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Second Annual Investors & Analyst
Meeting
Antonio Luiz P. MansoExecutive Vice President & CFO
Second Annual Investors & Analyst
Meeting
Antonio Luiz P. MansoExecutive Vice President & CFO
Foward Looking StatementsFoward Looking Statements
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 markets; management’s expectations and estimates concerning our future financial performance, financing plans and programs, and the effects of competition; successful development and marketing of the ERJ 170/190 regional jet family; our level of debt; anticipated trends in our industry; our expenditure plans; inflation and devaluation; our ability to develop and deliver our products on a timely basis; and existing and future governmental regulation.
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.
Capital Structure
Capital Capital StructureStructure –– VotingVoting SharesShares
20% European Group
Dassault Aviation 5,67% Thomson CSF 5,67% EADS 5,67% Snecma 3,00%
60 % Controlling Shareholders Bozano,Simonsen Group 20 %
SISTEL (Pension Fund) 20 %
PREVI (Pension Fund) 20 %
18.55 % Others
1.45 %Brazilian Govt.
242,544,448 Common Shares38.98%
Capital Capital Structure Structure –– Preferred SharesPreferred Shares
NYSE44%
Bovespa17%
Cia. Bozano10% Previ
12%
BNDESPar14%
Sistel3%
379,738,426 Preferred Shares
61.02%
Capital Capital Structure Structure –– EvolutionEvolution
Brazilian Shares
YE00 1Q01 2Q01 3Q01 4Q01
Common 242,544,448 242,544,448 242,544,448 242,544,448 242,544,448 Preferred 300,865,426 300,865,426 378,768,426 378,768,426 379,738,426
TOTAL 543,409,874 543,409,874 621,312,874 621,312,874 622,282,874 ADS Equivalent
135,852,469
135,852,469
155,328,219
155,328,219
155,570,719
Conversion Rights:
Stock Option: 14.8 million of options equivalent to 3.7 million of ADSs were granted and not exercised.
Capital Capital Structure Structure –– Stock DividendsStock Dividends
Stock Dividend Announcement:
As earnings reserve cannot exceed existing paid in capital.
Incorporation of R$ 342 MM earnings reserve to the paid in Capital with the issuance of 88.4 million of preferred shares (equivalent to 22,1 ADSs) to all shareholders.
Obejective to increase liquidity of Preferred Shares
Share As of % As of %Class Today Total capital Stock Dividend Mrach 02 Total capital
Common 242.544.448,00 39% 242.544.448,00 34%Preferred 379.738.426,00 61% 88.430.168,00 468.168.594,00 66%Total Shares Outstanding 622.282.874,00 100% 710.713.042,00 100%
ADS Equivalent 155.570.718,50 22.107.542,00 177.678.260,50
3rd Quarter Results
Income StatementCorporate Law
Jet DeliveriesJet DeliveriesJet Deliveries
3439 43
116
44 44 41
127
42
0
20
40
60
80
100
120
140
1Q00 2Q00 3Q00 9M00 4Q00 1Q01 2Q01 3Q01 9M01
Net RevenueNet RevenueNet Revenue
583 651766 772 838 775
2,369
2,009
756
0
1.000
2.000
3.000
1Q00 2Q00 3Q00 9M00 4Q00 1Q01 2Q01 3Q01 9M01
US$ Million – Corporate Law
US
$ M
M
Revenue Breakdown – Sep. 2001Revenue Breakdown Revenue Breakdown –– Sep. 2001Sep. 2001
International97%
Brazil3%
Revenue by Market
Revenue by Segment
Commercia l
8 7 %
D e f e n s e5 %
C o r p o r a t e
2 %
Spare Parts & S e r v i c e s
6 %
RevenueRevenue byby SegmentSegment -- ForecastForecast2002
Corporate10%
Defense12%
Parts & Services /
Others7%
Commercial71%
2003
Corporate12%
Defense12%
Parts & Services /
Others7%
Commercial69%
Gross ProfitGross Gross ProfitProfit
170 188260
620
246
380 344
1.027
299
43.3%
44.3%
45.3%
39.5%
31.8%29.1% 28.9%
30.9%33.9%
0
500
1.000
1.500
1Q00 2Q00 3Q00 9M00 4Q00 1Q01 2Q01 3Q01 9M010%
10%
20%
30%
40%
50%
US$ Million – Corporate Law
US
$ M
M
Mar
gin
%
US$ Million – Corporate Law
EBITEBITEBIT
715
242261
137177
10299
379
209
30.1%
31.2%
31.1%
23.0%
18.9%
15.6%17.0% 17.8%
27.6%
0
200
400
600
800
1.000
1Q00 2Q00 3Q00 9M00 4Q00 1Q01 2Q01 3Q01 9M010%
10%
20%
30%
US
$ M
M
Mar
gin
%
US$ Million – Corporate Law
EBITDAEBITDAEBITDA
119 119199
439
158
282 259
774
231
32.7%
33.4%
33.6%
26.0%
21.9%
18.3%20.4% 20.4%
30.5%
0
200
400
600
800
1.000
1Q00 2Q00 3Q00 9M00 4Q00 1Q01 2Q01 3Q01 9M010%
5%
10%
15%
20%
25%
30%
35%
US
$ M
M
Mar
gin
%
US$ Million – Corporate Law
Net IncomeNet IncomeNet Income
55 62104
222
128
354
99148
108
15.0%
12.8%
17.6%
13.5%
11.0%
9.5%9.4%
16.6%
14.3%
0
200
400
600
1Q00 2Q00 3Q00 9M00 4Q00 1Q01 2Q01 3Q01 9M010%
5%
10%
15%
20%
US
$ M
M
Mar
gin
%
3rd Quarter Results
Balance SheetCorporate Law
Total CashTotal CashTotal Cash
379
513599
1.189 1.169
884
1.264
0
200
400
600
800
1.000
1.200
1.400
1T00 2T00 3T00 4T00 1T01 2T01 3T01
US$ Milions
US
$ M
M
Total DebtTotal DebtTotal Debt
586549
491 457420
755
567
0
200
400
600
800
1.000
1T00 2T00 3T00 4T00 1T01 2T01 3T01
US$ Milions
US
$ M
M
Short Term82%
Long Term18%
Total Debt US$ 754.9 Million
Foreign Currency
95%
Local Currency -
R$ - 5%
Debt BreakdownDebt BreakdownDebt Breakdown
US$ Million
Net Net Cash Cash ((DebtDebt))
129
(208)
696749732
108
(37)
($400)
($200)
$0
$200
$400
$600
$800
1T00 2T00 3T00 4T00 1T01 2T01 3T01
InventoriesInventoriesInventories
703641
562 574
660
842764
0
200
400
600
800
1.000
1T00 2T00 3T00 4T00 1T01 2T01 3T01
US$ Millions
US
$ M
M
Accounts ReceivablesAccounts ReceivablesAccounts Receivables
390
563
793
198260
737
373
0
200
400
600
800
1.000
1T00 2T00 3T00 4T00 1T01 2T01 3T01
US$ Millions
US
$ M
M
Customers AdvancesCustomers AdvancesCustomers Advances
372401
424
371 376
443439
0
200
400
600
1T00 2T00 3T00 4T00 1T01 2T01 3T01
US$ Millions
US
$ M
M
Performance Indicators
Corporate Law
ReturnReturn onon AssetAsset -- ROAROA
-25%
-12%
-3%
8%15% 15%
19%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
95 96 97 98 99 00 9M01
ReturnReturn onon EquityEquity -- ROEROE
-93%
-14%
35%58%
75%
-169%
74%
-200%
-150%
-100%
-50%
0%
50%
100%
150%
95 96 97 98 99 00 9M01
Investments
(US$ Million)
Productivity EffortsProduct Development
InvestmentsInvestments
60%
40%
98 104 122147 162
213
81
050
100150200250300
95 96 97 98 99 00 9M01
(US$ thousand)
Revenue Revenue per per EmployeeEmployee
4075
172
242 247269
307
101
050
100150
200250
300350
94 95 96 97 98 99 00 9M01
April 97: 3,200 (Minimum Level Reached)
EmployeesEmployees
6,737
4,4944,3196,087
12,733
10,3348,302
3,849
0
3000
6000
9000
12000
15000
94 95 96 97 98 99 00 Set/01
Brazil: 12,213USA: 267Europe: 220Australia: 9China: 15Cingapure: 9Total sept.: 12,733
Growth 2000/1999: 24.5%
Production Cycle (months)Production Cycle (months)
1412
6 64.44.95.5
8
0
5
10
15
20
94 95 96 97 98 99 00 Sep./01
Investments ForecastInvestments Forecast
(US$ Millions) 2002 2003 2004 2005 2006· Products under Development 203 183 171 166 168
Commercial Programs 138 105 61 34 27 Corporate Programs 15 6 2 2 2 Defense Programs 51 72 109 130 139
· Segments 3 2 2 2 2 · Technology Development 6 6 6 6 6 · TOR 2 2 - - - · Property, Plant & Equipment 116 69 59 50 51
TOTAL 329 262 238 224 227
US Gaap & Corporate Law Accounting
Differences Brazilian Gaap Differences Brazilian Gaap & US & US GaapGaapThe Company’s accounting policies comply with the Corporate Law& Brazilian Gaap.
Corporate Law:Does not recognize the effects of changes in the purchasing power of the Brazilian currency. Used as local reporting policy for taxes purposes and for the Brazilian Exchange Commision – CVM
Brazilian Gaap:Recognizes effects of changes in the purchasing power of Brazilian currency due to inflation and is expressed in constant Reais. The Company uses the General Market Price Index (IGPM) which is published by Fudação Getúlio Vargas – FGV.
US Gaap:The effects of the price level adjustments are not eliminated in the reconciliation to US Gaap
Differences Brazilian Gaap Differences Brazilian Gaap & US & US GaapGaapForeign Currency Translation
Brazilian Gaap:Does not recognize a functional currency for a Brazilian Company reporting in Reais.
US Gaap:The majority of the Company’s Sales Revenues, Cost of Sales and Financing Costs are denominated in or indexed to US Dollar. Therefore the US Dollar its been used as functional currency.
Differences Brazilian Gaap Differences Brazilian Gaap & US & US GaapGaapRevaluation of PP&E
Brazilian Gaap:Revaluations may be recorded, providing certain formalities are compliedwith. The revaluation increment is credited to a reserve account in Shareholders’ equity and transferred to retained earnings as the relatedassets are depreciated or upon disposal.
US Gaap:The PP&E are reported as their historical cost less accumulated depreciation; revaluations are not permited.
Differences Brazilian Gaap Differences Brazilian Gaap & US & US GaapGaapOrganizational & Preoperating Costs
Brazilian Gaap:Preoperating expenses incurred in the construction or expenasion of a new facility may be deferred until the facility begins commercial operations. All cost related to the start up may also be capitalized. The amount as ajusted for monetary correction, when appropriate, is amortized over a period of five to tem years.
US Gaap:The rules are more restrictive. Construction and expensions costs are allocated to PP&E; preoperating and start up costs expenses are chargedto operations, and costs of start up activities and organization costs are expensed as incurred.
Differences Brazilian Gaap Differences Brazilian Gaap & US & US GaapGaapDeferred Charges
Brazilian Gaap:R&D for new aircraft types, new production lines or operations are capitalized or deferred for amortization over the period of time from the date the related production benefits or operations begin.
US Gaap:R&D divided into two categories: R&D and Additions to Fixed Assets.
R&D Costs: is the expense actually associated with the design anddevelopment of the aircraft and are expensed as they are incurred.
Additions to Fixed Assets: rellate solely to tooling built by the Company and required for the project, and treated as additions to PP&E, depeciated on the straight-line basis over twenty years.
Differences Brazilian Gaap Differences Brazilian Gaap & US & US GaapGaapIncome Tax
Brazilian Gaap:Income Tax rate is approximatelly 38.0% based on the Company’s (non consolidated results).
Possibilty of recongnising the tax loss carryfoward benefit.
US Gaap:As we are a Brazilian Company we pay tax based on our Corporate Law Income.
Also, we do not have the tax loss carryfoward benefit.
Differences Brazilian Gaap Differences Brazilian Gaap & US & US GaapGaapEarnings per Share
Brazilian Gaap:Disclousure of earnings per share is computed based on the number of shares outstanding at the end of the period.
US Gaap:Because the preferred and common shares have different dividend, votingand liquidation rights basic and diluted earnings per share are caluculatedusing the “two class method”:
Differences Brazilian Gaap Differences Brazilian Gaap & US & US GaapGaapOther Differences
• Computer Software Obtained for Internal Use
• Capitalization of Financing Costs During Construction
• Leasing Transactions
• Income Taxes
• Reversal of Proposaed Dividends
• Financial Instruments and Concentration of Credit Risk
Financial Financial Presentation Presentation
Corporate LawFigures were converted into US dollars using the average rate or the final commercial rate for the Income Statement and Balance Sheet respectively, for the corresponding periods.
US GaapThe historical US GAAP data were deflated and converted using the U.S. dollar exchange rate at the end of the period presented.
10
Net SalesNet Sales
2035 2009 21081548
2732
1300758
405
23692787
18441352
764381
0
1000
2000
3000
4000
5000
1996 1997 1998 1999 2000 9M00 9M01
US GAAP Corporate Law
(US$ Million)
10
EBITDAEBITDA
12142
394596
439
774
75196 287
507350
505
128285
0
200400
600800
1000
1996 1997 1998 1999 2000 9M00 9M01
US GAAP Corporate Law
(US$ Million)
10
Net Net IncomeIncome
222196
66
247129
(84)
191272
(31)
353
227
354
(122)
114
(300)(200)(100)
0100200300400500
1996 1997 1998 1999 2000 9M00 9M01
US GAAP Corporate Law
(US$ Million)
Gross Margin
EBIT Margin
EBITDA Margin
Net Income
Net SalesGross Profit
EBIT
EBITDA
Net Margin
Net Interest (Expense) Income, netMonetary & Exchange Variations
3Q01(US$ million)
2Q01
39%37%
24%21%
25%22%
66.565.8
$745.0$751.8292.9277.9
175.5154.4
188.1162.5
9%9%
0.1(1.9)(77.7)(20.3)
1%
(1)%5%
14%
16%
(106)%
283%
Variation
2Q01 2Q01 Vs Vs 3Q01 3Q01 –– US US GaapGaap
9M01(US$ million)
9M00
38%34%
23%21%
24%23%
195.7190.6
$2,108.3$1,548.3801.5529.4
475.0331.2
505.4350.3
9%12%
7.2(38.9)(155.5)(2.4)
3%
36%51%
43%
44%
(119)%
Variation
Gross Margin
EBIT Margin
EBITDA Margin
Net Profit
Net SalesGross Profit
EBIT
EBITDA
Net Margin
Net Interest (Expense) Income, netMonetary & Exchange Variations
9M00 9M00 VsVs 9M01 9M01 –– USUS GaapGaap
Backlog &
Deliveries Forecast
Backlog Backlog –– US$ US$ Billion Billion
7,7 8,6 10,9 11,4 10,9 10,7 11,2 10,7
10,612,2
12 12,6 12,8 12,8 12,7 12,7
23,423,923,523,724,020,8
22,9
18,3
1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01
Firm Options
US$ 23.4 US$ 23.4 Billion Billion in Total in Total BacklogBacklog, , including including US$ 10,7 US$ 10,7 Billion Billion in in Firm BacklogFirm Backlog
Jet Deliveries Jet Deliveries -- Units Units
4
32
60
96
160
135145
161
0
20
40
60
80
100
120
140
160
180
1996 1997 1998 1999 2000 2001 2002E 2003E
