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o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Name of each class | Name of each exchange on which registered | |
American Depositary Shares Ordinary Shares with a par value of€1.0 each | New York Stock Exchange New York Stock Exchange* |
- | Securities registered or to be registered pursuant to Section 12(g) of the Act:None | |
- | Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:None | |
- | Outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2006:54,738,538 Ordinary Shares |
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Exhibit 1.1 | ||||||||
Exhibit 8.1 | ||||||||
Exhibit 12.1 | ||||||||
Exhibit 12.2 | ||||||||
Exhibit 13.1 |
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Year Ended At December 31, | ||||||||||||||||||||||||
2006 | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||||||
(millions of | ||||||||||||||||||||||||
dollars, except | (millions of euro, except for Ordinary Share) | |||||||||||||||||||||||
per Ordinary | ||||||||||||||||||||||||
Share)(1) | ||||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||
Amounts in accordance with Italian GAAP : | ||||||||||||||||||||||||
Net sales: | ||||||||||||||||||||||||
Leather- and fabric-upholstered furniture | $ | 871.3 | € | 660.2 | € | 594.8 | € | 665.5 | € | 674.0 | € | 734.7 | ||||||||||||
Other(2) | 99.2 | 75.2 | 75.1 | 87.9 | 95.6 | 70.4 | ||||||||||||||||||
Total net sales | 970.5 | 735.4 | 669.9 | 753.4 | 769.6 | 805.1 | ||||||||||||||||||
Cost of sales | (647.4 | ) | (490.5 | ) | (459.4 | ) | (484.5 | ) | (508.8 | ) | (517.4 | ) | ||||||||||||
Gross profit | 323.1 | 244.9 | 210.5 | 268.9 | 260.8 | 287.7 | ||||||||||||||||||
Selling expenses | (245.8 | ) | (186.2 | ) | (182.2 | ) | (188.2 | ) | (179.3 | ) | (145.4 | ) | ||||||||||||
General and administrative expenses | (55.6 | ) | (42.2 | ) | (43.0 | ) | (40.7 | ) | (39.2 | ) | (40.5 | ) | ||||||||||||
Operating income (loss) | 21.7 | 16.5 | (14.7 | ) | 40.0 | 42.3 | 101.8 | |||||||||||||||||
Other income (expense), net(3) (4) (5) | 3.8 | 2.8 | 3.0 | (3.9 | ) | 3.7 | 14.5 | |||||||||||||||||
Earnings (loss) before taxes and minority interests | 25.5 | 19.3 | (11.7 | ) | 36.1 | 46.0 | 116.3 | |||||||||||||||||
Income taxes | (9.4 | ) | (7.1 | ) | (3.1 | ) | (17.6 | ) | (8.5 | ) | (25.0 | ) | ||||||||||||
Earnings (loss) before minority interests | 16.1 | 12.2 | (14.8 | ) | 18.5 | 37.5 | 91.3 | |||||||||||||||||
Minority interest | 0.1 | 0.1 | 0.2 | (0.1 | ) | (0.2 | ) | 0.1 | ||||||||||||||||
Net earnings (loss) | 16.2 | 12.3 | (14.6 | ) | 18.4 | 37.3 | 91.4 | |||||||||||||||||
Net earnings (loss) per Ordinary Share | 0.30 | 0.23 | (0.27 | ) | 0.34 | 0.68 | 1.67 | |||||||||||||||||
Amounts in accordance with U.S. GAAP : | ||||||||||||||||||||||||
Net earnings (loss) | 19.1 | 14.5 | (6.9 | ) | 18.8 | 38.0 | 92.0 | |||||||||||||||||
Net earnings (loss) per Ordinary Share (basic and diluted) | $ | 0.34 | € | 0.26 | € | (0.13 | ) | € | 0.34 | € | 0.70 | € | 1.68 | |||||||||||
Weighted average number of Ordinary Shares Outstanding | 54,733,796 | 54,733,796 | 54,681,628 | 54,681,628 | 54,681,628 | 54,681,628 | ||||||||||||||||||
Balance Sheet Data : | ||||||||||||||||||||||||
Amounts in accordance with Italian GAAP : | ||||||||||||||||||||||||
Current assets | $ | 537.5 | € | 407.3 | € | 384.5 | € | 389.4 | € | 383.1 | € | 402.6 | ||||||||||||
Total assets | 890.4 | 674.7 | 664.9 | 673.2 | 692.4 | 674.5 | ||||||||||||||||||
Current liabilities | 175.5 | 133.0 | 136.2 | 131.5 | 125.2 | 128.7 | ||||||||||||||||||
Long-term debt | 3.2 | 2.4 | 3.6 | 5.0 | 4.2 | 3.6 | ||||||||||||||||||
Minority interest | 0.8 | 0.6 | 0.7 | 0.9 | 0.9 | 0.5 | ||||||||||||||||||
Shareholders’ equity | 631.9 | 478.9 | 473.0 | 487.9 | 515.1 | 495.8 | ||||||||||||||||||
Amounts in accordance with U.S. GAAP : | ||||||||||||||||||||||||
Shareholders’ equity | $ | 618.1 | € | 468.4 | € | 453.7 | € | 464.5 | € | 452.3 | € | 432.3 |
1) | Amounts are translated into U.S. dollars by converting the euro amounts into U.S. dollars at the Noon Buying Rate for euros on December 29, 2006 of U.S.$ 1.3197 per euro. | |
2) | Sales included under “Other” principally consist of sales of polyurethane foam and leather to third parties and sales of living room accessories. | |
3) | Other income (expense), net is principally affected by gains and losses, as well as interest income and expenses, resulting from measures adopted by the Group in an effort to reduce its exposure to exchange rate risks. See Item 5, “Operating and Financial Review and Prospects — Results of Operations — 2006 Compared to 2005”, Item 11, “Quantitative and Qualitative Disclosures about Market Risk” and Notes 3, 24 and 25 to the Consolidated Financial Statements included in Item 18 of this annual report. | |
4) | Other income (expense), net, in 2005 was affected by the change in accounting principles for the translation of foreign subsidiaries’ financial statements under Italian GAAP. See Note 3 (d) to the Consolidated Financial Statements. In addition, other income (expense), net, in 2005 was positively affected by revenues for capital grants. See Note 24 to the Consolidated Financial Statements included in Item 18 of this annual report. | |
5) | Other income (expense), net, in 2006 was negatively affected by the provisions for contingent liabilities. See Note 24 to the Consolidated Financial Statements included in Item 18 of this annual report. |
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Year: | Average(1) | At Period End | ||||||
2002 | 0.9495 | 1.0485 | ||||||
2003 | 1.1411 | 1.2597 | ||||||
2004 | 1.2478 | 1.3538 | ||||||
2005 | 1.2400 | 1.1842 | ||||||
2006 | 1.2661 | 1.3197 |
Month ending: | High | Low | ||||||
29-Dec-06 | 1.3327 | 1.3073 | ||||||
31-Jan-07 | 1.3286 | 1.2904 | ||||||
28-Feb-07 | 1.3246 | 1.2933 | ||||||
30-Mar-07 | 1.3374 | 1.3094 | ||||||
30-Apr-07 | 1.3660 | 1.3363 | ||||||
31-May-07 | 1.3616 | 1.3419 |
(1) | The average of the Noon Buying Rates for the relevant period, calculated using the average of the Noon Buying Rates on the last business day of each month during the period. |
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Percentage of | ||||||
Name | ownership | Registered office | Activity | |||
Italsofa Bahia Ltd | 97.99 | Bahia, Brazil | (1) | |||
Minuano Nordeste S.A. | 100.00 | Pojuca, Brazil | (1) | |||
Italsofa Shanghai Ltd | 100.00 | Shanghai, China | (1) | |||
Softaly Shanghai Ltd | 100.00 | Shanghai, China | (1) | |||
Italsofa Romania | 100.00 | Baia Mare, Romania | (1) | |||
Natco S.p.A. | 99.99 | Bari, Italy | (2) | |||
I.M.P.E. S.p.A. | 90.83 | Qualiano, Italy | (3) | |||
Nacon S.p.A. | 100.00 | Bari, Italy | (4) | |||
Lagene S.r.l. | 100.00 | Bari, Italy | (4) |
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Percentage of | ||||||
Name | ownership | Registered office | Activity | |||
Natuzzi Americas Inc. | 100.00 | High Point, NC, USA | (4) | |||
Natuzzi Iberica S.A. | 100.00 | Madrid, Spain | (4) | |||
Natuzzi Switzerland AG | 97.00 | Kaltbrunn, Switzerland | (4) | |||
Natuzzi Nordic | 100.00 | Copenaghen, Denmark | (4) | |||
Natuzzi Benelux S.A. | 100.00 | Geel, Belgium | (4) | |||
Natuzzi Germany Gmbh | 100.00 | Dusseldorf, Germany | (4) | |||
Natuzzi Sweden AB | 100.00 | Stockholm, Sweden | (4) | |||
Natuzzi Japan KK | 100.00 | Tokyo, Japan | (4) | |||
Natuzzi Services Limited | 100.00 | London, UK | (4) | |||
La Galleria Limited | 100.00 | London, UK | (7) | |||
Natuzzi Netherlands Holding | 100.00 | Amsterdam, Holland | (5) | |||
Natuzzi United Kingdom Limited | 100.00 | London, UK | (7) | |||
Natuzzi Trade Service S.r.l. | 100.00 | Bari, Italy | (6) | |||
Kingdom of Leather Limited | 100.00 | London, UK | (7) | |||
Italholding S.r.l. | 100.00 | Bari, Italy | (5) |
(1) | Manufacture and distribution | |
(2) | Intragroup leather dyeing and finishing | |
(3) | Production and distribution of polyurethane foam | |
(4) | Distribution | |
(5) | Investment holding | |
(6) | Transportation services | |
(7) | Dormant |
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1 | Last update December 2006 |
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2006 | 2005 | 2004 | ||||||||||||||||||||||
U.S. and the Americas(1) | 245.4 | 37.2 | % | 241.7 | 40.6 | % | 279.4 | 42.0 | % | |||||||||||||||
Europe | 366.6 | 55.5 | % | 313.2 | 52.7 | % | 340.1 | 51.1 | % | |||||||||||||||
Rest of the World | 48.3 | 7.3 | % | 39.9 | 6.7 | % | 46.0 | 6.9 | % | |||||||||||||||
Total | 660.3 | 100.0 | % | 594.8 | 100.0 | % | 665.5 | 100.0 | % | |||||||||||||||
(1) | Outside the United States, the Group also sells its products to customers in Canada and Central and South America (collectively, the “Americas”). |
2006 | 2005 | 2004 | ||||||||||||||||||||||
U.S. and the Americas(1) | 1,364,873 | 45.2 | % | 1,386,329 | 49.3 | % | 1,564,901 | 51.0 | % | |||||||||||||||
Europe | 1,449,696 | 48.1 | % | 1,262,887 | 44.9 | % | 1,319,740 | 43.0 | % | |||||||||||||||
Rest of the World | 202,133 | 6.7 | % | 162,523 | 5.8 | % | 186,330 | 6.0 | % | |||||||||||||||
Total | 3,016,702 | 100.0 | % | 2,811,739 | 100.0 | % | 3,070,971 | 100.0 | % | |||||||||||||||
(1) | Outside the United States, the Group also sells its products to customers in Canada and Central and South America (collectively, the “Americas”). | |
(2) | Includes seats produced at Group-owned facilities and by subcontractors. Seats are a unit measurement. A sofa consists of three seats; an armchair of one. |
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Size | ||||||
(approximate | ||||||
square | ||||||
Location | meters) | Function | ||||
Santeramo in Colle (BA) – Italy | 29,000 | Headquarters, prototyping, manufacturing of wooden frames, leather cutting, sewing and product assembly, showroom (Owned) | ||||
Santeramo in Colle, Iesce (BA) – Italy | 27,500 | Sewing and product assembly (Owned) | ||||
Matera la martella – Italy | 38,000 | Fabric cutting, general warehouse of sofas and accessory furnishing (Owned) | ||||
Matera Iesce – Italy | 12,500 | Leather cutting, sewing and product assembly (Owned) | ||||
Altamura (BA) via dell’Avena – Italy | 5,800 | Leather cutting, sewing (Owned) | ||||
Altamura (BA) via Graviscella – Italy | 8,500 | Product assembly (Owned) | ||||
Altamura (BA) c.da Fornello– Italy | 7,000 | Warehouse (Owned) | ||||
Altamura (BA) via della Paglia – Italy | 3,300 | Training school, warehouse (Owned) | ||||
Altamura (BA) NDS – Italy | 3,700 | Accessory Furnishings warehouse (Owned) | ||||
Ginosa (TA) – Italy | 14,500 | Sewing and product assembly (Owned) | ||||
Laterza (TA) – Italy | 10,000 | Leather cutting (Owned) | ||||
Laterza (TA) – Italy | 13,000 | Fabric and lining cutting, leather warehouse (Owned) | ||||
Laterza (TA) – Italy | 20,000 | Accessory Furnishing Packaging and Warehouse (Owned) | ||||
Qualiano (NA) – Italy | 12,000 | Polyurethane foam production (Owned) | ||||
Pozzuolo del Friuli (UD) – Italy | 20,000 | Leather dyeing and finishing (Owned) | ||||
Montebello (VI) – Italy | 5,500 | Leather warehouse (Leased) | ||||
High Point — North Carolina - U.S.A. | 10,000 | Office and showroom for Natuzzi Americas (Owned) | ||||
Baia Mare – Romania | 70,200 | Leather cutting, sewing and product assembly, manufacturing of wooden frames, polyurethane foam shaping, fiberfill production and wood and wooden product manufacturing (Owned) | ||||
Shanghai – China | 43,500 | Leather cutting, sewing and product assembly, manufacturing of wooden frames, polyurethane foam shaping, fiberfill production (Owned) | ||||
Shanghai (Fengpu) – China | 14,000 | Leather and fabric cutting, leather and fabric warehouse (Leased) | ||||
Salvador de Bahia (Bahia) – Brazil | 28,000 | Leather cutting, sewing and product assembly, manufacturing of wooden frames, polyurethane foam shaping, fiberfill production (Owned) | ||||
Pojuca (Bahia) – Brazil | 30,000 | Leather cutting, sewing and product assembly, manufacturing of wooden frames, wooden feet, polyurethane foam shaping, fiberfill production (Owned) |
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Year ending December 31, | ||||||||||||
(millions of Euro) | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Land and plants | 2.4 | 3.4 | 9.5 | |||||||||
Equipment | 7.0 | 10.1 | 17.7 | |||||||||
Other assets | 10.5 | 11.6 | 27.2 | |||||||||
Total | 19.9 | 25.1 | 54.4 |
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Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
Cost of sales | 66.7 | 68.6 | 64.3 | |||||||||
Gross profit | 33.3 | 31.4 | 35.7 | |||||||||
Selling expenses | 25.3 | 27.2 | 25.0 | |||||||||
General and administrative expenses | 5.7 | 6.4 | 5.4 | |||||||||
Operating income (loss) | 2.3 | (2.2 | ) | 5.3 | ||||||||
Other income (expense), net | 0.4 | 0.4 | (0.5 | ) | ||||||||
Income taxes | 1.0 | 0.4 | 2.4 | |||||||||
Net earnings (loss) | 1.7 | (2.2 | ) | 2.4 |
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- | A net realized gain of€0.7 million in 2006 (compared to a loss of€4.3 million in 2005) on domestic currency swaps due to the difference between the forward rates of the domestic currency swaps and the spot rates at which the domestic currency swaps were closed (the Group uses the forward rate to hedge its price risks against unfavourable exchange rate variations); |
- | A net realized loss of€8.2 million in 2006 (compared to a gain of€5.4 million in 2005), from the difference between invoice exchange rates and collection/payment exchange rates; | ||
- | A net unrealized gain of€2.8 million in 2006 (compared to an unrealized gain of€2.1 million in 2005) on accounts receivable and payable; | ||
- | An unrealized gain of€5.5 million in 2006 (compared to an unrealized loss of€4.8 million in 2005), from the mark-to-market of domestic currency swaps. |
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- | Revenue from capital grants, which amounted to€4.4 million in 2005 and nil in 2006. In 2005, Natuzzi received under the aforementioned project “Natuzzi 2000” additional capital grants amounting to€7.9 million. A part of these capital grants, amounting to€4.4 million, was related to depreciation of property, plant and equipment recorded in the consolidated statements of earnings in years prior to 2005. Therefore, for this reason, the amount of€4.4 million was classified under the caption “other income (expense), net”. | ||
- | In 2006 the Company has charged to other income (expense), net the amount of€ 5.8 million for the estimated probable liabilities related to some claims (including tax claims) and legal actions. In 2005 the provisions for contingent liabilities were€ 0.6 million. | ||
- | Other expenses deriving from the write-off of fixed assets, which decreased from€2.8 million in 2005 to nil in 2006. | ||
- | Revenue for export incentive benefits, which increased to€ 3.4 million from€2.1 million reported in 2005. This incentive is measured on the basis of the export sales realized by the subsidiaries Italsofa Bahia Ltd and Minuano Nordeste S.A. | ||
- | A payment of€ 1.1 million received in 2006 from the landlord of a store for the termination of the related lease contract before the term specified in the lease agreement. In 2005 the Group recorded an expense of€0.6 million as a provision established for the penalties that the Group expected to pay to landlords of several stores located in England for the early termination of the related operating leases. |
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- | A net realized loss of€4.3 million in 2005 (compared to a gain of€5.0 million in 2004) on the domestic currency swaps due to the difference between the forward rate of the domestic currency swaps and the spot rate at which the domestic currency swaps were closed (the Company uses the forward rate to hedge its price risks against unfavorable exchange variations); | ||
- | A net realized gain of€5.4 million in 2005 (compared to a loss of€1.0 million in 2004), from the difference between the invoice exchange rate and the collection/payment exchange rate; |
- | During 2005 the Italian Accounting Profession changed the Italian accounting standard regarding the translation of the financial statements of a foreign subsidiary (see Note 3(d) to the Consolidated Financial Statements in Item 18 of this annual report). According to the new accounting principle, the exchange difference resulting from the translation of the financial statements of a foreign subsidiary expressed in a foreign currency has to be recorded as a direct adjustment to shareholders’ equity. Therefore in 2005 the Group did not record in the statement of operations exchange differences from the conversion of the non euro financial statements of the Company’s subsidiaries, while in 2004 recorded a gain of€1.4 million. Had the new Italian standard not been adopted in 2005, the Company would have recognized, in 2005, a foreign exchange gain of€1.7 million in the consolidated statement of earnings. The comparative financial statements of prior years have not been adjusted to apply the new Italian GAAP foreign currency translation standard retrospectively. | ||
- | A net unrealized gain of€2.1 million in 2005 (compared to an unrealized loss of€10.2 million in 2004) on accounts receivable and payable; | ||
- | An unrealized loss of€4.8 million in 2005 (compared to an unrealized gain of€7.1 million in 2004), from mark-to-market of domestic currency swaps. |
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- | Revenue from capital grants of€4.4 million. In 2005, Natuzzi received under the aforementioned project “Natuzzi 2000” additional capital grants amounting to€7.9 million. A part of these capital grants, amounting to€4.4 million, is related to depreciation of property, plant and equipment recorded in the consolidated statements of earnings in the years prior to 2005. Therefore, for this reason the amount of€4.4 million has been classified under the caption “other income (expense), net”. Another portion of these capital grants, amounting to€0.3 million has been classified in the net sales as they relate to depreciation of 2005. The remaining portion of€3.2 million has been classified in the consolidated balance sheet at December 31, 2005 as deferred income, and it will be charged to statements of earnings as revenue on a systematic basis over the useful life of the related asset. See Note 24 to the Consolidated Financial Statements included in Item 18 of this Annual Report. | ||
- | Other expenses of€2.8 million deriving from the write-off of fixed assets, most of them related to leasehold improvements related to the closure of some stores managed directly by Natuzzi. | ||
- | Revenue for incentive benefits of€2.1 million. This incentive is measured on the basis of the export sales realized by the subsidiary Italsofa Bahia Ltd. | ||
- | Expense of€0.6 million represents the provision established for the penalties that the Company expects to pay to landlords of several stores located in England for the early termination of the related operating leases. Actual amounts payable may be higher. | ||
- | Other income, net of€1.4 million. |
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Payments Due by Period(in thousands of euros) | ||||||||||||||||||||
Less than 1 | 1-3 | After 5 | ||||||||||||||||||
Contractual Obligations | Total | year | years | 4-5 years | years | |||||||||||||||
Long-Term Debt(1) | 2,751 | 318 | 657 | 612 | 1,164 | |||||||||||||||
Interest due on Long Term Debt(2) | 350 | 69 | 115 | 86 | 80 | |||||||||||||||
Operating Leases(3) | 66,978 | 12,524 | 22,391 | 18,168 | 13,895 | |||||||||||||||
Total Contractual Cash Obligations | 70,079 | 12,911 | 23,163 | 18,866 | 15,139 |
(1) | Please see Note 16 to the Consolidated Financial Statements included in this annual report for more information on the Group’s long-term debt. | |
(2) | Interest due on long-term debt has been calculated using fixed rates contractually agreed with lenders | |
(3) | The leases relate to the leasing of manufacturing facilities and stores by several of the Group’s companies. |
Amount of Commitment Expiration Per | ||||||||||||||||||||
Period(in thousands of euros) | ||||||||||||||||||||
Total | ||||||||||||||||||||
Amounts | Less than 1 | After 5 | ||||||||||||||||||
Other Commitments | Committed | year | 1-3 years | 4-5 years | years | |||||||||||||||
Guarantees(1) | 26,005 | 26,005 | — | — | — |
(1) | The guarantees are primarily comprised of surety bonds provided by certain financial institutions in connection with the Natuzzi 2000 project. The Company, in turn, directly provides guarantees in an equivalent amount to such financial institutions. The surety bonds will expire when the Italian Ministry of Industrial Activities provides the Company with the final disbursement of the capital grants already given. |
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Name | Age | Position with the Company | ||||
Pasquale Natuzzi * | 67 | Chairman of the Board of Directors and Chief Sales Officer | ||||
Ernesto Greco * | 56 | Chief Executive Officer, Member of the Board of Directors and Human Resources & Organization Director a.i. | ||||
Giuseppe Desantis * | 44 | Vice Chairman of the Board of Directors | ||||
Giuseppe Russo Corvace * | 57 | Member of the Board of Directors and Managing Director for Accounting and Finance | ||||
Armando Branchini * | 62 | Outside Director | ||||
Stelio Campanale * | 45 | Outside Director | ||||
Maurizia Iachino Leto di Priolo * | 58 | Outside Director | ||||
Filippo Simonetti | 39 | Chief Financial Officer | ||||
Giovanni Costantino | 43 | Product & Retail Development General Manager | ||||
Giovanni Ferrari | 52 | Operations General Manager | ||||
Giambattista Massaro | 45 | Purchasing Corporate Director, Chairman of Natco S.p.A. | ||||
Annunziata Natuzzi | 43 | Chief Executive Officer of Natco S.p.A. | ||||
Lorenzo Boffano | 56 | Retail Competence Center Director | ||||
Vito Tiziano Damiani | 43 | Internal Audit Director | ||||
Gaetano De Cataldo | 43 | Executive Vice President of Finance and Operations of Natuzzi Americas, Inc. |
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Name | Age | Position with the Company | ||||
Nicola V.M. Dell’Edera | 45 | Finance Director | ||||
José Manuel Gulias Roo | 49 | Spain and Portugal Country Manager | ||||
Thomas Hagerup | 39 | Nordic Region Country Manager | ||||
Oliver Heil | 40 | Commercial Director of the Asia & Pacific Region | ||||
Cesare Laberinti | 74 | Chairman and Managing Director of IMPE S.p.A | ||||
Giorgio Martellino | 38 | Legal Director | ||||
Nicola Masotina | 47 | Italy Country Manager | ||||
Jan Mentens | 40 | Benelux Country Manager | ||||
Giovanni Mercadante | 50 | Accounting Director | ||||
Ottavio Milano | 41 | Control Director | ||||
Marcelo Miraglia | 53 | Chairman and Managing Director of Minuano Nordeste S.A and Italsofa Bahia Ltd | ||||
Nick Moore | 45 | Managing Director of Natuzzi United Kingdom Ltd | ||||
Achille Poretta | 49 | Information Systems Director | ||||
Stefano Rezzin | 42 | Switzerland Country Manager | ||||
Bodo Rupp | 48 | Germany and Austria Country Manager | ||||
Stefano Sette | 38 | Vice President Sales Worldwide | ||||
Fredrick Starr | 75 | President and Chief Executive Officer of Natuzzi Americas Inc. | ||||
Francesco Stasolla | 41 | Chairman and Managing Director of Italsofa Romania S.r.l. | ||||
Richard Tan | 47 | Chairman and Managing Director of Italsofa (Shanghai) Ltd and Softaly (Shanghai) Ltd |
* | Nominated following the Natuzzi Annual Ordinary Shareholders’ Meeting held on May 3, 2007. |
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Name | Position | |
Francesco Venturelli | Chairman | |
Cataldo Sferra | Member | |
Costante Leone | Member | |
Giuseppe Pio Macario | Alternate | |
Vittorio Boscia | Alternate |
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Number of | Percent | |||||||
Shares Owned | Owned | |||||||
Pasquale Natuzzi(1) | 26,064,906 | 47.5 | % | |||||
Royce & Associates, LLC | 5,501,300 | 10.0 | % | |||||
Brandes Investment Partners, LP(2) | 4,725,030 | 8.6 | % | |||||
Tweedy, Browne Company, L.L.C. | 3,796,937 | 6.9 | % |
(1) | If Mr. Natuzzi’s Ordinary Shares are aggregated with those held by members of the Natuzzi Family, the amount owned would be 28,864,906 and the percentage ownership of Ordinary Shares would be 52.6%. | |
(2) | During the course of 2005, Brandes Investment Partners, LP increased its position in Natuzzi’s shareholders’ base by 2,519,750 Natuzzi ADSs, thus holding 8.4% of shareholders’ equity with a total of 4,587,197 Natuzzi ADSs as of December 31, 2005. During 2006, the position was increased by only 151,837 ADSs. |
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Dividends per | Translated into | |||||||
Year ended December 31, | Ordinary Share | dollars per ADS | ||||||
2006 | Not distributed | Not distributed | ||||||
2005 | Not distributed | Not distributed | ||||||
2004 | € | 0.0673 | $ | 0.09 | ||||
2003 | € | 0.1366 | $ | 0.15 | ||||
2002 | € | 0.3300 | $ | 0.35 |
(1) | Starting on January 1, 2001, the NYSE changed its practice of reporting stock quotes from a fractional to a decimal system. All stock quotes prior to this date, originally reported in fractions, were restated into decimals for ease of comparison. |
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New York Stock Exchange | ||||||||
Price per ADS | ||||||||
High | Low | |||||||
(in U.S. dollars) | ||||||||
2002 | ||||||||
First Quarter | 15.700 | 13.910 | ||||||
Second Quarter | 16.100 | 13.350 | ||||||
Third Quarter | 15.040 | 10.920 | ||||||
Fourth Quarter | 10.970 | 9.120 | ||||||
2003 | ||||||||
First Quarter | 10.050 | 7.240 | ||||||
Second Quarter | 9.600 | 7.990 | ||||||
Third Quarter | 10.390 | 7.820 | ||||||
Fourth Quarter | 11.000 | 9.460 | ||||||
2004 | ||||||||
First Quarter | 11.550 | 10.150 | ||||||
Second Quarter | 11.550 | 10.150 | ||||||
Third Quarter | 10.800 | 9.230 | ||||||
Fourth Quarter | 11.170 | 10.010 | ||||||
2005 | ||||||||
First Quarter | 11.650 | 10.290 | ||||||
Second Quarter | 10.270 | 8.100 | ||||||
Third Quarter | 9.000 | 8.050 | ||||||
Fourth Quarter | 8.400 | 6.760 | ||||||
2006 | ||||||||
First Quarter | 7.810 | 7.100 | ||||||
Second Quarter | 7.600 | 6.860 | ||||||
Third Quarter | 7.250 | 6.320 | ||||||
Fourth Quarter | 8.650 | 6.840 | ||||||
Monthly Data: | ||||||||
December-06 | 8.650 | 7.260 | ||||||
January-07 | 9.600 | 8.430 | ||||||
February-07 | 9.500 | 8.600 | ||||||
March-07 | 9.070 | 8.150 | ||||||
April-07 | 8.350 | 7.510 | ||||||
May-07 | 8.533 | 7.800 | ||||||
June 2007 (through June 20) | 8.210 | 7.180 |
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Euro equivalent of contractual amounts of | December 31, | |||||||
forward exchange contracts as of | 2006 | 2005 | ||||||
U.S. dollars | € | 90,744 | € | 72,496 | ||||
Euro | 19,154 | — | ||||||
Canadian dollars | 15,703 | 17,698 | ||||||
British pounds | 15,121 | 26,783 | ||||||
Australian dollars | 9,934 | 10,744 | ||||||
Norwegian kroner | 6,027 | 5,928 | ||||||
Swedish kroner | 3,887 | 3,441 | ||||||
Swiss francs | 2,584 | 656 | ||||||
Danish kroner | 924 | 845 | ||||||
Japanese yen | 864 | 1,504 | ||||||
Total | € | 164,942 | € | 140,095 | ||||
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December 31, 2006 | December 31, 2005 | |||||||||||||||
Contract | Fair | Contract | Fair | |||||||||||||
Amount | Value | Amount | Value | |||||||||||||
Assets | 137,608 | 6,141 | 46,075 | 392 | ||||||||||||
Liabilities | 27,334 | (678 | ) | 94,020 | (5,159 | ) | ||||||||||
Total | 164,942 | 5,463 | 140,095 | (4,767 | ) | |||||||||||
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2006 | 2005 | |||||||
(in euros) | ||||||||
Audit fees | 595,000 | 558,412 | ||||||
Audit-related fees | — | — | ||||||
Tax fees | — | — | ||||||
Other fees | — | — | ||||||
Total fees | 595,000 | 558,412 | ||||||
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— | the board of statutory auditors is established and selected pursuant to Italian law expressly permitting such a board; | |
— | the board of statutory auditors is required under Italian law to be separate from the Company’s board of directors; | |
— | the board of statutory auditors is not elected by management of the Company and no Executive Officer of the Company is a member of the board of statutory auditors; | |
— | Italian Law provides for standards for the independence of the board of statutory auditors from the Company and its management; | |
— | the board of statutory auditors, in accordance with applicable Italian law and the Company’s governing documents, is responsible, to the extent permitted by Italian law, for the appointment, retention and oversight of the work (including, to the extent permitted by law, the resolution of disagreements between management and the auditor regarding financial reporting) of any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company, and | |
— | to the extent permitted by Italian law, the audit committee requirements of paragraphs (b)(3), (b)(4) and (b)(5) of Rule 10A-3 apply to the Board of Statutory Auditors. |
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Page | ||
Report of Independent Registered Public Accounting Firm | F-1 | |
Consolidated Balance Sheets as of December 31, 2006 and 2005 | F-2 | |
Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004 | F-3 | |
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2006, 2005 and 2004 | F-4 | |
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004 | F-5 | |
Notes to the Consolidated Financial Statements | F-7 | |
1.1 | English translation of the by-laws (Statuto) of the Company, as amended and restated as of January 23, 2007. |
2.1 | Deposit Agreement dated as of May 15, 1993, as amended and restated as of December 31, 2001, among the Company, The Bank of New York, as Depositary, and owners and beneficial owners of ADRs (incorporated by reference to the Form 20-F filed by Natuzzi S.p.A. with the Securities and Exchange Commission on July 1, 2002, file number 1-11854). | |
8.1 | List of Significant Subsidiaries. | |
12.1 | Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
12.2 | Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
13.1 | Certifications pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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Natuzzi S.p.A.
June 22, 2007
F - 1
Table of Contents
December 31, | December 31, | |||||||
2006 | 2005 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents (note 4) | 128,109 | 89,723 | ||||||
Marketable debt securities (note 5) | 5 | 5 | ||||||
Trade receivables, net (note 6) | 119,274 | 123,608 | ||||||
Other receivables (note 7) | 44,681 | 46,256 | ||||||
Inventories (note 8) | 100,358 | 115,690 | ||||||
Unrealized foreign exchange gains (note 25) | 5,463 | — | ||||||
Prepaid expenses and accrued income | 1,955 | 2,551 | ||||||
Deferred income taxes (note 14) | 7,463 | 6,632 | ||||||
Total current assets | 407,308 | 384,465 | ||||||
Non current assets: | ||||||||
Property plant and equipment (note 9 and 22) | 405,870 | 407,847 | ||||||
Less accumulated depreciation (note 9 and 22) | (159,547 | ) | (145,054 | ) | ||||
Net property, plant and equipment | 246,323 | 262,793 | ||||||
Other assets (note 10) | 18,752 | 16,616 | ||||||
Deferred income taxes (note 14) | 2,291 | 1,064 | ||||||
Total assets | 674,674 | 664,938 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term borrowings (note 11) | 3,801 | 7,727 | ||||||
Current portion of long-term debt (note 16) | 318 | 426 | ||||||
Accounts payable-trade (note 12) | 79,519 | 73,533 | ||||||
Accounts payable-other (note 13) | 23,067 | 24,768 | ||||||
Unrealized foreign exchange losses (note 25) | — | 4,767 | ||||||
Income taxes (note 14) | 4,611 | 2,907 | ||||||
Salaries, wages and related liabilities (note 15) | 21,674 | 22,083 | ||||||
Total current liabilities | 132,990 | 136,211 | ||||||
Long-term liabilities: | ||||||||
Employees’ leaving entitlement (note 3 (o) ) | 35,269 | 32,274 | ||||||
Long-term debt (note 16) | 2,433 | 3,582 | ||||||
Deferred income for capital grants (note 3 (n) ) | 14,075 | 14,779 | ||||||
Other liabilities (note 17) | 10,460 | 4,358 | ||||||
Minority interest (note 18) | 605 | 709 | ||||||
Shareholders’ equity (note 19) : | ||||||||
Share capital | 54,739 | 54,682 | ||||||
Reserves | 42,292 | 42,292 | ||||||
Additional paid-in capital | 8,282 | 8,282 | ||||||
Retained earnings | 373,529 | 367,769 | ||||||
Total shareholders’ equity | 478,842 | 473,025 | ||||||
Committments and contingent liabilities (notes 21 and 25) | — | — | ||||||
Total liabilities and shareholders’ equity | 674,674 | 664,938 | ||||||
F - 2
Table of Contents
2006 | 2005 | 2004 | ||||||||||
Net sales (note 22) | 735,439 | 669,926 | 753,434 | |||||||||
Cost of sales (note 23) | (490,563 | ) | (459,492 | ) | (484,601 | ) | ||||||
Gross profit | 244,876 | 210,434 | 268,833 | |||||||||
Selling expenses | (186,238 | ) | (182,169 | ) | (188,182 | ) | ||||||
General and administrative expenses | (42,164 | ) | (42,955 | ) | (40,673 | ) | ||||||
Operating income (loss) | 16,474 | (14,690 | ) | 39,978 | ||||||||
Other income (expense), net (note 24) | 2,847 | 2,960 | (3,892 | ) | ||||||||
Earnings (loss) before taxes and minority interest | 19,321 | (11,730 | ) | 36,086 | ||||||||
Income taxes (note 14) | (7,085 | ) | (3,110 | ) | (17,650 | ) | ||||||
Earnings (loss) before minority interest | 12,236 | (14,840 | ) | 18,436 | ||||||||
Minority interest | 103 | 216 | (83 | ) | ||||||||
Net earnings (loss) | 12,339 | (14,624 | ) | 18,353 | ||||||||
Basic earnings (loss) per share (note 3(x)) | 0.23 | (0.27 | ) | 0.34 | ||||||||
Diluted earnings (loss) per share (note 3(x)) | 0.23 | (0.27 | ) | 0.34 | ||||||||
F - 3
Table of Contents
Share capital | Additional | |||||||||||||||||||||||
Number of | paid-in | Retained | ||||||||||||||||||||||
ordinary shares | Amount | Reserves | capital | earnings | Total | |||||||||||||||||||
Balances at December 31, 2003 | 54,681,628 | 57,526 | 80,236 | 8,282 | 369,019 | 515,063 | ||||||||||||||||||
Dividends distributed | — | — | — | — | (7,655 | ) | (7,655 | ) | ||||||||||||||||
Treasury shares cancelled | — | (2,844 | ) | (37,828 | ) | — | 2,844 | (37,828 | ) | |||||||||||||||
Transfer for liquidation of subsidiary | — | — | (116 | ) | — | 116 | — | |||||||||||||||||
Net earnings | — | — | — | — | 18,353 | 18,353 | ||||||||||||||||||
Balances at December 31, 2004 | 54,681,628 | 54,682 | 42,292 | 8,282 | 382,677 | 487,933 | ||||||||||||||||||
Dividends distributed | — | — | — | — | (3,828 | ) | (3,828 | ) | ||||||||||||||||
Exchange difference on translation of financial statements | — | — | — | — | 3,544 | 3,544 | ||||||||||||||||||
Net loss | — | — | — | — | (14,624 | ) | (14,624 | ) | ||||||||||||||||
Balances at December 31, 2005 | 54,681,628 | 54,682 | 42,292 | 8,282 | 367,769 | 473,025 | ||||||||||||||||||
Increase share capital | 56,910 | 57 | — | — | (57 | ) | — | |||||||||||||||||
Exchange difference on translation of financial statements | — | — | — | — | (6,522 | ) | (6,522 | ) | ||||||||||||||||
Net earnings | — | — | — | — | 12,339 | 12,339 | ||||||||||||||||||
Balances at December 31, 2006 | 54,738,538 | 54,739 | 42,292 | 8,282 | 373,529 | 478,842 | ||||||||||||||||||
F - 4
Table of Contents
2006 | 2005 | 2004 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net earnings (loss) | 12,339 | (14,624 | ) | 18,353 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 30,281 | 33,042 | 34,068 | |||||||||
Employees’ leaving entitlement | 6,778 | 6,877 | 7,435 | |||||||||
Deferred income taxes | (2,058 | ) | (6,300 | ) | (651 | ) | ||||||
Minority interest | (104 | ) | (216 | ) | 83 | |||||||
(Gain) loss on disposal of assets | 768 | (149 | ) | (3,468 | ) | |||||||
Unrealized foreign exchange losses and (gains) | (10,230 | ) | 11,868 | 621 | ||||||||
Deferred income for capital grants | (1,309 | ) | (5,616 | ) | (874 | ) | ||||||
Change in assets and liabilities: | ||||||||||||
Receivables, net | 1,883 | 10,580 | 28,052 | |||||||||
Inventories | 15,444 | (1,546 | ) | (16,637 | ) | |||||||
Prepaid expenses and accrued income | 596 | (141 | ) | (240 | ) | |||||||
Accounts payable | 4,285 | (7,443 | ) | 6,659 | ||||||||
Income taxes | 1,704 | 386 | (1,737 | ) | ||||||||
Salaries, wages and related liabilities | (445 | ) | 3,318 | 2,641 | ||||||||
Other liabilities | 6,102 | (1,001 | ) | (357 | ) | |||||||
Employees’ leaving entitlement | (3,854 | ) | (4,526 | ) | (4,795 | ) | ||||||
Total adjustments | 49,841 | 39,133 | 50,800 | |||||||||
Net cash provided by operating activities | 62,180 | 24,509 | 69,153 | |||||||||
Cash flows from investing activities: | ||||||||||||
Property, plant and equipment: | ||||||||||||
Additions | (15,563 | ) | (20,917 | ) | (51,860 | ) | ||||||
Disposals | 1,057 | 916 | 9,407 | |||||||||
Other assets | (3,560 | ) | (1,361 | ) | (893 | ) | ||||||
Government grants received | 605 | 1,002 | — | |||||||||
Purchase of business, net of cash acquired | (250 | ) | (1,985 | ) | (100 | ) | ||||||
Disposal of business | — | — | 5,475 | |||||||||
Net cash used in investing activities | (17,711 | ) | (22,345 | ) | (37,971 | ) | ||||||
F - 5
Table of Contents
2006 | 2005 | 2004 | ||||||||||
Cash flows from financing activities: | ||||||||||||
Long-term debt: | ||||||||||||
Proceeds | 363 | 533 | 1,284 | |||||||||
Repayments | (1,620 | ) | (2,094 | ) | (1,349 | ) | ||||||
Short-term borrowings | (3,926 | ) | 1,628 | 1,820 | ||||||||
Dividends paid to shareholders | — | (3,828 | ) | (7,655 | ) | |||||||
Dividends paid to minority interests | — | — | (61 | ) | ||||||||
Net cash used in financing activities | (5,183 | ) | (3,761 | ) | (5,961 | ) | ||||||
Effect of translation adjustments on cash | (900 | ) | 3,980 | (1,446 | ) | |||||||
Increase in cash and cash equivalents | 38,386 | 2,383 | 23,775 | |||||||||
Cash and cash equivalents, beginning of the year | 89,723 | 87,340 | 63,565 | |||||||||
Cash and cash equivalents, end of the year | 128,109 | 89,723 | 87,340 | |||||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Cash paid during the year for interest | 1,400 | 951 | 1,003 | |||||||||
Cash paid during the year for income taxes | 6,555 | 6,659 | 9,293 | |||||||||
Non cash investing activties | 3,093 | — | — | |||||||||
F - 6
Table of Contents
(Expressed in thousands of euros except as otherwise indicated)
1. | Description of business and Group composition |
Percent of | ||||||||
Name | ownership | Registered office | Activity | |||||
Italsofa Bahia Ltd | 97.99 | Bahia, Brazil | (1) | |||||
Minuano Nordeste S.A. | 100.00 | Pojuca, Brazil | (1) | |||||
Italsofa Shanghai Ltd | 100.00 | Shanghai, China | (1) | |||||
Softaly Shanghai Ltd | 100.00 | Shanghai, China | (1) | |||||
Italsofa Romania | 100.00 | Baia Mare, Romania | (1) | |||||
Natco S.p.A. | 99.99 | Bari, Italy | (2) | |||||
I.M.P.E. S.p.A. | 90.83 | Qualiano,Italy | (3) | |||||
Nacon S.p.A. | 100.00 | Bari, Italy | (4) | |||||
Lagene S.r.l. | 100.00 | Bari, Italy | (4) | |||||
Natuzzi Americas Inc. | 100.00 | High Point, NC, USA | (4) | |||||
Natuzzi Iberica S.A. | 100.00 | Madrid, Spain | (4) | |||||
Natuzzi Switzerland AG | 97.00 | Kaltbrunn, Switzerland | (4) | |||||
Natuzzi Nordic | 100.00 | Copenaghen, Denmark | (4) | |||||
Natuzzi Benelux S.A. | 100.00 | Geel, Belgium | (4) | |||||
Natuzzi Germany Gmbh | 100.00 | Dusseldorf, Germany | (4) | |||||
Natuzzi Sweden AB | 100.00 | Stockholm, Sweden | (4) | |||||
Natuzzi Japan KK | 100.00 | Tokyo, Japan | (4) | |||||
Natuzzi Services Limited | 100.00 | London, UK | (4) | |||||
Italholding S.r.l. | 100.00 | Bari, Italy | (5) | |||||
Natuzzi Netherlands Holding | 100.00 | Amsterdam, Holland | (5) | |||||
Natuzzi Trade Service S.r.l. | 100.00 | Bari, Italy | (6) | |||||
Natuzzi United Kingdom Limited | 100.00 | London, UK | (7) | |||||
Kingdom of Leather Limited | 100.00 | London, UK | (7) | |||||
La Galleria Limited | 100.00 | London, UK | (7) |
(1) | Manufacture and distribution | |
(2) | Intragroup leather dyeing and finishing | |
(3) | Production and distribution of polyurethane foam | |
(4) | Distribution | |
(5) | Investment holding | |
(6) | Transportation services | |
(7) | Dormant |
F - 7
Table of Contents
(Expressed in thousands of euros except as otherwise indicated)
Goodwill | 2,600 | |||
Fixed assets | 132 | |||
Leasehold improvements | 468 | |||
Current liabilities | (107 | ) | ||
Purchase price | 3,093 | |||
Goodwill | 100 | |||
Fixed assets | 38 | |||
Current assets | 112 | |||
Purchase price | 250 | |||
F - 8
Table of Contents
(Expressed in thousands of euros except as otherwise indicated)
Current assets | 1,107 | |||
Goodwill | 1,664 | |||
Other non current assets | 1,634 | |||
Current liabilities | (2,080 | ) | ||
Non current liabilities | (306 | ) | ||
Purchase price | 2,019 | |||
F - 9
Table of Contents
(Expressed in thousands of euros except as otherwise indicated)
Current assets | 710 | |||
Goodwill | 3,709 | |||
Fixed assets | 221 | |||
Leasehold improvements | 313 | |||
Non current liabilities | (143 | ) | ||
Purchase price | 4,810 | |||
Goodwill | 600 | |||
Leasehold improvements | 400 | |||
Cash paid | 1,000 | |||
F - 10
Table of Contents
(Expressed in thousands of euros except as otherwise indicated)
2. | Basis of preparation |
F - 11
Table of Contents
(Expressed in thousands of euros except as otherwise indicated)
3. | Summary of significant accounting policies |
a) | Principles of consolidation |
b) | Foreign currency transactions |
c) | Forward exchange contracts |
d) | Financial statements of foreign operations |
F - 12
Table of Contents
(Expressed in thousands of euros except as otherwise indicated)
F - 13
Table of Contents
(Expressed in thousands of euros except as otherwise indicated)
e) | Cash and cash equivalents |
F - 14
Table of Contents
(Expressed in thousands of euros except as otherwise indicated)
f) | Marketable debt securities |
g) | Accounts receivable and payable |
h) | Inventories |
i) | Property, plant and equipment |
j) | Treasury shares |
F - 15
Table of Contents
(Expressed in thousands of euros except as otherwise indicated)
k) | Other assets |
l) | Impairment of long-lived assets and long-lived assets to be disposed of |
m) | Income taxes |
n) | Government grants |
F - 16
Table of Contents
(Expressed in thousands of euros except as otherwise indicated)
o) | Employees’ leaving entitlement |
F - 17
Table of Contents
(Expressed in thousands of euros except as otherwise indicated)
p) | Net sales |
q) | Shipping and handling costs |
r) | Advertising costs |
s) | Commission expense |
t) | Warranties |
u) | Research and development costs |
F - 18
Table of Contents
(Expressed in thousands of euros except as otherwise indicated)
v) | Contingencies |
w) | Use of estimates |
x) | Earnings per share |
2006 | 2005 | 2004 | ||||||||||
Net earnings (loss) attributable to ordinary shareholders | 12,339 | (14,624 | ) | 18,353 | ||||||||
Weighted-average number of ordinary shares outstanding during the year | 54,733,796 | 54,681,628 | 54,681,628 | |||||||||
Increase resulting from assumed conversion of share grants and options | — | — | 27,576 | |||||||||
Weighted-average number of ordinary shares and potential shares outstanding during the year | 54,733,796 | 54,681,628 | 54,709,204 | |||||||||
4. | Cash and cash equivalents | |
Cash and cash equivalents are analyzed as follows: |
2006 | 2005 | |||||||
Cash on hand | 510 | 510 | ||||||
Bank accounts in Euro | 16,746 | 18,491 | ||||||
Bank accounts in foreign currencies | 110,798 | 70,699 | ||||||
Money market instruments | 55 | 23 | ||||||
Total | 128,109 | 89,723 | ||||||
F - 19
Table of Contents
(Expressed in thousands of euros except as otherwise indicated)
5. | Marketable debt securities | |
Details regarding marketable debt securities are as follows: |
2006 | 2005 | |||||||
Foreign corporate bonds | 5 | 5 | ||||||
Italian government bonds | — | — | ||||||
Total | 5 | 5 | ||||||
Further information regarding the Group’s investments in marketable debt securities is as follows: |
Gross unrealized | Fair | |||||||||||||||
2006 | Cost | Gains | Losses | value | ||||||||||||
Foreign corporate bonds | 5 | — | — | 5 | ||||||||||||
Italian government bonds | — | — | — | — | ||||||||||||
Total | 5 | — | — | 5 | ||||||||||||
Gross unrealized | Fair | |||||||||||||||
2005 | Cost | Gains | Losses | value | ||||||||||||
Foreign corporate bonds | 5 | — | — | 5 | ||||||||||||
Italian government bonds | — | — | — | — | ||||||||||||
Total | 5 | — | — | 5 | ||||||||||||
6. | Trade receivables, net | |
Trade receivables are analyzed as follows: |
2006 | 2005 | |||||||
North American customers | 37,408 | 48,257 | ||||||
Other foreign customers | 54,217 | 47,127 | ||||||
Domestic customers | 32,163 | 31,781 | ||||||
Trade bills receivable | 1,543 | 1,602 | ||||||
Total | 125,331 | 128,767 | ||||||
Allowance for doubtful accounts | (6,057 | ) | (5,159 | ) | ||||
Total trade receivables, net | 119,274 | 123,608 | ||||||
F - 20
Table of Contents
(Expressed in thousands of euros except as otherwise indicated)
Trade receivables | N° of customers | %on trade receivables | ||||||
2006 | 2 | 16 | % | |||||
2005 | 2 | 16 | % | |||||
2004 | 1 | 9 | % |
Net sales | N° of customers | %net sales | ||||||
2006 | 2 | 18 | % | |||||
2005 | 2 | 13 | % | |||||
2004 | 1 | 6 | % |
2006 | 2005 | 2004 | ||||||||||
Balance, beginning of year | 5,159 | 5,434 | 5,662 | |||||||||
Charges-bad debt expense | 1,695 | 1,326 | 1,297 | |||||||||
Reductions-write off of uncollectible accounts | (797 | ) | (1,601 | ) | (1,525 | ) | ||||||
Balance, end of year | 6,057 | 5,159 | 5,434 | |||||||||
2006 | 2005 | |||||||
U.S. dollars | 36,938 | 41,549 | ||||||
Australian dollars | 5,440 | 5,853 | ||||||
British pounds | 4,760 | 5,470 | ||||||
Canadian dollars | 4,023 | 7,405 | ||||||
Other currencies | 4,257 | 6,467 | ||||||
Total | 55,418 | 66,744 | ||||||
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(Expressed in thousands of euros except as otherwise indicated)
7. | Other receivables | |
Other receivables are analyzed as follows: |
2006 | 2005 | |||||||
Government capital grants | 11,798 | 11,798 | ||||||
Receivable from tax authorities | 11,642 | 10,343 | ||||||
VAT | 10,133 | 13,867 | ||||||
Advances to suppliers | 3,301 | 2,264 | ||||||
Other | 7,807 | 7,984 | ||||||
Total | 44,681 | 46,256 | ||||||
8. | Inventories | |
Inventories are analyzed as follows: |
2006 | 2005 | |||||||
Leather and other raw materials | 61,060 | 68,481 | ||||||
Goods in process | 10,696 | 13,294 | ||||||
Finished products | 28,602 | 33,915 | ||||||
Total | 100,358 | 115,690 | ||||||
9. | Property, plant and equipment and accumulated depreciation |
Cost or | Accumulated | Annual rate of | ||||||||||
2006 | valuation | depreciation | depreciation | |||||||||
Land | 17,194 | — | — | |||||||||
Industrial buildings | 184,780 | (39,475 | ) | 2-10 | % | |||||||
Machinery and equipment | 113,910 | (72,290 | ) | 10-25 | % | |||||||
Airplane | 24,075 | (5,056 | ) | 6 | % | |||||||
Office furniture and equipment | 27,159 | (19,754 | ) | 10-20 | % | |||||||
Retail gallery and store furnishings | 26,237 | (15,515 | ) | 25-35 | % | |||||||
Transportation equipment | 5,755 | (4,632 | ) | 20-25 | % | |||||||
Leasehold improvements | 5,252 | (2,825 | ) | 10-20 | % | |||||||
Construction in progress | 619 | — | — | |||||||||
Advances to suppliers | 889 | — | — | |||||||||
Total | 405,870 | (159,547 | ) | |||||||||
F - 22
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(Expressed in thousands of euros except as otherwise indicated)
Cost or | Accumulated | Annual rate of | ||||||||||
2005 | valuation | depreciation | depreciation | |||||||||
Land | 17,463 | — | — | |||||||||
Industrial buildings | 182,750 | (35,543 | ) | 2-10 | % | |||||||
Machinery and equipment | 118,097 | (69,968 | ) | 10-25 | % | |||||||
Airplane | 24,075 | (3,611 | ) | 6 | % | |||||||
Office furniture and equipment | 25,472 | (18,033 | ) | 10-20 | % | |||||||
Retail gallery and store furnishings | 24,070 | (11,339 | ) | 25-35 | % | |||||||
Transportation equipment | 5,762 | (4,354 | ) | 20-25 | % | |||||||
Leasehold improvements | 4,133 | (2,206 | ) | 10-20 | % | |||||||
Construction in progress | 5,442 | — | — | |||||||||
Advances to suppliers | 583 | — | — | |||||||||
Total | 407,847 | (145,054 | ) | |||||||||
Construction in progress relates principally to manufacturing facilities. | ||
10. | Other assets | |
Other assets consist of the following: |
2006 | 2005 | |||||||
Goodwill | 13,977 | 11,277 | ||||||
Equity in affiliated enterprises | 3,867 | 3,867 | ||||||
Others | 16,786 | 13,274 | ||||||
Total, gross | 34,630 | 28,418 | ||||||
Less accumulated amortization | (15,878 | ) | (11,802 | ) | ||||
Total, net | 18,752 | 16,616 | ||||||
At December 31, 2006 and 2005 the net book value of goodwill may be analyzed as follows: |
2006 | 2005 | |||||||
Gross carrying amount | 13,977 | 11,277 | ||||||
Less accumulated depreciation | (4,676 | ) | (2,155 | ) | ||||
Net book value | 9,301 | 9,122 | ||||||
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(Expressed in thousands of euros except as otherwise indicated)
11. | Short-term borrowings | |
Short-term borrowings consist of the following: |
2006 | 2005 | |||||||
Bank borrowings | 3,351 | 4,174 | ||||||
Bank overdrafts | 450 | 3,553 | ||||||
3,801 | 7,727 | |||||||
2006 | 2005 | |||||||
Bank borrowings | 4.87 | % | 4.92 | % | ||||
Bank overdrafts | 3.58 | % | 5.10 | % |
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(Expressed in thousands of euros except as otherwise indicated)
12. | Accounts payable-trade |
13. | Accounts payable-other | |
Accounts payable-other are analyzed as follows: |
2006 | 2005 | |||||||
Provision for warranties | 6,561 | 6,896 | ||||||
Advances from customers | 5,441 | 6,785 | ||||||
Cooperative advertising and quantity discount | 3,835 | 3,018 | ||||||
Withholding taxes on payroll and on others | 3,059 | 2,375 | ||||||
Payable to minority interest for dividends | 593 | 593 | ||||||
Payable to third parties for business acquisition | — | 860 | ||||||
Others | 3,578 | 4,241 | ||||||
Total | 23,067 | 24,768 | ||||||
The following table provides the movements in the provision for warranties: |
2006 | 2005 | 2004 | ||||||||||
Balance, beginning of year | 6,896 | 3,477 | 3,363 | |||||||||
Charges to profit and loss | 6,386 | 4,764 | 6,700 | |||||||||
Reductions for utilization | (6,721 | ) | (1,345 | ) | (6,586 | ) | ||||||
Balance, end of year | 6,561 | 6,896 | 3,477 | |||||||||
14. | Taxes on income | |
Italian companies are subject to two income taxes at the following rates: |
2006 | 2005 | 2004 | ||||||||||
IRES (state tax) | 33.00 | % | 33.00 | % | 33.00 | % | ||||||
IRAP (regional tax) | 4.25 | % | 4.25 | % | 4.25 | % |
F - 25
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(Expressed in thousands of euros except as otherwise indicated)
2006 | 2005 | 2004 | ||||||||||
Domestic | (11,012 | ) | (8,144 | ) | 19,878 | |||||||
Foreign | 30,333 | (3,586 | ) | 16,208 | ||||||||
Total | 19,321 | (11,730 | ) | 36,086 | ||||||||
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(Expressed in thousands of euros except as otherwise indicated)
2006 | 2005 | 2004 | ||||||||||
Expected income (loss) tax charge at full tax rates | 6,376 | (3,871 | ) | 11,908 | ||||||||
Effects of: | ||||||||||||
- Tax exempt income | (5,779 | ) | (4,954 | ) | (5,664 | ) | ||||||
- Aggregate effect of different tax rates in foreign jurisdictions | (4,434 | ) | (1,442 | ) | (1,796 | ) | ||||||
- Italian regional tax | 4,646 | 4,727 | 5,954 | |||||||||
- Non-deductible expenses | 2,694 | 3,537 | 1,970 | |||||||||
- Provisions for contingent liabilities | 914 | 155 | 217 | |||||||||
- Depreciation and impairment of goodwill | 274 | 396 | 2,931 | |||||||||
- Effect of net change in valuation allowance established against deferred tax assets | 1,989 | 4,157 | 1,119 | |||||||||
- Tax effect of unremitted earnings | 405 | 405 | 1,011 | |||||||||
Actual tax charge | 7,085 | 3,110 | 17,650 | |||||||||
�� |
F - 27
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(Expressed in thousands of euros except as otherwise indicated)
2006 | 2005 | 2004 | ||||||||||||||
Current: | ||||||||||||||||
Italian | 5,738 | 6,593 | 14,769 | |||||||||||||
Foreign | 3,405 | 2,817 | 3,532 | |||||||||||||
Total (a) | 9,143 | 9,410 | 18,301 | |||||||||||||
Deferred: | ||||||||||||||||
Italian | (2,592 | ) | (3,260 | ) | (760 | ) | ||||||||||
Foreign | 534 | (3,040 | ) | 109 | ||||||||||||
Total (b) | (2,058 | ) | (6,300 | ) | (651 | ) | ||||||||||
Total (a + b) | 7,085 | 3,110 | 17,650 | |||||||||||||
2006 | 2005 | |||||||
Deferred tax assets: | ||||||||
- Tax loss carryforwards | 17,562 | 14,937 | ||||||
- Provision for returns and discounts | 2,047 | 1,873 | ||||||
- Allowance for doubtful accounts | 1,746 | 1,594 | ||||||
- Inventory obsolescence | 1,849 | 2,490 | ||||||
- Provision for contingent liabilities | 1,403 | 368 | ||||||
- Intercompany profit on inventory | 1,051 | 475 | ||||||
- Provision for sales representatives | 658 | 555 | ||||||
- Unrealized net losses on foreign exchange | 590 | — | ||||||
- Goodwill | 374 | 17 | ||||||
- Other temporary differences | 1,698 | 1,218 | ||||||
Total gross deferred tax assets | 28,978 | 23,527 | ||||||
- Less valuation allowance | (15,146 | ) | (13,153 | ) | ||||
Net deferred tax assets (a) | 13,832 | 10,374 | ||||||
Deferred tax liabilities: | ||||||||
- Unremitted earnings of subsidiaries | (1,940 | ) | (1,535 | ) | ||||
- Revenue recognition | (768 | ) | (303 | ) | ||||
- Government grants | (655 | ) | (658 | ) | ||||
- Other temporary differences | (715 | ) | (182 | ) | ||||
Total deferred tax liabilities (b) | (4,078 | ) | (2,678 | ) | ||||
Net deferred tax assets (a + b) | 9,754 | 7,696 | ||||||
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(Expressed in thousands of euros except as otherwise indicated)
2006 | Current | Non current | Total | |||||||||
Gross deferred tax assets | 10,886 | 18,092 | 28,978 | |||||||||
Valuation allowance | — | (15,146 | ) | (15,146 | ) | |||||||
Net deferred tax assets | 10,886 | 2,946 | 13,832 | |||||||||
Deferred tax liabilities | (3,423 | ) | (655 | ) | (4,078 | ) | ||||||
Net deferred tax assets | 7,463 | 2,291 | 9,754 | |||||||||
2005 | Current | Non current | Total | |||||||||
Gross deferred tax assets | 8,655 | 14,872 | 23,527 | |||||||||
Valuation allowance | — | (13,153 | ) | (13,153 | ) | |||||||
Net deferred tax assets | 8,655 | 1,719 | 10,374 | |||||||||
Deferred tax liabilities | (2,023 | ) | (655 | ) | (2,678 | ) | ||||||
Net deferred tax assets | 6,632 | 1,064 | 7,696 | |||||||||
2008 | 527 | |||
2009 | 5,713 | |||
2010 | 3,664 | |||
2011 | 5,453 | |||
Thereafter | 42,434 | |||
Total | 57,791 | |||
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(Expressed in thousands of euros except as otherwise indicated)
15. | Salaries, wages and related liabilities |
2006 | 2005 | |||||||
Salaries and wages | 11,320 | 11,954 | ||||||
Social security contributions | 7,577 | 7,298 | ||||||
Vacation accrual | 2,777 | 2,831 | ||||||
Total | 21,674 | 22,083 | ||||||
16. | Long-term debt |
2006 | 2005 | |||||||
2.25% long-term debt payable in annual equal instalments with final payment due May 30, 2015 | 2,460 | 2,699 | ||||||
0.96% long-term debt payable in annual instalments with final payment due September 2010 | 291 | — | ||||||
3.0% long-term debt payable in semi-annual equal instalments with final payment due October 2007 | — | 1,309 | ||||||
Total long-term debt | 2,751 | 4,008 | ||||||
Less current instalments | (318 | ) | (426 | ) | ||||
Long-term debt, excluding current instalments | 2,433 | 3,582 | ||||||
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(Expressed in thousands of euros except as otherwise indicated)
2008 | 325 | |||
2009 | 332 | |||
2010 | 339 | |||
2011 | 273 | |||
Thereafter | 1,164 | |||
Total | 2,433 | |||
17. | Other liabilities |
2006 | 2005 | |||||||
Provision for contingent liabilities | 8,696 | 2,868 | ||||||
Termination indemnities for sales agents | 1,764 | 1,490 | ||||||
Total | 10,460 | 4,358 | ||||||
18. | Minority interest |
19. | Shareholders’ equity |
2006 | 2005 | |||||||
Mr. Pasquale Natuzzi | 47.5 | % | 47.6 | % | ||||
Miss Anna Maria Natuzzi | 2.6 | % | 2.6 | % | ||||
Mrs. Annunziata Natuzzi | 2.5 | % | 2.5 | % | ||||
Public investors | 47.4 | % | 47.3 | % | ||||
100 | % | 100 | % | |||||
F - 31
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(Expressed in thousands of euros except as otherwise indicated)
2006 | 2005 | |||||||
Legal reserve | 11,199 | 11,199 | ||||||
Monetary revaluation reserve | 1,344 | 1,344 | ||||||
Government capital grants reserve | 29,749 | 29,749 | ||||||
Total | 42,292 | 42,292 | ||||||
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(Expressed in thousands of euros except as otherwise indicated)
20. | Share grants and options |
F - 33
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Additional | ||||||||||||||||
MBO 2004 | Shares | Options | options | Total | ||||||||||||
Balance at December 31, 2005 | 113,786 | 369,752 | — | 483,538 | ||||||||||||
Granted | — | — | — | — | ||||||||||||
Exercised | (56,910 | ) | — | — | (56,910 | ) | ||||||||||
Forfeited | — | (88,746 | ) | — | (88,746 | ) | ||||||||||
Expired | — | — | — | — | ||||||||||||
Balance at December 31, 2006 | 56,876 | 281,006 | — | 337,882 | ||||||||||||
Weighted average remaining contractual life | 0.04 years | 2.04 years | — | |||||||||||||
Additional | ||||||||||||||||
MBO 2005 | Shares | Options | options | Total | ||||||||||||
Balance at December 31, 2005 | 57,626 | 165,946 | 82,973 | 306,545 | ||||||||||||
Granted | — | — | — | — | ||||||||||||
Exercised | — | — | — | — | ||||||||||||
Forfeited | — | (24,020 | ) | (12,010 | ) | (36,030 | ) | |||||||||
Expired | — | — | — | — | ||||||||||||
Balance at December 31, 2006 | 57,626 | 141,926 | 70,963 | 270,515 | ||||||||||||
Weighted average remaining contractual life | 0.54 years | 2.04 years | 2.04 years | |||||||||||||
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(Expressed in thousands of euros except as otherwise indicated)
21. | Commitments and contingent liabilities |
2007 | 12,524 | |||
2008 | 11,667 | |||
2009 | 10,724 | |||
2010 | 9,560 | |||
2011 | 8,608 | |||
Thereafter | 13,895 | |||
Total | 66,978 | |||
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(Expressed in thousands of euros except as otherwise indicated)
22. | Segmental and geographical information |
F - 36
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(Expressed in thousands of euros except as otherwise indicated)
2006 | 2005 | 2004 | ||||||||||
Leather upholstered furniture | 573,086 | 498,942 | 547,923 | |||||||||
Fabric upholstered furniture | 87,165 | 95,895 | 117,598 | |||||||||
Total | 660,251 | 594,837 | 665,521 | |||||||||
2006 | 2005 | 2004 | ||||||||||
Sales of upholstered furniture | ||||||||||||
United States of America | 204,303 | 207,215 | 238,807 | |||||||||
Italy | 81,911 | 67,020 | 73,017 | |||||||||
Spain | 45,955 | 35,668 | 27,557 | |||||||||
England | 39,874 | 50,805 | 83,391 | |||||||||
Canada | 36,244 | 31,608 | 38,175 | |||||||||
France | 33,551 | 24,622 | 26,026 | |||||||||
Germany | 30,927 | 24,329 | 19,743 | |||||||||
Belgium | 28,013 | 20,761 | 19,956 | |||||||||
Australia | 18,269 | 16,543 | 19,414 | |||||||||
Holland | 16,624 | 13,654 | 13,075 | |||||||||
Sweden | 12,227 | 10,809 | 8,735 | |||||||||
Norway | 10,520 | 11,271 | 12,151 | |||||||||
Other countries (none greater than 2%) | 101,833 | 80,532 | 85,474 | |||||||||
660,251 | 594,837 | 665,521 | ||||||||||
2006 | 2005 | |||||||
Long lived assets | ||||||||
Italy | 135,956 | 144,398 | ||||||
Romania | 36,088 | 36,046 | ||||||
Brazil | 23,791 | 25,677 | ||||||
China | 21,983 | 24,490 | ||||||
United States of America | 18,381 | 21,789 | ||||||
Other countries | 10,124 | 10,393 | ||||||
Total | 246,323 | 262,793 | ||||||
F - 37
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(Expressed in thousands of euros except as otherwise indicated)
23. | Cost of sales |
2006 | 2005 | 2004 | ||||||||||
Opening inventories | 115,690 | 112,601 | 97,518 | |||||||||
Purchases | 313,207 | 295,277 | 335,432 | |||||||||
Labor | 109,360 | 108,327 | 107,173 | |||||||||
Third party manufacturers | 19,609 | 25,340 | 26,943 | |||||||||
Other manufacturing costs | 33,055 | 33,637 | 30,136 | |||||||||
Closing inventories | (100,358 | ) | (115,690 | ) | (112,601 | ) | ||||||
Total | 490,563 | 459,492 | 484,601 | |||||||||
24. | Other income (expense), net |
2006 | 2005 | 2004 | ||||||||||
Interest income | 3,609 | 1,857 | 1,375 | |||||||||
Interest expense and bank commissions | (2,077 | ) | (1,803 | ) | (1,961 | ) | ||||||
Interest (expense) income, net | 1,532 | 54 | (586 | ) | ||||||||
Gains (losses) on foreign exchange, net | (4,651 | ) | 3,211 | (4,809 | ) | |||||||
Unrealized exchange gains (losses) on domestic currency swaps | 5,463 | (4,767 | ) | 7,101 | ||||||||
Gains (losses) on foreign exchange | 812 | (1,556 | ) | 2,292 | ||||||||
Losses on securities, net | — | — | (50 | ) | ||||||||
Other, net | 503 | 4,462 | (5,548 | ) | ||||||||
Total | 2,847 | 2,960 | (3,892 | ) | ||||||||
F - 38
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(Expressed in thousands of euros except as otherwise indicated)
2006 | 2005 | 2004 | ||||||||||
Net realized gains (losses) on domestic currency swaps | 664 | (4,269 | ) | 4,973 | ||||||||
Net realized gains (losses) on accounts receivable and payable | (8,166 | ) | 5,434 | (1,052 | ) | |||||||
Net unrealized gains (losses) on accounts receivable and payable | 2,851 | 2,046 | (8,730 | ) | ||||||||
Total | (4,651 | ) | 3,211 | (4,809 | ) | |||||||
2006 | 2005 | 2004 | ||||||||||
Provisions for contingent liabilities | (5,828 | ) | (560 | ) | (1,133 | ) | ||||||
Incentive from landlord | 1,100 | — | — | |||||||||
Revenue for capital grants | — | 4,380 | — | |||||||||
Export incentive benefits | 3,371 | 2,100 | — | |||||||||
Penalties to landlords | — | (658 | ) | |||||||||
Impairment loss of goodwill | — | — | (6,119 | ) | ||||||||
Write off of fixed assets | — | (2,770 | ) | (1,311 | ) | |||||||
Gain on disposal of subsidiary | — | — | 3,419 | |||||||||
Pre-acquisition loss | — | 495 | — | |||||||||
Other, net | 1,860 | 1,475 | (404 | ) | ||||||||
Total | 503 | 4,462 | (5,548 | ) | ||||||||
F - 39
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(Expressed in thousands of euros except as otherwise indicated)
F - 40
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(Expressed in thousands of euros except as otherwise indicated)
F - 41
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(Expressed in thousands of euros except as otherwise indicated)
25. | Financial instruments and risk management |
2006 | 2005 | |||||||
U.S. dollars | 90,744 | 72,496 | ||||||
Euro | 19,154 | — | ||||||
Canadian dollars | 15,703 | 17,698 | ||||||
British pounds | 15,121 | 26,783 | ||||||
Australian dollars | 9,934 | 10,744 | ||||||
Norwegian kroner | 6,027 | 5,928 | ||||||
Swedish kroner | 3,887 | 3,441 | ||||||
Swiss francs | 2,584 | 656 | ||||||
Danish kroner | 924 | 845 | ||||||
Japanese yen | 864 | 1,504 | ||||||
Total | 164,942 | 140,095 | ||||||
F - 42
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(Expressed in thousands of euros except as otherwise indicated)
2006 | 2005 | |||||||||||||||
Contract | Unrealized | Contract | Unrealized | |||||||||||||
amount | gains (losses) | amount | gains (losses) | |||||||||||||
Assets | 137,608 | 6,141 | 46,075 | 392 | ||||||||||||
Liabilities | 27,334 | (678 | ) | 94,020 | (5,159 | ) | ||||||||||
Total | 164,942 | 5,463 | 140,095 | (4,767 | ) | |||||||||||
26. | Fair value of financial instruments |
2006 | 2005 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
value | value | value | value | |||||||||||||
Assets: | ||||||||||||||||
- Marketable debts securities | 5 | 5 | 5 | 5 | ||||||||||||
Liabilities: | ||||||||||||||||
- Long-term debt | 2,751 | 2,472 | 4,008 | 3,614 |
F - 43
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(Expressed in thousands of euros except as otherwise indicated)
27. | Application of generally accepted accounting principles in the United States of America |
2006 | 2005 | 2004 | ||||||||||
Net earnings (loss) under Italian GAAP | 12,339 | (14,624 | ) | 18,353 | ||||||||
Adjustments to reported income: | ||||||||||||
(a) Revaluation of property, plant and equipment | 27 | 29 | 27 | |||||||||
(b) Government grants | 1,453 | 3,119 | 612 | |||||||||
(c) Revenue recognition | (615 | ) | 2,804 | 966 | ||||||||
(i) Goodwill and intangible assets | 1,828 | (249 | ) | (925 | ) | |||||||
(j) Share grants and options | (254 | ) | 136 | (1,140 | ) | |||||||
(k) Translation of foreign financial statements | 762 | 1,684 | — | |||||||||
(l) Penalties to landlords | (658 | ) | 658 | — | ||||||||
Tax effect of US GAAP adjustments | (393 | ) | (446 | ) | 860 | |||||||
Net earnings (loss) in conformity with US GAAP | 14,489 | (6,889 | ) | 18,753 | ||||||||
Basic earnings (loss) per share in conformity with US GAAP | 0.26 | (0.13 | ) | 0.34 | ||||||||
Diluted earnings (loss) per share in conformity with US GAAP | 0.26 | (0.13 | ) | 0.34 | ||||||||
F - 44
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(Expressed in thousands of euros except as otherwise indicated)
Reconciliation of shareholders’ equity: | 2006 | 2005 | ||||||
Shareholders’ equity under Italian GAAP | 478,842 | 473,025 | ||||||
(a) Revaluation of property, plant and equipment | (588 | ) | (615 | ) | ||||
(b) Government grants | (14,036 | ) | (15,489 | ) | ||||
(c) Revenue recognition | (6,260 | ) | (5,645 | ) | ||||
(i) Goodwill and intangible assets | 5,251 | 2,898 | ||||||
(k) Translation of foreign financial statements | 5,424 | (1,860 | ) | |||||
(l) Penalties to landlords | — | 658 | ||||||
Tax effect of US GAAP adjustments | (208 | ) | 710 | |||||
Shareholders’ equity in conformity with US GAAP | 468,425 | 453,682 | ||||||
F - 45
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(Expressed in thousands of euros except as otherwise indicated)
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(Expressed in thousands of euros except as otherwise indicated)
2006 | 2005 | |||||||
Effects | Effects | |||||||
Increase | Increase | |||||||
Consolidated balance sheet | (Decrease) | (Decrease) | ||||||
Trade receivables, net | (29,721 | ) | (33,106 | ) | ||||
Inventories | 19,824 | 22,711 | ||||||
Total effect on current assets (a) | (9,897 | ) | (10,395 | ) | ||||
Accounts payable-trade | (3,637 | ) | (4,750 | ) | ||||
Income taxes | (1,741 | ) | (1,468 | ) | ||||
Total effect on current liabilities (b) | (5,378 | ) | (6,218 | ) | ||||
Total effect on shareholders’ equity (a-b) | (4,519 | ) | (4,177 | ) | ||||
Consolidated statement of operations | 2006 | 2005 | 2004 | |||||||||
Net sales | 3,385 | 3,517 | 10,640 | |||||||||
Gross profit | 498 | 2,679 | 2,995 | |||||||||
Operating income | (615 | ) | 2,804 | 966 | ||||||||
Total effect on net earnings | (342 | ) | 1,737 | 1,778 | ||||||||
Net sales | 943 | |||
Cost of sale | (483 | ) | ||
Gross profit | 460 | |||
Selling expense | (417 | ) | ||
General and administrative expense | (175 | ) | ||
Operating loss | (132 | ) | ||
Other income, net | 132 | |||
Loss before taxes | — | |||
Income taxes | — | |||
Net loss | — | |||
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(Expressed in thousands of euros except as otherwise indicated)
US GAAP | IT GAAP | Difference | ||||||||||
Current assets | 1,107 | 1,107 | — | |||||||||
Goodwill | 985 | 1,664 | (679 | ) | ||||||||
Order backlog | 1,082 | — | 1,082 | |||||||||
Other non current assets | 1,634 | 1,634 | — | |||||||||
Deferred tax liabilities | (403 | ) | — | (403 | ) | |||||||
Current liabilities | (2,080 | ) | (2,080 | ) | — | |||||||
Non current liabilities | (306 | ) | (306 | ) | — | |||||||
Purchase price | 2,019 | 2,019 | — | |||||||||
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(Expressed in thousands of euros except as otherwise indicated)
US GAAP | IT GAAP | Difference | ||||||||||
Goodwill | — | 600 | (600 | ) | ||||||||
Intangible assets | 957 | — | 957 | |||||||||
Leasehold improvements | 400 | 400 | — | |||||||||
Deferred tax liabilities | (357 | ) | — | (357 | ) | |||||||
Cash paid | 1,000 | 1,000 | — | |||||||||
US GAAP | IT GAAP | Difference | ||||||||||
Goodwill | 1,778 | 2,600 | (822 | ) | ||||||||
Fixed assets | 132 | 132 | — | |||||||||
Leasehold improvements | 468 | 468 | — | |||||||||
Operating lease agreements | 1,310 | — | 1,310 | |||||||||
Deferred tax liabilities | (488 | ) | — | (488 | ) | |||||||
Payable to employes | (107 | ) | (107 | ) | — | |||||||
Purchase price | 3,093 | 3,093 | — | |||||||||
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(Expressed in thousands of euros except as otherwise indicated)
US GAAP | IT GAAP | Difference | ||||||||||
Goodwill | 37 | 100 | (63 | ) | ||||||||
Fixed assets and leas. impr. | 38 | 38 | — | |||||||||
Inventory | 112 | 112 | — | |||||||||
Franchisee agreements | 100 | — | 100 | |||||||||
Deferred tax liabilities | (37 | ) | — | (37 | ) | |||||||
Purchase price | 250 | 250 | — | |||||||||
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(Expressed in thousands of euros except as otherwise indicated)
Goodwill | Intangibles | Deferred taxes | ||||||||||||||||||||||
US | Italian | US | Italian | US | Italian | |||||||||||||||||||
Balance at December 31, 2003 | 9,179 | 12,008 | 6,141 | — | (2,088 | ) | — | |||||||||||||||||
Acquisition of Divani Due S.r.l. | 1,251 | 1,251 | — | — | — | — | ||||||||||||||||||
Amortization | — | (2,647 | ) | (512 | ) | — | 174 | — | ||||||||||||||||
Impairment losses | (9,179 | ) | (6,119 | ) | — | — | — | — | ||||||||||||||||
Balance at December 31, 2004 | 1,251 | 4,493 | 5,629 | — | (1,914 | ) | — | |||||||||||||||||
Acquisition of Koineè S.r.l. | 985 | 1,664 | 1,082 | — | (403 | ) | — | |||||||||||||||||
Acquisition of stores in Rome | 3,709 | 3,709 | — | — | — | — | ||||||||||||||||||
Acquisition of a store in Milan | — | 600 | 957 | — | (357 | ) | — | |||||||||||||||||
Fulfilment of order backlog | — | — | (1,082 | ) | — | 403 | — | |||||||||||||||||
Amortization | — | (1,344 | ) | (511 | ) | — | 174 | (23 | ) | |||||||||||||||
Balance at December 31, 2005 | 5,945 | 9,122 | 6,075 | — | (2,097 | ) | (23 | ) | ||||||||||||||||
Acquisition of Milan stores | 1,778 | 2,600 | 1,310 | — | (488 | ) | — | |||||||||||||||||
Acquisition of other stores | 37 | 100 | 100 | — | (37 | ) | — | |||||||||||||||||
Amortization | — | (2,521 | ) | (693 | ) | — | 241 | (494 | ) | |||||||||||||||
Balance at December 31, 2006 | 7,760 | 9,301 | 6,792 | — | (2,381 | ) | (517 | ) | ||||||||||||||||
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(Expressed in thousands of euros except as otherwise indicated)
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(Expressed in thousands of euros except as otherwise indicated)
2005 | 2004 | |||||||
Net earnings (loss) in conformity with US GAAP, as reported | (6,889 | ) | 18,753 | |||||
Stock-based employee compensation, as reported | (136 | ) | 1,140 | |||||
Stock-based employee compensation expense under fair value | (756 | ) | (1,284 | ) | ||||
Pro forma net earnings (loss) | (7,781 | ) | 18,609 | |||||
Expected life and performance related conditions | 2 years | — | 5.3 years | |||||||||
Expected volatility of the underlying share | 23 | % | ||||||||||
Expected dividend yield of the underlying share | 2 | % | ||||||||||
Risk-free interest rate | 2.43% – 3.79 | % |
2005 | As reported | Pro-forma | ||||||
Basic loss per share | (0.13 | ) | (0.14 | ) | ||||
Diluted loss per share | (0.13 | ) | (0.14 | ) | ||||
2004 | As reported | Pro-forma | ||||||
Basic earnings per share | 0.34 | 0.34 | ||||||
Diluted earnings per share | 0.34 | 0.34 | ||||||
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(Expressed in thousands of euros except as otherwise indicated)
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NATUZZI S.p.A. | ||||||
(REGISTRANT) | ||||||
By | /s/ Ernesto Greco | |||||
Ernesto Greco | ||||||
Chief Executive Officer |
Table of Contents
1.1 | English translation of the by-laws (Statuto) of the Company, as amended and restated as of January 23, 2007. | |
2.1 | Deposit Agreement dated as of May 15, 1993, as amended and restated as of December 31, 2001, among the Company, The Bank of New York, as Depositary, and owners and beneficial owners of ADRs (incorporated by reference to the Form 20-F filed by Natuzzi S.p.A. with the Securities and Exchange Commission on July 1, 2002, file number 1-11854). | |
8.1 | List of Significant Subsidiaries. | |
12.1 | Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
12.2 | Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
13.1 | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |