Contents Company information Individual financial statements
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ITR - Quarterly Information - 09/30/2012 - WEG SA 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 statement 5 Statement of comprehensive income 6 Cash flow statement 7 Statement of changes in equity Statement of changes in equity - 01/01/2012 to 09/30/2012 8 Statement of changes in equity - 01/01/2011 to 09/30/2011 9 Statement 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 Statement of changes in equity - 01/01/2012 to 09/30/2012 16 Statement of changes in equity - 01/01/2011 to 09/30/2011 17 Statement of value added 18 Comments on performance 19 Notes to financial information 30 Opinions and Statements Special Review Report - Unqualified 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Company information / Composition of capital Number of shares (Units) Paid-in capital Common Preferred Total Treasury stock Common Preferred Total Current quarter 09/30/2012 620,405,029 0 620,405,029 500,000 0 500,000 PAGE: 1 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Company information / Cash dividends Event Approval Earning First payment Type of share Class of share Board of Directors’ Meeting 03/20/2012 Interest on equity capital 08/15/2012 Common Earnings per share (Reais / Share) 0.06500 Board of Directors’ Meeting 06/26/2012 Interest on equity capital 08/15/2012 Common 0.06500 Board of Directors’ Meeting 07/24/2012 Dividend 08/15/2012 Common 0.10000 Board of Directors’ Meeting 09/25/2012 Interest on equity capital 03/13/2013 Common 0.06500 PAGE: 2 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Individual financial statements / Balance sheet - Assets (In thousands of reais) Account code Account description Current quarter 09/30/2012 Prior year 12/31/2011 1 Total assets 3,977,041 3,816,355 1.01 Current assets 849,570 584,445 1.01.01 Cash and cash equivalents 553,185 520,939 1.01.01.01 Cash and banks 27 28 1.01.01.02 Short-term investments 553,158 520,911 1.01.02 Short-term investments 256,634 0 1.01.02.01 Short-term investments at fair value 256,634 0 1.01.06 Taxes recoverable 9,480 3,782 1.01.06.01 Current taxes recoverable 9,480 3,782 1.01.08 Other current assets 30,271 59,724 1.01.08.03 Other 30,271 59,724 1.01.08.03.01 Dividends 1.01.08.03.02 Interest on equity capital 564 3,644 29,707 56,080 3,127,471 3,231,910 1,141 241,192 1.02 Non-current assets 1.02.01 Long-term receivables 1.02.01.01 Short-term investments at fair value 0 239,860 1.02.01.06 Deferred taxes 0 712 1.02.01.06.01 Deferred income and social contribution taxes 0 712 290 79 1.02.01.08.02 Receivables from subsidiaries 290 79 1.02.01.09 851 541 851 541 1.02.01.08 Receivables from related parties Other non-current assets 1.02.01.09.03 Judicial deposits 1.02.02 Investments 3,114,560 2,978,752 1.02.02.01 Equity interests 3,114,560 2,978,752 1.02.02.01.02 Investments in subsidiaries 3,114,560 2,978,752 1.02.03 Property, plant and equipment 11,760 11,956 1.02.03.01 Property, plant and equipment in use 11,760 11,956 1.02.04 Intangible asset 10 10 1.02.04.01 Intangible assets 10 10 10 10 1.02.04.01.02 Goodwill PAGE: 3 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Individual financial statements / Balance sheet - Liabilities and equity (In thousands of reais) Account Code Account description 2 Total liabilities and equity 2.01 Current liabilities 2.01.01 2.01.01.01 Current quarter 09/30/2012 Prior year 12/31/2011 3,977,041 3,816,355 53,685 8,753 Labor and social charges 3,597 3,200 Social obligations 3,597 3,200 2.01.03 Tax obligations 7,032 2,601 2.01.03.01 Federal tax obligations 7,032 2,601 84 36 2.01.03.01.01 Income and social contribution taxes payable 2.01.03.01.02 Other taxes payables 6,948 2,565 2.01.05 Other payables 43,056 2,952 2.01.05.02 Other 43,056 2,952 42,545 2,182 2.01.05.02.01 Dividends and interest on equity capital payable 2.01.05.02.04 Other 511 770 5,385 7,490 Other payables 0 1,837 Payables to related parties 0 1,837 2.02 Non-current liabilities 2.02.02 2.02.02.01 2.02.02.01.02 Payables to subsidiaries 0 1,837 2,481 3,764 2.02.03 Deferred taxes 2.02.03.01 Deferred income and social contribution taxes 2,481 3,764 2.02.04 Provisions 2,904 1,889 2.03 Equity 3,917,971 3,800,112 2.03.01 Paid-in capital 2,718,440 2,265,367 2.03.02 Capital reserves -51,189 239 599 239 -51,788 0 2.03.02.04 Options granted 2.03.02.07 Premium on share issue 2.03.03 Revaluation reserves 2.03.04 Income reserves 2.03.04.01 Legal reserve 2.03.04.02 Statutory reserve 2.03.04.08 Additional proposed dividends 2.03.04.09 Treasury stock 3,796 3,834 230,934 857,721 0 29,347 240,989 664,715 0 173,714 -10,055 -10,055 2.03.05 Retained earnings/accumulated losses 304,689 0 2.03.06 Equity valuation adjustments 668,487 704,466 2.03.06.01 Deemed cost 668,487 704,466 2.03.07 Cumulative translation adjustments 42,814 -31,515 PAGE: 4 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Individual financial statements / Income statement (In thousands of reais) Account Code Account description Current quarter YTD 01/01/2012 to 09/30/2012 Same quarter last year 07/01/2011 to 09/30/2011 Prior year accrued 01/01/2011 to 09/30/2011 3.04 Operating income/expenses 01/07/2012 à 30/09/2012 171,749 429,078 135,287 379,105 3.04.02 General and administrative expenses 3.04.02.01 Management fees -1,178 -3,000 -756 -2,284 -520 -1,491 -426 -1,275 3.04.02.02 Other administrative expenses 3.04.04 Other operating income -658 -1,509 -330 -1,009 0 2 0 85 3.04.05 Other operating expenses -743 -1,996 -281 -790 3.04.06 3.05 Equity pickup 173,670 434,072 136,324 382,094 Income before financial income (expenses) and taxes 171,749 429,078 135,287 379,105 3.06 Financial income (expenses) 13,026 43,387 19,666 52,861 3.06.01 Financial income 13,061 43,538 19,714 53,009 3.06.02 Financial expenses 3.07 Income before income taxes 3.08 Income and social contribution taxes 3.08.01 Current 3.08.02 Deferred 204 571 28 77 3.09 Net income from continuing operations 184,756 472,822 154,567 430,688 3.11 Income/loss for the period 184,756 472,822 154,567 430,688 3.99 Earnings per share – (reais/share) 3.99.01 Basic earnings per share 3.99.01.01 Common shares 0.29780 0.76212 0.24910 0.69420 3.99.02 Diluted earnings per share 3.99.02.01 Common shares 0.29768 0.76182 0.24910 0.69420 -35 -151 -48 -148 184,775 472,465 154,953 431,966 -19 357 -386 -1,278 -223 -214 -414 -1,355 PAGE: 5 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Individual financial statements / Statement of comprehensive income (In thousands of reais) Account code Account description Current quarter YTD 4.01 Net income for the period 4.02 4.02.01 4.03 Comprehensive income for the period 01/01/2012 to 09/30/2012 Same quarter last year 07/01/2011 to 09/30/2011 Prior year accrued 01/01/2011 to 09/30/2011 07/01/2012 to 09/30/2012 184,756 472,822 154,567 430,688 Other comprehensive income Cumulative translation adjustments 13,086 74,329 54,949 38,401 13,086 74,329 54,949 38,401 197,842 547,151 209,516 469,089 PAGE: 6 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Individual financial statements / Cash flow statement - Indirect Method (In thousands of reais) Account code Account description 6.01 Net cash from operating activities YTD 01/01/2012 to 09/30/2012 6.01.01 Cash from operations 6.01.01.01 Pre-tax income 6.01.01.02 Depreciation and amortization 6.01.01.03 Equity pickup 6.01.01.04 Other 6.01.02 Changes in assets and liabilities 6.01.02.01 Increase (decrease) in accounts receivable 6.01.02.02 6.01.02.03 6.01.03 Other 6.02 Net cash from investing activities 6.02.01 Investments 6.02.02 Dividends and interest on equity capital received 6.02.03 6.03 30,946 Prior year accrued 01/01/2011 to 09/30/2011 34,635 38,949 50,082 472,465 431,966 196 210 -434,072 -382,094 360 0 -9,002 -16,065 -11,535 -7,305 Increase (decrease) in accounts payable 2,699 -7,786 Income and social contribution taxes paid -166 -974 999 618 318,164 92,413 0 -1,304 334,938 326,983 Long-term financial investments -16,774 -233,266 Net cash from financing activities -316,864 -306,386 6.03.01 Dividends/interest on equity capital paid -316,864 -296,331 6.03.02 Treasury stock 6.05 Increase/(decrease) in cash and cash equivalents 6.05.01 6.05.02 0 -10,055 32,246 -179,338 Opening cash and cash equivalents balance 520,939 689,944 Closing cash and cash equivalents balance 553,185 510,606 PAGE: 7 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Individual financial statements / Statement of changes in equity - 01/01/2012 to 09/30/2012 (In thousands of reais) Account code Account description Paid-in capital Capital reserves Options granted and Treasury stock Income reserves Retained earnings/ accumulated losses Other comprehensive income 5.01 Equity Opening balances 2,265,367 4,073 684,007 173,714 672,951 3,800,112 5.03 Adjusted opening balances 2,265,367 4,073 684,007 173,714 672,951 3,800,112 5.04 Capital transactions with shareholders 453,073 -51,428 -453,073 -204,369 0 -255,797 5.04.01 Capital increase 453,073 0 -453,073 0 0 0 5.04.03 Recognized options granted 0 360 0 0 0 360 5.04.06 Dividends 0 0 0 -62,041 0 -62,041 5.04.07 Interest on equity capital 0 0 0 -142,328 0 -142,328 5.04.08 Premium on share issue 0 -51,788 0 0 0 -51,788 5.05 Total comprehensive income 0 0 0 508,801 38,350 547,151 5.05.01 Net income for the period 0 0 0 472,822 0 472,822 5.05.02 Other comprehensive income 0 0 0 35,979 38,350 74,329 5.05.02.04 Translation adjustments in the period 0 0 0 0 74,329 74,329 5.05.02.06 Realization of deemed cost 0 0 0 35,979 -35,979 0 5.06 Internal changes in equity 0 -38 0 -173,457 0 -173,495 5.06.02 Realization of revaluation reserve 0 -38 0 38 0 0 5.06.04 Payment of dividends 0 0 0 -173,714 0 -173,714 5.06.05 Prescribed dividends 5.07 Closing balances 0 0 0 219 0 219 2,718,440 -47,393 230,934 304,689 711,301 3,917,971 PAGE: 8 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Individual financial statements / Statement of changes in equity - 01/01/2011 to 09/30/2011 (In thousands of reais) Account code Account description Paid-in capital Capital reserves Options granted and Treasury stock Income reserves Retained earnings/ accumulated losses Other comprehensive income 5.01 Equity Opening balances 1,812,294 48,815 900,676 0 692,822 3,454,607 5.03 Adjusted opening balances 1,812,294 48,815 900,676 0 692,822 3,454,607 5.04 Capital transactions with shareholders 453,073 -44,930 -519,406 -201,082 0 -312,345 5.04.01 Capital increase 453,073 -44,930 -408,143 0 0 0 5.04.04 Treasury stock acquired 0 0 -10,055 0 0 -10,055 5.04.06 Dividends 0 0 -101,208 -60,179 0 -161,387 5.04.07 Interest on equity capital 0 0 0 -140,903 0 -140,903 5.05 Total comprehensive income 0 0 0 472,306 -3,217 469,089 5.05.01 Net income for the period 0 0 0 430,688 0 430,688 5.05.02 Other comprehensive income 0 0 0 41,618 -3,217 38,401 5.05.02.04 Translation adjustments in the period 0 0 0 0 38,401 38,401 5.05.02.06 Realization of deemed cost 0 0 0 41,618 -41,618 0 5.06 0 -37 0 37 0 0 5.06.02 Internal changes in equity Revaluation reserve released to retained earnings 5.07 Closing balances 0 -37 0 37 0 0 2,265,367 3,848 381,270 271,261 689,605 3,611,351 PAGE: 9 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Individual financial statements / Statement of value added (In thousands of reais) Account code Account description YTD 7.02 Inputs purchased from third parties 7.02.02 Materials, electricity, third party services and other 7.02.03 Loss/recovery of amounts receivable 7.03 Gross value added -1,698 -356 7.04 Withholdings -196 -210 7.04.01 Depreciation, amortization and depletion -196 -210 01/01/2012 to 09/30/2012 Accrued – prior year 01/01/2011 to 09/30/2011 -1,698 -356 -597 -271 -1,101 -85 7.05 Net value added produced -1,894 -566 7.06 Value added received in transfer 477,610 435,103 7.06.01 Equity pickup 434,072 382,094 7.06.02 Financial income 43,538 53,009 7.07 Total value added to be distributed 475,716 434,537 7.08 Distribution of value added 475,716 434,537 7.08.01 Personnel 2,654 2,053 7.08.01.01 Direct compensation 2,559 1,975 7.08.01.02 Benefits 52 43 7.08.01.03 Unemployment Compensation Fund (FGTS) 43 35 7.08.02 Taxes, charges and contributions 154 1,765 7.08.02.01 Federal 154 1,765 7.08.03 Third-party capital remuneration 86 31 7.08.03.01 Interest 86 31 7.08.04 Equity remuneration 472,822 430,688 142,328 140,903 62,041 60,179 268,453 229,606 7.08.04.01 Interest on equity capital 7.08.04.02 Dividends 7.08.04.03 Retained profit/loss for the period PAGE: 10 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Consolidated financial statements / Balance sheet - Assets (In thousands of reais) Account code Account description Current quarter 09/30/2012 Prior year 12/31/2011 1 Total assets 8,757,033 9,105,861 1.01 Current assets 5,657,018 5,867,061 1.01.01 Cash and cash equivalents 2,268,231 2,931,615 1.01.01.01 Cash and banks 137,844 59,512 1.01.01.02 Short-term investments 2,130,387 2,872,103 1.01.02 Short-term investments 256,634 0 1.01.02.01 Short-term investments at fair value 256,634 0 1.01.03 Accounts receivable 1,411,747 1,307,692 1.01.03.01 Trade accounts receivable 1,411,747 1,307,692 1.01.04 Inventories 1,389,619 1,362,314 1.01.06 Taxes recoverable 188,416 156,076 1.01.06.01 Current taxes recoverable 188,416 156,076 1.01.08 Other current assets 142,371 109,364 1.01.08.03 Other 1.02 Non-current assets 1.02.01 Long-term receivables 1.02.01.01 Short-term investments at fair value 1.02.01.01.01 Trading securities 142,371 109,364 3,100,015 3,238,800 80,004 432,469 670 280,635 670 280,635 32,190 111,488 1.02.01.06.01 Deferred income and social contribution taxes 32,190 111,488 1.02.01.09 1.02.01.06 Deferred taxes 47,144 40,346 1.02.01.09.03 Judicial deposits Other non-current assets 27,153 24,038 1.02.01.09.04 Taxes recoverable 14,256 12,902 5,735 3,406 1.02.01.09.05 Other 1.02.02 Investments 349 349 1.02.02.01 Equity interests 349 349 1.02.02.01.04 Other equity interests 349 349 1.02.03 Property, plant and equipment 2,526,237 2,445,760 1.02.03.01 Property, plant and equipment in use 2,448,964 2,375,326 1.02.03.03 Construction in progress 77,273 70,434 1.02.04 Intangible assets 493,425 360,222 1.02.04.01 Intangible assets 32,349 28,681 32,349 28,681 461,076 331,541 1.02.04.01.02 Other 1.02.04.02 Goodwill PAGE: 11 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Consolidated financial statements / Balance sheet - Liabilities and equity (In thousands of reais) Account code 2 2.01 2.01.01 2.01.01.01 2.01.02 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 2.02.02.01 2.02.02.01.01 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 and equity Current liabilities Labor and social charges Social obligations Trade accounts payable Tax obligations Federal tax obligations Income and social contribution taxes payable Other tax obligations Loans and financing Loans and financing Other payables Other Dividends and interest on equity capital payable Advances from clients Profit sharing Other Non-current liabilities Loans and financing Loans and financing Other payables Payables to third parties Debts with subsidiaries Other Tax obligations Other Deferred taxes Deferred income and social contribution taxes Provisions Consolidated equity Paid-in capital Capital reserves Options granted Premium on share issue Revaluation reserves Income reserves Tax obligations Statutory reserve Additional proposed dividends Treasury stock Retained earnings/accumulated losses Equity valuation adjustments Deemed cost Cumulative translation adjustments Non-controlling interest Current quarter 09/30/2012 8,757,033 2,876,077 223,573 223,573 321,473 113,478 113,478 73,178 40,300 1,617,387 1,617,387 600,166 600,166 43,327 316,697 40,752 199,390 1,876,901 1,256,575 1,256,575 124,966 926 926 124,040 44,576 79,464 322,296 322,296 173,064 4,004,055 2,718,440 -51,189 599 -51,788 3,796 230,934 0 240,989 0 -10,055 304,689 668,487 668,487 42,814 86,084 Prior year 12/31/2011 9,105,861 2,752,960 161,436 161,436 298,195 88,474 88,474 44,186 44,288 1,701,435 1,701,435 503,420 503,420 2,804 285,843 26,314 188,459 2,446,312 1,756,293 1,756,293 122,485 0 0 122,485 58,326 64,159 421,918 421,918 145,616 3,906,589 2,265,367 239 239 0 3,834 857,721 29,347 664,715 173,714 -10,055 0 704,466 704,466 -31,515 106,477 PAGE: 12 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Consolidated financial statements / Income statement (In thousands of reais) Account code Account description Current quarter YTD 07/01/2012 to 09/30/2012 01/01/2012 to 09/30/2012 Same quarter last year 07/01/2011 to 09/30/2011 Accrued – prior year 01/01/2011 to 09/30/2011 3.01 Revenue from sale of products and/or services 1,613,067 4,511,620 1,317,483 3,720,858 3.02 Cost of goods sold and/or services rendered 3.03 Gross profit -1,114,480 -3,159,405 -899,217 -2,610,493 498,587 1,352,215 418,266 1,110,365 3.04 3.04.01 Operating income/expenses -276,482 -779,618 -224,867 -630,260 Selling expenses -156,743 -454,077 -129,536 -368,222 3.04.02 General and administrative expenses -81,392 -225,176 -66,462 -189,234 3.04.02.01 Management fees 3.04.02.02 Other administrative expenses 3.04.04 Other operating income 1,246 14,440 479 11,145 3.04.05 Other operating expenses -39,593 -114,805 -29,348 -83,949 3.05 Income before financial income (expenses) and taxes 222,105 572,597 193,399 480,105 3.06 Financial income (expenses) 20,626 53,030 -7,990 73,970 3.06.01 Financial income 101,326 363,652 154,397 359,327 3.06.02 Financial expenses -80,700 -310,622 -162,387 -285,357 3.07 Income before income taxes 242,731 625,627 185,409 554,075 3.08 Income and social contribution taxes -55,785 -145,571 -25,219 -110,834 3.08.01 Current -61,926 -166,572 -37,444 -136,398 3.08.02 Deferred 6,141 21,001 12,225 25,564 3.09 Net income from continuing operations 186,946 480,056 160,190 443,241 3.11 Consolidated income/loss for the period 186,946 480,056 160,190 443,241 3.11.01 Attributed to shareholders of parent company 184,756 472,822 154,567 430,688 3.11.02 Attributed to non-controlling shareholders 2,190 7,234 5,623 12,553 3.99 Earnings per share (Reais/share) 3.99.01 Basic earnings per share 3.99.01.01 Common shares 0.29780 0.76212 0.24910 0.69420 3.99.02 Diluted earnings per share 3.99.02.01 Common shares 0.29768 0.76182 0.24910 0.69420 -4,627 -14,067 -4,225 -12,626 -76,765 -211,109 -62,237 -176,608 PAGE: 13 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Consolidated financial statements / Statement of comprehensive income (In thousands of reais) Account Code Account description Current quarter YTD 07/01/2012 to 09/30/2012 01/01/2012 to 09/30/2012 Same quarter last year 07/01/2011 to 09/30/2011 Accrued - prior year 01/01/2011 to 09/30/2011 4.01 Consolidated net income for the period 186,946 480,056 160,190 443,241 4.02 4.02.01 Other comprehensive income 12,811 74,054 54,949 38,401 Translation adjustments in the period 12,811 74,054 54,949 38,401 4.03 Consolidated comprehensive income for the period 199,757 554,110 215,139 481,642 4.03.01 Attributed to shareholders of parent company 197,842 547,151 209,516 469,089 4.03.02 Attributed to non-controlling shareholders 1,915 6,959 5,623 12,553 PAGE: 14 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Consolidated financial statements / Cash flow statement - Indirect Method (In thousands of reais) Account code Account description YTD 6.01 Net cash from operating activities 508,665 290,813 01/01/2012 to 09/30/2012 Accrued - prior year 01/01/2011 to 09/30/2011 6.01.01 Cash from operations 854,736 761,640 6.01.01.01 Pre-tax income 625,627 554,075 6.01.01.02 Depreciation and amortization 154,365 139,393 6.01.01.04 Employee profit sharing 74,384 68,172 6.01.01.05 Other 360 0 6.01.02 Changes in assets and liabilities -397,384 -494,815 6.01.02.01 Increase (decrease) in accounts receivable -253,774 -158,381 6.01.02.02 Increase (decrease) in accounts payable 135,902 149,649 6.01.02.03 Increase (decrease) in inventories -30,268 -263,387 6.01.02.04 Income and social contribution taxes paid -150,729 -133,543 6.01.02.05 Employee profit sharing paid -98,515 -89,153 6.01.03 Other 51,313 23,988 6.02 Net cash from investing activities -270,644 -319,668 6.02.01 Property, plant and equipment -188,662 -124,813 6.02.02 Intangible assets -133,691 -2,462 6.02.03 Disposal of permanent assets 6,111 2,472 6.02.04 Cumulative translation adjustments 74,054 38,401 6.02.05 Long-term financial investments 23,332 -233,266 6.02.06 Premium on share issue 6.03 Net cash from financing activities 6.03.01 Loans and financing raised 6.03.02 Payment of loans and finacing 6.03.03 Interest paid on loans and financing 6.03.04 Treasury stock 6.03.05 6.05 6.05.01 6.05.02 -51,788 0 -901,405 562,427 836,818 1,648,515 -1,286,438 -672,509 -134,146 -105,962 0 -10,055 Dividends/interest on equity capital paid -317,639 -297,562 Increase/(decrease) in cash and cash equivalents -663,384 533,572 Opening cash and cash equivalents balance 2,931,615 2,552,996 Closing cash and cash equivalents balance 2,268,231 3,086,568 PAGE: 15 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Consolidated financial statements / Statement of changes in equity - 01/01/2012 to 09/30/2012 (In thousands of reais) Account code Account description Paid-in Capital reserves capital Options granted and Treasury stock 5.01 Opening balances 2,265,367 5.03 Adjusted opening balances 2,265,367 4,073 5.04 Capital transactions with shareholders 453,073 -51,428 5.04.01 Capital increase 453,073 0 5.04.03 Recognized options granted 0 360 5.04.06 Dividends 0 0 0 -62,041 0 -62,041 0 -62,041 5.04.07 Interest on equity capital 0 0 0 -142,328 0 -142,328 0 -142,328 5.04.08 Premium on share issue 0 -51,788 0 0 0 -51,788 0 -51,788 5.04.09 Other 0 0 0 0 0 0 -27,352 -27,352 5.05 Total comprehensive income 0 0 0 508,801 38,350 547,151 6,959 554,110 5.05.01 Net income for the period 0 0 0 472,822 0 472,822 7,234 480,056 5.05.02 Other comprehensive income 0 0 0 35,979 38,350 74,329 -275 74,054 5.05.02.04 Translation adjustments in the period 0 0 0 0 74,329 74,329 -275 74,054 5.05.02.06 Realization of deemed cost 0 0 0 35,979 -35,979 0 0 0 5.06 Internal changes in equity 0 -38 0 -173,457 0 -173,495 0 -173,495 5.06.02 Revaluation reserve released to retained earnings 0 -38 0 38 0 0 0 0 5.06.04 Payment of proposed dividends 0 0 0 -173,714 0 -173,714 0 -173,714 5.06.05 Prescribed dividends 0 0 0 219 0 219 0 219 5.07 Closing balances 2,718,440 -47,393 230,934 304,689 711,301 3,917,971 86,084 4,004,055 4,073 Income reserves Retained earnings/ accumulated losses Other comprehensive income Equity Non-controlling interest Consolidated equity 684,007 173,714 672,951 3,800,112 106,477 3,906,589 684,007 173,714 672,951 3,800,112 106,477 3,906,589 -453,073 -204,369 0 -255,797 -27,352 -283,149 -453,073 0 0 0 0 0 0 0 0 360 0 360 PAGE: 16 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Consolidated financial statements / Statement of changes in equity - 01/01/2011 to 09/30/2011 (In thousands of reais) Account code Account description Paid-in Capital reserves capital Options granted and Treasury stock 5.01 Opening balances 1,812,294 5.03 Adjusted opening balances 1,812,294 48,815 5.04 Capital transactions with shareholders 453,073 -44,930 5.04.01 Capital increase 453,073 -44,930 5.04.04 Treasury stock acquired 0 0 5.04.06 Dividends 0 0 5.04.07 Interest on equity capital 0 0 5.04.08 Other 0 0 0 0 0 0 -3,073 -3,073 5.05 Total comprehensive income 0 0 0 472,306 -3,217 469,089 12,553 481,642 5.05.01 Net income for the period 0 0 0 430,688 0 430,688 12,553 443,241 5.05.02 Other comprehensive income 0 0 0 41,618 -3,217 38,401 0 38,401 5.05.02.04 Translation adjustments in the period 0 0 0 0 38,401 38,401 0 38,401 5.05.02.06 Realization of deemed cost 0 0 0 41,618 -41,618 0 0 0 5.06 Internal changes in equity 0 -37 0 37 0 0 0 0 5.06.02 Revaluation reserve released to retained earnings 5.07 Closing balances 48,815 Income reserves Retained earnings/ accumulated losses Other comprehensive income Equity Non-controlling interest Consolidated equity 900,676 0 692,822 3,454,607 89,229 3,543,836 900,676 0 692,822 3,454,607 89,229 3,543,836 -519,406 -201,082 0 -312,345 -3,073 -315,418 -408,143 0 0 0 0 0 -10,055 0 0 -10,055 0 -10,055 -101,208 -60,179 0 -161,387 0 -161,387 0 -140,903 0 -140,903 0 -140,903 0 -37 0 37 0 0 0 0 2,265,367 3,848 381,270 271,261 689,605 3,611,351 98,709 3,710,060 PAGE: 17 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Consolidated financial statements / Statement of value added (In thousands of reais) Account code Account description YTD 7.01 Revenues 5,176,132 4,345,244 01/01/2012 to 09/30/2012 Accrued - prior year 01/01/2011 to 09/30/2011 7.01.01 Sale of goods, products and services 5,170,305 4,334,352 7.01.02 Other revenues 11,464 13,011 7.01.04 Set up/reversal of allowance for doubtful accounts -5,637 -2,119 7.02 Inputs purchased from third parties -2,912,898 -2,430,182 7.02.02 Materials, electricity, third party services and other -2,888,182 -2,428,801 7.02.03 Loss/recovery of amounts receivable 7.03 Gross value added 7.04 7.04.01 -24,716 -1,381 2,263,234 1,915,062 Withholdings -154,365 -139,393 Depreciation, amortization and depletion -154,365 -139,393 2,108,869 1,775,669 363,652 359,327 7.05 Net value added produced 7.06 Value added received in transfer 7.06.02 Financial income 363,652 359,327 7.07 Total value added to be distributed 2,472,521 2,134,996 7.08 Distribution of value added 2,472,521 2,134,996 7.08.01 Personnel 967,277 775,268 7.08.01.01 Direct compensation 852,856 664,528 7.08.01.02 Benefits 70,541 73,148 7.08.01.03 Unemployment Compensation Fund (FGTS) 43,880 37,592 7.08.02 Taxes, charges and contributions 688,463 605,486 7.08.02.01 Federal 612,819 540,590 7.08.02.02 State 68,930 60,847 7.08.02.03 Local 6,714 4,049 7.08.03 Third-party capital remuneration 336,725 311,001 7.08.03.01 Interest 316,129 296,890 7.08.03.02 Rental 20,596 14,111 7.08.04 Equity remuneration 480,056 443,241 7.08.04.01 Interest on equity capital 142,863 140,903 7.08.04.02 Dividends 62,041 60,179 7.08.04.03 Retained profit/loss for the period 267,918 229,606 7.08.04.04 Non-controlling interest in retained profits 7,234 12,553 PAGE: 18 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Comments on performance Highlights • Net operating revenue in the third quarter of 2012 totaled R$ 1,613.1 million, with 22.4% growth over 3Q11 and 5.5% over the previous quarter; • EBITDA reached R$ 284.3 million for a 17.6% margin, 16.6% higher than the previous year and 9.3% higher than the previous quarter; • Net income totaled R$ 184.8 million, with net margin of 11.5%, with 19.5% growth over 3Q11 and 32.1% over the previous quarter; • Investments in fixed assets totaled R$ 164.6 million in the first nine months of 2012. Key figures 3Q12 2Q12 1,613,067 1,528,791 Domestic market 798,626 729,235 External market 814,441 799,556 External market - US$ 401,460 406,915 Gross Operating Profit 498,587 461,661 30.9% 30.2% 184.756 139.819 Net Operating Revenue Gross margin Net income % 3Q11 % 09M12 5.5% 1,317,483 22.4% 4,511,620 3,720,858 21.3% 9.5% 737,350 8.3% 2,242,129 2,121,020 5.7% 1.9% 580,133 40.4% 2,269,491 1,599,838 41.9% -1.3% 353,520 13.6% 1,178,760 980,972 20.2% 8.0% 418,266 19.2% 1,352,215 1,110,365 21.8% 30.0% 29.8% 19.5% 472,822 430,688 16.6% 31.7% 32.1% 154,567 9.3% 09M11 % 9.8% 11.5% 9.1% 11.7% 10.5% 11.6% 284,276 260,028 243,743 752,942 624,130 EBITDA margin 17.6% 17.0% 16.7% 16.8% EPS 0.2978 0.2254 0.7621 0.6942 9.8% R$ thousand Net margin EBITDA 18.5% 32.1% 0.2491 19.5% 20.6% Comments from Laurence Beltrão Gomes, WEG’s Finance and Investor Relations Officer In the third quarter of 2012, WEG was able to record significant 22% net revenue growth in relation to 2011. This strong growth, which was reached despite highly uncertain economic conditions, confirms the resilience and robustness of WEG’s business model. Once again, external markets’ sales performance, with above 40% growth, was the quarterly highlight. Investments made in our commercial footprint have been successful in expanding the products portfolio in the international market, even considering the scenario of low economic activity. This sales expansion is also due to the recognition of WEG’s brand attributes, reliability and state of the art technology. In the domestic market, we note that government measures to increase the competitiveness of the industrial sector are important both for the direct impact on WEG as for the impact on our customers. We hope in coming months the stimulus measures of “Brasil Maior” Plan will gain more traction and signs of recovery in the Brazilian industry will become clear. PAGE: 19 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Comments on performance Economic Activity and Industrial Production During the third quarter of 2012, conditions for industrial activity and economic activity in general remained relatively weak, both in emerging countries as well as in mature markets. In Brazil, the recent initiatives to stimulate industrial production began to show the first positive results. The purchasing manager indexes (PMI) in some of our key markets demonstrate a slight improvement in September compared to the previous month, but with indexes still near or slightly below 50 in major industrial markets. Indexes above 50 indicate industrial expansion, while below 50 indicate contraction in industrial activity. September 2012 August 2012 Manufacturing ISM Report on Business ® USA Markit/BME Germany Manufacturing PMI® Germany HSBC China Manufacturing PMI™ China 51.5 47.4 47.9 July 2012 49.6 44.7 47.6 49.8 43.0 49.3 In Brazil, industrial production decreased 3.4% in up to August 2012 in comparison the same period of the previous year. Over the previous 12 months the decrease reaches 2.9%. The expectations for industrial production in 2012, as captured by the Central Bank of Brazil Focus report that consolidates financial market estimates, are of 2% previous year. However, the monthly comparison shows that recent measures to expand production and increase industrial competitiveness are starting to have an impact. August was the third consecutive month of positive monthly comparisons. Industrial Indicators According to Categories of Use in Brazil Variation (%) Category Aug/Jul* Aug 12/Aug 11 Capital goods 0.30 -13.00 Intermediary Goods 2.00 -0.50 Consumer Goods 1.20 -0.20 Durable Goods 2.60 0.10 Semi-durable and non-durable 1.20 -0.30 General Industry 1.50 -2.00 Source: IBGE, Research Division, Industry Coordination (*) Category with seasonal adjustments Accumulated Year 12 months -12.20 -2.10 -2.10 -7.30 -0.40 -3.40 -8.50 -1.60 -2.50 -8.00 -0.70 -2.90 Capital goods production was, once again, the negative highlight in almost all comparisons, hampered by the strong influence of the heavy vehicles production, which showed a sharp drop over the year. Thus, these results do not necessarily reflect the environment that we find in our various client segments. Net Operating Revenue Net Operating Revenue reached R$ 1,613.1 million in the third quarter of 2012 (3Q12), corresponding to an increase of 22.4% in relation to third quarter of 2011 (3Q11) and an increase of 5.5% in relation to second quarter of 2012 (2Q12). Adjusted for the R$ 85.2 million from the consolidation of Watt Drive (Austria), Electric Machinery (USA), Stardur and of the WEG-Cestari joint venture (Brazil), net revenue growth would have been 16.2% in 3Q12 over 3Q11. PAGE: 20 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Comments on performance Net Operating Revenue per Market (R$ million) External Market Domestic Market 1,126 1,277 1,317 1,469 1,529 1,613 1,370 52% 50% 43% 44% 47% 59% 57% 56% 53% 52% 48% 50% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 41% 48% 2011 2012 Net operating revenue breakdown according to destination market is as follows: • Domestic Market: R$ 798.6 million, representing 49.5% of Net Operating Revenues, with growth of 8.3% over 3Q11 and of 9.5% over 2Q12; these figures incorporate the consolidation of revenues from Stadur and also the WEG-Cestari joint-venture. Adjusted for these transactions, revenue growth would have been of 2.6% over 3Q11. • External Market: R$ 814.4 million, equivalent to 50.5% of Net Operating Revenues, with growth of 40.4% over the same period of last year and of 1.9% over the previous quarter. Considering the average US dollar/Brazilian Real exchange rate of the quarter, net operating revenues from external market in US dollar reached US$ 401.5 million, which represents growth of 13.6% over 3Q11 and decrease of 1.3% over 2Q12. Adjusting for the consolidation of revenues from Watt Drive, Electric Machinery and Pulverlux, growth over 3Q11 would have been of 33.5% when measured in Brazilian Reais. As in the previous quarter, net revenues from external markets surpassed revenues from the domestic market. This faster growth abroad is due to the expansion of operations outside Brazil, with market share gains and expansion of the product portfolio. Additionally, this move is boosted by the devaluation of the Brazilian currency, of 19% in this quarter compared to 3Q11. Evolution of Net Revenues according to Geographic Market (R$ million) Net Operating Revenues . Domestic Market . External Market . External Market in US$ 3Q12 2Q12 Change 1,613.1 798.6 814.4 401.5 1,528.8 729.2 799.6 406.9 5.5% 9.5% 1.9% -1.3% 3Q11Change 1,317.5 737.4 580.1 353.5 22.4% 8.3% 40.4% 13.6% PAGE: 21 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Comments on performance External Market – Distribution of Net Revenues according to Geographic Market North America South and Central America Europe Africa Australasia 3Q12 2Q12 Change 3Q11Change 39.1% 15.8% 17.6% 13.1% 14.3% 29.8% 13.9% 27.8% 16.9% 11.6% 9.3 pp 2 pp -10.2 pp -3.8 pp 2.7 pp 34.0% 5.1 pp 18.0% -2.2 pp 23.0% -5.4 pp 15.0% -1.9 pp 10.0% 4.3 pp Distribution of Net Revenues per Business Area 3Q12 Electro-electronic Industrial Equipments Domestic Market External Market Energy Generation, Transmission and Distribution Domestic Market External Market Electric Motors for Domestic Use Domestic Market External Market Paints and Varnishes Domestic Market External Market 2Q12 % 3Q11 % 60.1% 23.1% 37.0% 66.2% 25.0% 41.2% -6.1 pp -1.9 pp -4.2 pp 61.4% 27.0% 34.5% -1.3 pp -3.8 pp 2.5 pp 24.5% 14.2% 10.3% 8.6% 6.2% 2.5% 6.8% 6.0% 0.8% 20.6% 12.6% 8.1% 7.9% 5.5% 2.4% 5.2% 4.7% 0.6% 3.8 pp 1.6 pp 2.2 pp 0.8 pp 0.7 pp 0.1 pp 1.5 pp 1.3 pp 0.2 pp 23.5% 16.3% 7.1% 9.6% 7.4% 2.2% 5.5% 5.2% 0.3% 1 pp -2.1 pp 3.1 pp -0.9 pp -1.2 pp 0.3 pp 1.3 pp 0.8 pp 0.5 pp Business Area As previously mentioned, the continuation of the sales performance in the external markets is the result of the consistent execution of our strategic plan, with geographic expansion combined with expansion of the product portfolio. The results are observable in the performance of the various business areas. In the Industrial Electro-Electronic Equipment area this strategy has been particularly important, especially in the external market expansion. Combining the strong WEG brand with the research and development efforts, we develop a portfolio of products adapted to the consumer preference for higher energy efficiency equipment, with innovative design and features that are customizable for each market. Thus, performance in this area of business continued to be the operational highlight and maximizing the returns on investments to expand commercial footprint and resulting in strong sales growth, both in mature markets such as Europe and North America, as in emerging markets such as Asia and Africa. In the Brazilian market, while conditions for investment in expansion of industrial capacity have improved as a result of the active governmental policies to recover competitiveness, such as the “Brasil Maior” Plan, the impacts are still limited. Our performance in this quarter was primarily attributable to our diversified market presence, since there were no major highlights from any particular segment. In the Energy Generation, Transmission and Distribution (GTD) area there were no change in market dynamics that have been observed in recent quarters. In the Generation segment, the implementation of regulatory changes has caused significant additional noise and new investments continued at a slow pace. We remain confident in our competitive advantages, such as the excellence of our industrial footprint and technological know-how in manufacturing power generation equipment using different renewable sources (hydroelectric, biomass and wind) adapted to Brazilian conditions. PAGE: 22 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Comments on performance In the Transmission and Distribution (T&D) market, we continue to see relatively stronger demand in Brazil and international prices still under pressure from excess production capacity. We have maintained invests and level of services provided to our clients, as we expect that this strategy will result, over time, in t strengthening of our relative market position and business expansion. The adjustments in our own production structure have already been made and allow us to remain competitive, both in Brazil and in North America, even under current market conditions. In the Motors for Domestic Use business area, we have observed a mismatch of market growth for “white goods,” especially after the implementation of measures to stimulate consumption, and the demand for our products. We expect that recent additional government measures, including increases of import tax, may restore the competitive equilibrium in the sector. Finally, in the Paints and Varnishes business area, we had for the first time in the third quarter the consolidation of revenues from Stardur. Regardless of this fact, the organic growth in this business area remained healthy, showing the advantages of diversified model and the ability to capture synergies. Net Operating Revenues Cost of goods sold Gross Operating Profit Gross Margin (-) Selling Expenses (-) General & Administrative (-) Profit Sharing Result from Activities (+) Depreciation & Amortization EBITDA EBITDA Margin 3Q12 2Q12 % 3Q11 % 1,613.1 (1,114.5) 498.6 30.9% (156.7) (81.4) (28.8) 231.6 52.6 284.3 17.6% 1,528.8 (1,067.1) 461.7 30.2% (155.1) (76.0) (22.6) 207.9 52.2 260.0 17.0% 5.5% 4.4% 8.0% 1,317.5 (899.2) 418.3 31.7% (129.5) (66.5) (24.7) 197.6 46.2 243.7 18.5% 22.4% 23.9% 19.2% 1.0% 7.1% 27.3% 11.4% 0.9% 9.3% 21.0% 22.5% 16.7% 17.2% 14.0% 16.6% Figures in R$ thousand Cost of Goods Sold Cost of Goods Sold (COGS) totaled R$ 1,114.5 million in 3Q12, increasing 23.9% over 3Q11 and 4.4% over 2Q12. Gross margin reached 30.9%, 0.8 percentage point lower than in 3Q11, but 0.7 percentage point higher than in the 2Q12. Gross Margin Gross margin variations were the result of positive and negative factors. Among the positive, we highlight (i) devaluation of the Brazilian Real and consequent revenue growth in external market; (ii) the relative stability of raw material costs; and (iii) revenue growth and consequent better dilution of manufacturing costs. We also highlight the positive impact from the changes on the social security contribution calculation methodology. However, we continue to observed: (i) the new units India and Linhares (ES) have not reached the ideal utilization levels, (ii) the product sold mix is still recovering, especially in long-cycle products, (iii) continuation of pricing pressures in segments such as T&D. Cost of Raw Materials Average copper spot prices at the London Metal Exchange fell by 14% in the 3Q12 compared to the average of 3Q11 and 2% compared to the average of 2Q12. Steel prices in the international markets have PAGE: 23 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Comments on performance continued to drop as compared to the previous quarter (-8%) as compared to the previous year (-12%), according to the CRUspiGlobal index. These lower US dollar prices for raw materials steel and copper are actually translated into relatively stable prices when measured in Brazilian Reais. We have insisted that these raw materials prices are set internationally or at least follow trends that are similar across many global markets, resulting in similar cost conditions for the various competitors, regardless of the location of their operations. Thus, the selling prices for most of our products reflect current market conditions and the relative share of raw materials in our total costs has been relatively stable. Selling, General and Administrative Expenses Consolidated selling, general and administrative expenses (SG&A) represented 14.8% of net operating revenue in the 3Q12, once again demonstrating the good performance of the actions taken to control expenses and increased productivity. In the 3Q11 these expenses represented 14.8% of net operating revenue and in the 2Q12 represented 15.1% of net operating revenue. EBITDA and EBITDA Margin As a result of the aforementioned impacts, EBITDA in 3Q12 (calculated according to the methodology defined by CVM Ofício Circular 01/07) totaled R$ 284.3 million, an increase of 16.6% over 3Q11 and of 9.3% over the previous quarter. EBITDA margin reached 17.6%, 0.9 percentage point lower compared to the 3Q11 and 0.6 percentage point higher compared to the 2Q12. Main impacts on EBITDA 155.6 208.5 139.9 383,7 FX Impact on Revenues 26.3 16.1 330,8 COGS (ex depreciation) 243.7 0,0 Volume, Prices & 243,7 Product Mix Changes EBITDA 3Q11 304,5 Selling Expenses 288,4 General and Administrative Expenses 4.1 284.3 284,3 Profit Sharing Program EBITDA 3Q12 PAGE: 24 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Comments on performance Net Financial Results Financial revenues totaled R$ 101.3 million in 3Q12 (R$ 154.4 million in 3Q11 and R$ 134.5 million in 2Q12). Financial expenses totaled R$ 80.7 million (R$ 162.4 million in 3Q11 and R$ 148.0 million in 2Q12). In this quarter, net financial income was positive in R$ 20.6 million (negative in R$ 8.0 million in 3Q11 and negative in R$ 13.5 million in 2Q12). Income Tax and Social Contribution The Income Tax and Social Contribution Tax on Net Profit provision in 3Q12 reached R$ 61.9 million (R$ 37.4 million in 3Q11 and R$ 56.2 million in 2Q12). Additionally, R$ 6.1 million were recorded as “Deferred income tax / social contribution” (R$ 12.2 million in 3Q11 and R$ 9.6 million in 2Q12). Net Income As a result of the previously discussed impacts, net income for 3Q12 was R$ 184.8 million, an increase of 19.5% over 3Q11 and of 32.1% over the previous quarter. The net margin of the quarter was 11.5%, 0.3 percentage point lower compared to the 3Q11 and 2.3 percentage point higher compared to the 2Q12. Operating cash flow Cash flow from operating activities in the first nine months of 2012 totaled R$ 508.7 million, an increase of 75% over the same period of 2011. This increase in operating generation was caused by contribution of virtually all components, with emphasis on: (i) increase in net income before depreciation and (ii) lower increase in working capital needs, especially with smaller expansion in inventories relative to sales growth. CAPEX Investments in expansion and modernization of production capacity amounted to R$ 164.6 million in the first nine months of 2012, being 92% directed to industrial units and other facilities in Brazil and the remaining to production units and other subsidiaries abroad. Our expectation was that we would see a gradual acceleration in our investment program for 2012 in relation to what we had in 2011, to reach approximately R$ 300 million during the year. Given the current execution of the capex program up to the end of 3Q12, we should not reach this target in 2012, even considering an eventual pick in the speed of execution in this last quarter, given the favorable financing conditions extended by BNDES on the Investments Acceleration Program (PSI). PAGE: 25 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Comments on performance Investments in Fixed Assets (R$ million) Outside Brazil Brazil 63,1 33,8 8,2 49,9 41,1 58,7 55,5 50,4 5,0 3,7 5,1 62,1 53,7 51,9 45,4 Q4 11 Q1 12 Q2 12 Q3 12 1,0 7,3 2,4 25,6 38,8 42,6 Q1 11 Q2 11 Q3 11 2011 2012 Cash flow from investing activities Investing activities consumed R$ 270.6 million in the first nine months of 2012, 15% lower than the volume consumed in the same period of 2011. This reduction occurred despite an increase of investments in fixed assets, a result not only of the investments in expansion and modernization of production capacity but also the consolidation of the assets from the acquisitions and partnerships. In addition, there was an increase of R$ 133.7 million of intangible and R$ 51.8 million in goodwill related to these acquisitions and joint ventures. The main reason for the decrease in cash consumption was reversal of investments previously classified as long-term and which are now classified as cash equivalents. Debt and Cash Position (R$ thousand) Cash & Financial Instruments - Current - Long Term Debt - Current - In Brazilian Reais - In other currencies - Long Term - In Brazilian Reais - In other currencies Net Cash (Debt) September 2012 December 2011 September 2011 2,525,535 2,524,865 670 2,873,962 1,617,387 868,994 748,393 1,256,575 1,044,603 211,972 (348,427) 3,212,250 2,931,615 280,635 3,457,728 1,701,435 585,687 1,115,748 1,756,293 1,560,712 195,581 (245,478) 3,319,834 3,086,568 233,266 3,288,987 1,797,222 723,389 1,073,833 1,491,765 1,337,411 154,354 30,847 As of September 30, 2012, cash (cash, cash equivalents and short and long term financial investments) totaled R$ 2,525.5 million and gross financial debt totaled R$ 2,874.0 million, resulting in a net debt position of R$ 348.4 million (net cash of R$ 30.8 million in September 30, 2011 and net debt of R$ 245.5 million in December 31, 2011). Cash is invested mainly in Brazilian currency denominated financial instruments referenced to the Interbank Deposit Certificate (CDI), in the first-tier banks. PAGE: 26 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Comments on performance The main sources of funding are: • • In local currency – loans from BNDES, FINEP and other development agencies; In other currencies – trade finance transactions and working capital financing of subsidiaries abroad, denominated in the respective currencies of each country. The characteristics of the debt are: • • • The duration of the long-term portion is 28.1 months. The duration of the Brazilian Reais denominated portion is 18.1 months and of the foreign currencies denominated portion is 10.1 months. The weighted average cost of fixed-rate debt denominated in Reais is approximately 6.9% per year. Floating rate contracts are indexed mainly by to the Brazilian long-term interest rate (TLJP). Dividends As of August 15, payments declared during the first half of 2012 were made to shareholders, as below: • On March 20, as interest on stockholders’ equity (JCP), to shareholders on said date, in the gross amount of R$ 47.4 million; • On June 26, as interest on stockholders’ equity (JCP), to shareholders on said date, in the Gross amount of R$ 47.4 million; • On July 24, as dividends referring to profit recorded in the first half of 2012, in the total amount of R$ 62.0 million. Event Board Meeting Date Payment Date Gross amount per share Net amount per share Interest on Stockholders’ Equity Dividends Interest on Stockholders’ Equity Interest on Stockholders’ Equity Total 09/25/2012 07/24/2012 06/26/2012 03/20/2012 03/13/2013 08/15/2012 08/15/2012 08/15/2012 R$ 0.07647059 R$ 0.10000000 R$ 0.07647059 R$ 0.07647059 R$ 0.32941177 R$ 0.06500000 R$ 0.10000000 R$ 0.06500000 R$ 0.06500000 R$ 0.29500000 Interim dividends and interest on equity capital declared in the first half of 2012 totaled R$ 156.9 million, corresponding to 54.5% of net income for the period. Earnings per share after withholding income tax was of R$ 0.23. In addition, on September 25, the Board of Directors approved interest on stockholders’ equity (JCP) to the shareholders of record on said date, in the gross amount of R$ 47.4 million. This JCP will be paid from March 13, 2013 onwards. Cash flow from financing activities Financing activities consumed R$ 901.4 million in the first nine months of 2012, mainly as a result of the decrease in gross debt, with payment of loans and financing. In this period we conducted a net reduction of R$ 449.6 million of debt (new debt of R$ 836.8 million and amortization of R$ 1,286.4 million). PAGE: 27 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Comments on performance Cash flow The total cash, as presented in the Statement of Cash Flows, of R$ 2,268.2 million, does not include R$ 256.6 million in financial investments with maturities less than twelve months, but without immediate liquidity. If considered “Cash”, “Cash equivalents” and “Short-term financial investments”, total short term cash and financial instruments reach R$ 2,524.9 million. 2,931.6 508.7 Operating 270.6 901.4 Investing 2,268.2 Financing Cash 4Q11 Cash 3Q12 Extraordinary Event On October 16, 2012, a fire broke out in our Stardur coatings manufacturing plant, located in Indaiatuba, São Paulo. There were no casualties, only material damage, for which the WEG has insurance coverage. Production at the Indaiatuba plant has been interrupted and is being transferred to the Guaramirin (SC) and Mauá (SP) plants. WEG expects that contingency measures implemented should minimize impacts to its market presence. WEGE3 Share Performance At the end of the last trading day of September 2012, the common shares issued by WEG, traded under the code WEGE3 at BM&F Bovespa, were quoted at R$ 23.62 with a nominal increase of 25.8% in the year. Considering the dividends and interest on stockholders equity declared in the first half of 2012, the total return for the shareholders was of 28.9% in 2012. The average daily traded volume in 3Q12 was R$ 4.8 million, 33% lower than 3Q11. Throughout the quarter 45,117 stock trades were carried out (48,156 stock trades in 3Q11), involving 15.0 million shares (26.0 million shares in 3Q11) and totaling R$ 303.8 million (R$ 458.5 million in 3Q11). PAGE: 28 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Comments on performance Share Price Performance and Traded Volume Dividend adjusted performance (dividends and interest on stockholders equity) PAGE: 29 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 WEG S.A. Notes to financial information September 30, 2012 In thousands of reais, except when otherwise indicated 1. Operations 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 production and sale of capital goods, such as electric motors, equipment for generation, transmission and distribution of electrical energy, industrial automation and paints and varnishes. The operations are performed through manufacturing facilities located in Brazil, Argentina, Mexico, United States of America, 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. Summary of significant accounting practices Preparation of financial information requires the use of certain accounting estimates and judgment by the Company’s management. There were no changes in these estimates in relation to those disclosed in Note 3 to the financial statements as of December 31, 2011. Authorization to complete the preparation of this financial information was granted at the executive board meeting on October 8, 2012. There were no changes in the accounting standards used for these financial information in relation to those used for the financial statements as of December 31, 2011. 3. Cash and cash equivalents a) Cash and banks b) Short-term investments In local currency Bank Deposit Certificates (CDB) and Investment Funds In foreign currency: Certificates of Deposits Abroad Other balances held abroad SWAP NDF – Non Deliverable Forwards TOTAL 09/30/12 27 616,825 616,825 616,825 616,852 COMPANY 12/31/11 28 520,911 520,911 520,911 520,939 CONSOLIDATED 09/30/12 12/31/11 137,844 59,512 2,130,387 2,872,103 2,075,893 2,832,901 2,075,893 2,832,901 49,216 37,502 29,804 25,041 19,412 12,461 5,278 1,700 2,268,231 2,931,615 Investments in Brazil CDBs and Investment Funds are remunerated at the rates of 98% to 107% of the CDI (100% to 106% of the CDI at December 31, 2011). Investments abroad: Certificates of deposits issued by foreign financial institutions bear interest as follows: In Euros with interest from 0.2% to 1.7% p.a. at the original amount of EUR 6,408, with balance of R$ 16,732; In US Dollars with interest from 0.02% to 4.5% p.a. at the original amount of US$ 6,458, the balance of which is R$ 13,072 In the original currency with interest from 2.0% to 7.0% p.a. at the amount of R$ 19,412. PAGE: 30 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Notes to financial information Short-term investments held as cash and cash equivalents are readily redeemable. The Company has investments in Financial Treasury Bills amounting to R$ 256,634, which are not considered cash and cash equivalents because they are not immediately redeemable. 4. Trade accounts receivable CONSOLIDATED 09/30/12 12/31/11 a) Balance breakdown: Domestic Market External Market SUBTOTAL Present value adjustment Allowance for doubtful accounts TOTAL b) Effective losses on trade accounts receivable in the period c) Maturity of trade notes: Falling due Overdue: Up to 30 days More than 30 days TOTAL 729,822 701,987 1,431,809 (1,349) (18,713) 1,411,747 673,032 650,876 1,323,908 (3,070) (13,146) 1,307,692 489 144 1,207,421 86,933 137,455 1,431,809 1,191,813 68,854 63,241 1,323,908 Changes in the allowance for doubtful accounts are as follows: Balance at 12/31/2010 Amounts written off permanently Set up of provision Reversal of provision Balance at 12/31/2011 Amounts written off permanently Set up of provision Reversal of provision Balance at 12/31/2012 5. (13,314) 144 (4,244) 4,268 (13,146) 489 (7,079) 1,023 (18,713) Inventories Finished products Work in process Raw materials and other Imports in transit Provision for obsolescence Total inventories in the domestic market CONSOLIDATED 09/30/12 12/31/11 262,829 262,408 239,500 262,454 227,499 225,658 54,437 51,611 (11,702) (9,741) 772,563 792,390 Finished products Work in process Raw materials and other Provision for obsolescence Total inventories in the external market 391,956 107,919 134,605 (17,424) 617,056 384,601 82,453 119,184 (16,314) 569,924 1,389,619 1,362,314 TOTAL PAGE: 31 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Notes to financial information Changes in the provision for obsolescence: Balance at 12/31/2010 Inventories written off permanently Set up of provision Balance at 12/31/2011 Inventories written off permanently Set up of provision Balance at 09/30/2012 (19,977) 22,148 (28,226) (26,055) 4,058 (7,129) (29,126) Inventories are insured and their coverage is determined considering the values and level of risk involved. The amount of R$ 3,159,405 was recognized as cost of goods sold (R$ 2,610,493 at September 30, 2011). Cost of sales includes the amounts of R$ 4,058, referring to inventories permanently written off, and R$ 7,129 referring to set up of provision for obsolescence. 6. Taxes recoverable State VAT (ICMS) on capital expenditures Value Added Tax (IVA) from foreign subsidiaries PIS/COFINS on capital expenditures ICMS IPI IRPJ/CSLL to be offset PIS/COFINS Other TOTAL Short-term Long-term 09/30/12 9,480 9,480 9,480 - COMPANY 12/31/11 3,782 3,782 3,782 - CONSOLIDATED 09/30/12 12/31/11 21,469 22,759 55,667 51,462 3,722 10,122 23,634 20,700 14,520 14,237 17,068 11,778 49,291 30,255 17,301 7,665 202,672 168,978 188,416 156,076 14,256 12,902 Credits will be realized by the Company and its subsidiaries through refund and/or offset against taxes and contributions. 7. Related parties The commercial transactions for purchase and sale of products, raw materials and hiring of services, as well as intercompany loans and funding and management compensation were carried out as under. 09/30/12 COMPANY 12/31/11 290 79 - - 290 79 - - - Current liabilities Contracts with managing officers - - 2,423 2,423 1,566 1,566 Non-current liabilities Management of financial resources WEG Equipamentos Elétricos S.A. RF Reflorestadora Ltda Hidráulica Indl. S.A. Ind. e Com - HISA - 1,837 926 - 09/30/12 1,699 138 COMPANY 09/30/11 1,491 990 501 1,275 843 432 14,067 1,351 12,716 12,626 1,180 11,446 893 592 301 619 409 210 5,496 809 4,687 3,680 573 3,107 BALANCE SHEET ACCOUNTS Non-current assets Management of financial resources WEG Tintas Ltda. WEG Equipamentos Elétricos S.A. P&L ACCOUNTS Management compensation: a) Fixed (fees) Board of Directors Executive Board b) Variable (profit sharing) Board of Directors Executive Board CONSOLIDATED 09/30/12 12/31/11 926 CONSOLIDATED 09/30/12 09/30/11 PAGE: 32 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Notes to financial information Additional information: a) Commercial operations Transactions for purchase and sale of inputs and products are carried out on an arm’s length basis, prevailing cash sales. b) Management of financial resources The financial and commercial operations between Group companies are recorded in book accounts, in compliance with the requirements of the Group’s bylaws, not subject to interest. The credit/debt contracts entered into with Administrators are recorded in book accounts, subject to interest from 95% to 100% of the CDI variation. Under article 33 of the Articles of Incorporation of WEG S.A., no loans may be granted to management. c) Intercompany loans (i) The subsidiary WEG Equipamentos Elétricos S.A. entered into na intercompany loan agreement with WEGCESTARI Redutores e Motorredutores S.A., effective through December 31, 2014. Financial charges above 100% of CDI will be applied to the monthly debt balance. (ii) The subdisiary WEB Equipamentos Elétricos S.A. entered into an intercompany loan agreement with Hidráulica Industrial S.A Ind. e Com. (HISA), effective through June 30, 2013. Financial charges above 100% the CDI will be applied to the debt balance. d) Provision of services 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.). e) Guarantees and sureties WEG S.A. granted guarantees and sureties to foreign subsidiaries, in the amount of US$ 256.7 million (US$ 207.5 million at December 31, 2011), and to subsidiaries in Brazil, the amount of R$ 25.0 million. f) Management compensation Compensation paid to the Board of Directors and Executive Board members amounted to R$ 1,351 and R$ 12,716, respectively, for services rendered, representing a total amount of R$ 14,067. As long as the return on invested capital is at least 10%, profit sharing payable to management will range between 0% and 2.5% of the net income. The related provision recognized in the income statement as other operating expenses totals R$ 5,496. Board members and officers receive additional corporate benefits, as follows: Health and dental assistance, life insurance, supplementary pension benefits, among others. 8. Deferred taxes – IRPJ/CSLL Deferred income and social contribution tax credits and debts were determined in accordance with applicable rules in force. PAGE: 33 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Notes to financial information a) Balance breakdown: IRPJ tax losses CSLL tax losses Temporary differences: Provision for contingencies Taxes questioned in court Losses on receivables from customers Losses on no moving inventories Indemnification from labor and contract terminations Freight and sales commissions Accounts payable (electric energy, technical assistance and other) Employee profit sharing Transition tax regime adjustment Accelerated depreciation incentive – Law No. 11196/05 Other Fixed assets deemed cost TOTAL Non-current assets Non-current liabilities COMPANY 09/30/12 12/31/11 781 (49) 456 (3,669) (2,481) (2,481) 565 (40) 147 (3,724) (3,052) 712 (3,764) CONSOLIDATED 09/30/12 12/31/11 18,277 11,773 2,685 1,252 32,351 15,339 2,704 5,879 11,020 6,898 14,882 13,608 (89,735) (4,128) 5,563 (325,449) (290,106) 32,190 (322,296) 28,346 9,686 3,234 5,628 10,772 4,819 12,610 7,173 (63,731) (2,922) 5,535 (344,605) (310,430) 111,488 (421,918) b) Estimated realization term Management estimates that deferred assets arising from temporary differences will be realized in proportion to realization of contingencies, losses and projected obligations. In relation to deferred tax credits calculated on income and social contribution tax losses, management estimates that they will be realized within the next 5 years. 9. Investments 9.1. Investments in subsidiaries Adjusted equity P&L for the period Investment in capital (%) 09/30/12 12/31/11 2,535,502 236,452 77,313 37,023 413,939 7,681 15,104 (3,644) 100.00 100.00 99.91 0.02 0.09 99.98 100.00 100.00 99.91 0.02 0.09 99.98 19,658 3,150 391 3006 - 100.00 100.00 - 100.00 100.00 95,512 6,004 - 99.99 - 250,283 10 34,461 - 99.99 - 0.01 99.90 18,828 32,078 1,819 (450) - 4,296 170 2,604 Equity pickup 09/30/12 09/30/11 Investment book value 09/30/12 12/31/11 374,743(*) 7,681 15,090 - 355,994 11,617 13,367 1 2,535,502 236,452 77,241 6 2,666,862 232,948 65,550 7 - - - - 99.99 - - 1 - 99.00 - 1.00 99.90 34,470 - - 250,282 - 831 - 50.01 61.92 - 61.92 - - - - 91.75 8.25 91.75 8.25 156 - 3,941 3,786 756 0.05 99.95 0.01 99.99 1 - 1 - 6,090 37,479 (336) 1,389 0.12 - 99.88 99.99 0.10 0.12 - 99.90 99.88 - - (3) - 8 - 8 - 53,072 10,588 10.44 89.55 10.44 89.55 1,097 758 5,541 4,478 Direct WEG Equipamentos Elétricos S.A. RF Reflorestadora 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. e Motorredut.S.A. Hidráulica Indl.S.A. Ind. e Com. Agro Trafo Administradora de Bens S.A. Sensores Eletrônicos Instrutech Ltda. Logotech Sensores Eletrônicos Ltda. Equisul Indústria e Comércio Ltda. Stardur Tintas Especiais Ltda WEG Equipamientos Electricos S.A. Indirect Direct Indirect PAGE: 34 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Notes to financial information WEG Chile S.A. WEG Colômbia Ltda. WEG Electric Corp. WEG Service CO. WEG Overseas S.A. WEG México S.A. de C.V. WEG Transformadores México S.A. 28,123 11,219 98,164 (396) 12 102,099 3,122 1,089 10,912 295 (9) 9,706 8.00 1.00 0.79 100.00 - 92.00 99.00 99.21 100.00 99.99 8.00 1.00 0.79 100.00 - 92.00 99.00 99.21 100.00 99.99 250 11 91 (9) - 142 16 97 (41) - 2,250 112 774 12 - 1,669 86 625 20 1 35,565 1,534 Voltran S.A de C.V. 47,504 4,094 WEG Indústrias Venezuela C.A. 3,879 (340) Zest Electric Motors (Pty) Ltd. 150,743 27,663 WEG Nantong CO Ltd. 50,940 1,541 WEG Middle East Fze. (695) 84 WEG Industries (Índia) Private Ltd. 112,011 (6,451) WEG Electric (Índia) Private Limited. 318 (103) WEG Electric Motors Japan CO. Ltd. 1,308 416 WEG Singapore Pte. Ltd. 2,865 2,468 WEG Germany GmbH. 39,506 1,079 WEG Benelux S.A. 28,655 3,828 WEG Ibéria S.L. 969,918 96,322 WEG France S.A.S 2,897 (625) WEG Electric Motors (UK) Ltd. 11,006 1,868 WEG Itália S.R.L. 8,168 618 WEG Euro Ind. Electrica S.A. 42,053 8,768 WEG Electric CIS 2,653 1,252 WEG Scandinavia AB. 3,159 1,050 WEG Austrália Pty Ltd. 29,388 3,950 WEG Peru S.A. 809 196 Pulverlux S.A. 660 (203) EPRIS Argentina S.R.L. 125 15 Electric Machinery Holding Company 66,095 124 Watt Drive Antriebstechnik GmbH 8,405 (398) TOTAL (*) Equity pickup adjusted by unearned income. - 60.00 60.00 99.99 92.57 100.00 100.00 - 60.00 60.00 99.99 50.68 100.00 100.00 - - - - - 99.99 - 99.99 - - - - 4.99 94.99 4.99 94.99 (6) (5) 16 20 0.07 5.74 0.05 - 100.00 100.00 100.00 99.99 100.00 100.00 100.00 99.93 94.26 100.00 100.00 100.00 99.95 100.00 100.00 0.07 5.74 0.05 - 100.00 100.00 100.00 99.99 100.00 100.00 100.00 99.93 94.26 100.00 100.00 100.00 99.95 100.00 100.00 1 496 - 151 - 6 2,415 - 5 1,856 - - 100.00 100.00 - 100.00 100.00 434,072 382,094 3,114,560 2,978,752 de C.V. 9.2. Other investments These refer to other investments recorded at cost of acquisition in the amount of R$ 349 (R$ 349 at December 31, 2011). 10. Property, plant and equipment Land, construction and facilities Equipment Furniture and fixtures Hardware Construction in progress Reforestation Other Subtotal Accumulated depreciation/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 - 30/09/12 15,973 15,973 COMPANY 31/12/11 15,973 15,973 (4,213) 11,760 (4,017) 11,956 CONSOLIDATED 30/09/12 31/12/11 1,120,585 1,073,721 2,622,710 2,455,418 80,867 76,988 84,259 70,884 77,273 70,434 49,660 48,676 45,713 39,476 4,081,067 3,835,597 (187,992) (1,241,036) (40,367) (61,485) (8,167) (15,783) 2,526,237 (169,563) (1,102,709) (39,907) (55,352) (7,325) (14,981) 2,445,760 PAGE: 35 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Notes to financial information a) Summary of changes in property, plant and equipment: 12/31/11 Transfer between classes Acquisitions 904,158 1,352,709 37,081 15,532 70,434 41,351 24,495 2,445,760 12,752 22,589 34 328 (37,008) (3,623) (4,928) 10,873 102,030 6,346 12,520 43,780 985 12,128 188,662 PPE class Land, construction and facilities Equipment Furniture and fixtures Hardware Construction in progress Reforestation Other TOTAL Write-offs (73) (4,425) (323) (98) 9 (1,201) (6,111) Deprec. And depletion (14,520) (116,164) (3,600) (5,312) (843) (2,546) (142,985) Exchange effect 19,403 24,935 962 (196) 58 677 45,839 09/30/12 932,593 1,381,674 40,500 22,774 77,273 41,493 29,930 2,526,237 b) During the nine-month period ended September 30, 2012, the Company capitalized loans costs amounting to R$ 1,050 (R$ 1,221 in 2011), referring to constructions in progress. Costs are capitalized until constructions in progress are transferred to PP& in operation. c) Amounts provided as collateral – PPE items were provided as collateral for loans, financing, labor claims and tax suits in consolidated the amount of R$ 9,198 (R$ 14,333 at December 31, 2011). 11. Intangible assets – consolidated Amortization /years Projects: - Development of products and processes - Information technology Software license Other Subtotal Goodwill on acquisition of subsidiaries 5 5 5 - TOTAL a) Cost Accumulated amortization 69,505 79,441 67,143 41,374 257,463 482,463 739,926 (69,505) (77,359) (49,835) (28,415) (225,114) (21,387) (246,501) Additions Amortization 09/30/12 12/31/11 2,082 17,308 12,959 32,349 461,076 493,425 8,329 10,959 9,393 28,681 331,541 360,222 Summary of changes in intangible assets: 12/31/11 Information technology project Software license Other Subtotal Goodwill on acquisition of subsidiaries TOTAL 8,329 10,959 9,393 28,681 331,541 360,222 PPE Transfer 120 4,808 4,928 4,928 9,962 677 10,639 123,052 133,691 (6,247) (3,420) (1,713) (11,380) (11,380) Exchange effect (313) (206) (519) 6,483 5,964 09/30/12 2,082 17,308 12,959 32,349 461,076 493,425 Goodwill additions in the period refer to acquisition of interest in WEG-Cestari Redutores e Motorredutores S.A. and Stardur Tintas Especiais Ltda.; as well as the change in the value of acquisition of Electric Machinery Holding Company. b) Schedule of amortization of intangible assets (except goodwill): 2012 2013 2014 2015 2016 onward TOTAL 3,716 6,792 5,551 3,390 12,900 32,349 PAGE: 36 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Notes to financial information 12. Loans and financing Financing raised in foreign currency comprises Advances on Exchange Contracts (ACC’s), BNDES-FINEM in currency basket, BNDES-FINEM in dollar and IFC in dollar (+) LIBOR. Financing taken by foreign subsidiaries for working capital purposes is denominated in US dollars and/or in the currency of each country, amounting to R$ 524.5 million in the short term (R$ 497.1 million at December 31, 2011) and R$ 26.4 million in the long term (R$ 23.5 million at December 31, 2011), corresponding to US$ 271.3 million (US$ 277.8 million at December 31, 2011). Direct financing from BNDES is secured by sureties of the controlling company WEG S.A. Finame financing is secured by sureties and chattel mortgage. All covenants related to capital ratio, current liquidity ratio and leverage ratio (net debt/Ebitda), included in the contracts with BNDES and IFC, are being met. Type IN BRAZIL SHORT TERM Working capital (ACC’s) Working capital Working capital Working capital Working capital Non Deliverable Forwards (NDF) Property, plant and equipment Property, plant and equipment Export prepayment Swap Other Annual charges Interest of 2.2% to 3.9% p.a. (+) exchange variation Long-term interest rate (TJLP) (+) 1.4% to 3.0% p.a. Interest of 4.0% to 9.0% p.a. US Dollar (+) 1.4% to 1.8% p.a. US Dollar (+) Libor (+) 3.25% p.a. Exchange variation TJLP (+) 1.0% to 5.0% p.a. UFIR (+) 1.0% to 4.0% p.a. US Dollar (+) Libor (+) 0.8% to 1.10% p.a. Sundry 1,092,850 175,880 297,212 541,831 20,037 7,326 5,658 6,334 20,397 14,476 241 3,458 1,204,287 596,087 247,694 330,505 15,868 6,335 310 5,939 1,126 423 TJLP (+) 1.4% to 3.0% p.a. UFIR (+) 1.0% to 4,0% p.a. Interest of 4.0% to 9.0% p.a. TJLP (+) 1.0% to 5.0% p.a. US Dollar (+) 1.4% to 1.8% p.a. US Dollar (+) Libor (+) 3.25% p.a. US Dollar (+) Libor (+) 0.8% to 1.10% p.a. Sundry 1,230,207 603,242 45,131 378,359 10,867 57,065 40,612 87,580 329 7,022 1.732.781 812.841 55.016 678.941 13.914 56.241 40.642 75.004 182 EURIBOR (+) 0.8% to 1.4% p.a. LIBOR (+) 0.3% to 0.9% p.a. 90% of PBOC (4.5% to 5.0%) p.a. BBSY (+) 2.0% p.a. Interest 0.8% to 11.5% p.a. Exchange variation - 524,537 147,712 202,082 10,143 7,040 155,709 126 1,725 497.148 176.198 94.921 50.965 30.900 144.164 - 90% of PBOC (4.5% to 5.0%) p.a. JIBAR (+) 3.5% p.a. Interest 1.5% to 3.0% p.a. EURIBOR 1.0% p.a. - 26,368 7,062 7,801 4,117 7,174 214 23.512 11.900 9.390 1.913 309 1.617.387 1.256.575 1,701,435 1,756,293 LONG TERM Working capital Property, plant and equipment Working capital Property, plant and equipment Working capital Working capital Export prepayment Swap Other OVERSEAS SHORT TERM Working capital Working capital Working capital Working capital Working capital Non Deliverable Forwards (NDF) Swap LONG TERM Working capital Working capital Working capital Working capital Swap Other TOTAL SHORT TERM TOTAL LONG TERM CONSOLIDATED 09/30/12 12/31/11 PAGE: 37 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Notes to financial information Maturity of long-term financing and loans: 09/30/12 260,062 401,464 384,950 126,073 84,026 1,256,575 2013 2014 2015 2016 2017 onwards TOTAL 13. 12/31/11 1,142,720 348,885 133,482 70,520 60,686 1,756,293 Provisions 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 counsel. 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 the provision for contingencies 09/30/12 2,297 2,297 - COMPANY 12/31/11 1,660 1,660 - (ii) labor - - 44,865 38,834 (iii) Civil - - 67,775 63,456 607 229 3,860 3,682 2,904 1,889 173,064 145,616 851 851 - 541 541 - 24,100 19,171 4,929 21,300 17,223 4,077 (i) Tax: - IRPJ and CSLL - INSS - PIS/COFINS - Other (i.1) (i.2) (iv) Other TOTAL (v) Judicial deposits - Tax - Other b) Statement of changes in the period – consolidated a) Tax b) Labor c) Civil d) Other TOTAL c) CONSOLIDATED 09/30/12 12/31/11 56,564 39,644 14,221 12,883 33,310 23,843 559 559 8,474 2,359 12/31/11 39,644 38,834 63,456 3,682 145,616 Additions 20,502 6,444 17,942 483 45,371 Interest 1,215 57 1,272 Write-offs (843) (7,623) (8,466) Reversals (3,582) (785) (6,057) (305) (10,729) 09/30/12 56,564 44,865 67,775 3,860 173,064 The provisions set up refer substantially to: (i) Tax contingencies (i.1) The Company maintains a provision for the proceeding referring to IPC difference (51.82%) of January 1989 – “Plano Verão” (Summer Plan). The decision is favorable to the limit of the index of 35.58%. (i.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. PAGE: 38 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Notes to financial information (ii) Labor contingencies The Company and its subsidiaries are defendants in labor claims primarily involving health and risk exposure, among others. In this respect, the amount of R$ 44,865 was recognized as a provision (R$ 38,834 at December 31, 2011). (iii) Civil contingencies These correspond primarily to civil lawsuits, including personal injury, aesthetic damage, occupational diseases and indemnities arising out of occupational accidents. The amount of R$ 67,775 was recognized as a provision (R$ 63,456 at December 31, 2011). (v) Restricted judicial deposits 09/30/12 IRPJ/CSLL on “Plano Verão” Other TOTAL RESTRICTED JUDICIAL DEPOSITS - Non-restricted judicial deposits TOTAL JUDICIAL DEPOSITS 851 851 851 COMPANY 12/31/11 541 541 541 CONSOLIDATED 09/30/12 12/31/11 13,195 13,195 10,905 8,105 24,100 21,300 3,053 2,738 27,153 24,038 The judicial deposits not restricted to the contingencies are awaiting a decree allowing withdrawal thereof. d) Contingencies classified as possible losses The Company and its subsidiaries are parties to other suits, the likelihood of loss of which are rated as possible, for which no provision for contingencies was set up. The estimated amount of such litigation relates to the tax proceedings totaling R$ 127,127 (R$ 82,115 at December 31, 2011). The proceedings considered relevant and on which there is a legal opinion involve: - tax based on profit computed as a percentage of gross revenue in the estimated amount of R$ 68.0 million; - tax on profits arising abroad in the estimated amount of R$ 18.0 million; - tax on products eligible for the so-called IT Act (“Lei da Informática”) in the estimated amount of R$ 36.0 million. 14. Equity a) Capital The Company capital is represented by 620,905,029 common registered book shares, with voting rights and no par value, including 500,000 treasury stock, as per item “d”. b) Shareholders’ compensation – interest on equity At September 25, 2012, the Company declared interest on equity capital in the gross amount of R$ 47,443 (R$ 40,326 net) corresponding to R$ 0.065 per share, net of 15% withholding income tax under the terms of Law No. 9249/95, paragraph 2, article 9, except for corporate shareholders exempted from said taxation. Under the terms of article 37 of the Articles of Incorporation and article 9 of Law No. 9249/95, interest on equity capital will be attributed to mandatory dividends and paid for capital represented by 620,405,029 shares as of March 13, 2013. c) Stock option plan (i) The plan The purpose of the Plan managed by the Board of Directors is to grant options to purchase WEG S.A. (“Company”) shares to statutory officers of the Company and its subsidiaries located in Brazil, with the objective of attracting, motivating and retaining them, in addition to aligning their interests to those of the Company and its shareholders. Each purchase option attributes to titleholder the right to purchase 1 (one) common share issued by the Company (BM&FBOVESPA: “WEGE3”), strictly on the terms and conditions established by the Plan (“Option”). PAGE: 39 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Notes to financial information Share purchase options to be granted are limited to a maximum of 2% (two percent) of total shares representing Company capital. Participants must maintain blocked for trading the shares representing the investment during the retention period, as defined by the Plan. The Plan may be extinguished, suspended or changed, at any time, based on proposal approved by the Company’s Board of Directors. (ii) The programs The Board of Directors may approve, on a half-yearly basis, Stock Option Programs ("Programs”), whereby the participants, number of options, strike price, distribution of options, effectiveness date and other specific rules are defined, with observance of the basic guidelines of each program. To participate in each program, participants must invest in Company shares the amount of their variable remuneration in the period. Number of shares Program Granted Acquired Options Vesting period st April/11 274.678 46.653 91.056 1 nd 2 rd 3 st September/11 274.678 18.072 35.894 535.000 41.000 75.200 1 nd 2 rd 3 40.824 1 nd 2 rd 3 Subtotal st March/12 Subtotal st September/12 110.000 21.162 Strike price 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 40.824 242.974 Subtotal 1 nd 2 rd 3 Reais (R$) Number of options Subtotal Restated price IPCA Option price Option difference 21.01 21.01 21.01 23.16 24.32 25.54 30.60 32.98 35.29 7.43 8.66 9.76 17.45 17.45 17.45 19.39 20.43 21.54 25.08 27.05 29.00 5.70 6.62 7.46 19.17 19.17 19.17 21.34 22.51 23.75 27.22 29.40 31.51 5.89 6.89 7.76 17.50 17.50 17.50 19.48 20.56 21.69 25.51 27.33 29.16 6.02 6.78 7.47 Expenses (R$ thousands) 226 263 296 785 68 79 89 236 148 173 194 515 82 92 102 276 1,812 The weighted average fair value was determined based on the Black-Scholes-Merton method, considering the following factors: Program Vesting period 1st April/11 2nd 3rd 1st September/11 2nd 3rd 1st March/12 2nd 3rd 1st 21.01 21.01 21.01 17.45 17.45 755 1.008 1.260 756 Related current share price (R$) 22.10 22.10 22.10 Expected share price volatility (%) 26.33 26.33 Risk-free interest rate during option term (%) 12.79 12.81 September/12 2nd 3rd 17.45 19.17 19.17 19.17 17.50 17.50 17.50 1.008 1.259 755 1.008 1.257 753 1.006 1.257 18.06 18.06 18.06 19.80 19.80 19.80 20.10 20.10 20.10 26.33 29.88 29.88 29.88 29.85 29.85 29.85 24.50 24.50 24.50 12.83 10.90 11.05 11.22 9.76 10.12 10.33 8.32 8.57 8.78 Factors: Option strike price ( R$) Option term - in days Recording of expenses with stock options is made along the vesting period. At September 30, 2012, R$ 360 was recorded in other income in the income statement for the year against capital reserve in equity. PAGE: 40 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Notes to financial information d) Treasury stock The Company maintains in treasury 500,000 shares acquired to be used in connection with exercise of share purchase options by beneficiaries of the Company’s share purchase option plan or for subsequent cancellation or disposal. 15. Operating Revenue BREAKDOWN OF NET REVENUE CONSOLIDATED 09/30/12 09/30/11 Gross revenue Domestic market External market 5,299,778 2,936,302 2,363,476 4,405,457 2,752,439 1,653,018 Deductions Taxes Returns/rebates (788,158) (658,684) (129,474) (684,599) (597,404) (87,195) Net operating revenue 4,511,620 3,720,858 16. Operating expenses by nature The Company elected to present the consolidated income statement by function. As required by IFRS, the Company details below the consolidated income statement by nature: CONSOLIDATED 09/30/12 09/30/11 NATURE OF EXPENSE Depreciation and amortization Personnel expenses Raw materials and materials for use and consumption Freight and insurance expenses Other expenses (3,939,023) (154,365) (1,034,849) (2,028,761) (138,378) (582,670) (3,240,753) (139,393) (841,988) (1,695,419) (112,413) (451,540) FUNCTION OF EXPENSE Cost of products and services sold Selling expenses General and administrative expenses Management fees Other operating expenses (3,939,023) (3,159,405) (454,077) (211,109) (14,067) (100,365) (3,240,753) (2,610,493) (368,222) (176,608) (12,626) (72,804) 17. Other operating revenues/expenses The amounts recorded refer to the share in net income, reversal/(provision) of tax proceedings, tax incentives and others, as follows: CONSOLIDATED 09/30/12 09/30/11 OTHER OPERATING REVENUES - Other OTHER OPERATING EXPENSES - Employee profit sharing - Employee profit sharing - foreign subsidiaries - Managing officer profit sharing - Provision /Reversal of tax suits - Tax incentives (Rouanet Law, Fia and others) - Other TOTAL NET 14,440 14,440 (114,805) (68,545) (5,840) (5,496) (10,010) (2,629) (22,285) (100,365) 11,145 11,145 (83,949) (64,452) (3,720) (3,680) 2,460 (960) (13,597) (72,804) PAGE: 41 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Notes to financial information 18. Financial income (expenses), net FINANCIAL INCOME Interest income Foreign exchange variation Present value adjustment - customers PIS/COFINS on interest on equity Other income FINANCIAL EXPENSES Interest on loans and financing Foreign exchange variation Present value adjustments – suppliers Other expenses FINANCIAL INCOME (EXPENSES), NET 19. 09/30/12 COMPANY 09/30/11 CONSOLIDATED 09/30/12 09/30/11 43,538 52,620 1 (9,438) 355 53,009 61,452 3 (8,723) 277 363,652 183,638 117,059 33,034 (9,438) 39,359 359,327 226,778 86,476 33,960 (8,723) 20,836 (151) (151) (148) (148) (310,622) (134,146) (146,439) (10,902) (19,135) (285,357) (105,962) (132,812) (13,879) (32,704) 43,387 52,861 53,030 73,970 Provision for income and social contribution taxes The Company and its subsidiaries in Brazil determine income and social contribution taxes whereby taxable profit is based on accounting records, except for WEG Administradora de Bens Ltda., Instrutech Ltda, Logotech Ltda and Agro Trafo Administradora de Bens S.A., which determine taxable profit as a percentage of gross sales. Provision for income tax was set up at the rate of 15%, plus 10% surtax, whereas social contribution tax was calculated at 9%, pursuant to current legislation. Provision for taxes of foreign companies is set up according to each country’s legislation. 09/30/12 472,465 34% COMPANY 09/30/11 431,966 34% (160,638) (146,868) (212,713) (188,386) 147,583 13,702 (290) 129,912 15,844 (166) (2,815) (216) 28,694 48,573 (7,094) (329) 1,771 22,709 47,916 5,485 357 (214) 571 (1,278) (1,355) 77 (145,571) (166,572) 21,001 (110,834) (136,398) 25,564 -0.08% 0.30% 23.27% 20.00% Reconciliation of income and social contribution taxes: Income before income taxes Nominal rate IRPJ and CSLL at nominal rate Adjustments to calculate effective contribution taxes: Investments in subsidiaries Difference in tax rates on income abroad Tax incentives Interest on equity capital Other adjustments IRPJ and CSLL on income Current tax Deferred tax Effective rate - % income and CONSOLIDATED 09/30/12 09/30/11 625,627 554,075 34% 34% social PAGE: 42 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Notes to financial information 20. Pension plan The Company and its subsidiaries are sponsors of WEG Seguridade Social – Pension Plan, whose main objective is to supplement the official pension plan provided by the social security system. This plan, administered by WEG Seguridade Social, provides the benefits of monthly income, sickness allowance supplementation, disability retirement supplementation, lump sum payment due to disability, death benefit, lump sum payment due to death, deferred proportional benefit and self-sponsorship. The number of participants is 20,653 (19,679 at September 30, 2011). The Company and its subsidiaries made contributions amounting to R$ 15,670 for the nine-month period ended September 30, 2012 (R$ 13,590 at September 30, 2011). Based on actuarial calculations made by independent actuaries, according to procedures established by CVM Rule No. 371/2000, no significant net actuarial liability was identified. 21. Insurance coverage The business unit in Brazil is responsible for managing the insurance portfolio of the WEG Group in Brazil and abroad, and it continuously prepares, together with the executive committee, risk policies for the WEG Group in order to protect its assets. The risk analysis assumptions adopted, given their nature, are not part of the scope of the audit of financial statements, and were therefore not examined by our independent auditors. In 2010, the Company began the process of implementation of the Worldwide Insurance Program (WIP), whereby local insurance policies will be replaced by worldwide policies, in compliance with the laws and standards effective in each country. Some of the worldwide insurance policies successfully implemented by the WEG Group are highlighted below: Transportation risk (export, import and domestic), civil liability for products, civil liability for management (D&O), surety bond, general civil liability, property insurancee and environment pollution. Insurance policies are issued only by multinational first-tier insurance companies that are able to provide services to the WEG Group in all countries where it operates. The financial strength and sustainability of these insurance companies are continuously monitored by the corporate unit in Brazil. Some of our policies and related capital are shown below: - Operating risks (assets): US$ 60 million; - Loss of profits: US$ 62 million; - Civil liability: US$ 25 million; - Civil liability – products: US$ 100 million; - Transportation: US$ 4 million per shipment (export and import) and R$ 6 million (domestic); - Environment pollution: USD 25.0 million. PAGE: 43 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Notes to financial information 22. Financial instruments The Company and its subsidiaries carried out an assessment of their financial instruments, including derivatives, recorded in the financial information at September 30, 2012, presenting the following book and market values: BOOK VALUE 09/30/12 12/31/11 Cash and cash equivalents: Cash and banks Short-term investments: - In local currency - In foreign currency - Swap - Non Deliverable Forwards - NDF Short-term investments – Financial Bills Trade accounts receivable Trade accounts payable Loans and financing: - In local currency - In foreign currency - Swap - Non Deliverable Forwards - NDF MARKET VALUE 09/30/12 12/31/11 137,844 59,512 137,844 59,512 2,075,893 49,216 5,278 256,634 1,411,747 321,473 2,832,901 37,502 1,700 280,635 1,307,692 298,195 2,075,893 49,216 5,278 256,634 1,411,747 321,473 2,832,901 37,502 1,913,597 945,112 9,469 5,784 2,146,581 1,310,837 310 1,913,597 945,112 9,469 5,784 1,700 280,635 1,307,692 298,195 2,146,581 1,310,837 310 Risk factors of the financial instruments are primarily related to: (i) Financial risks Foreign currency risks The Company conducts export and import operations in several currencies and manages and monitors financial exposure, with a view to balancing its financial assets and liabilities within the limits set out by management. The financial exposure limit (balance sheet) corresponds to five months of revenue in foreign currency, as defined by the Company’s Board of Directors. The Company conducted exports amounting to US$ 682.7 million for the nine-month period ended September 30, 2012 (US$ 605.4 million at September 30, 2011), representing a natural hedge for debts and other costs denominated in other currencies, mainly in US$. Risk of debt charges These risks derive from the possibility of the subsidiaries incurring losses on account of fluctuations in interest rates or other debt indices, which increase financial expenses related to loans and financing raised in the market, or reduce interest income of subsidiaries. The Company continuously monitors market interest rates in order to assess the need for protection against risk of volatility of such rates. PAGE: 44 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Notes to financial information Derivative financial instruments The Company has the following operations with derivative financial instruments: a) Non Deliverable Forwards (NDF), in the notional amount of: (i) US$ 98.1 million, held by subsidiary WEG Equipamentos Elétricos S.A., for the purpose of protecting exports against risks of exchange rate fluctuations; (ii) EUR 57.8 million, held by subsidiary WEG Equipamentos Elétricos S.A., for the purpose of protecting exports against risks of exchange rate fluctuations; (iii) US$ 11.4 million, held by the foreign subsidiary Zest Electric Motors (Proprietary) Limited, for the purpose of protecting its import operations against risks of exchange rate fluctuations. b) SWAP operations, in the notional amount of: (i) EUR 10.0 million and GBP 0.9 million, both maintained by subsidiary Watt Drive Antriebstechnik GmbH (Austrian company acquired in November 2011), in order to hedge its financing against risks of Euribor and GBP (pound sterling) fluctuations; (ii) USD 30.0 million, held by subsidiary WEG Equipamentos Elétricos S.A., for the purpose of protecting against increases in the Libor rate; (iii) R$ 200.0 million, held by subsidiary WEG Equipamentos Elétricos S.A., floating to fixed interest rate swaps, for the purpose of protecting against interest rate decreases. Management of the Company and its subsidiaries permanently monitor derivative financial instruments engaged through their internal controls. The sensitivity analysis table should be read in conjunction with other financial assets and liabilities denominated in foreign currency existing at September 30, 2012, as the effect of the estimated impacts of exchange rates on NDFs and swaps presented below will be offset, if effected, in whole or in part, against devaluations of all assets and liabilities. In preparing the table below, management defined that exchange rates used for MTM of financial instruments should be considered for the probable scenario (market value), valid at September 30, 2012. Such rates represent the best estimate of future behavior of prices and the value by which positions could be settled at the maturity. Unrealized gains and losses on derivative operations are recorded as loans and financing (losses) or short-term investments (gains), against foreign exchange gains (losses) in P&L. The table below presents the effect of “cash and expense” effects of the results of financial instruments in each of the scenarios in reais. PAGE: 45 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Notes to financial information a) Non Deliverable Forwards (NDF) operations”: Risk Counterparty USD increase USD increase USD increase USD increase USD increase USD increase USD increase USD increase USD increase Banco Bradesco S.A. Bank of America Banco do Brasil S.A. JP Morgan Banco Safra Citibank Banco HSBC S.A. Banco Santander S.A. Standard Chartered USD TOTAL Banco Bradesco S.A. Bank of America Banco do Brasil S.A. Banco Itaú S.A. Banco Santander S.A. Deutsche JP Morgan EUR TOTAL First National Bank First National Bank First National Bank USD TOTAL TOTAL EUR increase EUR increase EUR increase EUR increase EUR increase EUR increase EUR increase USD decrease USD decrease USD decrease Notional value Currency (million) USD 12.5 USD 20.5 USD 33.8 USD 3.5 USD 2.5 USD 1.5 USD 0.5 USD 22.3 USD 1.0 USD 98.1 EUR 8.0 EUR 11.0 EUR 12.5 EUR 6.5 EUR 16.8 EUR 2.0 EUR 1.0 EUR 57.8 USD 7.7 USD 0.1 USD 3.6 US$/R$ US$/R$ US$/R$ US$/R$ US$/R$ US$/R$ US$/R$ US$/R$ US$/R$ EUR/R$ EUR/R$ EUR/R$ EUR/R$ EUR/R$ EUR/R$ EUR/R$ US$/ZAR US$/ZAR US$/ZAR Market value at Possible scenario 25% Remote scenario 50% 09/30/12 Average R$ R$ Average R$ thousand Average price price thousand price thousand 2.0704 (812) 2.5860 (7.282) 3.1032 (13,752) 2.0691 (1,563) 2.6470 (12.167) 3.1765 (22,771) 2.0308 (254) 2.5385 (17.414) 3.0461 (34,574) 2.0787 (126) 2.5969 (1.945) 3.1163 (3,763) 2.1177 88 2.6495 (1.235) 3.1793 (2,559) 2.0765 (111) 2.5957 (890) 3.1148 (1,669) 2.0518 (68) 2.5648 (325) 3.0778 (581) 2.0659 (1,548) 2.5830 (13.066) 3.0997 (24,582) 2.0496 (130) 2.5620 (643) 3.0745 (1,154) (4,524) (54.967) (105,405) 2.6623 (357) 3.3254 (5.681) 3.9905 (11,006) 2.6598 (166) 3.3283 (7.480) 3.9939 (14,795) 2.6123 421 3.2654 (7.742) 3.9185 (15,905) 2.7148 (476) 3.3935 (4.888) 4.0722 (9,299) 2.6535 (460) 3.3158 (11.572) 3.9789 (22,683) 2.7328 (71) 3.4160 (1.437) 4.0992 (2,803) 2.6405 (25) 3.3006 (685) 3.9608 (1,346) (1,134) (39.485) (77,837) 8.3185 (5) 6.2389 (3.895) 4.1593 (7,785) 8.5000 (1) 6.3753 (30) 4.2502 (61) 8.8796 (120) 6.6595 (1.815) 4.4396 (3,750) (126) (5.740) (11,596) (5,784) (100.192) (194,838) b) Swap operations: Risk Counterparty Notional value (million) Market value 09/30/12 Average quotation GBP decrease Bank Austria Total Currency Swap Euribor decrease Bank Austria Libor decrease Citibank Libor decrease Citibank CDI increase Safra CDI increase Santander CDI increase Santander Total Interest Swap TOTAL GBP 0.9 CHF/GBP 1.5522 EUR 10.0 R$ 15.0 R$ 15.0 R$ 70.0 R$ 50.0 R$ 80.0 Interest of 1.76% p.a. Interest of 0.70% p.a. Interest of 0.66% p.a. Interest of 8.57% p.a. Interest of 8.52% p.a. Interest of 8.55% p.a. Possible scenario 25% R$ thousand (1,725) (1,725) (7,174) (195) (374) 2,142 1,895 1,240 (2.466) (4,191) Average quotation CHF/GBP 1,1416 Interest of 1.32% p.a. Interest of 0.52% p.a. Interest of 0.49% p.a. Interest of 10.71% p.a. Interest of 10.65% p.a. Interest of 10.69% p.a. R$ thousand (2,498) (2,498) (8,342) (317) (472) (1,789) (815) (3,527) (15.262) (17,760) Remote scenario 50% Average quotation CHF/GBP 0.7611 Interest of 0.88% p.a. Interest of 0.35% p.a. Interest of 0.32% p.a. Interest of 12.85% p.a. Interest of 12.78% p.a. Interest of 12.82% p.a. R$ thousand (3,271) (3,271) (9,410) (438) (570) (5,438) (3,338) (7,977) (27.171) (30,442) The recording was based on the market price at September 30, 2012 on an accrual basis. Such operations had a negative net impact at September 30, 2012 of R$ 3,994 (positive R$ 6,349 at September 30, 2011), which were recognzied as financial expenses. The Company does not have margins given in guarantee for derivative financial instruments outstanding at September 30, 2012. (ii) Operating risks Credit risk Credit risk arises from the possibility of the subsidiaries not receiving amounts from sales operations or credits held with financial institutions resulting from short-term investments. To mitigate the risk arising out of sales operations, the Company’s subsidiaries adopt the practice of analyzing the financial position of their customers, establishing a credit limit and constantly monitoring their debt balances. In connection with financial institutions, the Company and subsidiaries only invest in low credit risk institutions. PAGE: 46 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Notes to financial information 23. Government subsidies and assistance At September 30, 2012, the Company was granted subsidies amounting to R$ 13,463 (R$ 1,570 at September 30, 2011) arising from tax incentives, recognized in P&L for the period: a) WEG Amazônia S.A. - ICMS incentive credit of 90.25% 25 25 b) WEG Linhares Equipamentos Elétricos S.A. - ICMS incentive credit of 85.00% - Municipal investment 6,032 6,014 18 c) WEG Equipamentos Elétricos S.A. - Municipal investment 132 132 d) WEG Logística Ltda - ICMS incentive credit of 75.00% 7,274 7,274 All the conditions to obtain government subsidies were met. 24. Segment information Management has defined operating and geographic segments of the Company based on reports used internally to make strategic business decisions. The Company's management is structured and systematized with information on operations, considering the segments of industry, energy, overseas and consolidated. Brazil Industry 09/30/12 09/30/11 Overseas Eliminations and adjustments Consolidated Energy 09/30/12 09/30/11 09/30/12 Revenue from sale of products and/or services Income before income tax Depreciation / Amortization / Depletion 2,715,042 2,256,102 1,023,323 798,546 575,410 261,418 94,487 89,212 30,463 936,410 178,825 30,676 Identifiable assets Identifiable liabilities 09/30/12 12/31/11 09/30/12 3,196,498 2,734,721 1,349,800 755,243 558,117 403,028 12/3111 1,264,986 373,178 09/30/11 09/30/12 09/30/11 09/30/12 09/30/11 2,055,113 117,372 29,415 1,391,716 (1,281,858) 79,716 (551,709) 19,505 - (863,370) (279,876) - 4,511,620 625,627 154,365 3,720,858 554,075 139,393 09/30/12 1,966,448 464,249 12/31/11 1,645,050 433,886 12/31/11 (221,968) (193,975) 09/30/12 6,166,073 1,339,403 12/31/11 5,422,789 1,171,206 09/30/12 (346,673) (283,117) Industry: three phase and single phase Motors of low and average voltage, drives & controls, industrial automation equipment, paints and varnish. Energy: electric generators for hydraulic and thermal power plants (biomass), hydro turbines (PCH – small hydroelectric plants), transformers, substations, control panels and system integration services. Overseas: Consists of operations conducted through subsidiaries located in several countries. The column of eliminations and adjustments includes eliminations applicable to the Company in the context of consolidated financial information under IFRS. All operating assets and liabilities are presented as identifiable assets and liabilities. PAGE: 47 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Notes to financial information 25. Earnings per share – basic and diluted a) Basic Profit attributable to the Company shareholders Weighted average number of common shares held by shareholders (shares/thousand) Earnings per share - basic - R$ 09/30/12 472,822 620,405 0.76212 09/30/11 430,688 620,405 0.69420 09/30/12 472,822 620,648 0.76182 09/30/11 430,688 620,405 0.69420 b) Diluted Profit attributable to the Company shareholders Weighted average number of potentially dilutive common shares held by shareholders (shares/thousand) Profit attributable to the Company shareholders Potentially dilutive shares are the 243 thousand shares referring to the share call option plan. 26. Statement of comprehensive income The cumulative translation adjustments are presented as other comprehensive income. These amounts are not subject to taxation. A The presentation of the statement of comprehensive income is required by CPC 26 - Presentation of Financial Statements, and includes other comprehensive income, corresponding to revenues and expenses not recognized in the income statement, as required or permitted by the pronouncements, interpretations and guidance issued by Brazilian FASB (CPC). PAGE: 48 of 49 ITR - Quarterly Information - 09/30/2012 - WEG SA Version: 1 Opinions and statements / Special Review Report - Unqualified The Shareholders and Board of Directors WEG S.A. Jaraguá do Sul, SC Introduction We have reviewed the interim, individual and consolidated financial information of WEG SA, contained in the Quarterly Information Form - ITR for the quarter ended September 30, 2012, which comprises the balance sheet at September 30, 2012 and related income statement, statement of comprehensive income for the quarter and nine months then ended, and the statement of changes in equity and cash flow statement for the nine months then ended, including explanatory notes. Management is responsible for the preparation of the interim individual financial information in accordance with CPC 21 – Interim Financial Reporting, and of the interim consolidated financial information in accordance with CPC 21 and with IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the fair presentation of this information in conformity with the standards issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of Quarterly Financial Information (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of review We conducted our review in accordance with Brazilian and International Standards on Review Engagements (NBC TR 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, and ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion on the individual interim financial information Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim individual financial information included in the quarterly information referred to above is not fairly presented, in all material respects, in accordance with CPC 21 applicable to the preparation of quarterly information (ITR) and presented consistently with the standards issued by the Brazilian Securities and Exchange Commission (CVM) applicable to quarterly information. Conclusion on the consolidated interim financial information Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim consolidated financial information included in the quarterly information referred to above is not fairly presented, in all material respects, in accordance with CPC 21 and IAS 34 applicable to preparation of quarterly information (ITR) and presented consistently with the standards issued by the Brazilian Securities and Exchange Commission (CVM) applicable to quarterly information. Other matters Interim statements of value added We have also reviewed the individual and consolidated interim statements of value added for the nine-month period ended September 30, 2012, whose presentation in the interim financial information is required by rules issued by the Brazilian Securities and Exchange Commission (CVM) applicable to preparation of quarterly information (ITR), and as supplementary information under IFRS, which do not require SVA presentation. These statements were submitted to the same review procedures described above and, based on our review, we are not aware of any facts that would lead us to believe that they are not presented fairly, in all material respects, in accordance with the overall individual and consolidated interim financial information. Blumenau (SC), October 11, 2012. ERNST & YOUNG TERCO Auditores Independentes S.S. CRC-SP 015.199/O-6 S-SC Marcos Antonio Quintanilha Accountant CRC-1-SP 132.776/O-3-T-SC PAGE: 49 of 49
