ITR - Quarterly Information - 6/30/2012 - 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 - 1/1/2012 to 6/30/2012
8
Statement of changes in equity - 1/1/2011 to 6/30/2011
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 - 1/1/2012 to 6/30/2012
16
Statement of changes in equity - 1/1/2011 to 6/30/2011
17
Statement of value added
18
Comments on performance
19
Notes to financial information
29
Opinions and Statements
Special Review Report - Unqualified
49
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Company information / Composition of capital
Number of shares
(Units)
Current quarter
6/30/2012
Paid-in capital
Common
Preferred
Total
620,405,029
0
620,405,029
Treasury stock
Common
Preferred
Total
500,000
0
500,000
PAGE: 1 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Company information / Cash dividends
Event
Approval
Earning
First payment
Type of share
Class of share
Earnings per share
(Reais / Share)
Board of Directors’
Meeting
3/20/2012
Interest on equity capital
8/15/2012
Common
0.06500
Board of Directors’
Meeting
6/26/2012
Interest on equity capital
8/15/2012
Common
0.06500
Board of Directors’
Meeting
7/24/2012
Dividend
8/15/2012
Common
0.10000
PAGE: 2 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Individual financial statements / Balance sheet - Assets
(In thousands of reais) Account
code
Account description
1
Total assets
3,929,634
3,816,355
1.01
Current assets
873,728
584,445
1.01.01
Cash and cash equivalents
542,206
520,939
1.01.01.01
Cash and banks
29
28
1.01.01.02
Short-term investments
542,177
520,911
1.01.02
Short-term investments
251,540
0
1.01.02.01
Short-term investments at fair value
251,540
0
1.01.02.01.01 Trading securities
Current quarter
6/30/2012
Prior year
12/31/2011
251,540
0
1.01.06
Taxes recoverable
14,231
3,782
1.01.06.01
Current taxes recoverable
14,231
3,782
1.01.08
Other current assets
65,751
59,724
1.01.08.03
Other
65,751
59,724
9,187
3,644
1.01.08.03.01 Dividends
1.01.08.03.02 Interest on equity capital
1.02
Non-current assets
1.02.01
Long-term receivables
1.02.01.01
Short-term investments at fair value
1.02.01.06
Deferred taxes
1.02.01.06.01 Deferred income and social contribution taxes
1.02.01.08
Receivables from related parties
1.02.01.08.02 Receivables from subsidiaries
1.02.01.09
Other non-current assets
1.02.01.09.03 Judicial deposits
56,564
56,080
3,055,906
3,231,910
753
241,192
0
239,860
0
712
0
712
0
79
0
79
753
541
753
541
1.02.02
Investments
3,043,318
2,978,752
1.02.02.01
Equity interests
3,043,318
2,978,752
3,043,318
2,978,752
1.02.02.01.02 Investments in subsidiaries
1.02.03
Property, plant and equipment
11,825
11,956
1.02.03.01
Property, plant and equipment in use
11,825
11,956
1.02.04
Intangible assets
10
10
PAGE: 3 of 48
ITR - Quarterly Information - 6/30/2012 - 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
Labor and social charges
2.01.01.01
2.01.03
2.01.03.01
Current quarter
6/30/2012
Prior year
12/31/2011
3,929,634
3,816,355
93,782
8,753
3,483
3,200
Social obligations
3,483
3,200
Tax obligations
6,943
2,601
Federal tax obligations
6,943
2,601
0
36
6,943
2,565
2.01.03.01.01 Income and social contribution taxes payable
2.01.03.01.02 Other taxes payables
2.01.05
Other payables
83,356
2,952
2.01.05.02
Other
83,356
2,952
82,856
2,182
500
770
2.01.05.02.01 Dividends and interest on equity capital payable
2.01.05.02.04 Other
2.02
Non-current liabilities
6,369
7,490
2.02.02
Other payables
1,296
1,837
2.02.02.01
Payables to related parties
1,296
1,837
1,296
1,837
2.02.02.01.02 Payables to subsidiaries
2.02.03
Deferred taxes
2,684
3,764
2.02.03.01
Deferred income and social contribution taxes
2,684
3,764
2.02.04
Provisions
2,389
1,889
2.03
Equity
3,829,483
3,800,112
2.03.01
Paid-in capital
2,718,440
2,265,367
2.03.02
Capital reserves
-51,319
239
2.03.02.04
Options granted
469
239
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
-51,788
0
3,809
3,834
292,975
857,721
0
29,347
240,989
664,715
62,041
173,714
2.03.04.09
Treasury stock
-10,055
-10,055
2.03.05
Retained earnings/accumulated losses
155,819
0
2.03.06
Equity valuation adjustments
680,031
704,466
2.03.06.01
Deemed cost
680,031
704,466
2.03.07
Cumulative translation adjustments
29,728
-31,515
PAGE: 4 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Individual financial statements / Income statement (In thousands of reais)
Account
code
Account description
Current quarter
YTD
1/1/2012 to 6/30/2012
Same quarter
last year
4/1/2011 to 6/30/2011
Prior year
accrued
1/1/2011 to 6/30/2011
3.04
Operating income/expenses
4/1/2012 to 6/30/2012
125,533
3.04.02
General and administrative expenses
-969
257,329
137,693
243,818
-1,822
-765
-1,528
3.04.02.01
Management fees
-500
-971
-425
-849
3.04.02.02
Other administrative expenses
-469
-851
-340
-679
3.04.04
Other operating income
0
2
83
85
3.04.05
Other operating expenses
-650
-1,253
-293
-509
3.04.06
Equity pickup
127,152
260,402
138,668
245,770
3.05
Income before financial income (expenses) and taxes
125,533
257,329
137,693
243,818
3.06
Financial income (expenses)
14,062
30,361
17,174
33,195
3.06.01
Financial income
13,822
30,477
17,231
33,295
3.06.02
Financial expenses
240
-116
-57
-100
3.07
Income before income taxes
139,595
287,690
154,867
277,013
3.08
Income and social contribution taxes
224
376
-310
-892
3.08.01
Current
1
9
-364
-941
3.08.02
Deferred
223
367
54
49
3.09
Net income from continuing operations
139,819
288,066
154,557
276,121
3.11
Income/loss for the period
139,819
288,066
154,557
276,121
3.99
Earnings per share – (reais/share)
3.99.01
Basic earnings per share
3.99.01.01
Common shares
0.22537
0.46432
0.24912
0.44506
3.99.02
Diluted earnings per share
3.99.02.01
Common shares
0.22529
0.46416
0.24912
0.44506
PAGE: 5 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Individual financial statements / Statement of comprehensive income (In thousands of reais)
Account
code
Account description
4.01
Net income for the period
4.02
Other comprehensive income
4.02.01
Cumulative translation adjustments
4.03
Comprehensive income for the period
Current quarter
YTD
1/1/2012 to 6/30/2012
Same quarter
last year
4/1/2011 to 6/30/2011
Prior year
accrued
1/1/2011 to 6/30/2011
4/1/2012 to 6/30/2012
139,816
58,861
288,066
154,557
276,121
61,243
-18,961
-16,548
58,861
61,243
-18,961
-16,548
198,677
349,309
135,596
259,573
PAGE: 6 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Individual financial statements / Cash flow statement - Indirect Method (In thousands of reais)
Account
code
Account description
YTD
1/1/2012 to 6/30/2012
Prior year
accrued
1/1/2011 to 6/30/2011
6.01
Net cash from operating activities
17,619
23,607
6.01.01
Cash from operations
27,649
31,388
287,690
277,013
131
145
-260,402
-245,770
6.01.01.01
Pre-tax income
6.01.01.02
Depreciation and amortization
6.01.01.03
Equity pickup
6.01.01.20
Expenses with share purchase option plan
230
0
6.01.02
Changes in assets and liabilities
-10,648
-8,177
6.01.02.01
Increase (decrease) in accounts receivable
-14,354
-4,103
6.01.02.02
Increase (decrease) in accounts payable
3,733
-3,231
6.01.02.03
Income and social contribution taxes paid
-27
-843
6.01.03
Other
618
396
177,603
-53,005
0
-30
6.02
Net cash from investing activities
6.02.01
Investments
6.02.02
Dividends and interest on equity capital received
189,282
173,082
6.02.04
Long-term financial investments
-11,679
-226,057
6.03
Net cash from financing activities
-173,955
-171,594
6.03.01
Dividends/interest on equity capital paid
-173,955
-161,539
6.03.03
Treasury stock
0
-10,055
6.05
Increase/(decrease) in cash and cash equivalents
21,267
-200,992
6.05.01
Opening cash and cash equivalents balance
520,939
689,944
6.05.02
Closing cash and cash equivalents balance
542,206
488,952
PAGE: 7 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Individual financial statements / Statement of changes in equity - 1/1/2012 to 6/30/2012 (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
5.03
5.04
5.04.01
5.04.03
5.04.06
Equity
Opening balances
2,265,367
4,073
684,007
173,714
672,951
3,800,112
Adjusted opening balances
2,265,367
4,073
684,007
173,714
672,951
3,800,112
Capital transactions with shareholders
453,073
-51,558
-391,032
-156,926
0
-146,443
Capital increase
453,073
0
-453,073
0
0
0
Recognized options granted
0
230
0
0
0
230
Dividends
0
0
62,041
-62,041
0
0
5.04.07
Interest on equity capital
0
0
0
-94,885
0
-94,885
5.04.08
Premium on share issue
0
-51,788
0
0
0
-51,788
5.05
Total comprehensive income
0
0
0
312,501
36,808
349,309
5.05.01
Net income for the period
0
0
0
288,066
0
288,066
5.05.02
Other comprehensive income
0
0
0
24,435
36,808
61,243
5.05.02.04
Translation adjustments in the period
0
0
0
0
61,243
61,243
5.05.02.06
Realization of deemed cost
0
0
0
24,435
-24,435
0
5.06
Internal changes in equity
0
-25
0
-173,470
0
-173,495
5.06.03
Revaluation reserve released to retained earnings
0
-25
0
25
0
0
5.06.04
Payment of dividends
0
0
0
-173,714
0
-173,714
5.06.05
Prescribed dividends
0
0
0
219
0
219
5.07
Closing balances
2,718,440
-47,510
292,975
155,819
709,759
3,829,483
PAGE: 8 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Individual financial statements / Statement of changes in equity - 1/1/2011 to 6/30/2011 (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
Equity
5.01
5.03
Opening balances
1,812,294
48,815
900,676
0
692,822
3,454,607
Adjusted opening balances
1,812,294
48,815
900,676
0
692,822
3,454,607
5.04
Capital transactions with shareholders
453,073
5.04.01
Capital increase
453,073
-54,985
-449,172
-149,989
0
-201,073
-44,930
-408,143
0
0
0
5.04.04
Treasury stock acquired
0
-10,055
5.04.06
Dividends
0
0
0
0
0
-10,055
-41,029
-60,179
0
-101,208
5.04.07
Interest on equity capital
0
0
0
-89,810
0
-89,810
5.05
Total comprehensive income
0
0
0
301,963
-42,390
259,573
5.05.01
Net income for the period
0
0
0
276,121
0
276,121
5.05.02
Other comprehensive income
0
0
0
25,842
-42,390
-16,548
5.05.02.04
Translation adjustments in the period
0
0
0
0
-16,548
-16,548
5.05.02.06
Realization of deemed cost
0
0
0
25,842
-25,842
0
5.06
Internal changes in equity
0
-26
0
26
0
0
5.06.02
Revaluation reserve released to retained earnings
5.07
Closing balances
0
-26
0
26
0
0
2,265,367
-6,196
451,504
152,000
650,432
3,513,107
PAGE: 9 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Individual financial statements / Statement of value added (In thousands of reais)
Account
code
Account description
YTD
1/1/2012 to 6/30/2012
Accrued - prior
year
1/1/2011 to 6/30/2011
7.02
Inputs purchased from third parties
-938
-203
7.02.02
Materials, electricity, third party services and other
-199
-177
7.02.03
Loss/recovery of amounts receivable
-739
-26
7.03
Gross value added
-938
-203
7.04
Withholdings
-131
-145
7.04.01
Depreciation, amortization and depletion
7.05
Net value added produced
-131
-145
-1,069
-348
7.06
Value added received in transfer
290,879
279,065
7.06.01
Equity pickup
260,402
245,770
7.06.02
Financial income
30,477
33,295
7.07
Total value added to be distributed
289,810
278,717
7.08
Distribution of value added
289,810
278,717
7.08.01
Personnel
1,785
1,345
7.08.01.01
Direct compensation
1,723
1,295
7.08.01.02
Benefits
33
27
7.08.01.03
Unemployment Compensation Fund (FGTS)
29
23
7.08.02
Taxes, charges and contributions
-100
1,224
7.08.02.01
Federal
-100
1,224
7.08.03
Third-party capital remuneration
59
27
7.08.03.01
Interest
59
27
7.08.04
Equity remuneration
288,066
276,121
7.08.04.01
Interest on equity capital
94,885
89,810
7.08.04.02
Dividends
7.08.04.03
Retained profit/loss for the period
62,041
60,179
131,140
126,132
PAGE: 10 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Consolidated financial statements / Balance sheet - Assets (In thousands of reais)
Account
code
Account description
Current quarter
6/30/2012
Prior year
12/31/2011
1
Total assets
9,109,705
9,105,861
1.01
Current assets
6,020,120
5,867,061
1.01.01
Cash and cash equivalents
2,626,935
2,931,615
1.01.01.01
Cash and banks
1.01.01.02
Short-term investments
1.01.02
1.01.02.01
101,142
59,512
2,525,793
2,872,103
Short-term investments
251,540
0
Short-term investments at fair value
251,540
0
251,540
0
1.01.02.01.01 Trading securities
1.01.03
Accounts receivable
1,350,250
1,307,692
1.01.03.01
Trade accounts receivable
1,350,250
1,307,692
1.01.04
Inventories
1,459,793
1,362,314
1.01.06
Taxes recoverable
195,200
156,076
1.01.06.01
Current taxes recoverable
195,200
156,076
1.01.08
Other current assets
136,402
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
1.02.01.06
Deferred taxes
1.02.01.06.01 Deferred income and social contribution taxes
1.02.01.08
Receivables from related parties
1.02.01.08.04 Receivables from other related parties
1.02.01.09
Other non-current assets
136,402
109,364
3,089,585
3,238,800
81,920
432,469
657
280,635
657
280,635
35,441
111,488
35,441
111,488
143
0
143
0
45,679
40,346
1.02.01.09.03 Judicial deposits
26,142
24,038
1.02.01.09.04 Taxes recoverable
13,657
12,902
5,880
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
2,513,061
2,445,760
1.02.03.01
Property, plant and equipment in use
2,438,643
2,375,326
1.02.03.03
Construction in progress
74,418
70,434
1.02.04
Intangible assets
494,255
360,222
1.02.04.01
Intangible assets
34,758
28,681
34,758
28,681
459,497
331,541
1.02.04.01.02 Other
1.02.04.02
Goodwill
PAGE: 11 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Consolidated financial statements / Balance sheet - Liabilities and equity (In thousands of reais)
Account
code
Account description
Current quarter
6/30/2012
Prior year
12/31/2011
2
Total liabilities and equity
9,109,705
9,105,861
2.01
Current liabilities
3,230,080
2,752,960
2.01.01
Labor and social charges
226,231
161,436
2.01.01.01
Social obligations
226,231
161,436
2.01.02
Trade accounts payable
349,350
298,195
2.01.03
Tax obligations
85,137
88,474
2.01.03.01
Federal tax obligations
85,137
88,474
47,986
44,186
2.01.03.01.01 Income and social contribution taxes payable
2.01.03.01.02 Other tax obligations
37,151
44,288
2.01.04
Loans and financing
1,935,177
1,701,435
2.01.04.01
Loans and financing
1,935,177
1,701,435
2.01.05
Other payables
634,185
503,420
2.01.05.02
Other
634,185
503,420
84,507
2,804
325,175
285,843
20,485
26,314
2.01.05.02.01 Dividends and interest on equity capital payable
2.01.05.02.04 Advances from clients
2.01.05.02.05 Profit sharing
2.01.05.02.06 Other
204,018
188,459
2.02
Non-current liabilities
1,965,957
2,446,312
2.02.01
Loans and financing
1,325,811
1,756,293
2.02.01.01
Loans and financing
1,325,811
1,756,293
2.02.02
Other payables
142,261
122,485
2.02.02.02
Other
142,261
122,485
63,599
58,326
2.02.02.02.03 Tax obligations
2.02.02.02.04 Other
78,662
64,159
331,370
421,918
Deferred income and social contribution taxes
331,370
421,918
Provisions
166,515
145,616
2.02.03
Deferred taxes
2.02.03.01
2.02.04
2.03
Consolidated equity
3,913,668
3,906,589
2.03.01
Paid-in capital
2,718,440
2,265,367
2.03.02
Capital reserves
-51,319
239
2.03.02.04
Options granted
469
239
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
2.03.05
Retained earnings/accumulated losses
155,819
0
2.03.06
Equity valuation adjustments
680,031
704,466
2.03.06.01
Deemed cost
680,031
704,466
2.03.07
Cumulative translation adjustments
29,728
-31,515
2.03.09
Non-controlling interest
84,185
106,477
-51,788
0
3,809
3,834
292,975
857,721
0
29,347
240,989
664,715
62,041
173,714
-10,055
-10,055
PAGE: 12 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Consolidated financial statements / Income statement (In thousands of reais)
Account
code
Account description
Current quarter
YTD
1/1/2012 to 6/30/2012
Same quarter
last year
4/1/2011 to 6/30/2011
4/1/2012 to 6/30/2012
Accrued - prior
year
1/1/2011 to 6/30/2011
3.01
Revenue from sale of products and/or services
1,528,791
3.02
Cost of goods sold and/or services rendered
2,898,553
1,277,258
2,403,375
-1,067,130
-2,044,925
-895,821
-1,711,276
3.03
Gross profit
461,661
853,628
381,437
692,099
3.04
Operating income/expenses
-259,847
-503,136
-216,768
-405,393
3.04.01
Selling expenses
-155,143
-297,334
-122,667
-238,686
3.04.02
General and administrative expenses
-76,017
-143,784
-64,282
-122,772
3.04.02.01
Management fees
-4,677
-9,440
-4,355
-8,401
3.04.02.02
Other administrative expenses
-71,340
-134,344
-59,927
-114,371
3.04.04
Other operating income
8,236
13,194
1,995
10,666
3.04.05
Other operating expenses
-36,923
-75,212
-31,814
-54,601
3.05
Income before financial income (expenses) and taxes
201,814
350,492
164,669
286,706
3.06
Financial income (expenses)
-13,481
32,404
42,114
81,960
3.06.01
Financial income
134,525
262,326
111,387
204,930
3.06.02
Financial expenses
-148,006
-229,922
-69,273
-122,970
3.07
Income before income taxes
188,333
382,896
206,783
368,666
3.08
Income and social contribution taxes
-46,498
-89,786
-47,991
-85,615
3.08.01
Current
-56,193
-104,646
-58,850
-98,954
3.08.02
Deferred
9,695
14,860
10,859
13,339
3.09
Net income from continuing operations
141,835
293,110
158,792
283,051
3.11
Consolidated income/loss for the period
141,835
293,110
158,792
283,051
3.11.01
Attributed to shareholders of parent company
139,819
288,066
154,557
276,121
3.11.02
Attributed to non-controlling shareholders
2,016
5,044
4,235
6,930
3.99
Earnings per share (Reais/share)
3.99.01
Basic earnings per share
3.99.01.01
Common shares
0.22537
0.46432
0.24912
0.44506
3.99.02
Diluted earnings per share
3.99.02.01
Common shares
0.22529
0.46416
0.24912
0.44506
PAGE: 13 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Consolidated financial statements / Statement of comprehensive income
(In thousands of reais)
Current quarter
YTD
Same quarter
last year
4/1/2012 to 6/30/2012 1/1/2012 to 6/30/2012 4/1/2011 to 6/30/2011
Accrued - prior
year
1/1/2011 to 6/30/2011
141,835
293,110
158,792
283,051
59,098
61,544
-18,961
-16,548
Account
code
Account description
4.01
Consolidated net income for the period
4.02
Other comprehensive income
4.02.01
Translation adjustments in the period
59,098
61,544
-18,961
-16,548
4.03
Consolidated comprehensive income for the period
200,933
354,654
139,831
266,503
4.03.01
Attributed to shareholders of parent company
198,680
349,309
135,596
259,573
4.03.02
Attributed to non-controlling shareholders
2,253
5,345
4,235
6,930
PAGE: 14 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Consolidated financial statements / Cash flow statement - Indirect Method
(In thousands of reais)
Account
code
Account description
YTD
1/1/2012 to 6/30/2012
Accrued - prior
year
1/1/2011 to 6/30/2011
6.01
Net cash from operating activities
291,657
356,648
6.01.01
Cash from operations
530,431
505,398
6.01.01.01
Pre-tax income
382,896
368,666
6.01.01.02
Depreciation and amortization
101,731
93,239
6.01.01.04
Employee profit sharing
45,574
43,493
6.01.01.20
Expenses with share purchase option plan
230
0
6.01.02
Changes in assets and liabilities
-277,013
-148,039
6.01.02.03
Increase (decrease) in inventories
-99,506
-79,154
6.01.02.04
Income and social contribution taxes paid
-95,186
-78,373
6.01.02.05
Employee profit sharing paid
-60,971
-57,938
6.01.02.06
Increase (decrease) in accounts receivable
6.01.02.07
Increase (decrease) in accounts payable
6.01.03
Other
6.02
6.02.01
-171,062
-50,668
149,712
118,094
38,239
-711
Net cash from investing activities
-227,283
-325,308
Property, plant and equipment
-138,226
-74,938
6.02.02
Intangible assets
-131,484
-8,426
6.02.03
Disposal of permanent assets
4,533
660
6.02.04
Cumulative translation adjustments
6.02.06
Premium on share issue
6.02.07
Long-term financial investments
6.03
Net cash from financing activities
61,243
-16,547
-51,788
0
28,439
-226,057
-369,054
90,301
576,971
755,498
0
-10,055
6.03.01
Loans and financing raised
6.03.02
Treasury stock
6.03.03
Dividends/interest on equity capital paid
-172,314
-162,902
6.03.05
Payment of loans and financing
-683,207
-426,616
6.03.06
Interest paid on loans and financing
6.05
Increase/(decrease) in cash and cash equivalents
6.05.01
6.05.02
-90,504
-65,624
-304,680
121,641
Opening cash and cash equivalents balance
2,931,615
2,552,996
Closing cash and cash equivalents balance
2,626,935
2,674,637
PAGE: 15 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Consolidated financial statements / Statement of changes in equity - 1/1/2012 to 6/30/2012 (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
Non-controlling
interest
Consolidated
equity
Opening balances
2,265,367
4,073
684,007
173,714
672,951
3,800,112
106,477
3,906,589
5.03
Adjusted opening balances
2,265,367
4,073
684,007
173,714
672,951
3,800,112
106,477
3,906,589
5.04
Capital transactions with shareholders
453,073
-51,558
-391,032
-156,926
0
-146,443
-27,637
-174,080
5.04.01
Capital increase
453,073
0
-453,073
0
0
0
0
0
5.04.03
Recognized options granted
0
230
0
0
0
230
0
230
5.04.06
Dividends
0
0
62,041
-62,041
0
0
0
0
5.04.07
Interest on equity capital
0
0
0
-94,885
0
-94,885
0
-94,885
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
-27,637
-27,637
5.05
Total comprehensive income
0
0
0
312,501
36,808
349,309
5,345
354,654
5.05.01
Net income for the period
0
0
0
288,066
0
288,066
5,044
293,110
5.05.02
Other comprehensive income
0
0
0
24,435
36,808
61,243
301
61,544
5.05.02.04
Translation adjustments in the period
0
0
0
0
61,243
61,243
301
61,544
5.05.02.06
Realization of deemed cost
0
0
0
24,435
-24,435
0
0
0
5.06
0
-25
0
-173,470
0
-173,495
0
-173,495
5.06.02
Internal changes in equity
Revaluation reserve released to retained
earnings
0
-25
0
25
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
5.07
Closing balances
0
0
0
219
0
219
0
219
2,718,440
-47,510
292,975
155,819
709,759
3,829,483
84,185
3,913,668
PAGE: 16 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Consolidated financial statements / Statement of changes in equity - 1/1/2011 to 6/30/2011 (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
Non-controlling
interest
Consolidated
equity
Opening balances
1,812,294
48,815
900,676
0
692,822
3,454,607
89,229
3,543,836
5.03
Adjusted opening balances
1,812,294
48,815
900,676
0
692,822
3,454,607
89,229
3,543,836
5.04
Capital transactions with shareholders
453,073
-54,985
-449,172
-149,989
0
-201,073
-2,059
-203,132
5.04.01
Capital increase
453,073
-44,930
-408,143
0
0
0
0
0
5.04.04
Treasury stock acquired
0
-10,055
0
0
0
-10,055
0
-10,055
5.04.06
Dividends
0
0
-41,029
-60,179
0
-101,208
0
-101,208
5.04.07
Interest on equity capital
0
0
0
-89,810
0
-89,810
0
-89,810
5.04.20
Other
0
0
0
0
0
0
-2,059
-2,059
5.05
Total comprehensive income
0
0
0
301,963
-42,390
259,573
6,930
266,503
5.05.01
Net income for the period
0
0
0
276,121
0
276,121
6,930
283,051
5.05.02
Other comprehensive income
0
0
0
25,842
-42,390
-16,548
0
-16,548
5.05.02.04
Translation adjustments in the period
0
0
0
0
-16,548
-16,548
0
-16,548
5.05.02.07
Realization of deemed cost
0
0
0
25,842
-25,842
0
0
0
5.06
0
-26
0
26
0
0
0
0
5.06.02
Internal changes in equity
Revaluation reserve released to retained
earnings
0
-26
0
26
0
0
0
0
5.07
Closing balances
2,265,367
-6,196
451,504
152,000
650,432
3,513,107
94,100
3,607,207
PAGE: 17 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Consolidated financial statements / Statement of value added (In thousands of reais)
Account
code
Account description
YTD
1/1/2012 to 6/30/2012
Accrued - prior
year
1/1/2011 to 6/30/2011
7.01
Revenues
3,318,183
2,808,655
7.01.01
Sale of goods, products and services
3,313,159
2,796,741
7.01.02
Other revenues
7.01.04
Set up/reversal of allowance for doubtful accounts
7.02
8,323
11,495
-3,299
419
Inputs purchased from third parties
-1,840,571
-1,571,235
7.02.02
Materials, electricity, third party services and other
-1,824,093
-1,568,553
7.02.03
Loss/recovery of amounts receivable
-16,478
-2,682
7.03
Gross value added
1,477,612
1,237,420
7.04
Withholdings
-101,731
-93,239
7.04.01
Depreciation, amortization and depletion
7.05
Net value added produced
-101,731
-93,239
1,375,881
1,144,181
7.06
Value added received in transfer
262,326
204,930
7.06.02
Financial income
262,326
204,930
7.07
Total value added to be distributed
1,638,207
1,349,111
7.08
Distribution of value added
1,638,207
1,349,111
7.08.01
Personnel
632,732
507,483
7.08.01.01
Direct compensation
558,919
434,586
7.08.01.02
Benefits
44,799
47,867
7.08.01.03
Unemployment Compensation Fund (FGTS)
29,014
25,030
7.08.02
Taxes, charges and contributions
465,202
420,206
7.08.02.01
Federal
413,755
371,934
7.08.02.02
State
46,996
45,646
7.08.02.03
Local
4,451
2,626
7.08.03
Third-party capital remuneration
247,163
138,371
7.08.03.01
Interest
233,631
129,286
7.08.03.02
Rental
13,532
9,085
293,110
283,051
94,886
89,810
7.08.04
Equity remuneration
7.08.04.01
Interest on equity capital
7.08.04.02
Dividends
7.08.04.03
Retained profit/loss for the period
7.08.04.04
Non-controlling interest in retained profits
62,041
60,179
131,139
126,132
5,044
6,930
PAGE: 18 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Comments on performance
Highlights
Net operating revenue in the second quarter of 2012 totaled R$ 1,528.8 million, with 20% growth over 2Q11 and
12% over the previous quarter.
EBITDA reached R$ 260.0 million for a 17% margin, 21% growth in relation to the previous year and 25%
growth in relation to the previous quarter.
Net income totaled R$ 139.8 million, with net margin of 9.1%. There was a 10% decrease in comparison to 2Q11
and of 6% in relation to 1Q12.
Investments in fixed assets totaled R$ 114.2 million in the first six months of 2012. In June, we announced the
acquisition of Stardur (Brasil), in the paint and varnishes segment.
Main Quarterly Figures Net Operating Revenue
Domestic market
External market
External market in US$
Gross Operating Profit
Gross margin
Net income
Net margin
EBITDA
EBITDA margin
EPS
2Q12
1,528,791
729,235
799,556
406,915
461,661
30.2%
139,819
9.1%
260,028
17.0%
0.2254
1Q12
1,369,762
714,268
655,494
370,825
391,967
28.6%
148,247
10.8%
208,638
15.2%
0.2390
%
11.6%
2.1%
22.0%
9.7%
17.8%
-5.7%
24.6%
-5.7%
2Q11
1,277,258
723,348
553,910
347,886
381,437
29.9%
154,557
12.1%
215,579
16.9%
0.2491
%
19.7%
0.8%
44.3%
17.0%
21.0%
-9.5%
20.6%
-9.5%
1H12
1H11
%
2,898,553 2,403,375 20.6%
1,443,503 1,383,670 4.3%
1,455,050 1,019,705 42.7%
823,148
627,447 31.2%
853,628
692,099 23.3%
29.5%
28.8%
288,066
276,121 4.3%
9.9%
11.5%
468,666
380,387 23.2%
16.2%
15.8%
0.4643
0.4451 4.3%
Figures in R$ Thousand
Comments from Laurence Beltrão Gomes,
WEG’s Finance and Investor Relations Officer
The second quarter of 2012 showed strong revenue growth, driven again by the good sales performance in international
markets. This performance in external markets more than offset the slow growth observed in Brazil, showing once again
the robustness of the WEG business model. Even in an economic environment of great uncertainty, characterized by the
sovereign debt crisis in the Euro zone and the low level of investment in production capacity expansion in the Brazilian
industry, we were able to find and exploit growth opportunities in the markets we serve.
In the Brazilian market revenue growth was modest, given the environment of uncertainty regarding the Brazilian
economy growth perspectives, which has slowed industrial capacity expansion investments. Abroad, where our market
share is relatively smaller, we have been exploring the WEG brand reputation of reliable and technologically advanced
product portfolio. We believe that we will continue to be able to find opportunities, and thereby obtain significant growth
rates, by executing our plans of expanding the product mix offered abroad and entering new market niches. In Brazil, we
continue to believe that measures to simulate the industry, introduced by the “Brasil Maior” Plan, in conjunction to falling
basic interest rates to record lows and the devaluation of the Brazilian Real will result in a better business environment
for the industrial segment.
In this quarter we continued to execute our strategy to capture non-organic growth opportunities with acquisition of
Stardur Tintas, the first acquisition of the Coatings business unit in the Brazilian market, which brought technology to
complement our portfolio and market access to automotive repainting market.
PAGE: 19 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Comments on performance
Economic Activity and Industrial Production
The pace of overall economic activity and of industrial activity in particular, remained weak in the second quarter of
2012, continuing the downward trend in the pace of recovery, and some deterioration in economic conditions could be
seen in both emerging and mature markets.
The analysis of the purchasing manager indexes (or PMI indicators), which indicates the economic and industrial
activity situation in some of our major markets, demonstrates this clearly. Indexes above 50 indicate industrial
expansion and below of 50 signal industrial contraction. In June 2012, indexes in virtually all major industrial markets
are under 50.
June 2012
May 2012
Manufacturing ISM Report on Business ®
USA
49.7
53.5
Markit/BME Germany Manufacturing PMI®
Germany
45.0
45.2
China
48.2
48.4
HSBC China Manufacturing PMI™
In Brazil, industrial activity accumulated a decrease of 3.4% in 2012 up to May in comparison the same period of the
previous year. The drop in production accumulated in the previous 12 months was of 1.8%. This low industrial growth
scenario is already embedded in financial market expectations, as captured by the Central Bank of Brazil Focus report,
which has been showing diminishing rates for industrial production growth forecasts in 2012. In early July these
expectations were of a modest expansion of 0.1%.
Industrial Indicators According to Categories of Use in Brazil
Change (%)
Categories of Use
May/Apr*
Capital Goods
-1.80
Intermediary Goods
0.20
Consumer Goods
-2.80
Durable Goods
-2.20
Semi-durable and non-durable
-2.10
General Industry
-0.90
Source: IBGE, Research office, Industry Coordination
(*) Series with seasonal adjustment
May 12 / May 11
-12.20
-2.70
-4.30
-9.50
-2.70
-4.30
Accumulated
YTD
12 months
-12.00
-3.80
-2.00
-1.10
-2.50
-1.90
-10.00
-7.10
0.00
-0.30
-3.40
-1.80
Capital goods and durable goods production continued to be the negative highlights. The falls in these categories
should be analyzed carefully though, as there is a strong influence from the decreases in heavy vehicles production in
the automotive industry in the case of capital goods. Still, the situation of the Brazilian industry as a whole is weaker
today than was the perception in early 2012.
Net Operating Revenue
Net Operating Revenue reached R$ 1,528.8 million in the second quarter of 2012 (2Q12), corresponding to an
increase of 19.7% in relation to second quarter of 2011 (2Q11) and of 11.6% in relation to first quarter of 2012 (1Q12).
IN this quarter there was no additional revenues impact due to the consolidation of acquisitions. Only the assets and
liabilities of Stardur, acquired last June, were consolidated in this 2Q12.
Adjusted by adding of R$ 72.2 million resulting from the consolidation of net revenues of Watt Drive (Austria), Electric
Machinery (USA), Pulverlux (Argentina) and of joint venture WEG-Cestari (Brazil), growth of net revenue would have
been 14% in 2Q12 in relation to the 2Q11.
PAGE: 20 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Comments on performance
Net Operating Revenue per Market (R$ million)
External Market
Domestic Market
1,469
1,317
1,277
1,529
1,370
1,126
52%
43%
44%
47%
59%
57%
56%
53%
52%
48%
Q1
Q2
Q3
Q4
Q1
Q2
41%
48%
2011
2012
Net operating revenue breakdown according to destination market is the following:
Domestic market: R$ 729.2 million, representing 48% of Net Operating Revenues, with growth of 0.8% over
2Q11 and of 2.1% compared to 1Q12; these figures incorporate the consolidation of revenues of WEG-Cestari.
Adjusted for this acquisition, there would be a decrease of 1.4% in revenues compared to 2Q11.
External market: R$ 799.6 million, equivalent to 52% of Net Operating Revenues, with growth of 44.3% over
the same period of last year and of 22.0% over the previous quarter. Considering the average US
dollar/Brazilian Real exchange rate of quarter, net operating revenues from external market in US dollar
reached US$ 406.9 million, which represents growth of 17.0% over 2Q11 and of 9.7% over 1Q12. Adjusting for
the consolidation of revenues of Watt Drive, Electric Machinery and Pulverlux, growth over 2Q11 would have
been of 34.3% when measured in Brazilian Reais.
This was the first quarter in which net revenue of the external market exceeded that achieved in the domestic market.
The accelerated external market’s growth we have been experiencing over the previous quarters was amplified by the
9.9% devaluation the Brazilian Real against the US dollar during the 2Q12.
Evolution of Net Revenues according to Geographic Market (R$ Million)
Q2 2012
Net Operating Revenues
. Domestic market
. External market
. External market in US$
1,528.8
729.2
799.6
406.9
Q1 2012
1,369.8
714.3
655.5
370.8
Change
Q2 2011
11.6%
2.1%
22.0%
9.7%
1,277.3
723.3
553.9
347.9
Change
19.7%
0.8%
44.3%
17.0%
Distribution of Net Revenues according to Geographic Market
Q2 2012
North America
South and Central America
Europe
Africa
Australasia
29.8%
13.9%
27.8%
16.9%
11.6%
Q1 2012
35.8%
14.6%
27.8%
12.7%
9.1%
Change
-6 pp
-0.7 pp
0 pp
4.2 pp
2.5 pp
Q2 2011
32.8%
17.1%
23.5%
16.9%
9.6%
Change
-3 pp
-3.2 pp
4.3 pp
0 pp
2 pp
PAGE: 21 of 48
ITR - Quarterly Information - 6/30/2012 - WEG SA
Version: 1
Comments on performance
Distribution of Net Revenues per Business Area
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
Q2 2012
66.2%
25.0%
41.2%
20.6%
12.6%
8.1%
7.9%
5.5%
2.4%
5.2%
4.7%
0.6%
Q1 2012
63.5%
28.8%
34.7%
22.8%
12.1%
10.7%
8.1%
6.2%
1.9%
5.6%
5.1%
0.5%
%
2.7 pp
-3.8 pp
6.5 pp
-2.2 pp
0.5 pp
-2.7 pp
-0.2 pp
-0.7 pp
0.5 pp
-0.3 pp
-0.5 pp
0.1 pp
Q2 2011
62.4%
28.7%
33.8%
22.3%
15.2%
7.0%
9.8%
7.5%
2.4%
5.4%
5.3%
0.2%
%
3.8 pp
-3.7 pp
7.5 pp
-1.6 pp
-2.7 pp
1 pp
-1.9 pp
-2 pp
0 pp
-0.2 pp
-0.6 pp
0.4 pp
Business Areas
The excellent performance of sales in external markets, resulting from the consistent execution of our differentiated
business strategy, based on the expansion of our product portfolio abroad, can also be observed when analyzing the
performance of various business areas.
In the industrial electro-electronic equipments business, where we have, over the years, built a globally recognized
brand and strong presence in several markets, we continued to see strong growth both in mature markets, like Europe
and North America, and in emerging markets, such as Asia and Africa. In this case we have benefited from the
research and development effort focused on the innovative design and high performance products. This portfolio of
products, adapted to the trends that place strong preference for equipments with greater energy efficiency, has allowed
us to maximize returns on investments in commercial structure made in recent years, resulting in strong sales
expansion.
In the domestic market, although we observed some reduction in the rate of growth in this area during the quarter, we
continue to benefit from investments in specific segments such as oil and gas, shipbuilding, mining and cement.
In the GTD business remained the same dynamics that we have seen in recent quarters. In the domestic market we
continued to see the divergent trends in the Generation (G) and Transmission and Distribution (T&D) equipment
markets. In generation, we continue to observe slow demand recovery, but greater economic rationality, while in T&D,
although demand remains relatively stronger, prices continued to be under pressure. This pressure on the prices on the
T&D equipment is actually a reflection of the international environment in which, as we have described before, the
industry is adjusting its excess capacity. Our experience in similar situations shows that the strategy of maintaining
service levels and investment results, over time, in the strengthening of our market position and in business expansion.
It is what we have done in the North American market, with the transformer factory in México and the specific U.S.
commercial infrastructure.
In motors for domestic use, the stimulus measures announced in December 2011 began to impact consumer behavior,
but these impacts have not been fully felt through the production chain. Additional measures to produce competitive
equilibrium, including specific import tax and IPI increases for some imported products, may give increase momentum
during the seasonally important second half of the year.
In the paints and varnishes business, Stardur, whose acquisition was announced last June, will only have its
consolidated revenues from the third quarter of 2012 onwards. Anyway, the area was able to show growth in both the
Brazilian market and abroad.
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Comments on performance
Net Operating Revenues
Cost of Goods Sold
Gross Operating Profit
Gross Margin
(-) Selling Expenses
(-) General & Administrative
(-) Profit Sharing
Income from Activity
(+) Depreciation & Amortization
EBITDA
EBITDA Margin
Q2 2012
1,528.8
(1,067.1)
461.7
30.2%
(155.1)
(76.0)
(22.6)
207.9
52.2
260.0
17.0%
Q1 2012
1,369.8
(977.8)
392.0
28.6%
(142.2)
(67.8)
(22.9)
159.1
49.6
208.6
15.2%
%
11.6%
9.1%
17.8%
9.1%
12.2%
-1.4%
30.7%
5.2%
24.6%
Q2 2011
%
1,277.3
19.7%
(895.8)
19.1%
381.4
21.0%
29.9%
(122.7)
26.5%
(64.3)
18.3%
(24.6)
-8.2%
169.8
22.4%
45.7
14.0%
215.6
20.6%
16.9%
Figures in R$ thousands
Cost of Goods Sold
Cost of Goods Sold (COGS) totaled R$ 1,067.1 million in 2Q12, increasing 19.1% over 2Q11 and 9.1% over 1Q12.
Gross margin reached 30.2%, 0.3 percentage point higher than in the 2Q11 and 1.6 percentage point higher than in the
1Q12.
Gross Margin
The gross margin expansion is due to, among other effects: (i) growth in sales and revenues; (ii) the positive effect of
devaluation of the Real on the revenues in external market; (iii) stability of costs, mainly of raw material; and (iv)
expansion of activities and consequent greater dilution of manufacturing costs, important when we remember that the
greenfield production units in India and Linhares (ES) have yet to reach their optimal utilization levels.
Cost of Raw Materials
Average spot copper prices on the London Metal Exchange (LME) fell by 14% in the 2Q12 compared to the average of
2Q11 and 5% compared to the average of 1Q12. Steel prices in the international markets have continued to drop by
9% over 2Q11 and showed stability in comparison to the previous quarter, according to the CRUspiGlobal index.
This relative stability of raw materials (steel and copper) prices is beneficial to our business. These prices are
international or, at least, follow similar trends in the various global markets. Thus, the cost conditions are very similar to
the various competitors, regardless of the location of its manufacturing operations. The selling prices for most of our
products are recalculated according to the characteristics of each application, and tend to reflect current market
conditions, incorporating costs increases naturally and gradually.
Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses (SG&A) represented 15.1% of net operating revenues in the
2Q12, well within the usual behavior for these accounts (14.6% of operating revenues in 2Q11 and 15.3% of operating
revenues in 1Q12) and in line with the constant efforts to rationalize and increased productivity.
EBITDA and EBITDA Margin
As a result of the aforementioned effects, the EBITDA in 2Q12 (calculated according to the methodology defined by
CVM Ofício Circular 01/07) totaled R$ 260.0 million, an increase of 20.6% over 2Q11 and of 24.6% over the previous
quarter. EBITDA margin reached 17.0%, 0.1 percentage point higher compared to the 2Q11 and 1.8 percentage point
higher compared to the 1Q12.
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Comments on performance
Main impacts on EBITDA
79,4
165,8
172,2
FX Impact
on
Revenues
32,0
COGS (ex
depreciation)
215,6
11,3
Selling
Expenses
Volumes,
Prices &
Product Mix
Changes
EBITDA Q2 11
General and
Administrative
Expenses
2,0
260,0
Profit Sharing
Program
EBITDA Q2 12
Net Financial Results
Financial revenues totaled R$ 134.5 million in 2Q12 (R$ 111.4 million in 2Q11 and R$ 127.8 million in 1Q12). Financial
expenses totaled R$ 148.0 million (R$ 69.3 million in 2Q11 and R$ 81.9 million in 1Q12). In this quarter, net financial
income was negative in R$ 13.5 million (positive in R$ 42.1 million in 2Q11 and positive in R$ 45.9 million in 1Q12).
The increase in financial expenses in this second quarter was due to the effect of devaluation of the Brazilian Real on
the portion of debt denominated in foreign currencies. This debt in other currencies is used exclusively for export
financing and cash flow protection. It is always import remember that this is an accounting impact. Considering cash
flows, these trade finance loans will be amortized over the coming months as receivables from exports also
denominated in foreign currencies come due.
Income Tax and Social Contribution
The Income Tax and Social Contribution Tax on Net Profit provision in 2Q12 reached R$ 56.2 million (R$ 58.8 million in
2Q11 and R$ 48.5 million in 1Q12). Additionally, R$ 9.7 million were recorded as “Deferred income tax / social
contribution” (R$ 10.9 million in 2Q11 and R$ 5.2 million in 1Q12).
Net Income
As a result of the previously discussed impacts, mainly from the accounting effect of the Brazilian Real devaluation on
financial expenses, net income for 2Q12 was R$ 139.8 million, a decline of 9.5% over 2Q11 and of 5,7% over the
previous quarter. The net margin of the quarter was 9.1%, 3.0 percentage point lower compared to the 2Q11 and 1.7
percentage point lower compared to the 1Q12.
Operating Cash Flow
Cash flow from operating activities in the first half of 2012 totaled R$ 291.7 million, a decrease of 18% over the same
period of 2011. The expansion of activities increased operating cash flow, which was offset by increased working
capital needs, due either to the increase of R$ 99.5 million in inventory and of R$ 171.1 million in accounts receivable,
partially offset by increased R$ 149.7 million in accounts payable.
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Comments on performance
CAPEX
Investments in expansion and modernization of production capacity amounted to R$ 114.2 million in the first six months
of 2012, being 92% directed to industrial units and other facilities in Brazil and the remaining to production units and
other subsidiaries abroad.
As previously announced, we observe a gradual acceleration in our investment program over 2011. It is expected that
investments in 2012 will reach approximately R$ 300 million.
Investments in Fixed Assets (R$ million)
Outside Brazil In Brazil 63.1
49.9 41.1 2.4
7.3
25.6 38.8 42.6 1Q
2Q 3Q
33.8 8.2
58.7
55.5
5.0
3.7
62.1
53.7
51.9
4Q
1Q
2Q 1.0
2011 2012
Acquisition of Stardur
In June 19, we announced the acquisition of Stardur Tintas Especiais Ltda., a company specialized in manufacturing
and marketing of coatings such as high and low solids, engineered plastics, water soluble, coil coating and automotive
repainting segment, complementing WEG’s coatings business unit product portfolio. With 250 employees and 10,000
square meters area in Indaiatuba, State of São Paulo, Stardur recorded net revenues of approximately R$ 78 million in
2011.
Cash Flow from Investing Activities
Investing activities consumed R$ 227.3 million in the first half of 2012. We highlight, among the main changes, that
there was a re-acceleration of investments in expansion and modernization of productive capacity in relation to the
same period of 2011, which reached R$ 114.2 million. In addition, there was an increase of R$ 207.3 million in the
accounts of fixed and intangible assets and goodwill arising from capital transactions and joint ventures acquired, such
as the second tranche of ZEST, WEG-Cestari and Stardur.
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)
June 2012
2,879,132
2,878,475
657
3,260,988
1,935,177
998,122
937,055
1,325,811
1,090,936
234,875
(381,856)
December 2011
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)
June 2011
2,900,694
2,674,637
226,057
2,678,393
1,111,282
500,774
610,508
1,567,111
1,436,267
130,843
222,301
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Comments on performance
As of June 30, 2012, cash (cash, cash equivalents and short and long term financial investments) totaled R$ 2,879.1
million and gross financial debt totaled R$ 3,261.0 million, resulting in a net debt position of R$ 381.9 million (net cash
of R$ 222.3 million in June 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 firsttier banks.
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 27.6 months.
The duration of the Brazilian Reais denominated portion is 16.7 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 6.7% per year. Floating rate
contracts are indexed mainly by to the Brazilian long-term interest rate (TJLP).
Dividends
In the first half of 2012, the Board of Directors approved the following compensation to shareholders:
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.
In addition, on July 24, the Board of Directors approved intermediate dividends related the net income for the first half
of 2012, in the total amount of R$ 62.0 million to the shareholders of record on said date. These proceeds will be paid
from August 15, 2012 onwards.
Event
Board Meeting Date
Dividends
7/24/2012
Interest on Stockholders’ Equity
6/26/2012
Interest on Stockholders’ Equity
3/20/2012
Payment Date
8/15/2012
8/15/2012
8/15/2012
Total
Gross amount
per share
R$ 0.10000000
R$ 0.07647059
R$ 0.07647059
Net amount
per share
R$ 0.10000000
R$ 0.06500000
R$ 0.06500000
R$ 0.25294118
R$ 0.23000000
We maintain the policy of declaring quarterly interest on stockholders’ equity, in addition to semiannual dividends,
based on profits for the period. Amounts declared as remuneration to shareholders in the first half of 2012 represent
54,5% of net income for the period.
1st half
2012
1st half
2011
Dividends
Interest on Stockholders’ Equity
Gross Total
Per share
62.0
94.9
156.9
0.2529
60.2
89.8
150.0
0.2417
Net Earnings
Total Dividends / Net Earnings
288.1
54.5%
276.1
54.3%
%
4.6%
4.6%
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Comments on performance
Cash Flow from Financing Activities
Financing activities consumed R$ 369.1 million in the first half of 2012, continuing decrease in the movement of gross
debt, with payment of loans and financing. In the first half of 2012 we conducted a net reduction of R$ 106.2 million of
funding (new funding of R$ 577.0 million and amortization of R$ 683.2 million).
Cash Flow
The total cash, as presented in the Statement of Cash Flows, of R$ 2,626.9 million, does not include R$ 251.5 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$
2,878.5 million.
WEGE3 Share Performance
At the end of the last trading day of June 2012, the common shares issued by WEG, traded under the code WEGE3 at
BM&F Bovespa, were quoted at R$ 19.49 with a nominal increase of 3.8% 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 5.4% in
2012.
The average daily volume traded in 2Q12 was R$ 4.9 million, 40.6% lower than 2Q11. Throughout the quarter 39,940
stock trades were carried out (50,032 stock trades in 2Q11), involving 15.5 million shares (27.6 million shares in 2Q11)
and totaling R$ 306.3 million (R$ 515.3 million in 2Q11).
Share Price Performance and Traded Volume
Dividend adjusted performance (dividends and interest on stockholders equity)
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WEG S.A.
Notes to financial information
June 30, 2012
In thousands of reais, except where otherwise indicated
1. Company information
WEG S.A. (the “Company”) is a publicly traded company with main place of business at Avenida Prefeito Waldemar
Grubba, nº 3.300 in Jaraguá do Sul - SC, Brazil, holding company member of the WEG Group, and its business
purpose is the 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. Accounting policies
Preparation of financial information requires the use of certain accounting estimates and judgment by the Company’s
management, the most relevant of which are disclosed in Note 3.
Authorization to complete the preparation of this financial information was granted at the executive board meeting on
June 9, 2012.
There were no changes in the policies of this financial information in relation to the December 31, 2011 financial
statements.
3. Estimates and assumptions
Preparation of the financial information involves the use of estimates. These estimates took into account the
experience of past and current events, assumptions relating to future events and other objective and subjective
factors. Significant items subject to such estimates and assumptions include:
a)
b)
c)
d)
e)
f)
credit risk analysis to determine the allowance for doubtful accounts;
review of the economic useful lives of property, plant and equipment items and their recovery in operations;
measurement of fair value of financial instruments;
commitments to post-employment benefits for employees;
transactions related to share purchase options plan; and
deferred income tax asset on income and social contribution tax losses, as well as the analysis of other risks in
determining other provisions, including for contingencies, arising out of administrative and judicial proceedings
and other assets and liabilities at the reporting date.
The settlement of transactions involving these estimates may result in amounts different from those recorded in the
financial information due to uncertainties inherent to the estimate process. These estimates and assumptions are
reviewed periodically.
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Notes to financial information
4. Cash and cash equivalents
COMPANY
6/30/12
12/31/11
a) Cash and banks
CONSOLIDATED
6/30/12
12/31/11
29
28
101,142
59,512
542,177
520,911
2,525,793
2,872,103
542,177
520,911
2,485,111
2,832,901
542,177
520,911
2,485,111
2,832,901
-
-
40,451
37,502
Certificates of Deposits Abroad
-
-
33,648
25,041
Other balances held abroad
-
-
6,803
12,461
b) Short-term investments
In local currency:
Bank deposit certificate (CDB)
In foreign currency:
NDF – Non Deliverable Forwards
TOTAL
-
-
231
1,700
542,206
520,939
2,626,935
2,931,615
Investments in Brazil:
CDBs are remunerated at the rates of 100% 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 are bear interest as follows:
- In Euros with interest of 0.2% to 1.7% p.a. at the original amount of EUR 2,294, with balance of R$ 8,061;
- In US dollars with interest of 0.02% to 4.5% p.a. at the original amount of US$ 12,316, with balance of R$ 25,047;
- In the original currency with interest from 2.0% to 5.5% p.a. at the amount of R$ 6,803;
Short-term investments held as cash and cash equivalents are readily redeemable.
5. Trade accounts receivable
CONSOLIDATED
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
6/30/12
12/31/11
690,423
678,766
673,032
650,876
1,369,189
1,323,908
(2,151)
(16,788)
(3,070)
(13,146)
1,350,250
1,307,692
270
144
1,216,609
63,663
88,917
1,191,813
68,854
63,241
1,369,189
1,323,908
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Notes to financial information
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 6/30/2012
(13,314)
144
(4,244)
4,268
(13,146)
270
(4,875)
963
(16,788)
6. Inventories
CONSOLIDATED
6/30/12
12/31/11
Finished products
Work in process
Raw materials and other
Imports in transit
Provision for obsolescence
297,299
263,850
233,387
64,887
(10,614)
262,408
262,454
225,658
51,611
(9,741)
Total inventories in the domestic market
848,809
792,390
Finished products
Work in process
Raw materials and other
Provision for obsolescence
399,707
91,122
137,657
(17,502)
384,601
82,453
119,184
(16,314)
Total inventories in the external market
610,984
569,924
1,459,793
1,362,314
TOTAL
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 6/30/2012
(19,977)
22,148
(28,226)
(26,055)
3,113
(5,174)
(28,116)
Inventories are insured and their coverage is determined considering the values and level of risk involved. At June
30, 2012, the amount of R$ 2,044,925 was recognized as cost of goods sold (R$ 1,711,276 at June 30, 2011). Cost of
sales includes the amounts of R$ 3,113, referring to inventories permanently written off, and R$ 5,174 referring to set
up of provision for obsolescence.
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Notes to financial information
7. Taxes recoverable
COMPANY
CONSOLIDATED
6/30/11
12/31/11
6/30/12
12/31/11
Other
14,231
-
3,782
-
21,141
56,470
3,821
25,395
14,098
23,011
46,324
18,597
22,759
51,462
10,122
20,700
14,237
11,778
30,255
7,665
TOTAL
Short-term
Long-term
14,231
3,782
208,857
168,978
14,231
-
3,782
-
195,200
13,657
156,076
12,902
State VAT (ICMS) on capital expenditures
Value Added Tax (IVA) from foreign subsidiaries
PIS/COFINS on capital expenditures
ICMS
IPI
IRPJ/CSLL recoverable
PIS/COFINS
Credits will be realized by the Company and its subsidiaries through refund and/or offset against taxes and
contributions.
8. 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:
COMPANY
6/30/12
12/31/11
BALANCE SHEET ACCOUNTS
Non-current assets
Management of financial resources
WEG Tintas Ltda
Hidráulica Industrial S.A. Ind. e Com.
Sensores Eetrônicos Instrutech Ltda
Equisul Ind. e Com Ltda
Current liabilities
Contracts with managing officers
Non-current liabilities
Management of financial resources
WEG Equipamentos Elétricos S.A.
RF Reflorestadora Ltda
P&L ACCOUNTS
Management compensation:
a) Fixed (fees)
Board of Directors
Executive Board
b) Variable (profit sharing )
Board of Directors
Executive Board
CONSOLIDATED
6/30/12
12/31/11
-
79
143
-
-
79
-
84
55
4
-
-
-
2,310
1,566
2,310
1,566
1,296
1,837
-
-
1,296
-
1,699
138
-
-
COMPANY
6/30/12
6/30/11
CONSOLIDATED
6/30/12
6/30/11
971
637
334
849
561
288
9,440
878
8,562
8,401
801
7,600
512
335
177
398
263
135
3,245
461
2,784
2,326
368
1,958
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.
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Notes to financial information
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) 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.).
d) Guarantees and sureties
WEG S.A. granted guarantees and sureties to foreign subsidiaries, in the amount of US$ 203.0 million (US$ 207.5
million at December 31, 2011).
e) Management compensation
Compensation paid to the Board of Directors and Executive Board members amounted to R$ 878 and R$ 8,562,
respectively, for services rendered, representing a total amount of R$ 9,440.
As long as the return on invested capital is at least 12%, 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$3,245. Board members and officers receive additional corporate benefits, as follows: Health and dental
assistance, life insurance, supplementary pension benefits, among others.
9. Deferred taxes – IRPJ/CSLL
Deferred income and social contribution tax credits and debts were determined in accordance with applicable rules in
force.
a) Balance breakdown:
COMPANY
6/30/12
12/31/11
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
CONSOLIDATED
6/30/12
12/31/11
58
22
-
13,839
2,243
11,773
1,252
702
(46)
267
(3,687)
(2,684)
(2,684)
565
(40)
147
(3,724)
(3,052)
712
(3,764)
30,261
14,510
2,246
6,073
10,330
5,589
12,264
6,529
(80,970)
(3,197)
16,028
(331,674)
(295,929)
35,441
(331,370)
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.
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Notes to financial information
10. Investments
10.1. Investments in subsidiaries
Adjusted
equity
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.
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. de
C.V.
Voltran S.A de C.V.
WEG Indústrias Venezuela C.A.
Zest Electric Motors (Pty) Ltd.
WEG Nantong CO Ltd.
WEG Middle East Fze.
WEG Industries (Índia) Private Ltd.
WEG Electric (Índia) Private Limited.
WEG Electric Motors Japan CO. Ltd.
WEG Singapore Pte. Ltd.
WEG Germany GmbH.
WEG Benelux S.A.
WEG Ibéria S.L.
WEG France S.A.S
WEG Electric Motors (UK) Ltd.
WEG Itália S.R.L.
WEG Euro Ind. Electrica S.A.
WEG Electric CIS
WEG Scandinavia AB.
WEG Austrália Pty Ltd.
WEG Peru S.A.
Pulverlux S.A.
EPRIS Argentina S.R.L.
Electric Machinery Holding Company
Watt Drive Antriebstechnik GmbH
TOTAL
P&L for the
period
Investment in capital (%)
6/30/12
Direct Indirect
100.00
100.00
99.91
0.09
0.02
99.98
100.00
100.00
99.99
12/31/11
100.00
100.00
99.91
0.02
-
0.09
99.98
100.00
100.00
99.99
Equity pickup
6/30/12
2,477,859
235,311
71,740
37,665
19,567
1,989
88,439
247,455
5,630
8,439
(3,002)
299
1,845
2,558
244,062
10
38,583
52,868
4,285
2,102
546
5,803
36,980
50,747
25,083
10,983
93,994
(559)
14
93,364
25,422
3,005
331
159
822
91
(622)
6,603
1,718
850
7,178
136
(7)
5,491
99.99
91.75
0.01
0.10
0.12
10.44
8.00
1.00
0.79
100.00
-
0.01
99.90
50.01
61.92
8.25
99.99
99.90
99.88
99.99
89.55
92.00
99.00
99.21
100.00
99.99
99.00
91.75
0.01
0.10
0.12
10.44
8.00
1.00
0.79
100.00
-
1.00
99.90
61.92
8.25
99.99
99.90
99.88
89.55
92.00
99.00
99.21
100.00
99.99
25,430
146
(1)
699
137
9
62
31,955
44,798
4,004
142,568
50,046
(242)
109,548
469
956
1,608
37,569
27,050
917,926
3,932
9,571
6,980
39,516
1,862
1,373
26,601
765
775
454
65,192
8,366
(880)
2,984
(124)
20,220
846
541
(3,966)
61
83
1,219
(37)
2,773
56,681
467
751
(390)
7,004
583
(627)
1,534
175
(109)
94
(479)
120
4.99
0.07
5.74
0.05
-
60.00
60.00
99.99
92.57
100.00
100.00
99.99
94.99
100.00
100.00
100.00
99.99
100.00
100.00
100.00
99.93
94.26
100.00
100.00
100.00
99.95
100.00
100.00
100.00
100.00
4.99
0.07
5.74
0.05
-
60.00
60.00
99.99
50.68
100.00
100.00
99.99
94.99
100.00
100.00
100.00
99.99
100.00
100.00
100.00
99.93
94.26
100.00
100.00
100.00
99.95
100.00
100.00
100.00
100.00
6/30/11
219,463 (*) 228,642
6,955
5,630
8,431
9,511
(1)
1
-
Investment book
value
6/30/12
12/31/11
2,477,859
235,311
71,672
6
1
2,666,862
232,948
65,550
7
-
244,062
3,931
1
7
5,299
2,007
110
741
831
-
(7)
-
(2)
441
98
9
72
(40)
-
14
-
3,786
8
4,478
1,669
86
625
20
1
3
401
260,402
(5)
88
245,770
23
5
2,269
3,043,318
20
5
1,856
2,978,752
(*) Equity pickup adjusted by unearned income.
In June 2012, subsidiary WEG Equipamentos Elétricos S.A., acquired a 100% interest in Stardur Tintas Especiais Ltda.
Goodwill, in the amount of R$ 48,020, was initially measured as the excess consideration transferred for the net assets
acquired.
Consideration has been transferred using available cash and cash equivalents pursuant to the purchase and sale
agreement.
10.2. Other investments
These refer to other investments recorded at cost of acquisition in the amount of R$ 349 (R$ 349 at December 31,
2011).
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Notes to financial information
11. Property, plant and equipment
Until June 30, 2012, the Company capitalized borrowing costs in the amount of R$ 739 (R$ 1,221 at December 31,
2011) referring to construction in progress. The costs are capitalized until the moment of transfer of construction in
progress to property, plant and equipment in use.
COMPANY
6/30/12
12/31/11
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
-
15,973
15,973
15,973
15,973
CONSOLIDATED
6/30/12
12/31/11
1,109,686
1,073,721
2,578,981
2,455,418
78,939
76,988
82,121
70,884
74,418
70,434
49,193
48,676
48,124
39,476
4,021,462
3,835,597
(4,148)
11,825
(4,017)
11,956
(182,282)
(1,204,102)
(39,002)
(59,729)
(7,926)
(15,360)
2,513,061
(169,563)
(1,102,709)
(39,907)
(55,352)
(7,325)
(14,981)
2,445,760
a) Summary of changes in property, plant and equipment:
Class of PPE
Land, construction and facilities
Equipment
Furniture and fixtures
Hardware
Construction in progress
Reforestation
Other
TOTAL
12/31/11
904,158
1,352,709
37,081
15,532
70,434
41,351
24,495
2,445,760
Transfer
Acquisitions
between classes
10,853
7,311
19,873
66,339
228
4,523
(799)
10,511
(31,551)
35,414
517
(3,125)
13,611
(4,521)
138,226
Write-offs
(3,286)
(248)
(68)
9
(940)
(4,533)
Deprec. and Exchange
depletion
effect
(9,512)
14,594
(77,305)
16,549
(1,950)
302
(3,478)
694
112
(601)
(1,314)
38
(94,160)
32,289
6/30/12
927,404
1,374,879
39,936
22,392
74,418
41,267
32,765
2,513,061
b) Amounts provided as collateral – PPE items were provided as collateral for loans, financing, labor claims and tax
suits in consolidated the amount of R$ 14,526 (R$ 14,333 at December 31, 2011).
12. Intangible assets - consolidated
Amortization /years
Projects:
- Development of products and processes
- Information technology
Software license
Other
Subtotal
Goodwill on acquisition of subsidiaries
TOTAL
5
5
5
-
Cost
69,505
79,441
64,278
41,527
254,751
480,884
735,635
Accumulated
amortization
(69,505)
(75,276)
(47,403)
(27,809)
(219,993)
(21,387)
(241,380)
6/30/12
12/31/11
4,165
16,875
13,718
34,758
459,497
494,255
8,329
10,959
9,393
28,681
331,541
360,222
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Version: 1
Notes to financial information
a) Summary of changes in intangible assets:
12/31/11
Information technology project
Transfer from PPE
Additions
Exchange
effect
Amortization
6/30/12
8,329
-
-
(4,164)
-
4,165
Software license
10,959
-
7,833
(2,285)
368
16,875
Other
Subtotal
9,393
4,521
738
(1,120)
188
13,718
28,681
4,521
8,571
(7,571)
556
34,758
Goodwill on acquisition of subsidiaries
331,541
-
122,913
-
5,043
459,497
TOTAL
360,222
4,521
131,484
(7,571)
5,599
494,255
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
7,867
6,080
4,925
2,769
13,117
34,758
13. 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$ 556.6 million in the short term (R$ 497.1 million at December 31, 2011)
and R$ 34.34 million in the long term (R$ 23.5 million at December 31, 2011), corresponding to US$ 291.5 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.
PAGE: 35 of 48
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Version: 1
Notes to financial information
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
OTHER
Annual charges
Interest of 1.9% to 4.0% p.a. (+) exchange variation
TJLP (+) 1.4% to 5.0% 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.
Foreign exchange variation
TJLP (+) 1.0% to 5.0% p.a.
UFIR (+) 1.0% to 4.0% p.a.
Sundry
1,378,586
346,299
135,050
838,408
19,149
6,815
7,393
6,422
14,859
4,191
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 8.0% 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.
Foreign exchange variation
Sundry
1,291,487
785,035
49,125
236,962
12,197
59,010
40,426
101,035
7,697
1,732,781
812,841
55,016
678,941
13,914
56,241
40,642
75,004
182
EURIBOR (+) 0.6% to 3.5% p.a.
LIBOR (+) 0.9% to 4.5% p.a.
90% of PBOC (4.5% to 5.0%) p.a.
BBSY (+) 1.3% to 1.5% p.a.
Interest 1.5% to 17.2% p.a.
556,591
137,560
172,618
11,693
29,068
205,652
497,148
176,198
94,921
50,965
30,900
144,164
34,324
9,988
14,924
9,285
127
23,512
11,900
9,390
1,913
309
1,935,177
1,325,811
1,701,435
1,756,293
6/30/12
489,624
396,339
230,776
128,642
80,430
1,325,811
12/31/11
1,142,720
348,885
133,482
70,520
60,686
1,756,293
LONG TERM
Working capital
Property, plant and equipment
Working capital
Property, plant and equipment
Working capital
Working capital
Export prepayment – PPE
Other
OVERSEAS
SHORT TERM
Working capital
Working capital
Working capital
Working capital
Working capital
LONG TERM
Working capital
Working capital
Working capital
Working capital
Other
TOTAL SHORT TERM
TOTAL LONG TERM
CONSOLIDATED
6/30/12
12/31/11
90% of PBOC (4.5% to 5.0%) p.a.
JIBAR (+) 3.0% to 3,5% p.a.
Interest 1.0% to 6.4% p.a.
EURIBOR 1.5% to 2.55% p.a.
Maturity of long-term financing and loans:
2013
2014
2015
2016
2017 onwards
TOTAL
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Notes to financial information
14. 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
COMPANY
6/30/12
12/31/11
(i) Tax:
- IRPJ and CSLL
- INSS
- PIS/COFINS
- Other
CONSOLIDATED
6/30/12
12/31/11
2,066
2,066
-
1,660
1,660
-
55,329
13,776
30,044
7,253
4,256
39,644
12,883
23,843
559
2,359
(ii) Labor
-
-
42,366
38,834
(iii) Civil
-
-
65,384
63,456
323
229
3,436
3,682
2,389
1,889
166,515
145,616
753
753
-
541
541
-
22,989
18,630
4,359
21,300
17,223
4,077
(i.1)
(i.2)
(iv) Other
TOTAL
(v) Judicial deposits
- Tax
- Other
b) Statement of changes in the period - consolidated
12/31/11
a) Tax
b) Labor
c) Civil
d) Other
TOTAL
Additions
39,644
38,834
63,456
3,682
145,616
15,685
3,671
8,514
53
27,923
Interest
743
259
1,002
Write-offs
(843)
(3,855)
(4,698)
Reversals
(39)
(2,990)
(299)
(3,328)
6/30/12
55,329
42,366
65,384
3,436
166,515
c) 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.
(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$ 42,366 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$ 63,384 was recognized as a provision (R$
63,456 at December 31, 2011).
PAGE: 37 of 48
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Notes to financial information
(v) Restricted judicial deposits
IRPJ/CSLL on “Plano Verão”
Other
TOTAL RESTRICTED JUDICIAL DEPOSITS
- Non-restricted judicial deposits
TOTAL JUDICIAL DEPOSITS
COMPANY
6/30/12
12/31/11
753
541
753
541
753
541
CONSOLIDATED
6/30/12
12/31/11
13,195
13,195
9,794
8,105
22,989
21,300
3,153
2,738
26,142
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.
15. Equity
a) Capital
The Annual and Special General Meeting (AGO-E) held jointly on April 24, 2012 approved an increase in the
Company’s capital from R$ 2,265,367 to R$ 2,718,440, with no change in the number of shares, using the following
reserves:
- Legal reserve
R$ 29,347
- Capital budget reserve
R$ 423,726
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’ remuneration
b.1.) Interest on equity capital
As at June 30, 2012, the Company declared interest on equity capital in the gross amount of R$ 94,885 (R$ 80,652
net) corresponding to R$ 0.150 per share (R$ 0.130 net), net of 15% withholding income tax, pursuant to the following
approvals by the Board of Directors:
I - On March 20, 2012, 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, pursuant to paragraph 2, article 9 of Law No. 9249/95, except for corporate shareholders
that are already exempt from the mentioned tax.
II - On June 26, 2012, 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, pursuant to paragraph 2, article 9 of Law No. 9249/95, except for corporate shareholders
that are already exempt from the mentioned tax.
PAGE: 38 of 48
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Notes to financial information
b.2.) Interim dividends
The Board of Directors approved the payment of interim dividends on net income for the first half-year, in the amount of
R$ 62,041 (R$ 0.10 per share).
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 August 15,
2012.
Total payable interim dividends and interest on equity, net, amount to R$ 142.7 million, or R$ 0.23 per share,
equivalent to 49.53% of net income for the period.
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”).
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
R$
Vesting
period
1
April/11
274,678
47,953
93,006
st
nd
2
rd
3
Subtotal
st
September/11
274,678
19,072
37,894
1
nd
2
rd
3
Subtotal
535,000
42,620
76,820
2
st
nd
3rd
Subtotal
Total
Strike
price
R$ 000
Restated
Option price
price IPCA
Option
difference
Expenses
31,002
31,002
31,002
21.01
21.01
21.01
23.16
24.32
25.54
30.60
32.98
35.29
7.43
8.66
9.76
230
268
303
93,006
12,631
12,631
12,632
17.45
17.45
17.45
19.39
20.43
21.54
25.08
27.05
29.00
5.70
6.62
7.46
801
72
84
94
25,607
19.17
21.34
27.22
5.89
150
25,607
19.17
22.51
29.40
6.89
176
25,606
19.17
23.75
31.51
7.76
199
37,894
1
March/12
Number of
options
250
76,820
525
207,720
1,576
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Notes to financial information
The weighted average fair value was determined based on the Black-Scholes-Merton method, considering the
following factors:
Program
Vesting period
April/11
September/11
March/12
1st
2nd
3rd
1st
2nd
3rd
1st
2nd
3rd
21.01
21.01
21.01
17.45
17.45
17.45
19.17
19.17
19.17
755
1,008
1,260
756
1,008
1,259
755
1,008
1,257
Related current share price (R$)
22.10
22.10
22.10
18.06
18.06
18.06
19.80
19.80
19.80
Expected share price volatility (%)
26.33
26.33
26.33
29.88
29.88
29.88
29.85
29.85
29.85
Risk-free interest rate during option term (%)
12.79
12.81
12.83
10.90
11.05
11.22
9.76
10.12
10.33
Factors:
Option strike price ( R$)
Option term - in days
Recording of expenses with stock options is made along the vesting period. At June 30, 2012, R$ 230 was recorded in
other income in the income statement for the year against capital reserve in equity.
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.
16. Operating Revenue
BREAKDOWN OF NET REVENUE
CONSOLIDATED
6/30/12
6/30/11
Gross operating revenue
Domestic market
External market
3,383,637
1,879,609
1,504,028
2,853,413
1,798,924
1,054,489
Deductions
Taxes
Returns/rebates
(485,084)
(414,606)
(70,478)
(450,038)
(393,366)
(56,672)
Net operating revenue
2,898,553
2,403,375
17. 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
6/30/12
6/30/11
NATURE OF EXPENSE
Depreciation and amortization
Personnel expenses
Raw materials and materials for use and consumption
Freight and insurance expenses
Other expenses
(2,548,061)
(101,731)
(690,147)
(1,295,439)
(88,682)
(372,062)
(2,116,669)
(93,239)
(553,276)
(1,108,000)
(70,168)
(291,986)
FUNCTION OF EXPENSE
Cost of products and services sold
Selling expenses
General and administrative expenses
Management fees
Other operating expenses
(2,548,061)
(2,044,925)
(297,334)
(134,344)
(9,440)
(62,018)
(2,116,669)
(1,711,276)
(238,686)
(114,371)
(8,401)
(43,935)
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Notes to financial information
18. 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
6/30/12
6/30/11
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
13,194
13,194
(75,212)
(42,353)
(3,222)
(3,245)
(6,463)
(1,629)
(18,300)
(62,018)
10,666
10,666
(54,601)
(41,151)
(2,342)
(2,326)
(180)
(928)
(7,674)
(43,935)
19. Financial income (expenses), net
FINANCIAL INCOME
Interest income
Foreign exchange variation
Present value adjustment - customers
PIS/COFINS on interest on equity capital
Other income
FINANCIAL EXPENSES
Interest on loans and financing
Foreign exchange variation
Present value adjustments – suppliers
Other expenses
FINANCIAL INCOME (EXPENSES), NET
COMPANY
6/30/12
6/30/11
CONSOLIDATED
6/30/12
6/30/11
30,477
36,510
(6,155)
122
33,295
38,840
(5,637)
92
262,326
132,927
86,642
21,890
(6,155)
27,022
204,930
137,756
39,691
20,007
(5,637)
13,113
(116)
(116)
(100)
(100)
(229,922)
(90,504)
(118,921)
(7,863)
(12,634)
(122,970)
(65,624)
(29,795)
(9,072)
(18,479)
30,361
33,195
32,404
81,960
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Notes to financial information
20. 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.
Reconciliation of income and social contribution taxes:
COMPANY
6/30/12
6/30/11
Income before income taxes
Nominal rate
287,690
34%
277,013
34%
IRPJ and CSLL at nominal rate
(97,815)
(94,184)
(130,185)
(125,346)
88,537
9,635
19
83,562
9,817
(87)
(2,881)
1,090
12,326
32,261
(2,397)
(525)
(2,268)
13,969
30,545
(1,990)
376
9
367
(892)
(941)
49
(89,786)
(104,646)
14,860
(85,615)
(98,954)
13,339
(0.13)
0.32
23.45
23.22
Adjustments to calculate effective income and social 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 - %
CONSOLIDATED
6/30/12
6/30/11
382,896
368,666
34%
34%
21. 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 at June 30, 2012
is of 20,534 (19,586 at June 30, 2011). The Company and its subsidiaries made contributions amounting to R$ 10,196
until June 30, 2012 (R$ 9,051 until June 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.
22. 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 and property insurance.
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Notes to financial information
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$ 20 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)
23. Financial instruments
The Company and its subsidiaries carried out an assessment of their financial instruments, including derivatives, recorded
in the quarterly information at June 30, 2012, presenting the following book and market values:
BOOK VALUE
6/30/12
12/31/11
Cash and cash equivalents:
Cash and banks
Short-term investments:
- In local currency
- In foreign currency
- Non Deliverable Forwards – NDF
Short-term investments
Trade accounts receivable
Trade accounts payable
Loans and financing:
- In local currency
- In foreign currency
- Non Deliverable Forwards – NDF
MARKET VALUE
6/30/12
12/31/11
101,142
59,512
101,142
59,512
2,485,111
40,451
231
252,197
1,350,250
349,350
2,832,901
37,502
1,700
280,635
1,307,692
298,195
2,485,111
40,451
231
252,197
1,350,250
349,350
2,832,901
37,502
1,700
280,635
1,307,692
298,195
2,089,946
1,163,649
7,393
2,146,581
1,310,837
310
2,089,946
1,163,649
7,393
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 in the amount of US$ 454.7 million (US$ 388.0 million at June 30, 2011),
representing a natural hedge for debts and other costs denominated in other currencies, mainly in US$.
Risk of debt charges
These risks derive from the possibility of the subsidiaries incurring losses on account of fluctuations in interest rates or
other debt indices, which increase financial expenses related to loans and financing raised in the market, or reduce
interest income of subsidiaries. The Company continuously monitors market interest rates in order to assess the need
for protection against risk of volatility of such rates.
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Notes to financial information
Derivative financial instruments
The Company has the following operations with derivative financial instruments:
a) Non Deliverable Forwards (NDF), in the notional amount of:
(i) US$ 123.1 million, held by subsidiary WEG Equipamentos Elétricos S.A., for the purpose of protecting exports
against risks of exchange rate fluctuations.
(ii) EUR 49.0 million, held by subsidiary WEG Equipamentos Elétricos S.A., for the purpose of protecting exports
against risks of exchange rate fluctuations.
(iii) US$ 10.1 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 June 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 June 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.
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Notes to financial information
a) Non Deliverable Forwards (NDF) operations:
Risk
Dollar rise
Dollar rise
Dollar rise
Dollar rise
Dollar rise
Dollar rise
Dollar rise
Dollar rise
Dollar rise
Counterparty
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
TOTAL IN USD
Notional
value
(million)
USD 15.0
USD 23.5
USD 45.3
USD 7.5
USD 1.5
USD 1.5
USD 0.5
USD 27.3
USD 1.0
USD 123.1
EUR rise
EUR rise
EUR rise
EUR rise
EUR rise
Banco Bradesco S.A.
Bank of America
Banco do Brasil S.A.
Banco Itaú S.A.
Banco Santander S.A.
TOTAL IN EUR
EUR 7.0
EUR 13.2
EUR 10.5
EUR 1.0
EUR 17.3
EUR 49.0
EUR/R$
EUR/R$
EUR/R$
EUR/R$
EUR/R$
2.6098
2.6143
2.5862
2.6294
2.6165
(195)
148
589
(145)
(167)
230
3.2623
3.2678
3.2328
3.2867
3.2706
(4,748)
(8,474)
(6,199)
(802)
(11,460)
(31,683)
3.9147
3.9214
3.8793
3.9440
3.9247
(9,301)
(17,097)
(12,988)
(1,460)
(22,754)
(63,600)
Dollar fall
First National Bank
GRAND TOTAL
USD 10.1
US$/ZAR
8.2780
(144)
(7,306)
6.2085
(5,137)
(107,898)
4.1390
(10,274)
(208,648)
Rate
US$/R$
US$/R$
US$/R$
US$/R$
US$/R$
US$/R$
US$/R$
US$/R$
US$/R$
Market value at 6/30/12
Average
R$
rate
(thousand)
2.0662
(1,145)
2.0643
(2,136)
2.0674
(1,935)
2.0766
(213)
2.1127
74
2.0837
(122)
2.0618
(73)
2.0706
(1,702)
2.0598
(140)
(7,392)
Possible Scenario 25%
Average
R$
rate
(thousand)
2.5828
(8,912)
2.5804
(14,267)
2.5842
(25,349)
2.5958
(4,106)
2.6408
(718)
2.6047
(903)
2.5773
(331)
2.5882
(15,837)
2.5748
(655)
(71,078)
Remote Scenario 50%
Average
R$
rate
(thousand)
3.0994
(16,678)
3.0965
(26,398)
3.1010
(48,762)
3.1149
(8,000)
3.1690
(1,510)
3.1256
(1,694)
3.0928
(589)
3.1058
(29,973)
3.0897
(1,170)
(134,774)
b) Swap operations:
Notional
value
Risk
Counterparty (million)
GBP fall
Bank Austria GBP 0.9
Total currency swap
Euribor fall
Libor fall
CDI rise
CDI rise
CDI rise
Bank Austria
Citibank
Safra
Santander
Santander
EUR 10.0
USD 30.0
R$ 70.0
R$ 50.0
R$ 80.0
Market value at 6/30/12
Average
R$
rate
(thousand)
CHF/GBP 1.4923
(1,766)
(1,766)
Interest 2.09% p.a.
Interest 0.97% p.a.
Interest 8.82% p.a.
Interest 8.73% p.a.
Interest 8.77% p.a.
(6,197)
(217)
1,462
1,461
505
Possible Scenario 25%
Average
R$
rate
(thousand)
CHF/GBP 1.1192
(2,514)
(2,514)
Interest 1.56% p.a.
Interest 0.73% p.a.
Interest 11.03% p.a.
Interest 10.92% p.a.
Interest 10.96% p.a.
(7,552)
(549)
(2,682)
(1,475)
(4,512)
Remote Scenario 50%
Average
R$
rate
(thousand)
CHF/GBP 0.7462
(3,263)
(3,263)
Interest 1.04% p.a.
Interest 0.49% p.a.
Interest 13.23% p.a.
Interest 13.10% p.a.
Interest 13.16% p.a.
(8,907)
(882)
(6,496)
(4,190)
(9,150)
Total interest rate swap
(2,986)
(16,770)
(29,625)
GRAND
TOTAL
(4,752)
(19,284)
(32,888)
The recording was based on the market price at June 30, 2012 on an accrual basis. Such operations had a negative
net impact at June 30, 2012 of R$ 5,775, recognized as financial expenses (positive R$ 1,460 recognized as financial
income). The Company does not have margins given in guarantee for derivative financial instruments outstanding at
June 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.
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Notes to financial information
24. Government subsidies and assistance
In the first half of 2012, the Company was granted subsidies in the amount of R$ 8,710 arising from tax incentives,
recognized in P&L for the period:
a) WEG Amazônia S.A.
26
- ICMS incentive credit of 90.25%
25
- 75% reduction in IRPJ
1
b) WEG Linhares Equipamentos Elétricos S.A.
3,969
- ICMS incentive credit of 85.00%
3,957
- Municipal investment
12
c) WEG Equipamentos Elétricos S.A.
- Municipal investment
132
132
d) WEG Logística Ltda
- ICMS incentive credit of 75.00%
4,583
4,583
All the conditions in order to obtain government subsidies were met.
25. 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
6/30/12
6/30/11
Overseas
Energy
6/30/12
6/30/11
6/30/12
6/30/11
Revenue from sale of
products
and/or services
1,766,845 1,478,167
652,554
592,923 1,314,468
890,727
Income before income taxes
496,904
386,537
150,927
119,390
66,106
39,512
Depreciation/amortization/
depletion
62,066
58,672
20,218
20,142
19,447
14,425
6/30/12 12/31/11
6/30/12 12/31/11
6/30/12 12/31/11
Identifiable assets
3,137,565 2,734,721 1,305,927 1,264,986 1,988,411 1,645,050
Identifiable liabilities
705,487
558,117
410,591
373,178
455,864
433,886
Eliminations and
adjustments
Consolidated
6/30/12
6/30/11
6/30/12
6/30/11
(835,314)
(331,041)
(558,442)
(176,773)
2,898,553
382,896
2,403,375
368,666
6/30/12
(269,285)
(219,285)
12/31/11
(221,968)
(193,975)
101,731
6/30/12
6,162,618
1,352,657
93,239
12/31/11
5,422,789
1,171,206
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.
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Notes to financial information
26. 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$
6/30/12
6/30/11
288,066
620,405
0.46432
276,121
620,405
0.44506
b) Diluted
Profit attributable to the Company shareholders
Weighted average number of potentially dilutive common shares held by shareholders (shares/thousand)
Earnings per share – diluted – R$
6/30/12
6/30/11
288,066
620,613
0.46416
276,121
620,405
0.44506
Potentially dilutive shares are the 207,720 shares referring to the share purchase option plan.
27. Statement of comprehensive income
The cumulative translation adjustments are presented as other comprehensive income. These amounts are not subject
to taxation.
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).
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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 June 30, 2012, which comprises the balance sheet at June 30, 2012 and related income statement,
statement of comprehensive income for the quarter and half-year then ended, and the statement of changes in equity and cash flow
statement for the half-year 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 three-month period ended June
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), July 13, 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
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