farnborough airshow apresentação financeira

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  • 1. 5th Annual Investors and Analysts MeetingNovember 18 & 19, 2004So Jos dos Campos - Brazil Financial Antonio Luiz Pizarro MansoCFO

2. Forward Looking Statement This presentation 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. The words believes, may, will, estimates, continues, anticipates, intends, expects and similar words are intended to identify forward-looking statements. We undertake no obligations to update publicly or revise any forward-looking statements because of new information, future events or other factors. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this presentation might not occur. Our actual results could differ substantially from those anticipated in our forward-looking statements.THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT. 3. Shareholder Base 4. Embraer Voting CapitalOrdinary Shares: 242,544,44833.78%2% Individuals 20% 60% Controlling European GroupShareholders7% ForeignInstitutional Investors11%Brazilian Institutional Investors 20% European Group60% Controlling Shareholders Dassault 5.67% PREVI (Pension Fund)20% Thales 5.67%SISTEL (Pension Fund) 20% EADS 5.67% Snecma 2.99% Cia. Bozano20%THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT. 5. Preferred Shares Preferred Shares : 475,411,02666.22% 2%17%IndividualsControlling Shareholders10% BNDES 3% BrazilianInstitutional Investors 68% Foreign Investors THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT. 6. Dividends 50060% 404 421 400 49.8%50% 327 43.3%40% 300 36.1% 36.1%228195 30%27.2% 20020% 10010%0 0%2000 2001 2002 20039M04 DividendsPay Out Ratio R$ millionTHE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT. 7. Main Differences betweenBrazilian GAAP& US GAAP 8. Revenue Recognition BR Gaap & US Gaap Commercial Airline & Corporate Segments Revenues are generally recognized as the deliveries are made Defense Defense segment operates in a business environment that differs from Commercial Airline and Corporate markets segments. The main characteristics are: Long-term contracts with customers to develop defense products based on each customer need Quantities and selling price are generally fixed at the beginning of the program Exposed to risks in the execution of the contract Given these characteristics, revenues are recognized under the long-term contract rules and uses the percentage-of-completion method.THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT. 9. Defense Revenue and Costs Defense contract accounting Long-term contract accounting requires management to estimate the total contract cost. These cost consist of designing, engineering, manufacturing and entry into service. Total estimated contract costs include: Raw material Supplier components Direct Labor, including engineering Manufacturing overhead Estimated total Price to percent of complete x price = be recognized to dateRevenue to be -Revenue recognized= Current periodRecognized to date in prior periods revenue THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT. 10. Defense Revenue and Costs Defense contract accounting Contract monitoring and related adjustments: Review is made on a quartely basis As part of these reviews, additional revenues arising from change order requests and additional cost from over spending are identified and reflected in a revised contract margin. The effect of any revision is accounted for by way of a cumulative catch-up adjustment to margin Physical progressPercent of complete =Costs incurred to dateMost recent estimate of total costTHE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT. 11. Translation Effects (R$ x US$)BRGAAP Up to 1995 non monetary items used to be indexed by theUFIR (restating to current purchasing power) There is no fuctional currency conceptUSGAAP Functional Currency is the US$ (SFAS 52) Non Monetary Assets and Liabilities are accounted in historicalUS$THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT. 12. PP&EBRGAAP Assets revaluation at market value is allowed Interest capitalization was not foreseen up to 1996USGAAP Interest capitalization over Long-term assets construction (SFAS 34) Capitalization of assets acquired through capital leases (SFAS 13)THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT. 13. Deferred AssetsBRGAAPCapitalization of expenses that will benefit future fiscal yearsDeferral of pre-operation costsUSGAAPR&D accounted in the income statementPre-operation costs are not deferredTHE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT. 14. Capital & Operating LeaseBRGAAPCapital and operating lease are accounted as rentUSGAAPCapital and operating lease concept explained by SFAS 13Accounted as: Accounted as pre paid expenses Customers commercial financing Deferred incomeTHE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT. 15. Derivatives BRGAAP No CVM or IBRACON specific rule Accounted by the accrual method USGAAP SFAS 133 in use since 2001 Gains and losses recognized during the period Fair value of derivatives is mandatory THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT. 16. Deferred Income TaxesBRGAAP Differences between accounting and fiscal recordsUSGAAP All BR GAAP and US GAAP accounting diferences are consideredto calculate the deferred income tax 1999 (*)2000 2001 200220039M04 No IOSE 27.9%(27.4%) (34.5%) (33.4%)(38.9%)(33.7%) BenefitBR GAAP With IOSE 27.9%(24.2%) (30.6%) (26.6%)(29.8%)(22.5%)BenefitUS GAAP With Benefit (23.8%)(26.8%) (40.3%) (45.6%) 25.8% (25.7%) of IOSE IOSE = Interest on Shareholders Equity (*) 1999 no IOSE distribution THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT. 17. SPEsSome of the sales transactions are structured financings throughwhich an SPE purchases the aircraft, pays the full purchase priceon delivery or at the conclusion of the sales financing structure,and leases the related aircraft to the ultimate customer. BRGAAP New rule to be applied in 2005 USGAAP Accounted as collateralized accounts receivable and non-recourse and recourse debt. Consolidation of certain SPEs owned by third parties that lack the minimum amount of equity capital investment (capital at risk) as defined in the EITF Topic D-14 and EITF 90-15. Upon issuance of FIN 46 and FIN 46R, basic conditions requiring consolidation of such entities were maintained and therefore no significant effect is expected . Source: 20 F note 8THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT. 18. Guarantees BRGAAP No specific rule available Disclosure under notes to consolidated financial statements is mandatory USGAAP Since 01/01/2003 guarantees given to third parties are measured at fair value and recognized on income (FIN 45)THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT. 19. Reconciliation between BR & USGAAP Shareholders Equity(09/30/04) US$ Million1.6001.503 3 0111.400 -4 1213 1.3271.200-280-1 -16-131.000 800 600 400 200-BR GAAP Translation PP&E Inventories FinancialDeferredDerivativesFin 45Operacional DeferredOthersUSGAAPEffects Lease Assets (R&D) fair ValueLeaseIncome Taxes AdjusmentsTHE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT. 20. Reconciliation between BR & USGAAP Net Income (9M04)US$ Million350 327 -55 22 -5-4-13 22 2973004 -95 -4710425020015010050- BR GAAP Translation PP&E Inventories FinancialDeferred Derivatives Fin 45 OperacionalDeferred OthersExchanges USGAAP Effects Lease Assetsfair ValueLease Incomerate effect(R&D)Adjusments Taxes THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAERS WRITTEN CONSENT. 21. Off Balance SheetExposure 22. Off Balance Sheet ExposureFinancial Guarantees Provided in the form of guarantees of lease payments, to mitigate default-related losses. These guarantees are mainly issued for the benefit of the customers financing agent. Exercised when customers do not meet their payment obligations during the term of the financing. Collateralized by the aircraft. Upon an event of default, the Company usually is the agent for the guaranteed party for the refurbishment and remarketing of the underlying aircraft. The Company may be entitled to a fee for such remarketing services. Typically a claim under the guarantee shall be made only upon surrender of the underlying aircraft for remarketingTHE INFORMATION CONTAINED HEREIN IS T