2012 Financial Report

Contents
Page 3This is Hilti

4

Key figures

5

Management report

7

The Board of Directors

10

Other key management personnel

12

Corporate governance

15

Consolidated financial statements of Hilti Group

19

Auditors’ report on the consolidated financial statements

78

Financial statements of Hilti Corporation

81

Auditors’ report on the financial statements of Hilti Corporation

92

Contact information

94

Next information

94

This is Hilti
Page 4This is Hilti

We supply the construction industry with technologically superior products, systems andservices. We provide innovative solutions that feature outstanding added value.

We passionately create enthusiastic customers and build a better future with approximately
21,000 team members located in more than 120 countries around the world.

We live clear values. Integrity, the courage to embrace change, teamwork and commitment are
the foundations of our corporate culture.

We combine long-term financial success with comprehensive responsibility toward society andthe environment. Reciprocal tenets of openness, honesty and tolerance apply to teammembers, partners and suppliers alike. The goal of our strategy is to sustainably increase thevalue of the company.

201
Financial
Report Report
2012
Financial

Key figures
Page 5

Key figures

Key figures
Page 6

Key financial information of Hilti Group

Results (CHF million / %)Net sales

Depreciation and amortization
Operating result

Net income before tax
Net income

Return on capital employed (RoCE) in % (operating result)

2012

2011

2010

2009

2008

4,204

3,998

3,930

3,845

4,700

301

207

268

172

450

196
230
194

216
119
97

9.5

6.5

617

Total equity

2,297

Total non-current liabilities

1,044

Return on equity (RoE) in % (net income)Cash flow from operating activities

Balance sheet (CHF million / %)Total equity in % Total equity and liabilities
Total current liabilities

Capital expenditures on intangible assets and on property, plant andequipment

8.6

50

1,219
188

213
167
142

200
136
78

185
308
243

8.2

5.4

15.5

242

376

487

437

2,212

2,304

2,396

2,429

997

1,172

1,135

829

4.3

51

1,159

212

6.0

54

817
209

3.2

55

795
283

9.9

58

946
290

Intangible assets and property, plant and equipment

1,120

1,141

1,162

1,101

1,024

Total current assets

2,892

2,706

2,697

2,811

2,795

Total assets

4,559

4,368

4,293

4,326

4,204

Employees (as at December 31)

21,13921,84820,305

19,70920,994

2.75% bond 06 / 13 (early call for tax reasons only)

150

150

150

150

150

3.25% bond 09 / 14 (early call for tax reasons only)

300

300

300

300

–

Euro bonds 12 / 15-19 (EUR 109 million at fixed interest rates **)131

Other non-current assets

Dividend *Information on bonds (CHF million, nominal values)

3.50% bond 08 /12 (early call for tax reasons only)Euro bonds 12 / 15-19 (EUR 66 million at variable interest rates ***)*** As proposed by the Board of Directors*** Bonds have restricted tradeability*** Early call possible; bonds have restricted tradeability

547

131

–

80

521

47

300
–
–

434

71

300
–
–

414

–

300
–
–

386

96

300

–
–

2012 Financial ReportManagement report
Page 7

Management report

Significant strengthening of profitability and cash flow

On the basis of 5.2 percent sales growth in 2012, the Hilti Group was able
to substantially improve its operating result, which rose by 45 percent in
the year under review. Net income doubled, increasing 101 percent. This
growth was due in large measure to the rapid implementation of the
profitability enhancement program launched at the end of 2011.

The economic environment was challenging in 2012. While relevant southern European
markets continued to contract, most countries in central and northern Europe, including theimportant market of Germany, performed robustly. The Hilti Group profited from solid

economic momentum in South and North America as well as Asia. Construction activity
tapered off slightly in parts of eastern Europe and the Middle East (including in Dubai).

Positive sales growth

The divergence in growth trajectories was also reflected in the sales results of the various Hilti
regions. Double-digit growth rates were achieved in North and Latin America (13.4% and32.4%, respectively, in local currencies), where successful marketing and sales activities

enabled the firm to gain additional market share. The Hilti Group could not evade thecontinued severe economic downturn in southern Europe – primarily in major markets like Italy

and Spain –, and this ultimately caused sales to drop slightly in Europe as whole (-1.9%).

Management report
Page 8Eastern Europe posted double-digit sales growth, driven largely by activity in Russia. Politicalinstability in certain countries in the Near/Middle East and Africa led to a decline in sales whilebusiness in other markets (including Saudi Arabia and South Africa) was very favorable.
Positive momentum in the Asia/Pacific region translated into a correspondingly high growthrate (+9.5%).

The Hilti Group’s relatively new business relating to fastening solutions for the solar industry

also showed a mixed picture. While the Group reported significant growth in the USA and Asia,
sales declined in Europe due to the sharp market downturn. Overall, sales for the solar sector
fell slightly.

Following distinctly negative currency effects in 2011, the Swiss franc stabilized in 2012 –albeit at a persistently high level. In Swiss francs local currency translation had a slight positive
impact on growth (+0.8%). Sales increased by 5.2 percent to CHF 4,204 million.

Higher gross margins andproductivity

Hilti’s significant innovative strength and superior product differentiation, as well as its efforts
to lower product costs, allowed the Group to increase its gross margin despite challenging

market conditions in some regions. Productivity also improved further at all stages of theGroup’s value chain. The cost-saving measures at Hilti Corporate Headquarters and therestructuring of sales units in southern Europe, as well as in other individual markets, were
implemented according to plan.

Combined, these measures led to an increase in return on sales (ROS) from 5.2 to 7.1 percent.
Currency effects on the 2012 operating result were largely neutral due to relative currency
stability and the successful implementation of internal initiatives.

Significant cash flow
improvement

The Hilti Group devoted a good deal of energy to improving capital efficiency in 2012. The

average collection period on customer accounts, for example, was reduced by six days (9%).
As a result, the ratio of net working capital to sales improved from 27 to 22 percent. With 4.4
percent sales growth in local currencies, the Group managed to reduce net working capital by
CHF 150 million, further accelerating the positive trend set in previous years.

In line with strengthened profitability, cash flow from operating activities reached a record CHF
617 million. Despite higher investments, largely associated with the construction of the new
Innovation Center at Corporate Headquarters, free cash flow also achieved a record of CHF

363 million. Return on capital employed (ROCE) improved from 6.5 to 9.5 percent due to theaforementioned measures.

High liquidity and solidbalance sheet figures

Cash and cash equivalents increased to CHF 1,303 million. Interest-bearing debt stood at CHF
866 million at the end of 2012, down by CHF 76 million. Short-term bank borrowings amounted

to CHF 142 million (+29 million), while long-term bank borrowings were CHF 64 million (-17

million). The CHF 300 million bond that matured in 2012 was partially replaced by a EUR 175
million promissory note bond. This instrument, having maturities between three and sevenyears, was issued at attractive conditions and enjoyed significant demand. Alongsiderefinancing, this issue allowed the Hilti Group to achieve a better balance between eurodenominated receivables and liabilities. In addition to this promissory note bond, the Hilti

Group maintains two additional bonds on the Swiss capital market, having maturities in 2013
(CHF 150 million) and 2014 (CHF 300 million).

2012 Financial ReportManagement report
Page 9Net liquidity rose to CHF 437 million. Despite once again experiencing a negative effect,amounting to CHF 69 million, related to the valuation of pension fund obligations according to
IFRS, the equity ratio stood at 50 percent at the end of 2012.

In 2012, various restructuring measures were carried out to bolster the company’s pension
fund. These measures – in conjunction with improved investment performance – took thecoverage ratio back above the 100 percent mark (end of 2011: 94%).

The Board of Directors recommends a dividend payment of CHF 131 million for the 2012business year (2011: 47 million).

OutlookThe Hilti Group remains cautiously confident about its prospects for 2013. While growth

momentum slowed slightly in 2012, primarily due to developments in southern Europe, theGroup’s strong level of differentiation, very positive performances in North America as well as
in the emerging markets, should ensure that sales continue to grow, albeit in the lower singledigit range.

The profitability enhancement measures taken in 2012 will continue to feed through into 2013.
Barring large-scale economic upheaval, these initiatives and our capital efficiency drive should
ensure that the Hilti Group continues to increase in value.

The Board of Directors
Page 10The Board of Directors

The Board of Directors (from left): Michael Jacobi, Tis Prager, Michael Hilti, Pius Baschera, Giorgio Behr, Heinrich Fischer and Kim
Fausing on the occasion of their visit to Hilti North America’s Training Center in Tulsa, Oklahoma.

Prof. Dr. Pius Baschera
Chairman of theBoard of Directors
Zurich, Switzerland

Pius Baschera (born 1950; re-elected to serve until the 2013 Annual General Meeting) is
Chairman of the Board of Directors. He studied mechanical engineering and businessadministration at the Swiss Federal Institute of Technology (ETH) Zurich, where he earned his

doctorate. In 1979, he came to Hilti as Head of Financial Controlling in the production area.
Before being named Chairman, he served as CEO for 13 years. He is currently a Member of theBoard of Directors of F. Hoffmann-La Roche Ltd., Basel, and the Schindler Group, Hergiswil.

He also is a Member of the Advisory Boards of Vorwerk & Co., Wuppertal, and Ardex GmbH,

Witten, Chairman of the Board of Directors of Venture Incubator AG, Zug, and a professor of
Corporate Management at the Swiss Federal Institute of Technology Zurich.

Michael Hilti
Schaan, Principality of
Liechtenstein

Michael Hilti (born 1946; re-elected to serve until the 2015 Annual General Meeting), son ofcompany founder Professor Martin Hilti, has been a Member of the Board of Directors since1990. After studying business administration at the University of St. Gallen he worked inbanking in London before joining Hilti in 1974 as the Deputy Head of Marketing. Two years

later he was named to the company’s Executive Board and he served as CEO from 1990 to
1993. He was Chairman of the Board of Directors from 1994 to 2006. Michael Hilti is a Trusteeof the Martin Hilti Family Trust and President of the Board of the Hilti Foundation.

2012 Financial Report

The Board of Directors
Page 11

Prof. Dr. Giorgio Behr
Buchberg, Switzerland

Giorgio Behr (born 1948; re-elected to serve until the 2015 Annual General Meeting), Honorary
Professor at the University of St. Gallen, was previously a Member of the Board of Directors ofthe Hilti Corporation between 1993 and 2007. Since January 2008, he has been a Trustee ofthe Martin Hilti Family Trust and in January 2009 he was again elected to serve on the Board of
Directors of the Hilti Corporation. Giorgio Behr is the Chairman of the Supervisory Board of ZF

Friedrichshafen AG. He gained his doctorate degree at the law school of the University of
Zurich, was admitted to the bar and obtained a diploma as a Certified Public Accountant.
Today he is an entrepreneur in the industrial sector (Behr Bircher Cellpack BBC Group).

Kim Fausing
Sonderborg, Denmark

Kim Fausing (born 1964; elected to serve until the 2013 Annual General Meeting) was electedto the Board of Directors in 2010. He earned a degree in mechanical engineering at Aarhus

Teknikum, in Denmark, in 1987, and an MBA degree at Henley Management School, in
London, in 1996. His professional career led him to the Hilti Group in 1990, where he served invarious management functions in Europe and Asia until 2007. After moving to the Danish

Danfoss Group, he was named Chief Operating Officer and Member of the company’s
executive committee in January 2008. He also is a Director of Sauer-Danfoss Inc., of theGerman-Danish Chamber of Industry and Commerce and Vice-President of the Velux Group in

Copenhagen.

Heinrich Fischer
Rüschlikon, Switzerland

Heinrich Fischer (born 1950; re-elected until the 2013 Annual General Meeting) has been a
Member of the Board of Directors since 2007. He graduated in 1973 with an engineering

diploma from the Swiss Federal Institute of Technology Zurich, having studied electricalengineering and technical physics. He then went on to study business administration at the
University of Zurich while working in this field, earning a master’s degree in 1976. Beginning in
1977, he held senior management positions at Oerlikon Bührle Holding, Balzers AG (1980 to1989), and finally at Oerlikon Holding once again (1990 to 1995). From 1996 to 2007, he was

Chief Executive Officer at Saurer AG, Arbon. Heinrich Fischer is a Member of the Board of
Directors at Schweiter AG, Tecan AG, Orell Füssli AG (Chairman) and Sensirion AG.

Dr. Michael Jacobi
Binningen, Switzerland

Michael Jacobi (born 1953; re-elected until the 2013 Annual General Meeting) was elected to

the Board of Directors in 2007. He studied business economics at the University of St. Gallen
and at the University of Washington, Seattle, and earned his doctorate from St. Gallen in 1979.

From 1978 until 2007, he held various management positions in the financial area of Ciba
Geigy AG and later in Ciba Specialty Chemicals Inc., Basel. He was Global Chief Financial
Officer from 1996 until 2007. Today Michael Jacobi is an independent corporate consultant.

Since 2003, he has been a Member of the Board of Directors of Sonova Holding AG, Stäfa,
and since December 2008 a Trustee of the Martin Hilti Family Trust. He was named to theBoard of Directors of Actelion Pharmaceuticals Ltd., Allschwil, in 2009.

Dr. Tis Prager
Zumikon, Switzerland

Tis Prager (born 1948; re-elected until the 2013 Annual General Meeting) has been a Memberof the Board of Directors since June 1, 2006. He earned a doctorate in law from the Universityof Zurich in 1975, was admitted to the bar of the Canton of Zurich in 1978 and is a founding
member of the Prager Dreifuss law firm in Zurich and Bern. Among other mandates, Tis Prager

is the Chairman of the Board of the IE Engineering Group AG, Zurich, Hotel Zurich AG(Marriott), Scherer & Bühler AG, Meggen, and Emil Hitz AG, Bassersdorf. He is also a Memberof the Board of Directors of Bourquin SA, Couvet, and Caprez Ingenieure AG, Chur, and isactive in STEP, the Society of Trust and Estate Practitioners.

Other key management personnel
Page 12

Other ke y management personnel

The Executive Board (from left): Marco Meyrat, Christoph Loos, Matthias Gillner, Bo Risberg, Jörg Kampmeyer and Stefan Nöken at
the construction site of Hilti’s new Innovation Center in Schaan, Liechtenstein.

The Executive Board
Bo Risberg
Chief Executive Officer
Wollerau, Switzerland

Bo Risberg (born 1956, Sweden) has been CEO since January 1, 2007. He trained as amechanical engineer at Queen’s University in Canada and then acquired an MBA at IMD in
Lausanne. From 1981 to 1995 he worked in various positions with the ABB Group before

working for a consulting firm between 1995 and 1999. He joined Hilti in 1999 as Head of theDrilling and Demolition Business Unit. From 2001 to 2006, as a Member of the Executive
Board, he was responsible for the Business Areas, the Supply Chain comprising production,

sourcing and logistics and New Business & Technology. Bo Risberg is a Member of the Boardof Directors of Trelleborg AB, Sweden, Grundfos Holding A/S, Denmark, Poul Due Jensen
Foundation, Denmark, and IMD, Switzerland.

Matthias Gillner
Grabs, Switzerland

Matthias Gillner (born 1967, Germany) has been a Member of the Executive Board since April
2011. He is responsible for the Electric Tools & Accessories, Corporate Research &Technology and Global Tool Service units. Matthias Gillner studied chemical engineering at

Friedrich-Alexander University of Erlangen-Nürnberg, Germany. He was then employed by aconsulting company from 1993 to 2000. During this time he acquired an MBA at INSEAD in
Fontainebleau, France. He began his Hilti career in 2000 as the Head of Corporate

Development. After leading Corporate HR he was named Head of the Measuring Systems
Business Unit in 2003. From 2006 to 2011, Matthias Gillner was Head of the Electric Tools &Accessories Business Area. Matthias Gillner is Member of the Board of the European Power
Tool Association (EPTA).

2012 Financial Report

Other key management personnel
Page 13Jörg Kampmeyer
Chief Financial Officer
Vaduz, Principality of
LiechtensteinJörg Kampmeyer (born 1968, Germany) has been a Member of the Executive Board since April

2011. He is responsible for the Finance, Human Resources, IT and Corporate Development
units. Jörg Kampmeyer studied mechanical engineering and economics at RWTH Aachen

University after which he worked as a Management Consultant. He began his Hilti career in2002 as the Head of Corporate Development in Schaan. From 2003 to 2005, he was

responsible for the company’s worldwide marketing activities before heading the GermanMarket Organization in 2006 and, as of 2010, the Market Region Central Europe.

Dr. Christoph Loos
Schaan, Principality of
Liechtenstein

Christoph Loos (born 1968, Germany) has been a Member of the Executive Board since 2007.
For four years he has been responsible for Finance, HR and IT. Since 2011, he is in charge ofEmerging Markets and the global Energy & Industry business. After finishing his studies ofbusiness administration at the University of St. Gallen he has worked for an international
management consultancy in Germany and China. Upon joining Hilti in 2001, he first led the

Corporate Development team, after which he established the Strategic Marketing unit. At theend of 2003, he moved to Germany, first as a Regional Sales Director and then as General
Manager of Hilti Germany. Christoph Loos is a member of the Board of Trustees of the St.
Gallen Foundation for International Studies.

Marco Meyrat
Chur, Switzerland

Marco Meyrat (born 1963, Switzerland) has been a Member of the Executive Board since thebeginning of 2005. He is responsible for the markets in Europe and North America. With abusiness degree from the University of St. Gallen, he began his career in 1989 as ProductManager at Hilti headquarters in Schaan. After holding various positions in Hilti France and Hilti
Germany, he was named Head of Hilti Switzerland in 1999 and was subsequently appointed

General Manager of Hilti Germany in 2002. Marco Meyrat is Chairman of the Board of Directorsof OLMeRO AG, Glattbrugg.

Dr. Stefan Nöken
Mörschwil, Switzerland

Stefan Nöken (born 1965, Germany) has been on the Executive Board since the beginning of

2007. He is responsible for the Fastening & Protection, Global Logistics and Corporate

Intellectual Property units. Following studies in mechanical engineering at Aachen University,where he earned a doctorate, he was employed at the Fraunhofer Institute for Production
Technology in Aachen. In 2000, he joined Hilti as the Head of Corporate Engineering. In 2004,

he was appointed Head of Supply Chain Management. Stefan Nöken is a Member of the Boardof Trustees of the Fraunhofer Institute for Production Technology in Aachen and Vice-Presidentof the Forum for Supply Chain Management at the ETH Zurich.

Other key management personnel
Page 14

Executive Management Team

Executive Board(see above)

Regions

Guillaume Aberlenc, nationality: French
Cary Evert, nationality: American
Gareth Lewis, nationality: British
Jochen Olbert, nationality: German
Joaquim Sardà Solsona, nationality: Spanish (since 01 July 2012)
Peter Stracar, nationality: Czech (until 31 December 2012)
Ingo Valentini, nationality: Austrian (until 30 June 2012)
Robbert van der Feltz, nationality: Dutch

Business Units

Tassilo Deinzer, nationality: German
Jan Doongaji, nationality: Swiss
Johannes Wilfried Huber, nationality: Austrian
Raimund Zaggl, nationality: Austrian

Corporate Functions

Roeland Baaijens, nationality: Dutch
Michael Gahleitner, nationality: Austrian
Klaus Risch, nationality: Liechtensteiner
Günter Schweitzer, nationality: German (until 31 December 2012)
Franz Wirnsperger, nationality: Austrian
Martin Petry, nationality: German2012 Financial Report

Corporate governance
Page 15

Corporate governanceElection and term of office forthe members of the Board of

The members of the Board of Directors of Hilti Corporation are elected by the Annual General
Meeting for three years. As a rule, directors serve up to four terms, but no longer than until the

Directors

end of the business year in which they reach the age of 70.

Allocation of responsibilities

In addition to its legally defined duties, the Board of Directors specifically takes decisions on

and duties of the Board of
Directors

the basic strategic direction of the Group, its long-term and annual strategic planning,

important business decisions, as well as the succession planning of the Board of Directors
itself and the succession planning and the appointment of the Executive Board.

In the last business year, the Board of Directors supervised the activities of the Executive
Board and supported it in a consultative capacity. The Board of Directors took a strategic

focus and actively involved in projects concerning group strategy. In several multi-day Board
meetings and visits to major operating units of the Group, as well as on the basis of written andoral reports of the Executive Board, the Board of Directors dealt intensively with the economic

situation, day-to-day running of the business as well as with its corporate policy, financial
planning, risk management and basic questions of corporate development. Furthermore, theBoard of Directors was kept fully informed by the statutory auditors on the results of the auditof the annual accounts.

Audit Committee

The Audit Committee assists the Board of Directors in fulfilling its supervisory responsibilities
with respect to the accounting and financial reporting practices of Hilti Corporation and its

subsidiaries, compliance with legal and regulatory requirements, the internal and external audit

processes as well as with its oversight of the risk management. The overall responsibility forthe tasks delegated to the Audit Committee remains with the Board of Directors. In 2012, theAudit Committee consisted of Dr. Michael Jacobi (Chairman of the Audit Committee) and Dr.
Tis Prager who were appointed by the Board of Directors for a term of one year.

Internal audit

The internal audit department, Corporate Audit, supports the Board of Directors by monitoring
the internal control status within group entities. To achieve this, Corporate Audit conducts

audits focused on controls within major transaction cycles as well as on processes for
management of selected corporate risks. Corporate Audit’s objective is to provide

transparency over the Group’s control environment and enable security to be provided overthe Group’s resources.

Risk management

The Group maintains an enterprise wide risk management process which involves a complete

risk inventory with different risk owners assigned to manage all known strategic, financial andoccurrence-oriented risks of the Group. The risk owners are responsible for their respective

risks to evaluate, implement, review and monitor compliance with the corresponding risk

mitigation measures. The Corporate Risk Manager is responsible for the risk reporting process
and to ensure the reported content and identified measures regarding the identified risks isplausible. Corporate Audit undertakes reviews of selected risks as part of their internal control

reviews in group entities (see above) and in corporate functions managed by the respective riskowners. The risk management reporting is regularly reviewed by the Board of Directors.

Corporate governance
Page 16

Compensation to the Board of
Directors and Corporate
Management

Members of the Board of Directors are paid a fixed annual compensation plus a lump sum for

expenses. There is no additional compensation for the performance of an Audit Committee
function by a director. Former members of the Board of Directors do not receive any
remuneration.

The members of Corporate Management (the Executive Management Team, including the

Executive Board) receive an annual base salary and a bonus linked to performance. Membersof the Executive Board normally retire at the age of 56. They receive a severance payment inaddition to their statutory pension fund entitlement.

Former members of the Executive Management Team do not receive any additional
compensation other than their statutory pension fund entitlement. Total compensation isdetailed in the consolidated financial statements of Hilti Group (see note 42).

Shareholders’ participationrights

Details of share and participation capital are given in the consolidated financial statements ofthe Hilti Group (see note 20). Resolutions of shareholder meetings are generally decided by anabsolute majority of represented votes. A majority of at least three quarters of represented

votes is necessary to change the articles of incorporation, or for resolutions concerningchanges to share and participation capital, subscription rights, expansion or restriction ofbusiness scope as well as mergers, transformation or liquidation of the company.

Auditors

The examinations of the Group’s consolidated financial statements and the financial

statements of Hilti Corporation are conducted by PricewaterhouseCoopers Ltd., St. Gallen.

The company was reappointed in March 2012 for the 2012 year. The leading auditor has been

responsible for the mandate from 2012 following a partner rotation after the 2011 year. The

previous leading auditor was responsible for the mandate from 2005 to 2011. In respect of the2012 year, audit fees of the leading auditor amount to CHF 1.7 million whereas the non-audit-

related fees amount to CHF 0.3 million. Total audit fees of the Group including audits not

performed by the leading auditor amount to CHF 2.4 million.

2012 Financial Report

Page 17

Consolidated financial statements

Page 18

2012 Financial Report

Page 19
Consolidated financial statements of Hilti Group

Consolidated financial statementsof Hilti GroupConsolidated financial statements
Page 20

Consolidated balance sheet of Hilti Group as at December 31(financial amounts in CHF million)

Note

2012

2011

Intangible assets

7

371.3

394.4

Investment property

9

2.2

6.8

ASSETS

Property, plant and equipment

8

Investments in associates and joint ventures

10

Other financial investments

12

Derivative financial instruments

16

Deferred income tax assets

Trade and other receivables

11
14

Total non-current assets

Inventories

13

Current income taxes receivable

26

Derivative financial instruments

16

Trade and other receivables
Accrued income and prepayments
Financial assets at fair value through profit or loss
Cash and cash equivalents

14

748.5

13.3

147.0

17.2

12.1

130.4

16.6

349.1

312.0

1,667.8

1,662.2

555.3

615.9

8.3

14.4

19.2

897.5

15

82.9

17

35.8

9.0

43.5

930.6
47.6
8.2

26.4

1,302.7

1,062.5

Total current assets

2,891.5

2,705.6

TOTAL ASSETS

4,559.3

4,367.8

Assets classified as held for sale

The notes on pages 26 to 77 are an integral part of these consolidated financial statements.

18

746.4

19

–

–

2012 Financial Report

Consolidated financial statements
Page 21

Note

2012

2011

EQUITY AND LIABILITIES

Non-controlling interest

Equity attributable to equity holders of the parent

14.3

Total equity

20

Provisions

21

Deferred income tax liabilities

11

Pension and termination benefit obligations

13.0

2,282.3

2,198.9

80.0

108.7

2,296.6

2,211.9

22

337.5

Bonds

23

510.3

447.8

Trade and other payables

25

22.0

24.7

Long-term bank borrowings
Derivative financial instruments

24
16

Total non-current liabilities

28.6
64.3
0.9

303.2

29.8
81.2
1.4

1,043.6

996.8

Provisions

21

116.8

51.4

Trade and other payables

25

315.6

278.0

Accrued liabilities and deferred income

27

399.7

304.8

28

141.7

112.7

Current income taxes payable
Bonds

Short-term bank borrowings

Derivative financial instruments

26
23
16

92.2

149.7
3.4

98.4

299.8
14.0

Total current liabilities

1,219.1

1,159.1

Total liabilities

2,262.7

2,155.9

TOTAL EQUITY AND LIABILITIES4,559.3

4,367.8

The notes on pages 26 to 77 are an integral part of these consolidated financial statements.

Consolidated financial statements
Page 22

Consolidated income statement of Hilti Group for the year ending December 31(financial amounts in CHF million)

Net sales

Other operating revenues

Note

2012

2011

29

4,203.6

3,997.5

4,286.9

4,071.4

Total operating revenues

83.3

Change in inventory

30
30(1,282.1)(1,418.0)

Personnel expenses

31(1,688.1)(1,572.1)

Other operating expenses

33

Material costs

Depreciation and amortization

32

Total operating expenses
Operating result(56.1)

73.9(196.2)(763.9)62.4(215.8)(720.7)(3,986.4)(3,864.2)

300.5

207.2

Share of profit / (loss) of equity-accounted associates and joint ventures

10

1.4

2.4

Other revenues and expenses (net)34(15.7)(33.2)

230.0

118.9

(36.0)(22.4)

194.0

96.5

192.5

94.1

1.5

2.4

Finance costs

35

Net income before income tax expense

Income tax expense
Net income
Attributable to:Equity holders of the parent
Non-controlling interest
The notes on pages 26 to 77 are an integral part of these consolidated financial statements.

36(56.2)(57.5)

2012 Financial Report

Consolidated financial statements
Page 23

Consolidated statement of comprehensive income of Hilti Group for the year ending December 31(financial amounts in CHF million)

Note
Net income per income statement

2012

2011

194.0

96.5

Gains / (losses) on cash flow hedges taken to equity

16

2.2

(2.1)

Actuarial gains / (losses) on defined benefit plans22(68.8)(91.8)

20

11.0(Gains) / losses on cash flow hedges transferred from equity to income statement
Foreign currency translation differences

Deferred tax on items taken directly to or transferred from equity
Other comprehensive Income (OCI)
Total comprehensive Income
Attributable to:Equity holders of the parent
Non-controlling interest

The notes on pages 26 to 77 are an integral part of these consolidated financial statements.

16
20
20

1.3

(6.7)

(9.3)

(34.5)
13.9(61.0)(123.8)133.0(27.3)

131.9(30.2)

1.1

2.9

Consolidated financial statements
Page 24

Consolidated statement of changes in equity of Hilti Group for the year ending December 31(financial amounts in CHF million)

Share and

CapitalForeign

Cash flow

Retained

Non-

Total

participation reserves

currency

hedgingearnings

controlling

equitycertificate

translation

reserve

capitalreserve

Equity at January 1, 2012

Change in non-controlling interest

126.7

17.4

(330.2)(2.2)

2,387.2

13.0

2,211.9

–

–

–

–

(46.9)–(46.9)–

Dividend paid

Total comprehensive income

–

126.7

Equity at December 31, 2012

interest

Share and

–
–

17.4

–

–

(6.3)

3.1

(336.5)

0.9

(1.6)

0.2

135.1

1.1

2,473.8

14.3

(1.4)

133.0

2,296.6

CapitalForeign

Cash flow

Retained

Non-

Total

participation reserves

currency

hedgingearnings

controlling

equitycertificate

translation

reserve

capitalreserve

Equity at January 1, 2011 (as previously
reported)

Reclassification

Equity at January 1, 2011 (after
reclassification)

Change in non-controlling interest
Dividend paid

Total comprehensive income
Equity at December 31, 2011

interest

126.7

17.4

(264.4)(30.8)–

8.9

2,411.5

126.7

17.4

(295.2)

8.9

–

–

–

–

–
–

126.7

–

–
–

17.4

–

(35.0)(330.2)4.3

2,304.4

2,442.3

4.3

2,304.4–(71.0)–(71.0)(2.2)

2,387.2

13.0

2,211.9–(11.1)

30.8

–

15.9

–

5.8
2.9

–

5.8

(27.3)The reclassification corrects a misallocation within equity relating to periods prior to 2011 which previously had understated the foreign

currency translation reserve loss position and understated the retained earnings position. This reclassification has no effect on total

equity as reported in the consolidated balance sheet.

The “Change in non-controlling interest” results from the acquisition of the remaining 49% interest in Hilti Tendon Technologies Pty.
Ltd., Australia, in 2012 and from the investments in Hilti Emirates LLC, United Arab Emirates, and Hilti Qatar W.L.L., Qatar, in 2011.
For further details on equity see note 20.
The notes on pages 26 to 77 are an integral part of these consolidated financial statements.

2012 Financial Report

Consolidated financial statements
Page 25

Consolidated cash flow statement of Hilti Group for the year ending December 31(financial amounts in CHF million)

Note
Net income

Depreciation and amortization

32

Share of (profit) / loss of equity-accounted associates and joint ventures

10(Gains) / loss on foreign currencies and cash flow hedging instruments

34(Gain) / loss on disposal of investments

2012
194.0

2011
96.5

196.2

215.8

(1.4)

(2.4)

18.3

38.9

(9.4)

0.1

45.1

38.7

56.1

(62.4)

Increase / (decrease) in trade payables

21.3

20.7

Cash flow from operating activities before interest and tax

712.4

339.2

Interest paid

(56.2)(57.5)Cash flow from operating activities

616.6

241.5

Valuation of financial liabilities under amortized cost basis
Income tax expense (excluding deferred tax)
Interest (income) / expense(Increase) / decrease in inventories

36

34, 35(Increase) / decrease in trade receivables

82.9

Interest received

5.4

Income tax paid

(45.0)

Capital expenditure on intangible assets
Acquisition of subsidiaries(Increase) / decrease in financial investments(61.9)

43

Disposal of intangible assets(253.3)

Increase in long-term bank borrowings

0.4(Decrease) in long-term bank borrowings(12.7)

Increase in long term loans

1.0(Decrease) in long term loans(1.2)

Increase / (decrease) in short-term bank borrowings
Increase in bonds

Cash flow from financing activities

Effects of exchange rate changes on cash and cash equivalents
Total increase / (decrease) in cash and cash equivalents

Cash and cash equivalents at January 1
Cash and cash equivalents at December 31

The notes on pages 26 to 77 are an integral part of these consolidated financial statements.

(11.1)(61.9)Cash flow from investing activities

Dividend paid–

5.2

(Increase) / decrease in finance lease receivables

Increase / (decrease) in liability to shareholder(125.6)

2.0

Disposal of property, plant and equipment(Decrease) in bonds

50.8
57.2

(Increase) / decrease other net operating assets

Capital expenditure on property, plant and equipment

1.3

20

50.4

(54.9)(3.8)
7.1(47.3)(87.9)(123.7)
(7.2)
9.1

–

7.9

(67.4)(269.2)
26.7(10.1)
3.2

–

28.2

18.8

(300.0)

–

210.9

42

1.6

–

–

(0.4)

(46.9)(71.0)(120.3)(32.8)(2.8)(11.4)

240.2(71.9)

1,062.5

1,134.4

1,302.7

1,062.5

Notes to the consolidated financial statements
Page 26

Notes to the consolidated financial statements(1)

General information

The Hilti Group (the Group) comprises the Hilti Corporation and its domestic and foreignsubsidiaries. The Group supplies the worldwide construction industry with technologicallyleading products, systems and services that provide construction professionals with innovative

solutions and superior added value. Its product range includes equipment and systems
covering drilling and demolition, direct fastening, diamond and anchoring, fire stop and foam,
installation, measuring, screw fastening, and cutting and sanding.

The Hilti Corporation is a limited liability company incorporated and domiciled in the

Principality of Liechtenstein. The Group’s headquarters and the address of its registered office
are at Feldkircherstrasse 100, 9494 Schaan, Liechtenstein. The Group’s principal production
and research and development location is Liechtenstein with further production and researchand development locations worldwide. The Group operates in over 120 countries and hassome 21,000 employees worldwide.

These consolidated financial statements were approved for issue by the Board of Directors on
March 6, 2013.

(2)

Summary of significant
accounting policies(2.1)

Basis of preparation

The principal accounting policies applied in the preparation of these consolidated financial

statements are set out below. These policies have been consistently applied to both years
presented, unless otherwise stated.

These consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS). Preparation of the financial statements in accordancewith IFRS meets the requirements of Liechtenstein’s corporations law, the Personen- undGesellschaftsrecht (PGR).

The consolidated financial statements have been prepared under the historical costconvention, as modified by the revaluation of certain financial assets and financial liabilities(including derivative instruments).

The preparation of financial statements in conformity with IFRS can require the use of certain
critical accounting estimates. It also requires management to exercise its judgment in theprocess of applying the Group’s accounting policies. The accounting estimates and judgments
reflected in the 2012 consolidated financial statements that are critical in the context of theGroup’s financial position and financial performance are explained in note 3.

(2.2) Method of consolidation
Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern the financial andoperating policies, generally accompanying a shareholding of more than one-half of the voting
rights. The existence and effect of potential voting rights that are currently exercisable orconvertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
They are deconsolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by
the Group. The cost of an acquisition is measured as the fair value of the assets given, equity

instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a business combination aremeasured initially at their fair values at the acquisition date, irrespective of the extent of any

non-controlling interest. Goodwill is recognised for any excess over the fair value of theidentifiable net assets acquired of the sum of (i) the consideration transferred, (ii) the amount of

any non-controlling interest in the acquiree and (iii) the acquisition-date fair value of any

2012 Financial Report

Notes to the consolidated financial statements
Page 27

previous equity interest in the acquiree. If this is less than the fair value of the net assets of thesubsidiary acquired in the case of a bargain purchase, the difference is recognized directly inthe statement of comprehensive income.

Inter-company transactions, balances and unrealized gains on transactions between groupcompanies are eliminated. Unrealized losses are also eliminated unless the transaction

provides evidence of an impairment of the asset transferred. Accounting policies ofsubsidiaries are changed, where necessary, to ensure consistency with the policies adopted by
the Group.
Associates and joint
ventures

Associates are all entities over which the Group has significant influence but not control,

generally accompanying a shareholding of between 20% and 50% of the voting rights. Joint

ventures are all entities over which the Group has joint control but not unilateral control,
generally accompanying a shareholding of 50% of the voting rights.

Investments in associates and joint ventures are accounted for by the equity method of

accounting and are initially recognized at cost. The Group’s investments in associates and joint

ventures include goodwill (net of any accumulated impairment loss) identified on acquisition.
The Group’s share of its associates’ and joint ventures’ post-acquisition profits or losses isrecognized in the income statement. The cumulative post-acquisition movements are adjusted

against the carrying amount of the investment. When the Group’s share of losses in an
associate or joint venture equals or exceeds its interest in the associate or joint venture,including any other unsecured receivables, the Group does not recognize further losses, unlessit has incurred obligations or made payments on behalf of the associate or joint venture.

Unrealized gains on transactions between the Group and its associates or joint ventures are
eliminated to the extent of the Group’s interest in the associates or joint ventures. Unrealized
losses are also eliminated unless the transaction provides evidence of an impairment of theasset transferred. Accounting policies of associates or joint ventures are changed, where
necessary, to ensure consistency with the policies adopted by the Group.

(2.3) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided tothe chief operating decision-maker. The chief operating decision-maker, who is responsible forallocating resources and assessing performance of the operating segments, has been

identified as the Executive Board (EB) that makes strategic decisions. With the Group’s MultiChannel-Service (MCS) approach, all products and services are relevant for all customers andthe EB steers the business on group level as one unit. In accordance with IFRS 8 Operating
Segments, paragraph 5, the Hilti Group therefore operates in only one single operating

segment. The single operating segment disclosure is accordingly set out in the balance sheet,income statement, statement of comprehensive income, statement of changes in equity andthe cash flow statement. Breakdown of the segment information in terms of products, services
and geographical areas is provided in note 37.

(2.4) Foreign currency translation
Functional andpresentation currency

Items included in the financial statements of each of the Group’s entities are measured using

the currency of the primary economic environment in which the entity operates (the functional
currency). The consolidated financial statements are presented in Swiss francs, which is thefunctional and presentation currency of the Hilti Corporation.

Notes to the consolidated financial statements
Page 28

Transactions andbalances

Foreign currency transactions are translated into the functional currency using the exchange

rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation at year-end exchange rates

of monetary assets and liabilities denominated in foreign currencies, excluding long-term inter-company accounts receivables and payables, are recognized in the income statement. Foreignexchange gains and losses relating to long-term inter-company foreign currency loans are

regarded as part of the net investment in the foreign entity and are recognized in “Other
comprehensive income” (OCI).

Translation differences on non-monetary items, such as equities held at fair value throughprofit or loss, are reported as part of the fair value gain or loss. Translation differences on nonmonetary items, such as equities classified as available-for-sale financial assets, are includedin equity.
Translation on
consolidation

The results and financial position of all the Group’s entities that have a functional currency

different from the Group’s presentation currency are translated on consolidation into theGroup’s presentation currency as follows:••

assets and liabilities at the closing spot exchange rates at the balance sheet date (closingrate); andincome and expense items at year-to-date sales-weighted average exchange rates(average rate) (to provide a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates).

Gains and losses arising from the following impacts of the translation of the financial
statements of foreign operations are recognized in “Other comprehensive income” (OCI):•••

the difference between the average rate and the closing rate on income and expense
items;

the difference between the closing rate of the previous year and the closing rate of thecurrent year on opening net investments; andthe difference between the transaction date rate and the closing rate on the change in net
investments during the year.

When a foreign entity is sold, applicable exchange differences are recycled to the income
statement and recognized as part of the gain or loss on sale. When a foreign entity is acquired,
any applicable goodwill and fair value adjustments are treated as assets and liabilities of theforeign entity and are translated at the closing rate.

The following exchange rates of principal currencies were applied for translation into Swiss
francs:in CHF

Average rates

Closing rates

2012

2011

2012

2011

1 CAD

0.939

0.891

0.919

0.918

1 GBP

1.484

1.417

1.488

1.453

1 EUR

100 JPY

100 RUB
1 USD

1.205
1.175
3.019
0.938

1.234
1.112
2.991
0.882

1.207
1.059
2.996
0.915

1.214
1.215
2.911
0.935

2012 Financial Report

Notes to the consolidated financial statements
Page 29(2.5) Intangible assets

Goodwill is considered to have an indefinite useful life and is accordingly not amortized.
Goodwill is tested annually for impairment and recognized at cost less any accumulated

impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on thedisposal of an entity include the carrying amount of any goodwill relating to the entity sold.

Other intangible assets consist mainly of database and application software, certain productdevelopment expenditure and manufacturing patents. These assets are recognized at historicalcost less accumulated amortization and accumulated impairment losses, if any. They areamortized on a straight-line basis over their estimated useful lives which are mostly periods of

between three and five years. Other periods may be used where specific contractual
conditions apply.

Development expenditure is recognized as an asset only when the prerequisite criteria under
IAS 38 Intangible Assets are met. In substance, these criteria include the condition that there
be probable future benefits that are directly attributable to the expenditure. In practice, only

expenditure on certain product development projects that are subjected to a stringent review

process meets this condition. Such assets are normally amortized on a straight-line basis overa three-year period. All other development expenditure is recognized directly as an expense
when incurred.

(2.6) Property, plant andequipment

Land is valued at historical cost less accumulated impairment losses, if any. Other property,
plant and equipment are recognized at historical cost less accumulated depreciation andaccumulated impairment losses, if any. Historical cost includes expenditure that is directly

attributable to the acquisition of the items. Historical cost may also include transfers fromequity of any gains / losses on qualifying cash flow hedges of foreign currency purchases oftangible fixed assets.

Subsequent costs are included in an asset’s carrying amount or recognized as a separate
asset, as appropriate, only when it is probable that future economic benefits associated with
the item will flow to the Group and the cost of the item can be measured reliably. All othersubsequent costs represent repairs and maintenance and are recognized in the income
statement in the period they are incurred.

Depreciation is calculated using the straight-line method to allocate the historical costs ofassets, less their residual values, over their estimated useful lives. The estimated useful lives ofdepreciable property, plant and equipment are:
Buildings

Plant and machinery

Other operating assets

30 to 40 years

5 to 15 years
2 to 7 years

The residual values and estimated useful lives of assets are reviewed and adjusted, if
appropriate, at each balance sheet date.

Gains and losses on disposal are determined by comparing disposal proceeds with carrying
amount. These are recognized in the income statement in the period of disposal.

(2.7)

Investment property

Investment property comprises land and / or buildings held to earn rentals or for capital
appreciation. Investment property is measured on the same basis as land and buildings
included in property, plant and equipment. The Group has elected not to take the option inNotes to the consolidated financial statements
Page 30

IAS 40 Investment Property to recognize its investment property at fair value. Investment

property is disclosed separately from property, plant and equipment in accordance with IAS 1
Presentation of Financial Statements.

(2.8) Impairment ofintangible assets,
property, plant andequipment, andinvestment property

Intangible assets that have indefinite useful lives are not subject to amortization but are tested

annually for impairment. Other intangible assets, property, plant and equipment, andinvestment property are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount may not be recoverable. An impairment loss isrecognized for the amount by which an 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 its
value in use. For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating units).

(2.9) Financial assets

For the purposes of identifying accounting policies applied, financial assets are classified into
the following four categories:

•
•
•
•

financial assets at fair value through profit or loss;
loans and receivables;

held-to-maturity investments; andavailable-for-sale financial assets.

The classification depends on the purpose for which the financial assets were acquired.
Management determines the classification of its financial assets at initial recognition and reevaluates this designation at each reporting date.
Financial assets at fairvalue through profit orloss

This category has two subcategories: financial assets held for trading and those designated atfair value through profit or loss at inception. A financial asset is classified in this category if
acquired principally for the purpose of selling in the short term or if so designated bymanagement. Derivatives are also categorized as held for trading unless they are designatedas hedges. Assets in this category are classified as current assets if they are either held for
trading or are expected to be realized within 12 months of the balance sheet date.
Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable paymentsthat are not quoted in an active market. They arise when the Group provides money, goods orservices directly to a debtor with no intention of trading the receivable. They are included incurrent assets, except for maturities greater than 12 months after the balance sheet date.
These are classified as non-current assets. Loans and receivables are included in trade andother receivables in the balance sheet.
Held-to-maturity
investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable
payments and fixed maturities that the Group’s management has the positive intention andability to hold to maturity. During the 2011 and 2012 years, the Group did not hold any

investments in this category.
Available-for-salefinancial assets

Available-for-sale financial assets are non-derivative financial assets that are either designatedin this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months ofthe balance sheet date. During the 2011 and 2012 years, the Group did not hold any

investments in this category.

2012 Financial Report

Notes to the consolidated financial statements
Page 31

Accounting policies
applied to financial
assets

The accounting policies applied to financial assets are as follows:
For all classes of financial assets, purchases and sales are recognized on trade date (the dateon which the Group commits to purchase or sell the asset). Financial assets at fair value
through profit or loss are initially recognized at fair value with applicable transaction costs
immediately recognized in the income statement. All other financial assets are initiallyrecognized at fair value plus transaction costs. Financial assets are derecognized when therights to receive cash flows from the assets have expired or have been transferred and theGroup has transferred substantially all risks and rewards of ownership.

Available-for-sale financial assets and financial assets at fair value through profit or loss aresubsequently recognized at fair value. Loans and receivables and held-to-maturity investments
are recognized at amortized cost determined using the effective interest method. Realized andunrealized gains and losses arising from changes in the fair value of the “financial assets at fairvalue through profit or loss” category are recognized in the income statement in the period

they arise. Unrealized gains and losses arising from changes in the fair value of non-monetary

securities classified as available-for-sale financial assets are recognizedin “Other

comprehensive income” (OCI). When these securities are sold or impaired, the accumulated

fair value adjustment is recycled to the income statement and recognized as part of gains andlosses from investment securities.

The fair values of quoted investments are based on current bid prices. If current bid prices are
not available, fair value is determined using other information such as that derived from themarket prices of other similar instruments, discounted cash flow analysis and option pricing
models refined to reflect the issuer’s specific circumstances.

The Group assesses at each balance sheet date whether there is objective evidence that afinancial asset or a group of financial assets is impaired. In the case of equity securities

classified as available-for-sale financial assets, a significant or prolonged decline in the fairvalue of the security below its cost is considered in determining whether the securities are

impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss

recognized in “Other comprehensive income” (OCI) (measured as the difference between theacquisition cost and the current fair value, less any impairment loss on that financial asset
previously recognized in profit or loss) is recycled to the income statement.

(2.10) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using
the standard cost method with variances capitalized at acquisition and production andrecognized in the income statement together with the standard cost of inventory at time ofsale. Cost determined under this method approximates cost determined under the weighted

average method. The cost of finished goods and work in progress comprises design costs, rawmaterials, direct labor, other direct costs and related production overheads (based on normal

operating capacity). Net realizable value is the estimated selling price in the ordinary course ofbusiness, less costs of completion and direct selling expenses.

(2.11) Trade receivables

Trade receivables (see loans and receivables category of financial assets in note 2.9 above) arerecognized initially at fair value and subsequently measured at amortized cost using theeffective interest method, less an adjustment for impairment. The amount of the adjustment for
impairment is based on both an individual assessment according to known circumstances of

specific trade receivables and a collective assessment using an aging calculation applied to all

trade receivables, excluding those individually assessed, that are “past due” more than 31days.

Notes to the consolidated financial statements
Page 32

When there is objective evidence that a trade receivable is determined to be uncollectible, it is

written off against the adjustment for impairment account. Examples of such objective
evidence are significant financial difficulties of debtors, probability that debtors will enter
bankruptcy or financial reorganization and default or delinquency in payments. Changes in theadjustment for impairment account as well as any subsequent recoveries of amounts
previously written off are recognized in the income statement.

(2.12) Cash and cash
equivalents(2.13) Share capital

Cash and cash equivalents include cash in hand, deposits held at call with banks and othershort-term highly liquid investments, such as high-quality tradable bonds.

Incremental costs directly attributable to the issue of new shares or options are shown inequity as a deduction, net of tax, from the proceeds. Where any group entity purchases theHilti Corporation’s equity share capital (treasury shares), the consideration paid, including any

directly attributable incremental costs (net of income taxes), is deducted from equity
attributable to the Group’s equity holders until the shares are cancelled, reissued or disposedof. Where such shares are subsequently sold or reissued, any consideration received, net ofany directly attributable incremental transaction costs and the related income tax effects, isincluded in equity attributable to the Group’s equity holders.

(2.14) Borrowings

Borrowings are recognized initially at fair value net of transaction costs incurred. Borrowings

are subsequently stated at amortized cost; any difference between the amount at initialrecognition and the redemption value is recognized in the income statement over the period of

the borrowings using the effective interest method. Borrowings are classified as current

liabilities unless the Group has an unconditional right to defer settlement of the liability for atleast 12 months after the balance sheet date.

Group capitalizes borrowing costs directly attributable to the acquisition, construction or
production of a qualifying asset as part of the cost of that asset.

(2.15) Income taxes
Current income taxes

Income taxes payable and refundable relating to the current or prior years are classified,Deferred income taxes

Deferred income taxes are provided in full, using the liability method, on temporary differences

respectively, as current income taxes payable and current income taxes receivable.

arising between the tax bases of assets and liabilities and their carrying amounts in the

consolidated financial statements. However, if the deferred income tax arises from initialrecognition of an asset or liability in a transaction other than a business combination that at thetime of the transaction affects neither accounting nor taxable profit or loss, it is not accountedfor. Deferred income tax is determined using tax rates that have been legally enacted or
substantially enacted by the balance sheet date and are expected to apply when the related

deferred income tax asset is realized or the deferred income tax liability is settled. Deferredincome tax assets are recognized to the extent that it is probable that future taxable profit will
be available against which the temporary differences can be utilized. Deferred income tax isprovided on temporary differences arising on investments in subsidiaries, associates and joint

2012 Financial Report

Notes to the consolidated financial statements
Page 33

ventures except where the timing of the reversal of a temporary difference is controlled by theGroup and it is probable that the temporary difference will not reverse in the foreseeable future.

(2.16) Employee benefits
Pension benefits

Group companies operate various pension schemes. The schemes are generally funded throughpayments to insurance companies or trustee-administered funds, determined by periodic (one tothree years) actuarial calculations. The Group has both defined contribution and defined benefit
plans.

A defined contribution plan is a pension plan under which the Group pays fixed contributions

into a fund and will have no legal or constructive obligation to pay further contributions if thefund cannot meet its employee service benefit obligations. A defined benefit plan is either apension plan that predefines the amount of pension benefit that an employee will receive on

retirement (usually dependent on one or more factors such as age, years of service andcompensation) or a pension plan under which the Group has a legal or constructive obligation
to pay further contributions if the fund cannot meet its employee service benefit obligations.

For defined contribution plans, the Group pays contributions to publicly or privately
administered pension insurance plans on a mandatory, contractual or voluntary basis. The
Group has no further payment obligations once the contributions have been paid. The
contributions are recognized as employee benefit expense when they are due. Prepaid
contributions are recognized as an asset to the extent that a cash refund or a reduction in the

future payments is available. For defined benefit plans, the liability recognized in the balance

sheet is the present value of the defined benefit obligation at the balance sheet date less thefair value of plan assets. The defined benefit obligation is calculated at least every three years
by independent actuaries using the projected unit credit method. The present value of thedefined benefit obligation is determined by discounting the estimated future cash outflows
using interest rates of high-quality corporate bonds that are denominated in the currency inwhich the benefits will be paid, and that have terms to maturity approximating the terms of therelated pension liability.

Actuarial gains and losses arising from experience adjustments and changes in actuarial

assumptions are recognized in “Other comprehensive income” (OCI) in the period they arise
through the consolidated statement of comprehensive income.
Termination benefits

Termination benefits are payable when employment is terminated before the normal retirement

date, or whenever an employee accepts voluntary redundancy in exchange for these benefits.
The Group recognizes termination benefits when it is demonstrably committed to:

•
•
•
•

terminating the employment of current employees according to a detailed formal plan
without possibility of withdrawal;

providing termination benefits as a result of an offer made to encourage voluntary
redundancy; orproviding termination benefits due to a requirement under law.

Where a detailed formal plan exists, the liability is recognized as part of restructuring
obligations in provisions (see note 2.17).

Long-service benefits

Some group entities provide jubilee and other similar long-service benefits. The entitlement tothese benefits is usually conditional on the completion of a minimum service period. The

expected costs of these benefits are accrued over the period of employment using an
accounting methodology similar to that used for defined benefit pension plans.

Notes to the consolidated financial statements
Page 34

Profit sharing andbonus plans(2.17) Provisions

The Group recognizes a liability and an expense for bonuses and profit sharing, based onchanges in key financial results, such as sales, operating profit and net income, as specified in
employment contracts.

The Group recognizes a provision when:•••

the Group has a present 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; andthe amount of the obligation can be reliably estimated.

Major types of provisions recognized by the Group include provisions for warranty service
costs, restructuring costs, and product liability and legal claims. Provisions for restructuringcosts mostly comprise expected lease termination penalties and employee termination benefit

payments. Provisions are not recognized for future operating losses. Where provisions relate toa number of similar obligations, such as provisions for warranty service costs, the likelihoodthat an outflow will be required in settlement is determined by considering the class of
obligations as a whole. A provision is then recognized even if the likelihood of an outflow withrespect to any one item included in the same class of obligations may be small.

(2.18) Trade and otherpayables(2.19) Revenue recognition

Trade and other payables are recognized initially at fair value and subsequently measured atamortized cost using the effective interest method.

Revenue from the sale of goods is recognized in the income statement when the significant
risks and rewards of ownership have been transferred to the buyer, the revenue can bemeasured reliably and the payment can be reasonably assured. Revenue from services
rendered is recognized by reference to the stage of completion of the transaction at thebalance sheet date. Revenue from sales of goods under finance leases is recognized in the
periods the leases commence and the applicable interest income is recognized on an actuarial

basis over the lease terms. All revenues from sales of goods and services rendered arerecognized at normal selling price less applicable trade discounts and rebates. Revenue fromoperating leases is recognized on a straight-line basis over the lease terms.

(2.20) Dividend distributions

Dividend distributions to the Hilti Corporation’s shareholders are recognized as liabilities in theGroup’s financial statements in the periods in which the dividends are approved by the
Corporation’s shareholders.

(2.21) Financial risk
management

The Group’s activities expose it to a variety of financial risks: market risk (including currency

risk, interest rate risk and other price risk), credit risk and liquidity risk. The Group’s overall risk
management program focuses on the unpredictability of financial markets and seeks tominimize potential adverse effects on the Group’s financial performance. The Group uses
derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by a central treasury department (Corporate Treasury) underpolicies approved by the Board of Directors. Corporate Treasury identifies, evaluates andhedges certain financial risks in close co-operation with the Group’s operating units. The Board

provides written principles for overall risk management, as well as written policies covering

specific areas, such as the use of derivative and non-derivative financial instruments,
managing credit risk and investing excess liquidity.

2012 Financial Report

Notes to the consolidated financial statements
Page 35

Market risk

Currency risk

The Group is exposed to risk arising from various currency exposures, primarily with respect tothe Euro and the US dollar. Currency risk arises from future commercial transactions,recognized assets and liabilities and net investments in foreign operations, when futurecommercial transactions and recognized assets and liabilities are denominated in a currency
that is not the entity’s functional currency.

Currency risk arising from future operating transactions (sales and purchases of goods andservices) and recognized assets and liabilities is managed by Corporate Treasury using

hedging instruments, primarily forward contracts, cross-currency swaps and currency options.

Corporate Treasury’s risk management practice is to hedge between 50% and 100% of theGroup’s anticipated foreign exchange (FX) net cash in- or outflows for the subsequent 12
months. For hedge accounting purposes, forward contracts are designated against therelevant amounts of projected inter-company sales by the parent company and 100% (2011:100%) of projected sales qualify as “highly probable” forecast transactions.

The four categories of recognized financial assets and liabilities having the largest currencytranslation risk exposure are trade and other receivables, cash and cash equivalents, trade andother payables and bonds. The currency denominations at the balance sheet date of thecarrying amounts of these items are shown in notes 14, 18, 23 and 25 respectively. These

items represent the largest portions of the balances underlying the Group’s investments inforeign operations.

Currency exposures arising from open balances with third parties and / or group entities intrade and other receivables, trade and other payables, and bonds are reduced through thenatural hedging (currency matching) of these items as well as managed using hedging

instruments. Currency exposures arising from cash and cash equivalents are reduced bylimiting non-Swiss franc-denominated investments to the main currencies of the operative
business of the Group (primarily Euro and US dollar) and by limiting the proportions ofinvestments in these currencies.

At December 31, if the Swiss franc had strengthened / weakened by 10% against the US dollar/ Euro with all other variables held constant, net income for the year would have been affected
as follows (financial amounts in CHF million):
Net income

Swiss franc

strengthened (+10%)
2012

2011

USD

(2.8)

EUR

(0.2)

Swiss franc

weakened (-10%)
2012

2011

(0.6)

2.8

0.6

(3.3)

0.2

3.3

These effects result from the translation of trade receivables, loans, cash and cash equivalents

and derivative contracts held in foreign currencies.

Notes to the consolidated financial statements
Page 36

At December 31, if the Swiss franc had strengthened / weakened by 10% against the US dollar/ Euro with all other variables held constant, “Other comprehensive income” (OCI) would havebeen affected as follows (financial amounts in CHF million):

OCI

Swiss franc

strengthened (+10%)
2012

USD

(1.7)

EUR

(8.0)

2011

Swiss franc

weakened (-10%)
2012

(1.4)

2011

1.7

(20.8)

1.4

8.0

20.8

These effects result from (i) the translation of foreign currency long-term inter-company loans

treated as equity and (ii) changes in the values (due to the respective Swiss franc movements)of CHF derivative contracts held to hedge foreign currency risk. However, these effects
exclude the impacts of exchange differences arising on group entity financial instruments thatare covered by the retranslation adjustments of net investments in foreign operations (see notethth

2.4, 4 and 5 bullet points under sub-heading “Translation on Consolidation”).
Interest rate risk

The Group has significant investments in interest-bearing assets, mainly deposits, andsignificant long-term borrowings, mostly consisting of bonds the Group itself has issued.
Interest-bearing assets and borrowings subject to variable rates or held for trading expose theGroup to cash flow interest rate risk. Interest-bearing assets and borrowings subject to fixed

rates and not held for trading expose the Group to fair value interest rate risk.

Virtually all the Group’s interest-bearing assets are subject to variable rates or are reported atfair value through profit or loss because they are held for trading. All the Group’s bondliabilities are reported at amortized cost. The interest-bearing assets are denominated primarily

in Swiss franc and Euro investments (see note 18) and the bond liabilities are effectively

denominated in a combination of Swiss franc and Euro. Interest rate risk arising from long-term

financing (banking and capital market) liabilities is managed by Corporate Treasury by using
hedging instruments, primarily interest rate swaps. Corporate Treasury’s risk management
practice is to hedge between 40% and 60% of the Group’s relevant interest exposure.

Based on the December 31, levels of borrowings subject to variable rates and interest-bearing
assets subject to variable rates or held for trading, an increase / decrease of ten basis points

would have affected net income as follows (financial amounts in CHF million):
Net income

All currencies

Ten basis point

Ten basis point

2012

2011

2012

2011

0.9

0.6

(0.9)

(0.6)

increasedecrease

Separate simulations of the impact of interest rate changes on each of the Swiss franc, Euroand US dollar investment holdings have not been completed since an increase / decrease often basis points is considered reasonably possible for each of the three currencies.

2012 Financial Report

Notes to the consolidated financial statements
Page 37

Due to interest rate derivatives, “Other comprehensive income” (OCI) would have been
impacted as follows (financial amounts in CHF million):

OCI

USD

Ten basis point

Ten basis point

2012

2011

2012

2011

–

0.1

–

(0.1)

increasedecrease

Other price risk

The Group is exposed to some securities price risk because of investments held by the Group
which are at fair value through profit or loss. However, the impact of adverse price changes

would be minor since the Group’s investments in equities are relatively small. At the balance

sheet date, the carrying value of such investments is CHF 16.4 million (2011: CHF 15.3 million).
Accordingly, no sensitivity analysis has been undertaken.
Credit risk

Credit risk is managed on a group basis. Virtually all credit risk arises from cash and cash

equivalents (which primarily consist of demand deposits with first-class financial institutions)and from trade receivables (which represent credit exposures to customers).

The Group has significant concentrations of credit risk arising from its investments in cash andcash equivalents. These concentrations relate only to demand deposits with banking

institutions. Relevant credit information about the largest banking institution counterparties atthe balance sheet date is given in note 18. A minimum credit rating of “A” applies to all

counterparty institutions.

For trade receivables, the Group has policies in place to ensure that credit sales of products

are made to customers with appropriate credit histories. In addition, an active credit
management focus is maintained in all the Group’s market organizations to ensure that the

impact of credit risk is minimized. Details of the impairment estimates of trade receivables are
given in note 14. The Group has no significant concentrations of corresponding credit risk.

Liquidity risk

Cash flow forecasting is performed in the operating entities of the Group and aggregated by
Corporate Treasury. Corporate Treasury monitors rolling forecasts of the Group’s liquidity
requirements to ensure it has sufficient cash to meet operational needs while maintaining

sufficient headroom on its undrawn established borrowing facilities at all times so that theGroup does not breach borrowing limits or covenants (where applicable) on any of its
borrowing facilities. Such forecasting takes into consideration the Group’s debt financing
plans, covenant compliance, compliance with internal balance sheet ratio targets and, if
applicable, external regulatory or legal requirements – for example currency restrictions.

Surplus cash held by the operating entities over and above balance required for working

capital management is transferred to Corporate Treasury. Corporate Treasury invests surplus

Notes to the consolidated financial statements
Page 38

cash in interest-bearing current accounts and time deposits, choosing instruments withappropriate maturities or sufficient liquidity to provide sufficient headroom as determined by

the above-mentioned forecasts. At the reporting date, the Group held liquid funds of CHF
1,302.7 million (2011: CHF 1,062.5 million) that are expected to readily generate cash inflows

for managing liquidity risk.

The table below analyses the Group’s non-derivative financial liabilities into relevant maturity

groupings based on the periods from the balance sheet date to the contractual maturity date.
The amounts disclosed in the table are the contractual undiscounted cash flows including
future interest payments (financial amounts in CHF million):

Less than 1 Between 1
year
At December 31, 2012

Borrowings

356.3

200.9

50.8

315.4

0.8

6.8

13.2

Less than 1 Between 1

Between 2

0.2

Trade and other payables(excluding finance lease liabilities)

year

Borrowings

Finance lease liabilities

Trade and other payables(excluding finance lease liabilities)

Over 5

316.4

Finance lease liabilities

At December 31, 2011

Between 2

and 2 years and 5 years years

0.7

0.5

–

Over 5and 2 years and 5 years years

445.0

200.9

357.4

–

277.4

6.4

4.1

13.3

0.6

0.6

0.3

–

All of the non-trading Group’s derivative financial instruments are in hedge relationships andare disclosed in note 16.

The Group has an outstanding cross currency swap which is due in April 2014. This grosssettled derivative financial instrument generates undiscounted contractual cash inflows of CHF

98.9 million (2011: CHF 229.7 million) and undiscounted contractual cash outflows of CHF 79.6
million (2011: CHF 190.1 million).

(2.22) Capital structure risk
management

The Group’s primary objective when managing capital is to add sustainable value for investors

while ensuring the independence of the Group. In order to maintain or adjust the capital
structure, the Group maintains a flexible dividend policy within the limits of its overall financepolicies.

The Group monitors capital on the basis of the equity ratio measured as equity in percentage

of total equity and liabilities. The Group views a high equity ratio as the basis for ensuring
security, capability of taking risk, independence, flexibility and creditworthiness. The Group’s

objective is to maintain a sufficiently high equity ratio primarily to ensure independence fromthe influence of external creditors as well as to maintain a high external credit rating to help
minimize the cost of debt if and when further debt is issued.

2012 Financial Report

Notes to the consolidated financial statements
Page 39

The Group’s policy is to maintain a minimum equity ratio of 50% on a mid-term basis.
Following is equity ratio information at the balance sheet date (financial amounts in CHF
million):Total equity

Total equity and liabilities

2012

2011

2,296.6

2,211.9

50.4

50.6

4,559.3

Total equity in % Total equity and liabilities

4,367.8

The Group’s credit rating as assessed by the Credit Suisse Banking Group during 2012 on thebasis of the Group’s 2011 Financial Report is “High A stable” (2011: “High A stable”) (seeCredit Suisse: Swiss Corporate Credit Handbook August 2012).

(2.23) Fair value estimation

IFRS 7 Financial Instruments – Disclosures requires disclosure of fair value measurements bylevel using the following fair value measurement hierarchy:•••

Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

Inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

Inputs for the asset or liability that are not based on observable market data (that is,unobservable inputs) (level 3).

The following table presents the Group’s assets and liabilities that are measured at fair value(financial amounts in CHF million):
Level 1

Level 2

Level 3

Totalbalance

At December 31, 2012
AssetsFinancial assets at fair value
through profit and loss

Derivatives used for hedging

35.8
–

28.2

–

–

35.8

–

4.3

–

4.3

–

28.2

Liabilities

Derivatives used for hedging

Level 1

Level 2

Level 3

Totalbalance

At December 31, 2011
AssetsFinancial assets at fair value through profit
and loss

Derivatives used for hedging

26.4
–

51.7

–

–

26.4

–

15.4

–

15.4

–

51.7

Liabilities

Derivatives used for hedging

Notes to the consolidated financial statements
Page 40

The fair value of financial instruments traded in active markets is based on quoted market
prices at the balance sheet date. A market is regarded as active if quoted prices are readily

and regularly available from an exchange, dealer, broker, industry group, pricing service orregulatory agency, and those prices represent actual and regularly occurring market

transactions on an arm’s-length basis. The quoted market price used for financial assets heldby the Group is the current bid price. These instruments are included in level 1.

The fair value of financial instruments that are not traded in an active market (for example,

over-the-counter derivatives) is determined by using valuation techniques. These valuation
techniques maximize the use of observable market data where it is available and rely as little

as possible on entity-specific estimates. If all significant inputs required to determine the fairvalue of an instrument are observable, the instrument is included in level 2.

If one or more of the significant inputs is not based on observable market data, the instrument
is included in level 3. Specific factors relevant to the valuation of financial instruments include:•••

Quoted market prices or dealer quotes for similar instruments.

The fair value of interest rate swaps is calculated as the present value of the estimatedfuture cash flows based on observable yield curves.

The fair value of forward foreign exchange contracts is determined using forward

exchange rates at the balance sheet date, with the resulting value discounted back to•present value.

Other techniques, such as discounted cash flow analysis, are used to determine fair value
for the remaining financial instruments.

The fair value of investment property is determined as follows: The land component isdetermined by appraisal based on comparable property land values in the corresponding

areas. The buildings component is determined as the estimated depreciated replacement costof the applicable buildings. A valuation has not been undertaken by an independent valuer
since total investment property is insignificant.

The carrying values of trade receivables and payables are assumed to approximate their fairvalues. The carrying value of trade receivables is the total balance that is contractually

receivable less the applicable impairment adjustment (see loans and receivables category offinancial assets in note 2.9 above). The fair value of financial liabilities for disclosure purposes

is estimated by discounting the future contractual cash flows at the current market interest ratethat is available to the Group for similar financial instruments.

(2.24) Accounting forderivative financial
instruments andhedging activities

Derivatives are initially recognized at fair value on the date a derivative contract is entered into
and are subsequently remeasured at their fair value. The method of recognizing the resulting

gain or loss depends on whether the derivative is designated as a hedging instrument, and if
so, the nature of the item being hedged. The Group designates certain derivatives as one of:•••hedges of the fair value of recognized assets or liabilities or a firm commitment (fair value
hedges);hedges of highly probable forecast transactions (cash flow hedges); andhedges of net investments in foreign operations (net investment hedges).

At the inception of the transaction the Group documents the relationship between hedging

instruments and hedged items, as well as its risk management objective and strategy forundertaking various hedge transactions. The Group also documents its assessment, both athedge inception and at each external reporting date, of whether the derivatives that are used in
hedging transactions are highly effective in offsetting changes in fair values or cash flows ofhedged items.

2012 Financial Report

Notes to the consolidated financial statements
Page 41

Fair value hedges

Changes in the fair value of derivatives that are designated and qualify as fair value hedges arerecognized in the income statement, together with any changes in the fair value of the hedged
asset or liability that are attributable to the hedged risk.

Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify

as cash flow hedges are recognized in “Other comprehensive income” (OCI). The gain or loss
relating to the ineffective portion is recognized immediately in the income statement. Amounts

recognized in the “cash flow hedging reserve” are recycled to the income statement in the

periods when the hedged item will affect profit or loss (for example, when the hedged forecast
sale takes place).

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria forhedge accounting, any cumulative gain or loss recognized in equity at that time remains inequity and is recycled to the income statement when the forecast transaction is ultimately

recognized in the income statement. However, when a forecast transaction is no longer
expected to occur, the applicable cumulative gain or loss recognized in the “cash flow hedging
reserve” is immediately recycled to the income statement.
Net investment hedges

Hedges of net investments in foreign operations are accounted for similarly to cash flow
hedges. Any gain or loss on the hedging instrument relating to the effective portion of thehedge is recognized in the “cash flow hedging reserve”. The gain or loss relating to theineffective portion is recognized immediately in the income statement. Gains and losses

recognized in the “cash flow hedging reserve” are recycled to the income statement when theforeign operation is disposed of.
Derivatives that do not
qualify for hedge
accounting

Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value ofany derivative instruments that do not qualify for hedge accounting are recognized immediately
in the income statement.

The fair values of various derivative instruments used for hedging purposes are disclosed innote 16.

(2.25) Changes in accounting
policies

There have been no changes in accounting policies in the 2012 consolidated financial

statements from those adopted in 2011.

Notes to the consolidated financial statements
Page 42(3)

Critical accounting estimates and judgments

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal
the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.
(3.1)

Trade receivables

Losses on trade receivables are recognized when they are incurred, which requires management’s best estimate of probable losses. Suchestimate requires consideration of historical loss experience, adjusted for current conditions, and judgments about the probable effects ofrelevant observable data, including financial health of specific customers and market sectors or collateral values. Detailed information
concerning trade receivables is given in note 14.
(3.2) Inventories

Write-downs of inventories are recognized for particular items when net realizable value falls below cost. The determination of net

realizable value is made using a valuation process based on the aging of items with aging parameters set based on estimates of historicalloss experience. This process assumes a linear realizable value reduction based on age which might not always be reflective of market
behavior. Detailed information concerning inventories is given in note 13.

(3.3) Defined benefit plans

The expense incurred under the defined benefit retirement plans is based upon statistical and actuarial calculations, and is impacted byassumptions on discount rates used to arrive at the present value of future pension liabilities, expected returns that will be made on
existing pension assets, future salary increases as well as future pension increases. Furthermore, the independent actuaries use

statistically based assumptions covering future withdrawals of participants from the plan and estimates on life expectancy. The actuarial

assumptions used may differ materially from actual results due to changes in market and economic conditions, higher or lower withdrawal
rates or longer or shorter life spans of participants. These differences could significantly impact the amount of pension income or expense
recognized in future periods. A change of the discount rate of +0.25% / -0.25% has an impact of CHF (47.6) million / CHF 50.6 million on

the defined benefit obligation. Detailed information concerning the defined benefit plans is given in note 22.
(3.4) Income taxes

The measurement of current and deferred income tax liabilities or assets is dependent on the interpretation of income tax laws andregulations in the respective countries. Additionally, in tax audits the judgment made by management and tax consultants is finallychecked and adapted. As a consequence deviations between the initial assumptions and the final determination of income taxes maylead to material changes to current or deferred income tax expense of the period in which income tax is definite. Furthermore, therecognition of deferred tax assets on tax loss carry forwards depends on the probability of future taxable profits of group entities.
Several internal and external factors are used in the estimation of such future profits.
(3.5) Other critical accounting estimates and judgments

In the ordinary course of business, the company is or may be involved in lawsuits, claims, investigations and proceedings, including
product liability, commercial, environmental, health and safety matters, etc. The company is currently not aware of any such matter thateither individually or in the aggregate could likely have a material adverse effect on the company’s future financial position or results ofoperations.

2012 Financial Report

Notes to the consolidated financial statements
Page 43(4)

Early adoption of IFRS requirements

During 2012, the Group has not early adopted the requirements of the following IFRS standards, which at December 31, 2012, havebeen issued but are not effective for the 2012 Financial Statements:
Standard /Amendment toStandard

IAS 1: Financial
Statement

presentation
IAS 19: Employee
Benefits

Effective
date

July 1,
2012

January
1, 2013

Content

Importance for the Group

Main change resulting from these amendments is to No significant impact expected.
require classifications of items of "Other comprehensive
income" (OCI) based on whether they are potentiallysubsequently recyclable to profit or loss.

These amendments eliminate the corridor approach, The Group will adopt the revised IAS

calculate finance costs on a net funding basis and 19 as of January 1, 2013, with related
consider risk sharing elements between employer and retrospective application in 2012.
employee in the determination of the DBO. In addition Based on the current knowledge, thethere are changed disclosure requirements.

financial impacts of its retrospective

application in 2012 are expected tobe approximately as follows:• Net income: reduction of CHF 8
million• Equity: increase of CHF 35 million
as of December 31, 2012

The

resultdisclosure
in

some

provision details.

requirements
reclasses

IAS 27 (revised 2011): January

The revised IAS 27 includes dispositions on separate No significant impact expected.

statements

disposition has been included in the new IFRS 10.

Separate Financial

1, 2013

IAS 28 (revised 2011): January
Associates and joint

1, 2013IFRS 1: First time

January

venturesadoption on

government loans
IFRS 7: Financial
Instruments

Disclosure on asset

and liability offsetting
IFRS 10:

Consolidated

Financial Statements

1, 2013January
1, 2013January
1, 2013will

withinfinancial statements that are left after the control

IAS 28 (revised 2011) includes the requirements for joint No significant impact expected.
ventures, as well as associates, to be equity accounted
following the issue of IFRS 11.

This amendment addresses how first time adopter would Not relevant.
account for a government loan with a below-market rateof interest when transitioning to IFRS.

The amendment includes new disclosure requirements in No significant impact expected.
order to facilitate the comparison between financial
statements prepared in accordance with IFRS and US
GAAP.

The standard establishes principles for the presentation No significant impact expected.
and preparation of consolidated financial statements

when an entity controls one or more other entities.
Basically the standard compromises IAS 27 Consolidated

and Financial Statements and SIC-12 Consolidated
IFRS 11: Joint
arrangements

January
1, 2013

Special Purpose Entities.

The standard requires the following distinction:

The Group has assessed IFRS 11’s

assets, liabilities, revenues and expenses

ventures. The impact on total assets• Joint operations which lead to partial recognition of• Joint ventures which are accounted with the equity
methodimpact on joint operations and joint& liabilities, as well as on the

consolidated income statement isimmaterial.

Notes to the consolidated financial statements
Page 44

Standard /Amendment toStandard

IFRS 12: Disclosureof interest in otherentites

Effective
date

January
1, 2013IFRS 13: Fair value

January

IFRIC 20: Stripping

Januarymeasurement

costs in the

production phase ofa surface mine

IAS 32: Financial
instrument

presentation

IFRS 9: Financial
instruments

1, 2013

1, 2013January
1, 2014January
1, 2015

Content

Importance for the GroupIFRS 12 requires the disclosure for all forms of interest in No significant impact expected.
other entities, including joint arrangements, associates,

special purpose vehicles and other off balance sheet
vehicles.

The amendment provides guidance on how to determine No significant impact expected.
fair value measurements and requires disclosures about
fair value measurements.

The interpretation sets out the application for overburden Not relevant.
waste removal (stripping) cost in the production phase ofa surface mine.

These

amendments

clarifysomerequirements

for No significant impact expected.

offsetting financial assets and financial liabilities in thebalances sheet and their presentation.

IFRS 9 is the first standard issued as part of a wider The Group has not yet assessed

project to replace IAS 39. IFRS 9 retains but simplifies IFRS 9’s full impact on classification

the mixed measurement model and establishes two and measurement of financial assets.
primary measurement categories for financial assets: However, it is expected that theamortized cost and fair value. The guidance in IAS 39 on adoption will not have a significant
impairment of financial assets and hedge accounting impact.
continues to apply.

(5)

Changes in the scope of consolidation

There have been no changes in the scope of consolidation in 2012.

(6)

Financial assets and liabilities (financial amounts in CHF million)

Financial assets and liabilities listed according to the measurement categories identified under IAS 39 Financial Instruments:
Recognition and Measurement and the corresponding balance sheet items are as follows:

IAS 39 measurement category
Financial assets

Financial assets at fair value throughprofit or loss (FVTPL)

Held-to-maturity investments (HTM)
Loans and receivables (LR)

Available-for-sale financial assets (AFS)

Corresponding balance sheet item(s)Financial assets at fair value through profit or loss,
Derivatives used for hedging

Cash and cash equivalents, Other financial investments,
Trade and other receivables

Total financial assets

2012

2011

64.0

78.1

2,566.5

2,321.7

2,630.5

2,399.8

4.3

15.4

1,203.6

1,244.2

–

–

–

–

Financial liabilities

Financial liabilities at fair value
through profit or loss (FVTPL)

Derivatives used for hedging

amortized cost

payables, Short-term bank borrowings

Financial liabilities measured at
Total financial liabilities

Bonds, Long-term bank borrowings, Trade and other

1,207.9

1,259.6

2012 Financial Report

Notes to the consolidated financial statements
Page 45(7)

Intangible assets (financial amounts in CHF million)
Goodwill

Cost 2012
Opening balance at January 1, 2012

Currency translation adjustment

Change in scope of consolidation
Additions

Disposals

Other transfers
Closing balance at December 31, 2012
Accumulated amortization 2012
Opening balance at January 1, 2012

88.5

(1.9)
–

Develop-

Other

Total

ment costs

intangible

intangible

assetsassets

470.0
–

(1.1)

–

–

56.8

–

(0.1)

–

194.0

752.5

(3.0)

–

–

5.1

61.9

0.1

–

(2.1)

(3.2)

86.6

524.6

194.9

806.1

–

(248.5)(109.6)(358.1)

–

–

–

–

Currency translation adjustment–

Additions–(51.9)(25.1)(77.0)

Disposals

–

0.2

3.1

3.3

Closing balance at December 31, 2012–

(302.0)(132.8)(434.8)Net book values at December 31, 2012

86.6

222.6

62.1

371.3

Change in scope of consolidation
Impairment losses
Other transfers––

Goodwill

Cost 2011
Opening balance at January 1, 2011

Currency translation adjustment

Change in scope of consolidation

–

0.7

(1.9)
–

(3.7)
–

Develop-

Other

Total

ment costs

intangible

intangible

assetsassets

448.6

160.9

697.7

–

–

5.2

5.2

57.3

29.7

87.0

(0.4)

0.4

0.3
–

Other transfers–

Closing balance at December 31, 2011

(1.8)

0.7

88.2

Additions

Disposals

–

(5.3)

–

–

(35.5)

88.5

470.0

(0.3)

–

(1.9)

(37.4)

194.0

752.5

–

Notes to the consolidated financial statements
Page 46

Accumulated amortization 2011
Opening balance at January 1, 2011–

(217.3)(83.6)(300.9)

–

–

–

–

Currency translation adjustment–

Additions–(63.1)(28.1)(91.2)

Disposals

–

35.5

1.9

37.4

Closing balance at December 31, 2011–(248.5)(109.6)(358.1)

Net book values at December 31, 2011

88.5

221.5

84.4

394.4

Change in scope of consolidation
Impairment losses––

Other transfers

–

(3.6)
–

0.2

0.2

–
–

(3.6)
–

Of the intangible assets, only development costs are internally generated; all other intangible assets are acquired. Other intangible

assets consist mainly of patents, brands, customer lists and database/application software licenses. Additions to accumulated
amortization and impairment losses are included in depreciation and amortization (see note 32).

The goodwill of CHF 86.6 million (2011: CHF 88.5 million) arises from the acquisition of Unirac Inc. in 2010 and, for impairment testing
purposes, is solely allocated to the Group’s worldwide solar business as the cash-generating unit. To test for possible impairment of
goodwill, the discounted value of the estimated future cash flows of the cash-generating unit (its “value in use”) is compared with its

carrying amount. The estimated future cash flows are based on a three-year forecast period – 2013 to 2015 – and a growth rate

assumption of 2.0% (2011: 2.0%) for the terminal value beyond 2015 (2011: beyond 2015). The value in use is based on a discountrate of 10.7% before tax (2011: 12.8%). Based on the above inputs and assumptions, the cash-generating unit’s value in use exceeds

its carrying amount and this status would not change even if the growth rate assumption for the terminal value was reduced to zeroand the discount rate before tax was increased by one percent.

(8)

Property, plant and equipment (financial amounts in CHF million)

Cost 2012Land and

Plant and

Other

AssetsTotalbuildings

machinery

operatingunder con-tangible

assetsstructionassets

751.9

747.7

530.0

41.0

2,070.6

Currency translation adjustment

(6.6)

(1.1)

(3.2)

0.5

(10.4)

Additions

11.2

29.0

37.8

47.9

125.9

Transfers to investment properties

–

–

–

–

Opening balance at January 1, 2012

Change in scope of consolidation
Disposals

Other transfers

Closing balance at December 31, 2012

–

–

–

–

(2.2)

(13.7)(44.5)

9.9

16.3

9.8

(36.0)

764.2

778.2

529.9

53.4

–

–

–

(60.4)–

2,125.7

2012 Financial Report

Notes to the consolidated financial statements
Page 47

Accumulated depreciation 2012
Opening balance at January 1, 2012

Currency translation adjustment

Change in scope of consolidation(366.4)(552.6)(405.2)

–

–

–

3.0

1.1

–

2.7

–
–

(114.2)54.4–

Additions(19.7)(44.5)(50.0)

Disposals

2.0

13.1

39.3

–

Other transfers

–

–

–

–

Impairment losses
Transfers to investment properties

–
–

–

–

–

(381.1)(582.9)(413.2)Net book values at December 31, 2012

383.1

195.3

116.7

Opening balance at January 1, 2011

Currency translation adjustment
Change in scope of consolidation
Additions

Disposals

Transfers to investment properties
Other transfers

Closing balance at December 31, 2011
Accumulated depreciation 2011
Opening balance at January 1, 2011

Currency translation adjustment

Change in scope of consolidation

–
–

–

–
–

–

(1,377.2)

53.4

748.5

Plant and

Other

AssetsTotalbuildings

machinery

operatingunder con-tangible

assetsstructionassets

774.5

(8.3)
2.9
7.9

(11.7)(23.0)
9.6

724.4

(9.3)
0.6

34.5

(15.9)
–

13.4

536.8

(10.7)
0.2(25.8)

7.0(526.9)(407.8)–(1,310.2)(114.3)

–

69.5

2.7

–

20.6

–

(1,324.2)

41.0

746.4

14.2

45.2

Transfers to investment properties

17.9

–

2,070.6

–

10.1

(0.4)

0.9

41.0

–

Disposals–(29.1)(76.7)–(51.7)––

6.9(44.6)

(3.7)

3.7

–

(375.5)–(30.1)(2.8)(49.1)

530.0

–

–

2,075.8

122.8

747.7

5.1

(1.8)

31.8

751.9

2.8

40.1

48.6

(18.0)

Other transfers

6.8Land andAdditions

Impairment losses––

Closing balance at December 31, 2012

Cost 2011(1,324.2)

–

–

–

(0.5)

Closing balance at December 31, 2011(366.4)(552.6)(405.2)Net book values at December 31, 2011

385.5

195.1

124.8

–

14.8
–

(3.7)

(0.9)

Other operating assets consist mainly of office equipment, testing instruments, leasehold improvements and vehicles.
Capital expenditure, shown as additions to cost, relates primarily to manufacturing facilities enhancements and extensions of salesorganizations. Additions to accumulated depreciation are included in depreciation and amortization (see note 32).

Assets held under finance leases are included in plant and machinery and other operating assets at a net book value of CHF 3.2 million(2011: CHF 2.5 million). The liabilities arising from finance leases are detailed in note 25. Land and buildings with a book value of CHF

0.2 million (2011: CHF 0.2 million) serve as security for other payables (see note 25) with the total amount of CHF 2.1 million (2011:
CHF 4.0 million).

Notes to the consolidated financial statements
Page 48(9)

Investment property (financial amounts in CHF million)

Cost
Opening balance at January 1

Currency translation adjustment

Change in scope of consolidation
Additions

2012

2011

33.0

7.2

–

–

–
–

–
–

Disposals

(6.0)
–

25.8

Closing balance at December 31

27.0

33.0

(26.2)

(2.6)

–

–

Transfers

Accumulated depreciation
Opening balance at January 1

Currency translation adjustment

Change in scope of consolidation–

Additions(0.2)

Disposals

2.7

Impairment losses
Transfers

(1.1)

–

–

(0.6)
(2.4)
–

–

Closing balance at December 31(24.8)(20.6)Net book values at December 31

2.2

6.8

Fair value of investment property at December 31

5.6

19.3

(26.2)

The fair value of investment property is determined as at December 31. There are no restrictions on the realizability of investment
property.

The following amounts related to investment property have been recognized in the income statement:
2012
Rental income

Direct operating expenses arising from investment properties that generated rental income

Direct operating expenses arising from investment properties that did not generate rental income(10)

Investments in associates and joint ventures (financial amounts in CHF million)

The Group has ownership interests in the following joint ventures:

•
•
•
•

HILLOS GmbH, Jena (50% participation)

Panasonic Electric Works Power Tools (Shanghai) Co. Ltd., Shanghai (49% participation)
Racing Point Co. Ltd., Taipei (49% participation)

Intelligent Construction Tools LLC, Delaware (50% participation)

0.1

(0.1)
–

2011
0.1

(0.3)
(0.3)

2012 Financial Report

Notes to the consolidated financial statements
Page 49

Details concerning the investments are as follows:
2012

2011

12.1

10.9

Currency translation adjustment

(0.2)

(1.2)

Closing balance at December 31

13.3

12.1

Carrying value of joint ventures
Opening balance at January 1

Additions–Share of profit / (loss)

1.4

–

2.4

The following table summarises the total assets, liabilities, income and expenses of the joint ventures the group has an interest in. This
information is based on positions in the financial statements of the joint ventures for the relevant year:

2012

2011

Current assets

42.0

40.0

Current liabilities

11.8

13.7

Equity28.2

26.0

Expense(97.4)

Summary of financial information on joint ventures

Non-current assets

6.1

Non-current liabilities

8.1

Income

(11)

99.8

7.7
8.0

110.2

(107.2)

Deferred income taxes (financial amounts in CHF million)

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current
tax liabilities and when the deferred income taxes relate to the same fiscal authority. The amounts are as follows:
AssetsRecovery of deferred tax balances

2012

Liabilities

Net assets Assets

2011

Liabilities

Net assets

More than 1 year

163.7

(142.4)

21.3

151.4

(138.4)13.0

Less than 1 year

101.4

(4.3)

97.1

90.6

(3.0)

87.6

Total
Components of deferred tax balances

265.1

Inventories

54.7

Provisions

67.3

Fixed & intangible assets
Receivables(146.7)

118.4

242.0

(1.5)

53.2

48.2

(1.3)

66.0

60.4

62.1

(39.9)

22.2(141.4)

100.6

(0.1)

48.1

(1.0)

59.4

60.8

(43.5)

17.3

16.2(101.6)(85.4)

18.8(91.6)(72.8)Tax losses

31.4

–

31.4

26.6

–

26.6

Total

265.1

(146.7)

118.4

242.0

(141.4)

100.6

147.0

(28.6)

118.4

130.4

(29.8)

100.6

Other

Offsetting
Total offset

33.4(118.1)

(2.4)

118.1

31.0
–

27.2

(111.6)

(5.2)

111.6

22.0
–

Notes to the consolidated financial statements
Page 50

The movements in net deferred tax assets (liabilities) during the period 2011 to 2012 are as follows:
Inventories Fixed andintangible

Provisions

Receivables Tax

assetsNet deferred income tax assets (liabilities)
Opening balance at 1 January 2012

Changes in scope of consolidation(Charged) / credited to income statement(Charged) / credited to OCI

Other

losses

Total

48.1

17.3

59.4

(72.8)

26.6

22.0

6.0

5.3

(4.1)

(13.0)

4.8

9.7

(0.7)

0.4

–
–

–

–

–

11.4

–

–

–

–

–

100.6
–

8.7

–

–

(0.7)

11.4

Exchange rate differences

(0.9)

(0.4)

Closing balance at 31 December 2012

53.2

22.2

66.0

(85.4)

31.4

31.0

118.4

Opening balance at 1 January 2011

43.7

7.3

43.5

(63.4)

23.6

16.7

71.4

5.0

12.0

3.3

4.2

16.3

(0.6)

(1.0)

12.5

(11.5)

Exchange rate differences

–

3.3
0.1

2.1

(0.3)

(0.3)

Closing balance at 31 December 2011

48.1

17.3

59.4

(72.8)

26.6

22.0

Changes in scope of consolidation(Charged) / credited to income statement(Charged) / credited to OCI

–
–

(1.0)

–

–
–

–
–

–

1.4

(2.3)

(1.0)

13.9
–

100.6

The category “Inventories” includes the tax effects of temporary differences arising on unrealized inter-company profits as well as

those arising on differences between tax and accounting inventory measurements at the legal entity level. The category “Fixed andintangible assets” includes the tax effects of temporary differences arising both on intangible assets and on property, plant andequipment. The category “Other” includes the tax effects on temporary differences arising on accruals and financial instruments. The

category “Provisions” includes items charged / credited to OCI which are tax effects of temporary differences arising on defined
benefit pension plan actuarial gains / losses adjustments.

Deferred income tax assets are recognized for tax loss carry forwards to the extent that the realization of the related tax benefit

through the future taxable profits is probable. Details are as follows:

2012

2011

Total tax loss carry forwards

358.1

336.5

Unused tax loss carry forwards

127.0

142.3

Tax loss carry forwards recognized in deferred tax

231.1

194.2

Expiration of unused tax loss carry forwards:

Expiration < 1 years

4.9

2.8

Expiration > 5 years or no expiration date

114.5

129.6

Tax effect of unused tax loss carry forwards

36.3

40.5

Expiration 1 to <= 5 years

Unremitted earnings subject to withholding tax or other taxes

7.6

263.4

9.9

347.7

Deferred income tax liabilities have not been recognized for the withholding tax and other taxes that would be payable on theunremitted earnings of certain subsidiaries totaling CHF 263.4 million (2011: CHF 347.7 million). Such amounts are permanently reinvested.

2012 Financial Report

Notes to the consolidated financial statements
Page 51(12)

Other financial investments (financial amounts in CHF million)

Maturity

1 to < 2 years
2 to < 3 years
3 to < 4 years
4 to < 5 years>= 5 years

Total other financial investments
Further information

Fair values

Average effective interest rates (in %)

2012

2011

1.7

2.0

–

–

0.1
1.5

0.9
–

13.9

13.7

17.2

16.6

17.2

1.7

16.6

1.5

Other financial investments are recognized at amortized cost. These comprise mainly long-term loans granted to third parties,
restricted capitalized excesses of employee benefit plans, deposits (for example, in respect of rented premises) and other investmentsin equities.
(13)

Inventories (financial amounts in CHF million)

2012

2011

Raw materials

62.8

74.3

Finished goods

484.1

532.1

Work in progress
Total inventories

8.4

555.3

9.5

615.9

The change in inventories includes a currency translation impact which reduces the inventories by CHF 4.5 million in 2012. This is dueto the change in closing rates in 2012 compared to those in 2011.

Allowance made for possible inventory losses due to age and obsolescence totals CHF 55.1 million (2011: CHF 57.2 million). Thechange in the allowance recognized in the income statement is CHF (2.1) million (2011: CHF (0.6) million). This change is included in
the line “Change in inventory.”

Inventories totaling CHF 113.7 million (2011: CHF 98.2 million) serve as security for bank borrowings of CHF 27.5 million (2011: CHF
37.4 million) (see notes 24 and 28).

Notes to the consolidated financial statements
Page 52(14)

Trade and other receivables (financial amounts in CHF million)

2012

2011

Trade receivables

1,237.7

1,249.2

Trade receivables net

1,137.9

1,143.8

1,246.6

1,242.6

897.5

930.6

1,246.6

1,242.6

4.0

3.6

2012

2011

1 to < 2 years

188.5

166.0

3 to < 4 years

42.3

42.3

>= 5 years

7.4

Less adjustment for impairment of trade receivables
Other receivables
Total trade and other receivables

Current portion

Non-current portion
Total trade and other receivables
Further information

Average effective interest rates (in %)Maturity of non-current portion

2 to < 3 years
4 to < 5 years(99.8)

108.7

349.1

102.5
8.4

(105.4)
98.8

312.0

91.6
8.5
3.6

349.1

312.0

2012

2011

90.4

90.6

2012

2011

Not due

3.0

3.8

Past due 91 - 180 days

5.7

5.0

Total non-current trade and other receivables

Past due aging of gross trade receivables not determined to be impaired

Past due 1 - 31 days

Aging of gross trade receivables individually determined to be impaired

Past due 1 - 90 days

5.1

Past due 181 - 360 days

12.4

Uncollectible notes

6.8

Past due > 360 days

Total aging of gross trade receivables individually determined to be impaired

3.1
9.2

22.5

30.8

55.5

62.1

10.2

2012 Financial Report

Notes to the consolidated financial statements
Page 53

2012

2011

Opening balance of adjustment for the impairment of trade receivables at January 1

105.4

117.2

Write-offs of trade receivables charged to impairment adjustment account during year

(39.3)

Movements in the adjustment for the impairment of trade receivables

Additional impairment adjustment charged to income statement during year

33.7

34.5

(46.3)

99.8

105.4

2012

2011

EUR

604.7

640.4

Other

518.2

Closing balance of adjustment for the impairment of trade receivables at December 31

Currency denominations of the carrying amounts of trade and other receivables

USD

123.7
1,246.6

Total trade and other receivables

128.5
473.7
1,242.6

The change in trade and other receivables includes a currency translation impact which reduces the trade and other receivables by

CHF 11.3 million in 2012. This is due to the change in closing rates in 2012 compared to those in 2011.

The net change in the adjustment for the impairment of trade receivables is recognized in the income statement in the line “Other
operating expenses.”Receivables totaling CHF 166.8 million (2011: CHF 172.6 million) serve as security for bank borrowings of CHF 95.1 million (2011: CHF

105.5 million) (see notes 24 and 28).

Other receivables consist primarily of clearing balances from the offsetting of VAT, deposits, vendors with debit balances and otheradvances.

Details of the finance lease receivables included in trade receivables are as follows:
2012
Unearned

Net

Gross

UnearnedNet

investment

financeinvestment

investment

financeinvestmentin the lease

incomein the leasein the lease

incomein the lease

229.7

256.8

< 1 year

1 to < 5 years>= 5 years
Total at December 31

Unguaranteed residual values

Accumulated allowance for uncollectible finance lease receivables
Contingent rents recognized as income from financial lease
(15)

2011

Gross

269.9
377.1
0.1

647.1

40.2
32.2
–

72.4

344.9
0.1

574.7
–

(34.8)
–

313.5
0.1

570.4

32.1
27.2
–

59.3

224.7
286.3
0.1

511.1
–

(36.0)–

Accrued income and prepayments

Accrued income and prepayments cover mainly prepayments for property, plant and equipment and prepaid operating expenditure to
be allocated as expense in the next accounting period.

Notes to the consolidated financial statements
Page 54(16)

Derivative financial instruments (financial amounts in CHF million)(16.1) Derivative contracts to hedge the foreign currency risks

The Group enters into derivative contracts to hedge the foreign currency risks arising from forecast foreign currency sales andpurchases transactions and foreign currency investment positions. The applicable derivative contracts are designated as cash flow
and fair value hedges, respectively. The accounting treatment is described in the accounting policies, notes 2.23 and 2.24. Details ofderivative contracts outstanding at balance sheet date are as follows:

USD

EUR

Other

Total

185.1

(3.8)

248.0

429.3

–

–

–

–

278.0

(3.8)

248.0

522.2

Foreign currency forward contracts

2.0

–

2.8

4.8

Cross-currency swap

19.2

–

–

19.2

Totals

21.2

–

2.8

24.0

Contract values recognized in income statement during current and prior years

20.9

–

1.3

22.2

Totals

21.2

–

2.8

24.0

2012
Contract face amounts

Foreign currency forward contracts
Foreign currency options
Cross-currency swap
TotalsContract values

Foreign currency options

Recognition of contract values

Contract values recognized in the cash flow hedging reserve in equity

92.9

–

0.3

–

–

–

–

–

1.5

92.9

–

1.8

Movements of contract values recognized in the
cash flow hedging reserve in equity

Balance at start of year

(0.2)

–

(1.1)

(1.3)

(Gains) / losses recycled through OCI to income statement during year

0.2

–

1.1

1.3

Gains / (losses) recognized in OCI during year
Balance at end of year

0.3
0.3

–
–

1.5
1.5

1.8
1.8

There was no ineffectiveness to be recognized in the income statement.
The cross-currency swap contract has a maturity of more than 12 months (2014). Foreign currency forward contracts with a face

amount of CHF 6.0 million (EUR) have a maturity of more than 12 months (2014). All other contracts have a maturity of less than 12
months.

2012 Financial Report

Notes to the consolidated financial statements
Page 55

USD

EUR

Other

Total

Foreign currency forward contracts

98.1

81.0

239.3

418.4

Cross-currency swap

92.9

116.4
197.4

–

239.3

209.3

Foreign currency forward contracts

(2.2)

1.2

(4.8)

(5.8)

Cross-currency swap

17.6

24.0
25.2

–

(4.8)

41.6

Contract values recognized in income statement during current and prior years

15.6

25.2

(3.7)

37.1

Totals

15.4

25.2

(4.8)

35.8

8.7

–

1.4

10.1

(8.7)

–

(1.3)

(10.0)

2011
Contract face amounts

Foreign currency options
TotalsContract values

Foreign currency options
TotalsRecognition of contract values

Contract values recognized in the cash flow hedging reserve in equity

–

191.0

–

15.4

(0.2)

–

–

–

–

–

(1.1)

–

627.7

–

35.8

(1.3)

Movements of contract values recognized in the
cash flow hedging reserve in equity

Balance at start of year

Gains / (losses) recognized in OCI during year

(0.2)

Balance at end of year

(0.2)

(Gains) / losses recycled through OCI to income statement during year

–

(1.2)

–

(1.1)

(1.4)
(1.3)

(16.2) Derivative contracts to hedge interest rate risks

The Group enters into derivative contracts to hedge the interest rate risks arising from loans with variable interest rates. The applicable

derivative contracts are designated as cash flow or fair value hedges. Gains and losses recognized in the cash flow hedging reserve inequity on interest rate swap contracts will be continuously released to the income statement until the repayment of the bankborrowings. The accounting treatment is described in the accounting policies, notes 2.23 and 2.24. Details of derivative contracts
outstanding at balance sheet date are as follows:Notes to the consolidated financial statements
Page 56

USD

EUR

Total

111.2

23.1

134.3

1.1

(0.4)

2012
Outstanding interest rate swaps

Contract face amounts

Recognition of contract values

Contract values recognized in income statement during current and prior years
Contract values recognized in the cash flow hedging reserve in equity

0.7

0.3

–

(0.4)

(0.8)

Balance at start of year

(1.2)

–

(1.2)

(Gains) / losses recycled through OCI to income statement during year––

Totals

(0.8)

(0.1)

Movements of contract values recognized in the
cash flow hedging reserve in equity

Gains / (losses) recognized in OCI during year
Balance at end of year

0.4

(0.8)

–

0.4
–

–

(0.8)

USD

EUR

Total

116.3

148.7

265.0

2011
Outstanding interest rate swaps

Contract face amounts

Recognition of contract values

Contract values recognized in income statement during current and prior years
Contract values recognized in the cash flow hedging reserve in equity

1.5

0.4

1.9

(1.2)

(0.2)

(1.4)

Balance at start of year

(1.2)

–

(1.2)

Gains / (losses) recognized in OCI during year

(0.7)

–

(0.7)

Balance at end of year

(1.2)

–

(1.2)

Totals

0.3

0.2

0.5

Movements of contract values recognized in the
cash flow hedging reserve in equity(Gains) / losses recycled through OCI to income statement during year

0.7–

The fixed interest rates vary from 1.3% to 4.9% (2011: 3.4% to 4.9%) and the main floating rates are EURIBOR and LIBOR.

0.7

2012 Financial Report

Notes to the consolidated financial statements
Page 57(16.3) Reconciliations

Derivative contracts to hedge

Foreigncurrency
risks

Interest

rate risks

Total

2012

Current assets

7.9

1.1

9.0

Non-current assets

19.2

–

19.2

Non-current liabilities–

Current liabilities

(3.1)

(0.3)

Net balance sheet positions

24.0

(0.1)

23.9

Cash flow hedging reserve in equity

1.8

(0.8)

1.0

Gains / (losses) recognized in OCI during year

1.8

0.4

2.2

(Gains) / losses recycled through OCI to income statement during year

1.3

–

1.3

Derivative contracts to hedge

Foreigncurrency
risks

(3.4)

(0.9)

Interest

rate risks

(0.9)

Total

2011

Current assets

Non-current assets

8.2

41.6

1.9

–

(1.4)

Current liabilities(14.0)Net balance sheet positions

35.8

Cash flow hedging reserve in equity

Non-current liabilities

Gains / (losses) recognized in OCI during year

(Gains) / losses recycled through OCI to income statement during year

–

8.2

43.5

–

(14.0)

0.5

36.3

(1.3)

(1.2)

(2.5)

(1.4)

(0.7)

(2.1)

(10.0)

0.7

(1.4)

(9.3)

The cash flow hedging reserve in equity net of tax amounts to CHF 0.9 million (2011: CHF (2.2) million).
(17)

Other financial assets at fair value through profit or loss (financial amounts in CHF million)

Other financial assets at fair value through profit or loss are financial assets classified as held for trading. There are no financial assets

designated as financial assets at fair value through profit or loss.
Financial assets under this heading comprise:•investments in deposits, bonds and equities restricted to (1) the funding of losses arising from damages to assets and losses•

other investments in equities.

arising from product-related obligations, and (2) the funding of a deferred compensation plan for employees; andThese financial assets are all classified as current assets because they are expected to be traded within 12 months of the balance
sheet date. However, their contractual maturities mostly differ from this position. Relevant information is as follows:Notes to the consolidated financial statements
Page 58

2012

2011

0 to < 1 years

15.5

6.2

2 to < 3 years–

0.6

Maturity

1 to < 2 years

9.2

3 to < 4 years

1.3

4 to < 5 years>= 5 years

Total financial assets at fair value through profit or loss

(18)

–

9.8

35.8

9.9
–

1.3
8.4

26.4

Cash and cash equivalents (financial amounts in CHF million)

Cash includes cash on hand and demand deposits. The movement in cash and cash equivalents is shown in detail in the cash flow
statement.

The Group has legal or economic restrictions on the ability of subsidiaries to transfer funds to the parent in the amount of CHF 51.9

million (2011: CHF 27.7 million).

Following are the currency denominations of the carrying amounts of cash and cash equivalents:
2012

2011

CHF

809.7

631.6

USD

40.9

33.7

EUR

Other
Total cash and cash equivalents

265.2
186.9

1,302.7

227.3
169.9

1,062.5

The table below shows the rating and balance of the major counterparties at the balance sheet date:
Counterparty

RatingBalance

Credit Suisse

A+

272.3

UBS Investment Bank

A

116.5

Credit Suisse

A+

129.8

LGT Bank Liechtenstein

A+

70.2

2012

LGT Bank Liechtenstein
2011

UBS Investment Bank

A+

A

108.0

100.4

The bank ratings 2012 are the latest prepared and published by Standard & Poors on their website (2011: bank ratings have been
made and published by Standard & Poors). Management does not expect any losses from non-performance by these counterparties.

Cash and cash equivalents include a deposit of CHF 477.1 million (2011: CHF 474.3 million) with an investment company owned by

the shareholder (for details see note 42).

2012 Financial Report

Notes to the consolidated financial statements
Page 59(19)

Assets classified as held for saleAt balance sheet date 2012 and 2011 no assets are classified as held for sale.
(20)

Equity (financial amounts in CHF million)

The share capital consists of 176’000 registered shares with a par value of CHF 500 each, and the participation capital consists of774’400 participation certificates with a par value of CHF 50 each. The participation capital has no voting rights. All the capital is fully

paid in and is entitled to dividends.

The capital reserve contains the share premium from capital increases and capital accruing from mergers in previous years.
A dividend in respect of the year ended 31 December 2012 of CHF 51.5 per participation certificate and of CHF 515 per share,amounting to a total of CHF 130.5 million (financial year 2011: CHF 46.9 million), is to be proposed at the 2012 annual general meeting.

This future proposed dividend is not recognised in these financial statements.

Other comprehensive income (OCI) displays revenue and expense items arising in the current year that are recognised directly inequity and such items directly recognised in equity in past years that are recognised in the current year's income statement. OCI
therefore displays all current year movements of the items and components of equity described as follows:•

Gains and losses on cash flow hedges either taken to equity or recycled to the income statement are recognized in the cash flow

hedging reserve. This reserve contains the cumulative gains and losses arising on the derivative contracts hedging intra-group•••

foreign currency sales that have not occurred at each balance date and interest rate swap contracts (see note 16).
Actuarial gains and losses on defined benefit pension plans are recognized in retained earnings (note 22).

Foreign currency translation differences arise from the translation of group companies’ financial statements and long-term inter-company loans. They are recognized in the foreign currency translation reserve and the non-controlling interest.

Deferred tax directly taken to or transferred from equity relating to the previously described components is separately disclosed.

These items are included in the reserve where the underlying components are included.
Foreigncurrency

Cash flow
hedgingtranslation reserve

Retainedearnings

reserve
2012

Gains / (losses) on cash flow hedges taken to equity

controlling

Totalinterest

–

(0.2)

2.2

–

–
–

(0.2)

statement

–

1.3

–

–

1.3

to income statement

–

(0.2)

–

–

(0.2)

Actuarial gains / (losses) on defined benefit plans––(68.8)–(68.8)

Foreign currency translation differences

(6.3)

–

–

(0.4)

(6.7)

Total other comprehensive income 2012

(6.3)

(57.4)(0.4)

Deferred tax on gains / losses on cash flow hedges taken to equity(Gains) / losses on cash flow hedges transferred from equity to income
Deferred tax on gains / losses on cash flow hedges transferred from equity

Deferred tax on actuarial gains / losses on defined benefit plans
Deferred tax on items taken directly to or transferred from equity

–

Non-

–
–

–
–

3.1

–

11.4
–

–
–

2.2

11.4
–

(61.0)

Notes to the consolidated financial statements
Page 60

2011

Gains / (losses) on cash flow hedges taken to equity

–

(2.1)

–

–

(2.1)

statement

–

(9.3)

–

–

(9.3)

to income statement–––(91.8)

1.1

–

–

–

12.5

Deferred tax on gains / losses on cash flow hedges taken to equity(Gains) / losses on cash flow hedges transferred from equity to income
Deferred tax on gains / losses on cash flow hedges transferred from equity
Actuarial gains / (losses) on defined benefit plans––

Deferred tax on actuarial gains / losses on defined benefit plans
Foreign currency translation differences(35.0)

Total other comprehensive income 2011(35.0)

Deferred tax on items taken directly to or transferred from equity

(21)

–

0.3

–
–

(11.1)

–

–

0.3

1.1

–

(91.8)

–

12.5

–

0.5

(34.5)(78.2)

0.5(123.8)–––Provisions (financial amounts in CHF million)
Employee

Restructuring Warranty

Product

Other

Total

benefitobligations

liability

provisions

provisions

obligations

obligations

provisions

excludingpension andtermination
benefitobligations

64.9

1.3

67.7

4.9

21.3

160.1

(6.5)

(0.6)

(53.0)

(1.6)

(5.8)

(67.5)

Unused reversals

(1.3)

(0.4)

(6.2)

(0.9)

(0.9)

(9.7)

Closing balance at December 31, 2012

78.9

3.7

80.9

4.3

29.0

196.8

Opening balance at January 1, 2012

Additions

Amounts used
Conversion difference

22.0

(0.2)

3.4

–

72.9

1.9

(0.5)

14.4

–

–

114.6

(0.7)

Employee

Restructuring Warranty

Product

Other

Total

benefitobligations

liability

provisions

provisions

obligations

obligations

provisions

excludingpension andtermination
benefitobligations
Opening balance at January 1, 2011

Additions

Amounts used

Unused reversals
Conversion difference
Closing balance at December 31, 2011

50.0

4.9

59.0

9.4

24.6

147.9

(8.7)

(3.2)

(37.7)

(4.4)

(4.2)

(58.2)

(0.4)

(0.1)

(1.5)

–

(0.1)

24.6

(0.6)
64.9

0.1

(0.4)
1.3

56.7

(8.8)

67.7

2.4

(2.5)
4.9

1.4

(0.4)
21.3

85.2

(12.7)
(2.1)

160.1

2012 Financial Report

Notes to the consolidated financial statements
Page 61

2012
Current portion of total provisions

116.8

Total provisions as at December 31

196.8

Non-current portion of total provisions

80.0

2011
51.4

108.7
160.1

Employee benefit obligations excluding pension and termination benefit obligations comprise a long-term strategic bonus obligation,social fund obligations and other social obligations to employees such as for jubilee payments. The relevant period for the long-term
strategic bonus is 2010 – 2012 with payment to be made in 2013. Historically, the level of outflows concerning other employee benefit

obligations (excluding long-term strategic bonus) has been constant each year. Information concerning pension fund obligations isgiven in note 22.

Restructuring obligations mainly relate to reorganization projects of certain sales organizations.
Warranty obligations cover normal and extended service warranties on sold products. Outlays in respect of such warranties are

expected on an ongoing basis. Additions to this provision follow the sales development and the amounts are used with a time lag ofaround one to two years.

Product liability provisions are the estimated obligations arising from additional product-related exposures and legal claims that are
not covered by the normal and extended service warranties. Outlays and settlements are expected over a deferred period. Certainty

concerning the timing and level of outflows is low. The estimates are based on past incidents, which provide the best basis to estimate
current exposure.

Other provisions are amongst others built up for obligations regarding to legal claims, job accidents and insurance contracts.
(22)

Pension and termination benefit obligations (financial amounts in CHF million)

Pension and termination benefit obligations at the balance sheet date are as follows:
2012

2011

Pension obligations

296.9

265.7

Total pension and termination benefit obligations

337.5

303.2

2012

2011

Termination benefit obligations

40.6

37.5

(22.1) Pension obligations

Pension plans operated by the Group comprise both defined contribution plans and defined benefit plans.
Defined contribution plans

The employer’s contribution totals CHF 20.4 million (2011: CHF 19.4 million).
Defined benefit plans

Details of recognized net liabilities are as follows:

Present value of unfunded obligations(13.7)(14.7)

Present value of funded obligations(1,099.9)(999.1)(296.9)(265.7)

Fair value of plan assets
Net liability

816.7

748.1

Notes to the consolidated financial statements
Page 62

Movements of the plan assets are as follows:

Balance at January 1

Expected return on plan assets
Actuarial gains and losses
Employer contributions

Employee contributions

2012

2011

748.1

760.3

38.9

(50.0)

29.5
41.9
17.5

Benefits paid

(56.5)

Settlements(4.3)

Exchange differences
Balance at December 31

1.6

31.5
32.9
17.5

(42.7)
–

(1.4)

816.7

748.1

2012

2011

(1,013.8)(949.9)(30.5)(31.4)

Movements of the defined benefit obligation are as follows:

Balance at January 1

Current service cost
Interest cost

Actuarial gains and losses(41.9)(107.7)(42.9)(41.8)

Benefits paid

58.7

43.1

Curtailments and settlements

5.5–

Past service cost

Exchange difference

16.9
(0.8)

7.3
1.8

(1,113.6)(1,013.8)

2012

2011

Current service cost

(41.9)(42.9)

Interest cost

(30.5)(31.4)

Past service cost

16.9

7.3

Balance at December 31

Breakdown of net periodic pension cost recognized in the income statement is as follows:

Expected return on plan assets
Curtailments and settlements
Employee contributions

Net periodic pension cost

29.5
1.2

17.5

31.5
–

17.5

(7.3)

(18.0)

20122011(265.7)(189.6)

Changes of the net liability recognized in the balance sheet are as follows:

Balance at January 1

Exchange differences

Total expense charged in the income statement

0.8

(7.3)

Contributions paid

41.9

Recognition of actuarial gains and losses(68.8)

Benefits paid on unfunded portions of partly funded plans
Balance at December 31

2.2(296.9)0.4(18.0)
32.9
0.4(91.8)(265.7)

2012 Financial Report

Notes to the consolidated financial statements
Page 63

Amounts for surplus / (deficit) and experience adjustments for the current and four previous periods are as follows:

Defined benefit obligation
Plan assets

Surplus / (deficit)

Experience adjustments on plan liabilities

2012

2011

2010

2009

2008

(1,113.6)(1,013.8)(949.9)(883.6)(809.4)(296.9)(265.7)(189.6)(126.1)(95.3)

39.1(50.0)(14.5)

(0.9)

816.7

Experience adjustments on plan assets(31.5)

748.1

9.7

760.3

3.7

757.5

(5.2)

714.1

(13.4)(93.4)

Actuarial assumptions are based on long-term economic factors in the respective countries (weighted average). The significant
actuarial assumptions are:

2012

2011

Discount rate

2.3%

3.0%

Expected return on plan assets

4.1%

4.1%

Retirement benefit development

0.3%

0.3%

Salary development

1.8%

1.8%

The overall expected rate of return on assets, which reflects the different major categories of plan assets, is the weighted average ofthe expected rate of return of the assets of each individual plan included in the overall group plan assets.

The employer’s best estimate of contributions expected to be paid to the plan during the annual period beginning after the balance
sheet date is CHF 25.8 million (2011: CHF 27.9 million).

The actual return on plan assets was CHF 68.4 million (2011: CHF (18.5) million).
Major categories of plan assets as percentages are as follows:
2012

2011

Equity instruments

23.4%

18.6%

Property

12.6%

11.6%

Debt instruments
Other assets

45.4%
18.6%

49.9%
19.9%

In the balance sheet, the net liability is included in pension and termination benefit obligations (see table at start of note) and, in theincome statement, the various components of the net periodic pension cost are included as follows:••interest cost and expected return on plan assets – in other revenues and expenses (net); andremaining components – in personnel expenses.

The cumulative actuarial losses recognized in equity as a result of incremental recognitions in the other comprehensive income (OCI) of
periods to date totals CHF 267.3 million (2011: CHF 198.5 million).
(22.2) Termination benefit obligations

The obligation for termination benefits included in the balance sheet in pension and termination benefit obligations (see table at start ofnote) excludes the obligation for termination benefits recognized as part of restructuring obligations (which are instead included inprovisions (see note 21)).

Notes to the consolidated financial statements
Page 64(23)

Bonds (financial amounts in CHF million)

The bonds were issued by Hilti Corporation. Further details of the individual bonds are included in the key figures.
2012

2011

< 1 year

149.7

299.8

2 to < 3 years

32.0

298.5

Maturity

1 to < 2 years
3 to < 4 years

299.1
–

149.3
–

4 to < 5 years

131.5>= 5 years

47.7

–

Total bonds

660.0

747.6

CHF

448.8

747.6

Total bonds

660.0

747.6

678.8

775.7

2012

2011

1 to < 2 years

40.2

35.0

3 to < 4 years

3.5

13.9

No maturity

Currency

EUR

–

211.2

Further information

Fair values

Average effective interest rates (in %)

3.0

–
–

–

3.5

The Euro bonds (“Schuldscheindarlehen”) are not tradeable on any recognized stock exchange.
(24)Long-term bank borrowings (financial amounts in CHF million)

Maturity

2 to < 3 years
4 to < 5 years>= 5 years

19.5
0.6
0.5

31.8
0.5
–

64.3

81.2

USD

27.5

40.6

others–Total long-term bank borrowings

Currency

EUR

Total long-term bank borrowings

36.8

40.5
0.1

64.3

81.2

2.6

2.5

Further information

Average effective interest rates (in %)2012 Financial Report

Notes to the consolidated financial statements
Page 65

CHF 18.3 million (2011: CHF 28.1 million) of the total long-term bank borrowings are secured by inventories totaling CHF 75.8 million(2011: CHF 98.2 million) and receivables totaling CHF 66.0 million (2011: CHF 104.2 million). Another CHF 36.6 million (2011: CHF 40.3

million) of the total long-term bank borrowings are secured by receivables totaling CHF 36.8 million (2011: CHF 40.3 million) (see notes
13 and 14).
(25)

Trade and other payables (financial amounts in CHF million)

2012

2011

Trade payables

187.8

167.5

Total trade and other payables

337.6

302.7

Current portion

315.6

278.0

Total trade and other payables

337.6

302.7

0.1

0.1

1 to < 2 years

1.5

7.0

3 to < 4 years

1.4

0.6

Other payables

Non-current portion

149.8

22.0

135.2

24.7

Further information

Average effective interest rates (in %)Maturity of non-current portion

2 to < 3 years
4 to < 5 years

1.7
4.2

2.5
1.3

>= 5 years

13.2

13.3

Total non-current trade and other payables

22.0

24.7

EUR

147.6

127.3

USD

29.5

24.1

Total trade and other payables

337.6

302.7

No maturity

Currency denominations of the carrying amounts of trade and other payables

CHF
Other

–

75.1
85.4

–

71.9
79.4

The change in trade and other payables includes a currency translation impact which reduces the trade and other payables by CHF
1.9 million in 2012. This is due to the change in closing rates in 2012 compared to those in 2011.

Other payables include liabilities for personnel expenses totaling CHF 7.8 million (2011: CHF 2.8 million), liabilities for social

contributions totaling CHF 26.1 million (2011: CHF 11.3 million) and liabilities for source-deducted taxes and VAT totaling CHF 58.8

million (2011: CHF 50.7 million).

CHF 2.1 million (2011: CHF 4.0 million) of the other payables are secured by mortgages over land and buildings totaling CHF 0.2

million (2011: CHF 0.2 million) (see note 8).

Notes to the consolidated financial statements
Page 66

Details of the finance lease liabilities included in other payables are as follows:
Minimum
lease

2012

Interest

Principal

payments< 1 year

1 to < 5 years>= 5 years

Total at December 31

0.2

lease

2011

Interest

Principal

payments
–

1.2

0.1

1.4

0.1

–

Minimum

–

0.2
1.1
–

1.3

0.8
0.9
–

1.7

0.1
0.1
–

0.2

0.7
0.8
–

1.5

Details of the assets held under finance leases are included in note 8. Under the terms of the finance lease agreements, no contingent
rents are payable. No sublease payments on finance leases are expected to be received. The commitments arising from operatinglease contracts are detailed in note 39.
(26)

Current income taxes payable and receivable

Current income taxes payable and receivable consist of income taxes payable and refundable relating to the current or prior years.
Details concerning deferred income tax liabilities and assets are shown in note 11.
(27)

Accrued liabilities and deferred income

Accrued liabilities and deferred income comprise short-term liabilities, which include estimates, short-term expense accruals anddeferrals of income already received but attributable to subsequent accounting periods.
(28)

Short-term bank borrowings (financial amounts in CHF million)

2012

2011

EUR

64.8

32.2

USD

11.5

9.6

Currency

BRL
JPY

MXN

other
Total short-term bank debts
Further information

Average effective interest rates (in %)

17.6

11.6

10.6

17.3

9.7

13.7

141.7

112.7

3.2

5.2

27.5

28.3

CHF 9.2 million (2011: CHF 9.4 million) of the total short-term bank borrowings are secured by inventories totaling CHF 37.9 million(2011: CHF 24.5 million) and receivables totaling CHF 33.0 million (2011: CHF 26.0 million). CHF 31.0 million (2011: CHF 27.2 million)of the total short-term bank borrowings are secured by receivables totaling CHF 31.0 million (2011: CHF 27.2 million) (see notes 13
and 14).

2012 Financial Report

Notes to the consolidated financial statements
Page 67(29)

Net sales (financial amounts in CHF million)

Categories of net sales are as follows:
2012

2011

Net sales of goods

4,066.4

3,835.3

Total net sales

4,203.6

3,997.5

Net sales of services

137.2

162.2

The above categories “Net sales of goods” and “Net sales of services” in terms of IAS 18 Revenue represent, respectively, revenue
from sales of goods and revenue from rendering of services.

A breakdown of net sales geographies and by major countries is given in note 37.
(30)

Material costs (financial amounts in CHF million)

2012

2011

Materials(1,268.1)(1,401.0)

Total material costs(1,282.1)(1,418.0)(1,338.2)(1,355.6)

Outsourced manufacturing
Change in inventory
Total material costs including change in inventory(31)(14.0)(56.1)(17.0)
62.4

Personnel expenses (financial amounts in CHF million)

Personnel expenses comprise wages and salaries and social contributions. Social contributions include expenses for pensions andsimilar liabilities in addition to social security contributions.

2012

2011

Salaries and wages(1,363.6)(1,277.5)

Total personnel costs(1,688.1)(1,572.1)

2012

2011

Sales

16,41917,040

Production

2,775

2,843

Social charges(324.5)(294.6)The breakdown of the number of employees by function is as follows:

Research and development
Administration
Total employees (as at December 31)

(32)

1,094
851

21,1391,104
861

21,848Depreciation and amortization

This position comprises depreciation, amortization and impairment losses on intangible assets, property, plant and equipment andinvestment property. Depreciation and amortization are shown in all disclosures at the average rate. In 2012 impairment losses havebeen booked on development projects and other intangible assets due to the phase out of the related products. In 2011 impairment
losses were booked on aborted development projects and the termination of relocation plans.

Notes to the consolidated financial statements
Page 68(33)

Other operating expenses

The major items included in other operating expenses are expenditures for rent, outward freight, travel expenses, maintenance andtransportation.

In 2012 there were no major items requiring separate disclosure under this heading. 2011 other operating expenses include a

reimbursement of CHF 28.2 million from the insurance relating to a fire in the central warehouse in France. The related expenses of
CHF 19.2 million are reported in the different expense categories. The gain of CHF 9.0 million relates to lost sales and the difference
between the book values and the replacement costs of assets.
(34)

Other revenues and expenses (net) (financial amounts in CHF million)

Other revenue and expenses (net) comprise:•••

all interest and dividend income

all realized and unrealized gains / losses from investment securities

all gains / losses from the hedging of foreign currency investment securities, foreign currency receivable / payable balances andforecast foreign currency transactions other than those gains / losses recognized in the cash flow hedging reserve in equity at the•balance sheet dateexpected return on defined benefit pension plan assets, and interest cost on defined benefit pension plan obligations.

Amounts are as follows:
2012
Interest and dividend revenues

5.7

2011
7.8

Gains / (losses) arising from valuation changes on financial assets and fair value hedging instruments(2.1)

Gains / (losses) on foreign currencies(15.0)

Interest costs (defined benefit plans)(30.5)(31.4)

Total other revenues and (expenses) (net)(15.7)(33.2)

2012

2011

Interest expense(40.3)(41.6)

Total gains / (losses) on financial liabilities measured at amortized cost

(56.2)(57.5)

Gains / (losses) on foreign currency hedging instruments
Expected return on plan asset (defined benefit plans)

(35)

(3.3)

29.5

(2.2)

(16.8)(22.1)
31.5

Finance costs (financial amounts in CHF million)

Finance costs include interest expense on bonds and bank debts.
The following gains and losses are included in finance costs:

Other gains / (losses)(15.9)(15.9)

Interest expense on financial liabilities measured at amortized cost represents the total interest expense on financial liabilities not atfair value through profit or loss.

Finance costs are reported at the gross interest expense amount. Interest income from investments is separately included in “Other
revenue and expenses (net)”.

2012 Financial Report

Notes to the consolidated financial statements
Page 69(36)

Income tax expense (financial amounts in CHF million)

2012

2011

Current tax(45.1)(38.7)

Total income tax expense(36.0)(22.4)

Deferred tax

9.1

16.3

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rateapplicable to profits of the consolidated companies as follows:

2012

2011

Net income before income tax

230.0

118.9

Tax calculated at domestic tax rates applicable to profits in the respective countries(38.3)(13.5)

Income not subject to tax

5.8

5.2

Expenses not deductible for tax purposes(17.9)(8.3)

Tax losses for which no deferred tax asset has been recognized

(2.7)

(8.8)

2.0

2.6

Utilization of previously unrecognized tax losses

5.0

0.3

Tax attributable to prior years

10.1

Income tax expense(36.0)(22.4)

Weighted average applicable tax rate (in %)

16.7

11.4

Other

0.1

The amount in the position “Other” is mainly due to changes in tax rates, expense / income subject to different tax rates and nonrecoverable withholding taxes on intercompany dividends or interest payments.

(37)

Segment information (financial amounts in CHF million)

In accordance with IFRS 8 Operating Segments, paragraph 5, the Group operates in only one single operating segment. Additional
information concerning products, services and geographical areas is as follows:
Net sales information about products and services

Electric Tools & Accessories

Electric Tools & Accessories

Products
Services

Total Electric Tools & Accessories

Fastening & Protection Systems
Fastening & Protection Systems
Total Fastening & Protection Systems
Total Group

Products
Services

2012

2011

1,954.1

1,823.3

2,063.5

1,965.6

2,112.3

2,012.0

2,140.1

2,031.9

109.4

27.8

4,203.6

142.3

19.9

3,997.5

Notes to the consolidated financial statements
Page 70

Net sales information about geographical areas

Change inlocal

Europe excl. Eastern Europe
North America
Latin America
Asia/PacificEastern Europe/Middle East/Africa

2012

2011

2,137.7

2,239.7

156.0

118.2

858.1
560.6
491.2

CHF (%)

(4.6)

(%)

(1.9)

711.9

20.5

13.4

487.7

15.0

9.5

440.0
3,997.5

32.2
11.6

32.4
8.9

5.2

4.4

2012

2011

USA

691.2

572.6

France

385.4

421.7

Total Group

4,203.6

Change in currencies

Net sales information by geographical areas is based on the country of third party customer.
Net sales information for major countries

Germany
Liechtenstein (country of domicile)

601.2
59.2

590.1
80.5

Other countries

2,466.6

2,332.6

Total Group

4,203.6

3,997.5

2012

2011

Liechtenstein (country of domicile)

494.3

503.0

USA

131.2

142.0

Net sales by major countries are based on the country of domicile of the respective group entities.
The Group has no customer exceeding the threshold of 10% of the Group’s revenue.
Selected non-current assets information for major countries *Germany
Austria

192.8
86.6

198.0
91.7

Other countries

217.1

212.9

Total Group

1,122.0

1,147.6

2012

2011

Guarantees

7.6

8.0

Total contingent liabilities

10.0

9.6

* excluding non-current financial assets and deferred taxes(38)

Contingent liabilities (financial amounts in CHF million)

Other contingent liabilities

Management considers the possibility of any outflow in settlement to be remote.

2.4

1.6

2012 Financial Report

Notes to the consolidated financial statements
Page 71(39)

Other commitments (financial amounts in CHF million)

Payment commitments arising from non-cancellable operating lease contracts are as follows:2012< 1 year

86.1

2011
76.7

1 to < 5 years

135.1

125.2

Total at December 31

238.1

218.2

Future minimum sublease payments expected to be received––

Sublease payments received in current period–>= 5 years

Contingent rent expense for operating leases

16.9

16.3

–

0.1

0.1

2012

2011

Total delivery and purchase commitments

6.9

7.1

Total commitments for the acquisition of property, plant and equipment

10.5

14.7

Total other commitments

21.5

24.4

Other financial commitments are as follows:

Total commitments for the acquisition of intangible assets

Total commitments for software licences and maintenance fees
Total other financial commitments

(40)

1.0

40.8
80.7

0.1

36.2
82.5

Financial assets pledged as collateral

Details of receivables pledged as collateral for recognized liabilities are given in note 14. There are no other financial assets pledged ascollateral for recognized liabilities or for contingent liabilities.
(41)

Research and development expenditure

Expenditure on research and development in the reporting period amounted to CHF 174.5 million (2011: CHF 184.0 million).
(42)

Related party disclosures (financial amounts in CHF million)
Key management personnel compensation

Details of compensation of key management personnel are as follows:Notes to the consolidated financial statements
Page 72

2012

2011

Number of Remembers

Board of Directors

Corporate Management (Executive Board and Executive Management Team)
Total

7

23

30

Number of Re-

muneration members

2.9

34.9
37.8

7

24

31

muneration

2.5

28.7
31.2

Salaries and other short-term employee benefits

22.5

16.0

Other long-term benefits

12.9

12.7

Post-employment benefits
Termination benefits

Share-based payment
Total employee benefits to key management

2.4
–
–

37.8

2.5
–
–

31.2

Employee benefits to key management include both fixed and variable components. The variable components are performance-linked
and include a long-term bonus which is payable only if certain predetermined specific financial targets linked to the sustainable

development and growth of the Group’s business are achieved. In accordance with IAS 19 Employee Benefits, the 2012 portion of theestimated ultimate amount payable has been recognized as an obligation at December 31, 2012. The classification of the long-term
strategic bonus in the above compensation categories is determined by maturity.
Ownership of parent

100% of the registered shares of the Hilti Corporation are owned by the Martin Hilti Family Trust.
Cash deposit at shareholder

Cash and cash equivalents include a deposit of CHF 477.1 million (2011: CHF 474.3 million) with an investment company owned by
the Martin Hilti Family Trust. This deposit is repayable on demand and earns interest at market rate, which amounts to CHF 2.7 million(2011: CHF 3.6 million).

Other transactions and balances with shareholder

The Hilti Corporation rendered accounting, administration, rental and other support services to the Martin Hilti Family Trust. The

amount invoiced was CHF 1.0 million (2011: CHF 1.2 million). These services were charged at cost. Additionally, the Hilti Corporation

has a current liability to the Martin Hilti Family Trust of CHF 0.1 million (2011: CHF 0.1 million).

2012 Financial Report

Notes to the consolidated financial statements
Page 73

Joint venture

Details of transactions and balances between the Group and its joint ventures HILLOS GmbH, Jena, Racing Point Co. Ltd., Taipei,
Panasonic Electric Works Power Tools (Shanghai) Co. Ltd., Shanghai and Intelligent Construction Tools LLC, Delaware, are as follows:
Transactions with joint ventures

Received

2012

by Hilti
Group

78.8

Fixed assets–

Financial assets (finance arrangements)

Operating leasing or rent

Total

Balances outstanding with joint ventures at December 31––

Sold orgiven byHilti Group––

Settlement of liabilities

Licensesby Hilti

75.2

0.6

0.1

–

–

0.4

–

–

–

–

0.1

–

–

–

–

–

–

–

–

–

Transfer of research and development

2011

–

–

Interest payments
Financial leasing

given byReceived

Hilti Group Group

Goods

Services

Sold or

–

–
–

78.9
Assets

–

–

–

–

–

0.6
Liabilities

75.3
Assets

–
–
–
–

0.4
Liabilities

Current

7.1

1.7

6.9

0.6

Total

7.1

1.7

6.9

0.6

Non-current

–

–

–

–

Post-employment benefit plans

Details of transactions and balances with pension funds that are related parties to the Hilti Group are as follows:
Transactions with related party pension funds

2012

Received

Sold orGroup

Hilti Group Groupby Hilti

given byReceived
by Hilti

2011

Sold orgiven byHilti Group

Pension contributions

1.6

46.1

1.5

38.5

Services

–

0.3

–

0.3

Financial assets

–

–

–

–

Fixed assets–

Financial liabilities (finance arrangements)–

Interest payments–

Settlement of liabilities

–

Other

–

1.6

Total

Balances outstanding concerning related party pension funds at December 31

Assets

–

–

–

–

–

–

–

–

–

–

46.4
Liabilities

1.5
Assets

–

–

–

Total

–

–

–

–

–

–
–
–
–

38.8
Liabilities

Current

Non-current

–

–

–

0.6
0.6

Notes to the consolidated financial statements
Page 74

There were neither expenses nor provisions for bad debts relating to these pension funds.
(43)

Business combinations (financial amounts in CHF million)

Business combinations 2012:

There were no acquisitions during the 2012 year.
Business combinations 2011:

On 23 June 2011, the Group acquired 100% of the share capital of Transportes Continentales S.A., Panama and on 21 July 2011, thegroup acquired 100% of the share capital of Eurofox GmbH, Gewerbepark 10, 2821 Lanzenkirchen, Austria for CHF 9.0 million in total

for both interests. At that date, the fair value of the net assets and liabilities equaled CHF 9.0 million. The acquired businesses
contributed revenues of CHF 1.6 million and net profit of CHF 0.1 million to the Group for that period. If the acquisitions had occurredon 1 January 2011, group revenue would have increased by a further CHF 3.0 million and net income would have been decreased by
CHF 0.2 million in 2011.

Details of the purchase consideration are as follows:
Purchase consideration

2011

Cash paid

8.2

Deferred payment of purchase price to sellers

0.8

Total purchase consideration

9.0

The assets and liabilities as at date of acquisitions arising from the acquisition are as follows:
Fair value
Cash and cash equivalents

1.0

Property, plant and equipments

3.7

Trademarks, brand

1.0

Patents, technology

Customer relationship

4.2–

Inventories

1.0

Trade and other receivables

0.9

Deferred tax assets–

Trade and other payables(0.2)

Deferred tax liabilities(1.0)

Other liabilities

Fair value of net assets

(1.6)
9.0

Total purchase consideration

9.0

Purchase consideration settled in cash

8.2

Cash outflow on acquisition

7.2

Cash and cash equivalents in subsidiary acquired(44)

Events after the reporting period

There were no significant events after the reporting period.

1.0

2012 Financial Report

Notes to the consolidated financial statements
Page 75(45)

Group Companies

Country

Company name and location

ActivityS = sales

R = research

D = development
P = production
Se = services
H = holding

Parent company

Liechtenstein

Hilti Corporation, Feldkircherstrasse 100, Postfach 333, 9494 Schaan,

Tel. +423 234 2111, Fax +423 234 2965, www.hilti.com

S, R, D, P, Se, H

Main, 100% owned consolidated group companies (subsidiaries – including production plants and market
organizations)

Albania

Hilti Albania sh.p.k., Tirana

S

Algeria

Hilti Construction Equipements EURL, Alger

S

Argentina

Hilti Argentina S.R.L., Buenos AiresS

Australia

Hilti (Aust.) Pty. Ltd., Rhodes New South Wales

S

Hilti Mining Engineering Australia Pty Ltd, Rhodes New South WalesP

Hilti Tendon Technologies, Rhodes New South WalesD

Hilti Austria Gesellschaft m.b.H., WienS

Hilti Holding GmbH, Wien

H

Hilti Aktiengesellschaft Zweigniederlassung Thüringen, Thüringen

P

Eurofox GmbH, Lanzenkirchen

S, P, D

Belarus

Hilti BY FLLC, Minsk

S

Belgium

Hilti Belgium N.V., Asse-ZellikS

Bosnia-Herzegovina

Hilti Systems BH d.o.o. Sarajevo, Sarajevo

S

BrazilHilti do Brasil Comercial Ltda., São PauloS

Bulgaria

Hilti (Bulgaria) EOOD, Sofia

S

CanadaHilti (Canada) Corporation, Mississauga, Ontario

S

Unirac (Canada) Corporation, Toronto

S

Chile

Hilti Chile Limitada, Santiago de Chile

S

China

Hilti (China) Ltd., ZhanjiangP

Hilti (China) Distribution Ltd., ShanghaiS

Hilti (Shanghai) Ltd., Shanghai

P

Colombia

Hilti Colombia S A S, Bogota D.C.

S

Croatia

Hilti Croatia d.o.o., Sesvete

S

Czech Republic

Hilti ČR spol.sr.o., PrůhoniceS

Denmark

Hilti Danmark A/S, Rødovre-Copenhagen

S

Estonia

Hilti Eesti OÜ, Tallinn

S

Finland

Hilti (Suomi) OY, Vantaa

S

FranceHilti France S.A., Versailles

S

Germany

Hilti Deutschland AG (Liechtenstein), Zweigniederlassung Deutschland

S

Hilti GmbH Industriegesellschaft für Befestigungstechnik, KauferingP

Hilti Entwicklungsgesellschaft mbH, KauferingD

Hilti Kunststofftechnik GmbH, Nersingen

P

Hilti Deutschland Dienstleistung GmbH, KauferingSe

AustriaNotes to the consolidated financial statements
Page 76

Hilti Deutschland Logistik GmbH, Oberhausen

Se

Hilti (Gt. Britain) Ltd., Manchester

S

Hilti Invest Ltd., Jersey, St. Helier

Se

GreeceHilti Hellas S.A., Eastern Attiki

S

Hong Kong

Hilti Asia Ltd., Kowloon, Hong Kong

H, Se

Hilti (Hong Kong) Ltd., Kowloon, Hong Kong

S

Hilti (Hungária) Szolgáltató Kft., Budapest

S

Hilti Szerszám Kft., Kecskemét

P

Hilti India Private Ltd., New Delhi

S

Hilti Manufacturing India Private Limited, Mumbai

PIndonesia

P.T. Hilti Nusantara, Jakarta

S

Ireland

Hilti (Fastening Systems) Ltd., Dublin

S

IsraelHilti (Israel) Ltd., Petach Tiqva

S

Italy

Hilti Italia S.p.A., Sesto San Giovanni

S

Japan

Hilti (Japan) Ltd., Yokohama

S

Kazakhstan

Hilti Kazakhstan LLP, Almaty

S

Korea

Hilti (Korea) Ltd., Seoul

S

LatviaHilti Services Limited, Riga

S

Liechtenstein

Hilti Deutschland AG, SchaanS

Hilti (Schweiz) AG, Adliswil, Zweigniederlassung Schaan

S

Great Britain

Hungary
India

IVV-Internationale Vertrieb- und Verbund-Aktiengesellschaft, SchaanS

Lithuania

Hilti Complete Systems UAB, Vilnius

S

Luxembourg

Hilti Belgium S.A. "Succursale", Luxembourg

S

Malaysia

Hilti (Malaysia) Sdn. Bhd., Petaling Jaya

S

Hilti Asia IT Services Sdn Bhd, Petaling Jaya

Se

Hilti Mexicana, S.A. de C.V., Mexico City, Tlalnepantla

S

Hilti Operaciones de Mexico S.A. de C.V., Matamoros

P

Montenegro

Hilti Montenegro doo Podgorica, Podgorica

S

MoroccoHilti Maroc S.A., Casablanca

S

Netherlands

Hilti Nederland B.V., Berkel en Rodenrijs

S

Hilti International Finance B.V., Amsterdam

H

New ZealandHilti (New Zealand) Limited, Auckland

S

PanamaHilti Latin America S.A., Panama

S

Transportes Continentales S.A., Panama

Se

Philippines

Hilti (Philippines) Inc., Metropolitan Manila

S

PolandHilti (Poland) Sp. z o.o., Warsaw

S

Portugal

Hilti (Portugal) - Produtos e Serviços Lda., PortoS

Puerto Rico

Hilti Caribe LLC, San Juan, Hato Rey

S

Romania

Hilti Romania S.R.L., Otopeni

S

Russian Federation

Hilti Distribution Ltd., Moscow

S

SerbiaHilti SMN d.o.o., BelgradeS

Singapore

Hilti Far East Private Ltd., Singapore

S

Slovakia

Hilti Slovakia spol.sr.o., Bratislava

S

Slovenia

Hilti Slovenija d.o.o., Ljubliana

S

South Africa

Hilti (South Africa) (Pty) Ltd., Johannesburg/Midrand

S

Spain

Hilti Española, S.A., Madrid

S

SwedenHilti Svenska AB, Arlöv-MalmöS

Mexico2012 Financial Report

Notes to the consolidated financial statements
Page 77

Switzerland

Hilti (Schweiz) AG, Adliswil

S

Hilti Befestigungstechnik AG, Buchs

Se

Hilti-Finanz GmbH, Chur

H

Syria

Hilti Syria LLC, Damascus

S

TaiwanHilti Taiwan Co., Ltd., Taipei

S

Thailand

Hilti (Thailand) Ltd., Bangkok

S

TurkeyHilti Inşaat Malzemeleri Ticaret A.Ş., Istanbul

S

UkraineHilti (Ukraine) Ltd., Kiev

S

United Arab Emirates

Hilti Middle East FZE, Jebel Ali-Free Zone, Dubai

Se

USA

Hilti Inc., Tulsa, Oklahoma

S

Hilti of America, Inc., Delaware

H

Hilti Holdings Limited, Delaware

S, H

Diamond B., Inc., California

P

Hilti Solar North America, Delaware

H

Unirac Inc., Albuquerque

S, R, D, P

Venezuela

Hilti Venezuela S.A., Caracas

S

VietnamHilti Vietnam Company Limited, Ho Chi Minh CityS

Less than 100% owned consolidated group companies (subsidiaries)

Bahrain

Hilti Bahrain Co. W.L.L., Manama (49% participation)

S

Qatar

Hilti Qatar W.L.L., Doha (49% participation)

S

Saudi Arabia

Hilti Saudi Arabia for Construction Tools LLC, Riyadh (51% participation)

S

United Arab Emirates

Hilti Emirates LLC, Abu Dhabi (49% participation)

S

Less than 100% owned joint ventures and associates

China

Panasonic Electric Works Power Tools (Shanghai) Co. Ltd., Shanghai (49% participation)P

Germany

HILLOS GmbH, Jena (50% participation)

P

TaiwanRacing Point Co. Ltd., Taipei (49% participation)P

USAIntelligent Construction Tools LLC, Delaware (50% participation)

R, D, P

Auditors’ report on the consolidated financial statements
Page 78
Auditors’ report on the consolidated financial statement s

Report of the Group Auditors to theReport of the statutory auditor on the consolidated financial

General Meeting of Hilti

statements

Aktiengesellschaft, Schaan

As statutory auditor, we have audited the consolidated financial statements of Hilti
Aktiengesellschaft, which comprise the balance sheet, income statement,
statement of comprehensive income, cash flow statement, statement of changes inequity and notes (pages 19 to 77), and the consolidated management report on

pages 7 to 9 for the year ended December 31, 2012.

Board of Directors’ Responsibility

The Board of Directors is responsible for the preparation and fair presentation of

the consolidated financial statements in accordance with the International Financial
Reporting Standards (IFRS) and the requirements of Liechtenstein law. This
responsibility includes designing, implementing and maintaining an internal control

system relevant to the preparation and fair presentation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
The Board of Directors is further responsible for selecting and applying appropriate
accounting policies and making accounting estimates that are reasonable in thecircumstances.

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
Liechtenstein law as well as the International Standards on Auditing. Thosestandards require that we plan and perform the audit to obtain reasonableassurance whether the consolidated financial statements are free from material
misstatement.

An audit involves performing procedures to obtain audit evidence about theamounts and disclosures in the consolidated financial statements. The procedures
selected depend on the auditor’s judgment, including the assessment of the risks

of material misstatement of the consolidated financial statements, whether due tofraud or error. In making those risk assessments, the auditor considers the internal
control system relevant to the entity’s preparation and fair presentation of theconsolidated financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control system. An audit also includes

evaluating the appropriateness of the accounting policies used and thereasonableness 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.

2012 Financial Report

Page 79
OpinionIn our opinion, the consolidated financial statements for the year ended December
31, 2012 give a true and fair view of the financial position, the results of operations
and the cash flows in accordance with the International Financial ReportingStandards (IFRS) and comply with Liechtenstein law.

The consolidated management report is in accordance with the consolidated
financial statements.

We recommend that the consolidated financial statements submitted to you be
approved.

PricewaterhouseCoopers AG

René Rausenberger
Auditors in charge

St. Gallen, March 6, 2013

Ralf Zwick

2012 Financial Report

Page 81
Financial statements of Hilti Corporation

Financial statements of
Hilti Corporation, Schaan(including branches)Financial statements
Page 82

Balance sheet of Hilti Corporation as at December 31(financial amounts in CHF million)

Note

2012

2011

Intangible fixed assets

4

37.2

46.4

Financial investments

62,473.9

2,474.6

Inventories

7

177.3

200.8

Accounts receivables

8

540.7

603.1

ASSETS

Tangible fixed assets

5

Total fixed assets

CashAccrued income and prepayments

330.4

2,841.5

481.9

63.9

327.4

2,848.4

235.2

64.8

Total current assets

1,263.8

1,103.9

TOTAL ASSETS

4,105.3

3,952.3

Share capital

88.0

88.0

Participation capital

38.7

EQUITY AND LIABILITIES

38.7

Legal reserves

108.4

108.4

Retained earnings brought forward

960.5

1,061.2

1,136.6

1,231.9

Foreign currency translation reserve
Net income(10.9)

Total equity

9

Provisions

10

Borrowings, payables and other liabilities

43.3(53.8)

34.2

2,809.6

2,603.5

Total liabilities

2,968.7

2,720.4

TOTAL EQUITY AND LIABILITIES

4,105.3

3,952.3

Accrued liabilities and deferred income

11(48.1)(10.6)

115.8

82.7

2012 Financial Report

Financial statements
Page 83

Income statement of Hilti Corporation for the year ending December 31(financial amounts in CHF million)

Note
Net sales

Change in inventory of finished goods and work in progress

2012

2011

1,817.6

1,894.5(1.6)

Capitalized own production

4.5

Other operating revenues

8.5

Total operating revenues

1,914.8(1,080.1)

12(1,002.7)

Depreciation

14(54.1)

Other operating expenses

13

Total operating expenses
Operating result

Financial revenues

Financial expenses

15(337.4)(411.8)(298.2)(61.3)(422.9)(1,806.0)(1,862.5)

23.0

52.3

8.7

17.4

(78.7)

Financial result(70.0)(123.3)

Net income before tax expenses(47.0)(53.6)

(1.1)

(0.2)

(48.1)(53.8)Tax expenses
Net income

16

1.8

19.0

1,829.0

Material costs

Personnel expenses

(0.5)

17

(105.9)

Notes to the financial statements
Page 84

Notes to th e finan ci al stat ements(1)

General information

Hilti Corporation is a limited liability company incorporated and domiciled in the Principality of Liechtenstein. Its registered office is at
Feldkircherstrasse 100, 9494 Schaan, Liechtenstein. Hilti Corporation is the parent and main operating company of the Hilti Group.

The shareholders and holders of participation certificates have an interest in the Group through their interest in Hilti Corporation. The
accompanying Group’s consolidated financial statements are the most significant indicator of the Group’s financial position andfinancial performance.
(2)

Accounting policies(2.1)

Overview

In contrast to the Group’s consolidated financial statement which have been prepared in accordance with International Financial
Reporting Standards (IFRS), the financial statements of Hilti Corporation have been prepared in accordance with Liechtenstein’s
corporations law, the Personen- und Gesellschaftsrecht (PGR). As a result, there are significant differences between treatments in thefinancial statements of Hilti Corporation and treatments in the Group’s consolidated financial statements. The significant
measurement, recognition and presentation differences are listed below. Apart from these differences, the accounting policies adopted

for the measurement, recognition and presentation of financial statement items in both sets of financial statements are substantiallythe same.

(2.2) Differences in accounting policies to those of the GroupThe following table identifies the relevant financial statement items and the corresponding treatments where the accounting policies
adopted for the measurement and recognition of items in the financial statements of Hilti Corporation are significantly different fromthose adopted in the Group’s consolidated financial statements.
Relevant financial statement item

Treatment in financial statements ofTreatment in financial statements ofValuation of fixed assets and inventories

In accordance with taxation rules pursuant

At lower of market value and historical cost

Hilti Corporation

to Article 1086 of the PGR

At historical cost

Valuation of provisions

Based on business risk criteria

Reportinghedgingofderivative

anticipatedinstruments

operatingactions (cash flow hedges)

trans-

Reporting of development costs

Recognizedatsubject to adjustment for depreciation or
obsolescence based on economic estimates

Valuation of investments in associatedcompanies and joint ventures

Hilti GroupIn accordance with the equity method of

fair

value

accounting

In accordance with the best estimate of theamounts required to satisfy existing obligawith valuechanges reported directly in the income
statement

All immediately expensed

tions

Recognized

at

fair

value

with

value

changes reported as part of equity andrecycled to the income statement when the
anticipated operating transactions occur

For qualifying new product developments,
capitalized during the development phases
and subsequently amortized over the sales

lives of the new products while other deveMeasurement of pension plan obligation

Treated as defined contribution plan

lopment costs are immediately expensed

Treated as defined benefit plan with cumu-

lative actuarial gains/losses recognizeddirectly in equity

2012 Financial Report

Notes to the financial statements
Page 85

The following table identifies the significant presentation differences relating to items in the financial statements of Hilti Corporationand the corresponding items in the Group’s consolidated financial statements.
Relevant financial statement item

Presentation in financial statements of
Hilti Corporation

Investments in deposits, bonds and equi- Included in “Financial investments”
ties restricted to the funding of losses
arising from damages to assets and losses

Presentation in financial statements of
Hilti Group

Included in “Financial assets at fair value

through profit or loss” under current assets
headingarising from product-related obligations

Recognized values of derivative financial Included in “Accrued income and prepay- Presented as a separate line item “Derivainstruments

ments” or “Accrued liabilities and deferred tive financial instruments” under each of theincome” as applicablecurrent and non-current assets and liabili-

Short-term tax obligations

Included in “Provisions”

Presented as a separate line item “Current

ties headings

income taxes payable” under current liabilities heading(2.3) Changes in accounting policies

There have been no material changes in accounting policies in the 2012 financial statements of Hilti Corporation from those adopted in

2011.
(3)

Exchange rates

For details of foreign exchange rates of principal currencies that have been applied for translation into Swiss francs, see note 2.4 of theGroup’s consolidated financial statements.
(4)

Intangible fixed assets (financial amounts in CHF million)
RightsOther

Prepay-Total

intangible

ments orintangible

assetsassets under assets
development

Cost
Opening balance at January 1, 2012

Currency translation differences
Additions

Disposals

12.9

75.0

–

–

3.8

–

–

–

–

–

–

–

(1.0)

12.9

77.8

(8.0)

(33.5)––

Additions(1.3)

Transfers–

Transfers

Closing balance at December 31, 2012
Accumulated amortization
Opening balance at January 1, 2012

Currency translation differences
Disposals

–

–

–

3.8

(1.0)

–

90.7

–

(41.5)(11.7)–(13.0)

–

–

–

1.0

(9.3)

(44.2)Net book values at December 31, 2012

3.6

33.6

4.9

–

–

Closing balance at December 31, 2012

Net book values at December 31, 2011

87.9

41.5

–

–

–

1.0

–

(53.5)

–

37.2

–

46.4

Notes to the financial statements
Page 86(5)

Tangible fixed assets (financial amounts in CHF million)
Land and

Plant and

Other

Prepay-Totalbuildings

machinery

operatingments ortangibleequipment

assets under assets
construction

Cost
Opening balance at January 1, 2012

Currency translation differences
Additions

373.6

441.7

145.2

26.9

987.4

0.9

21.1

7.4

25.2

54.6

3.6

4.6

0.8

(9.0)

(0.3)

Disposals(6.8)

Closing balance at December 31, 2012

(0.5)

(0.1)

(7.9)

(9.3)

371.0

459.0

(162.0)Additions
Transfers

Transfers

Accumulated depreciation
Opening balance at January 1, 2012

Currency translation differences
Disposals

(0.1)

(1.0)

(3.9)

(27.9)

144.0

39.1

1’013.1(386.4)(111.6)–(660.0)(4.6)(25.5)(11.0)–(41.1)

(0.9)

–

0.9

0.1
3.4

0.4
6.5

0.1

–

7.9

–

0.6

–

17.8

–

–

Closing balance at December 31, 2012(164.0)(405.0)(113.7)–(682.7)

Net book values at December 31, 2012

207.0

54.0

30.3

39.1

330.4

Net book values at December 31, 2011

211.6

55.3

33.6

26.9

327.4

The insurance value of tangible fixed assets at the balance sheet date is CHF 779.6 million (2011: CHF 793.0 million).
(6)

Financial investments (financial amounts in CHF million)

Cost

Share-

Loans to

Other

Total

holdings

groupfinancialfinancialcompanies

invest-invest-

ments

ments

2,399.4

81.6

21.7

2,502.7

8.5

–

13.6

22.1

(3.9)

(19.7)

(0.2)

35.1

2,503.6(28.1)––(28.1)

Additions

(1.6)

–

–

(1.6)

Closing balance at December 31, 2012(29.7)––(29.7)Net book values at December 31, 2012

2,374.3

64.5

35.1

2,473.9

Opening balance at January 1, 2012

Currency translation differences
Additions

Disposals
Closing balance at December 31, 2012
Accumulated valuation allowance
Opening balance at January 1, 2012

Currency translation differences
Disposals

Net book values at December 31, 2011–

2,404.0––

2,371.3

2.6

64.5

–
–

81.6

–

–
–

21.7

2.6

(23.8)––

2,474.6

2012 Financial Report

Notes to the financial statements
Page 87

A list of group companies, directly or indirectly held by Hilti Corporation, is included on pages 75 to 77 of this Financial Report.

Pursuant to Article 1094 (3) of the PGR, some details relating to investments in group companies have not been disclosed in this list.
(7)

Inventories (financial amounts in CHF million)

2012

2011

Raw materials

35.7

47.0

Production in progress

6.1

7.6

Consumables

10.2

Finished products and goods held for resale

(8)

125.3

136.8

2012

2011

177.3

Total inventories

9.4

200.8

Accounts receivables (financial amounts in CHF million)

Trade accounts receivables from third parties

17.2

Trade accounts receivables from group companies

410.7

Total trade accounts receivables

427.9

Other accounts receivables from third parties

20.7

Other accounts receivables from group companies

20.3

459.8
480.1

19.8

92.1

Total other accounts receivables

112.8

103.2

Total accounts receivables

540.7

603.1

(9)

123.0

Equity (financial amounts in CHF million)
Share and

Legal

Foreign

Retained

PC capitalreserves

currency

earnings

Total equity

translation
reserve

126.7

108.4

Dividend paid 2012–

Foreign currency translation differences–

Equity at January 1, 2012

Net income 2012
Equity at December 31, 2012(10.6)

1'007.4

1'231.9––(46.9)(46.9)

–

(0.3)

–

(0.3)

–

–

–

(48.1)(48.1)

126.7

108.4

(10.9)

912.4

1'136.6

The share capital consists of 176,000 registered shares with a par value of CHF 500 each and the participation capital consists of
774,400 participation certificates with a par value of CHF 50 each. The participation capital has no voting rights. All the capital is fully
paid in and is entitled to dividends.

The currency translation differences arise from the inclusion of the income statement and balance sheet items of Plant Thüringen,

Austria, which are denominated in Euro. The foreign currency translation reserve comprises the accumulated foreign currency gains
and losses recognized in equity since 2003.

Notes to the financial statements
Page 88(10)

Provisions (financial amounts in CHF million)

2012

2011

Provisions for pensions and similar obligations

6.5

6.1

Other provisions

36.8

28.1

Tax obligations

–

–

43.3

Total provisions

34.2

Other provisions relate mainly to product liability and employee benefit obligations.
(11)

Borrowings, payables and other liabilities (financial amounts in CHF million)

2012

2011

Short-termLong-term

2.75% bond 2006/2013

149.7

–

149.7

3.25% bond 2009/2014

–

299.1

299.1

149.7

510.3

3.50% bond 2008/2012
Euro bonds 2012/2015-2019 (EUR 175 million)
Total bonds

–
–

–

211.2

Total

Short-termLong-term

–

149.3

149.3

–

298.5

298.5

660.0

299.8

447.8

747.6

–

299.8

211.2

–

–
–

Total

299.8
–

Bank borrowings

0.4

–

0.4

0.1

–

0.1

Trade accounts payables third parties

93.5

–

93.5

85.7

–

85.7

Total trade accounts payables

167.8

–

167.8

160.0

–

160.0

Other liabilities owing to third parties

17.7
48.4

4.6

1,910.7

22.3

1,959.1

19.4
45.3

3.3

1,627.7

22.7

1,673.1

Total other liabilities

66.1

1,915.3

1,981.4

64.8

1,631.0

1,695.8

Total borrowings, payables and other liabilities

384.0

2,425.6

2,809.6

524.7

2,078.8

2,603.5

Trade accounts payables group companies

Other liabilities owing to group companies

74.3

–

74.3

74.3

–

74.3

The contractual maturity of short-term liabilities is less than one year and for long-term liabilities over one year.
Long-term liabilities to the Hilti Foundation in Thüringen, Austria, are secured by a mortgage on the property in Thüringen for CHF 0.3

million (2011: CHF 0.3 million).

(12)

Material costs (financial amounts in CHF million)

Raw materials, consumables and bought-in goods for resale
Outsourced manufacturing
Total material costs

2012

2011

(991.9)(1,065.7)(1,002.7)(1,080.1)(10.8)(14.4)

2012 Financial Report

Notes to the financial statements
Page 89(13)

Personnel expenses (financial amounts in CHF million)

2012

2011

Wages and salaries(281.0)(251.0)

Other social contributions(20.2)

Pension contributions(36.2)(36.4)(10.8)(337.4)(298.2)

2012

2011

Financial investment revenues from third parties

2.6

8.1

Financial investment revenues from group companies

3.6

Total personnel expenses(14)

Depreciation and amortization

This position comprises depreciation and amortization on tangible and intangible fixed assets.
(15)

Financial revenues (financial amounts in CHF million)

7.7

Total revenues from financial investments

6.2

15.8

Revenues from cash and marketable securities invested with third parties

2.5

1.6

Total revenues from cash and marketable securities

2.5

1.6

Total financial revenues

8.7

17.4

2012

2011

Depreciation on financial assets

(1.6)

(1.2)

Interest and similar expenses incurred to third parties(29.4)(36.1)

Total interest and similar expenses(64.3)(67.2)

Operating currency and hedge gains / (losses)(12.8)(54.9)

Total financial expenses(78.7)(123.3)

Revenues from cash and marketable securities invested with group companies

(16)

–

Financial expenses (financial amounts in CHF million)

Interest and similar expenses incurred to group companies

(17)

–

Tax expenses

For income tax purposes, dividends received are tax exempt.

(34.9)(31.1)

Notes to the financial statements
Page 90(18)

Derivative financial instruments (financial amounts in CHF million)

Hilti Corporation enters into derivative contracts to hedge mainly foreign currency risks arising from forecast foreign currency sales andpurchases transactions. Derivative contracts are recognized when the applicable forecast transactions occur. Until then they remain

off-balance sheet. Recognized (i.e. on-balance sheet) derivative contracts are reported at fair value. Changes in the fair value ofrecognized derivative contracts are reported in the income statement. In accordance with Article 1093 of the PGR, details of the onand off-balance sheet derivative contracts outstanding at balance sheet date are as follows:

2012

2011

Foreign currency forward contracts

429.3

418.4

Interest rate swaps

111.2

251.9

Total contract face amounts

633.4

879.6

Contract face amounts

Foreign currency options
Cross-currency swaps

Contract values

Foreign currency forward contracts
Foreign currency options
Interest rate swaps

Cross-currency swaps

–

92.9

–

209.3

4.8

(5.8)

–

–

0.3

0.7

19.2

41.6

Contract values recognized (on-balance sheet)

24.3

39.0

Total contract values

24.3

36.5

2012

2011

Total contract values
Reporting of contract values

Contract values unrecognized (off-balance sheet)

(19)

24.3

–

36.5

(2.5)

Segment information

Pursuant to Article 1094 (2) of the PGR, a breakdown of net sales has not been disclosed.
(20)

Contingent liabilities (financial amounts in CHF million)

Credit facilities guarantees
Other guarantees

–

–

13.9

13.9

2012

2011

Expiring within 1 year

0.5

0.7

Total commitments

1.1

1.5

Total contingent liabilities

(21)

13.9

13.9

Commitments (financial amounts in CHF million)

Payment commitments arising from operating lease contracts and service contracts are as follows:

Expiring between 1 and 5 years

0.6

0.8

2012 Financial Report

Notes to the financial statements
Page 91(22)

Remuneration of the Board of Directors and the Corporate Management

For details of the remuneration of the Board of Directors and the Corporate Management, see note 42 of the Group’s consolidated
financial statements.

(23)

Number of employees

The breakdown of employees by nationality is as follows:
Country

2012

%

2011

%

Austria

883

45

901

43

Liechtenstein

187

9

206

10

Germany

Switzerland

Other countries
Total employees

(24)

391

20

424

20

241

12

263

13

1,973

100

2,089

100

271

14

295

14

Management report

Pursuant to Article 1121 (3) of the PGR, the management report of Hilti Corporation has been combined with the consolidated
management report. The consolidated management report is on pages 7 to 9 of this Financial Report.
(25)

Appropriation of retained earnings (financial amounts in CHF million)

2012

2011

Profit brought forward

960.5

1,061.2

At the disposal of the General Meeting

912.4

1,007.4

90.6

32.6

Net income(48.1)(53.8)

Proposal by the Board of Directors

Dividend of

CHF 515 (2011: CHF 185) per share

CHF 51.5 (2011: CHF 18.5) per participation certificate

Appropriation to other reserves
Balance carried forward
Total

39.9

–

781.9

912.4

14.3

–

960.5

1,007.4

Auditors’ report on the financial statements
Page 92

Auditors’ report on the financial state ment s of Hilti Corporation

Report of the Statutory
Auditors to the General
Meeting of Hilti

As statutory auditors, we have audited the accounting records and the financial statements(balance sheet, income statement and notes) on pages 81 to 91 and the management report ofHilti Aktiengesellschaft on pages 7 to 9 for the year ended December 31, 2012.

Aktiengesellschaft, Schaan

These financial statements and the management report are the responsibility of the Board of

Directors. Our responsibility is to express an opinion on these financial statements based on
our audit. We confirm that we meet the legal requirements concerning professional
qualification and independence.

Our audit was conducted in accordance with auditing standards promulgated by theprofession in Liechtenstein, which require that an audit be planned and performed to obtainreasonable assurance about whether the financial statements and the management report are

free from material misstatement. We have examined on a test basis evidence supporting theamounts and disclosures in the financial statements. We have also assessed the accounting

principles used, significant estimates made and the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements give a true and fair view of the financial position, theresults of operations and the cash flows in accordance with the Liechtenstein law. Furthermore, the accounting records and financial statements and the management report and the

proposed appropriation of available earnings comply with Liechtenstein law and thecompany’s articles of incorporation.

The management report is in accordance with the financial statements.
We recommend that the financial statements submitted to you be approved.
PricewaterhouseCoopers AG

René Rausenberger
Auditors in charge

St. Gallen, March 6, 2013

Ralf Zwick

2011 Financial Report

Auditors’ report on the financial statements
Page 93

Page 94
Contact information

Contact information

Jens SchulteTel. +423 234 2737
Fax +423 234 6737

jens.schulte@hilti.com

Next information

Next information

May 16, 2013: Interim financial information for January to April 2013
September 27, 2013: Interim financial information for January to August 2013
March 14, 2014: Financial Report for the year 20132012 Financial ReportPage 96