Contents

Contents

Key Figures

4

Management Report

5Group Financial Statements

9

Financial Statements Hilti Corporation

77

Corporate Governance91

Investor Information

95

Key Figures

Key Figu res

Key financial information of Hilti GroupKey Figu res

in CHF million
Results

Net sales

Depreciation and amortization
Operating result

2013

2012

2011

2010

2009

4,340

4,205

3,998

3,930

3,845

421

301

207

268

172

220

197

216

213

200

Net income before tax

354

223

119

167

136

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

12.8

9.5

6.5

8.2

5.4

Cash flow from operating activities

598

619

242

376

487

2,523

2,328

2,212

2,304

2,396

53

51

51

54

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

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

1,172

817
209

78

3.2

55

1,135

795
283

Intangible assets and property, plant and equipment

1,101

1,123

1,141

1,162

1,101

Total current assets

3,158

2,905

2,706

2,697

2,811

393

131

47

71

–

Other non-current assets
Total assets
Dividend*

504

4,763

528

4,556

521

4,368

434

4,293

414

4,326

21,456

21,13921,84820,305

19,709

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

–

150

150

150

150

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

300

300

300

300

300

1.875% bond 13/23 (early call for tax reasons only)

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)Euro bonds 12/15–19 (EUR 66 million at variable interest rates**)Euro bonds 12/15–19 (EUR 109 million at fixed interest rates***)*As proposed by the Board of Directors

–
100
81

134

–
–

80

131

300
–
–
–

300
–
–
–

300
–
–
–

** Bonds have restricted tradeability*** Early call possible; bonds have restricted tradeability
2012 numbers have been restated due to the adoption of IAS 19 Employee Benefits (Revised) and IFRS 11 Joint Arrangements.
Numbers prior to 2012 have not been restated.

Hilti Financial Report 2013 | 4Management Report

Another substantial improvement of profitability and capital efficiency
Mana ge ment Rep ort

Management Report

With a moderate 3.2 percent sales growth in line with expectations, theHilti Group increased its operating result by 40 percent while return onsales grew significantly from 7.2 to 9.7 percent in 2013. The Group thusachieved the objectives of its profitability enhancement and capitalefficiency program, initiated at the end of 2011, ahead of schedule, which
has created scope for new investments.

The regions in which the Hilti Group operates were again characterized by distinctly
heterogeneous economic developments. While the construction sector in most of Western,

Central and Eastern Europe remained subdued and markets in Southern Europe were
declining, Northern Europe showed signs of growth. North America’s solid economic

environment was overshadowed by monetary uncertainties and market development

remained modest. Latin America, the Middle East and Asia, however, continued to display
good economic momentum.
Overall moderate sales
growthThe Group’s regional sales figures are a reflection of this mixed picture. In the growth regionsof Latin America, Eastern Europe / Middle East / Africa and Asia/Pacific, the Group’s sales

growth in local currencies reached double digits (+17.9%, +14.3% and +17.3%). In North
America (+8.2% excl. solar, +2.8% incl. solar) distribution and marketing activities wereenhanced to cope with uncertain economic conditions. European sales continued to shrink
slightly (-1.1%), characterized by stronger growth in Northern Europe, subdued performancein Western Europe and persistent downward pressure in Southern Europe (Italy, Spain,

Greece). Against this backdrop, the Hilti Group succeeded in increasing global sales by 4.5
percent in local currencies.

Hilti Financial Report 2013 | 5

Management Report

While business in general developed in line with expectations, sales to the solar industry

showed an unsatisfying picture. Asia (in particular Japan) enjoyed substantial growth, but the

US solar market was a challenge and sales continued to drop significantly in Europe. The Hilti
Group expects that the European solar market will stabilize at a low level in the long run as aresult of the cut in public subsidies such as in Germany. In response to this development, theGroup has resorted to structural adjustments and partial write-offs reflecting the dampened
business potential.

On the exchange rate front, several regions were marked by weakening currencies against the

Swiss Franc, which was partly due to the monetary signals sent out by the US Fed (withsecondary impacts on Brazil, India, South Africa) and protective devaluation measures suchas in Japan. The exchange rate effect diminished the Group’s sales growth by -1.3 percent. In
Swiss Francs, sales have grown by 3.2 percent to CHF 4.3 billion.
Substantial enhancement of
profitability

The Hilti Group achieved the objectives of its profitability enhancement and capital efficiency

program, launched at the end of 2011, ahead of schedule in 2013. Additional actions to
reduce product costs and enhanced distribution productivity as well as structural adjustments

at Corporate Headquarters and in slow-growth markets have resulted in a gratifying

improvement of the operating profit margin (ROS) from 7.2 to 9.7 percent. Like sales, theoperating result was also negatively affected by exchange rates, as reflected by the reductionof ROS by -0.6 percent.
Strong cash flow andimproved capital efficiency

Capital efficiency was improved further thanks to a new internal steering and managementcompensation system. Average days sales outstanding (DSO) for receivables and inventory

range were again brought down by more than three days (6 and 3 percent, respectively). As aconsequence, net working capital relative to sales was reduced from 22 to 21 percent.
Operating cash flow was again high at CHF 598 million and free cash flow reached theexcellent level of CHF 354 million. Return on capital employed (ROCE) improved from 9.5 to
12.8 percent.
Sound balance sheet
structure

Cash and cash equivalents increased to CHF 1,538 million. Financial debt amounted to CHF

879 million at the end of 2013. Short-term bank borrowings stood at CHF 125 million (-16
million compared to 2012), while long-term bank borrowings were CHF 40 million (-25 million).

Thanks to the sound Group’s balance sheet structure, it was decided that the two bonds

maturing in 2013 and 2014 (CHF 150 million and 300 million, respectively) would only bepartially replaced by a new CHF 200 million bond issued in 2013. The new issue came in two
tranches, five and ten years, and was met with great demand. With coupons of 0.875 percent
and 1.875 percent, respectively, the Hilti Group managed to offer attractive conditions forbondholders.

Net liquidity rose to CHF 659 million. The equity ratio improved to 53 percent at year-end andcontinues to be very satisfactory.

For 2013, the Board of Directors proposes an ordinary dividend payment of CHF 153 million(2012: CHF 131 million).

Hilti Financial Report 2013 | 6

Management Report

Over the next few years and in line with business results, the Hilti Group intends to make useof its strong cash flow position to gradually repay excess liquidity – which it held throughout
the recent period of macroeconomic turbulence – to its owner. Having reviewed thecompany’s strategy last year, the Group has come to the conclusion that Hilti’s wellestablished and sound business profile no longer calls for this reserve and that the repaymentof excess liquidity will not compromise the company’s flexibility. The Hilti Group continues tohold high liquidity reserves to secure the company’s independence even in more challenging

times. Furthermore, the Group’s sole shareholder, the Martin Hilti Family Trust, owns sufficientliquidity for contingency financing. Therefore, the Board of Directors proposes the payment ofa special dividend of CHF 240 million, which will bring up the aggregate dividend payout to
CHF 393 million.
Outlook

Economic forecasters seem to agree that the business climate will be similar to or moderately
better than last year in most markets. At the same time, scope for additional investments in

new products and distribution facilities could emerge earlier than anticipated as a result of
positive profitability and cash flow trends. Hence, the Hilti Group is confident about theprospects for 2014 and expects growth in local currencies to be slightly above 2013 levels. On

the other hand, exchange rate markets will probably remain volatile. The Group’s profitability
and capital efficiency enhancement initiatives will continue to be effective in 2014 and are
expected to create more added value.

Hilti Financial Report 2013 | 7

Management Report

Hilti Financial Report 2013 | 8

Group Financial Statements
Group Financial Statements

Hilti Financial Report 2013 | 9

Group Financial Statements

Consolidated balance sheet

in CHF million

Note

31.12.2013

31.12.2012

01.01.2012

Intangible assets

7

340.0

371.3

394.4

Property, plant and equipment

8

760.8

751.4

750.1

Deferred income tax assets

11

126.5

142.6

123.9

Trade and other receivables

14

362.4

349.1

312.0

1,605.3

1,650.2

1,644.9

Restated*

Restated*

ASSETS

Investment property

Other financial investments

Derivative financial instruments

9

12
16

Total non-current assets

2.2

13.4
–

2.2

14.4
19.2

6.8

14.2
43.5

Inventories

13

548.5

563.4

625.5

Current income taxes receivable

26

11.4

8.3

14.4

Trade and other receivables

Accrued income and prepayments
Derivative financial instruments

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

14
15
16
17
18

943.2

899.2

50.3

83.0

32.1

35.9

33.8

9.0

930.0

47.7
8.2

26.4

1,538.3

1,065.3

Total current assets

3,157.6

1,306.6

TOTAL ASSETS

4,762.9

4,555.6

4,362.4* See note 2.2

2,905.4

2,717.5

The notes on pages 16 to 73 are an integral part of these Group financial statements.

Hilti Financial Report 2013 | 10

Group Financial Statements

in CHF million

Note

31.12.2013

31.12.2012

Restated*

01.01.2012

Restated*

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

9.3

14.3

13.0

2,513.5

2,313.8

2,245.5

2,522.8
57.5

2,328.1
49.9

2,258.5
47.4

22

308.4

329.0

309.1

23

414.7

510.3

447.8

Long-term bank borrowings

24

39.5

64.3

81.2

Derivative financial instruments

16

1.0

0.9

Bonds

Trade and other payables

25

Total non-current liabilities

26.0

24.9

28.6

22.0

29.8

24.7
1.4

872.0

1,005.0

941.4

Provisions

21

75.3

68.1

48.3

Trade and other payables

25

342.7

318.7

279.5

Accrued liabilities and deferred income

27

424.9

399.8

305.0

28

125.3

141.7

113.8

Employee benefits
Current income taxes payable
Bonds

Short-term bank borrowings

Derivative financial instruments

22
26
23
16

8.7

89.5

299.8
1.9

48.9
92.2

149.7
3.4

3.6

98.5

299.8
14.0

Total current liabilities

1,368.1

1,222.5

1,162.5

Total liabilities

2,240.1

2,227.5

2,103.9

TOTAL EQUITY AND LIABILITIES

4,762.9

4,555.6

4,362.4* See note 2.2
The notes on pages 16 to 73 are an integral part of these Group financial statements.

Hilti Financial Report 2013 | 11

Group Financial Statements

Consolidated income statementin CHF million

Net sales

Other operating revenues

Note

2013

29

4,340.2

4,204.6

4,432.5

4,287.9

29

Total operating revenues

92.3

83.3

Change in inventory

30
30(1,317.9)(1,274.4)

Personnel expenses

31(1,702.9)(1,692.4)

Other operating expenses

33(771.5)Material costs

Depreciation and amortization

32

Total operating expenses
Operating result

1.2

2012

Restated*(220.3)(57.5)(197.2)(765.2)(4,011.4)(3,986.7)

421.1

301.2

Other revenues and expenses (net)34(16.0)(22.0)

Finance costs

35(51.0)(56.3)

354.1

222.9

(50.0)(35.6)

304.1

187.3

305.5

185.8

Net income before income tax expense

Income tax expense36

Net income
Attributable to:Equity holders of the parent
Non-controlling interests* See note 2.2

(1.4)

1.5

The notes on pages 16 to 73 are an integral part of these Group financial statements.

Hilti Financial Report 2013 | 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

2013

2012

Restated*

304.1

187.3

0.4

3.5

(0.1)

(0.4)

(20.9)

(3.6)

47.6

(78.3)

to the income statement

42.1(65.8)

Other comprehensive income (OCI)

21.2(69.4)

Total comprehensive income

325.3

117.9

326.9

116.8

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(21.2)

(5.5)

(6.7)

12.5

Attributable to:Equity holders of the parent
Non-controlling interests* See note 2.2
The notes on pages 16 to 73 are an integral part of these Group financial statements.

Hilti Financial Report 2013 | 13

(1.6)

1.1

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

Equity at January 1, 2013

Change in non-controlling interests

126.7

17.4

–

–

–

Dividend paid

Total comprehensive income
Equity at December 31, 2013

in CHF million

–

126.7
Share and

–
–

17.4

(336.5)(0.2)–(21.0)(357.7)0.9

2,505.3

2,313.8–(130.5)(130.5)1.2

2,725.9

2,513.5

–

0.3

3.5

347.6

3.3

14.3

2,328.1–(130.5)9.3

2,522.8

(3.4)

326.9

(1.6)

(0.1)

325.3

CapitalForeign

Cash flow

Retained

Equity

Non-

Total

participation reserves

currency

hedgingearnings

attributable

controlling

equitycertificate

translation

reserveto equityinterests

capitalreserveholders of
the parent

Equity at December 31, 2011

Effect of changes in accounting
policies*

Equity at January 1, 2012*

Change in non-controlling interests
Dividend paid

Total comprehensive income
Equity at December 31, 2012** Restated, see note 2.2

126.7

17.4

(330.2)(2.2)

2,387.2

2,198.9

13.0

–

–

–

–

46.6

46.6

126.7

17.4

(330.2)(2.2)

2,433.8

2,245.5

13.0

2,258.5

–

–

–

–

(46.9)(46.9)–(46.9)

–
–

126.7

–
–

17.4

–

(6.3)

(336.5)

–

3.1
0.9

(1.6)

120.0

2,505.3

(1.6)

116.8

2,313.8–

2,211.9

0.2
1.1

14.3

46.6
(1.4)

117.9

2,328.1

For further details on transactions with non-controlling interests see note 5 and on equity see note 20.
The notes on pages 16 to 73 are an integral part of these Group financial statements.

Hilti Financial Report 2013 | 14

Group Financial Statements

Consolidated cash flow statementin CHF million

Note

Net income

Depreciation and amortization

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

34(Gain)/loss on disposal of investments

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

2012

Restated*

304.1

187.3

19.4

18.3

220.3

(4.6)
0.8

197.2

(9.4)
1.3

36

48.4

45.7

30

(1.2)

57.5

34, 35(Increase)/decrease in trade receivables

2013

Increase/(decrease) in trade payables

52.8(18.7)
25.1(Increase)/decrease in other net operating assets

51.2

58.2
55.1
22.8
81.5

697.6

715.5

Interest paid

(51.0)(56.3)Cash flow from operating activities

598.0

619.1

Cash flow from operating activities before interest and tax

Interest received

5.3

Income tax paid

Capital expenditure on intangible assets

Capital expenditure on property, plant and equipment(53.9)

7(79.1)(45.6)(61.9)(130.1)(126.1)

Disposal of intangible assets–

2.0(Increase)/decrease in finance lease receivables(48.5)(Increase)/decrease in financial investments

8

5.5

Disposal of property, plant and equipment

6.7
6.9

(244.1)

Cash flow from investing activities

Proceeds from long-term bank borrowings

2.8(11.0)
5.2(61.7)(253.5)
0.4

Repayment of long-term bank borrowings(18.8)(12.7)

Repayment of long-term loans

(2.3)

(1.2)

Proceeds from long-term loans

0.9

Proceeds from/(repayment of) short-term bank borrowings(19.7)

Proceeds from issuance of bonds
Repayment of bonds

200.0

1.0

27.0

210.9

(150.0)(300.0)(130.5)(46.9)(117.4)(121.5)

(4.8)

(2.8)

231.7

241.3

Cash and cash equivalents at January 1

1,306.6

1,065.3

Cash and cash equivalents at December 31

1,538.3

1,306.6

Increase/(decrease) in liability to shareholder
Dividend paid

Cash flow from financing activities

Effects of exchange rate changes on cash and cash equivalents
Total increase/(decrease) in cash and cash equivalents* See note 2.2
The notes on pages 16 to 73 are an integral part of these Group financial statements.

Hilti Financial Report 2013 | 15

42
20

0.2

–

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 21,000 employees worldwide.

These consolidated financial statements were approved for issue by the Board of Directors on
March 10, 2014.

(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 andudgments reflected in the01

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

Hilti Financial Report 2013 | 16

Notes to the Consolidated Financial Statements(2.2) Changes in accounting
policies and estimates
Changes in accounting
policies

Adoption of IAS 19 Employee Benefits (Revised)

IAS 19 Employee Benefits (Revised) (IAS 19R) was adopted as of January 1, 2013. This has

resulted in the restatement of the prior period information. The material impacts of IAS 19R on
the Group’s financial statements are as follows:

Calculation of pension costs: The previous practice of separately recognizing the

expected return on plan assets and the interest expense on the defined benefit obligation
is now replaced by the recognition of net interest on either the net defined benefit liabilityor the net defined benefit asset (as applicable).


Risk sharing: The new provision on sharing risk between the employees and employer
has reduced the defined benefit liability and impacts service costs measurements.

Disclosure requirements: Additional disclosures have been provided.

The Group’s financial statements were not affected by the new requirements in IAS 19R toprohibit deferred recognition of past service costs and certain actuarial gains and losses(‘corridor approach’). Both practices had not previously been adopted by the Group.

As a consequence of changes due to the adoption of IAS 19R, classification changes werealso made to other employee-related obligations: Employee-related obligations for ‘postemployment benefits’ and ‘other long-term employee benefits’ are now classified as‘employee benefits’. Previously ‘employee benefit obligations excluding pension andtermination benefit obligations’ were classified as ‘provisions’. In addition, assets of certain

investment funds are no longer allocated to ‘other financial investments’. Instead they areallocated to plan assets.

Adoption of IFRS 11 Joint Arrangements

IFRS 11 Joint Arrangements was adopted as of January 1, 2013. The Group has rights to theassets and obligations for the liabilities of each of the four joint arrangements in which it has

ownership interests (see note 44). Previously these have been classified as ‘investments inoint ventures’ and were accounted for under the equity method. In accordance with IFRS 11,

the investments have been reclassified as joint operations and are now accounted for bydirectly recognizing the relevant shares of assets, liabilities, revenues and expenses. Prior

period information has been restated accordingly. However, since the transactions of the joint
operations are mostly intragroup transactions, the impact on the Group’s financial statementsof the changes arising from the adoption of IFRS 11 is immaterial.
Summary of impacts

The following tables summarize the impacts resulting from the above changes in accounting

policies on relevant positions of the Group’s financial position, comprehensive income andcash flows.

Hilti Financial Report 2013 | 17

Notes to the Consolidated Financial Statements

Consolidated balance sheet as at January 1, 2012

in CHF million

Reported

Adjustment
IAS 19Adjustment
IFRS 11

Restated

ASSETS

Property, plant and equipment

746.4

–
–

(12.1)

3.7

750.1

Deferred income tax assets

130.4

(6.6)

0.1

123.9

1,662.2

(9.0)

(8.3)

1,644.9

9.6

625.5

0.1

47.7

Investments in associates and joint ventures
Other financial investments

Total non-current assets

12.1
16.6

(2.4)

Inventories

615.9

–

Accrued income and prepayments

47.6

–

Trade and other receivables
Cash and cash equivalents

930.6

–

–

(0.6)

–

14.2

930.0

1,062.5

2,705.6

–

–

2.8

11.9

1,065.3

Total current assets
TOTAL ASSETS

4,367.8

(9.0)

3.6

4,362.4

2,198.946.4

0.2

2,245.5

Provisions

108.7(61.3)–

Total non-current liabilities

996.8(55.4)–

Provisions

51.4

Trade and other payables

278.0

Accrued liabilities and deferred income

304.8

2,717.5

EQUITY AND LIABILITIES

Equity attributable to equity holders of the parent
Total equity

Employee benefits

Employee benefits

Current income taxes payable
Short-term bank borrowings

2,211.9

303.2

–

98.4

112.7

46.4

5.9

0.2

2,258.5
47.4

–

309.1

(3.6)

0.5

48.3

–

1.5

279.5

–

0.2

305.0

3.6
–
–

–

0.1
1.1

941.4

3.6

98.5

113.8

Total current liabilities

1,159.1–

3.4

1,162.5

Total liabilities

2,155.9(55.4)

3.4

2,103.9

TOTAL EQUITY AND LIABILITIES

4,367.8

(9.0)

3.6

4,362.4

Hilti Financial Report 2013 | 18

Notes to the Consolidated Financial Statements

Consolidated balance sheet as at December 31, 2012

in CHF million

Reported

Adjustment
IAS 19Adjustment
IFRS 11

Restated

ASSETS

Property, plant and equipment

748.5

–
–

(13.3)

2.9

751.4

Deferred income tax assets

147.0

(4.5)

0.1

142.6

1,667.8(7.3)(10.3)

1,650.2

Investments in associates and joint ventures
Other financial investments

Total non-current assets

13.3
17.2

(2.8)

–

–

14.4

Inventories

555.3

–

8.1

563.4

Accrued income and prepayments

82.9

–

0.1

83.0

Trade and other receivables

Financial assets at fair value through profit or loss

897.5

–

1.7

35.8

–

0.1

Total current assets

2,891.5

TOTAL ASSETS

Cash and cash equivalents

1,302.7

–

899.2

35.9

–

3.9

13.9

1,306.6

4,559.3

(7.3)

3.6

4,555.6

2,282.3

31.3

0.2

2,313.8

80.0(30.1)––

329.0

1,043.6(38.6)–

1,005.0

Provisions

116.8(48.9)

0.2

68.1

Trade and other payables

315.6

–

3.1

318.7

–

3.4

1,222.5

2,905.4

EQUITY AND LIABILITIES

Equity attributable to equity holders of the parent
Total equity

Provisions

Employee benefits
Total non-current liabilities

Employee benefits

Accrued liabilities and deferred income

2,296.6

337.5

–

399.7

31.3

(8.5)

48.9
–

0.2

–

0.1

2,328.1
49.9

48.9

399.8

Total current liabilities

1,219.1

Total liabilities

2,262.7(38.6)

3.4

2,227.5

TOTAL EQUITY AND LIABILITIES4,559.3

(7.3)

3.6

4,555.6

Hilti Financial Report 2013 | 19

Notes to the Consolidated Financial Statements

Consolidated statement of changes in equity

in CHF million

Equity at January 1, 2012

Change in non-controlling interests
Dividend paid

Total comprehensive income
Equity at December 31, 2012

Reported

Adjustment
IAS 192,211.9

Adjustment
IFRS 11

46.4

(1.4)

(46.9)

0.2––(15.1)

–

–

133.0

2,296.6

–

31.3

0.2

Restated

2,258.5(1.4)(46.9)

117.9

2,328.1

Consolidated income statement for the year ending December 31, 2012

in CHF million

Reported

Adjustment
IAS 19Adjustment
IFRS 11

Restated

Net sales

4,203.6–

1.0

4,204.6

Total operating revenues

4,286.9–

1.0

4,287.9(56.1)–(1.4)(57.5)(1,688.1)

(1.4)

(2.9)

(763.9)–(1.3)

Other operating income

Change in inventory
Material costs

Personnel expenses

Depreciation and amortization
Other operating expenses

Total operating expenses
Operating result

Share of profit/(loss) of equity-accounted associates and joint
ventures83.3(1,282.1)(196.2)

–

–
–

–

83.3

7.7

(1,274.4)(1.0)(197.2)(1,692.4)(765.2)(3,986.4)

(1.4)

1.1

(3,986.7)

300.5

(1.4)

2.1

301.2

–

(1.4)

1.4

Other revenues and expenses (net)(15.7)(6.3)

Net income before income tax

–

–

–

(0.1)

(22.0)

230.0

(7.7)

0.6

222.9

Income tax expense(36.0)

1.0(0.6)(35.6)Net income

194.0

(6.7)

–

187.3

192.5

(6.7)

–

185.8

Finance costs

Attributable to:Equity holders of the parent
Non-controlling interests(56.2)

1.5––(56.3)

1.5

Hilti Financial Report 2013 | 20

Notes to the Consolidated Financial Statements

Consolidated statement of comprehensive income for the year ending December 31, 2012

in CHF million

Net income

Reported

Adjustment
IAS 19Adjustment
IFRS 11

194.0

(6.7)

–

3.5

–

–

(6.7)

–

–

Net movement on cash flow hedges

Deferred tax on net movement on cash flow hedges(0.4)

Foreign currency translation differences

Items that may be subsequently–

Restated

187.3
3.5

–

(0.4)
(6.7)

reclassified to the income statement

(3.6)

–

–

(3.6)

Remeasurements on employee benefits(68.8)(9.5)–(78.3)

to the income statement(57.4)(8.4)–(65.8)

Other comprehensive income (OCI)(61.0)(8.4)–(69.4)

133.0(15.1)

–

117.9

131.9

(15.1)–

116.8

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

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

11.4

1.1

–

–

–

1.1

–

–

–

12.5

–

1.1

Consolidated cash flow statement for the year ending December 31, 2012

in CHF million

Reported

Adjustment
IAS 19Adjustment
IFRS 11

Restated

Cash flow from operating activities

616.6

(0.2)

2.7

619.1

Cash flow from investing activities(253.3)

0.2

(0.4)

(253.5)

Cash flow from financing activities(120.3)–(1.2)(121.5)

(2.8)

–

–

(2.8)

240.2

–

1.1

241.3

1,062.5–

2.8

1,065.3

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

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

Hilti Financial Report 2013 | 21

1,302.7–

3.9

1,306.6

Notes to the Consolidated Financial Statements

Further changes

With effect from January 1, 2013, the following new IFRS standards/amendments wereapplied:

IAS 1 – Presentation of Items of Other Comprehensive Income – Amendments to IAS 1
IAS 27 – Separate Financial Statements (Revised)

IAS 28 – Investments in Associates and Joint Ventures (Revised)

IFRS 7 – Financial Instruments: Disclosure – Offsetting Financial Assets and Financial
Liabilities

IFRS 10 – Consolidated Financial Statements

IFRS 12 – Disclosure of Interests in Other Entities
IFRS 13 – Fair Value Measurement

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

In 2013, the Group reviewed the useful life of capitalized development costs based on
updated information concerning product lifecycles. As a result, the amortization period for the

majority of capitalized development costs has been extended from three to five years. The

new amortization period was applied prospectively from January 1, 2013. The increase in theamortization period has resulted in an increase of 2013 net income by CHF 26 million (seenote 7) and is expected to result in an increase of 2014 net income by CHF 15–18 million.

(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.

Hilti Financial Report 2013 | 22

Notes to the Consolidated Financial Statements

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,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 oint 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 a price to ensure that the joint operations operate atbreak-even level. For their cash flows, the joint operations fully depend on the Group and thejoint operation partner.

Intercompany transactions, balances and unrealized gains on transactions between the Groupand its oint operations are eliminated to the extent of the Group’s interest in the oint

Hilti Financial Report 2013 | 23

Notes to the Consolidated Financial Statements

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).

(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).

Hilti Financial Report 2013 | 24

Notes to the Consolidated Financial Statements

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.

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

2012

2013

2012

1 CAD

0.901

0.939

0.837

0.919

1 GBP

1.449

1.484

1.472

1.488

1 EUR

100 JPY

100 RUB
1 USD(2.6) Intangible assets

Average rates

2013

1.231
0.949
2.903
0.927

1.205
1.175
3.019
0.938

1.228
0.848
2.709
0.890

1.207
1.059
2.996
0.915

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.

Hilti Financial Report 2013 | 25

Notes to the Consolidated Financial Statements

Subsequent costs are included in an asset’s carrying amount or recognized as a separate
asset, as appropriate, only when it is probable that future economic benefits associated with

the item will flow to the Group and the cost of the item can be measured reliably. All othersubsequent costs represent repairs and maintenance and are recognized in the income
statement in the period they are incurred.

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

30 to 40 years

Plant and machinery

5 to 15 years

Other operating assets

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 2013 | 26

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 2013 | 27

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 2013 | 28

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 2013 | 29

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

Hilti Financial Report 2013 | 30

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,primarily with respect to the euro and the US dollar. Currency risk arises from futurecommercial transactions, recognized assets and liabilities and net investments in foreign
operations, when future commercial transactions and recognized assets and liabilities aredenominated in a currency that is not the entity’s functional currency.

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

hedging instruments, primarily forward contracts, cross-currency swaps and currency options.
Corporate Treasury’s risk management practice is to hedge between 50% and 100% of theGroup’s anticipated 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%
(2012: 100%) of projected sales qualify as ‘highly probable’ forecast transactions.

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

Hilti Financial Report 2013 | 31

Notes to the Consolidated Financial Statements

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 (primarily euro and US dollar) and by limiting the proportions ofinvestments in these currencies.

At December 31, if the Swiss franc had strengthened/weakened by 10% against the US

dollar/euro with all other variables held constant, net income for the year would have been
affected as follows:in CHF million

Swiss franc

strengthened (+10%)
2013

USD
EUR

2012

(2.6)

Swiss franc

weakened (–10%)
2013

2012

2.6

2.8

(2.8)

3.4

(0.2)

(3.4)

0.2

These effects result from the translation of trade receivables, trade payables, loans, cash andcash equivalents and derivative contracts held in foreign currencies.

At December 31, if the Swiss franc had strengthened/weakened by 10% against the US

dollar/euro with all other variables held constant, ‘other comprehensive income’ (OCI) would
have been affected as follows:in CHF million

Swiss franc

strengthened (+10%)
2013

USD
EUR

(1.4)
(8.9)

2012

Swiss franc

weakened (–10%)
2013

2012

1.4

1.7

(1.7)
(8.0)

8.9

8.0

These effects result from (i) the translation of foreign currency long-term intercompany loans
treated as equity and (ii) changes in the values (due to the respective Swiss franc movements)of CHF derivative contracts held to hedge foreign currency risk. However, these effects
exclude the impacts of exchange differences arising on Group entity financial instruments thatare covered by the retranslation adjustments of net investments in foreign operations (see note
2.5, 4th and 5th bullet points under subheading ‘Translation on Consolidation’).
Interest rate risk

The Group has significant investments in interest-bearing assets, mainly deposits, andsignificant long-term borrowings, mostly consisting of bonds the Group itself has issued.
Interest-bearing assets and borrowings subject to variable rates or held for trading expose theGroup to cash flow interest rate risk. Interest-bearing assets and borrowings subject to fixed
rates and not held for trading expose the Group to fair value interest rate risk.

Virtually all the Group’s interest-bearing assets are subject to variable rates or are reported atfair value through profit or loss because they are held for trading. All the Group’s bondliabilities are reported at amortized cost. The interest-bearing assets are denominated primarily
in Swiss franc and euro investments (see note 18) and the bond liabilities are effectively

denominated in a combination of Swiss franc and euro. Interest rate risk arising from long-term
financing (banking and capital market) liabilities is managed by Corporate Treasury by using
hedging instruments, primarily interest rate swaps. Corporate Treasury’s risk management
practice is to hedge between 40% and 60% of the Group’s relevant interest exposure.

Hilti Financial Report 2013 | 32

Notes to the Consolidated Financial Statements

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

Increase of ten

Decrease of ten

2013

2012

2013

1.2

0.9

basis points

basis points

2012

(1.2)

(0.9)

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

2013

2012

2013

2012

–

0.5

–

basis points(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 7.7 million (2012: CHF 16.4 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 an investment company owned by the shareholder) and from tradereceivables (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 an investment company owned by the shareholder (see note 42).
Relevant credit information about the largest banking institution counterparties at the balance

sheet date is given in note 18. A minimum credit rating of ‘A’ applies to all counterparty
banking institutions.

For trade receivables, the Group has policies in place to ensure that credit sales of products
are made to customers with appropriate credit histories. In addition, an active credit

management focus is maintained in all the Group’s market organizations to ensure that the

impact of credit risk is minimized. Details of the impairment estimates of trade receivables are

given in note 14. The Group has no significant concentrations of corresponding credit risk 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

Hilti Financial Report 2013 | 33

Notes to the Consolidated Financial Statements

borrowing facilities. Such forecasting takes into consideration the Group’s debt financing

plans, covenant compliance, compliance with internal balance sheet ratio targets and, if
applicable, external regulatory or legal requirements – for example currency restrictions.

Surplus cash held by the operating 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
1,538.3 million (2012: CHF 1,306.6 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, 2013

Between 2

Over 5 years

and 2 years and 5 years

Borrowings

447.6

70.2

261.6

159.6

Trade and other payables

342.6

6.9

4.0

12.8

Finance lease liabilities

in CHF million

0.1

Less than 1 Between 1
year

At December 31, 2012*

0.6

0.6

Between 2–

Over 5 years

and 2 years and 5 years

Borrowings (excluding finance lease liabilities)

316.4

356.3

200.9

50.8

Trade and other payables

318.5

0.8

6.8

13.2

Finance lease liabilities* Restated, see note 2.2

0.2

0.7

0.5

–

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 519.0 million (2012: CHF 548.4 million)
and undiscounted contractual cash outflows of CHF 481.1 million (2012: CHF 524.3 million). Allof the non-trading Group’s derivative financial instruments are in hedge relationships and aredisclosed in note 16.

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

95.8 million (2012: CHF 98.9 million) and undiscounted contractual cash outflows of CHF 73.9
million (2012: CHF 79.6 million).

(2.23) Capital structure risk
management

The Group’s primary ob ective 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

Hilti Financial Report 2013 | 34

Notes to the Consolidated Financial Statements

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.

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

2013

2012*

Total equity

2,522.8

2,328.1

53.0

51.1

Total equity and liabilities

4,762.9

Total equity in % Total equity and liabilities* Restated, see note 2.2

4,555.6

The Group’s credit rating as assessed by the Credit Suisse Banking Group during 01 on thebasis of the Group’s 01 Financial Report is ‘High A stable’ (2012: ‘High A stable’) (see Credit
Suisse: Swiss Corporate Credit Handbook September 2013).

(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, 2013
AssetsFinancial assets at fair value
through profit and loss

Derivatives used for hedging
Liabilities

Derivatives used for hedging
in CHF million

32.1
–

33.8

–

–

32.1

–

2.9

–

2.9

Level 1–

33.8

Level 2

Level 3

Total

–

–

28.2

–

35.9

–

4.3

–

4.3

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

Derivatives used for hedging
Liabilities

Derivatives used for hedging
Restated, see note 2.2

35.9

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

Hilti Financial Report 2013 | 35

–

28.2

Notes to the Consolidated Financial Statements

The fair value of financial instruments traded in active markets is based on quoted market

prices at the balance sheet date. A market is regarded as active if quoted prices are readily
and regularly available from an exchange, dealer, broker, industry group, pricing service orregulatory agency, and those prices represent actual and regularly occurring market

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

The fair value of financial instruments that are not traded in an active market (for example,
over-the-counter derivatives) is determined by using valuation techniques. These valuation
techniques maximize the use of observable market data where it is available and rely as little

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

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

Quoted market prices or dealer quotes for similar instruments.

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



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

exchange rates at the balance sheet date, with the resulting value discounted back 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 loa ns 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.

Hilti Financial Report 2013 | 36

Notes to the Consolidated Financial Statements

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).

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 2013 | 37

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 defi nition, seldom
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 loss es.
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 . Detailed
information concerning trade receivables is given in note 14.
(3.2) Inventories

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

realizable value is made using a valuation process based on the aging of items with aging parameters set based on estimates 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.
(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 f inancial position or
results of operations.

Hilti Financial Report 2013 | 38

Notes to the Consolidated Financial Statements(4)

Early adoption of IFRS requirements

During 2013, the Group has not early adopted the requirements of the following IFRS standards, which at December 31, 2013, havebeen issued but are not effective for the 2013 Group financial statements:
Standard/

Amendment toStandard

IAS 32 Financial
Instruments –Presentation(Amendments)

IAS 36 Impairment of

Assets - Recoverable
amount disclosures(Amendment)

IAS 39 Financial

Effective dateContent

January 1,

These amendments clarify some of the requirements for No significant impact expected.

2014

January 1,
2014

January 1,

Instruments – Novation 2014of derivatives(Amendments)

IFRS 10, IFRS 12 andIAS 27 Investment

Entities (Amendments)

January 1,
2014

Importance for the Group

offsetting financial assets and financial liabilities on thebalance sheet.

This amendment addresses the disclosure of information No significant impact expected.
about the recoverable amount of impaired assets if thatamount is based on fair value less cost of disposal.

These amendments provide relief from discontinuing No significant impact expected.
hedge

accounting

whennovationofaderivative

designated as a hedging instrument meets certain
criteria.

These amendments

provide an exception to theconsolidation requirement for entities that meet thedefinition of an investment entity under IFRS 10. The

exception to consolidation requires investment entities
to account for subsidiaries at fair value through profit or

IFRIC 21 Levies

January 1,
2014

loss.

It is

not

expected

that

this

amendment would be relevant for
the Group, since none of theentities in the Group would qualify

to be an investment entity under
IFRS 10.

IFRIC 21 clarifies that an entity recognizes a liability for a No significant impact expected.
levy when the activity that triggers payment, as identified

by the relevant legislation, occurs. For a levy that istriggered upon reaching a minimum threshold, theinterpretation

clarifies

that

no

liability

shouldanticipated before the minimum threshold is reached.
IFRS 9 Financial
Instruments

Not yetpublished

Hilti Financial Report 2013 | 39be

The standard addresses the classification, measurement The

potential

impactontheand derecognition of financial assets, financial liabilities Group’s Financial Statements isand hedge accounting.

currently being assessed.

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

On January 1, 2013, the Group acquired an additional 24% interest in Hilti Saudi Arabia for Construction Tools LLC, Saudi Ara bia, 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.

On August 14, 2012, the Group acquired the remaining 49% interest in Hilti Tendon Technologies Pty. Ltd., Australia, at a conting ent

consideration of CHF 1.4 million. The carrying amount of the non-controlling interests in Hilti Tendon Technologies Pty. Ltd. on thedate of acquisition was CHF (0.2) million. The Group derecognized non-controlling interests of CHF (0.2) million and recorded a
decrease in equity attributable to equity holders of the parent of CHF 1.6 million.

The effect of these changes in ownership interests on the equity attributable to equity holders of the parent is summarized in the tablebelow:in CHF million
Carrying amount of non-controlling interests acquired
Net consideration to non-controlling interests

2012

3.4

(0.2)

3.3

(1.6)

(0.1)

Net effect on equity attributable to equity holders of the parent

(6)

2013

(1.4)

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

2013

2012*

62.9

61.4

2,857.3

2,569.3

3.0–

Total financial assets

2.7–

2,923.2

2,633.4

1.3

2.6

1,246.9

1,206.7

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* Restated, see note 2.2

Derivative financial instruments
short-term bank borrowings

1.6

1,249.8

1.7

1,211.0

Hilti Financial Report 2013 | 40

Notes to the Consolidated Financial Statements(7)

Intangible assets

in CHF million

Goodwill

Develop-

Other

ment costs intangible

Total

assetsCost 2013
Opening balance at January 1, 2013

Currency translation adjustment

Change in scope of consolidation
Additions

Disposals

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

86.6

(2.4)
–
–

(1.5)

–

806.7

(3.9)

–

74.0

5.1

–

79.1

(4.5)

(85.3)

84.2

517.8

194.6

796.6

–

(302.0)(133.4)(435.4)–––

Additions–

Disposals

195.5(80.8)–

1.9

Impairment losses––

Currency translation adjustment

Change in scope of consolidation

524.6(46.8)

–

–

–

1.0

–

2.9
–

(37.8)(19.7)(57.5)

(3.4)

(1.7)

(51.9)

–

–

–

80.8

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

Goodwill

Develop-

Other transfers

in CHF million

–

4.5

Other

ment costs intangible

85.3
–

Total

assetsCost 2012
Opening balance at January 1, 2012*

88.5

Currency translation adjustment(1.9)

Additions–

Change in scope of consolidation
Disposals

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

–
–

470.0

194.6

753.1

–

(1.1)

(3.0)

56.8

5.1

61.9

–

–

–

(2.1)

(3.2)

86.6

524.6

195.5

806.7

–

(248.5)(110.2)(358.7)

–

–

–

–

(0.1)

–

Additions–(51.9)(25.1)(77.0)

Disposals

–

0.2

3.1

3.3

Closing balance at December 31, 2012*–(302.0)(133.4)(435.4)

Net book values at December 31, 2012

86.6

222.6

62.1

371.3

Impairment losses
Other transfers* Restated, see note 2.2

Hilti Financial Report 2013 | 41

–
–

(1.8)
–

0.7

–

Currency translation adjustment

Change in scope of consolidation

–

0.1

(5.3)

(1.9)
–

0.7
–

(3.7)
–

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 amortization period for the majority of development costs has been extended from three to five years in 2013 (see note 2.2).
The goodwill of CHF 84.2 million (2012: CHF 86.6 million) arises from the acquisition of Unirac Inc. in 2010. In accordance with IAS 36,

goodwill is tested annually for impairment. Based on the assessment made in 2013, an impairment loss has been recognized in t heGroup’s 01 financial statements 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 – 2014 to 2016 (2012: 2013 to 2015) – and a constant growth rate

assumption of 1.0% (2012: 2.0%) for the terminal value beyond 2016 (2012: beyond 2015). The value in use of the CGU is based on a
discount rate of 9.9% before tax (2012: 10.7%) 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 cost of disposal was determined to be even lower. The recoverable am ount of
the solar CGU amounts to CHF 92 million as at December 31, 2013.

The calculation of the value in use is most sensitive to the following assumptions:Market outlook: The impairment loss results principally from significant structural changes in the solar business. Deterioration in
subsidy conditions reduced the market volume, especially in the European market, and at the same time led to a significant

reduction in prices as well as an increased competition. The projected cash flows have been updated to reflect these market

developments and are based on the assumption that cost reductions resulting from efficiency increases can be accomplished.
Should the projected annual cash flows be lowered by 10% the impairment loss would increase by CHF 9 million.


Discount rate: The discount rate used reflects specific risks to the CGU solar and is derived from its weighted average cost ofcapital (WACC). Should the post-tax discount rate be raised by 1.0% the impairment loss would increase by CHF 13 million.

Long-term growth rate: The long-term growth rate used for the relevant countries and markets is based upon management’s
expectations for the solar market as well as future projections, which are 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 10 million.

Hilti Financial Report 2013 | 42

Notes to the Consolidated Financial Statements(8)

Property, plant and equipmentin CHF million

Cost 2013
Opening balance at January 1, 2013

Currency translation adjustment

Change in scope of consolidation
Additions

Disposals

Transfers to investment properties
Other transfers
Closing balance at December 31, 2013
Accumulated depreciation 2013
Opening balance at January 1, 2013

Currency translation adjustment

Change in scope of consolidation
Additions

Impairment losses

Land andbuildings

764.2

(2.3)
–

4.3

(8.9)
–

3.3

Plant and

Other

Assetsassetsstruction

machinery operating

782.9

3.9

–

19.5

(22.4)
–

19.4

534.6

(7.0)
–

–

6.8

(416.3)

–

–

(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

Hilti Financial Report 2013 | 43

–

–

54.2

–

2,170.0––(90.0)

89.9(45.9)

21.5–(29.5)

–

8.0
–

–

4.5

Disposals

Transfers to investment properties––(586.4)(44.6)(5.3)–(58.7)(381.1)––2,135.2

130.1

516.2

(18.2)

0.1

65.8

803.3

(3.3)

53.5

Total

40.5

760.6

0.6

under con-

–
–

1.8
–

(108.7)
(2.2)

83.7
–
–

–

(1,409.2)

89.9

760.8

Notes to the Consolidated Financial Statements

in CHF million

Cost 2012
Opening balance at January 1, 2012*

Currency translation adjustment

Change in scope of consolidation

Land andbuildings

Opening balance at January 1, 2012*

Currency translation adjustment

Change in scope of consolidation
Additions

Impairment losses

struction

41.1

–

–

–

–

–

Accumulated depreciation 2012assets

(1.1)

29.1

(3.1)

–

–

9.9

16.3

9.8

764.2

782.9

534.6

(366.4)(555.6)(407.9)–––(19.7)–(45.0)–(36.0)–(1,329.9)

–

–

–

–

–

–

Other transfers

–

–

–

Closing balance at December 31, 2012*(381.1)(586.4)(416.3)

Net book values at December 31, 2012*

383.1

196.5

118.3

–

2,135.2(50.6)
39.4(60.6)

53.5

–

13.1
–

–

2.8

2.0
–

–

–

(44.8)

1.1(10.3)

126.1(13.6)

3.0

2,080.0

47.9

(2.2)

–

0.5

Total

37.9

Disposals

Transfers to investment properties

under con-

534.8

Transfers to investment properties
Closing balance at December 31, 2012*

Assets

752.2

(6.6)

11.2

Other transfers

Othermachinery operating

751.9

Additions

Disposals

Plant and

6.9–

(115.3)
–

–

54.5

–

–

–

–

(1,383.8)

53.5

751.4

* Restated, see note 2.2
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 2.5 million( 01 : CHF . million). The liabilities arising from finance leases are detailed in note 25. Land and buildings with a book value of CHF

0. million ( 01 : CHF 0. million) serve as security for other payables (see note 25) with the total amount of CHF 2.4 million (2012:
CHF 2.1 million).

Hilti Financial Report 2013 | 44

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

Disposals
Transfers

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

Currency translation adjustment

Change in scope of consolidation
Additions

2013

2012

27.0

33.0

–

–

–
–

–
–

(19.5)

(6.0)

7.5

27.0

(24.8)(26.2)

–

–

–

–

–

–

–

(0.2)

Disposals

19.5

2.6

Closing balance at December 31(5.3)(24.8)Net book values at December 31

2.2

2.2

Fair value of investment property at December 31

4.9

5.6

Impairment losses
Transfers

–
–

(1.0)
–

The fair value of investment property as at December 31 is determined as follows: The land component is determined by apprais albased 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 und ertaken 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

2013

2012

Rental income

0.1
–

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 2013 | 45

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

2013

2012*

0.3

16.8

100.5

114.0

Inventories

54.6

53.3

Provisions and employee benefits

57.6

Recovery of deferred tax balances

More than 1 year
Less than 1 year

100.2

Total
Components of deferred tax balances

Fixed and intangible assets

26.9

97.2

22.2
61.5

Receivables(93.9)(85.4)Tax losses

27.5

31.4

Total

100.5

114.0

(26.0)(28.6)

Other

27.8

of which recognized as deferred tax assets

126.5

of which recognized as deferred tax liabilities* Restated, see note 2.2

31.0

142.6

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, 2013

53.3

22.2

61.5

Changes in scope of consolidation

–

–

–

–

–

(5.5)

Closing balance at December 31, 2013

54.6

26.9

57.6

(93.9)

27.5

27.8

100.5

Opening balance at January 1, 2012*

48.2

17.3

52.8

(72.8)

26.6

22.0

94.1

Changes in scope of consolidation

–

–

–

–

–

–

–

–

–

–

12.5

(85.4)

31.4

31.0

114.0

(Charged)/credited to income statement(Charged)/credited to OCI

Currency translation adjustment(Charged)/credited to income statement(Charged)/credited to OCI

Currency translation adjustment
Closing balance at December 31, 2012 ** Restated, see note 2.2

3.8

(2.5)

6.0

–

(0.9)

53.3

4.6
0.1

5.3

–

31.4
–

31.0
–

114.0
–

2.7

(6.8)

(3.8)

(1.5)

(1.0)

(1.1)

(1.7)

(0.1)

(1.7)

(7.0)

–

(3.1)

(13.0)

(0.7)

0.4

–

12.5

22.2

61.5

(0.4)

(85.4)

–

4.8

–

–

9.7

(0.7)

(5.5)

9.7

(2.3)

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, pl ant andequipment. The category provisions and employee benefits includes items charged/credited to OCI which are tax effects of temporary

differences arising on remeasurements on defined benefit pension plans. The category receivables includes tax effects on temporary

Hilti Financial Report 2013 | 46

Notes to the Consolidated Financial Statements

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 regarding 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

2013

2012

Tax loss carryforwards recognized in deferred tax

193.1

231.1

Total tax loss carryforwards

305.9

358.1

Unused tax loss carryforwards

112.8

127.0

Expiration of unused tax loss carryforwards:

Expiration < 1 year

6.3

4.9

Expiration > 5 years or no expiration date

100.3

114.5

Tax effect of unused tax loss carryforwards

31.8

36.3

Expiration 1 to <= 5 years

Unremitted earnings subject to withholding tax or other taxes

6.2

278.5

7.6

263.4

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 278.5 million (2012: CHF 263.4 million). Such amounts are permanently reinvested.
(12)

Other financial investments

in CHF million

2013

2012*

1 to < 2 years

1.9

1.7

3 to < 4 years

1.4

Maturity

2 to < 3 years
4 to < 5 years

0.1

0.1
–

–

1.5

10.0

11.1

Fair values

13.4

14.4

Average effective interest rates (in %)

1.6

1.7

>= 5 years
Total other financial investments
Further information* Restated, see note 2.2

13.4

14.4

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

2013

2012*

Raw materials

56.8

69.2

Finished goods

482.7

485.4

Work in progress
Total inventories* Restated, see note 2.2

Hilti Financial Report 2013 | 47

9.0

548.5

8.8

563.4

Notes to the Consolidated Financial Statements

The change in inventories includes a currency translation adjustment which reduces the inventories by CHF 16.1 million in 2013. This isdue to the change in closing rates in 2013 compared to those in 2012.

Allowance made for possible inventory losses due to age and obsolescence totals CHF 48.2 million (2012: CHF 55.1 million). Thechange in the allowance recognized in the income statement is CHF 5.7 million (2012: CHF 1.8 million). This change is included in theline ‘change in inventory’.

Inventories totaling CHF 114.6 million (2012: CHF 113.7 million) serve as security for bank borrowings of CHF 25.1 million (2012: CHF
27.5 million) (see notes 24 and 28).
(14)

Trade and other receivables

in CHF million

2013

2012*

Trade receivables

1,298.6

1,241.7

Trade receivables net

1,183.8

1,141.9

1,305.6

1,248.3

Current portion

943.2

899.2

Non-current portion

362.4

Less adjustment for impairment of trade receivables
Other receivables
Total trade and other receivables(114.8)121.8(99.8)

106.4

349.1

1,305.6

1,248.3

4.4

4.0

1 to < 2 years

189.1

188.5

3 to < 4 years

48.9

42.3

Total trade and other receivables
Further information

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

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

100.5

10.4
13.5

102.5

8.4
7.4

362.4

349.1

86.3

90.4

Not due

2.2

3.0

Past due 91–180 days

8.3

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

5.9

5.1
5.7

Past due 181–360 days

16.7

12.4

Past due > 360 days

42.9

22.5

Total aging of gross trade receivables individually determined to be impaired

82.1

55.5

Uncollectible notes* Restated, see note 2.2

6.1

6.8

Hilti Financial Report 2013 | 48

Notes to the Consolidated Financial Statements

in CHF million

2013

2012

99.8

105.4

(32.9)(39.3)

EUR

630.4

609.3

Other

551.3

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

47.9

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

33.7

114.8

99.8

123.9
1,305.6

Total trade and other receivables* Restated, see note 2.2

123.9
515.1

1,248.3

The change in trade and other receivables includes a currency translation adjustment which reduces the trade and other receivables
by CHF 27.8 million in 2013. This is due to the change in closing rates in 2013 compared to those in 2012.

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 174.6 million (2012: CHF 166.8 million) serve as security for bank borrowings of CHF 93.9 million (2012: CHF
95.1 million) (see notes 24 and 28).

Other receivables primarily consist of VAT and tax refunds receivables totaling CHF 50.8 million (2012: CHF 35.2 million), deposits

totaling CHF 17.7 million (2012: CHF 17.7 million), advances totaling CHF 11.3 million (2012: CHF 9.6 million) and vendors wi th debit
balances totaling CHF 11.1 million (2012: CHF 11.5 million).

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

2013

2012

Gross

Unearned

Net

Gross

UnearnedNet

investment

financeinvestment

investment

financeinvestmentin the lease

incomein the leasein the lease

incomein the lease< 1 year

323.5

45.2

278.3

269.9

40.2

229.7

1 to < 5 years

383.6

36.0

347.6

377.1

32.2

344.9

Total at December 31

707.2

81.2

626.0

647.1

72.4

574.7

>= 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

–

(40.4)
–

0.1

–

0.1

–

(34.8)–

Accrued income and prepayments

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

Hilti Financial Report 2013 | 49

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

USD

EUR

Other

Total

101.1

42.9

275.8

419.8

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

24.5

0.1

6.4

31.0

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

2013
Contract face amounts

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

Foreign currency options

Recognition of contract values

Contract values recognized in the cash flow hedging reserve in equity

92.9

–

0.3

–

–
–

–

–

–

2.0

92.9

–

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

0.3
0.3

–

–

1.5

1.8

(0.3)

–

(1.5)

(1.8)

0.3

–

2.0
2.0

2.3
2.3

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

Hilti Financial Report 2013 | 50

Notes to the Consolidated Financial Statements

in CHF million

USD

EUR

Other

Total

Foreign currency forward contracts

185.1

(3.8)

248.0

429.3

Cross-currency swap

92.9

–

–

92.9

2012
Contract face amounts

Foreign currency options

–

–

–

–

278.0

(3.8)

248.0

522.2

Foreign currency forward contracts

2.0

–

2.8

4.8

Cross-currency swap

19.2

–

–

–

2.8

19.2

Total
Contract values

Foreign currency options
Total

Recognition of contract values

–

21.2

–

–

–

24.0

Contract values recognized in income statement during current and prior years

20.9

–

1.3

22.2

Total

21.2

–

2.8

24.0

(0.2)

–

(1.1)

(1.3)

–

1.1

1.3

Contract values recognized in the cash flow hedging reserve in equity

0.3

–

1.5

1.8

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

Hilti Financial Report 2013 | 51

0.3

–

0.3

–

0.2

1.5
1.5

1.8
1.8

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 or fair value hedges. Gains and losses recognized in the cash flow hedging reserve inequity on interest rate swap contracts will be continuously released to the income statement until the repayment of the bankborrowings. The accounting treatment is described in the accounting policies, notes 2.24 and 2.25. Details of derivative contracts
outstanding at balance sheet date are as follows:in CHF million

CHF

USD

EUR

Total

60.0

141.8

14.3

216.1

0.9

(0.1)

2013
Outstanding interest rate swaps

Contract face amounts

Recognition of contract values

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

–

(0.5)

(0.4)

Opening balance at January 1–

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

Closing balance at December 31

in CHF million

Total

0.8

0.5

–

(0.1)

(0.9)

(0.8)

–

(0.8)

–

–

(0.7)

(0.5)

(0.4)

–

(0.9)

CHF

USD

EUR

Total

–

111.2

23.1

134.3

1.1

(0.4)

(0.5)

(0.1)

Movements of contract values recognized in the
cash flow hedging reserve in equity(Gains)/losses on cash flow hedges reclassified from equity to income statement

0.2

0.4

–

0.6

2012
Outstanding interest rate swaps

Contract face amounts

Recognition of contract values

Contract values recognized in income statement during current and prior years

–

Total

–

Contract values recognized in the cash flow hedging reserve in equity

–

(0.8)

0.7

0.3

–

(0.4)

(0.8)

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

–

–

(1.2)
0.4

–

–

(1.2)

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

–

–

–

(0.1)

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

Closing balance at December 31

–

(0.8)

–

0.4
–

(0.8)

The fixed interest rates vary from 1.3% to 4.9% (2012: 1.3% to 4.9%) and the main floating rates are EURIBOR and LIBOR.

Hilti Financial Report 2013 | 52

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

Foreigncurrency
risks

Interest

rate risks

Total

2013

Current assets

32.5

1.3

33.8

Non-current assets

–

–

–

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 liabilities

in CHF million–

Foreigncurrency
risks

(1.0)

Interest

rate risks

(1.0)

Total

2012

Current assets

7.9

1.1

(3.1)

(0.3)

Total net book value derivative financial instruments at December 31

24.0

(0.1)

23.9

Cash flow hedging reserve in equity

1.8

(0.8)

1.0

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

1.8

0.4

2.2

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

1.3

–

1.3

Non-current assets

19.2

Non-current liabilities–

Current liabilities

–

(0.9)

9.0

19.2

(3.4)
(0.9)

The cash flow hedging reserve in equity net of tax amounts to CHF 1.2 million (2012: CHF 0.9 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.
(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.

Hilti Financial Report 2013 | 53

Notes to the Consolidated Financial Statements(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 amo unt of CHF 30.5
million (2012: CHF 39.3 million).

Following are the currency denominations of the carrying amounts of cash and cash equivalents:
in CHF million

2013

2012*

CHF

991.5

809.7

USD

73.5

58.6

EUR

239.3

CNY

35.2

Other
Total cash and cash equivalents* Restated, see note 2.2

265.2

36.4

198.8

136.7

1,538.3

1,306.6

The table below shows the rating and balance of the major counterparties at the balance sheet date:in CHF million
2013

RatingBalance

Credit Suisse

A

350.0

LGT Bank Liechtenstein

A+

109.5

UBS Investment Bank

2012

A

162.3

Credit Suisse

A+

272.3

LGT Bank Liechtenstein

A+

108.0

UBS Investment Bank

A

116.5

The bank ratings 2013 are the latest prepared and published by Standard & Poor’s on their website (2012: bank ratings have been
made and published by Standard & Poor’s). Management does not expect any losses from non-performance by these counterparties.

Cash and cash equivalents include a deposit of CHF 479.5 million (2012: CHF 477.1 million) with an investment company owned by
the shareholder (see note 42).
(19)

Assets classified as held for saleAt balance sheet date 2013 and 2012 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 capit al 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, 2013, of CHF 155 per participation certificate and of CHF 1,550 per share,amounting to a total of CHF 392.8 million (financial year 2012: CHF 130.5 million), is to be proposed at the 2013 annual general
meeting. This future proposed dividend is not recognized in these financial statements.

Hilti Financial Report 2013 | 54

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
reserve2013

Non-controlling

Totalinterests

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

–

1.6

–

–

1.6

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

–

(0.2)

–

–

(0.2)

from equity to income statement

–

(1.2)

–

–

(1.2)

reclassified from equity to income statement

–

0.1

–

–

0.1

0.6

–

–

(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

in CHF million(21.6)

–

–

(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

–

Foreigncurrency–(5.5)

Cash flow Retained
hedgingearnings

translation reserve
reserve
2012*

–

–

Non-

controlling

(5.5)

Total

interests

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

–

2.2

–

–

2.2

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

–

(0.2)

–

–

(0.2)

from equity to income statement

–

1.3

–

–

1.3

reclassified from equity to income statement

–

(0.2)

–

–

(0.2)

–

–

–

–

–

(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

(6.3)

–

–

(0.4)

(6.7)

reclassified to the income statement

(6.3)

3.1

–

(0.4)

(3.6)

Remeasurements on employee benefits––(78.3)–(78.3)

to the income statement––(65.8)–(65.8)

Total other comprehensive income 2012*

(6.3)

3.1

(65.8)(0.4)(69.4)

Deferred tax on remeasurements on employee benefits
Items that will never be reclassified* Restated, see note 2.2

Hilti Financial Report 2013 | 55

–

–

12.5

–

12.5

Notes to the Consolidated Financial Statements(21)

Provisionsin CHF million

Restructuring Warranty

Product

Other

Total

liability

3.7

80.9

Amounts used

(3.7)

(78.8)

Currency translation adjustment

–

(1.8)

Opening balance at January 1, 2013

Additions

Unused reversals

Closing balance at December 31, 2013

in CHF million

2.7
–

2.7

4.3

29.1

118.0

(1.2)

(9.3)

(93.0)

–

(0.1)

90.8

12.2

(2.3)

(0.9)

88.8

Restructuring Warranty

8.6

(1.4)

14.4
Product

114.3

26.9
Other

(4.6)
(1.9)

132.8
Total

liability
Opening balance at January 1, 2012*

1.3

67.7

4.9

21.8

95.7

Additions

3.4

72.9

1.9

14.4

92.6

(0.9)

(0.9)

Amounts used

(0.6)

(53.0)(1.6)

Currency translation adjustment

–

(0.5)

–

Unused reversals

(0.4)

(8.4)
(0.5)

in CHF million

2013

2012*

Current portion of total provisions

75.3

68.1

Non-current portion of total provisions

57.5

Total provisions at December 31* Restated, see note 2.2

4.3–(61.4)

118.0* Restated, see note 2.2

80.9

(6.2)

29.1

Closing balance at December 31, 2012*

3.7

(6.2)

132.8

49.9

118.0

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 lag 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 period. Certainty

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

current exposure. For exposures covered by the product liability provisions of CHF 14.4 million (2012: CHF 4.3 million), claims forrecovery have been made and the Group has recognized corresponding reimbursement assets of CHF 5.5 million (2012: CHF 0.6
million) in ‘accrued income and prepayments’.

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

Hilti Financial Report 2013 | 56

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 78.9%( 01 : 79.7%) of the Group’s total defined benefit obligation and 85.8% ( 01 : 85.7%) 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 ob ectives, 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 employee

contributions 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. 1.5% in 2013 and 1.0% in 2012). 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 (2012: 2010–2012) with payment to be made in 2016(2012: 2013). Historically the level 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 23.0 million (2012: CHF 20.4 million).

Hilti Financial Report 2013 | 57

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* Restated, see note 2.2

Funded2013

Unfunded Total

Funded726.2––(863.9)(882.4)

702.5

–
–

(882.4)(137.7)–(137.7)(179.9)–(179.9)(863.9)

120.0

–

726.2

2012*

Unfunded Total

120.0

117.0

–

702.5

117.0

(186.6)(44.3)(230.9)(186.1)(38.6)(224.7)(66.6)(44.3)(110.9)(69.1)(38.6)(107.7)

846.2

–

846.2

819.5

–

819.5

(1,050.5)(44.3)(1,094.8)(1,068.5)(38.6)(1,107.1)(204.3)(44.3)(248.6)(249.0)(38.6)(287.6)–(68.5)(68.5)–(90.3)(90.3)(204.3)(112.8)(317.1)(249.0)(128.9)(377.9)

2013

2012*

in CHF million
Current portion of total net book value employee benefits(8.7)

Non-current portion of total net book value employee benefits(308.4)(317.1)

Total net book value employee benefits(48.9)(329.0)(377.9)* Restated, see note 2.2(22.2) Reconciliation of fair value of plan assets

in CHF million

2013

2012*

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

702.5

117.0

819.5

638.7

111.9

750.6

13.4

1.6

15.0

42.4

4.5

46.9

14.0
24.9
15.7

4.5
7.1
0.8

18.5
32.0
16.5

17.6
35.9
16.6

5.0
6.6
0.9

22.6
42.5
17.5

Benefits paid

(44.3)(10.7)(55.0)(48.7)(9.3)(58.0)

Settlements

–

(0.1)

(0.1)

–

(4.4)

(4.4)

726.2

120.0

846.2

702.5

117.0

819.5

Currency translation adjustment
Closing balance at December 31* Restated, see note 2.2

–

(0.2)

(0.2)

–

1.8

1.8

Hilti Financial Report 2013 | 58

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

2013

2012*

Switzerland Other plans Total
Opening balance at January 1

Current service cost

Switzerland Other plans Total(882.4)(224.7)(1,107.1)(17.6)(7.9)(25.5)(24.6)

Interest expense on defined benefit obligation
Actuarial gains/(losses)

34.8

(8.8)

(785.4)(33.4)(2.2)(22.1)(21.5)(203.5)

(7.0)
(8.6)

(988.9)(29.1)(30.1)

32.6(102.3)(22.9)(125.2)

57.3

48.7

13.4

62.1

Contributions by plan participants(15.7)
44.3

13.0

(0.7)

(16.4)

Past service cost

(2.7)

(0.4)

(3.1)

16.8

0.1

16.9

Currency translation adjustment

–

0.8

0.8

–

(0.9)

(0.9)

Benefits paid
Settlements

Closing balance at December 31* Restated, see note 2.2–(863.9)–(230.9)(16.6)––(1,094.8)(882.4)(0.8)(17.4)

5.5(224.7)

5.5(1,107.1)(22.4) Components of defined benefit costs recognized in the income statementin CHF million

2013

2012*

Switzerland Other plans Total

Switzerland Other plans Total

Current service cost

(24.6)(8.8)(33.4)(22.1)(7.0)

Gains/(losses) on settlements

–

(0.1)

(0.1)

–

1.1

Past service cost

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(2.7)(27.3)

(0.4)

(3.1)

(9.3)

(36.6)(17.6)

(7.9)

(3.6)
(30.9)

14.0

Total service cost – in ‘personnel expenses’ (see note 1); and

16.9
1.1

(11.1)(25.5)(21.5)(8.6)(30.1)

(3.4)

(7.0)

(3.9)

(3.6)

(7.5)

(12.7)(43.6)

(9.2)

(9.4)

(18.6)

4.5

Interest income and expense – in ‘other revenues and expenses (net)’ (see note 4).

Hilti Financial Report 2013 | 59(29.1)

(5.8)

18.5

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

0.1

(5.3)

* Restated, see note 2.2



16.8

17.6

5.0

22.6

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

in CHF million

2013

2012*

Switzerland Other plans Total

Actuarial gains/(losses) arising from

Switzerland Other plans Totalchanges in demographic assumptions

–

(2.1)

(2.1)

–

(0.3)

(0.3)

changes in financial assumptions

34.8
–

0.3

(0.4)

35.1

(78.7)(28.3)(107.0)on defined benefit obligation

34.8

(2.2)

32.6

(102.3)(22.9)(125.2)Return on plan assets excluding interest income

13.4

1.6

15.0

42.4

4.5

46.9

48.2

(0.6)

47.6

(59.9)(18.4)(78.3)

Actuarial gains/(losses) arising from

Actuarial gains/(losses) arising from experience adjustments
Total actuarial gains/(losses)

Total remeasurements recordedin other comprehensive income* Restated, see note 2.2(0.4)(23.6)

5.7(17.9)(22.6) Plan asset classes at December 31

in CHF million

2013
Quoted2012*

Non-quoted Total%

Quotedmarket price market priceNon-quoted Total%

market price market priceCash and cash equivalents

40.7

–

40.7

4.8%

36.1

–

36.1

4.4%

Equity instruments

243.7

–

243.7

28.8%

219.2

–

219.2

26.7%

Real estate

11.1

94.0

105.1

12.4%

10.9

91.7

102.6

12.5%

Investment funds

31.1

46.5

77.6

9.2%

31.5

45.7

77.2

Structured debt

–

–

–

–

–

–

–

Debt instruments (e.g. bonds)
Derivatives

Asset-backed securities
OthersTotal plan assets at fair value

341.2
–
–

0.2

668.0

–
–
–

37.7

178.2

341.2
–
–

37.9

846.2

40.3%
–
–

4.5%

100.0%* The previous year was adjusted to the change in disclosure of the asset classes.

348.1
–
–

0.3

646.1

–
–
–

36.0

173.4

348.1
–
–

36.3

819.5

42.6%
–

9.4%
–
–

4.4%

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 5.5% (2012: 5.0%).

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 26.0% (2012: 24.0%). 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 43.3% (2012: 45.5%).

Real estate represents indirect and direct investments in residential and commercial properties. Indirect investments compris e 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 a llocation to realestate of the pension plan in Switzerland is 14.2% (2012: 14.3%).

Hilti Financial Report 2013 | 60

Notes to the Consolidated Financial Statements

Investment funds represent investments with an insurance company and a mandate with a bank which invests in alternative 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 5.9% (2012: 6.1%).

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 5.2% (2012: 5.1%).
(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

5,871(571.5)

52.2%

19.9

2013

880

(52.8)

4.8%

23.6

Retired
1,496

Total

Active8,247(470.5)(1,094.8)

12.4

16.8

43.0%

100.0%

Deferred

5,919

2012

Retired880(574.1)(55.1)

51.8%

5.0%

20.0

23.8

1,491

Total
8,290

(477.9)(1,107.1)

12.4

16.8

43.2%

100.0%The employer’s best estimate of contributions expected to be paid to defined benefit plans for the financial year 2014 is CHF 30.0
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:
2013

2012

Switzerland Other plans Total

Discount rate

Future salary increase
Future pension increase

Switzerland Other plans Total

2.3%

3.8%

2.6%

2.0%

3.6%

2.3%

–

1.8%

0.4%

–

1.6%

0.3%

1.5%

2.9%

1.8%

1.5%

2.8%

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 projected
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 4.0% 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 0.8% 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 2013 | 61

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
Maturity< 1 year

1 to < 2 years
2 to < 3 years

2013

2012

299.8

149.7

–

32.0

32.5

299.1

3 to < 4 years

133.8>= 5 years

148.6

99.8

131.5

Total bonds

714.5

660.0

CHF

499.7

448.8

Total bonds

714.5

660.0

4 to < 5 years

Currency

EUR

214.8

Further information

Fair values

Average effective interest rates (in %)

718.5

2.5

–

47.7

211.2

678.8

3.0

The euro bonds (‘Schuldscheindarlehen’) are not tradeable on any recognized stock exchange.
The fair values of Swiss franc bonds totaling CHF 503.7 million (2012: CHF 464.7 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 214.8 million (2012: CHF 214.1 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

2013

2012

1 to < 2 years

29.6

40.2

3 to < 4 years

1.6

3.5

>= 5 years

0.3

0.5

Maturity

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

USD

7.9
0.1

19.5
0.6

39.5

64.3

EUR

30.6

8.9

27.5

Total long-term bank borrowings

39.5

64.3

1.6

2.6

Further information

Average effective interest rates (in %)36.8

CHF 8.9 million (2012: CHF 18.3 million) of the total long-term bank borrowings are secured by inventories totaling CHF 40.6 million(2012: CHF 75.8 million) and receivables totaling CHF 37.3 million (2012: CHF 66.0 million). Another CHF 30.5 million (2012: CHF 36.6
million) of the total long-term bank borrowings are secured by receivables totaling CHF 31.2 million (2012: CHF 36.8 million) (see notes
13 and 14).

Hilti Financial Report 2013 | 62

Notes to the Consolidated Financial Statements(25)

Trade and other payables

in CHF million

2013

2012*

Trade payables

212.6

189.5

Total trade and other payables

367.6

340.7

Current portion

342.7

318.7

Total trade and other payables

367.6

340.7

0.1

0.1

1 to < 2 years

7.5

1.5

3 to < 4 years

1.2

1.4

Other payables

155.0

Non-current portion

24.9

Further information

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

2 to < 3 years

1.4

4 to < 5 years

2.0>= 5 years

Currency denominations of the carrying amounts of trade and other payables

EUR

CHF

Other

150.0

21.1

30.1

367.6

* Restated, see note 2.2

4.2

157.9

114.3

Total trade and other payables

1.7

13.2

74.3

USD

22.0

12.8
24.9

Total non-current trade and other payables

151.2

22.0

72.4
88.2

340.7

The change in trade and other payables includes a currency translation adjustment which reduces trade and other payables by
CHF 5.2 million in 2013. This is due to the change in closing rates in 2013 compared to those in 2012.

Other payables primarily consist of liabilities for personnel expenses totaling CHF 6.6 million (2012: CHF 7.8 million), liabilities for social

contributions totaling CHF 27.6 million (2012: CHF 26.1 million), liabilities for source-deducted taxes and VAT totaling CHF 69.3 million(2012: CHF 58.8 million) and customers with credit balances totaling CHF 22.7 million (2012: CHF 34.3 million).

CHF 2.4 million (2012: CHF 2.1 million) of other payables are secured by mortgages over land and buildings totaling CHF 0.2 million(2012: 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

2013

Interest

Principal

payments

Minimum
lease

2012

Interest

Principal

payments< 1 year

0.1
1.2

0.2

–

0.1

0.2
1.2

0.1

–

0.2

>= 5 years

–

–

–

–

–

–

1 to < 5 years
Total at December 31

Hilti Financial Report 2013 | 63

1.3

0.2

1.0
1.1

1.4

0.1

1.1
1.3

Notes to the Consolidated Financial Statements

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

Current income taxes payable and receivable

Current income taxes payable and receivable consist of income taxes payable and refundable relating to the current or prior 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

2013

2012

EUR

54.9

64.8

MXN

11.5

Currency

USD

18.0

JPY

29.1
9.7

8.5

10.6

Other

24.9

27.5

Total short-term bank borrowings

125.3

141.7

3.5

3.2

BRL

7.5

Further information

Average effective interest rates (in %)–CHF 16.2 million (2012: CHF 9.2 million) of the total short-term bank borrowings are secured by inventories totaling CHF 74.0 million(2012: CHF 37.9 million) and receivables totaling CHF 67.8 million (2012: CHF 33.0 million). CHF 38.3 million (2012: CHF 31.0 million)of the total short-term bank borrowings are secured by receivables totaling CHF 38.3 million (2012: CHF 31.0 million) (see notes 13
and 14).
(29)

Operating revenues

Categories of operating revenues are as follows:in CHF million

2013

2012*

Net sales of goods

4,190.1

4,067.4

Total net sales

4,340.2

4,204.6

4,432.5

4,287.9

Net sales of services
Other operating revenues
Total operating revenues

150.1
92.3

137.2
83.3

* Restated, see note 2.2
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 2013 | 64

Notes to the Consolidated Financial Statements(30)

Material costs

in CHF million

2013

2012*

Materials(1,302.2)(1,260.4)

Total material costs(1,317.9)(1,274.4)(1,316.7)(1,331.9)

Outsourced manufacturing
Change in inventory
Total material costs including change in inventory* Restated, see note 2.2(31)(15.7)
1.2(14.0)(57.5)

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

2013

2012*

Salaries and wages(1,386.5)(1,367.9)

Total personnel expenses(1,702.9)(1,692.4)

2013

2012

Sales

16,76016,419Production

2,677

2,775

Social contributions* Restated, see note 2.2(316.4)(324.5)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)

1,124
895

21,456

1,094
851

21,139Depreciation and amortization

This position comprises depreciation, amortization and impairment losses on intangible assets, property, plant and equipment andinvestment property. Depreciation and amortization are shown in all disclosures at the average rate. In 2013 impairment losse s havebeen recorded against goodwill related to the acquisition of Unirac Inc. in 2010, as well as on development projects and otherintangible assets due to the phase out of the related products. In 2012 impairment losses were recorded against development projects
and other intangible assets due to the phase out of the related products (see note 7).
(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 2013 | 65

Notes to the Consolidated Financial Statements(34)

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

2013

2012*

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

4.9

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

(0.1)

(2.1)

(37.9)(15.0)

Interest and dividend revenues

Gains/(losses) on foreign currency hedging instruments
Gains/(losses) on foreign currencies

Net interest income/(expense) on defined benefit plans

5.6

18.5

(7.0)

–

5.9

(3.3)
(7.5)

(16.0)(22.0)in CHF million

2013

2012*

Interest expense(36.2)(40.4)

Total finance costs(51.0)(56.3)

Total other revenues and (expenses) (net)* Restated, see note 2.2(35)

Finance costs

The following gains and losses are included in finance costs:

Other gains/(losses)* Restated, see note 2.2(14.8)(15.9)

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

Finance costs are reported at the gross interest expense amount. Interest income from investments is separately included in ‘otherrevenues and expenses (net)’.
(36)

Income tax expensein CHF million

2013

2012*

Current tax(48.4)(45.7)

Total income tax expense(50.0)(35.6)

Deferred tax* Restated, see note 2.2

(1.6)

10.1

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:

Hilti Financial Report 2013 | 66

Notes to the Consolidated Financial Statements

in CHF million

2013

2012*

Net income before income tax

354.1

222.9

Tax calculated at domestic tax rates applicable to profits in the respective countries(31.8)(37.9)

Expenses not deductible for tax purposes(27.6)(17.9)Tax losses for which no deferred tax asset has been recognized

(3.0)
5.6

(2.7)

10.1

Other effects

(3.2)

2.0

Income not subject to tax

4.6

Utilization of previously unrecognized tax losses

5.4

Tax attributable to prior years
Income tax expense

Weighted average applicable tax rate (in %)* Restated, see note 2.2

5.8
5.0

(50.0)(35.6)

9.0

17.0

The 01 increase in ‘expenses not deductible for tax purposes’ is caused by a non-tax deductible goodwill impairment of CHF 46.8

million (see note 7). The amount in ‘other effects’ is mainly due to changes in tax rates, as well as expense/income subject to different
tax rates.
(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
Electric Tools & Accessories
Electric Tools & Accessories

Products
Services

Total Electric Tools & Accessories

2013

2012*

1,966.8

1,955.1

2,088.3

2,064.5

121.5

109.4

Fastening & Protection Systems

Products

2,223.3

2,112.3

Fastening & Protection Systems

Services

28.6

27.8

Total Fastening & Protection Systems
Total Group* Restated, see note 2.2

Hilti Financial Report 2013 | 67

2,251.9
4,340.2

2,140.1
4,204.6

Notes to the Consolidated Financial Statements(37.2) Net sales information about geographical areas

in CHF million

2013

2012*

Change in Change in
CHF (%)

local

currencies(%)

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

2,177.9

2,152.5

1.2

(1.1)

168.2

156.0

7.7

17.9

9.9

14.3

867.1

858.9

603.3
523.7

4,340.2

560.6
476.6

4,204.6

0.9
7.6
3.2

2.8

17.3
4.5

* Restated, see note 2.2
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

2013

2012*

USA

692.8

691.2

Germany

600.0

602.2

Liechtenstein (country of domicile)

72.7

France403.4

Other countries

385.4

59.2

2,571.3

2,466.6

in CHF million

2013

2012*

Liechtenstein (country of domicile)

546.2

494.3

Germany

186.7

194.1

Austria

75.5

4,340.2

Total Group* Restated, see note 2.2

4,204.6

Net 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.
(37.4) Selected non-current assets information for major countries**

USA

Other countries
Total Group* Restated, see note 2.2

90.9

203.7

1,103.0

131.2

86.6

218.7

1,124.9** Excluding non-current financial assets and deferred taxes

Hilti Financial Report 2013 | 68

Notes to the Consolidated Financial Statements(38)

Contingent liabilities

in CHF million

2013

2012

Guarantees

7.5

7.6

Total contingent liabilities

9.4

10.0

2013

2012

Other contingent liabilities

1.9

2.4

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:in CHF million< 1 year

90.6

86.1

1 to < 5 years

136.5

135.1

Total at December 31

263.6

238.1

Future minimum sublease payments expected to be received––

Contingent rent expense for operating leases

0.1

0.1

2013

2012

>= 5 years

Sublease payments received in current period

36.5

–

16.9

–

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

Property, plant and equipment
Total at December 31

(40)

0.4

41.4
41.8

1.0

10.5
11.5

Financial assets pledged as collateral

Details of receivables pledged as collateral for recognized liabilities are given in note 14. There are no other financial as sets 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 188.5 million (2012: CHF 174.5 million), thereof
CHF 74.0 million (2012: CHF 56.8 million) were recognized as intangible assets (see development costs in note 7).

Hilti Financial Report 2013 | 69

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

2013

2012

Number of Remembers

Board of Directors

Corporate Management (Executive Board and Executive Management Team)
Total

7

27

34

Number of Re-

muneration members

3.1

37.1

40.2

7

23

30

muneration

2.9

34.9

37.8

Salaries and other short-term employee benefits

26.3

22.5

Other long-term employee benefits

10.5

12.9

Post-employment benefits

Total employee benefits to key management

3.4

40.2

2.4

37.8

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 01 3 portion of theestimated ultimate amount payable has been recognized as an obligation at December 31, 2013.
(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 479.5 million (2012: CHF 477.1 million) with an investment company owned by

the Martin Hilti Family Trust. This deposit is repayable on demand and earns interest at market rate, which amounts to CHF 2. 4 million(2012: CHF 2.7 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 0.9 million (2012: CHF 1.0 million). These services were charged at cost. Additionally, the Hilti Corporation
has a current liability to the Martin Hilti Family Trust of CHF 0.3 million (2012: CHF 0.1 million).
(43)

Events after the reporting period

There were no significant events after the reporting period.

Hilti Financial Report 2013 | 70

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 2013 | 71

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, SchaanS

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

Hilti (Malaysia) Sdn. Bhd., Petaling Jaya

S

Hilti Asia IT Services Sdn. Bhd., Petaling Jaya

Se

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

S

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

P

Montenegro

Hilti Montenegro doo Podgorica, Podgorica

S

MoroccoHilti Maroc S.A., Casablanca

S

Netherlands

Hilti Nederland B.V., Berkel en Rodenrijs

S

Hilti International Finance B.V., Amsterdam

H, 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, BelgradeS

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

South Africa

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

Malaysia
MexicoHilti Financial Report 2013 | 72

Notes to the Consolidated Financial Statements

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, Chur

H, Se

Syria

Hilti Syria LLC, Damascus

S

TaiwanHilti Taiwan Co., Ltd., Taipei

S

Thailand

Hilti (Thailand) Ltd., Bangkok

S

TurkeyHilti Inşaat Malzemeleri Ticaret A.Ş., Istanbul

S

UkraineHilti (Ukraine) Ltd., Kiev

S

United Arab Emirates

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

S, Se

USA

Hilti Inc., Tulsa, Oklahoma

S

Hilti of America, Inc., Delaware

H

Hilti Holdings Limited, Delaware

H

Diamond B., 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

TaiwanRacing Point Ltd., Taipei (49%)

P

USAIntelligent Construction Tools LLC, Delaware (50%)

P, D

Hilti Financial Report 2013 | 73

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 16 to 73), and the consolidated management report on
pages 5 to 7 for the year ended December 31, 2013.
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 2013 | 74

Auditors’ Report on the Consolidated Financial Statements

OpinionIn our opinion, the consolidated financial statements for the year ended December
31, 2013, give a true and fair view of the financial position, the results of operations
and the cash flows in accordance with the International Financial ReportingStandards (IFRS) and comply with Liechtenstein law.

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

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

PricewaterhouseCoopers AG

René Rausenberger
Auditors in charge

St. Gallen, March 10, 2014

Hilti Financial Report 2013 | 75

Ralf Zwick

Auditors’ Report on the Consolidated Financial Statements

Hilti Financial Report 2013 | 76

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

Hilti Financial Report 2013 | 77

Financial Statements Hilti Corporation

Balance sheet

in CHF million

Note

2013

2012

Intangible assets

4

30.2

37.2

Financial investments

6

2,040.2

2,473.9

Inventories

7

168.1

177.3

Trade and other receivables

8

501.0

540.7

608.8

481.9

ASSETS

Property, plant and equipment

5

Total non-current assets

Accrued income and prepayments
Cash and cash equivalents

353.6

2,424.0

51.6

330.4

2,841.5

63.9

Total current assets

1,329.5

1,263.8

TOTAL ASSETS

3,753.5

4,105.3

Share capital

88.0

88.0

Participation capital

38.7

EQUITY AND LIABILITIES

38.7

Legal reserves

108.4

108.4

Retained earnings brought forward

781.9

960.5

1,754.7

1,136.6

Foreign currency translation reserve
Net income(10.1)

Total equity

9

Provisions

10

Borrowings, payables and other liabilities

41.4(48.1)

43.3

1,821.8

2,809.6

Total liabilities

1,998.8

2,968.7

TOTAL EQUITY AND LIABILITIES

3,753.5

4,105.3

Accrued liabilities and deferred income

11

747.8

(10.9)

135.6

115.8

Hilti Financial Report 2013 | 78

Financial Statements Hilti Corporation

Income statementin CHF million

Note

2013

2012

2,073.8

1,817.6

Change in inventory of finished goods and work in progress

1.0

(1.6)

Other operating revenues

16.8

Net sales
Capitalized own production

4.0

Total operating revenues

4.5
8.5

2,095.6

1,829.0

Material costs

12(1,097.8)(1,002.7)

Depreciation and amortization

14(50.1)(54.1)

Personnel expenses
Other operating expenses

13

Total operating expenses
Operating result

Financial revenues

Financial expenses

15(470.0)(337.4)(411.8)(1,939.9)(1,806.0)

155.7

23.0

669.6

8.7

(72.2)(78.7)

Financial result

597.4(70.0)Net income before tax expense

753.1(47.0)

(5.3)

(1.1)

747.8

(48.1)Tax expense
Net income

Financial Statements Hilti Corporation
Notes to the Financial Statements

Hilti Financial Report 2013 | 7916(322.0)17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 2013 | 80

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 2013 financial statements of Hilti Corporation from those adopted in
2012.
(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
assets
Cost
Opening balance at January 1, 2013

Currency translation differences
Additions

Disposals
Transfers

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

Currency translation differences
Additions

Disposals
Transfers

12.9
–
–
–
–

77.8
–

3.6

(1.3)

30.7

90.7
–

3.6

(1.3)

30.7

12.9

110.8

123.7

(9.3)

(44.2)(53.5)

(1.0)

(9.5)

(10.5)

–
–

–

1.2

–

1.2

–

(10.3)(30.7)(30.7)

Closing balance at December 31, 2013
Net book values at December 31, 2013

2.6

27.6

30.2

Net book values at December 31, 2012

Hilti Financial Report 2013 | 81

3.6

(83.2)

33.6(93.5)

37.2

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
Opening balance at January 1, 2013

Currency translation differences
Additions

371.0
1.1
0.7

459.0

144.0

1.5

0.4

13.0

49.6

0.5

(7.8)

(25.6)(16.7)(22.1)

Closing balance at December 31, 2013

347.3

464.0

132.6

Accumulated depreciation

0.1

7.2

1,013.1

0.1

9.8

Disposals
Transfers

39.1

3.1

73.1

-

(64.4)

81.0

1,024.9–(164.0)(405.0)(113.7)–(682.7)

Currency translation differences

(0.4)

(1.0)

(0.3)

–

(1.7)

Disposals

18.6

19.4

–

Opening balance at January 1, 2013

Additions
Transfers(4.5)(24.4)(10.7)

-

–

-

14.7

Closing balance at December 31, 2013(150.3)(415.7)(105.3)

Net book values at December 31, 2013

197.0

48.3

Net book values at December 31, 2012

207.0

54.0

–

(39.6)
52.7

–

–

–

(671.3)

27.3

81.0

353.6

30.3

39.1

330.4

The insurance value of property, plant and equipment at the balance sheet date is CHF 827.6 million (2012: CHF 779.6 million).
(6)

Financial investments

in CHF million

Cost
Opening balance at January 1, 2013

Currency translation differences
Additions

Disposals
Closing balance at December 31, 2013
Accumulated valuation allowance
Opening balance at January 1, 2013

Currency translation differences

Share-

Loans toOther

holdings

Groupfinancialcompanies

investments

2,404.0

64.5

35.1

2,503.6

204.6

–

6.8

211.4

–

(619.7)

1,988.9(29.7)

(1.1)

62.9

–

–

(11.4)–(29.7)–(12.4)–(42.1)––––

Closing balance at December 31, 2013(42.1)––(632.2)

2,082.3–(12.4)

(0.5)

30.5

–

Additions

Disposals

(0.5)

Total

–
–

Net book values at December 31, 2013

1,946.8

62.9

30.5

2,040.2

Net book values at December 31, 2012

2,374.3

64.5

35.1

2,473.9

Hilti Financial Report 2013 | 82

Notes to the Financial Statements

A list of Group companies, directly or indirectly held by Hilti Corporation, is included on pages 71 to 73 of this Financial Report.
Pursuant to Article 1094 (3) of the PGR, some details relating to investments in Group companies have not been disclosed in this list.
(7)

Inventories

in CHF million

2013

2012

Raw materials

27.4

35.7

Consumables

9.6

10.2

124.0

125.3

in CHF million

2013

2012

Trade receivables from third parties

19.2

17.2

Production in progress

7.1

Finished products and goods held for resale

168.1

Total inventories

(8)

6.1

177.3

Trade and other receivables

Trade receivables from Group companies

457.0
476.2

410.7

Total trade receivables

Other receivables from third parties

24.5

20.7

Other receivables from Group companies

0.3

92.1

427.9

Total other receivables

24.8

112.8

Total trade and other receivables

501.0

540.7

(9)

Equityin CHF million

Share and

Legal

Foreign

Retained

PC capitalreserves

currency

earnings

Totaltranslation
reserve

126.7

108.4

(10.9)

912.4

1,136.6

Dividend paid

–

–

–

(130.5)(130.5)

Foreign currency translation differences

–

–

0.8

–

0.8

Net income

–

–

–

747.8

747.8

126.7

108.4

(10.1)

1,529.7

1,754.7

Equity at January 1, 2013

Equity at December 31, 2013

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 2013 | 83

Notes to the Financial Statements(10)

Provisionsin CHF million

2013

2012

Provisions for employee benefits

22.0

34.1

Tax obligations

2.9

Other provisions

–

16.5

9.2

41.4

Total provisions

43.3

Other provisions relate mainly to product liability.
(11)

Borrowings, payables and other liabilities

in CHF million

2013
Short-term

2.75% bond 2006/2013

Long-term

2012
Total

Short-term

–

–

214.8

–

100.1

100.1

299.8

414.7

714.5

149.7

510.3

660.0

–

–

–

0.4

–

0.4

Trade payables third parties

114.1

–

114.1

93.5

–

93.5

Total trade payables

208.0

–

208.0

167.8

–

167.8

Other liabilities owing to third parties

20.0

3.3

23.3

17.7

4.6

22.3

Other liabilities owing to Group companies

38.8

876.0

48.4

1,910.7

1,959.1

Total other liabilities

58.8

837.2

Total borrowings, payables and other liabilities

566.6

1,255.2

1,821.8384.0

2,425.6

2,809.6299.8

0.875% bond 2013/2018–

Euro bonds 2012/2015–2019 (EUR 175 million)
1.875% bond 2013/2023
Total bonds

Bank borrowings

Trade payables Group companies

93.9

149.7

214.8

–

Total

–

3.25% bond 2009/2014–

Long-term

–

299.8

99.8

99.8

–

840.5

93.9

899.3

–

149.7

211.2

211.2

–

299.1

–

–

–

74.3

66.1

–

–

1,915.3

299.1
–
–

74.3

1,981.4

The contractual maturity of short-term liabilities is less than one year and for long-term liabilities over one year.
Long-term liabilities to the Hilti Foundation in Thüringen, Austria, are secured by a mortgage on the property in Thüringen for CHF 0.
million (2012: CHF 0.3 million).
(12)

Material costs

in CHF million

2013

2012

Raw materials, consumables and bought-in goods for resale(1,085.6)(991.9)Total material costs(1,097.8)(1,002.7)

Outsourced manufacturing(12.2)(10.8)

Hilti Financial Report 2013 | 84

Notes to the Financial Statements(13)

Personnel expenses

in CHF million

2013

2012

Wages and salaries(275.3)(281.0)

Other social contributions(11.6)

Pension contributions(35.1)(36.2)(20.2)(322.0)(337.4)in CHF million

2013

2012

Financial investment revenues from third parties

–

2.6

666.3

6.2

Total personnel expenses(14)

Depreciation and amortization

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

Financial revenues

Financial investment revenues from Group companies
Total revenues from financial investments

Revenues from cash and marketable securities invested with third parties

Revenues from cash and marketable securities invested with Group companies

666.3

3.3

3.6

2.5

–

–

669.6

8.7

in CHF million

2013

2012

Depreciation on financial assets(12.3)(1.6)

Interest and similar expenses incurred to third parties(21.9)(29.4)

Total interest and similar expenses(52.4)(64.3)

Operating currency and hedge gains/(losses)(7.5)(12.8)

Total financial expenses(72.2)(78.7)

Total revenues from cash and marketable securities
Total financial revenues

(16)

2.5

Financial expenses

Interest and similar expenses incurred to Group companies

(17)

3.3

Tax expense

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

Hilti Financial Report 2013 | 85

(30.5)(34.9)

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
Contract face amounts

Foreign currency forward contracts
Foreign currency options

2013

2012

419.8

429.3

6.8

–

Interest rate swaps

201.8

111.2

Total contract face amounts

721.3

633.4

10.2

4.8

Cross-currency swaps

Contract values

Foreign currency forward contracts
Foreign currency options
Interest rate swaps

Cross-currency swaps

92.9

–
–

92.9

–

0.3

20.8

19.2

Contract values recognized (on-balance sheet)

31.0

24.3

Total contract values

31.0

24.3

in CHF million

2013

2012

Credit facilities guarantees––

Total contract values
Reporting of contract values

Contract values unrecognized (off-balance sheet)

(19)

31.0

–

24.3

–

Segment information

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

Contingent liabilities

Other guarantees

13.2

13.9

Total contingent liabilities

13.2

13.9

2013

2012

Expiring within 1 year

0.7

0.5

Expiring between 1 and 5 years

1.1

0.6

(21)

Commitments

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

Total commitments

1.8

1.1

Hilti Financial Report 2013 | 86

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 4 of the Group’s consolidated
financial statements.
(23)

Number of employees

The breakdown of employees by nationality is as follows:
Country

2013

%

2012

%

Austria

850

45

883

45

Germany

380

20

391

20

Switzerland

216

12

241

12

1,892

100

1,973

100

Liechtenstein
Other countries
Total employees

(24)

172
274

9

14

187
271

9

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

in CHF million

2013

2012

Profit brought forward

781.9

960.5

1,529.7

912.4

272.8

90.6

Net income

At the disposal of the General Meeting

747.8(48.1)

Proposal by the Board of Directors

Dividend of

CHF 1,550 (2012: CHF 515) per share

CHF 155 (2012: CHF 51.5) per participation certificate

Appropriation to other reserves
Balance carried forward
Total

Hilti Financial Report 2013 | 87

120.0
–

1,136.9

1,529.7

39.9
–

781.9
912.4

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 78 to 87 and the management reportof Hilti Aktiengesellschaft on pages 5 to 7 for the year ended December 31, 2013.

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 10, 2014

Hilti Financial Report 2013 | 88

Hilti Financial Report 2013 | 89

Hilti Financial Report 2013 | 90Corporate GovernanceCorporate Governance

Hilti Financial Report 2013 | 91

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 2013,
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 ob ective 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 2013 | 92

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 2013 for the 2013 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 2013 year, audit fees of the leading auditor amount to CHF 1.5 million whereas
the non-audit-related 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 2013 | 93Corporate Governance

Hilti Financial Report 2013 | 94

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 16, 2014

Interim financial information

September 26, 2014

Publication of the 2014 Financial Report

March 13, 2015

Annual results media conference

March 13, 2015

January to April 2014

January to August 2014

Hilti Financial Report 2013 | 95

Feldkircherstrasse 100

Phone +423 234 2737

E-mail: jens.schulte@hilti.com

Key dates

Media Officer

Investor Information

Hilti Financial Report 2013 | 96