EXHIBIT 1
US GAAP
BOVESPA: EMBR3, EMBR4 NYSE: ERJ
www.embraer.com
[EMBRAER LOGO GRAPHIC OMITTED]
EMBRAER ANNOUNCES THIRD QUARTER 2003 RESULTS 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$)
according to generally accepted accounting principles in the United States of
America (US GAAP). The financial data presented in this document as of and for
the quarters ended September 30, 2003, June 30, 2003 and September 30, 2002 are
derived from our unaudited financial statements. In order to better understand
the Company's operating performance, we are also presenting at the end of this
release certain information in accordance with the Brazilian Corporate Law
(Brazilian GAAP).
Sao Jose dos Campos, November 13, 2003 - Embraer (BOVESPA: EMBR3, EMBR4) (NYSE:
ERJ) one of the leading manufacturers of commercial aircraft in the world, ended
the third quarter of 2003 (3Q03) with net sales of US$ 438.6 million and a net
income of US$ 19.3 million equivalent to earnings per diluted ADS of US$ 0.1113.
The total company backlog as of September 30, 2003 totaled US$ 27.6 billion,
including US$ 10.4 billion in firm orders and US$ 17.2 billion in options.
Page 1
3rd Quarter Highlights
o 20 jets were delivered during the quarter, 17 to the commercial aircraft
market and three Legacy to the corporate aircraft market.
o Net sales were US$ 438.6 million, as compared to net sales of US$ 580.6
million for 3rd quarter 2002 (3Q02), during which 30 jets were delivered.
o Net income was US$ 19.3 million, equivalent to earnings per diluted ADS of
US$ 0.1113, as compared to the US$ 40.6 million recorded in 3Q02,
equivalent to earnings per diluted ADS of US$ 0.2340.
o Three sales contracts were announced in 3Q03 - two ERJ 145 to SATENA, the
Colombian state-owned company; five Legacy aircraft in special executive
configuration to the Government of India, and one EMBRAER 170 aircraft to
the Cirrus airline in Germany, with one more option for the same model.
o Embraer entered into a US$ 200 million syndicated loan with a 7-year term,
disbursed on July 1, 2003. These funds were intended for the purchase of
components, parts, and equipment for production of the EMBRAER 170/190
family.
o 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).
o As another demonstration of Embraer's partnership with and support by
BNDES, on September 5, 2003, BNDES and Embraer announced that they are in
advanced stages of finalizing a financing package for the export of
aircraft in 2003, involving up to a total of US$ 1.0 billion in customer
financing.
o Embraer was selected on September 24, 2003, for the third consecutive
year, to participate in the Dow Jones Sustainability Index (DJSI World)
being recognized as a top performer in social, environmental and economic
areas.
o Embraer announced on September 29 that the fuselage assembly of the
first EMBRAER 190 was completed successfully.
Page 2
Income Statement Highlights
A comparative table of the main items of Embraer's consolidated income
statements is presented below, regarding 3Q03, 3Q02, and 2Q03.
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Income Statement & Other Data
Unaudited 3q03 3Q02 2Q03
In US dollar million, except % and earnings per ADS
Net Sales 438.6 580.6 567.0
Gross profit 166.9 228.1 206.7
Gross Margin (%) 38.1 39.3 36.5
Selling, general administrative
and other expenses (78.9) (71.2) (77.6)
Research & development (38.9) (41.7) (51.4)
Employee profit sharing 0.3 (4.2) (8.0)
Income from operations 49.4 111.0 69.7
Operating margin (%) 11.3 19.1 12.3
Interest income (expense), net (3.3) 85.5 (100.1)
Financial transaction gain (loss), net (4.3) (90.6) (9.4)
Other non operating income (expense), net (9.8) (0.3) 0.2
Income (loss) before income taxes 32.0 105.6 (39.6)
Provision for income taxes (13.1) (64.7) 44.6
Minority interest 0.4 (0.3) (0.1)
Net income 19.3 40.6 4.9
Net Margin (%) 4.4 7.0 0.9
Depreciation & amortization 15.9 14.2 16.6
Earnings per ADS - basic 0.1119 0.2356 0.0282
Earnings per ADS - diluted 0.1113 0.2340 0.0281
Net Sales and Cost of Sales & Services
Embraer's net sales for 3Q03 totaled US$ 438.6 million, 24.5% below net sales
for 3Q02 of US$ 580.6 million. This lower figure is a result of fewer aircraft
delivered to the commercial airline market, partially offset by two additional
aircraft delivered to the corporate market, and by increased revenues derived
from the defense segment and customer services. The decline is also in part due
to the lower average sale price of Embraer's product mix.
A total of 20 jets, including 17 commercial jet aircraft and three Legacy
corporate jets, were delivered in 3Q03.
A comparison of net sales for the quarter with the US$ 567.0 million earned in
the previous period (2Q03) shows a decrease of 22.6%, due to fewer deliveries to
the commercial airline market and lower average sale price of Embraer's product
mix.
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Deliveries 3Q03 3Q02 2Q03
By Market
Commercial 17 28 25
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ERJ 135 4 - 6
ERJ 145 7 18 13
ERJ 140 6 10 6
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Corporate 3 1 3
Legacy 3 1 3
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Defense - 1 -
Legacy - 1 -
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Total 20 30 28
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The defense segment net sales increased from US$ 37.9 million in 3Q02 to US$
56.7 million in 3Q03, due to the recognition of revenues related to the Mexican
and Greek governments program for the EMB 145 MP and AEW&C, and the Brazilian
government's program for the EMB 145 AEW&C, ALX, and F-5.
Net Sales by Segment
In US$ millions 3Q03 3Q02 2Q03
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US$ % US$ % US$ %
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Commercial market
286.9 65.4 484.1 83.4 432.4 76.2
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Defense market
56.7 12.9 37.9 6.5 52.5 9.3
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Corporate market
52.8 12.0 19.1 3.3 49.8 8.8
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Customer services
& other related business 42.2 9.7 39.5 6.8 32.3 5.7
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Total
438.6 100.0 580.6 100.0 567.0 100.0
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Cost of sales and services for 3Q03 totaled US$ 271.7 million, as compared to
US$ 352.5 million and US$ 360.3 million in 3Q02 and 2Q03, respectively.
Consequently, gross margin for 3Q03 was 38.1%, as compared to 39.3% and 36.5%
for 3Q02 and 2Q03, respectively.
Operating Expenses & Income from Operations
During 3Q03, operating expenses totaled US$ 117.5 million and were stable when
compared to 3Q02 operating expenses of US$ 117.1 million. As a percentage of net
sales, the operating expenses increased from 20.2% in 3Q02 to 26.8% in 3Q03, due
to fewer aircraft deliveries, as well as increase in selling expenses, partially
offset by a decrease in research & development (R&D) and general &
administrative expenses.
Selling expenses for 3Q03 of US$ 49.0 million were 10.1% higher than the US$
44.5 million recorded in 3Q02. This increase results basically from a non-cash
charge of US$ 11.7 million relating to financial guarantees on aircraft
delivered during the period. Embraer began incurring these non-cash charges in
September 2002, and in 3Q02 these non cash charges totaled US$ 3.4 million.
Research and development expenses totaled US$ 38.8 million in 3Q03 as compared
to US$ 41.7 million in 3Q02. The total amount expended in 3Q03 reflects the
development of the new EMBRAER 170/190 jet family as well as improvements of the
Legacy executive aircraft.
General and administrative expenses for 3Q03 totaled US$ 28.7 million, a 6.8%
decrease as compared to the same period for the previous year. This decrease
results basically from a decrease in expenses for outsourced providers,
reflecting a continuation of Embraer's cost control program, begun at the end
2001.
Embraer's income from operations for 3Q03 totaled US$ 49.4 million, less than
the US$ 111.0 million recorded in 3Q02. In addition, operating margin for 3Q03
was 11.3%, compared to the 19.1% recorded in 3Q02. This decline in operating
margin is basically due to the decrease in net sales not matched by a decrease
in operating expenses.
Interest Income (expenses)
Embraer has entered into a number of derivative financial instruments, mainly
swaps, intended to balance its non-U.S. dollar-denominated assets against its
non-U.S. dollar-denominated liabilities, in relation to its forecast of future
cash flow, particularly R&D and capital expenditures which are denominated
mainly in reais. These swaps primarily convert its 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 its balance sheet with unrealized gains and losses reflected as a
component of interest expense.
Effective January 01, 2002, the company changed the classification of its
derivative financial instruments previously classified as Financial Transaction
Gain (loss), net to Interest Income (expenses). All previously reported amounts
have been restated to reflect this reclassification. The effects of this
reclassification did not impact the net income for the previous quarter
reported.
Embraer's interest expense was US$ 3.3 million in 3Q03, compared to an interest
income of US$ 85.5 million in 3Q02. Such expense is due to higher short and long
term loans outstanding in 3Q03. In 3Q02 Embraer recorded an unrealized gain of
US$ 70.8 million related to its swap transaction due to the 27.0% depreciation
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of the real during 3Q02. In addition, interest expenses were partially offset by
US$ 9.0 million in swap transaction unrealized gains, due to the 1.8%
depreciation of the real during the quarter.
Financial Transaction Gain (loss), net
Taking into consideration the reclassification mentioned above, US$ 4.3 million
was recorded in 3Q03 as a financial transaction loss compared to a loss of US$
90.6 million in 3Q02.
The financial transaction gain (loss) variations refer mainly to the
remeasurement of monetary assets and liabilities denominated in currencies other
than the U.S. dollar, and that are adjusted to the U.S. dollar at the end of
each period. In 3Q03, this loss resulted from the effect of the 1.8%
depreciation of the real on our net real-denominated assets.
Other Non Operating Expenses
Another factor that contributed to the decrease of net income this quarter was
the recognition of a non operating expense in the total amount of US$ 9.8
million. Of this amount US$ 9.2 million are related to an expense associated
with the repossession of certain aircraft intended for Indigo, which had its
contract cancelled in July, as previously announced. The Company is currently
working to remarket these aircraft, in order to mitigate such expense.
Provision for Income Taxes
In 3Q03 and 3Q02, Embraer recorded a total provision of US$ 13.1 million and US$
64.7 million for income tax and social contribution, which represents an
effective tax rate according to US GAAP of 40.8% and 61.3%, respectively. The
U.S. dollar is the Company's functional currency, which results in permanent
differences and translation gain or loss, that are deductible for income tax
purposes, since the taxes on income are computed on the results presented by the
Company under Brazilian Corporate Law. In 3Q03 and 3Q02 the real depreciated
1.8% and 36.9% against the U.S. dollar, respectively; therefore the effective
tax rate in 3Q02 was more impacted by the permanent differences arising from the
real devaluation against the US dollar.
Net Income
Net income in 3Q03 was US$ 19.3 million as compared to US$ 40.6 million in 3Q02,
due to the aforementioned effects.
Balance Sheet Highlights
As of September 30, 2003, Embraer's cash and cash equivalents were US$ 881.3
million. On the same date, short and long term loans (excluding non recourse
debt) totaled US$ 1,059.7 million. Therefore the Company had a net debt position
(total loans minus cash and cash equivalents) of US$ 178.4 million.
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Balance sheet data 3Q03 2Q03 1Q03
In millions
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Cash and cash equivalent 881.3 868.3 493.8
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Trade accounts receivable 980.9 789.7 913.2
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Inventories 1,126.6 1,028.8 1,020.8
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Total assets 5,432.9 5,115.8 4,396.8
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Short & long term loans 1,059.7 825.4 705.4
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Total liabilities 4,295.8 3,999.7 3,261.6
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Net cash (debt) (178.4) 42.9 (211.6)
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Shareholders' equity 1,137.1 1,116.1 1,135.2
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Cash and Cash Equivalents
Of the total balance in cash and cash equivalents of US$ 881.3 million, US$
460.8 million, or 52.3%, comprises investments in reais and the remaining 47.7%
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. This strategy also comprises expected future R&D
and capital expenditures, substantially denominated in reais.
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Trade Accounts Receivable
Embraer ended 3Q03 with total trade accounts receivable of US$ 980.9 million, an
increase of US$ 191.2 million from June 30, 2003. Of this total amount US$ 853.6
million is related to pending aircraft financing arrangements.
As another demonstration of Embraer's partnership with and support by BNDES, on
September 5, 2003, BNDES and Embraer announced that they are in advanced stages
of finalizing a financing package for the export of aircraft delivered and to be
delivered in 2003, involving up to a total of US$ 1.0 billion in customer
financing. BNDES and Embraer are strongly working to have this package
implemented during the fourth quarter of 2003. As of today, Embraer has received
US$ 407.5 million representing payments for aircraft already delivered.
Inventories
Inventories increased US$ 97.8 million from US$ 1,028.8 million at end of the
2Q03 to US$ 1,126.6 million at the end of the 3Q03. Inventories are at high
levels mainly due to following factors:
1. as part of the development of the new EMBRAER 170/190 jet family, Embraer
maintains six EMBRAER 170 and two EMBRAER 175 prototypes as part of the
certification process.
2. the beginning of EMBRAER 170 serial production, which the first delivery will
occur after its certification.
3. the Legacy corporate jets production cycle is longer than that of the ERJ 145
commercial jet family, primarily for asembly of the interior; and
4. higher supplier advances related to the defense products, a common practice
within this segment
Short Term and Long Term Loans
Embraer increased its total short and long term debt from US$ 825.4 million at
June 30, 2003 to US$ 1,059.7 million at September 30, 2003. This increase was
primarily due to a US$ 200 million 7-year term syndicated loan, which was
disbursed on July 1, 2003. The syndicate was led by Sumitomo Mitsui Banking
Corporation (SMBC), and its commercial and political risks were guaranteed by
Nippon Export and Investment Insurance (NEXI), the Japanese Government's export
credit agency.
As of September 30, 2003, 48.9% of Embraer's total loans were related to
long-term financing, compared to 38.7% on June 30, 2003.
Embraer has entered into a number of derivative financial instruments, mainly
swaps, intended to balance its non-U.S. dollar-denominated assets against its
non-U.S. dollar-denominated liabilities, considering its expected R&D and
capital expenditures. Therefore, taking into account these swaps, total short
term and long term loans of US$ 697.9 million are effectively denominated in
reais and indexed to the CDI, at a weighted average interest rate of 18.9% per
annum representing approximately 83% of the CDI.
The remaining US$ 361.9 million is denominated primarily in U.S. dollars with a
weighted average interest rate of 4.9% per annum.
Capital Expenditures
Improvements and Modernization
Investments in the Company's improvements and modernization of industrial and
engineering processes, machinery and equipment, totaled US$ 12.7 million during
3Q03, which when added to the US$ 31.4 million incurred during the first six
months of 2003 result in total capital expenditures of US$ 44.1 million for the
first nine months of 2003.
Supplementary Information according to Corporate Law (Brazilian GAAP)
Today Embraer also reported its 3Q03 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$).
Net revenues in 3Q03 totaled R$ 1,296.2 million and gross profit was R$ 457.9
million, with a gross margin of 35.3%. Income from operations for the period
(including employee profit sharing) totaled R$ 221.5 million, with
Page 6
an operating margin of 17.1%. Income before taxes was R$ 123.5 million (9.5% of
net revenues). Income tax and social contribution totaled R$ 34.2 million,
representing an effective tax rate of 27.7%. Net income for the period totaled
R$ 88.9 million (6.9% of net revenues).
Commercial, Corporate, and Defense Markets
Commercial Airline Market
A new agreement was executed during 3Q03 for acquisition of the EMBRAER 170/190
family. Embraer announced on September 26 the sale to the German company Cirrus
Airlines of one EMBRAER 170 aircraft, with an option for one more model. This
new order places Embraer in a position of 245 firm orders in its backlog and 308
options for the new EMBRAER 170/190 jet family.
Also during the quarter, American Eagle converted 80 firm orders and 25 options
of ERJ 140 into ERJ 145.
As announced today, the EMBRAER 170 provisional type certification was granted
and its definitive type certification will be issued in the 1st quarter of 2004.
The EMBRAER 175 successfully performed its maiden flight on June 14th and its
certification is expected for the 2nd quarter of 2004. The EMBRAER 190
certification is expected for the 3rd quarter of 2005, followed by the EMBRAER
195 certification expected for the 2nd quarter of 2006.
Embraer announced on September 29 that fuselage assembly of the first EMBRAER
190 had been successfully completed. The mating of both plugs with front,
central and rear sections of the fuselage was completed on schedule by the
production and project teams.
As of September 30, 2003, the Commercial Airline Market segment had the
following backlog position:
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Aircraft Firm orders Options Deliveries Firm order backlog
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ERJ 135 121 6 104 17
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ERJ 140 94 20 74 20
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ERJ 145 665 465 509 156
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EMBRAER 170 120 128 - 120
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EMBRAER 190 110 150 - 110
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EMBRAER 195 15 30 - 15
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Total 1,125 799 687 438
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Corporate Aircraft
At this year's NBAA, National Business Aviation Association Convention, held in
Orlando, Florida, United States of America, Embraer announced new performance
figures for one of its most successful products - the Legacy Executive jet.
Bolstered range, added fuel capacity, aerodynamic enhancements and a wealth of
new standard features are part of the improved aircraft.
The 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. Hence, on July 7,
2003 Embraer announced 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 ERJ 145/EMB 145 already operational in
several parts of the world.
On September 16, in Cartagena, Colombia, Embraer announced the acquisition of
two more ERJ 145 aircraft by SATENA, Colombia's state-owned airline. The 50-seat
regional jets should be delivered by the end of 2003 and will join the other
similar aircraft in operation with SATENA since 2002.
A contract was signed with the Indian Government, on September 19, for the
acquisition of five Legacy aircraft in a special Executive configuration. Four
of
Page 7
the jets will replace the Avros operated by the Palam-based Air HQ Communication
Squadron of the Indian Air Force (IAF), which ferries the President, Vice-
President and Prime Minister, among other dignitaries. The fifth Legacy will be
operated by the Border Security Force (BSF), under the Home Ministry.
Backlog
Embraer's firm orders backlog, including those orders by the Commercial,
Corporate, and Defense Markets, at the end of 3Q03 was US$ 10.4 billion, which
added to options totaled US$ 27.6 billion. Set forth below is the total backlog
at the end of each quarter for the last five quarters:
Backlog
US$ billions
3Q02 4Q02 1Q03 2Q03 3Q03
--------------------------------------------------------------
Options 13.0 13.2 11.3 16.8 17.2
Firm Orders 9.6 9.0 7.9 10.3 10.4
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Total 22.6 22.2 19.2 27.1 27.6
Investor Relation
During 3Q03, Embraer's preferred shares increased by 11.7%, closing at R$ 15.20
on September 30, 2003. The average daily volume traded during the period at
Bolsa de Valores de Sao Paulo (BOVESPA) was R$ 10.2 million. Common shares
appreciated 9.0% during the quarter and ended the period priced at R$ 11.40 per
share, with an average daily trading volume of R$ 2.3 million. Ibovespa
increased in value by 23.4% over the same period.
ADS's traded on the New York Stock Exchange (NYSE) increased in value by 10.7%
in the quarter, with a closing price of US$ 21.10. Average daily volume traded
in the period totaled 343 thousand ADS' s, equal to a US$ 6.7 million financial
volume. The Dow Jones Index appreciated 13.2% over the same period.
For the third consecutive year, Embraer was nominated for the Dow Jones
Sustainability Index (DJSI World). Selection is made among the 2,500 largest
companies included in the Dow Jones Global Index, choosing the 317 best
performers in social, environmental and economic areas. Besides Embraer, only
three other Brazilian companies are appointed to the DJSI. In the aerospace
sector, Embraer ranks second among the four companies appointed.
Recent Events
Jetmagic ERJ 135 Order
Following the end of the 3rd quarter, on October 9 Embraer announced that the
Irish airline Jetmagic, with headquarters in Cork, purchased one ERJ 135
aircraft. With the completion of this contract, the Irish company will operate
three Embraer regional jets. Delivery of this aircraft took place in October
2003. In addition, the Irish airline signed an option for another ERJ 135,
possibly to be converted into an ERJ 140 or ERJ 145.
EMBRAER 170 Certification
The EMBRAER 170 commercial airliner today gained provisional type certification
from the Brazilian airworthiness authority, Centro Tecnico Aeroespacial (CTA).
Issuance of a similar certificate by the U.S. Federal Aviation Administration
(FAA) is expected to happen soon.
The provisional type certificate means that the aircraft meets international
safety standards and allows the delivery of the EMBRAER 170 to airlines for the
beginning of crew training and route testing flights.
The EMBRAER 170 test campaign was completed with very good results in terms of
performance, comfort and reliability. The innovative electronic flight control
system (fly-by-wire), with software developed by Honeywell, had its architecture
and functionalities approved in extensive flight and ground tests. However,
recent discussions between Embraer, Honeywell, CTA, FAA and European Joint
Aviation Authorities (JAA)
Page 8
representatives established a mutual understanding that the flight control
system software certification documentation shall be supplemented, before
definitive type certification is granted in the first quarter 2004.
Alitalia Express, having considered the situation described above, has opted for
rescheduling the delivery of its aircraft to 2004, after the definitive type
certification is granted. Embraer and US Airways are currently engaged in
discussions aimed at defining initial deliveries of the EMBRAER 170.
With the postponement of final certification, Embraer is taking a conservative
approach as to its possible consequences, and therefore the eight EMBRAER 170
aircraft originally scheduled to be delivered this year to US Airways and
Alitalia are being excluded from the company's 2003 delivery forecast. Embraer
now forecasts 102 aircraft to be delivered this year instead of the 110
previously announced.
Conference Call Information
Embraer cordially invites you to participate in a conference call to review its
Third Quarter 2003 Results in US GAAP, to be held on Friday, November 14, 2003
at 8:00 A.M. Eastern Standard Time.
Please dial:
US Participants: (1-866) 812-0442
International Participants: (55 11) 4613-0502
Security Access Code: Embraer
The conference call will also be broadcast live over the internet:
www.embraer.com
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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.
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EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A.
CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)
ASSETS
as of June 30, as of September 30,
-------------- -------------------
2003 2003
-------------- -------------------
Unaudited
CURRENT ASSETS
Cash and cash equivalents 868,338 881,334
Trade accounts receivable 789,697 980,959
Collateralized accounts receivable 76,881 76,163
Inventories 1,013,167 1,110,909
Deferred income tax assets 104,520 96,909
Other current assets 76,429 87,790
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Total Current Assets 2,929,032 3,234,064
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NONCURRENT ASSETS:
Held to maturity investments 24,449 25,052
Collateralized accounts receivable 1,287,702 1,271,786
Inventories 15,650 15,700
Property, plant and equipment, net 434,967 431,320
Investments 4,830 4,796
Deferred income taxes 97,420 93,238
Other noncurrent assets 321,767 356,937
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Total noncurrent assets 2,186,785 2,198,829
--------- ---------
--------- ---------
TOTAL ASSETS 5,115,817 5,432,893
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EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A.
CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)
LIABILITIES AND SHAREHOLDERS' EQUITY
as of June 30, as of September 30,
-------------- -------------------
2003 2003
-------------- -------------------
Unaudited
CURRENT LIABILITIES
Loans 505,978 541,459
Accounts payable to suppliers 278,742 331,351
Customer advances 454,050 483,334
Other accounts payable and accrued
liabilities 720,591 733,134
Contingency 10,111 7,864
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Total Current Liabilities 1,969,472 2,097,142
-------------- ---------
LONG-TERM LIABILITIES
Loans 319,465 518,213
Customer advances 120,187 109,642
Contribution from suppliers 236,572 236,652
Other accounts payable and accrued
liabilities 1,330,893 1,311,063
Contingency 12,599 12,879
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Total long-term liabilities 2,019,716 2,188,449
-------------- ---------
-------------- ---------
MINORITY INTEREST 10,526 10,167
-------------- ---------
SHAREHOLDERS' EQUITY: 1,116,103 1,137,135
-------------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 5,115,817 5,432,893
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Page 11
EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars except per share data)
Three months ended September 30, Nine months ended September 30,
------------------------------- --------------------------------
2002 2003 2002 2003
------------------------------- --------------------------------
Unaudited Unaudited
GROSS SALES:
Domestic market 11,930 27,558 44,873 70,373
Foreign market 576,786 412,099 1,701,944 1,428,113
Sales deductions (8,116) (1,121) (19,204) (4,110)
------------------------------ --------------------------
NET SALES 580,600 438,536 1,727,613 1,494,376
------------------------------ --------------------------
Cost of sales and services (352,461) (271,636) (1,045,823) (924,698)
------------------------------ --------------------------
Gross Profit 228,139 166,900 681,790 569,678
------------------------------ --------------------------
Operating expenses
Selling expenses (44,480) (49,000) (134,004) (148,364)
Research and development (41,724) (38,839) (112,845) (125,761)
General and administrative (30,750) (28,661) (88,143) (79,239)
Employee profit sharing (4,231) 261 (15,025) (7,902)
Other operating income (expense), net 3,896 (1,154) (4,921) (6,289)
Equity in income (loss) from affiliates 193 (34) 280 51
------------------------------ --------------------------
Income From Operations 111,043 49,473 327,132 202,174
------------------------------ --------------------------
Interest (expense) income, net 85,477 (3,282) 105,636 (130,371)
Financial transaction loss, net (90,588) (4,357) (150,745) (13,421)
Other non-operating expense, net (319) (9,756) (873) (8,134)
------------------------------ --------------------------
Income Before Income Taxes 105,613 32,078 281,150 50,248
------------------------------ --------------------------
Provision for income taxes (64,727) (13,089) (135,118) 18,301
------------------------------ --------------------------
Income Before Minority Interest 40,886 18,989 146,032 68,549
------------------------------ --------------------------
Minority interest (286) 359 (850) (374)
------------------------------ --------------------------
Net Income 40,600 19,348 145,182 68,175
------------------------------ --------------------------
EARNINGS PER SHARE
Basic
Common 0.05 0.03 0.20 0.09
Preferred 0.06 0.03 0.22 0.10
Diluted
Common 0.05 0.03 0.20 0.09
Preferred 0.06 0.03 0.21 0.10
WEIGHTED AVERAGE SHARES (thousands of shafts)
Basic
Common 242,544 242,544 242,544 242,544
Preferred 468,915 471,349 449,250 470,767
Diluted
Common 242,544 242,544 242,544 242,544
Preferred 473,557 474,685 454,893 473,820
Earning Per Share - ADS Basic (US$) 0.2356 0.1119 0.8671 0.3945
Earnings Per Share- ADS DILUTED (US$) 0.2340 0.1113 0.8599 0.3928
Page 12
EMBRAER- EMPRESA BRASILEIRA DE AERONAUTICA S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended on Nine months ended on
September 30, September 30
2002 2003 2002 2003
Unaudited Unaudited
Operating Activities
Net Income 40,601 19,348 145,183 68,175
Adjustments to reconcile net income to net cash
provided by(used in) operating activities:
Depreciation and amortization 14,135 15,921 40,676 47,922
Provision for doubtful accounts (192) (131) 1,108 2,780
Provision for inventory obsolescence 15,288 (10,556) 5,994 (5,849)
Deffered income and social contribution tax 24,009 11,793 41,511 (27,306)
Cumulative translations adjustments (2,747) 92 (8,671) 3,533
Loss(Gain) on the disposition of assets 368 394 3,685 (733)
Equity in (income) loss from affiliates (194) 35 (280) (50)
Accrued interest recorded in loans 8,230 12,387 38,823 29,085
28 (360) 849 373
Minority interests ---------- --------- ------- ---------
99,783 48,923 268,878 117,930
Changes in assets and liabilities: (114,463) (219,021) 325,740 (257,641)
---------- --------- ------- ---------
Net cash provided by (used in) (14,680) (170,098) 594,618 (139,711)
operating activities
Investing Activities
Purchase ofproperty, plant and equipment (39,639) (12,734) (115,075) (44,109)
Proceeds from the sale of property, plant 63 65 405 2,315
and equipment
Held to maturity investments (3,420) (603) (9,107) (1,789)
Customer and commercial financing
- net additions (5,069) 341 (19,567) (1,933)
Guaranteed deposits and compulsory loans (33,891) (589) (37,370) (1,744)
---------- --------- ------- ---------
Net cash used in investing activities (81,956) (13,520) (180,714) (47,260)
Financing Activities
Repayment of loans (171,773) (28,120) (764,181) (314,176)
Proceeds from borrowings 174,691 250,162 500,613 794,571
Proceeds from the issuance of shares 161 1,593 514 1,750
Dividends paid (28,747) (24,308) (121,436) (62,872)
Payments ofrefmancedtaxes (8,172) (463) (11,882) (1,402)
Payments on capital lease obligations (1,702) (2,250) (6,758) (6,388)
---------- ---------- --------- --------
Net cash provided (used) by
financing activities (35,542) 196,614 (403,130) 411,483
---------- ---------- --------- --------
Net increase (decrease) in cash and equivalents (132,178) 12,996 10,774 224,512
Cash and cash equivalents at beginning of period 892,254 868,338 749,302 656,822
---------- --------- -------- --------
Cash and cash equivalents at end of period 760,076 881,334 760,076 881,334
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