##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the Fiscal Year Ended: December 31, 2010
 Commission file number: 001-11854
 NATUZZI S.p.A.
  Republic of Italy
 Via Iazzitiello 47, 70029 Santeramo in Colle Bari, Italy
 Mrs. Silvia Di Rosa
Tel. +39 335 78 64 209
sdirosa@natuzzi.com
Via Iazzitiello 47, 70029 Santeramo in Colle, Bari, Italy
  Title of each class
    
    Name of each exchange on which registeredAmerican Depositary Shares, each representing 
one Ordinary Share
    
    New York Stock ExchangeOrdinary Shares, with a par value of 1.00 each
    
    New York Stock Exchange
(for listing purposes only)
 None
 None
  As of December 31, 2010 54,853,045 Ordinary Shares
  o þ
  o þ
  þ o
  o o þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
  U.S. GAAP o
    
    IFRS o
    
    Other þ
  o þ
  o þ




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TABLE OF CONTENTS
 PagePART I
    
    
    2Item 1. Identity of Directors, Senior Management and Advisers
    
    
    2Item 2. Offer Statistics and Expected Timetable
    
    
    2Item 3. Key Information
    
    
    2Selected Financial Data
    
    
    2Exchange Rates
    
    
    4Risk Factors
    
    
    4Forward Looking Information
    
    
    10Item 4. Information on the Company
    
    
    10Introduction
    
    
    10Organizational Structure
    
    
    12Strategy
    
    
    13Manufacturing
    
    
    16Supply-Chain Management
    
    
    20Products
    
    
    22Advertising
    
    
    23Retail Development
    
    
    24Markets
    
    
    24Incentive Programs and Tax Benefits
    
    
    28Management of Exchange Rate Risk
    
    
    31Trademarks and Patents
    
    
    31Regulation
    
    
    32Environmental Regulatory Compliance
    
    
    32Insurance
    
    
    32Description of Properties
    
    
    33Capital Expenditures
    
    
    34Item 4A. Unresolved Staff Comments
    
    
    34Item 5. Operating and Financial Review and Prospects
    
    
    34Critical Accounting Policies
    
    
    34Results of Operations
    
    
    372010 Compared to 2009
    
    
    382009 Compared to 2008
    
    
    41Liquidity and Capital Resources
    
    
    45Contractual Obligations and Commitments
    
    
    46
  i




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TABLE OF CONTENTS
 PageTrend information
    
    
    47Related Party Transactions
    
    
    47New Accounting Standards under Italian and U.S. GAAP
    
    
    48Item 6. Directors, Senior Management and Employees
    
    
    50Compensation of Directors and Officers
    
    
    53Share Ownership
    
    
    54Statutory Auditors
    
    
    54External Auditors
    
    
    55Employees
    
    
    55Item 7. Major Shareholders and Related Party Transactions
    
    
    57Major Shareholders
    
    
    57Related Party Transactions
    
    
    57Item 8. Financial Information
    
    
    58Consolidated Financial Statements
    
    
    58Export Sales
    
    
    58Legal and Governmental Proceedings
    
    
    58Dividends
    
    
    59Significant Changes
    
    
    60Item 9. The Offer and Listing
    
    
    60Trading Markets and Share Prices
    
    
    60Item 10. Additional Information
    
    
    61By-laws
    
    
    61Certain Contracts
    
    
    70Exchange Controls
    
    
    70Taxation
    
    
    71Documents on Display
    
    
    76Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    76Item 12. Description of Securities Other than Equity Securities
    
    
    78PART II
    
    
    79Item 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    79Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    79Item 15. Controls and Procedures
    
    
    79Item 16. [Reserved]
    
    
    82Item 16A. Audit Committee Financial Expert
    
    
    82
  ii




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TABLE OF CONTENTS
 PageItem 16B. Code of Ethics
    
    
    82Item 16C. Principal Accountant Fees and Services
    
    
    82Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    
    83Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    83Item 16F. Change in Registrants Certifying Accountant
    
    
    83Item 16G. Corporate Governance
    
    
    84PART III
    
    
    88Item 17. Financial Statements
    
    
    88Item 18. Financial Statements
    
    
    88Item 19. Exhibits
    
    
    88Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1
   iii




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Presentation Of Financial Information
       1




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PART I
 
 Item 1. Identity of Directors, Senior Management and Advisers
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 
 Selected Financial Data
    2




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Year Ended At December 31,2010
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(millions ofdollars, exceptper OrdinaryShare)(1)
    
    
    
    
    
    
    (millions of euro, except per Ordinary Share)Statement of Operations Data:Amounts in accordance with Italian GAAP:Net sales:Leather- and fabric-upholstered furniture
    
    $
    608.6
    
    
    
    460.5
    
    
    
    450.6
    
    
    
    587.8
    
    
    
    563.5
    
    
    
    660.2Other(2)
    
    
    76.8
    
    
    
    58.1
    
    
    
    64.8
    
    
    
    78.2
    
    
    
    70.9
    
    
    
    75.2Total net sales
    
    
    685.4
    
    
    
    518.6
    
    
    
    515.4
    
    
    
    666.0
    
    
    
    634.4
    
    
    
    735.4Cost of sales
    
    
    (424.9
    )
    
    
    (321.5
    )
    
    
    (329.8
    )
    
    
    (478.8
    )
    
    
    (460.6
    )
    
    
    (490.5
    )Gross profit
    
    
    260.5
    
    
    
    197.1
    
    
    
    185.6
    
    
    
    187.2
    
    
    
    173.8
    
    
    
    244.9Selling expenses
    
    
    (203.9
    )
    
    
    (154.3
    )
    
    
    (149.6
    )
    
    
    (172.3
    )
    
    
    (173.9
    )
    
    
    (186.2
    )General and administrative expenses
    
    
    (56.0
    )
    
    
    (42.4
    )
    
    
    (46.6
    )
    
    
    (49.9
    )
    
    
    (49.0
    )
    
    
    (42.2
    )Operating income (loss)
    
    
    0.6
    
    
    
    0.4
    
    
    
    (10.6
    )
    
    
    (35.0
    )
    
    
    (49.1
    )
    
    
    16.5Operating income (loss) per Ordinary Share
    
    
    0.01
    
    
    
    0.01
    
    
    
    (0.02
    )
    
    
    (0.64
    )
    
    
    (0.90
    )
    
    
    0.30Other income (expense), Net (3) (4) (5)
    
    
    (5.8
    )
    
    
    (4.4
    )
    
    
    3.1
    
    
    
    (25.8
    )
    
    
    (2.6
    )
    
    
    2.8Income (loss) before taxes and minority interests
    
    
    (5.2
    )
    
    
    (4.0
    )
    
    
    (7.5
    )
    
    
    (60.8
    )
    
    
    (51.7
    )
    
    
    19.3Income taxes
    
    
    (9.3
    )
    
    
    (7.0
    )
    
    
    (9.8
    )
    
    
    (1.5
    )
    
    
    (11.4
    )
    
    
    (7.1
    )Income (loss) before non-controlling interests
    
    
    (14.5
    )
    
    
    (11.0
    )
    
    
    (17.3
    )
    
    
    (62.3
    )
    
    
    (63.1
    )
    
    
    12.2Non-controlling interest
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.4
    
    
    
    (0.4
    )
    
    
    (0.5
    )
    
    
    (0.1
    )Net income (loss)
    
    
    (14.6
    )
    
    
    (11.1
    )
    
    
    (17.7
    )
    
    
    (61.9
    )
    
    
    (62.6
    )
    
    
    12.3Net income (loss) per Ordinary Share
    
    $
    (0.27
    )
    
    
    (0.20
    )
    
    
    (0.32
    )
    
    
    (1.13
    )
    
    
    (1.14
    )
    
    
    0.23Dividends declared per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amounts in accordance with U.S. GAAP:Net sales
    
    
    675.1
    
    
    
    510.8
    
    
    
    506.0
    
    
    
    670.1
    
    
    
    635.9
    
    
    
    736.8Operating income (loss)
    
    
    0.6
    
    
    
    0.4
    
    
    
    (14.2
    )
    
    
    (40.0
    )
    
    
    (46.4
    )
    
    
    22.7Operating income (loss) per Ordinary Share
    
    
    0.01
    
    
    
    0.01
    
    
    
    (0.26
    )
    
    
    (0.73
    )
    
    
    (0.85
    )
    
    
    0.41Net income (loss)
    
    
    (12.3
    )
    
    
    (9.3
    )
    
    
    (25.7
    )
    
    
    (55.7
    )
    
    
    (60.0
    )
    
    
    14.5Net income (loss) per Ordinary Share (basic and
diluted)
    
    $
    (0.22
    )
    
    
    (0.17
    )
    
    
    (0.47
    )
    
    
    (1.02
    )
    
    
    (1.09
    )
    
    
    0.26Weighted average number of Ordinary Shares Outstanding
    
    
    54,853,045
    
    
    
    54,853,045
    
    
    
    54,853,045
    
    
    
    54,850,643
    
    
    
    54,817,086
    
    
    
    54,733,796Balance Sheet Data:Amounts in accordance with Italian GAAP:Current assets
    
    $
    396.2
    
    
    
    298.6
    
    
    
    301.9
    
    
    
    318.5
    
    
    
    364.1
    
    
    
    407.3Total assets
    
    
    668.6
    
    
    
    503.9
    
    
    
    508.6
    
    
    
    543.8
    
    
    
    617.5
    
    
    
    674.7Current liabilities
    
    
    143.0
    
    
    
    107.8
    
    
    
    116.8
    
    
    
    136.3
    
    
    
    146.0
    
    
    
    133.0Long-term debt
    
    
    18.0
    
    
    
    13.6
    
    
    
    5.9
    
    
    
    3.3
    
    
    
    2.1
    
    
    
    2.4Non-controlling interest
    
    
    2.8
    
    
    
    2.1
    
    
    
    1.9
    
    
    
    0.8
    
    
    
    0.1
    
    
    
    0.6Shareholders equity attributable to Natuzzi S.p.A.
and Subsidiaries(6)
    
    
    428.7
    
    
    
    323.1
    
    
    
    325.0
    
    
    
    345.2
    
    
    
    411.6
    
    
    
    478.9Net Asset
    
    
    431.5
    
    
    
    325.2
    
    
    
    326.9
    
    
    
    346.0
    
    
    
    411.7
    
    
    
    479.5Amounts in accordance with U.S. GAAP:Total assets
    
    $
    674.7
    
    
    
    508.5
    
    
    
    521.1
    
    
    
    560.5
    
    
    
    627.5
    
    
    
    674.9Shareholders equity attributable to Natuzzi S.p.A. and
Subsidiaries
    
    $
    422.3
    
    
    
    318.3
    
    
    
    327.6
    
    
    
    353.3
    
    
    
    408.5
    
    
    
    468.4Net Asset
    
    $
    425.1
    
    
    
    320.4
    
    
    
    329.5
    
    
    
    354.1
    
    
    
    408.6
    
    
    
    469.0
 
 1)
    
    Income Statement amounts are converted from euros into U.S. dollars by using the average
Federal Reserve Bank of New York euro exchange rate for 2010 of U.S. $1.3216 per 1 euro. Balance
Sheet amounts are converted from euros into U.S. dollars using the Federal Reserve Bank of New York
Noon Buying Rate of U.S. $1.3269 per 1 euro as of December 31, 2010. Source: Bloomberg (USCFEURO
Index).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  2010 Compared to 2009, Item 11. Quantitative and Qualitative
Disclosures about Market Risk and Notes 3, 23 and 24 to the Consolidated Financial Statements
included in Item 18 of this annual report.  3




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4)
    
    Other income (expense), net, in 2006 was negatively affected by the provisions for contingent
liabilities.5)
    
    Other income (expense), net in 2008 was negatively affected by the impairment losses of
long-lived assets, a one-time employee termination benefit and the provision for contingent
liabilities. See Note 23 to the Consolidated Financial Statements included in Item 18 of this
annual report.6)
    
    Share capital as of December 31, 2010, 2009, 2008, 2007 and 2006 amounted to 54.9 million,
54.9 million, 54.9 million, 54.8 million and 54.7 million, respectively. Shareholders Equity
represents the Total Equity attributable to Natuzzi S.p.A and its subsidiaries. 
 Exchange Rates
  Year:
    
    Average(1)
    
    
    At Period End2006
    
    
    1.2661
    
    
    
    1.31972007
    
    
    1.3797
    
    
    
    1.46032008
    
    
    1.4695
    
    
    
    1.39192009
    
    
    1.3955
    
    
    
    1.43322010
    
    
    1.3216
    
    
    
    1.3269
 Month ending:
    
    High
    
    
    Low31-Dec-10
    
    
    1.3395
    
    
    
    1.308931-Jan-11
    
    
    1.3715
    
    
    
    1.294428-Feb-11
    
    
    1.3794
    
    
    
    1.347431-Mar-11
    
    
    1.4212
    
    
    
    1.381330-Apr-11
    
    
    1.4821
    
    
    
    1.421131-May-11
    
    
    1.4875
    
    
    
    1.4015
 
 (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. Source: Federal Reserve Statistical Release on Foreign Exchange RatesHistorical
Rates for Euro Area; Bloomberg (USCFEURO Index)  
 Risk Factors
  The Group has a recent history of losses; the Groups future profitability and financial
condition depend on its ability to continue to successfully restructure its operations 
  4




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
    
    price competition from low-cost manufacturers;
    
    continuing sluggishness of major economies, with particular reference to
those in Europe;
    
    a sharp increase in shipping costs and raw material; and
    
    continuing unfavorable currency conditions.
    The recent worldwide economic downturn over the past few years has impacted the Groups
business and could continue to significantly impact our operations, sales, earnings and liquidity
in the foreseeable future 
   5




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The Groups operations have benefited in 2010 and in previous years from a temporary work
force reduction program that, if not continued, may have an impact on the Groups future
performance  Cassa
Integrazione Guadagni Straordinaria
 A failure to offer a wide range of products at different price-points could result in a
decrease in our future earnings 
 Our growth strategy includes, in part, the development of new stores each year. If we and our
dealers are not able to open new stores or effectively manage the growth of these stores, our
ability to grow and our profitability could be adversely affected 
 Demand for furniture is cyclical and may fall in the future
   6




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The Group operates principally in a niche area of the furniture market 
 The furniture market is highly competitive 
     Fluctuations in currency exchange rates have adversely affected and may adversely affect the
Groups results 
 The Group faces risks associated with its international operations 
  7




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The price of the Groups principal raw material is difficult to predict
 Introduction of a new integrated management system 
 
    
    improved quality, reliability and timeliness of information;
 
    
    improved integration and visibility of information stemming from different management
functions and countries; and
 
    
    optimization and global management of corporate processes.
   The Groups past results and operations have significantly benefited from government incentive
programs, which may not be available in the future 
  8




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The Group is dependent on qualified personnel 
 Investors may face difficulties in protecting their rights as shareholders or holders of ADSs
 Statuto
 One shareholder has a controlling stake of the company 
    9




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Forward Looking Information
    
 Item 4. Information on the Company
 
 Introduction
    10




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Divani & Divani
by Natuzzi Natuzzi Divani & Divani by Natuzzi Natuzzi
       11




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Organizational Structure
  Percentage ofName
    
    ownership
    
    
    Registered office
    
    ActivityItalsofa Nordeste S/A
    
    
    100.00
    
    
    Salvador de Bahia, Brazil
    
    (1)Italsofa Shanghai Ltd
    
    
    96.50
    
    
    Shanghai, China
    
    (1)Softaly Shanghai Ltd
    
    
    100.00
    
    
    Shanghai, China
    
    (1)Natuzzi China Ltd
    
    
    100.00
    
    
    Shanghai, China
    
    (1)Italsofa Romania
    
    
    100.00
    
    
    Baia Mare, Romania
    
    (1)Natco S.p.A.
    
    
    99.99
    
    
    Santeramo in Colle, Italy
    
    (2)I.M.P.E. S.p.A.
    
    
    90.84
    
    
    Santeramo in Colle, Italy
    
    (3)Nacon S.p.A.
    
    
    100.00
    
    
    Santeramo in Colle, Italy
    
    (4)Lagene S.r.l.
    
    
    100.00
    
    
    Santeramo in Colle, Italy
    
    (4)Natuzzi Americas Inc.
    
    
    100.00
    
    
    High Point, NC, USA
    
    (4)Natuzzi Iberica S.A.
    
    
    100.00
    
    
    Madrid, Spain
    
    (4)Natuzzi Switzerland AG
    
    
    100.00
    
    
    Dietikon, Switzerland
    
    (4)Natuzzi Nordic
    
    
    100.00
    
    
    Copenhagen, Denmark
    
    (4)Natuzzi Benelux S.A.
    
    
    100.00
    
    
    Hereentals, Belgium
    
    (4)Natuzzi Germany Gmbh
    
    
    100.00
    
    
    Köln, 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)Natuzzi Trading Shanghai Ltd
    
    
    100.00
    
    
    Shanghai, China
    
    (4)Natuzzi Oceania PTI Ltd
    
    
    100,00
    
    
    Sidney, Australia
    
    (4)Natuzzi Russia OOO
    
    
    100,00
    
    
    Moscow, Russia
    
    (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
    
    
    Santeramo in Colle, Italy
    
    (6)La Galleria Limited
    
    
    100.00
    
    
    London, UK
    
    (7)Natuzzi
United Kingdom Limited
    
    
    100.00
    
    
    London, UK
    
    (7)Kingdom of Leather Limited
    
    
    100.00
    
    
    London, UK
    
    (7)
 (1)
    
    Manufacture and distribution(2)
    
    Intragroup leather dyeing and finishing(3)
    
    Production and distribution of polyurethane foam(4)
    
    Services and Distribution(5)
    
    Investment holding(6)
    
    Transportation services(7)
    
    Dormant   12




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Strategy
     1.
    
    increasing competitiveness;
 2.
    
    improving service to clients;
 3.
    
    improving product quality;
 4.
    
    striving for innovation;
 5.
    
    the development of the new B2B trademark Edition, launched in 2010;
 6.
    
    introduction of a specific Key-Account program that should help the Group recover market
share among large customers in historical markets such as North America and, in particular,
Europe;
 7.
    
    creating more efficiency in the manufacturing and procurement process by revising product
cost structures and focusing more on the R&D and engineering process;
 8.
    
    eliminating waste and redundancies in Group processes, with a focus on increasing integration
within the Group by completing the SAP rollout; and
 9.
    
    a new commercial organization with focus on differentiation by brands, regions and
distribution channels.
  13




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Repositioning the Brand Portfolio Strategy of the Group
 1) The Natuzzi brand
  2) The Italsofa brand
 3) The Natuzzi Editions/Editions Brand
    14




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Improvement of the Groups Retail Program and Brand Development
 Divani & Divani by Natuzzi Natuzzi
     Product Diversification and Innovation
  15




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Manufacturing
         16




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17




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Raw Materials 
 i.e
  18




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19




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Supply-Chain Management
 Procurement Policies and Operations Integration 
 Production Planning (Order Management, Production, Procurement) 
      On demand
  20




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Upon forecast
     Load Optimization 
   Transportation 
   21




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Products
          22




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Innovation
   
 Advertising
   23




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Retail Development
  
 Markets
 Divani & Divani by Natuzzi Natuzzi Natuzzi Divani & Divani by Natuzzi Italsofa
  1) Leather and Fabric Upholstered Furniture, Net Sales (in millions of euro)
 2010
    
    
    2009
    
    
    2008Americas(1)
    
    
    164.2
    
    
    
    35.7
    %
    
    
    139.8
    
    
    
    31.0
    %
    
    
    208.6
    
    
    
    35.5
    %Natuzzi brand
    
    
    15.5
    
    
    
    3.4
    %
    
    
    15.3
    
    
    
    3.4
    %
    
    
    19.4
    
    
    
    3.3
    %Other (2)
    
    
    148.7
    
    
    
    32.3
    %
    
    
    124.5
    
    
    
    27.6
    %
    
    
    189.1
    
    
    
    32.2
    %Europe
    
    
    238.1
    
    
    
    51.7
    %
    
    
    263.7
    
    
    
    58.5
    %
    
    
    323.7
    
    
    
    55.1
    %Natuzzi brand
    
    
    145.0
    
    
    
    31.5
    %
    
    
    159.9
    
    
    
    35.5
    %
    
    
    196.9
    
    
    
    33.5
    %Other (2)
    
    
    93.1
    
    
    
    20.2
    %
    
    
    103.8
    
    
    
    23.0
    %
    
    
    126.8
    
    
    
    21.6
    %Rest of the world
    
    
    58.2
    
    
    
    12.6
    %
    
    
    47.0
    
    
    
    10.4
    %
    
    
    55.5
    
    
    
    9.4
    %Natuzzi brand
    
    
    31.6
    
    
    
    6.8
    %
    
    
    27.8
    
    
    
    6.2
    %
    
    
    32.8
    
    
    
    5.6
    %Other (2)
    
    
    26.6
    
    
    
    5.8
    %
    
    
    19.2
    
    
    
    4.3
    %
    
    
    22.6
    
    
    
    3.9
    %Total
    
    
    460.5
    
    
    
    100.0
    %
    
    
    450.6
    
    
    
    100.0
    %
    
    
    587.8
    
    
    
    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)
    
    Starting in 2010, the Other item includes net sales from the Natuzzi
Editions/Editions and Italsofa brands, as well as the Unbranded products. Therefore, net sales
for the years 2008 and 2009 have been classified accordingly.  24




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##### Table of Contents



2) Leather and Fabric Upholstered Furniture, Net Sales (in seats) (3)
 2010
    
    
    2009
    
    
    2008Americas(1)
    
    
    886,471
    
    
    
    45.4
    %
    
    
    785,156
    
    
    
    40.8
    %
    
    
    1,272,560
    
    
    
    46.7
    %Natuzzi brand
    
    
    40,112
    
    
    
    2.1
    %
    
    
    43,520
    
    
    
    2.3
    %
    
    
    69,352
    
    
    
    2.5
    %Other (2)
    
    
    846,359
    
    
    
    43.3
    %
    
    
    741,636
    
    
    
    38.6
    %
    
    
    1,203,207
    
    
    
    44.2
    %Europe
    
    
    847,451
    
    
    
    43.4
    %
    
    
    943,103
    
    
    
    49.0
    %
    
    
    1,211,939
    
    
    
    44.5
    %Natuzzi brand
    
    
    370,626
    
    
    
    19.0
    %
    
    
    414,876
    
    
    
    21.6
    %
    
    
    529,012
    
    
    
    17.9
    %Other (2)
    
    
    476,826
    
    
    
    24.4
    %
    
    
    528,227
    
    
    
    27.5
    %
    
    
    682,927
    
    
    
    26.6
    %Rest of the world
    
    
    220,670
    
    
    
    11.3
    %
    
    
    194,961
    
    
    
    10.1
    %
    
    
    237,809
    
    
    
    8.7
    %Natuzzi brand
    
    
    73,050
    
    
    
    3.7
    %
    
    
    70,855
    
    
    
    3.7
    %
    
    
    90,430
    
    
    
    3.3
    %Other (2)
    
    
    147,620
    
    
    
    7.6
    %
    
    
    124,106
    
    
    
    6.5
    %
    
    
    147,379
    
    
    
    5.4
    %Total
    
    
    1,954,592
    
    
    
    100.0
    %
    
    
    1,923,220
    
    
    
    100.0
    %
    
    
    2,722,307
    
    
    
    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)
    
    Starting in 2010, the Other item includes unit data from the Natuzzi
Editions/Editions and Italsofa brands, as well as the Unbranded products. Therefore, the
number of units sold for the years 2008 and 2009 have been classified accordingly.(3)
    
    Includes seats produced at Group-owned facilities and, until June 2010, also by
subcontractors. Seats are a unit measurement. A sofa consists of three seats; an armchair of one. 1. United States and the Americas.
      25




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##### Table of Contents



Natuzzi Natuzzi Natuzzi
 2. Europe.
  2a) Italy Divani & Divani Divani & Divani by
Natuzzi Divani & Divani by Natuzzi Natuzzi Natuzzi
 2b) Outside Italy. Divani & Divani by Natuzzi Italsofa Natuzzi Natuzzi Natuzzi
  3. Rest of the World.
 3a) Middle East & Africa.
  26




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##### Table of Contents



2009Natuzzi brand
    
    
    Other *
    
    
    Total 2009Country
    
    Net Sales
    
    
    %
    
    
    Net Sales
    
    
    %
    
    
    Net Sales
    
    
    %IRAN
    
    
    123.3
    
    
    
    0.06
    %
    
    
    62.6
    
    
    
    0.03
    %
    
    
    185.9
    
    
    
    0.04
    %SUDAN
    
    
    0.0
    
    
    
    0.00
    %
    
    
    0.0
    
    
    
    0.00
    %
    
    
    0.0
    
    
    
    0.00
    %SYRIA
    
    
    23.8
    
    
    
    0.01
    %
    
    
    30.1
    
    
    
    0.01
    %
    
    
    53.9
    
    
    
    0.01
    %All Other Countries
    
    
    202,907.4
    
    
    
    99.93
    %
    
    
    247,409.0
    
    
    
    99.96
    %
    
    
    450,316.4
    
    
    
    99.95
    %Total upholstery
net Sales
    
    
    203,054.5
    
    
    
    100.00
    %
    
    
    247,501.7
    
    
    
    100.00
    %
    
    
    450,556.2
    
    
    
    100.00
    %
 2010Natuzzi brand
    
    
    Other *
    
    
    Total 2010Country
    
    Net Sales
    
    
    %
    
    
    Net Sales
    
    
    %
    
    
    Net Sales
    
    
    %IRAN
    
    
    56.6
    
    
    
    0.03
    %
    
    
    183.5
    
    
    
    0.07
    %
    
    
    240.1
    
    
    
    0.05
    %SUDAN
    
    
    0.0
    
    
    
    0.00
    %
    
    
    0.0
    
    
    
    0.00
    %
    
    
    0.0
    
    
    
    0.00
    %SYRIA
    
    
    57.6
    
    
    
    0.03
    %
    
    
    63.7
    
    
    
    0.02
    %
    
    
    121.3
    
    
    
    0.03
    %All Other Countries
    
    
    192,031.8
    
    
    
    99.94
    %
    
    
    268,136.3
    
    
    
    99.91
    %
    
    
    460,168.2
    
    
    
    99.92
    %Total upholstery
net Sales
    
    
    192,146.0
    
    
    
    100.00
    %
    
    
    268,383.5
    
    
    
    100.00
    %
    
    
    460,529.6
    
    
    
    100.00
    %
 *
    
    Including Italsofa and Natuzzi Editions/Editions brands, as well as Unbranded products. de minimis
   Natuzzi
  27




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##### Table of Contents



Italsofa
 3b) Asia-Oceania.
 Natuzzi
 Natuzzi
 Italsofa
 India. Natuzzi Italsofa Natuzzi
 Expansion into New Markets  Upholstered Furniture: World Market Outlook 2011
 Customer Credit Management 
 
 Incentive Programs and Tax Benefits
   28




---



##### Table of Contents



Gazzetta Ufficiale della Repubblica Italiana
  29




---



##### Table of Contents



The Italian
Ministry of Education, University and Research Piano Operativo Nazionale
  30




---



##### Table of Contents



Management of Exchange Rate Risk
  
 Trademarks and Patents
   31




---



##### Table of Contents



Regulation
  
 Environmental Regulatory Compliance
  
 Insurance
   32




---



##### Table of Contents



Description of Properties
  Size
    
    
    
    
    Production(approximate
    
    
    
    
    Capacity
    
    
    Unit ofLocation
    
    square meters)
    
    
    Function
    
    per day
    
    
    MeasureSanteramo in Colle (BA)  Italy
    
    
    29,000
    
    
    Headquarters, prototyping, manufacturing of wooden frames, showroom (Owned)
    
    
    704
    
    
    FramesSanteramo in Colle, Iesce (BA) 
Italy
    
    
    28,000
    
    
    Sewing and product assembly (Owned)
    
    
    1.400
    
    
    SeatsMatera La Martella  Italy
    
    
    38,000
    
    
    General warehouse of sofas and accessory furnishing (Owned)
    
    
    N.A.
    
    
    N.A.Ginosa (TA)  Italy
    
    
    16,000
    
    
    Sewing and product assembly (Owned)
    
    
    900
    
    
    SeatsLaterza (TA)  Italy
    
    
    11,000
    
    
    Leather cutting (Owned)
    
    
    7,500
    
    
    Square MetersLaterza (TA)  Italy
    
    
    13,000
    
    
    Fabric and lining cutting, leather warehouse (Owned)
    
    
    6,000
    
    
    Linear MetersLaterza (TA)  Italy
    
    
    20,000
    
    
    Accessory Furnishing Packaging and Warehouse (Owned)
    
    
    N.A.
    
    
    N.A.Qualiano (NA)  Italy
    
    
    12,000
    
    
    Polyurethane foam production (Owned)
    
    
    87
    
    
    TonsPozzuolo del Friuli (UD)  Italy
    
    
    21,000
    
    
    Leather dyeing and finishing (Owned)
    
    
    14,000
    
    
    Square MetersHigh Point  North Carolina 
U.S.A.
    
    
    10,000
    
    
    Office and showroom for Natuzzi Americas (Owned)
    
    
    N.A.
    
    
    N.A.Baia Mare  Romania
    
    
    75,600
    
    
    Leather cutting, sewing and product
assembly, manufacturing of wooden frames, polyurethane foam shaping, fiberfill production and
wood and wooden product manufacturing (Owned)
    
    
    2,900
    
    
    SeatsShanghai  China (FENGPU)
    
    
    88,000
    
    
    Leather cutting, sewing and product assembly, manufacturing of wooden frames, polyurethane foam shaping, fiberfill production (Leased)
    
    
    3,000
    
    
    SeatsShanghai (Fengpu)  China
    
    
    15,000
    
    
    Sewing and product assembly (Leased)
    
    
    700
    
    
    SeatsSalvador de Bahia (Bahia)  Brazil
    
    
    28,700
    
    
    Leather cutting, sewing and product assembly, manufacturing of wooden frames, polyurethane foam shaping, fiberfill production (Owned)
    
    
    700
    
    
    Seats
   33




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##### Table of Contents



Capital Expenditures
  Year ending December 31,(millions of  Euro)2010
    
    
    2009
    
    
    2008Land and plants
    
    
    0.2
    
    
    
    0.3
    
    
    
    1.1Equipment
    
    
    13.8
    
    
    
    1.6
    
    
    
    5.1Other assets
    
    
    3.1
    
    
    
    6.7
    
    
    
    9.8Total
    
    
    17.1
    
    
    
    8.6
    
    
    
    16.0
 Natuzzi Natuzzi
 
 Item 4A. Unresolved Staff Comments
  
 Item 5. Operating and Financial Review and Prospects
  
 Critical Accounting Policies
 Use of Estimates 
  34




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##### Table of Contents



Recoverability of Long-lived Assets Including Goodwill and Other Intangible Assets 
      35




---



##### Table of Contents



Recoverability of Deferred Tax Assets 
     Allowances for Returns and Discounts 
  36




---



##### Table of Contents



Allowance for Doubtful Accounts 
 Revenue Recognition 
 
 Results of Operations
 Summary
 Natuzzi
  Natuzzi
  37




---



##### Table of Contents



Year Ended December 31,2010
    
    
    2009
    
    
    2008Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    62.0
    
    
    
    64.0
    
    
    
    71.9Gross profit
    
    
    38.0
    
    
    
    36.0
    
    
    
    28.1Selling expenses
    
    
    29.7
    
    
    
    29.0
    
    
    
    25.9General and administrative expenses
    
    
    8.2
    
    
    
    9.0
    
    
    
    7.4Operating margin
    
    
    0.1
    
    
    
    (2.0
    )
    
    
    (5.2
    )Other income (expense), net
    
    
    (0.8
    )
    
    
    0.6
    
    
    
    (3.9
    )Income taxes
    
    
    1.4
    
    
    
    1.9
    
    
    
    0.2Net loss
    
    
    (2.1
    )
    
    
    (3.3
    )
    
    
    (9.3
    )
  
 2010 Compared to 2009
 Net Sales
 Natuzzi
  Natuzzi Natuzzi
  38




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##### Table of Contents



Natuzzi Natuzzi
    . Natuzzi
 
 Other Net Sales
 Cost of Sales
 Gross Profit.
 Selling Expenses
 General and Administrative Expenses.
 Operating Income.
 Other Income (expenses), net.
  39




---



##### Table of Contents




    
    a net realized loss of  3.1 million in 2010 (which was unchanged from 2009) 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 gain of  5.8 million in 2010 (compared to a loss of  2.4 million
in 2009), from the difference between invoice exchange rates and collection/payment
exchange rates;
 
    
    a net unrealized gain of  0.8 million in 2010 (compared to an unrealized gain of 
7.8 million in 2009) on accounts receivable and payable; and
 
    
    a net unrealized loss of  0.8 million in 2010 (compared to an unrealized gain of 
4.4 million in 2009), from the mark-to-market of domestic currency swaps.
  
    
    a  3.8 million contingent-liabilities provision for estimated losses related to
some claims (including tax claims) and legal actions in 2010, while in 2009, the
provisions for contingent liabilities amounted to  3.8 million;
 
    
    other expenses of 0.5 million deriving from the write-off of fixed assets in 2010,
while in 2009, the other expenses deriving from the write off of fixed assets amounted
to  0.6 million;
 
    
     0.2 million as other expense, net in 2010, compared to other income, net of  2.9
million in 2009.
  Income Taxes
 i.e.
  40




---



##### Table of Contents



Net Loss.
  
 2009 Compared to 2008
  Net Sales
    41




---



##### Table of Contents



Italsofa Natuzzi Natuzzi Italsofa Natuzzi Italsofa
 Natuzzi Natuzzi
 Divani & Divani by Natuzzi Natuzzi Stores
    Natuzzi Brand . Natuzzi
  Italsofa Brand Italsofa
 Other Net Sales
 Cost of Sales
 Gross Profit.
  42




---



##### Table of Contents



Selling Expenses
 General and Administrative Expenses.
 Operating Loss.
 Other Income (expenses), net.
  
    
    a net realized loss of  3.1 million in 2009 (compared to a loss of  1.3 million in 2008) 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 gain of  2.1 million in 2009 (compared to a loss of 
6.3 million in 2008), from the difference between invoice exchange
rates and collection/payment exchange rates;
    
    a net unrealized gain of  7.9 million in 2009 (compared to an
unrealized gain of  1.1 million in 2008) on accounts receivable and
payable; and
    
    a net unrealized loss of  0.06 million in 2009 (compared to an
unrealized loss of  4.4 million in 2008), from the mark-to-market of
domestic currency swaps.
  
    
    a  3.8 million contingent-liabilities provision for estimated losses
related to some claims (including tax claims) and legal actions in
2009, while in 2008, the provisions for contingent liabilities
amounted to  3.2 million;
    
    other expenses of 0.6 million deriving from the write-off of fixed
assets in 2009, while in 2008, the other expenses deriving from the
write off of fixed assets amounted to  1.2 million;
    
    the Group did not record any expenses due to the impairment of
long-lived assets, while in 2008 it recorded  4.7 million for such
expense;
  43




---



##### Table of Contents




    
    the Group did not record any expenses for one-time termination
benefits, while in 2008 it recorded  4.6 million for such expenses;
and
    
     2.9 million as other income, net in 2009, compared to other
expenses, net of  0.8 million in 2008.
  Income Taxes
 i.e.
   Net Loss.
   44




---



##### Table of Contents



Liquidity and Capital Resources
        45




---



##### Table of Contents



Contractual Obligations and Commitments
      46




---



##### Table of Contents



Payments Due by Period (thousands of euro)Less than 1
    
    
    
    
    
    
    
    
    
    
    After 5Contractual Obligations
    
    Total
    
    
    year
    
    
    2-3 years
    
    
    4-5 years
    
    
    yearsLong-Term Debt(1)
    
    
    15,414
    
    
    
    1,831
    
    
    
    6,756
    
    
    
    5,497
    
    
    
    1,330Interest due on Long Term Debt (2)
    
    
    772
    
    
    
    251
    
    
    
    366
    
    
    
    134
    
    
    
    21Operating Leases (3)
    
    
    135,172
    
    
    
    19,036
    
    
    
    38,636
    
    
    
    39,997
    
    
    
    37,503Total Contractual Cash Obligations
    
    
    151,358
    
    
    
    21,118
    
    
    
    45,758
    
    
    
    45,628
    
    
    
    38,854
 
 (1)
    
    Please see Note 16 to the Consolidated Financial Statements included in Item 18
of 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.   
 Trend information
   
 Related Party Transactions
   47




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##### Table of Contents



New Accounting Standards under Italian and U.S. GAAP
 Process of Transition to International Accounting Standards 
 Italian GAAP 
 U.S. GAAP  Recently issued but not yet adopted
 Accounting Standards Update (ASU) No. 2010-06, Fair Value Measurements and Disclosures:
 Accounting Standards Update (ASU) No. 2010-13, CompensationStock Compensation:
  48




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##### Table of Contents



Accounting Standards Update (ASU) No. 2009-13, Revenue Recognition (Topic 605): Multiple
Deliverable Revenue Arrangements: Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements Revenue RecognitionMultiple-Element Arrangements
 Accounting Standards Update (ASU) No. 2010-28, IntangiblesGoodwill and Other (Topic 350):
When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative
Carrying Amounts, a consensus of the FASB Emerging Issues Task Force (Issue No. 10-A): When to Perform
Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts,
a consensus of the FASB Emerging Issues Task Force (Issue No. 10-A)
  49




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##### Table of Contents



Item 6. Directors, Senior Management and Employees
  Name
    
    Age
    
    Position with the CompanyPasquale Natuzzi *
    
    
    71
    
    
    Chairman of the Board of Directors, Chief
Executive OfficerAntonia Isabella Perrone *
    
    
    41
    
    
    DirectorAnnamaria Natuzzi *
    
    
    44
    
    
    DirectorGiuseppe Antonio DAngelo *
    
    
    45
    
    
    Outside DirectorMaurizia Iachino Leto di Priolo *
    
    
    61
    
    
    Outside DirectorGiuseppe Desantis*
    
    
    49
    
    
    Outside DirectorPietro Scott Jovane*
    
    
    42
    
    
    Outside DirectorGiuseppe Marino*
    
    
    46
    
    
    Outside DirectorAndrea Martinelli*
    
    
    64
    
    
    Outside DirectorVittorio Notarpietro
    
    
    48
    
    
    Chief Financial OfficerFernando Rizzo
    
    
    46
    
    
    Chief Human Resources and Organization OfficerClemente Giuseppe
    
    
    45
    
    
    Chief Operation OfficerGiuseppe Cacciapaglia
    
    
    43
    
    
    Chief Internal Control Systems OfficerCosimo Cavallo
    
    
    51
    
    
    Chief Editions & Softaly DivisionGiambattista Massaro
    
    
    48
    
    
    Chief Procurement OfficerStefano Sette
    
    
    42
    
    
    Chief Research & Development OfficerGiacomo Ventolone
    
    
    43
    
    
    Chief Institutional Relations & Corporate Communication OfficerAngelo Colacicco
    
    
    42
    
    
    Chief Information OfficerMassimiliano Quatraro
    
    
    37
    
    
    Chief Legal & Corporate Affairs OfficerSimon Hughes
    
    
    51
    
    
    Chief Natuzzi & Italsofa Division (Consultant)
 *
    
    The above mentioned Members of the Board of Directors were elected at the Companys Annual
General Shareholders Meeting held on April 28, 2011. Pasquale Natuzzi
 Antonia Isabella Perrone
 Annamaria Natuzzi
 Giuseppe Antonio DAngelo
  50




---



##### Table of Contents



Maurizia Iachino Leto di Priolo Fondazione
Franco Parenti De Agostini Executive Committee Consiglio di Reggenza della Banca dItalia
 Giuseppe Desantis Confindustria  Bari Sezione Legno Arredo 
Confindustria Basilicata Direttivo del
Comitato del Distretto del Mobile imbottito  Matera Direttivo del Comitato del Distretto del legno e Arredo  Puglia
 Pietro Scott Jovane
 Giuseppe Marino
 Andrea Martinelli
  51




---



##### Table of Contents



Vittorio Notarpietro
 Fernando Rizzo
 Giuseppe Clemente
 Giuseppe Cacciapaglia
 Cosimo Cavallo
 Giambattista Massaro
 Stefano Sette
  52




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##### Table of Contents



Giacomo Ventolone De Agostini Diffusione del Libro
 Angelo Colacicco
 Massimiliano Quatraro
 Simon Hughes
 
 Compensation of Directors and Officers
  
 Name
    
    Base CompensationPasquale Natuzzi
    
    
    221,411Antonia Isabella Perrone
    
    
    35,343Annamaria Natuzzi
    
    
    35,343Giuseppe Antonio DAngelo
    
    
    35,343Maurizia Iachino Leto di Priolo
    
    
    35,343Francesco Giannaccari
    
    
    33,399Mario Lugli
    
    
    35,343Giacomo Santucci
    
    
    35,343
  53




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##### Table of Contents



Share Ownership
  
 Statutory Auditors
  Name
    
    PositionCarlo Gatto
    
    ChairmanGianvito Giannelli
    
    MemberCataldo Sferra
    
    MemberCostante Leone
    
    AlternateGiuseppe Pio Macario
    
    Alternate
 
   54




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##### Table of Contents



External Auditors
  
 Employees
   Change betweenQualification
    
    2009
    
    
    2010
    
    
    2009 and 2010Top managers
    
    
    61
    
    
    
    57
    
    
    
    -4Middle managers
    
    
    141
    
    
    
    121
    
    
    
    -20Employees
    
    
    1.125
    
    
    
    1.234
    
    
    
    109Blue collars
    
    
    5.608
    
    
    
    5.354
    
    
    
    -254Total
    
    
    6,935
    
    
    
    6,766
    
    
    
    -169
  
 Cassa Integrazione Guadagni
  55




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##### Table of Contents



Cassa Integrazione Guadagni Straordinaria
  
    
    has launched a new organization, called 6x3 Brand Strategy, with a
focus on differentiation by brands, regions and distribution channels.
The launch of this new organization has been considered necessary in
order to assign clear responsibilities to people in achieving expected
results within each macro-division. For the Group, this new
organization is supposed to ensure the creation of value for consumers
and stakeholders at all levels;
    
    will be launching at a worldwide level an integrated ERP system for
human resources management through a structured management and
computerization of HR processes. The construction of a staff list
database at a worldwide level will help to create a Business
Intelligence and Reporting Integrated System and support Company
decision -making on strategic issues;and
    
    has confirmed the initiatives of retraining and re-qualification for
workers participating in CIGS, in order to facilitate a more effective
reintegration of such workers in the workplace through structured
paths in the fields of IT and workplace safety.
    56




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##### Table of Contents



Item 7. Major Shareholders and Related Party Transactions
 
 Major Shareholders
   Number of
    
    
    PercentShares Owned
    
    
    OwnedPasquale Natuzzi (1)
    
    
    29,358,089
    
    
    
    53.5
    %Schroder Investment Management North America
Ltd. (2)
    
    
    3,904,681
    
    
    
    7.1
    %Quaeroq CVBA(3)
    
    
    2,760,400
    
    
    
    5.0
    %
 
 (1)
    
    Includes ADSs purchased on April 18, 2008. If Mr. Natuzzis Ordinary Shares are
aggregated with those held by members of the Natuzzi Family, the amount owned would be 32,158,091
and the percentage ownership of Ordinary Shares would be 58.7%.(2)
    
    According to the Schedule 13G filed with the SEC by Schroder Invetsment Management
North America on February 23, 2011.(3)
    
    According to the Schedule 13G filed with the SEC by Quaeroq CVBA on November
18, 2008.    
 Related Party Transactions
  
  57




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##### Table of Contents



Item 8. Financial Information
 
 Consolidated Financial Statements
  
 Export Sales
 
 
 Legal and Governmental Proceedings
       
  
  58




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##### Table of Contents




 
 
  
   
 Dividends
     59




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##### Table of Contents



Significant Changes
  
  
 Item 9. The Offer and Listing
 
 Trading Markets and Share Prices
   60




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##### Table of Contents



New York Stock Exchange
 Price per ADS (in US dollars)High
    
    
    Low2006
    
    
    8.65
    
    
    
    6.322007
    
    
    9.60
    
    
    
    4.362008
    
    
    4.63
    
    
    
    1.632009
    
    
    3.51
    
    
    
    1.002010
    
    
    5.76
    
    
    
    2.78
 2008
    
    High
    
    
    LowFirst quarter
    
    
    4.63
    
    
    
    3.20Second quarter
    
    
    4.10
    
    
    
    3.16Third quarter
    
    
    4.04
    
    
    
    2.61Fourth quarter
    
    
    3.43
    
    
    
    1.63
 2009
    
    High
    
    
    LowFirst quarter
    
    
    1.96
    
    
    
    1.00Second quarter
    
    
    2.30
    
    
    
    1.00Third quarter
    
    
    2.79
    
    
    
    1.75Fourth quarter
    
    
    3.51
    
    
    
    2.60
 2010
    
    High
    
    
    LowFirst quarter
    
    
    5.76
    
    
    
    3.258Second quarter
    
    
    4.987
    
    
    
    2.95Third quarter
    
    
    3.71
    
    
    
    2.78Fourth quarter
    
    
    3.80
    
    
    
    3.04
 Monthly data
    
    High
    
    
    LowDecember 2010
    
    
    3.31
    
    
    
    3.07January 2011
    
    
    3.79
    
    
    
    3.12February 2011
    
    
    4.72
    
    
    
    3.75March 2011
    
    
    4.65
    
    
    
    4.00April 2011
    
    
    4.75
    
    
    
    4.20May 2011
    
    
    4.56
    
    
    
    3.64June 2011 (through June 24)
    
    
    3.71
    
    
    
    3.42
 
 Item 10. Additional Information
 
 By-laws
 Statuto
  61




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##### Table of Contents



General  
   Authorization of Shares   
 Form and Transfer of Shares 
 Dividend Rights 
  62




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##### Table of Contents



Voting Rights 
  Board of Directors 
 presidente amministratori delegati
   63




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##### Table of Contents



direttore generale
      64




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##### Table of Contents



Statutory Auditors  ollegio sindacale
    External Auditor 
  65




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##### Table of Contents



Meetings of Shareholders 
 Il Sole 24 Ore, Corriere della Sera La
Repubblica
      66




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##### Table of Contents



Preemptive Rights 
 Preference Shares. Other Securities 
  Segregation of Assets and Proceeds 
  67




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##### Table of Contents



Liquidation Rights  pari passu
 Purchase of Shares by the Company 
    Notification of the Acquisition of Shares 
  68




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##### Table of Contents



Minority Shareholders Rights. Withdrawal Rights 
      Liability for Mismanagement of Subsidiaries 
   69




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##### Table of Contents



Certain Contracts
  
 Exchange Controls
  
 
   70




---



##### Table of Contents



Taxation
      Italian Tax Considerations 
  71




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##### Table of Contents



72




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##### Table of Contents



United States Tax Considerations
       73




---



##### Table of Contents



Taxation of Capital Gains
 i) Italian Tax Considerations 
     ii) United States Tax Considerations 
  74




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##### Table of Contents



Taxation of Distributions from Capital Reserves
 Italian Tax Considerations 
 Other Italian Taxes
 Estate and Inheritance Tax 
 
 
 
    75




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##### Table of Contents



Documents on Display
  
 Item 11. Quantitative and Qualitative Disclosures About Market Risk
   Exchange Rate Risks
     
      
  76




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##### Table of Contents



Euro equivalent of contractual amounts of
    
    December 31,forward exchange contracts as of
    
    2010
    
    
    2009U.S. dollars
    
    
    30,604
    
    
    
    15,323Euro
    
    
    12,200
    
    
    
    10,714Canadian dollars
    
    
    12,081
    
    
    
    1,915British pounds
    
    
    8,838
    
    
    
    6,652Australian dollars
    
    
    7,149
    
    
    
    5,164Japanese yen
    
    
    2,310
    
    
    
    311Swiss francs
    
    
    1,584
    
    
    
    795Norwegian kroner
    
    
    1,091
    
    
    
    718Swedish kroner
    
    
    919
    
    
    
    587Danish kroner
    
    
    497
    
    
    
    470Total
    
    
    77,273
    
    
    
    42,649
 Euro equivalent*of contractual amounts of
    
    December 31,zero-costs collar options as of
    
    2010
    
    
    2009U.S. dollars
    
    
    2,847
    
    
    
    8,095Total
    
    
    2,847
    
    
    
    8,095
 *
    
    The euro equivalent is prudentially evaluated at the upper strike-price of each zero-cost
collar. Depending on the market price of the EURUSD exchange rate at every single maturity, the
euro equivalent (in thousands) coming from the exercise of the options would range from  2,847 to
 3,012.  
  77




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##### Table of Contents



December 31, 2010
    
    
    December 31, 2009Contract
    
    
    Unrealized
    
    
    Contract
    
    
    UnrealizedAmount
    
    
    gains (losses)
    
    
    Amount
    
    
    gains (losses)Assets
    
    
    40,981
    
    
    
    171
    
    
    
    13,281
    
    
    
    318Liabilities
    
    
    39,139
    
    
    
    (1,059
    )
    
    
    37,463
    
    
    
    (380
    )Total
    
    
    80,120
    
    
    
    (888
    )
    
    
    50,744
    
    
    
    (62
    )
 
  Interest Rate Risks
 
  
 Item 12. Description of Securities Other than Equity Securities
   78




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PART II
 
 Item 13. Defaults, Dividend Arrearages and Delinquencies
  
 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
  
 Item 15. Controls and Procedures
 (a) Disclosure Controls and Procedures 
  (b) Managements Annual Report on Internal Control Over Financial Reporting 
  79




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80




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##### Table of Contents



(c ) Attestation Report of the Registered Public Accounting Firm
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
           81




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##### Table of Contents



Item 16. [Reserved]
 
 Item 16A. Audit Committee Financial Expert
  
 Item 16B. Code of Ethics
  
 Item 16C. Principal Accountant Fees and Services
    2010
    
    
    2009(Expressed in thousands of euros)Audit fees
    
    
    821
    
    
    
    1,056Audit-related fees
    
    
    
    
    
    
    Tax fees
    
    
    86
    
    
    
    Other fees
    
    
    
    
    
    
    Total fees
    
    
    907
    
    
    
    1,056
    82




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##### Table of Contents



Item 16D. Exemptions from the Listing Standards for Audit Committees.
  1)
    
    the board of statutory auditors is established and selected pursuant to Italian law expressly
permitting such a board;
 2)
    
    the board of statutory auditors is required under Italian law to be separate from the
Companys Board of Directors;
 3)
    
    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;
 4)
    
    Italian law provides for standards for the independence of the board of statutory auditors
from the Company and its management;
 5)
    
    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
 6)
    
    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.
  
 Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  
 Item 16F. Change in Registrants Certifying Accountant
   83




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Item 16G. Corporate Governance
  società per azioni
 consiglio di amministrazione collegio sindacale revisore contabile
  Independent Directors
 NYSE Domestic Company Standards
  Our Practice
  84




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##### Table of Contents



inscritto nel registro dei revisori contabili
 Executive Sessions
 NYSE Domestic Company Standards
 Our Practice
 Audit Committee and Internal Audit Function
 NYSE Domestic Company Standards
 Our Practice
   85




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##### Table of Contents



Compensation Committee
 NYSE Domestic Company Standards
 Our Practice
 Nominating Committee
 NYSE Domestic Company Standards
 Our Practice
 Corporate Governance and Code of Ethics
 NYSE Domestic Company Standards
 Our Practice
  86




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##### Table of Contents



Certifications as to Violations of NYSE Standards
 NYSE Domestic Company Standards
  Our Practice
  Shareholder Approval of Adoption and Modification of Equity Compensation Plans
 NYSE Domestic Company Standards
 Our Practice
  87




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##### Table of Contents



PART III
 
 Item 17. Financial Statements
  
 Item 18. Financial Statements
  PageIndex to Consolidated Financial StatementsReport of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    F-3Consolidated Statements of Operations for the Years Ended December
31, 2010, 2009 and 2008
    
    
    F-4Consolidated Statements of Changes in Shareholders Equity for the
Years Ended December 31, 2010, 2009 and 2008
    
    
    F-5Consolidated Statements of Cash Flows for the Years Ended December
31, 2010, 2009 and 2008
    
    
    F-6Notes to the Consolidated Financial Statements
    
    
    F-7
 
 Item 19. Exhibits
 1.1
    
    English translation of the by-laws (Statuto) of the Company, as amended and restated as of
January 24, 2008 (incorporated by reference to the Form 20-F filed by Natuzzi S.p.A. with the
Securities Exchange Commission on June 30, 2008, file number 1-11854).
 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
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
 12.2
    
    Certification of the Chief Financial Officer 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.
  88




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
          F-1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 To the Shareholders of Natuzzi S.p.A. We have audited the accompanying consolidated balance sheet of Natuzzi S.p.A. and subsidiaries (the Natuzzi
Group) as of December 31, 2009, and the related consolidated statements of operations, changes in shareholders equity
and cash flows for each of the years in the two-year period ended December 31, 2009. These consolidated financial
statements are the responsibility of the management of Natuzzi S.p.A.. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of the Natuzzi Group as of December 31, 2009, and the results of its operations and its cash
flows for each of the years in the two-year period ended December 31, 2009, in conformity with established accounting
principles in the Republic of Italy. Established accounting principles in the Republic of Italy vary in certain significant respects from generally
accepted accounting principles in the United States of America. Information relating to the nature and effect of such
differences is presented in note 26 to the consolidated financial statements. KPMG S.p.A. Bari, Italy   F-2




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##### Table of Contents



Natuzzi S.p.A. and Subsidiaries
 
 Consolidated Balance Sheets
 as of December 31, 2010 and 2009
  Dec. 31, 2010
    
    
    Dec. 31, 2009ASSETSCurrent assets:Cash and cash equivalents (note 4)
    
    
    61,094
    
    
    
    66,330Marketable securities (note 5)
    
    
    4
    
    
    
    4Trade receivables, net (note 6)
    
    
    95,815
    
    
    
    97,045Other receivables (note 7)
    
    
    51,709
    
    
    
    54,538Inventories (note 8)
    
    
    87,355
    
    
    
    81,565Unrealized foreign exchange gain (note 24)
    
    
    171
    
    
    
    318Prepaid expenses and accrued income
    
    
    1,334
    
    
    
    1,415Deferred income taxes (note 14)
    
    
    1,078
    
    
    
    702Total current assets
    
    
    298,560
    
    
    
    301,917Non current assets:Property plant and equipment (note 9)
    
    
    422,025
    
    
    
    405,276Less (accumulated depreciation)
    
    
    (226,074
    )
    
    
    (211,442
    )Net property, plant and equipment (note 21)
    
    
    195,951
    
    
    
    193,834Other assets (note 10)
    
    
    9,345
    
    
    
    12,813Deferred income taxes (note 14)
    
    
    
    
    
    
    Total assets
    
    
    503,856
    
    
    
    508,564LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Bank Overdrafts (note 11)
    
    
    83
    
    
    
    760Current portion of long-term debt (note 16)
    
    
    1,831
    
    
    
    1,124Accounts payable-trade (note 12)
    
    
    64,317
    
    
    
    66,499Accounts payable-other (note 13)
    
    
    27,617
    
    
    
    29,266Unrealized foreign exchange losses (note 24)
    
    
    1,059
    
    
    
    380Income taxes (note 14)
    
    
    2,952
    
    
    
    3,708Salaries, wages and related liabilities (note 15)
    
    
    9,909
    
    
    
    15,054Total current liabilities
    
    
    107,768
    
    
    
    116,791Long-term liabilities:Employees leaving entitlement (note 3 (n) )
    
    
    28,412
    
    
    
    29,565Long-term debt (note 16)
    
    
    13,583
    
    
    
    5,857Deferred income taxes (note 14)
    
    
    
    
    
    
    47Deferred income for capital grants (note 3(m))
    
    
    10,358
    
    
    
    11,208Other liabilities (note 17)
    
    
    18,504
    
    
    
    18,209Shareholders equity (note 18):Share capital
    
    
    54,853
    
    
    
    54,853Reserves
    
    
    42,780
    
    
    
    42,780Additional paid-in capital
    
    
    8,282
    
    
    
    8,282Retained earnings
    
    
    217,204
    
    
    
    219,112Total equity attributable to Natuzzi S.p.A. and Subsidiaries
    
    
    323,119
    
    
    
    325,027Non-controlling interest (note 18)
    
    
    2,112
    
    
    
    1,860Total Shareholders equity
    
    
    325,231
    
    
    
    326,887Commitments and contingent liabilities (notes 20 and 23)
    
    
    
    
    
    
    Total liabilities and Shareholders equity
    
    
    503,856
    
    
    
    508,564
 See accompanying notes to the consolidated financial statements
  F-3




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##### Table of Contents



Natuzzi S.p.A. and Subsidiaries
 
 Consolidated Statements of Operations
Years ended December 31, 2010, 2009 and 2008
 2010
    
    
    2009
    
    
    2008Net sales (note 21)
    
    
    518,634
    
    
    
    515,352
    
    
    
    666,026Cost of sales (note 22)
    
    
    (321,501
    )
    
    
    (329,742
    )
    
    
    (478,770
    )Gross profit
    
    
    197,133
    
    
    
    185,610
    
    
    
    187,256Selling expenses
    
    
    (154,267
    )
    
    
    (149,596
    )
    
    
    (172,338
    )General and administrative expenses
    
    
    (42,468
    )
    
    
    (46,585
    )
    
    
    (49,914
    )Operating income/(loss)
    
    
    398
    
    
    
    (10,571
    )
    
    
    (34,996
    )Other income/(expense), net (note 23)
    
    
    (4,427
    )
    
    
    3,121
    
    
    
    (25,818
    )Earning/(loss) before taxes and non-controlling interest
    
    
    (4,029
    )
    
    
    (7,450
    )
    
    
    (60,814
    )Income taxes (note 14)
    
    
    (6,952
    )
    
    
    (9,802
    )
    
    
    (1,556
    )Net income/(loss)
    
    
    (10,981
    )
    
    
    (17,252
    )
    
    
    (62,370
    )Net (Income)/loss attributable to
Non-controlling interest
    
    
    (97
    )
    
    
    (434
    )
    
    
    432Net Income/(loss) attributable to
Natuzzi S.p.A. and Subsidiares
    
    
    (11,078
    )
    
    
    (17,686
    )
    
    
    (61,938
    )Basic loss per share (note 3 (y))
    
    
    (0.20)
    
    
    
    (0.32)
    
    
    
    (1.13)Diluted loss per share (note 3 (y))
    
    
    (0.20)
    
    
    
    (0.32)
    
    
    
    (1.13)
 See accompanying notes to the consolidated financial statements
  F-4




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##### Table of Contents



Natuzzi S.p.A. and Subsidiaries
 
 Consolidated Statements of Changes in Shareholders Equity
 Years ended December 31, 2010, 2009 and 2008
  Additio
    
    
    
    
    
    
    EquityNumber of
    
    
    Share
    
    
    
    
    
    
    nal paid
    
    
    
    
    
    
    attributable
    
    
    Non-
    
    
    Total Shareordinary
    
    
    Capital
    
    
    
    
    
    
    in
    
    
    Retained
    
    
    to Natuzzi
    
    
    controlling
    
    
    holdersshares
    
    
    Amount
    
    
    Reserves
    
    
    capital
    
    
    earnings
    
    
    S.p.A.
    
    
    interest
    
    
    equityBalances at December 31, 2007
    
    
    54,824,227
    
    
    
    54,824
    
    
    
    42,292
    
    
    
    8,282
    
    
    
    306,199
    
    
    
    411,597
    
    
    
    146
    
    
    
    411,743Majority Shareholder contribution
    
    
    
    
    
    
    
    
    
    
    488
    
    
    
    
    
    
    
    
    
    
    
    488
    
    
    
    
    
    
    
    488Increase in share capital
    
    
    28,818
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    (29
    )Exchange difference on
translation of financial
statement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,929
    )
    
    
    (4,929
    )
    
    
    (1,081
    )
    
    
    (3,848
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61,938
    )
    
    
    (61,938
    )
    
    
    (432
    )
    
    
    (62,370
    )Balances at December 31, 2008
    
    
    54,853,045
    
    
    
    54,853
    
    
    
    42,780
    
    
    
    8,282
    
    
    
    239,303
    
    
    
    345,218
    
    
    
    795
    
    
    
    346,013Exchange difference on
translation of financial
statement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,505
    )
    
    
    (2,505
    )
    
    
    (45
    )
    
    
    (2,550
    )Purchase non-controlling Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23
    )
    
    
    (23
    )Increase for capital
contribution of non-controlling
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    699
    
    
    
    699Net Income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,686
    )
    
    
    (17,686
    )
    
    
    434
    
    
    
    (17,252
    )Balances at December 31, 2009
    
    
    54,853,045
    
    
    
    54,853
    
    
    
    42,780
    
    
    
    8,282
    
    
    
    219,112
    
    
    
    325,027
    
    
    
    1,860
    
    
    
    326,887Exchange difference on
translation of financial
statement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,170
    
    
    
    9,170
    
    
    
    155
    
    
    
    9,325Net Income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,078
    )
    
    
    (11,078
    )
    
    
    97
    
    
    
    (10,981
    )Balances at December 31, 2010
    
    
    54,853,045
    
    
    
    54,853
    
    
    
    42,780
    
    
    
    8,282
    
    
    
    217,204
    
    
    
    323,119
    
    
    
    2,112
    
    
    
    325,231
 See accompanying notes to the consolidated financial statements
  F-5




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##### Table of Contents



Natuzzi S.p.A. and Subsidiaries
 
 Consolidated Statements of Cash Flows
 Years ended December 31, 2010, 2009 and 2008
  2010
    
    
    2009
    
    
    2008Cash flows from operating activities:Net income/(loss) attributable to
Natuzzi S.p.A. and Subsidiares
    
    
    (11,078
    )
    
    
    (17,686
    )
    
    
    (61,938
    )Adjustment to reconcile net income/(loss) to
net cash provided by/(used in) operating activitiesNon-controlling interest
    
    
    97
    
    
    
    434
    
    
    
    (432
    )Depreciation and amortization
    
    
    23,419
    
    
    
    26,565
    
    
    
    31,086Write off of Fixed Assets
    
    
    
    
    
    
    595
    
    
    
    1,189Impairment of long lived Assets
    
    
    
    
    
    
    
    
    
    
    4,703Employees leaving entitlement
    
    
    6,521
    
    
    
    6,525
    
    
    
    7,026Deferred income taxes
    
    
    (313
    )
    
    
    3,743
    
    
    
    (3,107
    )Loss on disposal of assets
    
    
    496
    
    
    
    492
    
    
    
    284Unrealized foreign exchange (gain)/losses
    
    
    1,038
    
    
    
    (4,409
    )
    
    
    5,417Deferred income for capital grants
    
    
    (748
    )
    
    
    (850
    )
    
    
    (1,274
    )Change in assets and liabilities:Receivables, net
    
    
    1,232
    
    
    
    16,903
    
    
    
    (3,462
    )Inventories
    
    
    (5,791
    )
    
    
    10,842
    
    
    
    14,916Prepaid expenses and accrued income
    
    
    78
    
    
    
    (157
    )
    
    
    588Accounts payable
    
    
    2,600
    
    
    
    (4,766
    )
    
    
    (21,372
    )Income taxes
    
    
    (504
    )
    
    
    1,910
    
    
    
    213Salaries, wages and related liabilities
    
    
    (5,235
    )
    
    
    (1,832
    )
    
    
    (720
    )Other liabilities
    
    
    (1,778
    )
    
    
    3,795
    
    
    
    3,576Employees leaving entitlement
    
    
    (7,674
    )
    
    
    (8,637
    )
    
    
    (8,692
    )Total adjustments
    
    
    13,438
    
    
    
    51,153
    
    
    
    29,939Net cash provided by/(used in)
operating activities
    
    
    2,360
    
    
    
    33,467
    
    
    
    (31,999
    )Cash flows from investing activities:Property, plant and equipment:Additions
    
    
    (14,006
    )
    
    
    (4,191
    )
    
    
    (11,884
    )Disposals
    
    
    1,122
    
    
    
    1,137
    
    
    
    174Other assets
    
    
    (3,046
    )
    
    
    (4,382
    )
    
    
    (4,097
    )(Purchase)/Disposal of business, net of cash acquired
    
    
    
    
    
    
    (1,040
    )
    
    
    2,262Net cash used in
investing activities
    
    
    (15,930
    )
    
    
    (8,476
    )
    
    
    (13,545
    )Cash flows from financing activities:Long-term debt:Proceeds
    
    
    9,557
    
    
    
    3,900
    
    
    
    2,038Repayments
    
    
    (1,124
    )
    
    
    (699
    )
    
    
    (691
    )Short-term borrowings
    
    
    (678
    )
    
    
    (8,941
    )
    
    
    2,125Majority Shareholder Capital Contribution
    
    
    
    
    
    
    
    
    
    
    488Net cash provided by/(used in)
financing activities
    
    
    7,755
    
    
    
    (5,740
    )
    
    
    3,960Effect of translation adjustments on cash
    
    
    579
    
    
    
    (228
    )
    
    
    1,432Increase/(decrease) in cash and cash equivalents
    
    
    (5,236
    )
    
    
    19,023
    
    
    
    (40,152
    )Cash and cash equivalents, beginning of the year
    
    
    66,330
    
    
    
    47,307
    
    
    
    87,459Cash and cash equivalents, end of the year
    
    
    61,094
    
    
    
    66,330
    
    
    
    47,307Supplemental disclosure of cash flow information:Cash paid during the year for interest
    
    
    155
    
    
    
    130
    
    
    
    327Cash paid during the year for income taxes
    
    
    9,146
    
    
    
    5,258
    
    
    
    1,399
  F-6




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##### Table of Contents



Notes to consolidated financial statements
  1. Description of business and Group composition
  Percent of
    
    
    RegisteredName
    
    ownership
    
    
    office
    
    
    ActivityItalsofa Nordeste S.A.
    
    
    100.00
    
    
    Salvador, Brazil
    
    
    (1
    )Italsofa Shanghai Ltd
    
    
    96.50
    
    
    Shanghai, China
    
    
    (1
    )Softaly Shanghai Ltd
    
    
    100.00
    
    
    Shanghai, China
    
    
    (1
    )Natuzzi China 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.
    
    
    90.84
    
    
    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
    
    
    100.00
    
    
    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
    )Natuzzi Trading Shanghai Ltd
    
    
    100.00
    
    
    Shanghai, China
    
    
    (4
    )Natuzzi Oceania Ltd
    
    
    100.00
    
    
    Sidney, Australia
    
    
    (4
    )Natuzzi Russia OOO
    
    
    100.00
    
    
    Moscow, Russia
    
    
    (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




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##### Table of Contents



Notes to consolidated financial statements
      Goodwill
    
    
    85Current assets
    
    
    40Purchase price
    
    
    125
    F-8




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##### Table of Contents



Notes to consolidated financial statements
  Goodwill
    
    
    566Fixed assets
    
    
    42Current assets
    
    
    358Current liabilities
    
    
    (74
    )Purchase price
    
    
    892
   2. Basis of preparation
    3. Summary of significant accounting policies
  a) Principles of consolidation
   F-9




---



##### Table of Contents



Notes to consolidated financial statements
   b) Foreign currency transactions
  c) Forward and collars exchange contracts
  d) Financial statements of foreign operations
  e) Cash and cash equivalents
  f) Marketable debt securities
    F-10




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##### Table of Contents



Notes to consolidated financial statements
   g) Accounts receivable and payable
    h) Inventories
    i) Property, plant and equipment
   F-11




---



##### Table of Contents



Notes to consolidated financial statements
  j) Other assets
   k) Impairment of long-lived assets and long-lived assets to be disposed of
  l) Income taxes
  m) Government grants
   F-12




---



##### Table of Contents



Notes to consolidated financial statements
        n) Employees leaving entitlement
     o) Net sales
   F-13




---



##### Table of Contents



Notes to consolidated financial statements
   p) Cost of sales, selling expenses, general and administrative expenses
     q) Shipping and handling costs
   F-14




---



##### Table of Contents



Notes to consolidated financial statements
  r) Advertising costs
  s) Commission expense
  t) Warranties
  u) Research and development costs
 
 v) Contingencies
  w) Use of estimates
  x) Leases
   F-15




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##### Table of Contents



Notes to consolidated financial statements
  y) Earnings (losses) per share
  2010
    
    
    2009
    
    
    2008Net earnings (loss) attributable to
ordinary shareholders
    
    
    (11,078
    )
    
    
    (17,686
    )
    
    
    (61,938
    )Weighted-average number of ordinary shares outstanding during the year
    
    
    54,853,045
    
    
    
    54,853,045
    
    
    
    54,850,643Increase resulting from assumed conversion
of share grants and options
    
    
    
    
    
    
    
    
    
    
    Weighted-average number of ordinary
shares and potential shares
outstanding during the year
    
    
    54,853,045
    
    
    
    54,853,045
    
    
    
    54,850,643
 4. Cash and cash equivalents
  2010
    
    
    2009Cash on hand
    
    
    248
    
    
    
    176Bank accounts in Euro
    
    
    42,668
    
    
    
    22,974Bank accounts in foreign currencies
    
    
    18,178
    
    
    
    43,180Total
    
    
    61,094
    
    
    
    66,330
  5. Marketable debt securities
  2010
    
    
    2009Foreign corporate bonds
    
    
    4
    
    
    
    4Total
    
    
    4
    
    
    
    4
  F-16




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##### Table of Contents



Notes to consolidated financial statements
   Gross unrealized
    
    
    Fair2010
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    valueForeign corporate bonds
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4Total
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4
 Gross unrealized
    
    
    Fair2009
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    valueForeign corporate bonds
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4Total
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4
  6. Trade receivables, net
  2010
    
    
    2009North American customers
    
    
    35,930
    
    
    
    33,778Other foreign customers
    
    
    43,766
    
    
    
    46,951Domestic customers
    
    
    25,486
    
    
    
    21,731Trade bills receivable
    
    
    6
    
    
    
    3,915Total
    
    
    105,188
    
    
    
    106,375Allowance for doubtful accounts
    
    
    (9,373
    )
    
    
    (9,330
    )Total trade receivables, net
    
    
    95,815
    
    
    
    97,045
   Trade receivables
    
    N° of customers
    
    

%
on trade receivables2010
    
    
    2
    
    
    
    16
    %2009
    
    
    2
    
    
    
    14
    %2008
    
    
    2
    
    
    
    16
    %
  F-17




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##### Table of Contents



Notes to consolidated financial statements
  Net sales
    
    N° of customers
    
    

%
net sales2010
    
    
    2
    
    
    
    20
    %2009
    
    
    2
    
    
    
    17
    %2008
    
    
    2
    
    
    
    22
    %
    2010
    
    
    2009
    
    
    2008Balance, beginning of year
    
    
    9,330
    
    
    
    8,615
    
    
    
    5,699Charges-bad debt expense
    
    
    430
    
    
    
    1,859
    
    
    
    3,550Reductions-write off of uncollectible accounts
    
    
    (387
    )
    
    
    (1,144
    )
    
    
    (634
    )Balance, end of year
    
    
    9,373
    
    
    
    9,330
    
    
    
    8,615
  2010
    
    
    2009U.S. dollars
    
    
    29,799
    
    
    
    27,354Canadian dollars
    
    
    7,357
    
    
    
    9,517British pounds
    
    
    5,397
    
    
    
    5,417Australian dollars
    
    
    4,384
    
    
    
    4,883Other currencies
    
    
    5,669
    
    
    
    3,704Total
    
    
    52,606
    
    
    
    50,875
 7. Other receivables
   F-18




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##### Table of Contents



Notes to consolidated financial statements
  2010
    
    
    2009Receivable from National
Institute for Social Security
    
    
    16,057
    
    
    
    19,626Government capital grants
    
    
    7,518
    
    
    
    10,213VAT
    
    
    8,703
    
    
    
    7,246Receivable from tax authorities
    
    
    5,069
    
    
    
    7,024Advances to suppliers
    
    
    5,118
    
    
    
    2,608Other
    
    
    9,244
    
    
    
    7,821Total
    
    
    51,709
    
    
    
    54,538
      8. Inventories
  2010
    
    
    2009Leather and other raw materials
    
    
    47,760
    
    
    
    42,802Goods in process
    
    
    11,323
    
    
    
    12,254Finished products
    
    
    28,272
    
    
    
    26,509Total
    
    
    87,355
    
    
    
    81,565
  9. Property, plant and equipment and accumulated depreciation
   F-19




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##### Table of Contents



Notes to consolidated financial statements
  Cost or
    
    
    Accumulated
    
    
    Annual rate of2010
    
    valuation
    
    
    depreciation
    
    
    depreciationLand and industrial buildings
    
    
    197,812
    
    
    
    (58,861
    )
    
    
    0  10
    %Machinery and equipment
    
    
    117,452
    
    
    
    (97,922
    )
    
    
    10  25
    %Airplane
    
    
    24,075
    
    
    
    (9,389
    )
    
    
    3
    %Office furniture and equipment
    
    
    24,053
    
    
    
    (22,394
    )
    
    
    10  20
    %Retail gallery and store
furnishings
    
    
    32,258
    
    
    
    (27,324
    )
    
    
    25  35
    %Transportation equipment
    
    
    5,411
    
    
    
    (4,695
    )
    
    
    20  25
    %Leasehold improvements
    
    
    9,381
    
    
    
    (5,489
    )
    
    
    10  20
    %Construction in progress
    
    
    11,583
    
    
    
    
    
    
    
    Total
    
    
    422,025
    
    
    
    (226,074
    )
 Cost or
    
    
    Accumulated
    
    
    Annual rate of2009
    
    valuation
    
    
    depreciation
    
    
    depreciationLand and industrial buildings
    
    
    193,700
    
    
    
    (54,590
    )
    
    
    0  10
    %Machinery and equipment
    
    
    118,122
    
    
    
    (93,245
    )
    
    
    10  25
    %Airplane
    
    
    24,075
    
    
    
    (8,667
    )
    
    
    3
    %Office furniture and equipment
    
    
    23,420
    
    
    
    (21,120
    )
    
    
    10  20
    %Retail gallery and store
furnishings
    
    
    31,058
    
    
    
    (24,217
    )
    
    
    25  35
    %Transportation equipment
    
    
    5,821
    
    
    
    (4,941
    )
    
    
    20  25
    %Leasehold improvements
    
    
    8,508
    
    
    
    (4,662
    )
    
    
    10  20
    %Construction in progress
    
    
    572
    
    
    
    
    
    
    
    Total
    
    
    405,276
    
    
    
    (211,442
    )
     F-20




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##### Table of Contents



Notes to consolidated financial statements
         F-21




---



##### Table of Contents



Notes to consolidated financial statements
    10. Other assets
  2010
    
    
    2009Software and other
    
    
    32,698
    
    
    
    28,952Goodwill
    
    
    9,136
    
    
    
    9,136Equity in affiliated enterprise
    
    
    1,429
    
    
    
    1,429Total, gross
    
    
    43,263
    
    
    
    39,517Less accumulated amortization
    
    
    (33,918
    )
    
    
    (26,704
    )Total, net
    
    
    9,345
    
    
    
    12,813
  Gross carrying
    
    
    Accumulated
    
    
    Net book2010
    
    amount
    
    
    depreciation
    
    
    valueSoftware
    
    
    19,884
    
    
    
    (14,345
    )
    
    
    5,539Trademarks, patents and other
    
    
    12,814
    
    
    
    (11,148
    )
    
    
    1,666Total
    
    
    32,698
    
    
    
    (25,493
    )
    
    
    7,205
 Gross carrying
    
    
    Accumulated
    
    
    Net book2009
    
    amount
    
    
    depreciation
    
    
    valueSoftware
    
    
    21,276
    
    
    
    (13,746
    )
    
    
    7,530Trademarks, patents and other
    
    
    7,676
    
    
    
    (6,048
    )
    
    
    1,628Total
    
    
    28,952
    
    
    
    (19,794
    )
    
    
    9,158
   F-22




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##### Table of Contents



Notes to consolidated financial statements
   2010
    
    
    2009Gross carrying amount
    
    
    9,136
    
    
    
    9,136Less accumulated depreciation
    
    
    (8,425
    )
    
    
    (6,910
    )Net book value
    
    
    711
    
    
    
    2,226
  Balance as of December 31, 2008
    
    
    3,403Acquisition of four retail stores
    
    
    651Amortization
    
    
    (1,828
    )Balance as of December 31, 2009
    
    
    2,226Amortization
    
    
    (1,515
    )Balance as of December 31, 2010
    
    
    711
   11. Bank overdrafts
  2010
    
    
    2009Bank overdrafts
    
    
    83
    
    
    
    760
   2010
    
    
    2009
    
    
    2008Bank borrowings
    
    
    
    
    
    
    
    
    
    
    6.22
    %Bank overdrafts
    
    
    1.27
    %
    
    
    1.18
    %
    
    
    3.31
    %
  F-23




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##### Table of Contents



Notes to consolidated financial statements
   12. Accounts payable-trade
  13. Accounts payable-other
  2010
    
    
    2009Provision for warranties
    
    
    8,661
    
    
    
    8,706Advances from customers
    
    
    7,221
    
    
    
    6,820Cooperative advertising and quantity discount
    
    
    4,381
    
    
    
    4,376Withholding taxes on payroll and on others
    
    
    2,636
    
    
    
    2,571Other
    
    
    4,718
    
    
    
    6,793Total
    
    
    27,617
    
    
    
    29,266
  2010
    
    
    2009
    
    
    2008Balance, beginning of year
    
    
    8,706
    
    
    
    10,717
    
    
    
    8,627Charges to profit and loss
    
    
    2,112
    
    
    
    227
    
    
    
    4,735Reductions for utilization
    
    
    (2,157
    )
    
    
    (2,238
    )
    
    
    (2,645
    )Balance, end of year
    
    
    8,661
    
    
    
    8,706
    
    
    
    10,717
 14. Taxes on income
  2010
    
    
    2009
    
    
    2008IRES (state tax)
    
    
    27.50
    %
    
    
    27.50
    %
    
    
    27.50
    %IRAP (regional tax)
    
    
    3.90
    %
    
    
    3.90
    %
    
    
    3.90
    %
  F-24




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##### Table of Contents



Notes to consolidated financial statements
        2010
    
    
    2009
    
    
    2008Domestic
    
    
    (11,414
    )
    
    
    (36,319
    )
    
    
    (30,986
    )Foreign
    
    
    7,385
    
    
    
    28,869
    
    
    
    (29,828
    )Total
    
    
    (4,029
    )
    
    
    (7,450
    )
    
    
    (60,814
    )
  F-25




---



##### Table of Contents



Notes to consolidated financial statements
   2010
    
    
    2009
    
    
    2008Expected income tax (benefit) expense charge
at full tax rates
    
    
    (1,108
    )
    
    
    (2,049
    )
    
    
    (16,724
    )Effects of:- Tax exempt income
    
    
    (1,376
    )
    
    
    (2,570
    )
    
    
    (2,489
    )- Aggregate effect of different tax
rates in foreign jurisdictions
    
    
    (2,183
    )
    
    
    (2,855
    )
    
    
    (3,258
    )- Italian regional tax
    
    
    1,951
    
    
    
    1,304
    
    
    
    2,057- Expiration and write off tax loss carry-forwards
    
    
    1,080
    
    
    
    
    
    
    
    - Non-deductible expenses
    
    
    2,987
    
    
    
    2,194
    
    
    
    3,384- Provisions for contingent liabilities
    
    
    
    
    
    
    380
    
    
    
    373- Depreciation and impairment of goodwill
    
    
    5
    
    
    
    5
    
    
    
    228- Effect of net change in valuation allowance
established against deferred tax assets
    
    
    5,229
    
    
    
    13,121
    
    
    
    18,799- Tax effect of unremitted earnings
    
    
    366
    
    
    
    271
    
    
    
    (814
    )Actual tax charge
    
    
    6,952
    
    
    
    9,802
    
    
    
    1,556
    2010
    
    
    2009
    
    
    2008Current:Italian
    
    
    1,980
    
    
    
    1,684
    
    
    
    2,057Foreign
    
    
    5,285
    
    
    
    4,375
    
    
    
    2,606Total (a)
    
    
    7,265
    
    
    
    6,059
    
    
    
    4,663Deferred:Italian
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    (313
    )
    
    
    3,743
    
    
    
    (3,107
    )Total (b)
    
    
    (313
    )
    
    
    3,743
    
    
    
    (3,107
    )Total (a + b)
    
    
    6,952
    
    
    
    9,802
    
    
    
    1,556
   F-26




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##### Table of Contents



Notes to consolidated financial statements
   2010
    
    
    2009Deferred tax assets:- Tax loss carry-forwards
    
    
    58,424
    
    
    
    62,240- Provision for warranties
    
    
    2,649
    
    
    
    2,501- Allowance for doubtful accounts
    
    
    3,394
    
    
    
    2,663- Unrealized net losses on foreign exchange
    
    
    1,013
    
    
    
    833Impairment loss of long-lived assets and others on fixed assets
    
    
    2,177
    
    
    
    1,959- One-time termination benefits and others on personnel
    
    
    666
    
    
    
    562- Inventory obsolescence
    
    
    1,585
    
    
    
    1,439- Goodwill
    
    
    1,768
    
    
    
    1,384- Intercompany profit on inventory
    
    
    770
    
    
    
    1,041- Provision for contingent liabilities
    
    
    1,049
    
    
    
    1,163- Provision for sales representatives
    
    
    386
    
    
    
    392- Other temporary differences
    
    
    707
    
    
    
    1,092Total gross deferred tax assets
    
    
    74,588
    
    
    
    77,269- Less valuation allowance
    
    
    (71,552
    )
    
    
    (74,626
    )Net deferred tax assets (a)
    
    
    3,036
    
    
    
    2,643Deferred tax liabilities:- Unrealized net gains on foreign exchange
    
    
    
    
    
    
    (562
    )- Unremitted earnings of subsidiaries
    
    
    (1,222
    )
    
    
    (856
    )- Government grants
    
    
    (570
    )
    
    
    (570
    )- Other temporary differences
    
    
    (166
    )
    
    
    Total deferred tax liabilities (b)
    
    
    (1,958
    )
    
    
    (1,988
    )Net deferred tax assets (a + b)
    
    
    1,078
    
    
    
    655
     F-27




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##### Table of Contents



Notes to consolidated financial statements
    2010
    
    Current
    
    
    Non current
    
    
    TotalGross deferred tax assets
    
    
    11,930
    
    
    
    62,658
    
    
    
    74,538Valuation allowance
    
    
    (10,705
    )
    
    
    (60,848
    )
    
    
    (71,501
    )Net deferred tax assets
    
    
    1,225
    
    
    
    1,811
    
    
    
    3,036Deferred tax liabilities
    
    
    (147
    )
    
    
    (1,811
    )
    
    
    (1,958
    )Net deferred tax assets
    
    
    1,078
    
    
    
    
    
    
    
    1,078
 2009
    
    Current
    
    
    Non current
    
    
    TotalGross deferred tax assets
    
    
    11,860
    
    
    
    65,409
    
    
    
    77,269Valuation allowance
    
    
    (10,643
    )
    
    
    (63,983
    )
    
    
    (74,626
    )Net deferred tax assets
    
    
    1,217
    
    
    
    1,426
    
    
    
    2,643Deferred tax liabilities
    
    
    (515
    )
    
    
    (1,473
    )
    
    
    (1,988
    )Net deferred tax assets
    
    
    702
    
    
    
    (47
    )
    
    
    655
  2011
    
    
    3,1302012
    
    
    42,6952013
    
    
    19,9512014
    
    
    35,7352015
    
    
    6,563Thereafter
    
    
    97,865Total
    
    
    205,939
    F-28




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##### Table of Contents



Notes to consolidated financial statements
  15. Salaries, wages and related liabilities
  2010
    
    
    2009Salaries and wages
    
    
    2,028
    
    
    
    4,939Social security contributions
    
    
    4,488
    
    
    
    6,987Vacation accrual
    
    
    3,393
    
    
    
    3,128Total
    
    
    9,909
    
    
    
    15,054
 16. Long-term debt
  2010
    
    
    20092.25% long-term debt payable in annual equal instalments
with final payment due May 30, 2015
    
    
    1,437
    
    
    
    1,7020.25% long-term debt payable in semi-annual instalments with
final payment due July 2013
    
    
    1,497
    
    
    
    1,3053-month Euribor (360) plus a 1,0% spread long-term debt
payable in
quarterly instalments with final payment due August 2015
    
    
    9,000
    
    
    
    0.96% long-term debt payable in annual instalments with
final payment due September 2010
    
    
    
    
    
    
    740.74% long-term debt payable in annual instalments with
final payment due April 2018
    
    
    3,480
    
    
    
    3,900Total long-term debt
    
    
    15,414
    
    
    
    6,981Less current instalments
    
    
    (1,831
    )
    
    
    (1,124
    )Long-term debt, excluding current instalments
    
    
    13,583
    
    
    
    5,857
    F-29




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##### Table of Contents



Notes to consolidated financial statements
   2012
    
    
    3,5012013
    
    
    3,2552014
    
    
    3,0112015
    
    
    2,486Thereafter
    
    
    1,330Total
    
    
    13,583
   17. Other liabilities
  2010
    
    
    2009Provision for contingent liabilities
    
    
    15,268
    
    
    
    14,952One-time termination benefits
    
    
    2,046
    
    
    
    2,046Termination indemnities for sales agents
    
    
    1,190
    
    
    
    1,211Total
    
    
    18,504
    
    
    
    18,209
     F-30




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##### Table of Contents



Notes to consolidated financial statements
  18. Shareholders equity
  2010
    
    
    2009Mr. Pasquale Natuzzi
    
    
    53.5
    %
    
    
    53.5
    %Mrs. Anna Maria Natuzzi
    
    
    2.6
    %
    
    
    2.6
    %Mrs. Annunziata Natuzzi
    
    
    2.5
    %
    
    
    2.5
    %Public investors
    
    
    41.4
    %
    
    
    41.4
    %100
    %
    
    
    100
    %
  2010
    
    
    2009Legal reserve
    
    
    11,199
    
    
    
    11,199Monetary revaluation reserve
    
    
    1,344
    
    
    
    1,344Government capital grants reserve
    
    
    29,749
    
    
    
    29,749Majority shareholder capital contribution
    
    
    488
    
    
    
    488Total
    
    
    42,780
    
    
    
    42,780
      Non-controlling interest 
  F-31




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##### Table of Contents



Notes to consolidated financial statements
  19. Share grants and options
       F-32




---



##### Table of Contents



Notes to consolidated financial statements
         20. Commitments and contingent liabilities
  2011
    
    
    19,0362012
    
    
    19,1542013
    
    
    19,4822014
    
    
    19,8232015
    
    
    20,174Thereafter
    
    
    37,503Total
    
    
    135,172
  F-33




---



##### Table of Contents



Notes to consolidated financial statements
     Istituto
Nazionale per la Previdenza Sociale
  F-34




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##### Table of Contents



Notes to consolidated financial statements
    21. Segmental and geographical information
   2010
    
    
    2009
    
    
    2008Upholstered furniture  Leather
    
    
    431,089
    
    
    
    413,751
    
    
    
    535,178Upholstered furniture  Fabric
    
    
    29,441
    
    
    
    36,805
    
    
    
    52,607Subtotal
    
    
    460,530
    
    
    
    450,556
    
    
    
    587,785Others
    
    
    58,104
    
    
    
    64,796
    
    
    
    78,241Total
    
    
    518,634
    
    
    
    515,352
    
    
    
    666,026
   F-35




---



##### Table of Contents



Notes to consolidated financial statements
   2010
    
    
    2009
    
    
    2008Sales of upholstered furnitureUnited States of America
    
    
    114,113
    
    
    
    103,174
    
    
    
    165,445Italy
    
    
    51,694
    
    
    
    53,454
    
    
    
    65,739England
    
    
    33,814
    
    
    
    29,701
    
    
    
    31,458Canada
    
    
    40,769
    
    
    
    28,076
    
    
    
    37,345France
    
    
    24,121
    
    
    
    27,500
    
    
    
    36,311Spain
    
    
    27,305
    
    
    
    27,304
    
    
    
    37,383Belgium
    
    
    23,251
    
    
    
    26,665
    
    
    
    27,572Germany
    
    
    18,318
    
    
    
    24,491
    
    
    
    27,045Holland
    
    
    10,476
    
    
    
    14,371
    
    
    
    16,965Australia
    
    
    15,157
    
    
    
    12,118
    
    
    
    16,172Other countries (none greater than 2%)
    
    
    101,512
    
    
    
    103,702
    
    
    
    126,350Total
    
    
    460,530
    
    
    
    450,556
    
    
    
    587,785
 2010
    
    
    2009Long lived assetsItaly
    
    
    108,433
    
    
    
    108,621Romania
    
    
    22,976
    
    
    
    24,577China
    
    
    24,362
    
    
    
    20,579United States of America
    
    
    15,431
    
    
    
    14,982Brazil
    
    
    18,388
    
    
    
    17,572Other countries
    
    
    6,361
    
    
    
    7,503Total
    
    
    195,951
    
    
    
    193,834
  22. Cost of sales
  2010
    
    
    2009
    
    
    2008Opening inventories
    
    
    81,565
    
    
    
    92,012
    
    
    
    107,290Purchases
    
    
    208,737
    
    
    
    195,783
    
    
    
    301,811Labor
    
    
    75,772
    
    
    
    78,505
    
    
    
    97,720Third party manufacturers
    
    
    12,438
    
    
    
    10,627
    
    
    
    18,474Other manufacturing costs
    
    
    30,344
    
    
    
    34,380
    
    
    
    45,487Closing inventories
    
    
    (87,355
    )
    
    
    (81,565
    )
    
    
    (92,012
    )Total
    
    
    321,501
    
    
    
    329,742
    
    
    
    478,770
  F-36




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##### Table of Contents



Notes to consolidated financial statements
   23. Other income (expense), net
  2010
    
    
    2009
    
    
    2008Interest income
    
    
    576
    
    
    
    482
    
    
    
    1,614Interest expense and bank commissions
    
    
    (1,575
    )
    
    
    (1,624
    )
    
    
    (1,855
    )Interest (expense) income, net
    
    
    (999
    )
    
    
    (1,142
    )
    
    
    (241
    )Gains (losses) on foreign exchange, net
    
    
    1,935
    
    
    
    6,931
    
    
    
    (6,589
    )Unrealized exchange losses
on exchange derivative instruments, net
    
    
    (888
    )
    
    
    (62
    )
    
    
    (4,471
    )Gains (losses) on foreign exchange, net
    
    
    1,047
    
    
    
    6,869
    
    
    
    (11,060
    )Other, net
    
    
    (4,475
    )
    
    
    (2,606
    )
    
    
    (14,517
    )Total
    
    
    (4,427
    )
    
    
    3,121
    
    
    
    (25,818
    )
  2010
    
    
    2009
    
    
    2008Net realized losses on
exchange derivative instruments
    
    
    (3,057
    )
    
    
    (3,101
    )
    
    
    (1,263
    )Net realized gains (losses) on accounts
receivable and payable
    
    
    6,801
    
    
    
    2,083
    
    
    
    (6,281
    )Net unrealized gains (losses) on
accounts receivable and payable
    
    
    (1,809
    )
    
    
    7,949
    
    
    
    955Total
    
    
    1,935
    
    
    
    6,931
    
    
    
    (6,589
    )
  2010
    
    
    2009
    
    
    2008Provisions for contingent liabilities
    
    
    (3,812
    )
    
    
    (3,846
    )
    
    
    (3,200
    )Settlement of INPS contingent liability
    
    
    
    
    
    
    (1,080
    )
    
    
    Impairment losses of long-lived assets
    
    
    
    
    
    
    
    
    
    
    (4,703
    )One-time termination benefits
    
    
    
    
    
    
    
    
    
    
    (4,605
    )Write off of fixed assets
    
    
    (454
    )
    
    
    (595
    )
    
    
    (1,189
    )Other, net
    
    
    (209
    )
    
    
    2,915
    
    
    
    (820
    )Total
    
    
    (4,475
    )
    
    
    (2,606
    )
    
    
    (14,517
    )
  F-37




---



##### Table of Contents



Notes to consolidated financial statements
  Provisions for contingent liabilities
          Settlement of INPS contingent liability
  F-38




---



##### Table of Contents



Notes to consolidated financial statements
  Impairment losses of long-lived assets
  One-time termination benefits
   F-39




---



##### Table of Contents



Notes to consolidated financial statements
  Write off of fixed assets
 24. Financial instruments and risk management
   2010
    
    
    2009U.S. dollars
    
    
    33,451
    
    
    
    23,418Euro
    
    
    12,200
    
    
    
    10,714Canadian dollars
    
    
    12,081
    
    
    
    1,915British pounds
    
    
    8,838
    
    
    
    6,652Australian dollars
    
    
    7,149
    
    
    
    5,164Swiss francs
    
    
    1,584
    
    
    
    795Norwegian kroner
    
    
    1,091
    
    
    
    718Swedish kroner
    
    
    919
    
    
    
    587Danish kroner
    
    
    497
    
    
    
    470Japanese yen
    
    
    2,310
    
    
    
    311Total
    
    
    80,120
    
    
    
    50,744
  F-40




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##### Table of Contents



Notes to consolidated financial statements
   2010
    
    
    2009Contract
    
    
    Unrealized
    
    
    Contract
    
    
    Unrealizedamount
    
    
    gains (losses)
    
    
    amount
    
    
    gains (losses)Assets
    
    
    40,981
    
    
    
    171
    
    
    
    13,281
    
    
    
    318Liabilities
    
    
    39,139
    
    
    
    (1,059
    )
    
    
    37,463
    
    
    
    (380
    )Total
    
    
    80,120
    
    
    
    (888
    )
    
    
    50,744
    
    
    
    (62
    )
     25. Fair value of financial instruments
  2010
    
    
    2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    Fairvalue
    
    
    value
    
    
    value
    
    
    valueAssets:- Marketable debts securities
    
    
    4
    
    
    
    4
    
    
    
    4
    
    
    
    4Liabilities:- Long-term debt
    
    
    15,414
    
    
    
    14,149
    
    
    
    6,981
    
    
    
    6,214
    F-41




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##### Table of Contents



Notes to consolidated financial statements
   26. Application of generally accepted accounting principles in the United States of America
    Reconciliation of net loss:
 2010
    
    
    2009
    
    
    2008Net loss attributable to Natuzzi S.p.A. and
subsidiaries under Italian GAAP
    
    
    (11,078
    )
    
    
    (17,686
    )
    
    
    (61,938
    )Adjustments to reported income:(a) Revaluation of property,
plant and equipment
    
    
    27
    
    
    
    27
    
    
    
    27(b) Government grants
    
    
    640
    
    
    
    610
    
    
    
    811(c) Revenue recognition
    
    
    (1,462
    )
    
    
    (2,652
    )
    
    
    2,330(d) Goodwill and intangible assets
    
    
 505
    
    
    
    1,505
    
    
    
    (2,634
    )(e) Share grants and options
    
    
    
    
    
    
    
    
    
    
    (2
    )(f) Translation of foreign financial statements
    
    
    2,896
    
    
    
    (5,193
    )
    
    
    753(g) One-time termination benefits
    
    
    
    
    
    
    (2,559
    )
    
    
    4,605(h) Impairment of long-lived assets
    
    
    
    
    
    
    (12
    )
    
    
    400Tax effect of US GAAP adjustments
    
    
    (794
    )
    
    
    223
    
    
    
    (14
    )Net loss in conformity with US GAAP
    
    
    (9,266
    )
    
    
    (25,737
    )
    
    
    (55,662
    )Basic loss per share in conformity
with US GAAP
    
    
    (0.17
    )
    
    
    (0.47
    )
    
    
    (1.02
    )Diluted loss per share in conformity
with US GAAP
    
    
    (0.17
    )
    
    
    (0.47
    )
    
    
    (1.02
    )
  F-42




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##### Table of Contents



Notes to consolidated financial statements
  Reconciliation of equity attributable to Natuzzi S.p.A. and Subsidiaries:
 2010
    
    
    2009Total equity attributable to Natuzzi S.p.A.
and Subsidiaries under Italian GAAP
    
    
    323,119
    
    
    
    325,027(a) Revaluation of property, plant and equipment
    
    
    (480
    )
    
    
    (507
    )(b) Government grants
    
    
    (10,787
    )
    
    
    (11,427
    )(c) Revenue recognition
    
    
    (6,157
    )
    
    
    (4,695
    )(d) Goodwill and intangible assets
    
    
    6,731
    
    
    
    6,226(f) Translation of foreign financial statements
    
    
    6,933
    
    
    
    13,208(g) One-time termination benefits
    
    
    2,046
    
    
    
    2,046(h) Impairment of long-lived assets
    
    
    388
    
    
    
    388Tax effect of US GAAP adjustments
    
    
    (3,494
    )
    
    
    (2,700
    )Equity attributable to Natuzzi S.p.A.
and Subsidiaries in conformity with US GAAP
    
    
    318,300
    
    
    
    327,566
  Condensed Consolidated Balance Sheets as at December 31, 2010 and 2009
 Dec. 31, 2010
    
    
    Dec. 31, 2009ASSETSCurrent assets
    
    
    289,630
    
    
    
    295,125Non current assets
    
    
    218,868
    
    
    
    225,962Total assets
    
    
    508,498
    
    
    
    521,087LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities
    
    
    108,261
    
    
    
    118,354Long-term liabilities
    
    
    79,825
    
    
    
    73,307Equity
attributable to Natuzzi S.p.A. and Subsidiaries
    
    
    318,300
    
    
    
    327,566Non-controlling interest
    
    
    2,112
    
    
    
    1,860Total Liabilities and Shareholders Equity
    
    
    508,498
    
    
    
    521,087
  F-43




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##### Table of Contents



Notes to consolidated financial statements
  Condensed Consolidated Statements of Operations Years Ended
December 31, 2010, 2009 and 2008
 2010
    
    
    2009
    
    
    2008Net sales
    
    
    510,755
    
    
    
    506,026
    
    
    
    670,130Cost of sales
    
    
    (321,892
    )
    
    
    (333,667
    )
    
    
    (496,905
    )Gross profit
    
    
    188,863
    
    
    
    172,359
    
    
    
    173,225Selling expenses
    
    
    (146,035
    )
    
    
    (140,021
    )
    
    
    (163,265
    )General and administrative expenses
    
    
    (42,468
    )
    
    
    (46,585
    )
    
    
    (49,916
    )Operating income/(loss)
    
    
    360
    
    
    
    (14,247
    )
    
    
    (39,956
    )Other income/(expenses), net
    
    
    (2,175
    )
    
    
    (1,248
    )
    
    
    (14,313
    )Earning/(loss)
before taxes and non-controlling interest
    
    
    (1,815
    )
    
    
    (15,495
    )
    
    
    (54,269
    )Income taxes
    
    
    (7,354
    )
    
    
    (9,808
    )
    
    
    (1,825
    )Net income/(loss)
    
    
    (9,169
    )
    
    
    (25,303
    )
    
    
    (56,094
    )Net (income)/loss attributable to the
non-controlling interest
    
    
    (97
    )
    
    
    (434
    )
    
    
    432Net income/(loss) attributable to
Natuzzi S.p.A. and Subsidiaries
    
    
    (9,266
    )
    
    
    (25,737
    )
    
    
    (55,662
    )
  Reconciliation of net sales from Italian GAAP to US GAAP
 2010
    
    
    2009
    
    
    2008Net sales Italian GAAP
    
    
    518,634
    
    
    
    515,352
    
    
    
    666,026(b) Government grants (reclassification)
    
    
    (748
    )
    
    
    (953
    )
    
    
    (990
    )(c) Revenue recognition (adjustment)
    
    
    (4,893
    )
    
    
    (5,144
    )
    
    
    9,430(j) Cost paid to resellers (reclassification)
    
    
    (2,238
    )
    
    
    (3,229
    )
    
    
    (4,336
    )Net sales US GAAP
    
    
    510,755
    
    
    
    506,026
    
    
    
    670,130
  F-44




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##### Table of Contents



Notes to consolidated financial statements
  Reconciliation of operating loss from Italian GAAP to US GAAP
 2010
    
    
    2009
    
    
    2008Operating income (loss) Italian GAAP
    
    
    398
    
    
    
    (10,571
    )
    
    
    (34,996
    )(a) Revaluation property, plant and
equipment (adjustment)
    
    
    27
    
    
    
    27
    
    
    
    27(b) Government grants (adjustment)
    
    
    640
    
    
    
    610
    
    
    
    811(c) Revenue recognition (adjustment)
    
    
    (1,462
    )
    
    
    (2,652
    )
    
    
    2,330(d) Goodwill and intangible assets (adjustment)
    
    
    1,211
    
    
    
    1,505
    
    
    
    (2,634
    )(e) Share grants and options (adjustment)
    
    
    
    
    
    
    
    
    
    
    (2
    )(g) One-time termination benefits
    
    
    
    
    
    
    (2,559
    )
    
    
    (h) Impairment of long-lived assets (reclassification)
    
    
    
    
    
    
    
    
    
    
    (4,703
    )(h) Impairment of long-lived assets (adjustment)
    
    
    
    
    
    
    (12
    )
    
    
    400(i) Write-off of tangible assets (reclassification)
    
    
    (454
    )
    
    
    (595
    )
    
    
    (1,189
    )Operating income (loss) US GAAP
    
    
    360
    
    
    
    (14,247
    )
    
    
    (39,956
    )
        F-45




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Notes to consolidated financial statements
    2010
    
    
    2009Effects
    
    
    EffectsIncrease
    
    
    IncreaseConsolidated balance sheets
    
    (Decrease)
    
    
    (Decrease)Trade receivables, net
    
    
    (23,500
    )
    
    
    (18,607
    )Inventories
    
    
    14,570
    
    
    
    11,818Total effect on current assets (a)
    
    
    (8,930
    )
    
    
    (6,789
    )Accounts payable-trade
    
    
    (2,773
    )
    
    
    (2,094
    )Income taxes
    
    
    
    
    
    
    (413
    )Total effect on current liabilities (b)
    
    
    (2,773
    )
    
    
    (2,507
    )Total effect on shareholders equity (a-b)
    
    
    (6,157
    )
    
    
    (4,282
    )
 Consolidated statements of operations
    
    2010
    
    
    2009
    
    
    2008Net sales
    
    
    (4,893
    )
    
    
    (5,144
    )
    
    
    9,430Gross profit
    
    
    (2,141
    )
    
    
    (2,991
    )
    
    
    3,149Operating income (loss)
    
    
    (1,462
    )
    
    
    (2,652
    )
    
    
    2,330Net Income
    
    
    (1,875
    )
    
    
    (2,707
    )
    
    
    2,709
 Intangibles Goodwill and Other
  F-46




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Notes to consolidated financial statements
  Impairment or Disposal of Long-Lived Assets
  Goodwill
    
    
    Intangibles
    
    
    Deferred taxesUS
    
    
    Italian
    
    
    US
    
    
    Italian
    
    
    US
    
    
    ItalianBalance at December 31, 2007
    
    
    7,760
    
    
    
    6,686
    
    
    
    6,281
    
    
    
    
    
    
    
    (2,077
    )
    
    
    (921
    )Impairment of goodwill
    
    
    (1,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Write off of goodwill
    
    
    
    
    
    
    (776
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Impairment of an intangible asset
    
    
    
    
    
    
    
    
    
    
    (3,583
    )
    
    
    
    
    
    
    1,218
    
    
    
    Amortization
    
    
    
    
    
    
    (2,507
    )
    
    
    (834
    )
    
    
    
    
    
    
    274
    
    
    
    (486
    )Balance at December 31, 2008
    
    
    6,260
    
    
    
    3,403
    
    
    
    1,864
    
    
    
    
    
    
    
    (585
    )
    
    
    (1,407
    )Acquisition of stores
    
    
    651
    
    
    
    651
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization
    
    
    
    
    
    
    (1,827
    )
    
    
    (322
    )
    
    
    
    
    
    
    100
    
    
    
    (526
    )Balance at December 31, 2009
    
    
    6,911
    
    
    
    2,227
    
    
    
    1,542
    
    
    
    
    
    
    
    (485
    )
    
    
    (1,933
    )Impairment of goodwill
    
    
    (706
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization
    
    
    
    
    
    
    (1,516
    )
    
    
    (305
    )
    
    
    
    
    
    
    105
    
    
    
    (476
    )Balance at December 31, 2010
    
    
    6,205
    
    
    
    711
    
    
    
    1,237
    
    
    
    
    
    
    
    (380
    )
    
    
    (2,409
    )
    F-47




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Notes to consolidated financial statements
        F-48




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Notes to consolidated financial statements
    Compensation  Stock Compensation Accounting for Stock-Based Compensation
    F-49




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Notes to consolidated financial statements
       Foreign Currency Transactions
   F-50




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Notes to consolidated financial statements
   Compensation  Retirement Benefits
     F-51




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Notes to consolidated financial statements
      F-52




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Notes to consolidated financial statements
  Impairment or
Disposal of Long-Lived
        F-53




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Notes to consolidated financial statements
        2010
    
    
    2009Balance, beginning of the year
    
    
    1,944
    
    
    
    1,715Additions based on tax positions related to the current year
    
    
    
    
    
    
    Additions for tax positions of prior years
    
    
    87
    
    
    
    351Reductions due to statute of limitations expiration
    
    
    (479
    )
    
    
    (122
    )Settlements
    
    
    
    
    
    
    Balance, end of year
    
    
    1,552
    
    
    
    1,944
  F-54




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Notes to consolidated financial statements
     US GAAP
    
    
    IT GAAP
    
    
    DifferenceBalance at January 1, 2010
    
    
    1,944
    
    
    
    1,944
    
    
    
    Additions based on tax positions related
to the current year
    
    
    
    
    
    
    
    
    
    
    Additions for tax positions of prior years
    
    
    87
    
    
    
    87
    
    
    
    Reductions due to statute of limitations expiration
    
    
    (479
    )
    
    
    (479
    )
    
    
    Settlements
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2010
    
    
    1,552
    
    
    
    1,552
    
    
    
    
 US GAAP
    
    
    IT GAAP
    
    
    DifferenceBalance at January 1, 2009
    
    
    1,715
    
    
    
    1,715
    
    
    
    Additions based on tax positions related
to the current year
    
    
    
    
    
    
    
    
    
    
    Additions for tax positions of prior years
    
    
    351
    
    
    
    351
    
    
    
    Reductions due to statute of limitations expiration
    
    
    (122
    )
    
    
    (122
    )
    
    
    Settlements
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2009
    
    
    1,944
    
    
    
    1,944
    
    
    
    
 US GAAP
    
    
    IT GAAP
    
    
    DifferenceBalance at January 1, 2008
    
    
    1,460
    
    
    
    1,460
    
    
    
    Additions based on tax positions related
to the current year
    
    
    2
    
    
    
    2
    
    
    
    Additions for tax positions of prior years
    
    
    483
    
    
    
    483
    
    
    
    Reductions due to statute of limitations expiration
    
    
    (230
    )
    
    
    (230
    )
    
    
    Settlements
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2008
    
    
    1,715
    
    
    
    1,715
    
    
    
    
   F-55




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Notes to consolidated financial statements
   Statement of Cash Flow
 Comprehensive Income 
 Accounting Standards Update(ASU) No. 2009-17, Improvements to Financial Reporting by
Enterprises involved with Variable Interest Entities (Formerly FASB Statement No. 46R):
  F-56




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Notes to consolidated financial statements
  Recently issued Accounting Pronouncements
  Accounting Standards Update (ASU) No. 2010-06, Fair Value Measurements and Disclosures:
 Accounting Standards Update (ASU) No. 2010-13, CompensationStock Compensation:
 Accounting Standards Update (ASU) No. 2009-13, Revenue Recognition (Topic 605): Multiple
Deliverable Revenue Arrangements: Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements Revenue RecognitionMultiple-Element Arrangements
  F-57




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Notes to consolidated financial statements
  Accounting Standards Update (ASU) No. 2010-28, IntangiblesGoodwill and Other (Topic 350):
When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative
Carrying Amounts, a consensus of the FASB Emerging Issues Task Force (Issue No. 10-A): When to Perform
Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts,
a consensus of the FASB Emerging Issues Task Force (Issue No. 10-A)
 27. Subsequent events
    F-58




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SIGNATURE
  NATUZZI S.p.A.By:
    /s/ Pasquale NatuzziName:
    Pasquale NatuzziTitle:
    Chief Executive Officer




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##### Table of Contents



Exhibit Index
 1.1
    
    
    English translation of the by-laws (Statuto) of the Company, as amended and restated as of
January 24, 2008 (incorporated by reference to the Form 20-F filed by Natuzzi S.p.A. with the
Securities and Exchange Commission on June 30, 2008, file number 1-11854).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
    
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.12.2
    
    
    Certification of the Chief Financial Officer 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.