ITR – Quarterly Information – 03/31/2014 – 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 03/31/2014
8
Statements of changes in equity - 01/01/2013 to 03/31/2013
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 03/31/2014
16
Statements of changes in equity - 01/01/2013 to 03/31/2013
17
Statements of value added
18
Comments on performance
19
Notes to financial statements
28
Opinions and Statements
Special Review Report – Unqualified
48
ITR -Quarterly Information - 03/31/2014 - WEG S/A
Version : 1
Company information / Composition of capital
Number of shares
(Units)
Quarterly ended
03/31/2014
Paid-in capital
Common
Preferred
Total
620,905,029
0
620,905,029
Treasury stock
Common
Preferred
Total
473,515
0
473,515
PAGE: 1 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Company information / Cash dividends
Event
Approval
Earning
Board of Directors’
Meeting
03/25/2014
Interest on equity
First payment
08/13/2014
Type of share
Common
Class of share Earnings per share (Reais / Share)
0.07100
PAGE: 2 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Individual financial statements / Balance sheet Assets
(In thousands of reais)
Account
code
Account description
Current quarter
03/31/2014
Prior year
12/31/2013
1
Total assets
4,561,172
4,668,281
1.01
Current assets
931,266
943,803
1.01.01
Cash and cash equivalents
893,490
870,906
1.01.01.01
Cash and banks
1.01.01.02
Short-term investments
1.01.06
Taxes recoverable
5,704
10,573
1.01.06.01
Current taxes recoverable
5,704
10,573
28
28
893,462
870,878
1.01.08
Other current assets
32,072
62,324
1.01.08.03
Other
32,072
62,324
1.01.08.03.01
Dividends
1.01.08.03.02
Interest on equity
1.02
Noncurrent assets
1.02.01
1.02.01.06
1,353
2,824
30,719
59,500
3,629,906
3,724,478
Long-term receivables
4,750
5,498
Deferred taxes
2,910
2,977
1.02.01.06.01
Deferred income and contribution taxes
2,910
2,977
1.02.01.08
Recoverable to related parties
493
1,193
1.02.01.08.02
Recoverable to subsidiries
493
1,193
1.02.01.09
Other noncurrent assets
1,347
1,328
1.02.01.09.03
Judicial deposits
1,347
1,328
1.02.02
Investments
3,620,355
3,714,150
1.02.02.01
Equity interest
3,620,355
3,714,150
1.02.02.01.02
Investments in subsidiaries
3,620,355
3,714,150
1.02.03
Property, plant and equipment
4,801
4,830
1.02.03.01
Property, plant and equipment in use
4,801
4,830
PAGE: 3 of 49
ITR – Quarterly Information – 03/31/2014 – 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
2.02.04
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
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
03/31/2014
4,561,172
58,976
3,628
3,628
8,103
8,103
17
8,086
47,245
47,245
46,824
421
10,632
10,632
4,491,564
2,718,440
(60,203)
1,545
(61,748)
3,700
1,005,903
74,972
940,453
0
(9,522)
163,475
583,100
583,100
77,149
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
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 49
ITR – Quarterly Information – 03/31/2014 – 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 period
01/01/2014 to 03/31/2014
Prior period
01/01/2013 to 03/31/2013
187,221
(818)
(488)
(330)
(750)
188,789
187,221
17,954
17,993
(39)
205,175
(288)
(221)
(67)
204,887
204,887
161,158
(796)
(466)
(330)
(463)
162,417
161,158
11,450
11,517
(67)
172,608
(309)
(345)
36
172,299
172,299
0.33023
0.27772
0.33001
0.27761
PAGE: 5 of 49
ITR – Quarterly Information – 03/31/2014– 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 period
01/01/2014 to 03/31/2014
Prior period
01/01/2013 to 03/31/2013
204,887
(53,618)
(53,618)
151,269
172,299
(25,135)
(25,135)
147,164
PAGE: 6 of 49
ITR – Quarterly Information – 03/31/2014– 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
6.05
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
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 03/31/2014
Prior period
01/01/2013 to 03/31/2013
19,234
16,635
205,175
29
(188,789)
220
2,178
3,266
(869)
(219)
421
250,922
250,922
0
(247,572)
(247,572)
22,584
870,906
893,490
8,183
10,378
172,608
29
(162,417)
158
(2,431)
(271)
(1,772)
(388)
236
201,852
206,322
(4,470)
(204,701)
(204,701)
5,334
561,214
566,548
PAGE: 7 of 49
ITR – Quarterly Information – 03/31/2014– WEG S/A
Version: 1
Individual financial statements / Statement of changes in equity - 01/01/2014 to 03/31/2014
(In thousands of reais)
Account
code
5.01
5.03
5.04
5.04.03
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
5.07
Account description
Opening balances
Adjusted opening balances
Capital transactions with shareholders
Recognized options granted
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
Closing balances
Paid-in
capital
2,718,440
2,718,440
2,718,440
Capital reserves,
Options granted and
Treasury stock
(54,012)
(54,012)
(2,479)
220
(2,699)
(12)
(12)
(56,503)
Income reserves
1,005,903
1,005,903
1,005,903
Retained earnings/
accumulated losses
163,174
163,174
(51,824)
(51,824)
215,287
204,887
10,400
10,400
(163,162)
12
(163,174)
163,475
Other comprehensive
income
724,267
724,267
(64,018)
(64,018)
(53,618)
(10,400)
660,249
Equity
4,557,772
4,557,772
(54,303)
220
(51,824)
(2,699)
151,269
204,887
(53,618)
(53,618)
(163,174)
(163,174)
4,491,564
PAGE: 8 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Individual financial statements / Statement of changes in equity - 01/01/2013 to 03/31/2013
(In thousands of reais)
Account
code
5.01
5.03
5.04
5.04.03
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
5.07
Account description
Opening balances
Adjusted opening balances
Capital transactions with shareholders
Recognized options granted
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
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)
(5,011)
158
(5,169)
(36)
(36)
(54,582)
Income
reserves
559,989
559,989
559,989
Retained earnings/
accumulated losses
127,803
127,803
(40,144)
(40,144)
184,399
172,299
12,100
12,100
(127,767)
36
(127,803)
144,291
Other comprehensive
income
703,652
703,652
(37,235)
(37,235)
(25,135)
(12,100)
666,417
Equity
4,060,349
4,060,349
(45,155)
158
(40,144)
(5,169)
147,164
172,299
(25,135)
(25,135)
(127,803)
(127,803)
4,034,555
PAGE: 9 of 49
ITR – Quarterly Information – 03/31/2014 – 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
7.08.04.03
Account description
Inputs purchased from third-parties
Materials, electricity, third party services and other
Loss/recovery of amounts receivable
Gross value added
Withholdings
Depreciation, amortization and depletion
Net value added produced
Value added received in transfer
Equity pick-up
Financial income
Total value added to be distributed
Distribution of value added
Personnel
Direct compensation
Benefits
Unemployment Compensation Fund (FGTS)
Taxes, charges and contributions
Federal
Third-party capital remuneration
Interest
Equity remuneration
Interest on equity capital
Retained profit/loss for the period
Current period
01/01/2014 to 03/31/2014
Prior period
01/01/2013 to 03/31/2013
(489)
(158)
(331)
(489)
29
29
(460)
206,782
188,789
17,993
206,322
206,322
1,079
1,041
18
20
318
318
38
38
204,887
51,824
153,063
(203)
12
(215)
(203)
(29)
(29)
(232)
173,934
162,417
11,517
173,702
173,702
910
861
32
17
450
450
43
43
172,299
40,144
132,155
PAGE: 10 of 49
ITR – Quarterly Information – 03/31/2014 – 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
1.01.03
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
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
03/31/2014
9,898,693
6,602,879
3,247,375
357,468
2,889,907
1,576,829
1,576,829
1,461,766
148,947
148,947
167,962
167,962
3,295,814
134,326
2,097
2,097
68,870
68,870
63,359
35,873
16,431
11,055
8,091
871
7,220
2,605,834
2,605,834
547,563
40,959
40,959
506,604
Prior year
12/31/2013
10,141,293
6,851,787
3,373,799
248,149
3,125,650
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 49
ITR – Quarterly Information – 03/31/2014 – 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
03/31/2014
9,898,693
2,506,714
199,637
199,637
379,952
137,847
137,847
72,342
65,505
914,246
914,246
875,032
875,032
47,016
469,261
44,201
314,554
2,822,456
2,192,311
2,192,311
98,307
98,307
30,333
67,974
292,073
292,073
239,765
4,569,523
2,718,440
(60,203)
1,545
(61,748)
3,700
1,005,903
74,972
940,453
0
(9,522)
163,475
583,100
583,100
77,149
77,959
Prior year
12/31/2013
10,141,293
2,578,048
216,553
216,553
420,250
139,570
139,570
83,771
55,799
912,796
912,796
888,879
888,879
87,723
459,130
34,191
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 49
ITR – Quarterly Information – 03/31/2014 – 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
Account description
Revenue from sale of products and/or services
Cost of goods sold and/or services rendered
Gross profit
Operating income/expenses
Selling expenses
General and administrative expenses
Management fees
Other administrative expenses
Other operating income
Other operating expenses
Income before financial results and taxes
Financial results
Financial income
Financial expenses
Income before income taxes
Income and social contribution taxes
Current
Deferred
Net income from continuous operations
Consolidated Income/ loss for the period
Atributed to shareholders of parent company
Atributed to non-controlling shareholders
Earnings per share - (Reais/share)
Basic earnings per share
3.99.01.01
Common shares
3.99.02
Diluted earnings per share
3.99.02.01
Common shares
Current period
01/01/2014 to 03/31/2014
1,783,543
(1,213,122)
570,421
(329,583)
(196,661)
(88,703)
(4,814)
(83,889)
1,846
(46,065)
240,838
28,479
152,842
(124,363)
269,317
(61,986)
(70,669)
8,683
207,331
207,331
204,887
2,444
Prior period
01/01/2013 to 03/31/2013
1,477,577
(1,013,973)
463,604
(266,842)
(157,029)
(73,273)
(4,410)
(68,863)
5,568
(42,108)
196,762
24,651
123,036
(98,385)
221,413
(48,342)
(51,305)
2,963
173,071
173,071
172,299
772
0.33023
0.27772
0.33001
0.27761
PAGE: 13 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Consolidated financial statements / Statement of comprehensive income
(In thousand of reais)
Account
code
Account description
Current period
01/01/2014 to 03/31/2014
Prior period
01/01/2013 to 03/31/2013
4.01
Consolidated net income for the period
207,331
173,071
4.02
Other comprehensive income
(53,997)
(24,745)
4.02.01
Adjustment of conversion period
(53,997)
(24,745)
4.03
Consolidated comprehensive income for the period
153,334
148,326
4.03.01
Attributed to shareholders of parent company
151,269
147,164
4.03.02
Attributed to noncontrolling shareholders
2,065
1,162
PAGE: 14 of 49
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Version: 1
Consolidated financial statements / Cash flow statement - Indirect method
(In thousand of reais)
Account
code
6.01
6.01.01
6.01.01.01
6.01.01.02
6.01.01.04
6.01.01.05
6.01.01.06
6.01.01.07
6.01.01.08
6.01.01.09
6.01.01.10
6.01.01.11
6.01.02
6.01.02.01
6.01.02.02
6.01.02.03
6.01.02.04
6.01.02.05
6.01.03
6.02
6.02.01
6.02.02
6.02.03
6.02.04
6.02.05
6.02.06
6.02.07
6.02.08
6.03
6.03.03
6.03.04
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
Expenses plan options purchase shares
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
Changes in assets and liabilities
Increase (decrease) in accounts receivable
Increase (decrease) in accounts payable
Increase (decrease) in inventories
Income and social contribution taxes paid
Employee profit sharing paid
Other
Net cash from investing activities
Property, plant and equipment
Intangible assets
Receive sale of fixed assets
Cumulative translation adjustments
Long-term financial investments
Premium on capital transaction
Acquisition of noncontrolling
Acquisition of subsidiary
Net cash from financing activities
Dividends/interest on equity capital paid
Funding of Borrowings obtained
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 03/31/2014
403,976
410,367
269,317
58,805
35,425
220
2,639
4,431
1,527
(467)
1,111
37,359
(12,641)
118,511
50,259
(10,915)
(81,448)
(89,048)
6,250
(142,363)
(64,284)
(3,208)
490
(53,618)
132
(2,699)
(5,947)
(13,229)
(388,037)
(248,230)
16,382
(112,601)
(43,588)
(126,424)
3,373,799
3,247,375
Prior period
01/01/2013 to 03/31/2013
334,910
337,421
221,413
52,136
28,659
158
106
(3,344)
147
992
1,387
35,767
(6,294)
91,360
46,754
(10,480)
(71,190)
(62,738)
3,783
(97,736)
(56,759)
(811)
903
(25,135)
(4,497)
(5,169)
(6,268)
0
474,374
(204,724)
827,186
(136,811)
(11,277)
711,548
2,302,256
3,013,804
PAGE: 15 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Consolidated financial statements / Statement of changes in equity - 01/01/2014 to 03/31/2014
(In thousand of reais)
Account
code
5.01
5.03
5.04
5.04.03
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
5.07
Capital reserves,
Other
Paid-in
Income
Retained earnings/ comprehensive
capital Options granted and reserves
Treasury stock
accumulated losses
income
Opening balances
2,718,440
(54,012) 1,005,903
163,174
724,267
Adjusted opening balances
2,718,440
(54,012) 1,005,903
163,174
724,267
Capital transactions with shareholders
(2,479)
(51,824)
Recognized options granted
220
Interest on equity
(51,824)
Goodwill on capital transaction
(2,699)
Other
Total comprehensive income
215,287
(64,018)
Net income for the period
204,887
Other comprehensive income (losses)
10,400
(64,018)
Adjustment of translation for the period
(53,618)
Realization at deemed cost
10,400
(10,400)
Internal changes in equity
(12)
(163,162)
Realization of revaluation reserve
(12)
12
Dividends paid
(163,174)
Closing balances
2,718,440
(56,503) 1,005,903
163,475
660,249
Account description
Equity
4,557,772
4,557,772
(54,303)
220
(51,824)
(2,699)
151,269
204,887
(53,618)
(53,618)
(163,174)
(163,174)
4,491,564
Non-controlling Consolidated
interest
equity
84,495
4,642,267
84,495
4,642,267
(8,601)
(62,904)
220
(1,320)
(53,144)
(2,699)
(7,281)
(7,281)
2,065
153,334
2,444
207,331
(379)
(53,997)
(379)
(53,997)
(163,174)
(163,174)
77,959
4,569,523
PAGE: 16 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Consolidated financial statements / Statement of changes in equity - 01/01/2013 to 03/31/2013
(In thousand of reais)
Account description
Account
code
5.01
5.03
5.04
5.04.03
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
Opening balances
Adjustment opening balances
Capital transactions with shareholders
Recognized options granted
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
Paid-in
capital
2,718,440
2,718,440
-
5.07
Closing balances
2,718,440
Capital
reserves,
Income
Options granted
reserves
and Treasury
Retained earnings/
stock
accumulated losses
(49,535) 559,989
127,803
(49,535) 559,989
127,803
(5,011)
(40,144)
158
(40,144)
(5,169)
184,399
172,299
12,100
12,100
(36)
(127,767)
(36)
36
(127,803)
(54,582)
559,989
144,291
Other
comprehensive
income
703,652
703,652
(37,235)
(37,235)
(25,135)
(12,100)
-
Equity
4,060,349
4,060,349
(45,155)
158
(40,144)
(5,169)
147,164
172,299
(25,135)
(25,135)
(127,803)
(127,803)
Non-controlling
interest
91,277
91,277
(11,508)
(220)
(11,288)
1,162
772
390
390
-
Consolidated
equity
4,151,626
4,151,626
(56,663)
158
(40,364)
(5,169)
(11,288)
148,326
173,071
(24,745)
(24,745)
(127,803)
-
666,417
4,034,555
80,931
4,115,486
PAGE: 17 of 49
ITR – Quarterly Information – 03/31/2014 – 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
7.08.04.03
7.08.04.04
Account description
Revenues
Sales of goods, products and services
Other revenues
Set up/Reversal of allowance for doubtful accounts
Inputs purchased from third parties
Materials, electricity, third party services and other
Loss/recovery of amounts receivable
Gross value added
Withholdings
Depreciation, amortization and depletion
Net value added produced
Value added received in transfer
Financial income
Total value added to be distributed
Distribution of value added
Personnel
Direct compensation
Benefits
Unemployment Compensation Fund (FGTS)
Taxes, charges and contributions
Federal
State
Municipal
Remuneration of third-party’s capital
Interest
Rental
Equity capital remuneration
Interest on equity capital
Retained profit/loss for the period
Noncontrolling interest in retained profits
Current period
01/01/2014 to 03/31/2014
2,062,514
2,065,039
962
(3,487)
(1,181,797)
(1,175,548)
(6,249)
880,717
(58,805)
(58,805)
821,912
152,842
152,842
974,754
974,754
354,413
296,827
38,930
18,656
279,796
248,633
28,908
2,255
133,214
123,816
9,398
207,331
51,824
153,063
2,444
Prior period
01/01/2013 to 03/31/2013
1,727,896
1,726,147
2,624
(875)
(936,170)
(927,396)
(8,774)
791,726
(52,136)
(52,136)
739,590
123,036
123,036
862,626
862,626
331,710
283,811
31,177
16,722
252,192
228,479
22,539
1,174
105,653
98,059
7,594
173,071
40,144
132,155
772
PAGE: 18 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Highlights
ƒ
ƒ
ƒ
ƒ
Net operating revenues in the first quarter of 2014 reached R$ 1,783.5 million, 20.7% higher than 1Q13
and 5.8% below 4Q13;
EBITDA reached R$ 299.6 million and EBITDA margin reached 16.8%. EBITDA grew by 20.4% over
the previous year and fell by 12.3% over the previous quarter;
Net Income totaled R$ 204.9 million, with net margin of 11.5% and growth of 18.9% over 1Q13 and
decrease of 13.7% over 4Q13;
Investments in fixed assets totaled R$ 64.3 million in the first three months of 2014.
Key Figures
Net Operating Revenue
Domestic Market
External Markets
External Markets in US$
Gross Operating Profit
Gross Margin
Net Income
Net Margin
EBITDA
EBITDA Margin
EPS
Q1 2014
Q4 2013
1.783.543
1.893.299
-5,8%
1.477.577
895.446
913.388
-2,0%
772.935
888.097
375.677
570.421
979.911
428.229
615.847
-9,4%
-12,3%
-7,4%
704.642
353.077
463.604
32,0%
32,5%
204.887
11,5%
299.643
16,8%
0,33023
%
Q1 2013
%
20,7%
15,9%
26,0%
6,4%
23,0%
31,4%
237.439 -13,7%
12,5%
341.653 -12,3%
18,0%
0,38270 -13,7%
172.299
11,7%
248.898
16,8%
0,27772
18,9%
20,4%
18,9%
Figures in R$ Thousand
Economic Activity and Industrial Production
Industrial activity in mature economies continued to show recovery signs in this first quarter of 2014, as can be
seen in the purchasing manager indexes analysis (PMI). PMI Indexes above 50 indicate industrial expansion,
while indexes below 50 indicate contraction in industrial activity. Both in USA as in Germany the expansion has
been uninterrupted since the second quarter of 2013. In China, however, 2014 began in contraction, reversing
the slight recovery observed at the end of 2013.
March 2014
February 2014
January 2013
Manufacturing ISM Report on Business ® (USA)
53,7
53,2
51,3
Markit/BME Germany Manufacturing PMI®
53,7
54,8
56,5
HSBC China Manufacturing PMI™
48,0
48,5
49,5
In Brazil, industrial production began 2014 at a slow pace. The cumulative growth in 2014 until February was
only 1.3% and growth in the last 12 months up to February was of 1.1%, maintaining the trend observed
throughout 2013, when annual growth reached 1.2%. This performance is below even the modest expectations
compiled by the Focus survey of the Brazilian Central Bank, that points to average growth of around 1.5% for
2014.
PAGE: 19 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Industrial Indicators According to Categories of Use in Brazil
Change (%)
Categories of Use
Feb 14 / Jan 14* Feb 14 / Feb 13
Capital Goods
Intermediary Goods
Consumer Goods
Durable Goods
Semi-durable and non-durable
General Industry
0,1
0,8
0,5
3,3
-0,1
0,4
12,4
1,1
7,4
20,9
3,6
5,0
Acummulated
On Year
12 months
8,0
-0,8
1,7
6,9
0,1
1,3
12,5
-0,1
0,0
1,3
-0,4
1,1
Source: IBGE, Research Office, Industry Coordination
(*) Series with seasonal adjustments
As has been common over the past few months, industrial production of capital goods showed the best results
among the categories of use, with 8% expansion accumulated in the year and 12.5% accumulated over the last
12 months, and also similarly to what we observed in 2013, influenced by the production of transport
equipment. Discounting this effect, the performance in capital goods production would be more modest.
Net Operating Revenue
Net Operating Revenues totaled R$ 1,783.5 million in the first quarter of 2014 (1Q14), corresponding to an
increase of 20.7% in relation to the first quarter of 2013 (1Q13) and a decrease of 5.8% in relation to the last
quarter of 2013 (4Q13). Organic growth (adjusting net revenues for the transactions WEG Transformers Africa
and WEG Balingen) was of 19.9% over 1Q13.
Net Operating Revenue per Market (R$ million)
External Market
Domestic Market
1.893
1.784
1.700
1.758
49%
50%
52%
51%
50%
48%
50%
Q2
Q3
Q4
Q1
1.478
48%
52%
Q1
2013
50%
2014
The first quarter of the year is a period of natural deceleration of business because of both the normal
seasonality of the markets and of the lower number of working days in comparison to the second part of the
year. Thus, the decline of Net Operating Revenue in 1Q14 over 4Q13 is normal and expected. On the other
hand, the devaluation of Brazilian Real in the period contributed for further expansion in relation to 1Q13. We
continue to see favorable trends in market fundamentals, such as product mix and average selling prices of the
long cycle products, with positive impacts on profitability. We also continue to perform the actions set out in the
WEG Plan 2020 and we are confident in achieving our strategic aspirations.
PAGE: 20 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Net Operating Revenue breaks down as follows in the 1Q14:
ƒ
Domestic Market: R$ 895.4 million, representing 50% of Net Operating Revenue, with 15.9% growth
over 1Q13 and decrease of 2.0% over 4Q13;
ƒ
External Market: R$ 888.1 million, equivalent 50% of Net Operating Revenue. The comparison in
Brazilian Reais shows growth of 26.0% over the same period last year and decrease of 9.4% over the
previous quarter. Considering the average US dollar, comparison shows growth of 6.4% compared to
1Q13 and decrease of 12.3% over 4Q13. Organic growth (excluding the transactions) in the external
markets was 24.3% over 1Q13.
Evolution of Net Revenues according to Geographic Market (R$ Million)
Q1 2014
Net Operating Revenues
- Domestic Market
- External Markets
- External Markets in US$
1.783,5
895,4
888,1
375,7
Q4 2013
1.893,3
913,4
979,9
428,2
Change
-5,8%
-2,0%
-9,4%
-12,3%
Q1 2013
1.477,6
772,9
704,6
353,1
Change
20,7%
15,9%
26,0%
6,4%
External Market – Distribution of Net Revenues according Geographic Market
North America
South and Central America
Europe
Africa
Australasia
Q1 2014
Q4 2013
Change
Q1 2013
36,0%
15,5%
31,7%
18,0%
37,5%
14,8%
26,5%
13,1%
8,9%
27,0%
13,7%
9,6%
4,3 pp
-2,5 pp
-0,5 pp
-0,6 pp
-0,7 pp
25,9%
11,7%
10,2%
Change
-1,5 pp
0,7 pp
0,6 pp
1,4 pp
-1,3 pp
Distribution of Net Revenues per Business Area
Electro-electronic Industrial Equipments
Domestic Market
External Market
Q1 2014
Q4 2013
%
Q1 2013
%
57,7%
60,1%
-2,3 pp
63,8%
-6 pp
23,0%
22,7%
0,3 pp
27,7%
-4,7 pp
34,7%
37,4%
-2,7 pp
36,1%
-1,3 pp
23,5%
22,9%
0,7 pp
19,8%
3,7 pp
Domestic Market
12,8%
12,7%
0 pp
11,7%
1,1 pp
External Market
10,8%
10,2%
0,6 pp
8,1%
2,7 pp
12,4%
11,0%
1,4 pp
10,1%
2,3 pp
Domestic Market
8,8%
7,5%
1,3 pp
7,3%
1,6 pp
0,7 pp
Energy Generation , Transmission and Distribution
Electric Motors for Domestic Use
External Market
3,6%
3,4%
0,1 pp
2,8%
Paints and Varnishes
6,4%
6,1%
0,3 pp
6,3%
0 pp
Domestic Market
5,6%
5,3%
0,3 pp
5,7%
0 pp
External Market
0,7%
0,7%
0 pp
0,7%
0,1 pp
PAGE: 21 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Business Areas
In the Industrial Electro-Electronic Equipment area performance in external markets was the result of our
better competitive position, made possible by the new exchange rate level and by the continued expansion of
products and applications. This performance was apparent mainly in North America, where the exchange rate
competitive gain was relatively higher, but was present in almost all other markets. Our products portfolio,
which includes some of the most technologically advanced products available, tailored to the specificities of
each market, remains an important competitive advantage, one that we can now explore even more intensely.
In the domestic market, we noticed that, after the initial impact of the devaluation on our customer’s
competitiveness and their recovering lost market to imported products, growth of serial production industrial
products, such as those used in equipment for consumer goods production, has decreased. The market for
long cycle products, used more commonly in process industries and infrastructure projects, remains
concentrated in specific segments. We have strengthened our actions on energy efficiency solutions in the
Brazilian market, an increasingly important aspect in a scenario of rising electricity costs.
We have been mentioning for some time that the gradual elimination of excess global production capacity in the
Energy Generation, Transmission and Distribution (GTD) business area has a positive impact on product
prices and profitability. In this favorable environment, the growth in demand for generation and the urgency of
investments in T&D is maximized. The results for the first quarter have been favorable and the positive trend
should continue over the coming quarters. We observe gradual acceleration in business in small hydroelectric
plants (PCH). The announcement for the wind turbines supply to Alupar (see below) consolidated our presence
in this market. In solar energy, we have an integrated generation solution and we continue to close significant
supply contracts.
The Motors for Domestic Use business area maintained the strong growth seen at the end of 2013, with the
exchange devaluation increasing the local production competitiveness and maximizing the impact of
consumption incentives. The sector has also benefited from the summer higher average temperatures, with
increased sales of air conditioning equipment.
In Paints and Varnishes business area, we observe growth in line with consolidated performance. We
continue executing our strategy of exploring business synergies with other WEG products, expanding the
products portfolio and entering new related segments.
Cost of Goods Sold
Cost of Goods Sold (COGS) totaled R$ 1,213.1 million in 1Q14, increasing 19.6% over 1Q13 and reduction of
5.0% over 4Q13. Gross margin reached 32.0%, with expansion of 0.6 percentage points over 1Q13 and
reduction of 0.5 percentage points over 4Q13.
The expansion of gross margin trend over recent quarters has been consistent and is due to: (i) the positive
effect of FX devaluation on revenues (ii) relative stability of raw materials costs; (iii) greater dilution of
manufacturing costs with revenue growth; (iv) productivity gains in the use of materials and labor with
innovations in engineering products and process; (v) reduction on payroll social security taxes.
Average on the London Metal Exchange (LME) spot copper prices fell by 11% in the 1Q14 compared to the
average of 1Q13 and by 2% compared to the average of 4Q13. Steel prices in the international markets fell by
7,8% over 1Q13 and by 4,5% over 4Q13. It is important to note that the price declines observed in US dollar
were partially compensated by the devaluation of Brazilian Reais, resulting in stable costs when measured in
the Brazilian currency.
PAGE: 22 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses (SG&A) represented 16.0% of net operating
revenue in the 1Q14, 0.4 percentage points higher than the 15.6% of the 1Q13 and 0.7 percentage points
higher than 15.3% of the 4Q13. In absolute terms, operating expenses grew by 23.9% over 1Q13 and
decreased by 1.2% over the previous quarter.
EBITDA and EBTIDA Margin
As a result of aforementioned impacts, EBITDA in 1Q14, calculated according to the methodology defined by
CVM in the Instruction nº 527/2012, totaled R$ 299.6 million, an increase of 20.4% over 1Q13 and a reduction
of 12.3% over 4Q13. EBITDA margin reached 16.8%, 1.2 percentage points lower than 4Q13 and at the same
level of 1Q13.
Q1 2014
Net Operating Revenues
Consolidated Net Income for the Period
Net Margin
(+) Income taxes & Contributions
(+/-) Financial income (expenses)
(+) Depreciation & Amortization
EBITDA
EBITDA Margin
138,4
Q4 2013
%
Q1 2013
1.893,3 -5,8%
237,3 -12,6%
12,5%
72,0 -14,0%
-24,4 16,7%
3,6%
56,8
341,7 -12,3%
18,0%
1.783,5
207,3
11,6%
62,0
-28,5
58,8
299,6
16,8%
%
1.477,6 20,7%
173,1 19,8%
11,7%
48,3 28,2%
-24,7 15,5%
52,1 12,8%
248,9 20,4%
16,8%
Figures in R$ Million
(193,7)
167,6
FX Impact on
Revenues
(39,3)
(14,5)
COGS (ex
depreciation)
248,9
Volumes,
Prices &
Product Mix
Changes
EBITDA Q1 13
Selling
Expenses
General and
Administrative
Expenses
(6,8)
Profit Sharing
Program
(0,9)
299,6
Other
Expenses
EBITDA Q1 14
Net Financial Results
In this quarter, net financial result was positive in R$ 28.5 million (positive in R$ 24.4 million in 4Q13 and R$
24.7 million in 1Q13). Financial revenues totaled R$ 152.8 million in 1Q14 (R$ 175.1 million in 4Q13 and R$
123.0 million in 1Q13). Financial expenses totaled R$ 124.4 million (R$ 150.7 million in 4Q13 and R$ 98.4
million in 1Q13). Net financial result growth of 15.5% is a result of increased net cash position and increase in
interest rates obtained on financial instruments in the Brazilian market.
PAGE: 23 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Income TAX
Income Tax and Social Contribution on Net Profit provision in 1Q14 reached R$ 70.7 million (R$ 71.7 million in
4Q13 and R$ 51.3 million in 1Q13). Additionally, R$ 8.7 million were recorded as ‘‘Deferred income tax / social
contribution’’ credit (debt of R$ 0.3 million in 4Q13 and credit of R$ 3.0 million in 1Q13).
Net Income
As a result of aforementioned impacts, net income for 1Q14 was R$ 204.9 million, an increase of 18.9% over
1Q13 and decrease of 13.7% over the previous quarter. The net margin of the quarter was 11.5%, 0.2
percentage point lower than the 1Q13 and 1.1 percentage point lower than the 4Q13.
Cash Flow
404,0
3.373,8
(388,0)
3.247,4
Investing
Operating
Cash Dec 2013
(142,4)
Financing
Cash Mar 2014
Cash flow from operating activities totaled R$ 404.0 million in 1Q14, with 21% growth over 1Q13. The growth is
explained mainly by the increase in cash generation from operations, with increase in net income before
depreciation, and by reduction of the working capital needs (reduction in receivables and increased suppliers).
These factors were partially compensated by increased income tax and profit sharing paid.
Investing activities consumed R$ 142.4 million in 1Q14, 46% higher than the 1Q13, with WEG Balingen
(Württembergische Elektromotoren GmbH) acquisition being the highlight and with the acceleration of the
investment in capacity expansion program.
Financing activities consumed R$ 388.0 million in 1Q14. We performed net amortizations of R$ 96.2 million
(new debt issued of R$ 16.4 million and amortizations of R$ 112.6 million), which compares with net increase of
R$ 690.4 million in new funding in 2013.
Investments
Investments in fixed assets for capacity expansion and modernization totaled R$ 64.3 million in the first three
months of 2014, 85% of which destined to the industrial plants and other installations in Brazil and the
remaining amount to production units and other subsidiaries abroad. WEG Balingen acquisiton added
approximately R$ 1.1 million in additional fixed assets.
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Version: 1
Outside Brazil
Brazil
61,3
63,9
61,1
6,0
11,8
15,6
13,1
50,7
49,5
48,3
48,0
Q1
Q2
Q3
Q4
56,8
64,3
8,4
55,9
Q1
2013
2014
Our expansion program of production capacity and industrial modernization for 2014 expects to invest
approximately R$ 592 million, with highlight to early stages of new industrial plant in China and the expansion
and verticalization capacity in the electric motors industrial plant in Mexico.
Debt and Cash Position
As of March 31, 2014 cash, cash equivalents and financial investments totaled R$ 3,249.5 million, mainly in
short-term, invested in Brazilian currency in first-tier banks, in fixed income instruments linked to the CDI. Gross
financial debt totaled R$ 3,106.6 million, 29% in short-term and 71% in long-term.
March 2014
December 2013
March 2013
Cash & Financial instruments
3.249.472
3.376.029
3.281.577
- Current
- Long Term
3.247.375
2.097
3.373.799
2.230
3.279.518
2.059
Debt
3.106.557
100%
3.209.004
100%
3.404.706
100%
914.246
29%
912.796
28%
1.526.274
45%
- Current
- In Brazilian Reais
503.749
16%
462.336
14%
1.077.205
32%
- In other currencies
410.497
13%
450.460
14%
449.069
13%
2.192.311
71%
2.296.208
72%
1.878.432
55%
1.976.524
64%
2.048.766
64%
1.646.899
48%
215.787
7%
247.442
8%
231.533
7%
- Long Term
- In Brazilian Reais
- In other currencies
Net Cash (Debt)
142.915
167.025
(123.129)
At the end of the 1Q14 WEG had net cash of R$ 142.9 million (net debt of R$ 123.1 million in March 31, 2013).
Over the 2013 we raised new funding on attractive terms of maturities and fees, increasing the duration and
lengthening the debt total profile, without increasing the gross debt.
The characteristics of the debt are:
ƒ Duration of long-term portion is 25.4 months.
ƒ Duration for the Brazilian Reais denominated portion is of 20.7 months and for the foreign currencies
denominated portion is of 11.5 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 49
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Version: 1
Dividends and interest on stockholder`s equity
On March 25, the Board of Directors approved the payment to shareholders, as interest on stockholders’ equity
(JCP), totaling R$ 51.8 million or R$ 0.083529412 per share (before deduction of income tax at source),
payable on August 13, 2014.
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 of March 2014 quoted at R$ 31.70, with nominal high of 1.7% in the year. Considering the dividends
and interest on stockholders equity declared in the first quarter, the high was 2.7% in 2014.
35,00
3.500
WEGE3
30,00
3.000
25,00
2.500
20,00
2.000
15,00
1.500
10,00
1.000
5,00
500
0,00
0
Traded shares (thousands)
WEGE3 share prices
Shares Traded (thousands)
The average daily traded volume in 1Q14 was R$ 15.5 million, (R$ 14.3 million in 1Q13). Throughout the
quarter 128,099 stock trades were carried out (114,952 stock trades in 1Q13), involving 31.8 million shares
(32.5 million shares in 1Q13) and totaling R$ 943.4 million (R$ 844.6 million in 1Q13).
Württembergische Elektromotoren GmbH Acquisition
On February 18, WEG S.A. announced that has agreed to acquire the electric motors and gearbox
manufacturer Württembergische Elektromotoren GmbH (“Württembergische”), a family owned business
PAGE: 26 of 49
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Version: 1
founded in 1939, and with manufacturing plants located in Balingen, south central Germany, 75 km from
Stuttgart, one of the most industrialized regions of the country. The company offers of gearboxes, three phase,
single-phase and direct current electric motors up to 1,000 watts and fractional servomotors.
The manufacturing plant occupies 5,000 square meters area, employing around 80 people. Net revenues in
2013 were of approximately € 7 million.
Acquisition of “Sinya” and “CMM” Groups in China
On March 25, WEG S.A. announced an agreement to acquire the Chinese manufacturer of electric motors for
washers and dryers Changzhou Sinya Electromotor Co. Ltd (“SINYA Group”) and the component manufacturer
Changzhou Machine Master Co. Ltd. (“CMM Group”).
SINYA Group manufactures electric motor for washers, dryers and other white goods appliances, developing
advanced technology products for major manufacturers worldwide. SINYA Group was founded in July 2005 and
the main manufacturing plant is located in Changzhou, Jiangsu province, occupying 28,550 square meters
area. A new manufacturing plant, with around 68,760 square meters, is under construction. The Group still
includes “Wuxi Ecovi”, an appliance products and solutions development and engineering company. SINYA
Group’s revenues in 2012 were of approximately USD 88 million.
CMM Group manufactures transmissions and mechanical components for “white line” solutions marketed by
SINYA Group. CMM Group was founded in July 2005 and the manufacturing plant is located in Changzhou,
with approximately 12,000 square meters area. CMM Group’s revenues in 2012 were of approximately USD 17
million, being SINYA Group one of its main customers.
These transactions are not part of the quarterly information at March 31, 2014 are subject to approval by
several Chinese regulators.
Wind Turbines Supply Contracts
On April 02, WEG S.A. announced that it has signed contract with specific purpose entity (“SPE”) Energia dos
Ventos I and pre-agreements with SPE Energia dos Ventos II, III, IV and X, all controlled by Alupar
Investimentos S.A., to supply wind energy generation systems (equipment and services.) The contracts include
the supply of 46 wind turbines of 2.1 MW each.
The agreements establish that, in addition to the usual installation and commissioning services, WEG shall
provide operation and maintenance services for 10 years after the commissioning. The wind turbines use the
Permanent Magnet Direct Drive technology (“PM/DD”) and will be installed in five wind farms located in Aracatí,
Ceará state, in the Brazilian Northeastern. The Energia dos Ventos I, II, III, IV and X projects won energy
purchasing contracts at the “A-5” auction held by Agencia Nacional de Energia Elétrica (ANEEL) in 2011. The
wind turbines will be manufactured at WEG’s plant in Jaraguá do Sul, Santa Catarina, with deliveries from 2015
onwards.
PAGE: 27 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
WEG S.A.
Notes to financial statements
At March 31, 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 April 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) fair value measurement of financial instruments;
d) commitments with employees’ benefit plans;
e) transactions with stock option plan;
f) deferred income tax assets on income and social contribution tax losses, and
g) 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 49
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Version: 1
Notes to financial statements
4. Cash and cash equivalents
COMPANY
03/31/14
12/31/13
a) Cash and banks
b) Short-term investments
In local currency
Bank Deposit Certificate (CDB) and Investment funds
In foreign currency
Certificates of Deposits Abroad
Other balances held abroad
SWAP
NDF - “Non Deliverable Forwards”
TOTAL
28
893,462
893,462
893,462
893,490
28
870,878
870,878
870,878
870,906
CONSOLIDATED
03/31/14
12/31/13
357,468
2,889,907
2,840,927
2,840,927
48,431
27,067
21,364
336
213
3,247,375
248,149
3,125,650
3,027,945
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 4,863, of which balance amounts to R$ 15,358
(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$ 5,175, of which the balance amounts to R$
11,709 (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$ 21,364 (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 statements of cash flows.
5. Trade accounts receivable
CONSOLIDATED
03/31/14
12/31/13
a) Breakdown of balances
Domestic Market
External Market
SUBTOTAL
Present value adjustment
Allowance for losses on trade receivables
TOTAL
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
TOTAL
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 03/31/2014
861,277
750,170
1,611,447
(5,491)
(29,127)
1,576,829
833,903
856,826
1,690,729
(3,950)
(27,973)
1,658,806
39
2,345
1,408,459
81,341
121,647
1,611,447
1,470,047
104,446
116,236
1,690,729
(18,190)
2,345
(14,068)
1,940
(27,973)
39
(1,193)
(29,127)
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ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Notes to financial statements
6. Inventories
CONSOLIDATED
03/31/14
12/31/13
281,873
271,911
293,448
260,049
272,810
248,487
50,630
63,501
(13,354)
(11,012)
885,407
832,936
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
OVERALL TOTAL
The breakdown of provision for slow moving is as follows:
Balance at 01/01/2013
Reversal of provision
Recognition of a provision
Balance at 12/31/2013
Reversal of provision
Recognition of a provision
Balance at 03/31/2014
374,263
112,783
110,893
(21,580)
576,359
427,344
93,497
114,545
(22,395)
612,991
1,461,766
1,445,927
(27,013)
6,915
(13,309)
(33,407)
1,070
(2,597)
(34,934)
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.
7. 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
03/31/14
12/31/13
5,704
10,573
5,704
10,573
5,704
10,573
-
CONSOLIDATED
03/31/14
12/31/13
25,928
25,989
65,863
67,222
2,160
2,585
24,419
22,991
12,357
13,368
15,664
21,552
10,983
7,335
4,140
17,882
3,864
4,253
165,378
183,177
148,947
166,384
16,431
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.
PAGE: 30 of 49
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Version: 1
Notes to financial statements
8. 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 directors/officers
CONSOLIDATED
03/31/14
12/31/13
03/31/14
12/31/13
493
1,193
-
-
493
1,193
-
-
-
-
5,237
5,237
2,206
2,206
COMPANY
INCOME STATEMENT
Management compensation:
a) Fixed (fees)
Board of Directors
Executive Board
b) Variable (profit sharing )
Board of Directors
Executive Board
CONSOLIDATED
03/31/14
03/31/13
03/31/14
03/31/13
488
255
233
466
254
212
4,814
510
4,304
4,410
508
3,902
420
219
201
248
135
113
3,507
403
3,104
1,730
270
1,460
Additional information:
a) Business transactions
The transactions of purchase and sale of inputs and products are made under the same conditions with unrelated third parties,
prevailing spot sales;
b) Management of financial resources
The financial and commercial operations between Group companies are recorded, in 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$ 191.2 million (US$ 196.9 million at
December 31, 2013);
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Version: 1
Notes to financial statements
e) Management compensation
Board of Directors members were paid the amount of R$ 510 (R$ 508 at March 31, 2013) and the executive officers were paid
the amount of R$ 4,304 (R$ 3,902 at March 31, 2013), for their services, aggregating the total of R$ 4,814 (R$ 4,410 at March
31, 2013).
Was planned the participation of 0% to 2.5% of net income to be paid to management as long as the result of activity on capital
invested is at least 10%. The provision is recognized in P&L for the period, in the amount of R$ 3,507 (R$ 1,730 at March 31,
2013), under other operating expenses. Board members and officers receive additional corporate benefits, as follows: Health
and dental insurance, life insurance, supplementary pension benefits, among others.
9. Deferred taxes
Deferred income tax and social contribution tax credits and debts were determined in accordance with each country’s ruling
standards.
a) Breakdown:
Income tax losses
CSLL tax losses
Temporary differences:
Provision for contingencies
Taxes questioned in court
Losses on trade receivables
Losses on 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
Adjustment of transition tax regime
Accelerated depreciation incentive - Law n° 11.196/05
Other additions and exclusions
Deemed cost of PP&E
TOTAL
Noncurrent assets
Noncurrent liabilities
COMPANY
03/31/14
12/31/13
156
267
165
172
3,615
(52)
563
(1,537)
2,910
2,910
-
3,576
(52)
561
(1,547)
2,977
2,977
-
CONSOLIDATED
03/31/14
12/31/13
33,114
35,917
8,106
7,947
40,408
27,934
4,200
9,094
12,169
9,102
29,625
13,805
(140,875)
(5,746)
21,390
(285,529)
(223,203)
68,870
(292,073)
40,206
27,038
5,275
9,887
12,656
8,858
22,915
10,759
(133,428)
(5,522)
15,005
(291,542)
(234,029)
60,376
(294,405)
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.
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Version: 1
Notes to financial statements
10. Investments
10.1. Investments in subsidiaries
Ajusted
Shareholders
’ equity
WEG Equipamentos Elétricos S.A.
RF Reflorestadora Ltda.
WEG Tintas Ltda.
WEG Amazônia S.A.
WEG Administradora de Bens Ltda.
WEG Logística Ltda.
WEG Linhares Equips Elétricos S.A.
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.
Watt Euro-Drive PTE Ltd.
WEG Singapore Pte. Ltd.
WEG Colômbia Ltda.
WEG Middle East Fze.
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.
TOTAL
(*)Equity pickup adjusted by unearned income
P&L
Investments in Capital (%)
Equity
03/31/14
Indirect
-
Direct
100,00
12/31/13
Indirect
-
Book Value
03/31/14 03/31/13
03/31/14
12/31/13
3,016,511
163,261
Direct
100.00
3,016,511
3,122,002
168,162
102,168
1,258
6,129
100.00
99.91
0.09
100,00
99.91
0.09
1,258
6,124
1,912
6,572
168,162
102,073
167,488
98,702
39,481
361
0.02
99.98
0.02
99.98
-
-
6
6
22,037
67,640
142,198
583
3,711
8,462
5.00
0.01
95.00
100.00
99.99
5.00
0.01
95.00
100.00
99.99
29
-
6
-
1,102
1
1,656
1
314,677
10
40,714
20,764
44,810
7,077
1,559
86,870
10
175,616
(54)
4,743
4,619
20,131
50,383
3,868
6,644
51,035
830
138
27,664
12,656
156
37,637
23,637
77,815
14,775
2,557
11,963
(2,986)
906,132
51,333
142,664
52,386
1,999
13,291
(1,181)
265
114,984
493
14,042
12,805
1,560
3,198
134,118
43,061
52,223
2,471
48,943
4,403
4,584
6,822
(936)
16,600
3,583
1,069
(21)
80
(69)
341
1,583
886
(790)
367
(2,118)
370
(6)
(87)
6,869
138
(4)
(1,036)
(1,902)
948
(998)
3,776
311
83
(157)
(213)
923
4,352
119
738
332
(529)
(468)
(104)
(126)
468
197
87
4,464
2,516
(875)
948
635
(217)
(357)
(1,018)
-
99.99
0.05
91.75
0.01
10.44
0.01
8.00
1.00
0.79
5.00
0.07
0.01
0.05
5.74
-
0.01
99.90
50.01
99.95
62.32
8.25
100.00
99.99
100.00
100.00
76.09
100.00
100.00
86.67
100.00
100.00
100.00
89.55
100.00
100.00
100.00
100.00
100.00
99.99
92.00
100.00
100.00
100.00
99.00
100.00
100.00
100.00
99.21
100.00
100.00
100.00
100.00
90.00
99.99
95.00
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
99.99
0.05
91.75
0.01
10.44
0.01
8.00
1.00
0.79
4.99
0.07
0.01
0.05
5.74
-
0.01
99.90
50.01
99.95
62.32
8.25
100.00
99.99
100.00
96.62
70.00
89.47
100.00
86.67
100.00
100.00
89.55
100.00
100.00
100.00
100.00
100.00
99.99
92.00
100.00
100.00
100.00
99.00
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
16,600
1
74
717
(80)
(2)
35
(5)
1
36
-
18,810
(100)
440
95
3
28
2
1
148
-
314,676
20
6,494
5,329
1,891
120
1,124
25
9
1
1
2,810
-
305,583
20
6,420
5,970
2,156
131
1,116
32
9
1
1
2,856
-
188,789 162,417
3,620,355
3,714,150
164,001 134,500
PAGE: 33 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Notes to financial statements
10.2. 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 100% of Württembergische Elektromotoren
GmbH, manufacturer of electric motors and gearmotors in Germany. The goodwill, in the amount of R$6,265, was initially
measured as transferred payment exceeding amount in relation to acquired net assets.
(iii) SINYA and CMM Groups
In 25 of March 2014, the Company announced the signing of agreements for the acquisition of the Chinese manufacturer of
electric motors for washing machines and clothes dryers Sinya Changzhou Electric motor Co. Ltd. ("sinya Group") and the
component manufacturer Changzhou Master Machine Co. Ltd. ("Group CMM "). The acquisitions are not part of the financial
statements of March 31, 2014, against being subject to approval by Chinese regulatory authorities.
11. Property, plant and equipment
The Company, in 2014, does not have to capitalize borrowing costs (R$ 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
CONSOLIDATED
03/31/14
12/31/13
03/31/14
12/31/13
Land
1,440
1,440
335,994
337,735
Construction and facilities
5,639
5,639
891,469
878,537
Equipment
2,852,492
2,831,826
Furniture and fixtures
102,883
95,235
Hardware
85,441
84,030
Construction in progress
72,433
84,418
Reforestation
51,990
51,571
Other
50,220
39,246
Subtotal
7,079
7,079
4,442,922
4,402,598
Accumulated deprec,/depletion
Construction and facilities
Equipment
Furniture and fixtures
Hardware
Reforestation
Other
TOTAL
Annual depreciation rate (%)
02 to 03
05 to 20
07 to 10
20 to 50
-
(2,278)
(2,278)
4,801
(2,249)
(2,249)
4,830
(1,837,088)
(223,786)
(1,468,028)
(56,361)
(60,697)
(11,888)
(16,328)
2,605,834
(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
Reforestation
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
16,978
(105)
(5,522)
811
7,242
20
(30)
(24,210)
-
30,897
2,267
1,938
15,941
420
13,123
65,397
Exchange
effect
(930)
(4)
(26)
(72)
(45,131)
(1,602)
(2,236)
-
(1,741)
(5,547)
(4,737)
(384)
(130)
(3,644)
-
(856)
(983)
(56,330)
(5)
(16,188)
(464)
(1,601)
-
03/31/14
335,994
667,683
1,384,464
46,522
24,744
72,433
40,102
33,892
2,605,834
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).
PAGE: 34 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Notes to financial statements
12. Intangible assets – consolidated
Software license
Other
Subtotal
Goodwill - Acquisition of subsidiaries
TOTAL
Amortization/
Years
5
5
-
Cost
80,889
51,220
132,109
527,957
660,066
Accumulated
Amortization
(57,659)
(33,491)
(91,150)
(21,353)
(112,503)
03/31/14
12/31/13
23,230
17,729
40,959
506,604
547,563
23,733
17,039
40,772
503,048
543,820
a) Summary of changes in intangible assets:
Software license
Other
Subtotal
Goodwill - Acquisition of subsidiaries
TOTAL
12/31/13
Additions
Amortization
23,733
17,039
40,772
503,048
543,820
1,071
2,137
3,208
6,265
9,473
(1,381)
(1,094)
(2,475)
(2,475)
Exchange
effect
03/31/14
(193)
(353)
(546)
(2,709)
(3,255)
23,230
17,729
40,959
506,604
547,563
03/31/14
7,351
8,029
7,054
5,101
8,419
5,005
40,959
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
13. 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$ 344.7 million in the short-term (R$ 378.8 million at December 31, 2013) and R$ 103.0 million in the
long-term (R$ 108.2 million at December 31, 2013), corresponding to US$ 197.9 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 03/31/14
CONSOLIDATED
03/31/14
12/31/13
TJLP (+) 1,4% a 5,0% p.a.
Interest of 3.5% to 9.0 %p.a.
US$ dollar (+) 1.4% to 1.8% p.a.
US$ dollar (+) Libor (+) 3.3% p.a.
UFIR (+) 1.0% to 4.0% p.a.
US$ dollar (+) Libor (+) 1.1% p.a.
Exchange rate variation
TJLP (+) 1.0% to 8.7% p.a.
Sundry
569,490
279,628
202,901
22,284
7,973
18,576
32,367
594
722
2,523
1,922
533,972
284,099
151,534
23,082
7,401
18,124
33,519
6,867
6,667
1,936
743
PAGE: 35 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Notes to financial statements
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 5.0% p.a.
UFIR (+) 1.0% to 4.0% p.a.
Interest of 3.5% to 9.0 %p.a.
TJLP (+) 1.0% to 8.7% p.a.
US$ dollar (+) 1.4% to 1.8% 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)
EURIBOR (+) 0.6% to 1.0% p.a.
LIBOR (+) 0,7% to 1.9% p.a.
90% of PBOC (7.1% to 8.2%) p.a.
BBSY (+) 2.3% p.a.
Interest of 1.0% to 15.0% p.a.
Exchange rate variation
LONG TERM
Working Capital
Working Capital
Working Capital
SWAP
LIBOR (+) 0,7% to 1.9% p.a.
Interest of 1.0% to 15.0% p.a.
EURIBOR (+) 0.6% to 1.0% p.a.
-
TOTAL SHORT TERM
TOTAL LONG TERM
2,089,294
395,646
39,485
1,521,421
15,965
30,345
33,945
48,480
4,007
2,187,968
409,477
36,178
1,580,130
16,921
37,149
35,139
66,914
6,060
344,756
61,490
131,512
757
150,029
968
378,824
156,692
134,599
1,311
881
85,341
-
103,017
88,303
3,601
3,056
8,057
108,240
91,369
5,018
4,487
7,366
914,246
2,192,311
912,796
2,296,208
Maturity of long-term financing and loans:
03/31/14
634,220
1,296,983
69,263
132,173
31,487
28,185
2,192,311
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
14. Provision for contingencies
The Company and its subsidiaries are parties to administrative and judicial proceedings of labor, civil and tax nature arising from
the normal activities of their businesses. The respective provisions were set up for proceedings the likelihood of loss of which
was rated as “probable” based on the estimate of value at risk determined by the Company’s legal counselors. The Company's
management estimates that the provision for contingencies set up is sufficient to cover any losses from the proceedings in
progress.
a) Balance of provision for contingencies
(i) Tax:
- IRPJ e CSLL
- INSS
- IRRF
- Other
(a.1)
(a.2)
(a.3)
COMPANY
03/31/14
12/31/13
10,632
10,522
3,156
3,046
7,476
7,476
-
CONSOLIDATED
03/31/14
12/31/13
95,872
93,248
16,306
16,096
41,394
39,926
7,811
7,811
30,361
29,415
PAGE: 36 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Notes to financial statements
(ii) Labor
-
-
79,318
79,189
(iii) Cívil
-
-
61,684
60,161
(iv) Other
-
-
2,891
2,736
10,632
10,522
239,765
235,334
1,347
1,347
-
1,328
1,328
-
33,071
23,707
9,364
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
03/31/14
93,248
79,189
60,161
2,736
235,334
2,211
1,600
2,135
450
6,396
413
1,133
260
1,806
(738)
(493)
(143)
(1,374)
(1,866)
(379)
(152)
(2,397)
95,872
79,318
61,684
2,891
239,765
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$ 79,318 (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$ 61,684 (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
03/31/14
12/31/13
1,347
1,328
1,347
1,328
1,347
1,328
CONSOLIDATED
03/31/14 12/31/13
13,195
13,195
19,876
33,071
2,802
35,873
19,263
32,458
2,802
35,260
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$ 87,592 (R$ 85,142 at December 31, 2013).
The processes classified as “possible” by legal opinions, are:
PAGE: 37 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Notes to financial statements
- taxation on profits computed abroad in the total estimated amount of R$ 35 million.
- taxation on products of Information Technology Acts in the amount of R$ 36 million.
- not properly approved of IPI credits amounting to R$ 10.6 million.
15. 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 22,604 participants (20,871 at March 31, 2013). The Company and its subsidiaries made
contributions in the amount of R$ 6,690 (R$ 5,815 at March 31, 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.
16. Equity
a) Capital
The Company's capital stock is made up by 620,905,029 common registered and uncertified shares, without par value, all of
which with voting rights, not including the 473,515 shares held in treasury as per item "c”.
b) Shareholder compensation - Interest on equity capital
The Company declared throughout 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.
Interest on equity capital, under clause 37 of the Company's bylaws and article nine of Law 9,949/95, will be imputed to the
mandatory dividends and will be paid as from August 13, 2014, for a capital stock of 620,431,514 shares.
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. 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 26,485 shares. The Company maintains 473,515
treasury shares in the amount of R$ 9,522.
17. 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.
PAGE: 38 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Notes to financial statements
In order to participate in each Program, the participant must invest an amount of his/her variable compensation in each period in
Company’s shares.
Number of shares
Program
Granted Acquired
Rights
Number
Vesting
of Options
Period
Rights
274,678
46,653
91,056
1º
2º
3º
September /11 274,678
18,072
35,894
1º
2º
3º
April /11
Subtotal
Subtotal
535,000
41,000
75,200
1º
2º
3º
September /12 110,000
21,162
40,824
1º
2º
3º
242,974
45,572
82,574
1º
2º
3º
September /13 174,452
22,810
41,870
1º
2º
3º
50,228
85,016
1º
2º
3º
March /12
Subtotal
Subtotal
April /13
Subtotal
Subtotal
March /14
Subtotal
Total
30,352
30,352
30,352
91,056
11,965
11,965
11,964
35,894
25,067
25,067
25,066
75,200
13,608
13,608
13,608
40,824
27,525
27,525
27,524
82,574
13,957
13,957
13,956
41,870
28,339
28,339
28,338
85,016
452,434
In reais (R$)
Price
Strike
corrected
Price
by IPCA
21.01
23.16
21.01
24.32
21.01
25.54
Amount
Option
Option
appropriate
price Difference (thousand R$)
30.60
32.98
35.29
7.43
8.66
9.76
17.45
17.45
17.45
19.39
20.43
21.54
25.08
27.05
29,00
5.70
6.62
7.46
19.17
19.17
19.17
21.34
22.51
23.75
27.22
29.40
31.51
5.89
6.89
7.76
17.50
17.50
17.50
19.48
20.56
21.69
25.51
27.33
29.16
6.02
6.78
7.47
24.43
24.43
24.43
27.28
28.83
30.47
34.58
37.24
39.91
7.30
8.41
9.44
24.96
24.96
24.96
27.97
29.60
31.33
37.47
40.55
43.50
9.50
10.95
12.16
27.23
27.23
27.23
30.68
32.56
34.56
41.62
44.98
48.35
10.94
12.42
13.79
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: 39 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Notes to financial statements
The weighted average of fair value was determined based on the Black-Scholes-Merton method, considering the following aspects:
Program
April /11
September/11
March /12
September /12
April /13
September /13
March /14
Vesting
Period
1°
2°
3°
1°
2°
3°
1°
2°
3°
1°
2°
3°
1°
2°
3°
1º
2º
3º
1º
2º
3º
Exercise price
of option (R$)
Lifespan of the
option – in days
755
1,008
1,260
756
1,008
1,259
755
1,008
1,257
753
1,006
1,257
760
1,008
1,260
756
1,007
1,258
753
1,005
1,257
21.01
17.45
19.17
17.50
24.43
24.96
27.23
Current price for
Interest free of risk
corresponding
Expected volatility
for the lifespan of the
share
in share price (%)
option (%)
(R$)
22.10
26.33
12.79
22.10
26.33
12.81
22.10
26.33
12.83
18.06
29.88
10.90
18.06
29.88
11.05
18.06
29.88
11.22
19.80
29.85
9.76
19.80
29.85
10.12
19.80
29.85
10.33
20.10
24.50
8.32
20.10
24.50
8.57
20.10
24.50
8.78
25.72
28.53
8.67
25.72
28.53
9.01
25.72
28.53
9.24
27.75
28.25
11.29
27.75
28.25
11.69
27.75
28.25
11.81
31.60
20.51
12.28
31.60
20.51
12.44
31.60
20.51
12.58
Summary of the movement of shares plan:
Number of shares
Program
Balance 12/31/2013
Granted
Expired/
Canceled
Exercised
Balance 03/31/2014
April/11
69,440
-
-
-
69,440
September/11
28,358
-
-
-
28,358
March/12
74,200
-
-
-
74,200
September/12
40,824
-
-
-
40,824
April/13
82,574
-
-
-
82,574
September/13
41,870
-
-
-
41,870
85,016
-
-
85,016
85,016
-
-
422,282
March/14
Total
337,266
The recognition of expenses with stock option is carried out throughout the period of acquisition of "vesting rights”.
In March 31, 2014, was recorded R$ 220 (R$ 158 at March 31, 2013) as other results in the financial statements for the year
counterpart capital reserve in Equity.
The accumulated equity totals in March 31, 2014 R$ 1,545 (R$ 1,325 at December 31, 2013).
PAGE: 40 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Notes to financial statements
18. Net revenue
BREAKDOWN OF NET REVENUE
CONSOLIDATED
03/31/14
03/31/13
Gross revenue
Domestic market
External market
2,125,289
1,184,610
940,679
1,775,556
1,023,412
752,144
Deductions
Taxes
Returns and Rebates
(341,746)
(281,496)
(60,250)
(297,979)
(248,570)
(49,409)
Net revenue
Domestic Market
External Market
1,783,543
895,446
888,097
1,477,577
772,935
704,642
19. 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
03/31/14
03/31/13
Gross operational revenue recognized
70,703
42,282
Incurred costs
(52,038)
(30,763)
Received prepayments
03/31/14
75,842
12/31/13
38,393
20. Operating expenses by nature and function
CONSOLIDATED
03/31/14
03/31/13
EXPENSE BY NATURE
Depreciation, amortization and depletion
Personnel expenses
Raw materials and use and consumption materials
Freight and insurance costs
Other expenses
(1,542,705)
(58,805)
(412,308)
(783,065)
(55,284)
(233,243)
(1,280,815)
(52,136)
(345,933)
(647,113)
(43,867)
(191,766)
EXPENSE BY FUNCTION
Cost of products and services sold
Selling expenses
General and administrative expenses
Management fees
Other operating expenses
(1,542,705)
(1,213,122)
(196,661)
(83,889)
(4,814)
(44,219)
(1,280,815)
(1,013,973)
(157,029)
(68,863)
(4,410)
(36,540)
PAGE: 41 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Notes to financial statements
21. Other operating revenue/expenses
The recorded values are relative to profit sharing, reversal/ (provision) for lawsuits and others, as follows:
CONSOLIDATED
03/31/14
03/31/13
1,846
5,568
1,846
5,568
(46,065)
(42,108)
(31,120)
(26,026)
(4,305)
(2,633)
(3,507)
(1,730)
(1,629)
(1,528)
(1,506)
(857)
(3,998)
(9,334)
(44,219)
(36,540)
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
22. 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
03/31/14
COMPANY
03/31/13
CONSOLIDATED
03/31/14
03/31/13
17,993
21,232
(3,343)
104
11,517
14,334
(2,898)
81
152,842
71,021
57,672
15,019
(3,343)
12,473
123,036
46,410
65,247
7,796
(2,898)
6,481
(39)
(39)
(67)
(67)
(124,363)
(43,588)
(63,390)
(5,385)
(12,000)
(98,385)
(40,546)
(47,881)
(3,175)
(6,783)
17,954
11,450
28,479
24,651
23. Provision for income and social contribution taxes
The parent company and subsidiaries in Brazil assess income and social contribution taxes according to taxable income, except
for WEG Administradora de Bens Ltda. 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
COMPANY
03/31/14
03/31/13
205,175
172,608
34%
34%
CONSOLIDATED
03/31/14 03/31/13
269,317
221,413
34%
34%
IRPJ and CSLL calculated at the statutory rate
(69,760)
(58,687)
(91,568)
(75,280)
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
64,188
5,333
(49)
(288)
(221)
(67)
55,222
2,995
161
(309)
(345)
36
(993)
(2,711)
14,131
17,698
1,457
(61,986)
(70,669)
8,683
(1,113)
3,540
11,532
13,724
(745)
(48,342)
(51,305)
2,963
Effective rate - %
0.14%
0.18%
23.02%
21.83%
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ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Notes to financial statements
24. Insurance coverage
The corporate unit in Brazil is responsible for the management of the insurance portfolio of the WEG Group in Brazil and
abroad; and continuously constitutes, jointly with the executive board, the risk policies for the WEG Group so as to protect its
assets.
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): US$ 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$25 million;
- Contractual Insurance: as stipulated in the contract;
- Risk Engineering Installation and Assembly: R$ 40 million Latin America and USD 5 million United States.
- Officers Liability (D&O): US$ 30 million.
25. 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
03/31/14
12/31/13
MARKET VALUE
03/31/14
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
3,247,375
357,468
2,889,907
2,840,927
48,431
336
213
2,097
1,576,829
4,826,301
3,373,799
248,149
3,125,650
3,027,945
96,036
553
1,116
2,230
1,658,806
5,034,835
3,247,375
357,468
2,889,907
2,840,927
48,431
336
213
2,097
1,576,829
4,826,301
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
379,952
3,106,557
2,480,273
614,142
1,562
10,580
3,486,509
420,250
3,209,004
2,509,933
682,902
6,867
9,302
3,629,254
379,952
3,106,557
2,480,273
614,142
1,562
10,580
3,486,509
420,250
3,209,004
2,509,933
682,902
6,867
9,302
3,629,254
The risk factors of financial instruments are relate to:
PAGE: 43 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Notes to financial statements
(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$ 200.0 million (US$ 204.8 million in the first quarter), 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$ 3.0 million, (US$ 10.5 million at December 31, 2013) held by subsidiary WEG Equipamentos Elétricos S.A., seeking to
protect exports from the fluctuation risks of the exchange rates;
(ii) EUR 8.0 million, (EUR 15.0 million at December 31, 2013) held by subsidiary WEG Equipamentos Elétricos S.A. to
protect exports from the fluctuation risks of the exchange rates;
(iii) US$ 12.9 million, (US$ 5.6 million at December 31,2013) held its subsidiary abroad Zest ElectricMotors (Pty) Ltd., to
protect imports from the fluctuation risks of the exchange rates,
b) SWAP operations, in the notional amount of:
(i) EUR 10 million, held by its subsidiary Watt Drive Antriebstechnik GmbH, with the purpose of hedging financing from
fluctuation risks of Euribor;
(ii) 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.
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 March 31, 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
March 31, 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.
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ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Notes to financial statements
The table below presents "cash and expense" effects of the results of financial instruments in real scenarios.
a)
Operations of Non Deliverable Forwards - NDF:
Market value at
03/31/14
Notional value
(thousands)
Risk
Dolar Increase
Dolar Increase
Dolar Increase
Dolar Increase
Dolar Increase
Dolar Increase
Dolar Increase
Total Dolar
Euro Increase
Euro Increase
Euro Increase
Euro Increase
Total Euro
USD Decrease
USD Decrease
Total Dolar
Euro Decrease
Euro Decrease
Total Euro
Total
500
500
500
500
1,000
233
1,200
4,433
1,000
5,000
500
2,000
8,500
614
12,364
12,978
607
94
701
Possible scenario 25%
R$
Currency Average price thousand Average price
US$/R$
US$/R$
US$/R$
US$/R$
US$/R$
US$/ZAR
US$/AUD
2.2682
2.2848
2.2896
2.2680
2.2787
10.5971
0.9245
EUR/R$
EUR/R$
EUR/R$
EUR/R$
3.2358
3.1810
3.1796
3.1524
US$/ZAR
US$/ZAR
10.5877
10.6920
EUR/ZAR
EUR/ZAR
14.3611
14.6441
(64)
(61)
(62)
(62)
(128)
18
29
(330)
(46)
(221)
(8)
58
(217)
213
(989)
(776)
(21)
(5)
(26)
(1,349)
2.8352
2.8560
2.8620
2.8350
2.8483
13.2464
1.1556
4.0448
3.9763
3.9745
3.9404
7.9408
8.0190
10.7708
10.9831
Remote scenario 50%
R$
thousand Average price
(348)
(346)
(349)
(346)
(697)
(116)
(558)
(2,760)
(855)
(4,197)
(405)
(1,519)
(6,976)
(140)
(8,162)
(8,302)
(494)
(80)
(574)
(18,612)
R$
thousand
3.4022
3.4272
3.4344
3.4021
3.4180
15.8957
1.3868
4.8537
4.7715
4.7695
4.7286
5.2939
5.3460
7.1806
7.3221
(631)
(632)
(635)
(629)
(1,267)
(250)
(919)
(4,963)
(1,664)
(8,173)
(802)
(3,095)
(13,734)
(492)
(15,334)
(15,826)
(966)
(155)
(1,121)
(35,644)
b) SWAP Operations:
Risk
Euribor decrease
Libor decrease
Libor decrease
CDI increase
CDI increase
CDI increase
Total
Notional vallue (milion)
EUR 10.0
USD 15.0
USD 15.0
R$ 80.0
R$ 50.0
R$ 70.0
Market value at
03/31/14
Average price
R$ thousand
Interest of 1.52% p.a.
(8,057)
Interest of 0.82% p.a.
(100)
Interest of 0.76% p.a.
(186)
Interest of 11.7% p.a.
(1,877)
Interest of 11.7% p.a.
336
Interest of 11.8% p.a.,
(360)
(10,244)
Possible scenario 25%
Average price
Interest of 1.14% p.a.
Interest of 0.61% p.a.
Interest of 0.57% p.a.
Interest of 14.7% p.a.
Interest of 14.6% p.a.
Interest of 14.7% p.a.
R$ thousand
(9,098)
(148)
(222)
(6,144)
(1,444)
(3,079)
(20,135)
Remote scenario 50%
Average price
Interest of 0.76% p.a.
Interest of 0.41% p.a.
Interest of 0.38 % p.a.
Interest of 17.6% p.a.
Interest of 17.5% p.a.
Interest of 17.7% p.a.
R$ thousand
(10,139)
(196)
(257)
(9,206)
(3,127)
(5,638)
(28,563)
We carried out the accounting record based on the market price as at March 31, 2014 according to the fair value and accrual
method. These operations had a net positive impact as at March 31, 2014 of R$ 4,385 (R$ 7,973 positive at March 31, 2013),
which were recognized as financial expenses. The Company did not have outstanding derivative financial instruments at March
31, 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: 45 of 49
ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Notes to financial statements
26. Subsidies and assistance government
The Company obtained subventions in the amount of R$ 10,744 (R$ 9,484 at March 31, 2013) from tax incentives, recognized
in the year:
CONSOLIDATED
03/31/14
03/31/13
Total Subsidies and assistance government
a) WEG Amazônia S.A.
- ICMS incentive credit of 90.25%
- Corporate Income Tax (IRPJ) 75.00% reduction
10,744
91
77
14
9,484
70
70
-
b) WEG Linhares Equipamentos Elétricos S.A.
- ICMS incentive credit of 85.00%
- Corporate Income Tax (IRPJ) 75.00% reduction
- Municipal investment
6,126
5,918
202
6
4,141
3,776
359
6
c) WEG Logística Ltda.
- ICMS incentive credit of 75.00%
4,527
4,527
5,273
5,273
There are no contingencies tied to subsidies, and all of the conditions for obtaining government subsidies have been met.
27. Information by segment
Brazil
Foreign
Industry
3/31/14
Revenue from sale of products /
1,101,036
services
344,364
Earnings before income taxes
Depreciation / Amortization /
35,944
Depletion
3/31/14
3,070,046
Identifiable assets
810,287
Identifiable liabilities
Eliminations and adjustment
Consolidated
Energy
3/31/13
3/31/14
3/31/13
3/31/14
3/31/13
3/31/14
3/31/13
3/31/14
3/31/13
946,972
291,116
362,422
112,080
304,572
101,392
819,754
35,295
656,582
45,334
(499,669)
(222,422)
(430,549)
(216,429)
1,783,543
269,317
1,477,577
221,413
32,515
12/31/13
3,101,374
780,033
10,669
3/31/14
1,276,346
528,108
9,978
12/31/13
1,297,686
471,689
12,192
3/31/14
2,138,790
646,514
9,643
12/31/13
2,282,020
781,749
‐
3/31/14
51,204
(341,291)
‐
12/31/13
(18,715)
(360,911)
58,805
3/31/14
6,536,386
1,643,618
52,136
12/31/13
6,662,365
1,672,560
Industry: single phase and triple phase motors with low and medium tension, drives and controls, equipment and
services for industrial automation, paints and varnishes.
Energy: electricity generators for thermal and hydraulic power plants (biomass), hydraulic turbines (PCHs), transformers,
substations, control panels and system integration services.
Foreign: composed by operations carried out by subsidiaries in other countries.
The adjustment and elimination column 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.
28. 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.
Profit attributed to Company shareholders
Weighted average number of outstanding common shares (shares /thousand)
Basic earnings per share - R$
03/31/14
204,887
620,432
0.33023
03/31/13
172,299
620,405
0.27772
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ITR – Quarterly Information – 03/31/2014 – WEG S/A
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Notes to financial statements
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$
03/31/14
204,887
620,854
0.33001
03/31/13
172,299
620,648
0.27761
The amount of 422,282 shares (242,974 shares at March 31, 2013), which refer to the stock option plan were considered as
weighted average dilutive potential shares on March 31, 2014.
29. Statement of comprehensive income
The Company presents as other comprehensive income the values of accumulated translation adjustment. These values are
not taxable.
The presentation of the comprehensive income results is required by CPC 26 - Financial Statement Presentation and includes
the comprehensive results which correspond to revenue and expense items which are not recognized in the financial
statements as required or allowed by the standards, interpretations and guidance issued by the CPC.
30. Other informations
Provisional Measure 627, of November 11, 2013
The Company has reviewed the provisions of the Provisional Measure 627 of November 11, 2013 ("MP 627") and Instruction
1397, to September 16, 2013, as amended by IN 1422 December 19, 2013 ("IN 1397").
Although the MP 627 comes into force from January 1, 2015, there is the possibility of an option (irreversibly) for its
implementation from January 1, 2014. The Company monitors the matter to implement these measures.
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ITR – Quarterly Information – 03/31/2014 – 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 March 31, 2014, which comprise the balance
sheet as of March 31, 2014 and the related statements of income, comprehensive income, changes in
shareholders’ equity and cash flows for the three months period then ended, including the notes to the financial
statements.
Management is responsible for the preparation of the 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 three months
period ended in March 31, 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
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ITR – Quarterly Information – 03/31/2014 – WEG S/A
Version: 1
Information and considered as supplemental information by international accounting standards (IFRS), which
do not require the disclosure of the statement of value added. This statement was submitted to the same review
procedures previously described and, based on our review, we are not aware of any fact that would lead us to
believe that they have not been fairly stated, in all material respects, in relation to the interim financial
statements, Company and Consolidated, taken as a whole.
Joinville, April 11, 2014
KPMG Auditores Independentes
CRC SC-000071/F-8
Marcelo Lima Tonini
Accountant CRC PR-045569/O-4 T – SC
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