2014 FINANCIAL REPORT

Contents

Key Figures

4

Management Report

5Group Financial Statements

9

Financial Statements Hilti Corporation73

Corporate Governance87

Investor Information

91

Key Figures

Key Figu res

Key financial information of Hilti GroupKey Figu res

financial amounts in CHF million
Results

Net sales

Depreciation and amortization
Operating result

2014

2013

2012

2011

2010

4,497

4,340

4,205

3,998

3,930

537

421

301

207

268

194

220

197

216

213

Net income before tax

499

354

223

119

167

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

16.8

12.8

9.5

6.5

8.2

Free cash flow

383

354

366

(28)

(13)

2,449

2,523

2,328

2,212

2,304

53

53

51

51

Net income

Return on equity (RoE) in % (net income)Balance sheet

Total equity

Total equity in % Total equity and liabilities
Total non-current liabilities
Total current liabilities

Capital expenditures on intangible assets and on property, plant andequipment

426

17.1

1,053
1,106

258

304

12.5

872

1,368

209

187
8.3

1,005
1,223

188

97

4.3

997

1,159

212

142
6.0

54

1,172

817
209

Intangible assets and property, plant and equipment

1,152

1,101

1,123

1,141

1,162

Total current assets

2,884

3,158

2,905

2,706

2,697

455

393

131

47

71

Other non-current assets
Total assets
Dividend*

573

4,609

504

4,763

528

4,556

521

4,368

434

4,293

22,24821,456

21,13921,84820,3052.75% bond 06/13 (early call for tax reasons only)

–

–

150

150

150

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

–

300

300

300

300

100

100

–

–

–

Employees (as at December 31)
Information on bonds (nominal values)

3.50% bond 08/12 (early call for tax reasons only)–

0.875% bond 13/18 (early call for tax reasons only)

100

Euro bonds 12/15–19 (EUR 66 million at variable interest rates**)79

1.875% bond 13/23 (early call for tax reasons only)Euro bonds 12/15–19 (EUR 109 million at fixed interest rates***)
*

131

–
100
81

134

–
–

80

131

300
–
–
–

300
–
–
–

As proposed by the Board of Directors** Early call possible; bonds have restricted tradeability*** Bonds have restricted tradeability

Hilti Financial Report 2014 | 4Management Report

Profitability and capital efficiency brought up to target level
Mana ge ment Rep ort

Management Report

Having generated sales growth of 7.5 percent in local currencies and of
3.6 percent in Swiss francs resulting in total net sales of CHF 4.5 billion,
the Hilti Group has increased its operating result by 27 percent inbusiness year 2014. Return on sales rose further from 9.7 to 11.9
percent, while return on capital employed was up from 12.8 to 16.8
percent. Free cash flow was at a very good level of CHF 383 million.
Thus, both profitability and cash flow lie within the target range of theGroup ’s corporate strategy and the enhanced investments in sales andproducts were carried out according to plan.

In 2014, the Hilti Group operated in a predominantly positive environment, albeit withconsiderable regional differences. While markets in Northern and Central Europe weregenerally positive, construction in Western and Southern Europe continued to be subdued. An
exceptionally strong winter that hit the Eastern part of North America at the beginning of theyear dampened what was otherwise a very positive market performance. The emerging
markets were characterized by heterogeneous economic developments: Middle East andparts of Asia did very well, quite in contrast to Eastern Europe which was severely affected by
the political situation in Russia and Ukraine. The initial momentum seen in Latin America wasincreasingly tarnished by political and fiscal uncertainties later in the year.

Hilti Financial Report 2014 | 5

Management Report

Substantial sales growth inlocal currencies

Against this backdrop, the Hilti Group stood its ground well and posted growth in all regions.
After a slightly negative trend in the previous year, our overall business in Europe has returned

to growth (+3.5%). In North America, a strong second half allowed to almost completely offset

a slow start to the year (+9.5 %). In the emerging markets, sales growth reached double - digit
figures in local currencies (Eastern Europe / Middle East / Africa + 14.9 %, Asia + 10.6%, Latin
America + 14.6%).

Overall, sales in local currencies were up 7.5 percent (against 4.5 % in the prior year).
Negative currency impacts

Especially in the first half of the year, currencies of most regions lost in value against the
Swiss franc. Apart from the US Federal Reserve’s monetary policy, this was mainly caused by

local political and economic uncertainties (particularly in Russia) as well as currency
depreciations with the aim to boost the economy (e.g. in Japan). In the second half, thesituation stabilized, mainly in the US. After conversion into Swiss francs, sales growth shrunkby – 3.9 percent. Hence, in Swiss francs, sales were up 3.6 percent to CHF 4.5 billion.
Enhanced productivity andhigher margins

Thanks to accelerated growth, productivity enhancements and increased margins, operating

profitability was up further from 9.7 to 11.9 percent (exchange rate impact –0.5%). Net profit
grew by 40.2 percent to CHF 426 million.

Return on capital employed improved by 12.8 to 16.8 percent and operating cash flow wasagain high at CHF 630 million, supported by reductions of accounts receivable collection
period by one day and of inventory days by four days. With CHF 383 million, also free cash
flow was at a very good level.

Hence, the company has reached its 2014 target levels of operating profitability, capitalefficiency and free cash flow conversion.

The Hilti Group has stepped up its investments according to plan. Expenditure for researchand development grew by 17.9 percent (CHF 222 million) while headcount was up from21,456 to 22,248 (+4 %).
Very sound balance sheet
structure

Cash and cash equivalents amounted to CHF 1223 million at year-end (2013: CHF 1538
million). This CHF 315 million decrease reflects dividend payments of CHF 393 million for 2013
as well as the CHF 300 million repayment of a bond issue.

As a result, financial debt was reduced significantly to CHF 553 million as at the end of 2014(previous year: CHF 879 million). Net liquidity rose to CHF 669 million. The equity ratio
continues to be very sound at 53 percent (unchanged against 2013).

For the 2014 business year, the Board of Directors proposes an ordinary dividend payment of
CHF 214 million (2013: CHF 153 million). As a result of the company’s strong cash flow and incontinuation of the repayment of excess liquidity to its owner initiated last year, the Board of
Directors further proposes the payment of a special dividend of CHF 241 million, which willbring up the aggregate dividend payout to CHF 455 million.

Hilti Financial Report 2014 | 6

Management Report

Outlook

According to the economic forecasts for 2015, the business climate is expected to be similar

as in 2014, strongly marked by increasing geopolitical volatilities. The Hilti Group expects

growth in local currencies to be in the solid single - digit range. The decision taken by the

Swiss National Bank on January 15, 2015, to lift the minimum exchange rate of CHF 1.20 per
euro and the subsequent surge of the Swiss franc also have a significant impact on the
globally operating Hilti Group. As a consequence, a number of immediate countermeasures
were initiated that will mitigate the short - term negative currency effects.

Despite this additional financial burden, Hilti’s highly solid profitability, balance sheet and cash
flow positions along with the ongoing measures to improve productivity, flexibility and capitalefficiency will enable the Group to pursue its planned investments into market access as wellas innovative products and services. Thus, the Hilti Group sees itself well positioned and looks
with confidence into the 2015 business year.

Hilti Financial Report 2014 | 7

Management Report

Hilti Financial Report 2014 | 8

Group Financial Statements
Group Financial Statements

Hilti Financial Report 2014 | 9

Group Financial Statements

Consolidated balance sheet

in CHF million

Note

31.12.2014

31.12.2013

Intangible assets

7

360.5

340.0

Property, plant and equipment

8

791.9

760.8

Deferred income tax assets

11

146.6

126.5

Trade and other receivables

14

404.0

362.4

1,725.1

1,605.3

559.7

548.5

9.9

11.4

ASSETS

Investment property

Other financial investments

Derivative financial instruments

9

12
16

Total non-current assets

Inventories

13

Current income taxes receivable

26

Trade and other receivables

Accrued income and prepayments
Derivative financial instruments

Financial assets at fair value through profit or loss
Cash and cash equivalents

1.9

14.3
5.9

14

1,004.5

15

45.4

17

34.2

16
18

7.4

2.2

13.4
–

943.2

50.3
33.8
32.1

1,222.8

Total current assets

2,883.9

1,538.3

TOTAL ASSETS

4,609.0

4,762.9

3,157.6

The notes on pages 16 to 68 are an integral part of these Group financial statements.

Hilti Financial Report 2014 | 10

Group Financial Statements

in CHF million

Note

31.12.2014

31.12.2013

EQUITY AND LIABILITIES

Non-controlling interests
Equity attributable to equity holders of the parent
Total equity

20

Provisions

21

Deferred income tax liabilities

11

Employee benefits

9.7

9.3

2,439.7

2,513.5

2,449.4
68.4

2,522.8
57.5

22

526.6

308.4

23

378.4

414.7

Long-term bank borrowings

24

28.5

39.5

Derivative financial instruments

16

–

Bonds

Trade and other payables

25

Total non-current liabilities

23.3

28.2

26.0

24.9
1.0

1,053.4

872.0

Provisions

21

62.8

75.3

Trade and other payables

25

350.3

342.7

Accrued liabilities and deferred income

27

425.3

424.9

28

114.6

125.3

Employee benefits
Current income taxes payable
Bonds

Short-term bank borrowings

Derivative financial instruments

22
26
23
16

15.8
91.2
31.9
14.3

8.7

89.5

299.8
1.9

Total current liabilities

1,106.2

1,368.1

Total liabilities

2,159.6

2,240.1

TOTAL EQUITY AND LIABILITIES

4,609.0

4,762.9

The notes on pages 16 to 68 are an integral part of these Group financial statements.

Hilti Financial Report 2014 | 11

Group Financial Statements

Consolidated income statementin CHF million
Net sales

Other operating revenues

Note

2014

2013

29

4,497.3

4,340.2

4,599.9

4,432.5

29

Total operating revenues

Change in inventory

30

Personnel expenses

31

Material costs

Depreciation and amortization
Other operating expenses(1,317.9)

32(194.4)(220.3)(4,063.4)(4,011.4)

536.5

421.1

(6.1)

(16.0)

498.8

354.1

(72.5)(50.0)

426.3

304.1

426.9

305.5

33

34
35

Net income before income tax expense

Income tax expense

1.2(1,363.0)

Operating result

Finance costs

6.7

92.3

30

Total operating expenses

Other revenues and expenses (net)

102.6

36

Net income
Attributable to:Equity holders of the parent
Non-controlling interests(1,783.9)(728.8)(31.6)(0.6)(1,702.9)(771.5)(51.0)(1.4)

The notes on pages 16 to 68 are an integral part of these Group financial statements.

Hilti Financial Report 2014 | 12

Group Financial Statements

Consolidated statement of comprehensive income

in CHF million

Note

Net income

Net movement on cash flow hedges

16

Foreign currency translation differences

20

Deferred tax on net movement on cash flow hedges

20

2014

2013

426.3

304.1

4.8

0.4

(0.6)

(0.1)

22.8

(21.2)

27.0(20.9)(159.3)47.6

to the income statement(133.9)42.1

Other comprehensive income (OCI)(106.9)21.2

Total comprehensive income

319.4

325.3

319.0

326.9

Items that may be subsequently reclassified
to the income statement

Remeasurements on employee benefits

Deferred tax on remeasurements on employee benefits

22
20

Items that will never be reclassified

25.4

(5.5)

Attributable to:Equity holders of the parent
Non-controlling interests

The notes on pages 16 to 68 are an integral part of these Group financial statements.

Hilti Financial Report 2014 | 13

0.4

(1.6)

Group Financial Statements

Consolidated statement of changes in equity

in CHF million

Share and

CapitalForeign

Cash flow

Retained

Equity

Non-

Total

participation reserves

currency

hedgingearnings

attributable

controlling

equitycertificate

translation

reserveto equityinterests

capitalreserveholders of
the parent

126.7

17.4

(357.7)1.2

2,725.9

2,513.5

9.3

2,522.8

–

–

–
–

–

4.2

426.9

426.9

(0.6)

426.3

benefits

–

–

–

–

(133.9)(133.9)–(133.9)differences

Equity at January 1, 2014

Net income recognized in income
statement

Cash flow hedges–

Remeasurements on employee
Foreign currency translation

–

4.2

4.2

–

–

–

21.8
21.8

4.2

293.0

319.0

21.8

1.0
0.4

319.4

Dividend paid

–

–

–

–

(392.8)(392.8)–(392.8)Change in non-controlling interests

–

–

–

–

–

–

–

Equity at December 31, 2014

in CHF million

126.7
Share and

17.4

(335.9)

5.4––

Total comprehensive income

–

–

–

2,626.1

2,439.7

9.7

22.8

–

2,449.4

CapitalForeign

Cash flow

Retained

Equity

Non-

Total

participation reserves

currency

hedgingearnings

attributable

controlling

equitycertificate

translation

reserveto equityinterests

capitalreserveholders of
the parent

Equity at January 1, 2013

Net income recognized in income
statement

Cash flow hedges

Remeasurements on employee
benefits

Foreign currency translationdifferences

126.7

17.4

(336.5)

–

–

–
–

0.3

–

–

–
(21.0)

–

–

–

–

–

Total comprehensive income

Dividend paid

–

–

126.7

17.4

Change in non-controlling interests
Equity at December 31, 2013

–

–

–

0.9

2,505.3

2,313.8

14.3

2,328.1

–

305.5

305.5

(1.4)

304.1

–

42.1

42.1

–

42.1

(21.0)

(0.2)

–

–

0.3

–

(21.0)

0.3

347.6

326.9

–

–

(130.5)(130.5)(357.7)1.2

2,725.9

2,513.5

(0.2)

–

3.5

3.3

–

0.3

(21.2)

(1.6)

325.3

–

(130.5)9.3

2,522.8

(3.4)

(0.1)

For further details on transactions with non-controlling interests see note 5 and on equity see note 20.
The notes on pages 16 to 68 are an integral part of these Group financial statements.

Hilti Financial Report 2014 | 14

Group Financial Statements

Consolidated cash flow statementin CHF million

Note

Net income

Depreciation and amortization(Increase)/decrease in inventories(Increase)/decrease in trade receivables

32
30(Increase)/decrease in finance lease receivables
Change in non-cash items and other net operating assets

194.4

(6.7)

220.3

(1.2)

2.2

25.1

(104.8)(48.5)
68.4

549.5(79.1)(152.7)(130.1)(Increase)/decrease in financial investments

(1.0)

6.7

Disposal of property, plant and equipment

11.4

Acquisition of subsidiaries

8

304.1

(18.7)

629.6
7

2013

Restated*(10.0)

110.1

Cash flow from operating activities

Capital expenditure on property, plant and equipment

426.3(86.7)

Increase/(decrease) in trade payables

Capital expenditure on intangible assets

2014

Disposal of intangible assets

Cash flow from investing activities

Proceeds from long-term borrowings

–

0.1

–

(247.0)(195.6)

0.6

Repayment of long-term borrowings

–

6.9

3.7

(1.3)

(21.1)–

200.0

Proceeds from/(repayment of) short-term borrowings(15.2)

Repayment of bonds(300.0)(150.0)(392.8)(130.5)

10.5

(4.8)

Total increase/(decrease) in cash and cash equivalents(315.5)

231.7

Cash and cash equivalents at January 1

1,538.3

1,306.6

Proceeds from issuance of bonds

Increase/(decrease) in liability to shareholder
Dividend paid

Cash flow from financing activities

Exchange differences

Cash and cash equivalents at December 31

Cash flow from operating activities includes
Interest received
Interest paid

Income tax paid
* See note 2.2

The notes on pages 16 to 68 are an integral part of these Group financial statements.

Hilti Financial Report 2014 | 15

42
20

0.1

(708.6)

1,222.8

5.9(38.4)(61.9)(19.7)

0.2(117.4)

1,538.3

5.3(51.0)(53.9)

Notes to the Consolidated Financial Statements

Notes to t he Co nsoli date d Fi nanci al S tate me nts(1) Gen eral i nfo rma tion(2) S um mary of si gnific ant acc oun ting policie s(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 andsystems covering drilling and demolition, direct fastening, diamond and anchoring, fire stopand 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 22,000 employees worldwide.

These consolidated financial statements were approved for issue by the Board of Directors on
March 11, 2015.

(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) at fair value through profit or loss.

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 andjudgments reflected in the 2014 consolidated financial statements that are critical in thecontext of the Group’s financial position and financial performance are explained in note 3.

(2.2) Changes in accounting
policies and estimates

Certain presentation changes have been made to the consolidated cash flow statement toimprove the internal consistency and overall relevance of the consolidated financial
statements. Cash flows related to ‘increase/decrease of finance lease receivables’ are now
presented as cash flow from operating activities instead of as cash flow from investing

activities to reflect the core operating nature the fleet management business has assumed
since its inception. As a consequence, in 2014, the cash flow from operating activities has

been reduced by CHF 86.7 million (2013: reduced by CHF 48.5 million) with corresponding
increases in the cash flow from investing activities. Terminology (renaming) changes have also
been made to some items to improve clarity.

Hilti Financial Report 2014 | 16

Notes to the Consolidated Financial Statements

Further changes

With effect from January 1, 2014, the following new IFRS standards/amendments wereapplied:

IAS 32 Financial Instruments – Presentation

IAS 36 Impairment of Assets – Recoverable amount disclosures
IAS 39 Financial Instruments – Novation of derivatives
IFRS 10, IFRS 12 and IAS 27 Investment entities
IFRIC 21 Levies

The application of all the above standards had no material impact on the Group’s financial
position, comprehensive income and cash flows.

(2.3) Method of consolidation
Subsidiaries

Subsidiaries are all entities over which the Group has control. The Group controls an entity
when the Group is exposed to, or has rights to, variable returns from its involvement with theentity and has the ability to affect those returns through its power over the entity. Subsidiaries

are fully consolidated from the date on which control is transferred to the Group. They aredeconsolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The
consideration transferred for the acquisition of a subsidiary is the fair values of the assets

transferred, the liabilities incurred to the former owners of the acquiree and the equity interests
issued by the Group. The consideration transferred includes the fair value of any asset or

liability resulting from a contingent consideration arrangement. Identifiable assets acquired

and liabilities and contingent liabilities assumed in a business combination are measured

initially at their fair values at the acquisition date. The Group recognizes any non-controllinginterest in the acquiree at the non-controlling interest’s proportionate share of the recognizedamounts of acquiree’s identifiable net assets.

Acquisition-related costs are expensed as incurred.
The excess of the consideration transferred, the amount of any non-controlling interest in theacquiree and the acquisition-date fair value of any previous equity interest in the acquiree overthe fair value of the identifiable net assets acquired is recorded as goodwill. If the total of

consideration transferred, non-controlling interest recognized and previously held interest

measured is less than the fair value of the net assets of the subsidiary acquired in the case ofa bargain purchase, the difference is recognized directly in the income statement.

Intercompany transactions, balances and unrealized gains on transactions between Group
companies are eliminated. Unrealized losses are also eliminated. Accounting policies ofsubsidiaries are changed, where necessary, to ensure consistency with the policies adopted
by the Group.
Changes in ownershipTransactions with non-controlling interests that do not result in loss of control are accounted

without change inowners. The difference between fair value of any consideration paid and the relevant shareinterests in subsidiaries for as equity transactions – that is, as transactions with the owners in their capacity as
controlacquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains orlosses on disposals to non-controlling interests are also recorded in equity.

Disposal of subsidiaries When the Group ceases to have control, any retained interest in the entity is remeasured to its

fair value at the date when control is lost, with the change in carrying amount recognized in‘other revenues and expenses (net)’ in profit or loss. The fair value is the initial carrying
amount for the purposes of subsequently accounting for the retained interest as an associate,

Hilti Financial Report 2014 | 17

Notes to the Consolidated Financial Statements

joint venture or financial asset. In addition, any amounts previously recognized in ‘othercomprehensive income (OCI)’ in respect of that entity are accounted for as if the Group had
directly disposed of the related assets or liabilities. This may mean that amounts previously

recognized in ‘other comprehensive income (OCI)’ are reclassified to ‘other revenues andexpenses (net)’ in profit or loss.
Associates

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.

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

initially recognized at cost. The Group’s investments in associates include goodwill (net of any

accumulated impairment loss) identified on acquisition. The Group’s share of its associates’

post-acquisition profits or losses is recognized in the income statement. The cumulative postacquisition movements are adjusted against the carrying amount of the investment. When theGroup’s share of losses in an associate equals or exceeds its interest in the associate,including any other unsecured receivables, the Group does not recognize further losses,
unless it has incurred obligations or made payments on behalf of the associate.

Unrealized gains on transactions between the Group and its associates are eliminated to theextent of the Group’s interest in the associates. Unrealized losses are also eliminated unlessthe transaction provides evidence of an impairment of the asset transferred. Accounting
policies of associates are changed, where necessary, to ensure consistency with the policies
adopted by the Group.
Joint arrangements

Under IFRS 11 investments in joint arrangements are classified as either joint operations or
joint ventures depending on the contractual rights and obligations of each investor.

Joint operations are joint arrangements whereby the parties that have joint control of thearrangement have rights to the assets, and obligations for the liabilities, relating to thearrangement. Joint control is the contractually agreed sharing of control of an arrangement,

which exists only when decisions about the relevant activities require unanimous consent of
the parties sharing control. The Group as a joint operator accounts for the assets, liabilities,
revenues and expenses in relation to its interest in a joint operation in accordance with the
IFRSs applicable to the particular assets, liabilities, revenues and expenses.

The Group’s joint operations are engaged in developing, manufacturing and selling products

for the construction industry. The majority of their output is sold to the parties of the joint
operation. The products are sold at arm’s length. For their cash flows, the joint operations fully
depend on the Group and the joint operation partner.

Intercompany transactions, balances and unrealized gains on transactions between the Groupand its joint operations are eliminated to the extent of the Group’s interest in the joint
operation. Unrealized losses are also eliminated. Accounting policies of joint arrangements arechanged, where necessary, to ensure consistency with the policies adopted by the Group.

Joint ventures are joint arrangements whereby the parties that have joint control of thearrangement have rights to the net assets of the joint arrangement. Joint control is thecontractually agreed sharing of control of an arrangement, which exists only when decisions
about the relevant activities require unanimous consent of the parties sharing control.
Investments in joint ventures are accounted by using the equity method of accounting (refer tosection associates above).

Hilti Financial Report 2014 | 18

Notes to the Consolidated Financial Statements(2.4) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided

to the chief operating decision-maker. The chief operating decision-maker, who is responsible

for allocating 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 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 and the cash
flow statement. Breakdown of the segment information in terms of products, services andgeographical areas is provided in note 37.

(2.5) Foreign currency translation
Functional andpresentation currency

Items included in the financial statements of each of the Group’s companies are measured
using the currency of the primary economic environment in which the entity operates (thefunctional currency). The consolidated financial statements are presented in Swiss francs,
which is the functional and presentation currency of the Hilti Corporation.

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
intercompany accounts receivables and payables, are recognized in the income statement.

Foreign exchange gains and losses relating to long-term intercompany foreign currency loans
are regarded as part of the net investment in the foreign entity and are recognized in ‘othercomprehensive 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 ‘other comprehensive income’ (OCI).
Translation on
consolidation

The results and financial position of all the Group’s companies 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); and

income 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; andthe difference between the transaction date rate and the closing rate on the change innet investments during the year.

Hilti Financial Report 2014 | 19

Notes to the Consolidated Financial Statements

On the foreign operation’s disposal, applicable exchange differences are reclassified to theincome statement and recognized as part of the gain or loss on disposal. When a foreign
operation is acquired, any applicable goodwill and fair value adjustments are treated as assets
and liabilities of the foreign entity and are translated at the closing rate.

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

Closing rates

2013

2014

2013

1 CAD

0.829

0.901

0.855

0.837

1 GBP

1.506

1.449

1.544

1.472

1 EUR

100 JPY

100 RUB
1 USD(2.6) Intangible assets

Average rates

2014

1.215
0.865
2.397
0.915

1.231
0.949
2.903
0.927

1.202
0.828
1.662
0.990

1.228
0.848
2.709
0.890

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.

Development costs are 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 beprobable future benefits that are directly attributable to the costs. In practice, only costs on
certain product development projects that are subjected to a stringent review process meetthis condition. Such assets are normally amortized on a straight-line basis over a five-year
period. All other development costs are recognized directly as an expense when incurred.

Other intangible assets consist mainly of database and application software, as well as
manufacturing patents. These assets are recognized at historical cost less accumulated

amortization and accumulated impairment losses, if any. They are amortized 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.

(2.7)

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.

Hilti Financial Report 2014 | 20

Notes to the Consolidated Financial Statements

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

30 to 40 years

Other operating assets

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.

(2.8) 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
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.

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

Intangible assets that have an indefinite useful life or intangible assets not ready to use are notsubject to amortization and are tested annually for impairment. Other intangible assets,
property, plant and equipment, and investment property are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognized 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 costsof disposal and its value in use. For the purposes of assessing impairment, assets are groupedat the lowest levels for which there are largely independent cash flows (cash-generating units).

(2.10) Financial assets

For the purposes of identifying accounting policies applied, financial assets are classified into
the following categories:financial assets at fair value through profit or loss;
loans and receivables; 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 fair This category has two subcategories: financial assets held for trading and those designated atvalue through profit orloss

fair 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.

Hilti Financial Report 2014 | 21

Notes to the Consolidated Financial Statements

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’ and ‘cash and cash equivalents’ in the balance sheet (see notes 2.12 and2.13).
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 noncurrent assets unless management intends to dispose of the investment within 12 months ofthe balance sheet date.

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

classified

asavailable-for-salefinancialassetsarerecognizedin‘othercomprehensive income’ (OCI). When these securities are sold or impaired, the accumulated fairvalue adjustment is reclassified to the income statement and recognized as part of gains andlosses from investment securities.

Financial assets and liabilities are offset and the net amount reported in the balance sheet
when there is a legally enforceable right to offset the recognized amounts and there is anintention to settle on a net basis or realize the asset and settle the liability simultaneously.

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 reclassified to the income statement.

Hilti Financial Report 2014 | 22

Notes to the Consolidated Financial Statements(2.11) 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. Standard costs are annually reviewed and updated in the light of current conditions. Cost
determined under this method approximates cost determined under the weighted averagemethod. 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) and other costs incurred in bringing the inventories to their present locationand condition. Net realizable value is the estimated selling price in the ordinary course ofbusiness, less costs of completion and direct selling expenses.

(2.12) Trade receivables

Trade receivables (see loans and receivables category of financial assets in note 2.10 above)
are recognized 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 31
days.

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.

(2.13) Cash and cash
equivalents(2.14) Share capital

Cash and cash equivalents include cash in hand, deposits held at call with banks and othershort-term highly liquid investments with original maturities of three months or less.

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 canceled, re-issued or disposedof. Where such shares are subsequently sold or re-issued, 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.

(2.15) 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.

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

Hilti Financial Report 2014 | 23

Notes to the Consolidated Financial Statements(2.16) Income taxes

The tax expense for the period comprises current and deferred tax. Tax is recognized in theincome statement, except to the extent that it relates to items recognized in ‘othercomprehensive income (OCI)’ or directly in equity. In this case, the tax is also recognized in‘other comprehensive income (OCI)’ or directly in equity, respectively.

Current income taxes

The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the balance sheet date in the countries where the company and its

subsidiaries operate and generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is

subject to interpretation. It establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Income taxes payable and refundable relating to the current or prior years are classified,
respectively, as current income taxes payable and current income taxes receivable.

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

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

(2.17) Employee benefits
Pension obligations

Group companies operate various post-employment schemes, including both defined benefit
and defined contribution pension plans. The schemes are generally funded through payments

to insurance companies or trustee-administered funds, determined by periodic (one to three
years) actuarial valuations.

A defined contribution plan is a pension plan under which the Group pays fixed contributions
into a separate entity and has no legal or constructive obligations to pay further contributions if

the fund does not hold sufficient assets to pay all employees the benefits relating to employee
service in the current and prior periods.

A defined benefit plan is either a pension plan that predefines the amount of pension benefit

that an employee will receive on retirement (usually dependent on one or more factors such asage, years of service and compensation) 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.

The liability recognized in the balance sheet in respect of defined benefit pension plans is thepresent value of the defined benefit obligation at the end of the reporting period less the fairvalue of plan assets. The defined benefit obligation is calculated at least every three years byindependent actuaries using the projected unit credit method. The present value of the defined

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 in which

Hilti Financial Report 2014 | 24

Notes to the Consolidated Financial Statements

the benefits will be paid, and that have terms to maturity approximating to the terms of therelated pension obligation. In countries where there is no deep market in such bonds, themarket rates on government bonds are used.

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

assumptions are recognized in ’other comprehensive income’ (OCI) in the period in which theyarise. Past-service costs are recognized immediately in the income statement.

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.
Termination benefits

Termination benefits are payable when employment is terminated by the Group before thenormal retirement date, or whenever an employee accepts voluntary redundancy in exchange

for these benefits. The Group recognizes termination benefits at the earlier of the following
dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when theentity recognizes costs for a restructuring that is within the scope of IAS 37 and involves thepayment of termination benefits. In the case of an offer made to encourage voluntary

redundancy, the termination benefits are measured based on the number of employees

expected to accept the offer. Benefits falling due more than 12 months after the end of thereporting period are discounted to their present value.
Long-service benefits

Some Group companies provide jubilee and other similar long-service benefits. The entitlement
to these 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.

Variable compensation The Group recognizes a liability and an expense for variable compensation based on changes

in key financial results, such as sales, operating profit, net income and capital employed as
specified in the employment contracts.

(2.18) Provisions

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, product liability and legal claims. Provisions for restructuring costs
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.

(2.19) Trade and otherpayablesHilti Financial Report 2014 | 25

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

Notes to the Consolidated Financial Statements(2.20) Revenue recognition

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.

(2.21) 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.

(2.22) 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 market risk, credit risk and investing excess liquidity.
Market risk

Currency risk

The Group operates globally and is exposed to risk arising from various currency exposures.
Currency risk arises from future commercial transactions, recognized assets and liabilities andnet investments in foreign operations.

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 net cash in- or outflows in each major foreign currency for the subsequent

12 months. For hedge accounting purposes, forward contracts are designated against therelevant amounts of projected intercompany sales by the parent company and 100%
(2013: 100%) of projected sales qualify as ‘highly probable’ forecast transactions.

Currency risks arising from net investments in foreign operations are only hedged in
exceptional cases.

Currency exposures arising from open balances with third parties and/or Group companies 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 and by limiting the proportions of investments in these currencies.

Hilti Financial Report 2014 | 26

Notes to the Consolidated Financial Statements

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

Swiss franc

strengthened (+10%)
2014

2013

USD

(4.2)

(2.6)

All other currencies

(4.4)

(3.0)

EUR

2.7

3.4

Swiss franc

weakened (–10%)
2014

2013

4.2

2.6

(2.7)

(3.4)

4.4

3.0

These effects result from the translation of monetary asset and liability positions held in foreign
currencies and from derivative contracts to hedge these foreign currency risks.

At December 31, if the Swiss franc had strengthened/weakened by 10% against the US dollar,
euro and all other currencies with all other variables held constant, ‘other comprehensive

income’ (OCI) would have been affected as follows:in CHF million

Swiss franc

strengthened (+10%)
2014

2013

Swiss franc

weakened (–10%)
2014

2013

USD

2.0

(1.4)

(2.0)

1.4

All other currencies

13.7

11.1

(13.7)(11.1)

EUR

–

–

–

–

These effects result from changes in the values (due to the respective Swiss franc movements)of CHF derivative contracts held to hedge foreign currency risk.
Interest rate risk

The Group has investments in interest-bearing assets, mainly deposits, and long-termborrowings, mostly consisting of bonds the Group itself has issued. Interest-bearing assets
and borrowings subject to variable rates or held for trading expose the Group to cash flowinterest 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 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 tohedge between 40% and 60% of the Group’s relevant interest exposure.

Based on 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:in CHF million

All currencies

Hilti Financial Report 2014 | 27

Increase of ten

Decrease of ten

2014

2013

2014

0.9

1.2

basis points

basis points

(0.9)

2013
(1.2)

Notes to the Consolidated Financial Statements

Separate simulations of the impact of interest rate changes on each of the Swiss franc, euro

and US dollar investment holdings have not been completed since an increase/decrease of ten
basis points is considered reasonably possible for each of the three currencies.

Due to interest rate derivatives, ‘other comprehensive income’ (OCI) would have been
impacted as follows:in CHF million

CHF

Increase of ten

Decrease of ten

2014

2014

2013

0.5

0.5

basis points

(0.5)

2013
(0.5)

basis points

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 6.6 million (2013: CHF 7.7 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 a deposit with the shareholder) 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 to demand deposits with banking institutions
and to a deposit with the shareholder (see note 42). For all major counterparty banking
institutions a minimum credit rating of ‘A’ must apply. The Group regularly reviews thecounterparties’ creditworthiness based on the ratings issued by Standard & Poor’s.
Management does not expect any losses from non-performance by these counterparties.

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 withtrade receivables.
Liquidity risk

Cash flow forecasting is performed in the operating companies of the Group and aggregatedby 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.

Hilti Financial Report 2014 | 28

Notes to the Consolidated Financial Statements

Surplus cash held by the operating companies over and above balance required for working
capital management is transferred to Corporate Treasury. Corporate Treasury invests surplus

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 1,222.8 million (2013: CHF 1,538.3 million) that are expected to readily generate cash
inflows for managing liquidity risk.

The table below analyzes 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:
in CHF million

Less than 1 Between 1
year

At December 31, 2014

Between 2

Over 5 years

and 2 years and 5 years

Borrowings

153.9

23.8

304.4

107.6

Trade and other payables

350.1

9.5

5.3

12.4

Finance lease liabilities

in CHF million

0.2

Less than 1 Between 1
year

At December 31, 2013

0.6

0.4

Between 2–

Over 5 years

and 2 years and 5 years

Borrowings (excluding finance lease liabilities)

447.6

70.2

261.6

159.6

Trade and other payables

342.6

6.9

4.0

12.8

Finance lease liabilities

0.1

0.6

0.6

–

All of the non-trading Group’s gross settled derivative financial instruments are in hedge
relationships and are due to settle within 12 months of the balance sheet date. These contracts

require undiscounted contractual cash inflows of CHF 574.5 million (2013: CHF 519.0 million)

and undiscounted contractual cash outflows of CHF 581.7 million (2013: CHF 481.1 million). Allof the non-trading Group’s derivative financial instruments are in hedge relationships and aredisclosed in note 16.

(2.23) 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.

Hilti Financial Report 2014 | 29

Notes to the Consolidated Financial Statements

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:in CHF million

2014

2013

Total equity

2,449.4

2,522.8

53.1

53.0

Total equity and liabilities

4,609.0

Total equity in % Total equity and liabilities

4,762.9

Based on the Group’s credit profile and outlook as assessed by the Credit Suisse Banking

Group during 2014 on the basis of the Group’s 2013 Financial Report a credit rating of ‘High A
stable’ was assigned (2013: ‘High A stable’) (see Credit Suisse: Swiss Corporate Credit
Handbook August 2014).

(2.24) Fair value estimation

The table below analyzes financial instruments carried at fair value, by valuation method. The
different levels have been defined as follows:

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:
in CHF million

Level 1

Level 2

Level 3Total

At December 31, 2014
AssetsFinancial assets at fair value
through profit and loss

Derivatives used for hedging
Liabilities

Derivatives used for hedging
in CHF million

34.2
–

13.3

–

–

34.2

–

14.3

–

14.3

Level 1–

Level 2

Level 3

13.3

Total

At December 31, 2013
AssetsFinancial assets at fair value
through profit and loss

Derivatives used for hedging
Liabilities

Derivatives used for hedging

32.1
–

33.8

–

–

32.1

–

2.9

–

2.9

–

33.8

There were no transfers between levels 1 and 2 during the year.
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.

Hilti Financial Report 2014 | 30

Notes to the Consolidated Financial Statements

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

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 2.10 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.

(2.25) 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.
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 reclassified 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).

Hilti Financial Report 2014 | 31

Notes to the Consolidated Financial Statements

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 reclassified 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 reclassified 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 reclassified to the income statement when
the foreign 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.

Hilti Financial Report 2014 | 32

Notes to the Consolidated Financial Statements(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, seld om
equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to thecarrying 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.

Such estimate requires consideration of historical loss experience, adjusted for current conditions, and judgments about the probableeffects of relevant observable data, including financial health of specific customers and market sectors or collateral values. Detaile d
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 o fhistorical loss experience. This process assumes a linear realizable value reduction based on age which might not always be reflectiveof market behavior. Detailed information concerning inventories is given in note 13.
(3.3) Goodwill

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policies stated in notes 2.6
and 2.9. The recoverable amounts of cash-generating units are determined based on value-in-use calculations which require mediumand long-term estimates. They comprise internal planning data (cash flows, growth rates, etc.) as well as parameters based on external
data (e.g. discount rates). Detailed information concerning the annual goodwill impairment test is given in note 7.
(3.4) Employee benefits

The status of various defined benefit plans depends on long-term actuarial assumptions that may differ from actual future

developments. The calculation of the discount rate, future increases in salaries/wages and pensions, and mortality are important
assumptions in actuarial valuations. Detailed information concerning the defined benefit plans is given in note 22.
(3.5) Income taxes

The measurement of current and deferred income tax liabilities or assets is dependent on the interpretation of income tax law s 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 carryforwards depends on the probability of future taxable profits of Group companies.

Several internal and external factors are used in the estimation of such future profits. Detailed information concerning income taxes isgiven in notes 11 and 36.

(3.6) 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 matterthat either individually or in the aggregate could likely have a material adverse effect on the company’s future financial position or

results of operations.

Hilti Financial Report 2014 | 33

Notes to the Consolidated Financial Statements(4)

Early adoption of IFRS requirements

During 2014, the Group has not early adopted the requirements of the following IFRS standards, which at December 31, 2014, havebeen issued but are not effective for the 2014 Group Financial Statements. The Group intends to adopt these standards, if app licable,
when they become effective.
Standard/

Amendment toStandard

IAS 19 Employee

Benefits (Amendment)

Effective dateContent

July 1,This amendment clarifies the treatment of contributions No significant impact expected.

2014

Importance for the Group

from employees or third parties to defined benefit plans.

Entities with plans that require contributions which varywith service will be required to recognize the benefit ofthose contributions over employee’s working lives.
IFRS 10 Consolidated
Financial Statements
and IAS 28 Invest-

January 1,
2016

ments in Associates

These amendments address an inconsistency between No significant impact expected.
IFRS 10 and IAS 28 in the sale or contribution of assets
between an investor and its associate or joint venture.

and Joint Ventures(Amendments)
IFRS 11 Joint

Arrangements(Amendment)

January 1,
2016This amendment provides new guidance on how to No significant impact expected.
account for the acquisition of an interest in a joint venture

operation that constitutes a business. The amendments

require an investor to apply the relevant IFRS 3 principles
for business combinations accounting.

IAS 1 Presentation of
Financial Statements(Amendments)

January 1,
2016

The amendments to IAS 1 are designed to further

encourage companies to apply professional judgment indetermining what information to disclose in their financial

The Group is currently assessing
the impact of IAS 1.

statements. For example, the amendments make clearthat materiality applies to the whole of financial
statements

and

that

the

inclusionofimmaterial

information can inhibit the usefulness of financial

disclosures. Furthermore, the amendments clarify thatcompanies

shoulduse

professional

judgmentindetermining where and in what order information ispresented in the financial disclosures.
IAS 16 Property, Plant
and Equipment andIAS 38 Intangible

January 1,
2016

Assets (Amendment)

IAS 27 Separate

Financial Statements(Amendment)This amendment clarifies that the use of revenue-based
methods to calculate the depreciation of property, plantNo significant impact expected.

and equipment is not appropriate. A revenue based

method can only be used in very limited circumstances
to amortize intangible assets.
January 1,
2016

The amendment allows entities to use the equity method No significant impact expected.
to account for investments in subsidiaries, joint ventures
and associates in their separate financial statements.

Hilti Financial Report 2014 | 34

Notes to the Consolidated Financial Statements

Standard/

Amendment toEffective dateStandard

Content

Importance for the GroupIFRS 15 Revenue from January 1,

This is the converged standard on revenue recognition. It The Group is currently assessing

Customers

and related interpretations. The principles in IFRS 15

Contracts with2017

replaces IAS 11 Construction Contracts, IAS 18 Revenue the impact of IFRS 15.
provide a more structured approach to measuring andrecognizing revenue by using a five-step model. Revenue
is recognized when a customer obtains control of a goodor service. A customer obtains control when it has theability to direct the use of and obtain the benefits fromthe good or service.
IFRS 9 Financial
Instruments

January 1,
2018

The final version of IFRS 9 Financial Instruments replaces The Group is currently assessing
IAS 39. The standard introduces new requirements for the impact of IFRS 9.
classification and measurement, impairment, and hedge
accounting. IFRS 9 retains but simplifies the mixed
measurement model and establishes three primarymeasurement categories for financial assets: amortized
cost, fair value through other comprehensive income(OCI) and fair value through profit or loss (P&L). For
financial liabilities there were no changes to classificationand measurement except for the recognition of changes

in own credit risk in OCI, for liabilities designated at fairvalue through profit or loss.

Hilti Financial Report 2014 | 35

Notes to the Consolidated Financial Statements(5)

Business combinations and transactions with non-controlling interests(5.1)

Business combinations

There were no business combinations during the reporting period.
(5.2) Transactions with non-controlling interests

During 2014, there were no transactions with non-controlling interests.
On January 1, 2013, the Group acquired an additional 24% interest in Hilti Saudi Arabia for Construction Tools LLC, Saudi Arabia, at a

net consideration of CHF 0.1 million increasing its ownership interest to 75%. The Group derecognized non-controlling interests of
CHF 3.4 million and recorded an increase in equity attributable to equity holders of the parent of CHF 3.3 million.

The effect of these changes in ownership interests on the equity attributable to equity holders of the parent is summarized i n the tablebelow:in CHF million

2014

2013

Carrying amount of non-controlling interests acquired–

3.4

Net effect on equity attributable to equity holders of the parent–

Net consideration to non-controlling interests

(6)

–

(0.1)
3.3

Financial assets and liabilities

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:in CHF million
Financial assets

Corresponding balance sheet item(s)Financial assets at fair value throughFinancial assets at fair value through profit or loss, derivative

Derivatives used for hedging

Derivative financial instruments

profit or loss

Loans and receivables

financial instruments

Cash and cash equivalents, other financial investments, tradeand other receivables

Available-for-sale financial assets

2014

2013

38.6

62.9

2,645.6

2,857.3

8.9–

Total financial assets

3.0–

2,693.1

2,923.2

11.6

1.3

931.9

1,246.9

Financial liabilities

Financial liabilities at fair value throughprofit or loss

Derivative financial instruments

Financial liabilities measured at

Bonds, long-term bank borrowings, trade and other payables,

Derivatives used for hedging
amortized cost

Total financial liabilities

Derivative financial instruments
short-term bank borrowings

2.7

946.2

1.6

1,249.8

Hilti Financial Report 2014 | 36

Notes to the Consolidated Financial Statements(7)

Intangible assets

in CHF million

Goodwill

Develop-

Other

ment costs intangible

Total

assetsCost 2014
Opening balance at January 1, 2014

Currency translation adjustment

Change in scope of consolidation
Additions

Disposals

Other transfers
Closing balance at December 31, 2014
Accumulated amortization 2014
Opening balance at January 1, 2014

Currency translation adjustment

Change in scope of consolidation
Additions

Impairment losses
Disposals

84.2
9.5
–
–

517.8
–

194.6

4.4

–

96.6

–

796.6

13.9
–

8.2

104.8

–

–

–

(28.6)(17.4)

93.7

585.8

189.8

869.3

(44.9)(262.4)(149.3)(456.6)

–

–

–

–

(7.2)
–

(25.2)––(41.9)
(3.8)

(2.7)

(46.0)(9.9)–(17.2)(59.1)(0.1)(29.1)

–

28.6

17.3

Closing balance at December 31, 2014

(77.3)(279.5)(152.0)(508.8)Net book values at December 31, 2014

16.4

306.3

37.8

360.5

Goodwill

Develop-

Other transfers

in CHF million

–

–

–

Other

ment costs intangible

45.9
–

Total

assetsCost 2013
Opening balance at January 1, 2013

86.6

524.6

195.5

806.7

Currency translation adjustment

(2.4)

–

(1.5)

(3.9)

Additions

–

74.0

5.1

79.1

Change in scope of consolidation
Disposals

Other transfers
Closing balance at December 31, 2013
Accumulated amortization 2013
Opening balance at January 1, 2013

–

–

–

–

–

(80.8)(4.5)(85.3)

84.2

517.8

194.6

796.6

–

(302.0)(133.4)(435.4)

–

–

–

–

–

1.9

Additions–(37.8)(19.7)(57.5)

–

80.8

4.5

85.3

Closing balance at December 31, 2013(44.9)(262.4)(149.3)(456.6)

Net book values at December 31, 2013

39.3

255.4

45.3

340.0

Impairment losses
Disposals

Other transfers

Hilti Financial Report 2014 | 37

(46.8)
–

(3.4)
–

1.0

–

Currency translation adjustment

Change in scope of consolidation

–

–

(1.7)
–

2.9
–

(51.9)–

Notes to the Consolidated Financial Statements

Of intangible assets, only development costs are internally generated; all other intangible assets are acquired. Other intang ible assets
consist mainly of patents, brands, customer lists and database/application software licenses. Additions to accumulated amortizationand impairment losses are included in depreciation and amortization (see note 32).

The goodwill of CHF 93.7 million (2013: CHF 84.2 million) arises from the acquisition of Unirac Inc. in 2010. In a ccordance with IAS 36,

goodwill is tested annually for impairment. Based on the assessment made in 2014, an impairment loss has been recognized in t heGroup’s 2014 financial statements of CHF 25.2 million (2013: impairment loss of CHF 46.8 million). Details are described below.

For impairment testing purposes, goodwill is solely allocated to the Group’s worldwide solar business as the cash-generating unit

(CGU). To test for possible impairment of goodwill, the discounted value of the estimated future cash flows of the CGU (its “value inuse”) is compared with its carrying amount. The future cash flows are estimated on the basis of the business plan approved bymanagement in general covering a three-year forecast period – 2015 to 2017 (2013: 2014 to 2016) – and a constant growth rate

assumption of 1.0% (2013: 1.0%) for the terminal value beyond 2017 (2013: beyond 2016). The value in use of the CGU is based on a
discount rate of 12.0% before tax (2013: 9.9%) and was determined to be below its carrying amount. The value in use of the CGU wasused as the recoverable amount since the fair value less costs of disposal was determined to be even lower. The recoverable a mountof the solar CGU is CHF 66 million as at December 31, 2014 (2013: CHF 92 million).

The 2014 impairment loss results from a reduction in projected cash flows due to a recent deterioration in the market conditions of thesolar business in Japan. This was mostly caused by the recently announced restrictions in the grid connection of solar parks in Japan.
There has been no observable change in the market conditions of the solar business in the US. This remains stable in line wit hprevious assessments.

The calculation of value in use is most sensitive to the following assumptions:

Projected cash flows: These largely depend on management’s expectations concerning the development of the solar market andthe planned business focus by the Group on this area of operation. The projected cash flows have been updated to reflect thedevelopments causing the 2014 impairment loss. Should the projected annual cash flows be further lowered by 10% the
impairment loss would increase by CHF 7 million.


Discount rate: The discount rate used reflects specific risks to the CGU solar and is derived from its weighted co st of capital(WACC). Should the post-tax discount rate be raised by 1.0% the impairment loss would increase by CHF 8 million.

Long-term growth rate: The long-term growth rate used for the relevant countries and markets is based upon management’s

expectations concerning the long-term development of the solar market as corroborated by external information sources. The

growth rate employed does not exceed the long-term average growth rate customarily used for the relevant countries andmarkets. Should the long-term growth rate be decreased to 0% the impairment loss would increase by CHF 6 million.

Hilti Financial Report 2014 | 38

Notes to the Consolidated Financial Statements(8)

Property, plant and equipmentin CHF million

Cost 2014
Opening balance at January 1, 2014

Currency translation adjustment

Change in scope of consolidation

Land andbuildings

760.6

(3.4)
–

Additions

13.2

Transfers to investment properties–

Disposals

Other transfers
Closing balance at December 31, 2014
Accumulated depreciation 2014
Opening balance at January 1, 2014

Currency translation adjustment

Change in scope of consolidation
Additions

Impairment losses

(4.8)
0.5

Plant and

Other

Assetsassetsstruction

machinery operating

803.3

(3.0)
–

11.6

(17.5)
–

12.6

516.2

(4.5)
–

–

9.6

(403.5)

–

–

(0.7)

(1,409.2)

–

(0.2)

–

–

–

33.3

Other transfers

–

–

–

Closing balance at December 31, 2014(405.4)(639.2)(413.9)Net book values at December 31, 2014

360.7

167.8

112.1

Hilti Financial Report 2014 | 39

–

–

–

–

2,250.4(45.7)

14.9–(22.7)(61.2)

151.3

–

4.6
–

–

2.2

Disposals

Transfers to investment properties––(615.0)(40.5)(11.1)–(38.9)(390.7)––2,170.0

152.7

526.0

(19.1)

(0.2)

84.3

807.0

2.1

89.9

Total

43.6

766.1

(0.2)

under con-

–
–

4.1
–

(105.3)
(0.9)

52.8
–
–

–

(1,458.5)

151.3

791.9

Notes to the Consolidated Financial Statements

in CHF million

Cost 2013
Opening balance at January 1, 2013

Currency translation adjustment

Change in scope of consolidation
AdditionsLand andbuildings

Plant and

Other

Assetsassetsstruction

machinery operating

764.2

782.9

534.6

53.5

–

–

–

–

(2.3)
4.3

3.9

19.5

(7.0)

–

–

Other transfers

3.3

19.4

6.8

Accumulated depreciation 2013
Opening balance at January 1, 2013

Currency translation adjustment

Change in scope of consolidation
Additions

Impairment losses

760.6

803.3

516.2

(381.1)(586.4)(416.3)

–

–

–

0.6

(18.2)–(3.3)(44.6)(2.2)–(1,383.8)

–

–

–

–

–

Other transfers

–

–

–

Closing balance at December 31, 2013

(390.7)(615.0)(403.5)Net book values at December 31, 2013

369.9

188.3

112.7

–

2,170.0–

54.2(90.0)

89.9(45.9)

21.5–(29.5)

–

8.0
–

–

4.5

Disposals

Transfers to investment properties––(58.7)

Closing balance at December 31, 2013

(5.3)

130.1

(22.4)–

2,135.2

65.8

(8.9)
–

0.1

Total

40.5

Disposals

Transfers to investment properties

under con-

1.8–

(108.7)
(2.2)

–

83.7

–

–

–

–

(1,409.2)

89.9

760.8

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, extensions of salesorganizations and the construction of the innovation center at corporate headquarters. 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 1.6 million(2013: 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 (2013: CHF 0.2 million) serve as security for other payables (see note 25) with the total amount of CHF 2.5 million (2013:
CHF 2.4 million).

Hilti Financial Report 2014 | 40

Notes to the Consolidated Financial Statements(9)

Investment property

in CHF million
Cost
Opening balance at January 1

Currency translation adjustment

Change in scope of consolidation
Additions

2014

2013

7.5

27.0

–

–

–
–

–
–

Disposals(0.3)(19.5)

Closing balance at December 31

7.2

7.5

(5.3)

(24.8)––

Transfers

Accumulated depreciation
Opening balance at January 1

Currency translation adjustment

Change in scope of consolidation
Additions

Impairment losses

–

–
–
–

–

–
–
–

Disposals–

19.5

Closing balance at December 31

(5.3)

(5.3)

Net book values at December 31

1.9

2.2

Fair value of investment property at December 31

3.9

4.9

Transfers––

The fair value of investment property as at December 31 is determined as follows: The land component is determined by appraisal

based on comparable property land values in the corresponding areas. The building component is determined as the estimateddepreciated replacement cost of the applicable buildings. A valuation has not been undertaken by an independent surveyor since total
investment property is insignificant. The fair values are within level 2 of the fair value hierarchy.
There are no restrictions on the realizability of investment property.
The following amounts related to investment property have been recognized in the income statement:in CHF million

2014

2013

Rental income

0.1

0.1

Direct operating expenses arising from investment properties that did not generate rental income––

Direct operating expenses arising from investment properties that generated rental income(10)

Investments in associates and joint ventures

The Group has no ownership interests in associates and joint ventures during the reporting period.

Hilti Financial Report 2014 | 41––

Notes to the Consolidated Financial Statements(11)

Deferred income taxes

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 net book values are as follows:in CHF million

2014

Recovery of deferred tax balances

More than 1 year

7.4

Less than 1 year

2013

0.3

115.9

100.2

Inventories

69.0

54.6

Provisions and employee benefits

93.4

123.3

Total
Components of deferred tax balances

Fixed and intangible assets

26.8

100.5

26.9
57.6

Receivables(96.4)(93.9)Tax losses

3.9

27.5

123.3

100.5

(23.3)(26.0)

Other

26.6

Total

of which recognized as deferred tax assets

146.6

of which recognized as deferred tax liabilities

27.8

126.5

The movements in net deferred tax assets (liabilities) during the reporting period are as follows:in CHF million

Inventories

Fixed and

Provisions

intangible

andassetsemployee

Receivables Tax

Total

Other

lossesbenefits
Net deferred income tax
assets/(liabilities)
Opening balance at January 1, 2014

Changes in scope of consolidation

54.6
–

26.9
–

57.6
–

(93.9)
–

27.5
–

27.8
–

(Charged)/credited to income statement

11.9

0.2

10.1

(5.7)

(23.5)(2.1)

Currency translation adjustment

2.5

(0.3)

0.3

3.2

(0.1)

0.9

(Charged)/credited to OCI

–

–

25.4

–

–

25.4

3.9

26.6

123.3

114.0

69.0

26.8

93.4

(96.4)

Opening balance at January 1, 2013

53.3

22.2

61.5

(85.4)

31.4

31.0

Changes in scope of consolidation

–

–

–

–

–

–

3.8

4.6

Currency translation adjustment

(2.5)

0.1

(Charged)/credited to OCI

Closing balance at December 31, 2013

–

54.6

2.7

(6.8)

(3.8)

(1.5)

(1.1)

(1.7)

(0.1)

(1.7)

–

(5.5)

26.9

57.6

–

(93.9)

–

(9.1)

–

Closing balance at December 31, 2014

(Charged)/credited to income statement

100.5

–

27.5

–

27.8

6.5

–

(1.0)
(5.5)
(7.0)

100.5

The category inventories includes the tax effects of temporary differences arising on unrealized intercompany profits as well as thosearising on differences between tax and accounting treatment regarding inventory measurements at the legal entity. The category fixedand intangible assets includes the tax effects of temporary differences arising both on intangible assets and on property, pla nt andequipment. The category provisions and employee benefits includes items charged/credited to ‘other comprehensive income (OCI)’

which are tax effects of temporary differences arising on remeasurements on defined benefit pension plans. The category receivables

includes tax effects on temporary differences arising on fleet management sales/receivables due to the different treatment in some tax
legislations (operating lease) and IFRS (finance lease) as well as on differences between tax and accounting treatment regard ing

Hilti Financial Report 2014 | 42

Notes to the Consolidated Financial Statements

receivable measurements at the legal entity. The category ‘other’ mainly includes tax effects on temporary differences arising on

accruals and financial instruments.

Deferred income tax assets are recognized for tax loss carryforwards to the extent that the realization of the related tax benefit throughthe future taxable profits is probable. Details are as follows:in CHF million

2014

2013

Tax loss carryforwards recognized in deferred tax

18.1

193.1

Total tax loss carryforwards

111.8

305.9

Unused tax loss carryforwards

93.7

112.8

Expiration of unused tax loss carryforwards:

Expiration < 1 year

8.0

6.3

Expiration > 5 years or no expiration date

80.8

100.3

Tax effect of unused tax loss carryforwards

24.3

31.8

Expiration 1 to <= 5 years

Unremitted earnings subject to withholding tax or other taxes

4.9

393.7

6.2

278.5

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 393.7 million (2013: CHF 278.5 million). Such amounts are permanently reinvested.
(12)

Other financial investments

in CHF million

2014

2013

1 to < 2 years

1.6

1.9

3 to < 4 years

1.6

1.4

Maturity

2 to < 3 years
4 to < 5 years>= 5 years
Total other financial investments
Further information

Fair values

0.2
0.4

0.1
–

10.5

10.0

14.3

13.4

14.3

13.4

Other financial investments are recognized at amortized cost. These comprise mainly long-term loans granted to third parties, deposits(e.g. in respect of rented premises) and other investments in equities.
(13)

Inventories

in CHF million

2014

2013

Raw materials

52.7

56.8

Finished goods

497.8

482.7

Work in progress
Total inventories

9.2

559.7

9.0

548.5

The change in inventories includes a currency translation adjustment which increases the inventories by CHF 4.5 million in 2014. Thisis due to the change in closing rates in 2014 compared to those in 2013.

Hilti Financial Report 2014 | 43

Notes to the Consolidated Financial Statements

Allowance made for possible inventory losses due to age and obsolescence totals CHF 42.5 million (2013: CHF 48.2 million). Thechange in the allowance recognized in the income statement is CHF 5.8 million (2013: CHF 5.7 million). This change is included in theline ‘change in inventory’.

Inventories totaling CHF 156.7 million (2013: CHF 114.6 million) serve as security for bank borrowings of CHF 17.3 million (2013: CHF
25.1 million) (see notes 24 and 28).
(14)

Trade and other receivables

in CHF million

2014

2013

Trade receivables

1,391.3

1,298.6

Trade receivables net

1,283.0

1,183.8

Total trade and other receivables

1,408.5

1,305.6

Current portion

1,004.5

943.2

Total trade and other receivables

1,408.5

1,305.6

1 to < 2 years

205.1

189.1

3 to < 4 years

54.4

48.9

Less adjustment for impairment of trade receivables
Other receivables

Non-current portion

Maturity of non-current portion

2 to < 3 years
4 to < 5 years>= 5 years(108.3)
125.5

404.0

124.4

10.7
9.4

(114.8)
121.8

362.4

100.5

10.4
13.5

404.0

362.4

82.5

86.3

Not due

4.2

2.2

Past due 91–180 days

6.4

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

5.5

Past due 181–360 days

12.1

Uncollectible notes

1.8

Past due > 360 days

Total aging of gross trade receivables individually determined to be impaired

37.7
67.7

5.9
8.3

16.7
42.9
6.1

82.1

Hilti Financial Report 2014 | 44

Notes to the Consolidated Financial Statements

in CHF million
Movements in the adjustment for the impairment of trade receivables
Opening balance of adjustment for the impairment of trade receivables at January 1

Additional impairment adjustment charged to income statement during year

2014

2013

114.8

99.8

(33.8)(32.9)

27.3

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

47.9

108.3

114.8

EUR

648.7

630.4

Other

608.8

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

151.0
1,408.5

Total trade and other receivables

123.9
551.3

1,305.6

The change in trade and other receivables includes a currency translation adjustment which increases the trade and other receivables
by CHF 5.6 million in 2014. This is due to the change in closing rates in 2014 compared to those in 2013.

The net change in the adjustment for the impairment of trade receivables is recognized in the income statement in the line ‘otheroperating expenses’.

Receivables totaling CHF 195.4 million (2013: CHF 174.6 million) serve as security for bank borrowings of CHF 84.2 million (2013: CHF
93.9 million) (see notes 24 and 28).

Other receivables primarily consist of VAT and tax refunds receivables totaling CHF 56.3 million (2013: CHF 50.8 million), deposits
totaling CHF 18.1 million (2013: CHF 17.7 million), advances totaling CHF 11.3 million (2013: CHF 11.3 million) and vendors with debit
balances totaling CHF 10.2 million (2013: CHF 11.1 million).

Details of the finance lease receivables included in trade receivables are as follows:in CHF million

2014

2013

Gross

Unearned

Net

Gross

UnearnedNet

investment

financeinvestment

investment

financeinvestmentin the lease

incomein the leasein the lease

incomein the lease< 1 year

353.5

51.4

302.1

323.5

45.2

278.3

1 to < 5 years

433.9

41.7

392.2

383.6

36.0

347.6

Total at December 31

787.5

93.1

694.4

707.2

81.2

626.0

>= 5 years

Unguaranteed residual values

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

0.1

–

0.1

–

(29.9)
–

0.1

–

0.1

–

(40.4)–

Accrued income and prepayments

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

Hilti Financial Report 2014 | 45

Notes to the Consolidated Financial Statements(16)

Derivative financial instruments(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 a ndpurchases transactions and foreign currency investment positions. The applicable derivative contracts are designated as cash flo w
and fair value hedges, respectively. The accounting treatment is described in the accounting policies, notes 2.24 and 2.25. Details ofderivative contracts outstanding at balance sheet date are as follows:in CHF million

USD

EUR

Other

Total

232.9

21.7

291.6

546.2

–

–

–

–

232.9

21.7

291.6

546.2

(11.1)

(0.1)

4.4

(6.8)

2014
Contract face amounts

Foreign currency forward contracts
Foreign currency options
Cross-currency swap
Total
Contract values

Foreign currency forward contracts
Foreign currency options
Cross-currency swap

–

–
–

–

–
–

–

–
–

–

–
–

(11.1)

(0.1)

4.4

(6.8)

Contract values recognized in income statement during current and prior years(10.0)

(0.1)

2.9

(7.2)

Total

(11.1)

(0.1)

4.4

(6.8)

Total
Recognition of contract values

Contract values recognized in the cash flow hedging reserve in equity

(1.1)

–

1.5

0.4

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

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

(1.1)

–

–

2.0

2.3

(Gains)/losses on cash flow hedges reclassified from equity to income statement

(0.3)

–

(2.0)

(2.3)

Opening balance at January 1

Closing balance at December 31

0.3

(1.1)

–

1.5
1.5

0.4
0.4

There was no ineffectiveness to be recognized in the income statement.
All contracts have a maturity of less than 12 months.

Hilti Financial Report 2014 | 46

Notes to the Consolidated Financial Statements

in CHF million

USD

EUR

Other

Total

Foreign currency forward contracts

101.1

42.9

275.8

419.8

Cross-currency swap

92.9

–

–

92.9

2013
Contract face amounts

Foreign currency options

6.8

–

–

6.8

200.8

42.9

275.8

519.5

Foreign currency forward contracts

3.7

0.1

6.4

10.2

Cross-currency swap

20.8

–

–

20.8

Total
Contract values

Foreign currency options

–

–

–

–

24.5

0.1

6.4

Contract values recognized in income statement during current and prior years

24.2

0.1

4.4

28.7

Total

24.5

0.1

6.4

31.0

0.3

–

1.5

1.8

–

(1.5)

(1.8)

Total
Recognition of contract values

Contract values recognized in the cash flow hedging reserve in equity

0.3

–

2.0

31.0

2.3

Movements of contract values recognized in the
cash flow hedging reserve in equity
Opening balance at January 1

Gains/(losses) on cash flow hedges taken to equity(Gains)/losses on cash flow hedges reclassified from equity to income statement
Closing balance at December 31

Hilti Financial Report 2014 | 47

0.3

–

0.3

–

(0.3)

2.0
2.0

2.3
2.3

Notes to the Consolidated Financial Statements(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 hedges. Gains and losses recognized in the cas h flow hedging reserve in equity on

interest rate swap contracts will be continuously released to the income statement until the repayment of the bank borrowings . The
accounting treatment is described in the accounting policies, notes 2.24 and 2.25. Details of derivative contracts outstanding atbalance sheet date are as follows:in CHF million

CHF

USD

EUR

Total

60.0

9.9

5.9

75.8

–

–

(0.1)

–

2014
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

–

5.9

(0.1)

(0.5)

(0.4)

(Gains)/losses on cash flow hedges reclassified from equity to income statement

(1.0)

0.3

–

–

Closing balance at December 31

5.9

in CHF million

Total

–

–

5.8

–

(0.9)

–

(0.7)

(0.1)

–

5.8

CHF

USD

EUR

Total

60.0

141.8

14.3

216.1

5.9

5.8

Movements of contract values recognized in the
cash flow hedging reserve in equity
Opening balance at January 1

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

7.4

7.4

2013
Outstanding interest rate swaps

Contract face amounts

Recognition of contract values

Contract values recognized in income statement during current and prior years

–

0.9

(0.1)

0.8

Contract values recognized in the cash flow hedging reserve in equity

(0.5)

(0.4)

–

(0.9)

–

(0.8)

–

(0.8)

0.2

0.4

Total

(0.5)

0.5

(0.1)

(0.1)

Movements of contract values recognized in the
cash flow hedging reserve in equity
Opening balance at January 1

Gains/(losses) on cash flow hedges taken to equity(0.7)

Closing balance at December 31(0.5)(Gains)/losses on cash flow hedges reclassified from equity to income statement

–

–

(0.4)

–

–

(0.7)
0.6

(0.9)

The fixed interest rates vary from 1.3% to 3.4% (2013: 1.3% to 4.9%) and the main floating rates are EURIBOR and LIBOR.

Hilti Financial Report 2014 | 48

Notes to the Consolidated Financial Statements(16.3) Reconciliationsin CHF million

Foreigncurrency
risks

Interest

rate risks

Total

2014

Current assets

7.4

–

7.4

Non-current assets

–

5.9

5.9

Current liabilities(14.2)(0.1)(14.3)

Total net book value derivative financial instruments at December 31

(6.8)

5.8

(1.0)

Cash flow hedging reserve in equity

0.4

5.8

6.2

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

0.4

7.4

7.8

(Gains)/losses on cash flow hedges reclassified from equity to income statement

(2.3)

(0.7)

(3.0)

Non-current liabilities

in CHF million–

Foreigncurrency
risks–

Interest

rate risks

–

Total

2013

Current assets

32.5

1.3

33.8

Current liabilities

(1.5)

(0.4)

(1.9)

Total net book value derivative financial instruments at December 31

31.0

(0.1)

30.9

Cash flow hedging reserve in equity

2.3

(0.9)

1.4

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

2.3

(0.7)

1.6

(Gains)/losses on cash flow hedges reclassified from equity to income statement

(1.8)

0.6

(1.2)

Non-current assets
Non-current liabilities

–
–

–

(1.0)

–

(1.0)

The cash flow hedging reserve in equity net of tax amounts to CHF 5.4 million (2013: CHF 1.2 million).
The Group enters into derivative financial instruments with various counterparties, principally financial institutions with i nvestment
grade credit ratings of at least A– according to Standard & Poor’s.

Hilti Financial Report 2014 | 49

Notes to the Consolidated Financial Statements(17)

Financial assets at fair value through profit or loss

All financial assets at fair value through profit or loss are classified as held for trading. 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
arising from product-related obligations, and (2) the funding of a deferred compensation plan for employees; andother investments in equities.

These financial assets are all classified as current assets because they are expected to be traded within 12 months of the ba lance
sheet date. However, their contractual maturities mostly differ from this position.
(18)

Cash and cash equivalents

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 a mount of CHF 22.2
million (2013: CHF 30.5 million).

Cash and cash equivalents include a deposit of CHF 240.9 million (2013: CHF 479.5 million) with the shareholder (see note 42).
(19)

Assets classified as held for saleAt balance sheet date 2014 and 2013 no assets are classified as held for sale.
(20)

EquityThe 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 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 December 31, 2014, of CHF 179.50 per participation certificate and of CHF 1,795 per share,amounting to a total of CHF 454.9 million (financial year 2013: CHF 392.8 million), is to be proposed at the 2014 annual general
meeting. This future proposed dividend is not recognized in these financial statements.

Hilti Financial Report 2014 | 50

Notes to the Consolidated Financial Statements

The disaggregation of changes of other comprehensive income by each type of reserve in equity is shown below:
in CHF million

Foreigncurrency

Cash flow Retained
hedgingearnings

translation reserve
reserve2014

Non-controlling

Totalinterests

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

–

7.8

–

–

7.8

Deferred tax on gains/losses on cash flow hedges taken to equity

–

(1.0)

–

–

(1.0)

from equity to income statement

–

(3.0)

–

–

(3.0)

reclassified from equity to income statement

–

0.4

–

–

0.4

0.6

–

–

reclassified to the income statement

21.8

Remeasurements on employee benefits(Gains)/losses on cash flow hedges reclassifiedDeferred tax on gains/losses on cash flow hedges
Foreign currency translation differences

–

1.0

22.2

4.2

–

1.0

27.0

–

–

(159.3)–(159.3)to the income statement––(133.9)–(133.9)Total other comprehensive income 2014

21.8

4.2

(133.9)1.0(106.9)Reclassification adjustments relating to disposals of foreign operations
Items that may be subsequently

Deferred tax on remeasurements on employee benefits
Items that will never be reclassified

in CHF million

21.2

–

Foreigncurrency

-

–

25.4

Cash flow Retained
hedgingearnings

translation reserve
reserve
2013

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

–

Non-

controlling

0.6

25.4

Total

interests

–

(0.2)

1.6

–

–
–

(0.2)

from equity to income statement

–

(1.2)

–

–

(1.2)

reclassified from equity to income statement

–

0.1

–

–

0.1

0.6

–

–

Deferred tax on gains/losses on cash flow hedges taken to equity(Gains)/losses on cash flow hedges reclassifiedDeferred tax on gains/losses on cash flow hedges
Foreign currency translation differences

Reclassification adjustments relating to disposals of foreign operations
Items that may be subsequently
reclassified to the income statement

Remeasurements on employee benefits

Deferred tax on remeasurements on employee benefits
Items that will never be reclassified
to the income statement
Total other comprehensive income 2013

Hilti Financial Report 2014 | 51––

(21.6)

–

–

1.6

–

(0.2)

(21.8)–

0.6(21.0)

0.3

–

(0.2)

(20.9)

–

–

47.6

–

47.6

–

–

42.1

–

42.1

(21.0)

0.3

42.1

(0.2)

21.2

–

–

(5.5)

–

(5.5)

Notes to the Consolidated Financial Statements(21)

Provisionsin CHF million

Restructuring Warranty

Product

Other

Total

liability

2.7

88.8

14.4

26.9

132.8

Amounts used

(2.1)

(64.3)

(8.2)

(6.9)

(81.5)

Currency translation adjustment

0.2

(1.8)

–

0.4

Opening balance at January 1, 2014

Additions

Unused reversals

Closing balance at December 31, 2014

in CHF million

3.3

(0.3)
3.8

79.6

0.7

(6.9)

(2.7)

95.4

Restructuring Warranty

9.6

(2.2)

4.2
Product

93.2

27.8
Other

(12.1)

(1.2)

131.2
Total

liability
Opening balance at January 1, 2013

3.7

80.9

4.3

29.1

118.0

Additions

2.7

90.8

12.2

8.6

114.3

(2.3)

(0.9)

(1.4)

(4.6)

Amounts used

(3.7)

(78.8)

Currency translation adjustment

–

(1.8)

Unused reversals

–

88.8

(9.3)

–

(0.1)

(1.9)

132.8

in CHF million

2014

2013

Current portion of total provisions

62.8

75.3

Non-current portion of total provisions

68.4

Total provisions at December 31

14.4(93.0)

26.9

Closing balance at December 31, 2013

2.7

(1.2)

131.2

57.5

132.8

Restructuring provisions mainly relate to reorganization projects of certain sales organizations.
Warranty provisions 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 l ag ofaround one to two years.

Product liability provisions are the estimated obligations arising from additional product-related exposures and legal claims that are notcovered by the normal and extended service warranties. Outlays and settlements are expected over a deferred pe riod. 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. For exposures covered by the product liability provisions of CHF 4.2 million (2013: CHF 14.4 million), claims forrecovery have been made and the Group has recognized corresponding reimbursement assets of CHF 1.4 million (2013: CHF 5.5
million) in ‘accrued income and prepayments’.

Other provisions are amongst others built up for obligations regarding legal claims and job accidents.

Hilti Financial Report 2014 | 52

Notes to the Consolidated Financial Statements(22)

Employee benefits

Employee benefits creating obligations of the Group to its employees comprise defined benefit plans, other long -term employee
benefits and short-term employee benefits. The Group also provides employee benefits through defined contribution plans.
Defined benefit plans

Swiss pension plan
The Group’s largest defined benefit pension plan is located in Switzerland: It covers employees of the parent company as well as of
the Swiss and other Liechtenstein-based Group companies (the ‘Swiss pension plan’). The Swiss pension plan accounts for 78.7%(2013: 78.9%) of the Group’s total defined benefit obligation and 85.8% (2013: 85.8%) of the Group’s plan assets.

The Swiss pension plan is funded through a legally separate trustee-administered pension fund. The pension plan is overseen by aregulator as well as by a state supervisory body. The pension plan’s most senior governing body (Board of Trustees) must becomposed of equal numbers of employee and employer representatives. The Board of Trustees is responsible for the investment of

the assets. When defining the investment strategy, it takes account of the pension fund’s objectives, benefit obligations and risk
capacity. The investment strategy is defined in the form of a long-term target asset structure (investment policy). The Board ofTrustees delegates the implementation of the investment policy – in accordance with the investment strategy – to an Investment
Committee. The cash funding of the plan is designed to ensure that present and future contributions should be sufficient to meet future

liabilities. Further on, the Board of Trustees is able to adapt the contributions and benefits. There is a stop-loss insurance which covers
the risk from a certain excess amount (e.g. for disability or death).

The Swiss pension plan contains a cash balance benefit formula, accounted for as a defined benefit plan. Employer and employe econtributions are defined in the pension fund rules in terms of an age-related sliding scale of percentages of remuneration. Under
Swiss law, the pension fund guarantees the vested benefit amount as confirmed annually to members. Interest may be added tomember balances at the discretion of the Board of Trustees (i.e. 1.75% in 2014 and 1.5% in 2013). At retirement date, members havethe right to take their retirement benefit as a lump sum, an annuity or part as a lump sum with the remaining balance converted to a
fixed annuity at the rates defined in the fund rules. The Board of Trustees may change the conversion rate at their discretion subject tothe plan’s funded status and the requirements of the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension

Plans (BVG).

Other defined benefit plans
The remaining defined benefit plans are located in Austria, Germany, Great Britain, Italy, Taiwan, France, Japan and Korea. Only thelast three plans listed are still open for new plan participants.
Other long-term employee benefits

Other long-term employee benefits comprise jubilee and other long-service benefits, a long-term incentive and other long-term
employee benefits. The relevant period for the long-term incentive is 2013–2015 with payment to be made in 2016. Historically thelevel of outflows concerning other long-term employee benefits (excluding long-term incentive) has been constant each year.
Short-term employee benefits

Short-term employee benefits such as short-term variable compensation are included in ‘accrued liabilities and deferred income’ (seenote 27).

Defined contribution plans

The employer’s contribution totals CHF 29.0 million (2013: CHF 23.0 million).

Hilti Financial Report 2014 | 53

Notes to the Consolidated Financial Statements(22.1) Employee benefit obligations (defined benefit plans and other long-term benefits)

in CHF million

Switzerland

Fair value of plan assets

Present value of defined benefit obligation
Net defined benefit (liability)/asset
at December 31
Other plans

Fair value of plan assets

Present value of defined benefit obligation
Net defined benefit (liability)/asset
at December 31
Total

Fair value of plan assets
Present value of defined benefit obligation
Net defined benefit (liability)/asset
at December 31

Present value of other employee benefits
Total net book value employee benefits
at December 31

Funded2014

Unfunded Total

Funded786.6––(1,051.5)(863.9)

726.2

–
–

(863.9)(264.9)–(264.9)(137.7)–(137.7)(1,051.5)

129.9

–

786.6

2013

Unfunded Total

129.9

120.0

–

726.2

120.0

(234.3)(50.6)(284.9)(186.6)(44.3)(230.9)(104.4)(50.6)(155.0)(66.6)(44.3)(110.9)

916.5

–

916.5

846.2

–

846.2

(1,285.8)(50.6)(1,336.4)(1,050.5)(44.3)(1,094.8)(369.3)(50.6)(419.9)(204.3)(44.3)(248.6)–(122.5)(122.5)–(68.5)(68.5)(369.3)(173.1)(542.4)(204.3)(112.8)(317.1)

2014

2013

in CHF million
Current portion of total net book value employee benefits(15.8)

Non-current portion of total net book value employee benefits(526.6)(542.4)

Total net book value employee benefits(8.7)(308.4)(317.1)(22.2) Reconciliation of fair value of plan assets

in CHF million

2014

2013

Switzerland Other plans Total
Opening balance at January 1

Interest income on plan assets

Return on plan assets excluding interest income
Contributions by employer

Contributions by plan participants

Switzerland Other plans Total

726.2

120.0

846.2

702.5

117.0

819.5

43.8

4.5

48.3

13.4

1.6

15.0

16.1
23.4
14.9

5.1
4.6
0.1

21.2
28.0
15.0

14.0
24.9
15.7

4.5
7.1
0.8

18.5
32.0
16.5

Benefits paid

(37.8)(8.0)(45.8)(44.3)(10.7)(55.0)

Settlements

–

(0.2)

(0.2)

–

(0.1)

(0.1)

786.6

129.9

916.5

726.2

120.0

846.2

Currency translation adjustment
Closing balance at December 31

–

3.8

3.8

–

(0.2)

(0.2)

Hilti Financial Report 2014 | 54

Notes to the Consolidated Financial Statements(22.3) Reconciliation of present value of defined benefit obligationin CHF million

2014

2013

Switzerland Other plans Total
Opening balance at January 1

Current service cost

Interest expense on defined benefit obligation
Actuarial gains/(losses)(863.9)(25.1)(19.9)(230.9)

(5.9)
(8.8)

Switzerland Other plans Total(1,094.8)(882.4)(224.7)(1,107.1)(28.7)(17.6)(7.9)(25.5)(31.0)(162.2)(45.4)(207.6)

37.8

9.3

47.1

Past service cost

(3.3)

Currency translation adjustment–

Contributions by plan participants(14.9)

Benefits paid
Settlements

Closing balance at December 31–(1,051.5)–(24.6)
34.8(14.9)(15.7)–(3.2)–(284.9)(8.8)(33.4)

(2.2)

32.6

44.3

(0.7)

13.0

(16.4)

(3.3)

(2.7)

(0.4)

(3.1)

(3.2)

–

0.8

0.8

–

–

(1,336.4)(863.9)57.3–(230.9)–(1,094.8)(22.4) Components of defined benefit costs recognized in the income statementin CHF million

2014

2013

Switzerland Other plans Total

Current service cost
Past service cost

Gains/(losses) on settlements
Total service cost

Interest income on plan assets

Interest expense on defined benefit obligation
Net interest income/(expense)
on defined benefit plans
Total defined benefit costs
recognized in the income statement

Switzerland Other plans Total(25.1)(5.9)(31.0)(24.6)

(8.8)

–

(0.2)

(0.2)

–

(0.1)

(3.3)

(28.4)

–

(3.3)

(6.1)

(34.5)(27.3)(19.9)(8.8)(28.7)

(3.8)

(3.7)

(32.2)

(9.8)

16.1

5.1



Total service cost – in ‘personnel expenses’ (see note 31); andInterest income and expense – in ‘other revenues and expenses (net)’ (see note 34).

Hilti Financial Report 2014 | 55

(0.4)

(33.4)

(3.1)
(0.1)

(9.3)

(36.6)(17.6)(7.9)(25.5)

(7.5)

(3.6)

(3.4)

(7.0)

(42.0)(30.9)(12.7)(43.6)

21.2

In the income statement, the various components of the defined benefit costs are included as follows:


(2.7)

14.0

4.5

18.5

Notes to the Consolidated Financial Statements(22.5) Remeasurements of the net defined benefit (liability)/asset

in CHF million

2014

2013

Switzerland Other plans Total

Actuarial gains/(losses) arising fromchanges in demographic assumptions
Actuarial gains/(losses) arising fromchanges in financial assumptions

Actuarial gains/(losses) arising from experience adjustments

–

(0.1)

(0.1)

–

(2.1)

(2.1)

(120.7)(47.6)(168.3)

34.8
–

0.3

(0.4)

35.1

(162.2)(45.4)(207.6)

34.8

(2.2)

32.6

43.8

4.5

48.3

13.4

1.6

15.0

(118.4)(40.9)(159.3)

48.2

(0.6)

47.6

(41.5)

Total actuarial gains/(losses)
on defined benefit obligation

Return on plan assets excluding interest income
Total remeasurements recordedin other comprehensive income

Switzerland Other plans Total

2.3(39.2)(0.4)(22.6) Plan asset classes at December 31

in CHF million

2014
Quoted2013

Non-quoted Total%

Quotedmarket price market priceNon-quoted Total%

market price market priceCash and cash equivalents

55.7

–

55.7

6.1%

40.7

–

40.7

4.8%

Equity instruments

253.7

–

253.7

27.7%

243.7

–

243.7

28.8%

5.8

112.0

117.8

12.9%

11.1

94.0

105.1

12.4%

Investment funds

56.7

51.9

108.6

11.8%

31.1

46.5

77.6

Structured debt

–

–

–

–

–

–

–

Debt instruments (e.g. bonds)
Real estate
Derivatives

Asset-backed securities
OthersTotal plan assets at fair value

331.2
–
–
–

703.1

–
–
–

49.5

213.4

331.2
–
–

49.5

916.5

36.1%
–
–

5.4%

100.0%

341.2
–
–

0.2

668.0

–
–
–

37.7

178.2

341.2
–
–

37.9

846.2

40.3%
–

9.2%
–
–

4.5%

100.0%The Group does not make use of any assets held by pension plans.
Cash and cash equivalents are primarily invested with financial institutions that have at least an ‘A’ rating or in money market funds.
The allocation to cash and cash equivalents of the pension plan in Switzerland is 7.0% (2013: 5.5%).

Equity instruments represent investments in equity funds and direct investments. They generally have quoted market prices in an
active market. The allocation to equities of the pension plan in Switzerland is 27.3% (2013: 26.0%). The pension plans’ assets do notinclude any shares or participation certificates of Hilti Corporation.

Debt instruments (e.g. bonds) generally have a credit rating that is no lower than ‘BBB’, have quoted market prices in an active market
and are primarily direct investments. The allocation to debt instruments of the pension plan in Switzerland is 38.3% (2013: 43.3%).

Real estate represents indirect and direct investments in residential and commercial properties. Indirect investments comprise listed

and unlisted real estate funds, investment foundations and unlisted real estate fund of funds. Direct investments are primarily held inresidential properties in Liechtenstein. Directly held real estate is periodically valued by an independent expert. The allocation to realestate of the pension plan in Switzerland is 15.0% (2013: 14.2%).

Hilti Financial Report 2014 | 56

Notes to the Consolidated Financial Statements

Investment funds represent investments with an insurance company and a mandate with a bank which invests in a lternative asset
classes (e.g. hedge funds and commodities). In case of investment funds, no quoted market prices in an active market are usuallyavailable. The allocation to investment funds of the pension plan in Switzerland is 6.1% (2013: 5.9%).

The position ‘others’ primarily includes private equity investments, mezzanine investments and insurance-linked securities, among

others. Leveraging and short selling is prohibited. No quoted market prices in an active market are usually available. The al location to‘others’ of the pension plan in Switzerland is 6.3% (2013: 5.2%).
(22.7) Plan members at December 31

financial amounts in CHF million

Plan members

Defined benefit obligation
Share in %Average weighted duration in years

ActiveDeferred

5,784

2014

961

(660.5)(118.2)

20.9

24.3

49.5%

8.8%

Retired
1,494

Total

Active8,239(557.7)(1,336.4)

12.8

17.8

41.7%

100.0%

Deferred

5,871

2013

Retired880(571.5)(52.8)

52.2%

4.8%

19.9

23.6

1,496

Total
8,247

(470.5)(1,094.8)

12.4

16.8

43.0%

100.0%The employer’s best estimate of contributions expected to be paid to defined benefit plans for the financial year 2015 is CHF 25.0

million.

(22.8) Actuarial assumptions

Actuarial assumptions are based on long-term economic factors in the respective countries. Each item of ‘other plans’ is a weighted
average in relation to the relevant underlying component. The significant assumptions are as follows:
2014

2013

Switzerland Other plans Total

Discount rate

Future salary increase
Future pension increase

Switzerland Other plans Total

1.3%

2.8%

1.6%

2.3%

3.8%

2.6%

–

2.1%

0.5%

–

1.8%

0.4%

1.5%

1.4%

1.5%

1.5%

2.9%

1.8%

Life expectancy is reflected in the defined benefit obligations by using mortality tables of the country in which the plan is located. The
generational tables BVG/LPP 2010 have been used for Switzerland.

In general, the present value of the defined benefit obligations is determined annually by independent actuaries using the pr ojected
unit credit method. Actuarial assumptions are required for this purpose.

The discount rate, future salary increase and life expectancy were identified as significant actuarial assumptions. The follo wing impacts
on the defined benefit obligation are to be expected:


A 0.25% increase/decrease in the discount rate would lead to a decrease/increase of 4.4% in the defined benefit obligation.
A 0.25% increase/decrease in expected future salaries would lead to an increase/decrease of 0.7% in the defined benefit
obligation.



A one year increase/decrease in life expectancy would lead to an increase/decrease of 2.3% in the defined benefit obligation.

The sensitivity analysis is based on realistically possible changes as of the end of the reporting period. Each change in a significant
actuarial assumption was analyzed separately as part of the test. Interdependencies were not taken into account.

Hilti Financial Report 2014 | 57

Notes to the Consolidated Financial Statements

(23)

Bonds

The bonds were issued by Hilti Corporation. Further details of the individual bonds are included in the key figures (see page 4).
in CHF million

2014

2013

< 1 year

31.9

299.8

2 to < 3 years

131.1

Maturity

1 to < 2 years
3 to < 4 years

–

32.5
–

99.7

133.8

>= 5 years

100.1

148.6

Total bonds

410.3

714.5

CHF

199.9

499.7

Total bonds

410.3

714.5

4 to < 5 years

Currency

EUR

47.5

210.4

Further information

Fair values

Average effective interest rates (in %)

431.3

1.8

99.8

214.8

718.5

2.5

The euro bonds (‘Schuldscheindarlehen’) are not tradeable on any recognized stock exchange.
The fair values of Swiss franc bonds totaling CHF 214.0 million (2013: CHF 503.7 million) are based on the quoted market prices andare within level 1 of the fair value hierarchy. The fair values of the euro bonds totaling CHF 217.3 million (2013: CHF 214.8 million) arebased on the cash flows discounted using a market-based interest rate and within level 2 of the fair value hierarchy.
(24)Long-term bank borrowings

in CHF million

2014

2013

1 to < 2 years

16.9

29.6

3 to < 4 years

2.7

1.6

>= 5 years–

0.3

Maturity

2 to < 3 years
4 to < 5 years
Total long-term bank borrowings
Currency

USD

8.5
0.4

28.5

–

7.9
0.1

39.5

8.9

EUR

28.5

30.6

Total long-term bank borrowings

28.5

39.5

CHF 28.5 million (2013: CHF 30.5 million) of the total long-term bank borrowings are secured by receivables totaling CHF 28.5 million(2013: CHF 31.2 million). None of the long-term bank borrowings as at December 31, 2014, are secured by inventories and receivables(2013: CHF 8.9 million of the total long-term bank borrowings have been secured by inventories totaling CHF 40.6 million andreceivables totaling CHF 37.3 million) (see notes 13 and 14).

Hilti Financial Report 2014 | 58

Notes to the Consolidated Financial Statements(25)

Trade and other payables

in CHF million

2014

2013

Trade payables

217.4

212.6

Total trade and other payables

378.5

367.6

Current portion

350.3

342.7

Total trade and other payables

378.5

367.6

1 to < 2 years

10.1

7.5

2 to < 3 years

2.1

1.4

4 to < 5 years

2.0

Other payables

161.1

Non-current portion

28.2

Maturity of non-current portion

3 to < 4 years

1.6>= 5 years

155.0

24.9

1.2
2.0

12.4

12.8

EUR

154.4

157.9

USD

48.8

21.1

28.2

Total non-current trade and other payables
Currency denominations of the carrying amounts of trade and other payables

CHF

60.2

Other

115.1
378.5

Total trade and other payables

24.9

74.3

114.3
367.6

The change in trade and other payables includes a currency translation adjustment which reduces trade and other payables by
CHF 1.2 million in 2014. This is due to the change in closing rates in 2014 compared to those in 2013.

Other payables primarily consist of liabilities for personnel expenses totaling CHF 8.8 million (2013: CHF 6.6 million), liabilities for social

contributions totaling CHF 25.2 million (2013: CHF 27.6 million), liabilities for source-deducted taxes and VAT totaling CHF 74.9 million(2013: CHF 69.3 million) and customers with credit balances totaling CHF 23.7 million (2013: CHF 22.7 million).

CHF 2.5 million (2013: CHF 2.4 million) of other payables are secured by mortgages over land and buildings totaling CHF 0.2 million(2013: CHF 0.2 million) (see note 8).

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

Minimum
lease

2014

Interest

Principal

payments< 1 year0.2>= 5 years–

1 to < 5 years
Total at December 31

Minimum
lease

2013

Interest

Principal–

0.1

payments
–

0.2

0.1

–

–

–

1.0

0.1

1.2

0.1

0.9
1.1

1.2

0.2

1.3

0.2

–

1.0
–

1.1

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.

Hilti Financial Report 2014 | 59

Notes to the Consolidated Financial Statements(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 y ears.
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

in CHF million

2014

2013

EUR

38.6

54.9

RUB

13.3

Currency

USD

22.0

BRL

18.0
–

7.0

7.5

Other

28.5

42.4

Total short-term bank borrowings

114.6

125.3

TRY

5.2

2.5

CHF 17.3 million (2013: CHF 16.2 million) of the total short-term bank borrowings are secured by inventories totaling CHF 156.7 million(2013: CHF 74.0 million) and receivables totaling CHF 128.5 million (2013: CHF 67.8 million). CHF 38.4 million (2013: CHF 38.3 million)of the total short-term bank borrowings are secured by receivables totaling CHF 38.4 million (2013: CHF 38.3 million) (see notes 13
and 14).
(29)

Operating revenues

Categories of operating revenues are as follows:in CHF million

2014

2013

Net sales of goods

4,334.0

4,190.1

Total net sales

4,497.3

4,340.2

4,599.9

4,432.5

Net sales of services
Other operating revenues
Total operating revenues

163.3
102.6

150.1
92.3

The above categories ‘net sales of goods’ and ‘net sales of services’ in terms of IAS 18 Revenue represent, respectively, revenue fromsales of goods and revenue from rendering of services. Other operating revenues, amongst others, consist of finance lease interests
including related risk premiums.

A breakdown of net sales by geographical areas and by major countries is given in note 37.

Hilti Financial Report 2014 | 60

Notes to the Consolidated Financial Statements(30)

Material costs

in CHF million

2014

2013

Materials(1,345.9)(1,302.2)

Total material costs(1,363.0)(1,317.9)(1,356.3)(1,316.7)

Outsourced manufacturing
Change in inventory
Total material costs including change in inventory(31)(17.1)
6.7(15.7)
1.2

Personnel expenses

Personnel expenses comprise wages and salaries and social contributions. Social contributions include expenses for pensions a ndsimilar liabilities in addition to social security contributions.
in CHF million

2014

2013

Salaries and wages(1,449.6)(1,386.5)

Total personnel expenses(1,783.9)(1,702.9)

2014

2013

Sales

17,372

16,760

Production

2,714

2,677

Social contributions(334.3)(316.4)The breakdown of the number of employees of Group companies by function is as follows:

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

(32)

1,223
939

22,248

1,124
895

21,456

Depreciation and amortization

This position comprises depreciation, amortization and impairment losses on intangible assets, property, plant and equipment andinvestment property. For both 2014 and 2013, impairment losses mostly relate to goodwill arising from the acquisition of Unir ac Inc.

and the rest to development projects due to the phase out of the related products (see note 7). The position is shown at the average
rate.

(33)

Other operating expenses

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

Hilti Financial Report 2014 | 61

Notes to the Consolidated Financial Statements(34)

Other revenues and expenses (net)Other revenues and expenses (net) comprise:in CHF million

2014

2013

Gains/(losses) on disposal of foreign operations and investments

0.6

4.9

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

0.2

(0.1)

Interest and dividend revenues

6.0

Gains/(losses) on foreign currency hedging instruments(20.6)Net interest income/(expense) on defined benefit plans(7.5)

Gains/(losses) on foreign currencies

Total other revenues and (expenses) (net)

(35)

15.2

(6.1)

5.6

18.5

(37.9)(7.0)(16.0)

Finance costs

Finance costs are reported at the gross interest expense amount. Interest expense on financial liabilities measured at amorti zed cost
represents the total interest expense on financial liabilities not at fair value through profit or loss. Interest income from investments is
separately included in ‘other revenues and expenses (net)’.
(36)

Income tax expensein CHF million

2014

2013

Current tax(64.0)(48.4)

Total income tax expense(72.5)(50.0)

Deferred tax

(8.5)

(1.6)

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:in CHF million

2014

2013

Net income before income tax

498.8

354.1

Tax calculated at domestic tax rates applicable to profits in the respective countries(70.7)(31.8)

Expenses not deductible for tax purposes(18.6)(27.6)Tax losses for which no deferred tax asset has been recognized

(1.4)

(3.0)

Income not subject to tax

Utilization of previously unrecognized tax losses

5.7
5.7

4.6
5.4

Tax attributable to prior years

10.9

Income tax expense(72.5)(50.0)

Weighted average applicable tax rate (in %)

14.2

9.0

Other effects

(4.1)

5.6

(3.2)

The line ‘Expenses not deductible for tax purposes’ includes the tax effect of a non-tax deductible goodwill impairment of CHF 25.2

million (2013: CHF 46.8 million) (see note 7). The line ‘Other effects’ includes the effects of changes in tax rates and expe nses orincomes subject to different tax rates.

Hilti Financial Report 2014 | 62

Notes to the Consolidated Financial Statements(37)

Segment information

In accordance with IFRS 8 Operating Segments, paragraph 5, the Group operates in only one single operating segment. Additiona l
information concerning products, services and geographical areas is as follows:(37.1) Net sales information about products and services

in CHF million

2014

2013

Products

2,060.4

1,966.8

Products

2,273.6

2,223.3

Total Fastening & Protection Systems

2,302.7

2,251.9

Total Group

4,497.3

4,340.2

Electric Tools & Accessories
Electric Tools & Accessories

Services

Total Electric Tools & Accessories

Fastening & Protection Systems
Fastening & Protection Systems

Services

134.2

2,194.6

29.1

121.5

2,088.3

28.6(37.2) Net sales information about geographical areas

in CHF million

2014

2013

Change in Change in
CHF (%)

local

currencies(%)

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

2,221.1

2,177.9

2.0

3.5

176.5

168.2

4.9

14.6

3.7

14.9

924.1

867.1

632.7
542.9

4,497.3

603.3
523.7

4,340.2

6.6
4.9
3.6

9.5

10.6
7.5

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

in CHF million

2014

2013

USA

749.0

692.8

France

398.7

403.4

Germany
Liechtenstein (country of domicile)
Other countries
Total GroupNet sales by major countries are based on the country of domicile of the respective Group companies.
The Group has no customer exceeding the threshold of 10% of the Group’s revenue.

Hilti Financial Report 2014 | 63

615.0
68.6

2,666.0

4,497.3

600.0
72.7

2,571.3

4,340.2

Notes to the Consolidated Financial Statements(37.4) Selected non-current assets information for major countries*

in CHF million

2014

2013

Liechtenstein (country of domicile)

640.3

546.2

Austria

87.6

90.9

Germany

175.2

USA

53.3

Other countries

197.9

186.7

75.5

203.7

1,154.3

1,103.0

in CHF million

2014

2013

Guarantees

7.1

7.5

Other contingent liabilities

2.5

1.9

in CHF million

2014

2013

< 1 year

91.5

90.6

Total Group* Excluding non-current financial assets and deferred taxes(38)

Contingent liabilities

9.6

Total contingent liabilities

9.4

Management considers the possibility of any outflow in settlement to be remote.
(39)

Other commitments

Payment commitments arising from non-cancelable operating lease contracts are as follows:

1 to < 5 years

164.0

136.5

Total at December 31

309.4

263.6

Future minimum sublease payments expected to be received––

Contingent rent expense for operating leases

0.1

0.1

2014

2013

>= 5 years

53.9

Sublease payments received in current period

–

36.5

–

Capital commitments contracted for at the end of the reporting period but not yet incurred are as follows:in CHF million
Intangible assets

0.3

Property, plant and equipment

12.1
12.4

Total at December 31

(40)

0.4

41.4
41.8

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 222.3 million (2013: CHF 188.5 million), thereof
CHF 96.6 million (2013: CHF 74.0 million) were recognized as intangible assets (see development costs in note 7).

Hilti Financial Report 2014 | 64

Notes to the Consolidated Financial Statements(42)

Related party disclosures(42.1) Key management personnel compensation

Details of compensation of key management personnel are as follows:
financial amounts in CHF million

2014

2013

Number of Remembers

Board of Directors

Corporate Management (Executive Board and Executive Management Team)
Total

7

27

34

Number of Re-

muneration members

3.4

48.5

51.9

muneration

7

27

34

3.1

37.1

40.2

Salaries and other short-term employee benefits

31.1

26.3

Other long-term employee benefits

16.3

10.5

Post-employment benefits

Total employee benefits to key management

4.5

51.9

3.4

40.2

Employee benefits to key management include both fixed and variable components. The variable components are performance -linked

and include a long-term incentive 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 201 4 portion of theestimated ultimate amount payable has been recognized as an obligation at December 31, 2014, under the heading of other long-term
employee benefits (see note 22).

(42.2) Ownership of parent

100% of the registered shares of the Hilti Corporation are owned by the Martin Hilti Family Trust.
(42.3) Cash deposit with shareholder

Cash and cash equivalents include a deposit of CHF 240.9 million (2013: CHF 479.5 million) with the Martin Hilti Family Trust. Thisdeposit is repayable on demand and earns interest at market rate, which amounts to CHF 1.4 million (2013: CHF 2.4 million).
(42.4) 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 (2013: CHF 0.9 million). These services were charged at cost. Additionally, the Hilti Corporation
has a current liability to the Martin Hilti Family Trust of CHF 0.4 million (2013: CHF 0.3 million).
(43)

Events after the reporting period

On 15 January 2015 the Swiss National Bank announced that it would no longer intervene to ensure the minimum e xchange rate of

1.20 Swiss francs per euro was maintained. As a consequence, the value of the Swiss franc increased significantly against all major
currencies. The amounts reported in these consolidated financial statements do not reflect changes in foreig n exchange rates after
December 31, 2014. Since the Group uses the Swiss franc as the consolidated financial statements’ presentation currency, aweakening of foreign currencies against the Swiss franc will have a negative currency translation impact on the Group’s consolidated
position.

Should this position continue, the resulting net foreign currency translation differences recognized in other comprehensive income in2015 will be negative; however, the Group’s equity ratio will remain largely unchanged. Details of the Group’s foreign exchange risk
management and the currency translation sensitivity analyses are disclosed in Note 2.22.

Hilti Financial Report 2014 | 65

Notes to the Consolidated Financial Statements(44)

Group companies and joint arrangements

Country

Company name and location

ActivityS = sales

R = research

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

Liechtenstein

Hilti Corporation, Feldkircherstrasse 100, P.O. Box 333, 9494 Schaan,
Tel. +423 234 2111, www.hilti.com

S, R, D, P, Se, H

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 WalesS

Austria

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

Hilti Belgium Finance CVBA, AsseSe

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, D

Hilti (China) Distribution Ltd., ShanghaiS

Hilti (Shanghai) Ltd., Shanghai

P, D

Colombia

Hilti Colombia S A S, Bogota D.C.

S

Croatia

Hilti Croatia d.o.o., Sesvete

S

Czech Republic

Hilti ČR spol. s r.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

Hilti Deutschland Logistik GmbH, Oberhausen

Se

Hilti Financial Report 2014 | 66

Notes to the Consolidated Financial Statements

Great Britain

Hilti (Great 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, D

Hilti India Private Ltd., New Delhi

S

Hilti Manufacturing India Private Limited, Mumbai

P, D

Indonesia

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 Equipment Corporation, Schaan

H

Hilti Finanz AG, Schaan

Se

Hilti (International) Services, Ltd., Schaan

Se

IVV-Internationale Vertrieb- und Verbund-Aktiengesellschaft, SchaanSe

Hungary
India

Hilti (Schweiz) AG, Adliswil, Zweigniederlassung SchaanS

Lithuania

Hilti Complete Systems UAB, Vilnius

S

Luxembourg

Hilti Belgium S.A. "Succursale", Luxembourg

S

Hilti Luxembourg Holding S.a.r.l.; Luxembourg

H

Macao

Hilti (Hong Kong) Ltd. Macao Branch, Macao

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

MexicoHilti 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, Se

New ZealandHilti (New Zealand) Limited, Auckland

S

PanamaHilti International Holding S.A., Panama

Se

Hilti Latin America S.A., Panama

S, Se

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 SRL, Otopeni

S

Russian Federation

Hilti Distribution Ltd., Moscow

S

SerbiaHilti SMN d.o.o. Beograd, Zemun

S

Singapore

Hilti Far East Private Ltd., Singapore

S, H

Slovakia

Hilti Slovakia spol. s r.o., Bratislava

S

Slovenia

Hilti Slovenija d.o.o., Ljubljana

S

Hilti Financial Report 2014 | 67

Notes to the Consolidated Financial Statements

South Africa

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

S

Spain

Hilti Española, S.A., Madrid

S

SwedenHilti Svenska AB, Arlöv-MalmöS

Switzerland

Hilti (Schweiz) AG, Adliswil

S

Hilti Befestigungstechnik AG, Buchs

Se

Hilti-Finanz GmbH, Buchs

H, Se

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

S, Se

USA

Hilti Inc., Tulsa, Oklahoma

S

Hilti of America, Inc., Delaware

H

Hilti Holdings Limited, Delaware

H

Hilti US Manufacturing, Inc., California

P

Hilti Solar North America, Delaware

H

Unirac Inc., Albuquerque

S, P, D

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%)

S

Qatar

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

S

Saudi Arabia

Hilti Saudi Arabia for Construction Tools LLC, Riyadh (75%)

S

United Arab Emirates

Hilti Emirates LLC, Abu Dhabi (49%)

S

Although the Group owns less than half of the voting rights of Hilti Bahrain Co. W.L.L., Hilti Qatar W.L.L. and Hilti Emirates LLC,
management has determined that the Group controls these three companies. The Group has control, as contractual agreements grant

the Group the right to appoint and remove management responsible for directing the relevant activities. In addition, the Group is
entitled to appoint, remove and substitute a majority of members of the Companies’ Board of Directors.
Joint operations

China

Panasonic Eco Solutions Power Tools (Shanghai) Company Limited (49%)

P

Germany

HILLOS GmbH, Jena (50% participation)

P

Hilti Seuffer Electronics GmbH, Calw (50% participation)

P, D

TaiwanRacing Point Ltd., Taipei (49%)

P

USAIntelligent Construction Tools LLC, Delaware (50%)

P, D

Hilti Financial Report 2014 | 68

Auditors’ Report on the Consolidated Financial Statements

A udito rs’ Rep or t on the Cons olida ted Fina ncial S ta te ment 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

in equity and notes (pages 10 to 68), and the consolidated management report on
pages 5 to 7 for the year ended December 31, 2014.
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 tofraud or error. The Board of Directors is further responsible for selecting andapplying appropriate accounting policies and making accounting estimates thatare reasonable in the circumstances.
Auditor’s responsibility

Our responsibility is to express an opinion on these consolidated financial

statements based on our audit. We conducted our audit in accordance with
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.

Hilti Financial Report 2014 | 69

Auditors’ Report on the Consolidated Financial Statements

OpinionIn our opinion, the consolidated financial statements for the year ended December
31, 2014, 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

Ralf Zwick

St. Gallen, March 11, 2015

Hilti Financial Report 2014 | 70

Hilti Financial Report 2014 | 71

Hilti Financial Report 2014 | 72

Financial Statements
Hilti Corporation (including branches)
Financial Statements Hilti Corporation

Hilti Financial Report 2014 | 73

Financial Statements Hilti Corporation

Balance sheet

in CHF million

Note

31.12.2014

31.12.2013

ASSETS

Intangible assets

4

25.3

30.2

Property, plant and equipment

5

398.9

353.6

Financial investments

6

1,986.4

2,040.2

7

182.0

168.1

26.2

51.6

Total non-current assets

Inventories

Trade and other receivables

Accrued income and prepayments

8

Cash and cash equivalents

2,410.6

568.1
501.0

2,424.0

501.0
608.8

Total current assets

1,277.3

1,329.5

TOTAL ASSETS

3,687.9

3,753.5

Share capital

88.0

88.0

Legal reserves

108.4

108.4

1,136.9

781.9

EQUITY AND LIABILITIESParticipation capital

38.7

Foreign currency translation reserve(11.3)

Retained earnings brought forward
Net income

293.8

38.7

(10.1)

747.8

Total equity

9

1,654.5

1,754.7

Provisions

10

57.3

41.4

Borrowings, payables and other liabilities

1,829.8

1,821.8

Total liabilities

2,033.4

1,998.8

TOTAL EQUITY AND LIABILITIES

3,687.9

3,753.5

Accrued liabilities and deferred income

11

146.3

135.6

Hilti Financial Report 2014 | 74

Financial Statements Hilti Corporation

Income statementin CHF million

Note

Net sales

Change in inventory of finished goods and work in progress

2014

2013

2,374.5

2,073.8(0.5)

Capitalized own production

2.3

Other operating revenues

14.2

Total operating revenues

1.0
4.0

16.8

2,390.5

2,095.6

Material costs

12(1,237.7)(1,097.8)

Personnel expenses

13(306.9)(322.0)(498.8)(470.0)Depreciation and amortization
Other operating expenses

14(43.4)(50.1)(2,086.8)(1,939.9)

303.7

155.7

81.6

669.6

4.1

597.4

Net income before income tax expense

307.8

753.1

Tax expense(14.0)(5.3)

Net income

293.8

747.8

Total operating expenses
Operating result

Financial revenues

Financial expenses
Financial result

Financial Statements Hilti Corporation
Notes to the Financial Statements

Hilti Financial Report 2014 | 7515
16(77.5)(72.2)

Notes to the Financial Statements(1)

General information

Hilti Corporation is a limited liability company incorporated and domiciled in the Principality of Liechtenstein. Its registe red 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 Corp oration. 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 statements, 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 subst antiallythe 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 p olicies
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 Group financial statements

Valuation of property, plant and equipment

In accordance with taxation rules pursuant

At lower of market value and historical costand inventories

Hilti Corporation

to Article 1086 of the PGR

subject to adjustment for depreciation or

obsolescence based on economic estimates

Valuation of investments in associatedAt historical cost

Valuation of provisions

Based on business risk criteria

Reporting of derivative financial instru-

Recognized at fair value with value changes Recognized at fair value with value changes

companies and joint ventures

ments hedging anticipated operatingtransactions (cash flow hedges)

Reporting of development costs

In accordance with the equity method of
accounting

In accordance with the best estimate of theamounts required to satisfy existing obligations

reported directly in the income statement

All immediately expensed

reported as part of equity and reclassified
totheincomestatement

when

anticipated operating transactions occur

theFor qualifying new product developments,

capitalized during the development phases
and subsequently amortized over the sales

lives of the new products while otherdevelopment
expensed
Measurement of pension plan obligation

Treated as defined contribution plan

costs

are

immediately

Treated as defined benefit plan with cumulative remeasurements recognized directlyin equity

Hilti Financial Report 2014 | 76

Notes to the Financial Statements

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

Presentation in financial statements of
Hilti Corporation

Presentation in Group financial statements

Investments in deposits, bonds and equi- Included in ‘financial investments’

Included in ‘financial assets at fair value

arising from damages to assets and losses

headingties restricted to the funding of losses
arising from product-related obligations

through profit or loss’ under current assets

Recognized values of derivative financial Included in ‘accrued income and prepay- Presented as a separate line item ‘derivative
instruments

ments’ or ‘accrued liabilities and deferred 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 2014 financial statements of Hilti Corporation from those adopted in
2013.
(3)

Exchange rates

For details of foreign exchange rates of principal currencies that have been applied for translation into Swiss francs, see note 2.5 of theGroup’s consolidated financial statements.
(4)

Intangible assets

in CHF million

Rights

Other

Total

intangible
assetsCost 2014

12.9

110.8

123.7

–

6.7

6.7

Disposals–(16.2)(16.2)

Closing balance at December 31, 2014

12.9

101.3

114.2

(10.3)(83.2)(93.5)

Additions

(0.6)
–

(8.5)

13.7

(9.1)

13.7

Transfers–––

Opening balance at January 1, 2014

Currency translation adjustment
Additions
Transfers

Accumulated amortization 2014
Opening balance at January 1, 2014

Currency translation adjustment
Disposals

–

–

–

–

–

–

–

–

–

Closing balance at December 31, 2014(10.9)(78.0)(88.9)Net book values at December 31, 2014

2.0

23.3

25.3

Net book values at December 31, 2013

Hilti Financial Report 2014 | 77

2.6

27.6

30.2

Notes to the Financial Statements(5)

Property, plant and equipmentin CHF million

Land and

Plant and

Other

Prepayments Totalbuildings

machinery

operatingor assets

equipment

underconstruction

Cost 2014
Opening balance at January 1, 2014

Currency translation adjustment
Additions

Disposals
Transfers

Closing balance at December 31, 2014
Accumulated depreciation 2014
Opening balance at January 1, 2014

Currency translation adjustment
Additions

Disposals
Transfers

347.3

(1.2)

10.7

464.0

(1.8)
6.2

132.6

81.0

7.7

59.2

(0.5)

(0.3)

(7.2)

(8.2)

356.5

469.0

131.6

(150.3)(415.7)

0.5

1.3

–

(4.5)
–
–

7.8

(19.7)
6.2
–

(0.1)

1,024.9

(3.6)

83.8

(0.7)

(16.4)

131.6

1,088.7(105.3)–(671.3)

0.4

–

7.4

–

–

(7.8)

(10.1)(154.3)(427.9)(107.6)

Net book values at December 31, 2014

202.2

41.1

Net book values at December 31, 2013

197.0

48.3

2.2

–

–

Closing balance at December 31, 2014––(34.3)
13.6––(689.8)

24.0

131.6

398.9

27.3

81.0

353.6

The insurance value of property, plant and equipment at the balance sheet date is CHF 929.0 million (2013: CHF 827.6 million).
(6)

Financial investments

in CHF million

Cost 2014
Opening balance at January 1, 2014

Currency translation adjustment
Additions

Disposals
Closing balance at December 31, 2014
Accumulated valuation allowance 2014
Opening balance at January 1, 2014

Currency translation adjustment

Share-

Loans toOther

holdings

Groupfinancialcompanies

investments

62.9

30.5

2,082.3

–

0.8

0.8

1,988.9
–

0.0

(2.6)

1,986.3(42.1)

–

–
–

–

–

–

(90.3)
1,896.0

1,946.8

–
–

63.0
62.9

(6.5)

2,076.7–

Closing balance at December 31, 2014

Net book values at December 31, 2013

(3.9)

0.1

27.4

–

(48.2)Net book values at December 31, 2014

–

63.0

–

(42.1)

Additions

Disposals

0.1

Total

–

–

(48.2)–(90.3)

27.4
30.5

–

1,986.4

2,040.2

A list of Group companies, directly or indirectly held by Hilti Corporation, is included on pages 66 to 68 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.

Hilti Financial Report 2014 | 78

Notes to the Financial Statements(7)

Inventories

in CHF million

2014

2013

Raw materials

23.8

27.4

Consumables

9.5

Production in progress

6.6

Finished products and goods held for resale

9.6
7.1

142.1

124.0

in CHF million

2014

2013

Trade accounts receivables from third parties

25.2

19.2

182.0

Total inventories

(8)

168.1

Trade and other receivables

Trade accounts receivables from group companies

520.6

457.0

Total trade accounts receivables

545.8

476.2

Other accounts receivables from third parties

22.3

24.5

Total other accounts receivables

22.3

24.8

Total accounts receivables

568.1

501.0

Other accounts receivables from group companies

(9)

–

0.3

Equityin CHF million

Share and Legal

PC capital reserves

Foreigncurrencytranslation

Retainedearnings

Total

equityreserve
Equity at January 1, 2014

Dividend paid
Foreign currency translation differences
Net income

Equity at December 31, 2014

126.7

108.4

(10.1)

1,529.7

–

–

(1.2)

–

126.7

108.4

(11.3)

–
–

–
–

–
–

(392.8)293.81,430.7

1,754.7(392.8)
(1.2)

293.8

1,654.5

The share capital consists of 176,000 registered shares with a par value of CHF 500 each and the participation capital consis ts of
774,400 participation certificates with a par value of CHF 50 each. The participation capital has no voting rights. All the c apital 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.

Hilti Financial Report 2014 | 79

Notes to the Financial Statements(10)

Provisionsin CHF million

2014

2013

Provision for employee benefits

32.5

22.0

Other provisions

11.7

16.5

Tax obligations

13.1
57.3

Total provisions

2.9

41.4

Other provisions relate mainly to product liability.
(11)

Borrowings, payables and other liabilities

in CHF million

2014

2013

Short–term Long–term Total

Short–term Long–term Total

3.25% bond 2009/2014

–

–

–

299.8

–

299.8

Euro bonds 2012/2015-2019 (EUR 175 million)

31.9

178.5

210.4

–

214.8

214.8

0.875% bond 2013/2018

–

99.8

99.8

–

99.8

99.8

1.875% bond 2013/2023

–

100.1

100.1

–

100.1

100.1

Total bonds

31.9

378.4

410.3

299.8

414.7

714.5

Bank borrowings

–

–

–

0.0

–

0.0

110.3

–

110.3

114.1

–

114.1

Trade accounts payables group companies

91.0

–

91.0

93.9

–

93.9

Total trade accounts payables

201.3

–

201.3

208.0

–

208.0

Other liabilities owing to third parties

18.6

3.3

21.9

20.0

3.3

23.3

Other liabilities owing to group companies

49.2

1,147.1

1,196.3

38.8

837.2

876.0

Total other liabilities

67.8

1,150.4

1,218.2

58.8

840.5

899.3

Total borrowings, payables and other liabilities

301.0

1,528.8

1,829.8

566.6

1,255.2

1,821.8

Trade accounts payables third parties

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 CH F 0.3

million (2013: CHF 0.3 million).
(12)

Material costs

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

2014

2013

(1,224.4)(1,085.6)(13.3)(1,237.7)(12.2)(1,097.8)

Hilti Financial Report 2014 | 80

Notes to the Financial Statements(13)

Personnel expenses

in CHF million

2014

2013

Wages and salaries(256.4)(275.3)Pension contributions

Other social contributions
Total personnel expenses(14)(32.1)(18.4)(35.1)(11.6)(306.9)(322.0)

2014

2013

Depreciation and amortization

This position comprises depreciation and amortization on intangible assets and property, plant and equipment.
(15)

Financial revenues

in CHF million
Financial investment revenues from third parties

Financial investment revenues from group companies

4.3

–

73.3

Total revenues from financial investments

77.6

666.3

Revenues from cash and marketable securities invested with third parties

4.0

3.3

Total revenues from cash and marketable securities

4.0

3.3

Total financial revenues

81.6

669.6

in CHF million

2014

2013

Depreciation on financial assets(48.2)(12.3)

Interest and similar expenses incurred to third parties(15.3)(21.9)

Total interest and similar expenses(36.7)(52.4)

Revenues from cash and marketable securities invested with group companies

(16)

–

Financial expenses

Interest and similar expenses incurred to group companies

Operating currency and hedge gains/(losses)
Total financial expenses

(17)

–

666.3

Tax expense

For income tax purposes, dividends received are tax-exempt.

Hilti Financial Report 2014 | 81

(21.4)(30.5)

7.4(7.5)(77.5)(72.2)

Notes to the Financial Statements(18)

Derivative financial instruments

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:in CHF million

2014

2013

Foreign currency forward contracts

546.2

419.8

Interest rate swaps

69.9

201.8

Total contract face amounts

616.1

721.3

Foreign currency forward contracts

(6.8)

10.2

Interest rate swaps

5.8–

Total contract values(1.0)

Contract face amounts

Foreign currency options
Cross currency swaps

Contract values

Foreign currency options
Cross currency swaps

–
–

–

6.8

92.9

–

–

20.8

Contract values recognized (on-balance sheet)

(1.0)

31.0

Total contract values

(1.0)

31.0

2014

2013

Reporting of contract values

Contract values unrecognized (off-balance sheet)

(19)

–

31.0

–

Segment information

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

Contingent liabilities

in CHF million
Credit facilities guarantees––

Other guarantees

11.9

13.2

2014

2013

Expiring within 1 year

0.8

0.7

Total commitments

2.4

1.8

Total contingent liabilities

(21)

11.9

13.2

Commitments

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

Expiring between 1 and 5 years

1.6

1.1

Hilti Financial Report 2014 | 82

Notes to the Financial Statements(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

2014

%

2013

%

Austria

854

44

850

45

Liechtenstein

165

9

172

Germany

Switzerland

Other countries
Total employees

(24)

390

20

221

11

1,939

100

309

16

380

20
9

216

12

1,892

100

274

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 5 to 7 of this Financial Report.
(25)

Appropriation of retained earnings

2014

2013

1,136.9

781.9

293.8

747.8

1,430.7

1,529.7

CHF 1'795 (2013: CHF 1'550) per share

315.9

272.8

CHF 179,5 (2013: CHF 155) per participation certificate

139.0

120.0

in CHF million
Profit brought forward
Net income
At the disposal of the General Meeting
Proposal by the Board of Directors

Dividend of

Appropriation to other reserves
Balance carried forward
Total

Hilti Financial Report 2014 | 83

–

–

975.8

1,136.9

1,430.7

1529.7

Auditors’ Report on the Financial Statements

A udito rs’ Rep or t on the Fina ncial S t ate ment s

Report of the statutory
auditors to the General
Meeting of Hilti
Aktiengesellschaft, Schaan

As statutory auditors, we have audited the accounting records and the financial statements(balance sheet, income statement and notes) on pages 74 to 83 and the management reportof Hilti Aktiengesellschaft on pages 5 to 7 for the year ended December 31, 2014.

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

Ralf Zwick

St. Gallen, March 11, 2015

Hilti Financial Report 2014 | 84

Hilti Financial Report 2014 | 85

Hilti Financial Report 2014 | 86Corporate GovernanceCorporate Governance

Hilti Financial Report 2014 | 87Corporate GovernanceElection and term of office for The members of the Board of Directors of Hilti Corporation are elected by the Annual General
the members of the Board of
Directors

Allocation of responsibilities
and duties of the Board of
Directors

Meeting for three years. As a rule, directors serve up to four terms, but no longer than until theend of the business year in which they reach the age of 70.

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

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 was actively involved in projects concerning Group strategy. In several multiday

Board meetings and visits to major operating units of the Group, as well as on the basis ofwritten and oral reports of the Executive Board, the Board of Directors dealt intensively withthe 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, the Board of Directors was kept fully informed by the statutory auditors on the
results of the audit of 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

for the tasks delegated to the Audit Committee remains with the Board of Directors. In 2014,
the Audit 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 companies. 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. For financial and occurrence-oriented risks, the Corporate Risk Manager
is responsible for the risk reporting process and to ensure the reported content and identified

measures regarding the identified risks are plausible. Corporate Audit undertakes reviews of

selected risks as part of their internal control reviews in Group companies (see above) and in

corporate functions managed by the respective risk owners. For strategic risks, Corporate
Development runs annual strategy review workshops with the Executive Board. The risk
management reporting is regularly reviewed by the Board of Directors.

Hilti Financial Report 2014 | 88Corporate GovernanceCompensation to the Boardof 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 variable compensation linked toperformance. Members of the Executive Board normally retire at the age of 56. They receive aseverance payment in addition 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 Group financial statements (see note 42).
Shareholders’ participationrights

Details of share and participation capital are given in the Group financial statements (see note20). Resolutions of shareholder meetings are generally decided by an absolute majority ofrepresented votes. A majority of at least three quarters of represented votes is necessary tochange the articles of incorporation, or for resolutions concerning changes to share andparticipation capital, subscription rights, expansion or restriction of business scope as well as
mergers, transformation or liquidation of the company.

Auditors

The examinations of the Group financial statements and the financial statements of Hilti

Corporation are conducted by PricewaterhouseCoopers Ltd., St. Gallen (leading auditor). The
company was reappointed in March 2014 for the 2014 year. The auditor-in-charge has been
responsible for the mandate from 2012 following a partner rotation after the 2011 year. In

respect of the 2014 year, audit fees of the leading auditor amount to CHF 1.5 million whereas
the non-audit fees amount to CHF 0.2 million. Total audit fees of the Group including audits
not performed by the leading auditor amount to CHF 2.2 million.

Hilti Financial Report 2014 | 89Corporate Governance

Hilti Financial Report 2014 | 90

Investor Information

Investor Information
Invest or In for ma tion

Contact

information

Investor relations

Media relations

Dr. Jens Schulte

Matthias Hassler

Executive Vice President
Finance & Controlling
Hilti Corporation

Hilti Corporation

9494 Schaan

9494 Schaan

Feldkircherstrasse 100
Liechtenstein

Liechtenstein
Phone +423 234 4949

www.hilti.com

www.hilti.com

E-mail: matthias.hassler@hilti.com

Interim financial information

May 19, 2015

Interim financial information

September 18, 2015

Publication of the 2015 Financial Report

March 18, 2016

Annual results media conference

March 18, 2016

January to April 2015

January to August 2015

Hilti Financial Report 2014 | 91

Feldkircherstrasse 100

Phone +423 234 2737

E-mail: jens.schulte@hilti.com

Key dates

Media Officer

Hilti. Outperform. Outlast.
www.hilti.com