[EMBRAER LOGO]
EMBRAER ANNOUNCES THIRD QUARTER 2004
RESULTS IN US GAAP
The Company's operating 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 September 30, 2004, June 30, 2004 and September30, 2003 are
derived from our unaudited financial statements. As additional information
regarding the Company's operating performance, we are also presenting in this
release a summary of certain information presented in accordance with the
Brazilian Corporate Law (Brazilian GAAP).
Sao Jose dos Campos, November 15, 2004 - Embraer (BOVESPA: EMBR3, EMBR4) (NYSE:
ERJ), one of the leading commercial aircraft manufacturers in the world,
registered in 3Q04 net sales of US$936.5 million and net income of US$113.7
million, equivalent to diluted earnings per ADS of US$0.65. The order backlog as
of September 30, 2004 totaled US$29.5 billion, including US$11.0 billion in firm
orders and US$8.5 billion in options.
Page 1 of 14
3rd Quarter 2004 Highlights
o For the second consecutive quarter, Embraer's net sales reached a
historical high. Net sales for 3Q04 totaled US$936.5 million, a 113.5%
increase compared to the same period last year.
o Net income reached US$113.7 million for 3Q04, 487.6% higher than 3Q03.
o A total of 40 jet aircraft were delivered in 3Q04: 38 to the commercial
airline market, including 13 EMBRAER 170 jets, and two deliveries to the
corporate market.
o Embraer revised its total deliveries forecast for the years 2004 and 2005,
from 160 and 170, respectively, to 145 aircraft for each year.
o 54 new commercial aircraft orders were added to Embraer's backlog from
customers Air Canada, Republic Airways Holdings and Luxair. Total new
orders added to the Company's backlog during the first nine months of the
year reached 111 aircraft.
o The Embraer ERJ 145 platform was selected as part of the winning bid for
the U.S. Army Aerial Common Sensor (ACS) program.
o Embraer announced the beginning of the final flight-test phase of the
certification process that will raise the service ceiling of the Legacy
business jet to 41,000 feet (12,500 meters).
Page 2 of 14
Income Statement Highlights
A comparative table of the main items of Embraer's consolidated income statement
is presented below for the three months ended September 30, 2003 and 2004 (3Q03
and 3Q04) and for the three months ended June 30, 2004 (2Q04).
Income Statement Unaudited 2004 3Q03 3Q04
In US$ millions, except % and earnings per ADS
Net Sales 924.3 438.6 936.5
Gross Profit 301.4 166.9 311.3
Gross Margin 32.6% 38.1% 33.2%
Selling, general administrative and other expenses (132.8) (78.9) (133.1)
Research and development (30.4) (38.9) (34.5)
Employee profit sharing (15.7) 0.3 (16.8)
Income from operations 122.5 49.4 126.9
Operating margin 13.3% 11.3% 13.6%
Interest income, net 4.3 (3.3) 7.9
Foreign exchange gain (loss) net (16.7) (4.3) 14.0
Other non-operating income (expense) net - (9.8) -
Income before income taxes 110.1 32.0 148.8
Income tax expense (29.2) (13.1) (34.8)
Minority interest (0.7) 0.4 (0.3)
Net income 80.2 19.3 113.7
Net margin 8.7% 4.4% 12.1%
Earnings per ADS - basic 0.4620 0.1119 0.6539
Earnings per ADS - diluted 0.4589 0.1113 0.6498
Deliveries, Net Sales and Cost of Sales & Services
A total of 40 jet aircraft were delivered during 3Q04, of which 25 were ERJ 145
jets and 13 were EMBRAER 170 jets delivered to the commercial airline market and
two were Legacys delivered to the corporate market. This figure also includes
one ERJ 145 aircraft delivered by Harbin Embraer Aircraft Industry Company
Limited (HEAI) in China.
During the first nine months of 2004, Embraer delivered a total of 106 aircraft.
On October 20, the Company revised its total deliveries forecast for the years
2004 and 2005 from 160 and 170, respectively, to 145 deliveries for each year,
which is further explained in the Commercial, Corporate and Defense Markets
section of this release.
Aircraft delivered
by Segment 2Q04 3Q03 3Q04
Commercial
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ERJ 135 - 4 -
ERJ 145 25(*) 7 25
ERJ 140 - 6 -
EMBRAER 170 15 - 13
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Corporate
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Legacy/Shuttle 3 3 2
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Total 43 20 40
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(*) Three ERJ 145 deliveries were accounted as operating lease.
For the second consecutive quarter, Embraer's net sales reached a historical
high. Net sales for 3Q04 totaled US$936.5 million. Net sales increased 113.5%
compared to 3Q03. This increase is mainly due to higher number of aircraft
delivered, as well as to the higher average sales price due to the new product
mix arising from deliveries of the new EMBRAER 170 jet aircraft.
Net sales for the Commercial airline market totaled US$760.4 million, an
increase of 165.0% compared to US$286.9 million in 3Q03.
Defense segment net sales increased 42.1%, from US$56.7 million in 3Q03 to
US$80.6 million in this quarter, due to the recognition of revenues related to
F5 program and the ALX program, now in the initial serial
Page 3 of 14
manufacturing stage with its first deliveries in August. This increase was
partially offset by the decline in revenues from intelligence programs (AEW&C),
now reaching their maturity stage.
Embraer's net sales also include revenues from Customer Services & Other Related
Businesses, which increased 33.9% from US$42.2 million in 3Q03 to US$56.5
million in 3Q04. This increase was partially offset by a 26.1% decrease in
corporate market net sales, as there were three Legacy deliveries in 3Q03
compared to only two this quarter.
Net sales
by segment 2Q04 3Q03 3Q04
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US$ % US$ % US$ %
Commercial Airline 748.6 81.0 286.9 65.4 760.4 81.2
Defense 65.8 7.1 56.7 12.9 80.6 8.6
Corporate 55.5 6.0 52.8 12.0 39.0 4.2
Customer services and others 54.4 5.9 42.2 9.7 56.5 6.0
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Total 924.3 100.0 438.6 100.0 936.5 100.0
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Gross margins decreased from 38.1% in 3Q03 to 33.2% in 3Q04. When compared to
2Q04, gross margin increased slightly due to initial improvements on the EMBRAER
170 production "learning curve".
Operating Expenses & Income from Operations
During 3Q04, operating expenses totaled US$184.4 million, 57.1% higher than
3Q03, compared to a 113.5% sales increase. In 2Q04, operating expenses totaled
US$178.9 million.
The increase in operating expenses during the quarter was mainly due to higher
selling expenses.
Selling expenses for the quarter totaled US$104.1 million, as compared to
US$49.0 million in 3Q03. The increase in selling expenses is a consequence of
higher aircraft deliveries, and includes product warranty and sales related
expenses, as well as other expenses and provisions related to pre-sales and
after-sales support for the Company's products.
As a percentage of net sales, selling expenses were 11.1% and were relatively
stable when compared to the same period last year.
This quarter, Embraer invested US$42.2 million in research and development,
primarily related to the development of the EMBRAER 170/190 jet family. This
amount was partially offset by the recognition of US$7.7 million in payments
received from the Company's risk sharing partners related to fulfillment of
certain EMBRAER 170/190 jet family development contractual milestones. As a
result, during 3Q04, research and development expenses totaled US$34.5 million
net. Total cash contribution received from the risk sharing partners totaled
US$245.6 million, of which US$118.1 million has already been recognized as
income, including US$103.8 million in the first nine months of this year.
General and administrative expenses as a percentage of net sales decreased from
6.5% in 3Q03 to 3.7% this quarter mainly due to higher sales revenue. In 3Q04,
these expenses totaled US$34.2 million compared to US$28.6 million in 3Q03. The
increase in administrative expenses in 3Q04 was mainly due to US$2.0 million
spent on the implementation of the SAP 4.7 Aerospace & Defense version. This
project should allow the Company to improve its process and business management
capabilities, as well as assist the Company with compliance with the
requirements of the U.S. Sarbanes-Oxley Act of 2002.
Employee profit sharing is tied to the Company's action plan and to dividend
payments to Embraer's shareholders. During the quarter, US$16.8 million was
accrued based on the payment of interest on shareholders' equity declared during
the period.
In addition, in 3Q04, other operating expense, net represented an income of
US$5.2 million, of which US$1.9 million relates to the reversion of a provision
made in 2Q04 and the additional US$3.3 million is related to fines and penalties
owed by customers.
Embraer's income from operations in 3Q04 totaled US$126.9 million, 156.4% higher
than the US$49.4 million recorded in 3Q03. Operating margin also increased from
11.3% in 3Q03 to 13.5% in 3Q04.
Page 4 of 14
Interest Income (expense)
US$ millions 2Q04 3Q03 3Q04
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Interest Expense (42.1) (40.2) (25.1)
Interest Income 28.8 35.9 40.0
Monetary & Exchange Variations 7.6 (0.2) 6.6
Derivative Financial Instruments Gain (loss) 10.0 1.2 (13.6)
Total Interest Income (expense), net 4.3 (3.3) 7.9
Average R$/US$ exchange rate 3.0474 2.9332 2.9783
Final period R$/US$ exchange rate 3.1075 2.9234 2.8586
During this quarter, Embraer earned US$7.9 million in net financial income, as
compared with expenses of US$3.3 million for the same period last year and an
income of US$4.3 million in 2Q04. This increase is mainly due to higher interest
income related to higher average cash available during the course of the quarter
when compared to the same period last year. Interest expense totaled US$25.1
million in 3Q04 compared to US$40.2 million in 3Q03. This decrease is This
decrease is mainly due to a reassessment of the PIS/COFINS provision related to
the impact of exchange rate variations on its assets and on financial income,
which resulted in a reversion of US$15.5million.
The interest income, net was partially offset by US$13.6 million of losses on
derivative instruments in 3Q04 compared to a US$1.2 million gain in the same
period last year.
Foreign Exchange Gain (loss)
Variations in this item refer mainly to the remeasurement of monetary assets and
liabilities denominated in other currencies and that are converted to the U.S.
dollar at the end of each period. In 3Q04, US$14.0 million was recognized as a
foreign exchange gain, compared to losses of US$4.4 and US$16.7 million in 3Q03
and 2Q04, respectively.
In 3Q04, foreign exchange gain resulted mainly from the effect of the 8.0%
appreciation of the real on the Company's US$209 million net Reais-denominated
assets at the end of the quarter.
Income Taxes
This quarter's income taxes totaled US$34.8 million and represented an effective
rate in US GAAP of 23.4%. Embraer's statutory tax rate is 34%. The difference
between the statutory and effective US GAAP tax rate is mainly a result of
recognition of interest on shareholders' equity, which is deductible for tax
purposes.
Net Income
As a result, Embraer's net income in 3Q04 of US$113.7 million (equivalent to
US$0.65 per diluted ADS) was almost five times higher than the net income of
US$19.3 million in 3Q03. Net income as a percentage of net sales recorded in
3Q04 was 12.1%, compared with 4.4% in 3Q03.
Balance Sheet Highlights
As of September 30,2004, Embraer's cash and cash equivalents were US$1,389.4
million. On the same date, short and long term loans totaled US$1,169.2 million.
Therefore, the Company had a net cash position (cash and cash equivalents minus
total loans) of US$220.2 million in 3Q04, compared to US$303.9 million in 2Q04.
The reduction in the net cash position is principally a result of the increase
in inventories from US$1,247.3 million as of June 30, 2004 to US$1,390.1 million
at the end of the quarter, and also an increase in accounts receivable from
US$471.6 million at the end of 2Q04 to US$577.6 million this quarter.
Page 5 of 14
Balance Sheet Data
(In US$ millions) 2Q04 3Q03 3Q04
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Cash and cash equivalents 1,333.8 881.3 1,389.4
Trade accounts receivable 471.6 980.9 703.4
Inventories 1,247.3 1,126.6 1,390.1
Total assets 6,445.0 5,432.9 6,491.3
Loans 1,029.9 1,059.7 1,169.2
Net cash (debt) 303.9 (178.4) 220.2
Shareholders' equity 1,266.7 1,137.1 1,327.4
Cash and Cash Equivalents
Of the total US$1,389.4 million balance in cash and cash equivalents, 63.0% is
denominated mainly in US dollars and the remaining 37.0% is denominated in
reais. 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 takes into account expected future R&D and
capital expenditures, which are substantially denominated in reais.
Trade Accounts Receivable
During the quarter, accounts receivable increased by US$231.8 million, reaching
US$703.4 million as of September 30, 2004. Of this total amount, approximately
72% is related to aircraft delivered for which sales financing arrangements are
under a structuring process.
Because US Airways voluntary filed for reorganization under Chapter 11 of the
U.S. Bankruptcy Code on September 12, 2004, deliveries to the airline have been
suspended since that time. As of today, Embraer had delivered 22 EMBRAER 170
aircraft to US Airways, 15 of which had been financed by GECAS. Sales financing
for the remaining seven has been temporarily financed by Embraer, and US Airways
has already paid 15% of the value of these aircraft in cash. Due to the Chapter
11 filing, 90% of the temporary financing has been accounted for as long
term accounts receivable and the remaining 10% as short term accounts
receivables.
Inventories
Due to the rescheduling of aircraft deliveries for the remainder of 2004,
inventories increased by US$142.8 million this quarter, including four aircraft
painted in the colors of US Airways. However, considering the flexibility of the
existing contracts negotiated with suppliers, the Company expects that the
excess of raw-material, work in progress and finished aircraft will be consumed
within the coming months.
Short and Long-Term Loans
Short- and long-term debt totaled US$1,169.2 million in 3Q04 compared to
US$1,029.9 million in 2Q04, of which 63.4% and 66.5% were related to long-term
financing at the end of 3Q04 and 2Q04, respectively. This short-term debt
increase reflects the need for temporary funding to support the higher
inventories and trade accounts receivables. The long-term credit lines are due
to mature between 2005 and 2011, with an average life of almost three years.
Taking into account the existing swaps, 93.0% of the total loans are denominated
in U.S. dollars, with a weighted average interest rate of 3.9% per annum. The
remaining 7.0% are effectively denominated in reais and indexed to the CDI, at a
weighted average interest rate of 12.4% per annum.
Capital Expenditures
Improvements and Modernization - additions to PP&E
During the first nine months of 2004, the Company invested US$34.1 million in
the improvement and modernization of its industrial and engineering processes.
During the quarter, these investments amounted US$12.8 million.
Page 6 of 14
Supplementary Information according to Brazilian Corporate Law (BR GAAP)
Today Embraer also reported its 3Q04 earnings in accordance with BR GAAP, which
according to Brazilian legislation must be used as a basis for calculating
distribution of dividends and interest on shareholders' equity, income tax and
social contribution. Below is presented selected consolidated income data in
accordance with Brazilian GAAP and in reais (R$).
Net sales in 3Q04 totaled R$2,734.2 million and gross profit was R$881.2
million, with a gross margin of 32.2%. Income from operations for the period
(including employee profit sharing) totaled R$462.2 million, with an operating
margin of 16.9%. Income before taxes was R$551.1 million (20.2% of net sales).
Income tax and social contribution totaled R$150.7 million, representing an
effective tax rate of 27.3%. Net income for the period totaled R$396.9 million
(14.5% of net sales).
Commercial Airline, Defense and Corporate Markets
Commercial Airline Market
On September 12, 2004, North American airline US Airways filed voluntary
petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. US
Airways signed a contract in May 2003 for the purchase of 85 EMBRAER 170
aircraft. Embraer had delivered 22 EMBRAER 170 aircraft to US Airways as of
September 12, 2004. The remaining deliveries have been temporarily suspended
until the airline's situation becomes more clear.
After the end of the quarter, American Eagle reached a preliminary agreement
with Embraer to cancel its last 18 ERJ 145 regional jet aircraft deliveries,
which were planned to be delivered between July 2005 and February 2006.
In light of these events, Embraer reduced its total deliveries forecast for the
years 2004 and 2005 to 145 aircraft for each year.
On the other hand, the third quarter of 2004 was marked by the execution by Air
Canada of a purchase agreement containing 45 firm orders and 45 options for the
EMBRAER 190 aircraft. This announcement confirmed the commercial proposal signed
by Air Canada in December 2003 and allowed Embraer to add 45 new firm orders and
45 options to its order book. Deliveries of the aircraft, configured for dual
class seating, are scheduled to begin in November 2005. The firm order is valued
at US$ 1.35 billion, at list price, with a potential value of more than US$ 2.7
billion if all options are exercised.
The introduction of new generation airliner to Air Canada fleet is a key
component of its restructuring business plan to implement high frequency,
low-cost services on new and existing routes in Canada and the United States.
Consistent with this strategy, the EMBRAER 190 will be deployed by Air Canada to
pursue strategic market opportunities in North America while offering customers
a premium travel experience with enhanced space, comfort and convenience.
During the quarter, Republic Airways Holdings converted seven EMBRAER 170
options into firm orders, the announcement of which brings to 23 the total
number of EMBRAER 170s on order with Republic Airways Holdings. The parent
company of Chautauqua Airlines and Republic Airlines, this customer holds an
additional 28 options for the EMBRAER 170. It is expected that all seven
aircraft ordered by Republic Airways Holdings will be placed into service with
United Airlines as part of their United Express program.
On September 22, in a ceremony in Sao Jose dos Campos, Embraer delivered the
first EMBRAER 170 to Republic Airways Holdings. The EMBRAER 170 is configured
with 70 seats, including six first class, 16 economy plus and 48 economy seats.
This will be the first EMBRAER 170 in service with a two-class cabin
arrangement.
During the quarter, Embraer and Luxair signed a purchased agreement for two ERJ
135s, our 37-seat aircraft, and one additional option for the same model. The
signing of the agreement, for which the commercial proposal was announced in
July 2004, allows Embraer to include this order on its backlog. Luxair is
currently operating a fleet of eight ERJ 145s, nicknamed "Eurojet," and now
intends to use these two additional ERJ 135s in its network for longer routes
and to serve London City airport (LCY) from Luxemburg. The ERJ 135 received its
LCY certification in October 2003 and is today one of only a few jets allowed to
operate there.
Page 7 of 14
Therefore, during the first nine months of the year, a total of 111 commercial
aircraft were added into Embraer's order book. The Company received 31 new
orders for the ERJ 145 family and additional 80 orders for the EMBRAER 170/190
family.
Defense Market
In the defense segment, on August 2, the ERJ 145 platform was selected as part
of the winning bid for the U.S. Army Aerial Common Sensor (ACS) program.
Embraer, as part of the Lockheed Martin team, will provide its ERJ 145 platform
for the U.S. Army's next-generation battlefield surveillance system called
Aerial Common Sensor (ACS), under a Systems Development and Demonstration (SDD)
contract. Under the US$879 million SDD contract, the team will deliver five
certified, mission-ready airborne ISR systems, with initial testing planned for
2006. The balance of the effort would be performed under a follow-on, low-rate
initial production contract anticipated in 2007, followed by a full rate
production contract in 2009. The ACS will replace current ISR aircraft,
including the Army's Guardrail Common Sensor, the Airborne Reconnaissance Low
aircraft and the Navy's fleet of EP-3 aircraft. Under the SDD contract, the
Lockheed Martin team will combine and enhance the capabilities of the current
systems on these platforms into a single ISR mission package on a standard
airborne platform. With follow-on production contracts, it is expected that the
program should reach 38 aircraft for the Army and be worth more than $7 billion
to the team. The U.S. Navy has also indicated its commitment to the ACS system
as an EP-3 replacement, which would add 19 aircraft to the program.
After the ACS announcement, Embraer, on August 23, broke ground on a new
aircraft assembly facility at Cecil Commerce Center, with Florida Gov. Jeb Bush,
and Jacksonville Mayor John Peyton, among other distinguished guests, manning
ceremonial shovels with Embraer President and CEO Mauricio Botelho. The
facility, scheduled for completion in 2005, will be dedicated to supporting U.S.
defense and homeland security programs.
Corporate Market
In the Corporate Market, Embraer announced the beginning of the final
flight-test phase of the certification process that will raise the service
ceiling of the Legacy business jet to 41,000 feet (12,500 meters). Certification
for the new flight level is expected in the first quarter 2005 and deliveries
are expected to begin soon there after. A service bulletin will be made
available upon request to current Legacy owners to upgrade their aircraft for
the same capability.
Finally, during the quarter, Legend Development Co. Ltd. became the first
company in Asia to take delivery of a Legacy Executive aircraft. Legend is owned
by Macao-based entrepreneur Mr. Chow Kam Fai David. The delivery ceremony took
place at Embraer headquarters on September 28, 2004.
Order Book and Backlog
Embraer's Commercial Airline Market order book by product at September 30, 2004,
was as follows:
Commercial Airline Market Firm Orders Options Deliveries Firm Backlog
Order Book
ERJ 145 Family
ERJ 135 124 3 105 19
ERJ 140 94 20 74 20
ERJ 145 704 408 595 109
Total ERJ 145 Family 922 431 774 148
EMBRAER 170/190 Family
EMBRAER 170 155 148 36 119
EMBRAER 190 155 215 - 155
EMBRAER 195 15 20 - 15
Total EMBRAER 170/190 Family 325 383 36 289
Total 1,247 814 810 437
As of September 30, 2004, Embraer's total firm order backlog, including the
Commercial Airline, Corporate and Defense markets, totaled US$ 11.0 billion.
Total backlog, including options, reached US$ 29.5 billion. As the
Page 8 of 14
American Eagle agreement has not been finalized, that order is not reflected in
Embraer's third-quarter order book.
Set forth below is the total backlog at the close of each quarter for the last
five quarters:
Backlog
(US$ billion)
3Q03 4Q03 1Q04 2Q04 3Q04
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Firm Orders 10.4 10.6 10.9 10.5 11.0
Options 17.3 17.5 17.7 17.8 18.5
Capital Markets & Shareholder Distributions
Embraer's common and preferred shares traded in the domestic market, on Bolsa de
Valores de Sao Paulo (BOVESPA), decreased in value by 17.1% and 14.5%,
respectively, during 3Q04, closing at R$13.83 and R$18.80, respectively, on
September 30, 2004. In comparison, the Bovespa index in turn appreciated by 9.9%
during the same period.
The Company's ADSs (American Depositary Shares) traded on the New York Stock
Exchange (NYSE), and reached a closing sale price of US$26.40 at the end of
September 2004, representing a 7.6% decrease in value during the period.
The average daily common share volume for the quarter was R$3.4 million and the
average daily preferred share volume totaled R$10.2 million. Average daily ADS
trading volume for the same period was US$13.5 million.
During 3Q04, Embraer's Board of Directors approved a payment of Interest on
Shareholders' Equity in the amount of R$160.1 million (equivalent to US$56.0
million), representing R$0.20913 per common share and R$0.23005 per preferred
share and equivalent to US$ 0.32188 per ADS. The total interest on shareholders'
equity distributed this quarter represents 49.3% of net income recorded in 3Q04.
During the first nine months of the year, Embraer distributed to its
shareholders R$ 421.1 million (equivalent to US$ 142.2 million) which
represented 47.8% off its net income during the same period.
Benefit/Base Period Date of Date of Approved Value Value per Share
Approval Payment Thousand US$ Voting Preferred
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1Q04 Interest 12/3/2004 8/4/2004 34,723 0.04546 0.05001
2Q04 Interest 6/25/2004 7/15/2004 51,489 0.06733 0.07406
3Q04 Interest 9/20/2004 10/15/2004 55,992 0.07315 0.08047
TOTAL 142,204 0.18594 0.20454
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Recent Developments
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Copa Airlines
Page 9 of 14
Copa Airlines of Panama announced on October 19, its acquisition of ten EMBRAER
190 commercial jets with an option for twenty additional aircraft. The airline's
first delivery is planned for November 2005. Copa was the undisclosed customer
from Embraer's order book and therefore, the current order backlog was not
affected by this announcement.
Air Canada
On 12 November 12, Embraer announced an order from Air Canada for 15 EMBRAER 175
airliners, plus options for an additional 15 aircraft, adding to its order
placed earlier this year for 45 firm and 45 option EMBRAER 190 aircraft.
Deliveries of the EMBRAER 175s are set to begin in July 2005.
At list price, the order for the 15 EMBRAER 175s is valued at US$ 420 million
(CAD$ 507.86 million), with a potential value of US$ 840 million (CAD$ 1.016
billion) if all options are converted. With this formal purchase agreement, Air
Canada becomes the first customer for the EMBRAER 175.
Conference Call Information
Date: Tuesday, November 16, 2004
English (US GAAP) Portuguese (BR GAAP)
11h00 A.M. (SP time) 9h00 A.M. (SP time)
8h00 A.M. (NY time) 6h00 A.M. (NY time)
Dial in numbers: Dial in numbers:
(1-800) 860-2442 - Participants from the U.S. (11) 4613-0501 - Participants from Brazil
(11) 4613-0502 - Participants from Brazil (55 11) 4613-4525 - Participants from other countries
(1-412) 858-4600 - Participants from other countries Access Code: Embraer
Access Code: Embraer
Replay: (55 11) 4613-4532 Replay: (11) 4613-4532
Access code: 169 Access Code: 142
The presentations will also be broadcast live over the internet at Embraer's web
page (www.embraer.com / www.embraer.com.br).
For additional information please contact:
Embraer - Empresa Brasileira de Aeronautica S/A
For additional information please contact:
Embraer - Empresa Brasileira de Aeronautica S/A
Anna Cecilia Bettencourt Daniel Bicudo
(55 12) 3927 1216 (55 12) 3927 1106
acecilia@embraer.com.br dbicudo@embraer.com.br
Milene Petrelluzzi Paulo Ferreira
(55 12) 3927 3054 (55 12) 3927 3953
milene.petrelluzzi@embraer.com.br ferreira.paulo@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 10 of 14
EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)
ASSETS
As of June 30, As of September 30,
2004 2004
CURRENT ASSETS
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Cash and cash equivalents 1,333,787 1,389,425
Trade accounts receivable,net 471,596 590,370
Collateralized accounts receivable 178,572 145,987
Inventories 1,230,772 1,372,745
Deferred income taxes 115,798 133,302
Other 389,041 364,817
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Total current assets 3,719,566 3,996,646
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NONCURRENT ASSETS:
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Trade accounts receivable,net - 113,061
Collateralized accounts receivable 1,690,592 1,297,497
Customer and commercial financing 219,904 213,912
Inventories 16,575 17,361
Property, plant and equipment, net 380,770 375,137
Investments 75,202 82,744
Deferred income taxes 71,818 111,900
Other 270,579 283,080
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Total noncurrent assets 2,725,440 2,494,692
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TOTAL ASSETS 6,445,006 6,491,338
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Page 11 of 14
EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollarsl
LIABILITIES AND SHAREHOLDERS' EQUITY
As of June 30, As of September 30,
2004 2004
CURRENT LIABILITIES
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Loans 345,215 427,507
Accounts payable to suppliers 661,459 802,073
Customer advances 435,756 395,038
Non recourse and recourse debt 479,325 375,360
Other accounts payable and accrued liabilities 465,699 525,908
Deferred income taxes - 4,123
Contingencies 327,960 375,535
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Total current liabilities 2,715,414 2,905,544
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LONG-TERM LIABILITIES
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Loans 684,687 741,656
Customer advances 100,781 112,812
Contribution from suppliers 152,601 145,752
Non recourse debt 1,389,838 1,068,125
Other accounts payable and accrued liabilities 93,675 97,747
Deferred income taxes - 49,009
Contingencies 20,050 22,076
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Total long-term liabilities 2,441,632 2,237,177
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MINORITY INTEREST 21,227 21,185
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SHAREHOLDERS' EQUITY: 1,266,733 1,327,432
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 6,445,006 6,491,338
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Page 12 of 14
EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands of U.S. dollars, except per share data)
Three Months Ended on Nine Months Ended on
September 30, September 30,
2003 2004 2003 2004
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Net sales 438,536 936,477 1,494,376 2,486,999
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Cost of sales and services (271,636) (625,205) (924,698) (1,672,283)
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Gross profit 166,900 311,272 569,678 814,716
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Operating expenses
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Selling expenses (49,000) (104,073) (148,364) (266,317)
Research and development (38,839) (34,506) (125,761) (5,435)
General and administrative (28,661) (34,257) (79,239) (97,011)
Employee profit sharing 261 (16,797) (7,902) (42,956)
Other operating expense, net (1,154) 5,230 (6,289) (600)
Equity in income (loss) from affiliates (34) - 51 -
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Income from operations 49,473 126,869 202,174 402,397
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Interest(expense) income, net (3,282) 7,886 (130,371) 4,548
Foreign exchange gain (loss), net (4,357) 13,968 (13,421) (4,968)
Other non-operating income (expense), net (9,756) 22 (8,134) 13
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Income before income taxes 32,078 148,745 50,248 401,990
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Income tax benefit (expense) (13,089) (34,780) 18,301 (103,431)
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Income before minority interest 18,989 113,965 68,549 298,559
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Minority interest 359 (270) (374) (1,321)
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Net income 19,348 113,695 68,175 297,238
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Earnings per share
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Basic
Common 0.0254 0.1486 0.0897 0.3883
Preferred 0.0280 0.1635 0.0986 0.4271
Diluted
Common 0.0253 0.1477 0.0893 0.3858
Preferred 0.0278 0.1624 0.0982 0.4244
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Weighted average shares (thousands of shares)
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Basic
Common 242,544 242,544 242,544 242,544
Preferred 471,349 474,995 470,767 475,411
Diluted
Common 242,544 242,544 242,544 242,544
Preferred 474,685 479,405 473,820 479,822
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Earnings per share - ADS basic (US$) 0.1119 0.6539 0.3945 1.7085
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Earnings per share - ADS diluted (US$) 0.1113 0.6498 0.3928 1.6977
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Page 13 of 14
EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands of U.S.dollars except per share data
Three months ended Nine months ended
on September 30, on September 30,
2003 2004 2003 2004
Operating activities
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Net income 19,348 113,695 68,175 297,238
Adjustments to reconcile net income to net cash
provided by(used in) operating activities:
Depreciation and amortization 15,921 15,407 47,922 44,250
Allowance for doubtful accounts (131) (2,086) 2,780 (1,180)
Provision for inventory obsolescence (10,556) 14,014 (5,849) 28,024
Deferred income taxes 11,793 (4,454) (27,306) 6,447
Foreign exchange loss(gain), net 4,357 (13,968) 13,421 4,968
Loss (gain) on disposition of assets 394 (22) (733) 41
Equity in income (loss) from affiliates - - (50) -
Interest accrued in excess of interest paid (paid in 8,847 4,308 14,502 (9,190)
excess of accrued)
Minority interests (360) 270 373 1,321
Other (568) (2,225) (1,790) (3,263)
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49,045 124,939 111,445 368,656
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Changes in assets and liabilities: (215,073) (181,204) (310,635) (176,629)
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Net cash provided by (used in) operating activities (166,028) (56,265) (199,190) 192,027
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Investing activities
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Purchase of property, plant and equipment (10,734) (12,816) (42,109) (34,058)
Net additions to investments - (7,193) - (51,444)
Proceeds from sale of property, plant and equipment 65 37 2,315 131
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Net cash used in investing activities (10,669) (19,972) (39,794) (85,371)
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Financing activities
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Repayment of loans (24,582) (118,314) (299,594) (592,588)
Proceeds from borrowings 250,163 252,570 794,571 729,721
Proceeds from issuance of shares 1,593 779 1,750 2,506
Dividends and/or Interest on capital paid (24,469) (51,523) (63,033) (128,459)
Payments on capital lease obligations (2,250) (899) (6,388) (3,806)
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Net cash provided by (used in) financing activities 200,455 82,613 427,306 7,374
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Effect of exchange rate changes on cash (10,762) 49,262 36,190 9,575
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Net increase (decrease) in cash and equivalents 12,996 55,638 224,512 123,605
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Cash and cash equivalents, beginning of period 868,338 1,333,787 656,822 1,265,820
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Cash and cash equivalents, end of period 881,334 1,389,425 881,334 1,389,425
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Page 14 of 14