Basis of presentation

General information on the Company

At the Shareholders’ Meeting on 25 April 2013, it was decided to transform KION Holding 1 GmbH, whose registered office is at Abraham-Lincoln-Strasse 21, 65189 Wiesbaden, Germany, into a public stock corporation with the name KION GROUP AG. The transformation became legally effective when KION GROUP AG was entered in the commercial register at the Wiesbaden local court under reference HRB 27060 on 4 June 2013. KION GROUP AG is the parent company of the KION Group in Germany. Superlift Holding S.à r.l., Luxembourg, is the parent company of KION GROUP AG.

The condensed consolidated interim financial statements were prepared by the Executive Board of KION GROUP AG on 8 November 2013.

Basis of preparation

The condensed consolidated interim financial statements of the KION Group for the nine months ended 30 September 2013 have been prepared in line with International Accounting Standard (IAS) 34 “Interim Financial Reporting” and other International Financial Reporting Standards (IFRSs) as adopted by the European Union in accordance with Regulation (EC) No. 1606 / 2002 of the European Parliament and of the Council concerning the application of international accounting standards for interim financial statements. A condensed scope of interim reporting has been prepared in accordance with IAS 34.

All of the IFRSs and the related interpretations (IFRICs / SICs) of the IFRS Interpretations Committee (IFRS IC) that had been issued by the reporting date and that were required to be applied for financial years commencing on or after 1 January 2013 have been applied in preparing these condensed consolidated interim financial statements. These condensed consolidated interim financial statements do not contain all the information and disclosures required of a set of consolidated annual financial statements and should therefore be read in conjunction with the consolidated financial statements prepared for the year ended 31 December 2012. With the exception of the new IFRS standards and interpretations described below, the accounting policies used to prepare these condensed consolidated interim financial statements were the same as those used to prepare the consolidated financial statements for the year ended 31 December 2012.

The reporting currency is the euro. All amounts are disclosed in millions of euros (€ million) unless stated otherwise. The addition of the totals presented may result in rounding differences of +/– € 0.1 million. The percentages shown are calculated on the basis of the respective amounts, rounded to the nearest thousand euros.

Financial reporting standards to be adopted for the first time in the current financial year

The following financial reporting standards were adopted for the first time in the condensed consolidated interim financial statements for the nine months ended 30 September 2013:

• Amendments to IFRS 1 “First-time Adoption of International Financial Reporting Standards”: amendments relating to fixed transition dates and severe hyperinflation
• Amendments to IFRS 1 “First-time Adoption of International Financial Reporting Standards”: amendments relating to government loans with a below-market rate of interest
• Amendments to IFRS 7 “Financial Instruments: Disclosures”: offsetting of financial assets and financial liabilities
• IFRS 13 “Fair Value Measurement”
• Amendments to IAS 1 “Presentation of Financial Statements”: amendments relating to the presentation of items of other comprehensive income
• Amendments to IAS 12 “Income Taxes”: limited amendment to IAS 12 relating to the recovery of underlying assets
• Amendments to IAS 19 “Employee Benefits”: elimination of the use of the “corridor” approach and amendments relating to the presentation of items of pension expense
• IFRIC 20 “Stripping Costs in the Production Phase of a Surface Mine”
• Improvements to IFRSs (2009– 2011).

Apart from the changes described below, the first-time adoption of these standards and interpretations has had no material effect on the financial position or financial performance of the KION Group or on the disclosures in the notes to its financial statements:

• The amended IAS 1 results in a revised presentation of the statement of comprehensive income. Following the amendment to the standard, the items of other comprehensive income and loss must be split into items that will never be reclassified to profit or loss and items that might be reclassified to profit or loss in future periods.
• The publication of IFRS 13 “Fair Value Measurement” introduces a separate standard containing general rules on the measurement of fair value. The KION Group is applying these rules for the first time in the 2013 financial year. The main impact of this is enhanced disclosures in the notes to the financial statements.
• The effects of the amendments to IAS 19 are described in the section “Accounting policies”.

Financial reporting standards released but not yet adopted

In its condensed consolidated interim financial statements for the nine months ended 30 September 2013, the KION Group has not applied – besides the standards and interpretations reported as at 31 December 2012 – the following standards and interpretations, which have been issued by the IASB but are not yet required to be applied in 2013:

• Amendments to IAS 36 “Impairment of Assets”: clarification of recoverable amount disclosures required for non-financial assets
• Amendments to IAS 39 “Financial Instruments: Recognition and Measurement”: amendments relating to the novation of derivatives and continuation of hedge accounting
• IFRIC 21 “Levies”.

These standards and interpretations will only be applied by the companies included in the KION Group from the date on which they must be adopted for the first time. Their effects on the financial position and financial performance of the KION Group are expected to be insignificant.

Basis of consolidation

A total of 19 German and 81 foreign subsidiaries were fully consolidated in addition to KION GROUP AG as at 30 September 2013. On 11 June 2013, Superlift Holding S.à r.l., Luxembourg, made a non-cash capital contribution – including all of the shares in Superlift Funding S.à r.l., Luxembourg – to KION GROUP AG as part of a capital increase. Superlift Funding S.à r.l. was therefore consolidated as part of the KION Group for the first time in June 2013.

In July 2013, the KION Group also acquired the remaining shares (45.7 per cent) in the French dealer Bretagne Manutention S.A. for a purchase consideration of € 16.2 million. As a result, as at 30 September 2013, KION GROUP AG indirectly held all the capital and voting shares in Bretagne Manutention S.A., Pacé, via Fenwick-Linde S.A.R.L., Elancourt, France. The shortfall of € 13.0 million between the amount of the non-controlling interest and the fair value of the consideration paid is recognised in retained earnings.

Furthermore, in September 2013, the KION Group acquired the remaining shares (49.9 per cent) in the French dealer MANUSOM SAS for a purchase consideration of € 0.4 million. As a result, as at 30 September 2013, KION GROUP AG indirectly held all the capital and voting shares in MANUSOM SAS, Rivery, via STILL SAS, Marne la Vallée, France.

In addition, ten joint ventures and associates were consolidated and accounted for using the equity method as at 30 September 2013, which was the same number as at 31 December 2012; 41 (31 December 2012: 39) companies with minimal business volumes or no business operations were not included in the consolidation.

Acquisition

In May 2013, STILL agreed to acquire 51.0 per cent of the shares in Arser İş Makineleri Servis ve Ticaret A.Ş. (referred to below as “Arser”), which had previously acted as exclusive dealer for the substantial Turkish market. The transaction was closed on 14 August 2013. The acquisition has enabled the KION Group to further strengthen the leading position of STILL and the brand company’s Turkish distribution and service network.

The incidental acquisition costs incurred by this business combination amounted to € 0.3 million and have been recognised as an expense for the current period and reported as administrative expenses on the face of the consolidated income statement.

The impact of this acquisition on the consolidated financial statements of KION GROUP AG based on the provisional figures available at the acquisition date is shown below.

The acquisition has not had any material impact on the KION Group’s revenue or net income (loss). If this business combination had been completed by 1 January 2013, this would have had no material impact on either the revenue or the net income (loss) reported by the KION Group for the first nine months of this year.

The purchase price allocation for the acquisition described above was only provisional as at 30 September 2013 because some details, particularly in the area of leasing, had not yet been fully evaluated. Goodwill constitutes the strategic and geographical synergies that the KION Group expects to derive from this business combination. The goodwill arising from this acquisition is currently not tax deductible.

Accounting policies

The accounting policies applied in these condensed consolidated interim financial statements are fundamentally the same as those used for the year ended 31 December 2012. These condensed consolidated interim financial statements are based on the interim financial statements of the parent company and its consolidated subsidiaries prepared in accordance with the standard accounting policies applicable throughout the KION Group.

The amendments in IAS 19R “Employee Benefits” are required to be applied on a retrospective basis to financial statements for financial years commencing on or after 1 January 2013. In the KION Group, actuarial gains and losses, including deferred taxes, were already recognised in other comprehensive income (loss).

First-time adoption of the revised IAS 19 in the KION Group for the 2013 financial year has led to an overall decrease in retained earnings / net income of € 3.3 million with effect from 1 January 2012. Firstly, this is the result of the revised definition of termination benefits, according to which partial-retirement bonus payments must be accumulated as other long-term benefits for employees on a pro-rata basis over the vesting period. This has led to an increase in retained earnings / net income of € 1.8 million with effect from 1 January 2012. Secondly, because the amendment to IAS 19R requires the past service cost to be recognised immediately, retained earnings / net income declined by € 0.8 million. Furthermore, alignment of the expected return on plan assets with the discount rate caused retained earnings / net income to fall by € 4.3 million with effect from 1 January 2012, while there was an equivalent rise in gains / losses on employee benefits recognised in other comprehensive income (loss).

Net income for the 2012 financial year has also increased retrospectively by € 1.0 million, while other comprehensive income (after deferred taxes) has gone down by € 1.0 million owing to the alignment of the expected return on plan assets with the discount rate. The change in the accounting treatment of provisions for partial retirement obligations has resulted in a decrease in net income (after income taxes) of € 0.8 million for the 2012 financial year. The consequences of the above effects for the first nine months of 2012 were a rise of € 0.2 million in net income (after income taxes) and a decline of € 0.7 million in other comprehensive income (loss).

Assumptions and estimates

The preparation of these condensed IFRS consolidated interim financial statements requires the use of assumptions and estimates for certain line items that affect recognition and measurement in the statement of financial position and the income statement. The actual amounts realised may differ from estimates. Assumptions and estimates are applied in particular:

• in assessing the need for and the amount of impairment losses on intangible assets, property, plant and equipment, and inventories;
• in determining the useful life of non-current assets;
• in classifying leases;
• in measuring options;
• to the recognition and measurement of defined benefit pension obligations, provisions for tax, and other provisions; and
• in assessing the recoverability of deferred tax assets.

The estimates may be affected, for example, by deteriorating global economic conditions or by changes in exchange rates, interest rates or commodity prices. Production errors, the loss of key customers and changes in financing can also impact on the Company’s performance going forward. Changes are recognised in profit or loss when they become known and assumptions are adjusted accordingly.