Financial and corporate governance embraer day 2006
•
0 likes•287 views
This document discusses Embraer's capital reorganization and corporate governance improvements. Some key points: - Embraer conducted a capital reorganization to finance expansion programs through equity markets, create acquisition currency, and improve market perception, liquidity, and governance. - Its largest shareholders are pension funds and Brazil's development bank BNDES. It has American Depositary Shares listed on the NYSE. - Governance improvements include an independent audit committee, disclosure policies, and adopting both Brazilian and US accounting standards. - It manages risks through its leasing subsidiary ECC Leasing and monitoring the residual values of its aircraft. - Embraer finances sales through a variety of sources including Brazil's development bank BN
Recommended
More Related Content
What's hot
What's hot (14)
Viewers also liked
Similar to Financial and corporate governance embraer day 2006
Similar to Financial and corporate governance embraer day 2006 (20)
More from Embraer RI
More from Embraer RI (20)
Recently uploaded
Recently uploaded (20)
Financial and corporate governance embraer day 2006
- 2. Capital Reorganization • Financing the expansion programs through the equity capital markets • Creation of an acquisition currency for potential expansions • The increase in liquidity and better market perception of the Company • The improvement in corporate governance and transparency, in addition to the listing in the “Novo Mercado”,
- 3. October, 2006 Ordinary Shares: 738,699,207 Embraer Capital Structure Sharholders with more than 5% participation BOZANO GROUP 11.1% PREVI (PENSION FUND) 16.4% SISTEL (PENSION FUND) 7.4% BNDESPAR 6.3% OTHERS NYSE 41.3% OTHERS BOVESPA 17.8%
- 5. • Board of Directors Composition: Eight representatives elected by all Shareholders; Two representatives indicated by the Employees; One governament representative. • Active Board of Directors & Permanent Fiscal Board acting as an Audit Commitee. Corporate Governance
- 6. Audit Comitee – Conselho Fiscal • Composed of five members including one financial expert • Elected in a annual general shareholders’ meeting • Makes financial reporting recommendations to management and the board • Responsible for handling whistleblower complains • Oversees the relationship between managers and external auditors Corporate Governance
- 7. Corporate Governance Actions Trading policy Disclosure Policy Risk management Code of Ethics & Conduct Disclosure Comitee Accountability Brazilian Gaap & US Gaap Simultaneously Corporate Governance
- 8. Implementation Status SOX # 404 In process Scope and Planning 1 Completed April 2007 Risks Identification & Objectives 2 Internal Controls Docum 3 Testing Internal Controls 4 Remediations Report 20F 31/12/06 Avaliation External Auditors 5 Corporate Governance
- 9. Dividends 68 204 187 112 50% 54% 63% 42% 2003 2004 2005 9M06 Dividends Pay-Out Ratio US$ Million R$ Milhões 195 585 445 242 62.7% 60.0% 46.6% 33.2% 2003 2004 2005 9M06 Dividends Pay-out Ratio
- 11. (53)(54)Provisions & Liabilities Recorded (418)(415)Mutually Exclusive Exposure* 2,1562,177Off Balance Sheet Exposure 2,2092,127Estimated proceeds from performance guarantees and underlying assets 906878RVGs 1,7211,768Maximum Financial Guarantees June 30 2006 2005US$ million The maximum potential payments represent the “worst-case scenario,” and do not necessarily reflect the expected results by the Company. Estimated proceeds from performance guarantees and underlying assets represent the anticipated values of assets the Company could liquidate or receive from other parties to offset its payments under guarantees. *The residual value guarantees can only be exercised if the financial guarantees have expired without having been triggered and therefore have not been combined to calculate the maximum exposure Source: 20 F note 34 Off Balance Sheet Exposure
- 12. Trade-in options Provide a customer with the right to trade-in existing aircraft upon the purchase of a new aircraft. The trade in price per aircraft is less than the original sales price of the aircraft and less than management’s estimation for the future market value of the relevant aircraft. 6 Commercial jets are subject to trade-in Of the total 914 firm orders and 133 options signed for the ERJ 145 family since 1996, only 7 were trade-ins of EMB 120s (Brasilia). Of the total 543 firm orders and 421 options signed for the EMBRAER 170/190 family since 1999, only 6 included trade-in options. Off Balance Sheet Exposure
- 13. Risk Management
- 14. ECC Leasing Asset Management is responsible for all administration and technical issues related to Embraer’s portfolio of pre-owned aircraft. ECC Leasing Company Ltd (ECC Leasing) was incorporated in Dublin (Ireland) on September 19th, 2002. Main Responsibilities • Manage Embraer’s pre-owned aircraft assets • Vehicle for remarketing pre-owned aircraft resulting from trade-in/up supporting new aircraft sales • Manage remarketing obligations assumed by Embraer before lenders or leasing companies • Search for potential airlines on the market to acquire or lease the aircraft from ECC Leasing’s portfolio • Main focus on activities that involve Embraer products • Manage activities of appraisal, acquisition, maintenance, leasing and remarketing of pre-owned aircraft
- 15. Asset Management Remarketing Activities 5 ex-Rio Sul ERJ 145 Leased to Aerolitoral ( Mexico) 2005 7 ex-Rio Sul ERJ 145 Sold to FAB ( Brazil ) 2005 1 ex-Rio Sul ERJ 145 Sold to DPF ( Brazil ) 2005 2 ex-Rio Sul ERJ 145 In advanced negotiation with potential customer 7 ex-Rio Sul EMB 120 Sold to FAB ( Brazil ) 2005 1 EMB 120 In advanced negotiation with potential customer
- 16. 2 ex-LOT ERJ 145 Leased to BMI ( England ) 2006 2 EMBRAER 170 Pre-Series Leased to Paramount ( India ) 2005/2006 1 ex-LOT ERJ 145 Leased to Lagunair (Spain ) 2006 Asset Management Remarketing Activities 2 ex-LOT ERJ 145 Leased to Satena ( Colombia ) 2006 1 EMB 120 Sold to CVRD ( Brazil ) 2006
- 17. Asset Management Remarketing Activities 1 EMBRAER 170 Pre-Series Leased to Satena ( Colombia ) 2006 1 EMB 170 Pre serie Leased to Air Caraïbes (Guadeloupe) 2006 2 Legacy Sold to FAB ( Brazil ) 2006
- 18. ERJ- 145.065 ERJ- 145.083 ERJ- 145.089 ERJ- 145.090 ERJ- 145.852 ERJ- 145.861 ERJ- 145.495 ERJ- 145.528 ERJ- 145.165 ERJ- 145. 227 EMB- 170.004 EMB 120.044 EMB 120.052 EMB 120.041 EMB 120.064 EMB 120.166 EMB 120.313 ERJ 145. 001 ERJ- 145.600 ERJ- 145.608 ERJ- 145.016 ERJ- 145.021 ERJ- 145.002 ERJ- 145.003 EMB-170.005 EMB-170.002 EMB-170.006 ERJ- 145.155 ERJ- 145.114 ERJ- 145.137 EMB 120.323 EMB 120.356 EMB 120.357 Available mid 2007 EMB 120.359EMB- 170.017 EMB 120.355 ERJ- 145.336 ERJ- 145.339 Asset Management Portfolio In advanced negotiation with potential customer In advanced negotiation with Angolan Government
- 19. Parked Aircraft - World Source: BACK (Operator Category: Scheduled Airline, Non Scheduled, Leasing and Financial Institution) Seat Segment 0 100 200 300 400 500 600 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 set/06 NumberofAircraft 30 - 60 61 - 90 91 - 120 Jet Aircraft (Western Built) (as of Sep 05, 2006) Seg Manuf. Number of Parked Aircraft % % of Fleet Parked Boeing 149 53% 12% Douglas 86 30% 28% Fokker 29 10% 11% BAe 19 7% 15% Airbus 0 0% 0% Embraer 0 0% 0% Total 283 100% 15% BAe 52 51% 25% Fokker 45 45% 30% Douglas 2 2% 8% Bombardier 2 2% 1% Embraer 0 0% 0% Total 101 100% 12% Bombardier 82 71% 8% Fairchild 30 26% 32% Embraer 4 3% 0% Total 116 100% 6% 91-12061-9030-60
- 20. ERJ 145 LR Year over Year Residual Value Curve New Aircraft – Uninflated Values 2005 & 2006 Values 0 2 4 6 8 10 12 14 16 18 20 year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 year 11 year 12 year 13 year 14 year 15 year 16 US$Million 2nd half 2005 2nd half 2006
- 21. EMBRAER 170 LR Year over Year Residual Value Curve New Aircraft – Uninflated Values 2005 & 2006 Values 0 5 10 15 20 25 30 year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 year 11 year 12 year 13 year 14 year 15 year 16 US$Million 2nd half 2005 2nd half 2006
- 22. EMBRAER 190 AR Year over Year Residual Value Curve New Aircraft – Uninflated Values 2005 & 2006 Values 0 5 10 15 20 25 30 35 year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 year 11 year 12 year 13 year 14 year 15 year 16 US$Million 2nd half 2005 2nd half 2006
- 23. Sales Finance
- 24. Financing Sources (1995~2Q 2006) BNDES 42% Market 58% $ 20.5 $ 7.7 $ 12.8 US$ BI 1995 – 2Q2006 1,148 479 669 # Aircraft Total BNDES Market Note: % Delivered Aircraft
- 25. Financing Sources Evolution 40% 84% 55% 27% 17% 6% 60% 16% 45% 73% 94% 83% 2001 2002 2003 2004 2005 2006 1S ECA - BNDES Market Note: % Delivered Aircraft
- 26. Financing Source Forecast * Commercial Aircraft Forecast Capital MKT 5% Banks & Leasing Co BNDES 20% Forecasted FY 2006 to FY 2008 financing to commercial aviation:
- 27. Diversification of Financing Sources - USA We obtained positive results in contacting banks and investors, searching new mechanisms and sources for financing our customers. Among them, we shall emphasize: Alexander Hamilton Debis Air Finance MetLife Capital Alliance Capital Fifty Third Bank Mitsui American State Bank Finova Nation City Ameritech Credit Corp. Fleet Bank Phillip Morris Attransco GATX South Trust Bank First Teachers Insurance Bank of America ICX Corp. The Cit Group Bell Atlantic Integra Transamerica BNY Capital Funding Jefferson Pilot Life Travellers Insurance Chrysler Capital Corp. John Hancock Wachovia Bank Comerica JP Morgan Chase Zions Credit Corp
- 28. Diversification of Financing Sources Rest of World Banco Austria Austria Barclays United Kingdom BCI Italy Bell Atlantic United States BNP France CALL United Kingdom Citibank New York - London - Asia Coronation Ireland Credit Lyonnais France Deustch Bank Germany Die Nationale Investeringsbank Netherlands Hamburgische Landesbank Germany HSH Nord Bank AG Germany Ingepar France Landesbank Sachsen Girozentrale Germany Lloyds Bank PLC United Kingdom Natexis France Norddeutsche Landesbank Girozentrale Germany Royal Bank Leasing Ltd. United Kingdom Standard Chartered United Kingdom Transasian Air Australia
- 29. Financing Structures (1995~2Q 2006) Tax Lease 46% Finance Lease 5% Operating Lease 5% Cash 1% Bridge 1% Straight Financing 40% Note: % Delivered Aircraft Total: 1,148 aircraft
- 30. EETC and Secured Financing 2.7 3.7 5.0 8.0 10.4 3.4 1.1 0.9 0.4 0.5 1.1 0.4 0.2 2.1 0.4 0.2 0.3 1.5 $- $2 $4 $6 $8 $10 $12 $14 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006* US$Billion Mainline Aircraft Secured Financing RJ Secured Financing RJ Secured Financing: 100% CAL Continental EETC (% Total Volume) Dec 2003 - US$ 414 MM (27%) Jun 2004 - US$ 174 MM (16%) Sep 2005 - US$ 311 MM (42%) Aug 2006 – US$ 54 MM (4%*) Continental EETC (% Total Volume) Dec 2003 - US$ 414 MM (27%) Jun 2004 - US$ 174 MM (16%) Sep 2005 - US$ 311 MM (42%) Aug 2006 – US$ 54 MM (4%*) Source: Citigroup * Forecast
- 31. EETC and Secured Financing Source: Citigroup Mainline Aircraft Secured Financing 87% RJ Secured Financing 13% % of Total Secured Aircraft Issuance 1997-2006 1st Half Embraer Participation 33%
- 33. Jet Deliveries 59 96 160 161 131 101 148 141 93 1998 1999 2000 2001 2002 2003 2004 2005 9M06
- 34. Net Revenue by Segment 9M06 9M05 Defense and Government 6% Executive Aviation 13% Customer Services and Others 15% Commercial Aviation 67% Defense and Government 12% Executive Aviation 6% Commercial Aviation 72% Customer Services and Others 10%
- 35. US$ million Net Revenues and Gross Margin – US GAAP 2,723 3,830 3,441 2,144 2,526 2,927 28.4% 39.4% 37.7% 34.1% 30.2% 39.6% 2001 2002 2003 2004 2005 9M06 Net Revenue Gross Margin
- 36. R$ million Net Revenues and Gross Margin – BR GAAP 6.891 7.748 6.571 10.231 9.133 6.012 23,7% 35,8% 25,0% 33,3% 44,6% 41,6% 2001 2002 2003 2004 2005 9M06 Receita Líquida Margem Bruta
- 37. US$ Million Income from Operations- US GAAP 651 470 265 544 505 218 22.3% 18.6% 12.3% 13.2% 8.0% 15.8% 2001 2002 2003 2004 2005 9M06 Income from Operations Margin
- 38. R$ million Income from Operations – BR GAAP 1.928 2.167 1.243 1.714 414 787 18,9% 16,8% 8,6% 6,9% 28,0% 28,0% 2001 2002 2003 2004 2005 9M 06 Luc ro Operac ional Margem Operac ional
- 39. Net Income – US GAAP US$ Million 3 2 8 2 2 3 1 3 6 3 8 0 4 4 6 2 6 6 9 .8 % 1 1 .6 %1 1 .1 %1 1 .2 % 8 .8 % 6 .3 % 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 9 M0 6 Net Inc ome Net Margin
- 40. R$ million Net Income – BR GAAP 1.101 1.179 587 1.281 709 406 16% 15% 9% 13% 8% 7% 2001 2002 2003 2004 2005 9M06 lucro líquido Margem
- 41. BR GAAP Differences between accounting and fiscal records US GAAP All BR GAAP and US GAAP accounting differences are considered to calculate the deferred income tax 18.0% 25,9% 9M06 19,7%20,8%29,8%26,6%30,6%BR GAAP 25.8% 2003 22.7% 2004 8.4%45.6%40.3%US GAAP 200520022001 Effective Tax Rates Effective Tax Rate
- 42. Effective Tax Rate – 9M06 US GAAP BR GAAP US$ THOUSANDS R$ THOUSANDS Income Before taxes 329,958 565,197 Nominal expense 34% tax rate 112,186 192,167 Permanent additions 5,742 35,675 Permanent exclusions (1,679) (18,369) Interest on Shareholders Equity (34%) (32,041) (70,304) Other items (24,753) 7,061 Total expenses 59,455 146,230 Effective tax rate 18.0% 25.9%
- 43. Balance Sheet
- 44. US$ Million R$ million US GAAP BR GAAP Others Com m ercial Airline Market Accounts Receivable Breakdown 302 351 346 332 368 488 100 136 140 32 3Q05 4Q05 1Q06 2Q06 3Q06 577 823 754 719 1,085 233 302 797 70294 3T05 4T05 1T06 2T06 3T06
- 45. US$ Million R$ million US GAAP BR GAAP Aircraft Financing Support 488 100 136 140 32 278 229 174 164 3Q05 4Q05 1Q06 2Q06 3Q06 1,085 233 302294 70 651 497 378 357 3T05 4T05 1T06 2T06 3T06 C o stu m e ra n d C o m m e rc ia lF in a n c in g A c c o u n t s R e c e i v a b le s C o s t u m e r a n d C o m m e r c i a l F i n a n c i n g u
- 46. US$ Million Inventories R$ Million US GAAP BR GAAP 1,601 1,511 1,648 1,639 1,886 3Q05 4Q05 1Q06 2Q06 3Q06 4,053 3,967 4,115 3,971 4,417 3T05 4T05 1T06 2T06 3T06
- 47. US$ Million Net Cash (Debt) Position R$ Million US GAAP BR GAAP 1,102 216 843 1,139657 3T05 4T05 1T06 2T06 3T06 97 360 302 527 507 3Q05 4Q05 1Q06 2Q06 3Q06
- 48. Total Debt of US$ 1,599.8 Million • Average cost in R$ = 8.5 % p/a • Average cost in US$ =7.2 % p/a Loans Loans Average Maturity: 1 year and 11 months Brazilian Currency 25% Foreign Currency 75% Short Term 48% Long Term 52%
- 49. Loans Maturity US$ million 760 131 188 2 01 44 1,600 2 76 Total Short- term 2007 2008 2009 2010 2011
- 50. Emissão de Bond Sumário dos termos Sumário dos termos Emissor: Embraer Overseas Limited Guarantidor: Empresa Brasileira de Aeronáutica S.A. Principal: US$ 400 milhões Formato: 144 A/ Reg S com Registration Rights Ratings: Baa3/BBB- (Moody/S&P) Vencimento: 24 de Janeiro de 2017 Coupon: 6,375% Yield: 6,466% Spread sobre UST: 168 bps Preço: 99,289% Joint Bookrunners: J.P. Morgan Securities Inc. e Citigroup Tombstone Tombstone 20 de outubro de 2006 6,375% Bonds com Vencimento em 2017 US$400.000.000
- 51. Investments
- 52. R&D – PP&E 9M06 111 64 50 59 84 70 158 173 153 148 131 143 114 100 2000 2001 2002 2003 2004 2005 9M06 PP&E R&D
- 53. Research & Development Forecast NewPrevious 32 237 59 127 51 2007 4821Defense & Government 173188TOTAL 6147Technology Development 9087Executive Aviation 2254Commercial Aviation 20082007US$ Million Defense & Government R&D are funded by their contracts and are included as Cost of sales and services
- 54. PP&E NewPrevious 194 13 104 77 2007 11777TOTAL 29-Customer Services 36-Production Ramp Up 5277Productivity 20082007US$ Million
- 55. Contributions from Risk Sharing Partners US$ Million - 246 20 17 42 55 108 1 14 Total 2001 2002 2003 2004 2005 2006E 2007E 2008/2010E
- 56. Investor Relations Phone: + 5512 3927- 4404 investor.relations@embraer.com.br www.embraer.com.br THANK YOU!