third annual analyst & investor meeting financial presentation
TRANSCRIPT
EmbraerThird Annual
Investor MeetingSão José dos Campos
Nov. 21-22, 2002
Antonio Luis Pizarro MansoCFO
ShareholderBase
Embraer Voting Capital
20% European Group
1.45%Brazilian Govt.
18.55%Free Float
60% Controlling Shareholders
20% European GroupDassault Aviation 5.67%Thales 5.67%EADS 5.67%Snecma 2.99%
1.45%Brazilian Govt.
18.55%Free Float
60% Controlling Shareholders PREVI (Pension Fund) 20%SISTEL (Pension Fund) 20%Cia. Bozano 20%
Ordinary Shares: 242,544,448 34.08%
Preferred SharesPreferred Shares : 469,207,776 65.92%
NYSE41.85%
Sistel2.11%
Bozano Holdings, Ltd
5.09% BB - Bco de Investimentos S.A.
0.62%Previ12.97%
Cia Bozano5.11%
BNDESPar11.96% BOVESPA
20.29%
NYSE41.85%
Sistel2.11%
Bozano Holdings, Ltd
5.09% BB - Bco de Investimentos S.A.
0.62%Previ12.97%
Cia Bozano5.11%
BNDESPar11.96% BOVESPA
20.29%
3rd Quarter 2002Financial Results
US GAAP /BR GAAP
US$ MillionUS GAAP
Net Sales & Gross Margin
581
743
590823
39,3%39,2%38,2%40,3%
0
300
600
900
2Q01 3Q01 2Q02 3Q0230%
40%
50%
R$ MillionBR GAAP
1918 19761971
1556
49,4%
41,8%44,3%45,3%
0
1000
2000
3000
4000
2T01 3T01 2T02 3T020%
15%
30%
45%
60%
US GAAP
Sales per Segment3Q02
Revenue Breakdown
ERJ 14027%
ERJ 14556%
Defesa7%Corporativo
3%Peças e Serviços
7%
BR GAAP
Sales per Segment3T02
ERJ 14024%
ERJ 14552%
Defesa9%
Corporativo4%
Peças e Serviços
11%
BR GAAP
Sales per Market3T02 .
Revenue Breakdown
Europa20%
EUA77%
Brasil3%
US GAAP
Sales per Market3Q02
Europa16%
EUA81%
Brasil3%
US GAAP
US$ Million
EBIT & Margin
1 1 11 7 5 1 1 9
1 8 7
1 9 , 1 %2 0 , 3 %2 3 , 5 %2 2 , 7 %
0
100
200
300
2Q01 3Q01 2Q02 3Q02
0%
10%
20%
30%
40%
628
615386
597
20,0%
31,2%31,1%
31,1%
0
200
400
600
800
2T01 3T01 2T02 3T020%
10%
20%
30%
40%
50%
BR GAAP
R$ Milhões
EBITDA & Margin
197
125
186
134
21,6%22,7%
25,0%24,0%
0
100
200
300
2Q01 3Q01 2Q02 3Q0210%
20%
30%
US GAAP
US$ Million
676
429659645
33,6% 33,6%
33,4%34,2%
0
200
400
600
800
2T01 3T01 2T02 3T02
0%
10%
20%
30%
40%
50%
BR GAAP
R$ Milhões
Net Income & Margin
40,6
93
55 37
7,0%6,2%7,3%
11,3%
0
50
100
150
2Q01 3Q01 2Q02 3Q020,0%
5,0%
10,0%
15,0%
US GAAP
US$ Million
167
253
338
188
17,6%
17,6%12,8%
9,5%
0
100
200
300
400
2T01 3T01 2T02 3T020%
10%
20%
30%
BR GAAP
R$ Milhões
Net Cash (Debt)
US GAAP
US$ Million
733
(22)
39
360
217
-200
0
200
400
600
800
1000
Dec.31,2000
Dec. 31,2001
Mar. 31,2002
June 30,2002
Sep. 30,2002
1.431
(53)
89
1.023846
(400)
0
400
800
1.200
1.600
2.000
2.400
31 Dez.2000
31 Dez.2001
31 Mar.2002
30 Jun.2002
30 Set.2002
BR GAAP
R$ Milhões
FinancialFinancial
SupportSupport
For SalesFor Sales
Previous Disclosure
• Financial Guarantees, based on the assumptions of EmbraerManagement, did not represent any potential liability, considering:
• the asset value of the aircraft
• the market value of the aircraft
• the credit ratings of the airline companies
• the market conditions
New Scenario – Post 9/11
• Decrease in the asset value of the aircraft
• Reduction in the market value of the aircraft
• Deterioration of the credit ratings of the airline companies
• More competitive market conditions
FinancialFinancial
SupportSupport
For SalesFor Sales
Sales FinancingSales Financing
Sales Financing
• Embraer is strongly commited to its customer needs, including the financial needs
• Embraer does not intend to finance sales of new aircraft on a long-term basis
• Contractual obligations and partnership with customers represent a strong commitment
• Financial support for sales plays a fundamental role in the future growth of the Company
ERJ Financing MethodsERJ Financing MethodsERJ Financing Methods
• Total aircraft delivered: 587 (through Sep/02)• Total amount exported: US$ 9.635 Billion• Total amount financed by BNDES: US$ 5.088 Billion
Market48%
BNDES52%
Straight Financing
30%
Tax Lease56%
Finance Lease
6%
Operating Lease
8%
Total Aircraft Delivered: 587
ERJ Financing MethodsERJ Financing MethodsERJ Financing Methods
Tax Lease
USLL73%
UK Tax Lease
8%
US Single Investor Lease13%
Polish Tax Lease
4%
French Tax Lease
2%
ERJ Financing MethodsERJ Financing MethodsERJ Financing Methods
Diversification of Financing Sources
Alliance Capital Credit Lyonnais JP Morgan ChaseAmerican State Bank Debis Air Finance MetiLife CapitalAmeritech Credit Corp. DVB MitsuiAttransco Eurojet Natexis BankBanco Portugues do Atlantico Fifty Third Bank Nation CityBank First Finova NIBBank of America Fleet Bank Phillip MorrisBarclays Bank GATX Royal Bank of ScotlandBCI - Banca Commerciale Italiana GECAS South TrustBell Atlantic GEFA Gesellschaft (Deutsch Bank) Standard CharteredBerliner Bank Giro Bank Teachers InsuranceBNP Paribas Hallifax Bank of Scotland (HBOS) The Cit GroupBNY Capital Funding HVB TransamericaCitibank ICX Corp. Travellers Insurance Comerica Integra Wachovia BankCoronation Aircraft Leasing Jefferson Pilot Life WestLBCredit Agricole John Hancock Zions Credit Corp
Amount US$ Million
Source: Salomon Smith Barney – review September 13,2002
762 9851.607
2.688
3.720
6.030
7.9548.543
1.4702.092
1994 1995 1996 1997 1998 1999 2000 2001 2002 2002(*)
EETC – Annual volume of new issues - 1994 ~ 2002EETC EETC –– Annual volume of new issues Annual volume of new issues -- 1994 ~ 20021994 ~ 2002
(*) Included issue based on floating interest realized by Continental and Northwest.
FinancialFinancial
SupportSupport
For SalesFor Sales
Asset ManagementAsset Management
EMBRAER Capital - Structure
ECC Leasing Co. Ltd.(Ireland)Leasing
ECC Insurance & Financial Co. Ltd.(Cayman Islands)Captive Insurance
ECC Investiment Switzerland, AG(Switzerland)
Holding
Embraer Spain Holding Co. SL(Spain)Holding
EMBRAER S.A.(Brazil)
Manufacturer
ECC Leasing Company
ECC Leasing Co. Ltd.(Ireland)Leasing
ECC Insurance & Financial Co. Ltd.(Cayman Islands)Captive Insurance
ECC Investiment Switzerland, AG(Switzerland)
Holding
Embraer Spain Holding Co. SL(Spain)Holding
EMBRAER S.A.(Brazil)
Manufacturer
Mission:• Manage and remarket a portfolio of aircraft thatEmbraer acquires through trade-ins and exercised put options;• Remarketing service provider for third-parties in connection with sales campaign.
ECC Leasing Co. Ltd.(Ireland)Leasing
• Embraer is NOT allowed to lease NEW aircraft without specific Board approval for such transactions;
• Business sense: any transaction has to
accomplish a set of tests and rules, as follows:• Gross margin test;• Net margin test• Cash flow test; and• Title transfer rule.
ECC Insurance Company
ECC Leasing Co. Ltd.(Ireland)Leasing
ECC Insurance & Financial Co. Ltd.(Cayman Islands)Captive Insurance
ECC Investiment Switzerland, AG(Switzerland)
Holding
Embraer Spain Holding Co. SL(Spain)Holding
EMBRAER S.A.(Brazil)
Manufacturer
Mission:• Assures the payment of contingent losses that Embraermay face related to Embraer’s financial guarantees;
ECC Insurance & Financial Co. Ltd.(Cayman Islands)Captive Insurance
Insurance Outline:• IRB transaction approval:
• $ 252,5 MM premium payments over the next five
years covering all financial guarantees associated with
deliveries within such period
• Regulated by Cayman Islands Monetary Authority
• Initial Capital in Insurance $ 2,6 MM
• Insurance policy issued associated with aircraft
deliveries up to Sep.02:• $ 185,6 MM premium over 5 years, of which• $ 26,3 MM first premium payment for obligations through Sep. 02.• $3.4 MM in IBNR losses• New declarations and endorsements quarterly (new premiums)
Currently Expected Transactions
• Transfer of existing aircraft portfolio held by EFL to ECC Leasing Co. with a book value of US$43 million.
• Repurchase in 2003 of approx. US$50 million in aircraft –10% of total previously disclosed exposure. Based on the Company’s current estimates, no relevant losses or gains are expected to occur with transactions involving these aircraft.
• Future sales will be increasingly subject to trade-in options.
FinancialFinancial
SupportSupport
For SalesFor Sales
Working CapitalWorking Capital
US$ MillionUS GAAP
Accounts Receivables
245
175
738
633
183
0
300
600
900
Dec. 31,2000
Dec. 31,2001
Mar. 31,2002
June 30,2002
Sep. 30,2002
Note: Short & Long term, net of allowance.
1053
387
1558
1770
568
0
400
800
1200
1600
2000
2400
31Dez.2000
31 Dez.2001
31 Mar.2002
30 Jun.2002
30 Set.2002
R$ MillionBR GAAP
US$ MillionUS GAAP
Inventories
603
1.015 995 992 946
0
400
800
1.200
Dec. 31,2000
Dec. 31,2001
Mar. 31,2002
June 30,2002
Sep. 30,2002
1122
2371 2468
2768
2313
0
700
1400
2100
2800
31 Dez. 2000 31 Dez. 2001 31 Mar. 2002 30 Jun. 2002 30 Set. 2002
R$ MillionBR GAAP
Flexibility incorporated into the production line allowed an increase in efficiency and decrease in production lead time
Lead Time in Months
8,0
6,0 6,05,5
4,9 5,0
3,7
1996 1997 1998 1999 2000 2001 9M02
Reduced Production Cycle
HedgingHedging
StrategyStrategy
Main Assumptions
• Firm backlog of US$9.6 billion
• 97% revenues in US$
• 75% of R&D investments in R$
• 32% of total cash disbursements in R$
Main Objective of the Hedging Strategy
Optimize the Natural Hedge of the Cash Flow
Bank Debt - US$ 542.9 million
September 30, 2002
Loans Breakdown
Debt MaturityCurrency Breakdown
• Considering Currency Swaps• Average R$ debt cost: 15.5% p.a.• Average US$ debt cost: 5.0% p.a.
• Average Maturity: 4 years
Long Term55%
Short Term45%
Mainly US$ denominated
46%R$ denominated
54%
FX Exposure – US GAAP figures in US$
Total Cash
Total Debt
Net Amount
R$ US$
June Sep
669.2
144.1
525.1
Total
516.9
292.6
224.3
223.1
388.5
(165.4)
243.2
250.3
(7.1)
892.3
532.6
359.7
760.1
542.9
217.2
Considering the Swaps effective as of June and September 2002
58% of net exposure of Cash in R$ as of June 30.
30% of Net Exposure of Cash in R$ as of September 30.
June Sep June Sep
