Exhibit 1
[EMBRAER LOGO GRAPHIC OMITTED]
EMBRAER REPORTS SECOND 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$) in accordance with US GAAP. The
financial data presented in this document for the
quarters ended June 30, 2003, March 31, 2003 and June 30, 2002
are derived from our unaudited financial statements. In order
to better understand the Company's operating performance, we are
also presenting at the end of this release certain
information in accordance with the Brazilian
Corporate Law (Brazilian GAAP).
Sao Jose dos Campos, August 13, 2003 - Embraer (BOVESPA: EMBR3, EMBR4) (NYSE:
ERJ), one of the leading commercial aircraft manufacturers in the world, reports
in second quarter 2003 (2Q03) net sales of US$ 567.0 million and net income of
US$ 4.9 million, equivalent to diluted earnings per ADS of US$ 0.0281. The order
backlog as of June 30, 2003 totaled US$ 27.1 billion, including US$ 10.3 billion
in firm orders and US$ 16.8 billion in options.
1
Beginning in third quarter 2002 the real experienced vigorous exchange rate
volatility against the U.S. dollar, which only began to decrease in intensity in
first quarter 2003. In October 2002, the U.S. dollar/real exchange rate peaked
at R$ 3.9552 to US$ 1 and equaled to R$ 3.5333 to US$ 1 at the end of 2002,
representing a depreciation of the real for the year of 52.3%. The real/U.S.
dollar exchange rate dropped to R$ 2.8720 to US$ 1 as of June 30, 2003, an
appreciation of 14.3% during 2Q03 and 18.7% during the first six months of 2003.
The appreciation of the real resulted in an increase mainly in cost of sales and
services and research and development expense, despite a decrease in net sales,
which caused a decline in gross margin.
In addition, we have entered into a number of swaps intended to balance our
non-U.S. dollar-denominated assets against our non-U.S. dollar-denominated
liabilities plus shareholders' equity in relation to our forecasts of future
cash flows. These swaps primarily effectively convert our fixed and floating
rate U.S. dollar-denominated debt and fixed and floating rate yen-denominated
debt into CDI-based reais-denominated obligations. Because these swaps are not
accounted for as hedging transactions under U.S. GAAP, these swaps are recorded
at fair value on our balance sheet with unrealized gains and losses reflected as
a component of interest expense. Due mostly to the 14.3% appreciation of the
real, we recognized an unrealized loss on these swaps of US$ 85.0 million during
the 2Q03.
In addition, during the first half of 2003, our customers experienced additional
delays in receiving financing from BNDES. As a result, Embraer had higher U.S.
dollar denominated trade accounts receivable and lower real-denominated cash and
cash equivalents than it had expected, causing a net financial transaction loss
of US$ 9.4 million.
The combined effects of the unrealized loss and the net financial transaction
loss resulted in a substantial decrease in net income. Net income decreased from
US$ 36.9 million to US$ 4.9 million.
Second Quarter Highlights
o A total of 28 jets were delivered during the quarter, two less than the 30
jets delivered in second quarter 2002 (2Q02).
o Net Sales totaled US$ 567.0 million, 3.8% less than reported for 2Q02.
o Income from operations totaled US$ 69.7 million, as compared to the US$
119.5 million reached in 2Q02.
o Net income was US$ 4.9 million, compared to US$ 36.9 million for the same
period in 2002.
o Three important aircraft sales agreements were entered into regarding the
EMBRAER 170/190 jet family with JetBlue, US Airways and LOT, further
evidencing the support for this aircraft family in the U.S. and European
commercial airline markets.
o During the first half of 2003 Embraer had a net increase of 126 aircraft in
orders for the EMBRAER 170/190 jet family.
o On June 2, 2003 Embraer announced its intention of establishing an
industrial facility in Jacksonville, Florida, USA, with a view to supplying
aircraft for the US defense and national security markets.
o EMBRAER 175's first flight took place successfully in June.
o On June 15, 2003, Embraer revised the total number of jets to be delivered
in 2003, from 132 to 110 units, and increased its aircraft delivery
estimates for 2004, from 136 to 160 units.
o Embraer cancelled the Indigo contract for 23 Legacy shuttles on July 15,
2003.
o On April 24, 2003, Kawasaki Aeronautica do Brasil Industria Ltda. launched
its new industrial plant located within the Embraer facility at Gaviao
Peixoto.
2
Income Statement Highlights
A comparative table of the main items of Embraer's consolidated income
statements presented below, regarding 1Q03, 2Q02, and 2Q03.
Income Statement & Other Data
Unaudited 1Q03 2Q03 2Q02
In US$ million, except % and earnings per ADS
Net Sales 488.8 567.0 589.7
Gross profit 194.1 206.7 231.4
Gross Margin (%) 39.7 36.5 39.2
Selling, general administrative and other expenses (75.5) (77.6) (72.2)
Research & development (35.5) (51.4) (35.4)
Employee profit sharing (0.1) (8.0) (4.3)
Income from operations 83.0 69.7 119.5
Operating margin (%) 17.0 12.3 20.3
Interest income (expense), net (27.0) (100.1) 18.1
Financial transaction gain (loss), net 0.3 (9.4) (58.8)
Other non operating income (expense), net 1.4 0.2 (0.7)
Income (loss) before income taxes 57.7 (39.6) 78.1
Provision for income taxes (13.2) 44.6 (41.0)
Minority interest (0.6) (0.1) (0.2)
Net income 43.9 4.9 36.9
Net Margin (%) 9.0 0.9 6.2
Depreciation & amortization 15.4 16.6 14.6
Earnings per ADS - basic 0.2545 0.0282 0.2142
Earnings per ADS - diluted 0.2535 0.0281 0.2137
Net Sales and Cost of Sales & Services
Embraer's net sales for 2Q03 totaled US$ 567.0 million, 3.8% below net sales for
2Q02 of US$ 589.7 million. This lower figure is a result of fewer aircraft
delivered to the commercial airline market, partially offset by one additional
aircraft delivered to the corporate market, and by increased revenues derived
from the defense segment. The decline is also in part due to the lower average
sale price of Embraer's product mix.
A total of 28 jets, including 25 commercial jet aircraft and three Legacy
corporate jets, were delivered in 2Q03.
Deliveries
By Market 1Q03 2Q03 2Q02
Commercial 22 25 28
ERJ 135 3 6 -
ERJ 145 15 13 18
ERJ 140 4 6 10
Corporate 1 3 2
Legacy 1 3 2
Total 23 28 30
The defense segment net sales increased from US$ 15.9 million in 2Q02 to US$
52.5 million in 2Q03, due to the recognition of revenues related to the Mexican
government's program for the EMB 145 MP, and the Brazilian government's program
for the EMB 145 AEW&C, ALX, and F-5.
3
Net Sale by Segment
In US$ millions 1Q03 2Q03 2Q02
US$ % US$ % US$ %
Commercial market 389.3 79.7 432.4 76.2 491.9 83.4
Defense market 55.2 11.3 52.5 9.3 15.9 2.7
Corporate market 15.3 3.1 49.8 8.8 38.0 6.4
Customer services & other related business 29.0 5.9 32.3 5.7 43.9 7.5
Total 488.8 100.0 567.0 100.0 589.7 100.0
A comparison of net sales for the quarter with the US$ 488.8 million earned in
the previous period (1Q03) shows a gain of 16.0%, arising from an increase in
deliveries to the commercial and corporate markets offset by the lower average
sale price of Embraer's product mix. This increase was partially offset by a
4.9% decrease in defense net sales.
Cost of sales and services for 2Q03 totaled US$ 360.3 million, as compared to
US$ 358.3 million and US$ 294.7 million in 2Q02 and 1Q03, respectively. As
approximately 10% of the cost of sales and services are real denominated, the
currency's 14.3% exchange rate gain resulted in a corresponding increase in cost
of sales and services for 2Q03. Consequently gross margin for 2Q03 was 36.5%, as
compared to 39.2% and 39.7% for 2Q02 and 1Q03, respectively.
Operating Expenses & Income from Operations
During 2Q03, operating expenses totaled US$ 137.0 million and were 22.4% higher
than 2Q02 operating expenses of US$ 111.9 million. This increase in operating
expenses reflects the increases in selling expenses, research and development,
and employee profit sharing, which was partially offset by a decrease in general
and administrative expenses.
Selling Expenses
Selling expenses for 2Q03 of US$ 52.3 were 33.1% higher than the US$ 39.3
million recorded in 2Q02. This increase results basically from a non-cash charge
of US$ 10.8 million relating to financial guarantees on aircraft delivered
during the period. Embraer began incurring these non-cash charges in September
2002, based on changes in future aircraft market value estimates and the
commercial airlines' credit ratings.
Research & Development
During 2Q03, research and development expense totaled US$ 51.4 million, an
increase of 45.4% in comparison to an expense of US$ 35.4 in 2Q02. This increase
stems partially from the development of the new EMBRAER 170/190 jet family, as
we approach the latter development stages of the EMBRAER 170. Another
determining factor in the increase in research and development expenses was the
14.3% exchange rate gain of the real during 2Q03, as 87% of these expenses are
recorded in reais .
General & Administrative
General and administrative expenses for 2Q03 totaled US$ 25.8 million, a 16.0%
decrease as compared to the same period for the previous year. This decrease
results basically from a decrease in personnel expenses and expenses for
outsourced providers, reflecting a continuation of Embraer's cost control
strategy begun at the end 2001.
Employee Profit Sharing
Employee profit sharing is tied to the action plan and the meeting of specific
goals, as well as dividend payments to Embraer's shareholders and recorded
profit in accordance with Brazilian GAAP. The US$ 8.0 million provision recorded
for 2Q03 was based on the payment of interest on shareholders' equity
distributed in 2Q03 related to the first six months of the year, and on profits
recorded for the same period under Brazilian GAAP. The increase over 2Q02
reflects the fact that in the first half of 2002, distributions on shareholders
equity, and consequently accruals for employee profit sharing, occurred in the
first and second quarters for the first half of 2002.
4
Income from Operations
Embraer's income from operations for 2Q03 totaled US$ 69.7 million, below the
US$ 119.5 million recorded in 2Q02. In addition, operating margin for 2Q03 was
12.3%, compared to the 20.3% recorded in 2Q02. This decline in operating margin
is basically due to the decrease in gross margin, as well as the increasing
research and development expense and selling expenses.
Interest Income (expenses)
Despite the increase in average cash balances in 2Q03, Embraer's interest
expenses rose to US$ 100.1 million, against US$ 18.1 in interest income for
2Q02.
Due to the 14.3% exchange rate gain of the real during the quarter, Embraer
recorded an unrealized loss in the amount of US$ 85.0 million relating to its
swaps, as discussed above. In addition, we recorded additional interest expense
of US$15.1 million due to higher outstanding short-term borrowings.
Financial Transaction Gain (loss), net
Variations in this item refer mainly to the remeasurement of monetary assets and
liabilities denominated in other currencies and that are adjusted to the U.S.
dollar at the end of each period. Financial transaction loss, net decreased from
US$ 58.8 million in 2Q02 to US$ 9.4 million in 2Q03. In 2Q03, this loss results
from the effect of the 14.3% appreciation of the real on our net
real-denominated liabilities, which were higher than expected due to the delay
in payments by BNDES.
Provision for Income Taxes
The provision for income taxes decreased from an expense of US$41.0 million in
2Q02 to a tax benefit of US$44.6 million in 2Q03. The tax benefit in 2Q03 is
mainly due to a loss for Brazilian tax purposes combined with the effect of the
appreciation of the real on Embraer's real-denominated tax credits.
Net Income
Net income in 2Q03 was US$ 4.9 million as compared to US$ 36.9 million in 2Q02.
The decrease in net income reflects the decrease in income from operations and
the impact of the exchange rate gain of the real on the value of the swaps, as
well as the increase in net real-denominated liabilities.
5
Balance Sheet Highlights
As of June 30, 2003, Embraer's cash and cash equivalents were US$ 868.3 million.
On the same date, short and long term loans (excluding non recourse debt)
totaled US$ 825.4 million. Therefore the Company had a net debt position (total
loans minus cash and cash equivalents) of US$ 42.9 million.
Balance sheet data 2Q03 1Q03 4Q02
In millions
Cash and cash equivalent 868.3 493.8 656.8
Trade accounts receivable 789.7 913.2 735.9
Inventories 1,028.8 1,020.8 880.3
Total assets 5,115.8 4,396.8 4,285.5
Short & long term loans 825.4 705.4 552.6
Total liabilities 3,999.7 3,261.6 3,195.3
Net cash (debt) 42.9 (211.6) 104.2
Shareholders' equity 1,116.1 1,135.2 1,090.2
Short Term and Long Term Loans
Embraer increased its total short term debt from US$ 367.6 million at March 31,
2003 to US$ 506.0 million at June 30, 2003. This increase was incurred to
finance working capital during the quarter, primarily as a result of delays in
payments on the purchase price of aircraft due to a delay in our customers'
receiving financing from BNDES. As of June 30, 2003, 38.7% of Embraer`s total
loans was related to long-term financing, compared to 47.9% on March 31, 2003.
In order to better match its currency and interest risks on monetary assets to
its monetary liabilities, Embraer has entered into a number of swaps, primarily
converting its fixed and floating rate U.S. dollar-denominated debt and fixed
and floating rate yen-denominated debt into CDI-based real-denominated
obligations. Therefore, taking into account these swaps, total short term and
long term loans of US$ 482.7 million are effectively denominated in reais and
indexed to the CDI, at a weighted average interest rate of 19.5% per annum
representing 74.8% of the CDI.
The remaining US$ 343.3 million is denominated primarily in U.S. dollars with a
weighted average interest rate of 5.5% per annum.
Cash and Cash Equivalents
Of the total balance in cash and cash equivalents of US$ 868.3 million, US$
368.2 million, or 42.4%, comprises investments in reais and the remaining 57.6%
is primarily in U.S. dollars. Embraer's investment strategy is to maintain cash
and cash equivalents sufficient to minimize the currency and interest rate risks
of its assets and liabilities plus shareholders'equity.
Trade Accounts Receivable
Embraer ended 2Q03 with total trade accounts receivable of US$ 789.7 million, a
decrease of US$ 123.5 million from March 31, 2003. The decrease in trade
accounts receivable results from a decrease in the number of aircraft delivered
during the period for which financing was pending, offset in part by delayed
payments caused by delays in BNDES financing. Although BNDES provided US$ 397.3
million in financing during the quarter related to outstanding receivables, an
additional US$ 211.4 million of trade accounts receivable represent payments
pending receipt of BNDES financing at June 30, 2003. The remaining US$ 451.4
million of trade accounts receivable represent customers that are in the process
of negotiating and structuring their financing arrangements. The balance refers
to receivables for customer service and support and amounts payable by defense
customers.
6
Inventories
Inventories remained practically stable at US$ 1,028.8 million at the end of the
2Q03, compared to US$ 1,020.8 million as of March 31, 2003. Inventories are at
high levels mainly due to three factors:
1- the development of the new EMBRAER 170/190 jet family maintains six
prototypes as part of the certification process. Moreover, production of the
EMBRAER 170 for delivery began in 2Q03;
2- the Legacy corporate jets require more production time, primarily for
assembly of the interior; and
3- the development of several defense programs, which require higher inventory
levels due to a longer production time.
Capital Expenditures
Improvements and Modernization
Investments in the Company's improvements and modernization of industrial and
engineering processes, machinery and equipment, totaled US$ 15.8 million during
2Q03, which when added to the US$ 15.6 million incurred in 1Q03 result in total
capital expenditures of US$ 31.4 million for the first half of 2003.
Supplementary Information according to Corporate Law (Brazilian GAAP)
Today Embraer also reported its 2Q03 earnings in accordance with the corporate
law accounting method (Brazilian GAAP), which according to Brazilian legislation
must be used as a basis for calculating distribution of dividends and interest
on shareholders' equity, income tax and social contribution. Below follows a
selection of consolidated income data in accordance with Brazilian GAAP and in
reais (R$).
Net revenues in 2Q03 totaled R$ 1,650.3 million and gross profit was R$ 521.0
million, with a gross margin of 31.6%. Income from operations for the period
(including employee profit sharing) totaled R$ 282.4 million, with an operating
margin of 17.1%. Income before taxes was R$ 27.3 million (1.7% of net revenues).
Income tax and social contribution totaled R$ 4.5 million, representing an
effective tax rate of 16.5%. Net income for the period totaled R$ 21.4 million
(1.3% of net revenues).
Commercial, Corporate, and Defense Aircraft Markets
Commercial Aircraft
Three new sales contracts related to the EMBRAER 170/190 jet family were
announced in the second quarter of 2003 - with LOT Polish Airlines, US Airways,
and JetBlue Airways. These new orders show that the combination of high
performance, low operating costs, and passenger comfort of the EMBRAER 170/190
jet family meets and exceeds the challenging requirements of the airline
industry.
On April 25, 2003, Embraer and LOT Polish Airlines signed the final agreement
for the purchase of ten EMBRAER 170 aircraft. The net impact on Embraer's firm
orders backlog was six aircraft, since four of these will be delivered to LOT by
means of operating leasing arrangements with GE Capital Aviation Services
("GECAS"). These four units were already included as firm orders to Embraer
under an existing agreement with GECAS. The agreement with LOT also contemplates
options for 11 EMBRAER 170s, which can be converted to EMBRAER 190/195s.
On May 12, 2003, Embraer announced an order by US Airways for 85 EMBRAER 170
aircraft, with first delivery estimated for late this year. According to the
agreement, US Airways will receive 55 aircraft from Embraer and 30 under a
pre-existing contract with GECAS. The US Airways contract also includes options
for 50 EMBRAER 170 aircraft and 140 ERJ 145 aircraft.
In June 2003, JetBlue Airways ordered 100 EMBRAER 190 jets, deliveries of which
are scheduled to begin in 2005. This airline also purchased options for an 100
aircraft of the same model. Fifteen of these are included under a pre-existing
contract with GECAS.
7
Hence, during the first half of 2003, Embraer showed a net increase of 126
aircraft in firm orders for the EMBRAER 170/190 jet family. This takes into
account the cancellation of 30 units by SWISS in the first quarter of 2003, and
a firm order for 10 EMBRAER 190s by another customer. As of June 30, 2003, the
Commercial Aircraft Segment had the following backlog position:
Firm orders
Product Firm orders Options Deliveries Backlog
ERJ 135 121 6 100 21
ERJ 140 174 45 68 106
ERJ 145 581 434 502 79
EMBRAER 170 119 157 - 119
EMBRAER 190 110 120 - 110
EMBRAER 195 15 32 - 15
Total 1,120 794 670 450
Corporate Aircraft
Owing to difficulties experienced by Indigo in 2Q03 and because of contractual
issues, Embraer had excluded firm orders under the contract with Indigo
beginning in June 2003. The cancellation of Indigo's contract for 23 firm orders
and 50 options for Legacy aircraft occurred on July 15, 2003.
Defense Market
Embraer has actively sought expansion opportunities in the US defense and
national security markets in view of the demand for advanced and cost effective
Intelligence, Surveillance and Reconnaissance (ISR) systems. Thus, on June 2,
2003 Embraer announced its intention to inaugurate new industrial facilities in
Jacksonville, Florida, intended for the production of aircraft destined to the
US defense and national security markets. These new facilities, located at Cecil
Commerce Center, fully qualify the company as a supplier for the US government's
defense and national security programs.
As a part of this expansion, Embraer announced on July 7, 2003 that it had been
invited by Lockheed Martin to form part of a group to participate in a bid for
the development of the next generation of the US Army's Intelligence,
Surveillance, and Reconnaissance systems, known as Aerial Common Sensor (ACS).
Embraer would provide Lockheed Martin's projected ACS system with a platform
based on the already worldwide operational ERJ 145/EMB 145.
Backlog
Embraer's firm orders backlog, including orders by the Commercial, Corporate,
and Defense Markets, totaled US$ 10.3 billion at the end of the second quarter
of 2003 and together with options reached US$ 27.1 billion. We demonstrate below
the progression of backlog at the close of each quarter:
Firm order backlog in US$ billion
2Q02 3Q02 4Q02 1Q03 2Q03
------------------------------------------------------------------
Firm order backlog 10.1 9.6 9.0 7.9 10.3
Options 13.7 13.0 13.2 11.3 16.8
------------------------------------------------------------------
Total 23.8 22.6 22.2 19.2 27.1
Aircraft Delivery Forecasts
8
As announced on June 15, 2003, as a result of a reassessment of the EMBRAER 170
certification campaign, the company estimated November 2003 as the new date for
certification of the EMBRAER 170 aircraft. This decision stemmed from delays in
finalizing systems tests and in the presentation of the relevant documentation,
as well as the inclusion in the basic certification program of characteristics
originally intended to be post-certification items. The EMBRAER 175 aircraft had
a successful maiden flight on June 14 and its certification is expected for the
third quarter of 2004. The EMBRAER 190 certification program was advanced to the
third quarter of 2005, to be followed by the EMBRAER 195 certification in the
third quarter of 2006.
In view of the new EMBRAER 170 certification estimates, economic uncertainties,
and the adverse market conditions faced by the civil aviation market as a whole,
and by the corporate jet field in particular, Embraer revised deliveries in 2003
from 132 to 110 aircraft.
Embraer's delivery estimates for 2004 were increased from 136 to 160 aircraft.
Investor Relations
During the second quarter of 2003, Embraer's preferred shares increased 39.8% in
value, with a closing sale price of R$ 13.60 on June 30, 2003. During this
period, the average daily trading volume at Bolsa de Valores de Sao Paulo
(BOVESPA) - Sao Paulo Stock Exchange - was R$ 16.1million. Our common stock
appreciated 26.2% during the quarter and ended the period quoted at R$ 10.45 per
share, with an average daily trading volume of R$ 2.7million. During the same
period, Ibovespa (the Sao Paulo Stock Exchange index) increased 15.1% in value.
The ADS's traded on the New York Stock Exchange (NYSE), increased 64.8% in value
during the quarter, with a closing sale price of US$ 19.10 at the end of the
period. The average trading volume on the NYSE during the quarter totaled
543,000 ADS's, equal to a financial volume of US$ 8.7 million. The Dow Jones
Average increased 12.4% in value over the same period.
During this quarter, Embraer's Board of Directors approved the distribution of
interest on capital covering the first and second quarters of the current fiscal
year, totaling R$ 76.7 million, or equivalent to a distribution of R$ 0.110950
per preferred share and R$ 0.100870 per common share.
Recent Events
As part of the recent strategy to extend the maturity profile of its
indebtedness, Embraer entered into a syndicated US$ 200 million loan agreement
for a 7-year term, disbursement of which took place on July 1st, 2003. These
funds are intended for the purchase of components, parts, and equipment for the
production of the EMBRAER 170/190 jet family.
This transaction was led by Sumitomo Mitsui Banking Corporation (SMBC) with
participating banks ABN Amro Bank, Credit Lyonnais and Societe Generale. Nippon
Export and Investment Insurance (NEXI), the Japanese government's export credit
arm, is responsible for covering commercial and political risks. NEXI's support
in this transaction was unique, as this was the first time a policy was issued
covering 90% of commercial risks, affording an attractive total cost, with
interest at Libor plus 2.97% per annum including the cost of insurance.
9
Investor Meeting in New York
Embraer will host an Investor Meeting to discuss the Second Quarter Results in
US GAAP on August 14, 2003 at 10:00 A.M. (New York time).
Local:
New York Palace Hotel
Room: The Holmes - 4th Floor
Address: 455 Madison Avenue
New York, New York - 10022
This meeting will also be available through a conference call and will be
broadcasted live on the internet at the following address: www.embraer.com
---------------
Conference Call Dial in Numbers:
US Participants: (1-866) 812-0442
International Participants: (55 11) 4613-0501
Security Access Code: Embraer
10
EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A.
CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)
ASSETS
as of March 31, as of June 30,
------------------- -------------------
2003 2003
------------------- -------------------
Unaudited
CURRENT ASSETS
Cash and cash equivalents 493,769 868,338
Trade accounts receivable 913,174 789,697
Collateralized accounts receivable 63,214 76,881
Inventories 1,005,264 1,013,167
Deferred income tax assets 94,198 104,520
Other current assets 87,956 76,429
------------------- -------------------
Total Current Assets 2,657,575 2,929,032
------------------- -------------------
NONCURRENT ASSETS
Held to maturity investments 23,853 24,449
Collateralized accounts receivable 864,203 1,287,702
Inventories 15,495 15,650
Property, plant and equipment, net 437,628 434,967
Investments 4,820 4,830
Deferred income taxes 62,985 97,420
Other noncurrent assets 330,294 321,767
------------------- -------------------
Total noncurrent assets 1,739,278 2,186,785
------------------- -------------------
------------------- -------------------
TOTAL ASSETS 4,396,853 5,115,817
------------------- -------------------
11
EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A.
CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)
LIABILITIES AND SHAREHOLDERS' EQUITY
as of March 31, as of June 30,
------------------- -------------------
2003 2003
------------------- -------------------
Unaudited
CURRENT LIABILITIES
Loans 367,614 505,978
Accounts payable to suppliers 322,987 278,742
Customer advances 392,082 454,050
Other accounts payable and accrued liabilities 592,647 720,591
Contingencies 8,606 10,111
------------------- -------------------
Total Current Liabilities 1,683,936 1,969,472
------------------- -------------------
LONG-TERM LIABILITIES
Loans 337,842 319,465
Customer advances 92,804 120,187
Contribution from suppliers 236,152 236,572
Other accounts payable and accrued liabilities 891,391 1,330,893
Contingencies 9,968 12,599
------------------- -------------------
Total long-term liabilities 1,568,157 2,019,716
------------------- -------------------
------------------- -------------------
MINORITY INTEREST 9,556 10,526
------------------- -------------------
SHAREHOLDERS' EQUITY: 1,135,204 1,116,103
------------------- -------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 4,396,853 5,115,817
------------------- -------------------
12
EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A.
CONSOLIDATED STATEMENTS OF INCOME
In thousands of U.S.dollars except per share data
Three months ended June 30, Six months ended June 30,
------------------------------- -----------------------------
2002 2003 2002 2003
--------------- --------------- -------------- --------------
GROSS SALES:
Domestic market 17,522 21,635 32,943 42,815
Foreign market 569,952 545,062 1,125,158 1,016,014
Sales deductions 2,213 349 (11,088) (2,989)
--------------- --------------- -------------- --------------
NET SALES 589,687 567,046 1,147,013 1,055,840
--------------- --------------- -------------- --------------
Cost of sales and services (358,317) (360,299) (693,362) (655,000)
--------------- --------------- -------------- --------------
Gross Profit 231,370 206,747 453,651 400,840
--------------- --------------- -------------- --------------
Operating expenses
Selling expenses (39,318) (52,264) (88,322) (97,426)
Research and development (35,363) (51,420) (76,592) (86,922)
General and administrative (30,758) (25,822) (57,393) (50,578)
Employee profit sharing (4,305) (8,026) (10,794) (8,163)
Other operating expense, net (2,165) 460 (4,548) (5,135)
Equity in income from affiliates - 10 87 85
--------------- --------------- -------------- --------------
Income From Operations 119,461 69,685 216,089 152,701
--------------- --------------- -------------- --------------
Interest income (expense), net 18,123 (100,100) 20,159 (127,089)
Financial transaction loss, net (58,847) (9,351) (60,157) (9,064)
Other non-operating income (expense), net (660) 192 (554) 1,622
--------------- --------------- -------------- --------------
Income (loss) before Income Taxes 78,077 (39,574) 175,537 18,170
--------------- --------------- -------------- --------------
Provision for income taxes (41,003) 44,586 (70,391) 31,390
--------------- --------------- -------------- --------------
Income Before Minority Interest 37,074 5,012 105,146 49,560
--------------- --------------- -------------- --------------
Minority interest (190) (137) (564) (733)
--------------- --------------- -------------- --------------
Net Income 36,884 4,875 104,582 48,827
--------------- --------------- -------------- --------------
EARNINGS PER SHARE
Basic
Common 0.05 0.01 0.14 0.06
Preferred 0.05 0.01 0.16 0.07
Diluted
Common 0.05 0.01 0.14 0.06
Preferred 0.05 0.01 0.16 0.07
WEIGHTED AVERAGE SHARES (thousands of shares)
Basic
Common 242,544 242,544 242,544 242,544
Preferred 468,204 470,513 439,201 470,472
Diluted
Common 242,544 242,544 242,544 242,544
Preferred 469,803 473,635 442,229 473,380
Earning Per Share - ADS Basic (US$) 0.2142 0.0282 0.6341 0.2827
Earnings Per Share - ADS DILUTED (US$) 0.2137 0.0281 0.6312 0.2815
13
EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended on June 30, Six months ended on June 30,
------------------------------ ----------------------------
2002 2003 2002 2003
Unaudited Unaudited
Operating Activities
Net Income 36,884 4,875 104,582 48,827
Adjustments to reconcile net income to net cash
provided by(used in) operating activities:
Depreciation and amortization 14,669 16,668 26,541 32,001
Provision for doubtful accounts 1,357 2,395 1,300 2,911
Provision for inventory obsolescence - 2,308 (9,294) 4,707
Deffered income and social contribution tax 18,578 (44,757) 17,502 (39,099)
Cumulative translations adjustments (1,131) 2,369 (5,924) 3,441
Loss(Gain) on the disposition of assets 3,138 178 3,317 (1,127)
Equity in (income) loss from affiliates - (10) (87) (85)
Accrued interest recorded in loans 22,207 9,515 30,594 16,698
Minority interests 190 137 564 733
-------- -------- -------- --------
95,892 (6,322) 169,095 69,007
Changes in assets and liabilities: 388,143 283,118 440,203 (38,620)
-------- -------- -------- --------
Net cash provided by operating activities 484,035 276,796 609,298 30,387
Investing Activities
Purchase of property, plant and equipment (32,120) (15,768) (75,436) (31,375)
Proceeds from the sale of property, plant and equipment 341 691 342 2,250
Held to maturity investments (9,683) (596) (5,687) (1,186)
Customer and commercial financing - net additions (22,521) 8,740 (14,498) (2,274)
Guaranteed deposits and compulsory loans (10,984) (585) (3,479) (1,155)
-------- -------- -------- --------
Net cash used in investing activities (74,967) (7,518) (98,758) (33,740)
Financing Activities
Repayment of loans (271,264) (149,362) (592,408) (286,056)
Proceeds from borrowings 193,650 260,102 325,922 544,409
Proceeds from the issuance of shares 353 157 353 157
Dividends paid (68,220) (2,814) (92,689) (38,564)
Payments of refinanced taxes (2,193) (536) (3,710) (939)
Payments on capital lease obligations (2,267) (2,256) (5,056) (4,138)
-------- -------- -------- --------
Net cash provided (used) by financing activities (149,941) 105,291 (367,588) 214,869
-------- -------- -------- --------
Net increase in cash and equivalents 259,127 374,569 142,952 211,516
Cash and cash equivalents at beginning of period 633,127 493,769 749,302 656,822
-------- -------- -------- --------
Cash and cash equivalents at end of period 892,254 868,338 892,254 868,338
======== ======== ======== ========
14