14. Previous Disclosure
• Financial Guarantees, based on the assumptions of Embraer
Management, 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
15. 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
17. 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
18. ERJ 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
BNDES
Market 52%
48%
20. ERJ Financing Methods
Tax Lease
Polish Tax US Single UK Tax
Lease Investor Lease
4% Lease 8%
13%
French Tax
Lease
2%
USLL
73%
21. Diversification of Financing Sources
Alliance Capital Credit Lyonnais JP Morgan Chase
American State Bank Debis Air Finance MetiLife Capital
Ameritech Credit Corp. DVB Mitsui
Attransco Eurojet Natexis Bank
Banco Portugues do Atlantico Fifty Third Bank Nation City
Bank First Finova NIB
Bank of America Fleet Bank Phillip Morris
Barclays Bank GATX Royal Bank of Scotland
BCI - Banca Commerciale Italiana GECAS South Trust
Bell Atlantic GEFA Gesellschaft (Deutsch Bank) Standard Chartered
Berliner Bank Giro Bank Teachers Insurance
BNP Paribas Hallifax Bank of Scotland (HBOS) The Cit Group
BNY Capital Funding HVB Transamerica
Citibank ICX Corp. Travellers Insurance
Comerica Integra Wachovia Bank
Coronation Aircraft Leasing Jefferson Pilot Life WestLB
Credit Agricole John Hancock Zions Credit Corp
22. EETC – Annual volume of new issues - 1994 ~ 2002
EETC – Annual volume of new issues - 1994 ~ 2002
Amount US$ Million
8.543
7.954
6.030
3.720
2.688
2.092
1.607 1.470
985
762
1994 1995 1996 1997 1998 1999 2000 2001 2002 2002(*)
(*) Included issue based on floating interest realized by Continental and Northwest.
Source: Salomon Smith Barney – review September 13,2002
25. ECC Leasing Company
ECC Leasing Co. Ltd.
(Ireland)
Leasing
EMBRAER S.A. Mission:
(Brazil)
Manufacturer • Manage and remarket a portfolio of aircraft that
Embraer acquires through trade-ins and
Embraer Spain Holding Co. SL
(Spain) exercised put options;
Holding
• Remarketing service provider for third-parties
ECC Leasing Co. Ltd. ECC Investiment Switzerland, AG in connection with sales campaign.
(Ireland) (Switzerland)
Leasing Holding
• Embraer is NOT allowed to lease NEW aircraft
ECC Insurance & Financial Co. Ltd. without specific Board approval for such
(Cayman Islands)
Captive Insurance 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.
26. ECC Insurance Company
ECC Insurance & Financial Co. Ltd.
(Cayman Islands)
Captive Insurance
EMBRAER S.A.
Mission:
(Brazil) • Assures the payment of contingent losses that Embraer
Manufacturer
may face related to Embraer’s financial guarantees;
Embraer Spain Holding Co. SL
(Spain) Insurance Outline:
Holding
• IRB transaction approval:
ECC Leasing Co. Ltd. ECC Investiment Switzerland, AG • $ 252,5 MM premium payments over the next five
(Ireland) (Switzerland)
Leasing Holding years covering all financial guarantees associated with
deliveries within such period
ECC Insurance & Financial Co. Ltd.
(Cayman Islands) • Regulated by Cayman Islands Monetary Authority
Captive Insurance
• 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)
27. 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$50 million in aircraft –
10% of total previously disclosed exposure. Based on the
Company’s current estimates, no relevant losses or gains
are expected to occur with transactions involving these
aircraft.
• Future sales will be increasingly subject to trade-in options.
29. Accounts Receivables
US$ Million R$ Million
US GAAP BR GAAP
900 2400
738
2000
1770
633
1558
600 1600
1200 1053
300 800
245
568
183 175
387
400
0 0
Dec. 31, Dec. 31, Mar. 31, June 30, Sep. 30, 31 31 Dez. 31 Mar. 30 Jun. 30 Set.
2000 2001 2002 2002 2002 Dez.2000 2001 2002 2002 2002
Note: Short & Long term, net of allowance.
30. Inventories
US$ Million R$ Million
US GAAP BR GAAP
1.200
2768
1.015 995 992 2800
946 2371 2468
2313
800 2100
603
1400
1122
400
700
0 0
Dec. 31, Dec. 31, Mar. 31, June 30, Sep. 30, 31 Dez. 2000 31 Dez. 2001 31 Mar. 2002 30 Jun. 2002 30 Set. 2002
2000 2001 2002 2002 2002
31. Reduced Production Cycle
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 6,0
5,5
4,9 5,0
3,7
1996 1997 1998 1999 2000 2001 9M02
33. 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
34. Loans Breakdown
Bank Debt - US$ 542.9 million
September 30, 2002
Currency Breakdown Debt Maturity
Mainly US$ Short
denominated Term
R$ 46% Long Term 45%
denominated
55%
54%
• Considering Currency Swaps • Average Maturity: 4 years
• Average R$ debt cost: 15.5% p.a.
• Average US$ debt cost: 5.0% p.a.
35. FX Exposure – US GAAP figures in US$
Considering the Swaps effective as of June and September 2002
R$ US$ Total
June Sep June Sep June Sep
Total Cash 669.2 516.9 223.1 243.2 892.3 760.1
Total Debt 144.1 292.6 388.5 250.3 532.6 542.9
Net Amount 525.1 224.3 (165.4) (7.1) 359.7 217.2
58% of net exposure of Cash in R$ as of June 30.
30% of Net Exposure of Cash in R$ as of September 30.
