ITR -Quarterly Information - 03/31/2016 - WEG S/A
Version : 1
Contents
Company information
Composition of capital
1
Cash dividends
2
Individual financial statements
Balance sheet - Assets
3
Balance sheet - Liabilities and equity
4
Income statements
5
Statement of comprehensive income
6
Cash flow statement
7
Statement of changes in equity
Statements of changes in equity - 01/01/2016 to 03/31/2016
8
Statements of changes in equity - 01/01/2015 to 03/31/2015
9
Statements of value added
10
Consolidated financial statements
Balance sheet - Assets
11
Balance sheet - Liabilities and equity
12
Income statement
13
Statement of comprehensive income
14
Cash flow statement
15
Statement of changes in equity
Statements of changes in equity - 01/01/2016 to 03/31/2016
16
Statements of changes in equity - 01/01/2015 to 03/31/2015
17
Statements of value added
18
Comments on performance
19
Notes to financial statements
27
Auditor’s report and statements
Quarterly information report review
49
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
Company information / Composition of capital
Number of shares
(Units)
Quarterly ended
03/31/2016
Paid-in capital
Common
Preferred
Total
1,614,353,076
0
1,614,353,076
Treasury stock
Common
Preferred
Total
1,205,872
0
1,205,872
1
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
Company information / Cash dividends
Event
Approval
Earning
Board of Directors’
Meeting
03/22/2016
Interest on equity
First payment
08/17/2016
Type of share
Common
Class of share Earnings per share (Reais / Share)
0.04700
2
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
Individual financial statements / Balance sheet - Assets
(In thousands of reais)
Account
code
Account description
1
Current quarter
03/31/2016
Prior year
12/31/2015
Total assets
5,988,588
6,215,117
1.01
Current assets
1,113,538
1,155,109
1.01.01
Cash and cash equivalents
675,422
1,023,357
1.01.01.01
Cash and banks
22
29
1.01.01.02
Short-term investments
675,400
1,023,328
1.01.02
Long-term investments
364,811
-
1.01.06
Taxes recoverable
13,344
17,926
1.01.06.01
Current taxes recoverable
13,344
17,926
1.01.08
Other current assets
59,961
113,826
1.01.08.03
Other
59,961
113,826
1.01.08.03.01
Dividends
1.01.08.03.02
Interest on equity
1.01.08.03.03
Others
1.02
Noncurrent assets
1.02.01
Long-term receivables
828
1,040
55,354
112,786
3,779
-
4,875,050
5,060,008
8,970
9,031
1.02.01.06
Deferred taxes
679
781
1.02.01.06.01
Deferred income and contribution taxes
679
781
1.02.01.08
Credits with related parties
27
10
1.02.01.08.02
Credits with subsidiaries
27
10
1.02.01.09
Other noncurrent assets
8,264
8,240
1.02.01.09.03
Judicial deposits
8,264
8,240
1.02.02
Investments
4,861,513
5,046,381
1.02.02.01
Equity interest
4,861,513
5,046,381
1.02.02.01.02
Investments in subsidiaries
4,861,513
5,046,381
1.02.03
Property, plant and equipment
4,567
4,596
1.02.03.01
Property, plant and equipment in use
4,567
4,596
3
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
Individual financial statements / Balance sheet - Liabilities and equity
(In thousands of reais)
Account
code
2
2.01
2.01.01
2.01.01.01
2.01.03
2.01.03.01
2.01.03.01.01
2.01.03.01.02
2.01.05
2.01.05.02
2.01.05.02.01
2.01.05.02.04
2.02
2.02.04
2.03
2.03.01
2.03.02
2.03.02.04
2.03.02.05
2.03.02.07
2.03.03
2.03.04
2.03.04.01
2.03.04.02
2.03.04.08
2.03.05
2.03.06
2.03.06.01
2.03.08
2.03.08.01
2.03.08.02
Account description
Total liabilities
Current liabilities
Labor and social charges
Social obligations
Tax obligations
Federal tax obligations
Income and social contribution taxes payable
Other taxes payables
Other payables
Other
Dividends and interest on equity capital payable
Other
Noncurrent liabilities
Provisions
Equity
Paid-in capital
Capital reserves
Options granted
Treasury stock
Premium on capital transaction
Revaluation reserve
Income reserve
Legal reserve
Statutory reserve
Additional proposed dividends
Retained earnings/accumulated losses
Equity valuation adjustments
Deemed cost
Other comprehensive income
Derivative financial instruments
Cumulative translation adjustments
Current quarter
03/31/2016
5,988,588
100,379
6,925
6,925
13,563
13,563
13,563
79,891
79,891
79,502
389
4,622
4,622
5,883,587
3,533,973
(71,174)
1,352
(13,673)
(58,853)
3,630
1,299,868
105,539
1,194,329
207,793
479,190
479,190
430,307
(12,235)
442,542
Prior year
12/31/2015
6,215,117
181,217
7,361
7,361
14,205
14,205
145
14,060
159,651
159,651
158,209
1,442
4,520
4,520
6,029,380
3,533,973
(74,113)
2,474
(17,069)
(59,518)
3,630
1,430,422
105,539
1,194,329
130,554
493,106
493,106
642,362
5,774
636,588
4
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
Individual financial statements / Income statement
(In thousands of reais)
Account
code
3.04
3.04.02
3.04.02.01
3.04.02.02
3.04.05
3.04.06
3.05
3.06
3.06.01
3.06.02
3.07
3.08
3.08.01
3.08.02
3.09
3.11
3.99
3.99.01
3.99.01.01
3.99.02
3.99.02.01
Account description
Operating income/expenses
General and administrative expenses
Management fees
Other operating expenses
Other operating expenses
Equity pick-up
Income before financial result and taxes
Financial income (expenses)
Financial income
Financial expenses
Income before income taxes
Income and social contribution taxes
Current
Deferred
Net income from continuous operations
Profit/ loss for the period
Earnings per share - (Reais/share)
Basic earnings per share
Common shares
Diluted earnings per share
Common shares
Current period
01/01/2016 to 03/31/2016
Prior period
01/01/2015 to 03/31/2015
256,587
(1,002)
(610)
(392)
(856)
258,445
256,587
25,974
26,030
(56)
282,561
(165)
(63)
(102)
282,396
282,396
223,585
(1,081)
(529)
(552)
(661)
225,327
223,585
22,504
22,542
(38)
246,089
(230)
(249)
19
245,859
245,859
0.17506
0.15240
0.17495
0.15228
5
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
Individual financial statements / Statement of comprehensive income
(In thousands of reais)
Account
code
4.01
4.02
4.02.01
4.02.02
4.03
Account description
Net income for the period
Other comprehensive income
Cumulative translation adjustments
Hedge Accounting
Comprehensive income for the period
Current period
01/01/2016 to 03/31/2016
Prior period
01/01/2015 to 03/31/2015
282,396
(212,055)
(194,046)
(18,009)
70,341
245,859
235,016
235,016
480,875
6
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
Individual financial statements / Cash flow statements - indirect method
(In thousands of reais)
Account
code
6.01
6.01.01
6.01.01.01
6.01.01.02
6.01.01.03
6.01.01.04
6.01.02
6.01.02.01
6.01.02.02
6.01.02.03
6.01.03
6.02
6.02.01
6.02.02
6.02.03
6.03
6.03.01
6.03.02
6.05
6.05.01
6.05.02
Account description
Net cash flows from operating activities
Cash from operations
Income before taxes
Depreciation, amortization
Equity pickup
Expenses plan options purchase shares
Changes in assets and liabilities
(Increase)/decrease in accounts receivable
Increase/(decrease) in accounts payable
Income and social contribution taxes paid
Other
Net cash flows from investing activities
Dividends and interest on equity capital received
Long-term financial investments
Investments
Net cash from financing activities
Dividends/interest on equity capital paid
Treasury shares
Increase/(decrease) in cash and cash equivalents
Opening cash and cash equivalents balance
Closing cash and cash equivalents balance
Current period
01/01/2016 to 03/31/2016
Prior period
01/01/2015 to 03/31/2015
23,566
24,484
282,561
29
(258,445)
339
(1,306)
1,175
(2,273)
(208)
388
(89,278)
318,694
(364,811)
(43,161)
(282,223)
(285,619)
3,396
(347,935)
1,023,357
675,422
15,343
21,033
246,089
29
(225,327)
242
(6,021)
(5,699)
22
(344)
331
273,126
274,609
(1,483)
(268,685)
(268,715)
30
19,784
886,700
906,484
7
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
Individual financial statements / Statement of changes in equity - 01/01/2016 to 03/31/2016
(In thousands of reais)
Account
code
5.01
5.03
5.04
5.04.03
5.04.05
5.04.07
5.05
5.05.01
5.05.02
5.05.02.04
5.05.02.06
5.05.02.08
5.06
5.06.04
5.07
Account description
Opening balances
Adjusted opening balances
Capital transactions with shareholders
Recognized options granted
Sold treasury shares
Interest on equity capital
Total comprehensive income
Net income for the period
Other comprehensive income
Translation adjustments in the period
Hedge accounting – Cash flow
Realization of deemed cost
Internal changes in equity
Dividends paid
Closing balances
Paid-in
capital
3,533,973
3,533,973
3,533,973
Capital reserves,
Options granted and
Treasury stock
(70,483)
(70,483)
2,939
(1,122)
4,061
(67,544)
Income reserves
1,299,868
1,299,868
1,299,868
Retained earnings/
accumulated losses
130,554
130,554
(88,519)
677
(89,196)
296,312
282,396
13,916
13,916
(130,554)
(130,554)
207,793
Other comprehensive
income
1,135,468
1,135,468
(225,971)
(225,971)
(194,046)
(18,009)
(13,916)
909,497
Equity
6,029,380
6,029,380
(85,580)
(445)
4,061
(89,196)
70,341
282,396
(212,055)
(194,046)
(18,009)
(130,554)
(130,554)
5,883,587
8
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
Individual financial statements / Statement of changes in equity - 01/01/2015 to 03/31/2015
(In thousands of reais)
Account
code
5.01
5.03
5.04
5.04.03
5.04.05
5.04.07
5.05
5.05.01
5.05.02
5.05.02.04
5.05.02.06
5.06
5.06.02
5.06.04
5.07
Account description
Opening balances
Adjusted opening balances
Capital transactions with shareholders
Recognized options granted
Sold treasury shares
Interest on equity capital
Total comprehensive income
Net income for the period
Other comprehensive income
Translation adjustments in the period
Realization of deemed cost
Internal changes in equity
Realization of revaluation reserve
Dividends paid
Closing balances
Paid-in
capital
3,533,973
3,533,973
3,533,973
Capital reserves,
Options granted and
Treasury stock
(63,899)
(63,899)
293
232
61
26
26
(63,580)
Income
reserves
678,665
678,665
678,665
Retained earnings/
accumulated losses
167,494
167,494
(67,398)
(20)
(67,378)
264,202
245,859
18,343
18,343
(167,520)
(26)
(167,494)
196,778
Other comprehensive
income
740,152
740,152
216,673
216,673
235,016
(18,343)
956,825
Equity
5,056,385
5,056,385
(67,105)
212
61
(67,378)
480,875
245,859
235,016
235,016
(167,494)
(167,494)
5,302,661
9
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
Individual financial statements / Statement of value added
(In thousands of reais)
Account
code
7.02
7.02.02
7.02.03
7.03
7.04
7.04.01
7.05
7.06
7.06.01
7.06.02
7.07
7.08
7.08.01
7.08.01.01
7.08.01.02
7.08.01.03
7.08.02
7.08.02.01
7.08.03
7.08.03.01
7.08.04
7.08.04.01
7.08.04.03
Account description
Inputs purchased from third-parties
Materials, electricity, third party services and other
Loss/recovery of amounts receivable
Gross value added
Withholdings
Depreciation, amortization and depletion
Net value added produced
Value added received in transfer
Equity pick-up
Financial income
Total value added to be distributed
Distribution of value added
Personnel
Direct compensation
Benefits
Unemployment Compensation Fund (FGTS)
Taxes, charges and contributions
Federal
Third-party capital remuneration
Interest
Equity remuneration
Interest on equity capital
Retained profit/loss for the period
Current period
01/01/2016 to 03/31/2016
Prior period
01/01/2015 to 03/31/2015
(591)
(123)
(468)
(591)
(29)
(29)
(620)
284,475
258,445
26,030
283,855
283,855
1,102
1,059
18
25
301
301
56
56
282,396
89,196
193,200
(436)
(103)
(333)
(436)
(29)
(29)
(465)
247,869
225,327
22,542
247,404
247,404
1,162
1,103
22
37
350
350
33
33
245,859
67,378
178,481
10
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
Consolidated financial statements / Balance Sheet - Assets
(In thousand of reais)
Account
code
1
1.01
1.01.01
1.01.01.01
1.01.01.02
1.01.02
1.01.03
1.01.03.01
1.01.04
1.01.06
1.01.06.01
1.01.08
1.01.08.03
1.01.08.03.01
1.01.08.03.02
1.02
1.02.01
1.02.01.01
1.02.01.01.01
1.02.01.06
1.02.01.06.01
1.02.01.09
1.02.01.09.03
1.02.01.09.04
1.02.01.09.05
1.02.01.09.06
1.02.02
1.02.02.01
1.02.02.01.04
1.02.03
1.02.03.01
1.02.04
1.02.04.01
1.02.04.01.02
1.02.04.02
Account description
Total assets
Current assets
Cash and cash equivalents
Cash and banks
Short-term investments
Long-term investments
Trade accounts receivable
Clients
Inventories
Taxes recoverable
Current taxes recoverable
Other current assets
Other
Derivative financial instruments
Others
Noncurrent assets
Long-term receivables
Long-term investments at fair value
Trading securities
Deferred taxes
Deferred income and social contribution taxes
Other noncurrent assets
Judicial deposits
Taxes recoverable
Derivative financial instruments
Other
Investments
Equity interests
Other equity interests
Property, plant and equipment
Property, plant and equipment in use
Intangible assets
Intangible assets
Other
Goodwill
Current quarter
03/31/2016
13,458,854
8,713,628
2,477,210
323,157
2,154,053
1,263,978
2,490,042
2,490,042
1,868,740
276,560
276,560
337,098
337,098
3,706
333,392
4,745,226
519,234
203
203
128,315
128,315
390,716
48,781
15,076
262,053
64,806
1,395
1,395
1,395
3,247,118
3,247,118
977,479
110,355
110,355
867,124
Prior year
12/31/2015
14,261,541
9,589,344
3,277,115
477,710
2,799,405
1,157,644
2,545,927
2,545,927
2,009,254
266,944
266,944
332,460
332,460
7,519
324,941
4,672,197
619,206
214
214
131,327
131,327
487,665
55,810
16,640
371,208
44,007
1,379
1,379
1,379
3,264,898
3,264,898
786,714
117,394
117,394
669,320
11
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
Consolidated financial statements / Balance Sheet - Liabilities and equity
(In thousand of reais)
Account
code
2
2.01
2.01.01
2.01.01.01
2.01.02
2.01.03
2.01.03.01
2.01.03.01.01
2.01.03.01.02
2.01.04
2.01.04.01
2.01.04.01.01
2.01.04.01.02
2.01.05
2.01.05.02
2.01.05.02.01
2.01.05.02.04
2.01.05.02.05
2.01.05.02.06
2.01.05.02.07
2.01.05.02.08
2.02
2.02.01
2.02.01.01
2.02.01.01.01
2.02.01.01.02
2.02.02
2.02.02.02
2.02.02.02.03
2.02.02.02.04
2.02.02.02.05
2.02.03
2.02.03.01
2.02.04
2.03
2.03.01
2.03.02
2.03.02.04
2.03.02.05
2.03.02.07
2.03.03
2.03.04
2.03.04.01
2.03.04.02
2.03.04.08
2.03.05
2.03.06
2.03.06.01
2.03.08
2.03.08.01
2.03.08.02
2.03.09
Account description
Total liabilities
Current liabilities
Labor and social charges
Social obligations
Trade accounts payable
Tax obligations
Federal tax obligations
Income and social contribution taxes payable
Other
Loans and financing
Loans and financing
In local currency
In foreign currency
Other payables
Other
Dividends and interest on equity capital payable
Advance from clients
Profit sharing
Derivative financial instruments
Payable accounts – foreign subsidiaries
Other
Noncurrent liabilities
Loans and financing
Loans and financing
In local currency
In foreign currency
Other payables
Other
Tax obligations
Derivative financial instruments
Other
Deferred taxes
Deferred income and social contribution taxes
Provisions
Consolidated equity
Paid-in capital
Capital reserves
Options granted
Treasury stock
Premium on capital transaction
Revaluation reserve
Income reserves
Legal reserve
Statutory reserve
Additional proposed dividends
Retained earnings/accumulated losses
Equity valuation adjustments
Deemed cost
Other comprehensive income
Derivative financial instruments
Cumulative translation adjustments
Noncontrolling interest
Current quarter
03/31/2016
13,458,854
3,057,697
261,940
261,940
502,294
120,842
120,842
21,340
99,502
1,017,473
1,017,473
437,731
579,742
1,155,148
1,155,148
94,263
434,562
52,901
14,434
223,291
335,697
4,394,119
3,636,054
3,636,054
1,707,451
1,928,603
181,225
181,225
785
38,736
141,704
224,250
224,250
352,590
6,007,038
3,533,973
(71,174)
1,352
(13,673)
(58,853)
3,630
1,299,868
105,539
1,194,329
207,793
479,190
479,190
430,307
(12,235)
442,542
123,451
Prior year
12/31/2015
14,261,541
3,494,850
191,077
191,077
566,769
121,461
121,461
28,160
93,301
1,284,633
1,284,633
637,552
647,081
1,330,910
1,330,910
172,484
486,225
143,897
1,438
209,867
316,999
4,610,631
3,868,335
3,868,335
1,747,118
2,121,217
159,632
159,632
783
16,248
142,601
242,696
242,696
339,968
6,156,060
3,533,973
(74,113)
2,474
(17,069)
(59,518)
3,630
1,430,422
105,539
1,194,329
130,554
493,106
493,106
642,362
5,774
636,588
126,680
12
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
Consolidated financial statements / Income Statement
(In thousand of reais)
Account
code
3.01
3.02
3.03
3.04
3.04.01
3.04.02
3.04.02.01
3.04.02.02
3.04.04
3.04.05
3.05
3.06
3.06.01
3.06.02
3.07
3.08
3.08.01
3.08.02
3.09
3.11
3.11.01
3.11.02
3.99
3.99.01
Account description
Revenue from sale of products and/or services
Cost of goods sold and/or services rendered
Gross profit
Operating income/expenses
Selling expenses
General and administrative expenses
Management fees
Other administrative expenses
Other operating income
Other operating expenses
Income before financial results and taxes
Financial results
Financial income
Financial expenses
Income before income taxes
Income and social contribution taxes
Current
Deferred
Net income from continuous operations
Consolidated Income/ loss for the period
Atributed to shareholders of parent company
Atributed to non-controlling shareholders
Earnings per share - (Reais/share)
Basic earnings per share
3.99.01.01
Common shares
3.99.02
Diluted earnings per share
3.99.02.01
Common shares
Current period
01/01/2016 to 03/31/2016
2,416,344
(1,743,591)
672,753
(415,679)
(242,051)
(118,924)
(5,881)
(113,043)
4,468
(59,172)
257,074
60,544
163,631
(103,087)
317,618
(30,360)
(50,175)
19,815
287,258
287,258
282,396
4,862
Prior period
01/01/2015 to 03/31/2015
2,130,291
(1,491,668)
638,623
(364,561)
(206,835)
(106,341)
(5,558)
(100,783)
3,511
(54,896)
274,062
41,679
519,628
(477,949)
315,741
(64,944)
(76,322)
11,378
250,797
250,797
245,859
4,938
0.17506
0.15240
0.17495
0.15228
13
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Version: 1
Consolidated financial statements / Statement of comprehensive income
(In thousand of reais)
Account
code
Account description
Current period
01/01/2016 to 03/31/2016
Prior period
01/01/2015 to 03/31/2015
4.01
Consolidated net income for the period
287,258
250,797
4.02
Other comprehensive income
(216,287)
235,002
4.02.01
Adjustment of conversion period
(198,278)
235,002
4.02.02
Hedge accounting
(18,009)
-
4.03
Consolidated comprehensive income for the period
70,971
485,799
4.03.01
Attributed to shareholders of parent company
70,341
480,875
4.03.02
Attributed to noncontrolling shareholders
630
4,924
14
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Version: 1
Consolidated financial statements / Cash flow statement - Indirect method
(In thousand of reais)
Account
code
6.01
6.01.01
6.01.01.01
6.01.01.02
6.01.01.03
6.01.01.04
6.01.01.05
6.01.01.06
6.01.01.07
6.01.01.08
6.01.01.09
6.01.01.10
6.01.02
6.01.02.01
6.01.02.02
6.01.02.03
6.01.02.04
6.01.02.05
6.01.03
6.02
6.02.01
6.02.02
6.02.03
6.02.05
6.02.07
6.02.09
6.03
6.03.01
6.03.02
6.03.03
6.03.04
6.03.05
6.04
6.05
6.05.01
6.05.02
Account description
Net cash from operating activities
Cash from operations
Income before taxes
Depreciation, amortization and depletion
Employee profit sharing
Expenses plan options purchase shares
Provision for credit risk
Provision for tax, civil and labor liabilities
Provision for inventory losses
Provision for product warranty
Loss on disposal of PPE
Accrued interest on loans and financing
Changes in assets and liabilities
(Increase)/decrease in accounts receivable
Increase/(decrease) in accounts payable
(Increase)/decrease in inventories
Income and social contribution taxes paid
Employee profit sharing paid
Other
Net cash from investing activities
Property, plant and equipment
Intangible assets
Write off fixed assets
Long-term financial investments
Acquisition of subsidiary
Cash acquired from subsidiary
Net cash from financing activities
Funding of Borrowings obtained
Payment of loans and financing
Interest paid on loans and financing
Treasury shares
Dividends/interest on equity capital paid
Exchange variation of cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Opening cash and cash equivalents balance
Closing cash and cash equivalents balance
Current period
01/01/2016 to 03/31/2016
383,339
495,691
317,618
85,157
44,743
339
(10,485)
12,622
(710)
2,842
595
42,970
(53,031)
(29,435)
46,959
124,924
(56,995)
(138,484)
(59,321)
(506,786)
(114,454)
(508)
6,329
(106,323)
(291,830)
(647,780)
139,478
(414,423)
(91,375)
3,396
(284,856)
(28,678)
(799,905)
3,277,115
2,477,210
Prior period
01/01/2015 to 03/31/2015
255,526
493,021
315,741
74,298
37,162
242
3,265
13,306
7,640
3,475
886
37,006
(353,455)
(233,777)
166,965
(120,339)
(72,419)
(93,885)
115,960
(167,766)
(120,293)
(9,098)
11,306
(18,494)
(34,576)
3,389
185,913
689,164
(187,469)
(48,565)
30
(267,247)
30,681
304,354
3,284,275
3,588,629
15
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Version: 1
Consolidated financial statements / Statement of changes in equity - 01/01/2016 to 03/31/2016
(In thousand of reais)
Account
code
5.01
5.03
5.04
5.04.03
5.04.05
5.04.07
5.04.08
5.05
5.05.01
5.05.02
5.05.02.04
5.05.02.06
5.05.02.08
5.06
5.06.04
5.07
Capital reserves,
Other
Paid-in
Income
Retained earnings/ comprehensive
capital Options granted and reserves
Treasury stock
accumulated losses
income
Opening balances
3,533,973
(70,483) 1,299,868
130,554
1,135,468
Adjusted opening balances
3,533,973
(70,483) 1,299,868
130,554
1,135,468
Capital transactions with shareholders
2,939
(88,519)
Recognized options granted
(1,122)
677
Treasury shares sold
4,061
Interest on equity
(89,196)
Capital transactions
Total comprehensive income
296,312
(225,971)
Net income for the period
282,396
Other comprehensive income (losses)
13,916
(225,971)
Adjustment of translation for the period
(194,046)
Hedge accounting – Cash flow
(18,009)
Realization at deemed cost
13,916
(13,916)
Internal changes in equity
(130,554)
Dividends paid
(130,554)
Closing balances
3,533,973
(67,544) 1,299,868
207,793
909,497
Account description
Equity
6,029,380
6,029,380
(85,580)
(445)
4,061
(89,196)
70,341
282,396
(212,055)
(194,046)
(18,009)
(130,554)
(130,554)
5,883,587
Non-controlling Consolidated
interest
equity
126,680
6,156,060
126,680
6,156,060
(3,859)
(89,439)
(445)
4,061
(1,583)
(90,779)
(2,276)
(2,276)
630
70,971
4,862
287,258
(4,232)
(216,287)
(4,232)
(198,278)
(18,009)
(130,554)
(130,554)
123,451
6,007,038
16
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Version: 1
Consolidated financial statements / Statement of changes in equity - 01/01/2015 to 03/31/2015
(In thousand of reais)
Account description
Account
code
5.01
5.03
5.04
5.04.03
5.04.05
5.04.07
5.04.09
5.05
5.05.01
5.05.02
5.05.02.04
5.05.02.06
5.06
5.06.02
5.06.04
Opening balances
Adjustment opening balances
Capital transactions with shareholders
Recognized options granted
Treasury shares sold
Interest on equity
Other
Total comprehensive income
Net income for the period
Other comprehensive income
Adjustments of Translation for the period
Realization of deemed cost
Internal changes in equity
Realization of revaluation reserve
Dividends paid
Paid-in
capital
3,533,973
3,533,973
-
5.07
Closing balances
3,533,973
Capital
reserves,
Income
Options granted
reserves
and Treasury
Retained earnings/
stock
accumulated losses
(63,899)
678,665
167,494
(63,899)
678,665
167,494
293
(67,398)
232
(20)
61
(67,378)
264,202
245,859
18,343
18,343
26
(167,520)
26
(26)
(167,494)
(63,580)
678,665
196,778
Other
comprehensive
income
740,152
740,152
216,673
216,673
235,016
(18,343)
-
Equity
5,056,385
5,056,385
(67,105)
212
61
(67,378)
480,875
245,859
235,016
235,016
(167,494)
(167,494)
Non-controlling
interest
82,878
82,878
7,567
(263)
7,830
4,924
4,938
(14)
(14)
-
Consolidated
equity
5,139,263
5,139,263
(59,538)
212
61
(67,641)
7,830
485,799
250,797
235,002
235,002
(167,494)
(167,494)
956,825
5,302,661
95,369
5,398,030
17
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Version: 1
Consolidated financial statements / Statement of value added
(In thousand of reais)
Account
code
7.01
7.01.01
7.01.02
7.01.04
7.02
7.02.02
7.02.03
7.03
7.04
7.04.01
7.05
7.06
7.06.02
7.07
7.08
7.08.01
7.08.01.01
7.08.01.02
7.08.01.03
7.08.02
7.08.02.01
7.08.02.02
7.08.02.03
7.08.03
7.08.03.01
7.08.03.02
7.08.04
7.08.04.01
7.08.04.03
7.08.04.04
Account description
Revenues
Sales of goods, products and services
Other revenues
Set up/Reversal of allowance for doubtful accounts
Inputs purchased from third parties
Materials, electricity, third party services and other
Loss/recovery of amounts receivable
Gross value added
Withholdings
Depreciation, amortization and depletion
Net value added produced
Value added received in transfer
Financial income
Total value added to be distributed
Distribution of value added
Personnel
Direct compensation
Benefits
Unemployment Compensation Fund (FGTS)
Taxes, charges and contributions
Federal
State
Municipal
Remuneration of third-party’s capital
Interest
Rental
Equity capital remuneration
Interest on equity capital
Retained profit/loss for the period
Noncontrolling interest in retained profits
Current period
01/01/2016 to 03/31/2016
2,714,104
2,702,144
1,476
10,484
(1,502,784)
(1,494,633)
(8,151)
1,211,320
(85,157)
(85,157)
1,126,163
163,631
163,631
1,289,794
1,289,794
536,000
471,908
42,943
21,149
351,654
331,217
17,502
2,935
114,882
102,687
12,195
287,258
89,196
193,200
4,862
Prior period
01/01/2015 to 03/31/2015
2,428,367
2,426,663
3,174
(1,470)
(1,362,563)
(1,347,893)
(14,670)
1,065,804
(74,298)
(74,298)
991,506
519,628
519,628
1,511,134
1,511,134
445,361
380,075
46,386
18,900
328,152
297,386
27,685
3,081
486,824
477,538
9,286
250,797
67,378
178,481
4,938
18
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
HIGHLIGHTS
ƒ Net Operating Revenues in the first quarter of 2016 reached R$ 2,416.3 million, with 13.4% growth over the 1Q15
and decrease of 11.6% over the 4Q15;
ƒ EBITDA reached R$ 342.2 million, and EBITDA margin reached 14.2%, 2.2 percentage points lower than the
previous year and 0.2 percentage point higher than the previous quarter;
ƒ Net Income totaled R$ 282.4 million, with net margin of 11.7% and growth of 14.9% over the 1Q15 and decrease of
26.4% over the 4Q15;
ƒ Investments in capacity expansion and modernization totaled R$ 112.6 million, being 25% in industrial plants in
Brazil and 75% abroad. The highlights were the plants in Mexico and China.
ƒ On March 28, we announced the acquisition of Bluffton Motor Works, LLC., an electric motor manufacturer with
headquarters in Bluffton, Indiana, USA.
KEY FIGURES
Net Operating Revenue
Domestic Market
External Markets
External Markets in US$
Gross Operating Profit
Gross Margin
Net Income
Net Margin
EBITDA
EBITDA Margin
EPS (adjusted for splits)
(R$ Thousand)
Q1 2016
Q4 2015
2.416.344
994.805
1.421.539
363.565
672.753
27,8%
282.396
11,7%
342.231
14,2%
2.734.251
1.060.519
1.673.732
435.575
730.436
26,7%
383.916
14,0%
382.001
14,0%
0,17506
0,23800
%
Q1 2015
-11,6%
-6,2%
-15,1%
-16,5%
-7,9%
-26,4%
-10,4%
-26,4%
%
2.130.291
1.027.854
1.102.437
385.011
638.623
30,0%
245.859
11,5%
348.361
16,4%
0,15240
13,4%
-3,2%
28,9%
-5,6%
5,3%
14,9%
-1,8%
14,9%
ECONOMIC ACTIVITY AND INDUSTRIAL PRODUCTION
Growth expectations for global economic activity in 2016 have remained very close to the levels that we have observed
in recent years. The most significant contribution is coming from developed economies, offsetting the lower emerging
economies dynamism, especially from China, which continues to adjust and pressure commodity prices worldwide. The
recent data on industrial activity seem to confirm the consistency of the mature economies activity, maintaining readings
above 50 (indicating expansion) in Germany and, after a few months, in the USA. In China, although the indicator still
shows retraction, this appears to be decreasing in intensity.
Manufacturing ISM Report on Business ® (USA)
Markit/BME Germany Manufacturing P M I ®
HSBC China Manufacturing P M I ™
March 2016
51,8
50,7
49,7
February 2016
49,5
50,5
48,0
January 2016
48,2
52,3
48,4
In Brazil, industrial production showed a contraction of 2.5% in February over the previous month, and industrial
production decreased sequentially in almost all of the last 12 months. The drop in the annual readings is still significant,
mostly from durable consumer goods and capital goods numbers. With this result, the Brazilian industrial production is
more than 20% below the highest level, reached in mid-2013, and almost on the same level of the start of 2004.
The business environment remains weak, with the industry facing a situation that combines high inventories for a
declining demand, low consumer confidence levels, tax and energy prices increases, difficulties in access to financing
and, in the case of the capital goods sector, a rapid reduction in investments. This environment should continue until
political and macroeconomic uncertainties diminish.
19
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Version: 1
INDUSTRIAL INDICATORS IN BRAZIL ACCORDING TO LARGE ECONOMIC CATEGORIES
Change (%)
Categories of Use
Acummulated
Feb 16 / Jan 16* Feb 16 / Feb 15
Capital Goods
Intermediary Goods
Consumer Goods
Durable Goods
Semi-durable and non-durable
General Industry
0,3
-2,0
-3,2
-5,3
-0,6
-2,5
On Year
12 months
-30,8
-10,1
-10,1
-29,0
-4,5
-11,8
-27,1
-6,3
-9,4
-20,0
-6,4
-9,0
-25,8
-8,5
-8,1
-29,3
-2,0
-9,8
Source: IBGE, Research Office, Industry Coordination
(*) Series with seasonal adjustments
NET OPERATING REVENUES
The WEG’s performance in the first quarter of 2016 may be considered positive when placed in the context in which we
are operating, both in the domestic market, clearly unfavorable to investment, as in the global environment, characterized
by slow economic recovery.
Net Operating Revenues totaled R$ 2,416.3 million in the first quarter of 2016 (1Q16), with 13.4% growth over the first
quarter of 2015 (1Q15) and a decrease of 11.6% over the fourth quarter of 2015 (4Q15). The adjusted growth of net
revenues for the transactions occurred in the period reached 12.1% over the 1Q15.
NET OPERATING REVENUES PER MARKET
Brazilian Market
External Market
2,349.4
2,130.3
2,546.3
(R$ MILLION)
2,734.3
2,416.3
57%
61%
45%
43%
39%
41%
Q2 15
Q3 15
Q4 15
Q1 16
52%
55%
48%
Q1 15
59%
Net Operating Revenue in 1Q16 breakdowns as follows:
ƒ Brazilian Market: R$ 994.8 million, representing 41% of Net Operating Revenue, a decrease of 3.2% over 1Q15 and
decrease of 6.2% over 4Q15;
ƒ External Markets: R$ 1,421.5 million, equivalent 59% of Net Operating Revenue. The strong appreciation of the US
dollar observed in 2015 continued to make the analysis the markets behavior difficult. The growth in the local currency
market may be more than offset by the depreciation of this currency against the dollar. Thus, we present the growth
compared to 1Q15 from various points of view:
ƒ
Measured in Brazilian Reais: 28.9%
ƒ
Measured in Brazilian Reais, excluding the acquisitions (organic growth): 26.3%
ƒ
Measured in local currencies, weighted by the revenues in each market: 10.3%
ƒ
Measured in average US dollar for the quarter: -5.6%
20
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Version: 1
EVOLUTION OF NET REVENUE ACCORDING TO GEOGRAPHIC MARKET
Q1 2016
Net Operating Revenues
- Brazilian Market
- External Markets
- External Markets in US$
2.416,3
994,8
1.421,5
363,6
(R$ MILLION)
Q4 2015
2.734,3
1.060,5
1.673,7
435,6
%
Q1 2015
-11,6%
-6,2%
-15,1%
-16,5%
2.130,3
1.027,9
1.102,4
385,0
%
13,4%
-3,2%
28,9%
-5,6%
Our sales prices in the different markets are almost always denominated in the market’s local currency, reflecting the
competitive conditions and the strength of WEG’s brand in that market.
EXTERNAL MARKET – DISTRIBUTION OF NET REVENUE ACCORDING TO GEOGRAPHIC MARKET
North America
South and Central America
Europe
Africa
Australasia
Q1 2016
Q4 2015
%
Q1 2015
41,6%
13,0%
27,8%
8,6%
9,0%
42,5%
15,2%
23,3%
9,6%
9,4%
-0,9 pp
-2,2 pp
4,5 pp
-1,0 pp
-0,4 pp
35,8%
17,7%
24,7%
10,5%
11,3%
%
5,8 pp
-4,7 pp
3,1 pp
-1,9 pp
-2,3 pp
BUSINESS AREA
Industrial Electro-Electronic Equipment – The external markets remained the most dynamic part of the business. We
continue investing resources in expanding our presence in several global markets, with additional effort in staff, services,
and sales infrastructure. These actions strengthen WEG’s brand as a global manufacturer of electrical products, enhance
our competitive position and ultimately result in sales growth. Included in this effort are the capacity expansions in Mexico
and China and the recent acquisition of Bluffton, a commercial electric motors manufacturer with a strong presence in
the North American market. The consolidation of this brand in our portfolio will expand the product line and give even
more flexibility in servicing the combined client base of the two companies.
Operating conditions continued weak in Brazil. Industrial investment remains soft and almost entirely focused on the only
replenishing capital depreciation. We did not see a fast recovery following the traditional slowdown in activity at the end,
and most important investment projects are still on hold, awaiting greater political and economic scenario visibility. The
decrease in volumes sold has been only partially offset by sales price adjustments, aligning them to higher material costs
affected by the weaker exchange rate.
Energy Generation, Transmission and Distribution (GTD) – The GTD business is characteristically long cycle, that
is, we work to fulfil a relatively long backlog of orders. This characteristic makes the business slower to react to changes
in the business environment. In Brazil, we continue to see the wind power generation segment as the highlight, as this
is where the backlog is longer. We have moved further along the operational learning curve, with significant productivity
gains in the manufacturing process and logistics. Future performance will hinge on the results the results of the next
energy auctions. In any case, we began exploring opportunities in electricity generation in other markets, especially in
Latin America, where we can take advantage of the technological solutions we have developed for the Brazilian
conditions.
In transmission and distribution (T&D) we carried out an intensive engineering effort in our products to regain
competitiveness after significant material cost increases occurred in 2015. This effort allowed us to win new orders and
recompose the medium-term backlog. Despite the slow economic activity and the decreasing demand for energy in
Brazil, with postponements of investments in expansion and maintenance, our competitiveness has allowed us to perform
better the market.
Motors for Domestic Use – The Brazilian market performance in this business area showed no recovery. Given current
conditions for consumer disposable income and credit availability, we expect volumes to continue weak and only partially
offset by price increases. Operations abroad in this business area are concentrated in WEG Yatong, China. This
operation manufactures electric motors for appliances for our customers in North America and Europe, with revenues in
hard currency, which has shown consistent performance.
Paints and Varnishes – With the weak performance of industrial and consumer goods markets in Brazil, the alternative
in this business area has been the search for new markets and applications for our products. We benefited from the
better performance in Argentina market, where our significant presence has partially offset the weak performance in
Brazil.
21
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Version: 1
DISTRIBUTION OF NET REVENUE PER BUSINESS AREA
Q1 2016
Q4 2015
%
Q1 2015
%
Electro-electronic Industrial Equipments
53,2%
51,4%
1,8 pp
52,0%
1,2 pp
Domestic Market
14,9%
12,5%
2,4 pp
18,5%
-3,6 pp
External Market
38,3%
38,9%
-0,6 pp
33,5%
4,8 pp
Energy Generation , Transmission and Distribution
30,7%
32,0%
-1,3 pp
28,9%
1,8 pp
Domestic Market
17,3%
17,9%
-0,6 pp
18,4%
-1,1 pp
External Market
13,4%
14,1%
-0,7 pp
10,5%
2,9 pp
Electric Motors for Domestic Use
11,0%
11,9%
-0,9 pp
13,7%
-2,7 pp
Domestic Market
4,8%
4,7%
0,1 pp
6,7%
-1,9 pp
External Market
6,2%
7,2%
-1 pp
7,0%
-0,8 pp
Paints and Varnishes
4,7%
4,4%
0,3 pp
5,2%
-0,5 pp
Domestic Market
4,0%
3,5%
0,5 pp
4,6%
-0,6 pp
External Market
0,7%
0,9%
-0,2 pp
0,6%
0,1 pp
COST OF GOODS SOLD
The Cost of Goods Sold (COGS) totaled R$ 1,743.6 million in 1Q16, 16.9% above 1Q15 and 13.0% below 4Q15. Gross
margin reached 27.8%, 2.2 percentage points lower than in 1Q15, and 1.1 percentage points higher than in 4Q15.
Throughout 2015, several factors negatively influence the gross margin, and we have worked to eliminate or reduce the
intensity of these adverse impacts. Thus, the gross margin behavior is explained by:
(i) In the Brazilian market, we have passed on to sales prices the increased costs of some raw materials caused by
the Brazilian Real devaluation that occurred in 2015. Given the unfavorable market conditions, these price increases
were made in installments, and in the coming quarters we will notice the full impact on revenues;
(ii) We have not made, in this quarter, any additional provisions for slow moving inventories abroad, such as in 2015.
Other provisions continued to be recorded as usual;
(iii) We also noticed a much weaker dilutive impact on margins from two new business, wind power and motors for
domestic use produced in China. In both cases, the comparison basis in this 1Q16 was more relevant. In addition,
in wind generation, we are moving up along the prices, volumes, and productivity curves, with positive effects on
margins.
On the other hand, new pressures continued to prevent a faster recovery of the gross margin. We highlight the impact
of the slower pace of business in the domestic market over the manufacturing costs and on the dilution of fixed costs.
COGS COMPOSITION
Labor
21,3%
Q1 16
Depreciation
4,4%
Other Costs
9,0%
Materials
65,3%
Other Costs
Depreciation 9,2%
4,5%
Q1 15
Labor
21,4%
Materials
64,9%
In the 1Q16, average copper spot prices at the London Metal Exchange (LME) continue to decline, both compared to
the previous year ( a drop of 19.8% over the 1Q15) as compared to the previous quarter (-4.3%). Steel prices also
continue to decline, 35.8% compared to 1Q15, and a decrease of 10.2% compared to 4Q15. These negative variations,
although partially offset by currency depreciation, also contributed to lower cost pressure.
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consolidated selling, general and administrative expenses (SG&A) totaled R$ 361.0 million in 1Q16, 15.3% growth over
the 1Q15 and decrease of 6.8% over the previous quarter. As a percentage of Net Operating Revenue, operating
expenses represented 14.9% in 1Q16, 0.2 percentage points higher than in 1Q15, and 0.7 percentage points higher than
in 4Q15. Considering the characteristic of lower seasonal activity in the first quarter, this was a positive performance,
showing effective operating expenses control.
EBITDA AND EBITDA MARGIN
In the 1Q16, EBITDA (according to the Instruction CVM 527/2012) totaled R$ 342.2 million, a decrease of 1.8% over the
1Q15 and decrease of 10.4% over the 4Q15. EBITDA margin reached 14.2%, 2.2 percentage points lower than 1Q15,
and 0.2 percentage points higher than 4Q15.
FIGURES IN R$ MILLION
Q1 2016
Net Operating Revenues
Net Income before Minorities
Net Margin
(+) Income taxes & Contributions
(+/-) Financial income (expenses)
(+) Depreciation & Amortization
EBITDA
EBITDA Margin
Q4 2015
2.416,3
287,3
11,9%
30,4
-60,5
85,2
342,2
14,2%
380,5
%
Q1 2015
2.734,3 -11,6%
383,7 -25,1%
14,0%
n.a.
-7,8
-79,0 -23,4%
0,0%
85,1
382,0 -10,4%
14,0%
%
13,4%
14,5%
2.130,3
250,8
11,8%
64,9 -53,3%
-41,7 45,3%
74,3 14,6%
348,4 -1,8%
16,4%
(242,4)
(35,1)
348,4
(94,5)
COGS (ex
depreciation)
Volumes,
Prices &
Product Mix
Changes
EBITDA Q1 15
FX Impact on
Revenues
Selling
Expenses
(11,5)
(7,6)
4,4
General and
Administrative
Expenses
Profit Sharing
Program
Other Income
342,2
EBITDA Q1 16
NET FINANCIAL RESULTS
Net financial result was positive in R$ 60.5 million in 1Q16 (positive in R$ 41.7 million in the 1Q15 and positive in R$
79.0 million in the 4Q15). The net financial results were positive mainly due to the mark-to-market of derivative
transactions used to hedge the foreign currency debt, with additional reductions in interest rates in US dollar in Brazil
(coupom cambial) as a result of decreased perception of risk Brazil.
We stress that this is an accounting impact and that there is no actual cash outflow until the transactions are settled. In
any case, we continue to find competitive financial costs on the market.
INCOME TAX
In the 1Q16, the provision for “Income Tax and Social Contribution on Net Profit” reached R$ 50.2 million (R$ 76.3 million
and R$ 9.6 million in 1Q15 and 4Q15, respectively). Additionally, a credit of R$ 19.8 million was recorded as ‘‘Deferred
Income Tax / social contribution’’ (credit of R$ 11.4 million and credit of R$ 17.4 million, respectively). Despite the
temporary impact in the first two months of the year (limitations cash dividends (interest on stockholders’ equity) and
suspension of the "Lei do Bem" incentives for innovation), there was no significant increase in the effective rate of income
tax, which continued influenced by the difference in income tax rates abroad.
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NET INCOME
As a result of previously mentioned impacts, net income for 1Q16 was R$ 282.4 million, an increase of 14.9% over 1Q15
and decrease of 26.4% compared to the previous quarter. Net margin for the quarter was 11.7%, practically the same
level of 1Q15 and 2.3 percentage points lower than the previous quarter.
CASH FLOW
Cash generation from operating activities was of R$ 383.3 million in the first quarter of 2016, with efficiency gains in the
management of inventories and accounts receivables. The slowdown in the Brazilian market, however, with an impact
on accounts payable and advances from customers, prevented an even clearer improvement.
We continued to execute the investment program, with emphasis on the expansion in new plants in China and Mexico.
Moreover, at the end of March, we announced the acquisition of Bluffton. As a result, investing activities consumed R$
506.8 million in the quarter.
Finally, financing activities consumed R$ 647.8 million in the period, with R$ 139.5 million in new debt raised and R$
414.4 million in debt amortization (a net decrease of R$ 274.9 million), and the net payments of R$ 376.2 million in
interest on loans and dividends and interest on stockholders’ equity.
383,3
(506,8)
3.277,1
(647,8)
Operating
(28,7)
Investing
Financing
2.477,2
Exchange Rate
variation on Cash
Cash December 2015
Cash March 2016
INVESTMENTS
The new electric motors industrial plants in Mexico and China continued representing the most significant portion of the
investment program for capacity expansion and modernization. The two industrial facilities had started production in
2015 and will continue modular expansion over the coming years.
131,5
120,1
34,3
134,1
112,6
82,4
86,6
97,7
85,0
49,6
85,8
32,8
Q1 15
Q2 15
Brazil
44,9
36,4
Q3 15
Q4 15
Outside Brazil
27,6
Q1 16
In the first quarter 2016, we invested R$ 112.6 million in capacity expansion and modernization, with 75% allocated to
industrial plants and other subsidiaries abroad and 25% for the industrial plants in Brazil.
The 2016 capex program foresees investments of R$ 470.0 million, always maintaining the modular characteristic of the
capacity increases, carried out according to effective demand and seeking to maximize the return on invested capital.
We also invested R$ 74.5 million in research, development and innovation in this quarter, a fundamental part of our
business model, which allows us to be competitive in industrial electrical products on a global scale. These expenditures
represent approximately 3.1% of our net operating revenue in 1Q16.
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DEBT AND CASH POSITION
On March 31, 2016, cash, cash equivalents and financial investments totaled R$ 4,007.2 million, invested in first-tier
banks and denominated in Brazilian currency, while the gross financial debt totaled R$ 4,706.7 million, being 22% in
short-term and 78% in long-term, resulting in net debt of R$ 699.5 million.
FIGURES IN R$ THOUSAND
Cash & Financial instruments
- Current
- Long Term
Debt
- Current
- In Brazilian Reais
- In other currencies
- Long Term
- In Brazilian Reais
- In other currencies
Net Cash (Debt)
March 2016
4.007.150
3.744.894
262.256
4.706.697 100%
1.031.906
22%
449.736
582.170
3.674.791
78%
1.733.908
1.940.883
(699.547)
December 2015
4.813.700
4.442.278
371.422
5.170.654 100%
1.286.071
25%
638.990
647.081
3.884.583
75%
1.751.352
2.133.231
(356.954)
March 2015
4.672.310
4.671.192
1.118
4.809.092 100%
1.998.692
42%
1.181.347
817.345
2.810.400
58%
1.342.978
1.467.422
(136.782)
The current characteristics of the debt are:
ƒ The total debt duration of 26.8 months and for the long-term portion is of 33.8 months. In December 2015, these durations were 27,7
months and 36.0 months, respectively.
ƒ The duration for portion denominated in Brazilian Reais is 23.2 months and for the portion in foreign currencies is 29.9 months. In
December 2015, these durations were 23.2 months and 31.6 months, respectively.
ƒ The weighted average cost of fixed-rate Brazilian Reais denominated debt is approximately 7.9% per year (7.6% per year in December
2015). Floating rate contracts indexed mainly to the Brazilian long-term interest rate TJLP.
An important part of cash consumption was due to the payment of the acquisition of Bluffton, concluded on March 28.
DIVIDENDS
On March 22, 2016, the Board of Directors approved the payment to shareholders, as interest on stockholders’ equity
(JCP), totaling R$ 89.2 million before income tax withholding, payable on August 17, 2016.
Our policy is to declare interest on stockholders' equity quarterly and declare dividends based on profit earned each
semester, i.e., we declare six different events each year and pay them semiannually.
WEGE3 SHARE PERFORMANCE
The common shares issued by WEG, traded under the code WEGE3 at BM&F Bovespa, ended the last trading session
of March 2016 quoted at R$ 14.01, with a nominal loss of 6.3% in the year and loss of 5.4% considering the dividends
and interest on stockholders' equity declared in the period.
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7.000
25,00
Shares Traded (thousands)
WEG E3
6.000
20,00
WEGE3 share prices
15,00
10,00
4.000
3.000
Traded shares (thousands)
5.000
2.000
5,00
1.000
0,00
0
The average daily traded volume in 1Q16 was R$ 38.1 million, (R$ 21.8 million in 1Q15). Throughout the quarter 664.919
stock trades were carried out (167,244 stock trades in 1Q15), involving 132.9 million shares (42.1 million in 1Q15, even
before the split effected in the OGM at the end of March 2015) and moving R$ 2,285.0 million (R$ 1,330.5 million in
1Q15).
AQUISITION OF BLUFFTON MOTOR WORKS (USA)
On March 28, WEG S.A. announced the acquisition of Bluffton Motor Works, LLC. (“Bluffton”), an electric motor
manufacturer with headquarters in Bluffton, Indiana, USA.
Founded in 1944, Bluffton specializes in manufacturing fractional electric motors up to 5 HP, offering a wide range of
customized products to customers in the United States. Market segments served include food & beverage processing,
industrial and commercial equipment manufacturers, pumps and ventilation, among others. Bluffton headquarters
occupies approximately 400,000 square feet, and the company employs over 400 people. Net revenue in 2015 was
approximately $64 million.
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WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
1
Company information
WEG S.A. ("Company") is a publicly-held limited liability corporation headquartered at Avenida Prefeito Waldemar
Grubba, 3300, in Jaraguá do Sul - SC, Brazil, holding company comprising the WEG Group ("Group"), whose main
activity is the production and trade of capital goods such as electric motors, generators and transformers; gear units and
geared motors; frequency converters; motor starters and maneuver devices (circuit breakers); 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 hydro, thermal biomass, wind and solar energy
powerplants; 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, Colombia, Mexico, United Stated, Portugal, Austria, Germany, 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 Novo Mercado.
The Company has American Depositary Receipts (ADRs) - Level 1 that are traded on the over-the-counter (OTC) market
in the United States under the symbol WEGZY.
2
Basis of preparation and statement of compliance
The consolidated and company interim financial statements ("interim financial statements") have been prepared taking
into consideration all the Company's significant information prepared in accordance with the International Financial
Reporting Standards - "IFRS", which have been implemented in Brazil by the Committee for Accounting Pronouncements
("CPC"), approved by the Brazilian Securities and Exchange Commission ("CVM") and the Brazilian Federal Accounting
Council ("CFC").
The Technical Pronouncements Review 7 (approved in December 2014) amended CPC 35, CPC 37 and CPC 18 and
permitted the use of share of profit of equity-accounted investees in the individual Financial Statements in IFRS, thus
eliminating the difference between BR GAAP and IFRS.
The financial statements have been prepared on the historical cost basis, except for the assessment at fair value of
certain assets and liabilities and adjusted, when required by the standard.
Authorization to issue this Financial Statement was granted at the executive board's meeting held on April 08, 2016.
The accounting policies, basis of consolidation and methods of calculation adopted in the preparation of quarterly
information, as well the estimates and judgments used in applying the accounting policies are the same practiced in
preparing the financial statements for the year ended December 31, 2015.
3 Accounting estimates
The financial statements include the use of estimates that took into consideration the Management's assessments and
judgments, past and current event experiences, assumptions related to future events and other objective and subjective
factors. The significant items subject to those estimates are:
a) credit risk analysis for the determination of the allowance for doubtful accounts;
b) review of the economic useful life of property, plant and equipment, and its recovery in operations;
c) fair value measurement of financial instruments;
d) commitments to employee benefit plan;
e) transactions with stock call option plan;
f) deferred income and social contribution taxes; and
g) provisions for contingencies.
The settlement of transactions involving those estimates may lead to amounts significantly different from those recorded
in the financial statements due to the inaccuracies inherent in the estimate process. The aforementioned estimates and
assumptions are periodically reviewed.
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WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
4
Cash and cash equivalents
a) Cash and banks
b) Interest-earning bank deposits
In local currency:
Bank Deposit Certificate (CDB), Repurchase Operation
In foreign currency:
Certificates of Deposits Abroad
Other investments abroad
TOTAL
03/31/16
22
675,400
675,400
675,400
675,422
COMPANY
12/31/15
29
1,023,328
1,023,328
1,023,328
1,023,357
CONSOLIDATED
03/31/16 12/31/15
323,157
477,710
2,154,053 2,799,405
2,092,477 2,694,786
2,092,477 2,694,786
61,576
104,619
52,369
84,299
9,207
20,320
2,477,210 3,277,115
Investments in Brazil:
Are remunerated at rates ranging between of 100.0% and 105.0% of CDI (100.0% and 105.0% of CDI at December 31,
2015).
Investments abroad:
CONSOLIDATED
Interest rate
In Euros
In US Dollars
In Argentine Pesos
In Rand (South Africa)
In other currencies
TOTAL
5
0.001% p.a.
0.20% to 0.25% p.a.
27.00% to 33.00% p.a.
0.25% to 5.25% p.a.
0.71% to 7.00% p.a.
Amounts in the
original currency
2,201
9,745
24,210
11,946
Sundry
03/31/16
12/31/15
8,925
34,642
5,911
2,891
9,207
61,576
13,693
4,212
56,010
10,384
20,320
104,619
Financial investments
Bank Deposit Certificate(CDB) and Repurchase Operations
Other
TOTAL
Current assets
Non-current assets
03/31/16
364,811
364,811
364,811
-
COMPANY
12/31/15
-
CONSOLIDATED
03/31/16
12/31/15
1,263,978
1,157,644
203
214
1,264,181
1,157,858
1,263,978
1,157,644
203
214
Financial investments are remunerated at rates ranging between 14.8% to 16.4% p.a. (9.1% to 15.97% p.a. at December
31, 2015).
6
Trade receivables
CONSOLIDATED
03/31/16
12/31/15
a) Breakdown of balances:
Domestic market
External market
SUBTOTAL
Discounted present value
Allowance for doubtful accounts
TOTAL
1,208,930
1,337,696
2,546,626
(11,170)
(45,414)
2,490,042
1,176,306
1,431,866
2,608,172
(6,346)
(55,899)
2,545,927
28
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WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
b) Effective losses on doubtful accounts for the period
c) Maturity of trade notes:
Due
Overdue: Until 30 days
From 31 to 90 days
From 91 to 180 days
Up to 180 days
TOTAL
6,818
21,408
2,178,733
134,530
106,125
63,696
63,542
2,546,626
2,257,888
155,762
101,063
30,467
62,992
2,608,172
The movement of the allowance for doubtful accounts is shown as follows:
Balance at 01/01/2015
Losses written off during the year
Recording of provision for the year
Reversal of provision for the year
Saldo em 12/31/2015
Losses written off during the year
Recording of provision for the year
Reversal of provision for the year
Saldo em 03/31/2016
7
(39,696)
21,408
(40,523)
2,912
(55,899)
6,818
(2,290)
5,957
(45,414)
Inventories
CONSOLIDATED
Finished goods
Work in progress
Raw materials and other
Imports in progress
Provision for slow-moving inventory losses
Total inventories - domestic market
03/31/16
316,033
284,562
287,733
36,875
(14,160)
911,043
12/31/15
303,093
293,077
315,038
62,962
(12,637)
961,533
Finished goods
Work in progress
Raw materials and other
Provision for slow-moving inventory losses
Total inventories - external markets
557,494
225,019
248,142
(72,958)
957,697
669,880
199,052
253,980
(75,191)
1,047,721
1,868,740
2,009,254
GRAND TOTAL
The movement of the provision for slow-moving inventory losses is shown as follows:
Balance at 01/01/2015
Recording of provision for the year
Reversal of provision for the year
Balance at 12/31/2015
Recording of provision for the year
Reversal of provision for the year
Balance at 03/31/2016
(38,944)
(51,828)
2,944
(87,828)
(1,738)
2,448
(87,118)
Inventories are insured and their coverage is determined considering the values and level of risk involved. The recording
and reversal of provisions for slow-moving inventory losses are recorded in the costs of goods sold.
29
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WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
8
Recoverable taxes
COMPANY
State VAT (ICMS) on PP&E acquisitions
IVA from foreign subsidiaries
PIS/COFINS on PP&E acquisitions
ICMS
IPI
IRPJ/CSLL recoverable
PIS/COFINS
Reintegra
Other
TOTAL
Current assets
Non-current assets
03/31/16
13,344
13,344
13,344
-
12/31/15
17,926
17,926
17,926
-
CONSOLIDATED
03/31/16
27,752
88,150
3,302
16,498
21,702
99,683
32,244
492
1,813
291,636
276,560
15,076
12/31/15
29,824
109,712
3,670
20,941
23,925
63,254
25,327
3,706
3,225
283,584
266,944
16,640
Credits will be realized by the Company and its subsidiaries through regular tax collection, also including tax credits
subject to refund and/or offsetting.
9
Related parties
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:
Amount of existing balances:
EQUITY ACCOUNTS
Non-current assets
Management of financial resources
WEG Equipamentos Elétricos S.A.
Current liabilities
Agreements with the Management
Profit sharing of the Management
COMPANY
CONSOLIDATED
03/31/16
12/31/15
03/31/16
12/31/15
27
10
-
-
27
10
-
-
389
389
1,442
1,442
11,735
8,851
2,884
16,761
3,688
13,073
______________________________________________________________________________________________
03/31/16
COMPANY
03/31/15
Management compensation:
a) Fixed (fees)
Board of Directors
The Executive Board
610
309
301
529
230
299
5,881
618
5,263
5,558
460
5,098
b) Variable (profit sharing)
Board of Directors
The Executive Board
419
211
208
327
142
185
3,286
422
2,864
2,698
285
2,413
INCOME ACCOUNTS
CONSOLIDATED
03/31/16
03/31/15
30
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WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
Supplementary Information:
a) Business transactions
The purchase and sale transactions regarding inputs and goods are performed under the same conditions performed
with unrelated third parties;
b) Management of financial resources
The financial and commercial operations performed between the Group companies are recorded and supported by the
Group's convention. The credit/debit contracts executed with the Management are remunerated by interest between
95% and 100% of the CDI variation;
c) Services rendered and other covenants
WEG Equipamentos Elétricos S,A, executed an agreement for “Guarantees and Other Covenants” with Hidráulica
Industrial S,A, Ind, e Com. (HISA), for WEG to be the guarantor in loans and provide guarantee to customers
(Performance Bond, guarantee insurance, etc,);
d) Sureties and guarantees
WEG SA has sureties and guarantees to subsidiaries abroad, in the amount of US$ 165.2 million (US$ 164.0 million at
December 31, 2015);
e) Management's compensation
The Board of Directors members were paid the amount of R$ 618 (R$ 460 at March 31, 2015) and the executive board
was paid the amount of R$ 5,263 (R$ 5,098 at March 31, 2015), for their services, aggregating the total of R$ 5,881 (R$
5,558 at March 31, 2015).
It is expected the participation of 0% to 2.5% of consolidated net income to be paid to management provided the minimum
operating performance goals are met. The performance goals refer to Return on Capital Investment (50% weight), net
operating revenue growth (25% weight) and EBITDA growth (25% weight). The corresponding provision was recorded
for the period in the amount of R$ 3,286 (R$ 2,698 at March 31, 2015), under the caption other operating income. The
Management receives additional corporate benefits, as follows: Health and dental insurance, life insurance,
supplementary private pension fund benefits, among others.
10 Deferred taxes
Deferred income and social contribution tax credits and debts were determined in accordance with the CVM Resolution
599/09 that approved the technical pronouncement CPC 32 - Taxes on income.
a) Breakdown of amounts:
Corporate income tax (IRPJ) losses
Negative basis of CSLL calculation
Temporary differences:
Provisions:
Labor and civil contingencies
Taxes questioned in court
Losses on trade receivables
Losses on slow-moving inventories
Labor severance pay and contract termination fine
Freight and sales commissions
Third-party services
Employee profit sharing
Unrealized gains from derivatives
Derivatives - Hedge Accounting
COMPANY
03/31/16 12/31/15
-
1,571
-
1,537
-
CONSOLIDATED
03/31/16
12/31/15
72,137
73,712
9,709
8,692
69,051
32,900
6,706
11,818
15,256
9,327
56,088
16,039
(32,908)
6,303
69,120
31,008
8,538
13,553
16,966
11,055
53,660
8,842
(34,294)
-
31
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Version: 1
WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
Acceleration depreciation incentive under Law 11196/05
Amortization difference between tax goodwill and accounting
goodwill
Amortization difference between tax goodwill and accounting
goodwill (useful life)
Other
PP&E Deemed costs
TOTAL
Non-current assets
Non-current liabilities
-
-
(7,050)
(7,067)
-
-
(28,783)
(28,692)
(15)
582
(1,459)
679
679
(52)
765
(1,469)
781
781
-
(144,595)
43,989
(231,922)
(95,935)
128,315
(224,250)
(142,717)
44,973
(238,718)
(111,369)
131,327
(242,696)
b) Estimated realization term
Management considers that the deferred assets resulting from temporary differences will be realized in proportion to the
realization of contingencies, losses and forecast obligations.
In relation to deferred tax credits calculated on income and social contribution tax losses and negative basis of social
contribution, management estimates that they will be realized within the next 5 years, taking into consideration the
projection of future profits.
11 Investments
11.1 Investments in subsidiaries
Country
WEG Equipamentos Elétricos S.A. (*)
RF Reflorestadora Ltda.
WEG Tintas Ltda.
WEG Amazônia S.A.
WEG Administradora de Bens Ltda.
WEG Logística Ltda.
WEG Linhares Equips. Elétricos S.A.
Brazil
WEG Drives & Controls Aut. Ltda.
WEG Partner Aerogeradores S.A.
WEG-Cestari Redut. Motorredut. S.A.
WEG Automação Critical Power Ltda.
Hidráulica Indl. S.A. Ind. e Com.
Agro Trafo Adm. de Bens S.A.
Injetel Ind. Com. Comp. Plásticos
Ltda.
Paumar S/A Indústria e Comércio
WEG-Jelec Oil and Gas Sol. Aut.
Ltda.
Transformadores do Nordeste Ltda.
Zest WEG Group Africa (PTY) Ltd.
Zest Energy (Pty) Ltd.
Zest WEG Manufacturing (Pty) Ltd.
South Africa
Zest WEG Electric (Pty) Ltd.
Electric/Instrumentations Eng.
Cont.(Pty)
Zest WEG Group Namibia Limited
WEG (Germany) GmbH
Watt Drive GmbH
Germany
Wurttembergische Elektromotoren
GmbH
Antriebstechnik KATT Hessen GmbH
WEG Equipamientos Electricos S.A.
Pulverlux S.A.
Argentina
EPRIS Argentina S.R.L.
WEG Austrália Pty Ltd.
Australia
Watt Drive Antriebstechnik GmbH
WEG International Trade GmbH
Austria
WEG Holding GmbH
WEG Benelux S.A.
Belgium
ShareeholdersProfit or Loos for
Equity
the period
Investment in the Capital (%)
03/31/16
12/31/15
Direct Indirect Direct
Indirect
99.79
0.21 100.00
100.00
- 100.00
99.91
0.09
99.91
0.09
0.02
99.98
0.02
99.98
79.97
20.03
3.53
96.47
100.00
100.00
100.00
100.00
89.20
10.80
89.20
10.80
0.10
99.90
0.10
99.90
50.00
50.00
0.01
99.99
0.01
99.99
62.39
62.39
91.75
8.25
91.75
8.25
4,116,484
163,180
128,175
42,723
62,921
120,135
229,943
424,399
9
39,267
74,604
38,779
7,518
233,152
573
8,164
(418)
940
4,673
15,132
16,915
758
1,338
(2,731)
(1,113)
18,397
118,843
(797)
(2,745)
-
100.00
100.00
-
10
4,316
174,935
7,358
3,668
106,577
(335)
(2,177)
1,379
(1,436)
879
0.01
-
100.00
99.99
100.00
76.09
100.00
74.90
20,234
386
45,588
5,297
(151)
49
(1,627)
(252)
-
12,937
8,564
91,023
3,023
46
9,395
17,127
439,080
1,914,035
40,080
(113)
(729)
11,450
617
(904)
(4,268)
142,641
176,032
173
10.45
-
Share of profit of
equity-accounted
investees
03/31/16
03/31/15
Investment book
value
03/31/16
12/31/15
231,985
573
8,156
2,432
15,088
(1,021)
197,147
1,104
5,662
(116)
18,242
2,470
4,116,484 4,360,941
163,180
163,431
128,056
122,014
7
7
50,321
1,120
1
1
378,562
370,823
11
11
6,898
8,770
100.00
100.00
-
-
-
-
0.01
-
100.00
99.99
100.00
76.09
100.00
74.90
-
-
-
-
86.67
100.00
100.00
100.00
-
86.67
100.00
100.00
100.00
-
-
-
-
100.00
100.00
89.55
100.00
100.00
100.00
100.00
100.00
100.00
100.00
10.45
-
100.00
100.00
89.55
100.00
100.00
100.00
100.00
100.00
100.00
100.00
1,116
-
819
-
9,494
-
10,386
-
32
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
Country
ShareeholdersProfit or Loos for
Equity
the period
WEG Chile S.A.
Chile
WEG (Nantong) Electric Motor Co.,
Ltd.
Changzhou Machine Master Co., Ltd.
Changzhou Master Machinery Co.,
Ltd.
Changzhou Sinya Electromotor Co.,
Ltd.
China
Changzhou Yatong Jiewei Elect., Ltd.
Wuxi Ecovi Technology Co., Ltd.
Jiangsu Shiya Elect. Technolog.
Co.,Ltd
The First Drive Technology Co., Ltd.
WEG (Jiangsu) Electric Equip. Co.,
Ltd.
Watt Euro-Drive Far East Pte. Ltd.
Singapore
WEG Singapore Pte. Ltd.
WEG Colômbia S.A.S.
FTC Energy Group S.A.
Colombia
Transformadores Suntec S.A.S.
United Arab
WEG Middle East Fze.
Emirates
WEG Ibéria Industrial S.L.
Spain
Autrial S.L.
WEG Electric Corp.
Electric Machinery Company Inc.
United
WEG Service Co.
States
FTC Energy Group Inc.
Bluffton Motor Works, LLC.
WEG France SAS
France
Zest Electric Ghana Ltd.
Ghana
E & I Electrical Ghana Ltd.
WEG Industries Índia Private Ltd.
India
WEG Electric (Índia) Private Ltd.
WEG (UK) Ltd.
England
WEG Itália S.R.L.
Italy
WEG Electric Motors Japan Co. Ltd.
Japan
Watt Euro-Drive SDN BHD
Malaysia
WEG México S.A. de C.V.
WEG Transform. México S.A. de
Mexico
C.V.
Voltran S.A. de C.V.
ENI Eletrical Mozambique (Pty)
Mozambique
Limited
WEG Peru S.A.
Peru
WEG Euro Ind. Electrica S.A.
Portugal
WEG Electric CIS
Russia
WEG Scandinavia AB
Sweden
ENI Eletrical Tanzania (Pty) Limited
Tanzania
WEG Indústrias Venezuela C.A.
Venezuela
E & I Zambia Ltd.
Zambia
TOTAL
(*)Equity pickup adjusted by unearned income
43,143
Investment in the Capital (%)
03/31/16
12/31/15
Direct Indirect Direct
Indirect
(48)
8.00
92.00
8.00
92.00
Share of profit of
equity-accounted
investees
03/31/16
03/31/15
Investment book
value
03/31/16
12/31/15
(4)
8
3,571
3,682
171,508
42,803
5,860
(2,650)
-
100.00
100.00
-
100.00
100.00
-
-
-
-
(1,365)
(106)
-
100.00
-
100.00
-
-
-
-
51,882
46,779
1,107
(2,713)
(1,406)
1,143
-
100.00
100.00
100.00
-
100.00
100.00
100.00
-
-
-
-
13,335
19,378
(188)
-
-
100.00
100.00
-
100.00
100.00
-
-
-
-
164,162
22,126
4,247
53,484
4,348
11,201
(3,566)
21
281
1,791
534
124
-
100.00
100.00
100.00
100.00
100.00
100.00
-
100.00
100.00
100.00
100.00
51.00
100.00
-
(120)
-
-
-
(5,241)
(676)
-
100.00
-
100.00
-
-
-
-
61,804
(5,902)
276,561
27,189
13,548
287
87,251
15,582
1,111
(310)
187,726
2,629
26,368
24,573
3,231
4,097
218,908
687
1,406
8,326
1,868
(480)
29
(3,799)
1,536
(110)
5,701
(219)
513
1,128
426
91
2,715
-
100.00
51.00
100.00
100.00
100.00
51.00
100.00
100.00
100.00
90.00
100.00
100.00
100.00
100.00
95.00
100.00
100.00
5.00
-
100.00
51.00
100.00
100.00
100.00
51.00
100.00
100.00
90.00
100.00
95.00
100.00
100.00
95.00
100.00
100.00
(7)
-
(9)
(8)
-
1
155
1
63,354
83,959
4,339
5,336
-
60.00
60.00
-
60.00
60.00
-
-
-
-
30
3,550
85,774
3,693
10,261
712
6,665
(331)
(2)
741
2,319
160
(2,284)
(107)
(2,237)
(37)
0.05
5.74
-
66.67
99.95
94.26
100.00
100.00
100.00
100.00
50.00
0.05
5.74
-
66.67
99.95
94.26
100.00
100.00
100.00
100.00
50.00
127
258,445
128
225,327
2
2
4,925
5,037
4,861,513 5,046,381
between related parties.
11.2 Acquisitions in 2016
(i) Bluffton Motor Works, LLC.
The subsidiary WEG Electric Corp., acquired the company Bluffton Motors Works, LLC., which operates in the
manufacture of electric motors in USA. The goodwill in the amount of R$ 204,579 was initially measured as the excess
of the consideration transferred in relation to net assets acquired. Inclusion in the consolidated balance sheet as from
March 2016.
33
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
12 Property, plant and equipment
COMPANY
Land
Constructions and Facilities
Equipment
Furniture and fixtures
Hardware
Construction in progress
Reforestation
Other
Total property, plant and equipment
Accumulated depreciation/depletion
Annual depreciation
rate (%)
02 to 03
05 to 20
07 to 10
20 to 50
-
Constructions and facilities
Equipment
Furniture and fixtures
Hardware
Reforestation
Other
TOTAL PROPERTY, PLANT AND
EQUIPMENT, NET
CONSOLIDATED
03/31/16
1,440
5,639
7,079
12/31/15
1,440
5,639
7,079
03/31/16
380,219
1,173,115
3,614,987
126,103
105,883
213,003
54,240
115,717
5,783,267
12/31/15
394,311
1,125,488
3,571,271
126,801
107,294
268,141
54,044
99,698
5,747,048
(2,512)
(2,483)
(2,536,149)
(2,482,150)
(2,512)
-
(2,483)
-
(314,566)
(2,032,016)
(74,574)
(77,074)
(17,601)
(20,318)
(303,281)
(1,991,669)
(73,780)
(76,409)
(16,921)
(20,090)
4,567
4,596
3,247,118
3,264,898
a) Summary of changes in property, plant and equipment - consolidated:
PP&E Classification
12/31/15
Land
Constructions and facilities
Equipment
Furniture and fixtures
Hardware
Construction in progress
Reforestation
Advances to suppliers
Other
TOTAL
394,311
822,207
1,579,602
53,021
30,885
268,141
37,123
71,902
7,706
3,264,898
Transfer between
classes
Acquisitions
(4,478)
41,313
17,479
(3)
579
(53,150)
(1,866)
126
-
Write-offs
1,108
25,375
86,047
2,080
1,275
13,601
201
18,433
6,352
154,472
(1,990)
(114)
(4,433)
(191)
(77)
(14)
(105)
(6,924)
Depreciation
and
depletion
(7,806)
(65,838)
(2,168)
(3,195)
(685)
(973)
(80,665)
Foreign
Exchange
effect
(8,732)
(22,426)
(29,886)
(1,210)
(658)
(15,575)
(5,336)
(840)
(84,663)
03/31/16
380,219
858,549
1,582,971
51,529
28,809
213,003
36,639
83,133
12,266
3,247,118
b) Amounts offered in guarantee – PP&E items were provided as collateral for loans, financing, labor claims and tax
suits in the consolidated amount of R$ 25,005 (R$ 24,145 as of December 31, 2015).
13 Intangible - consolidated
Amortization / No. of
years
Software license
Right to use property
Other
Subtotal
Goodwill - Acquisition of
subsidiaries
TOTAL
5
50 – 99
5
-
Accumulated
amortization
03/31/16
12/31/15
107,896
64,609
206,273
378,778
(72,229)
(18,022)
(178,172)
(268,423)
35,667
46,587
28,101
110,355
36,964
51,051
29,379
117,394
888,476
1,267,254
(21,352)
(289,775)
867,124
977,479
669,320
786,714
Cost
34
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
a) Summary of changes in intangible assets:
Software license
Right to use property
Other
Subtotal
Goodwill - Acquisition of
subsidiaries
TOTAL
12/31/15
Additions
Write-offs
36,964
51,051
1,617
-
(59)
-
Transfer
Amortization
-
(2,493)
(198)
Foreign
Exchange
effect
(362)
(4,266)
03/31/16
35,667
46,587
29,379
736
-
-
(1,801)
(213)
28,101
117,394
2,353
(4,841)
110,355
204,579
(1,845)
(4,492)
669,320
(59)
-
-
(4,930)
867,124
786,714
206,932
(59)
(1,845)
(4,492)
(9,771)
977,479
b) Purchase Price Allocation – PPA:
In February 2016 was finalized the PPA report (Purchase Price Allocation) of the company Antriebstechnik KATT Hessen
GmbH., acquired in January 2015. As a result of the PPA the amount of R$ 1,845 initially recognized as goodwill was
recorded in property, plant and equipment according to their fair value. The PPA report did not identify other assets or
liabilities at fair value to be recognized.
c) Amortization schedule of intangible assets (except goodwill):
03/31/16
13,868
17,133
15,716
12,282
6,837
44,519
110,355
2016
2017
2018
2019
2020
2021 onwards
TOTAL
12/31/15
17,144
17,120
15,787
11,878
7,646
47,819
117,394
14 Loans and financing
Direct loans from BNDES and FINEP are guaranteed by the parent company WEG S.A.'s sureties. FINAME operations
are guaranteed by sureties and collateral.
All covenant clauses related to indicators of capitalization, current liquidity and the relation between net debt/Ebitda
included in the contracts entered into with BNDES are being met.
Modality
BRAZIL
SHORT TERM
In Reais, prefixed rate
Working capital
Property, plant and equipment
In Reais, floating rate
Working capital
Working capital
In US Dollar
Working capital (ACCs)
Prepayment of Export (PPE)
Other
Other
Annual charges at 03/31/16
CONSOLIDATED
03/31/16
12/31/15
477,820
736,784
374,141
5,348
573,271
4,429
TJLP (+) 1.4% to 5.0% p.a.
UFIR (+) 1.0% to 4.0% p.a.
46,106
8,409
45,959
10,781
Variation US$ (+) 1.2% p.a.
Variation US$ (+) Libor (+) 1.1% p.a.
8,169
31,920
39,833
59,398
3,727
3,113
3.5% to 11.0% p.a.
2.5% to 8.7% p.a.
Sundry
35
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
LONG TERM
In Reais, prefixed rate
Working capital
Property, plant and equipment
In Reais, floating rate
Working capital
Working capital
In US Dollar
Prepayment of Export (PPE)
Other
Other
ABROAD
SHORT TERM
In US Dollar
Working capital
In Euros
Working capital
In Mexican Pesos
Working capital
In Renmimbi (China)
Working capital
Other currencies
Working capital
LONG TERM
In US Dollar
Working capital
In Euros
Working capital
In Mexican Pesos
Working capital
In Rand (South Africa)
Working capital
Other currencies
Working capital
3,273,103
3,464,966
1,553,392
21,363
1,575,013
23,018
104,510
20,433
116,672
24,190
1,565,652
1,717,848
7,753
8,225
539,653
547,849
Libor (+) 0.8% to 1.7% p.a.
165,144
128,911
Euribor (+) 0.8% to 4.6% p.a.
200,696
210,066
TIIE + 1.1% p.a.
34,749
8,623
3.9% to 4.1% p.a.
39,353
92,664
Local market rates
99,711
107,585
362,951
403,369
105,843
120,653
25,530
27,736
TIIE (+) 1.1% p.a.
156,387
169,825
8.0% to 9.3% p.a.
74,606
84,291
585
864
1,017,473
3,636,054
1,284,633
3,868,335
03/31/16
683,202
1,454,923
1,082,585
184,739
47,954
182,651
3,636,054
12/31/15
747,392
1,527,427
1,155,849
193,391
48,074
196,202
3,868,335
3.5% to 11.0% p.a.
2.5% to 8.7% p.a.
TJLP (+) 1.4% to 5.3% p.a.
UFIR (+) 1.0% to 4.0% p.a.
Variation US$ (+) Libor (+) 1.0% to 1.5% p.a.
Sundry
Libor (+) 1.5% p.a.
Euribor (+) 2.0% to 3.8% p.a.
Local market rates
TOTAL SHORT TERM
TOTAL LONG TERM
Maturity of long-term financing and loans:
2017
2018
2019
2020
2021
2022 onwards
TOTAL
15 Provisions 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 business. The corresponding provisions were recorded 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 recorded is sufficient to
cover any possible losses arising from the proceedings in progress.
36
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
a) Balance of provisions for contingencies:
03/31/16
4,622
4,146
476
-
COMPANY
12/31/15
4,520
4,044
476
-
(ii) Labor
-
-
153,890
146,714
(iii) Civil
-
-
76,557
83,107
(iv) Others
-
-
3,663
3,512
4,622
4,520
352,590
339,968
Reversals
31/03/16
118,480
153,890
76,557
3,663
352,590
(i) Tax:
- IRPJ and CSLL
- INSS
- PIS and COFINS
- IRRF
- Others
(a.1)
(a.2)
(a.3)
TOTAL
CONSOLIDATED
03/31/16
12/31/15
118,480
106,635
25,246
18,363
52,889
49,513
31,424
30,097
476
476
8,445
8,186
b) Changes in the provisions for contingencies for the period - consolidated:
a) Tax
b) Labor
c) Civil
d) Others
TOTAL
12/31/15
106,635
146,714
83,107
3,512
339,968
Additions
10,089
8,680
1,664
151
20,584
Interest
1,756
448
384
2,588
Write-offs
(1,861)
(5,722)
(7,583)
(91)
(2,876)
(2,967)
c) The provisions recorded basically refer to:
(i) Tax contingencies
(a.1) Refers to the proceeding to IPC difference of January 1989 “plano Verão” (Summer Plan) on monetary correction
of 16.24%;
(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 allowance, among others;
(a.3) Refers to non-ratification by the Brazilian Federal Revenue Department (FRB) about the request for offsetting the
credit balance of PIS and COFINS with federal tax debts.
(ii) Labor contingencies
The Company and its subsidiaries are defendants in labor claims primarily involving health and risk exposure, among
others. The amount provided for is R$ 153,890 (R$ 146,714 as of December 31, 2015).
(iii) Civil contingencies
These correspond primarily to civil lawsuits, including personal injury, aesthetic damage, occupational diseases and
indemnities arising out of occupational accidents. The amount provided for is R$ 76,557 (R$ 83,107 as of December 31,
2015).
d) Judicial deposits:
COMPANY
CONSOLIDATED
03/31/16
12/31/15
03/31/16
12/31/15
Tax
3,937
3,913
31,912
31,718
Labor and Civil
4,327
4,327
13,488
20,181
Others
966
991
TOTAL RESTRICTED JUDICIAL DEPOSITS
8,264
8,240
46,366
52,890
- Non-restricted judicial deposits
2,415
2,920
TOTAL JUDICIAL DEPOSITS
8,264
8,240
48,781
55,810
The non-restricted judicial deposits related to contingencies are waiting authorization for withdrawal from court.
37
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
e) Contingencies assessed as possible losses:
The Company and its subsidiaries are parties to other suits, whose chances of loss are assessed as "possible", for which
no provision for contingencies was recorded.
The estimated amount of such litigation relates to the tax proceedings totaling R$ 91,816 (R$ 86,498 as of December
31, 2015). The main proceedings assessed as "possible" loss are:
- taxation on profits earned abroad in the total estimated amount of R$ 48.0 million;
- no approval of IPI credits in the amount of R$10.6 million;
- levy of ICMS-ST on purchase transactions of raw materials amounting to R$ 9.3 million.
16 Private pension plan
The Company and its subsidiaries are sponsors of WEG Social Security - Private 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 (retirement), annual bonus,
supplemental sickness benefits, supplemental disability retirement, pension due to death, supplementation of the annual
bonus and death benefit.
The number of participants is 20,268 (22,264 at March 31, 2015). The Company and its subsidiaries made contributions
in the amount of R$ 5,779 (R$ 7,475 at March 31, 2015).
Based on actuarial calculations carried out by independent actuaries, aiming to define the liabilitie net value between the
defined benefit obligation and the fair value of plan assets in accordance with the procedures established by the CVM
Resolution 695/12 – technical pronouncement CPC 33 (R1) Employee Benefits. The Company maintains a provision
recorded in the amount of R$ 4,092 (R$ 4,092 at December 31, 2015).
17 Equity
a) Capital
The Company's capital consists of 1,614,353,076 registered book-entry ordinary shares with no par value, all with voting
rights, including 1,205,872 treasury shares pursuant to item "c".
b) Dividends and interest on equity capital
The Company stated on March 22, 2016, interest on equity capital in the gross amount of R$ 89,196 (R$ 67,378 in
March, 2015), net R$ 75,817 (R$ 57,271 in March, 2015) corresponding to R$ 0.047 per share, after the deduction of
withholding tax of 15% pursuant to § 2º of article 9 of Law No. 9249/95, except for corporate shareholders who are exempt
from this tax.
Under article 37 of the Company's bylaws and article 9 of Law 9949/95 interest on equity capital will be charged from
mandatory dividends and will be paid as from August 17, 2016.
c) Treasury shares
The shares acquired by the Company are held in treasury for use in connection with exercise of share purchase option
by the beneficiaries of the Share Purchase Option Program of the Company or subsequent disposal or cancellation.
The amount of 299,508 shares were exercised by the beneficiaries of the Share Call Option Plan in the first quarter of
2016. The Company holds in treasury 1,205,872 shares at the average cost of R$ 11.34 per share in the total amount of
R$ 13,673 (R$ 17,069 at December 31, 2015).
18 Stock option plan
(i) Plan description
The Plan is managed by the Board of Directors, seeking to grant Stock Call Option Plans of WEG S.A.’s (Company)
shares or its subsidiaries with head offices located in Brazil to to its statutory officers so as to attract, motivate and retain
them, as well as align their interests to those of the Company and its shareholders.
Each option grants its bearer with the right to acquire 1 (one) ordinary Company-issued share (BM&FBOVESPA:
“WEGE3”), strictly according to the terms and conditions established in the Plan ("Option”).
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WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
The stock options to be granted are limited to the maximum of 2% (two percent) of the total shares representing the
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 description
The Board of Directors may approve, each semester, a Share Purchase Option Programs ("Programs"), 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 your variable compensation in each
period in Company’s shares.
Program
April/11
Number
of Options
Rights
Average value in Reais (R$)
Exercise
price
IPCA
Corrected
Price
Option price
Unearned cash
(R$ thousand)
Option
difference
163,155
8.08
9.36
12.68
3.32
785
71,398
6.71
7.87
10.40
2.54
236
169,393
7.38
8.67
11.30
2.64
515
95,053
6.73
7.91
10.51
2.60
276
April/13
214,688
9.40
11.10
14.33
3.23
692
September/13
108,862
9.60
11.40
15.58
4.19
455
March/14
221,040
10.48
12.54
17.30
4.76
1,053
August/14
91,160
13.12
15.75
19.77
4.03
367
March/15
187,020
14.05
16.90
22.49
5.60
1,046
August/15
181,055
16.60
19.60
25.44
5.84
1,058
March/16
194,575
13.09
15.82
21.85
6.03
1,173
September/11
March/12
September/12
TOTAL
1,697,399
7,656
The weighted average fair value was determined based on the Black-Scholes-Merton method, considering the following
aspects:
Program
Option exercise
price (R$)
Option lifespan
- in days
Current
corresponding
share price (R$)
Expected volatility
in share price (%)
Interest rate free of risk
for the option lifespan
(%)
April/11
8.08
755 – 1,260
8.50
13.17
12.79 – 12.83
September/11
6.71
756 – 1,259
6.95
14.94
10.90 – 11.22
March/12
7.38
755 – 1,257
7.62
14.93
9.76 – 10.33
September/12
6.73
753 – 1,257
7.73
12.25
8.32 – 8.78
April/13
9.40
760 – 1,260
9.89
14.27
8.67 – 9.24
September/13
9.60
756 – 1,258
10.68
14.13
11.29 – 11.81
March/14
10.48
753 – 1,257
12.16
10.26
12.28 – 12.58
August/14
13.12
754 – 1,257
13.45
10.02
11.26 – 11.28
March/15
14.05
751 – 1,254
15.21
19.73
13.26 – 13.43
August/15
16.60
752 – 1,255
16.62
21.25
13.74 – 13.78
March/16
13.09
753 – 1,256
14.01
33.44
13.79 – 13.93
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WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
Summary of the plan's shares movement:
Number of shares
Program
April/11
September/11
March/12
September/12
April/13
September /13
March/14
August/14
March/15
August /15
March /16
TOTAL
12/31/15
60,156
38,412
114,576
71,362
171,576
95,038
221,040
91,160
187,020
181,055
1,231,395
Granted Expired/ Canceled
194,575
194,575
(18,000)
(68,000)
(86,000)
Exercised
03/31/16
(50,968)
(24,480)
(55,120)
(27,992)
(52,440)
(31,462)
(57,046)
(299,508)
9,188
13,932
59,456
43,370
119,136
63,576
163,994
73,160
119,020
181,055
194,575
1,040,462
The recognition of expenses on stock options is carried out throughout the period of acquisition of "vesting rights”.
In March 31, 2016, the amount of R$ 339 (R$ 242 at March 31, 2015) was recorded in the account other income in the
financial statements for the year in counterpart to the capital reserve in Equity.
The options exercised in the first quarter of 2016 were recorded in the amount of R$ 784 (R$ 30 at March 31, 2015)
being recorded in equity the amount of R$ 1,461 (R$ 10 at March 31, 2015) in the legal reserve account and the amount
of R$ 677 (R$ 20 at March 31, 2015) reversal to the amount provided for and recognized in the retained earnings account.
The accumulated amount recorded in equity totals as of March 31, 2016 R$ 1,352 (R$ 2,474 as of December 31, 2015).
19 Net revenue
BREAKDOWN OF NET REVENUE
CONSOLIDATED
03/31/16
03/31/15
Gross revenue
Domestic market
External markets
2,755,441
1,260,540
1,494,901
2,460,375
1,313,134
1,147,241
Deductions
Taxes
Returns/Rebates
(339,097)
(285,801)
(53,296)
(330,084)
(296,372)
(33,712)
Net revenue
Domestic market
External markets
2,416,344
994,805
1,421,539
2,130,291
1,027,854
1,102,437
20 Construction contracts
Construction contracts' revenues and costs are recognized according to the execution of each project using the method
of incurred costs percentage.
Gross operating revenues recognized
Incurred costs
Advances received
CONSOLIDATED
03/31/16
03/31/15
301,376
163,617
(249,167)
(146,138)
03/31/16
306,458
12/31/15
187,853
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WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
21 Operating expenses by nature and function
EXPENSE BY NATURE
Depreciation, amortization and depletion
Personnel expenses
Raw materials, use materials and consumables
Freight and insurance costs
Other expenses
CONSOLIDATED
03/31/16
03/31/15
(2,159,270)
(1,856,229)
(85,157)
(74,298)
(564,650)
(480,349)
(1,138,856)
(968,432)
(59,283)
(62,299)
(311,324)
(270,851)
EXPENSE BY FUNCTION
Cost of goods sold and services rendered
Selling expenses
General and administrative expenses
Management's fees
Other operating expenses
(2,159,270)
(1,743,591)
(242,051)
(113,043)
(5,881)
(54,704)
(1,856,229)
(1,491,668)
(206,835)
(100,783)
(5,558)
(51,385)
22 Other operating revenue/expenses
The recorded amounts refer to profit sharing, reversal/ provision for tax lawsuits and other, as follows:
CONSOLIDATED
03/31/16
03/31/15
4,468
3,511
4,468
3,511
(59,172)
(54,896)
(37,312)
(30,832)
(7,431)
(6,330)
(3,286)
(2,698)
(1,728)
(857)
(415)
(1,300)
(9,000)
(12,879)
(54,704)
(51,385)
OTHER OPERATING REVENUES
- Others
OTHER OPERATING EXPENSES
- Profit sharing - Employees
- Profit sharing - foreign subsidiaries
- Profit sharing - Management
- Recording/Reversal of provision for tax lawsuits
- Tax incentives - Rouanet Law
- Others
TOTAL NET
23 Financial income, net
FINANCIAL INCOME
Short-term investment yield
Exchange variation
Exchange variation - trade payables
Exchange variation - trade receivables
Exchange variation - Loans
Exchange variation - Other
Present value adjustment - trade receivables
PIS/COFINS on interest on equity capital
PIS/COFINS on financial income
Derivative
PROEX - Equaliz. of Interest rate
Other income
FINANCIAL EXPENSES
Interest on loans and financing
Exchange variation
Exchange variation - trade payables
Exchange variation - trade receivables
Exchange variation - Loans
Exchange variation - Other
Present value adjustment - trade payables
Derivative
Other expenses
03/31/16
26,030
33,436
(6,024)
(1,563)
181
COMPANY
03/31/15
22,542
26,827
(4,351)
66
(56)
(56)
(38)
(38)
CONSOLIDATED
03/31/16
03/31/15
163,631
519,628
127,251
103,076
120,443
233,145
32,676
35,571
26,530
68,986
39,398
25,310
21,839
103,278
11,650
15,551
(6,053)
(4,398)
(6,170)
(99,919)
163,773
6,513
6,055
9,916
2,426
(103,087)
(60,308)
12,688
(12,461)
(54,340)
113,651
(34,162)
(7,564)
(39,751)
(8,152)
(477,949)
(50,649)
(410,021)
(26,138)
(23,207)
(243,215)
(117,461)
(5,973)
(7,470)
(3,836)
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WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
NET FINANCIAL INCOME
25,974
22,504
60,544
41,679
24 Provision for income and social contribution taxes
The parent company and subsidiaries in Brazil determine income and social contribution taxes according to taxable
income, except for WEG Administradora de Bens Ltda, and Agro Trafo Miner., Agric., Pec. e Administradora de Bens
S.A., which adopt the determination using the presumed income. The provision for income tax was recorded at a 15%
rate, plus of additional of 10% and social contribution net income at a 9% rate. The taxes abroad are recorded according
to the legislation of each country.
Income before taxes on profit
Statutory combined rates
03/31/16
282,561
34%
COMPANY
03/31/15
246,089
34%
IRPJ and CSLL are calculated at the nominal rate
(96,071)
(83,670)
(107,990)
(107,352)
87,871
8,185
(150)
76,611
6,915
(86)
(1,299)
36,539
11,719
155
30,421
95
(3,756)
(7,655)
24,795
3,037
22,998
2,989
(165)
(63)
(102)
(230)
(249)
19
(30,360)
(50,175)
19,815
(64,944)
(76,322)
11,378
0.06%
0.09%
9.56%
20.57%
Reconciliation of income and social contribution taxes:
Adjustment to determine the effective income and social
contribution taxes:
Result form investments in subsidiaries
Rate difference on foreign results
Tax incentives
Reintegra
Interest on equity capital
Other adjustments
IRPJ and CSLL on income
Current tax
Defered tax
Effective rate - %
CONSOLIDATED
03/31/16
03/31/15
317,618
315,741
34%
34%
25 Insurance coverage
The corporate unit in Brazil is responsible for the of the WEG Group's management regarding the insurance portfolio in
Brazil and abroad, establishing risk policies for the Group in order to protect its assets. The Company and its subsidiaries
implemented the Worldwide Insurance Program - WIP, in which the following world policies established stand out, such
as: Transport risk (Export, Import and Domestic), Civil Product Liability, Directors and Officers (liability) insurance (D&O),
Surety Bond, General Civil Liability, Properties and Environment Pollution, Contractual Insurance and Engineering
Installation and Assembly Risk.
The insurance policies are issued only in first-tier multinational insurance companies that can meet the WEG Group in
the countries where it has operations. The financial structure and sustainability of the aforementioned insurance
companies are continuously monitored by WEG's Brazilian corporate unit.
Some of the policies and their insured capital are highlighted below:
- Operating risks (Equity): US$ 36 million;
- Loss of Profits: US$ 13 million (for Paint companies and newly acquired companies for the first 12 months);
- Civil liability: US$ 25 million;
- Products Civil Liability: US$ 50 million;
- Transport: US$ 5 million per shipment (Export, Import and Domestic);
- Environment pollution: US$ 20 million;
- Contractual Insurance: As stipulated in the contract;
- Installation and Assembly Engineering Risk: R$ 100 million in Brazil, R$ 40 million in Latin America (except Cuba) and
US$ 5 million in the US;
- Directors & Officers (liability) insurance (D&0): US$30 million.
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WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
26 Financial instruments
The Company and its subsidiaries carried out an evaluation of its financial instruments, including derivatives, recorded
in the financial statements presented the following values:
Cash and cash equivalents
Cash and banks
Short-term investments
- In local currency
- In foreign currency
Short-term investments
Derivative
- Non Deliverable Forwards - NDF
- SWAP
- Hedge accounting
Total - assets
03/31/16
2,477,210
323,157
2,154,053
2,092,477
61,576
1,264,181
265,759
3,706
262,053
4,007,150
BOOK VALUE
12/31/15
3,277,115
477,710
2,799,405
2,694,786
104,619
1,157,858
378,727
6,259
365,892
6,576
4,813,700
03/31/16
2,477,210
323,157
2,154,053
2,092,477
61,576
1,264,181
265,759
3,706
262,053
4,007,150
FAIR VALUE
12/31/15
3,277,115
477,710
2,799,405
2,694,786
104,619
1,157,858
378,727
6,259
365,892
6,576
4,813,700
Loans and financing
- In local currency
- In foreign currency
Derivative
- Non Deliverable Forwards - NDF
- SWAP
- Hedge accounting
Total liabilities
4,653,527
2,145,182
2,508,345
53,170
5,070
30,279
17,821
4,706,697
5,152,968
2,384,671
2,768,297
17,686
590
16,295
801
5,170,654
4,653,527
2,145,182
2,508,345
53,170
5,070
30,279
17,821
4,706,697
5,152,968
2,384,671
2,768,297
17,686
590
16,295
801
5,170,654
26.1 Risk factors
The risk factors of financial instruments are basically related to:
a) Credit risks
Arises from the possibility of the subsidiaries not receiving amounts arising from sales or credit transactions with financial
institutions generated by financial investments. To mitigate the risk arising from sales operations, the Company's
subsidiaries adopt a policy of analyzing the financial position of their customers, establishing a credit limit and
permanently follow your outstanding balance. With regard to financial investments, the Company and its subsidiaries
invests with institutions with low credit risk.
b) Foreign currency risks
The Company and its subsidiaries have import and export operations in various currencies; they manage and monitor
their exposure to foreign currency, seeking to balance their financial assets and liabilities within the limits established by
Management.
The limit of exposure to foreign exchange sold (net) may be equivalent up to two months of exports in foreign currencies
as established by the Company's Board of Directors.
The Company and its subsidiaries had export operations totaling US$ 156.6 million (US$ 177.5 million in 2015), which
acts as a natural hedge for indebtedness and other costs related to other currencies, especially US Dollars.
c) 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 income related to the subsidiaries' short-term investments. The Company and its subsidiaries continually
monitor market interest rates aiming at assessing the possible need for entering into new contracts as a hedge against
the volatility of these rates.
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WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
26.2 Derivative financial instruments
The Company and its subsidiaries have the following operations with derivative financial instruments:
a) Non Deliverable Forwards - NDF, in the notional amount of:
(i) US$ 7.0 million, held by subsidiary WEG Equipamentos Elétricos S.A., with the purpose of hedging its financing from
the fluctuation risks;
(ii) US$ 5.1 million, held by subsidiary WEG Equipamentos Elétricos S.A., with the purpose of hedging the raw materials
purchase operations in foreign currency against the fluctuation risks;
(iii) US$ 14.8 million, held by subsidiary Zest WEG Group Africa (PTY) Ltd, aiming at hedging the import operations of
products against the fluctuation risks;
(iv) EUR 18.0 million, held by subsidiary WEG Equipamentos Elétricos S.A., with the purpose of hedging the exports
against the fluctuation risks;
(v) EUR 1.8 million, held by subsidiary WEG Equipamentos Elétricos S.A., with the purpose of hedging the raw
materials purchase operations in foreign currency against the fluctuation risks.
b) SWAP operations, in the notional amount of:
(i) EUR 10 million, held by subsidiary Watt Drive Antriebstechnik GmbH, with the purpose of hedging its financing from
the Euribor fluctuation risks;
(ii) US$ 4.3 million held by subsidiary WEG Equipamentos Elétricos S.A. aiming at hedging against Libor increase risks;
(iii) US$ 400.0 million held by the subsidiary WEG Equipamentos Elétricos S.A., with the purpose of hedging the
financing operations against the US$ Dollar spike risks;
(iv) R$ 80 million, held by subsidiary WEG Equipamentos Elétricos S.A., with the purpose to protect against the risk of
falling interest rates.
The Company's Management and that of its subsidiaries permanently monitors the derivative financial instruments
contracted through its internal control.
The sensitivity analysis statement chart (item 26.3) must be read jointly with the other financial assets and liabilities
expressed in foreign currency as of March 31, 2016, as the estimated impact of the foreign currency rate over NDFs
and SWAPs presented below will be offset, if effective, in whole or in part, with the devaluation of all assets and liabilities.
Management has determined that, for the probable scenario (market value), should be considered the exchange rates
used to mark to market the financial instruments, valid on March 31, 2016. These rates represent the best estimate of
the future behavior of prices and these represent the amount by which the positions could be settled at maturity.
The Company and its subsidiaries made the accounting based on their market price on March 31, 2016 at fair value and
the accrual basis. These operations had net negative impact at March 31, 2016 in the amount of R$ 139,670 (R$ 4,385
positive at March 31, 2015) as which were recognized in financial income. The Company and its subsidiaries have no
margin guarantees for derivative financial instruments outstanding at March 31, 2016.
c) Derivative financial instruments designated to hedge accounting (hedge accounting)
The Company made the formal designation of its operations subject to protection accounting (hedge accounting) for
derivative financial instruments purchase of inputs protection and expenses denominated in foreign currency,
documenting:
- Date of designation and identification of the hedging relation;
- Description of the purpose of hedging and risk management strategy;
- Hedge compliance statement and risk management;
- Description and identification of the derivative instrument and the hedged item;
- Description of the risks covered and excluded risks;
- Description of the evaluation method of the actual hedge effectiveness;
- Evaluation of Frequency of prospective effectiveness and retrospective;
- Description of hedge accounting policy.
The Company and its subsidiaries it has operations of hedge accounting, at March 31, 2016, n in the notional amount of
US$ 38.3 million and EUR 16.5 million, held by subsidiary WEG Equipamentos Elétricos S.A.
44
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Version: 1
WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
The Company and its subsidiaries made the accounting based on their fair value on March 31, 2016, and the accrual
basis. The net accrued value of taxes recorded in equity is R$ 12,235 negative (R$ 5,774 positive at December 31,
2015).
The Company and its subsidiaries have no margin guarantees for derivative financial instruments outstanding at March
31, 2016.
26.3 Sensitivity Analysis
The following tables show in real the "cash and expense" of the results of the financial instruments in each scenario.
a) Short-term investments and Financing:
(*)Analysis of sensitivity variation of investments: risk of the Company in the event of reduction in interest rates,
considering the position static applications backed by the CDI rate as of March 31, 2016.
(**)Financing variation sensitivity analysis: the Company's risk in the event of rising interest rates, considering the static
funding position backed TJLP of March 31, 2016.
b) Non Deliverable Forwards – NDF operations:
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WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
c) SWAP operations:
d) Hedge accounting operations:
27 Subsidies and Government grants
The Company and its subsidiaries obtained subsidies in the amount of R$ 12,979 (R$ 15,546 at March 31, 2015) deriving
from tax incentives, recognized in the income for the period:
TOTAL SUBSIDIES AND GOVERNMENT GRANTS
a) WEG Amazônia S.A.
- ICMS incentive credit of 90.25%
- Corporate Income Tax (IRPJ) 75.0% reduction
03/31/16
12,979
75
75
-
CONSOLIDATED
03/31/15
15,546
562
128
434
b) WEG Linhares Equipamentos Elétricos S.A.
- ICMS incentive credit of 85.0%
- Corporate Income Tax (IRPJ) 75.0% reduction
- Corporate Income Tax (IRPJ) 30% reduction due to reinvestment
- Municipal investment
9,738
8,139
1,512
81
6
11,081
8,843
2,232
6
c) WEG Logística Ltda.
- ICMS incentive credit of 75.0%
3,166
3,166
3,903
3,903
There are no contingencies related to the aforementioned subsidies, and all of the conditions for obtaining government
subsidies have been met.
46
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Version: 1
WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
28 Information by segment
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, wind power generators, control dashboards, integration services of renewable and
distributed energy systems and solutions.
Foreign: composed of operations carried out by subsidiaries located in various countries.
The adjustment and elimination column includes the eliminations applicable to the Company in the context of the
Consolidated Financial Statements.
All operating assets and liabilities are presented herein as identifiable assets and liabilities.
29 Earnings per share
a) Basic
The calculation of basic earnings per share is performed by means of dividing the net income for the year attributable to
the holders of the Company's ordinary shares, by the weighted average number of ordinary outstanding shares for the
year.
Earnings attributable to the Company's shareholders.
Weighted average number of outstanding ordinary shares (adjusted including splitting) held by
shareholders (shares/thousand)
Basic earnings per share - R$
03/31/16
282,396
1,613,147
03/31/15
245,859
1,613,269
0.17506
0.15240
b) Diluted
Net earnings per share is calculated by dividing the net earnings attributable to Company’s holders of ordinary shares
by the weighted average number of outstanding ordinary shares for the year plus the weighted average number of
ordinary shares that would be issued upon the conversion of all potential diluted ordinary shares into ordinary shares.
Earnings attributable to the Company's shareholders.
Weighted average number of outstanding ordinary shares (adjusted including splitting) potentially
diluting held by shareholders (shares/thousand)
Diluted earnings per share - R$
03/31/16
282,396
03/31/15
245,859
1,614,188
1,614,498
0.17495
0.15228
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ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
WEG S.A.
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2016
(Amounts in thousands of Reais, except otherwise stated)
30 Statement of comprehensive income
The Company and its subsidiaries present as other comprehensive income the amounts of accumulated translation
adjustment. These amounts are not taxable.
The presentation of the comprehensive income results is required by CPC 26 - Financial Statement Presentation (R1)
and includes other comprehensive income which correspond to revenue and expense items which are not recognized in
the financial statements as required or authorized by the pronouncements, interpretations and guidance issued by CPC.
48
ITR – Quarterly Information – 03/31/2016 – WEG S/A
Version: 1
Quarterly Information Review Report
To the Shareholders and Board of Directors
WEG S.A.
Jaraguá do Sul - SC
Introduction
We have reviewed the interim financial statements, individual and consolidated, of Weg S.A. (“Company”) contained
within the Quarterly Information for the quarter ended March 31, 2016, which comprise the balance sheet as of March
31, 2016 and the related statements of income, comprehensive income, changes in shareholders’ equity and cash flows
for the three months period then ended, including the notes to the financial statements.
Management is responsible for the preparation of the interim financial statements in accordance with the technical
pronouncement CPC 21(R1) and IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards
Board - IASB, as well as for the presentation of these information in accordance with the standards issued by the Brazilian
Securities and Exchange Commission (CVM) applicable to the Quarterly Information. Our responsibility is to express a
conclusion on the interim financial statements based on our review.
Scope of the review
We conducted our review in accordance with Brazilian and international standards for reviewing interim financial
information (NBC TR 2410 and ISRE 2410 - Review of Interim Financial Information Performed by the Independent
Auditor of the Entity, respectively). An interim review consists principally of making enquiries and having discussions with
persons responsible for financial and accounting matters, and applying analytical and other review procedures. An interim
review is substantially less in scope than an audit conducted in accordance with auditing standards and, consequently,
does not provide assurance that we would become aware of any or all significant matters that might be identified in an
audit. Accordingly, we do not express such an audit opinion.
Conclusion about the interim financial statements
Based on our review, we are not aware of any fact that leads us to believe that the individual and consolidated interim
financial statements included in the quarterly information referred to above have not been prepared, in all material
respects, in accordance with CPC 21(R1) and IAS 34 issued by the IASB applicable to the Quarterly Information and
presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission.
Other issues
Statements of value added
We have also reviewed the statements of value added, individual and consolidated, for the three months period ended
in March 31, 2016, prepared under the responsibility of the Company’s Management, whose disclosure in the interim
financial statements is required in accordance with the standards issued by the Brazilian Securities and Exchange
Commission (CVM) applicable to the preparation of the Quarterly Information and considered as supplemental
information by international accounting standards (IFRS), which do not require the disclosure of the statement of value
added. This statement was submitted to the same review procedures previously described and, based on our review,
we are not aware of any fact that would lead us to believe that they have not been fairly stated, in all material aspects,
in relation to the interim financial statements, individual and consolidated, taken as a whole.
Joinville April 12, 2016
KPMG Auditores Independentes
CRC SC-000071/F-8
Marcelo Lima Tonini
Contador CRC PR-045569/O-4 T-SC
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