Exhibit 1
[EMBRAER logo]
- --------------------------------------------------------------------------------
Financial Support For Sales
- --------------------------------------------------------------------------------
As stated in the Company's Third Quarter 2002 U.S. GAAP Earnings Release,
Embraer has created the following structure in order to offer financial
support for sales:
------------------------------
EMBRAER S.A.
(Brazil)
Manufacturer
------------------------------
------------------------------
Embraer Spain Holding Co. SL
(Spain)
Holding
------------------------------
------------------------------ ----------------------------------
ECC Leasing Co. Ltd. ECC Investment Switzerland, AG
(Ireland) (Switzerland)
Leasing Holding
------------------------------ ----------------------------------
----------------------------------
ECC Insurance & Financial Co. Ltd.
(Cayman Islands)
Captive Insurance
----------------------------------
Embraer`s wholly-owned subsidiary ECC Leasing Co. Ltd was created with the
mission of managing and remarketing a portfolio of aircraft that Embraer may
acquire through trade-ins and repurchase obligations and provide remarketing
services for third parties in connection with its sales campaign. ECC Leasing
Co. Ltd. does not intend to lease new aircraft. For such transactions, it will
be necessary to obtain specific Board approval.
ECC Insurance & Financial Co. Ltd, regulated by the Cayman Islands Monetary
Authority, was established to provide a vehicle for Embraer to self-insure
against contingent losses that Embraer may face related to Embraer's financial
guarantees.
Embraer has received IRB (Instituto de Resseguros do Brasil - Brazilian
Reinsurance Institute) transaction approval for US$252.5 million in premium
payments (self-insurance funding) over the next five years covering 100% of the
exposure related to financial guarantees associated with deliveries within such
period. The initial capital invested in ECC Insurance is US$2.6 million. The
insurance policy issued associated with aircraft deliveries up to September 30,
2002 is expected to be funded with US$185.6 million in premium payments over the
next five years. The IBNR (Incurred But Not Recorded) provision recorded was
US$3.4 million during the third quarter of 2002. New declarations and
endorsements (new premiums) are expected to occur on a quarterly basis, as new
aircraft are delivered.
Embraer expects the following transactions to occur involving these
subsidiaries: (i) the transfer of the existing aircraft portfolio held by EFL to
ECC Leasing Co. with a book value of US$43 million; and (ii) the repurchase in
2003 of approximately US$50 million in aircraft - 10% of total previously
disclosed exposure. Based on the Company's current estimates, no relevant losses
or gains are expected to occur with transactions
- --------------------------------------------------------------------------------
1
[EMBRAER logo]
involving these aircraft. The Company believes that future sales may be
increasingly subject to trade-in options.
- --------------------------------------------------------------------------------
Hedging Strategy
- --------------------------------------------------------------------------------
Considering that: (i) Embraer has a firm backlog of US$9.6 billion; (ii) 97% of
its revenues are in US$; (iii) 75% of the R&D expenses are in R$; and (iv) 32%
of its total cash disbursements are in R$, the main objective of the Company's
hedging strategy is to optimize the natural hedge of its cash flow.
- --------------------------------------------------------------------------------
This document includes forward-looking statements or statements about events or
circumstances which have not occurred. We have based these forward-looking
statements largely on our current expectations and projections about future
events and financial trends affecting our business and our future financial
performance. These forward-looking statements are subject to risks,
uncertainties and assumptions, including, among other things: general economic,
political and business conditions, both in Brazil and in our market;
expectations of trends in the industry; our investment plans; our capacity to
develop and deliver products on the previously agreed dates; and existing and
future government regulations.
The words "believes," "may," "will," "estimates," "continues," "anticipates,"
"intends," "expects" and similar words are intended to identify forward-looking
statements. We undertake no obligations to update publicly or revise any
forward-looking statements because of new information, future events or other
factors. In light of these risks and uncertainties, the forward-looking events
and circumstances discussed in this press release might not occur. Our actual
results could differ substantially from those anticipated in our forward-looking
statements.
- --------------------------------------------------------------------------------
2