EXHIBIT 1
US GAAP
BOVESPA: EMBR3, EMBR4
NYSE: ERJ
www.embraer.com
INVESTOR RELATIONS
Anna Cecilia Bettencourt
Andrea Bottcher
Paulo Ferreira
Tel: (55 12) 3927 1216
investor.relations@embraer.com.br
[EMBRAER LOGO OMITTED]
EMBRAER ANNOUNCES FIRST QUARTER 2005
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, 2005, December 31,
2004 and March 31, 2004 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 16, 2005 - Embraer (BOVESPA: EMBR3, EMBR4) (NYSE: ERJ),
the world's leading manufacturer of commercial jets up to 110 seats, recorded in
the first quarter of 2005 net sales of US$763.3 million and net income of
US$96.5 million, equivalent to diluted earnings per ADS of US$0.55. The firm
order backlog as of March 31, 2005 totalled US$9.9 billion.
- --------------------------------------------------------------------------------
1st Quarter 2005 Highlights
- --------------------------------------------------------------------------------
o Net sales for the first quarter of 2005 (1Q05) were US$763.3 million,
21.9% higher than the sales of US$626.2 million in 1Q04.
o Net income in 1Q05 was US$96.5 million, a 6.6% decrease over 1Q04.
o A total of 30 jets were delivered during 1Q05: 28 jets to the
Commercial Airline Market, and two Legacys to the Business Jet Market.
o On January 19, 2005, Republic Airways Holdings added 16 firm orders and
34 options for the EMBRAER 170 to its order book. Of the 16 new firm
aircraft orders, two were already accounted for in Embraer's
fourth-quarter 2004 order book.
o On February 28, 2005, Embraer delivered its 900th jet of the ERJ 145
family to European customer Luxair.
o Embraer signed in February a Memorandum Of Understanding with the
Indian Defense, Research and Development Organization to support the
development of the Indian Air Force's new Airborne Early Warning &
Control system.
o Harbin Embraer announced on March 24, 2005 the sale of five ERJ 145s to
China Eastern Airlines Jiangsu Ltd.
o The consortium formed by Embraer and the European Aeronautic Defense
and Space Company (EADS) received approval from the government commerce
authorities of Portugal, Germany and Italy in March to acquire 65% of
OGMA - Industria Aeronautica de Portugal S.A., one of the largest
maintenance, repair and overhaul facilities in Europe.
1
- --------------------------------------------------------------------------------
Income Statement Highlights
- --------------------------------------------------------------------------------
A comparative table of the main items of Embraer's consolidated income statement
is presented below for the three months ended March 31, 2004 and 2005 (1Q04 and
1Q05) and for the three months ended December 31, 2004 (4Q04).
- ----------------------------------------------------------------------------------------------------
Income Statement Unaudited 4Q04 1Q04 1Q05
In US$ millions, except % and earnings per ADS
- ----------------------------------------------------------------------------------------------------
Net sales 953.5 626.2 763.3
Gross profit 358.5 202.0 268.0
Gross margin 37.6% 32.3% 35.1%
Selling, general administrative and other expenses (159.6) (98.1) (101.1)
Research and development (39.1) 59.5 (30.4)
Employee profit sharing (18.2) (10.4) (12.0)
Income from operations 141.6 153.0 124.5
Operating margin 14.9% 24.4% 16.3%
Interest income, net (42.5) (7.6) (7.1)
Foreign exchange gain (loss),net (7.3) (2.2) 2.9
Other non-operating income (expense) net (0.1) -- --
Income before income taxes 91.7 143.2 120.3
Income tax benefit (expense) (8.7) (39.5) (22.5)
Minority interest (0.1) (0.4) (1.3)
Net income 82.9 103.3 96.5
Net margin 8.7% 16.5% 12.6%
Earnings per ADS -basic 0.4768 0.5952 0.5537
Earnings per ADS - diluted 0.4739 0.5908 0.5504
Net Sales and Cost of Sales & Services
Due to a larger volume of aircraft deliveries, Embraer's net revenues in 1Q05
reached US$ 763.3 million, a 21.9% increase over revenues in the same period
last year.
Net revenue from the commercial airline segment increased 30.5%, due to higher
commercial aircraft deliveries - 28 compared to 22 deliveries in the same period
last year.
- --------------------------------------------------------------------------------
Aircraft delivered
by sector 4Q04 1Q04 1Q05
- --------------------------------------------------------------------------------
Commercial 34 22 28
- --------------------------------------------------------------------------------
ERJ 135 1 (1) -- 2
ERJ 145 23(2) 14 16
ERJ 140 -- -- --
EMBRAER 170 10 8 10
- --------------------------------------------------------------------------------
Defense -- 1 --
- --------------------------------------------------------------------------------
EMB 145 -- 1 --
Legacy -- -- --
- --------------------------------------------------------------------------------
Corporate 8 -- 2
- --------------------------------------------------------------------------------
Legacy/Shuttle 8 -- 2
- --------------------------------------------------------------------------------
Total 42 23 30
- --------------------------------------------------------------------------------
Deliveries identified by parenthesis are accounted for as operating leases.
In addition, Embraer's net revenues include sales to the Defense, Business jet
market and Customer Services market, which combined reached 24.2% of the
Company's total revenue.
Page 2
The defense segment represented 10.3% of the Company's net revenues, totaling
US$ 78.8 million, a decrease over the US$ 130.7 million recorded in 1Q04. The
surveillance aircraft contracts, in particular a contract with the Mexican Air
Force, are in their final stages, and as a result, a smaller amount of revenue
has been recognized during 1Q05 compared to 1Q04. Net revenues in this segment
declined despite the revenues recognized from existing contracts, including the
contract with the Indian Air Force for five Legacys, which are expected to be
delivered during the second half of the year. Furthermore, one aircraft was
delivered to Satena, a State-owned Colombian airline, in 1Q04.
- ---------------------------------------------------------------------------------------------------------------------------
Net sales
by segment 4Q04 1Q04 1Q05
- ---------------------------------------------------------------------------------------------------------------------------
US$ % US$ % US$ %
Commercial Airline Market 627.2 65.8 443.2 70.8 578.2 75.8
Defense Market 88.7 9.3 130.7 20.9 78.8 10.3
Business Jet Market 151.2 15.9 -- -- 33.1 4.3
Customer Services and Others 86.4 9.1 52.3 8.4 73.2 9.6
- ---------------------------------------------------------------------------------------------------------------------------
Total 953.5 100.0 626.2 100.0 763.3 100.0
- ---------------------------------------------------------------------------------------------------------------------------
Cost of sales and services for 1Q05 totalled US$495.3 million, compared to
US$424.2 million in 1Q04. Due to a better product mix, combined with
improvements in the EMBRAER 170 learning curve, gross margin in 1Q05 reached
35.1%, higher than the 32.3% recorded in 1Q04.
Operating Expenses & Income from Operations
During 1Q05, operating expenses totalled US$143.5 million, compared to US$49.0
million reached in the same period last year. In 1Q04, the company recognized an
operating income of US$88.7 million in payments received from the Company's risk
sharing partners related to the fulfillment of certain contractual milestones in
the development of the EMBRAER 170/190 family. In 1Q05, this contribution
totalled US$ 5.6 million. Therefore, Embraer's income from operations in 1Q05
totalled US$124.5 million, compared to US$153.0 million recorded in 1Q04. In
addition, operating margin for 1Q05 was 16.3%, compared to 24.4% recorded in
1Q04.
During 1Q05, the Company invested US$36.0 million in new products research and
development, mainly in the development of the EMBRAER 170/190 jet family.
Therefore, research and development net of the contribution from risk sharing
partners was an expense of US$30.4 million in 1Q05 compared to an income of
US$59.5 million in 1Q04.
Selling expenses decreased from US$67.2 million in 1Q04 to US$53.8 million in
1Q05. In 1Q04, as part of the Company's effort to support the commencement of
the EMBRAER 170 model operations, Embraer recognized an expense of US$6.7
million related to customer technical assistance.
In 1Q05, general and administrative expenses totalled US$42.1 million compared
to US$30.4 million recorded in 1Q04. The increase in administrative expenses was
mainly due to US$5.9 million spent on the implementation of the SAP 4.7
Aerospace & Defense version. This project will allow the Company to improve its
process and business management capabilities. In addition, as approximately 80%
of the Company's administrative expenses are denominated in reais, the 8.3%
appreciation of the currency against U.S. dollar since 1Q04 negatively impacted
the Company's administrative costs. Compared to 4Q04, administrative expenses
remained relatively stable, decreasing slightly from US$42.3 million to
US$42.1 million in 1Q05.
Net Income
Despite the improved operating results in 1Q05 compared to the same period last
year which was significantly impacted by an income recognition of US$88.7
million related to the contribution by Company's risk sharing partners, net
income in 1Q05 totalled US$ 96.5 million equivalent to US$ 0.55 per diluted ADS.
As a result of lower cash availability, net interest expense was US$ 7.1 million
in 1Q05.
This quarter's income taxes totalled US$ 22.5 million and represented an
effective tax rate in US GAAP of 18.7%. Embraer's statutory tax rate is 34%. The
difference between statutory and effective US GAAP tax rate is attributed to the
recognition of interest on shareholders' equity of US$ 39.9 million during 1Q05,
which is tax-deductible in Brazil.
Page 3
- --------------------------------------------------------------------------------
Balance Sheet Highlights
- --------------------------------------------------------------------------------
OGMA's financial statements have been consolidated with Embraer's since March
9th 2005. The addition of OGMA has not had a material impact on our income
statement for 1Q05. OGMA's effects on the consolidated balance sheet are as
follows:
- --------------------------------------------------------------------------------
Balance Sheet Data 1Q05
(In US$ million) Embraer(1) OGMA Total
- --------------------------------------------------------------------------------
Cash and cash equivalents 814.8 11.2 826.0
Short term investments 44.2 -- 44.2
Trade accounts receivable 794.5 62.7 857.2
Inventories 1,505.7 64.2 1,569.9
Fixed assets 378.8 10.4 389.2
Suppliers 584.0 38.9 622.9
Loans 1,011.0 26.0 1,037.0
Shareholders' equity (2) 1,410.8 -- 1,410.8
Net cash (debt) (3) (152.0) (14.8) (166.8)
(1) Excluding OGMA
(2) OGMA's Shareholder equity in the amount of US$ 53.1 is not included in the
consolidation.
(3) Net Debt = Cash & Cash equivalent + Short term investments - Loans
As of March 31, 2005, Embraer's cash, cash equivalents and short-term
investments were US$ 870.2 million. On the same date, short and long term loans
(does not include non-recourse debt) amounted to US$ 1,037.0 million. Therefore,
the Company had a net debt position (total loans minus cash, cash equivalents
and short-term investments) of US$ 166.8 million.
The combination of higher inventories and accounts receivables resulted in a
decrease of the Company's net cash position.
- --------------------------------------------------------------------------------
Balance Sheet Data
(In US$ million) 4Q04 1Q04 1Q05
- --------------------------------------------------------------------------------
Cash and cash equivalents 1,314.0 1,097.5 826.0
Short term investments 46.7 -- 44.2
Trade accounts receivable 685.8 464.5 857.2
Inventories 1,428.3 1,272.9 1,569.9
Fixed assets 381.3 399.1 389.2
Suppliers 559.9 539.9 622.9
Loans 1,338.7 919.8 1,037.0
Shareholders' equity 1,353.9 1,237.9 1,410.8
Net cash (debt) 22.0 177.7 (166.8)
* Net cash= Cash and cash equivalents + Short term investments - Loans
Trade Accounts Receivable
During 1Q05, trade accounts receivable increased by US$ 171.4 million and the
Company ended the quarter with US$857.2 million in trade accounts receivables.
Of this total amount, approximately US$ 606.7 million is related to aircraft
delivered for which sales financing arrangements are under a structuring
process.
During 1Q05, Embraer delivered three aircraft to US Airways which have been in
our inventories since the airline filed for bankruptcy protection. Such
deliveries were part of an agreement filed with the bankruptcy court allowing US
Airways to maintain its equity investment in the aircraft, using its down
payments previously made by US Airways to the Company.
In addition, Embraer is jointly structuring a financial transaction with one of
its customers using the US capital markets to fund aircraft deliveries in 2005.
While this process is not concluded, these aircraft are being accounted for as
accounts receivables.
Page 4
OGMA accounted for US$62.7 million of Embraer's trade accounts receivables in
1Q05.
Inventories
With the beginning of serial production of the EMBRAER 175 and EMBRAER 190
aircraft, which have their first deliveries scheduled for the third quarter of
2005, inventories increased from US$1,428.3 million at the end of 4Q04 to US$
1,569.9 million at March 31, 2005.
OGMA accounted for US$64.2 million of Embraer's inventories in 1Q05.
Short Term and Long Term Loans
Despite the higher working capital needs during 1Q05, total short and long term
loans decreased by US$ 301.7 million in 1Q05, totalling US$ 1,037.0 million at
the end of the quarter. This decrease is mainly due to a pre-export credit
financing pre-payment of US$ 310.7 million.
Of the total debt, 77.6% is long-term loans and the remaining US$ 232.3 million
is short term.
In addition, of the total debt, US$23.6 million is effectively denominated in
reais and indexed to the CDI, at a weighted average interest rate of 14.8% per
annum.
The remaining US$1,013.4 million is denominated in other currencies, primarily
U.S. dollars, with a weighted average interest rate of 5.3% per annum.
Cash, Cash Equivalents and Short-Term Investments
Of the total US$ 870.2 million balance in cash, cash equivalents and short-term
investments, US$211.9 million is denominated in US dollars and the remaining
75.6% is comprised of investments primarily 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,
substantially denominated in reais.
- --------------------------------------------------------------------------------
Capital Expenditures
- --------------------------------------------------------------------------------
Improvements and Modernization
Investments in the improvement and modernization of the Company's industrial and
engineering processes, and property, plant, and equipment totalled US$13.7
million during 1Q05.
- --------------------------------------------------------------------------------
Supplementary Information according to Corporate Law (Brazilian GAAP)
- --------------------------------------------------------------------------------
Today Embraer also reported its 1Q05 earnings in accordance with the corporate
law accounting method (Brazilian GAAP), which according to Brazilian legislation
must be used as a basis for calculating distribution of dividends and interest
on shareholders' equity, income tax and social contribution. Below is presented
selected consolidated income data in accordance with Brazilian GAAP and in reais
(R$).
Net sales in 1Q05 totalled R$2,036.5 million and gross profit was R$627.7
million, with a gross margin of 30.8%. Income from operations for the period
(including employee profit sharing) totalled R$328.0 million, with an operating
margin of 16.1%. Income before taxes was R$312.1 million (15.3% of net sales).
Income tax and social contribution totalled R$74.9 million, representing an
effective tax rate of 24.0%. Net income for the period totalled R$234.8 million
(11.5% of net revenues).
- --------------------------------------------------------------------------------
Commercial Airline, Business Jet, and Defense Markets
- --------------------------------------------------------------------------------
Commercial Airline Market
During the first quarter, Embraer announced that Republic Airways Holdings has
added 16 firm and 34 option EMBRAER 170s to its order book. This order considers
the substitution of an existing order for eight ERJ 145s and the addition of
another eight airplanes. This brings Republic's order book for EMBRAER 170s to
39 firm EMBRAER 170s and 61 options. Of the 16 new firm aircraft, two were
already accounted for in Embraer's 4Q04 order book.
Page 5
Republic will use the new aircraft to supply service to Delta Air Lines as a
Delta Connection carrier. Republic already flies the EMBRAER 170 for United
Airlines as part of its United Express service. Through its subsidiaries,
Republic is one of the largest operators of Embraer aircraft with more than 110
ERJs and E-Jets.
In February, an important achievement was reached with the delivery of our 900th
jet of the ERJ 145 family to European customer Luxair. The handover ceremony of
the carrier's second ERJ 135 jet took place at the headquarters of Embraer in
Sao Jose dos Campos, state of Sao Paulo, Brazil. Luxair intends to use its two
new ERJ 135s to serve London City Airport (LCY) from Luxembourg and on its
network for longer routes. The ERJ 135 received LCY certification in October
2003 and today is one of the few jets allowed to operate in that particular
airport.
Harbin Embraer announced in March the sale of five ERJ 145s to China Eastern
Airlines Jiangsu Ltd. The contract marks the second order placed by a Chinese
airline with Harbin Embraer Aircraft Industry Co., Ltd. (HEAI). Deliveries for
this customer are expected to start in the second half of 2005 and continue in
2006. This deal will increase the ERJ 145 fleet in China to 16 aircraft, joining
five airplanes operated by Sichuan Airlines and six operated by China Southern
Airlines.
At March 31, 2005 , the Commercial Airline segment showed the following firm
order backlog:
- --------------------------------------------------------------------------------
Firm Firm Order
Aircraft Orders Options Delivered Backlog
- --------------------------------------------------------------------------------
ERJ 135 123 2 108 15
ERJ 140 94 20 74 20
ERJ 145 681 211 634 47
EMBRAER 170 172 137 56 116
EMBRAER 175 15 -- -- 15
EMBRAER 190 155 230 -- 155
EMBRAER 195 15 20 -- 15
- --------------------------------------------------------------------------------
Total 1,255 620 872 383
- --------------------------------------------------------------------------------
Business Jet Market
In March, the Legacy corporate jet received certification from the aviation
authorities in Brazil, the U.S. and Europe to raise its service ceiling to
41,000 feet (12,500 meters). This achievement reinforces the Company's
commitment to meeting market expectations and adding value to its customers.
The higher service ceiling allows Legacy operators to take advantage of less
congested airways, for faster and more enjoyable flights.
Embraer expects to deliver the first aircraft with the 41,000 feet capability to
new customers in the second quarter of 2005. The service bulletin for current
Legacy owners will be made available upon request and some are already scheduled
for implementation.
One day after the certification to raise the Legacy service ceiling, Embraer
announced Boutsen Aviation as an authorized sales representative for Benelux
(Belgium, The Netherlands, and Luxembourg), the Principality of Monaco and the
French Cote d'Azur. This representation covers the Legacy family of corporate
jets, which comprises the Legacy Executive, Legacy Shuttle and Legacy Shuttle
HC. This partnership will enable Embraer to be closer to its European customers
and cater to their specific needs.
Defense Market
Embraer signed in February a Memorandum Of Understanding with the Indian DRDO
(Defense, Research and Development Organization) to support the development of
the Indian Air Force's new Airborne Early Warning & Control (AEW&C) system. The
new system will be based on the EMB 145 Intelligence, Surveillance and
Reconnaissance (ISR) platform, one of the world's best selling ISR platforms.
Embraer's commitment to contribute its previous experience in platform
development and complex systems integration was a key factor in the DRDO's
selection.
Indian government analysts and Embraer company engineers are collecting the
necessary technical data on the aircraft for the study. At the request of the
Indian government, an Embraer team recently visited the Indian Defense Research
and Development Organization and held in-depth discussions to support DRDO
personnel in their task.
The analysis is expected to result in an initial contract for three EMB 145
AEW&C aircraft and technical support during the development effort. An order for
additional aircraft could materialize in the future, based on a successful first
development phase.
Page 6
Customer Services
As the Company's fleet of aircraft grows in the U.S. and Europe, specifically
the new EMBRAER 170/190 family of airliners, Embraer must also grow to continue
to meet customer expectations for high quality service and maintenance of their
aircraft.
Embraer is expanding its maintenance operation in Nashville, United States and
its presence in Europe, through the acquisition of OGMA - Industria Aeronautica
de Portugal S.A., to meet the growing demand for full-service aircraft
maintenance.
Embraer Aircraft Maintenance Services Inc. (EAMS) will build a new 70,000
square-foot facility at Nashville International Airport (BNA) to add capacity
and capability for maintenance on the fast growing fleet of Embraer aircraft in
North America. As a consequence, 140 to 160 new employees are expected to be
eventually added to EAMS' current workforce of 200-plus employees.
In Europe, the government commerce authorities from Portugal, Germany and Italy
have approved the acquisition of a 65% interest in OGMA - Industria Aeronautica
de Portugal S.A. by a consortium formed by Embraer and the European Aeronautic
Defense and Space Company (EADS).
To acquire OGMA, Embraer and EADS created the AIRHOLDING, SGPS, S.A., with
Embraer holding a 99 percent stake and EADS holding a 1 percent stake. In the
future, the participation of EADS in this company could reach a maximum of 30
percent.
Backlog & Delivery Forecast
Out of the total 145 aircraft expected to be delivered in 2005, Embraer
delivered 30 aircraft in the first quarter of 2005.
Approximately 60% of the aircraft deliveries forecasted for 2005 will be
concentrated in the second half of the year, which is when the first deliveries
of the EMBRAER 175 and EMBRAER 190 are scheduled to begin.
Embraer maintains its forecast for deliveries of 145 Commercial, Business and
Defense aircraft (including only executive transport aircraft) in each of the
years of 2005 and 2006.
As of March 31, 2005, Embraer's firm order backlog, including the Commercial
Airline, Business Jet and Defense markets totalled US$ 9.9 billion.
Firm Backlog US$ Billion
1Q04 2Q04 3Q04 4Q04 1Q05
---- ---- ---- ---- ----
10.9 10.5 11.0 10.1 9.9
- --------------------------------------------------------------------------------
Investor Relations
- --------------------------------------------------------------------------------
Embraer's American Depositary Shares (ADS) traded on the New York Stock Exchange
(NYSE) closed at US$31.3 at the end of March 2005, representing a 6.4% decrease
in value during the first quarter.
The Company's common and preferred shares traded in the domestic market on the
Bolsa de Valores de Sao Paulo (BOVESPA) closed at R$15.92 and R$20.84,
respectively, at the end of March 2005, representing an increase of 0.76% and
decrease of 6.13%, respectively, during the first quarter. The Bovespa index in
turn increased in value by 1.58% during the same period.
The average daily trading volume for the ADS's, common shares, and preferred
shares during the same period was US$21.6 million, R$4.0 million, and R$9.8
million, respectively.
Page 7
During a meeting held March 11, 2005, the Board of Directors approved the
distribution of interest on shareholder's equity on April 15, 2005 in the amount
of US$ 40.0 million, representing US$ 0.22925 per ADS.
- --------------------------------------------------------------------------------
Recent Events
- --------------------------------------------------------------------------------
Embraer Launches Very Light Jet and Light Jet
On May 3, Embraer announced its intention to strengthen its position in the
business aviation market with new products and services by complementing the
Legacy offering with jets for the Very Light and Light categories.
Recently created, the Very Light Jet category is made up of aircraft that carry
6 to 8 people or up to 10,000 pounds. The Light segment, already established, is
comprised of jets that commonly transport up to 8 or 9 people.
Embraer's entry into the Very Light and Light categories was approved by
Embraer's Board of Directors in April. The investment in the new jets is
expected to total US$ 235 million. This program will be funded by the partners,
financial institutions and the Company's own cash generation. Based upon
in-depth market assessments, Embraer has estimated demand for approximately
3,000 Very Light, Entry and Light jets over the next decade. This figure does
not include the air taxi market.
Embraer's Very Light Jet will carry up to eight people and be powered by Pratt &
Whitney Canada's PW617F engine, with 1,615 pounds of thrust. Its range will be
1,160 nautical miles (NBAA IFR reserves with 100 nm alternate) with four people
onboard and it will have a maximum operating speed of Mach 0.7. The airplane is
designed for a short takeoff distance and is capable of flying at 41,000 feet.
The Very Light Jet is expected to enter service in mid-2008 and is expected to
be priced at $2.75 million based on 2005 economic conditions.
The Light Jet will be powered by P&WC's PW535E engine, with 3,200 pounds of
thrust. Comfortably accommodating up to nine people, the Light Jet's range will
be 1,800 nautical miles (NBAA IFR reserves with 100 nm alternate) with six
people onboard, and it will have a maximum operating speed of Mach 0.78. The
airplane is also designed for a short takeoff distance and is capable of flying
at 45,000 feet.
The Light Jet is expected to enter service in mid-2009 and is expected to be
priced at US$ 6.65 million based on 2005 economic conditions.
Embraer is committed to making long-term investments in this business to offer
revolutionary products and completely integrated solutions to a sophisticated
customer base. The Company's goal is to build a robust business aviation unit
and a global infrastructure to support it.
Saudi Arabian Airlines Order
On April 27, Saudi Arabian Airlines signed a contract with a firm order of 15
EMBRAER 170 aircraft, with the first delivery scheduled for December 2005. The
airline is Embraer's first customer for the type in the Middle East. All
aircraft will be configured in a two-class layout with a total of 66 seats, six
of which will be assigned to first class.
As it enters its 60th year of operation, Saudi Arabian Airlines is strongly
committed to the development and expansion of services within the Kingdom and
the region. The airline intends to deploy its newly acquired EMBRAER 170 within
its domestic and regional markets, adding frequencies on existing routes and
eventually developing mini-hubs at Hail City in the North of the country and
Abha in the South.
Sale of Three EMBRAER 170/190 Family Jets to TAME
On April 18, Embraer announced the sale of three EMBRAER 170/190 family aircraft
to TAME Linea Aerea del Ecuador, the state-run Ecuadorian airline. The customer
will acquire two 76-seat EMBRAER 170 jets and one 104-seat EMBRAER 190, with
deliveries expected to take place in 2005 and 2006. TAME also holds four options
on aircraft of the same jet family.
- --------------------------------------------------------------------------------
Conference Call Information
- --------------------------------------------------------------------------------
Embraer will hold a conference call to review its 1Q05 Results in US GAAP May
17, 2005
Page 8
English (US GAAP) Portuguese (BR GAAP)
10:00 am (NY Time) 8:00 am (NY Time)
11:00 am (SP Time) 9:00 am (SP Time)
Dial-in Numbers Dial-in Number
1 800 473-6123 +55 11 2101-1490
1 973 582-2706 Code: Embraer
Code: 6060657
Replay Number Replay Number
1 973 341-3080 55 11 2101-1490
Code: 6060657 Code: Embraer
The conference call will also be broadcast live over the web at 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
Andrea Bottcher
(55 12) 3927 3054
abottcher@embraer.com.br
- --------------------------------------------------------------------------------
This document includes forward-looking statements or statements about events or
circumstances which have not occurred. We have based these forward-looking
statements largely on our current expectations and projections about future
events and financial trends affecting our business and our future financial
performance. These forward-looking statements are subject to risks,
uncertainties and assumptions, including, among other things: general economic,
political and business conditions, both in Brazil and in our market;
expectations of trends in the industry; our investment plans; our capacity to
develop and deliver products on the previously agreed dates; and existing and
future government regulations.
The words "believes," "may," "will," "estimates," "continues," "anticipates,"
"intends," "expects" and similar words are intended to identify forward-looking
statements. We undertake no obligations to update publicly or revise any
forward-looking statements because of new information, future events or other
factors. In 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.
- --------------------------------------------------------------------------------
Page 9
EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A.
------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(in thousands of U.S. dollars)
------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------------
As of December 31, As of March 31,
2004 2005
- ----------------------------------------------------------------------------------------------------------
CURRENT ASSETS
- ----------------------------------------------------------------------------------------------------------
Cash and cash equivalents 1,314,038 826.028
Short-term investments 46,738 44,235
Trade accounts receivable, net 566,127 690,235
Collateralized accounts receivable 70,599 53,105
Inventories 1,408,608 1,547,696
Deferred income taxes 104,417 103,135
Other 364,982 425,169
- ----------------------------------------------------------------------------------------------------------
Total current assets 3,875,509 3,689,603
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
NONCURRENT ASSETS:
- ----------------------------------------------------------------------------------------------------------
Trade accounts receivable, net 119,678 166,943
Collateralized accounts receivable and residual value 777,546 792,033
Customer and commercial financing 332,761 327,401
Inventories 19,674 22,238
Property, plant and equipment, net 381,265 389,241
Investments 48,267 33,625
Deferred income taxes 262,403 256,960
Other 286,575 289,782
- ----------------------------------------------------------------------------------------------------------
Total noncurrent assets 2,228,169 2,278,223
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
TOTAL ASSETS 6,103,678 5,967,826
- ----------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------
As of December 31, As of March 31,
2004 2005
- ----------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
- ----------------------------------------------------------------------------------------------------------
Loans 513,281 232,345
Accounts payable to suppliers 556,492 619,468
Customer advances 375,548 386,240
Non-recourse and recourse debt 351,405 336,967
Other accounts payable and accrued liabilities 414,789 440,162
Deferred income taxes 14,997 14,584
Contingencies 89,589 156,505
- ----------------------------------------------------------------------------------------------------------
Total current liabilities 2,316,101 2,186,271
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
LONG-TERM LIABILITIES
- ----------------------------------------------------------------------------------------------------------
Loans 825,448 804,674
Accounts payable to suppliers 3,450 3,410
Customer advances 103,615 96,260
Contribution from suppliers 140,037 134,269
Non-recourse and recourse debt 654,291 641,916
Other accounts payable and accrued liabilities 141,512 204,331
Deferred income taxes 157,817 148,403
Contingencies 386,096 295,762
- ----------------------------------------------------------------------------------------------------------
Total long-term liabilities 2,412,266 2,329,025
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
MINORITY INTEREST 21,443 41,764
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY: 1,353,868 1,410,766
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 6,103,678 5,967,826
- ----------------------------------------------------------------------------------------------------------
Page 10
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
In thousands of U.S.dollars except per share data
- -----------------------------------------------------------------------------------------
Three Months Ended
March 31, 2004 March 31, 2005
- -----------------------------------------------------------------------------------------
Net sales 626,201 763,290
- -----------------------------------------------------------------------------------------
Cost of sales and services (424,168) (495,290)
- -----------------------------------------------------------------------------------------
Gross profit 202,033 268,000
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Operating expenses
- -----------------------------------------------------------------------------------------
Selling expenses (67,177) (53,798)
Research and development 59,472 (30,368)
General and administrative (30,380) (42,155)
Employee profit sharing (10,417) (11,988)
Other operating expense, net (522) (5,187)
Equity in income (loss) from affiliates -- --
- -----------------------------------------------------------------------------------------
Income from operations 153,009 124,504
- -----------------------------------------------------------------------------------------
Interest(expense) income, net (7,638) (7,104)
Foreign exchange gain (loss) net (2,238) 2,888
Other non-operating income (expense), net 29 (24)
- -----------------------------------------------------------------------------------------
Income before income taxes 143,162 120,264
- -----------------------------------------------------------------------------------------
Income tax benefit (expense) (39,489) (22,453)
- -----------------------------------------------------------------------------------------
Income before minority interest 103,673 97,811
- -----------------------------------------------------------------------------------------
Minority interest (359) (1,306)
- -----------------------------------------------------------------------------------------
Net income 103,314 96,505
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Earnings per share
- -----------------------------------------------------------------------------------------
Basic
Common 0.1353 0.1258
Preferred 0.1488 0.1384
Diluted
Common 0.1343 0.1251
Preferred 0.1477 0.1376
- -----------------------------------------------------------------------------------------
Weighted average shares (thousands of shares)
- -----------------------------------------------------------------------------------------
Basic
Common 242,544 242,544
Preferred 473,788 476,721
Diluted
Common 242,544 242,544
Preferred 478,981 480,840
- -----------------------------------------------------------------------------------------
Earnings per share - ADS basic (US$) 0.5952 0.5537
- -----------------------------------------------------------------------------------------
Earnings per share - ADS diluted (US$) 0.5908 0.5504
- -----------------------------------------------------------------------------------------
Page 11
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 on March 31,
2004 2005
- --------------------------------------------------------------------------------------------------------------------------
Operating activities
- --------------------------------------------------------------------------------------------------------------------------
Net income 103,314 96,505
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 13,306 17,191
Allowance for doubtful accounts (455) 1,106
Provision for inventory obsolescence 5,525 5,076
Deferred income taxes 15,354 (3,102)
Foreign exchange loss (gain), net 2,238 (2,888)
Loss (gain) on disposition of assets 58 (47)
Interest accrued in excess of interest paid (paid in excess of accrued) (5,815) 2,143
Minority interests 359 1,306
Other (750) 1,880
- --------------------------------------------------------------------------------------------------------------------------
Changes in assets and liabilities: (128,746) (240,728)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 4,388 (121,558)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Investing activities
- --------------------------------------------------------------------------------------------------------------------------
Purchase of property, plant and equipment (9,836) (13,660)
Proceeds from sale of property, plant and equipment 45 83
Net additions to investments -- (151)
- --------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (9,791) (13,728)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Financing activities
- --------------------------------------------------------------------------------------------------------------------------
Repayment of loans (256,173) (521,682)
Proceeds from borrowings 138,229 227,416
Proceeds from issuance of shares 719 2,045
Dividends and/or Interest on capital paid (40,348) (59,441)
Payments on capital lease obligations (1,825) (279)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (159,398) (351,941)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (3,521) (783)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents (168,322) (488,010)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning of period 1,265,820 1,314,038
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period 1,097,498 826,028
- --------------------------------------------------------------------------------------------------------------------------
Page 12