Annual Report 2012
1
Financial statement 2012
Message from
the president
Dear Shareholders,
The performance achieved by WEG in 2012 is a reason for celebration. Even in a difficult
economic environment, with low growth rates in Brazil and in developed countries, we
managed to grow Consolidated Revenue by 19%.
We expanded our presence and our product line abroad allowing for a 38% growth.
In 2012, we continued the implementation of the WEG 2020’s Strategic Plan aiming to
integrate operations acquired, such as the Electric Machinery, established in the US and
the manufacturer of turbo-generators and other high-voltage electric machines. Also,
there is the integration of the operations of the Austrian company Watt Drive and WEGCestari, thereby consolidating our position of players in the business power transmission.
This year, we also announced the acquisitions of Stardur and Paumar integrating the
Company’s paint business, in addition to Injetel that complemented our product line in
the building automation market.
Operating generation of cash (EBITDA) totaled R$1,053.5 million, reflecting 19% increase
with a margin of 17.1%. In the current year, R$238.4 million was invested in property,
plant and equipment.
HARRY SCHMELZER JUNIOR
Chief Executive Officer
The technological update of our product portfolio is one of the key factors contributing
to the maintenance of our competitiveness in our markets. We invested approximately
R$145 million in research, development and innovation in 2012. One of the results arising
from this focus on innovation was the 2012 FINEP Innovation Award 2012.
We also made advances in the Social Responsibility area. In 2012, we invested R$12.6
million in specific areas, such as citizenship, culture, sport and environment, being R$2.9
million through tax incentive laws, R$3.6 million of Company’s resources, in addition
to environmental investment of approximately R$6.2 million in several manufacturing
facilities.
An important acknowledgement of the development of our practices was the inclusion
of WEGE3 shares in the BM&F Bovespa corporate sustainability index (ISE). WEG is the
only company in the ISE index in the segment of capital goods.
We also highlight the inclusion of WEG, in November 2012, in the MSCI Global Standard
Indexes, which we believe is a result of the actions we have been implementing to seize
increase in liquidity of WEGE3 share.
Finally, we must acknowledge and thank all effort and dedication devoted by our 25,350
employees in Brazil and abroad, which was essential to WEG’s good performance in 2012.
We still expect to find, in 2013, a quite challenging scenario, with gradual improvement of
global economic conditions, still within a quite competitive environment.
Important measures announced by the Brazilian Government in 2012, as well as the
actual interest rate at levels historically low combined with a favorable exchange rate
may contribute to the increase competitiveness of the industry in Brazil and thus promote
investments in the expansion of industrial productive capacity.
WEG will continue in the quest for continuous and sustainable growth focused on the
implementation of WEG 2020 Plan. With the support we have been receiving from our
employees, customers, suppliers, shareholders and from the overall community, we are
confident to boost our chances of success.
Thank you all for the trust and confidence.
HARRY SCHMELZER JR.
Chief Executive Officer
2
Financial statement 2012
WEG S.A.
MANAGEMENT REPORT
December 31, 2012
We present hereby to our shareholders the
Consolidated Financial Statements of WEG Group and
WEG S.A. for the year ended December 31, 2012.
3
Financial statement 2012
Scenario
SCENARIO
The global economic recovered at a slow pace in 2012. The presidential election and tax
issues in the United States increased the insecurity of markets in the mid year, while the
change of leadership in China without external impact visible and also seemingly calmer.
Jointly with the continuity of sovereign debt crisis of periphery European countries, these
were the main events promoting the volatility in financial markets and affecting economic
performance. The emerging markets, even with the economic slowdown in China,
continued to grow faster than those of developed economies. In this sense, we may see:
World product growth, according to estimates of the report World Economic Outlook
report of the International Monetary Fund, is expected to reach 3.3% in 2012, in
comparison to 5.3% increase of emerging economies on average, against only 1.2
more advanced economies. It is noteworthy that the expansion pace estimated in
2012 is lower than that observed in 2011, showing that the adjustment of mature
economies impacts the global economic dynamism. Another important point is that
global interest rates were kept at levels historically, showing that countries maintain
the commitment with monetary incentive;
In Brazil, gross domestic product growth should be around 1% in comparison with
2011, a performance below expectations. Brazil’s industrial production fell 2.7% in
2012, according to the Brazilian Institute of Geography and Statistics (IBGE). Capital
goods production dropped 11.8% over the previous year, which reflected its worst
performance;
Preliminary data from the Brazilian Electrical and Electronics Industry Association
(ABINEE) indicates that the Brazilian electronics sector should reached 5% growth in
sales in 2012 over the previous year. In areas related to capital goods, closer to WEG’s
business, such as industrial automation and industrial equipment, growth rates were
of 8% and 3% respectively. Only the area GTD showed better performance, with an
estimated growth of 18%. These growth rates reflect both the performance of the
Brazilian market as of exports.
We emphasize that troughout the Brazilian government has been adopting several tax
reduction measures, under the “Brazil Maior” Program, as well as structured incentive
policies by BNDES to extend loans for investments. Furthermore, the exchange rate has
found a new level, more favorable for local producers. This set of measures demonstrate
the concern for the recovery of competitiveness of the Brazilian industrial sector and
encourage us, in the expectation that we will face the remaining structural bottlenecks of
competitiveness.
4
Financial statement 2012
Economic and financial aspects
ECONOMIC AND FINANCIAL ASPECTS
Operating revenue
In 2012, the consolidated Net Operating Revenue (NOR) reached R$ 6,173.9 million, up 19%
as compared to prior year. This revenue growth can be observed in all areas of business. The
industrial electric and electronic equipment, paints and varnishes and GTD maintained the high
growth rates observed since the previous year, while home appliance engines showed modest
growth.
We highlight the following aspects in each of these areas:
Industrial electro-electronic equipment
Revenues grew by 17% over 2011, primarily due to good performance in external markets, where
we see revenue growth of 26.5%. Our growth strategy abroad has two main premises. The first
is the geographic expansion by leveraging our extensive expertise in electrical machines and our
relationship with leading manufacturers of capital goods to conquer new positions. Moreover, in
the markets in which we already have a strong commercial base in electrical products, primarily
with industrial electric motors, we have been seeking to introduce new products and services
aiming to increase the scope of our offer.
In Brazil, even though the industrial production performance and investment in the expansion of
production capacity has been low, we managed to find growth opportunities. Our operations are
focused on acting on opportunities in industry segments with their own dynamism, expanding our
portfolio of products and using our vertical productive capacity and engineering to offer customized
and integrated solutions.
Electric energy generation, transmission and distribution equipment (GTD)
Net Operating Revenue grew by 22% over 2011. Energy generation equipment (G) focuses on
renewable and distributed energy sources, such as small hydroelectric plants and thermal biomass
energy, and more recently, wind and solar energy sources. The wind energy has been recording
high growth rates in Brazil, while the PCHs and thermal biomass energy recorded lower, although
consistent growth rates. In the transmission and distribution business (T&D) continues to record
expansion in demand, however with depressed prices, which prevented these from having a
better performance. This global price situation arises from the lack of balance between productive
capacity and demand, both in emerging and in mature economies.
Motors for home appliances
Revenues grew by 2.2% over 2011. This indicates that the growth in the white goods demand
was reached by imported finished products or domestic production with little local content and
that government incentives to the increase consumption, such as temporary tax reductions, did
not have impact on the entire production chain.
Paints and varnishes
Area with the highest relative growth rate, 31% over the previous year. Our strategy in paints and
varnishes is to leverage relationships with customers who have achieved in other business areas,
performing cross-sales and maximizing the return of our sales effort. In 2012, investments and
transactions were made for purposes of expansion in new markets and new products.
5
Financial statement 2012
Economic and financial aspects
Domestic Market
Net Operating Revenue in the domestic market totaled R$ 3,016.7 million, up 4% as compared to
prior year and representing 49% of our NOR. Nevertheless the unfavorable conditions particularly
for the Brazilian industry, which experienced decreases throughout the year in industrial production
in general and capital goods in particular, we managed, thanks to our productive flexibility
and business agility, to find and exploit the opportunities in some economic sectors with own
dynamism. Our strategy to expand our product and service portfolio, providing industrial solutions
increasingly comprehensive and integrated, allows us to remain Brazil’s market leaders in many of
the our operating areas.
External Market
Net Operating Revenue in the external markets grew by 38% over the prior year and totaled
R$ 3,157.2 million, corresponding 51% of our NOR. Translated in US dollar average, net
operating revenue in the external markets totaled US$ 1,609.7 million, showing growth of
18% compared to 2011. As we have already observed in 2011, this good performance in external markets was the result
of both the operations expansion in our traditional markets as expansion into new markets and
business. Growth of 38% in the external markets, 32% are due to operations organic growth,
with the remainder resulting from the acquisition and integration of business and manufacturing
operations of the various acquisitions made in recent years.
Cost of goods sold
Cost of goods sold (COGS) reached R$ 4,293.0 million, or 69.5% of NOR (70.0% in 2011),
generating gross margin of 30.5%, slightly improvement over the previous year.
Despite the margin stability, we continue to see challenging conditions for maintaining the industrial
operations competitiveness in Brazil. We have global sourcing programs of raw materials and inputs
and of continuous improvement to optimize capacity and increase of industrial efficiency. The
new electric motors industrial units in Linhares, state of Espírito Santo, and high voltage electrical
machines in Hosur, India, had low initial contribution in the dilution of fixed costs during the rampup of production. However, we are confident that these units show, with the gradual occupation
of their productive capacity, increasing results, since they were designed within industry standards
more advanced.
We also highlight the devaluation of 14.3% in the Brazilian currency and the tax exemptions
implemented by the Brazilian government, which contributed to the competitiveness of our
products. These measures, together with the conditions of long-term credit offered by agents,
such as the BNDES, have provided greater resilience to industrial segment and reduced negative
impacts of global macroeconomic conditions on the industry.
6
Financial statement 2012
Economic and financial aspects
Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses totaled R$ 927.2 million, or 15% of NOR
(R$ 768.4 million in 2011, or 14.8% of NOR). Operating expenses grew by 20.7% as compared
to prior year in absolute terms, with small relative expansion of 0.2 percentage points. Despite the
performance on the administrative expenses, seeking greater operational efficiency, strong growth
in the external markets caused greater expansion of sales expenses.
EBITDA
As a result of aforementioned impacts, EBITDA totaled R$ 1,053.5 million (calculated according
to the method established by the Brazilian Securities and Exchange Commission (CVM) in Official
Circular No. 01/07), an increase of 19% over 2011. EBITDA margin reached 17.1%, 0.1 percentage
point higher over 2011. We emphasize that this was the first year that the EBITDA surpassed R$
1 billion.
EBITDA calculated using the new methodology set forth by the Brazilian Comissão de Valores
Mobiliários (CVM) Instruction nº 527/2012 would have reached R$ 1,016.7 million, with margin
of 16.5%. Compared to 2011, the absolute growth would have been 19.5% and EBITDA margin
expansion would have been 0.1 percentage point.
Financial Income and Expenses
Net financial income was positive in R$ 55.7 million (R$ 103.0 million in 2011), with Financial
Income totaled R$ 460.4 million (R$ 499.6 million in 2011) and Financial Expenses totaled R$
404.7 million (R$ 396.6 million in 2011). The reduction in net financial income in the previous year
was a result both of lower real interest that occurred in Brazil, as the effect of devaluation on debt
in foreign currencies.
Net Income
As a result from the aforementioned effects, Consolidated Net Income attributable to WEG S.A.’s
shareholders reached R$ 656.0 million, up 12% in relation to R$ 586.9 million in 2011. Return on
net equity in 2012 was of 17.3% (17% in 2011), with net margin of 10.6% (11.3% in 2011).
7
Financial statement 2012
Capitalization
CAPITALIZATION
Maintaining our financial flexibility is important in our strategy to capture investment opportunities
with attractive returns without excessive increase in risk exposure. Thus, our capital structure is
sound and preserves our access to funds and sources of liquidity. In addition, we maintain close
relationship with agents, such as the Brazilian Development Bank (BNDES) and the International
Finance Corporation (IFC), as important sources of capital for long-term investments, and FINEP,
which has been a big supporter of our investments in research and development in technological
innovation.
In 2012, we observed a decrease in both our cash position as of total financing while maintaining
a net debt position of close to balance end. The new level of real interest rates in Brazil decreases
the attractiveness of high cash positions, as discussed earlier. The cash resources are invested in
top-tier banks and mostly in domestic currency.
At December 31, 2012 cash and cash equivalents totaled R$ 2,565.5 million, mainly in short-term.
The gross financial debt totaled R$ 2,689.8 million, being 61% in short-term financing and 39% in
long-term financing. At the end of 2012, WEG recorded net debt of R$ 124.3 million.
DECEMBER 2012
CASH & EQUIVALENT
2.565.532
3.212.250
Short-term
2.563.500
2.931.615
Long-term
2.032
280.635
2.689.840
3.457.728
Short-term
1.645.772
1.701.435
In Reais
1.067.683
585.687
578.089
1.115.748
Long-term
1.044.068
1.756.293
In Reais
824.910
1.560.712
In other currencies
219.158
195.581
(124.308)
(245.478)
DEBT
In other currencies
Net Cash (Debt)
8
DECEMBER 2011
Financial statement 2012
Investments
INVESTMENTS
Investiments in fixed assets for capacity expansion and modernization totaled R$ 238.4 million
in 2012, 90% of which destined to industrial plants and other installations in Brazil and the remaining
amount to production units and other subsidiaries abroad. In addition to these investments, R$ 27
million in fixed assets were incorporated from the consolidated of Stardur, Paumar, Injetel and WEG
Cestari transactions in 2012.
Disbursements in capacity expansion over the 2012 were lower than originally forecasted because
our investment program is managed for optimum capacity utilization and maximization of return on
invested capital. Thus, the relatively lower performance in domestic and optimization efforts to meet
demand in the external market determined a slower speed of implementation of the investment
program.
INVESTMENTS IN RESEARCH, DEVELOPMENT AND INNOVATION (RD&I)
Important technological changes continue to affect our markets and products. Accordingly, we
maintain a consistent research program, development and technological innovation, one of the
main vectors of our future growth, as outlined in the strategic planning WEG 2020. These efforts in
research and development include the development of new products, continuous improvement of
products already available, engineering of adjustment and application of products and systems, and
improvement of our industrial processes.
In 2012, these investments totaled R$148.3 million, reflecting 2.4% of Net Operating Revenue.
DIVIDENDS
Management will propose during the annual General Shareholders’ Meeting to distribute R$
375.2 million as payment of dividends and interest on stockholders equity on 2012 results, which
corresponds to R$ 0.60482353 per share before eventual taxes deductions. This amount represents
57% of net income before statutory adjustments.
As of August 15th, 2012, payments declared during the first half of 2012 were made to shareholders
(intermediate dividends), in the total amount of R$ 156.9 million. The payment of dividend declared
during the second half of 2012 (supplementary dividends), in the total amount of R$ 218.3 million,
will begin on March 13th, 2013.
Net income, dividends and pay-out (%)
59%
2008
Financial statement 2012
2009
2010
656,0
57%
2011
375,2
586,9
339,0
306,4
519,8
548,0
300,0
301,1
560,0
54%
9
58%
55%
2012
Dividends
Net income
- Pay-out
Highlights
HIGHLIGHTS
Acquisition Stardur
On June 19th, 2012 WEG S.A. announced acquisition of Stardur Tintas Especiais Ltda., a company
specialized in manufacturing and marketing of coatings and operates in coatings such as high and
low solids, engineered plastics, water soluble, coil coating and automotive repainting segment,
complementing WEG’s coatings business unit product portfólio. With 250 employees and 10,000
square meters area in Indaiatuba, State of São Paulo, Stardur recorded net revenues of approximately
R$ 78 million in 2011.
On October 16th, 2012 WEG S.A. announced that a fire broke out at the plant. There were no casualties,
only material damage, for which the WEG has insurance coverage. The production at the Indaiatuba
plant has been interrupted and being transfered to Guaramirin (SC) and Mauá (SP) plants.
Acquisition Paumar
On December 03rd, 2012 WEG S.A. announced acquisition of Indústria de Tintas e Vernizes Paumar
S.A. (“Paumar”), a company specialized in manufacturing and marketing of coatings, varnishes, enamels
and lacquers.
Paumar was founded in 1964 and currently employs 67 people, occupying around 5,800 square meters
of an industrial area of around 37,500 square meters in Mauá, in the State of São Paulo. Revenues in
2011 were of approximately R$ 21 million.
The acquisition of Paumar mainly for maintenance of productive capacity, affected by fire on October
2012 at the Stardur unit.
Acquisition Injetel
On October 31st, 2012 WEG S.A. announced acquisition of Injetel Indústria e Comércio de Componentes
Plásticos Ltda. (“Injetel”), a company specialized in manufacturing and marketing of power switches,
power outlets and plugs for commercial and residential applications.
Injetel was founded in 1991 and currently employs 50 people, occupying around 2,000 square meters
industrial area in Curitiba, in the State of Paraná. Revenues in 2011 were of approximately R$ 7 million.
Selection for the ISE (Corporate Sustainability Index)
On November 29th, 2012 BM&FBOVESPA announced that WEG S.A. was selected for the ISE portfolio
BM&FBOVESPA, which ranges from January 07, 2013 to January 03, 2014. Company is the sole
representative of capital goods, machinery and equipment and electro-electronic equipment industry
segment. WEG is also of 14 companies that authorized the opening of the questionnaire responses of
selection.
The new portfolio brings together 51 parts of 37 companies. They represent 16 sectors and totaled
R$ 1.07 trillion in market value, equivalent to 44.81% of the total value of companies traded on the
BM&FBOVESPA on 11/26/2012.
10
Financial statement 2012
Highlights
Highlights
Inclusion on MSCI Global Indices’
On November 14th, 2012, company MSCI Inc., owner of the family of MSCI equity indexes, announced
the inclusion, from November 30, 2012, the common shares issued by WEG traded on the BM&F
Bovespa with the code WEGE3, in the MSCI Global Standard Indexes.
The indices calculated by MSCI are used as reference performance by investors totaling more than U$
7 trillion worldwide. The inclusion of the shares of WEG in the MSCI indexes is the result of the gradual
increase in the liquidity of these shares. At the same time, it is expected that inclusion can increase the
interest of foreign institutional investors in shares “WEGE3” and receipt “WEGZY” traded OTC in the
U.S.
FINEP 2012 Award
On December 19th, 2012, cerimony in the presence of president Dilma Rousseff, the process of
managing innovation in WEG was awarded one of the FINEP Innovation Award 2012, category “Large
Company”.
The Award is organized by the Financier of Studies and Projects (Finep), linked to the Ministery of
Science, Technology and Innovation (MCTI) and was created to recognize and disseminate innovative
efforts made by companies, scientific and technological institutions, and Brazilian inventors, developed
in Brazil and already applied in the country or abroad.
11
Financial statement 2012
Outlook
OUTLOOK
The Outlook for 2013 are continuity of the main trends observed in recent years, with gradual recovery
of global economic growth. We believe these conditions will be similar to those found as of 2010, these
conditions will allow us to continue implementing the actions forecasted in our WEG 2020’s strategic
planning and maintain the growth of our operating activities. Penetrate new markets and the expansion
of the line of products through acquisitions and strategic partnerships will continue to be explored.
In Brazil, we see prospects to resume industrial segment growth. Measures for elimination of payroll and
tax simplification, the credit for investment incentives within the PSI of the BNDES and the new level,
which improves the competitiveness of the domestic industry, should result in gradual improvement in
industry performance. Additionally, we will continue to observe investments in infrastructure of the Brazil’s
Growth Acceleration Program (PAC), in road ports and airports concessions and in the preparations
for 2014 World Cup and the 2016 Olympic Games in Rio de Janeiro. Additionally, we will give greater
attention to investment in generation, transmission and distribution of electricity, guaranteeing the
conditions for a continued economic growth.
Abroad, we will continue to seek opportunities to expand our business, in the so-called mature
economies, with less favorable macroeconomic environment. Our proximity to the customers, the
broad portfolio of products technologically advanced and our ability to provide customized solutions will
continue to distinct us from the market the global market. This flexibility and agility in serving the market
have always been the trademark of our performance.
OUR CAPITAL BUDGET FOR 2013 PROVIDES FOR THE FOLLOWING INVESTMENTS:
Investments
Property, plant and equipment (plant expansion/modernization)
Intangible (Software)
Working capital
Total investments
(R$ million)
265,3
3,9
87,4
356,6
These investments will be supported by the utilization of the Capital Budget Reserve and of funds to be
raised with financial institutions in Brazil and abroad.
12
Financial statement 2012
Outlook
AUDIT SERVICES
In accordance with CVM Instruction No. 381/03, we hereby inform that the Company and its
subsidiaries adopt as a formal procedure to seek advice from independent auditors, Ernst Young
Terco Auditores Independentes (“EYT”), in order to ensure that the provision of these other services
will not affect the independence and objectivity required for the performance of independent audit
services. In this regard, E&YT issues an annual statement of independence, under the terms
of NBC TA 260, issued by Brazil’s National Association of State Boards of Accountancy (CFC),
whereby it states that, as provided for in the independence rules adopted by the Brazilian Securities
and Exchange Commission (CVM), the relation between E&YT (and its subsidiaries and affiliates)
and the Company does not impair independence. This statement is submitted to WEG’s Board
of Directors. The policy of the Company and its subsidiaries for the engagement of independent
auditor’s services ensures there is no conflict of interests, loss of independence or objectivity.
During 2012, EYT provided specific management advisory services, as well as the translation of
financial statements into English, in addition to the assurance services of financial statements, as
follows:
2012
%
1.054.010
100
Audit financial statements
889.399
84
Other services
164.611
16
Legal advisory in Brazil
75.000
7
Financial and tax advisory abroad
89.611
9
BRAZIL
ARBITRATION CHAMBER
The Company is bound to arbitration by the Market Arbitration Chamber, pursuant to the arbitration
clause provided for in its articles of incorporation.
Jaraguá do Sul (SC), February 2013.
THE MANAGEMENT
13
Financial statement 2012
Balance sheet
WEG S.A.
BALANCE SHEET
At December 31, 2012 and 2011 in thousands of reais
CONSOLIDATED
COMPANY
Notes
31/12/12
31/12/11
31/12/12
31/12/11
561.214
261.244
6.107
60.832
-
520.939
3.782
59.724
-
2.302.256
261.244
1.472.839
1.306.273
183.627
183.778
2.931.615
1.307.692
1.362.314
156.076
109.364
889.397
584.445
5.710.017
5.867.061
Assets
Current Assets
Cash and cash equivalents
Short-term investments
Trade receivables
Inventories
Taxes recoverable
Dividends and interest on equity receivable
Other
4
5
6
7
8
Noncurrent Assets
Short-term investments
Judicial deposits
Receivables for related parties
Deferret taxes
Taxes recoverable
Other
5
15
9
10
8
864
-
239.860
541
79
712
-
2.032
27.844
36.891
16.032
6.034
280.635
24.038
111.488
12.902
3.406
Investments
Property, plant and equipament
Intangible assets
11
12
13
3.259.097
4.947
10
2.978.752
11.956
10
7.622
2.537.094
529.984
349
2.445.760
360.222
3.264.918
3.231.910
3.163.533
3.238.800
4.154.315
3.816.355
8.873.550
9.105.861
Total assets
The accompanying notes are an integral part of the financial statements
14
Financial statement 2012
Balance sheet
WEG S.A.
BALANCE SHEET
At December 31, 2012 and 2011 in thousands of reais
31/12/12
COMPANY
31/12/11
9.716
86
79.070
-
CONSOLIDATED
31/12/12
31/12/11
5.765
36
2.182
-
331.037
1.645.772
222.559
72.927
79.381
358.124
33.559
269.465
298.195
1.701.435
205.725
44.185
2.804
285.843
26.314
90.072
8.753
3.012.824
2.752.960
296
3.475
123
-
1.837
1.889
3.764
-
1.044.068
47.328
206.613
320.503
90.588
1.756.293
58.326
145.616
421.918
64.159
3.894
7.490
1.709.100
2.446.312
93.966
16.243
4.721.924
5.199.272
2.718.440
(50.293)
(10.055)
570.044
758
703.652
127.803
2.265.367
3.834
(10.055)
694.062
239
672.951
173.714
2.718.440
(50.293)
(10.055)
570.044
758
703.652
127.803
2.265.367
3.834
(10.055)
694.062
239
672.951
173.714
4.060.349
3.800.112
4.060.349
3.800.112
-
-
91.277
106.477
Total equity
4.060.349
3.800.112
4.151.626
3.906.589
Total liabilities and equity
4.154.315
3.816.355
8.873.550
9.105.861
Notes
Liabilities
Current liabilities
Trade accounts payables
Loans and financing
Social and tax obligations
Income and social securitiy taxes
Dividends and interest on equity payable
Advances from costumers
Profit sharing
Other
Noncurrent liabilities
Loans and financing
Tax obligations
Payables to related parties
Provision for contingencies
Deferred taxes
Other
14
14
9
15
10
Total liabilities
Equity
Company´s shareholders
Capital
Capital reserves
Treasury stock
Income reserves
Stock option plan
Equity valuation adjustment
Proposed additional dividends
Non-controlling shareholders
17.a
17.d
18
The accompanying notes are an integral part of the financial statements
15
Financial statement 2012
Balance sheet
WEG S.A.
INCOME STATEMENT
Years ended December 31, 2012 and 2011
In thousands of reais, exept when indicated otherwise
CONSOLIDATED
COMPANY
Notes
Sale of products
Sale of services
Net revenue
19
Cost of goods and services sold
Gross profit
Selling and distribution expenses
Administrative expenses
Management tees
Other operating expenses
Equity pickup
9
21
11
Income before financial results
Financial income
Financial expenses
22
22
Income before taxes
Current taxes
Deferred taxes
Net income for the year
23
23
31/12/12
31/12/11
31/12/12
31/12/11
-
-
5.972.118
242.414
(40.654)
5.049.430
192.300
(52.321)
-
-
6.173.878
5.189.409
-
-
(4.293.022)
(3.633.358)
-
-
1.880.856
1.556.051
(2.140)
(2.011)
(3.130)
607.970
(1.339)
(1.701)
(1.302)
522.197
(619.980)
(288.409)
(18.793)
(145.263)
-
(508.904)
(242.495)
(16.988)
(124.539)
-
600.689
517.855
808.411
663.125
54.975
(180)
70.562
(161)
460.420
-404.729
499.570
-396.569
655.484
588.256
864.102
766.126
(367)
862
(1.485)
165
(228.859)
29.621
(182.956)
23.851
655.979
586.936
664.864
607.021
655.979
8.885
586.936
20.085
1,06
0,95
Atributable to:
Company shareholders
Non-controlling company
Earnings per share atributable to company shareholders - basic and diluted (in R$)
The accompanying notes are an integral part of the financial statements
16
Financial statement 2012
Balance sheet
WEG S.A.
STATAMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 2012 and 2011
In thousands of reais
CONSOLIDATED
COMPANY
Net income for the year
Accumulated translation adjustments (*)
Comprehensive income attributable to:
Company´s shareholders
Non-controlling shareholders
31/12/12
31/12/11
31/12/12
31/12/11
655.979
586.936
664.864
607.021
78.521
34.378
83.513
34.366
734.500
621.314
748.377
641.387
734.500
13.877
621.314
20.073
(*) The item in the income statament is not taxable
The accompanying notes are an integral part of the financial statements
17
Financial statement 2012
WEG S.A.
STATEMENTS OF CHANGES IN EQUITY
Years ended December 31, 2012 and 2011. In thousands of reais.
Capital reserve
Revaluation
Capital Goodwill of assets of
reserve subosidiaries
At january 1, 2011
Dividend paids
Capital in crease
Capital transactions
Acquisiton of treasure stock (Note 17.d)
Pricing of options granted (Note 18)
Realization of revaluation reserves
Reversal of dividends of
previous years
Equity valuation of adjustment:
Accumulated translation adjustments
Realization of deemed cost net of taxes
Net income of the year
Proposed allocations:
Legal reserve (Note 17.c)
Dividends (Note 17.b)
Interest of equity (Note 17.b)
Capital budget reserve
At December 31, 2011
Dividends paid
Capital increase
Capital transactions
Pricing of options granted (Note 18)
Realization of revaluation reserves
Reversal of dividends of
previous years
Equity valuation adjustment:
Accumulated translation adustments
Realization of deemed cost net of taxes
Net income for the year
Proposed allocations:
Legal reserve (Note 17.c)
Dividends (Note 17.b)
Interest of equity (Note 17.b)
Capital budged reserve
At December 31, 2012
18
Demonstrações financeiras 2012
Stock
option
plan
Treasury
stock
Equity
valuation
adjustment
Income reserve
Capital
budged
reserve
Legal
reserve
Proposed
additional
dividends
Retained
earnings
44.931
3.884
-
-
53.409
746.059
(65.893) 758.715
453.073
-
(44.931)
-
(50)
239
-
(10.055)
-
(53.409)
-
(354.733)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
29.347
-
273.389
2.265.367
-
3.834
239
(10.055)
29.347
664.715
453.073
-
(54.077)
-
(50)
519
-
-
(29.347)
-
(423.726)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
32.799
-
296.256
2.718.440
(54.077)
3.784
758
(10.055)
32.799
537.245
Company´s
Non-controlling
shareholders
shareholders
Translation Deemed
adjustment
cost
1.812.294
Equity
Total
101.208
-
3.454.607
89.229
3.543.836
-
(101.208)
-
50
(101.208)
(10.055)
239
-
(1.759)
-
(101.208)
(1.759)
(10.055)
239
-
-
-
532
532
-
532
34.378
- (54.249)
-
-
54.249
586.936
34.378
586.936
(12)
67
20.085
34.366
67
607.021
-
86.857
86.857
-
(29.347)
(147.036)
(191.995)
(273.389)
(60.179)
(105.138)
-
(1.133)
-
(61.312)
(105.138)
-
(31.515) 704.466
173.714
-
3.800.112
106.477
3.906.589
-
(173.714)
-
50
(173.714)
(54.077)
519
-
(26.353)
-
(173.714)
(80.430)
519
-
-
-
442
442
-
442
78.521
- (47.820)
-
-
47.820
655.979
78.521
655.979
4.992
8.885
83.513
664.864
-
127.803
-
(32.799)
(189.844)
(185.392)
(296.256)
(62.041)
(185.392)
-
(1.940)
(784)
-
(63.981)
(186.176)
-
47.006 656.646
127.803
-
4.060.349
91.277
4.151.626
-
-
The accompanying notes are an integral part of the financial statements
Balance sheet
WEG S.A.
STATEMENTS OF CLASH FLOW - INDIRECT METHOD
Years ended December 31, 2012 and 2011
In thousand of reais
CONSOLIDATED
31/12/12
COMPANY
31/12/11
31/12/12
31/12/11
655.484
250
519
(607.970)
-
588.256
276
239
(522.197)
-
864.102
208.337
519
108.466
766.126
188.030
239
93.354
(9.101)
2.732
1.686
(316)
-
(6.532)
(6.071)
977
(1.449)
-
(324.344)
187.545
92.326
66.701
(210.296)
(99.790)
(343.874)
130.982
(273.341)
34.293
(174.304)
(88.369)
43.284
53.499
893.566
333.136
(21.384)
335.240
-
(1.304)
(239.860)
327.073
-
(7.220)
(54.077)
(237.882)
(17.939)
(183.156)
17.359
22.827
78.521
(189.065)
2.426
(234.902)
(280.635)
21.000
34.378
313.856
85.909
(381.567)
(646.798)
(316.865)
(10.055)
(298.358)
982.720
(1.578.739)
(174.827)
(52.090)
(318.422)
2.284.737
(1.127.569)
(155.246)
(10.055)
(299.586)
(316.865)
(308.413)
(1.141.358)
692.281
520.939
689.944
2.931.615
2.552.996
561.214
520.939
2.302.256
2.931.615
Operating activities
Income before taxes
Depreciation and amortization
Stock option plan expenses
Equity pickup
Employee´s profit sharing
Increase (decrease) in accounts receivable
Increase (decrease) in accounts payable
Increase (decrease) in inventories
Other changes in assets and liabilities
Income and social contribuition taxes paid
Payment of employee´s profit sharing
Net cash flow from operating activities
Inventing activieties
Investments Premium on capital transaction
Property, plant and equipment
Intangibel assets
Acquisition of subsidiary
Long-term financial investments
Disposal of assets
Dividends/interest on equity received
Accumulated currency translation adjustments
Net cash flow applied in investing
activities
Financing activities
Loans and financing raised
Payment of loans and financing
Interest paid on loans and financing
Acquisition on noncontrolling interest
Treasury stock
Dividends/interest on equity paid
Net cash flow applied in financing
activieties
Cash and cash equivalents at january 1
Cash and cash equivalents at december 31
The accompanying notes are an integral part of the financial statements
19
Financial statement 2012
Balance sheet
WEG S.A.
STATEMENT OF VALUE ADDED
Years ended December 3 ,2012 and 2011
In thousands of reais
CONSOLIDATED
31/12/12
COMPANY
31/12/11
31/12/12
31/12/11
Revenues
-
-
7.091.928
6.005.251
Sales of goods, products and services
Other Revenues Provision for losses on trade receivables - rev./(const.)
-
-
7.074.406
23.939
(6.417)
6.006.960
718
(2.427)
(2.542)
(703)
(3.979.234)
(3.382.369)
(994)
(1.548)
(2.542)
(378)
(325)
(3.928.347)
(50.887)
(3.376.707)
(5.662)
(703)
3.112.694
2.622.882
Depreciation, amortization and depletion
(250)
(276)
(208.337)
(188.030)
Net value added generated by the entity
(2.792)
(979)
2.904.357
2.434.852
Value added received in transfers
662.946
592.760
460.420
499.570
Equity pickup
Financial income
607.971
54.975
522.197
70.563
460.420
499.570
Total value added to be distributed
660.154
591.781
3.364.777
2.934.422
Distribution of value added
660.154
591.781
3.364.777
2.934.422
3.880
3.769
55
56
188
187
1
107
107
655.979
189.844
185.392
280.743
-
2.886
2.793
46
47
1.926
1.926
33
33
586.936
147.036
191.995
247.905
-
1.277.996
1.097.014
123.360
57.622
991.837
885.100
97.746
8.991
430.080
402.520
27.560
664.864
189.844
185.392
280.743
8.885
1.051.038
896.973
105.138
48.927
842.670
749.346
87.351
5.973
433.693
414.051
19.642
607.021
147.036
191.995
247.905
20.085
Inputs acquired from third parties
Materials, energy, third party services,
and others
Others
Gross value added
Personnel
Direct remuneration
Benefits
F.G.T.S.
Taxes, charges and contributions
Federal
State
Municipal
Remuneração de capitais de terceiros
Interest
Aluguéis
Remuneration of third party capital
Dividends
Interest of equity
Retained profit / loss for the year
Retained profit / loss for the year - non controlling
The statemant of value added is not an integral part of the consolidated financial statements under IFRS.
The accompanying notes are an integral part of the financial statements
20
Financial statement 2012
Notes to financial statements
WEG S.A.
Notes to financial statements
At December 31, 2012
(In thousands of reais, except when indicated otherwise).
1. Company information
WEG S.A. (the “Company”) is a publicly traded company with main place of business at Avenida
Prefeito Waldemar Grubba, No 3.300, in Jaraguá do Sul - SC, Brazil, holding company member of
the WEG Group, and its business purpose is the manufacture and marketing of capital goods, such
as, electric motors, generators and transformers; reducers, geared reducers, frequency inverters,
starter motors and maneuver devices; control and protection of electric circuits and industrial
automation; electric traction solutions (land and sea); solutions for the generation of renewable and
distributed energy, exploring all opportunities in small hydroelectric plants and thermal biomass,
wind and solar energy sources; no-breaks and alternators for groups of generators; electric
substations; industrial electrical and electronic equipment systems; and industrial paint & varnish.
The operations are performed through manufacturing facilities located in Brazil, Argentina, Mexico,
United Stated, Portugal, Austria, South Africa, India, and China. The Company has shares traded
on BM&F Bovespa under the code “WEGE3” and has been listed since June 2007 in the special
segment of corporate governance called New Market.
The Company has American Depositary Receipts (ADR) – Level 1 that are traded on over-thecounter (OTC) market, in the United States under the symbol WEGZY.
2.Accounting policies
Preparation of financial statements requires the use of certain accounting estimates and judgment
by the Company’s management, the most relevant of which are disclosed in Note 3.
Authorization to complete the preparation of these financial statements was granted at the
executive board meeting on February 8, 2013.
The policies adopted with regard to individual and consolidated financial statements were as
follows:
a) Individual financial statements (Company)
The individual financial statements were prepared in accordance with the accounting practices
adopted in Brazil issued by the Brazilian FASB (CPC) and are published jointly with the consolidated
financial statements. The accounting practices adopted in Brazil applied in the individual financial
statements differ from the International Financial Reporting Standards (IFRS) applicable to the
individual financial statements only concerning the valuation of investments by the equity method,
since under IFRS they would be measured at cost or fair value.
b) Consolidated financial statements
The financial statements were prepared in accordance with accounting practices adopted in
Brazil, that include rules issued by the Brazilian Securities and Exchange Commission (CVM) and
pronouncements from Brazil’s FASB (CPC), which comply with international accounting standards
issued by (IASB).
21
Financial statement 2012
Notes to financial statements
2.1. Consolidation basis
The financial statements of subsidiaries are prepared for the same reporting period as that of the
Company, using consistent accounting practices, and include the financial statements presented
in Note 11.
All balances, revenue, expenses and unrealized gains and losses, arising from the transactions of
companies of the Group included in the consolidation are eliminated altogether.
A change in interest equity on a subsidiary that does not result in loss of control is accounted for
a transaction between shareholders under equity.
The P&L for the year and comprehensive income are attributed to the company’s shareholders
and the non-controlling shareholders of consolidated companies. Losses are attributed to
noncontrolling interest, even if these result in negative balance.
2.2 Business combination
Upon acquiring a business, the Company assesses financial assets and liabilities assumed so as to
classify them and allocate them in accordance with contractual terms, economical circumstances
and relevant conditions within no longer than one year from acquisition date. In the event of a
business combination in stages, fair value on acquisition date of interests previously held in the
acquired company’s capital is reassessed at fair value on the acquisition date, and any impacts
are recognized in income statements.
Goodwill is initially measured as transferred payment exceeding amount in relation to acquired net
assets (identifiable net assets acquired and liabilities assumed). If payment is lower than fair value
of acquired net assets, difference should be recognized as gain in income statements.
After initial recognition, goodwill is measured at cost, net of any accumulated impairment losses.
For impairment test purposes, goodwill acquired in a business combination is, as from acquisition
date, allocated to each Company’s cash generating unit, which are expected to benefit from
such combination synergy, regardless of other assets or liabilities of the acquired company being
attributed to these units. When goodwill is part of a cash generating unit and a portion thereof is
disposed of, goodwill related to the portion sold is to be included in the cost of operations upon
computing gains or losses from disposal. Goodwill of this transaction is computed based on
amounts proportional to the portion sold in relation to the cash generation unit.
2.3 Foreign currency translation
a) Functional currency of companies of the Group
Consolidated financial statements are presented in reais (R$), which is the functional currency of
the Company and its subsidiaries in Brazil.
The functional currency of the foreign subsidiaries is determined based on the primary economic
environment in which it operates, and when the currency differs from the financial statements’
functional currency and presentation, this shall be translated into reais (R$) on the date of the
financial statements.
b) Transactions and balances
Transactions in foreign currencies are initially recorded based on the functional exchange rate
effective at the date of the transaction. Monetary assets and liabilities stated in foreign currency
are then retranslated at the functional currency exchange rate in force as of balance sheet date.
All currency translation differences are recognized in P&L. Nonmonetary items are measured at
historical cost in foreign currency are translated into foreign currency by using the exchange
rate prevailing on dates of initial transactions. Nonmonetary items that are measured at fair
value in a foreign currency are translated using the exchange rates prevailing upon the fair value
determination.
22
Financial statement 2012
Notes to financial statements
c) Translation of balances of the Group´s company
Assets and liabilities of foreign subsidiaries are translated into reais by the exchange rate effective
on the date of financial statements, and the corresponding financial statements are translated by
the monthly average exchange rate. Exchange rate differences resulting from such translation shall
be individually accounted for in equity. Whereupon the sale of a subsidiary abroad, the cumulative
deferred value recognized in equity, related to this subsidiary abroad, shall be recognized in the
financial statements.
2.4 Cash and cash equivalents
Include cash, credit balances in current accounts, investments redeemable in the short and long term,
which are registered at cost plus interest earned up to the year closing date, in accordance with rates
agreed with financial institutions and do not exceed its market or realization value (Note 4).
2.5. Short-term investments
Are registered at cost plus interest earned up to the year closing date, in accordance with
rates agreed with financial institutions and do not exceed its market or realization value. Shortterm investments are not considered cash and cash equivalents for these are not immediately
redeemable (Note 5).
2.6. Customers
Correspond to trade accounts receivable for the sale of goods or rendering of services in the normal
course of activities, presented at present and realization value. Allowance for doubtful accounts is
calculated based on credit risk analysis, which considers the percentage trade acceptance bill, market
liquidity and the credit level, being sufficient to cover losses on amounts receivable (Note 6).
2.7. Inventories
Inventories are evaluated and stated at average acquisition or production cost, considering the
present value, when applicable. The Company’s inventory costing is carried out by means of
absorption, by using the weighted moving average.
Provisions for inventory for : (i) realization; (ii) slow-moving; and (iii) obsolete inventories are set
up, when deemed necessary by the Management. Imports of raw materials in transit are stated at
accumulated cost of each import (Note 6).
2.8 Related parties
Purchase and sale of inputs, products and services are carried out under terms and conditions
similar to those of transactions with non-related third parties (Note 9).
2.9. Investment properties
The investment properties are recorded at acquisition and/or construction cost, less accumulated
depreciations thereof, except for land, which does not depreciate.
Investment properties are written off when disposed of or when they are no longer permanently
used. The difference between the net amount resulting from the sale and the book value of the
asset is recognized in the income statement in the year in which the write-off took place. Transfers
from this account only occur when there is a change in its use (Note 11).
23
Financial statement 2012
Notes to financial statements
2.10. Property, plant and equipment
PP&E are assessed at acquisition and/or construction cost, plus interest capitalized during the
construction period, when applicable. PP&E are presented deducted from the corresponding
depreciations, which does not apply to land, considering it is not depreciated. Include costs
incurred with loans during the period of construction, improvement and expansion period of
industrial units.
Expenses with repair and maintenance that do not increase the useful life of assets are recognized
as expenses, when incurred. Gains and losses from disposals are assessed by comparing the
sale’s product with the net book value and are recognized in the financial statement.
Depreciation is calculated by the straight line method considers the asset’s useful life, and reviewed
periodically with the purpose of adjusting depreciation rates (Note 12).
2.11. Intangible assets
These are assessed at acquisition cost, deducted of amortization and of provisions, if any, in order
to adjust these to the probable realization, when necessary. Intangible assets with indefinite useful
life are amortized based on the estimated period for the generation of future economic benefits.
Goodwill based on estimated future profitability, with indefinite life, was amortized up to December
31, 2008, being subject to recoverability test on an annual basis or where evidence indicates
possible loss in economic value (Note 13).
2.12. Evaluation of assets at recoverable value
PP&E and intangible assets and, which include premiums for future profitability expectation and
other noncurrent assets, when applicable, are annually evaluated at recoverable value through
future cash flows. Sales growth rates are considered as premises of sale growth rates within
conservative level of 90% of budget, margins equivalent to those obtained in the last fiscal year
and discount rates that account for the expected returns. At December 31, 2012 the reduction in
these assets was not assessed.
2.13. Provision for contingencies
Provisions are recognized when the Company and its subsidiaries have a current obligation arising
from past events, with probable need for an outflow of resources to offset the obligation and
allowing for the amount to be reliably estimated. Provision are periodically reviewed according to
their nature and based on the opinion of the Company’s legal counselors. (Note 15).
2.14. Dividends and interest on equity
Dividends and interest on equity capital allocated to dividends are recognized as a liability based
on minimum dividends defined by the Company’s articles of incorporation. Any amount exceeding
the minimum mandatory is only recognized as a liability upon the shareholder’s approval in a
Special or Annual General Meeting or Board of Directors (Note17).
2.15. Adjustment to present value
Assets and liabilities from short-term operations, when relevant, were adjusted at present value
based on discount rates that reflect the best market’s evaluation. The discount rate used is the
Certificate of Interbank Deposit (CDI). The measurement of the adjustment at present value was
carried out on a “pro rata die”, as from the origin of each transaction.
24
Financial statement 2012
Notes to financial statements
2.16. Benefit plan
The Company sponsors a defined pension plan providing risk benefits, such as, disability, illness,
death annuity benefits, and lump-sum death benefits. The costing of the plan is established based
on the projected unit credit cost method. The actuarial commitments with pension and retirement
benefits are accrued based on actuarial calculations, annually produced by independent actuaries,
pursuant to the projected unit credit cost method, net of plan assets given in guarantee of the
plan, and the corresponding costs recognized during the employees’ length of service. Actuarial
assumptions are used, such as mortality tables, estimate evolution costs of health care, biological
and economic assumptions, and also historical data of expenses incurred and of employees’
contributions (Note 16).
2.17. Financial instruments
The Company’s financial instruments include:
a) Cash and cash equivalents: Presented at market value, equivalent to its book value.(Note 4);
b) Short-term investments: The market value is reflected in the amounts recorded in the balance
sheets. Short-term investments are classified as intended for trading (Nota 5).
c) Customers: Recognized at their realization value through the tax effective rate and are classified
are loans and receivables (Note 6).
d) Trade accounts payable: Recognized based at their amortized cost based on the tax effective
rate and are classified are receivables.
e) Loans and financing: The main purpose of this financial instrument is to generate resources to finance
the Company’s expansion programs and supply cash flows’ needs within a short term. (Note 14);
- Financings and loans in local currency – are classified as financial liabilities non-measured at
fair value and accounted for at their restated amounts pursuant to the fees agreed upon. Market
values of said loans are equivalent to their book value, for being financial instruments with particular
characteristics from specific financing sources.
- Loans and financing in foreign currency – taken out to support working capital of commercial
operations in Brazil and in subsidiaries abroad and are restated pursuant to fees agreed upon.
- Swap and NDF Operations – “Non Deliverable Forwards”: Classified as derivative financial
instruments, registered based on their market price.
2.18. Treasury stock
These are recognized at cost and deducted of equity. No gains or losses are recognized in P&L
on purchase, sale, issue or cancellation of the Company’s own equity instruments. Any difference
between the book value and the consideration received is recognized in other capital reserves.
2.19. Stock option plan
The company grants stock purchase options to its statutory officers or its subsidiaries in Brazil,
which will exercise their option only after specific grace period. The options are measured at
fair value based on the granting date by using the Black-Scholes-Merton pricing model and are
recognized as expenses under the other results accounts in the income statement for the year
matched against capital reserve in Equity to the extent that the deadlines for the exercise of call
option periods are realized. (Note 17).
Changes and reversals subsequent to calculation of acquisition are performed only upon: (i)
decrease in the price of options granted for the year; (ii) decrease in number of options that are
expected to be granted.
25
Financial statement 2012
Notes to financial statements
2.20 Government grants and assistance
The government grants are recognized when there is reasonable assurance that the benefit will
be received and the corresponding conditions were met. When the benefit refers to expense
item, it will be recorded in income in equal amounts throughout the expected useful life of the
corresponding benefit, on a systematic basis in relation to cost of which the benefit intends to
settle. When the benefit refers to assets, it is recognized as deferred income and recorded in
income in equal amounts over the expected useful life of the corresponding asset. When the
Company receives non-monetary benefits, the relevant item and the benefit are recorded at par
value and reflected in the income statement over the expected useful life of the asset in equal
annual installments (Note 26).
2.21 Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will be generated
in favor of the Company. Revenue is measured at the fair value of the consideration received,
excluding deductions, rebates and taxes or duties on sales. Revenue from the sale of goods is
recognized in income statements when all inherent risks and rewards have been transferred to the
buyer. The revenue of services is recognized in income based on its realization.
2.22. Taxes
a) Income and social contribution taxes—current and deferred
Except for subsidiaries established abroad, which comply with tax rates valid in the respective
country, income and social contribution taxes of the Company and subsidiaries in Brazil are
calculated at 25% and 9% rates, respectively.
b) Other taxes
Revenues, expenses and assets are recognized net of taxes on sales, except: (i) when taxes on
sales incurred on the purchase of goods or services are not recoverable with the tax authorities,
case in which taxes on sales are recognized as part of the acquisition cost or of expense item,
as follows; (ii) when amounts receivable and payable are presented together with taxes on sales;
and net value of taxes on sales, recoverable or payable, is included as a component of amounts
receivable or payable in the balance sheet.
2.23 Earnings per share - base and diluted
Base earnings per share is calculated by dividing the net profit attributable to the Company’s
shareholders by the weighted average number of common shares issued during the fiscal year.
Diluted profit per share is calculated by adjusting the weighted average number of outstanding
common shares assuming all common shares that would potentially result in dilution. (Note 28).
2.24 Segment information
The management defined the operational and geographical segments of the Company based on
the reports used internally for strategic business decision-making. The Company’s management
is structured and aligned with information of the operations considering the industrial, energy,
foreign and consolidated segments (Note 27).
2.25 New pronouncements that are not yet in force
The Management has been following the pronouncements that: (i) were issued, however shall be
effective only as from January 1, 2013; and (ii) are under investigation by regulatory organs and are
public knowledge, and concluded that none of these pronouncements should cause significant
impacts on the Company’s financial statements.
26
Financial statement 2012
Notes to financial statements
3. Estimates and assumptions
The financial statements included the use of estimates that considered past and current event
experiences, assumptions related to future events and other objective and subjective factors.
Significant items subject to these estimates and assumptions include:
a) credit risk analysis for the determination of the allowance for doubtful accounts;
b) review of the economic useful life of fixed assets and their recovery in operations;
c) fair value measurement of financial instruments;
d) commitments with employees’ benefit plans;
e) transactions with stock option plan;
f) deferred income tax assets on income and social contribution tax losses, and
g) analysis of other risks for determination of other provisions, including contingencies arising
from administrative and judicial proceedings and other assets and liabilities at the date of financial
statements
The settlement of transactions involving these estimates may result in amounts different from
those recorded in the financial statements due to the misstatements inherent to the estimate
process. Estimates and assumptions are periodically reviewed.
27
Financial statement 2012
4.Cash and cash equivalents
CONSOLIDATED
COMPANY
a) Cash and banks
b) Short-term investments
In local currency
Bank Deposit Certificate (CDB) and Investment funds
In foreign currency
Certificates of Deposits Abroad
Other balances held abroad
SWAP
NDF – Non Deliverable Forwards
31/12/12
31/12/11
31/12/12
31/12/11
28
561.186
561.186
561.186
-
28
520.911
520.911
520.911
-
211.295
2.090.961
1.932.330
1.932.330
149.656
128.596
21.060
8.956
19
59.512
2.872.103
2.832.901
2.832.901
37.502
25.041
12.461
1.700
520.939
2.302.256
2.931.615
561.214
Total
Investments in Brazil:
CDBs and LFs are remunerated at the rates of 98% to 107% of the CDI (100% to 106% of CDI at
December 31, 2011).
Investments abroad:
Certificates of deposits issued by foreign financial institutions are bear interest as follows:
- In Euros with interest of 0.25% to 2.4% p.a. at the original amount of EUR33,972, of which balance
amounts to R$91,635 (R$7,430 at December 31, 2011);
- In US dollars with interest of 0.02% to 0.5% p.a. at the original amount of US$18,060, of which the
balance amounts to R$36,961 (R$17,611at December 31, 2011);
- In the original currency with interest from 2.0% to 7.0% p.a. at the amount of R$21,060 (R$12,461
at December 31, 2011).
5.Short-term investments
COMPANY
CONSOLIDATED
31/12/12
31/12/11
31/12/12
31/12/11
Treasury Bills
Bank Deposit Certificate (CDB)
Other
261.244
-
239.860
-
261.244
2.032
239.860
40.775
-
Total
261.244
239.860
263.276
280.635
261.244
-
239.860
261.244
2.032
280.635
Short-term
Long-term
The Company has investments in Treasury Bills in the amount of R$ 261,244 which bear interest at
rates of 105% to 107% of the CDI (100% to 106% of CDI on December 31, 2011). These applications
are not considered as cash and cash equivalents due to a lack of immediate liquidity feature.
28
Financial statement 2012
6.Trade accounts receivable
a) Breakdown of balances
Domestic Market
External Market
SUBTOTAL
Present value adjustment
Allowance for losses on trade receivables
Total
b) Actual losses on trade accounts receivable for the period
c) Maturity of trade notes
Not yet due
Due: Up to 30 days
Over 30 days
Total
31/12/12
CONSOLIDATED
31/12/11
753.737
738.189
673.032
650.876
1.491.926
1.323.908
(897)
(18.190)
(3.070)
(13.146)
1.472.839
1.307.692
3.010
144
1.266.632
97.068
128.226
1.191.813
68.854
63.241
1.491.926
1.323.908
The breakdown of provision with losses on trade accounts receivable is as follows:
Balance at 01/01/2011
Losses written-off
Setting up of provisions
Reversal of provisions
(13.314)
144
(4.244)
4.268
Balance at 31/12/2011
Losses written-off
Setting up of provisions
Reversal of Provisions
(13.146)
3.010
(8.810)
756
Balance at 31/12/2012
(18.190)
29
Financial statement 2012
7.Inventories
Finished products
Products in process
Raw materials and others
Imports in transit
Provision for obsolescence
Total inventories - domestic market
Finished products
Products in process
Raw materials and others
Provision for obsolescence
Total inventories - external market
Overall total
31/12/12
CONSOLIDATED
31/12/11
229.276
222.197
229.249
51.167
(9.780)
262.408
262.454
225.658
51.611
(9.741)
722.109
792.390
408.681
72.734
119.982
(17.233)
384.601
82.453
119.184
(16.314)
584.164
569.924
1.306.273
1.362.314
The breakdown of provision for obsolescence is as follows:
Balance at 01/01/2011
Inventories write-off
Setting up of provisions
(19.977)
22.148
(28.226)
Balance at 31/12/2011
Inventories write-off
Setting up of provisions
(26.055)
9.067
(10.025)
Balance at 31/12/2012
(27.013)
Inventories are insured and their coverage is determined considering the values and level of
risk involved, the cost of sales includes R$ 9,067 (R$ 22,148 at December 31, 2011) regarding
inventories written off in the amount of R$ 10,025 (R$ 28,226 at December 31, 2011), maintaining
provision for inventory losses.
30
Financial statement 2012
8. Taxes recoverable
CONSOLIDATED
COMPANY
31/12/12
31/12/11
31/12/12
31/12/11
State VAT (ICMS) on capital expenditures
Value Added Tax (IVA) from foreign subisidiaries
PIS/COFINS on capital expenditures
ICMS
IPI
IRPJ/CSLL recoverable
PIS/COFINS
Other
6.107
-
3.782
-
23.462
69.400
3.696
24.554
12.643
16.050
33.416
16.438
22.759
51.462
10.122
20.700
14.237
11.778
30.255
7.665
Total
6.107
3.782
199.659
168.978
6.107
-
3.782
-
183.627
16.032
156.076
12.902
Short-term
Long-term
Credits will be realized by the Company and its subsidiaries through regular tax collection, also
including tax credits subject to refund and/or offset. 31
Financial statement 2012
9.Related parties
The financial statements include the financial information of the Company and its subsidiaries as in
Note 11. Business transactions of purchase and sale of products, raw materials and contracting
of services as well as financial transactions of loans, raising of funds among Group companies and
management fees are as follows:
BALANCE SHEET
CONSOLIDATED
COMPANY
31/12/12
31/12/11
31/12/12
31/12/11
Noncurrent assets
Management of financial resources
WEG Tintas Ltda
-
79
-
-
-
79
-
-
Current liabilities
Agreements with directors/officers
-
-
2.092
2.092
1.566
1.566
296
1.837
-
-
296
-
1.699
138
-
-
31/12/12
COMPANY
31/12/11
31/12/12
31/12/11
Management compensation:
a) Fixed (fees)
Board of Directors
Executive Board
2.011
1.342
669
1.701
1.124
577
18.793
1.825
16.968
16.988
1.588
15.400
b) Variable (profit sharing)
Board of Directors
Executive Board
1.582
1.058
524
979
647
332
9.849
1.439
8.410
-
6.129
906
5.223
-
Noncurrent liabilities
Management of financial resources
WEG Equipamentos Elétricos S.A.
RF Reflorestadora Ltda
CONSOLIDATED
INCOME STATEMENT
32
Financial statement 2012
Additional information:
a) Business transactions
The transactions of purchase and sale of inputs and products are made under the same conditions
with unrelated third parties, prevailing spot sales;
b) Management of financial resources
The financial and commercial operations between Group companies are recorded in book
accounts, in compliance with the requirements of the Group’s bylaws, not subject to interest.
The credit/debit contracts entered into with Administrators are recorded in book accounts, subject
to interest between 95% and 100% of the CDI variation;
c) Services provision and other covenants
WEG Equipamentos Elétricos S.A. entered into an agreement for “Guarantees and Other
Covenants” with Hidráulica Industrial S.A. Ind. e Com - HISA, for WEG to be guarantor in loan
operations and provide guarantee to customers (Performance Bond, guarantee insurance, etc.);
d) Securities and guarantees
WEG S.A. granted guarantees and sureties to foreign subsidiaries, in the amount of US$ 237.9
million (US$207.5 million at December 31, 2011);
e) Management compensation
Board of Directors members were paid the amount of R$ 1,825 (R$ 1,588 at 12/31/2011) and the
executive officers were paid the amount of R$ 16,968 (R$ 15,400 at December 31, 2011), for their
services, aggregating the total of R$ 18.793 (R$ 16,988 at 12/31/2011).
As long as the result of activity on capital invested is at least 10%, interest to be paid to management
is expected to range from 0% to 2.5% of net income. The provision is recognized in P&L for
the period, in the amount of R$ 9,849 (R$6,129 at December 31, 2011), under other operating
expenses. Board members and officers receive additional corporate benefits, as follows: Health
and dental insurance, life insurance, supplementary pension benefits, among others.
33
Financial statement 2012
10.Deferred taxes
Deferred income tax and social contribution tax credits and debts were determined in accordance
with each country’s ruling standards
a)Breakdown:
Income tax losses
CSLL tax losses
Temporary differences:
Provision for contingencies
Taxes questioned in court
Losses on trade receivables
Losses on obsolete inventories
Labor severance pay and for contract termination
Freight and sales commissions
Accounts payable (electric energy, technical assistance and others)
Employee profit sharing
Adjustment of transition tax regime
Accelerated depreciation incentive – Law No, 11196/05
Other additions and exclusions
Deemed cost of PP&E
Total
Noncurrent assets
Noncurrent liabilities
CONSOLIDATED
31/12/12
COMPANY
31/12/11
31/12/12
31/12/11
21
-
21.393
3.277
11.773
1.252
879
(51)
614
(1.586)
565
(40)
147
(3.724)
32.302
24.383
2.694
5.244
13.316
7.936
15.241
11.254
(97.766)
(4.359)
768
(319.295)
28.346
9.686
3.234
5.628
10.772
4.819
12.610
7.173
(64.815)
(2.923)
6.620
(344.605)
(123)
(3.052)
(283.612)
(310.430)
(123)
712
(3.764)
36.891
(320.503)
111.488
(421.918)
b) Estimated realization term
Management estimates that deferred assets arising from temporary differences will be realized in proportion to
realization of contingencies, losses and projected obligations.
In relation to deferred tax credits calculated on income and social contribution tax losses, management
estimates that they will be realized within the next 5 years.
34
Financial statement 2012
11.Investments
11.1. Investments in subsidiaries
Adjusted
equity
WEG Equipamentos Elétricos S.A.
2.667.895
RF Reflorestadora S.A
RF Reflorestadora Ltda
237.332
WEG Tintas Ltda.
82.917
WEG Amazônia S.A.
37.415
WEG Administradora de Bens Ltda.
24.720
WEG Logística Ltda.
4.767
WEG Linhares Equips Elétricos S.A.
98.118
WEG Drives & Controls Automação Ltda
254.217
WEG Partner Aerogeradores S.A.
10
WEG-Cestari Redut. Motorredut. S.A.
36.090
WEG Automação Critical Power Ltda **
17.572
Hidráulica Indl.S.A. Ind. e Com.
52.789
Agro Trafo Administradora de Bens S.A.
4.853
Sensores Eletrônicos Instrutech Ltda.
2.555
Logotech Sensores Eletrônicos Ltda.
Injetel Ind. Com. Comp. Plásticos Ltda
814
Ind. de Tintas e Vernizes Paumar S.A.
66.950
WEG Equipamientos Electricos S.A.
54.268
WEG Chile S.A.
24.118
WEG Colômbia Ltda.
12.027
WEG Electric Corp.
102.585
WEG Service CO.
(128)
WEG Overseas S.A.
9
WEG México S.A. de C.V.
104.336
WEG Transformadores México S.A. de C.V. 35.144
Voltran S.A de C.V.
46.490
WEG Indústrias Venezuela C.A.
5.928
Zest Electric Motors (Pty) Ltd.
157.064
WEG Nantong CO Ltd.
54.797
WEG Middle East Fze.
(1.647)
WEG Industries (Índia) Private Ltd.
107.617
WEG Electric (Índia) Private Limited
677
WEG Electric Motors Japan CO. Ltd.
1.351
WEG Singapore Pte. Ltd.
WEG Germany GmbH.
WEG Benelux S.A.
WEG Ibéria S.L.
WEG France S.A.S
WEG Electric Motors (UK) Ltd.
WEG Itália S.R.L.
WEG Euro Ind. Electrica S.A.
WEG Electric CIS
WEG Scandinavia AB.
WEG Austrália Pty Ltd.
WEG Peru S.A.
Pulverlux S.A.
EPRIS Argentina S.R.L.
Electric Machinery Holding Company
Watt Drive Antriebstechnik GmbH
Total
35
3.701
40.226
29.076
725.889
3.105
12.116
9.562
44.038
4.796
1.368
30.525
908
778
161
61.867
8.147
Net income
(loss) for
the year
574.529
10.012
23.449
(3.252)
368
4.623
8.610
41.336
1.664
(754)
514
727
934
112
222
5.539
13.938
3.562
1.592
14.728
569
(11)
12.609
1.165
3.189
1.967
41.694
4.376
(886)
(8.018)
272
588
3.284
501
3.342
97.295
(521)
2.870
1.741
9.447
3.284
(1.091)
4.882
282
(57)
56
1.990
(281)
Investment in capital (%))
31/12/12
31/12/11
Direct
Indirect Direct
100,00
100,00
99,91
0,02
5,09
99,99
0,05
91,75
0,05
10,44
8,00
1,00
0,79
100,00
4,99
0,07
5,74
0,05
-
0,09
99,98
94,91
100,00
99,99
0,01
99,90
50,01
99,95
61,92
8,25
99,95
100,00
100,00
89,55
92,00
99,00
99,91
100,00
99,99
60,00
60,00
99,99
92,57
100,00
100,00
99,99
94,99
100,00
100,00
100,00
99,99
100,00
100,00
100,00
99,93
94,26
100,00
100,00
100,00
99,95
100,00
100,00
100,00
100,00
100,00
100,00
99,91
0,02
99,00
0,12
91,75
0,01
0,10
10,44
8,00
1,00
0,79
100,00
4,99
0,07
5,74
0,05
-
Equity
Pickup
31/12/12
31/12/11
31/12/12
31/12/11
533.587 (*)
10.012
23.427
(1)
(3.450)
41.344
1
667
1
1.425
288
16
121
(11)
13
1
529
-
487.376
11.618
2.437
18.433
1
1.077
(2)
-
2.667.895
237.332
82.840
6
1.238
1
254.217
9
-
2.666.862
232.948
65.550
7
831
8
-
(238)
967
263
12
51
(43)
(1)
246
-
4.453
2
5.666
1.929
120
808
9
1
34
7
2.529
1
-
3.786
4.478
1.669
86
625
20
1
20
5
1.856
-
3.259.097
2.978.752
Indirect
0,09
99,98
100,00
100,00
99,99
1,00
99,90
99,88
61,92
8,25
99,99
99,90
89,55
92,00
99,00
99,21
100,00
99,99
60,00
60,00
99,99
50,68
100,00
100,00
99,99
94,99
100,00
100,00
100,00
99,99
100,00
100,00
100,00
99,93
94,26
100,00
100,00
100,00
99,95
100,00
100,00
100,00
100,00
607.970
Financial statement 2012
Investment
Book Value
522.197
(*) Equity pickup adjusted by unearned income.
(**) Change in the corporate name of Equisul Indústria e Comércio Ltda.
11.2. Acquisitions
Seeking to ever increase the Company’s product and solution portfolio, thus gaining flexibility to
cater to customers and increase its potential for growth, the following companies were acquired:
(i) Zest Electric Motors (Pty) Ltd.
In January 2012, the subsidiary WEG Equipamentos Elétricos S.A., acquired 41.89% of Zest
Electric Motors (Pty) Ltd. The goodwill, in the amount of R$ 54,077, was initially measured as
transferred payment exceeding amount in relation to acquired net assets and recognized in equity
as capital transaction. The consideration transferred was realized through resources available in
cash and cash equivalents in the amount of R$106,167.
(ii) WEG-Cestari Redutores e Motorredutores S.A.
In January 2012, the subsidiary WEG Equipamentos Elétricos S.A., acquired 50% + 01 in WEGCestari Redutores e Motorredutores S.A.. Goodwill, in the amount of R$66,706, was initially
measured as transferred payment exceeding amount in relation to acquired net assets. The
consideration transferred was realized through resources available in cash and cash equivalents
in the amount of R$84,613.
The financial statements of this subsidiary were consolidated as of January 1, 2012.
(iii) Stardur Tintas Especiais Ltda.
In June 2012, the subsidiary WEG Equipamentos Elétricos S.A., acquired 100% in Stardur Tintas
Especiais Ltda. Goodwill, in the amount of R$48,020, was initially measured as transferred payment
exceeding amount in relation to acquired net assets. The consideration transferred was realized
through resources available in cash and cash equivalents in the amount of R$85,000.
The financial statements of this subsidiary were consolidated as of July 1, 2012.
(iv) Injetel Ind. Com. Comp. Plásticos Ltda.
In October 2012, the subsidiary WEG Drives e Controls Automação Ltda., acquired 100% in Injetel
Ind. Com. Comp. Plásticos Ltda. Goodwill, in the amount of R$3,552, was initially measured
as transferred payment exceeding amount in relation to acquired net assets. The consideration
transferred was realized through resources available in cash and cash equivalents in the amount
of R$ 4,233.
The consideration transferred was realized through resources available in cash and cash equivalents
in the amount of R$4,233.
The financial statements of this subsidiary were consolidated as of November 1, 2012.
(v) Ind. de Tintas e Vernizes Paumar S.A.
In November 2012, the subsidiary WEG Equipamentos Elétricos S.A., acquired 100% in Ind. de
Tintas e Vernizes Paumar S.A.. Goodwill, in the amount of R$32,724, was initially measured as
transferred payment exceeding amount in relation to acquired net assets. The consideration
transferred was realized through resources available in cash and cash equivalents in the amount
of R$15,000.
The financial statements of this subsidiary were consolidated as of December 1, 2012.
36
Financial statement 2012
11.3. Restructuring
(i) Capital reduction - WEG Iberia S.L.
In December 2012, the subsidiary WEG Iberia S.L. reduced its capital by EUR 42,4 million in favor
of its subsidiary WEG Equipamentos Elétricos S.A. with 50.68% on equity interest formerly held in
the subsidiary Zest Electric Motors (Pty) Ltd.. The transaction had not impacts on the consolidated
financial statements.
(ii) Merger - Stardur Tintas Especiais Ltda.
In December 2012, WEG Equipamentos Elétricos S.A. increased its capital in Ind. de Tintas
e Vernizes Paumar S.A (“Paumar”). with an investment held in Stardur Tintas Especiais Ltda
(“Stardur”), with subsequent merger of Stardur in Paumar, as the best alternative capable of
minimizing the effects of production stoppage by Stardur; due to the fire of October 16, 2012,
avoiding/and or minimizing the loss in the market and considering the impossibility of reconstruction
of such industrial facilities; the technical and operating feasibility of
Paumar to produce and market product lines formerly manufactured by Stardur; the operating
and administrative cost reductions through the merger Stardur in Paumar; and the complementary
product line.
11.4. Other investments
These refer to other investments recorded at cost of acquisition in the amount of R$ 402 (R$ 349
at December 31, 2011) and the transfer of R$7,220 of a real estate property for ownership to
investments.
37
Financial statement 2012
12.Property, plant and equipment
The Company capitalized borrowing costs in the amount of R$ 1,306 (R$ 1,221 at December 31, 2011)
regarding ongoing constructions. The costs are capitalized until the moment of transfer of construction
in progress to property, plant and equipment in use.
31/12/12
CONSOLIDATED
COMPANY
31/12/11
31/12/12
31/12/11
Land, construction and facilities
Equipment
Furniture and fixtures
Hardware
Construction in progress
Reforestation
Other
7.079
-
15.973
-
1.141.222
2.652.581
82.998
83.145
76.079
50.005
41.221
1.073.721
2.455.418
76.988
70.884
70.434
48.676
39.476
Subtotal
7.079
15.973
4.127.251
3.835.597
(2.132)
-
(4.017)
-
(191.688)
(1.271.564)
(41.592)
(60.502)
(8.464)
(16.347)
(169.563)
(1.102.709)
(39.907)
(55.352)
(7.325)
(14.981)
4.947
11.956
2.537.094
2.445.760
Accumulated depreciation/depletion
Construction and facilities
Equipment
Furniture and fixtures
Hardware
Reforestation
Other
Annual depreciation rate (%)
02 a 03
05 a 20
07 a 10
20 a 50
Total
a) Summary of changes in property, plant and equipment:
PP&E Classification
31/12/11
Land, construction and facilities
Equipment
Furniture and fixtures
Hardware
Construction in progress
Reforestation
Other
904.158
1.352.709
37.081
15.532
70.434
41.351
24.495
Transfer
between
29.863
25.428
(704)
(56.711)
(3.496)
Total
2.445.760
(5.620)
Acquis.
Write-offs
26.729
145.179
8.878
14.690
59.852
1.328
8.700
265.356
(9.994)
(10.203)
(474)
(128)
(100)
(1.928)
Deprec. and
depletion
(21.649)
(153.859)
(4.883)
(7.392)
(1.139)
(4.183)
Exchange
effect
20.427
21.763
803
645
2.604
1.288
949.534
1.381.017
41.405
22.643
76.079
41.540
24.876
(22.827)
(193.105)
47.530
2.537.094
31/12/12
b) Amounts offered in guarantee – PPE items were provided as collateral for loans, financing, labor claims and
tax suits in the amount of R$ 15,790 (R$ 14,333 at December 31, 2011).
38
Financial statement 2012
13. Intangible assets – consolidated
Amortization
/Years
Information Technology Project
Software license
Other
Subtotal
Goodwill - Acquisition of subsidiaries
5
5
5
-
Cost
Accumulated
Depreciation
31/12/12
31/12/11
79.441
68.256
40.849
188.546
520.156
(79.441)
(50.885)
(27.005)
(157.331)
(21.387)
17.371
13.844
31.215
498.769
8.329
10.959
9.393
28.681
331.541
529.984
360.222
708.702
Total
(178.718)
a)Summary of changes in intangible assets:
Information Technology Project
Software license
Other
Subtotal
Goodwill - Acquisition of subsidiaries
TOTAL
31/12/11
Transfer of
PP&E
Additions
Amort.
Exchange
effect
31/12/12
8.329
10.959
9.393
28.681
331.541
120
5.500
5.620
-
11.069
1.175
12.244
157.727
(8.329)
(5.050)
(1.853)
(15.232)
-
273
(371)
(98)
9.501
17.371
13.844
31.215
498.769
360.222
5.620
169.971
(15.232)
9.403
529.984
31/12/12
31/12/11
7.461
6.789
4.584
3.917
8.464
14.166
4.654
3.369
1.396
975
4.121
31.215
28.681
b) Schedule of amortization of intangible assets (except goodwill):
2012
2013
2014
2015
2016
After 2017
Total
(c) Goodwill on acquisition of subsidiaries is not amortized for accounting purposes. Therefore the income tax
liability was recognized by the Company (Note 9).
39
Financial statement 2012
14.Loans and financing
Financing raised in foreign currency comprises Advances on Exchange Contracts (ACC’s), BNDESFINEM in currency basket, BNDES-FINEM in dollar and IFC in dollar (+) LIBOR.
Financing taken by foreign subsidiaries for working capital purposes is denominated in US dollars and/
or in the currency of each country, amounting to R$ 490,7 million in the short-term (R$ 497,1 million
at December 31, 2011) and R$ 40,8 million in the long-term (R$ 23,5 million at December 31, 2011),
corresponding to US$ 260,1 million (US$277,8 million at December 31, 2011).
Direct loans from BNDES are guaranteed by the parent company, WEG S.A. Finame operations are
guaranteed by collateral signature and statutory lien.
All covenant clauses related to indicators of capitalization, current liquidity and the relation between net
debt/Ebitda, included in the BNDES and IFC contracts, are being met.
CONSOLIDATED
Type
In Brazil
SHORT TERM
Annual charges
31/12/12
31/12/11
1.155.042
1.204.287
37.406
490.076
545.257
20.166
6.876
23.074
14.558
7.901
6.244
254
3.230
596.087
247.694
330.505
15.868
6.335
1.126
310
5.939
423
1.003.260
1.732.781
391.430
44.427
373.596
8.866
52.423
37.464
88.137
326
6.591
812.841
55.016
678.941
13.914
56.241
40.642
75.004
182
40.808
23.512
15.943
13.471
3.307
8.087
2.222
11.900
9.390
-
40.808
15.943
13.471
3.307
8.087
23.512
2.222
11.900
9.390
-
Total short term
1.645.772
1.701.435
Total long term
1.044.068
1.756.293
Working capital (ACCs)
Working Capital
Working Capital
Working Capital
Working Capital
Working Capital
Prepayment of Export
Non Deliverable Forwards (NDF)
Property, plant and equipment
SWAP
Other
LONG TERM
Working Capital
Property, plant and equipment
Working Capital
Property, plant and equipment
Working Capital
Working Capital
Prepayment of Export
SWAP
Other
Interest of 2.6% to 3.0% p.a. (+) exchange variation
TJLP (+) 1.4% to 3.0% p.a.
Interest of 4.9% to 9.0 %p.a.
US$ dollar (+) 1.4% to 1.8% p.a.
US$ dollar (+) Libor (+) 3.3% p.a.
UFIR (+) 1.0% to 4.0% p.a.
Exchange rate variation
Exchange rate variation
TJLP (+) 1.0% to 5.0% p.a.
Sundry
TJLP (+) 1.4% to 2.0% p.a.
UFIR (+) 1.0% to 4.0% p.a.
Interest of 4.0% to 9.0 %p.a.
TJLP (+) 1.0% to 5.0% p.a.
US$ dollar (+) 1.4% to 1.8% p.a.
US$ (+) Libor (+) 3.3% p.a.
Exchange rate variation
Sundry
ABROAD
SHORT TERM
Working Capital
Working Capital
Working Capital
Working Capital
Working Capital
Non Deliverable Forwards (NDF)
LONG TERM
Working Capital
Working Capital
Working Capital
Working Capital
Working Capital
SWAP
40
Financial statement 2012
EURIBOR (+) 0.8% to 1.4% p.a.
LIBOR (+) 0.3% to 0.9% p.a.
90% of PBOC (4.5% to 5.0%) p.a.
BBSY (+) 2.0% p.a.
Interest of 0.8% to 11.5% p.a.
Exchange rate variation
Libor (+) 2.4% p.a.
Interest of 1.5% to 15% p.a.
Euribor (+) 1.0% p.a.
90% of PBOC (4.5% to 5.0%) p.a.
JIBAR (+) 3.0% to 3.5% p.a.
-
MATURITY OF LONG-TERM FINANCING AND LOANS:
2013
2014
2015
2016
2017
2018
Total
31/12/12
31/12/11
405.730
386.643
144.776
59.253
47.666
1.142.720
348.885
133.482
70.520
31.090
29.596
1.044.068
1.756.293
15.Provision for contingencies
The Company and its subsidiaries are parties to administrative and judicial proceedings of labor, civil
and tax nature arising from the normal activities of their businesses. The respective provisions were set
up for proceedings the likelihood of loss of which was rated as “probable” based on the estimate of
value at risk determined by the Company’s legal counselors.
The Company’s management estimates that the provision for contingencies set up is sufficient to cover
any losses from the proceedings in progress.
a)Balance of provision for contingencies
CONSOLIDATED
31/12/12
COMPANY
31/12/11
31/12/12
31/12/11
2.586
2.586
-
1.660
1.660
-
89.122
14.668
36.977
24.700
12.777
39.644
12.883
23.843
2.918
(ii) Labor
-
-
46.118
38.834
(iii) Civel
-
-
68.980
63.456
(iv) Other
889
229
2.393
3.682
3.475
1.889
206.613
145.616
864
864
-
541
541
-
25.133
19.670
5.463
21.300
17.223
4.077
(i) Tax:
- IRPJ e CSLL
- INSS
- Presumed IPI credit
- Other
(a.1)
(a.2)
(a.3)
Total
(v) Restricted judicial deposits
- Tax
- Other
b) Changes in the provision for contingencies for the period – consolidated
a)Tax
b)Labor
c)Civel
d)Other
Total
41
Financial statement 2012
31/12/11
Additions
Interest
Write-offs
Reversals
31/12/12
39.644
38.834
63.456
3.682
49.478
9.550
25.649
1.260
1.553
695
-
(856)
(10.345)
-
(2.963)
(10.475)
(2.549)
89.122
46.118
68.980
2.393
145.616
85.937
2.248
(11.201)
(15.987)
206.613
c) The provisions set up basically refer to:
(i)Tax contingencies
(a.1) The Company maintains a provision for the proceeding referring to IPC difference (51.82%)
of January 1989 – “Plano Verão” (Summer Plan). The decision is favorable to the limit of the
index of 35.58%.
(a.2) This refers to social security contribution taxes payable. The litigation refers to social security
charges levied on the private pension plan, profit sharing, education funding tax, among others.
(a.3) Refers to judicial proceedings, in order to ensure the right to claim IPI credits (from the
acquisition of raw materials, materials, intermediate products and packaging exempt, taxed at
zero rate or not subject to taxation) offset against IRPJ, CSLL, PIS, COFINS, IPI debits of the
subsidiary Ind. de Tintas e Vernizes Paumar S.A..
(ii) Labor contingencies
The Company and its subsidiaries are defendants in labor claims primarily involving health and risk
exposure, among others. Based on which a provision of R$ R$46,118 (R$38,834 at December
31, 2011) was set up.
(iii) Civil contingencies
These correspond primarily to civil lawsuits, including personal injury, aesthetic damage,
occupational diseases and indemnities arising out of occupational accidents. A provision of R$
68,980 was set up (R$ 63.456 at December 31, 2011)
(iv) Restricted judicial deposits
IRPJ/CSLL on “Summer Plan”
Other
Total restricted judicial deposits
- Non-restricted judicial deposits
Total judicial deposits
CONSOLIDATED
31/12/12
COMPANY
31/12/11
31/12/12
31/12/11
864
541
13.195
11.938
13.195
8.105
864
541
25.133
21.300
-
-
2.711
2.738
864
541
27.844
24.038
The judicial deposits not restricted to the contingencies are awaiting a decree allowing withdrawal thereof.
d) Contingencies classified as possible losses
The Company and its subsidiaries are parties to other suits, the likelihood of loss of which are
rated as “possible”, for which no provision for contingencies was set up.
The estimated amount of such litigation relates to the tax proceedings totaling R$ 143,997
(R$82,115 at December 31, 2011). Those considered relevant and with “legal opinions” include
the following proceedings:
- taxation according to taxable profit in the total estimated amount of R$ 68.0 million.
- taxation on profits computed abroad in the total estimated amount of R$ 35 million.
- taxation on products of Information Technology Acts in the amount of R$36 million.
42
Financial statement 2012
16. Benefit plan
The Company and its subsidiaries are sponsors of WEG Social Security – Pension Plan, which seeks to
supplement the retirement benefits offered by the official social security system.
The Plan managed by WEG Seguridade Social includes monthly income benefits, supplementation of
sick-leave, supplementation of retirement due to disability, pension due to death, lump sum benefit (due
to death), proportional deferred benefit and self-funding.
There comprise 20,431 participants (19,926 at December 31, 2011). The Company and its subsidiaries
made contributions in the amount of R$ 20,359 (R$ 17,612 at December 31, 2011).
Based on actuarial calculations carried out by independent actuarial, as per the procedures established
by CVM Resolution No. 371/2000, actuarial liabilities were identified in the amount of R$5,000.
17. Equity
a) Capital
The Company’s capital stock is made up by 620,405,029 common registered and uncertified shares,
without par value, all of which with voting rights, not including the 500,000 shares held in treasury as per
item “d”. The Annual and Extraordinary Shareholders Meeting of April 24, 20112 approved Company’s
capital increase from R$ 2,265,367 to R$2,718,440, without change in the number of shares, with use
of the following reserves:
- Legal reserve
- Reserve for Equity Budget
R$ 29.347
R$ 423.726
R$ 453.073
b)Dividends and interest on equity
The Group’s Bylaws provide for the distribution of at least 25% of Adjusted Net Income, considering that
the Company propose the following:
31/12 /12
31/12 /11
NET INCOME FOR THE YEAR ATTRIBUTABLE TO THE COMPANY’S SHAREHOLDERS
- (-) Legal reserve
- (+) Realization of Reevaluation Reserve (1989) and attributed cost (2010)
CALCULATION BASE DIVIDENDS
- Dividends for the 1st half R$ 0.100/share (R$ 0.097/share in 2011)
- Interest on equity for the 1st half was R$ 0.130/share (R$ 0.123/share in 2011),
IRRF R$ 14,233 (R$ 13,472 in 2011).
Dividends for the 2nd half R$ 0.206/share (R$ 0.140/share in 2011)
- Interest on equity in the 2nd half was R$ 0.124/share (R$ 0.140/share
in 2011), IRRF R$ 13,576 (R$ 15,328 in 2011)
655.979
(32.799)
47.870
671.050
586.936
(29.347)
54.299
611.888
62.041
94.886
60.179
89.811
127.803
90.506
86.857
102.184
Total dividends/interest on equity for the year
375.236
339.031
43
Financial statement 2012
c) Constitution of reserves
- Legal reserve: set up in the total amount of R$ 32,799 (R$29,347 at December 31, 2011)
equivalent to 5% and net income for the year, observing the 20% capital limit.
- Profit retention reserve: Refers to the remaining net income for the year R$ 254,123, plus
accumulated profit of R$ 48,312(from the realization of reevaluation reserve (1989), of the
realization of the attributed cost (2010) and reversal of dividends from prior years), which were
allocated to the capital budget reserve for the 2013 investment plan.
d) Treasury stock
The Company, based on the Board of Directors’ Minutes of April 26, 2011 and with the purpose of
supporting its Stock Option Plan, was authorized to acquire up to 500,000 Company’s common
shares. 500,000 common shares were acquired, in the amount of R$10,055 at average cost
of R$20.11/share. The shares acquired shall be held in Treasury to be used in the exercise of
the purchase right of stock options by the Company’s stock option plans beneficiaries or the
subsequent cancellation or disposal.
44
Financial statement 2012
18.Stock option plan
(i) Plan description
The Plan is managed by the Board of Directors, seeking to grant stock option plans for WEG
S.A.’s (Company) shares to its statutory officers or of its subsidiaries with head offices in Brazil,
so as to attract, motivate and retain them, as well as aligning their interests to that of the Company
and its shareholders.
Each option grants its bearer with the right to acquire 1 (one) common Company-issued share
(BM&FBOVESPA: “WEGE3”), strictly according to the terms and conditions established in the
Plan (“Option”). Share purchase options to be granted are limited to 2% (two percent) of the total
Company’s capital.
The participant must maintain the invested shares blocked during the retention period, according
to the minimum levels determined by the Plan. The Plan may be extinguished, suspended or
altered at any moment, through a proposal approved by the Company’s Board of Directors.
(ii) Programs
The Board of Directors may approve, each semester, a Share Purchase Option Program (“Program”),
which will define the participants, number of Options, exercise price, Option distribution, term and
other rules specific to each Program.
In order to participate in each Program, the participant must invest an amount of his/her variable
compensation in each period in Company’s shares.
Number of shares
Program
Granted
April/11
Acquired
274.678
46.653
In Reais (R$)
Strike
Price
Price
Corrected by
IPCA
Option
Price
Option
Difference
30.352
30.352
30.352
91.056
21,01
21,01
21,01
23,16
24,32
25,54
30,60
32,98
35,29
7,43
8,66
9,76
226
263
296
785
35.894
1º
2º
3º
11.965
11.965
11.964
35.894
17,45
17,45
17,45
19,39
20,43
21,54
25,08
27,05
29,00
5,70
6,62
7,46
68
79
89
236
75.200
1º
2º
3º
25.067
25.067
25.066
75.200
19,17
19,17
19,17
21,34
22,51
23,75
27,22
29,40
31,51
5,89
6,89
7,76
148
173
194
515
40.824
1º
2º
3º
13.608
13.608
13.608
40.824
17,50
17,50
17,50
19,48
20,56
21,69
25,51
27,33
29,16
6,02
6,78
7,47
82
92
102
276
Vesting
Period
Number
of Options
Rights
91.056
1º
2º
3º
Rights
Subtotal
September/11
274.678
18.072
Subtotal
March/12
535.000
41.000
Subtotal
September/12
110.000
Subtotal
242.974
Total
45
21.162
Financial statement 2012
Amounts
appropriate
(thousand Mil)
1.812
The weighted average of fair value was determined based on the Black-Scholes-Merton method, considering the
following aspects: Program
September/11
April/11
Vesting Period
Factors:
Exercise price of option (R$)
Lifespan of the option - in days
Current price for corresponding share (R$)
Expected volatility in share price (%)
Interest free of risk for the lifespan of the
option (%)
March/12
1st
2st
3st
1st
2st
21,01
755
22,10
26,33
21,01
1.008
22,10
26,33
21,01
1.260
22,10
26,33
17,45
756
18,06
29,88
17,45
1.008
18,06
29,88
17,45 19,17
1.259 755
18,06 19,80
29,88 29,85
19,17
1.008
19,80
29,85
12,79
12,81
12,83
10,90
11,05
11,22
9,76
10,12
3st
1st
2st
September/12
3st
1st
2st
3st
19,17 17,50
1.257 753
19,80 20,10
29,85 24,50
17,50
1.006
20,10
24,50
17,50
1.257
20,10
24,50
10,33
8,57
8,78
8,32
Recording of expenses with shares is carried out throughout the period of acquisition of “vesting rights”.
In 2012, R$519 (R$239 at December 31, 2011) was recorded as other results in the financial statements for the year
against capital reserve in Equity The accumulated equity totals R$ 758 (R$ 239 at December 31, 2011).
19.Net revenue
Breakdown of net revenue
Gross revenue
Domestic market
External market
Deductions
Taxes
Returns and Rebates
Net revenue
CONSOLIDATED
31/12/12
31/12/11
7.240.816
3.945.096
3.295.720
6.130.291
3.766.447
2.363.844
(1.066.938)
(900.528)
(166.410)
(940.882)
(817.551)
(123.331)
6.173.878
5.189.409
20.Operating expenses by nature
The Company opted for presenting consolidated income statement by function. As required by IFRS, the
Company sets out below a detailed consolidated income statement by nature: CONSOLIDATED
31/12/12
31/12/11
EXPENSE BY NATURE
Depreciation and amortization
Personnel expenses
Raw materials and use and consumption materials
Freight and insurance costs
Other expenses
(5.365.467)
(208.337)
(1.352.979)
(2.797.680)
(181.766)
(824.705)
(4.526.284)
(188.030)
(1.132.117)
(2.392.200)
(124.399)
(689.538)
EXPENSE BY FUNCTION
Cost of products and services sold
Selling expenses
General and administrative expenses
Management fees
Other operating expenses
(5.365.467)
(4.293.022)
(619.980)
(288.409)
(18.793)
(145.263)
(4.526.284)
(3.633.358)
(508.904)
(242.495)
(16.988)
(124.539)
46
Financial statement 2012
21.Other operating revenue/expenses
The recorded values are relative to profit sharing, reversal/(provision) for
lawsuits and others, as follows:
CONSOLIDATED
31/12/12
31/12/11
18.593
18.593
17.072
17.072
OTHER OPERATING EXPENSES
- Profit sharing – Employees
- Profit sharing – foreign subsidiaries
- Profit sharing - executive board
- Constitution/Reversal of provision for tax proceedings
- Tax incentives of Rouanet Law
- Other
(163.856)
(99.608)
(8.858)
(9.849)
(12.201)
(3.629)
(29.711)
(141.611)
(87.629)
(5.725)
(6.129)
(196)
(2.194)
(39.738)
Total net
(145.263)
(124.539)
OTHER OPERATING REVENUE
- Other
22.Financial income (expenses), net
CONSOLIDATED
COMPANY
FINANCIAL INCOME
Short-term investment yield
Exchange variation
Present value adjustment – customers
Pis/Cofins on interest on equity
Other
FINANCIAL EXPENSES
Interest on loans and financing
Exchange variation
Present value adjustment – suppliers
Other expenses
Net financial income
47
Financial statement 2012
31/12/12
31/12/11
31/12/12
31/12/11
54.975
67.088
(12.552)
439
70.562
81.958
(11.739)
343
460.420
222.910
156.712
42.824
(12.552)
50.526
499.570
313.069
123.346
48.251
(11.739)
26.643
(180)
(180)
(161)
(161)
(404.729)
(174.827)
(191.919)
(13.389)
(24.594)
(396.569)
(155.246)
(177.636)
(17.756)
(45.931)
54.795
70.401
55.691
103.001
23.Provision for income and social contribution taxes
The parent company and subsidiaries in Brazil assess income and social contribution taxes according
to taxable income, except for WEG Administradora de Bens Ltda., Instrutech Ltda, e Agro Trafo
Administradora de Bens S.A., which adopt profit computed as a percentage of the Company’s gross
revenue. The provision for income tax was constituted at a 15% rate added of a 10% additional, and
social contribution with a 9% rate. Taxes for companies abroad are constituted according to the Law of
each country.
Reconciliation of income and social contribution taxes:
Income before taxes on profit
Statutory rate
IRPJ and CSLL calculated at the statutory rate
Adjustment to determine effective income
and social contribution taxes:
Result from investments in subsidiaries
Rate difference on foreign results
Tax incentives
Interest on equity
Other adjustments
IRPJ and CSLL as per the income statement
Current tax
Deferred tax
Effective rate - %
CONSOLIDATED
31/12 /12
COMPANY
31/12 /11
31/12 /12
31/12/11
655.484
34%
588.256
34%
864.102
34%
766.126
34%
(222.865)
(200.007)
(293.795)
(260.483)
207.889
16.898
(1.427)
177.547
22.128
(988)
(2.414)
(2.114)
40.750
63.300
(4.965)
22
(6.368)
33.481
65.288
8.955
495
(367)
862
(1.320)
(1.485)
165
(199.238)
(228.859)
29.621
(159.105)
(182.956)
23.851
-0,08%
0,22%
23,06%
20,77%
24.Insurance coverage
The corporate unit in Brazil is responsible for the management of the insurance portfolio of the WEG
Group in Brazil and abroad; and continuously constitutes, jointly with the executive board, the risk
policies for the WEG Group so as to protect its assets. Risk analysis assumptions adopted, given
their nature, are not included in the audit scope and, as a result, were not audited by our independent
auditors.The Company implemented the Worldwide Insurance Program – WIP, through which the local
insurance policies will be replaced by worldwide policies, such as: transport risk (Export, Import and
Domestic), Civil Product Liability, Civil Management’s Liability (D&O), Surety Insurance, General Civil
Liability, Properties and Environment Pollution.
The insurance policies are issued only by first tier multinational insurance companies which are able to
cater to the WEG Group in the countries where it operates. The financial structure and sustainability of
said insurance companies are continuously monitored by the Brazilian corporate unit.
Below we highlight some of the policies and the due capital:
- Operating Risks (Equity): R$60 million;
- Loss of profits: US$62 million;
- Civil liability US$25 million;
- Civil liability products: US$ 100 million
- Transport: US$ 4 million per shipment (Import and export) and R$ 6 million (Domestic).
- Environmental pollution: US$25 million.
48
Financial statement 2012
25.Financial instruments
The Company and its subsidiaries carried out an evaluation of its financial instruments, including
derivatives, recorded in the financial statements as at December 31, 2012, which presented the
following book and market values:
MARKET VALUE
31/12/12
BOOK VALUE
31/12/11
31/12/12
31/12/11
211.295
59.512
211.295
59.512
Short-term investments:
- Local currency
- Foreign Currency
- SWAP
- Non Deliverable Forwards (NDF)
Short-term investments
Customers
Suppliers
1.932.330
149.656
8.956
19
263.276
1.472.839
331.037
2.832.901
37.502
1.700
280.635
1.307.692
298.195
1.932.330
149.656
8.956
19
263.276
1.472.839
331.037
2.832.901
37.502
1.700
280.635
1.307.692
298.195
Loans and financing:
- Local currency
- Foreign Currency
- Non Deliverable Forwards (NDF)
- SWAP
1.892.593
780.181
8.399
8.667
2.145.977
1.311.441
310
-
1.892.593
780.181
8.399
8.667
2.145.977
1.311.441
310
-
Cash and cash equivalents:
Cash and banks
The risk factors of financial instruments relate to:
(i) Financial risks
Foreign currency risk
The Company has import and export operations in various currencies, it manages and monitors its
exposure to foreign currency, seeking to balance its financial assets and liabilities within the limits
established by Management .
The financial exposure limit (balance sheet) is equivalent to 3 months of revenue in foreign currency as
defined by the Company’s Board of Directors.
The Company had export operations totaling US$ 905.5 million (US$ 851.6 million at December 31,
2011), which acts as a natural hedge for indebtedness and other costs pegged to other currencies,
especially US Dollars.
Risks related to debt charges
These risks arise from the possibility that the subsidiaries may suffer losses due to fluctuations in interest
rates or other debt indexes, which increase financial expenses related to loans and financings obtained
in the market, or decrease financial revenues relative to financial investments from subsidiaries. The
Company continuously monitors the interest rates in the market so as to evaluate the need, if any, of
protection against the risk of volatility of said rates.
49
Financial statement 2012
Derivative financial instruments
The Company has the following operations with financial instruments:
a) NDF derivative financial instruments – Non Deliverable Forwards, with notional amount of:
(i) US$ 66.6 million, (US$ 10 million at December 31, 2011) held by subsidiary WEG Equipamentos
Elétricos S.A., seeking to protect exports from the fluctuation risks of the exchange rates;
(ii) EUR 42,3 million held by subsidiary WEG Equipamentos Elétricos S.A. to protect exports from
the fluctuation risks of the exchange rates;
(iii) US$ 13.7million, (US$ 14.4 million at December 31, 2011) held its subsidiary abroad Zest
Electric Motors (Pty) Ltd., to protect imports from the fluctuation risks of the exchange rates.
b) SWAP operations, in the notional amount of:
(i) EUR 10 million, held by its subsidiary Watt Drive Antriebstechnik GmbH, with the purpose of
hedging financing from fluctuation risks of Euribor;
(ii) EUR 30,0 million held by subsidiary WEG Equipamentos Elétricos S.A. to protect a g a i n s t
Libor increase risks;
(iii) R$ 200 million, held by the subsidiary WEG Equipamentos Elétricos S.A., SWAP from fixed to
floating interest rate, to hedge against decrease risk in interest rate.
The Company’s Management and that of its subsidiaries permanently monitors the derivative
financial instruments contracted through its internal controls.
The sensitivity analysis statement chart must be read jointly with the other financial assets and
liabilities expressed in foreign currency as at December 31, 2012, as the estimated impact of the
foreign currency rate over the NDFs and on SWAPs presented below will be offset, if effective,
entire or partially, with loss of value of assets and liabilities
Management defined that the Company must use the exchange rates used to mark financial
instruments to market valid as at December 31, 2012 for the likely scenario (market value). Said
rates represent the best estimate of future behavior of said prices and represent the value for
which the positions may have been settled on their maturity date.
Unrealized profit and losses in operations with derivatives are recorded (in case of loss) in the loans
and financing line or (in case of profit) as financial investments and matched against exchange
gains (losses) in P&L.
50
Financial statement 2012
The table below presents “cash and expense” effects of the results of financial instruments in real
scenarios.
a) NDF Operations – “Non Deliverable Forwards”:
Market value at
31/12/12
Risk
USD increase
USD increase
USD increase
USD increase
USD increase
USD increase
USD increase
EUR increase
EUR increase
EUR increase
EUR increase
EUR increase
EUR increase
EUR increase
USD decrease
USD decrease
Remote scenario 50%
Counterparty
Notional
value
(million)
Currency
Average
price
R$ thousand
Average
price
R$ thousand
Average
price
Banco Bradesco S.A.
Bank of America
Banco do Brasil S.A.
JP Morgan
Banco Safra
Citibank
Banco Santader S.A.
USD 8,0
USD 13,5
USD 18,8
USD 2,5
USD 2,5
USD 1,5
USD 19,8
US$/R$
US$/R$
US$/R$
US$/R$
US$/R$
US$/R$
US$/R$
2,0604
2,0713
2,0699
2,0853
2,1066
2,0537
2,0717
(791)
(952)
(882)
45
116
(77)
(1.021)
2,5731
2,5863
2,5859
2,6013
2,6356
2,5671
2,5917
(4.912)
(7.943)
(10.6110)
(1.259)
(1.201)
(847)
(11.246)
3,0878
3,1036
3,1030
3,1215
3,1627
3,0805
3,1100
Total em USD
USD 66,6
Banco Bradesco S.A.
Deutsche
Banco Santander S.A.
Banco Itaú S.A.
Bank of America
Standard Chartered
Banco do Brasil S.A.
EUR 5,5
EUR 2,0
EUR 10,8
EUR 6,5
EUR 7,5
EUR 0,5
EUR 9,5
Total EM EUR
EUR 42,3
First National Bank
First National Bank
USD 10,4
USD 3,3
USD Total
USD 13,7
Total
51
Possible scenario 25%
Financial statement 2012
(3.562)
EUR/R$
EUR/R$
EUR/R$
EUR/R$
EUR/R$
EUR/R$
EUR/R$
2,7375
2,7923
2,7417
2,7741
2,8117
2,8551
2,7342
(637)
(190)
(850)
(861)
(1.092)
34
(742)
(38.049)
3,4192
3,4903
3,4392
3,4676
3,5139
3,5689
3,4140
(4.338)
US$/ZAR
US$/ZAR
8,4840
8,4840
(499)
19
(4.401)
(1.586)
(8.218)
(5.369)
(6.365)
(323)
(7.236)
(9.033)
(14.934)
(20.339)
(2.562)
(2.517)
(1.617)
(21.531)
(72.533)
4,1030
4,1884
4,1270
4,1611
4,2167
4,2827
4,0969
(33.498)
6,3630
6,3630
R$ thousand
(8.165)
(2.982)
(15.586)
(9.877)
(11.637)
(680)
(13.730)
(62.657)
4,2420
4,2420
(11.143)
(3.502)
(480)
(7.576)
(14.645)
(8.380)
(79.123)
(149.835)
b) SWAP operations:
Risk
Counterparty
Euribor decrease
Libor decrease
Libor decrease
CDI increase
CDI increase
Bank Austria
Citibank
Citibank
Safra
Santander
National
value
(million)
EUR 10,0
R$ 15,0
R$ 15,0
R$ 70,0
R$ 50,0
R$ 80,0
Market value
31/12/12
Average
Possible scenario 25%
R$
thousand
Interest 1,51% p.a. (8.087)
Interest 0,65% p.a. (380)
Interest 0,70% p.a. (200)
Interest 8,02% p.a. 3.414
Interest 7,97% p.a. 2.782
Interest 8,00% p.a. 2.760
Average
Interest 1,13% p.a.
Interest 0,49% p.a.
Interest 0,52% p.a.
Interest 10,02% p.a.
Interest 9,96% p.a.
Interest 10,00% p.a.
Remote scenario 50%
R$
thousand
Average
R$
thousand
(9.122)
(477)
(320)
(92)
378
(1.476)
Interest 0,76% p.a.
Interest 0,33% p.a.
Interest 0,35% p.a.
Interest 12,03% p.a.
Interest 11,95% p.a.
Interest 12,00% p.a.
(10.158)
(573)
(441)
(3.376)
(1.879)
(5.463)
Total Interest SWAP
289
(11.109)
(21.890)
Total
289
(11.109)
(21.890)
We carried out the accounting record based on the market price as at December 31, 2012
according to the accrual method. These operations had a net positive impact as at December 31,
2012 of R$ 6,977, (R$ 3,899 at December 31, 2011), which were recognized as financial revenues.
The Company did not have outstanding derivative financial instruments at December 31, 2012.
(ii) Operational risks
Credit risk - Risks arise from the possibility of the Company’s subsidiaries not receiving the
amounts related to sales or not receiving credit from financial institutions regarding financial
investments. To mitigate the risk from sales, the Company’s subsidiaries analyze the financial
situation of their customers, as well as establish a credit limit and permanently assess their debtor
balance. Regarding financial investments, the Company and its subsidiaries invest in low risk
credit institutions.
26.Subsidies and assistance government
The Company obtained subventions in the amount of R$ 19,858 (R$ 2,877 in 2011) from tax
incentives, recognized in the year:
31/12/12
31/12/11
91
91
-
1.213
955
258
b) WEG Equipamentos Elétricos S.A.
- ICMS incentive credit of 85.00%
- Municipal investment
8.361
8.337
24
1.664
1.664
-
c) WEG Equipamentos Elétricos S.A.
- Municipal investment
165
165
-
11.241
11.241
-
a) WEG Amazônia S.A.
- ICMS incentive credit of 90.25%
- Corporate Income Tax (IRPJ) 75% reduction
d) WEG Logística Ltda
- ICMS incentive credit of 75.00%
All conditions to obtain government incentives were met.
52
Financial statement 2012
27.Information by segment
Brazil
Industry
Foreign
Write-offs and
Adjustments
Consolidated
Energy
31/12/2012 31/12/2011
31/12/2012 31/12/2011
31/12/2012 31/12/2011
31/12/2012 31/12/2011
31/12/2012 31/12/2011
- Revenue from sale of
products / services
3.628.243
3.131.392
1.414.518
1.320.846
2.873.460
1.990.544
(1.742.343)
(1.253.373)
6.173.878
5.189.409
- Earnings before
income taxes
1.059.513
817.283
398.621
234.465
166.420
86.220
(760.452)
(371.842)
864.102
766.126
127.787
120.073
41.224
41.370
39.326
26.587
_
_
208.337
188.030
3.318.386
2.734.721
1.370.784
1.264.986
1.938.375
1.645.050
(391.884)
(221.968)
6.235.661
5.422.789
758.499
558.117
394.642
373.178
601.25
433.886
(328.808)
(193.975)
1.425.587
1.171.206
- Depreciation /
Amortization / Depletion
- Identifiable assets
- Identifiable liabilities
Industry: single phase and triple phase motors with low and medium tension, drives and controls,
equipment and services for industrial automation, paints and varnishes.
Energy: electricity generators for thermal and hydraulic power plants (biomass), hydraulic turbines
(PCHs), transformers, substations, control panels and system integration services.
Foreign: composed by operations carried out by subsidiaries in other countries.
The adjustment and elimination column applicable to the Company in the context of the Consolidated
IFRS Financial Statements. All operating assets and liabilities are presented as identifiable assets
and liabilities.
53
Financial statement 2012
28.Earnings per share
a) Basic
Calculation of basic earnings (loss) per share is made by dividing net income (loss) for the year,
attributed to common shareholders, by the weighted average number of common shares available
during the year.
Profit attributed to Company shareholders
Weighted average number of outstanding common shares (shares /thousand)
Basic and diluted earnings per share – R$
31/12 /12
31/12 /11
655.979
620.405
1,0573
586.936
620.405
0,9461
b) Diluted
Net earnings per share is calculated by dividing the net profit attributable to Company’s common
shareholders by the weighted average number of outstanding common shares for the year plus
the weighted average number of common shares that would be issued upon the conversion of all
potential diluted common shares into common shares.
Profit attributed to Company shareholders
Weighted average of potentially diluted common shares held
by shareholders (shares/thousand)
Basic and diluted earnings per share – R$
31/12 /12
31/12 /11
655.979
586.936
620.648
1,0569
620.536
0,9459
The amount of 242,974 shares (130,900 at December 31, 2011) was considered to be shares
with potential to dilute, related to the stock option plan.
29.Statement of comprehensive income
The Company presents as other comprehensive income the values of accumulated translation
adjustment. These values are not taxable.
The presentation of the comprehensive income results is required by CPC 26 – Financial Statement
Presentation and includes the comprehensive results which correspond to revenue and expense
items which are not recognized in the financial statements as required or allowed by the standards,
interpretations and guidance issued by the CPC.
54
Financial statement 2012
BOARD OF DIRECTORS
Décio da Silva - Chairman
Nildemar Secches- Vice-Chairman
Dan Ioschpe
Douglas Conrado Stange
Martin Werninghaus
Miriam Voigt Schwartz
Moacyr Rogério Sens
Wilson Pinto Ferreira Junior
Executive Board
Harry Schmelzer Junior - CEO
Sérgio Luiz Silva Schwartz - Vice-CEO
Laurence Beltrão Gomes - CFO and IRO
Antônio Cesar da Silva - Marketing Officer
Carlos Diether Prinz - Diretor - Transmission and Distribution Officer
Hilton Jose da Veiga Faria - Human Resources Officer
Luis Gustavo Lopes Iensen - International Department Officer
Siegfried Kreutzfeld - Diretor - Motors Officer
Sinésio Tenfen - Diretor – Energy Officer
Umberto Gobbato - Automation Officer
Wandair José Garcia – Information Technology Officer
Wilson José Watzko - Controllership Officer
Accountant
Wilson José Watzko
TC-CRC/SC 16555/O-4
CPF 352.366.129-34
Supervisory Board
Alidor Lueders
Eduardo da Gama Godoy
Eduardo Grande Bittencourt
Hayton Jurema da Rocha
Ilário Bruch
Marcelo Adolfo Moser
55
Financial statement 2012
INDEPENDENT AUDITOR’S REPORT ON THE
FINANCIAL STATEMENTS – UNQUALIFIED
THE SHAREHOLDERS, BOARD OF DIRECTORS AND OFFICERS WEG S.A.
JARAGUÁ DO SUL, SC
We have reviewed the accompanying individual and consolidated financial information of WEG S.A.,
identified as Company and Consolidated, comprising the balance sheet at December 31, 2012 and the
related statements of income, statements of comprehensive income, statements of changes in equity
and cash flow statements for the year then ended, and a summary of significant accounting practices
and other explanatory information.
MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
Management is responsible for the preparation and fair presentation of the individual financial statements
in accordance with accounting practices adopted in Brazil and of the consolidated financial statements
in accordance with the International Financial Reporting Standards (IFRS), issued by the International
Accounting Standards Board (IASB), and with accounting practices adopted in Brazil, and for such
internal control as management determines is necessary to enable the preparation of these financial
statements that are free from material misstatement, whether due to fraud or error.
AUDITOR’S RESPONSIBILITY
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with Brazilian and International Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal control relevant to the
Company’s preparation and fair presentation of the Company’s financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the
appropriateness of accounting practices used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
56
Financial statement 2012
OPINION ON THE INDIVIDUAL FINANCIAL STATEMENTS
In our opinion, the individual financial statements referred to above present fairly, in all material respects,
the financial position of WEG S.A. at December 31, 2012, and its financial performance and cash flows
for the year then ended, in accordance with accounting practices adopted in Brazil.
OPINION ON THE CONSOLIDATED FINANCIAL STATEMENTS
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of WEG S.A. at December 31, 2012, and its consolidated financial
performance and consolidated cash flows for the year then ended, in accordance with International
Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB)
and accounting practices adopted in Brazil.
EMPHASIS OF MATTER
As described in Note 2, the individual financial statements were prepared in accordance with accounting
practices adopted in Brazil. For WEG S.A., such practices differ from IFRS applicable to individual
financial statements solely as regards to assessment of investments in subsidiaries, affiliated companies
and joint ventures under the equity method. IFRS require evaluation of these investments by their fair
value or their cost value.
OTHER MATTERS
STATEMENTS OF VALUE ADDED
We have also examined the individual and consolidated added value statements (DVA), relative to the
year ended December 31, 2012, prepared under the responsibility of the Company’s Management,
whose presentation is required for the Brazilian Corporation Law for publicly-held companies, and
supplementary IFRS information does not require the presentation of DVA.
The financial statements herein have been submitted to the same audit procedures previously described
and, in our opinion are adequately presented, in all material aspects, regarding the financial statements
taken as a whole.
Blumenau (SC), 08 de fevereiro de 2013.
Ernst & Young Terco
Auditores Independentes S.S.
CRC-2-SP 015.199/O-6 F- SC
Marcos Antonio Quintanilha
Accountant CRC-1-SP 132.776/O – 3 -T – SC
57
Financial statement 2012
WEG S.A. - FINANCIAL STATEMENTS
REPORT OF SUPERVISORY BOARD
Supervisory Board of WEG SA., performing its legal function, has examined the Management Report,
and the proposals of the Management for allocation of Net Income, based on the tests and clarifications
offered by the Management, by the representatives of the Independent Auditors, and also based on
the report of ERNST & YOUNG TERCO – Auditores Independentes S.S. on the unqualified Financial
Statements dated February 8, 2013. The Supervisory Board resolves that said documents are
appropriate to be examined and voted on by the Annual Shareholders’ Meeting.
Jaraguá do Sul (SC), February 26, 2013.
ALIDOR LUEDERS
EDUARDO GRANDE BITTENCOURT
HAYTON JUREMA DA ROCHA
STATEMENT
Through this instrument, the CEO and other Officers of WEG S.A., a publicly owned company, with
head office at Avenida Prefeito Waldemar Grubba, 3300, registered under CNPJ (Brazilian IRS Registry
of Legal Entities) No. 84429695/0001-11, for the purposes described in items V and VI of Article 25 of
CVM instruction 480, of December 7, 2009, hereby state that:
i.they have reviewed, discussed and agree with the opinions regarding the financial statements of WEG
S.A. and consolidated statements for year ended December 31, 2012;
ii.they have reviewed, discussed and agree with the opinions expressed in the Ernst & Young Terco
Auditores Independentes S.S. of February 8, 2013 on the financial statements of WEG S.A. and
consolidated statements for year ended December 31, 2012.
Jaraguá do Sul (SC), February 08, 2013.
Harry Schmelzer Junior - CEO
Sérgio Luiz Silva Schwartz - Vice-CEO
Laurence Beltrão Gomes - CFO and IRO
Antônio Cesar da Silva - Marketing Officer
Carlos Diether Prinz - Diretor - Transmission and Distribution Officer
Hilton Jose da Veiga Faria - Human Resources Officer
Luis Gustavo Lopes Iensen - International Department Officer
Siegfried Kreutzfeld - Diretor - Motors Officer
Sinésio Tenfen - Diretor – Energy Officer
Umberto Gobbato - Automation Officer
Wandair José Garcia – Information Technology Officer
Wilson José Watzko - Controllership Officer
58
Financial statement 2012
SOCIAL REPORT 2012 AND 2011 - BRAZIL CONSOLIDATED 2012
2011
7.240.816 6.173.878 864.102 1.226.914 6.130.291 5.189.409 766.126
1.032.238 1- Basis of Calculation
1.1 - Gross Operating Revenues
1.2 - Net Operating Revenues
1.3 - Net Operating Income
1.4 - Gross Payroll
2 - Internal Social Indicators
2.1 - Meals
2.2 - Compulsory Social Charges
2.3 - Profit Sharing
2.4 - Private Pension Plan
2.5 - Health and Dental Assistance
2.6 - Education
2.7 - Other Benefits
2012
% of
Gross
% of Net
Operating Income
24.369
367.958
118.315
20.359
22.325
7.647
14.253
1,99
29,99
9,64
1,66
1,82
0,62
1,16
2011
% of
Gross
% of Net
Operating Income
2,82
42,59
13,69
2,36
2,58
0,88
1,65
22.503
360.926
99.483
17.612
17.934
7.286
12.459
2,18
34,97
9,63
1,70
1,74
0,71
1,21
2,94
47,11
12,98
2,30
2,34
0,95
1,63
Total
575.226
46,88
66,57
538.203
52,14
70,25
3 - External Social
2012
% of
Gross
% of Net
Operating Income
2011
% of
Gross
% of Net
Operating Income
3.1 - Taxes
3.2 - Contributions to Society
3.2.1 - Education and Culture
3.2.2 - Sports and Leisure
3.2.3 - Philantropy
675.163
6.486
2.103
529
3.854
55,03
0,53
0,17
0,05
0,31
78,13
0,75
0,24
0,06
0,46
588.504
7.425
2.300
598
4.527
57,02
0,72
0,22
0,06
0,44
Total
681.649
78,89
% of Net
Operating Income
595.929
2011
57,74
% of
Gross
77,79
% of Net
Operating Income
0,71
4.706
0,46
0,62
4 - Environmental Indicators
2012
55,56
% of
Gross
Environmental Investments
6.172
0,50
With regard to setting “annual goals” to reduce waste generation,
consumption in general in production/operation and increase the
effectiveness with which natural resources are used, the company:
5 - Employee Indicators
5.1 - Number of employees at the end of the period
5.2 - Number of admissions during the period
5.3 - Number of layoffs during the period
5.4 - Number of women working at the end of period
5.5 - % of management positions held by women
5.6 - Number of outsourced employees
5.7 - Number of interns
5.8 - Number of employees aged 45+ at the end of period
5.9 - Number of afro-descendants employees
at the end of period
6 - Material information about the company’s
corporate citizenship practices
Total number of work-related accidents
Social and environmental projects developed by the
company were defined by:
Safety and health standards at the workplace were
defined by:
With regard to the freedom of association, the right to collective
bargaining and the internal representation of workers, the company:
The private pension scheme includes:
The profit sharing scheme includes:
When selecting suppliers, the same ethical and social and
environmental responsibility standards adopted by the company:
With regard to employees’ participation in voluntary
work programs, the company:
Total value added to be distributed:
Distribution of Value Added (DVA):
59
Financial statement 2012
( ) does not set gols ( ) meets from 51 to 75%
( ) meets from 0 to 50%
( X ) meets from 76 to 100%
2012
22.323
5.740
4.331
4.962
5
2.220
38
1.840
3.602
10
2012
762
( ) Board ( ) Board and Management
( X ) all employees
( ) Board and Management ( ) all employees
( X ) all employees + Cipa
( ) does not get involved ( X ) follows ILO norms
( ) encourages and follows ILO
( ) Board ( ) Board and Management ( X ) all employees
( ) Board ( ) Board and Management ( X ) all employees
( ) are not considered
( ) are suggested
( X ) are demanded
( ) does not get involved ( ) supports
( X ) organizes and encourages
Em 2012: R$ 3.364.777
38% Employees
29% Government
20% Shareholders 13% third parties 76,82
0,97
0,30
0,08
0,59
( ) does not set gols ( ) meets from 51 to 75%
( ) meets from 0 to 50%
( X ) meets from 76 to 100%
2011
20.914
5.320
3.809
5.521
5
1.284
27
2.012
3.327
10
2011
1.005
( ) Board ( ) Board and Management
( X ) all employees
( ) Board and Management ( ) all employees
( X ) all employees + Cipa
( ) does not get involved ( X ) follows ILO norms
( ) encourages and follows ILO
( ) Board ( ) Board and Management ( X ) all employees
( ) Board ( ) Board and Management ( X ) all employees
( ) are not considered ( ) are suggested
( X ) are demanded
( ) does not get involved ( ) supports
( X ) organizes and encourages
Em 2011: R$ 2.934.422
36% Employees 29% Government
20% Shareholders
15% third parties