EXHIBIT 99.2 [GRAPHIC OMITTED] US GAAP Common Shares - ------------- Bovespa: EMBR3 Preferred Shares - ---------------- Bovespa: EMBR4 NYSE: ERJ 1 ADS = 4 Pref. shares www.embraer.com EMBRAER INVESTOR RELATIONS Anna Cecilia Bettencourt Gustavo Poppe Milene Petrelluzzi Paulo Ferreira Phone: 55 12 3927 1216 mercapit@embraer.com.br [EMBRAER LOGO] [GRAPHIC OMITTED] EMPRESA BRASILEIRA DE AERONAUTICA S/A REPORTS FIRST QUARTER 2003 EARNINGS RELEASE IN US GAAP The company's operational and financial information is presented, except where otherwise indicated, on a consolidated basis in United States dollars (US$) in accordance with US GAAP. The financial data presented in this document for the quarters ended March 31, 2003, December 31, 2002 and March 31, 2002 are derived from our unaudited financial statements. In order to better understand the Company's operating performance, we are also presenting at the end of this release certain information in accordance with the Brazilian Corporate Law Method for the same period ("Brazilian GAAP"). Sao Jose dos Campos, May 13, 2003 - Embraer (BOVESPA: EMBR3, EMBR4) (NYSE: ERJ), one of the leading commercial aircraft manufacturers in the world, registered in 1Q03 net sales of US$488.8 million and net income of US$43.9 million, equivalent to diluted earnings per ADS of US$0.2535. The order backlog as of March 31, 2003 totaled US$19.2 billion, US$7.9 billion in firm orders and US$11.3 billion in options. 1st Quarter 2003 Highlights o Net sales for the 1Q03 were US$ 488.8 million, 12.3% lower than the sales of US$ 557.3 million in the 1Q02. o Net income in 1Q03 was US$ 43.9 million, equivalent to diluted earnings per ADS of US$0.2535. o A total of 23 jets were delivered in 1Q03: 22 jets to the Commercial Aviation market and one Legacy to the Corporate Aviation market. o Embraer announced on January 10 that LOT Polish Airlines confirmed its decision to acquire 10 EMBRAER 170 with options for an additional 11 aircraft that can be converted into the EMBRAER 190 and 195 models. o Embraer announced on February 12 that ExpressJet Airlines requested a revision of the deliveries originally scheduled to take place during the years 2003-2005. o On March 25, Embraer announced that SWISS reduced its firm orders for EMBRAER 170 and EMBRAER 195 aircraft to 30 aircraft, 15 of each model, from an original total of 60. The number of options for both models was also reduced to 20, from 100 aircraft. o Embraer forecasts deliveries of 132 aircraft for 2003 and 136 aircraft for 2004. The above-mentioned forecast already includes the delivery rescheduling for ExpressJet and the contractual renegotiation with SWISS. 1 The following is a comparative analysis of the selected financial data of Embraer's consolidated statement of income for the three months ending March 31, 2003 and 2002 (1Q03 and 1Q02) and December 31, 2002 (4Q02). - ------------------------------------------- -------------------------------- ------------------------------------ Three months ended Three months ended Income Statement December 31, 2002 March 31, March 31, Unaudited 2002 2002 2003 - ------------------------------------------- -------------------------------- ------------------ --------------- US$ US$ US$ In US$ millions, except % and earnings per ADS Net Sales 798.2 557.3 488.0 Gross Profit 312.3 222.3 194.1 Gross Margin (%) 39.1 39.9 39.7 Operating Expenses (113.8) (78.0) (75.5) Research and development (45.8) (41.2) (35.5) Employee profit sharing (10.2) (6.5) (0.1) Income from operations 142.5 96.6 83.0 Operating margin (%) 17.9 17.3 17.0 Interest income, net (4.0) 2.1 (27.0) Financial transaction loss, net (6.1) (1.3) 0.3 Other non-operating income (expense) net (0.5) 0.1 1.4 Income before income taxes 131.9 97.5 57.7 Provision for income taxes (53.4) (29.4) (13.2) Minority interest (1.1) (0.4) (0.6) Cumulative effect of accounting change - - - Net income 77.4 67.7 43.9 Net margin (%) 9.7 12.1 9.0 Earnings per ADS - basic 0.4487 0.4294 0.2545 Earnings per ADS - diluted 0.4463 0.4284 0.2535 - ------------------------------------------------------------------------------------------------------------------- 23 aircraft were Deliveries, Net Sales and Gross Margin delivered during -------------------------------------- 1Q03. During the 1Q03, 23 aircraft were delivered in comparison to 30 in 1Q02. Net sales in 1Q03 totaled US$ 488.8 million, 12.3% lower than the US$ 557.3 million recorded in 1Q02. The decrease in Embraer's net sales during the period is primarily a consequence of the reduction in aircraft deliveries to the regional market since September 2001, partially compensated for by the better sales mix, which included 12 ERJ145XR and one Legacy. 2 - ---------------------------- -------------------------------------------------- Planes Delivered 4th Quarter 1st Quarter by Sector 2002 2002 2003 - ---------------------------- ------------------- -------------- -------------- Commercial ERJ 135 2 1 3 ERJ 145 28 18 15 ERJ 140 6 10 4 EMB 120 0 0 0 Defense EMB 135 0 0 0 EMB 145 0 1 0 Legacy 0 0 0 Corporate Legacy / Shuttle 5 0 1 EMB 135 0 0 0 - -------------------------------------------------------------------------------- Total 41 30 23 - -------------------------------------------------------------------------------- In 1Q03, Commercial Aviation accounted for 79.6% of total sales, as compared to 87.9% in 1Q02. This reduction is in line with company's strategy of revenue diversification and also reflects the reduction of 20.6% in sales in the Commercial Aviation segment. Corporate Aviation represented 3.1% of net sales, Customer Services represented 5.9% of net sales and Defense reached 11.3% of net sales, with a 64.8% growth in comparison with 1Q02. This growth can be attributed to the revenues recognition related to the Intelligence, Surveillance & Reconnaissance programs for Greece (EMB 145 AEW&C) and Mexico (EMB 145 MP and EMB 145 AEW&C). - --------------------------- ---------------------------- -------------------------------------- Net sales Three months ending Three months ending March 31, by sector December 2002 2002 2003 - --------------------------- ---------------------------- ------------------ ---------------- US$ % US$ % US$ % Commercial Aviation 644.3 80.7 490.1 87.9 389.3 79.6 Defense Aviation 40.0 5.0 33.5 6.0 55.2 11.3 Corporate Aviation 87.8 11.0 - - 15.3 3.1 Customer Services and other related businesses 26.2 3.3 33.7 6.0 29.0 5.9 - ------------------------------------------------------------------------------------------------------ Total 798.3 100.0 557.3 100.0 488.8 100.0 - ------------------------------------------------------------------------------------------------------ Defense reached In 1Q03, gross profit was US$ 194.1 million, 12.7% lower 11.3% of net than the US$ 222.3 million in 1Q02, mainly due to the sales. reduction in commercial aircraft deliveries. Gross margin in 1Q03, however was relatively stable at 39.7%, compared to 39.9% in 1Q02, despite the decrease in aircraft deliveries. SG&A Expenses ------------- In 1Q03, SG&A expenses were down to US$69.9 million from US$75.6 million during 1Q02. This reduction reflects the effect of the R$-devaluation on R$-denominated expenses partially, offset by a US$11.4 million provision for financial guarantees. Also, in 1Q03 customer training represented a revenue of US$5.1 million, due to a reversion of a previously made provision due to revision of contract training obligations, which in the 1Q02 represented an expense of US$7.2 million. 3 Other Operating Expense, net ---------------------------- Other Operating Expense, increased to US$5.3 million in 1Q03 from US$2.4 million in 1Q02. This is mainly attributable to a US$2.0 million increase in internal training and professional development expenses. Research and Development (R&D) ------------------------------ In 1Q03, R&D expense was reduced to US$ 35.5 million from US$41.2 million in 1Q02. This decrease was mainly related to the effect of the R$ devaluation on R$-denominated expenses. Employee Profit Sharing ----------------------- Employee Profit Sharing is subject to meeting operational goals established at the beginning of the year and is based on dividends distributions during the year to shareholders. Employee profit sharing was reduced to US$0.1 million in 1Q03 from US$6.5 million in 1Q02, as there was no distribution of dividends or interest on equity during the quarter at Embraer. Operating Income from Operations margins were ---------------------- stable, at 17.2%, despite the In 1Q03, income from operations was down to US$ 83.0 million reduction in net from US$96.6 million in 1Q02. Operating margins were stable sales. at 17.0% in 1Q03, in comparison to 17.3% in 1Q02, despite the reduction in net sales. Interest Income (Expense), net ------------------------------ In 1Q03, Interest Income (Expense), net decreased to an expense of US$27.0 million from an income of US$2.1 million in 1Q02, as a result of the recognition of US$23.6 million in losses as the Real appreciated and the Company, due to the effect of the hedging transactions and the increase in working capital needs, had net liabilities in R$ of US$ 256.3 million (see "Financial Management"). The marking to market of the hedging transactions were reclassified to this line item from Financial Transaction Gain (Loss), net. Financial Transaction Gain (Loss), net -------------------------------------- Embraer uses the dollar as the functional currency for US GAAP, and the variations in this item refer mainly to the remeasurement of monetary assets and liabilities denominated in other currencies that are adjusted to the dollar at the end of each period. Net Financial Transaction Gain (Loss) in 1Q03 represented an income of US$0.3 million, in comparison to an expense of US$1.3 million registered in 1Q02, as the Real appreciated during this quarter. Provision for Provision for Income Taxes income taxes -------------------------- was positively affected by the Our provision for income taxes decreased from US$29.4 Real appreciation. million in 1Q02 to US$13.2 million in 1Q03 mainly due to lower taxable income under the Brazilian Corporate Law financial statements and to the effect of the Real appreciation on our R$-denominated tax credits. Our effective tax rate in 1Q03 was 22.9% as compared to 30.2% in 1Q02, as further compared to a statutory tax rate in each year of 34%. The reduction in the effective tax rate was mainly related to the effect of the Real appreciation on our R$-denominated tax credits. Net Income ---------- In 1Q03, net income was US$ 43.9 million (equivalent to US$0.25347 per diluted ADS), or 9.0% of net sales, while net income for 1Q02 was US$ 67.7 million (equivalent to US$0.42839 per diluted ADS), or 12.1% of net sales. Financial Management 4 As of March 31, 2003, Embraer's cash and cash equivalents were US$ 493.8 million. On the same date, indebtedness totaled US$ 705.4 million. Therefore the Company had a net debt position (loans minus cash and cash equivalents) of US$ 211.6 million. Net Debt position in US$211.6 million as of March 31, 2003. ------------------------------ -------------------------- ------------------ --------------- Balance Sheet and Other Data as of December 31, as of March 31 Unaudited - US$ million 2002 2002 2003 ------------------------------ -------------------------- ------------------ --------------- US$ US$ US$ Cash and cash equivalents 656.8 633.1 493.8 Accounts receivable 610.6 706.5 826.4 Collateralized accounts receivable 288.9 318.9 285.9 Inventories 880.3 1,010.1 1,020.8 Total assets 3,632.5 3,509.7 3,755.4 Loans 552.6 594.3 705.4 Non recourse debt 228.9 318.9 285.9 Total liabilities 2,542.3 2,494.8 2,620.2 Net cash (debt) 104.2 38.8 (211.6) Shareholders' equity 1,090.2 1,014.9 1,135.2 ------------------------------ -------------------------- ------------------ --------------- Note: Net cash (debt) is Loans minus Cash and cash equivalents. Loans ----- During this quarter, the Company increased its loans with trade-related financing, which are mainly short-term, and as a result, on March 31, 2003, 47.9% of Embraer`s total loans was long-term financing, compared with 55.8% on December 31,2002. Embraer partially converted its Japanese yen and US dollar denominated debt to R$-related interbank interest rates (CDI). Therefore, out of the total US dollar and other currency loans of US$ 681.5 million, 65.3%, or US$ 445.0 million, is indexed in R$. When considering the effect of these hedges, out of the total company loans of US$ 705.4 million, 33.5% or US$ 236.5 million primarily refers to US$ borrowing with a weighted average cost of 5.2% per annum. The remaining US$ 468.9 million, equivalent to 66.5% of the total loans, is financed in Brazilian currency at a weighted average interest rate of 21.7% per annum, equivalent to 82.6% of the CDI. Cash ---- Of the total cash and cash equivalents balance of US$493.8 million, 43.1% is comprised of investments in R$ and the remaining 56.9% primarily in US dollars. The Embraer cash investment strategy is based on prospects of future investments, which are mostly denominated in R$. Accounts Receivable and Inventories ----------------------------------- Since September 2001, Embraer has supported the delivery of aircraft to certain customers that were concluding their financing agreements. This support has caused its accounts receivable in the recent quarters to be more volatile, compared to its historical trends. On March 31, 2003, there was a balance of US$ 826.4 million in accounts receivable, in comparison to US$ 610.6 million as of December 31, 2002, and US$ 706.5 million as of March 31, 2002, related to aircraft delivered whose financing arrangements are in the process of being finalized. As of March 31, 2003, approximately 71% of the short-term accounts receivable are related to financing already approved by the BNDES and 21% are financing structures in negotiation. The disbursement of the receivables is expected to be initiated during the second quarter. Short-term inventories increased US$ 140.5 million between December 31, 2002 and March 31, 2003. This increase was related to the EMBRAER 170 development, which currently has six prototypes carrying out the flight certification campaign, the initial production of the EMBRAER 175 first prototype, the initial serial production of the EMBRAER 170 and the increase in production of the Legacies which demand a longer period for interior finishing. 5 Capital Expenditures Productivity and Improvements in Industrial Efficiency & Others ------------------------------------------------------------ In 1Q03, US$15.7 million was invested in improving the Company's industrial efficiency, including improvements and modernization of industrial and engineering processes, machinery and equipment. Supplementary Information according to Corporate Law (Brazilian GAAP) ------------------------------------------------------------ Today Embraer also reported the 1Q03 earnings results in accordance with corporate law method of accounting (Brazilian GAAP), which according to Brazilian legislation must be used as a basis for calculating the distribution of dividends and interest on shareholders' equity, income tax and social contribution. Below is presented a selected consolidated results in accordance with corporate law and in Reais (R$). Net revenues in 1Q03 totaled R$ 1,695.1 million and gross profit reached R$ 668.2 million, with a gross margin of 39.4%. The operating profit for the period (including employee profit-sharing) totaled R$ 399.9 million, with an operating margin of 23.6%. The EBITDA for the period was R$ 435.3 million and the EBITDA margin 25.7%. Pre-tax income was R$ 318.6 million (18.8% of net revenues). Income tax and social contribution totaled R$ 119.3 million, representing an effective tax rate of 37.5%. Net income for the period totaled R$ 197.4 million (11.6% of net revenues). Order Book and Backlog Civil Aviation -------------- o Commercial Aviation Order Book In February ExpressJet Airlines requested a revision of the deliveries originally scheduled to take place during the years 2003-2005. The reprogramming of deliveries to ExpressJet of ERJ 145 XR aircraft redistributes the same number of aircraft originally agreed upon, thus establishing a new schedule for the years 2003, 2004, 2005 and 2006. According to the new schedule, Embraer will deliver to ExpressJet 36 aircraft instead of 48 in 2003 and 21 aircraft instead of 36 in 2004. In 2005, the revision will increase the amount of deliveries to 21 instead of two, with the remaining eight units to be delivered in 2006 Also during the 1Q03, Embraer announced that SWISS reduced its firm orders for EMBRAER 170 and EMBRAER 195 aircraft to 30 aircraft, 15 of each model, from an original total of 60. The number of options for both models was also reduced to 20, from 100 aircraft. The EMBRAER 170 shall enter service at SWISS in August 2004, with four aircraft delivered, followed by eight aircraft in 2005. Deliveries of the EMBRAER 195 will start in 2006. Embraer forecasts deliveries of 132 aircraft for 2003 and 136 aircraft for 2004. The above-mentioned forecast already includes the delivery rescheduling for ExpressJet and the contractual renegotiation with SWISS. Embraer's total backlog for the commercial aviation segment on March 31, 2003 was US$ 15.5 billion (US$ 6.0 billion in firm orders and US$ 9.5 billion in options). This amount corresponds to 802 aircraft, including 322 firm orders and 480 options. Commercial Aviation Order Book stands at US15.5 billion. As of March 31, 2003, the Commercial Aviation order book was as follows: - -------------------------------------------------------------------------------- Family Total Deliveries Firm Options Orders Orders - -------------------------------------------------------------------------------- Commercial Aviation 1,447 645 322 480 ERJ 145 1,231 645 234 352 6 EMBRAER 170/190 216 - 88 128 - -------------------------------------------------------------------------------- o Corporate Aviation Order Book As of March 31, 2003, the total backlog for the Corporate Aviation division amounted to US$ 2.4 billion, which corresponds to 150 aircraft, including 58 firm orders and 92 options, with the following breakdown: - ------------------------------------------------------------------------------- Family Total Deliveries Firm Options Orders Orders - ------------------------------------------------------------------------------- Corporate Aviation 166 16 58 92 Legacy Executive 76 7 33 36 Legacy Shuttle 75 2 23 50 EMB 135 15 7 2 6 - ------------------------------------------------------------------------------- Two EMB135 for the Corporate Market were ordered during 1Q02. Defense Market -------------- The order book for the Defense segment at the end of the first quarter amounted to firm orders of US$ 1.0 billion. Taking options into account, this amount totalled US$ 1.3 billion. Backlog ------- The Embraer firm order backlog at the end of the 1Q03 was US$ 7.9 billion, which together with options, reached US$ 19.2 billion. The following chart shows the order backlog as of at the end of the last five quarters. 1Q02 2Q02 3Q02 4Q02 1Q03 ---------------------------------------------------------------- Firm order backlog 10.3 10.1 9.6 9.0 7.9 Options 12.8 13.7 13.0 13.2 11.3 Dividends and Interest on Equity In 1Q03, no Dividends or Interest on Equity were distributed. Recent Developments LOT deal -------- 7 On April 18, 2003 Embraer and LOT Polish Airlines have signed the final agreement for the acquisition of ten EMBRAER 170s. The contract also includes options for additional eleven aircraft, with a possible conversion into the EMBRAER 190 or EMBRAER 195 types. First delivery is scheduled to take place in early 2004. The net impact on the firm order backlog will amount to six aircraft, since four will be leased from GE Capital Aviation Services ("GECAS"). These four aircraft already appear in the current order book under the agreement with GECAS. The order involves the negotiation of trade-in, as of 2006, of three ERJ 145 currently operated by LOT and, in case the options are exercised, there will be trade-in of up to three ERJ 145, depending on the number of options exercised. At the same occasion Embraer and LOT announced that they have signed a two year agreement, appointing the carrier an authorized service center for both base and line maintenance for the ERJ 145 aircraft type, effective immediately. This agreement is part of the manufacturer's intention to extend its already strong MRO network within Europe. LOT is now entitled to provide full base and line maintenance, through its service center at Warsaw International Airport in Poland, to support both its own Embraer fleet and also to become an alternative base for other ERJ operators. US Airways Order ---------------- Embraer announced on May 12, 2003 an order from US Airways for 85 EMBRAER 170 airliners with deliveries starting later this year. The airline also took options on 50 additional EMBRAER 170s and 140 ERJ 145s. The total value of the firm contract at list price is US $ 2.1 billion, with a potential value of more than US $ 6.2 billion, if options are converted. US Airways is the first carrier in North America to order the new EMBRAER 170, the first member of a new family of Embraer aircraft designed to tap the gap between 50-seat regional jets and larger jets with more than 120 seats. Under the agreement, US Airways will take 55 aircraft from Embraer and 30 from General Electric Capital Aviation Services (GECAS), which had ordered 50 EMBRAER 170s in 2000. US Airways will take its first EMBRAER 170 in November 2003. Conference Call Information --------------------------- Embraer cordially invites you to participate in a conference call to review its First Quarter 2003 Results in US GAAP, to be held on Wednesday, May 14, 2003 at 10:00 a.m. Eastern Standard Time. Please dial: US Participants: 800 473 6123 International Participants: (1-973) 582 2706 Security Access Code: Embraer The conference call will also be broadcasted live over the internet on www.embraer.com and www.prnewswire.com.br For additional information please contact: Embraer - Empresa Brasileira de Aeronautica S/A Anna Cecilia Bettencourt (55 12) 3927 1216 acecilia@embraer.com.br ----------------------- Gustavo Poppe (55 12) 3927 1106 8 gustavo.poppe@embraer.com.br Milene Petrelluzzi (12) 3927 3054 milene.petrelluzzi@embraer.com.br ------------------------------------------------------------ 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. ------------------------------------------------------------ 9 EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A. CONSOLIDATED BALANCE SHEETS (in thousands of U.S. dollars) ASSETS As of December 31 as of March 31 ------------------------------- ------------------------------------ 2001 2002 2002 2003 ----------- ------------ ------------- --------------- Audited Unaudited Unaudited Unaudited CURRENT ASSETS Cash and cash equivalents 749,302 656,822 633,127 493,769 Trade accounts receivable 596,801 610,583 706,498 826,355 Collateralized accounts receivable 16,315 20,233 18,319 21,677 Inventories 1,015,081 864,800 995,441 1,005,264 Deferred income tax assets 98,756 90,014 95,914 94,198 Other current assets 89,093 222,032 58,937 174,775 ----------- ------------ ----------- ------------- Total Current Assets 2,565,348 2,464,484 2,508,236 2,616,038 ----------- ------------ ----------- ------------- NONCURRENT ASSETS: Held to maturity investments 35,651 23,263 31,655 23,853 Collateralized accounts receivable 306,033 268,683 300,547 264,257 Inventories 22,714 15,518 14,689 15,495 Property, plant and equipment, net 366,481 436,716 397,745 437,628 Investments 4,362 4,745 4,448 4,820 Deferred income taxes 85,139 72,827 89,057 62,985 Other noncurrent assets 175,059 346,226 163,343 330,294 ----------- ------------ ----------- ------------- Total noncurrent assets 995,439 1,167,978 1,001,484 1,139,332 ----------- ------------ ----------- ------------- TOTAL ASSETS 3,560,787 3,632,462 3,509,720 3,755,370 =========== ============ =========== ============= EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A. CONSOLIDATED BALANCE SHEETS (in thousands of U.S. dollars) LIABILITIES AND SHAREHOLDERS' EQUITY As of December 31 as of March 31 ------------------------------- ---------------------------------- 2001 2002 2002 2003 ----------- ------------ ------------- --------------- Audited Unaudited Unaudited Unaudited CURRENT LIABILITIES Loans 526,550 244,526 365,261 367,614 Accounts payable to suppliers 265,593 323,115 272,145 322,987 Customer advances 385,265 409,258 373,567 392,082 Other accounts payable and accrued liabilities 506,060 611,151 575,600 551,110 Contingency 4,395 5,244 4,518 8,606 ----------- ------------ ----------- ------------- Total Current Liabilities 1,687,863 1,593,294 1,591,091 1,642,399 ----------- ------------ ----------- ------------- LONG-TERM LIABILITIES Loans 245,186 308,111 228,983 337,842 Customer advances 106,594 95,625 97,994 92,804 Contribution from suppliers 143,615 235,445 227,445 236,152 Other accounts payable and accrued liabilities 338,236 292,488 330,478 291,445 Contingency 10,767 9,093 10,518 9,968 ----------- ------------ ----------- ------------- Total long-term liabilities 844,398 940,762 895,418 968,211 ----------- ------------ ----------- ------------- MINORITY INTEREST 8,170 8,226 8,344 9,556 ----------- ------------ ----------- ------------- SHAREHOLDERS' EQUITY: 1,020,356 1,090,108 1,014,867 1,135,204 ----------- ------------ ----------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 3,560,787 3,632,462 3,509,720 3,755,370 =========== ============ =========== ============= 10 thiss EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A. CONSOLIDATED STATEMENTS OF INCOME In thousands of U.S. dollars except per share data 1st Quarter ------------------------ 2002 2003 GROSS SALES: Domestic market 15,421 21,180 Foreign market 555,206 470,952 Sales deductions (13,301) (3,338) --------- --------- NET SALES 557,326 488,794 --------- --------- Cost of sales and services (335,045) (294,701) --------- --------- Gross Profit 222,281 194,093 --------- --------- Operating expenses Selling expenses (49,004) (45,162) Research and development (41,229) (35,502) General and administrative (26,635) (24,756) Employee profit sharing (6,489) (137) Other operating expense, net (2,383) (5,595) Equity in income from affiliates 87 75 --------- --------- Income From Operations 96,628 83,016 --------- --------- Interest income, net 2,036 (26,989) Financial transaction gain (loss), net (1,310) 287 Other non-operating income, net 106 1,430 --------- --------- Income Before Income Taxes 97,460 57,744 --------- --------- Provision for income taxes (29,388) (13,196) --------- --------- Income Before Minority Interest 68,072 44,548 --------- --------- Minority interest (374) (596) --------- --------- Net Income 67,698 43,952 ========= ========= EARNINGS PER SHARE Basic Common 0.10 0.06 Preferred 0.11 0.06 Diluted Common 0.10 0.06 Preferred 0.11 0.06 WEIGHTED AVERAGE SHARES (thousands of shares) Basic Common 242,544 242,544 Preferred 410,198 470,430 Diluted Common 242,544 242,544 Preferred 411,627 473,123 Earning Per Share - ADS Basic (US$) 0.4294 0.2545 Earnings Per Share - ADS DILUTED (US$) 0.4284 0.2535 11 EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A. CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended March 31, March 31, 2001 2002 --------------------------- Unaudited Unaudited Operating Activities Net Income 67,698 43,952 Adjustments to reconcile net income to net cash provided by(used in) operating activities: Depreciation and amortization 11,872 15,333 Provision for (reversal of) doubtful accounts (57) 516 Provision for (reversal of) inventory obsolescence (9,294) 2,399 Deffered income and social contribution tax (1,076) 5,658 Cumulative translations adjustments (4,793) 1,072 Loss (Gains) on the disposition of assets 179 (1,305) Equity in income from affiliates (86) (75) Accrued interest recorded in loans 8,961 7,183 Minority interests (201) 596 ------------ ----------- 73,203 75,329 Changes in assets and liabilities: 56,056 (322,328) ------------ ----------- Net cash provided by (used in) operating activities 129,259 (246,999) Investing Activities Purchase of property, plant and equipment (43,316) (15,607) Proceeds from the sale of property, plant and equipment 1 1,559 Customer and commercial financing - net additions 8,023 (11,014) Guaranteed deposits and compulsory loans 7,505 (570) ------------ ----------- Net cash used in investing activities (27,787) (25,632) Financing Activities Repayment of loans (321,144) (136,694) Proceeds from borrowings 132,272 284,307 Dividends paid (24,469) (35,750) Payments of refinanced taxes (1,517) (403) Payments on capital lease obligations (2,789) (1,882) ------------ ----------- Net cash provided (used) by financing activities (217,647) 109,578 ------------ ----------- Net decrease in cash and equivalents (116,175) (163,053) Cash and cash equivalents at beginning of year 749,302 656,822 ------------ ----------- Cash and cash equivalents at end of year 633,127 493,769 ============ =========== 12 EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A. BACKLOG AS OF MARCH 31, 2003 - - ERJ 145: - --------------------------------------------------------------------------------------------------------------- Client Country Firm Options Deliveries Firm Order Orders Backlog - --------------------------------------------------------------------------------------------------------------- Air Caraibes Guadaloupe 2 0 2 0 Air Moldova Moldova 0 2 0 0 Alitalia Italy 14 7 11 3 American Eagle USA 56 17 56 0 Axon Airlines Greece 3 0 3 0 British Midland United Kingdom 11 5 9 2 British Regional United Kingdom 23 3 23 0 Brymon United Kingdom 7 14 7 0 Cirrus Germany 1 0 1 0 Continental Express USA 245 100 171 74 ERA Spain 2 0 2 0 GECAS USA 2 0 2 0 KLM Exel Holland 2 2 2 0 LOT Poland 16 0 14 2 Luxair Luxembourg 9 2 9 0 Mesa USA 36 45 32 4 Portugalia Portugal 8 0 8 0 Proteus France 18 7 13 5 Regional Airlines France 17 0 14 3 Rheintalflug Austria 4 4 3 1 Rio-Sul Brazil 16 0 16 0 Sichuan Airlines China 5 0 5 0 Skyways AB Sweden 4 11 4 0 Swiss Switzerland 25 15 25 0 Trans States USA 12 0 12 0 Wexford USA 45 67 45 0 Total 583 301 489 94 - --------------------------------------------------------------------------------------------------------------- - - ERJ 135: - --------------------------------------------------------------------------------------------------------------- Client Country Firm Options Deliveries Firm Order Orders Backlog - --------------------------------------------------------------------------------------------------------------- American Eagle USA 40 0 40 0 British Midland United Kingdom 4 0 2 2 City Air Sweden 2 1 2 0 Continental Express USA 30 0 30 0 Pan Europeenne France 1 0 1 0 Proteus France 6 0 6 0 Regional Airlines France 3 0 3 0 Regional Air Lines Morocco 1 5 0 1 SA Airlink South Africa 20 0 5 15 Wexford USA 15 0 5 10 TOTAL 122 6 94 28 - --------------------------------------------------------------------------------------------------------------- 13 - - ERJ 140: - --------------------------------------------------------------------------------------------------------------- Client Country Firm Options Deliveries Firm Order Orders Backlog - --------------------------------------------------------------------------------------------------------------- American Eagle USA 139 25 47 92 Midwest Express USA 20 20 0 20 Wexford USA 15 0 15 0 TOTAL 174 45 62 112 - --------------------------------------------------------------------------------------------------------------- - - EMBRAER 170: - --------------------------------------------------------------------------------------------------------------- Client Country Firm Options Deliveries Firm Order Orders Backlog - --------------------------------------------------------------------------------------------------------------- Air Caraibes Guadaloupe 2 2 0 2 Alitalia Italy 6 6 0 6 GECAS USA 50 78 0 50 Swiss Switzerland 15 10 0 15 Total 73 96 0 73 - --------------------------------------------------------------------------------------------------------------- - - EMBRAER 195: - --------------------------------------------------------------------------------------------------------------- Client Country Firm Options Deliveries Firm Order Orders Backlog - --------------------------------------------------------------------------------------------------------------- GECAS USA 0 22 0 0 Swiss Switzerland 15 10 0 15 Total 15 32 0 15 - --------------------------------------------------------------------------------------------------------------- Legacy Executive: - --------------------------------------------------------------------------------------------------------------- Client Country Firm Options Deliveries Firm Order Orders Backlog - --------------------------------------------------------------------------------------------------------------- SWIFT USA 24 25 2 22 Undisclosed - 16 11 5 11 TOTAL 40 36 7 33 - --------------------------------------------------------------------------------------------------------------- Legacy Shuttle and EMB 135 - Corporate Market: - --------------------------------------------------------------------------------------------------------------- Client Country Firm Options Deliveries Firm Order Orders Backlog - --------------------------------------------------------------------------------------------------------------- Conoco USA 1 0 1 0 Indigo USA 25 50 2 23 Undisclosed - 8 6 6 2 TOTAL 34 56 9 25 - --------------------------------------------------------------------------------------------------------------- 14