[EMBRAER LOGO] [GRAPHIC OMITTED]
[US GAAP BOVESPA: EMBR3, EMBR4 NYSE: ERJ] [GRAPHIC OMITTED]
EMBRAER ANNOUNCES FIRST QUARTER 2004
RESULTS IN US GAAP
The company's operating and financial information is presented, except where
otherwise stated, 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, 2004, December 31, 2003 and March 31, 2003 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, May 14, 2004 - Embraer (BOVESPA: EMBR3, EMBR4) (NYSE: ERJ),
one of the leading commercial aircraft manufacturers in the world, registered in
1Q04 net sales of US$626.2 million and net income of US$103.3 million,
equivalent to diluted earnings per ADS of US$0.59. The order backlog as of March
31, 2004 totaled US$28.6 billion, US$10.9 billion in firm orders and US$17.7
billion in options.
1
1st Quarter 2004 Highlights
o Net sales for 1Q04 were US$626.2 million, 28.1% higher than the sales of
US$488.8 million in 1Q03.
o Net income in 1Q04 was US$103.3 million, 135.1% higher compared to 1Q03.
o The EMBRAER 170 type certification was granted by the Brazilian, US, and
European authorities in late February.
o A total of 23 jets were delivered in 1Q04: 22 jets to the Commercial
Aviation market, including the first eight EMBRAER 170 deliveries, and
one EMB 145 to the Defense market.
o Embraer had previously received a US$88.7 million cash contribution from
risk sharing partners for the EMBRAER 170 development, which was
recognized in 1Q04 as operating income.
o On February 2, 2004, Harbin Embraer announced the sale of six ERJ 145
models to China Southern Airlines.
o The roll out of the EMBRAER 190, an aircraft seating 98 to 106
passengers, took place during a public ceremony held at Sao Jose dos
Campos in February. The EMBRAER 190 took its maiden flight a month
later, initiating its flight test campaign.
o In March 2004, Embraer announced the conversion into firm orders of 16
of 50 options for the ERJ 145LR regional jet by Republic Airways
Holdings.
o In March, Republic Airways Holdings also ordered 50 EMBRAER 170
aircraft, 13 of which are firm orders and 37 of which are options.
2
Income Statement Highlights
A comparative table of the main items of Embraer's consolidated income statement
is presented below for the three months ended March 31, 2003 and 2004 (1Q03 and
1Q04) and for the three months ended December 31, 2003 (4Q03).
Income Statement 4Q03 1Q03 1Q04
In US$ millions, except % and earnings per ADS
Net Sales 649.1 488.8 626.2
Gross Profit 238.7 194.1 202.0
Gross Margin 36.8% 39.7% 32.3%
Selling, general administrative
and other expenses (106.0) (75.5) (98.1)
Research and development (47.4) (35.5) 59.5
Employee profit sharing (12.5) (0.1) (10.4)
Income from operations 72.8 83.0 153.0
Operating Margin 11.2% 17.0% 24.4%
Interest income, net (10.3) (27.0) (7.6)
Foreign exchange gain (loss), net (3.1) 0.3 (2.2)
Other non-operating income
(expense) net (1.3) 1.4 -
Income before income taxes 58.1 57.7 143.2
Income tax benefit (expense) 9.6 (13.2) (39.5)
Minority interest 0.1 (0.6) (0.4)
Net income 67.8 43.9 103.3
Net margin 10.4% 9.0% 16.5%
Earnings per ADS - basic 0.3917 0.2545 0.5952
Earnings per ADS - diluted 0.3874 0.2535 0.5908
Net Sales and Cost of Sales & Services
During 1Q04, 23 aircraft were delivered, the same number as were delivered in
1Q03 and seven aircraft less than were delivered in 4Q03. Normally first quarter
deliveries are lower than the following quarters.
Embraer's net sales increased by 28.1% as compared with 1Q03, reaching US$626.2
million.
Commercial aviation market net sales increased 13.8%, due to the first eight
deliveries in March of the EMBRAER 170 model, which has a higher average sales
price than the aircraft in the ERJ 145 family.
Defense segment net sales increased 136.8%, from US$55.2 million in 1Q03 to
US$130.7 million in 1Q04, due to the recognition of revenues related to the
Mexican and Greek government programs for the EMB 145 MP and AEW&C, and the
Brazilian government's program for the EMB 145 AEW&C and F-5. Embraer's net
sales also include revenues from Customer Services & Other Related Business,
which increased 80.3% from US$29.0 million in 1Q03 to US$52.3 million in 1Q04.
There were no deliveries to the Corporate Aviation Market in 1Q04.
Aircraft delivered
by sector 4Q03 1Q03 1Q04
Commercial
- --------------------------------------------------------------------------------
ERJ 135 1 3 -
ERJ 145 22 15 14
ERJ 140 - 4 -
EMBRAER 170 - - 8
- --------------------------------------------------------------------------------
Defense
- --------------------------------------------------------------------------------
EMB 145 1 - 1
- --------------------------------------------------------------------------------
Corporate
- --------------------------------------------------------------------------------
Legacy/Shuttle 6 1 -
- --------------------------------------------------------------------------------
Total 30 23 23
- --------------------------------------------------------------------------------
3
Embraer maintains its forecast for deliveries of 160 and 170 Commercial,
Corporate and Defense aircraft (exclusively government transport aircraft) in
2004 and 2005, respectively. The Company expects to deliver approximately 40% of
2004 deliveries in the first half of the year and the remaining 60% in the
second half of 2004, especially due to deliveries of the EMBRAER 170 that
started in March 2004.
Net sales
by segment 1Q03 1Q04
- --------------------------------------------------------------------------------
US$MM % US$MM %
Commercial aviation 389.3 79.6 443.2 70.8
Defense aviation 55.2 11.3 130.7 20.9
Corporate aviation 15.3 3.1 - 0.0
Customer services and others 29.0 5.9 52.3 8.4
- --------------------------------------------------------------------------------
Total 488.8 100.0 626.2 100.0
- --------------------------------------------------------------------------------
Cost of sales and services for 1Q04 totaled US$424.2 million, as compared to
US$294.7 million in 1Q03. Consequently, gross margin in 1Q04 was 32.3%, as
compared to 39.7% in 1Q03 and 36.8% in 4Q03.
Gross margin decreased in 1Q04 due to the start of EMBRAER 170 production and
the ensuing "learning curve" related to a new product. In addition, Embraer's
total gross margin was negatively impacted by 1.2 percentage points due to the
reassessment of future sales and costs related to certain defense contracts for
which sales are recognized under the percentage of completion method.
Operating Expenses & Income from Operations
During 1Q04, operating expenses totaled US$49.0 million, 55.9% and 70.5% lower
than 1Q03 and 4Q03, respectively. This decrease was mainly due to the
recognition as operating income of US$88.7 million in payments received from the
Company's risk sharing partners related to fulfillment of certain EMBRAER
170/190 jet family development contractual milestones.
The remaining US$149.5 million in cash advances already received from the
EMBRAER 170/190 risk sharing partners is expected to be recognized as operating
income over the next two years.
During 1Q04, the Company invested US$29.1 million in new products research and
development, mainly in the development of the EMBRAER 170/190 jet family.
Therefore, net research and development represented an income of US$59.5 million
in 1Q04 compared to an expense of US$35.5 million in 1Q03.
Selling expenses totaled US$67.2 million, 48.7% above the US$45.2 million
incurred in 1Q03. In 1Q04, customer training totaled US$4.3 million in expenses
while during the same period last year it represented a revenue of US$5.1
million, due to the reversal of a previously made provision resulting from the
revision of certain contractual training obligations. In addition, provisions
for customer technical assistance increased US$13.7 million in 1Q04, as part of
the Company's effort to better serve the commencement of the EMBRAER 170 model
operations. As a percentage of net sales, selling expenses increased from 9.2%
in 1Q03 to 10.7% in 1Q04.
In 1Q04, general and administrative expenses totaled US$30.4 million compared to
US$35.5 million and US$24.8 million recorded in 4Q03 and 1Q03 respectively. The
increase in administrative expenses compared to 1Q03 is mainly due to an
increase in expenses associated with personnel, payroll taxes, and an
out-sourced service provision. As a result of an inflation recovery, Embraer
adjusted its employees salaries by 17% last November.
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$10.4 million accrued in 1Q04
was based on the payment of interest on shareholders' equity
declared/distributed during the quarter.
4
Embraer's income from operations in 1Q04 totaled US$153.0 million, higher than
the US$83.0 million recorded in 1Q03. In addition, operating margin for 1Q04 was
24.4%, compared to the 17.0% and 11.2% recorded in 1Q03 and 4Q03, respectively.
Interest Income (expenses)
US$ millions 4Q03 1Q03 1Q04
Interest Expense (36.4) (21.4) (28.1)
Interest Income 40.0 21.2 31.9
Monetary & Exchange Variations (0.6) 0.7 (3.9)
Derivative Financial Instruments Gain (loss) (13.3) (27.5) (7.5)
Total Interest Income (expense), net (10.3) (27.0) (7.6)
Average R$/US$ exchange rate 2.8992 3.4909 2.8945
Final period R$/US$ exchange rate 2.8892 3.3531 2.9086
Embraer's interest income (expense), net was an interest expense of US$7.6
million in 1Q04, compared to an expense of US$27.0 million in 1Q03.
The higher average net cash available in 1Q04 compared to 1Q03 resulted in a net
interest income of US$3.8 million in 1Q04 as compared to an expense of US$0.2
million in 1Q03. In addition, Embraer recorded an expense of US$11.4 million
related to its derivative financial instruments and net monetary and exchange
variations. In 1Q03, due to the appreciation of the real against the U.S.
Dollar, these expenses totaled US$26.8 million.
Embraer has entered into a number of derivative financial instruments, mainly
swaps, intended to offset its foreign exchange effects between its non-U.S. and
U.S. dollar denominated assets and liabilities, while considering its expected
R&D and capital expenditures 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 income (expense), net.
Income Taxes
Income taxes increased from US$13.2 million in 1Q03 to US$39.5 million in 1Q04,
which represents an effective tax rate of 27.6% according to US GAAP. Embraer's
statutory tax rate is 34%. The difference between the statutory and effective US
GAAP tax rate is mainly due to interest on shareholders equity provisions, which
is deductible for tax purposes.
Net Income
As a result of the foregoing factors, Embraer's net income in 1Q04 of US$103.3
million (equivalent to US$0.5908 per diluted ADS) was 135.1% higher than the net
income of US$44.0 million in 1Q03 (equivalent to US$0.2535 per diluted ADS). Net
income as a percentage of net sales recorded in 1Q04 was 16.5%, compared with
9.0% in 1Q03.
Balance Sheet Highlights
5
As of March 31, 2004, Embraer's cash and cash equivalents were US$1,097.5
million. On the same date, short and long term loans totaled US$919.8 million.
Therefore, the Company had a net cash position (cash and cash equivalents minus
total loans) of US$177.7 million.
Balance Sheet Data
(In US$ million) 4Q03 1Q03 1Q04
Cash and cash equivalents 1,265.8 493.8 1,097.5
Trade accounts receivable 356.4 913.2 464.5
Inventories 1,172.9 1,020.8 1,272.9
Total assets 5,956.0 4,396.9 5,967.6
Loans 1,043.7 705.4 919.8
Net cash (debt) 222.1 (211.6) 177.7
Shareholders' equity 1,169.2 1,135.2 1,237.9
Cash and Cash Equivalents
Of the total US$1,097.5 million balance in cash and cash equivalents, US$387.3
million is denominated in US dollars and the remaining 64.7% comprises
investments in reais. Embraer's investment strategy is to maintain cash and cash
equivalents sufficient to minimize the currency and interest rate risks of
assets and liabilities. This strategy also comprises expected future R&D and
capital expenditures, substantially denominated in reais.
Trade Accounts Receivable
Trade accounts receivable increased 30.3% from US$356.4 million at the end of
4Q03 to US$464.5 million at the end of 1Q04. Of this total amount, US$270.6
million is related to aircraft delivered for which sales financing arrangements
are pending.
Embraer is jointly structuring a financial transaction with one of its customers
using the US capital markets to fund aircraft deliveries in 2004 for that
customer. The Company expects this transaction to be concluded between June and
July, and it will involve the financing of aircraft delivered during the first
half of the year as well as aircraft scheduled for delivery in the second half
of 2004.
Inventories
Inventories grew by US$100.0 million from US$1,172.9 million in 4Q03 to a total
of US$1,272.9 million in 1Q04. This increase was due to the EMBRAER 170
certification postponement as well as its planned production rate increase. In
addition, the assembly of two EMBRAER 190/195 aircraft pre series is in
progress.
Short Term and Long Term Loans
As of March 31, 2004, short- and long-term debt totaled US$919.8 million, of
which 59.4% was related to long-term financing, compared to 50.5% on December
31, 2003. This increase reflects the Company's policy of extending its debt
profile and reducing the need for temporary funding of its accounts receivable.
The long-term credit lines are due to mature between 2005 and 2015.
Embraer has entered into a number of derivative financial instruments, mainly
swaps, intended to offset its foreign exchange effects between its non-U.S. and
U.S. dollar denominated assets and liabilities, while considering its expected
R&D and capital expenditures.
Therefore, taking into account these swaps, total short term and long term loans
of US$124.2 million are effectively denominated in reais and indexed to the CDI,
at a weighted average interest rate of 14.38% per annum representing
approximately 69.2% of the CDI.
The remaining US$795.6 million is denominated in other currencies, primarily
U.S. dollars, with a weighted average interest rate of 4.25% per annum.
6
Capital Expenditures
Improvements and Modernization
Investments in the improvement and modernization of the Company's industrial and
engineering processes, and PP&E, totaled US$9.8 million during 1Q04.
Supplementary Information according to Corporate Law (Brazilian GAAP)
Today Embraer also reported its 1Q04 earnings in accordance with the corporate
law accounting method (Brazilian GAAP), which according to Brazilian legislation
must be used as a basis for calculating distribution of dividends and interest
on shareholders' equity, income tax and social contribution. Below is presented
selected consolidated income data in accordance with Brazilian GAAP and in reais
(R$).
Net sales in 1Q04 totaled R$1,815.5 million and gross profit was R$577.9
million, with a gross margin of 31.8%. Income from operations for the period
(including employee profit sharing) totaled R$255.3 million, with an operating
margin of 14.1%. Income before taxes was R$240.9 million (13.3% of net sales).
Income tax and social contribution totaled R$45.5 million, representing an
effective tax rate of 18.9%. Net income for the period totaled R$194.6 million
(10.7% of net revenues).
Commercial, Corporate, and Defense Aircraft Markets
The EMBRAER 170 aircraft was awarded its final type certification by the
Brazilian, US, and European authorities late last February, paving the way for
the beginning of deliveries in key markets of the world. The EMBRAER 170's
flight testing campaign involved six prototypes, in addition to a production
aircraft used for reliability tests. Another 250 tests were undertaken in
laboratories and ground-based flight simulators.
Immediately following granting of the certifications, in March, eight EMBRAER
170 aircraft were delivered to the customers Alitalia, LOT, and US Airways.
Embraer opened the gates in February of its main Brazilian manufacturing
facility in Sao Jose dos Campos to roll out the EMBRAER 190, the largest
commercial airplane ever manufactured in Brazil. The rollout ceremony was
attended by Brazilian President Luiz Inacio Lula da Silva, Sao Paulo State
Governor Geraldo Alckmin, cabinet ministers, customers, partners and suppliers,
Brazilian and international news media as well as Embraer employees.
Embraer's newest airliner has already attracted 100 firm orders from launch
customer JetBlue Airways, and another 10 firm orders from an undisclosed
customer, in addition to 150 options. Furthermore, late last year Embraer and
Air Canada signed a commercial proposal for 45 EMBRAER 190 jets with options on
an additional 45.
A month later on March 12, the EMBRAER 190 took its maiden flight. The first
flight marked the beginning of the EMBRAER 190's flight test campaign, which
will be conducted at Gaviao Peixoto, in the interior of Sao Paulo state.
Conclusion of the flight test campaign will validate the new aircraft to receive
type certification in the third quarter of 2005. This will immediately be
followed by the first deliveries to launch customer JetBlue Airways of the U.S.
Harbin Embraer announced on February 2 the sale of six ERJ 145 to China Southern
Airlines. The contract marks the first order placed by a Chinese airline with
Harbin Embraer Aircraft Industry Co. Ltd. (HEAI), the joint venture between
Brazil's Embraer and China's Harbin Aircraft Industry Co. Ltd. (HAI) and Hafei
Aviation Industry Co. Ltd. (HAFEI), both controlled by China Aviation Industry
Corporation II (AVIC II). Under the agreement with China Southern, deliveries
are expected to start in June of 2004 and stretch until January 2005. As Embraer
holds a 51% share of HEAI's equity, the deliveries by the Joint Venture are
consolidated in the 160 jet aircraft expected to be delivered by Embraer in the
course of 2004.
On March 4, 2004, Embraer announced the conversion of 16 of 50 options for the
ERJ 145LR regional jet into firm orders by Republic Airways Holdings, the parent
company of Chautauqua Airlines. Deliveries are expected to begin in May and run
through September. Chautauqua Airlines is one of only two carriers worldwide
that operate all three variants of the ERJ platform including the ERJ135, ERJ
140 and ERJ 145.
7
Still in March, Embraer announced an other order from Republic Airways Holdings
for up to 50 EMBRAER 170 airliners. Under the agreement, 13 firm aircraft will
begin delivery in the third quarter of 2004. Republic Airways Holdings also
holds options on another 37 aircraft of the same model, with 12 to be confirmed
by July 1.
As of March 31, 2004, the Commercial segment showed the following firm order
backlog:
Aircraft Firm Options Deliveries Firm Order
Orders Backlog
- ----------------------------------------------------------------------------
ERJ 135 122 2 105 71
ERJ 140 94 20 74 20
ERJ 145 697 440 545 152
EMBRAER 170 133 162 8 125
EMBRAER 190 110 150 - 110
EMBRAER 195 15 30 - 15
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Total 1,171 804 732 439
Embraer's firm order backlog at the close of 1st Quarter 2004 totaled US$10.9
billion, which when added to the options total US$28.6 billion, not including a
sale to Air Canada, which is still in its commercial proposal stage. Set forth
below is the total backlog at the close of each quarter for the last six
quarters.
Order Backlog
US$ billions
4Q02 1Q03 2Q03 3Q03 4Q03 1Q04
- --------------------------------------------------------------------
Firm Orders 9.0 7.9 10.3 10.4 10.6 10.9
Options 13.2 11.3 16.8 17.3 17.5 17.7
- --------------------------------------------------------------------
Total 22.2 19.2 27.1 27.7 28.1 28.6
8
Investor Relations
Embraer's common and preferred shares traded in the domestic market, on Bolsa de
Valores de Sao Paulo (BOVESPA), decreased in value by 7.5% and 9.7% during 1Q04,
closing at R$17.86 and R$23.20 respectively on March 31, 2004. The Bovespa index
in turn decreased in value by 0.4%.
The Company's ADS's (American Depositary Shares) traded on the New York Stock
Exchange (NYSE), reached a closing sale price of US$32.10 at the end of March
2004, representing a 9.3% decrease in value during the period.
The average daily common share volume for the quarter was R$4.4 million and the
average daily preferred share volume totaled R$12.8 million. Average daily ADS
trading volume for the same period was US$17.4 million.
Conference Call Information
Embraer cordially invites you to participate in a conference call to review its
1Q04 Results in US GAAP, to be held on May 17, 2004 at 10:00 a.m. Eastern
Standard Time.
Dial in numbers:
US Participants: (1 888) 340 8477
International Participants: (55 11) 4613 0502
Security Access Code: Embraer
The conference call will also be broadcast live over the Internet:
www.embraer.com
For additional information please contact:
Embraer - Empresa Brasileira de Aeronautica S/A
Anna Cecilia Bettencourt
(55 12) 3927 1216
acecilia@embraer.com.br
Daniel Bicudo
(55 12) 3927 1106
dabicudo@embraer.com.br
Milene Petrelluzzi
(55 12) 3927 3054
milene.petrelluzzi@embraer.com.br
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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 the 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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Page 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,
2003 2004
- --------------------------------------------------------------------------------
CURRENT ASSETS
- --------------------------------------------------------------------------------
Cash and cash equivalents 1,265,820 1,097,498
Trade accounts receivable, net 356,401 464,453
Collateralized accounts receivable 102,110 129,197
Inventories 1,158,060 1,258,385
Deferred income taxes 102,533 111,263
Other 349,080 343,111
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Total current assets 3,334,004 3,403,907
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NONCURRENT ASSETS:
- --------------------------------------------------------------------------------
Collateralized accounts receivable 1,648,849 1,620,009
Inventories 14,770 14,534
Property, plant and equipment, net 402,663 399,091
Investments 39,820 40,570
Deferred income taxes 95,984 71,900
Other 419,908 417,626
- --------------------------------------------------------------------------------
Total noncurrent assets 2,621,994 2,563,730
- --------------------------------------------------------------------------------
TOTAL ASSETS 5,955,998 5,967,637
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LIABILITIES AND SHAREHOLDERS' EQUITY
As of December 31, As of March 31,
2003 2004
- --------------------------------------------------------------------------------
CURRENT LIABILITIES
- --------------------------------------------------------------------------------
Loans 517,014 373,873
Accounts payable to suppliers 404,065 539,908
Customer advances 448,648 448,910
Non recourse and recourse debt 360,645 386,436
Other accounts payable and accrued liabilities 694,541 711,972
Contingencies 8,750 9,040
- --------------------------------------------------------------------------------
Total current liabilities 2,433,663 2,470,139
- --------------------------------------------------------------------------------
LONG-TERM LIABILITIES
- --------------------------------------------------------------------------------
Loans 526,728 545,943
Customer advances 110,539 101,688
Contribution from suppliers 234,958 160,371
Non recourse and recourse debt 1,390,314 1,362,770
Other accounts payable and accrued liabilities 56,067 48,968
Contingencies 21,893 19,336
- --------------------------------------------------------------------------------
Total long-term liabilities 2,340,499 2,239,076
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- --------------------------------------------------------------------------------
MINORITY INTEREST 12,611 20,521
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY: 1,169,225 1,237,901
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 5,955,998 5,967,637
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Page 10
EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A.
CONSOLIDATED STATEMENTS OF INCOME
In thousands of U.S. dollars except per share data
Three Months Ended
March 31, 2003 March 31, 2004
- --------------------------------------------------------------------------------
Gross sales
- --------------------------------------------------------------------------------
Domestic market 21,180 49,021
Foreign market 470,952 576,997
Sales deductions (3,338) 183
- --------------------------------------------------------------------------------
Net sales 488,794 626,201
- --------------------------------------------------------------------------------
Cost of sales and services (294,701) (424,168)
- --------------------------------------------------------------------------------
Gross profit 194,093 202,033
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Operating expenses
- --------------------------------------------------------------------------------
Selling expenses (45,162) (67,177)
Research and development (35,502) 59,472
General and administrative (24,756) (30,380)
Employee profit sharing (137) (10,417)
Other operating expense, net (5,595) (522)
Equity in income (loss) from affiliates 75 -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Income from operations 83,016 153,009
- --------------------------------------------------------------------------------
Interest (expense) income, net (26,989) (7,638)
Foreign exchange gain (loss), net 287 (2,238)
Other non-operating income
(expense), net 1,430 29
- --------------------------------------------------------------------------------
Income before income taxes 57,744 143,162
- --------------------------------------------------------------------------------
Income tax benefit (expense) (13,196) (39,489)
- --------------------------------------------------------------------------------
Income before minority interest 44,548 103,673
- --------------------------------------------------------------------------------
Minority interest (596) (359)
- --------------------------------------------------------------------------------
Net income 43,952 103,314
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Earnings per share
- --------------------------------------------------------------------------------
Basic
Common 0.0578 0.1353
Preferred 0.0636 0.1488
Diluted
Common 0.0576 0.1343
Preferred 0.0634 0.1477
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Weighted average shares (thousands of shares)
- --------------------------------------------------------------------------------
Basic
Common 242,544 242,544
Preferred 470,430 473,788
Diluted
Common 242,544 242,544
Preferred 473,123 478,981
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Earnings per share - ADS basic (US$) 0.2545 0.5952
- --------------------------------------------------------------------------------
Earnings per share - ADS diluted (US$) 0.2535 0.5908
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Page 11
EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands of U.S. dollars except per share data
Three months ended on March 31,
2003 2004
- --------------------------------------------------------------------------------
Operating activities
- --------------------------------------------------------------------------------
Net income 43,952 103,314
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 15,333 13,306
Allowance for doubtful accounts 516 (455)
Provision for inventory obsolescence 2,399 5,525
Deferred income taxes 5,658 15,354
Foreign exchange loss (gain), net (287) 2,238
Loss (gain) on disposition of assets (1,305) 58
Equity in income (loss) from affiliates (75) 0
Interest accrued in excess of interest paid
(paid in excess of accrued) 2,811 (5,815)
Minority interests 596 359
Other (590) (750)
------------- -----------
- --------------------------------------------------------------------------------
69,008 133,134
- --------------------------------------------------------------------------------
Changes in assets and liabilities: (348,524) (128,746)
------------- -----------
- --------------------------------------------------------------------------------
Net cash provided by (used in)
operating activities (279,516) 4,388
- --------------------------------------------------------------------------------
Investing activities
- --------------------------------------------------------------------------------
Purchase of property, plant and equipment (15,607) (9,836)
Proceeds from sale of property,
plant and equipment 1,559 45
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Net cash used in investing activities (14,048) (9,791)
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Financing activities
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Repayment of loans (132,323) (256,173)
Proceeds from borrowings 284,307 138,229
Proceeds from issuance of shares 0 719
Dividends and/or Interest on capital paid (35,791) (40,348)
Payments on capital lease obligations (1,882) (1,825)
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Net cash provided by (used in) financing
activities 114,311 (159,398)
------------- -----------
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Effect of exchange rate changes on cash 16,200 (3,521)
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Net increase (decrease) in cash and
equivalents (163,053) (168,322)
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Cash and cash equivalents, beginning of period 656,822 1,265,820
------------- -----------
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Cash and cash equivalents, end of period 493,769 1,097,498
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