Relatório da Administração e Release de resultados do 4Q12 ...ri.unicasamoveis.com.br/admin/uploader/uploads/p18od04fqs3mt126qg0... · 3 2012 Management Report To the Shareholders,

Relatório da Administração e Release de resultados do 4Q12 e 2012

MANAGEMENT REPORT - 2012

PUBLICLY HELD COMPANY CORPORATE TAXPAYER ID. (CNPJ): 90.441.460/0001-48 COMPANY REGISTRY NO. (NIRE): 43.300.044.513

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2012 Management Report

BOARD OF DIRECTORS

Alexandre Grendene Bartelle Chairman

Juvenil Antônio Zietolie

Vice Chairman

Frank Zietolie Director

João Carlos Sfreddo

Independent Director

Renato Ochman Director

BOARD OF EXECUTIVE OFFICERS

Frank Zietolie President

Kelly Zietolie Vice President

Paulo E. Junqueira de Arantes Filho

Financial and Investor Relations Officer

Thiago Proença Baisch Commercial Officer

Ivanir Moro Accountant

Regional Accounting Council Membership No. CRC/RS-053351/O-7

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To the Shareholders,

In compliance with applicable laws and the Bylaws of the company, the Management of Unicasa Indústria de Móveis S.A. hereby presents the Management Report and the Financial Statements prepared according to the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), the generally accepted accounting principles in Brazil and the rules issued by the Securities and Exchange Commission of Brazil (CVM). The Company adopted all the standards, revisions of standards and interpretations issued by IASB and which are effective for the financial statements ended on December 31, 2012.

The Financial Statements of Unicasa Indústria de Móveis S.A. as of December 31, 2012, were prepared in accordance with the generally accepted accounting principles in Brazil and the rules issued by the Securities and Exchnage Commission of Brazil (CVM), while also complying with the accounting guidelines derived from corporate law (Law 6,404/76), which include the new provisions introduced, amended and canceled by Law 11,638 of December 28, 2007 and Law 11,941 of May 27, 2009. These practices differ from the IFRS applicable to separate financial statements only with regard to the valuation of investments in subsidiaries, which are valued using the equity income method, whereas they would be valued at cost or fair value according to IFRS.

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Summary

1. MESSAGE FROM THE MANAGEMENT ....................................................................................... 5

2. COMPANY OVERVIEW ........................................................................................................... 6

3. MACROECONOMIC SCENARIO ................................................................................................ 8

4. SALES AND DISTRIBUTION CHANNELS ...................................................................................... 8

5. SALES PERFORMANCE ........................................................................................................... 9

6. FINANCIAL PERFORMANCE ................................................................................................... 12

7. OWN STORES .................................................................................................................... 18

8. DIVIDENDS AND INTEREST ON EQUITY (IOE)........................................................................... 19

9. CORPORATE GOVERNANCE .................................................................................................. 20

10. CORPORATE EVENTS IN 2012 ........................................................................................... 21

11. HR AND HEADCOUNT ...................................................................................................... 22

12. ADMINISTRATIVE RESTRUCTURING .................................................................................... 22

13. RESPONSIBILITY AND SOCIAL AND ENVIRONMENT PROTECTION PROJECTS ............................... 22

14. INDEPENDENT AUDITORS ................................................................................................. 23

15. MARKET ARBITRATION CHAMBER ..................................................................................... 23

16. STATEMENT BY EXECUTIVE OFFICERS ................................................................................. 23

17. ANNEX I - FINANCIAL STATEMENTS – INCOME STATEMENT ................................................. 24

19. ANNEX III - FINANCIAL STATEMENTS – CASH FLOW STATEMENT .......................................... 26

20. ANNEX IV – STATEMENT OF VALUE ADDED....................................................................... 27

21. ANNEX V - GROSS REVENUE, GROSS REVENUE EX-IPI AND MODULES SOLD .......................... 28

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1. MESSAGE FROM THE MANAGEMENT

2012 was a remarkable year in the history of Unicasa. On March 26, 2012, Unicasa filed an application with the Securities and Exchange Commission of Brazil (CVM) for registration as a publicly held company and on April 27, 2012, its shares started to be traded on the São Paulo Stock Exchange BM&FBOVESPA. On that date, Unicasa became the first Brazilian furniture company to go public. The process of going public was an important component of the plan to professionalize the Company and in this regard, a board of directors was created and executive officers were hired from the market during the year.

Two projects were launched in 2012 to obtain an in-depth and systematic knowledge of all the processes involved in the business, especially the retail operation, which is presently concentrated in a broad ad diversified network of exclusive resellers: i) the operation of own stores; and ii) the implementation of an ERP across the entire store network. The project to operate own stores was launched in the first quarter of 2012 and was mainly driven by the conclusion that the experience gained from operating stores would bring the Company the knowledge necessary to professionalize the entire network. The main challenge in this project was to find a model that would enable the Company to operate profitably in a market where most competitors operate under the “Simples” tax regime, which involves lower tax rates. With assistance from consulting firms specializing in market research and behavior, management, taxes and retail, Unicasa structured a profitable business model to operate Dell Anno stores in São Paulo city. Initially the plan is to operate six stores in São Paulo and one in Manaus. The first stores should be opened in the beginning of the second quarter of 2013 and by the end of the year, all the stores should be operational.

We believe that the project to implement ERP at the stores should make store management more efficient for the exclusive resellers by standardizing the processes. The implementation of a single system across the network will enable Unicasa to track – in real time – information that can be compared, consolidated and obtained in a systematic manner in order to identify the best performance at each stage of the customer service chain and develop the best practices to be disseminated across the network, further improving its performance. ERP implementation is expected to be concluded by the end of 2013.

In 2012, Unicasa started production in the flexible line, in which it had invested R$30 million in 2011 – the highest investment in machinery and equipment made by the Company in its history. To improve the competitiveness of its products, in 2012 the Company invested R$3.7 million in painting equipment at Lacca, thus reducing costs and delivery times. Production start-up in the line is scheduled for the second quarter of 2013. In 2012, the Company also launched a project to build a new brand in its portfolio to replace the brand Telasul Planejados. On March 8, 2013, we announced the launch of this new brand, called “Casa Brasileira”, which will be operated under the franchise model. The expansion plan for the first year of operation was targeted at the main state capitals of Brazil. All these projects and initiatives are being executed in 2013.

The year 2012 was also marked by challenges that affected the Company’s performance. The

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combination of several factors, both internal and external, such as i) a less favorable economic scenario; ii) the reduced supply of credit to final consumers; iii) the pressure on prices of suppliers; iv) increased delinquency among exclusive resellers; v) delays in the delivery of units in the construction sector, especially in São Paulo; and vi) the closure of stores that contributed significantly to the Company’s results. The Company faced difficulties in quickly reopening the closed stores due to i) the increase in rents at the time of renewal of the rental agreements as a result of which some stores were no longer economically feasible; and ii) with the slowdown of the economy in 2012, the number of investors with the appropriate profile declined substantially. These factors combined adversely affected our revenues and margins. The Company’s prospects for 2013 are optimistic, combining a positive outlook for the macroeconomic environment and the non-recurrence of a few problems faced last year. In 2012, we carried out a comprehensive appraisal and restructuring process covering the executive officers and managers. We believe that currently we have professionals with the skills and profile needed for their positions, as well as a base of stores exclusive resellers more qualified, a trend that should prevail in our process of opening stores. We conclude by thanking our shareholders, exclusive resellers and their teams, clients, suppliers and, especially, our dedicated employees who are committed to our success, for their support and trust in this year of challenges and hard work. 2. COMPANY OVERVIEW With over 28 years of experience in the market, we have a broad range of solutions in customized furniture for residential and commercial environments, which include kitchens, bedrooms, closets, home theaters, laundry rooms and bathrooms, among others, as well as complete solutions for offices and kids. Unicasa markets its products through the brands Dell Anno, Favorita, New, Telasul and Casa Brasileira. On December 31, 2012, we had 952 exclusive dealers (463 Dell Anno and Favorita, 459 New and 30 Telasul). The first brand created in 1985 and Unicasa’s current premium line is Dell Anno, consisting of higher value products that feature contemporary design and minimalist concepts, whose differential lies in its identification with the world of fashion. Favorita joined the portfolio of the Company in 2003, associating its image with versatile solutions for varied lifestyles and an excellent quality/ price perception. In 2007, continuing our business expansion through the brand use licensing agreement signed with Telasul S.A., we obtained the non-exclusive right to use the Telasul brand, whose profile meets the needs of large retail chains. In 2009, we launched the brand New, aimed at the intelligent and practical use of space, combining style and competitive prices. On March 8 this year, we announced to the market the creation a new brand - Casa Brasileira - which will operate in the franchise model. During this first year of operation, we seek to expand the brand by focusing on the main state capitals as the target market.

Our products are conceived by our in-house team of architects, designers and engineers, divided into individual and autonomous creation and research units for each brand. These professionals are responsible for interpreting the domestic and international market trends in design, fashion and architecture and use them in our annual collections.

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Our modern industrial complex, which combines cutting-edge technology with a versatile production model, enables us to manufacture made-to-order products and deliver them quickly, thus resulting in low inventories of finished products. The process starts with the development of projects at the exclusive dealers, which is done by architects or technicians using specific software (ProMob). Clients actively participate in designing the project and in choosing the products that will be present in the environment they chose. For this reason, and to prepare qualified customer service and sales teams, we provide the dealer network with a support structure for training, through the da Universidade Corporativa Unicasa, which covers everything from orientation on products and development of projects, to assembling the modules after sale, people management and business administration. Once the project has been developed, the exclusive dealer (store owner) forwards the client's order to the sales area along with the respective projects, which, after being processed in our system, will be sent to production. In the case of multibrand stores, since the line of products includes only standardized furniture, production starts as soon as store owners send their clients’ orders, without the need for developing a specific project. Following the receipt of orders and projects, as applicable, the clients’ orders are forwarded to the Production Programming and Control (PCP) area, which then creates the production plans through integrated manufacturing systems. These systems issue reports specifying the quantity of inputs, accessories, packaging and other materials that will be required to manufacture the products in the client's order and draw up an adequate production plan that minimizes raw material losses, ensures the shipment of products within agreed deadlines, improves cost control and an optimized resource utilization planning. After the production plans are generated, production of the furniture modules begins, which consists of the following stages: cutting, finishing, drilling, inventory, packaging and shipping in the four production centers, as follows: Cutting Center: consists of cutting machines that cut MDF and MDP sheets used in the production of furniture modules. Finishing Center: consists of forming and edge banding machines that perform grooving, lowering, edge banding and finishing of MDF and MDP sheets used in the production of the modules (45°, beveling or laminated forms). Drilling Center: consists of fully automated drilling machines that perform many types of drilling on MDF and MDP sheets used in the production of furniture modules. This is the last stage of parts processing. Packaging Center: consists of sorting conveyor belts on which parts and components are sorted to compose the module that will be packaged and forwarded for shipping.

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3. MACROECONOMIC SCENARIO

The year 2012 began with monetary authorities expecting GDP growth of 4.5% in the year. This forecast was successively revised downwards and GDP growth closed the year at a mere 0.9%, disappointing the market. The Brazilian Government launched measures to promote consumption, such as the temporary reduction announced in March 2012 of the Tax on Industrialized Products (IPI) on furniture, from 5% to 0%. The effect from the reduction in the IPI tax, which boosted vehicle sales during 2012, did not have the same appeal in our business, since the net impact for final consumers is much less significant, especially at exclusive dealers. The IPI reduction drove sales particularly of modular furniture with lower average ticket, as is the case of Telasul in Unicasa's portfolio. However, the collateral effect was an increase in the prices of wood boards (MDF and MDP) effected by our suppliers. The benefit of the temporary IPI tax reduction decreased to 2.5% as of February and is expected to return to 5% as from July 2013.

As another incentive, the Brazilian Government determined, as of August 2012, a change in the calculation of social security to reduce payroll costs by eliminating the current social security contribution on payroll, which was replaced by a new contribution calculated on gross revenue, at the rate of 1%, after excluding export revenues. The net effect of this measure was positive for Unicasa’s financial results, although not very significant in 2012. For 2013, we project GDP growth of between 2% and 3%, with inflation of up to 6%.

4. SALES AND DISTRIBUTION CHANNELS

Unicasa’s main distribution channel is its network of exclusive dealers spread across Brazil. We ended 2012 with 952 exclusive stores and 2,131 multibrand stores. The Dell Anno and Favorita brands have 463 exclusive stores, 14 fewer than in 2011. The New brand expanded its dealer base by five stores in 4Q12, bringing the total new stores in 2012 to 80. The following table shows the increase in exclusive stores by quarter since 2011.

Year 2011 2012 1Q12 2Q12 3Q12 4Q12

Exclusive Stores 886 952 11 32 18 5

Dell Anno and Favorita 477 463 (19) 2 3 -

New Exclusivo 379 459 30 30 15 5

Telasul (Casa Brasileira) 30 30 - - - -

For 2013, we plan to recover the Dell Anno and Favorita stores closed in 2012, focusing on opening stores in markets with potential to significantly contribute to the Company’s results. For New, we will concentrate in opening stores that can contribute more significantly to the Company’s results, despite a reduction in the number of store openings compared to 2012, when we focused our openings on smaller markets, which have a lower impact on the Company’s results. In 2013, we plan to open at least 30 additional New stores. We also plan to open 35 new operations of the Casa Brasileira franchise in the year.

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5. SALES PERFORMANCE Same Store Sales As stated in the previous earnings release, we will not disclose information on same-store-sales until the calculation base is composed of stores representing at least 90% of the brands’ revenues. We expect the store base to reach this threshold once we implement the ERP across the dealer network. Gross Revenue ex-IPI Revenue information by brand is presented as gross revenue excluding the IPI tax (gross revenue ex-IPI) in the comparison base, since we believe this improves the comparability of the sales data for each brand, given that the IPI tax exemption did not exist in 2011. Gross revenue data is available in Annex V to this earnings release. Dell Anno and Favorita Dell Anno and Favorita 4Q11 4Q12 Var. 2011 2012 Var.

Gross Revenue ex-IPI 61,374 52,809 -14.0% 233,072 195,676 -16.0%

Number of Modules Sold 210.3 178.4 -15.2% 812.7 698.5 -14.1%

Average Unit Price (R$) 291.8 296.0 1.4% 286.8 280.1 -2.3%

The Dell Anno and Favorita brands registered a reduction of 14.0% in Gross revenue ex-IPI and 15.2% in modules sold, and an increase of 1.4% in average unit prices compared to 4Q11. Compared to 3Q12, there was an increase of 10.5% in gross revenue ex-IPI, 4.0% in modules sold and 6.3% in average unit prices. In 2012, gross revenue ex-IPI decreased 16.0%, due to the 14.1% reduction in modules sold and 2.3% decrease in average unit prices. Though this revenue decrease is significant, it is still lower than in 3Q12 (-24.3%), which attests to the gradual and positive recovery of the store base as we identify entrepreneurs that meet the adequate profile for opening our stores. Part of the improved performance compared to 3Q12 is also due to the increase in same store sales on comparable basis.

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New New Exclusive Stores 4Q11 4Q12 Var. 2011 2012 Var.

Gross Revenue ex-IPI 24,796 25,430 2.6% 87,679 91,756 4.6%

Number of Modules Sold 121.8 138.0 13.3% 445.9 488.0 9.4%

Average Unit Price (R$) 203.6 184.3 -9.5% 196.6 188.0 -4.4%

New Multimarca 4Q11 4Q12 Var. 2011 2012 Var. Gross Revenue ex-IPI 4,874 4,165 -14.5% 17,864 17,032 -4.7% Number of Modules Sold 24.2 23.0 -5.0% 91.4 93.4 2.2% Average Unit Price (R$) 201.4 181.1 -10.1% 195.4 182.4 -6.7%

Gross revenue ex-IPI at the Exclusive channel of the New brand grew 2.6%, with an increase of 13.3% in modules sold and decrease of 9.5% in average unit prices compared to 4Q11. Compared to 3Q12, there was a 6.6% increase in gross revenue ex-IPI, reflecting the 7.7% increase in modules sold and the 1.0% reduction in average unit prices. At the end of 2012, gross revenue ex-IPI and modules sold increased 4.6% and 9.4%, respectively. While we seek to recover the New stores closed in São Paulo and other state capitals, we observe that the consolidated performance grew once again this quarter, driven by a combination of maturation and better performance by the stores opened in 2012; improved conditions of credit approval by our financial partners; and the upturn in same store sales performance. The Multibrand channel recorded a decrease in gross revenue ex-IPI in both comparison periods, while module sales increased, although at lower average unit prices. Compared to 4Q11, gross revenue ex-IPI decreased 14.5%, whereas in the 12-month period the decrease was 4.7%. Similar to other Unicasa brands, the multibrand channel loses strength and importance with the consolidation of the exclusive store network. Telasul The performance of the Telasul brand in exclusive, multibrand and department store (module) channels improved in both comparison periods, with the latter two channels accounting for more than 94% of the Revenue in the year. In the quarter, gross revenue ex-IPI increased 31.3%, with sales volume growing 35.4%, while average price decreased 3.0%. In the year, gross revenue ex-IPI increased 39.0%, with sales volume growing 37.3% and average price increasing 1.2%.

Telasul Exclusive, Multibrand and Dept. Stores 4Q11 4Q12 Var. 2011 2012 Var.

Gross Revenue ex-IPI 8,917 11,712 31.3% 28,567 39,695 39.0%


Average Unit Price (R$) 134.3 130.3 -3.0% 129.3 130.8 1.2%

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Unicasa Corporate

This segment recorded gross revenue ex-IPI decreases of 44.7% and 15.4% compared to 4Q11 and 2011, respectively, with both periods recording a decline in sales volume and an increase in average unit price. The performance of the Unicasa Corporate sales channel in 2012 was affected by the restructuring of the team and internal commercial management processes, whose maturing and subsequent impact on performance should improve during 2013.

Unicasa Corporate 4Q11 4Q12 Var. 2011 2012 Var.



Average Unit Price (R$) 298.6 410.0 37.3% 222.1 247.1 11.3%

Other Revenues

Other revenues are derived from to employees, suppliers, freight operators and others.

Other Revenues 4Q11 4Q12 Var. 2011 2012 Var.

Gross Revenue ex-IPI 928 1,435 54.5% 3,880 6,112 57.5%


Average Unit Price (R$) 237.9 121.5 -48.9% 215.6 219.9 2.0%

Export Market

Exports decreased 19.6% from 4Q11, although they increased 15.3% from 2011, with a decline in sales volume in both periods and an increase of 81.8% and 57.5%, respectively, in the average price. The increase in average price in 2012 is due to the qualification of the exported product, with a higher share of Dell Anno products in the mix.

Unicasa - Exports 4Q11 4Q12 Var. 2011 2012 Var.

Gross Revenue ex-IPI 2,179 1,753 -19.6% 6,994 8,063 15.3%



Consolidated Indicators

Unicasa - Consolidated 4Q11 4Q12 Var. 2011 2012 Var.


Number of Modules Sold 459.1 455.2 -0.8% 1,705.3 1,697.0 -0.5%

Average Unit Price (R$) 229.2 216.4 -5.6% 225.1 214.0 -4.9% Unicasa – Domestic Market 4Q11 4Q12 Var. 2011 2012 Var.


Number of Modules Sold 433.7 444.0 2.4% 1,614.9 1,630.9 1.0%

Average Unit Price (R$) 237.6 217.9 -8.3% 233.3 217.8 -6.6% Unicasa - Exports 4Q11 4Q12 Var. 2011 2012 Var.

Gross Revenue ex-IPI 2,179 1,753 -19.6% 6,994 8,063 15.3%



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6. FINANCIAL PERFORMANCE Financial Summary Executive Summary 4Q11 4Q12 Var. 2011 2012 Var.

Net Revenue 80,365 75,560 -6.0% 294,677 279,441 -5.2%

Gross Profit 34,980 31,479 -10.0% 125,885 115,469 -8.3%

Gross Margin 43.5% 41.7% -1.8 p.p. 42.7% 41.3% -1.4 p.p.

Operating Income 18,174 8,819 -51.5% 73,378 47,754 -34.9%

Operating Margin 22.6% 11.7% -10.9 p.p. 24.9% 17.1% -7.8 p.p.

Net Income 14,937 10,232 -31.5% 57,792 42,164 -27.0%

Net Margin 18.6% 13.5% -5.1 p.p. 19.6% 15.1% -4.5 p.p.

EBITDA 20,188 10,909 -46.0% 80,444 56,031 -30.3%

EBITDA Margin 25.1% 14.4% -10.7 p.p. 27.3% 20.1% -7.2 p.p

Net Revenue Net revenue of the Company decreased by 6.0% in 4Q12 compared to 4Q11. In the 12-month period, net revenue decreased by 5.2%. Cost of Goods Sold (COGS) Unit cost per module sold decreased by 2.05%, from R$98.87 in 4Q11 to R$96.84 in 4Q12. COGS fell 2.87%, while sales volume fell 0.8%. COGS decreased R$1.3 million between 4Q11 and 4Q12, due to: i) The reduction of 6.0% in net revenue and 0.8% in sales volume, corresponding to a R$0.3 million reduction in materials due to volume; ii) The R$0.6 million reduction in personnel expenses with the implementation of new machinery and the reduction of taxes on payroll; iii) Tthe R$0.2 million reduction in provisions for discontinued products due to the optimized use of materials in the production process. iv) Decrease in costs of inputs due to the mix with a greater share of materials that have lower monetary costs, net of material price increases and higher expenses with depreciation amounting to R$0.1 million.

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The chart below shows the variation in the Cost of Production between 4Q11 and 4Q12:

In the 12-month period, the unit cost per module sold decreased 2.4% from R$98.98 in 2011 to R$96.63 in 2012, for a nominal decrease of R$4.9 million, due mainly to: i) Net revenue reduction of 5.2%, with a 0.5% reduction in sales volume, corresponding to a R$0.7 million reduction in materials, due to volume; ii) the R$0.5 million reduction in maintenance expenses due to the acquisition of new machinery and the increase in the number of newer assets (outsourced services); iii) the R$0.5 million decline in Personnel expenses due to the capex in 2011. iv) The reduction in provisions for discontinued products by R$0.7 million due to the optimized use of materials in the production process. v) Decrease in costs of inputs as a result of the mix with a greater share of materials that have lower monetary costs, net of material price increases amounting to R$3.6 million; and others. vi) Addition of R$1.1 million related to depreciation of new assets acquired in 2011 and during 2012. The chart below shows the variation in Production Costs between 2011 and 2012:

R$45.3M R$0.3M R$0.6M R$0.2M R$0.1M R$44.1M

COGS 4Q11Volume

Reduction PersonnelProvision fordisc.products

Mix,deprec.andinputs,net COGS 4Q12

R$168.8MR$0.7M R$0.5M R$0.5M R$0.7M R$2.5M

R$163.9M

COGS 2011Volume

Reduction Outsourcing PersonnelProvision fordisc.products

Mix,deprec.andinputs,net COGS 2012

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Gross Profit and Gross Margin Gross Profit in the quarter was R$31.4 million, with Gross Margin of 41.7%. Gross margin decreased 1.8 p.p. from 4Q11, but recovered in relation to 3Q12, expanding by 0.7 p.p. The Gross Margin increase in relation to 3Q12, despite the maintenance of a product mix with a lower margin, results from our policy on discounts combined with a better dilution of fixed costs due to greater sales volumes. Gross Margin in the 12-month period was 1.4 p.p. lower than in 2011, at 41.3%, with Gross Income of R$115.4 million, impacted mainly by the margin recorded in 2Q12 (39.0%). Selling, General and Administrative Expenses (SG&A) Expenses Selling, general and administrative expenses increased R$5.8 million from 4Q11 and R$18.0 million from 2011, corresponding to 31.6% and 27.6% of net revenue, respectively, as detailed below: Selling, General and Administrative Expenses 4Q11 4Q12 Var. 2011 2012 Var.

Total SG&A (18,017) (23,875) 32.5% (59,003) (77,059) 30.6%

Selling Expenses (12,096) (18,192) 50.4% (42,223) (57,422) 36.0%

Payroll, Outsourced Services, Commissions, Provisions and Materials (6,537) (7,923) 21.2% (19,890) (28,675) 44.2%

Marketing and Other (5,559) (10,269) 84.7% (22,333) (28,747) 28.7%

% of Net Revenue -15.1% -24.1% 9.0 p.p. -14.3% -20.5% 6.2 p.p.

Administrative Expenses (5,921) (5,683) -4.0% (16,780) (19,637) 17.0%

Payroll, Outsourced Services, Depreciation and Materials (3,673) (3,316) -9.7% (11,100) (12,103) 9.0%

Provisions and Other (2,248) (2,367) 5.3% (5,680) (7,534) 32.6%

% of Net Revenue -7.4% -7.5% 0.1 p.p. -5.7% -7.0% 1.3p.p.

SG&A % of Net Revenue 22.5% 31.6% 9.2p.p. 20.0% 27.6% 7.6p.p.

R$ 59.0M R$ 3.9M R$ 2.2M R$ 3.0M R$ 1.7M R$ 3.0M R$ 2.0M R$ 2.2M R$ 77.0M

SG&A 2011 PersonnelOutsourcingand Other Marketing PDD

OtherProvisions

Ownstores

ClientExpenses SG&A 2012

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Selling, General and Administrative Expenses (SG&A) – continued:

Personnel expenses increased R$0.2 million from 4Q11 and R$3.9 million from 2011. The increase results from the Company’s professionalization process and includes mostly the structure of the Board of Executive Officers, Board of Directors and other internal areas created or restructured during 2012.

In the quarter, service expenses and other expenses increased R$0.1 million, while in the year these expenses increased R$2.2 million, driven mainly by tax expenses amounting to R$0.4 million, related to the bank premium received in the third quarter of 2012, and the write-off of uncollectible receivables amounting to R$0.9 million. Marketing expenses increased R$3.0 million compared to 4Q11 and 2011, due to the continued investments in campaigns contracted at the start of the year, based on the expectation of higher than actual revenue. For 2013, the budget for these expenses is linked to revenue generation.

Allowance for doubtful accounts (PDD) increased R$0.2 million in the quarter compared to 4Q11. In 2012, the nominal increase was R$1.7 million from 2011, reflecting the increase in delinquency at the stores. Other provisions, which include labor, tax and civil risks, increased R$0.5 million in the quarter, compared to 4Q11, and R$3.0 million in 2012 compared to 2011, and were largely composed of the provision for losses with guarantee, realized in the second quarter of 2012 in the amount of R$2.5 million.

Expenses with own stores came to R$1.3 million in the quarter and R$2.0 million in the year, and are mainly related to personnel expenses and consulting services on franchises and legal and tax issues.

Client expenses increased R$1.5 million from 4Q11 and R$2.2 million from 2011, respectively. These expenses are related to serving final consumers at closed stores and may remain at these levels in the short term.

Other Operating Income and Expenses Other operating income increased R$2.8 million from 2011, mainly due to the bank premium arising from the renegotiation of the commercial agreement with the financial institution that provides financial support to operations at the dealer network. This agreement raised the percentage of remuneration on production.

Other Operating Income and Expenses 4Q11 4Q12 Var. 2011 2012 Var.

Operating Expenses (9) (23) 155.6% (76) (35) -53.9%

Operating Income 1,220 1,238 1.5% 6,572 9,379 42.7%

Bank Premium 849 853 0.5% 4,625 7,152 54.6%

Other Operating Income 371 385 3.8% 1,947 2,227 14.4%

Total Other Operating Income and Expenses 1,211 1,215 0.3% 6,496 9,344 43.8%

% of Net Revenue 1.5% 1.6% 0.1p.p. 2.2% 3.3% 1.1p.p.

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Net Income Net Income decreased 31.5% and 27.0% from 4Q11 and 2011, mainly due to lower revenues, particularly from Dell Anno and Favorita, and to higher SG&A expenses. Net Financial Result The net financial result increased 7.3% compared to 4Q11 and 14.9% compared to 2011. Financial Result 4Q11 4Q12 Var. 2011 2012 Var.

Net Financial Result 1,721 1,846 7.3% 7,998 9,192 14.9%

Financial Expenses (1,664) (909) -45.4% (2,645) (3,075) 16.3%

IOF charge and bank fees (192) (119) -38.0% (797) (622) -22.0%

Loans and financing expenses (80) (128) 60.0% (305) (547) 79.3%

Exchange variation expenses (45) (104) 131.1% (162) (413) 154.9%

Present value adjustment - AVP (1,335) - -100.0% (1,335) (342) -74.4%

Other financial expenses (12) (558) 4550.0% (46) (1,151) 2402.2%

Financial Income 3,385 2,755 -18.6% 10,643 12,267 15.3%

Interest income 535 819 53.1% 2,733 3,346 22.4%

Discounts 43 67 55.8% 325 516 58.8%

Yield from short-term investments 344 465 35.2% 1,996 2,487 24.6%

Exchange variation income 818 103 -87.4% 973 314 -67.7%

Present value adjustment - AVP 1,497 1,139 -23.9% 3,989 5,033 26.2%

Other financial income 148 162 9.5% 627 571 -8.9% EBITDA and EBITDA Margin EBITDA in 4Q12 fell by 10.7 percentage points, from R$20.1 million (4Q11) to R$10.9 million. EBITDA Margin in the twelve-month period was 20.1%, down 7.2 p.p. from 2011. EBTIDA decreased because of the same factors that led to lower net income. R$ '000 4Q11 4Q12 Var.

2011 2012 Var.

Net Income for the period 14,937 10,232 -31.5% 57,792 42,164 -27.0%

(+) Income and Social Contribution Taxes 4,958 433 -91.3% 23,584 14,782 -37.3%

(-) Financial Result (1,721) (1,846) 7.3% (7,998) (9,192) 14.9%

Financial Expenses 1,664 909 -45.4% 2,645 3,075 16.3%

Financial Income 3,385 2,755 -18.6% 10,643 12,267 15.3%

EBIT 18,174 8,819 -51.5% 73,378 47,754 -34.9%

(+) Depreciation and Amortization 2,014 2,090 3.8% 7,066 8,277 17.1%

EBITDA 20,188 10,909 -46.0% 80,444 56,031 -30.3%

EBITDA Margin 25.1% 14.4% -10.7p.p. 27.3% 20.1% 7.2 p.p.

17


The chart below shows the change in EBITDA between 2011 and 2012:

Net Cash

In 4Q12/2012, the Company’s net cash position was R$23 million, up R$18 million from 4Q11/2011.

R$ '000 31/12/2011 31/12/2012 Var.

Short-Term Debt 1,115 5,128 359.9%

Long-Term Debt 5,688 557 -90.2%

Gross Debt 6,803 5,685 -16.4%

Cash and Cash Equivalents and Short-Term Investments 12,131 28,719 136.7%

Net Debt/(Cash surplus) (5,328) (23,034) 332.3%

EBITDA (last 12 months) 80,444 56,031 -30.3%

Net Debt/EBITDA (last 12 months) (0.07) (0.41) 0.34

Return on Invested Capital (ROIC) Net ROIC in the year was 17.3%, down 12.7 p.p. from the previous year.

R$ '000 2011 2012 Var.

EBIT (LTM) 73,378 47,754 -34.9%

Average of Operating Assets 173,769 203,713 17.2%

ROIC 42.2% 23.4% -18.8%

Effective IR + CSLL rate (LTM) -29.0% -26.0% 3.0%

ROIC, Net 30.0% 17.3% -12.7%

Investments / Capex

The Company’s capex in 2012 totaled R$11.2 million in property, plant and equipment, which includes R$7.2 million in machinery and equipment, of which R$3.7 million in the new painting equipment at Lacca, and R$3.5 million in the installation of flexible production machinery acquired in 2011, machining machinery and exhaustion system. In addition, another R$4.0 million were used in improvements,

R$ 80.4M

R$ 15.2M R$ 4.9M

R$ 15.2M R$ 2.8M R$ 2.8M R$ 1.1M R$ 56.0M

EBITDA 2011 Net Revenue COGS

SellingExpenses

Adm.Expenses

OtherIncome Depreciation

EBITDA2012

18


buildings, furniture and fixtures and IT equipment. In terms of intangible assets, we invested R$17.6 million, bulk of it in commercial properties to support our project of own stores (more information in item 7 (Own Stores).

Investments in Subsidiaries

The Board of Directors meeting held on October 8, 2012 approved the creation by Unicasa Indústria de Móveis S.A., of a subsidiary called Unicasa Comércio de Móveis Ltda. as a limited liability Company with initial capital of up to one hundred thousand reais (R$100,000.00), whose corporate purpose will be to trade, import and export furniture products made of wood, iron, steel and aluminum, kitchen items and other products related to residential and commercial furniture, among other services. 7. OWN STORES The Project on Own Stores has the following core objectives:

1. Live the Retail Experience: To acquire experience in operating stores, identifying

difficulties and opportunities, pursuing service excellence, and developing direct relationship with the final consumer;

2. Test platform: product, promotion, store layout, assembly, client acquisition, positioning and software, among others;

3. Source of best practices and indicators: Improve the performance of the reseller network by disseminating the best practices validated by indicators;

4. Reposition the Dell Anno brand in São Paulo: To increase credibility in the customized furniture segment, guaranteeing service quality and, as a result, reinforcing the image of the Dell Anno brand in this market.

Unicasa plans to open seven own stores, six in the city of São Paulo and one in Manaus. The decision to open new stores is not a new driver of expansion or change in the Company’s business model, but exclusively aims to meet the objectives listed above. By December 31, 2012, the Company had concluded investments in six commercial properties, four to be used for own stores and two will continue to be operated by independent dealers in strategically important locations for our business where we may even open new stores in the future. These commercial properties have been recorded as intangible assets. In 2013, we expect to conclude investments in three more stores, which should follow the same line of operation as the commercial properties acquired in 2012. We expect to close 2013 with nine stores, with seven operated by Unicasa as own stores and two as investment.

19


8. DIVIDENDS AND INTEREST ON EQUITY (IOE) The Management proposal for Dividends and Interest on Equity (IOE) distribution of R$34 million (net), will result in a payout of 85% of adjusted net income, for fiscal year of 2012. The Company holds its Annual Shareholders’ Meeting by April 30 of each year, in which dividends and IOE will be submitted for approval. The Companys bylaws determine the distribution of 25% of net income, adjusted by the deductions and additions set forth in Article 202, II and III of the corporate law, to be distributed to shareholders as mandatory dividends. The percentage distribution may be higher than stated in the Company´s bylaws, being annually examined by the Administration, conforming dividend policy and taking into consideration the availability of cash and the need for investments to expand. At the meeting held on December 21, 2012, the Board of Directors announced the distribution of IOE for fiscal year 2012, in the gross amount of nine million, nine hundred sixty-two reais and seventy-eight cents (R$9,000,962.78), and net of R$ 7,989,969.97 (seven million nine hundred and eighty-nine thousand, nine hundred and sixty-nine reais and ninety-seven cents) equivalent to R$ 0.13620000 per share. The payment will be made on the date to be resolved at the Annual Shareholders’ Meeting of 2013. Additionally, in March 27, 2013, the Board of Directors approved the proposal for distribution of minimum and additional dividends proposed and IOE representing 85% of the adjusted net profit for the fiscal year of 2012, to be submitted to the Annual Shareholders’ Meeting of 2013, as detailed in the table below:

Proposal for dividend distribution 2012 In R$

Net Income for the period 42,164,092.70

Legal Reserve (5%) 2,108,204.64

Adjusted Net Income 40,055,888.06

Dividends – Proposed distribution – 85% 34,047,504.85

Interest on equity (net) 7,989,969.97

Dividends 26,057,534.88

Proposal of Retained Profits for Expansion Reserve (1) 4.997.391,42 (1) To calculate the amount withheld, consider the gross Interest on Equity amount (R$9,000,961.76)

The net aggregate amount of dividends and IOE totaled thirty-four million, forty-seven thousand, five hundred four reais and eighty-five centavos (R$34,047,504.85), corresponding to R$0.515197 per share.

20


9. CORPORATE GOVERNANCE

On April 27th, 2012, the shares of Unicasa started trading on the BMF&BOVESPA under the ticker UCAS3. The Company is part of the Novo Mercado listing segment, the highest level of corporate governance of the São Paulo Stock Exchange. All Unicasa shares are common shares and entitle their holders to all the rights provided under corporate law applicable to publicly held companies and under the Novo Mercado Regulation. The Company’s shares started the trading session of April 27th, 2012 quoted at R$14.00 (fourteen reais) and closed the day at R$15.36, (fifteen reais and thirty-six cents ) ffup 9.7%. On March 26th , 2012, the shares closed trading at R$9.65 (nine reais and sixty-five cents). The book value per share at December 31st, 2012 is R$3,36 (three reais and thirty-six cents) The chart below shows the variation in the share price in relation Ibovespa in period of Abril 27th , 2012 a March, 26th , 2013.

Source: Broadcast

The Board of Directors consists of five members: Alexandre Grendene Bartelle, Chairman of the Board of Directors, Juvenil Antônio Zietolie, Vice Chairman of the Board of Directors, Frank Zietolie, Director, João Carlos Sfreddo, Independent Director and Renato Ochman, Director. The Board of Executive Officers is composed of the Chief Executive Officer, Frank Zietolie, the Vice President Kelly Zietolie, the Chief Financial and Investor Relations Officer Paulo E. Junqueira de Arantes Filho, and the Commercial Officer Thiago Proença Baisch.

abr-12 mai-12 jun-12 jul-12 ago-12 set-12 out-12 nov-12 dez-12 jan-13 fev-13 mar-13

UNICASA IBOV

UCAS3-37,1%

IBOV-9,7%

21


Unicasa’s capital is divided into 66,086,364 shares, of which 46% (30,399,727 shares) are free float. Below is the summarized ownership structure:

(1) Kelly Zietolie.2.8%; Emilia Angela Saretta Zietolie, 1.5%; Nely Rosa C. Schenatto.1.3%.

Unicasa’s Investor Relations Department is located in the city of Bento Gonçalves in the state of Rio Grande do Sul, along with the Company’s administrative headquarters and industrial complex. In 2012, the Investor Relations Department carried out 200 service actions, starting with the first Unicasa Day, held in April, which was attended by 14 potential investors prior to the IPO. Over the course of the year, Unicasa received 40 investors and/or potential investors, held 135 conference calls and 11 meetings in São Paulo. On December 3, 2012, Unicasa held its first APIMEC meeting at the Deville hotel in Porto Alegre, in which more than 50 people took part.

10. CORPORATE EVENTS IN 2012

Three Extraordinary Shareholders’ Meetings, one Annual and Extraordinary Shareholders’ Meeting and 13 Board of Directors’ Meetings were held in 2012. These documents are available at the Company’s in the website under Corporate Governance – Minutes and Meetings (http://www.unicasamoveis.com.br/ri/)

Unicasa Móveis

AlexandreGrendene Bartelle

39.78%

Frank Zietolie

8.62%

(1)Other

5.60%

Free Float

46.00%

http://www.unicasamoveis.com.br/ri/)

22


11. HR AND HEADCOUNT

We closed 2012 with 872 employees, a reduction of 111 employees compared to 2011 (983 employees). The industrial complex had a reduction of 142 employees due to investments in machinery and equipment made in 2011, which improved automation of the industrial process. However, 31 people were hired in the administrative and commercial areas as part of the Company’s professionalization process. Area 2012 2011 Var.

Industrial Plants 568 710 -142

Commercial and Administrative 304 273 31

Total – Unicasa Employees 872 983 -111 12. ADMINISTRATIVE RESTRUCTURING

During 2012 and early 2013, we created two executive officer positions with the objective of collaborating towards the Company’s growth. In January 2012, the new Commercial Officer took office and in January 2013, the new Industrial Officer took office. 13. RESPONSIBILITY AND SOCIAL AND ENVIRONMENT PROTECTION PROJECTS

Unicasa complies with all the environmental laws applicable to its industrial segment. Following are the practices aimed at protecting the environment:

• Separation and disposal of solid waste generated in the manufacturing process; • Treatment of industrial effluents; • Reuse of 100% of the water used in our plants; • Reuse of by-products generated during the production process, such as sawdust, wood, plastic

and cardboard, which are used by other sectors of economy; • Substitution of diesel oil by LPG (liquefied petroleum gas); • Use of packaging made of recyclable plastic to transport the furniture we produce; • Use of raw material acquired only from companies that adopt an economically viable,

ecologically correct and socially just system, certified ISO 14001, which guarantees that the impacts of their activities are controlled and that they undertake to use the wood from certified planted forests, owned by the Company or by third parties, or acquired from controlled sources, in accordance with the principles and criteria of the Forest Stewardship Council (FSC). This wood is employed in the production of reconstituted wood boards and could also be used to produce energy;

• Air Pollution Control System

23


14. INDEPENDENT AUDITORS

The Company’s external auditors Ernst & Young Terco Auditores Independentes S.S. did not provide services not related to external audit during the fiscal years 2009, 2010 and 2011. In 2012, we hired services unrelated to external audit, in compliance with the Company’s policy on conflict of interests. The Company’s policy on hiring services unrelated to external audit from the independent auditor is based on principles that preserve the auditor’s autonomy, which are: (a) auditors should not audit their own work; (b) auditors should not perform managerial functions at their client; and (c) auditors should not promote the interests of their client. 15. MARKET ARBITRATION CHAMBER

The Company, its shareholders, managers and members of the Board of Directors undertake to resolve, through arbitration, all and any dispute or controversy that may arise among them, related or caused by, particularly, the application, validity, efficacy, interpretation, violation and the effects of provisions of the Novo Mercado Listing Agreement, the Novo Mercado Listing Regulation and the Company’s Bylaws. 16. STATEMENT BY EXECUTIVE OFFICERS

Pursuant to CVM Instruction 480/09, the executive officers hereby declare that they have reviewed, discussed and agree with the financial statements for the fiscal year ended December 31, 2012 and the opinions contained in the independent auditors’ report.

24


17. ANNEX I - FINANCIAL STATEMENTS – INCOME STATEMENT

R$ '000 4Q12 4Q11 Var. 2012 2011 Var.

Gross Revenue from Sales 98,551 110,034 -10.4% 367,072 402,355 -8.8% Domes tic Ma rket 96,798 107,856 -10.3% 359,009 395,361 -9.2%

Del l Anno a nd Fa vori ta 52,234 64,421 -18.9% 197,287 244,567 -19.3% New Excl us i ve Dea l ers 25,445 26,004 -2.2% 92,661 91,959 0.8% New Mu l ti -bra nd Dea l ers 4,169 5,116 -18.5% 17,217 18,751 -8.2% Te l a s ul 11,716 9,364 25.1% 40,072 30,010 33.5% Uni ca sa Corpora te 1,189 2,259 -47.4% 4,921 6,043 -18.6% Other Reve nue s 2,045 692 195.5% 6,851 4,031 70.0%

Export Ma rke t 1,753 2,178 -19.5% 8,063 6,994 15.3% Sa l es Dedu cti on (22,991) (29,669) -22.5% (87,631) (107,678) -18.6% Net Revenue from Sales 75,560 80,365 -6.0% 279,441 294,677 -5.2% Cos t of Goods Sol d (44,081) (45,385) -2.9% (163,972) (168,792) -2.9% Gross Profit 31,479 34,980 -10.0% 115,469 125,885 -8.3%

Se l l i ng Expe ns es (18,192) (12,096) 50.4% (57,422) (42,223) 36.0% Genera l a nd Ad mi ni s tra ti ve Expen se s (5,683) (5,921) -4.0% (19,637) (16,780) 17.0% Other Ope ra tin g Income , Net 1,215 1,211 0.3% 9,344 6,496 43.8%

Income Before Financial (Expenses) Income 8,819 18,174 -51.5% 47,754 73,378 -34.9% Fi na nci a l Exp ens es (909) (1,664) -45.4% (3,075) (2,645) 16.3% Fi na nci a l Income 2,755 3,385 -18.6% 12,267 10,643 15.3%

Operating income before income and social contribution taxes 10,665 19,895 -46.4% 56,946 81,376 -30.0% Income a nd Soci a l Contri buti on Ta xes (433) (4,958) -91.3% (14,782) (23,584) -37.3%

Current 1,026 (3,002) -134.2% (15,719) (25,207) -37.6% Deferred (1,459) (1,956) -25.4% 937 1,623 -42.3%

Net Income for the period 10,232 14,937 -31.5% 42,164 57,792 -27.0%

25


18. ANNEX II - FINANCIAL STATEMENTS – BALANCE SHEET

R$ '000 2012 2011 Var.

Current assets 136,105 125,946 8.1% Ca sh a nd Ca s h Equi va l e nts 28,719 12,131 136.7% Re s tri cte d Ma rke ta bl e Se curi ti e s - 323 -100.0% Accounts re ce i va bl e 77,732 77,833 -0.1% Inve ntori e s 19,296 22,144 -12.9% Adva nce s a nd pre pa yme nts 1,038 712 45.8% Loa n s Gra nte d 1,971 3,524 -44.1% Pre pa i d e xpe n se s 1,868 5,674 -67.1% Re co ve ra bl e ta xe s 3,104 1,508 105.8% Othe r curre nt a s s e ts 2,377 2,097 13.4%

Non-current assets 138,114 132,255 4.4% Accounts re ce i va bl e 15,476 33,022 -53.1% Loa n s Gra nte d 5,547 8,102 -31.5% As se ts He l d for Sa l e 8,848 6,751 31.1% De fe rre d I ncome a nd Soci a l Contri buti o n Ta xe s 6,734 4,428 52.1% Re co ve ra bl e ta xe s 25 43 -41.9% Pre pa i d e xpe n se s 251 526 -52.3% Judi ci a l d e pos i ts 2,140 1,419 50.8% Othe r non-curre nt a s s e ts 2,004 636 215.1%

Inve s tme nts 404 704 -42.6% Prope rty, pl a n t a nd e qu i pme nt 78,373 75,994 3.1% Inta n gi bl e a s s e ts 18,312 630 2.806,7%

Total Assets 274,219 258,201 6.2%

R$ '000 2012 2011 Var.

Current liabilities 46,367 53,301 -13.0% Loa n s a nd fi na n ci n g 5,128 1,115 359.9% Tra de a ccou nts pa ya bl e 6,698 8,425 -20.5% Ta x l i a bi l i ti e s 4,961 15,974 -68.9% Di vi de n ds a nd i nte re s t on e qu i ty p a ya b l e 10,014 7,905 26.7% Pa yro l l a nd Re l a te d Cha rge s 4,507 4,556 -1.1% Adva nce s from cus tome rs 14,002 14,269 -1.9% Othe r curre nt l i a bi l i ti e s 1,057 1,057 0.0%

Non-current liabilities 5,722 9,161 -37.5% Loa n s a nd fi na n ci n g 557 5,688 -90.2% Ta x l i a bi l i ti e s - 84 -100.0% Provi s i on for Ta x, Ci vi l a nd La bor Ri sks 5,165 3,389 52.4%

Shareholders' Equity 222,130 195,739 13.5% Ca pi ta l Stock 187,709 29,699 532.0% Ca pi ta l Re s e rve (2,658) - 100.0% Profi t Re s e rve 13,045 5,939 119.6% Propos e d Add i ti on a l Di vi d e nds 24,034 160,101 -85.0%

Total Liabilities and Shareholders' Equity 274,219 258,201 6.2%

26


19. ANNEX III - FINANCIAL STATEMENTS – CASH FLOW STATEMENT

R$ '000 4Q12 4Q11 Var. 2012 2011 Var.

Cash Flows from Operating Activities

Operating income before income and social contribution taxes 10,665 19,895 -46.4% 56,946 81,376 -30.0%

Adjus tment to Reconci le Net Income to Ca sh a nd Equiva lents:

Depreciation a nd Amortization 2,090 2,014 3.8% 8,277 7,066 17.1%

Foreign Exchange Va ria tion (165) 102 -261.8% 58 (80) -172.5% Interest Appropriation 128 79 62.0% 547 305 79.3% Ta x, Social Securi ty, Labor a nd Civi l Provis ions 568 111 411.7% 1,776 1,261 40.8%

Provis ion for Obs olescence (235) (465) -49.5% (694) 3 23.233,3%

Al lowa nce for doubtful a ccounts 1,782 2,118 -15.9% 4,123 2,448 68.4%

Provis ion for los ses with recoverable credi ts - - 0.0% 2,468 - 100.0% Write-off of Property, Plant and Equipment 28 154 -81.8% 122 324 -62.3%

14,861 24,008 -38.1% 73,623 92,703 -20.6%

Changes in As sets a nd Liabi l i ties

Tra de accounts receivable 4,761 (13,023) -136.6% (369) (26,862) -98.6% Inventories 2,855 6,846 -58.3% 3,542 1,582 123.9% Recoverable ta xes 2,386 413 477.7% (178) (1,453) -87.7%

Restricted Ma rketable Securi ties - (8) -100.0% 323 (33) 1.078,8%

Loans Gra nted 460 700 -34.3% 3,184 (847) -475.9% Prepa id expens es 2,280 (2,270) -200.4% 4,081 (2,631) -255.1% Other current a nd non-current as sets 5,952 1,866 219.0% (5,165) (1,593) 224.2%

Non-current as sets a vai la ble for s afe (747) (884) -15.5% (2,097) (884) 137.2%

Tra de accounts paya ble (3,600) (5,569) -35.4% (784) 776 -201.0%

Adva nces from customers (2,305) (1,887) 22.2% (267) 2,365 -111.3% Ta x l iabi l i ties (1,470) 1,835 -180.1% (2,831) (627) 351.5% Other current a nd non-current l ia bi l ities (3,467) (2,059) 68.4% (49) 1,005 -104.9%

Income Ta x a nd Socia l Contribution (5,273) (4,306) 22.5% (26,395) (25,574) 3.2%

Net Cash from Operating Activities 16,693 5,662 194.8% 46,618 37,927 22.9%

Cash Flow from Investing Activities

Investments - (300) -100.0% - (300) -100.0%

Property, pla nt a nd equipment (5,368) (8,483) -36.7% (11,205) (29,848) -62.5% Inta ngible a ssets (230) (72) 219.4% (3,137) (171) 1.734,5%

Net Cash used in Investing Activities (5,598) (8,855) -36.8% (14,342) (30,319) -52.7%

Cash Flow from Financing Activities

Ca pi ta l increa se - - 0.0% 127,909 - 100.0% Expens es with sha re i ss ue - - 0.0% (4,027) - 100.0% Borrowings - 4,000 -100.0% - 4,741 -100.0%

Loa n and Interest Payments (405) (1,084) -62.6% (1,665) (2,704) -38.4%

Pa yment of interes t on equity (1,937) - 100.0% (7,905) (5,780) 36.8% Dividends pa id - (1,200) -100%,0 (130,000) (12,355) 952.2%

Cash Flow (used in) from Financing Activities (2,342) 1,716 -236.5% (15,688) (16,098) -2.5%

Increase (Decrease) in Cash and Cash Equivalents 8,753 (1,477) -692.6% 16,588 (8,490) -295.4%

Changes in Cash and Cash Equivalents

At the Beginning of the Period 19,966 13,608 46.7% 12,131 20,621 -41.2%

At the End of the Period 28,719 12,131 136.7% 28,719 12,131 136.7%

Increase (Decrease) in Cash and Cash Equivalents 8,753 (1,477) -692.6% 16,588 (8,490) -295.4%

27


20. ANNEX IV – STATEMENT OF VALUE ADDED

Statement of Added Value (R$ ‘000) 4Q12 4Q11 Var. 2012 2011 Var.

Revenue from products s old, net of returns and PVA 96,438 107,094 11.0% 357,958 392,957 -8.9% Other Revenues 961 1,751 82.2% 8,955 6,496 37.9% Al lowa nce for doubtful a ccounts (1,782) (2,118) 18.9% (4,123) (2,448) 68.4%

95,617 106,727 11.6% 362,790 397,005 -8.6%

Inputs acquired from third parties Cos t of products and goods s old (46,678) (47,199) 1.1% (174,153) (184,766) -5.7% Ma teria ls , energy a nd outsourced s ervices (14,345) (13,867) -3.3% (42,063) (40,845) 3.0% Other (3,909) 3,350 -185.7% (14,448) (5,587) 158.6%

(64,932) (57,716) -11.1% (230,664) (231,198) -0.2%

Gross value added 30,685 49,011 59.7% 132,126 165,807 -20.3% Deprecia tion and Amorti za tion (2,090) (2,014) -3.6% (8,277) (7,066) 17.1% Gross value added by the entity 28,595 46,997 64.4% 123,849 158,741 -22.0%

Value added received in transfer Fina ncial Income 2,755 3,385 22.9% 12,267 10,643 15.3%

2,755 3,385 22.9% 12,267 10,643 15.3%

Total value added to distribute 31,350 50,382 60.7% 136,116 169,384 -19.6%

Personnel Di rect compensa tion 7,513 10,515 40.0% 27,597 22,907 20.5% Benefits 940 (1,769) -288.2% 5,251 2,108 149.1% FGTS (workers’ severi ty fund) 372 539 44.9% 2,017 1,891 6.7%

8,825 9,285 5.2% 34,865 26,906 29.6% Taxes, charges and contributions Federal 5,349 16,488 208.2% 34,121 57,548 -40.7% Sta te 6,014 7,405 23.1% 21,830 24,412 -10.6% Municipal 21 12 -42.9% 61 80 -23.8% 11,384 23,905 110.0% 56,012 82,040 -31.7%

Debt remuneration Interes t 128 79 -38.3% 547 305 79.3% Other 781 2,176 178.6% 2,528 2,341 8.0%

909 2,255 148.1% 3,075 2,646 16.2%

Equi ty remuneration Interest on Equity 11,024 9,300 -15.6% 9,000 9,300 -3.2% Retained earnings (792) - -100.0% 7,106 - 100.0% Proposed addi tiona l dividends - 5,637 100.0% 26,058 48,492 -46.3%

10,232 14,937 46.0% 42,164 57,792 -27.0%

Total value added distributed 31,350 50,382 60.7% 136,116 169,384 -19.6%

Relatório da Administração 2012

28

21. ANNEX V - GROSS REVENUE, GROSS REVENUE EX-IPI AND MODULES SOLD

Gross Revenue from Sales

R$ '000 1Q12 1Q11 2Q12 2Q11 3Q12 3Q11 4Q12 4Q11 6M12 6M11 9M12 9M11 2012 2011

Gross Revenue from Sales 89,173 88,571 86,953 93,130 92,395 110,620 98,551 110,033 176,126 181,701 268,521 292,321 367,072 402,354

Domestic Market 88,131 87,459 85,180 92,075 88,901 107,972 96,798 107,855 173,311 179,534 262,211 287,505 359,009 395,361

Del l Anno and Favori ta 51,311 55,458 45,919 58,472 47,823 66,217 52,234 64,421 97,230 113,930 145,053 180,146 197,287 244,567 New Excl us ive Deal ers 21,575 18,282 21,762 20,908 23,879 26,765 25,445 26,004 43,337 39,190 67,216 65,955 92,661 91,959 New Mul ti -brand Deal ers 4,341 3,940 4,074 4,421 4,633 5,274 4,169 5,116 8,415 8,361 13,048 13,635 17,217 18,751 Tel asul 8,540 6,770 10,366 5,843 9,450 8,033 11,716 9,364 18,906 12,613 28,356 20,646 40,072 30,010 Uni casa Corporate 1,329 1,637 992 1,299 1,411 849 1,189 2,259 2,321 2,936 3,732 3,784 4,921 6,043 Other Re ve nues 1,035 1,372 2,067 1,132 1,705 835 2,045 691 3,102 2,504 4,806 3,340 6,851 4,031

Export Market 1,042 1,112 1,773 1,055 3,494 2,648 1,753 2,178 2,815 2,167 6,310 4,816 8,063 6,994

Gross Revenue from Sales Ex-IPI

R$ '000 1Q12 1Q11 2Q12 2Q11 3Q12 3Q11 4Q12 4Q11 6M12 6M11 9M12 9M11 2012 2011

Gross Revenue from Sales (ex-IPI) 85,593 84,392 86,837 88,703 92,278 105,495 98,493 105,218 172,430 173,095 264,709 278,592 363,202 383,809

Domestic Market 84,551 83,280 85,064 87,648 88,784 102,847 96,740 103,039 169,615 170,928 258,399 273,776 355,139 376,815

Del l Anno and Favori ta 49,200 52,867 45,884 55,724 47,783 63,107 52,809 61,374 95,084 108,591 142,867 171,698 195,676 233,072 New Excl us ive Deal ers 20,726 17,427 21,752 19,936 23,848 25,520 25,430 24,796 42,478 37,363 66,326 62,883 91,756 87,679 New Mul ti -brand Deal ers 4,167 3,753 4,074 4,213 4,626 5,023 4,165 4,874 8,241 7,966 12,867 12,990 17,032 17,864 Tel asul 8,184 6,445 10,363 5,554 9,436 7,651 11,712 8,917 18,547 11,999 27,983 19,650 39,695 28,567 Uni casa Corporate 1,277 1,559 991 1,237 1,411 808 1,189 2,150 2,268 2,796 3,679 3,603 4,868 5,753

Other Re ve nues 997 1,229 2,000 984 1,680 738 1,435 928 2,997 2,213 4,677 2,952 6,112 3,880 Export Market 1,042 1,112 1,773 1,055 3,494 2,648 1,753 2,179 2,815 2,167 6,310 4,816 8,063 6,994

Modules Sold

Units 1Q12 1Q11 2Q12 2Q11 3Q12 3Q11 4Q12 4Q11 6M12 6M11 9M12 9M11 2012 2011

Modules Sold 390,841 379,043 407,734 390,159 443,172 477,048 455,212 459,056 798,575 769,202 1,241,747 1,246,250 1,696,959 1,705,306

Domestic Market 381,466 364,597 395,322 378,752 410,016 437,834 444,026 433,712 776,788 743,348 1,186,805 1,181,183 1,630,831 1,614,895

Del l Anno and Favori ta 179,389 183,918 169,216 197,904 171,477 220,551 178,373 210,319 348,605 381,821 520,081 602,372 698,454 812,691 New Excl us ive Deal ers 109,187 93,907 112,736 103,727 128,130 126,475 137,963 121,834 221,924 197,634 350,054 324,108 488,017 445,942 New Mul ti -brand Deal ers 22,884 20,580 21,845 21,379 25,710 25,236 22,957 24,183 44,729 41,959 70,438 67,195 93,396 91,377 Tel asul 61,658 52,881 81,611 43,676 70,323 58,038 89,941 66,426 143,268 96,557 213,592 154,594 303,532 221,021 Uni casa Corporate 5,602 8,944 4,062 5,926 7,048 3,845 2,944 7,232 9,664 14,870 16,712 18,715 19,657 25,947 Other Re ve nues 2,747 4,368 5,853 6,140 7,328 3,690 11,848 3,719 8,600 10,508 15,927 14,198 27,775 17,917

Export Market 9,375 14,446 12,412 11,408 33,156 39,213 11,186 25,344 21,787 25,853 54,943 65,067 66,128 90,411

Financial Statements

Unicasa Indústria de Móveis S.A. Financial statements related to the years ended December 31, 2012 and 2011 with Independent Auditor’s Report on Financial Statements

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UNICASA INDÚSTRIA DE MÓVEIS S.A. Financial Statements December 31, 2012 and 2011 Contents Independent auditor’s report on financial statements ...................................................... 1 Financial Statements Balance sheets .................................................................................................................. 3 Income statements ............................................................................................................ 5 Statements of changes in equity ......................................... ................................................6 Statements of comprehensive income ............................................................................... 7 Cash flow statements ........................................................................................................ 8 Statements of value added ................................................................................................ 9 Notes to financial statements .......................................................................................... 10

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A free translation from Portuguese into English of Independent Auditor’s Report on financial statements in accordance with accounting practices adopted in Brazil and International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board – IASB

Independent auditor’s report on financial statements The Shareholders, Board of Directors and Officers UNICASA INDÚSTRIA DE MÓVEIS S.A. Bento Gonçalves- RS We have audited the accompanying financial statements of Unicasa Indústria de Móveis S.A. (“Company”), which comprise the balance sheet as at December 31, 2012 and the related income statements, comprehensive income, statements of changes in equity and cash flow statements for the year then ended, and a summary of significant accounting practices and other explanatory information. Management's responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) and in accordance with accounting practices adopted in Brazil, and for such internal control as management determines necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Brazilian and international standards on auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the Company’s financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. An audit also includes evaluating the appropriateness of accounting practices used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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Opinion on the financial statements In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Unicasa Indústria de Móveis S.A. as at December 31, 2012, its financial performance and its cash flows for the year then ended, in accordance with accounting practices adopted in Brazil and the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). Other matters Statements of value added We have also audited the statements of value added (SVA) for the year ended December 31, 2012, which are management’s responsibility and presentation of which is required by the Brazilian Corporation Law for publicly-held companies, and as supplementary information for IFRS not requiring the presentation of SVA. These statements were submitted to the same audit procedures previously described and, in our opinion, are fairly presented, in all material respects, in relation to the overall financial statements. Porto Alegre, March 5, 2013. ERNST & YOUNG TERCO Auditores Independentes S.S. CRC-2SP015199/O-6/F/RS Luis Carlos de Souza Accountant CRC-1SC021585/O-4

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A free translation from Portuguese into English of Financial Statements in accordance with accounting practices adopted in Brazil and International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board – IASB

UNICASA INDÚSTRIA DE MÓVEIS S.A. Balance sheets December 31, 2012 and 2011 (In thousands of reais)

Note 2012 2011 Assets Current assets Cash and cash equivalents 4 28,719 12,131 Restricted short-term investments - 323 Trade accounts receivable 5 77,732 77,833 Inventories 6 19,296 22,144 Salary advances and prepayments 1,038 712 Loans granted 8 1,971 3,524 Prepaid expenses 1,868 5,674 Taxes recoverable 3,104 1,508 Other assets 11 2,377 2,097 Total current asset 136,105 125,946 Noncurrent assets

Trade accounts receivable 5 15,476 33,022 Loans granted 8 5,547 8,102 Asset held for sale 7 8,848 6,751 Deferred income and social contribution taxes 14 6,734 4,428 Taxes recoverable 25 43 Prepaid expenses 251 526 Judicial deposits 15 2,140 1,419 Other assets 11 2,004 636 41,025 54,927 Investments 404 704 Property, plant and equipment 9 78,373 75,994 Intangible assets 10 18,312 630 97,089 77,328 Total noncurrent assets 138,114 132,255 Total assets 274,219 258,201

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Note 2012 2011 Liabilities Current liabilities Loans and financing 12 5,128 1,115 Trade accounts payable 13 6,698 8,425 Tax liabilities 4,961 15,974 Interest on equity - payable 16.c 7,990 7,905 Salaries and social charges 4,507 4,556 Advances from customers 14,002 14,269 Mandatory dividends to be distributed 16.c 2,024 - Other current liabilities 1,057 1,057 Total current liabilities 46,367 53,301 Noncurrent assets Loans and financing 12 557 5,688 Tax liabilities - 84 Provision for tax, civil and labor contingencies 15 5,165 3,389 Total noncurrent liabilities 5,722 9,161 Equity 16 Capital 187,709 29,699 Capital reserves (2,658) - Income reserves 13,045 5,939 Additional dividends proposed 24,034 160,101 Total equity 222,130 195,739 Total liabilities and equity 274,219 258,201

See accompanying notes.

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UNICASA INDÚSTRIA DE MÓVEIS S.A. Income statements Years ended December 31, 2012 and 2011 (In thousands of reais, except earnings per share)

Note 2012 2011

Net revenue from sales 21 279,441 294,677

Cost of products sold (163,972) (168,792)

Gross profit 115,469 125,885

Operating income (expenses)

Selling expenses (57,422) (42,223)

Administrative expenses (19,637) (16,780)

Other operating income, net 18 9,344 6,496

Income before financial income and expenses 47,754 73,378

Financial expenses 19 (3,075) (2,645)

Financial income 19 12,267 10,643

Operating income before income and social contribution 56,946 81,376

Income and social contribution taxes 14

Current (15,719) (25,207)

Deferred 937 1,623

(14,782) (23,584)

Net income for the year 42,164 57,792

Basic and diluted earnings per share (R$) 17 0.67 1.01 See accompanying notes.

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UNICASA INDÚSTRIA DE MÓVEIS S.A. Statements of changes in equity Years ended December 31, 2012 and 2011 (In thousands of reais)

Income reserves

Realized Capital Legal Reserve Retained Proposed additional Retained

capital reserve reserve for investments profits dividends earnings Total Balances at December 31, 2010 29,699 - 5,939 - 123,964 - - 159,602 Distributed dividends (Note 16.c) - - - - (12,355) - - (12,355) Net income for the year - - - - - - 57,792 57,792 Allocation of income:

Interest on equity (Note 16.b) - - - - - - (9,300) (9,300) Additional dividends proposed - - - - (111,609) 160,101 (48,492) -

Balances at December 31, 2011 29,699 - 5,939 - - 160,101 - 195,739 Capital increase (Note 16.a) 158,010 - - - - (30,101) - 127,909 Share issuance costs (Note 16.b) - (2,658) - - - - - (2,658) Distributed dividends (Note 16.c) - - - - - (130,000) - (130,000) Net income for the year - - - - - - 42,164 42,164 Allocation of income:

Interest on equity (Note 16.c) - - - - - - (9,000) (9,000) Mandatory minimum dividends - - - - - - (2,024) (2,024) Proposed Additional dividends (Note 16.c) - - - - - 24,034 (24,034) - Retained profits (Note 16.b) - - 2,109 4,997 - - (7,106) -

Balances at December 31, 2012 187,709 (2,658) 8,048 4,997 - 24,034 - 222,130 See accompanying notes.

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UNICASA INDÚSTRIA DE MÓVEIS S.A. Statements of comprehensive income Years ended December 31, 2012 and 2011 (In thousands of reais)

2012 2011 Net income for the year 42,164 57,792 Other comprehensive income - - Total comprehensive income for the period, net of taxes 42,164 57,792


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UNICASA INDÚSTRIA DE MÓVEIS S.A. Cash flow statements Years ended December 31, 2012 and 2011 (In thousands of reais)

2012 2011

Operating income before income and social contribution 56,946 81,376

Adjustments to reconcile net income to cash and cash equivalents: Depreciation and amortization 8,277 7,066 Exchange variation – customers 73 (152) Exchange variation – suppliers (15) 72 Interest appropriation 547 305 Provision for labor, tax and civil risks 1,776 1,261 Provision for obsolescence (694) 3 Allowance for doubtful accounts 4,123 2,448 Valuation allowance with credits recoverable 2,468 - Write-off of PP&E 122 324

73,623 92,703 Changes in assets and liabilities:

Trade accounts receivable (369) (26,862) Inventories 3,542 1,582 Taxes recoverable (178) (1,453) Restricted short-term investments 323 (33) Loans granted 3,184 (847) Prepaid expenses 4,081 (2,631) Other current or noncurrent assets (5,165) (1,593) Noncurrent assets held for sale (2,097) (884) Trade accounts payable (784) 776 Advance from customers (267) 2,365 Tax liabilities (2,831) (627) Current and noncurrent liabilities (49) 1,005

Payment of income and social contribution taxes (26,395) (25,574) Net cash from operating activities 46,618 37,927

Cash flow from investing activities: Investments - (300) Property, plant and equipment (PP&E) (11,205) (29,848) Intangible assets (3,137) (171)

Cash flow used in investing activities (14,342) (30,319)

Cash flow from financing activities Capital increase due to issue of shares 127,909 - Share issuance expenses (4,027) - Loans raised - 4,741 Loan repayments (1,665) (2,704) Payment of interest on equity (7,905) (5,780) Dividends paid (130,000) (12,355)

Cash flow used in financing activities (15,688) (16,098)

Increase/(decrease) in cash and cash equivalents 16,588 (8,490)

Statement of changes in cash and cash equivalents At the beginning of year 12,131 20,621 At the end of year 28,719 12,131

Increase/(decrease) in cash and cash equivalents 16,588 (8,490)

Transactions not involving cash and cash equivalents:

Transfer of investment sale outlet to intangible assets (300) -

Purchase of PP&E in installments 943 (1,893)

Acquisition of sale outlets and PP&E with credits receivable from exclusive retailers

Trade accounts receivable (13,820) - Loans granted (924) - Other assets (2) - Goodwill – Intangible assets (Note 10) 14,476 - Property, plant and equipment (Note 9) 270 -


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UNICASA INDÚSTRIA DE MÓVEIS S.A. Statements of value added Years ended December 31, 2012 and 2011 (In thousands of reais)

2012 2011 Revenue from product sale, net of adjustment to present value 357,958 392,957 Other revenues 8,955 6,496 Allowance for doubtful accounts (4,123) (2,448) 362,790 397,005 Inputs purchased from third parties Cost of products and goods sold (174,153) (184,766) Materials, energy, third-party services (42,063) (40,845) Other (14,448) (5,587) (230,664) (231,198)

Gross value added

132,126 165,807 Depreciation and amortization (8,277) (7,066) Gross value added generated by the Company 123,849 158,741 Value added received in transfer Financial income 12,267 10,643 12,267 10,643 Total value added to be distributed 136,116 169,384 Personnel

Direct compensation 27,597 22,907 Benefits 5,251 2,108 Government Severance and Indemnity Fund for Employees (FGTS) 2,017 1,891 34,865 26,906 Taxes, charges and contributions Federal 34,121 57,548 State 21,830 24,412 Municipal 61 80 56,012 82,040 Third-party capital remuneration Interest 547 305 Other 2,528 2,341 3,075 2,646 Equity remuneration Dividends and interest on equity 35,058 57,792 Retained earnings 7,106 - 42,164 57,792 Total value added distributed 136,116 169,384


UNICASA INDÚSTRIA DE MÓVEIS S.A. Notes to financial statements Years ended December 31, 2012 and 2011 (In thousands of reais except when otherwise stated)

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1. Operations

Unicasa Indústria de Móveis S.A. (the “Company”) was established in 1985 and is primarily engaged in manufacturing, importing and exporting furniture made of wood, iron, steel and aluminum, kitchen furniture and other commercial and residential furniture items. The Company is a publicly-held company, headquartered in the city of Bento Gonçalves, state of Rio Grande do Sul. Its shares have been traded in the New Market segment of Brazilian Securities, Commodities and Futures Exchange (BM&FBovespa S.A.), under the stock ticker symbol UCAS3 since April 27, 2012. The Company has a broad chain of exclusive retailers and multi-brand stores in Brazil and abroad, which sell products of the following brands: “Dell Anno”, “Favorita”, “New” and “Telasul Madeira”. The Company’s modern manufacturing plant has state-of-the-art technology, developing, manufacturing, distributing and selling furniture and other products for all types of residential and commercial environments, reaching all consumption segments. Unicasa Comércio de Móveis Ltda. was established on October 8, 2012, whose capital is wholly owned by the Company. This subsidiary had no balances or transactions at December 31, 2012. The Company's management expects to begin its subsidiary’s operations in March 2013.

2. Summary of significant accounting practices

2.1 Basis of preparation and presentation of the financial statements

The financial statements were prepared in accordance with accounting practices adopted in Brazil, which comprise the rules and regulations issued by the Brazilian Securities Commission (CVM) and the pronouncements, interpretations and guidance issued by the Brazilian Accounting Standards Commitee (CPC), and in accordance with the International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). The Company’s financial statements for the year ended December 31, 2012 were authorized for issuance in accordance with the resolution taken by the executive board meeting held on January 28, 2013. The preparation of these financial statements requires the use of certain accounting estimates and judgment by the Company’s management, the most significant of which are disclosed in Note 3. The Company reviewed and adopted all standards, revisions and interpretations issued by IASB and CPC that are effective for the financial statements for year ended December 31, 2012 and 2011.

2.2 Revenue recognition

Revenue is recognized to the extent that economic benefits are likely to flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding deductions, rebates and taxes or duties on sales. The Company assesses revenue transactions in accordance with specific criteria to determine if it is the agent or principal and thus concluded it has been acting as the principal in all its sales contracts. The following specific recognition criteria must also be met before revenue is recognized:

UNICASA INDÚSTRIA DE MÓVEIS S.A. Notes to financial statements (Continued) Years ended December 31, 2012 and 2011 (In thousands of reais except when otherwise stated)

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2. Summary of significant accounting practices (Continued)

2.2 Revenue recognition (Continued) Sale of products Sales revenue is recognized when significant risks and rewards of ownership of the products are transferred to the buyer, which generally occurs upon delivery thereof.

Financial income For all financial instruments stated at amortized cost, interest income or expense is recorded at the effective interest rate, discounting exactly the payments or estimated future receipts of cash during the estimated life of the financial instruments or in a shorter period of time, where applicable, at net book value of financial assets or liabilities. Interest income is included in the “Financial income” account in the income statements.

2.3 Translation of balances stated in foreign currency

These financial statements are presented in Brazilian reais (R$), which is the Company’s functional currency. Transactions in foreign currency are initially recorded at the foreign currency exchange rate on the transaction date. Monetary assets and liabilities stated in foreign currency are translated at the foreign exchange rate effective on the balance sheet date. All differences are recorded in the income statement.

2.4 Cash and cash equivalents

Cash and cash equivalents include cash, balances in bank account, short-term investments redeemable up to three months as of the date of acquisition and with insignificant risk of change in their market value.

2.5 Trade accounts receivable

Trade accounts receivable are recorded at billed amount, adjusted at present value when applicable, including the corresponding direct taxes incumbent upon the Company. Trade accounts receivable from foreign customers are updated as disclosed in Note 2.3 If the receipt period corresponds to one year or less, these accounts receivable will be classified as current assets. Otherwise, these will be classified as noncurrent. Allowance for doubtful accounts was recorded in an amount considered sufficient by the Company’s management to cover any losses arising from the realization of credits, based on the analysis of balances of customers with default risk.


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2.6 Inventories

Inventories are measured at cost or net realizable value, whichever is lower. Conditions of and costs incurred to transport each product to its current location are accounted for as follows: (i) Raw-materials – acquisition cost based on average cost. (ii) Finished products and work in process – cost of direct materials and labor and a

proportional portion of overhead costs, based on regular operating capacity. Net realizable value corresponds to sales price in the normal course of business, less estimated conclusion costs and estimated selling costs. Provisions for slow-moving or obsolete inventories are set up, whenever deemed necessary by the management.

2.7 Noncurrent assets held for sale Noncurrent assets classified as held for sale are measured based on the lower amount between book value and fair value, deducted of cost to sell. Noncurrent assets are classified as held for sale when the related book values are recovered by means of a sale transaction, rather than through continuous use. This condition is only met when the sale is highly probable and the group of assets/assets for sale is available for immediate sale in their current condition. Management should be committed the sale. Once classified as held for sale, the assets are not depreciated or amortized.

2.8 Property, plant and equipment These are recorded at acquisition or construction cost. Depreciation is calculated on a

straight-line basis at rates considering the estimated useful life of assets as described in Note 9. PP&E is stated net of Social Contribution Tax on Gross Revenue for Social Integration Program (PIS)/Social Contribution Tax on Gross Revenue for Social Security Financing (COFINS) and State VAT (ICMS) credits, recorded against taxes recoverable. An item of property, plant and equipment is written off when sold or when no future economic benefit is expected to arise from its use or sale. Possible gains or losses from assets written off - calculated as the difference between net sales and book value of assets - are included in the income statement in the year in which the asset is written off. Repair and maintenance costs are recognized in the income statement, when incurred. The net book value and useful life of assets and depreciation methods are reviewed at each year-end, and prospectively adjusted, if so necessary.


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2.9 Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization, when applicable. Intangible assets internally generated are not capitalized, being recognized in the income statement in the year as incurred. The useful life of intangible assets is evaluated as finite and indefinite. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each financial year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the income statement in the expense category consistent with the function of the intangible assets. Intangible assets with indefinite useful lives are not amortized, however they are annually tested to determine impairment losses, individually or in relation to cash-generating unit. The assessment of indefinite useful life is reviewed annually to determine whether such assessment is still applicable. Otherwise, change in the useful life assessment from indefinite to finite shall be performed on prospective basis. Company’s expenses with research and development totaled R$2,601 (R$2,663 in 2011) and due to noncompliance with capitalization criteria, these were posted in the income statements as costs and operating expenses.

2.10 Impairment of nonfinancial assets Management regularly reviews the net book value of assets in order to evaluate events or

changes in the operating or technological economic circumstances that may indicate deterioration or impairment. When such evidence is identified and the net book value exceeds the recoverable amount, a valuation allowance is set up by adjusting the net book value at recoverable amount

The recoverable value of an asset or a certain cash generating unit is defined as the lower of value in use or net sales value.

The estimation of the amount in use of the asset, the estimated future cash flows are discounted to present value by using a discount rate before taxes that reflects the weighted average cost of capital pursuant to the industry, in which the cash-generating unit operates. The net sales value is determined, where possible, based on a sale contract in a transaction on arm's length bases, between knowledgeable, interested and willing parties, adjusted for expenses attributable to the sale of assets, or when there is no firm sales contract, based on the market price of an active market, or at the latest transaction price with similar assets.


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2.10 Impairment loss of nonfinancial assets (Continued) At December 31, 2012 no impairment risks were identified, accordingly, no provision for impairment losses was required.

2.11 Adjustment to present value of assets and liabilities Current and noncurrent monetary assets and liabilities are adjusted to present value, when the effect is considered significant in relation to the overall accompanying overall financial statements. At December 31, 2012 and 2011, only trade accounts receivable and loans granted to customers were considered significant and subject to present value adjustment. There were no other current or noncurrent assets and liabilities, which required present value adjustment. The present value is calculated at the interest rate reflecting term and risk of each transaction, also considering contractual cash flows and explicit and sometimes implicit interest rate, interest rate of the respective assets and liabilities. For forward transactions, the Company uses Selic rate variation, since this is the benchmark rate used in this type of transaction. Present value adjustment of trade accounts receivable is recorded against gross revenue in the income statements and the difference between present value of a transaction and face value of billing is considered as a financial income and will be allocated based on amortized cost.

2.12 Provisions

General Provisions are recognized when the Company has a present (legal or not formalized)

obligation arising from a past event, the settlement of which is likely to require an outflow of economic benefits, and such obligation amount may be reliably estimated.

Provisions for tax, civil and labor risks The Company is party to several legal and administrative proceedings. Provisions are set up for all contingencies related to lawsuits for which an outflow of resources is probable to settle the contingency/obligation and when its amount may be reasonably estimated. Assessment of the likelihood of loss includes analysis of available evidence, hierarchy of laws, available case law, recent court rulings and their relevance in the legal system, as well as the evaluation of outside legal advisors. The provisions are reviewed and adjusted to take into account changes in circumstances, such as the applicable statute of limitations, outcomes of tax inspections, or additional exposures that may be identified based on new issues or court decisions.


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2.13 Taxation

Sales tax Revenues, expenses and assets are recognized net of sales tax, except:

• when taxes on sales incurred on the purchase of goods or services are not recoverable

with the tax authorities, case in which taxes on sales are recognized as part of the acquisition cost or of expense item, as applicable;

• when amounts receivable and payable are presented together with sales tax; and • when net amount of sales tax recoverable from, or payable to, the taxation authority is

included as part of receivables or payables on the balance sheet. Sales revenues are subject to the following taxes and contributions at the statutory rates below:

Rates State VAT (ICMS) 7.00% to 17.00% Federal VAT (IPI) (*) 5.00% to 10.00% Social Contribution Tax on Gross Revenue for Social Security

Financing (COFINS) 7.60%

Social Contribution Tax on Gross Revenue for Social Integration Program (PIS)

1.65%

National Institute for Social Security (INSS) (**) 1.00% * The Brazilian Federal Government, by means of a Decree No. 7796 of August 30, 2012, zeroed IPI rate up

to December 31, 2012. ** The Brazilian Federal Government, by means of a Decree No. 10546 of December 14, 2011, changed the

calculation method of the contribution, which stared to be performed based on revenues.

Sales revenues are stated net of these taxes in income statement for the year. Credits arising from noncumulative PIS/COFINS are recorded by deducting the cost of products sold.

Current income and social contribution taxes Current tax assets and liabilities are measured at expected recoverable value or payable to tax authorities, and are stated as current assets or liabilities, according to their expected realization and/or settlement. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. Deferred income and social contribution taxes

Deferred taxes arise from temporary differences at balance sheet date between the tax bases of assets and liabilities and their book values. Deferred taxes are recognized for all deductible temporary differences, to the extent it is probable that a taxable profit will be available against which the deductible temporary differences, except when the deferred tax assets or liabilities relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction other than a business combination and, at the time of the transaction, affects neither the accounting profit nor the taxable profit or loss


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2.13 Taxation (Continued) Carrying amount of deferred tax assets is reviewed at each balance sheet date and written off to the extent it is no longer likely that taxable income will be available to allow for the use, in whole and in part, of the deferred tax asset. Deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow for the recovery of deferred tax asset. Deferred tax assets and liabilities are recorded under noncurrent assets or liabilities and are measured at tax rates expected to be applied in the year, in which the asset is realized, based on tax rates (and tax laws) duly enacted at the reporting date. At December 31, 2012 and 2011, the Company did not record income and social contribution tax losses.

2.14 Other employee benefits Benefits granted to Company’s employees and managing officers include, in addition to fixed compensation (salaries and social security contributions, vacation pay and 13th monthly salary pay), variable compensation, such as profit sharing, health care plan and education allowance. These benefits are recorded in the income statement for the year when the Company has an obligation on an accrual basis, as incurred.

2.15 Earnings per share The Company calculates its basic and diluted earnings per share using the weighted average number of common shares outstanding over the corresponding period.

2.16 Cash flow statement and statement of value added The cash flow statements were prepared under the indirect method and are presented in accordance with CPC 03 - Cash Flow Statement, issued by the Brazilian Accounting Standards Commitee (CPC). The statement of value added was prepared in accordance with CPC 09.


17


2.17 Financial instruments - Initial recognition and subsequent measurement Initial recognition and measurement Financial instruments are initially measured at fair value plus transactional costs directly attributable to their acquisition or issuance, except for financial assets and liabilities classified at fair value through profit or loss, where such costs are recorded directly in the income statements for the year. Main financial assets recognized by the Company include: cash and cash equivalents, trade accounts receivable and loans granted to customers. These assets were classified under loans and receivable. In 2011, the Company had a restricted short-term investment, which was classified as held to maturity. The main financial liabilities are: trade accounts payable, other accounts payable and loans and financing. These instruments are classified as loans and financing and measured at amortized cost. Subsequent measurement The subsequent measurement of financial instruments is performed at each balance sheet date according to classification of financial asset and liability under the following categories: fair value through profit or loss, held-to-maturity investments, loans and receivables and loans and financing.

The Company’s financial assets and liabilities were classified into the following categories: Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs incurred. Amortization of the effective interest rate method is included in financial income under profit or loss. The losses arising from impairment are recognized in income statement as financial expenses. Loans and financing After initial recognition, interest bearing loans and financing are subsequently measured at amortized cost using the effective interest rate method. Gains and losses are recognized in the income statement upon derecognition of liabilities, as well as through the effective interest rate method amortization process.


18


2.18 Information by segment

The Company’s operations involve developing, manufacturing, marketing and providing furniture-related services (modular and planned) for both the domestic and international markets, which are organized in a single operating segment. Although products are sold through specific sales channels, according to their category, the Company manages and controls its products on an integrated basis. The corresponding operating results are also monitored and assessed on an integrated basis

2.19 Lease agreements

The Company entered into an operating lease agreement for aircraft, which is recognized as an expense on a systematic basis, representing the period for which the benefit on the leased asset item is obtained, even if such payments are not made on such basis. For the year ended December 31, 2012, lease expenses and expenditures related to the aircraft maintenance and up keeping totaled R$1,776 (R$1,561 at December 31, 2011), which were fully reimbursed by shareholders for the use thereof.

2.20 New IFRSs and IFRIC interpretations (International Financial Reporting Interpretations Committee) Below is a summary of standard already issued and effective as of this year, which did not impact the Company’s financial statements: • IAS 1 - Presentation of Financial Statements – Presentation of Other Comprehensive Results. • IAS 12 Income Taxes - Recovery of Underlying Assets. This revision provided clarification on how to calculate deferred taxes on investment properties measured at fair value. Below we highlight the standards already issued and not yet effective at the reporting date. Based on the management’s evaluation, such standards will not impact the Company’s financial statements: • IAS 19 Employee Benefits (revision) - This amendment becomes effective for yearly periods beginning on or after January 1, 2013. • IAS 27 Consolidated and Separate Financial Statements (revised in 2011) – This amendment becomes effective for yearly periods beginning on or after January 1, 2013. • IAS 28 Accounting for Investments in Associates and Joint Ventures (revised in 2011) – This amendment becomes effective for yearly periods beginning on or after January 1, 2013. • IAS 32 Offsetting of Financial Assets and Financial Liabilities – effective as of January 1, 2014, the Company does not expect significant impacts on its financial statements.


19


2.20 New IFRSs and IFRIC interpretations (International Financial Reporting Interpretations Committee) (Continued)

• IFRS 7 Financial instruments: Disclosures – Increase in disclosures related to write-offs. This amendment shall be effective for yearly periods beginning on or after July 1, 2011, and, in Brazil, only after the approval from Brazilian FASB (CPC). • IFRS 9 Financial instruments – Classification and Measurement IFRS 9, as issued, the pronouncement is the Phase 1 of the IAS 39 “Financial Instruments replacement project, and refers to the classification and measurement of financial assets and liabilities as established by IAS 39. This standard will be effective for yearly periods beginning on or after January 1, 2013. • IFRS 10 - Consolidated Financial Statements – This amendment becomes effective for yearly periods beginning on or after January 1, 2013. • IFRS 11 – Joint arrangements. This amendment will be effective for yearly periods beginning on or after January 1, 2013. • IFRS 12 – Explains and requires specific disclosures related to investments in other companies. Not applicable to the Company. • IFRS 13 – Measurement at fair value. This amendment will be effective for yearly periods beginning on or after January 1, 2013. There are no other standards and interpretations issued but not yet adopted that may, in the management’s opinion, have a significant impact on the income or equity disclosed by the Company.

3. Significant accounting judgment, estimates and assumptions

The preparation of the Company’s financial statements require Management to make judgments and estimates and adopt assumptions that affect the presented revenues, expenses, assets and liabilities as well as the disclosures of contingent liabilities at the reporting date. However, uncertainties related to these assumptions and estimates may lead to results requiring significant adjustment to the book value of the affected asset or liability in future periods. Estimates and assumptions Significant assumptions regarding the uncertainty sources of future estimates and other significant estimate-related sources of uncertainty as of the balance sheet date, involving significant risk of future adjustments in assets and liabilities’ book value for the following financial year are discussed below:


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3. Significant accounting judgments, estimates and assumptions (Continued) Provisions for tax, civil and labor risks: Assessment of the likelihood of loss includes analysis of available evidence, hierarchy of laws, available case law, recent court rulings and their relevance in the legal system, as well as the evaluation of outside legal advisors. Provisions are reviewed and adjusted to consider changes in circumstances, such as: applicable prescription period, tax audit conclusions or additional exposures identified based on new matters or court decisions. Impairment loss of non-financial assets: Impairment losses exist when the book value of an asset or cash-generating unit exceeds its recoverable value, which is the highest amount between fair value less selling cost and value in use. The calculation of fair value less selling costs is based on information available on sales transactions of similar assets or market prices less any additional costs to dispose of the asset. Calculation of value in use is based on discounted cash flow model. Cash flows derive from budget for the following five years and include no restructuring activities to which the Company is not yet committed or significant investments that may improve the asset base of the cash generating unit subject to test. The recoverable value is sensitive to the discount rate used in discounted cash flow method, as well as to the receipt of estimated future cash flows and the growth rate used for extrapolation purposes. Taxes: There are uncertainties regarding the interpretation of complex tax regulations and the amount and term of future taxable income. Given the nature and the complexity of existing contractual instruments, differences between actual results and assumptions adopted, or future changes in these assumptions could require future adjustments in the already recorded revenue and tax expenses. The Company records provisions for contingencies that may arise as a result of tax audits by competent authorities in the jurisdictions in which it operates. The amount of these provisions is based on various factors, such as past tax audit experience and different interpretations of tax regulations by the taxpaying entity and by the relevant tax authority. These differences of interpretation may arise on a wide variety of subjects depending on conditions prevailing in the Company’s domicile. Settlement of transactions involving these estimates may result in amounts significantly different from those recorded in the financial statements due to inaccuracies inherent to their estimation process. The Company reviews its estimates and assumptions at least on a quarterly basis.


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4. Cash and cash equivalents 2012 2011 Cash and banks 1,728 1,261 Short-term investments Bank deposit certificate (CDB) 26,991 10,870

28,719 12,131

These highly liquid short-term investments are immediately convertible into known cash amounts and subject to insignificant risk of any changes in value Short-term investments are made with first tier banks (country’s ten largest bank institutions), earnings of which are pegged to Interbank Deposit Certificate (approximately 100.4% of CDI).

5. Trade accounts receivable

2012 2011 Domestic market

of third parties of related parties (Note 20)

95,071 135

109,254 99

Foreign Market of third parties 3,723 2,219

Checks receivable 5,302 7,915 104,231 119,487 (-) Allowance for doubtful accounts (8,306) (5,069) (-) Present value adjustment (2,717) (3,563)

93,208 110,855 Current assets 77,732 77,833 Noncurrent assets 15,476 33,022 93,208 110,855 Average receipt terms from January to December were of 46 and 45 days respectively. The changes in the allowance for doubtful accounts are shown below:

2012 2011 Balance at the beginning of year (5,069) (2,621) Additions (12,341) (5,540) Amounts recovered / realized 7,011 1,930 Write-off due to bad debts 2,093 1,162 Balance at end of year (8,306) (5,069) Analysis of trade accounts receivable at December 31, 2012 and 2011 by maturity:

2012 2011 Falling due 91,603 107,773 Overdue: From 1 to 30 days 2,538 4,473 From 31 to 60 days 1,295 1,885 From 61 to 90 days 1,835 1,101 From 91 to 180 days 3,472 1,428 Over 181 days 3,488 2,827 104,231 119,487


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6. Inventories

2012 2011 Finished products 17 15 Work in process 2,834 3,514 Products for resale 417 509 Raw materials 12,495 14,397 Packing materials 185 236 Intermediate materials 2,044 2,979 Advances to suppliers 488 258 Sundry materials 1,189 1,303 Provision for obsolescence (373) (1,067)

19,296 22,144 The breakdown of provision for obsolescence is as follows:

2012 2011 Balance at the beginning of year (1,067) (1,064) Additions (808) (3) Amounts recovered / realized 1,502 -

Balance at end of year (373) (1,067)

7. Noncurrent asset held for sale

At December 31, 2012, the balance of R$8,848 (R$6,751 at December 31, 2011) is mainly comprised of land, apartments and other real estate properties received in debt negotiations with customers and are available for immediate sale. The Company has an agreement with specialist brokers for sale of real estate properties and believes in the possibility of selling such assets in the short term. The amounts are kept at acquisition cost and are lower than their market value.

8. Loans granted

2012 2011 Loans granted 7,790 11,985 (-) Present value adjustment (272) (359) 7,518 11,626 Current assets 1,971 3,524 Noncurrent assets 5,547 8,102

7,518 11,626

These refer to loans granted by the Company to customers, with the purpose of financing the expansion of authorized and exclusive retailers’ chain stores. The loans bear average interest of 9.08% per year. The Company has letters of credit from the store partners, as well as first degree mortgage guarantees, as guarantee for the loans granted The Company provided sureties to bank financing obtained by the exclusive retailers. At December 31, 2012, the balance of the guarantee provided totaled R$37 (R$ 4,831 at December 31, 2011)


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9. Property, plant and equipment

PP&E cost Land Buildings Improvements Facilities Machinery and equipment Vehicles

Furniture and

fixtures IT equipment Construction in

progress Advances Total

Balance at 12/31/2011

1,378

14,883

3,300

3,738

76,239

72

2,108

3,878

5,644

1,645 112,885

Acquisitions

-

80

26

425

2,909

76

405

614

3,036

2,976 10,547

Write-offs

-

-

(1)

-

(358)

(28)

(89)

(19)

-

- (495)

Transfers

-

4,286

-

4

5,143

-

5

-

(5,568)

(3,870) -

Balance at 12/31/2012 1,378 19,249 3,325 4,167 83,933 120 2,429 4,473 3,112 751 122,937

Accumulated depreciation Land Buildings Improvements Facilities Machinery and

equipment Vehicles Furniture

and fixtures

IT equipment Construction in progress Advances Total

Balance at 12/31/2011

-

(4,246)

(486)

(299)

(28,166)

(42)

(833)

(2,819)

-

- (36,891)

Depreciations

-

(629)

(133)

(403)

(6,234)

(17)

(204)

(426)

-

- (8,046)

Write-offs

-

-

-

-

273

12

69

19

-

- 373Balance at 12/31/2012 - (4,875) (619) (702) (34,127) (47) (968) (3,226) - - (44,564)

Net book value

Balance at 12/31/2011 1,378 10,637 2,814 3,439 48,073 30 1,275 1,059 5,644 1,645 75,994 Balance at 12/31/2012 1,378 14,374 2,706 3,465 49,806 73 1,461 1,247 3,112 751 78,373

During the year, the Company acquired PP&E items equivalent to a total of R$10,547. The balance payable to suppliers for PP&E acquisition at December 31, 2012 totaled R$950 (R$1,893 at December 31, 2011), as mentioned in Note 13. From the total additions for the year, the amount of R$270 refers to assets acquired from customers (exclusive retailers) and that were offset with trade accounts receivable balances held with such exclusive retailers.

Depreciation is calculated on a straight-line basis considering the assets’ useful lives. The table below shows rates that consider the remaining useful life of assets:

Weighted average

of useful life Average annual depreciation

rate Buildings 25 years 4% Improvements 25 years 4% Facilities 10 years 10% Machinery and equipment 10 years 10% Vehicles 5 years 20% Furniture and fixtures 10 years 10% IT equipment 5 years 20%


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10. Intangible assets

Software Trademarks and

patents Store use rights Total Balance at 12/31/2011 508 122 - 630 Acquisitions 371 6 17,236 17,613 Transfer of investments - - 300 300 Accumulated (210) (21) - (231) Balance at 12/31/2012 669 107 17,536 18,312

The Company keeps the intangible asset at acquisition cost at the following depreciation rates:

Weighted average

of useful life Average annual depreciation

rate Software 5 years 20% Trademarks and patents 10 years 10% Store use rights Indefinite - The acquisitions of store use rights occurred substantially in December 2012 and seek to create of a chain of own stores to be operated by the Company. From the total store use rights acquired, R$14,476 referred to agreement of Company’s customers, with the amount due having been paid by offsetting trade accounts receivable balances of the corresponding customers, existing on the transaction date. Other acquisitions, in the amount of R$2,760, were performed with payment in cash. At December 31, 2012 there are no other obligations from these acquisitions to be recognized by the Company. Impairment test The Company evaluated the recovery of the net book value of intangible assets with indefinite useful lives by using the concept of "net fair value of selling expenses", through evaluation reports of the market value of store use rights purchased, prepared by company specialized in market evaluations. The methodology used to determine the net fair value of selling expenses was the comparative method of market data. This method determines the amount based on comparison with market data that are similar in terms of intrinsic and extrinsic characteristics of the asset then evaluated. The characteristics and attributes of the surveyed data that impact price formation and, consequently, the figure, were weighted by homogenization or by statistical inference. The aforesaid market research resulted in the composition of a representative sample of data from real estate market with features, as far as possible, similar to those in possession of the Company, using all available evidence. The recovery test of intangible assets of the Company did not result in the need for recognition of loss for the year ended December 31, 2012, since the estimated market value is higher than the net book value on the valuation date.


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11. Other assets

2012 2011

Recovery of expenses (a) 2,044 848 Taxes recoverable 4,333 535 Other (b) 472 1,350 (-) Valuation allowance with credits recoverable (2,468) - Total 4,381 2,733

Current assets 2,377 2,097 Noncurrent assets 2,004 636

4,381 2,733

(a) Refers mainly to expenses incurred by the Company in marketing campaigns, which shall be reimbursed by the exclusive retailers.

(b) Substantially composed of receivables from financial institutions as described in Note 18.

12. Loans and financing

Interest

rates Final

maturity

2012

2011 Financing of property, plant and equipment Banco Votorantim 9% per year 06/15/2014 1,672 2,788 Export financing Banco Santander – BNDES 9% per year 06/15/2013 4,013 4,015 5,685 6,803 Current liabilities 5,128 1,115 Noncurrent liabilities 557 5,688 5,685 6,803 Aging list of long-term payable at December 31, 2012 and 2011:

Maturity for the year 2012 2011 2013 - 5,130 2014 557 558 557 5,688

The Company’s controlling shareholders provided sureties on the loans and financing. At December 31, 2012, the Company had R$18,500 in credit facilities made available and approved by financial institutions, however; not used. The Company’s loans and financing do not have covenant clauses.


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13. Trade accounts payable The trade accounts payable for the years ended December 31, 2012 and 2011 break down as under:

14. Income and social contribution taxes

Amounts recorded in profit or loss The breakdown of income and social contribution tax expenses at December 31, 2012 and 2011 is described below:

Reconciliation of income tax expenses with statutory rates

Reconciliation between income tax expense and the result obtained by multiplying book profit by the local tax rate for year ended December 31, 2012 and 2011 is described below:

2012 2011

Income tax Social

contribution Income tax Social

contribution Income before taxes 56,946 56,946 81,376 81,376 Income and social contribution taxes at statutory rate of 25% and 9%, respectively, (14,237) (5,125) (20,344) (7,324) Adjustments to effective tax rate Interest on equity capital 2,250 810 2,325 837 Permanent exclusions/additions 508 56 132 (190) Tax incentive for deduction of income tax (PAT) 48 - 50 - Income tax - surtax 24 - 24 - Tax incentive (technological innovation) 650 234 666 240 Amount recorded in the income statement (10,757) (4,025) (17,147) (6,437) Total income and social contribution taxes (14,782) (23,584) Effective rate 19% 7% 21% 8%

2012 2011 Domestic market

Inputs of third parties 4,589 2,842

Sundry materials 526 559

Services 633 3,131

5,748 6,532

Foreign Market

Property, plant and equipment 950 1,893

950 1,893

Total markets – domestic and foreign 6,698 8,425

2012 2011 Current income and social contribution taxes: Current income and social contribution tax expenses (15,719) (25,207) Deferred income and social contribution taxes: Tax credit on expenses with issuance of shares for the IPO process (1,369) - Related to set up and reversal of temporary differences 2,306 1,623 Income and social contribution tax expenses recorded in the income statement (14,782) (23,584)


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14. Income and social contribution taxes (Continued) Deferred income and social contribution taxes

Breakdown of deferred income and social contribution taxes is described below:

Balance sheet Income statement 2012 2011 2012 2011

Income tax

Allowance for doubtful accounts 2,076 1,046 1,030 532 Provision for adjustment of obsolete inventories 93 267 (174) 1

Provision for commissions 55 59 (4) (35) Provision for investment losses 31 31 - -

Valuation allowance with sureties 617 - 617 -

Provision for tax, civil and labor risks 1,291 847 444 315 Present value adjustment 747 981 (234) 672

Other temporary provisions 12 (3) 15 (290)

4,922 3,228 1,694 1,195

Social contribution

Allowance for doubtful accounts 748 376 372 191 Provision for adjustment of obsolete inventories 34 96 (62) -

Provision for commissions 20 21 (1) (14) Provision for investment losses 50 50 - -

Valuation allowance with sureties 222 - 222 -

Provision for tax, civil and labor risks 465 305 160 97 Present value adjustment 269 353 (84) 242

Other temporary provisions 4 (1) 5 (88)

1,812 1,200 612 428

Total income and social contribution taxes 6,734 4,428 2,306 1,623


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15. Provision for tax, civil and labor contingencies

I) Provisions The Company is defendant in certain labor, civil and tax proceedings. The provision for estimated

losses was recorded based on the opinion of its legal advisors, in an amount considered sufficient to cover probable losses arising from unfavorable court decisions.

At December 31, 2012 and 2011, the provision for contingencies breaks down as follows:

2012 2011 Provision for labor risks 1,867 1,190 Provision for tax risks 2,319 1,632 Provision for civil risks 979 567

5,165 3,389 Labor – the Company is a party to labor claims mainly referred to overtime, health hazard bonus, hazardous duty pay, among others. Tax – the Company is a party to tax proceedings mostly related to federal VAT (IPI) and National Institute for Social Security (INSS). Civil – The Company is a party to labor proceedings involving shop owners and end consumers, in which the Company is jointly liable. The management, based on the legal counselors’ opinion and on the history of outcomes of these claims, believes that the amounts provisioned are sufficient to cover probable losses.

At December 31, 2012, civil proceedings with losses rated as possible totaled R$11,270. Labor and tax claims totaled R$922 and R$8,288, respectively.

The Company has been challenging in court the tax notice served regarding the offset of IPI

tax credits in the amount of R$8,451, with loss rated as possible by the Company’s legal advisors. There is no other proceeding individually significant.

Changes in provision for contingencies are as follows:

2012 2011 Balance at the beginning of year 3,389 2,128 Additions 3,802 4,034 Amounts recovered / realized (2,026) (2,773) Balance at end of year 5,165 3,389


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15. Provision for tax, civil and labor contingencies (Continued)

II) Judicial deposits

The Company maintains judicial deposits related to various tax, labor and civil proceedings, and are described as follows:

2012 2011

Judicial deposits – Labor 105 82 Judicial deposits – Tax 716 695 Judicial deposits – Civil 1,319 642

2,140 1,419

16. Equity

a) Capital

The General Shareholders and Special General Meeting of February 24, 2012, revalidated by the Special General Meeting (SGM) of February 27, 2012, approved the Company’s capital increase by R$30,101 through the capitalization of income reserve and without issuing new shares, thus, the Company’s capital increased from R$29,699 at December 31, 2011 to R$ 59,800 at March 31, 2012. The Special General Meeting of March 30, 2012 approved the split of Company’s common registered shares with no par value at the proportion of 10.3547337 new common registered shares with no par value for each one (1) existing common registered shares with no par value, reflecting an increase of 51,450,100 shares, totaling 56,950,000 common registered shares with no par value at March 31, 2012 (5,499,000 at December 31, 2011). On April 25, 2012, the Company was registered as a publicly-held company. In the context of the Company’s primary and secondary public offering, the Board of Directors’ meeting of April 25, 2012 approved the Company’s capital increase by R$127,909 upon the issue of 9,136,364 common, registered shares with no par value, which was fully paid in with funds arising from the Company’s public offering of shares. At December 31, 2012, capital of R$187,709 is divided into 66,086,364 common registered shares with no par value. Common shares issued and fully paid up

Shares Capital (thousands)

Balance at 12/31/2011 5,499 29,699 Paid up capital on 02/27/2012 - 30,101 Split of shares at 03/30/2012 51,451 - Issue of shares on 04/25/2012 9,136 127,909 Balance at 12/31/2012 66,086 187,709


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16. Equity (Continued)

b) Retained profits reserves Capital reserve Distribution costs, attributed to the Company, arising from the primary offering, totaled R$4,027 (R$2,658 net of tax effects).

Legal reserve

Legal reserve was set up pursuant to the Corporation Law and the Articles of Incorporation, at 5% of the net income of each year up to the limit of 20% of the capital. Accordingly, the Company allocated R$2,109 to legal reserve in 2012, totaling the balance of R$8,048 at December 31, 2012. Reserve for expansion The Company’s management, based on the capital budget, proposed for deliberation of the General Shareholders’ and Special General meeting to be held on April 30, 2013, the set up of a Income Reserve for Expansion in the amount of R$4,997, as provided for in article 34, item (e) of the Company’s articles of incorporation, to cover part of the expansion plan investments. Pursuant to article 199 of Law 6404/76, the balance of this reserve may not exceed the Company’s capital.

c) Dividends and interest on equity Dividends

In accordance with the Company’s Articles of Incorporation, the minimum mandatory dividend is calculated at 25% of the adjusted net income for the year after statutory reserves are recorded. The Company may include interest on equity to the account of minimum mandatory dividends. The General and Special Meeting held on February 24, 2012, revalidated at the Special General meeting of February 27, 2012, approved the distribution of retained earnings reserves accumulated up to December 31, 2011 in the amount of R$ 130,000, fully paid until July 3, 2012.

Interest on equity capital

In compliance with Law No. 9249/95, the Company calculated interest on equity capital based on the long-term interest rate (TJLP) variation. In compliance with tax legislation in force, interest on equity capital at December 31, 2012 totaled R$ 9,000 (R$ 7,990, net withholding tax), R$ 9,300 in 2011 (R$7,905, net of withholding tax). The amount computed was recorded as financial expenses and reversed to a specific account, thus not being recorded in the income statement, except for tax impacts recognized under Income and Social Contribution Taxes


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16. Equity (Continued)

c) Dividends and interest on equity (Continued)

Dividends and interest on equity paid From the profits earned in the year ended December 31, 2012 and based on the generation capability of Company’s operating cash, the management proposed to the General Special Meeting to be held on April 30, 2013 for the resolution on dividend distribution in the amount of R$34,048 and R$7,990 (R$0.1209 per share) as interest on own capital and R$26,058 (R$ 0.3943 per share) as dividends, as under:

2012 2011

Net income for the year 42,164 57,792 Legal reserve (5%) (2,109) - Adjusted net income 40,055 57,792 Minimum mandatory dividends (25%) 10,014 14,448 Proposed distribution Interest on equity, net of withholding income tax 7,990 7,905 Mandatory minimum dividends 2,024 6,543 Proposed additional 24,034 5,812 Total proposed for distribution 34,048 20,260 Dividends distributed above the minimum 24,034 5,812 Percentage of adjusted dividends distributed 85.0% 35.1%

17. Net earnings per share

The basic calculation of earnings per share is made through the division of net income for the year, attributed to the Company’s common shareholders, by the weighted average number of common shares available in the year. The Company does not have preferred shares. There is no difference between the calculation of basic and diluted earnings per share, given the absence of dilutive potential shares. The table below presents P&L and share data used to calculate basic and diluted earnings per share: 2012 2011

• Net income for the year

42,164 57,792 • Weighted average number of shares issued (in thousands)* 63,208 56,950

• Earnings per share - base and diluted (R$) 0.67 1.01 * Considering the split of shares approved by the Special General Meeting held on March 30, 2012. There were no other transactions involving common or potential common shares between the balance sheet date and the completion date of these financial statements.


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18. Other operating expenses

2012 2011 Operating expenses Losses on the disposal of PP&E items (35) (76) (35) (76) Operating revenues Gains on the disposal of PP&E items 10 92 Bank premium 7,152 4,625 Other operating expenses 2,217 1,855 9,379 6,572 Other operating income, net 9,344 6,496

This refers to amounts received from financial institutions as per the volume of financing made through the store chain served by the Company, which is matched against other assets.

19. Financial income (expenses), net

2012 2011 Financial expenses Tax on Financial Transactions (IOF) expenses and banking fees (622) (797) Loans and financing expenses (547) (305) Foreign exchange losses (413) (162) Present value adjustment (342) (1,335) Discounts granted (1,086) (5) Other financial expenses (65) (41) (3,075) (2,645) Financial income Interest received 3,346 2,733 Discounts obtained 516 325 Short-term investment yield 2,487 1,996 Foreign exchange gains 314 973 Present value adjustment 5,033 3,989 Other financial income 571 627 12,267 10,643 Financial income (expenses), net 9,192 7,998


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20. Transactions and balances with related parties For the year ended December 31, 2012 and 2011, the Company carried out the following transactions with related parties:

2012 2011 Current assets Trade accounts receivable Telasul S.A. 135 99 135 99 Other receivables Other related parties (a) - 952 - 952 Total assets 135 1,051 2012 2011 Income statement Sales

Other related parties (a) 26 - Telasul S.A. 502 622

528 622 Purchase Telasul S.A. 11,498 15,548 11,498 15,548

(a) Other related parties represented by transactions with shareholders.

Transactions involving the Company and the related party Telasul S.A., refers to purchase of inputs (aluminum doors, aluminum profiles and metal accessories) used in the production process for manufacturing of modular furniture. Unicasa also sells various finished products to Telasul S.A. (office furniture, modular furniture, among others), as well as wood scraps. Transactions are made at market price with an average purchase and sale term of seven days.

As mentioned in Note 2.20, the Company maintains the lease of one aircraft. For the year ended December 31, 2012, lease expenses and expenditures related to aircraft maintenance and up keeping totaled R$1,776 (R$1,561 at December 30, 2011), which were fully reimbursed by shareholders for the use of such equipment.

Company’s transaction terms and conditions Telasul S.A. is controlled by the Company’s controlling shareholders. Balances outstanding at the year-end are not secured and shall be settled in cash within terms similar to third-party transactions. No guarantees were given or received for related-party receivables or payables. Management compensation The Company paid its managing officers (Statutory Officers and Board of Directors) compensation of R$2,555 in the year ended December 31, 2012 (R$3,072 at December 31, 2011). The Company does not provide its key personnel with the following compensation benefits: (i) post-employment benefit, (ii) long-term benefit, (iii) termination benefits and (iv) share-based payment


34

21. Net revenue from sales

The breakdown of net revenue from sales is as follows:

2012 2011 Gross revenue from sales 367,072 402,355 IPI on sales (3,870) (18,546) ICMS tax substitution on sales (28) - Gross sales revenue ( - ) IPI and tax substitution on sales 363,174 383,809 ICMS on sales (40,437) (43,812) Other sales tax (PIS/COFINS/INSS) (34,182) (35,922) Sales returns (5,356) (4,057) Present value adjustment (3,758) (5,341) 279,441 294,677

22. Expenses by nature

2012 2011 Expenses by function Cost of goods and services (163,972) (168,792) Selling expenses (57,422) (42,223) Administrative expenses (19,637) (16,780) (241,031) (227,795) Expenses by nature Personnel expenses (37,599) (33,755) Expenses with inputs (134,222) (138,692) Depreciation and amortization expenses (8,277) (7,066) Expenses with third-party services (12,611) (11,843) Advertising expenses (13,488) (10,456) Commission expenses (2,688) (2,498) Provision expenses (7,673) (3,712) Other expenses (24,473) (19,773) (241,031) (227,795)


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23. Financial risk management objectives and policies

The Company maintains financial instrument transactions, whose risks are managed through financial position strategies and system of exposure limit thereof, all recorded in the balance sheet accounts, which are held to meet the operating needs.

a) Fair value of financial instruments

At December 31, 2012 and 2011, key financial instruments and methods and assumptions adopted in determining fair value are described below:

• Cash and cash equivalents – direct result of Company’s operations and are marked to

market, which is equivalent to their book value at the balance sheet date. • Trade accounts receivable – direct result of the Company’s commercial operations, are

measured at the amortized cost and recorded at their original values, deducted of Valuation allowance and present value adjustment, when applicable. The book value approximates fair value considering short-term settlement of these operations.

• Loans granted – These are classified as financial assets not measured at fair value and

are recorded at amortized cost method in accordance with contractual conditions, net of present value adjustment. This definition was adopted, because the amounts are not held for trading, and according to management's understanding, these reflect the most significant accounting information. The fair values of loans granted differ from their book values, for being financial instruments with fixed interest rates that differ from current observable market rates.

• Loans and financing – These are classified as financial liabilities not measured at fair

value and are recorded at amortized cost method in accordance with contractual conditions. This definition was adopted, because the amounts are not held for trading, and according to management's understanding, these reflect the most significant accounting information. The fair values of financing granted differ from their book values, for being financial instruments with fixed interest rates that differ from current observable market rates.

All transactions with financial instruments are recognized in the Company’s financial statements. The following chart shows outstanding balances at December 31, 2012 and 2011, as well as their fair value:

Book value Fair value

2012 2011 2012 2011 Assets

Loans and receivables Cash and cash equivalents 28,719 12,131 28,719 12,131 Trade accounts receivable 93,208 110,855 93,208 110,855 Loans granted 7,518 11,626 8,096 11,626

Held to maturity Restricted short-term investments - 323 - 323

Liabilities Loans and financing

Trade accounts payable (6,698) (8,425) (6,698) (8,425) Loans and financing (5,685) (6,803) (5,725) (6,803)

The Company adopted the technique of evaluation of observable prices (“Level 2”) to determine the fair value of its financial instruments


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23. Financial risk management objectives and policies (Continued)

b) Risk management

The Company’s main financial liabilities comprise trade accounts payable, loans and financing and related parties. Such financial liabilities mainly aim to raise funds for the Company’s operations. The Company’s financial assets comprise cash and cash equivalents, trade accounts receivable and loans granted to customers, which are obtained directly from its transactions.

The Company is exposed to market risk (including interest rate risk, currency risk, and commodity price risk), credit risk and liquidity risk. Financial instruments affected by risks include loans and financing, short-term investments classified as cash and cash equivalents, trade accounts receivable, and loans granted to customers.

Risk management activities are consistent with the Company’s risk management policy; and are managed by its directors. These risks are managed based on control policy, which establishes exposure ongoing monitoring and measurement techniques. The Company does not carry out transactions with derivative instruments or any other type of transaction for speculative purposes.

• Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument fluctuates due to changes in market prices. Market prices include three types of risk: interest rate risk, currency risk, price risk - which may include, among others, commodities price risk. Financial instruments affected by market risk include loans payable and receivable and trade accounts payable.


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b) Risk management (Continued)

• Interest rate risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument fluctuates due to changes in the market’s interest rates. The Company’s risk exposure to changes in market interest rates relates primarily to the Company’s long-term debt obligations subject to variable interest rates.

The Company manages its interest rate risk by keeping a balanced portfolio of loans receivable and payable subject to fixed and variable rates. In order to mitigate these risks, the Company makes it a practice to spread fund raising in terms of fixed and floating rates, and permanent analysis of financial institution risks.

• Currency risks

Company’s income and expenses are subject to variation, due to volatility effects of floating exchange rate on transactions pegged to foreign currencies, basically in the export of finished product. The Company has been successful in adjusting its cost structure and sales prices so as to absorb foreign exchange rate fluctuation. At December 31, 2012, the Company’s trade accounts receivable from sales to the foreign market totaled USD 1,841 thousand and payable balance of EUR 352 thousand related to the purchase of new equipment for the plant.

Foreign currency sensitivity

A foreign currency sensitivity analyses and three different scenarios were established in

order to check the price index sensitivity of assets and liabilities in foreign currency to which the Company’s financial investments was exposed at December 31, 2012.

Three scenarios have been considered, with the probable scenario being adopted by the

Company. These scenarios were defined based on Management’s expectation for exchange rate variations on maturity dates of corresponding contracts subject to these risks.

In addition to this scenario, we present another two scenarios, with 25% and 50%

deterioration of the risk variable then considered.

Operation Currency Probable scenario

(Book value) Scenario A Scenario B Decrease in exchange rate

Trade accounts receivables in foreign

currency R$ 3,723 2,792 1,862 Trade accounts payables in foreign

currency R$ (950) (712) (475) Rate deterioration: Exchange rate reference: Dollar 2.04 1.53 1.02

Euro 2.70 2.02 1.35 Effect on income before tax R$ (693) (1,386)


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b) Risk management (Continued) • Commodity price risk This risk is related to the likelihood of floating in the price of raw materials and other

inputs used in the production process. Because it uses commodities, such as raw material and MDF boards, the Company may have its cost of products sold affected by price changes of these materials. In order to minimize this risk, the Company continuously monitors price fluctuations and, as applicable, establishes strategic inventories to maintain its business activities. The Company has been successful in adopting this policy.

• Credit risk

This risk arises from the Company’s likelihood of recording losses from default of its counterparts or financial institutions depositary of funds or investments. In order to mitigate these risks, the Company makes it a practice to review the financial position of its counterparts, define credit limits and monitor, on an ongoing basis, the outstanding positions. In relation to the financial institutions, the Company carries out transactions only with low-risk financial institutions, based on management's assessment. The Company’s has also recorded an allowance for doubtful accounts for trade accounts receivable, as mentioned in Note 5. Trade accounts receivable The customers’ credit risk is managed by the finance department, and is subject to the risk-related procedures, controls and policies established by the Company. Credit limits are established for all customers based on internal rating criteria. The credit quality of the customer is assessed based on an extensive internal credit rating system. Outstanding receivables from customers are regularly monitored. At December 31, 2012, the Company had approximately 8 customers (11 customers at December 31, 2011) accounting for approximately 50.04% (50.40% at December 31, 2011) of all outstanding receivables. The Company has security interests and monitors its exposure. These customers operate with a number of shops in Brazil, including a department store. There is no customer who individually represents more than 10% of total sales. The need for a valuation allowance due to impairment is analyzed on each date reported on an individual basis for major customers. In addition, a number of trade accounts receivable with lower balances are separated in homogeneous groups and, in these case, the requirement for the record of allowance for doubtful accounts is assessed collectively. Financial instruments and bank deposits The credit risk of balances with banks and financial institutions is managed by the Company’s financial department and monitored by the Executive Board. The exceeding funds are invested exclusively in first-tier financial institutions authorized by the Executive Board. The amounts invested are monitored to minimize the risk concentration and, therefore mitigate financial losses in the event of a possible counterparty’s bankruptcy.


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b) Risk management (Continued)

• Liquidity risk

Liquidity risk is the possibility of the Company not having enough funds to comply with their commitments based on different currencies and settlement terms of its rights and obligations.

The Company’s control of liquidity and cash flow is monitored daily by its financial department, to ensure that the cash operating generation and consequent prior funding (if necessary), be enough for the maintenance of its schedule of commitments, not generating liquidity risks for the Company.

The chart below summarizes maturity profile of financial liabilities at December 31, 2012 based on contractual payments and estimated interest rates:

At December 31, 2012 Less than 3

months 3 to 12 months

1 to 5 years Total

Loans and financing 396 4,991 570 5,957 Trade accounts payable 6,695 3 - 6,698

The Company does not have outstanding derivative financial instruments at December 31, 2012 and 2011 or engage any instruments of this nature over the years then ended.

c) Capital management

The primary goal of Company's capital management is to ensure that it maintains a strong credit rating and a trouble-free capital ratio in order to support business while maximizing shareholders’ value. The Company manages its capital structure and adjusts it based on changes in economic conditions. The capital structure or financial risk arises from the choice between own capital (capital contribution and retained profits) and third-party capital used by the Company to finance its operations. In order to mitigate liquidity risks and leverage the weighted average cost of capital, the Company permanently monitors its debt-to-equity levels in accordance with market standards. Furthermore, there were no changes in the objectives, policies or processes during the years ended December 31, 2012 and 2011. The Company’s net debt includes loans and financing and trade accounts payable, less cash and cash equivalents and restricted short-term investments not immediately redeemable, as stated below:

2012 2011 Loans and financing 5,685 6,803 Trade accounts payable 6,698 8,425 ( - ) Cash and cash equivalents (28,719) (12,131) ( - ) Restricted short-term investments - (323) Net debt (16,336) 2,774 Equity 222,130 195,739 Equity and net debt 205,794 198,513


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24. Insurance

The Company has insurance coverage considered sufficient by management to cover risks, if any, to its assets and/or liabilities. The main insurance categories are stated below:

Effective term

Amount insured Coverage From Up to

Fire, storm and electrical damage

Machinery and equipment 12/31/2012 12/31/2013 100,500 Inventory 12/31/2012 12/31/2013 21,827 Buildings 12/31/2012 12/31/2013 36,000

Loss of profits 12/31/2012 12/31/2013 17,712

25. Information by segment

The Company only manufactures (modular and planned) furniture, and it is organized in a single business unit. The Company’s products, although sold to various end consumers, these are not controlled and managed by the management as independent segments; accordingly, the Company’s profit or loss is managed, monitored and assessed as a single operating segment. Gross sales revenue in the domestic and foreign markets is represented below:

Gross revenue from sales 2012 2011 Domestic Market 359,009 395,361 Foreign Market 8,063 6,994 367,072 402,355

Documents

Relatório da Administração e Release de resultados do 4Q12 ...ri.unicasamoveis.com.br/admin/uploader/uploads/p18od04fqs3mt126qg0... · 3 2012 Management Report To the Shareholders,