ITR – Quarterly Information – 06/30/2014 – 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 - 01/01/2014 to 06/30/2014
8
Statements of changes in equity - 01/01/2013 to 06/30/2013
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 - 01/01/2014 to 06/30/2014
16
Statements of changes in equity - 01/01/2013 to 06/30/2013
17
Statements of value added
18
Comments on performance
19
Notes to financial statements
28
Opinions and Statements
Special Review Report – Unqualified
50
ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 Company information / Composition of capital
Number of shares
(Units)
Quarterly ended
06/30/2014
Paid-in capital
Common
807,176,538
Preferred
0
Total
807,176,538
Treasury stock
Common
581,100
Preferred
0
Total
581,100
PAGE: 1 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 Company information / Cash dividends
Event
Approval
Earning
First payment
Type of share
Class of share Earnings per share (Reais / Share)
Board of Directors’
Meeting
03/25/2014
Interest on equity
08/13/2014
Common
0.07100
Board of Directors’
Meeting
06/24/2014
Interest on equity
08/13/2014
Common
0.06000
PAGE: 2 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 Individual financial statements / Balance sheet Assets
(In thousands of reais)
Account
code
Account description
Current quarter
06/30/2014
Prior year
12/31/2013
1
Total assets
4,751,174
4,668,281
1.01
Current assets
1,007,950
943,803
1.01.01
Cash and cash equivalents
848,222
870,906
1.01.01.01
Cash and banks
44
28
1.01.01.02
Short-term investments
848,178
870,878
1.01.02
Short-term investments
54,565
0
1.01.06
Taxes recoverable
13,261
10,573
1.01.06.01
Current taxes recoverable
13,261
10,573
1.01.08
Other current assets
91,902
62,324
1.01.08.03
Other
91,902
62,324
1.01.08.03.01
Dividends
27,820
2,824
1.01.08.03.02
Interest on equity
64,082
59,500
3,743,224
3,724,478
5,996
5,498
1.02
Noncurrent assets
1.02.01
Long-term receivables
1.02.01.06
Deferred taxes
2,899
2,977
1.02.01.06.01
Deferred income and contribution taxes
2,899
2,977
1.02.01.08
Recoverable to related parties
0
1,193
1.02.01.08.02
Recoverable to subsidiaries
0
1,193
1.02.01.09
Other noncurrent assets
3,097
1,328
1.02.01.09.03
Judicial deposits
3,097
1,328
1.02.02
Investments
3,732,456
3,714,150
1.02.02.01
Equity interest
3,732,456
3,714,150
1.02.02.01.02
Investments in subsidiaries
3,732,456
3,714,150
1.02.03
Property, plant and equipment
4,772
4,830
1.02.03.01
Property, plant and equipment in use
4,772
4,830
PAGE: 3 of 51 ITR – Quarterly Information – 06/30/2014 – 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
2.02.02
2.02.02.01
2.02.02.01.02
2.02.04
2.03
2.03.01
2.03.02
2.03.02.04
2.03.02.07
2.03.03
2.03.04
2.03.04.01
2.03.04.02
2.03.04.08
2.03.04.09
2.03.05
2.03.06
2.03.06.01
2.03.07
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
Other liabilities
Related parties liabilities
Debit with subsidiaries
Provisions
Equity
Paid-in capital
Capital reserves
Options granted
Premium on capital transaction
Revaluation reserve
Income reserve
Legal reserve
Statutory reserve
Additional proposed dividends
Treasury stock
Retained earnings/accumulated losses
Equity valuation adjustments
Deemed cost
Cumulative translation adjustments
Current quarter
06/30/2014
4,751,174
108,070
3,973
3,973
8,548
8,548
43
8,505
95,549
95,549
94,960
589
11,231
532
532
532
10,699
4,631,873
3,533,973
(59,852)
1,573
(61,425)
3,687
316,237
0
199,892
125,334
(8,989)
219,724
572,896
572,896
45,208
Prior year
12/31/2013
4,668,281
99,987
3,561
3,561
7,914
7,914
16
7,898
88,512
88,512
87,305
1,207
10,522
0
0
0
10,522
4,557,772
2,718,440
(57,724)
1,325
(59,049)
3,712
1,169,077
74,972
940,453
163,174
(9,522)
0
593,500
593,500
130,767
PAGE: 4 of 51 ITR – Quarterly Information – 06/30/2014 – 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 expenses
Other operating expenses
Equity pick-up
Income before financial income (expenses) 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
Income/ loss for the period
Earnings per share - (Reais/share)
Basic earnings per share
Common shares
Diluted earnings per share
Common shares
Current quarter
04/01/2014 to 06/30/2014
Current period
01/01/2014 to 06/30/2014
Prior quarter
04/01/2013 to 06/30/2013
Prior period
01/01/2013 to 06/30/2013
209,024
(797)
(472)
(325)
(467)
210,288
209,024
19,129
19,164
(35)
228,153
(168)
(157)
(11)
227,985
227,985
396,245
(1,615)
(960)
(655)
(1,217)
399,077
396,245
37,083
37,157
(74)
433,328
(456)
(378)
(78)
432,872
432,872
192,640
(666)
(475)
(191)
(1,429)
194,735
192,640
12,569
12,400
169
205,209
(241)
(90)
(151)
204,968
204,968
353,798
(1,462)
(941)
(521)
(1,892)
357,152
353,798
24,019
23,917
102
377,817
(550)
(435)
(115)
377,267
377,267
0.28264
0.53667
0.25413
0.46776
0.28240
0.53625
0.25399
0.46754
PAGE: 5 of 51 ITR – Quarterly Information – 06/30/2014– 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
4.03
Account description
Net income for the period
Other comprehensive income
Cumulative translation adjustments
Comprehensive income for the period
Current quarter
04/01/2014 to 06/30/2014
227,985
(31,941)
(31,941)
196,044
Current period
Prior quarter
01/01/2014 to 06/30/2014 04/01/2013 to 06/30/2013
432,872
(85,559)
(85,559)
347,313
204,968
58,947
58,947
263,915
Prior period
01/01/2013 to 06/30/2013
377,267
33,812
33,812
411,079
PAGE: 6 of 51 ITR – Quarterly Information – 06/30/2014 – 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
6.02.02
6.02.03
6.03
6.03.01
6.03.03
6.05
6.05.01
6.05.02
Account description
Net cash flows from operating activities
Cash from operations
Income before taxes
Depreciation, amortization and depletion
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
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
01/01/2014 to 06/30/2014
Prior period
01/01/2013 to 06/30/2013
27,908
34,557
433,328
58
(399,077)
248
(7,262)
(7,344)
433
(351)
613
196,853
251,418
(54,565)
(247,445)
(247,768)
323
(22,684)
870,906
848,222
14,812
20,969
377,817
58
(357,152)
246
(7,077)
(9,944)
3,365
(498)
920
468,217
206,973
261,244
(204,356)
(204,356)
0
278,673
561,214
839,887
PAGE: 7 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 Individual financial statements / Statement of changes in equity - 01/01/2014 to 06/30/2014
(In thousands of reais)
Account
code
5.01
5.03
5.04
5.04.01
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
5.06
5.06.02
5.06.04
5.06.05
5.07
Account description
Opening balances
Adjusted opening balances
Capital transactions with shareholders
Increase of capital
Recognized options granted
Sold treasury shares
Interest on equity capital
Premium on capital transaction
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 resoluction reserve
Dividends paid
Dividends prescribed
Closing balances
Paid-in
capital
2,718,440
2,718,440
815,533
815,533
3,533,973
Capital reserves,
Options granted and
Treasury stock
(54,012)
(54,012)
(2,128)
248
323
(2,699)
(25)
(25)
(56,165)
Income reserves
1,005,903
1,005,903
(815,000)
(815,533)
533
190,903
Retained earnings/
accumulated losses
163,174
163,174
(108,795)
(35)
(108,760)
453,476
432,872
20,604
20,604
(162,797)
25
(163,174)
352
345,058
Other comprehensive
income
724,267
724,267
(106,163)
(106,163)
(85,559)
(20,604)
618,104
Equity
4,557,772
4,557,772
(110,390)
213
856
(108,760)
(2,699)
347,313
432,872
(85,559)
(85,559)
(162,822)
(163,174)
352
4,631,873
PAGE: 8 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 Individual financial statements / Statement of changes in equity - 01/01/2013 to 06/30/2013
(In thousands of reais)
Account
code
5.01
5.03
5.04
5.04.03
5.04.05
5.05.06
5.04.07
5.04.08
5.05
5.05.01
5.05.02
5.05.02.04
5.05.02.06
5.06
5.06.02
5.06.04
5.06.05
5.07
Account description
Opening balances
Adjusted opening balances
Capital transactions with shareholders
Recognized options granted
Sold treasury shares
Dividends
Interest on equity capital
Premium on capital transaction
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
Dividends prescribed
Closing balances
Paid-in
capital
2,718,440
2,718,440
2,718,440
Capital reserves,
Options granted and
Treasury stock
(49,535)
(49,535)
(4,818)
246
105
(5,169)
(48)
(48)
(54,401)
Income
reserves
559,989
559,989
282
282
560,271
Retained earnings/
accumulated losses
127,803
127,803
(98,813)
49
(14.924)
(83,938)
414,263
377,267
36,996
36,996
(127,464)
48
(127,803)
291
315,789
Other comprehensive
income
703,652
703,652
(3,184)
(3,184)
33,812
(36,996)
700,468
Equity
4,060,349
4,060,349
(103,349)
295
387
(14,924)
(83,938)
(5,169)
411,079
377,267
33,812
33,812
(127,512)
(127,803)
291
4,240,567
PAGE: 9 of 51 ITR – Quarterly Information – 06/30/2014 – 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
7.08.04.02
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
Dividends
Retained profit/loss for the period
Current period
01/01/2014 to 06/30/2014
Prior period
01/01/2013 to 06/30/2013
(578)
27
(605)
(578)
(58)
(58)
(636)
436,234
399,077
37,157
435,598
435,598
2,058
1,983
35
40
597
597
71
71
432,872
108,760
0
324,112
(806)
152
(958)
(806)
(58)
(58)
(864)
381,069
357,152
23,917
380,205
380,205
2,230
2,146
49
35
865
865
(157)
(157)
377,267
83,938
14,924
278,405
PAGE: 10 of 51 ITR – Quarterly Information – 06/30/2014 – 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
1.02
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
1.02.02
1.02.02.01
1.02.02.02
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
Short-term investments
Trade accounts receivable
Clients
Inventories
Taxes recoverable
Current taxes recoverable
Other current assets
Other
Noncurrent assets
Long-term receivables
Short-term investments at fair value
Trading securities
Deferred taxes
Deferred income and social contribution taxes
Other noncurrent assets
Judicial deposits
Taxes recoverable
Other
Investments
Equity interests
Investment properties
Property, plant and equipment
Property, plant and equipment in use
Intangible assets
Intangible assets
Other
Goodwill
Current quarter
06/30/2014
10,362,672
6,886,608
3,285,865
286,469
2,999,396
76,570
1,637,568
1,637,568
1,541,091
153,858
153,858
191,656
191,656
3,476,064
124,207
1,415
1,415
58,767
58,767
64,025
40,622
17,671
5,732
8,223
1,003
7,220
2,680,579
2,680,579
663,055
45,445
45,445
617,610
Prior year
12/31/2013
10,141,293
6,851,787
3,373,799
248,149
3,125,650
0
1,658,806
1,658,806
1,445,927
166,384
166,384
206,871
206,871
3,289,506
123,866
2,230
2,230
60,376
60,376
61,260
35,260
16,793
9,207
7,264
44
7,220
2,614,556
2,614,556
543,820
40,772
40,772
503,048
PAGE: 11 of 51 ITR – Quarterly Information – 06/30/2014 – 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
2.01.05
2.01.05.02
2.01.05.02.01
2.01.05.02.04
2.01.05.02.05
2.01.05.02.06
2.02
2.02.01
2.02.01.01
2.02.02
2.02.02.02
2.02.02.02.03
2.02.02.02.04
2.02.03
2.02.03.01
2.02.04
2.03
2.03.01
2.03.02
2.03.02.04
2.03.02.07
2.03.03
2.03.04
2.03.04.01
2.03.04.02
2.03.04.08
2.03.04.09
2.03.05
2.03.06
2.03.06.01
2.03.07
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
Other payables
Other
Dividends and interest on equity capital payable
Advance from clients
Profit sharing
Other
Noncurrent liabilities
Loans and financing
Loans and financing
Other payables
Other
Tax obligations
Other
Deferred taxes
Deferred income and social contribution taxes
Provisions
Consolidated equity
Paid-in capital
Capital reserves
Options granted
Premium on capital transaction
Revaluation reserve
Income reserves
Legal reserve
Statutory reserve
Additional proposed dividends
Treasury stock
Retained earnings/accumulated losses
Equity valuation adjustments
Deemed cost
Cumulative translation adjustments
Noncontrolling interest
Current quarter
06/30/2014
10,362,672
2,484,307
245,082
245,082
420,498
102,357
102,357
50,330
52,027
712,711
712,711
1,003,659
1,003,659
121,897
485,371
73,952
322,439
3,170,626
2,530,842
2,530,842
106,603
106,603
30,415
76,188
290,117
290,117
243,064
4,707,739
3,533,973
(59,852)
1,573
(61,425)
3,687
316,237
0
199,892
125,334
(8,989)
219,724
572,896
572,896
45,208
75,866
Prior year
12/31/2013
10,141,293
2,578,048
152.739
152.739
420,250
139,570
139,570
83,771
55,799
912,796
912,796
952,693
952,693
87,723
459,130
98,005
307,835
2,920,978
2,296,208
2,296,208
95,031
95,031
30,199
64,832
294,405
294,405
235,334
4,642,267
2,718,440
(57,724)
1,325
(59,049)
3,712
1,169,077
74,972
940,453
163,174
(9,522)
0
593,500
593,500
130,767
84,495
PAGE: 12 of 51 ITR – Quarterly Information – 06/30/2014 – 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
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
Attributed to shareholders of parent company
Attributed 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
Account description
Prior quarter
04/01/2013 to 06/30/2013
1,699,639
(1,141,643)
557,996
(299,060)
(174,312)
(79,701)
(4,353)
(75,348)
4,991
(50,038)
258,936
(2,483)
145,637
(148,120)
256,453
(51,691)
(59,551)
7,860
204,762
204,762
204,968
(206)
Prior period
01/01/2013 to 06/30/2013
1,821,547
(1,244,222)
577,325
(326,086)
(191,300)
(96,418)
(4,934)
(91,484)
1,739
(40,107)
251,239
32,349
142,242
(109,893)
283,588
(55,493)
(53,088)
(2,405)
228,095
228,095
227,985
110
Current period
01/01/2014 to 06/30/2014
3,605,090
(2,457,344)
1,147,746
(655,669)
(387,961)
(185,121)
(9,748)
(175,373)
3,585
(86,172)
492,077
60,828
295,084
(234,256)
552,905
(117,479)
(123,757)
6,278
435,426
435,426
432,872
2,554
0.28264
0.53667
0.25413
0.46776
0.28240
0.53625
0.25399
0.46754
Current quarter
04/01/2014 to 06/30/2014
3,177,216
(2,155,616)
1,021,600
(565,902)
(331,341)
(152,974)
(8,763)
(144,211)
10,559
(92,146)
455,698
22,168
268,673
(246,505)
477,866
(100,033)
(110,856)
10,823
377,833
377,833
377,267
566
PAGE: 13 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 Consolidated financial statements / Statement of comprehensive income
(In thousand of reais)
Account
code
Account description
4.01
Consolidated net income for the period
Current quarter
04/01/2014 to 06/30/2014
Current period
01/01/2014 to 06/30/2014
Prior quarter
04/01/2013 to 06/30/2013
Prior period
01/01/2013 to 06/30/2013
228,095
435,426
204,762
377,833
58,959
34,214
4.02
Other comprehensive income
(31,911)
(85,908)
4.02.01
Adjustment of conversion period
(31,911)
(85,908)
58,959
34,214
263,721
412,047
4.03
Consolidated comprehensive income for the period
196,184
349,518
4.03.01
Attributed to shareholders of parent company
196,044
347,313
263,915
411,079
140
2,205
(194)
968
4.03.02
Attributed to noncontrolling shareholders
PAGE: 14 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A 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
6.01.01.04
6.01.01.05
6.01.01.06
6.01.01.07
6.01.01.08
6.01.01.09
6.01.01.10
6.01.01.20
6.01.02
6.01.02.03
6.01.02.04
6.01.02.05
6.01.02.06
6.01.02.07
6.01.03
6.02
6.02.01
6.02.02
6.02.03
6.02.04
6.02.06
6.02.07
6.02.08
6.02.09
6.02.10
6.03
6.03.01
6.03.02
6.03.03
6.03.05
6.03.06
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
Provision for credit risk
Provision for tax, civil and labor liabilities
Provision for inventory losses
Provision for product warranty
Low of noncurrent assets
Accrued interest on loans and financing
Expenses plan options purchase shares
Changes in assets and liabilities
Increase (decrease) in inventories
Income and social contribution taxes paid
Employee profit sharing paid
Increase (decrease) in accounts receivable
Increase (decrease) in accounts payable
Other
Net cash from investing activities
Property, plant and equipment
Intangible assets
Receive sale of fixed assets
Cumulative translation adjustments
Premium on capital transaction
Short-term investments
Acquisition of noncontrolling
Acquisition of subsidiary
Cash acquired from subsidiary
Net cash from financing activities
Loans and financing obtained
Treasury shares
Dividends/interest on equity capital paid
Payment of loans and financing
Interest paid on loans and financing
Increase (decrease) in cash and cash equivalents
Opening cash and cash equivalents balance
Closing cash and cash equivalents balance
Current period
01/01/2014 to 06/30/2014
707,999
833,811
552,905
119,066
71,504
2,955
7,730
245
5,021
1,364
72,773
248
(131,280)
(68,663)
(156,338)
(95,035)
110,039
78,717
5,468
(454,394)
(158,315)
(8,708)
4,195
(85,559)
(2,699)
(75,755)
(5,947)
(136,528)
14,922
(341,539)
385,963
323
(221,726)
(422,998)
(83,101)
(87,934)
3,373,799
3,285,865
Prior period
01/01/2013 to 06/30/2013
485,966
755,187
477,866
105,747
63,665
2,087
19,539
2,983
5,528
3,705
73,821
246
(282,634)
(64,721)
(128,334)
(68,936)
(163,450)
142,807
13,413
165,223
(118,040)
(1,483)
1,122
33,812
(5,169)
261,249
(6,268)
0
0
80,635
1,109,750
0
(204,467)
(736,534)
(88,114)
731,824
2,302,256
3,034,080
PAGE: 15 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 Consolidated financial statements / Statement of changes in equity - 01/01/2014 to 06/30/2014
(In thousand of reais)
Account
code
5.01
5.03
5.04
5.04.01
5.04.03
5.04.05
5.04.06
5.04.07
5.04.08
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
5.06.05
5.07
Capital reserves,
Paid-in
capital Options granted and
Treasury stock
Opening balances
2,718,440
(54,012)
Adjusted opening balances
2,718,440
(54,012)
Capital transactions with shareholders
815,533
(2,128)
Increase of capital
815,533
Recognized options granted
248
Sold treasury shares
323
Dividends
Interest on equity
Goodwill on capital transaction
(2,699)
Other
Total comprehensive income
Net income for the period
Other comprehensive income (losses)
Adjustment of translation for the period
Realization at deemed cost
Internal changes in equity
(25)
Realization of revaluation reserve
(25)
Dividends paid
Dividends prescribed
Closing balances
3,533,973
(56,165)
Account description
Income
reserves
1,005,903
1,005,903
(815,000)
(815,533)
533
190,903
Other
Retained earnings/ comprehensive
accumulated losses
income
163,174
724,267
163,174
724,267
(108,795)
(35)
(108,760)
453,476
(106,163)
432,872
20,604
(106,163)
(85,559)
20,604
(20,604)
(162,797)
25
(163,174)
352
345,058
618,104
Equity
4,557,772
4,557,772
(110,390)
213
856
(108,760)
(2,699)
347,313
432,872
(85,559)
(85,559)
(162,822)
(163,174)
352
4,631,873
Non-controlling Consolidated
interest
equity
84,495
4,642,267
84,495
4,642,267
(10,834)
(121,224)
213
856
(222)
(222)
(1,550)
(110,310)
(2,699)
(9,062)
(9,062)
2,205
349,518
2,554
435,426
(349)
(85,908)
(349)
(85,908)
(162,822)
(163,174)
352
75,866
4,707,739
PAGE: 16 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 Consolidated financial statements / Statement of changes in equity - 01/01/2013 to 06/30/2013
(In thousand of reais)
Account description
Account
code
5.01
5.03
5.04
5.04.03
5.04.05
5.04.06
5.04.07
5.04.08
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
5.06.05
Opening balances
Adjustment opening balances
Capital transactions with shareholders
Recognized options granted
Sold treasury shares
Dividends
Interest on equity
Goodwill on capital transaction
Other
Total comprehensive income
Net income for the period
Other comprehensive income (losses)
Adjustments of Translation for the period
Realization of deemed cost
Internal changes in equity
Realization of revaluation reserve
Dividends paid
Dividends prescribed
Paid-in
capital
2,718,440
2,718,440
-
5.07
Closing balances
2,718,440
Capital
reserves,
Income
Options granted
reserves
Retained earnings/
and Treasury
accumulated losses
stock
(49,535) 559,989
127,803
(49,535) 559,989
127,803
(4,818)
282
(98,813)
246
49
105
282
(14,924)
(83,938)
(5,169)
414,263
377,267
36,996
36,996
(48)
(127,464)
(48)
48
(127,803)
291
(54,401)
560,271
315,789
Other
comprehensive
income
703,652
703,652
(3,184)
(3,184)
33,812
(36,996)
-
Equity
4,060,349
4,060,349
(103,349)
295
387
(14,294)
(83,938)
(5,169)
411,079
377,267
33,812
33,812
(127,512)
(127,803)
291
Non-controlling
interest
91,277
91,277
(10,732)
(214)
(444)
(10,074)
968
566
402
402
-
Consolidated
equity
4,151,626
4,151,626
(114,081)
295
387
(15,138)
(84,382)
(5,169)
(10,074)
412,047
377,833
34,214
34,214
(127,512)
(127,803)
291
700,468
4,240,567
81,513
4,322,080
PAGE: 17 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A 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
7.08.04.02
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
Dividends
Retained profit/loss for the period
Noncontrolling interest in retained profits
Current period
01/01/2014 to 06/30/2014
4,169,906
4,172,536
2,580
(5,210)
(2,234,783)
(2,226,222)
(8,561)
1,935,123
(119,066)
(119,066)
1,816,057
295,084
295,084
2,111,141
2,111,141
853,766
733,908
82,100
37,758
571,020
508,354
57,784
4,882
250,929
232,554
18,375
435,426
108,760
0
324,112
2,554
Prior period
01/01/2013 to 06/30/2013
3,701,513
3,700,404
3,814
(2,705)
(1,994,170)
(1,979,497)
(14,673)
1,707,343
(105,747)
(105,747)
1,601,596
268,673
268,673
1,870,269
1,870,269
707,951
608,264
66,188
33,499
523,271
468,373
51,400
3,498
261,214
245,432
15,782
377,833
83,938
14,924
278,405
566
PAGE: 18 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 Highlights
ƒ
ƒ
ƒ
ƒ
Net operating revenues in the second quarter of 2014 reached 1,821.5 million, for 7.2% growth over the
2Q13 and 2.1% growth over the 1Q14;
EBITDA reached R$ 311.5 million and EBITDA margin reached 17.1%. EBITDA was stable over the
previous year and grew by 4.0% over the previous quarter;
Net income totaled R$ 228.0 million, with net margin of 12.5% and growth of 11.2% over the previous
year and 11.3% over the previous quarter;
Investments in fixed assets totaled R$ 158.3 million in the first six months of 2014, being 80% in Brazilian
units and 20% in expansion projects abroad.
Key Figures
Economic Activity and Industrial Production
In this second quarter of 2014, the gradual recovery of the economic and industrial activity conditions in mature
economies was accompanied by better conditions in China. The analysis of purchasing manager indexes (PMI)
shows the continuation of the expansion of industrial activity (PMI’s above 50 indicate expansion whereas below
50 indicate contraction of industrial activity), both the USA and, to a lower intensity, Germany. China’s recovery
is discreet, but June brought the first signal of expansion in this year.
June 2014
May 2014
April 2014
Manufacturing ISM Report on Business ® (USA)
55,3
55,4
54,9
Markit/BME Germany Manufacturing PMI®
52,0
52,3
54,1
HSBC China Manufacturing PMI™
50,7
49,4
48,1
This recovery did not reach Brazil, which continued showing contraction of industrial production. The available
data indicates that until May 2014, there was a contraction of 1.6% and, in the last 12 months, the expansion
was of only 0.2%, showing further deterioration compared to 2013 growth, of only 1.2%. The expectations of the
financial market, collected by the Focus survey of the Brazilian Central Bank, are of contraction of 0.7% in
industrial production in 2014.
PAGE: 19 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 Industrial Indicators According to Categories of Use in Brazil
Change (%)
Categories of Use
May 14 / Apr 14* May 14 / May 13
Capital Goods
Intermediary Goods
Consumer Goods
Durable Goods
Semi-durable and non-durable
General Industry
-2,6
-0,9
-0,3
-3,6
1,0
-0,6
-9,7
-2,8
-2,2
-11,2
0,8
-3,2
Acummulated
On Year
12 months
-5,8
-1,8
-0,1
-3,2
1,0
-1,6
4,1
-0,8
1,1
-0,4
1,5
0,2
Source: IBGE, Research Office, Industry Coordination
(*) Series with seasonal adjustments
We note that this deterioration has been widespread, with a negative performance in practically all economic
categories, even those that maintained positive performance over the previous year, like capital goods. In this
case, there was a clear inflection, with the accumulated indicator in 2014 showing a 5.8% drop, although still
maintaining a 4.1% expansion over the previous 12 months.
Net Operating Revenue
Net Operating Revenues totaled R$ 1,821.5 million in the second quarter of 2014 (2Q14), with 7.2% growth over
the previous year (2Q13), and 2.1% growth over the previous quarter (1Q14). Organic growth (adjusting net
revenues for the transactions occurred in the period) was of 6.0% over 2Q13.
Net Operating Revenue per Market (R$ million)
External Market
Brazilian Market
1.893
1.784
1.822
52%
50%
51%
50%
48%
50%
49%
Q3
Q4
Q1
Q2
1.700
1.758
49%
50%
51%
Q2
1.478
48%
52%
Q1
2013
2014
The second quarter showed continuation of the gradual growth recovery in external markets and better
performance in the long cycle products related to energy infrastructure, especially in the Brazilian market. On the
other hand, we noticed a clear loss of dynamism in the domestic market for short cycle, serial products. These
were the products that beneficiated the most from the more competitive conditions brought by the appreciated
exchange rate from 2013, with our domestic customers of these products recovering market share over their
foreign competitors. This was no longer a growth factor in this quarter, both because this market share driven
growth has reached its limitations in a market that is expanding a very low rate, as because the Brazilian Real
has started to appreciate against the US Dollar recently. Besides theses conditions, we also
PAGE: 20 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 observed a clear preference of our Brazilian clients for reducing exposure to inventories approaching the period
of the FIFA World Cup play, avoiding the unfavorable seasonality and the negative impacts of the various formal
and informal holidays. Finally, the comparison of average rates of Real became less favorable during this period,
decreasing the contribution to revenue growth this 2Q14.
Net Operating Revenue in 2Q14 splits as follows:
ƒ
Brazilian Market: R$ 900.3 million, representing 49% of Net Operating Revenue, with 3.1% growth over
2Q13 and 0.5% growth over 1Q14;
ƒ
External Market: R$ 921.2 million, equivalent 51% of Net Operating Revenue. The comparison in Brazilian
Reais shows growth of 11.5% over the same period last year and growth of 3.7% over the previous quarter.
Considering the average US dollar, comparison shows growth of 3.5% compared to 2Q13 and growth of
10.0% over the 1Q14. Organic growth (excluding the transactions) in the external market was 9% over
2Q13.
Evolution of Net Revenues according to Geographic Market (R$ Million)
Q2 2014
Net Operating Revenues
- Brazilian Market
- External Markets
- External Markets in US$
1.821,5
900,3
921,2
413,1
Q1 2014
1.783,5
895,4
888,1
375,7
Change
2,1%
0,5%
3,7%
10,0%
Q2 2013
1.699,6
873,4
826,3
399,2
Change
7,2%
3,1%
11,5%
3,5%
External Market – Distribution of Net Revenues according Geographic Market
North America
South and Central America
Europe
Africa
Australasia
Q2 2014
Q1 2014
Change
Q2 2013
38,0%
15,2%
27,4%
10,5%
8,9%
36,0%
15,5%
26,5%
13,1%
8,9%
2 pp
-0,3 pp
0,9 pp
-2,6 pp
0 pp
32,1%
18,0%
25,8%
12,5%
11,6%
Change
5,9 pp
-2,8 pp
1,6 pp
-2 pp
-2,7 pp
Distribution of Net Revenues per Business Area
Q2 2014
Q1 2014
%
Q2 2013
%
61,7%
57,7%
3,9 pp
61,5%
0,2 pp
Brazilian Market
24,1%
23,0%
1,1 pp
25,7%
-1,6 pp
External Market
37,5%
34,7%
2,8 pp
35,8%
1,8 pp
25,3%
23,5%
1,8 pp
21,2%
4,1 pp
Brazilian Market
15,1%
12,8%
2,3 pp
12,3%
2,8 pp
External Market
10,2%
10,8%
-0,5 pp
8,9%
1,3 pp
Electro-electronic Industrial Equipments
Energy Generation , Transmission and Distribution
Electric Motors for Domestic Use
7,0%
12,4%
-5,4 pp
10,9%
-3,9 pp
Brazilian Market
4,8%
8,8%
-4 pp
7,7%
-2,9 pp
External Market
2,2%
3,6%
-1,4 pp
3,2%
-1 pp
Paints and Varnishes
6,1%
6,4%
-0,3 pp
6,5%
-0,4 pp
Brazilian Market
5,4%
5,6%
-0,2 pp
5,7%
-0,3 pp
External Market
0,6%
0,7%
-0,1 pp
0,8%
-0,1 pp
PAGE: 21 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 Business Areas
In the Industrial Electro-Electronic Equipment area, performance in the Brazilian market was characterized
by de retraction of industrial activity in anticipation of the FIFA World Cup hosting, mainly in serial, short-cycle
products, which normally used in machine-tools, with limited customization. As discussed above, we noticed that
the recovery cycle created by the new level of the exchange rate from 2013 onwards, which increase the
competitiveness of local machinery manufacturers compared to the imported competitors and allowed them to
regain some market share back, has probably run its course. In the long-cycle products, which commonly applied
in large projects, such as process and infrastructure industries, the market continues to show limited activity and
is concentrated in few specific segments.
In the external market, the results were better, due to a more aggressive competitive positioning and the
continued expansion of products and applications. In some markets, these factors were compounded by
improved macroeconomic conditions, with a gradual recovery of activity providing some additional expansion
opportunities, mainly in places like North America and Europe. In other cases, such as China, we were able to
maintain a good performance even without the additional macroeconomic push. Finally, in some smaller markets,
such as Africa, Australia, and South America, the relative importance of industries like mining, which are in a
cyclical slowdown, limits our growth.
In the Energy Generation, Transmission and Distribution (GTD) business area, we still observing a gradual
improvement in competitive conditions, with stronger demand combined with a gradual elimination of global
production capacity excess, resulting in positive impacts over prices and profitability. In Brazil, the weak rainy
season and its impact on the generation capacity of hydroelectric plants has resulted in growing the demand for
wind generation and making viable energy sources such as small hydroelectric plants (PCH) and biomass, as
well as increasing the urgency of investments in T&D. We continue to observe a consistent expansion in this
quarter and positive trends for the coming quarters, when we should begin to see delivery of the orders captured
over the recent months and, thus, recognized as revenues.
On the other hand, the Motors for Domestic Use business area showed deceleration this quarter. This was a
combination of unfavorable seasonality, with the natural reduction of business, and of the anticipation of the FIFA
World Cup, that typically causes a shift in consumer demand, from the WEG electric motors’ bearing “white
goods” towards TV sets. Furthermore, we also note in this case the exhaustion of positive impact of the exchange
rate on the competitiveness of local production and of the incentives for Brazilian consumer.
Finally, in Paint and Varnishes business area, we also observe the effect of decrease in durable consumer
goods activity and industrial production in Brazil, which was counterbalanced by the diversity of market segments.
We continue to explore business synergies with other WEG business areas and expand the product portfolio,
entering in new segments.
Cost of Goods Sold
Cost of Goods Sold (COGS) totaled R$ 1,244.2 million in 2Q14, 9.0% above 2Q13 and 2.6% above 1Q14. Gross
margin reached 31.7%, with a reduction of 1.1 percentage points over 2Q13 and reduction of 0.3 percentage
points over 1Q14.
The interruption of the consistent expansion trend of gross margin was mainly due to: (i) the difficulty of realign
sales prices at the necessary speed, especially under unfavorable domestic market conditions; (ii) lower than
expected revenue growth. The positive impacts of productivity gains from product and process engineering
innovations and of the reduction of payroll taxes were not sufficient to compensate the negative impacts
mentioned above.
Average London Metal Exchange (LME) spot copper prices rose by 4.6% in the 2Q14 compared to the average
of 2Q13 and fell by 5.1% compared to the average of 1Q14. Steel prices in the international markets rose by
PAGE: 22 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 7% over 2Q13 and fell by 1% over 1Q14. It is important to note that these price variations are denominated in
US dollar and are compounded by the exchange rate.
Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses (SG&A) represented 15.8% of net operating revenue
in the 2Q14, 0.9 percentage points higher than the 14.9% of the 2Q13 and 0.2 percentage points lower than
16.0% of the 1Q14. In absolute terms, operating expenses grew by 13.3% over 2Q13 and by 0.8% over the
previous quarter.
EBITDA and EBTIDA Margin
As a result of aforementioned impacts, EBITDA in 2Q14, calculated according to the methodology defined by
CVM in the Instruction nº 527/2012, totaled R$ 311.5 million, nearly unchanged over 2Q13 and 4.0% above the
1Q14. EBITDA margin reached 17.1%, 1.3 percentage points lower than 2Q13 and 0.3 percentage points higher
than 1Q14.
66,0
(97,3)
55,9
(18,5)
FX Impact on
Revenues
312,5
Volumes,
Prices &
Product Mix
Changes
EBITDA Q2 13
(19,9)
COGS (ex
depreciation)
Selling
Expenses
General and
Administrative
Expenses
(0,8)
13,5
Profit Sharing
Program
Other
Expenses
311,5
EBITDA Q2 14
Net Financial Results
In this quarter, net financial result was positive in R$ 32.3 million (negative result of R$ 2.5 million in 2Q13 and
positive R$ 28.5 million in 1Q14). Financial revenues totaled R$ 142.2 million in 2Q14 (R$ 145.6 million in 2Q13
and R$ 152.8 million in 1Q14). Financial expenses totaled R$ 109.9 million (148.1 million in 2Q13 and R$ 124.4
million in 1Q14). Net financial result growth of 13.6% over the previous quarter is a result of increase in interest
rates obtained on financial instruments in the Brazilian market and reduced exchange rate exposure in debt
compared to 2013.
PAGE: 23 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 Income TAX
Income Tax and Social Contribution on Net Profit provision in 2Q14 reached R$ 53.1 million (R$ 59.6 million on
2Q13 and R$ 70.7 million on 1Q14). Additionally, R$ 2.4 million were recorded as “Deferred income tax / social
contribution” debt (credit of R$ 7.9 million in 2Q13 and R$ 8.7 million in 1Q14).
Net Income
As a result of aforementioned impacts, net income for 2Q14 was R$ 228.0 million, an increase of 11.2% over
2Q13 and 11.3% over the previous quarter. The net margin of the quarter was 12.5%, 0.5 percentage points
higher than 2Q13 and 1.0 percentage point higher than the 1Q14.
Cash Flow
708,0
(454,4)
(341,5)
3.373,8
3.285,9
Investing
Operating
Cash December 2013
Financing
Cash June 2014
Cash flow from operating activities totaled R$ 708.0 million in the first half of 2014, an increase of 46% over the
same period last year. The expansion was due to the increase in cash generated from operations, mainly with
increase in net income before depreciation, besides the reduction of the working capital needs, especially the
reduction of receivables, more than offsetting the higher consumption of cash with payments of income tax and
profit sharing, which reflect the results obtained in 2013.
Investing activities consumed R$ 454.4 million in the first half of 2014, reverting a cash flow situation observed
in 2013. Highlights were the acquisitions of WEG Balingen, in Germany, Sinya Group and CMM, and the
acceleration of investments in expansion and modernization of productive capacity program.
Finally, financing activities consumed R$ 341.5 million in the first half of the year, also reverting the cash flow
situation observed in the previous year. We performed net amortizations of R$ 37.0 million (new debt issued of
R$ 385.9 million and amortizations of R$ 423.0 million), which compares with net increase of R$372.2 million in
new funding in 2013.
Investments
Investments in fixed assets for capacity expansion and modernization totaled R$ 158.3 million in the first six
months of 2014, being 80% of it destined to the industrial plants and other installations in Brazil and the remaining
amount to production units and other subsidiaries abroad. The consolidation of Sinya e CMM acquisition added
approximately R$ 57.2 million in additional fixed assets.
PAGE: 24 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 Outside Brazil
Brazil
94,0
56,8
6,0
61,3
11,8
63,9
15,6
61,1
13,1
64,3
8,4
50,7
49,5
48,3
48,0
55,9
Q1
Q2
Q3
Q4
Q1
23,5
70,6
Q2
2014
2013
Our industrial production capacity expansion and modernization program for 2014 foresees investments of
approximately R$ 592 million, the highlights being the first stages of new industrial plants in China and México,
with expansion and verticalization of the production capacity of industrial electric motors. In other less dynamic
markets, investments are being reassessed so that execution match effective demand expansion.
Debt and Cash Position
On June 30, 2014 cash, cash equivalents and financial investments totaled R$ 3,363.8 million, mainly in shortterm, invested in Brazilian currency in first-tier banks, in fixed income instruments linked to the CDI. Gross
financial debt totaled R$ 3,243.6 million, being 22% in short-term and 78% in long-term.
June 2014
December 2013
June 2013
Cash & Financial instruments
3.363.850
3.376.029
3.036.107
- Current
- Long Term
3.362.435
1.415
3.373.799
2.230
3.034.080
2.027
Debt
3.243.553
100%
3.209.004
100%
3.048.764
100%
712.711
22%
912.796
28%
1.327.078
44%
- Current
- In Brazilian Reais
381.728
12%
462.336
14%
855.787
28%
- In other currencies
330.983
10%
450.460
14%
471.291
15%
- Long Term
- In Brazilian Reais
- In other currencies
Net Cash (Debt)
2.530.842
78%
2.296.208
72%
1.721.686
56%
1.936.275
60%
2.048.766
64%
1.454.531
48%
594.567
18%
247.442
8%
267.155
9%
120.297
167.025
(12.657)
At the end of the 2Q14 WEG had net cash of R$ 120.3 million (net debt of R$ 12.7 million in June 30, 2013).
Over the quarter we raised new funding on attractive terms of maturities and fees, increasing the duration and
lengthening the debt total profile.
The characteristics of the debt are:
ƒ The total duration debt is 22.8 months and the long-term portion is 28.1 months. Duration portion
denominated in Brazilian Reais is 20.1 months and for the portion in foreign currencies is 29.6 months.
ƒ The weighted average cost of fixed-rate denominated in Brazilian Reais is approximately 6.1% per year.
Floating rate contracts are indexed mainly by the Brazilian long-term interest rate (TLJP).
PAGE: 25 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 Dividends and interest on stockholder`s equity
Over the first half of 2014, the Board of Directors approved the following compensation events to shareholders:
ƒ
ƒ
On March 25, as interest on stockholders’ equity (JCP), to shareholders on said date, in the gross amount
of R$ 51.8 million;
On June 24, as interest on stockholders’ equity (JCP), to shareholders on said date, in the gross amount
of R$ 56.9 million;
In addition, on July 22, the Board of Directors approved intermediate dividends related to the net income for the
first half of 2014, in the total amount of R$ 125.3 million to the shareholders on said date. These proceeds will
be paid from August 13, 2014 onwards. Amounts declared as remuneration to shareholders in the first half
represent 54.1% of net income for the period.
Dividends
Interest on Stockholders' Equity
Gross Total
Net Earnings
Total Dividends / Net Earnings
1st Half
2014
125,3
108,8
234,1
432,9
54,1%
1st Half
%
2013
114,8
83,9
198,7 17,8%
377,3
52,7%
Our policy is to declare interest on stockholders equity quarterly and declare dividends based on profit earned
each semester, thus, we reported six different earnings each year, which is paid semiannually.
WEGE3 Share Performance
The common shares issued by WEG, traded under the code WEGE3 at BM&F Bovespa, ended the last trading
session on June 2014 quoted at R$ 28.29, with nominal gain of 18.0% in the year. Considering the dividends and
interest on stockholders equity declared in the first half, the increase was of 19.7% in 2014.
PAGE: 26 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 30,00
3.500
Shares Traded (thousands)
3.000
2.500
20,00
2.000
15,00
1.500
Traded shares (thousands)
WEGE3 share prices
25,00
WEGE3
10,00
1.000
5,00
0,00
500
0
The average daily traded volume in 2Q14 was R$ 15.6 million (R$ 16.3 million in 2Q13). Throughout the quarter
133,501 stock trades were carried out (134,061 stock trades in 2Q13), involving 35.3 million shares and moving
R$ 938.6 million (R$ 1,027.8 million in 2Q13).
Capital Increase With Shares
The Extraordinary Shareholders’ Meeting, held on April 23, 2014, approved the Company’s capital increase, in
the amount of R$ 815,532,131.00, increasing it from R$ 2,718,440,437.00 to R$ 3,533,972,568.00, with a 30%
stock bonus (three new ordinary shares for each 10 ordinary shares held).
The shareholders registered in the Company’s book on April 23, 2014 were benefited. The bonus shares were
included in the shareholders’ positions on April 28, 2014, and they were available on April 29, 2014.
After a period in which shareholders could, if they wished to, transfer fractions of shares resulting from the stock
bonus, these fractions were grouped and sold at auction on June 13, 2014, at BM&FBOVESPA. In this auction,
were sold 1.458 ordinary shares, without par value. The values obtained with the sale of shares in the auction
(R$ 28.391083676 per share) were paid to shareholders, pro rata to the fractions held by them before the auction,
on June 26, 2014.
PAGE: 27 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 WEG S.A.
Notes to financial statements
At June 30, 2014
(In thousands of reais, except when indicated otherwise).
1. Company information
WEG S.A. (the “Company”) is a publicly traded company with main place of business at Avenida Prefeito Waldemar Grubba,
no 3.300, in Jaraguá do Sul - SC, Brazil, holding company member of the WEG Group, and its business purpose is the
manufacture and marketing of capital goods, such as, electric motors, generators and transformers; control and protection of
electric circuits and industrial automation; electric traction solutions (land and sea); solutions for the generation of renewable
and distributed energy, exploring all opportunities in small hydroelectric plants and thermal biomass, wind and solar energy
sources; no-breaks and alternators for groups of generators; electric substations; industrial electrical and electronic
equipment systems; and industrial paint & varnish. The operations are performed through manufacturing facilities located in
Brazil, Argentina, Mexico, United Stated, Portugal, Austria, South Africa, India, and China.
The Company has shares traded on BM&F Bovespa under the code “WEGE3” and has been listed since June 2007 in
the special segment of corporate governance called New Market.
The Company has American Depositary Receipts (ADR) - Level 1 that are traded on over-the-counter (OTC) market, in
the United States under the symbol WEGZY.
2. Accounting policies
The quarterly information have been prepared in accordance with the rules of the Brazilian Securities Commission (CVM) applicable
to the preparation of Quarterly Information (ITR), using the historical cost basis of value, except for the measurement at fair value
of certain financial instruments, when required by the standards.
Authorization to complete the preparation of these quarterly information was granted at the executive board meeting on July 11,
2014.
The accounting policies, basis of consolidation and methods of calculation adopted in the preparation of quarterly information, as
well as major uncertainties in the estimates and judgments used in applying the accounting policies are the same practiced in
preparing the financial statements for the year ended 12.31.2013.
3. Estimates and assumptions
The financial statements included the use of estimates that considered past and current event experiences, assumptions related
to future events and other objective and subjective factors. Significant items subject to these estimates and assumptions include:
a) credit risk analysis for the determination of the allowance for doubtful accounts;
b) review of the economic useful life of fixed assets and their recovery in operations;
c) impairment of intangible assets;
d) fair value measurement of financial instruments;
e) commitments with employees benefit plans;
f) transactions with stock option plan;
g) deferred income tax assets on income and social contribution tax losses, and
h) Provisions, for contingencies;
The settlement of transactions involving these estimates may result in amounts different from those recorded in the quarterly
information statements due to the misstatements inherent to the estimate process. Estimates and assumptions are periodically
reviewed.
PAGE: 28 of 51 4. Cash and cash equivalents
COMPANY
06/30/14
12/31/13
a) Cash and banks
b) Short-term investments
In local currency
Bank Deposit Certificate (CDB), Repurchase operations
and Investment funds
In foreign currency
Certificates of Deposits Abroad
Other balances held abroad
SWAP
NDF - “Non Deliverable Forwards”
TOTAL
CONSOLIDATED
06/30/14
12/31/13
44
848,178
848,178
28
870,878
870,878
286,469
2,999,396
2,947,012
248,149
3,125,650
3,027,945
848,178
848,222
870,878
870,906
2,947,012
51,085
25,744
25,341
1,299
3,285,865
3,027,945
96,036
67,997
28,039
553
1,116
3,373,799
Investments in Brazil:
Are remunerated at the rates of 100% to 103.5% of the CDI (100% to 103.5% of CDI at December 31, 2013).
Investments abroad:
Certificates of deposits issued by foreign financial institutions are bear interest as follows:
- In Euros with interest of 0.15% to 0.52% p.a. at the original amount of EUR 1,934, of which balance amounts to R$ 5,810 (R$
25,002 at December 31, 2013);
- In US dollars with interest of 0.20% to 0.41% p.a. at the original amount of US$ 9,046, of which the balance amounts to R$
19,934 (R$ 42,995 at December 31, 2013);
- In the original currency with interest from 2.0% to 26.75% p.a. at the amount of R$ 25,341 (R$ 28,039 at December 31, 2013),
Financial investments readily convertible to a known amount of cash, and aren’t subject to significant risks of change in value. For
these, were considered as cash equivalents in the financial statements.
5. Short-term investments
Certificate of deposit and repurchase operations
Others
TOTAL
Current assets
Noncurrent assets
COMPANY
06/30/14
12/31/13
54,565
54,565
54,565
-
CONSOLIDATED
06/30/14
12/31/13
76,570
1,415
2,230
77,985
2,230
76,570
1,415
2,230
The Company has investments in total amount of R$ 76,570, which are remunerated at the rates of 100% to 103.5% of the CDI.
These investments are not recognized as cash and cash equivalent once they do not have immediate liquidity characteristics.
6. Trade accounts receivable
CONSOLIDATED
06/30/14
12/31/13
a) Breakdown of balances
Domestic Market
External Market
SUBTOTAL
Present value adjustment
Allowance for losses on trade receivables
TOTAL
TOTAL
816,598
857,471
1,674,069
(5,573)
(30,928)
1,637,568
1,674,069
833,903
856,826
1,690,729
(3,950)
(27,973)
1,658,806
1,690,729
PAGE: 29 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A b) Losses on trade accounts receivable for the period
c) Maturity of trade notes
Not yet due
Due: Up to 30 days
Over 30 days
Version: 1 1,128
2,345
1,449,056
97,058
127,955
1,470,047
104,446
116,236
The breakdown of provision with losses on trade accounts receivable is as follows:
Balance at 01/01/2013
Losses written-off
Setting up of provisions
Reversal of provisions
Balance at 12/31/2013
Losses written-off
Setting up of provisions
Reversal of Provisions
Balance at 06/30/2014
(18,190)
2,345
(14,068)
1,940
(27,973)
1,128
(4,083)
(30,928)
7. Inventories
Finished products
Products in process
Raw materials and others
Imports in transit
Provision for slow moving
Total inventories - domestic market
Finished products
Products in process
Raw materials and others
Provision for slow moving
Total inventories - external market
CONSOLIDATED
06/30/14
12/31/13
300,583
271,911
315,812
260,049
287,786
248,487
40,784
63,501
(11,452)
(11,012)
933,513
832,936
402,130
109,040
118,607
(22,199)
607,578
427,344
93,497
114,545
(22,395)
612,991
OVERALL TOTAL
1,541,091
1,445,927
The breakdown of provision for slow moving is as follows:
Balance at 01/01/2013
(27,013)
Reversal of provision
6,915
Recognition of a provision
(13,309)
Balance at 12/31/2013
(33,407)
Reversal of provision
4,504
Recognition of a provision
(4,749)
Balance at 06/30/2014
(33,652)
Inventories are insured and their coverage is determined considering the values and level of risk involved. Recognition and
reversal of provision of loss for slow moving are recorded in cost of goods sold.
PAGE: 30 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 8. Taxes recoverable
State VAT (ICMS) on capital expenditures
Value Added Tax (IVA) from foreign subsidiaries
PIS/COFINS on capital expenditures
ICMS
IPI
IRPJ/CSLL recoverable
PIS/COFINS
REINTEGRA
Other
TOTAL
Short-term
Long-term
COMPANY
06/30/14
12/31/13
13,261
10,573
13,261
10,573
13,261
10,573
-
CONSOLIDATED
06/30/14
12/31/13
27,592
25,989
58,887
67,222
2,019
2,585
24,290
22,991
16,687
13,368
24,439
21,552
14,051
7,335
1,233
17,882
2,331
4,253
171,529
183,177
153,858
166,384
17,671
16,793
Credits will be realized by the Company and its subsidiaries through regular tax collection, also including tax credits subject to
refund and/or offset.
9. Related parties
The financial statements include the financial information of the Company and its subsidiaries as in Note 10. 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:
COMPANY
BALANCE SHEET
Noncurrent assets
Management of financial resources
WEG Equipamentos Elétricos S.A.
Current liabilities
Agreements with administrators
Noncurrent liabilities
Management of financial resources
WEG Equipamentos Elétricos S.A.
CONSOLIDATED
06/30/14
12/31/13
06/30/14
12/31/13
-
1,193
-
-
-
1,193
-
-
-
-
3,020
3,020
2,206
2,206
532
-
-
-
532
-
-
-
COMPANY
INCOME STATEMENT
Management compensation:
a) Fixed (fees)
Board of Directors
Executive Board
b) Variable (profit sharing )
Board of Directors
Executive Board
CONSOLIDATED
06/30/14
06/30/13
06/30/14
06/30/13
960
494
466
941
508
433
9,748
989
8,759
8,763
1,017
7,746
614
316
298
934
504
430
6,001
632
5,369
7,062
1,009
6,053
PAGE: 31 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 Additional information:
a) Business transactions
The transactions of purchase and sale of inputs and products are made under the same conditions with unrelated third parties;
b) Management of financial resources
The financial and commercial operations between Group companies are recorded, in compliance with the requirements of the
Group’s bylaws;
The credit/debit contracts entered into with Administrators are recorded subject to interest between 95% and 100% of the CDI
variation;
c) Services provision and other covenants
WEG Equipamentos Elétricos S.A. entered into an agreement for “Guarantees and Other Covenants” with Hidráulica Industrial
S.A. Ind. e Com - HISA, for WEG to be guarantor in loan operations and provide guarantee to customers (Performance Bond,
guarantee insurance, etc.);
d) Securities and guarantees
WEG S.A. granted guarantees and sureties to foreign subsidiaries, in the amount of US$ 184.7 million (US$ 196.9 million at
December 31, 2013);
e) Management compensation
Board of Directors members were paid the amount of R$ 989 (R$ 1,017 at June 30, 2013) and the executive officers were paid
the amount of R$ 8,759 (R$ 7,746 at June 30, 2013), for their services, aggregating the total of R$ 9,748 (R$ 8,763 at June 30,
2013).
Was planned the participation of 0% to 2.5% of net income to be paid to management from that achieved minimum operating
performance targets. The provision is recognized in profit and loss, in the amount of R$ 6,001 (R$ 7,062 at June 30, 2013), under
other operating expenses. The Board members receive additional corporate benefits, such as: health and dental insurance, life
insurance, supplementary pension benefits, among others.
10. Deferred taxes
Deferred income tax and social contribution tax credits and debts were determined in accordance with each country’s ruling
standards.
a) Breakdown:
Income tax losses
Social contribution tax losses
Temporary differences:
Provision for contingencies
Taxes questioned in court
Losses on trade receivables
Losses on low movement inventories
Labor severance pay and for contract termination
Freight and sales commissions
Accounts payable (electric energy, technical assist and others)
Employee profit sharing
Other additions and exclusions
Adjustment of transition tax regime
Accelerated depreciation incentive - Law n° 11.196/05
Deemed cost of PP&E
TOTAL
Noncurrent assets
Noncurrent liabilities
COMPANY
06/30/14
12/31/13
105
267
146
172
3,638
590
(52)
(1,528)
2,899
2,899
-
3,576
561
(52)
(1,547)
2,977
2,977
-
CONSOLIDATED
06/30/14
12/31/13
35,815
35,917
8,781
7,947
40,108
28,492
4,875
8,600
12,273
8,974
36,607
8,073
13,465
(152,037)
(6,065)
(279,311)
(231,350)
58,767
(290,117)
40,206
27,038
5,275
9,887
12,656
8,858
22,915
10,759
15,005
(133,428)
(5,522)
(291,542)
(234,029)
60,376
(294,405)
PAGE: 32 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 b) Estimated realization term
Management estimates that deferred assets arising from temporary differences will be realized in proportion to realization of
contingencies, losses and projected obligations.
In relation to deferred tax credits calculated on income and social contribution tax losses, management estimates that they will
be realized within the next 5 years, with a view to projecting future profits.
That estimate is based on the projection of discounted cash flow assumptions calculated periodically according to the prospects
of each business.
11. Investments
11.1. Investments in subsidiaries
País
Ajusted
Shareholde
r equity
Investments in Capital (%)
Equity
Book Value
P&L
06/30/14
Direct Indirect
100.00
-
12/31/13
Direct Indirect
100.00
-
100.00
99.91
100.00
99.91
0.09
06/30/14
06/30/13
12/31/13
WEG Equipamentos Elétricos S.A. (*)
RF Reflorestadora Ltda.
WEG Tintas Ltda.
WEG Amazônia S.A.
3,125,993
355,939
168,600
106,097
2,293
12,271
39,819
699
0.02
99.98
0.02
99.98
-
-
6
6
WEG Administradora de Bens Ltda.
WEG Logística Ltda.
WEG Linhares Equips Elétricos S.A.
WEG Drives & Controls Automação
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.
Ind. de Tintas e Vernizes Paumar
S.A.
WEG-Jelec Oil and Gas Sol. Aut.
Ltda.
Zest Electric Motors (Pty) Ltd.
Zest Energy (Pty) Ltd.
Shaw Controls (Pty) Ltd.
WEG Transf. África (Pty) Ltd.
Electric/Instrumentations
Eng.Cont.(Pty)
WEG Germany GmbH.
Watt Drive GmbH.
Wurttembergische Elektromotoren
GmbH
WEG Equipamientos Electricos S.A.
Pulverlux S.A.
EPRIS Argentina S.R.L.
WEG Austrália Pty Ltd.
Watt Drive Antriebstechnik GmbH
WEG International Trading GmbH
WEG Benelux S.A.
WEG Chile S.A.
WEG Nantong CO. Ltd.
Changzhou Machine Master Co., Ltd.
Changzhou Master Machinery
Changzhou Sinya Electromotor Co.,
Ltd.
Changzhou Yatong Jiewei Elect., Ltd.
Wuxi Ecovi Technologies Co., Ltd.
Jiangsu Shiya Elect. Technolog. Co.,
Ltd
The First Drive Technologies Co., Ltd.
WEG (Jiangsu) Electric Equip. Co.
Ltd.
Watt Euro-Drive PTE Ltd.
WEG Singapore Pte. Ltd.
24,312
71,108
147,436
1,053
7,178
13,700
4.41
-
95.59
100.00
100.00
5.00
0.01
95.00
100.00
99.99
1
-
583
-
1,074
1
1,656
1
350,766
10
38,722
37,444
41,439
6,990
32,263
2,865
750
(3,392)
(7)
89.20
0.03
91.75
10.80
99.90
50.00
99.97
62.32
8.25
99.99
0.05
91.75
0.01
99.90
50.01
99.95
62.32
8.25
19,627
(6)
37,812
1,799
312,885
10
6,416
305,583
20
6,420
4,075
46
-
100.00
-
100.00
-
-
-
-
77,507
1,606
-
100.00
0.01
99.99
-
-
-
-
10
150,662
170
3,482
4,187
7,887
1,109
(1,915)
101
-
100.00
100.00
76.09
100.00
100.00
-
100.00
96.62
70.00
89.47
100.00
-
-
-
-
17,349
46,790
3,819
(4,214)
(1,334)
72
-
86.67
100.00
100.00
-
86.67
100.00
100.00
-
-
-
-
6,413
54,367
1,047
129
25,899
6,115
151
36,170
24,991
81,504
10,930
(414)
(99)
12,303
360
(9)
(2,506)
(2,638)
710
982
9,237
(352)
(17)
10.44
8.00
-
100.00
89.56
100.00
100.00
100.00
100.00
100.00
100.00
92.00
100.00
100.00
100.00
10.44
0.01
8.00
-
89.55
100.00
100.00
100.00
100.00
100.00
99.99
92.00
100.00
-
1,284
-
906
262
5,663
1,994
-
5,970
2,156
-
10,717
23,011
(4,096)
5,899
(7,903)
(1,225)
-
100.00
100.00
100.00
-
-
-
-
-
9,569
8,908
-
-
100.00
100.00
-
-
-
-
-
23,998
15,152
2,899
(28)
948
498
-
100.00
100.00
100.00
-
100.00
100.00
-
-
-
Brazil
South
Africa
Germany
Argentina
Australia
Austria
Belgium
Chile
China
Singapore
0.09
363,332 298,610
06/30/14
2,293
12,259
58
-
3,962
12,867
3,125,993
3,122,002
168,600
106,000
167,488
98,702
PAGE: 33 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A WEG Colômbia Ltda.
Colombia
WEG Middle East Fze.
Arab
Emirates
WEG Ibéria S.L.
WEG Ibéria Industrial S.L.
WEG Electric Corp.
Electric Machinery Holding Company
WEG Service CO.
WEG France SAS
Zest Eletric Ghana Ltd.
E & I Electrical Ghana Ltd.
WEG Industries (Índia) Private Ltd.
WEG Electric (Índia) Private Ltd
WEG Electric Motors (UK) Ltd.
WEG Itália S.R.L.
WEG Electric Motors Japan CO. Ltd.
Watt Euro-Drive SDN BHD
WEG México S.A. de C.V.
WEG Transform. México S.A. de C.V.
Voltran S.A. de C.V.
WEG Peru S.A.
WEG Euro Ind. Electrica S.A.
WEG Electric CIS
WEG Scandinavia AB.
WEG Indústrias Venezuela C.A.
E & I Zambia Ltd.
ENI Eletrical Tanzania (Pty) Limited
ENI Eletrical Moçambique (Pty)
Limited
Spain
USA
France
Ghana
India
England
Italy
Japan
Malaysia
Mexico
Peru
Portugal
Russia
Sweden
Venezuela
Zambia
Tanzania
Mozambique
TOTAL
(*)Equity pickup adjusted by unearned income
Version: 1 12,395
106
1.00
99.00
1.00
99.00
(3)
(2,181)
904,438
48,916
142,755
25,734
3,245
13,761
(1,462)
(53)
110,486
1,192
14,354
12,849
1,608
3,204
136,351
41,328
54,511
1,272
43,462
4,359
3,599
7,347
(1,247)
(871)
541
40,310
178
7,980
497
2,046
1,256
(985)
(238)
(1,816)
595
227
941
259
162
9,117
1,541
4,658
(238)
2,846
(314)
(1,071)
(1,946)
(2,271)
(1,014)
0.79
5.00
0.07
0.05
5.74
-
100.00
100.00
100.00
99.21
100.00
100.00
100.00
100.00
90.00
100.00
95.00
100.00
99.93
100.00
100.00
100.00
60.00
60.00
99.95
94.26
100.00
100.00
100.00
50.00
100.00
0.79
4.99
0.07
0.01
0.05
5.74
-
100.00
100.00
100.00
99.21
100.00
100.00
100.00
100.00
90.00
99.99
94.99
100.00
99.93
100.00
100.00
99.99
60.00
60.00
99.95
94.26
100.00
100.00
99.99
50.00
-
76
30
1
(1)
126
-
(6)
(1)
-
66.67
-
-
1
124
131
2
1
258
-
1,123
60
9
1
1
2,496
-
1,116
32
9
1
1
2,856
-
-
-
-
-
399,077
357,152
3,732,456
3,714,150
89
11.2. Acquisitions 2014
(i) Zest Electric Motors (Pty) Ltd.
In January 2014, the subsidiary WEG Equipamentos Elétricos S.A., acquired 3.38% of Zest Electric Motors (Pty) Ltd. The goodwill,
in the amount of R$ 2.699, was initially measured as transferred payment exceeding amount in relation to acquired net assets and
recognized in equity as capital transaction.
(ii) Württembergische Elektromotoren GmbH.
In February 2014, the subsidiary WEG Equipamentos Elétricos S.A., acquired the company Württembergische Elektromotoren
GmbH, manufacturer of electric motors and gearmotors in Germany. The goodwill, in the amount of R$6.265, was initially
measured as transferred payment exceeding amount in relation to acquired net assets.
(iii) Changzhou Sinya Electromotor Co., Ltd. – SINYA Group
In June 2014, after approval from Chinese regulators, the subsidiary WEG Equipamentos Elétricos S.A., acquired the company
Changzhou Sinya Electricmotor Co., Ltd., a manufacturer of electric motors for washing machines and clothes dryers in China.
The goodwill in the amount of R $ 64,653, was initially measured as the excess of the consideration transferred over the net assets
acquired.
(iv) Changzhou Master Machinery Co., Ltd e Changzhou Machine Master Co., Ltd
In June 2014, after approval from Chinese regulators, the subsidiary WEG Equipamentos Elétricos S.A., acquired the companies
Changzhou Master Machinery Co., Ltd and Changzhou Machine Master Co., Ltd., manufacturers of components in China. The
goodwill in the amount of R $ 47,150, was initially measured as the excess of the consideration transferred compared to the net
assets acquired.
PAGE: 34 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 12. Property, plant and equipment
The Company, capitalized in the first half of 2014, borrowing costs in the amount of R$ 76 (R$ 592 at December 31, 2013) regarding
ongoing constructions. The costs are capitalized until the moment of transfer of construction in progress to property, plant and
equipment in use.
COMPANY
06/30/14
12/31/13
1,440
1,440
5,639
5,639
7,079
7,079
Land
Construction and facilities
Equipment
Furniture and fixtures
Hardware
Construction in progress
Reforesting
Other
Subtotal
Accumulated deprec,/depletion
Construction and facilities
Equipment
Furniture and fixtures
Hardware
Reforesting
Other
TOTAL
Annual depreciation rate (%)
02 to 03
05 to 20
07 to 10
20 to 50
-
(2,307)
(2,307)
4,772
CONSOLIDATED
06/30/14
12/31/13
334,087
337,735
906,439
878,537
2,978,590
2,831,826
97,607
95,235
85,603
84,030
77,993
84,418
52,379
51,571
65,178
39,246
4,597,876
4,402,598
(2,249)
(2,249)
4,830
(1,917,297)
(232,807)
(1,544,616)
(50,252)
(59,517)
(12,629)
(17,476)
2,680,579
(1,788,042)
(217,469)
(1,434,703)
(49,010)
(58,802)
(11,033)
(17,025)
2,614,556
a) Summary of changes in property, plant and equipment - consolidated:
12/31/13
PP&E Classification
Land
Construction and facilities
Equipment
Furniture and fixtures
Hardware
Construction in progress
Reforesting
Other
TOTAL
337,735
661,068
1,397,123
46,225
25,228
84,418
40,538
22,221
2,614,556
Transfer Acquis. Write-offsDeprec. and
between
depletion
classes
(860)
63
25,387
8,821
(915)
(11,464)
29,682 115,045
417
4,655
365
5,409
(49,303) 46,570
808
(6,548) 35,298
- 216,669
(2,988)
(65)
(18)
(12)
(91,370)
(3,135)
(4,490)
-
(1,596)
(1,781)
(113,836)
(701)
(5,559)
-
Exchange
effect
(2,851)
(9,265)
(13,518)
(742)
(408)
(3,680)
-
(787)
(31,251)
06/30/14
334,087
673,632
1,433,974
47,355
26,086
77,993
39,750
47,702
2,680,579
PAGE: 35 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 b) Amounts offered in guarantee – PP&E items were provided as collateral for loans, financing, labor claims and tax suits in the
amount of R$ 23,118 (R$ 23,118 at December 31, 2013).
13. Intangible assets – consolidated
Software license
Right to use property
Other
Subtotal
Goodwill - Acquisition of subsidiaries
TOTAL
Amortization/
Years
5
50 - 99
5
-
Cost
83,169
25,045
32,815
141,029
638,963
779,992
Accumulated
Amortization
(59,593)
(16,979)
(19,012)
(95,584)
(21,353)
(116,937)
06/30/14
12/31/13
23,576
8,066
13,803
45,445
617,610
663,055
23,733
7,840
9,199
40,772
503,048
543,820
a) Summary of changes in intangible assets:
Software license
Right to use property
Other
Subtotal
Goodwill - Acquisition of subsidiaries
TOTAL
12/31/13
Additions
Amortization
23,733
7.840
9,199
40,772
503,048
543,820
5,186
705
5,054
10,945
117,025
127,970
(3,042)
(62)
(2,126)
(5,230)
(5,230)
Exchange
effect
06/30/14
(2,301)
(417)
1,676
(1,042)
(2,463)
(3,505)
23,576
8.066
13,803
45,445
617,610
663,055
06/30/14
5,153
8,568
7,625
6,042
5,073
12,984
45,445
12/31/13
9,232
7,098
6,148
4,265
7,566
6,463
40,772
b) Schedule of amortization of intangible assets (except goodwill):
2014
2015
2016
2017
2018
After 2019
TOTAL
14. Loans and financing
Financing raised in foreign currency comprises Prepayment of Export, BNDES-FINEM in combination currency, BNDES-FINEM
in dollar and IFC in dollar (+) LIBOR.
Financing taken by foreign subsidiaries for working capital purposes is denominated in US dollars and/or in the currency of each
country, amounting to R$ 291.8 million in the short-term (R$ 378.8 million at December 31, 2013) and R$ 238.5 million in the longterm (R$ 108.2 million at December 31, 2013), corresponding to US$ 240.8 million (US$ 207.9 million at December 31, 2013).
Direct loans from BNDES are guaranteed by the parent company, WEG S.A. Finame operations are guaranteed by collateral
signature and statutory lien.
All covenant clauses related to indicators of capitalization, current liquidity and the relation between net debt/Ebitda, included in
the BNDES and IFC contracts, are being met.
Type
In Brazil
SHORT TERM
Working capital
Working capital
Working capital
Working capital
Working capital
Prepayment of Export
Non Deliverable Forwards (NDF)
Property, plant and equipment
SWAP
Other
Annual charges in 06/30/14
CONSOLIDATED
06/30/14
12/31/13
TJLP (+) 1,4% a 5,0% p.a.
Interest of 3.5% to 8.0 %p.a.
US$ dollar (+) 1.4% p.a.
US$ dollar (+) Libor (+) 3.3% p.a.
UFIR (+) 1.0% to 4.0% p.a.
US$ dollar (+) Libor (+) 1.1% p.a.
Exchange rate variation
2.5% to 8.7% p.a.
Sundry
420,859
105,651
253,607
3,907
18,504
31,730
1,167
3,494
2,799
533,972
284,099
151,534
23,082
7,401
18,124
33,519
6,867
6,667
1,936
743
PAGE: 36 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 2,292,334
408,379
39,354
1,462,076
18,084
570
355,489
8,382
2,187,968
409,477
36,178
1,580,130
16,921
37,149
35,139
66,914
6,060
EURIBOR (+) 0.6% to 1.0% p.a.
LIBOR (+) 0,7% to 1.9% p.a.
90% of PBOC (5.4% to 6.0%) p.a.
BBSY (+) 2.3% p.a.
Interest of 0.7% to 25.0% p.a.
Exchange rate variation
291,852
3,983
64,752
223,022
95
378,824
156,692
134,599
1,311
881
85,341
-
LIBOR (+) 0.7% to 1.9% p.a.
Interest of 0.7% to 25.0% p.a.
EURIBOR (+) 0.6% to 1.0% p.a.
-
238,508
219,636
7,676
2,590
8,606
108,240
91,369
5,018
4,487
7,366
712,711
2,530,842
912,796
2,296,208
LONG TERM
Working Capital
Property, plant and equipment
Working Capital
Property, plant and equipment
Working Capital
Working Capital
Prepayment of Export
Other
TJLP (+) 1.4% to 5.3% p.a.
UFIR (+) 1.0% to 4.0% p.a.
Interest of 3.5% to 8.0 %p.a.
2.5% to 8.7% p.a.
US$ dollar (+) 1.4% p.a.
US$ dollar (+) Libor (+) 3.3% p.a.
US$ dollar (+) Libor (+) 1.1% p.a.
Sundry
ABROAD
SHORT TERM
Working Capital
Working Capital
Working Capital
Working Capital
Working Capital
Non Deliverable Forwards (NDF)
LONG TERM
Working Capital
Working Capital
Working Capital
SWAP
TOTAL SHORT TERM
TOTAL LONG TERM
Maturity of long-term financing and loans:
06/30/14
617,946
1,435,803
70,396
117,463
258,586
30,648
2,530,842
2015
2016
2017
2018
2019
2020 after
TOTAL
12/31/13
745,968
1,305,799
67,502
127,064
29,989
19,886
2,296,208
15. Provision for contingencies
The Company and its subsidiaries are parties to administrative and judicial proceedings of labor, civil and tax nature arising from
the normal activities of their businesses. The respective provisions were set up for proceedings the likelihood of loss of which was
rated as “probable” based on the estimate of value at risk determined by the Company’s legal counselors. The Company's
management estimates that the provision for contingencies set up is sufficient to cover any losses from the proceedings in
progress.
PAGE: 37 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 a) Balance of provision for contingencies
(i) Tax:
- IRPJ e CSLL
- INSS
- IRRF
- Other
(a.1)
(a.2)
(a.3)
COMPANY
06/30/14
12/31/13
10,699
10,522
3,223
3,046
7,476
7,476
-
CONSOLIDATED
06/30/14
12/31/13
98,445
93,248
16,729
16,096
42,525
39,926
7,811
7,811
31,380
29,415
(ii) Labor
-
-
78,994
79,189
(iii) Cívil
-
-
62,779
60,161
(iv) Other
-
-
2,846
2,736
10,699
10,522
243,064
235,334
3,097
3,097
-
1,328
1,328
-
37,904
27,399
10,505
32,458
23,363
9,095
TOTAL
(v) Restricted judicial deposits
- Tax
- Other
b) Changes in the provision for contingencies for the period - consolidated
a) Tax
b) Labor
c) Civil
d) Other
TOTAL
12/31/13
Additions
Interest
Write-offs
Reversals
06/30/14
93,248
79,189
60,161
2,736
235,334
4,276
4,026
5,838
1,405
15,545
921
2,842
865
4,628
(973)
(2,460)
(143)
(3,576)
(6,090)
(1,625)
(1,152)
(8,867)
98,445
78,994
62,779
2,846
243,064
c) The provisions recorded basically refer to:
(i)
Tax contingencies
(a.1) The Company and the subsidiaries maintains a provision of 16.24% for the proceeding referring to IPC difference (51.82%)
of January 1989 “Plano Verão” (Summer Plan). The decision is favorable to the limit of the index of 35.58%.
(a.2) This refers to social security contribution taxes payable. The litigation refers to social security charges levied on the private
pension plan, profit sharing, education funding tax, among others.
(a.3) Relates to late payment penalty levied on credit IRRF on interest on capital received, offset by debts of the same nature,
whose compensation has not been approved by the RFB.
(ii) Labor contingencies
The Company and its subsidiaries are defendants in labor claims primarily involving health and risk exposure, among others. Was
provisioned the amount of R$ 78,994 (R$ 79,189 at December 31, 2013).
(iii) Civil contingencies
These correspond primarily to civil lawsuits, including personal injury, aesthetic damage, occupational diseases and indemnities
arising out of occupational accidents. Was provisioned the amount of R$ 62,779 (R$ 60,161 at December 31, 2013).
d) Judicial deposits
IRPJ/CSLL “Summer Plan”
Other
TOTAL RESTRICTED JUDICIAL DEPOSITS
Non-restricted judicial deposits
TOTAL JUDICIAL DEPOSITS
COMPANY
06/30/14
12/31/13
3,097
1,328
3,097
1,328
3,097
1,328
CONSOLIDATED
06/30/14 12/31/13
13,195
13,195
24,709
37,904
2,718
40,622
19,263
32,458
2,802
35,260
PAGE: 38 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 The judicial deposits not associated ace contingencies are waiting authorized to withdraw from court.
e) Contingencies classified as possible losses
The Company and its subsidiaries are parties to other suits, the likelihood of loss of which are rated as "possible", for which no
provision for contingencies was set up.
The estimated amount of such litigation relates to the tax proceedings totaling R$ 56,032 (R$ 85,142 at December 31, 2013). The
processes classified as “possible” by legal opinions, are:
- taxation on profits computed abroad in the total estimated amount of R$ 35 million.
- not properly approved of IPI credits amounting to R$ 10.6 million.
16. Benefit plan
The Company and its subsidiaries are sponsors of WEG Social Security - Pension Plan, which seeks to supplement the retirement
benefits offered by the official social security system.
The Plan managed by WEG Seguridade Social includes monthly income benefits, 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 22,781 participants (20,859 at June 30, 2013). The Company and its subsidiaries made contributions
in the amount of R$ 13,453 (R$ 11,624 at June 30, 2013).
Based on actuarial calculations carried out by independent actuarial, aiming to define the taxable net value of the defined benefit
obligation and the fair value of plan assets in accordance with the procedures established by CVM Resolution No. 695/12 –
technical pronouncement CPC 33 (R1) Benefits Employee, provision was set up in the amount of R$ 5,000.
17. Equity
a) Capital
On 23 April 2014 the increase in the Company's capital of R$ 2,718,440 to R$ 3,533,973 was approved by incorporating of part
the balance of Profit Retention Reserve for Investments in the amount of R$ 815,533, attributed to shareholders as a bonus, three
(3) new ordinary shares for every ten (10) ordinary shares, with the subsequent issuance of 186,271,509 new nominative common
registered and uncertified shares, without par value, all of which with voting rights, made up by 620,905,029 to 807,176,538
common shares.
b) Shareholder compensation
b.1) Interest on equity capital
The Company declared during the first semester of 2014, interest on capital in the gross amount of R$ 108,760 (R$ 92,446 net of
taxes) corresponding to R$ 0.131 per share, net income tax, as the following approvals Board of Directors:
I. On March 25, 2014, interest on equity capital in the gross amount of R$ 51,824 (R$ 44,050 net) equivalent to R$ 0,071 per share,
which will be paid net of withholding income tax at 15%, pursuant to paragraph two, article nine of Law 9,249/95, except for
shareholders that are legal entities and are exempt from the taxation.
II. On June 24, 2014, interest on equity capital in the gross amount of R$ 56,936 (R$ 48,396 net) equivalent to R$ 0,060 per share,
which will be paid net of withholding income tax at 15%, pursuant to paragraph two, article nine of Law 9,249/95, except for
shareholders that are legal entities and are exempt from the taxation.
b.2) Interim dividends
The directors submitted to the Board of Directors proposed the distribution of interim dividends on the results recorded in the first half
of 2014, amounting to R$ 125,334 (R$ 0.155 per share). The proposed value is recorded under Proposed Dividend on Equity.
Interest on equity capital, pursuant to paragraph two, article nine of Law 9,249/95, will be imputed to the mandatory dividend will be
paid from August 13, 2014.
The total amount of interim dividends and Interest on equity capital, account for the total amount of R$ 217.8 million, equivalent to
50.31% of net income in the period.
PAGE: 39 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 c) Treasury stock
The Company, based on the Board of Directors’ minutes of April 26, 2011 and with the purpose of supporting its Stock Option
Plan, was authorized to acquire up to 500,000 Company’s common shares. Were acquired 500,000 common shares in may 2011,
in the amount of R$10,055 at average cost of R$ 20.11/share.
Due to the increase of capital bonus of shares, the balance on April 23, 2014 of 448,532 treasury shares increased to 583,092,
an increase of 134,560 new shares at no charge.
The shares acquired shall be held in Treasury to be used in the exercise of the purchase right of stock options by the Company’s
stock option plans beneficiaries or the subsequent cancellation or disposal.
Were exercised by the beneficiaries of the stock option plan the amount of 53,460 shares. The Company maintains 581,100
treasury shares in the amount of R$ 15,47, amounting to R$ 8,989.
18. Stock option plan
(i) Plan description
The Plan is managed by the Board of Directors, seeking to grant Stock Option Plans for WEG S.A.’s (Company) shares to its
statutory officers or of its subsidiaries with head offices in Brazil, so as to attract, motivate and retain them, as well as aligning
their interests to that of the Company and its shareholders.
Each option grants its bearer with the right to acquire 1 (one) common Company-issued share (BM&FBOVESPA: “WEGE3”),
strictly according to the terms and conditions established in the Plan ("Option”). Share purchase options to be granted are limited
to 2% (two percent) of the total Company’s capital.
The participant must maintain the invested shares blocked during the retention period, according to the minimum levels
determined by the Plan. The Plan may be extinguished, suspended or altered at any moment, through a proposal approved by
the Company's Board of Directors.
(ii) Programs
The Board of Directors may approve, each semester, a Share Purchase Option Program ("Program"), which will define the
participants, number of Options, exercise price, Option distribution, term and other rules specific to each Program.
The Programs of Stock Options have been updated on the date of April 24, 2014, face to 30% bonus on the number of shares
considered at the exercise price of the new market values and the increase of shares to the number of stocks. The update does
not present impact on the calculation performed at the beginning of the program. In order to participate in each Program, the
participant must invest an amount of his/her variable compensation in each period in Company’s shares.
PAGE: 40 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 Reais (R$)
Program
Number of
shares Rights
Vesting
Period
April /11
118,372
1º
2º
3º
46,662
1º
2º
3º
97,760
1º
2º
3º
51,770
1º
2º
3º
107,344
1º
2º
3º
54,431
1º
2º
3º
110,520
1º
2º
3º
Subtotal
September /11
Subtotal
March /12
Subtotal
September /12
Subtotal
April /13
Subtotal
September /13
Subtotal
March /14
Subtotal
Total
Number
of Options
Rights
39,457
39,457
39,458
118,372
15,554
15,554
15,554
46,662
32,586
32,587
32,587
97,760
17,256
17,257
17,257
51,770
35,781
35,781
35,782
107,344
18,143
18,144
18,144
54,431
36,840
36,840
36,840
110,520
586,859
Strike
Price
Price
corrected
by IPCA
Option
price
Option
Difference
16.16
16.16
16.16
17.82
18.71
19.64
23.54
25.37
27.15
5.72
6.66
7.51
13.42
13.42
13.42
14.91
15.72
16.57
19.29
20.81
22.31
4.38
5.09
5.74
14.75
14.75
14.75
16.41
17.32
18.27
20.94
22.62
24.24
4.53
5.30
5.97
13.46
13.46
13.46
14.99
15.81
16.68
19.62
21.02
22.43
4.63
5.21
5.75
18.79
18.79
18.79
20.99
22.18
23.44
26.60
28.65
30.70
5.61
6.47
7.26
19.20
19.20
19.20
21.51
22.77
24.10
28.82
31.19
33.46
7.31
8.42
9.36
20.95
20.95
20.95
23.60
25.05
26.59
32.02
34.60
37.19
8.42
9.55
10.60
Amount
appropriate
(thousand R$)
226
263
296
785
68
79
89
236
148
173
194
515
82
92
102
276
201
231
260
692
132
153
170
455
310
352
391
1,053
4,012
PAGE: 41 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 The weighted average of fair value was determined based on the Black-Scholes-Merton method, considering the following aspects:
Vesting
Period
Program
April /11
September/11
March /12
September /12
1°
2°
3°
1°
2°
3°
1°
2°
3°
1°
2°
3°
1°
2°
3°
April /13
September /13
March /14
1º
2º
3º
1º
2º
3º
Exercise price
of option (R$)
Lifespan of the
option – in days
Current price for
Expected volatility in
corresponding share
shere price (%)
(R$)
755
1,008
1,260
756
1,008
1,259
755
1,008
1,257
753
1,006
1,257
760
1,008
1,260
756
1,007
1,258
753
1,005
1,257
16.16
13.42
14.75
13.46
18.79
19.20
20.95
17.00
17.00
17.00
13.89
13.89
13.89
15.23
15.23
15.23
15.46
15.46
15.46
19.78
19.78
19.78
21.35
21.35
21.35
24.31
24.31
24.31
Interest free of risk for
the lifespan of the
option (%)
26.33
26.33
26.33
29.88
29.88
29.88
29.85
29.85
29.85
24.50
24.50
24.50
28.53
28.53
28.53
28.25
28.25
28.25
20.51
20.51
20.51
12.79
12.81
12.83
10.90
11.05
11.22
9.76
10.12
10.33
8.32
8.57
8.78
8.67
9.01
9.24
11.29
11.69
11.81
12.28
12.44
12.58
Summary of the movement of shares plan:
Number of shares
Program
Balance 12/31/2013
Share bonus Granted
Canceled
Exercised
(15,013)
Balance 06/30/201
April/11
69,440
16,756
-
-
September/11
28,358
8,505
-
-
March/12
75,200
19,139
-
-
September/12
39,824
11,946
-
-
-
51,770
April/13
82,574
24,770
-
-
-
107,344
September/13
41,870
12,561
-
-
-
54,431
March/14
-
Total
337,266
(11,962)
71,183
36,863
82,377
25,504
85,016
-
-
110,520
119,181
85,016
-
(26,975)
514,488
The recognition of expenses with stock option is carried out throughout the period of acquisition of "vesting rights”.
In June 30, 2014, was recorded R$ 446 (R$ 350 at June 30, 2013) as other results in the financial statements for the year
counterpart capital reserve in Equity.
The options exercised and canceled during the first half of 2014 were held under the caption capital reserve in equity in the amount
of R$ 198 (R$ 104 in the first half of 2013) and R$ 233 for the options performed (R$ 55 in the first half of 2013) and R$ 35
complement to the amount accrued (reversal of R$ 49 in the first half of 2013) recognized in retained earnings.
The accumulated equity totals in June 30, 2014 R$ 1,573 (R$ 1,325 at December 31, 2013).
PAGE: 42 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 19. Net revenue
BREAKDOWN OF NET REVENUE
CONSOLIDATED
06/30/14
06/30/13
Gross revenue
Domestic market
External market
4,268,732
2,361,924
1,906,808
3,785,106
2,164,320
1,620,786
Deductions
Taxes
Returns and Rebates
(663,642)
(567,446)
(96,196)
(607,890)
(523,188)
(84,702)
Net revenue
Domestic Market
External Market
3,605,090
1,795,795
1,809,295
3,177,216
1,646,289
1,530,927
20. Construction contracts
Construction contract’s revenues and costs are recognized according to the execution of each project by the method of
percentage of incurred costs.
CONSOLIDATED
06/30/14
06/30/13
Gross operational revenue recognized
49,450
74,834
Incurred costs
(23,374)
(49,551)
Received prepayments
06/30/14
129,611
12/31/13
38,393
21. Operating expenses by nature and function
CONSOLIDATED
06/30/14
06/30/13
EXPENSE BY NATURE
Depreciation, amortization and depletion
Personnel expenses
Raw materials and use and consumption materials
Freight and insurance costs
Other expenses
(3,113,013)
(119,066)
(842,442)
(1,569,702)
(118,265)
(463,538)
(2,721,518)
(105,747)
(720,110)
(1,365,740)
(89,858)
(440,063)
EXPENSE BY FUNCTION
Cost of products and services sold
Selling expenses
General and administrative expenses
Management fees
Other operating expenses
(3,113,013)
(2,457,344)
(387,961)
(175,373)
(9,748)
(82,587)
(2,721,518)
(2,155,616)
(331,341)
(144,211)
(8,763)
(81,587)
PAGE: 43 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 22. Other operating revenue/expenses
The recorded values are relative to profit sharing, reversal/ (provision) for lawsuits and others, as follows:
CONSOLIDATED
06/30/14
06/30/13
3,585
10,559
3,585
10,559
(86,172)
(92,146)
(62,742)
(58,304)
(8,762)
(5,362)
(6,001)
(7,062)
(2,352)
(5,631)
(2,566)
(1,886)
(3,749)
(13,901)
(82,587)
(81,587)
OTHER OPERATING REVENUE
- Other
OTHER OPERATING EXPENSES
- Profit sharing - Employees
- Profit sharing - foreign subsidiaries
- Profit sharing - executive board
- Constitution/Reversal of provision for tax proceedings
- Tax incentives of Rouanet Law
- Other
TOTAL NET
23. Financial income (expenses), net
FINANCIAL INCOME
Short-term investment yield
Exchange variation
Present value adjustment - customers
Pis/Cofins on interest on equity
Other income
FINANCIAL EXPENSES
Interest on loans and financing
Exchange variation
Present value adjustment - suppliers
Other expenses
NET FINANCIAL INCOME
06/30/14
COMPANY
06/30/13
CONSOLIDATED
06/30/14
06/30/13
37,157
43,991
(6,995)
161
23,917
29,741
(5,960)
136
295,084
140,092
102,741
32,062
(6,995)
27,184
268,673
101,778
137,112
17,174
(5,960)
18,569
(74)
(74)
102
102
(234,256)
(84,099)
(114,306)
(10,413)
(25,438)
(246,505)
(88,114)
(133,615)
(5,308)
(19,468)
37,083
24,019
60,828
22,168
24. Provision for income and social contribution taxes
The parent company and subsidiaries in Brazil assess income and social contribution taxes according to taxable income, except
for WEG Administradora de Bens Ltda. and Agro Trafo Administradora de Bens S.A., which adopt profit computed as a percentage
of the Company's gross revenue. The provision for income tax was constituted at a 15% rate added of a 10% additional, and social
contribution with a 9% rate. Taxes for companies abroad are constituted according to the Law of each country.
Reconciliation of income and social contribution taxes
Income before taxes on profit
Statutory rate
IRPJ and CSLL calculated at the statutory rate
Adjustment to determine effective income and social contribution taxes:
Result from investments in subsidiaries
Rate difference on foreign results
Tax incentives
Interest on equity
Other adjustments
IRPJ and CSLL as per the income statement
Current tax
Deferred tax
Effective rate - %
COMPANY
06/30/14
06/30/13
433,328
377,817
34%
34%
CONSOLIDATED
06/30/14 06/30/13
552,905
477,866
34%
34%
(147,332)
(128,458)
(187,988)
(162,474)
135,686
11,268
(78)
(456)
(378)
(78)
121,432
6,632
(156)
(550)
(435)
(115)
(302)
(4,482)
32,920
37,252
5,121
(117,479)
(123,757)
6,278
(2,609)
8,850
24,760
28,690
2,750
(100,033)
(110,856)
10,823
0.11%
0.15%
21.25%
20.93%
PAGE: 44 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 25. Insurance coverage
The corporate unit in Brazil is responsible for the management of the insurance portfolio of the WEG Group in Brazil and abroad;
and continuously constitutes, jointly with the executive board, the risk policies for the WEG Group so as to protect its assets.
The Company implemented the Worldwide Insurance Program - WIP, through which the local insurance policies will be
replaced by worldwide policies, such as: transport risk (Export, Import and Domestic), Civil Product Liability, Civil Management's
Liability (D&O), Surety Insurance, General Civil Liability, Properties and Environment Pollution, Contractual Insurance and Risk
Engineering Installation and Assembly.
The insurance policies are issued only by first tier multinational insurance companies which are able to cater to the WEG Group
in the countries where it operates. The financial structure and sustainability of said insurance companies are continuously
monitored by the Brazilian corporate unit.
Below we highlight some of the policies and the due capital.
- Operating Risks (Equity): R$36 million;
- Loss of profits: US$13 million (for the paint and vanishes companies);
- Civil liability US$25 million;
- Civil liability products: US$ 100 million;
- Transport: US$ 4 million per shipment (Import and Export) and R$ 6 million (Domestic);
- Environmental pollution: US$25 million;
- Contractual Insurance: as stipulated in the contract;
- Risk Engineering Installation and Assembly: R$ 100 milion Brazil, R$ 40 million Latin America Except Cuba, and USD 5
million United States.
- Officers Liability (D&O): US$ 30 million.
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:
BOOK VALUE
06/30/14
12/31/13
MARKET VALUE
06/30/14
12/31/13
Cash and cash equivalents
Cash and banks
Short-term investments:
- Local currency
- Foreign currency
- SWAP
- Non Deliverable Forwards - NDF
Short-term investments
Customers
Total assets
3,285,865
286,469
2,999,396
2,947,012
51,085
1,299
77,985
1,637,568
5,001,418
3,373,799
248,149
3,125,650
3,027,945
96,036
553
1,116
2,230
1,658,806
5,034,835
3,285,865
286,469
2,999,396
2,947,012
51,085
1,299
77,985
1,637,568
5,001,418
3,373,799
248,149
3,125,650
3,027,945
96,036
553
1,116
2,230
1,658,806
5,034,835
Suppliers
Loans and financing:
- Local currency
- Foreign currency
- Non Deliverable Forwards (NDF)
- SWAP
Total liabilities
420,498
3,243,553
2,318,003
913,355
95
12,100
3,664,051
420,250
3,209,004
2,509,933
682,902
6,867
9,302
3,629,254
420,498
3,243,553
2,318,003
913,355
95
12,100
3,664,051
420,250
3,209,004
2,509,933
682,902
6,867
9,302
3,629,254
PAGE: 45 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 The risk factors of financial instruments are relate to:
(i) Financial risks
Foreign currency risk
The Company and subsidiaries has import and export operations in various currencies, it manages and monitors its exposure to
foreign currency, seeking to balance its financial assets and liabilities within the limits established by Management.
The financial exposure limit (net) can be to equivalent to 2 months of exports in foreign currency as defined by the Company's
Board of Directors.
The Company had export operations totaling US$ 455.2 million (US$ 429.1 million in the first half of 2013), which acts as a natural
hedge for indebtedness and other costs tied to other currencies, especially US Dollars.
Risks related to debt charges
These risks arise from the possibility that the subsidiaries may suffer losses due to fluctuations in interest rates or other debt
indexes, which increase financial expenses related to loans and financings obtained in the market, or decrease financial
revenues relative to financial investments from subsidiaries. The Company continuously monitors the interest rates in the market
so as to evaluate the need, if any, of protection against the risk of volatility of said rates.
Derivative financial instruments
The Company and its subsidiaries have the following operations with derivative financial instruments:
a) NDF derivative financial instruments - Non Deliverable Forwards, with notional amount of:
(i) US$ 1.2 million, held by subsidiary WEG Austrália Pty Ltda, for the purpose of protecting exports from the fluctuation risks of
the exchange rates;
(ii) US$ 15.8 million, held by foreign subsidiary Zest Electric Motors (Pty) Ltd., for the purpose of protecting its transactions
imports of products from the risks of fluctuations in exchange rates;
b) SWAP operations, in the notional amount of:
(i) EUR 10 million, held by its subsidiary Watt Drive Antriebstechnik GmbH, with the purpose of hedging financing from
fluctuation risks of Euribor;
(ii) US$ 30 million held by subsidiary WEG Equipamentos Elétricos S.A. to protect against Libor increase risks;
(iii) R$ 200 million, held by the subsidiary WEG Equipamentos Elétricos S.A., SWAP from fixed to floating interest rate, to hedge
against decrease risk in interest rate.
(iv) US$ 100 million, held by the subsidiary WEG Equipamentos Elétricos S.A., SWAP from protect the Prepayment Export
operations against the risk of fluctuation rates.
The Company's Management and that of its subsidiaries permanently monitors the derivative financial instruments contracted
through its internal controls.
The sensitivity analysis statement chart must be read jointly with the other financial assets and liabilities expressed in foreign
currency as at June 30, 2014, as the estimated impact of the foreign currency rate over the NDFs and on SWAPs presented
below will be offset, if effective, entire or partially, with loss of value of assets and liabilities.
Management defined that the Company must use the exchange rates used to mark financial instruments to market valid as at
June 30, 2014 for the likely scenario (market value). Said rates represent the best estimate of future behavior of said prices and
represent the value for which the positions may have been settled on their maturity date.
The table below presents "cash and expense" effects of the results of financial instruments in real scenarios.
PAGE: 46 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A a)
Version: 1 Operations of Non Deliverable Forwards - NDF:
Market value at
06/30/14
Notional value
(thousands)
Risk
Dolar Increase
Dolar Increase
Total Dolar
Euro Increase
Total Euro
USD Decrease
USD Decrease
Total Dolar
Euro Decrease
Total Euro
Total
243
1,200
1,443
391
391
1,332
14,496
15,828
314
314
Possible scenario 25%
R$
Currency Average price thousand Average price
US$/ZAR
US$/AUD
10.5446
0.9426
EUR/ZAR
14.9499
US$/ZAR
US$/ZAR
10.7786
10.7908
EUR/ZAR
14.3544
(2)
(27)
(29)
13
13
104
(167)
(63)
(16)
(16)
(95)
13.1808
1.1783
18.6874
8.0840
8.0931
10.7708
Remote scenario 50%
R$
thousand Average price
(132)
(619)
(751)
(318)
(318)
(648)
(8,355)
(9,003)
(252)
(252)
(10,324)
R$
thousand
15.8169
1.4139
22.4249
5.3893
5.3954
7.1806
(266)
(969)
(1,235)
(624)
(624)
(1,399)
(16,543)
(17,942)
(489)
(489)
(20,290)
b) SWAP Operations:
Market value at
Possible scenario 25%
06/30/14
Risk
Notional vallue (milion) Average price
R$ thousand
Average price
R$ thousand
Interest of 1.12% p.a.
(8,606) Interest of 0.84% p.a.
(9,324)
Euribor decrease EUR 10.0
Libor decrease
US$ 15.0
Interest of 0.61% p.a.
(211) Interest of 0.45% p.a.
(241)
Libor decrease
US$ 15.0
Interest of 0.68% p.a.
(127) Interest of 0.51% p.a.
(168)
CDI increase
R$ 80.0
Interest of 10.98% p.a.
(968) Interest of 13.72% p.a.
(4,334)
CDI increase
R$ 50.0
Interest of 10.90% p.a.
845 Interest of 13.63% p.a.
(551)
CDI increase
R$ 70.0
Interest of 10.97% p.a.,
455
Interest of 13.71% p.a.
(1,721)
Total Swap Interests
(8,612)
(16,339)
Dolar decrease
US$ 25.0
2.2025
(1,213)
1.6519
(12,945)
Dolar decrease
US$ 25.0
2.2025
(373)
1.6519
(12,080)
US$ 25.0
2.2025
(418)
1.6519
(12,163)
Dolar decrease
US$ 25.0
2.2025
(185)
1.6519
(11,938)
Dolar decrease
Total Swap Rates
(2,189)
(49,126)
TOTAL
(10,801)
(65,465)
Remote scenario 50%
Average price
Interest of 0.56% p.a.
Interest of 0.30% p.a.
Interest of 0.34 % p.a.
Interest of 16.47% p.a.
Interest of 16.35% p.a.
Interest of 16.45% p.a.
1.1013
1.1013
1.1013
1.1013
R$ thousand
(10,042)
(270)
(210)
(6,780)
(1,882)
(3,788)
(22,972)
(24,678)
(23,787)
(26,909)
(23,691)
(96,065)
(119,037)
The Company’s accounting records based on the market price as at June 30, 2014 according to the fair value and accrual method.
These operations had a net negative impact as at June 30, 2014 of R$ 1,773 (R$ 4,435 negative at June 30, 2013), which were
recognized in net income. The Company has no margins pledged in guarantee for derivative financial instruments outstanding at
June 30, 2014.
(ii) Operational risks
Credit risk
Risks arise from the possibility of the Company's subsidiaries not receiving the amounts related to sales or not receiving credit
from financial institutions regarding financial investments. To mitigate the risk from sales, the Company's subsidiaries analyze
the financial situation of their customers, as well as establish a credit limit and permanently assess their debtor balance.
Regarding financial investments, the Company and its subsidiaries invest in low risk credit institutions.
PAGE: 47 of 51 ITR – Quarterly Information – 06/30/2014 – WEG S/A Version: 1 27. Subsidies and assistance government
The Company obtained subventions in the amount of R$ 18,990 (R$ 16,842 at June 30, 2014) from tax incentives, recognized in
the year:
CONSOLIDATED
06/30/14
06/30/13
Total Subsidies and assistance government
a) WEG Amazônia S.A.
- ICMS incentive credit of 90.25%
- Corporate Income Tax (IRPJ) 75% reduction
b) WEG Linhares Equipamentos Elétricos S.A.
- ICMS incentive credit of 85%
- Corporate Income Tax (IRPJ) 75% reduction
- Municipal investment
c) WEG Equipamentos Elétricos S.A.
- Municipal investment
d) WEG Logística Ltda.
- ICMS incentive credit of 75%
18,990
176
113
63
16,842
122
122
-
11,365
11,353
12
9,948
8,709
1,127
12
-
111
111
7,449
7,449
6,661
6,661
There are no contingencies tied to subsidies, and all of the conditions for obtaining government subsidies have been met.
28. Information by segment
Brazil
Industry
Energy
6/30/14 6/30/13 6/30/14 6/30/13
Revenue from sale of products /
2,225,266 2,036,014 800,784
653,746
services 679,553 650,625 267,573 201,335
Earnings before income taxes Depreciation / Amortization /
72,640 65,707 21,793 20,064
Depletion 6/30/14 12/31/13 6/30/14 12/31/13
3,045,520 3,101,374 1,337,704 1,297,686
Identifiable assets 784,025 780,033 587,018 471,689 Identifiable liabilities Foreign
6/30/14
6/30/13
Eliminations and adjustment
6/30/14 6/30/13 Consolidated
6/30/14
6/30/13
1,683,123 71,763 1,422,077
107,289
(1,104,083) (465,984) (934,621) (481,383) 3,605,090
552,905
3,177,216
477,866
24,633
6/30/14
2,297,802
711,756
19,976
12/31/13
2,282,020
781,749 ‐ 12/31/13 (18,715) (360,911) 119,066
6/30/14
6,891,211
1,756,303
105,747
12/31/13
6,662,365
1,672,560
‐ 6/30/14 210,185 (326,496) Industry: single phase and triple phase motors with low and medium tension, drives and controls, equipment and services
for industrial automation, paints and varnishes.
Energy: electricity generators for thermal and hydraulic power plants (biomass), hydraulic turbines (PCHs), transformers,
substations, control panels and system integration services and solutions for renewable and distributed wind energy.
Foreign: composed by operations carried out by subsidiaries in other countries.
The adjustment and elimination column include the eliminations applicable to the Company in the context of the Consolidated
Financial Statements. All operating assets and liabilities are presented as identifiable assets and liabilities.
PAGE: 48 of 51 29. Earnings per share
a) Basic
Calculation of basic earnings per share is made by dividing net income, attributed to common shareholders, by the weighted
average number of common shares available during the year.
06/30/14
06/30/13
Profit attributed to Company shareholders
432,872
377,267
Weighted average number of outstanding common shares (shares /thousand)
806,587
806,540
Basic earnings per share - R$
0.53667
0.46776
b) Diluted
Net earnings per share is calculated by dividing the net profit attributable to Company’s common shareholders by the weighted
average number of outstanding common shares for the year plus the weighted average number of common shares that
would be issued upon the conversion of all potential diluted common shares into common shares.
Profit attributed to Company shareholders
Weighted average of potentially diluted common shares held by shareholders(shares/thousand)
Basic and diluted earnings per share - R$
06/30/14
432,872
807,227
0.53625
06/30/13
377,267
806,540
0.46754
30. Statement of comprehensive income
The Company presents as other comprehensive income the values of accumulated translation adjustment. These values are not
taxable.
The presentation of the comprehensive income results is required by CPC 26 - Financial Statement Presentation and includes
the comprehensive results which correspond to revenue and expense items which are not recognized in the financial statements
as required or allowed by the standards, interpretations and guidance issued by the CPC.
PAGE: 49 of 51 ITR – Quarterly Information – 06/30/2014 – 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 June 30, 2014, which comprise the balance sheet
as of June 30, 2014 and the related statements of income and comprehensive income for the three and six months
period them ended and the changes in shareholders’ equity and cash flows for the six months period then ended,
including the notes to the financial statements.
Management is responsible for the preparation of the individual interim financial statements in accordance with
the technical pronouncement CPC 21(R1) – Interim financial statements, and the consolidated interim financial
statements in accordance with the technical pronouncement CPC 21(R1) and International Accounting Standard
(IAS) 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well
as for the presentation of these interim financial statements 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 applying analytical
and other review procedures, and making enquiries of and having discussions with persons responsible for
financial and accounting matters. An interim review is substantially less in scope than an audit conducted in
accordance with auditing standards. An interim review 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 individual interim financial statements
Based on our review, we are not aware of any fact that leads us to believe that the individual 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) applicable to the Quarterly Information and presented in accordance with the
standards issued by the Brazilian Securities and Exchange Commission.
Conclusion about the consolidated interim financial statements
Based on our review, we are not aware of any fact that leads us to believe that the 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 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 six months period
ended in June 30, 2014, 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
PAGE: 50 of 51 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 respects, in relation to the interim financial statements, Company and Consolidated, taken
as a whole.
Joinville, July 11, 2014
KPMG Auditores Independentes
CRC SC-000071/F-8
Marcelo Lima Tonini
Accountant CRC PR-045569/O-4 T – SC
PAGE: 51 of 51