

Note

2010
Restated

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

15
15

62.78
62.61

71.64
71.48

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

15
15

58.88
58.72

65.45
65.31

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

15
15

3.90
3.89

6.19
6.17

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.

6

7
8
9
10
12
13
14
32

Note

84

Forbo Annual Report 2011 – Consolidated financial statements

Comprehensive income statement

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

The items under ‘Other comprehensive income for theyear, net of tax’ include income tax effects which aredescribed in note 14 ‘Income tax’.

2011

2010

146.5

163.3

– 6.2
– 18.6– 119.6
11.7– 14.3

– 1.2
8.6
– 1.7
0.0
– 19.1127.4– 12.20.2– 4.7– 138.9
24.4

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

Forbo Annual Report 2011 – Consolidated financial statements

85

Consolidated shareholders’ equity

2011

CHF m
December 12, 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

Share
capitalTreasuryshares

0.3

– 0.1

0.3

– 0.1

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

Reserves

Revaluation
reserve

Assetsavailablefor-saleReserves
fromcash flow
hedgesTranslationdifferences

778.4– 97.6680.8
163.3– 12.2

136.5

21.2

– 0.2

136.5

21.2

– 0.2

– 256.5
97.6– 158.9

– 2.6

0.2

– 124.3

679.6
163.3
– 138.9

151.1
7.3
5.5
33.7
– 13.5
864.9

0.0
– 7.3

– 2.6

0.2

– 124.3

24.4– 283.2

5.5
33.7– 13.5
729.7

Reserves

Total

729.7
146.5
– 19.1127.4
5.0– 18.5– 28.3
815.3

2010

CHF m
As at December 31, 2009
Transfer (Note 39)
As at January 1, 2010 (restated)
Group profit for the year
Other comprehensive
income for the year, net of tax
Total comprehensive income
Change in revaluation reserve
Share-based payments
Treasury shares
Dividend payment
December 31, 2010

0.0
0.3

– 0.1

129.2

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

18.6

0.0

Total

679.6

86

Forbo Annual Report 2011 – Consolidated financial statements

Consolidated cash flow statement

2011

2010

Cash flow from operating activities
CHF mGroup profit for the year
Tax expense
Group profit before taxes
Financial result
Depreciation and impairment on property, plant, and equipment
Amortization and impairment on intangible assets
Profit from disposal of non-current assets
Share-based payments
Income tax paid
Increase/decrease (–) in provisions and employee benefit obligations
Increase in other operating working capital
Increase in net operating working capital1)
Net cash flow from operating activities

146.5
29.8
176.3
– 17.5
44.8
4.9
– 0.1
5.2
– 29.813.1– 1.3– 54.1
141.5

163.3
51.5
214.8
– 28.9
53.4
5.0
– 4.3
5.5
– 27.7– 6.4– 9.1– 14.3
188.0

Cash flow from investing activities
CHF m
Purchase of non-current assets
Proceeds from the disposal of non-current assets
Decline in current finance liabilities
Sale of available-for-sale financial assets
Net cash flow from investing activities– 39.7
0.4
4.4
53.0
18.1

– 37.6
19.3
0.0
92.6
74.3

Cash flow from financing activities
CHF m
Decrease (–)/increase in current financial debt
Decrease in non-current financial debt
Interest paid
Interest received
Purchase of treasury shares
Proceeds from sale of treasury shares
Dividend payment
Net cash flow from financing activities– 64.6– 6.0– 10.31.0– 42.228.7– 28.3– 121.7

0.2– 270.5– 14.3
1.0
– 7.6
41.3
– 13.5– 263.4

Change in cash and cash equivalents
CHF m
Increase/decrease (–) 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

37.9
– 4.0
171.4
205.3

– 1.1
– 25.7
198.2
171.4

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

12.9
192.4
205.3

171.4
171.4

1) Net operating working capital includes the items ‘Trade receivables’, ‘Inventories’, and ‘Trade payables’.

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

Forbo Annual Report 2011 – Consolidated financial statements

87

Notes – accounting principles

1 General information
Forbo Holding Ltd (the company) and its subsidiaries(together with the company constituting the Group)
manufactures floorings, adhesives, and drive and conveyor technology. The Group has a global network oflocations with production and distribution plus puresales 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
Board of Directors on March 14, 2012 and released for
publication on March 20, 2012. The report is subject toapproval by the Ordinary General Meeting on April 27,
2012.
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 have been prepared inaccordance 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 date of
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 have changed.
The comparable data from the consolidated financial
statements of the prior year were, where necessary,­restated and 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 percent of voting
rights or in which it bears managerial responsibility
for their operations and financial policies. Subsidiaries
are fully consolidated from the date on which control
is transferred to the Group. They are deconsolidated
from the date that control ceases.

88

Forbo Annual Report 2011 – 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 agreementson contingent considerations are accounted for attheir 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 the­acquiree, the non-controlling interest is recognized as
the proportionate share of the fair value of the net assets acquired. Goodwill is the excess of the cost of thebusiness combination over the acquirer’s interest in
the fair value of the acquired net assets. If the accounting for a business combination can be determined
only provisionally by the end of the period in which
the combination is effected, provisional values areused. During the measurement period, the provisional
values are adjusted retroactively. Further assets and­liabilities can be 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 the time. The measurement period does notlast more than twelve months from the date of acquisition. Goodwill is not written off but is tested for impairment after each reporting date.

Inter-company transactions, balances, and unrealized
gains or losses on transactions between Group companies are eliminated. Accounting policies of subsidiaries 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 percent and50 percent of the voting rights. Investments in asso­
ciates are accounted for using the equity method of­accounting and are initially recognized at cost. The
Group’s investments in associates include goodwill
identified on acquisition, 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 inan associate equals or exceeds its interest in the asso­
ciate, the Group does not recognize further losses, unless it has incurred obligations or made payments onbehalf of the associate.
The subsidiaries included in the group of consolidated
companies are listed under ‘Group companies’ (frompage 138 of this report).

Forbo Annual Report 2011 – Consolidated financial statements

Foreign currency translation
The individual companies generally prepare their­financial statements in the local currency. The local
currency (functional currency) as a rule corresponds
to the currency of the primary economic environment
in which the company operates. Foreign currencytransactions are translated into the functional currency­using the exchange rates prevailing at the dates oftransactions or the dates of valuation where items are
remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and fromthe translation at year-end exchange rates of monetary assets and liabilities denominated in 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 whose changes infair value are recognized in income are reported in theincome statement. However, translation differenceson non-monetary financial assets whose changes infair value are recognized in comprehensive income aretaken to ‘Other comprehensive income’.

89

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 offset against consolidated shareholders’ equity and taken to the comprehensive income
statement in the event the company is divested.
On consolidation, exchange differences arising fromthe translation of net investment in independent foreign operations, of borrowings and of other currency
instruments designated as hedges of such investments are recognized in other comprehensive income.
When a foreign operation is disposed of, exchange differences that were recorded in the other comprehensive income are transferred to the income statement as
part of 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)

2011

2010

2011

2010

1.23
0.89
1.42
1.11
13.72
13.66

1.38
1.04
1.61
1.19
15.40
14.47

1.22
0.94
1.46
1.22
14.88
13.66

1.25
0.94
1.46
1.15
14.20
13.99

90

Forbo Annual Report 2011 – Consolidated financial statements

Maturities
Assets are designated current assets if they are realized
or consumed in the Group’s ordinary business cycle
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 other obligations are assigned to non-current liabilities.
Segment information
Segment reporting discloses financial and descriptive
information on the reportable segments. The reportable segments are business segments and combinations of business segments that meet specific criteria.
Business segments are components of a company forwhich separate financial information is available thatis regularly examined by the chief operating decisionmaker 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 through which theperformance of the operating segments is assessedand 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 calculated on the basis ofmarket data, and the prices applied are therefore comparable to those that would have applied in a transaction with a third party.
Segment accounting is prepared to include operating
profit (EBIT). Allocation of interest and taxes to the­individual divisions and Corporate is not appropriate
owing to the highly centralized functions finances
and taxes.

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, ora subsidiary acquired exclusively with a view to resale.
A component of the Group can be clearly demarcatedfrom the rest of the Group, both operationally andfor accounting purposes. Discontinued operations areshown 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 recognized separately. Associated­assets 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 madeto the prior year for these items. Information associated with the discontinued operation is reported 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 makes­estimates on the basis of historical data, taking into
­account features specific to customers, transactions,and agreements. Appropriate provisions are made for
expected warranty claims.

Forbo Annual Report 2011 – 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 payment is granted. The fairvalue of the share options is determined by the BlackScholes model. The anticipated maturity used in themodel is adjusted on the basis of best estimates withregard to the effects of non-transferability, restrictions
on exercise, and conduct. Further information on­determining the fair value of the share options is provided in note 25 ‘Employee participation plan’. The fairvalue determined on granting equity-settled sharebased payments is posted to 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 iscalculated on the basis of applicable tax rates.

91

Deferred tax liabilities are recognized for temporary
differences between assets and liabilities in the balance sheet, and the amounts as measured for tax purposes 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 fiscally offsettable losses, but only insofar as it is likely that sufficient taxable
profits will be available against which these differ­ences can be offset. Deferred taxes are not reported if
the temporary differences arise from the recognitionof goodwill or from the initial recognition of other assets or liabilities unconnected with the acquisition of
a company which relate to events not affecting taxable
income or the profit for the year.
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 amount of the deferred tax claims ischecked each year on the reporting date and reduced
if it is no longer likely that sufficient taxable profits areavailable to realize the claim either wholly or in part.
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. In this case, the corresponding tax effect is also
to be recognized directly in ‘Other comprehensive income’.
Deferred income tax is recognized on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of thetemporary difference is controlled by the Group and
it is probable that the temporary difference will not­reverse in the foreseeable future.

92

Forbo Annual Report 2011 – Consolidated financial statements

Property, plant, and equipment
Land and buildings are carried on the balance sheet attheir 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 valueon the reporting date. All accumulated depreciation is­offset 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,
and equipment 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 their estimated 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 systems have different useful lives, they
are depreciated as separate items. Useful lives and­residual 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 belonging to the company or, if thisis shorter, over the life of the underlying lease agreement.
The profit or loss arising from the sale of property, plantor equipment is defined as the difference between thesale proceeds and the carrying amount of the asset
and is recognized in income.
Intangible assets
Goodwill is the excess of the cost of the business combination over the acquirer’s interest in the fair value ofthe acquired net assets. Goodwill created on the acquisition of subsidiaries is included in ‘Intangible assets’.
Goodwill is tested annually for impairment and carriedat cost less accumulated impairment losses. Impairment losses on goodwill may not be reversed. Gains
and losses on the disposal of an entity include the­carrying amount of goodwill relating to the entity thatis sold off.

Forbo Annual Report 2011 – 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 ina subsequent period.

93

Impairment of non-financial assets
Assets that have an indefinite useful life, for example
goodwill and certain trademarks, are not subject toscheduled amortization. They are tested for impairment 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’.

94

Forbo Annual Report 2011 – Consolidated financial statements(b) Loans and receivables
Loans and receivables are non-derivative financial­assets with fixed or determinable payments that are
not quoted in an active market. They are included incurrent 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-derivative­financial 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 recognition 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 of ownership.

Available-for-sale financial assets and assets in the­category ‘Financial assets at fair value through profit
or loss’ are carried at fair value after their initial recog­
nition. 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 presented in the income statement in the period in which they are incurred. Dividend income fromfinancial assets classified as at fair value through profit
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 the comprehensive income statement withno effect on income. When securities classified as available-for-sale are sold or impaired, the accumulated fairvalue adjustments previously recognized in the comprehensive income statement are included 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 shares is 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 the caseof equity investments classified as available-for-sale­financial 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 foravailable-for-sale financial assets, the cumulative loss
– measured as the difference between the acquisition
cost and the current fair value, less any previous impairment losses on that financial asset – is removed
from equity and recognized in the income statement.
­Impairment losses on equity instruments recognizedin the income statement are not reversed throughprofit and loss. Impairment testing of trade receivables
is described in note 20 ‘Trade receivables’.

Forbo Annual Report 2011 – 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 is entered 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 ofa recognized asset or liability or an unrecognizedfirm commitment (fair value hedge);–– hedges of a particular risk 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 used in
hedging transactions are highly effective in offsettingchanges in fair values or cash flows of hedged items.

95

The fair values of various derivative instruments used
for hedging purposes are disclosed in note 34 ‘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.
(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 and tohedge currency risks in connection with short-term or
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 or currency risk, are recognized in the income statement
under ‘Financial income/financial expenses’.
If the hedge no longer meets the criteria for hedge­accounting, 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.

96

Forbo Annual Report 2011 – Consolidated financial statements(b) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognized in the comprehensive income
statement. The ineffective portion of such changes
in fair value, however, is recognized directly in the income statement.
Amounts accumulated in equity are reclassified to
profit or loss and are recognized as income or expensein the period in which the hedged item affects profit orloss (for example, when the forecast sale that has been
hedged takes place). The gain or loss from the effective
portion of interest rate swaps that hedge variable rateborrowings is recognized in the income statement.
The gain or loss from the ineffective portion is also recognized in the income statement. However, when theforecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventories
or property, plant and equipment) or a non-financial
liability, the gains or losses previously deferred in equity are included in the initial measurement of the costof the asset or liability. The deferred amounts are ultimately recognized in the cost of goods sold in the caseof inventories or in depreciation in the case of property, plant, and equipment.
When a hedging instrument expires, or is sold, or ceases to meet the criteria for hedge accounting, any cumulative gain or loss existing in the comprehensive
income at that time remains in equity and is recognized in the income statement only when the originally hedged forecast transaction actually occurs. If
a forecast transaction is no longer expected to occur,
the cumulative gain or loss that was reported in equity
is immediately transferred to the income statement.
(c) Net investment hedge
Hedges of net investments in foreign operations areaccounted for similarly to cash flow hedges. Any gainor loss on the effective portion of the hedging in­strument is recognized in the comprehensive income
statement; the gain or loss relating to the ineffective
portion is recognized immediately in the income statement. Gains or losses accumulated in equity are transferred to the income statement when the foreign operation is sold off in full or in part. The last portion of
the US private placement is being used to hedge net
investments in the USA.

(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.
The Group employed hedge accounting in the prioryear in connection with the hedging 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 fromthe US private placement against fluctuations. The effective portion of the change in market value of thehedging instrument was recognized in the comprehensive income statement, with no effect on the income statement, until the gain or loss on the hedged
item was realized; the ineffective portion of the change
in market value of the hedging instrument was recognized in the income statement. The cumulative changes in market value were reported in the income statement when future firm commitments were recognizedin 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’
and recognized separately in the balance sheet under­‘Assets held for sale’ and ‘Liabilities directly associatedwith assets held for sale’, if their carrying amount ismore likely to be realized by sale than by use. This isconditional upon the sale being highly probable andthe assets being ready for immediate sale. For a sale to
be classified as highly probable, the following criteria
must be met: management is committed to a plan tosell the asset, the asset is marketed for sale at a pricethat is reasonable in relation to its current fair value,
and the completion of the sale is expected to occur
within twelve months. Assets held for sale are measured at the lower of their carrying amount or the fairvalue less costs to sell.

Forbo Annual Report 2011 – Consolidated financial statements

97

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.

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.

Inventories are for the greater part measured at average cost. Adjustments are made for unsalable inven­tories and inventories with insufficient turnover.

Current and non-current financial debt
Current and non-current financial debt consists mainlyof private placements, bonds, bank loans, and leasing
debt. It is stated at amortized cost (less transaction
costs). Borrowing costs are recognized in the income
statement, using the effective interest method.

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.
Marketable securities
Marketable securities are mainly financial assets available-for-sale. Initial recognition and subsequent measurement are described separately under ‘Financial­assets’ from page 93 onwards of this report.
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 attheir par value. Payments by shareholders above thepar value are credited to reserves.

Dividends are debited to equity in the period in which
the resolution on their distribution is adopted.

Financial debt is assigned to current debt, except if theGroup has to settle the obligation twelve months after
the reporting date or enjoys unlimited right to postpone 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.

98

Forbo Annual Report 2011 – Consolidated financial statements

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 plan
reductions or compensations are immediately taken to
the income statement.
Actuarial gains and losses are reported in the statement of comprehensive income under ‘Other com­prehensive income for the year, net of tax’, with due
account 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 the obligation.
A provision for restructuring expenses is reported if theGroup has defined a detailed, formalized restructuring
plan which has created a justified 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 businessactivities.
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 International­Accounting Standards Board (IASB) and International­Financial Reporting Interpretations Committee (IFRIC)
came into force:–– IAS 24 (revised) – ‘Related party disclosures’–– IAS 32 (revised) – ‘Financial instruments: Presentation’–– IFRIC 14/IAS 19 (revised) – ‘The Limit on a Defined Benefit Asset, Minimum Funding Requirements and theirInteraction’–– IFRIC 19 (new) – ‘Extinguishing financial liabilities withequity instruments’–– ‘Improvements to IFRSs’ (published in May 2010)
The IASB published its third collection of amendments to various IFRSs. This affects a total of six­standards and one interpretation, although – in accordance with the underlying idea of the amendment collections – they do not involve fundamental
changes to the standards. In some cases, inconsistencies have been eliminated or formulations improved.
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 Management assumptions and estimates
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.

Forbo Annual Report 2011 – Consolidated financial statements

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.
If the asset itself does not generate any independent
cash flow, the impairment test must be performed fora cash-generating unit. As a rule, the Group defines the
cash-generating units on the basis of geographicallycohesive markets, the technologies used or the sales
generated by the brands concerned. Important assumptions in these calculations include growth rates,
margins, estimates and management’s experience ofthe future development of net working capital, anddiscount rates. The actual cash flows may deviate significantly from the planned discounted future values.
Likewise, the useful lives may be shortened or in­vestment assets impaired in the event of a change inthe use of buildings, machinery and facilities, changeor abandonment of locations or lower-than-expected
revenues over the medium term. Further informationon this topic can be found in note 16 ‘Property, plant,
and equipment’ and note 17 ‘Intangible assets’.

99

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 revenues from theemployee pension schemes and on the comprehensive income statement. Further information on this
topic can be found in note 27 ‘Employee benefit obligations’.
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’.

100 Forbo Annual Report 2011 – Consolidated financial statements

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 beoffset against future profits. This assessment depends
on a number of different factors and developments.
Further information on this topic can be found in note
14 ‘Income taxes’.

5 Standards approved but not yet applied
The following new and revised standards and inter­
pretations had been published, though they had not
yet become compulsory by the time the consolidated
financial 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 tothe table below represent an initial estimate by management.

Standards
Standard/Interpretation
IFRS 7 (revised) – ‘Financial instruments: Disclosures’IAS 12 (revised) – ‘Income taxes’
IAS 1 (revised) – ‘Presentation of Financial Statements’IAS 19 (revised) – ‘Employee Benefits’IAS 32 (revised) – ‘Offsetting financial assets and financial liabilities’
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’
IFRS 9 (new) – ‘Financial instruments’* 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 Project.
Since they have little impact on the financial statements, no detailed list of the changes is given.

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

Date effective
July 1, 2011
January 1, 2012
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

Plannedapplication2012 business year
2012 business year
2013 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 2011 – Consolidated financial statements 101

Notes

6 Segment reporting
Forbo is a global producer of Flooring Systems, Bonding Systems, and Movement Systems. The divisions
correspond to the internal management structure andare run separately because the products that they
manufacture, distribute, and sell differ fundamentallyin terms of production, distribution, and marketing.
Flooring Systems develops, produces, and sells linoleum, vinyl floorings, dirt trap systems, carpet tiles, andneedlefelt floorcoverings as well as the various accessory products required for laying, processing, cleaning,and care of flooring. Bonding Systems develops, produces, and sells adhesives for industrial applications
and the construction industry as well as synthetic polymers. Movement Systems develops, produces, andsells high-quality belts made of synthetics for use inpower transmission or as conveyor and process belts.
Corporate includes the costs of the Group headquarters and certain items of income and expenses which
are not directly attributable to a specific business.
Flooring Systems, Movement Systems, Bonding Systems, and Corporate are reportable segments. The
identification of the reportable segments is based oninternal management reporting to the Chief Executive
Officer of the Group and hence on the financial information used to check 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:

2011
CHF m
Total net sales
Inter-segment sales
Net sales to third parties
Operating profit (EBIT)
Operating assets
Number of employees (December 31)

Flooring
Systems
806.8
– 1.8
805.0
117.6
640.3
2,706

Bonding
Systems
604.4– 19.5
584.9
19.0
371.0
1,406

The EBIT of the Bonding Systems division in the reporting year was negatively impacted by two exceptional
items. Forbo signed a contract with H.B. Fuller Company on December 21, 2011 on the sale of its industrial
adhesives business, including synthetic polymers, belonging to the Bonding Systems division. This resulted

Movement
Systems
317.3
0.0
317.3
32.2
235.0
1,861

Corporate

Elimination– 21.3
21.3

Total
1,707.2
1,707.2
158.8
1,267.5
6,014– 10.021.2
41

in the EBIT of Bonding Systems being reduced by­exceptional expenses amounting to CHF 9.3 million.
The provisions of CHF 5.5 million (see note 28 ‘Provisions’) for restorative work on the environment, which
the continuing operations of the Bonding Systems division had to make, also had a negative impact on EBIT.

Segment information on the reportable segments forthe prior year:
2010
CHF m
Total net sales
Inter-segment sales
Net sales to third parties
Operating profit (EBIT)
Operating assets
Number of employees (December 31)

Flooring
Systems
874.2
– 0.3
873.9
134.7
642.7
2,738

Bonding
Systems
606.6– 21.9
584.7
37.7
354.0
1,384

Movement
Systems
331.1
0.0
331.1
25.5
234.4
1,780

Corporate– 12.020.8
41

Elimination– 22.2
22.2

Total
1,789.7
1,789.7185.9
1,251.95,943

102 Forbo Annual Report 2011 – Consolidated financial statements

Management reporting and the internal control system are based on the same accounting principles
as external reporting except for the presentation of
discontinued operations, which are reported in thepresent consolidated financial statements in accordance with the requirements of IFRS 5. The segment
information presented above, however, includes thediscontinued operations. Detailed information on discontinued operations can be found in note 32 ‘Discontinued operations and assets held for sale as wellas liabilities directly associated with assets held forsale’.

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 in themain exercises central control over the financial result.
Inter-segment sales are effected 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 except for thepresentation of discontinued operations.
Net sales in segment reporting comprises the net
sales from discontinued operations, whereas net sales
in the income statement matches with the net sales ofcontinuing operations.

CHF m
Net sales as per segment reporting
Discontinued operations
Net sales

2011

2010

1,707.2– 503.4
1,203.8

1,789.7– 498.5
1,291.2

2011

2010

158.8
18.4
– 9.9
167.3

185.9
29.3
– 17.2198.0

31.12.2011

31.12.2010

961.6
305.9
1,267.5
234.4
1,501.9

1,251.9242.3
1,494.2

Reconciliation of segment results to the income statement and balance sheet:

CHF mOperating profit (EBIT) according to segment information
Financial result
Discontinued operations
Group profit before taxes

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

Forbo Annual Report 2011 – Consolidated financial statements 103

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/Australia/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/Australia/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 16.0 million in the­reporting year (2010: CHF 17.6 million).

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

2010
Third-party sales

31.12.2010
Operating assets

30.5
170.0
172.5
159.7
127.5
114.7
62.7
49.6
887.2
223.8
180.2
1,291.2

89.3
148.1
284.5
125.2
185.5
35.6
77.1
31.4
976.7
170.6
104.6
1,251.99 Other operating expenses‘Other operating expenses’ comprises primarily environmental expenditure, legal costs, maintenance costs,
warranties, costs for consulting and auditing, insurance costs, taxes on capital and levies based on local
legislation.
10 Other operating profit

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

‘Other operating profit’ consists of insurance payments
received, proceeds from the sale of waste for recycling
purposes as well as proceeds from the release of provisions due to the efficient execution of projects.

104 Forbo Annual Report 2011 – Consolidated financial statements

11 Personnel expenses

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

As at December 31, 2011, the headcount of the continuing operations was 4,875 (2010: 4,816). The average headcount over the year was 4,884 (2010: 4,852).
Salaries and wages include share-based payments
worth CHF 5.0 million (2010: CHF 5.5 million).

2011

2010

277.2
70.6
347.8

293.1
73.8
366.9

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
Total financial income

2011

2010

1.0
29.1
30.1

1.1
43.2
44.3

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

Gains from the sale of securities (available-for-sale­financial assets) came to CHF 29.1 million (2010:
CHF 43.2 million) in the reporting year. The sale of­Rieter shares generated proceeds for the Groupamounting to CHF 53.0 million (2010: CHF 92.4 million). The Group realized a financial gain of CHF 29.1

million before tax (2010: CHF 43.0 million) in the reporting year on the strength of this sales price. The
Group has now sold its entire interest in Rieter.
The prior year sum includes CHF 43.0 million fromthe sale of 288,691 Rieter shares to related persons.

Forbo Annual Report 2011 – Consolidated financial statements 105

13 Financial expenses

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

2011

2010

9.9

14.9
– 0.1
0.4
– 0.6
0.4

0.4
1.4
– 0.3
0.3
11.7

15.0

2011

2010

30.8
– 0.9
29.9

48.3
0.5
48.8

The average interest rate on interest-bearing debt (private placements, bonds, non-current bank debt, andcurrent bank debt) in 2011 was 4.5% (2010: 3.2%).

14 Income taxes

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

106 Forbo Annual Report 2011 – 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
Write-off of deferred tax assets
Utilization of tax losses not capitalized 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 therevenues or losses in each country. The expected tax
expense is the sum of the expected individual tax in-

2011

2010

167.3
– 40.3198.0– 48.7

– 0.2
– 0.6
– 2.5
7.7
6.0
– 29.9

– 4.5
– 0.2
– 4.5
12.1
– 3.0
– 48.8

come/expense of all subsidiaries. The expected individual tax income/expense in a country is calculated
by multiplying the individual profit/loss by the tax rateapplicable in the country concerned. The expected tax
rate in the reporting year was 24.1% (2010: 24.6%).

Forbo Annual Report 2011 – Consolidated financial statements 107

Tax loss carry forwards not capitalized and capitalized
as deferred income tax assets, broken down by maturity:
2011
CHF m
Expiry after:
1 year
2 years
3 years
4 years
5 years
More than 5 years
Total tax loss carry forwards

2010
CHF m
Expiry after:
1 year
2 years
3 years
4 years
5 years
More than 5 years
Total tax loss carry forwards

In 2011, CHF 1.8 million (2010: CHF 3.1 million) of unused tax loss carry forwards expired.

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

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

Not capitalized

Capitalized

Total

4.5
6.2
4.3
4.6
37.5
163.5
220.6

0.0
0.0
0.1
1.4
0.0
17.5
19.0

4.5
6.2
4.4
6.0
37.5
181.0
239.6

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 simultaneously. The following amounts are shown in the balance
sheet:
31.12.2011

31.12.2010

21.9– 49.5– 27.6

17.6– 54.3– 36.7

108 Forbo Annual Report 2011 – Consolidated financial statements

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

Inventories
8.9
– 2.2
– 0.8
5.9

Property,plant, andequipment
9.0
– 5.3
– 0.7
3.0

Provisions
29.2– 14.1– 0.1
15.0

Inventories
– 2.2
– 1.5
0.0

Property,plant, andequipment– 50.510.9
5.7

Provisions– 13.2
– 1.1
0.1

– 3.7

– 33.9– 14.2

Deferred tax assets/liabilities (–), net
as at December 31, 20106.7

– 41.5

16.0

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

2.2

– 30.90.8

CHF m
As at December 31, 2010
Decrease (–)/increase in deferred tax assets
Transfer to assets held for sale
As at December 31, 2011

Loss carryforwards
4.0
9.6
– 0.3
13.3

Other
14.3
0.9
– 3.6
11.6

Total
65.4
– 11.1
– 5.5
48.8

Other
– 36.2
0.1
11.5

Total
– 102.1
8.4
17.3– 24.6– 76.44.0– 21.9– 36.713.3– 13.0– 27.6

Deferred tax liabilities

CHF m
As at December 31, 2010
Decrease/increase (–) in deferred tax liabilities
Transfer to liabilities directly associated withassets held for sale
As at December 31, 2011

Loss carryforwards

Increase in deferred tax liabilities, net
Of which recognized in other comprehensive
income statement

9.1
– 3.7

Of which recognized in the income statement
Of which transfer to discontinued operations

0.9
11.9

Tax expense and income recognized directly in thecomprehensive income statement:

2011
Before tax

Tax expense(–)/income

After tax

CHF m
Change in fair value of financial instruments
available-for-saleGain from sale of financial instruments
available-for-sale; transfer to income statement– 23.44.8– 18.6

Changes in revaluations reserves for property,
plant, and equipment

– 1.6

0.4

– 1.2

Actuarial gains/losses (–) on pension obligations
Cash flow hedges
Net investment hedges
Translation differences
Other comprehensive income

15.7
– 1.7
0.0
– 4.4
– 15.4

– 7.1

8.6
– 1.7
0.0
– 6.2
– 19.1

– 1.8
– 3.7

2010
Before tax

Tax expense(–)/income

After tax

14.7

– 3.0

11.7

– 18.03.7– 14.3– 15.10.2– 4.7– 121.8– 144.7

2.9– 12.20.2– 4.7– 119.6– 138.9

2.2
5.8

Forbo Annual Report 2011 – Consolidated financial statements 109

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 destroyed in thereporting 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 andin-the-money share options were to be exercised.

The calculations are based on the following share information:

Weighted average of number of shares
Amount of shares adjusted for stock option plans
Weighted average of number of shares used to calculate diluted earnings per share2011
2,333,621
6,100
2,339,721

2010
2,279,602
4,885
2,284,487

110 Forbo Annual Report 2011 – Consolidated financial statements

16 Property, plant, and equipment

Cost on acquisition or valuation
CHF m
As at December 31, 2009
Additions
Disposals
Transfers
Translation differences
As at December 31, 2010
Additions
Disposals
Revaluation
Transfers
Translation differences
Transfer to assets held for sale
As at December 31, 2011Land andbuildings

382.8
2.9
– 24.91.4– 44.5
317.7
2.1
– 0.5
– 1.6
3.9
– 8.6
– 51.8261.2

Other
property,plant, andequipment

917.9
14.9
– 57.021.6– 118.0
779.4
14.2
– 7.3

162.1
3.3
– 7.0
1.5
– 20.4
139.5
2.8
– 3.5

23.0
16.2
– 0.8
– 24.5
– 2.3
11.6
20.3

10.0
– 14.1– 121.2
661.0

3.1
– 2.7
– 18.7120.5– 16.3
– 0.1
– 4.9
10.6

1,485.8
37.3– 89.70.0– 185.2
1,248.2
39.4– 11.3– 1.6
0.7– 25.5– 196.6
1,053.3

Machineryandequipment

Other
property,plant, andequipment

Assets underconstruction

Total
property,plant, andequipment

Accumulated depreciation and impairments
CHF m
As at December 31, 2009
Depreciation
Impairments
Disposals
Translation differences
As at December 31, 2010
Depreciation
Disposals
Transfers
Translation differences
Transfer to assets held for sale
As at December 31, 2011
Net carrying amountAs at December 31, 2010
As at December 31, 2011Land andbuildings

3.0
14.1

Total
property,plant, andequipment

Machineryandequipment

Assets underconstruction

147.3
5.8

1.5

– 12.5
– 0.9
3.7
12.5
– 0.4
6.3
– 5.8
– 0.8
15.5

784.1
33.1
0.4
– 55.6– 97.0
665.0
27.1
– 7.2
– 6.4
– 18.1– 95.7564.7– 6.5– 18.7
127.9
5.2
– 3.4
0.8
– 2.6
– 16.2
111.7

0.0
– 0.1
1.4

0.2
0.0
1.6

935.9
53.0
0.4
– 74.6– 116.7
798.0
44.8– 11.00.7– 26.3– 112.7
693.5

314.0
245.7

114.4
96.3

11.6
8.8

10.2
9.0

450.2
359.8

Forbo Annual Report 2011 – Consolidated financial statements 111

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 by

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

Property, plant, and equipment also include leased­assets with a net carrying amount of CHF 0.2 million(2010: CHF 0.3 million).
The sum insured for property damage for buildings,
machinery, equipment, and inventories came to
CHF 1,650.7 million (2010: CHF 2,079.9 million).

means of the depreciated replacement cost method.
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 as at December 31, 2011 as
the result of a revaluation.
If land and buildings were carried at amortized cost on
acquisition or production cost, the figures would be as
follows:
2011

2010

319.2
– 188.2
131.0

404.4
– 228.7
175.7

Maintenance and repair costs amounted to CHF 22.0
million (2010: CHF 23.6 million). Depreciation totaling
CHF 36.0 million (2010: CHF 41.8 million) has beenposted under ‘Cost of goods sold’, ‘Development costs’,‘Marketing and distribution costs’, ‘Administrative costs’,and ‘Assets held for sale’.

112 Forbo Annual Report 2011 – Consolidated financial statements

17 Intangible assets

Cost on acquisition
CHF m
As at December 31, 2009
Additions
Disposals
Translation differences
As at December 31, 2010
Additions
Disposals
Transfers
Translation differences
Transfer to assets held for sale
As at December 31, 2011

Accumulated amortization and impairments
CHF m
As at December 31, 2009
Amortization
Disposals
Translation differences
As at December 31, 2010
Amortization
Disposals
Transfers
Translation differences
Transfer to assets held for sale
As at December 31, 2011
Net carrying amountAs at December 31, 2010
As at December 31, 2011

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
flow for calculating the value in use. The cash flows
for the first five years are estimated by management.

Other
intangible assets

Total

– 0.1
– 25.0
37.7

104.0
0.3
– 1.3
– 12.8
90.2
0.3
– 0.1
0.2
– 0.3
– 6.6
83.7

377.3
0.3
– 1.3
– 38.3
338.0
0.3
– 0.1
0.2
– 3.3
– 121.2
213.9

Goodwill

Trademarks

Otherintangible assets

Total

12.3

32.6

– 2.1
10.2

0.0
32.6

– 0.2
– 1.8
8.2

– 3.5
29.1

23.3
5.0
– 1.4
– 2.1
24.8
4.9
– 0.1
0.1
– 0.3
– 6.3
23.1

68.2
5.0
– 1.4
– 4.2
67.6
4.9
– 0.1
0.1
– 0.5
– 11.6
60.4

174.8
84.3

30.2
8.6

65.4
60.6

270.4
153.5

Goodwill

Trademarks

209.2

64.1

– 24.2
185.0

– 1.3
62.8

– 2.9
– 89.692.5

Growth is usually forecasted at 1% for future years.
In addition, relatively constant margins are assumed.
The discount rate, which lies between 8.5% and 12.6%,
corresponds to the total weighted cost of capital before taxes including an average risk charge estimatedby management.

Forbo Annual Report 2011 – Consolidated financial statements 113

Goodwill as at December 31, 2011 mainly comprised
the goodwill acquired in connection with the acquisition of Bonar Floors in 2008. As at December 31, 2011,
the item ‘Trademarks’ mainly referred to the trademarks
obtained through the acquisitions of Bonar Floors. The
remaining intangible assets consist mainly of the customer relationships and technologies in connection
with the acquisition of Bonar Floors plus the software
acquired.

The annual impairment test of goodwill from theBonar Floors acquisition yielded a value in use that wassignificantly higher than the carrying amount. The­discount rate applied was 8.5%. The intangible assets
acquired were also subject to impairment testing bymeans of sensitivity analyses. The cash-generating unit
underlying the goodwill impairment test is the Flooring Systems division. The cash-generating units linked
to the impairment testing of trademarks were thosecompanies which generated sales using the trademarks. The discount rate applied in the impairment
tests for trademarks was 12.6%.

18 Investments in associates
and other non-current assets

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

31.12.2011

31.12.2010

0.9
0.3
1.2

1.0
4.7
5.7

31.12.2011

31.12.2010

43.6
65.4
135.6
– 25.0
219.6

71.1
65.9
155.3
– 31.4260.9

19 Inventories

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

Provisions for inventories amounted to CHF 25.0 million (2010: CHF 31.4 million). Expenses for inventories(cost of goods sold) recognized in the reporting year
came to CHF 488.6 million (2010: CHF 478.7 million).

114 Forbo Annual Report 2011 – Consolidated financial statements

20 Trade receivables

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

Trade receivables after deduction of the allowancefor doubtful receivables amounting to CHF 8.1 million(2010: CHF 19.9 million) came to CHF 159.2 million(2010: CHF 220.8 million).
As a rule, no default interest is charged for receivables
past due. As at the reporting date, there was no indication that debtors would fail to meet their payment­obligations 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

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

As at December 31, 2011, CHF 18.2 million in trade receivables (2010: CHF 28.2 million) were past due but
not the subject of a valuation allowance; an allowance
was made and a reserve established for trade receivables totaling CHF 30.1 million (2010: 38.5 million).

31.12.2011

31.12.2010

144.4
22.9
– 8.1
159.2

214.5
26.2
– 19.9220.8

has given notice of payment difficulties. Valuation allowances 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.
Trade receivables capitalized as at the balance sheet
date:
31.12.2011

31.12.2010

167.3
143.9

240.7
198.9

11.0
5.9
4.0
2.3
0.2
– 8.1
159.2

20.8
9.5
3.2
6.5
1.8
– 19.9220.8

Forbo Annual Report 2011 – Consolidated financial statements 115

Gross value of trade receivables by currency:

31.12.2011

31.12.2010

1.0
83.7
20.0
17.3
14.5
7.8
7.0
16.0
167.3

1.6
119.7
34.4
17.6
17.8
14.8
8.6
26.2
240.7

2011

2010

– 19.9
– 1.8
6.3
2.7
0.1
4.5
– 8.1

– 21.1
– 4.4
1.1
2.5
2.0

CHF m
CHF
EUR
USD
JPY
GBP
CNY
SEK
Other
Total trade receivables, grossChanges in valuation allowances for doubtful trade receivables during the reporting year:

CHF m
As at January 1
Additions
ReleaseUse
Translation differences
Transfer to assets held for sale
As at December 31

The creation and release of allowances for doubtful
trade receivables are included in ‘Marketing and distribution costs’ in the income statement.

– 19.921 Marketable securities‘Marketable securities’ in the prior year mainly comprised registered shares of Rieter Holding AG, as valued
at the closing price on the SIX Swiss Exchange on thelast day of trading in the prior year. In the reporting
year, all the registered shares of Rieter Holding AG weresold.

116 Forbo Annual Report 2011 – Consolidated financial statements

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.

31.12.2011

31.12.2010

0.2
130.1
62.1
192.4

0.1
152.5
18.8
171.4

24 Share capital
The share capital of Forbo Holding Ltd stood at
CHF 250,000 on December 31, 2011 (2010: CHF 271,315)
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, 2011.

Change in shares in circulation:

Total shares outstanding
Treasury shares
Shares with dividend rights:
Treasury shares
Share buyback 2008
Shares with no dividend rights
Total treasury shares
Total shares in circulation

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

31.12.2011
Number2,500,000

ChangeNumber– 213,152

31.12.2010
Number2,713,152

179,823

40,404– 213,152

139,419
213,152
21,419373,9902,339,162

21,419201,2422,298,758– 172,748– 40,404

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.

Forbo Annual Report 2011 – Consolidated financial statements 117

25 Employee participation plan
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

days in January of the current year. The options are issued 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 daysin 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.
Options
Change in the number of outstanding options andtheir weighted average strike price:
2011

Weighted
averagestrike pricein CHF

Options outstanding as at January 1
GrantedForfeited
Exercised
ExpiredOptions outstanding as at December 31

484
733
546
568

Of the outstanding 32,438 options (2010: 25,594),
6,962 were exercisable as at December 31, 2011 (2010:
6,268). The exercise of 5,350 options (2010: 10,394)­resulted in the issue of 5,350 Forbo Holding Ltd shares(2010: 10,394) at a weighted average strike price of

Numberof options

25,594
12,1940– 5,350
032,4382010
Weighted
averagestrike pricein CHF

438
435
322
484

Numberof options

30,8235,165
0– 10,394
025,594

CHF 546 (2010: CHF 322). The weighted average shareprice on the exercise days was CHF 699 (2010: CHF
490). The expense for equity-settled options charged
to the income statement in accordance with IFRS 2
amounted to CHF 1.9 million (2010: CHF 0.7 million).

118 Forbo Annual Report 2011 – Consolidated financial statements

Information on the outstanding options as at December 31, 2011:

Series
2007
2008
2009
2010
2011
Total options outstanding

In the reporting year, a total of 12,194 equity-settled
options (2010: 5,165) were issued under the MIP. The
fair value of these options amounted to CHF 149.9(2010: CHF 117.1). The options were valued in accordance with the Black-Scholes model using the following input factors: share price at issue date CHF 690(2010: CHF 452), strike price CHF 733 (2010: CHF 435),
volatility 29.0% (2010: 29.0%), expected time to maturity 4.1 years (2010: 4.1 years), dividend yield 1.7%
(2010: 1.3%), and risk-free interest rate 1.7% (2010:1.6%). 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 the calculation model has been adapted using the best possible estimates to allow for restrictions
on exercise rights and possible behavior patterns.

Strike price
(CHF)

565
822
215
435
733

Number ofoutstanding
options

Averageremainingterm (years)

Number of
exercisable
options

918
6,044
8,117
5,165
12,19432,438

0.2
1.2
2.3
3.3
4.3
2.9

918
6,044

SharesUnder the MIP, 2,232 shares in Forbo Holding Ltd were
issued in the reporting year (2010: 1,061). The shareprice at valuation date was CHF 690 (2010: CHF 452).
The Delegate of the Board of Directors and CEO is remunerated primarily with shares. On the basis of an
employment contract signed in 2005, 47,395 shareswere issued in 2006 at a fair value of CHF 270 each forthe entire five-year contract term (2006 to 2010). Theseshares were restricted until December 31, 2010. The
corresponding personnel expenditure was charged tothe income statement over the entire contractual period on a pro rata basis. With effect from January 2009,
the employment contract with the Delegate of theBoard of Directors and CEO was extended to run until
the end of April 2013. Compensation is again 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 3.1 million (2010: CHF 4.8 million).

6,962

Forbo Annual Report 2011 – Consolidated financial statements 119

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 2011 Forbo Holding Ltd repurchasedbonds with a nominal value totaling CHF 5.6 million.

31.12.2011

31.12.2010

191.3
– 0.5
190.8
0.7
– 47.0
144.5

196.9
– 1.0
195.9
62.7
0.9
– 63.0196.5

31.12.2011

31.12.2010

144.5
0.5

47.2
150.3

– 0.5
144.5

– 1.0
196.5

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, 2010
Derivative financial instruments as at December 31, 2011

Numberof contracts

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

3
70

21.5
84.7

– 0.3
– 2.3

120 Forbo Annual Report 2011 – Consolidated financial statements

Financial derivatives are valued at fair value in accordance with IAS 39. The replacement value (sum of all
positive and negative fair values) as at December 31,
2011 was CHF – 2.3 million (2010: replacement value
CHF – 0.3 million).

The private placement and bond are measured at­amortized cost using the effective interest method.

Outstanding private placement and bondas at December 31, 2011
Company
Private placement: Forbo NL Holding B.V.
(guaranteed by Forbo Holding Ltd)
Bond: Forbo Holding Ltd

Financial covenants
The private placement, bond, and bank debt containstandard general covenants. The private placement
and part of the bank debt also contain financial covenants, i.e. a defined maximum debt gearing (the ratioof consolidated net debt to consolidated EBITDA may
not exceed 3 to 1), a defined minimum interest coverage ratio (ratio of consolidated EBITDA to consolidated
net interest payable may not be less than 4 to 1), andcapital adequacy rules (shareholders’ equity in the consolidated balance sheet may not fall below CHF 535.5
million).
The private placement, the bond, and part of the bankdebt include standard events of default. All facilities are
unsecured (with the exception of guarantees provided
by Forbo Holding Ltd as surety for its subsidiaries).

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 costs

Currency
USD

m
50.0

Term
2002 – 2012

Interest rate
6.290%

CHF

144.5

2009 – 2013

4.125%

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:

2011

2010

10.5
29.0
– 21.211.0
30.9– 25.8
– 0.4
15.7

18.3

Forbo Annual Report 2011 – Consolidated financial statements 121

Changes in defined benefit obligations under the defined 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

2011

2010

599.9
10.9
4.4
30.5
– 22.2
6.1

635.5
11.5
4.4
32.6
– 27.031.0– 3.3– 84.8– 11.8– 33.5
584.3

599.9

Changes in expected plan assets of the defined benefit
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

The actual return on plan assets of continuing operations comes to CHF 44.6 million. In 2010, the return of
all operations was CHF 43.0 million.

2011

2010

525.2
22.4
12.8
4.4
21.8
– 22.2

566.9
27.1
17.8
4.4
15.9
– 27.0– 2.9– 77.0– 3.2– 19.6
541.6

525.2

122 Forbo Annual Report 2011 – 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/assets (–)
Net assets not recognized in the balance sheet
Net liabilities/assets (–) recognized in the balance sheet

31.12.2011

31.12.2010

31.12.2009

31.12.2008

31.12.2007

584.3– 541.6
42.7

599.9– 525.2
74.7

635.5– 566.9
68.6

575.1– 516.5
58.6

42.7

74.7

68.6

58.6

734.9
– 750.5– 15.6
12.5
– 3.1

2011

2010

2009

2008

2007

0.4
0.1%

– 7.7
– 1.2%

8.8
1.5%

0.6
0.0%

0.3
0.0%

23.4
4.5%

15.9
2.8%

27.0
5.2%

– 96.9– 12.9%– 26.6– 3.5%

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 refers to the continuing
operations. Actuarial gains and losses are recognizedin the balance sheet under ‘Pension liabilities’ and presented directly in the other comprehensive income.

Most of the pension plans are financed in full or in partvia outsourced funds. Pension liabilities amounting
to CHF 32.1 million (2010: CHF 37.8 million) of a totalof CHF 584.3 million (2010: CHF 599.9 million) are not­financed via funds.

Forbo Annual Report 2011 – Consolidated financial statements 123

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

CHF m
Net liabilities as at January 1
Total pension expenses
Employer contributions
Actuarial gains (–)/losses
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 gains/losses (–) in the current period
Translation differences
Total actuarial gains/losses (–) as at December 31

The actuarial gain in the reporting year compriseda gain of CHF 23.7 million (2010: gain of CHF 15.9 million and loss of CHF 7.7 million) linked to past experience adjustments and a loss of CHF 8.0 million (2010:
CHF 23.3 million) caused by changes 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.

2011

2010

74.7
19.0
– 12.8– 15.7– 8.6– 13.9
42.7

68.6
16.6
– 17.8
15.1
– 7.8
74.7

Actuarial gains and losses on defined benefit plansof all operations recognized in the comprehensive­income statement:

2011

2010

– 14.6
15.7
8.7
9.8

– 2.9
– 15.1
3.4– 14.6

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

2011

2010

5.2
4.2
3.2
2.3

5.2
4.8
3.2
2.3

124 Forbo Annual Report 2011 – 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.

2011

2010

20.7
76.7
1.6
1.0
100.0

25.0
73.0
1.0
1.0
100.0

The cost of the contributions to defined contributionplans of continuing operations, which is includedin personnel expenses, amounted to CHF 2.5 million(2010: CHF 4.0 million).

28 Provisions

Provisions
Provisions
for legal
claims

Personnel
provisions

Other
provisions

Total
2011

Total
2010

11.5
11.1
– 5.4
– 0.7
– 0.1
– 0.1

24.1
6.5
– 11.2
– 4.9
– 0.2
– 1.6

57.2
33.2
– 20.6
– 9.2
– 0.3
– 2.5

71.7
16.1
– 27.2
– 1.5
– 1.9

0.0

19.8
1.6
– 2.5
– 3.5
0.0
– 0.8

1.7

12.5

14.6

16.3

12.7

57.8

57.2

1.1
0.6

12.5

0.0
14.6

11.9
4.4

5.3
7.4

18.3
39.5

21.9
35.3

Warranty
provisions

Environmental
provisions

1.8
1.5
– 1.5
– 0.1
0.0
0.0

0.0
12.5

As at December 31
Of which current provisions
Of which non-current provisions

CHF m
As at January 1
Additions
Used during the year
Reversed during the year
Translation differences
Transfer to liabilities directly associatedwith assets held for sale

Warranty provisions are linked to product sales and are
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 the downsizing programs.

Provisions of CHF 21.0 million were made in connection with discontinued operations. They are intended
to cover anticipated cash outflows in connection withrisks in the areas of environmental protection (CHF 7.0
million), litigation (CHF 6.0 million), personnel (CHF 3.0
million), and other areas (CHF 5.0 million). In addition,
environmental provisions of CHF 5.5 million were set
aside in connection with the continuing operations of
Bonding Systems. This amount corresponds to the anticipated cash outflow necessary for decontaminationof a production site. The item ‘Other provisions’ includes the use of restructuring provisions and provisions for structural adjustments formed in prior years.

Forbo Annual Report 2011 – Consolidated financial statements 125

29 Trade payables

Trade payables
CHF m
Accounts payable
Notes payable
Total trade payables

31.12.2011

31.12.2010

85.9
0.2
86.1

134.3
1.4
135.7

31.12.2011

31.12.2010

43.3
63.4
106.7

48.3
70.1
118.4

30 Accrued expenses

Accrued expenses
CHF m
Accrued expenses for compensation and benefits to employees
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’.

31.12.2011

31.12.2010

0.5
47.0
47.5

2.9
63.0
65.9

126 Forbo Annual Report 2011 – 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 on the sale of the industrial
adhesives operation, including synthetic polymers,of the Bonding Systems division. This transaction excludes the operations of the building and construction
adhesives business unit. The sale price was CHF 370
million. After fulfilment of all conditions, the transaction was closed on March 5, 2012.

All prior-year figures relating to the consolidatedi­ncome statement and its notes have been adjusted
accordingly. In the consolidated balance sheet the assets and liabilities of the discontinued operations arerecognized under ‘Assets held for sale’ and ‘Liabilities
directly associated with assets held for sale’. In accordance with IFRS 5, the prior-year figures have not been
restated for the balance sheet. For movement tables
related to assets and liabilities, discontinued operations have been transferred at the closing values of
the reporting period. The consolidated cash flow statement includes the cash flows from discontinued operations, and this note provides a summary of the cash
flows related 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

2011

2010

– 0.4
– 7.9
2.3

26.3
– 6.2
– 20.0Assets of discontinued operations:
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 2011 – Consolidated financial statements 127

Liabilities directly associated with assets held for sale:
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
Development costs
Marketing and distribution costs
Administrative costs
Other operating expenses
Other operating profit
Operating profit
Financial income
Financial expenses
Group profit for the year from discontinued operations before taxes
Income taxes
Group profit for the year from discontinued operations after taxes

2011

2010

503.4
– 424.7
78.7– 8.6– 28.6– 22.5– 15.6
6.5
9.9
0.1
– 1.0
9.0
0.1
9.1

498.5
– 415.5
83.0– 9.7– 37.4– 20.0
– 1.9
3.2
17.2
0.1
– 0.5
16.8
– 2.7
14.1

128 Forbo Annual Report 2011 – Consolidated financial statements

33 Contingent liabilities

CHF mContingent liabilities

31.12.2011

31.12.2010

1.5

0.8

2011

2010

7.5
17.5
5.6
30.6

10.2
16.7
5.5
32.4

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 2011 income statement totaled CHF 18.5 million(2010: CHF 19.9 million). The Group has no individuallysignificant operational leasing contracts.

Finance lease liabilities stood at CHF 0.7 million at yearend 2011 (2010: CHF 0.9 million) and appear under‘Non-current financial debt’.

Forbo Annual Report 2011 – Consolidated financial statements 129

35 Additional information
on financial instruments
The financial instruments held at the balance sheet
date fall into the following categories:
As at December 31, 2011
CHF m
AssetsTrade receivables and other receivables
Other financial non-current assets
Cash and cash equivalents
Marketable securities
Financial derivatives
Total assets

Cash andcash equivalents

Loans andreceivables

Derivatives used
for hedging

Financial assets
available-for-sale

183.9
0.2
192.4
0.1
192.4

CHF m
Liabilities
Interest-bearing debt
Financial derivatives
Trade payables and other payables1)
Total liabilities

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

Loans andreceivables

Derivatives used
for hedging

As at December 31, 2010
CHF m
AssetsTrade receivables and other receivables
Other financial non-current assets
Cash and cash equivalents
Marketable securities
Financial derivatives
Total assets

CHF m
Liabilities
Interest-bearing debt
Financial derivatives
Trade payables and other payables1)
Total liabilities

1) Excluding sales tax.

Cash andcash equivalents

Financial assets
available-for-sale

249.2
4.6
171.4
47.4
171.4

253.8
Financial liabilities
at amortized costs

47.4
Derivatives used
for hedging

262.2
0.3
154.7
416.9

0.3

Financial
instruments held
for trading130 Forbo Annual Report 2011 – Consolidated financial statements

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, 2011
CHF m
Financial assets available-for-saleFinancial derivatives
Total assets
Financial derivatives
Total liabilities

As at December 31, 2010
CHF m
Financial assets available-for-saleFinancial derivatives
Total assets
Financial derivatives
Total liabilities

36 Acquisition of subsidiaries
As in the prior year, the Group did not acquire any subsidiaries in the reporting year.

–– Level 2: Input factors other than market prices­included 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-observable inputs).

Level 1
0.1
0.1

Level 1
47.4

Level 2

Level 3

Total
0.1
0.3
0.4
2.5
2.5

Level 3

Total
47.4

0.3
0.3
2.5
2.5

Level 2

47.4
0.3
0.3

47.4
0.3
0.3

Forbo Annual Report 2011 – Consolidated financial statements 131

37 Related party transactions
Compensation paid to members of the Board of Directors and Executive Board:
Executive Board
CHF mRemuneration
Employer contributions to the pension scheme
Other long-term benefits
Termination benefits
Share-based payments
Total payments

2011
4.8
0.4
0.0
0.0
3.1
8.3

2010
2.6
0.4
0.0
0.0
1.4
4.4

Board of Directors
2011
0.9
0.2
0.0
0.0
1.5
2.61)

2010
0.8
0.2
0.0
0.0
3.9
4.9

Total
2011
5.7
0.6
0.0
0.0
4.6
10.9

2010
3.4
0.6
0.0
0.0
5.3
9.3

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 increase in comparison with the prior year is due to the
expansion of the Executive Board in spring 2010,
which is reported for the full year in 2011, and special
bonuses paid in connection with the disposal of theindustrial adhesives business. Employer contributions
to the pension fund are reported separately. Sharebased payments to the Executive Board consist of­estimated performance-based variable remuneration
within the framework of the MIP (see note 25 ‘Employee participation plan’) for the reporting year, amounting to CHF 2.7 million (payable in spring 2012) plus thedifference, amounting to CHF 0.4 million, between thebonuses deferred at the end of the prior year (payablein equity instruments) and the value of the equity instruments actually issued in the reporting year.

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 thefirst contract. The 29,775 shares are restricted until December 31, 2013. The share-based payments made to
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 (2010: 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. However, theshare-based compensation in the reporting year does
not include the annual portion of the Forbo Holding
Ltd shares allocated to the Delegate of the Board of
Directors and CEO in 2005, which came to CHF 2.6 million in 2010.

The compensation paid to the Board of Directors included CHF 0.3 million (2010: CHF 0.3 million) for
the Delegate of the Board of Directors and CEO. This
includes annual amounts of CHF 0.15 million (2010:
CHF 0.15 million) for payment of employee contributions to the pension fund and social security, and of
CHF 0.15 million (2010: CHF 0.17 million) for private
use of the company car, employer contributions to
the pension fund and to AHV/ALV (old-age and unemployment insurance) plus accident and daily benefits
insurance. Employer contributions to the pension
fund are reported separately. Current payment benefits for non-executive Board members of Forbo Holding Ltd totaled CHF 0.6 million (2010: CHF 0.5 million).

Moreover, the share-based payments made to theBoard of Directors include the 508 Forbo Holding Ltd
shares allocated to the non-executive Board members
in 2011 (2010: 631 shares) with a market value of
CHF 0.4 million (2010: CHF 0.3 million).
Further details relating to the compensation paid to
the Executive Board and the Board of Directors can befound in note 17 ‘Disclosure of compensation paid to
the Board of Directors and the Executive Board pursuant to Articles 663bbis and 663c of the Swiss Code ofObligations’ in the financial statements for Forbo Holding Ltd.

132 Forbo Annual Report 2011 – Consolidated financial statements

On April 12, 2010, the Group sold 288,691 Rieter shares
to Artemis Beteiligungen IV AG, a company owned byMichael Pieper. The Group obtained CHF 92.4 million in
cash and cash equivalents from the sale of the Rieter
shares, posting financial income totaling CHF 43.0 million before tax from the sale in the prior year.
Enia Carpet Group AG in liquidation constitutes a related party because the Forbo Group holds a 33 1/3%
stake. The Forbo Group bought products from Enia
Carpet Group worth CHF 1.6 million in the prior year,
while Enia Carpet Group bought products from theGroup worth CHF 0.1 million in that period. The goods
were sold and purchased at market conditions.
As at December 31, 2011 and 2010, 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 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 only with
first-class banks. The creditworthiness of these institutions is assessed on the basis of evaluations by leading
rating agencies.
Derivatives include instruments used by the company
to manage foreign currency and interest risks or combinations thereof.

Forbo Annual Report 2011 – Consolidated financial statements 133

Translation 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 translation risk.

Furthermore, risks associated with the translation of assets and liabilities denominated in foreign currencies(translation risks) are managed by establishing an appropriate financing policy that includes net investment hedges.
The following table shows the sensitivity of profit­before tax and of equity to changes in the exchange
rate of the US dollar, the euro, the pound sterling and
the Swiss franc. The table illustrates the sensitivity inrelation to transaction risks and cash flow hedges.
Translation risks, the effects of loans that qualify as net
investments, and net investment hedges are not taken
into account.

2011
Change inexchange 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

Change inexchange rate5%
– 5%

Impact on profit
before tax
0.4
– 0.4

Impact on
shareholders’ equity
0.0
0.0

USD/CHF

5%
– 5%

0.4
– 0.4

0.0
0.0

EUR/USD

5%
– 5%

0.4
– 0.4

0.0
0.0

GBP/CHF

5%
– 5%

0.1
– 0.1

0.0
0.0

GBP/EUR

5%
– 5%

0.1
– 0.1

0.0
0.0

CHF m
EUR/CHF2010
CHF m
EUR/CHF

134 Forbo Annual Report 2011 – Consolidated financial statements

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 havea negative effect on net financial profit and shareholders’ equity, the Group uses derivatives to manage themon a case-by-case basis. The table below shows thesensitivity 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 was­arrived at by taking the arithmetic mean of the initialand final amounts.

2011
Change ininterest 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

Change ininterest rate
50bp
– 50bpImpact on profit
before tax
0.1
– 0.1

Impact on
shareholders’ equity
0.0
0.0

USD

50bp
– 50bp

0.1
– 0.1

0.0
0.0

CHF

50bp
– 50bp

0.1
– 0.1

0.0
0.0

CHF m
EUR

2010
CHF m
EUR

Forbo Annual Report 2011 – Consolidated financial statements 135

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 67% on
December 31, 2011. The Group has sufficient liquidity
reserves (as at December 31, 2011 these stood at
CHF 192.4 million in cash and cash equivalents and
CHF 0.1 million in securities) to be able to meet its

commitments at any time. At present, the Group regards a liquidity stock of roughly CHF 80 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, 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

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 up to
1 year
66.6
154.7
0.4
9.2
21.9
21.5

Remaining term
to maturity
1 – 2 years
0.2
0.1
0.3
56.1

Remaining term
to maturity
over 5 years
0.1

As at December 31, 2010

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
2 – 5 years

Remaining term
to maturity
over 5 years
0.1

0.3
156.2

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.

136 Forbo Annual Report 2011 – Consolidated financial statements

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, 2011, shareholders’ equity stood at CHF 815.3 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.

ed reserves in equity as at January 1, 2010 were toohigh by CHF 97.6 million, while the translation differences in equity were too low by the same amount. Thiserror was corrected in the opening balance as at January 1, 2010 in accordance with IAS 8. The transfer had
no effect either on the 2010 and 2011 income statements or on the total of equity or any single balance
sheet item as at December 31, 2010 or December 31,
2011. Moreover, the transfer did not affect the cash
flow of the Group.
40 Events after the balance sheet date

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.
In connection with the US private placement and­certain bank facilities, the Group has a covenant thatdefines the minimum consolidated shareholders’ equity as CHF 535.5 million.
39 Prior-period restatement
For the 2011 consolidated financial statements, the­Executive Board analyzed the total amount of thetranslation differences recognized in equity in order tobe able to allocate them to the individual divisions andcompanies. The analysis revealed that part of thesetranslation differences cannot be allocated to individ­
ual divisions or companies owing to system adjustments. As a consequence of this situation, the origin of
which goes back to the years before 2002, the report-

Forbo signed a contract with H.B. Fuller Company on
December 21, 2011 on the sale of its industrial adhesives business, including synthetic polymers, belonging to the Bonding Systems division. The building andconstruction adhesives business was excluded fromthis transaction. The sale price was CHF 370 million. On
fulfillment of all conditions, the transaction was closed
on March 5, 2012.
On conclusion of the contract for the sale of industrial
adhesives in December 2011, Forbo studied the strategic options available for the remaining unit in the division, building and construction adhesives. Forbo wasat the same time contacted by various interested parties. It therefore took a decision in February 2012 andannounced that it would begin discussions with theseparties in the coming months in a structured process
on the possible sale of the building and construction
adhesives business. The discussions are still in an earlystage, and the outcome is completely open.

Forbo Annual Report 2011 – Consolidated financial statements 137

138 Forbo Annual Report 2011 – Consolidated financial statements

Group companies(as at December 31, 2011)

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 Adhesives België BVBA1)
Forbo Flooring N.V.

DendermondeGroot-Bijgaarden

EUR
EUR

61,332250,000

100%
100%

BrazilForbo Pisos Ltda.
Forbo Siegling Brasil Ltda.

São PauloSão Paulo

BRL
BRL

10,0007,008,746

100%
50%

CanadaForbo Adhesives (Canada) Ltd.1)
Forbo Flooring Inc.
Forbo Siegling Ltd.

Saint John
TorontoToronto

CAD
CAD
CAD

3,500,157
500,000
501,000

100%
100%
100%

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 Linoleum OY
Oy Forbo Adhesives Nordic Ab1)

Helsinki
Esbo

EUR
EUR

33,63825,280100%
100%

FranceForbo Adhesives France S.A.S.1)
Forbo Château Renault S.A.S.
Forbo Participations S.A.S.
Forbo Reims SNC
Forbo Sarlino S.A.S.
Forbo Siegling France S.A.S.

SurbourgChâteau-Renault
Reims
Reims
Reims
Lomme

EUR
EUR
EUR
EUR
EUR
EUR

1,440,000
1,000,000
43,490,386
3,879,810
6,400,000
819,000

100%
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, 2011
D Direct participation of Forbo Holding Ltd

D

N

N

D

Flooring Bonding
Systems Systems

Movement
Systems

Holding/Services

S

S

S
S

S
MS

MS
S
S

MS

S
S

S1)

S
MS

H
MS

MS
MS
H
MS
S

1) Eliminated from the Group as at March 6, 2012 following the saleof the industrial adhesives business, including synthetic polymers,
to H.B. Fuller Company.

SForbo Annual Report 2011 – Consolidated financial statements 139

Currency

Share capital

Equityinterest

EUR
EUR
EUR
EUR
EUR
EUR
EUR

5,120,000
15,400,000
2,050,000
500,000
10,230,000
1,023,000
100,000

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

Kallithea (Athens)EUR

927,656

100%

MS

Hong Kong
Forbo Adhesives Hong Kong Ltd.1)
Forbo International Hong Kong Ltd.

Hong Kong
Hong Kong

HKD
HKD

1,000,000
1

100%
100%

S

Hungary
Forbo Adhesives Hungary Kft.1)
Forbo Siegling Hungária Kft.

Budapest
Budaörs

HUF
EUR

3,000,000
107,623

100%
100%

S

India
Forbo Siegling Movement Systems
India Pvt. Ltd.

Pune

INR

26,000,000

100%

Forbo Adhesives India Pvt. Ltd.

Mumbai

INR

15,000,000

100%

Ireland
Forbo Adhesives Ireland Ltd.1)
Forbo Ireland Ltd.
Forbo-Siegling (Ireland) Ltd.

DublinDublinDublin

EUR
EUR
EUR

2,520
127,000
25,395

100%
100%
100%

S

Pianezze (Vicenza)
Segrate (Milan)
Paderno Dugnano(Milan)

EUR
EUR
EUR

416,000
60,000120,000

100%
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%

Company

Registered office

Germany
Forbo Adhesives Deutschland GmbH1)
Forbo Beteiligungen GmbH
Forbo Erfurt GmbH
Forbo Flooring GmbH
Forbo Siegling GmbHPaul Heinicke GmbH & Co. KG1)
Realbelt GmbH

Pirmasens
LörrachErfurtPaderborn
Hanover
Pirmasens
Lörrach

GreeceForbo Adhesives Greece S.A.I.C1)

Italy
Forbo Adhesives Italia S.p.A.1)
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, 2011
D Direct participation of Forbo Holding Ltd

D

D

D

Flooring Bonding
Systems Systems

MS

Movement
Systems

Holding/Services

H
MS
S
MS
H
S

H
H

S

S
H

S
H

MS
S

MS

H

S

1) Eliminated from the Group as at March 6, 2012 following the saleof the industrial adhesives business, including synthetic polymers,
to H.B. Fuller Company.

140 Forbo Annual Report 2011 – Consolidated financial statements

Flooring Bonding
Systems Systems

Movement
SystemsMS

Company

Registered office

Currency

Share capital

Equityinterest

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

Tlalnepantla

MXN

24,676,404

100%

S1)

Netherlands
Forbo Adhesives Nederland B.V.1)
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.

GenderenZaanstad
Krommenie
Krommenie
Krommenie
Coevorden
Spankeren

EUR
EUR
EUR
EUR
EUR
EUR
EUR

27,600454,000
11,350,000
1,944,500
13,500,000
3,624,000
113,445

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

S
MS

New Zealand
Forbo Siegling Ltd.

Auckland

NZD

650,000

100%

NorwayForbo Flooring AS

Asker

NOK

1,000,000

100%

People’s Republic of China
Forbo Adhesives (Guangzhou) Co., Ltd.1)
Forbo Adhesives (Shanghai) Co., Ltd.1)
Forbo Shanghai Co., Ltd.
Forbo Siegling (Shenyang) Belting Co., Ltd.

Guangzhou
Shanghai
Shanghai
Shenyang

USD
USD
CHF
USD

8,000,000
1,000,000
4,000,000
16,221,000

100%
100%
100%
100%

PolandForbo Adhesives Poland Sp. z o.o.1)

Warsaw

PLN

50,000100%

Leça da Palmeira(Porto)EUR74,850100%

Siegling (Portugal) Lda.

Gemunde (Porto)

EUR

500,000

100%

Romania
Forbo Adhesives Romania S.R.L.1)
Forbo Siegling Romania S.R.L.

OradeaBucharest

RON
RON

7,077
38,000100%
100%

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

Moscow
Moscow
Stary Oskol
St. 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%

Portugal
Forbo-Revestimentos, S.A.

S Sales
MS Manufacturing and Sales
H Holding/Services
N Not consolidated as at December 31, 2011
D Direct participation of Forbo Holding Ltd

D

Holding/Services

MS
MS
H
MS
S

S

S

MS
MS
S

MS
MS

S

S
H

S
S

S
MS

1) Eliminated from the Group as at March 6, 2012 following the saleof the industrial adhesives business, including synthetic polymers,
to H.B. Fuller Company.

MS
S

MS

Forbo Annual Report 2011 – Consolidated financial statements 141

Company

Registered office

Spain
Forbo Adhesives Spain, S.L.1)
Forbo Pavimentos, S.A.
Forbo Siegling Iberica, S.A.

SwedenForbo Flooring AB
Forbo Project Vinyl AB
Forbo Siegling Svenska AB

Mos (Pontevedra)
Barcelona
Montcada i Reixac(Barcelona)

Gothenburg
GothenburgKållered(Gothenburg)

D
D

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

Baar
Baar
Giubiasco
Baar

D
D
D
D

TurkeyForbo Adhesives Ticaret Limited Sirketi1)

Istanbul

United Kingdom
Forbo Adhesives UK Ltd.1)
Forbo Flooring UK Ltd.
Forbo-Nairn Ltd.
Forbo Siegling (UK) Ltd.
Forbo UK Ltd.
Westbond Ltd.

Chatteris
Kirkcaldy
LondonDunkinfield
LondonDerbyshire

USA
Forbo Adhesives, LLC1)
Forbo America Inc.
Forbo America Services Inc.
Forbo Flooring, Inc.
Forbo Siegling, LLC

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

S Sales
MS Manufacturing and Sales
H Holding/Services
N Not consolidated as at December 31, 2011
D Direct participation of Forbo Holding Ltd

D

D

Currency

Share capital

Equityinterest

EUR
EUR
EUR

6,015,006
60,101
1,532,550

100%
100%
100%

SEK
SEK
SEK

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

100%
100%
100%

CHF
CHF
CHF
CHF

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

100%
100%
100%
100%

TRY

1,325,000

100%

GBP
GBP
GBP
GBP
GBP
GBP

100
3,609,990
8,000,000
50,77449,500,000
400,000

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

USD
USD
USD
USD
USD

5,000,100
19,957,259
50,0003,517,000
15,455,000

100%
100%
100%
100%
100%

Flooring Bonding
Systems Systems

Movement
Systems

Holding/Services

MS
S
S

S
S
S

H
H
MS
S1)

MS

H

S

MS
MS

H
H
S
H
H

MS
H
H
S
MS

1) Eliminated from the Group as at March 6, 2012 following the saleof the industrial adhesives business, including synthetic polymers,
to H.B. Fuller Company.

142 Forbo Annual Report 2011 – 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
comprise the consolidated balance sheet, consolidated income statement, comprehensive income statement,
consolidated shareholder’s equity, consolidated cash flow statement and notes (pages 82 to 136), for the year
ended December 31, 2011.
Board of Directors’ Responsibility
The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial
statements 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 andapplying 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 to fraud
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 audit­procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness 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
is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements for the year ended December 31, 2011 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 2011 – Consolidated financial statements 143

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 14, 2012

Reto Tognina
Audit Expert

144 Forbo Annual Report 2011 – Consolidated financial statements

Consolidated income statements
2007 – 2011
CHF m
Net sales
Cost of goods sold
Gross profit
Development costs
Marketing and distribution costs
Administrative costs
Other operating expenses
Other operating profit
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 years 2011 and 2010.

2011

2010

2009

2008

2007

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

2,004.0– 1,331.9
672.1– 31.6– 325.9– 137.7– 33.9
19.4
162.4
11.7
– 19.3154.8– 44.1

76.1

16.0

110.7

The consolidated income statements for 2007 – 2009
therefore include both the continuing and the discontinued operations.

Forbo Annual Report 2011 – Consolidated financial statements 145

Consolidated balance sheets
2007 – 2011
Assets
CHF m
Non-current assets
Property, plant, and equipment
Intangible assets
Deferred tax assets
Employee benefit 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
Marketable securities
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

31.12.2011

31.12.2010

31.12.2009

31.12.2008

31.12.2007

536.4
359.8
153.5
21.9
0.0
1.2
965.5
361.4
219.6
159.2
24.8
8.0
0.1
192.4
1,501.9

743.9
450.2
270.4
17.6
0.0
5.7
750.3

885.7
549.9
309.1
20.5
0.0
6.2
859.7

928.7
586.3
311.7
28.8
0.0
1.9
909.1

601.7
423.7
151.9
20.7
3.1
2.3
803.5

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

286.3
287.7
29.5
22.5
0.0
177.5
1,405.2

31.12.2011

31.12.2010

31.12.2009

31.12.2008

31.12.2007

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

713.1
38.0
– 4.0
679.1
254.7
194.9
0.0
42.3
17.5
437.4
138.1
167.6
24.2
29.8
77.7

764.5
1,494.2

1,065.8
1,745.4

1,253.4
1,837.8

692.1
1,405.2

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

147
148
149
150
157
158

148 Forbo Annual Report 2011 – 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

2011

2010

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

53,765,439
93,546,926
678,740
147,991,105

2011

2010

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

3,750,075
30,391,394
15,151
34,156,620
113,834,485

Note

1
2

Note

3
4

Forbo Annual Report 2011 – Annual statements for the holding company 149

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

31.12.2011

31.12.2010

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

590,903,226
442,636,053
148,267,173
200,531,148
2,199,993
234,447
134,569
187,693,160
10,268,979
791,434,374

31.12.2011

31.12.2010

9476,912,175
250,000

583,389,530
271,31512
11122,225,827
33,759,493

129,088,651
55,610,149

12
11

15,600,000
45,696,901
0

15,600,000
101,835,830
38,936,338

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

128,212,762
113,834,485
208,044,844
150,000,000
13,991,600
40,745,247
17,8303,290,167
791,434,374

Note

5
6

7
8

Note

13
14

150 Forbo Annual Report 2011 – 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 65.9 million (2010:
CHF 53.8 million) and consists of interest and dividend
income.
2 Financial income from securities
and short-term investments
This item totaling CHF 3.5 million (2010: CHF 93.5 million) includes income from investments and derivatives and interest income from banks. In the prior year
this item contained in particular gains from securities
transactions.

3 Administrative expenses
Administrative expenses increased from the prior year
by CHF 0.2 million and totaled CHF 3.9 million.
4 Financial expenses
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 and advances from Group companies.
5 Investments in Group companies
As at December 31, 2011 Forbo Holding Ltd held thefollowing direct investments:

Investments in Group companies
Currency

Share capitalin 1,000

Equityinterest

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

GBP
USD
EUR
CHF
CHF
AUD
SEK
NOK
CHF
CHF

0.1
19,957
15,400100
10,000
1,400
8,000
1,000
100
100

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

Services
Holding/Services
Manufacturing and Sales
Services

GBP
EUR
SEK
EUR

25
43,49050,000
1,023

50%
100%
100%
72%

Company

Registered office

Activity

Forbo Adhesives UK Ltd.1)
Forbo America Inc.
Forbo Beteiligungen GmbH
Forbo Financial Services AG
Forbo Finanz AG
Forbo Floorcoverings Pty. Ltd
Forbo Flooring AB
Forbo Flooring AS
Forbo-Giubiasco SA
Forbo International SA

GB-Chatteris
US-Wilmington, DE
DE-Lörrach
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
Paul Heinicke GmbH & Co. KG1)

CI-St. Helier
FR-Reims
SE-Gothenburg
DE-Pirmasens1) Eliminated from the Group as at March 6, 2012 following the saleof the industrial adhesives business, including synthetic polymers,
to H.B. Fuller Company.

6 Advances to Group companies

8 Cash and cash equivalents

Advances to Group companies are denominated in
Swiss francs and foreign currencies. The net increaseyear-on-year was CHF 7.0 million.

This item consists of bank deposits and cash equivalents with initial maturities of three months or less.
9 Share capital

7 Marketable securities
The item ‘Marketable securities’ includes treasury
shares in Forbo Holding Ltd. This balance sheet item
was valued at fair value as at December 31, 2011.
This item also includes repurchased bonds of Forbo
Holding Ltd.

As at December 31, 2011, the share capital of Forbo
Holding Ltd totaled CHF 250,000 (2010: CHF 271,315),
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.

Forbo Annual Report 2011 – Annual statements for the holding company 151

At the Ordinary General Meeting on April 29, 2011, theshareholders of Forbo Holding Ltd voted to reduce
the share capital of CHF 271,315.20 to CHF 250,000
by destruction of the 213,152 registered shares repurchased through the share buyback program approvedat the Ordinary General Meeting of April 25, 2008. The
capital reduction was completed with the entry in theCommercial 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 on
April 29, 2011, the shareholders of Forbo Holding Ltd­approved the proposal of the Board of Directors to­repurchase the company’s own shares, via a second
trading line on the SIX Swiss Exchange, up to a maximum of 10 percent of the share capital over a periodof three years in order to reduce the capital. By December 31, 2011 no purchases of the company’s own
shares had been made for this purpose.

10 Conditional capital
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, 2011 remained unchanged against the prioryear at CHF 16,645.
11 Reserve for treasury shares
The ‘Reserve for treasury shares’ amounting to CHF 45.7
million and the capital contribution reserves amounting to CHF 33.8 million relate to treasury shares heldat year-end by Forbo Holding Ltd and its subsidiaries
valued at cost of CHF 79.5 million (prior year: CHF 157.4
million). The treasury shares developed as follows over
the reporting year:

Treasury shares

Cost
CHF
157,445,979
42,181,697
120,171,281
79,456,395

As at January 1, 2011
Additions
Disposals
As at December 31, 2011

Number ofregistered shares
373,990
89,245
261,993201,242

12 General reserves

13 BondGeneral reserves totaled CHF 137.8 million (prior year:
CHF 144.7 million) and consist of general reserves(CHF 15.6 million) and general capital contribution­reserves (CHF 122.2 million). The statutory capital contribution reserves total CHF 156.0 million and consistof general reserves (CHF 122.2 million) and reserves
for treasury shares (CHF 33.8 million).

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 the issue was leadmanaged by Credit Suisse. It has been traded on the
SIX Swiss Exchange since July 20, 2009. In the reporting
year, Forbo Holding Ltd repurchased bonds with anominal value totaling CHF 5.6 million. These bonds
are included under the item ‘Marketable securities’.

152 Forbo Annual Report 2011 – Annual statements for the holding company

14 Other advances from Group companies‘Other advances from Group companies’ as at De­
cember 31, 2011 include in particular advances from
Forbo Finanz AG in connection with its cash pool withUBS.
15 Contingent liabilities
Guarantees and letters of comfort to third parties infavor of Group companies amounted to CHF 52.5
­million at year-end (2010: CHF 116.3 Mio), of which
CHF 47.3million (2010: CHF 110.0 million) was utilized.

The main factor here was guarantees to investors andbanks in connection with funds raised by a Group
company in the form of a US private placement(CHF 46.9 million).
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
681,543
201,242As percentage
27.26
8.05

Forbo Annual Report 2011 – Annual statements for the holding company 153

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 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, member7)
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)6)

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
50,0001) The amounts shown in the table are based on valuation models
used and disclosed in the consolidated financial statements. The
table therefore shows all compensation issued in the reporting
year, including compensation for which the payment date or­definitive legal acquisition 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 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 subsumed under total compensation to the Board of Directors. It is not possible to clearly
divide the total compensation paid for 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 arevery 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 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

2,708,000

Other
compensation

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(MIP) or the share-based payments for the non-executive Board
members. The total compensation for the Delegate of the Boardof Directors and CEO for the financial year came to CHF 2,497,194.
This figure, reported under ‘Other compensation’, includes private
use of a company car, employer contributions to the pension planand 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 the reporting year. It comprised a gross basic
salary and a performance-related bonus, which is set in March of
the year following the business year in question and is determinedby the achievement of the individual and the Group targets.
The performance-related component is paid in accordance withthe rules of 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 AHV/ALV (old-age andunemployment insurance) plus accident and daily sickness benefits insurance, which are shown separately in the column ‘Other
compensation’.
6) Following the expansion of the Executive Board as of April 1,
2010, these figures contain the compensation paid to an additional member of the Executive Board for 12 months (insteadof 9 months in the prior year). The increase in comparison withthe prior year is due to the above-mentioned expansion of the
Executive Board and special bonuses paid in connection with thedisposal of the industrial adhesives business.
7) Dr. Reto Müller was elected as a new member of the Board of­Directors at the Ordinary General Meeting of April 29, 2011.

154 Forbo Annual Report 2011 – Annual statements for the holding company

Compensation
For the year 20101)
Base compensation

Variablecompensation

SharesCash, shares,
options
CHF

Cash
Name and function

Dr. Albert Gnägi, Chairman
Michael Pieper, Vice Chairman
Dr. Peter Altorfer, 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)6)1) The amounts shown in the table are based on valuation models
used and disclosed in the consolidated financial statements. The
table therefore shows all compensation that was granted in theyear 2010, including compensation for which the payment date or
definitive legal acquisition will occur after December 31, 2010.
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 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 subsumed under total compensation to the Board of Directors. It is not possible to clearly
divide the total compensation paid for the two functions.
4) In fall 2005, the Delegate of the Board of Directors and CEO agreed
that the major part of his compensation for 2005 and for the following five years (from 2006 up to and including 2010) would be
paid largely in shares. In lieu of salary payments, for the contractual
period of employment until December 31, 2010, he was allocated47,395 shares at fair value on the date on which the agreement
was signed, i.e. CHF 270 each, for the entire five-year term of theagreement (2006 to 2010). The shares were valued at fair value on
the grant date. These shares were restricted until December 31,
2010 and freely available only as of January 1, 2011. 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,­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 In-

CHF

Number

CHF

207,155
66,12072,131
74,915420,321150,000

311
99
108
113
631
9,479

137,845
43,88047,86950,085
279,679
2,559,330

570,3212,232,499

10,11002,839,009
37,500

Other
compensation

2,516,325

vestment Plan (MIP) or the share-based payments for the non-ex­
ecutive Board members. The total compensation for the Delegateof the Board of Directors and CEO for the financial year came to
CHF 3,079,837. 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. 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. The 29,775
shares are restricted until December 31, 2013. The extension of this
employment contract is not included in the table above and will
be shown on a pro rata basis only as of January 1, 2011.
5) The total compensation paid to the members of the Executive
Board (excluding the Delegate of the Board of Directors and CEO)was CHF 5,591,381. It comprised a 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 the Group targets. The performancerelated component is paid in accordance with the rules of theManagement Investment Plan (MIP) (see note 25 ‘Employee participation plan’ to the consolidated financial statements). The totalcompensation paid to the members of the Executive Board also
includes private use of a company car, employer contributions to
the pension plan and to AHV/ALV (old-age and unemployment
insurance) plus accident and daily sickness benefits insurance,
which are shown separately in the column ‘Other compensation’.
6) Following the expansion of the Executive Board as of April 1, 2010,
these figures contain the compensation paid to an additional
member of the Executive Board compared to the prior year.

Total

CHF

CHF

26,25011,723
12,425
7,154
57,552
370,507371,250
121,723
132,425
132,154757,552
3,079,837

428,059805,057

3,837,389
5,591,381

Forbo Annual Report 2011 – Annual statements for the holding company 155

Advances and loans
As at December 31, 2011, no advances or loans tomembers of the Board of Directors or members of
the Executive Board were outstanding.

Investments in Group companies
In 2011
As at December 31, 2011, the individual membersof the Board of Directors and the Executive Board (including related parties) held the following number ofshares 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 members of theBoard 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

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.
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 contained in the amount shown and are restricted 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 members of the Executive Board, the number 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.

156 Forbo Annual Report 2011 – Annual statements for the holding company

IN 2010As at December 31, 2010, the individual members of
the Board of Directors and the Executive Board (in­cluding related parties) held the following number ofshares in Forbo Holding Ltd:
Investments 2010
SharesName and function
Dr. Albert Gnägi, Chairman
Michael Pieper, Vice Chairman
Dr. Peter Altorfer, member
Vincent Studer, member
Non-executive members of theBoard of Directors

Options1)5)Series 2010
1:12)

Series 2009
1:12)

Series 2008
1:12)

Series 2007
1:12)

Series 2006
1:12)

500

9,041
681,466682
358
691,547

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

162,054

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

853,601
1,328

565

1,496

1,157

1,204

Tom Kaiser, Chief Operating Officer6)
Daniel Keist, Head Corporate Center
Jörg Riboni, Chief Financial Officer
Michel Riva, Executive
Vice President Bonding Systems

1,825
1,050
3,653
663

1,058
988
1,143
706

2,179
2,034
1,220
99

1,073
783
1,948
485

1,258

8,519

4,460

7,028

5,446

5,250

2,091
697

Jens Schneider, Executive
Vice President Flooring Systems6)
Executive Board

1) The details of the options are described in note 25 ‘Employee­participation plan’ to the consolidated financial statements.
2) Subscription ratio.
3) The number of shares reported includes the 47,395 shares restricted until the end of 2010. With effect from January 2009, theemployment 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 inshares. The modalities are very similar to the provisions of the firstcontract. The 29,775 shares are contained in the amount shown
and are restricted until December 31, 2013.

5) Since participation in the MIP and option ownership is not limited
to members of the Executive Board, the number of outstanding
options shown here as at December 31, 2010 differs from the figures in note 25 ‘Employee participation plan’ to the consolidated
financial statements.
6) The Board of Directors of Forbo Holding Ltd appointed Tom ­Kaiser
Chief Operating Officer of the Forbo Group on April 1, 2010. He
had been a member of the Executive Board since 2004 and responsible for the Flooring Systems division. Jens Schneider, who
had been responsible for Finance and Administration at Flooring
Systems since 2005, was appointed his successor.

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

18 Risk assessment
With 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.

500

Tradable
options

Forbo Annual Report 2011 – Annual statements for the holding company 157

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

2011

2010

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

113,834,485
128,212,762
28,069,944
270,117,191

2011

2010

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

28,069,944
242,047,247
270,117,191

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 27, 2012, the Board of­Directors will propose a dividend payment of CHF 12.00 (2010:
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.

158 Forbo Annual Report 2011 – 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 148 to 156), for the year ended December 31, 2011.
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 planand perform the audit to obtain reasonable assurance whether the financial statements are free from material
misstatement.
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, 2011 comply with Swiss law and thecompany’s articles of incorporation.

Forbo Annual Report 2011 – Annual statements for the holding company 159

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 the company’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 14, 2012

Reto Tognina
Audit Expert

Our floor coverings are so durable that­everyone wants them in their team. We,
too, have the stamina and enthusiasmthat keeps us working on new solutions
to ensure we offer superior quality.
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.

SC2012031305 –Forbo Annual Report 2011

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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

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Annual Report 2011

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