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.
3. Second Quarter 2007 - Summary
Jet Deliveries
• As a result of actions taken regarding 36 37 36
the supply chain and industrial process, 27
30
25
2Q07 deliveries came to 36 jets, bringing
the total for the first six months of 2007
to 61 aircraft.
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07
• The Company's industrial costs are still
Net revenues – Gross Margin
at a high level due to longer production
cycles and higher man/hour labor costs 28,7% 28,3%
27,5%
in its production processes, including 24,3% 22,7%
1.110
those related to overtime work, and the
1.084
1.021 21,8%
894
recently hired employees.
808 843
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07
4. Second Quarter 2007 - Summary
• Backlog reached record high of US$15.6 billion;
• Phenom family has accumulated more than 460 Firm orders;
• Embraer participated in the 2007 Paris Air Show. During the Air Show,
important deals were firmed including Lufthansa contract for 30
EMBRAER190 and Japan Airlines (JAL) order of ten EMBRAER 170 jets. Also
during the Air Show, Embraer and Brazilian airline BRA Transportes Aéreos
signed a preliminary commercial agreement for 20 firm orders of the
EMBRAER 195 jet, Italy’s Alpi Eagles confirmed five options for the
EMBRAER 195 jet from its original order for five aircraft of this model and GE
Commercial Aviation Services (GECAS) confirmed three options for
EMBRAER 190 jets
5. Second Quarter 2007 – New accounting practices
• After the implementation of a new business segment, Customer Services, a
comprehensive analysis of our commercial operations and of certain accounting
practices, Embraer has modified the application of previously adopted US GAAP
accounting policies.
• The change had no effect on Earnings from continuing operations, Net Earnings,
Retained Earnings or Shareholders´ Equity. The change resulted in reclassifications
on Net Sales, Cost of Sales and Services, Selling Expenses and Interest Income
(Expenses), Net, as described below:
1) Expenses related to Product Guarantees are recorded on the aircraft
delivery date and estimated upon historical basis. Those expenses were reclassified
from Selling Expenses to Cost of Sales and Services;
2) Contratual obligations related to prepaid spare parts, services as training
and technical representative assistance have their revenues recorded when “ganhas”
by the Company. Formerly, a provision was made for the amounts related to those
obligations when the aircraft was delivered, but they were reversed from Selling
Expenses against Net Sales.
6. Second Quarter 2007 – New accounting practices
3) The fulfillment of those obligations described above with the customers, may
occur before or after the actual delivery of the aircraft. Obligations accomplished
before the delivery date of the aircraft were recorded as revenues “ganhas” against
Account Receivables. All other contractual obligations accomplished after the delivery
of the aircraft but not yet accounted were recorded in Current Liabilities as Unearned
Income;
4) Commercial concessions prior accounted as Selling Expenses, were
reclassified as Sales Deductions. The recuperation of part those commercial
concessions through financing structures was recorded as Financial Income but it has
been reclassified as Gross Sales offsetting Sales Deductions.
Embraer believes that the modification of the previously adopted accounting practice is
a more appropriate application, and will facilitate the comparability of the company's
financial information with the financial information of other aircraft manufacturers and
will enhance investors understanding of its results and financial condition.
7. 2007 Guidance – After Modified Accounting
Practices
GROSS MARGIN
BEFORE AFTER
30% at 4Q07 23.5% at 4Q07
EBIT
BEFORE AFTER
10.0% FY07 7.0% FY07
10. Net Revenues and Gross Margin
US$ million
1.937
1.823
1.110
25,4% 25,3%
832
21,8%
22,7%
1H06 2H06 1Q07 2Q07
11. Net Revenue by Segment
2Q06 2Q07
Customer Customer
Services and Services and
Others
Others 14% 12%
Executive Executive
Aviation
Aviation 11% 16%
Defense and
Government Defense and
Commercial
Aviation
6% Government
63%
Commercial 9%
Aviation 69%
16. Net Cash (Debt) Position
US$ Million
527 507
416
302
217
128
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07
17. Loans
Total Debt of US$ 1,751.5 Million
Short
Term
27%
Brazilian Foreign
Currency Currency
21% 79%
Long
Term
73%
• Average cost in R$ = 8.67%p/a Long-Term Loan Average
• Average cost in US$ =Libor + 1.20% p/a Maturity: 3 years and 6 months
18. Loans Maturity
US$ million
472
567
1,751
63
94
33
522
Total Short- 2008 2009 2010 2011 after
term 2011
