Farnborough airshow apresentação financeira

5th Annual Investors and Analysts Meeting
November 18 & 19, 2004
São José dos Campos - Brazil

Financial

Antonio Luiz Pizarro Manso
CFO

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.

THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAER’S WRITTEN CONSENT.

Embraer Voting Capital

Ordinary Shares: 242,544,448 33.78%

2% Individuals
20% 60% Controlling
European Group Shareholders

7%
Foreign
Institutional Investors

11%
Brazilian
20% European Group 60% Controlling Shareholders
Dassault 5.67% PREVI (Pension Fund) 20%
Thales 5.67%
SISTEL (Pension Fund) 20%
EADS 5.67%
Snecma 2.99% Cia. Bozano 20%

Preferred Shares

Preferred Shares : 475,411,026 66.22%

2%
17%
Individuals
Controlling Shareholders

10%
BNDES

3% Brazilian
68% Foreign Investors


Dividends

500 60%
404 421
400 49.8% 50%
327 43.3%
40%
300 36.1% 36.1%
228
195 30%
27.2%
200
20%
100 10%

0 0%
2000 2001 2002 2003 9M04

Dividends Pay Out Ratio

R$ million


Main Differences between
Brazilian GAAP
&
US GAAP

Revenue Recognition – BR Gaap & US Gaap
Commercial Airline & Corporate Segments

Revenues are generally recognized as the deliveries are made

Defense

Defense segment operates in a business environment that differs from
Commercial Airline and Corporate markets segments. The main characteristics are:

Long-term contracts with customers to develop defense products
based on each customer need
Quantities and selling price are generally fixed
at the beginning of the program
Exposed to risks in the execution of the contract

Given these characteristics, revenues are recognized under the long-term
contract rules and uses the percentage-of-completion method.


Defense Revenue and Costs
Defense contract accounting

Long-term contract accounting requires management to estimate the total
contract cost. These cost consist of designing, engineering, manufacturing and entry
into service.

Total estimated contract costs include:
Raw material
Supplier components
Direct Labor, including engineering
Manufacturing overhead

Estimated total Price to
percent of complete x price = be recognized to date

Revenue to be - Revenue recognized = Current period
Recognized to date in prior periods revenue


Defense Revenue and Costs
Defense contract accounting

Contract monitoring and related adjustments:

Review is made on a quartely basis

As part of these reviews, additional revenues arising from change
order requests and additional cost from over spending are identified
and reflected in a revised contract margin.

The effect of any revision is accounted for by way of a cumulative
catch-up adjustment to margin

Physical progress

Percent of complete = Costs incurred to date
Most recent estimate of total cost


Translation Effects (R$ x US$)

BRGAAP
ü Up to 1995 non monetary items used to be indexed by the
UFIR (restating to current purchasing power)
ü There is no fuctional currency concept

USGAAP
ü Functional Currency is the US$ (SFAS 52)
ü Non Monetary Assets and Liabilities are accounted in historical
US$


PP&E
BRGAAP
ü Assets revaluation at market value is allowed
ü Interest capitalization was not foreseen up to 1996

USGAAP
ü Interest capitalization over Long-term assets construction (SFAS 34)
ü Capitalization of assets acquired through capital leases (SFAS 13)


Deferred Assets

BRGAAP
üCapitalization of expenses that will benefit future fiscal years
üDeferral of pre-operation costs

USGAAP
üR&D accounted in the income statement
üPre-operation costs are not deferred


Capital & Operating Lease

BRGAAP
üCapital and operating lease are accounted as rent

USGAAP
üCapital and operating lease concept explained by SFAS 13
üAccounted as:
Accounted as pre paid expenses
Customers commercial financing
Deferred income


Derivatives

BRGAAP
ü No CVM or IBRACON specific rule
ü Accounted by the accrual method

USGAAP
ü SFAS 133 in use since 2001
ü Gains and losses recognized during the
period
ü Fair value of derivatives is mandatory


Deferred Income Taxes
BRGAAP
ü Differences between accounting and fiscal records

USGAAP
ü All BR GAAP and US GAAP accounting diferences are considered
to calculate the deferred income tax

1999 (*) 2000 2001 2002 2003 9M04
No IOSE 27.9% (27.4%) (34.5%) (33.4%) (38.9%) (33.7%)
Benefit
BR GAAP
With IOSE 27.9% (24.2%) (30.6%) (26.6%) (29.8%) (22.5%)
Benefit

US GAAP With Benefit (23.8%) (26.8%) (40.3%) (45.6%) 25.8% (25.7%)
of IOSE

IOSE = Interest on Shareholders’ Equity
(*) 1999 no IOSE distribution

SPEs
Some of the sales transactions are structured financings through
which an SPE purchases the aircraft, pays the full purchase price
on delivery or at the conclusion of the sales financing structure,
and leases the related aircraft to the ultimate customer.

BRGAAP
ü New rule to be applied in 2005

USGAAP
ü Accounted as collateralized accounts receivable and non-recourse and
recourse debt.

ü Consolidation of certain SPEs owned by third parties that lack the
minimum amount of equity capital investment (“capital at risk”) as
defined in the EITF Topic D-14 and EITF 90-15.

ü Upon issuance of FIN 46 and FIN 46R, basic conditions requiring
consolidation of such entities were maintained and therefore no
significant effect is expected .
Source: 20 F note 8

Guarantees

BRGAAP
ü No specific rule available
ü Disclosure under notes to consolidated financial
statements is mandatory

USGAAP
ü Since 01/01/2003 guarantees given to third parties
are measured at fair value and recognized on income
(FIN 45)


Reconciliation between BR & USGAAP
Shareholders Equity
(09/30/04)
US$ Million

1.600
1.503 3 0 11
1.400 -4 121 3 1.327
1.200
-280 -1 -16 -13
1.000

800

600

400

200

-
BR GAAP Translation PP&E Inventories Financial Deferred Derivatives Fin 45 Operacional Deferred Others USGAAP
Effects Lease Assets (R&D) fair Value Lease Income Taxes
Adjusments


Reconciliation between BR & USGAAP

Net Income
(9M04)
US$ Million

350
327 -55
22 -5 -4 -13 22 297
300 4 -9 5
-4 7
104
250

200

150

100

50

-
BR GAAP Translation PP&E Inventories Financial Deferred Derivatives Fin 45 Operacional Deferred Others Exchanges USGAAP
Effects Lease Assets fair Value Lease Income rate effect
(R&D) Adjusments Taxes


Off Balance Sheet
Exposure

Off Balance Sheet Exposure

Financial Guarantees

Provided in the form of guarantees of lease payments, to mitigate
default-related losses.

These guarantees are mainly issued for the benefit of the customers
financing agent.

Exercised when customers do not meet their payment obligations during
the term of the financing.

Collateralized by the aircraft.

Upon an event of default, the Company usually is the agent for the
guaranteed party for the refurbishment and remarketing of the underlying
aircraft. The Company may be entitled to a fee for such remarketing services.
Typically a claim under the guarantee shall be made only upon surrender of the
underlying aircraft for remarketing



Residual Value Guarantees (RVGs)

Provide a third party with a specific guaranteed asset value at the end
of financing agreement.

In the event of a decrease in market value of the aircraft, the Company
shall bear the difference between the specific guaranteed amount and
the actual fair market value.

In order to benefit from the guarantee, the guaranteed party has to make
the aircraft to meet tight specific return conditions.

Financial Guarantees & RVGs

In the event both guarantees were issued for the same aircraft,
the residual value guarantees can only be exercised if the financial
guarantees have expired without having been triggered, and therefore,
are mutually exclusive.



Provisioning of financial guarantees and RVGs

In order to cover the exposure related to financial guarantees, a provision
is recorded at the time of the delivery.

Use of sophisticated models to measure the provision:

External appraisals of expected aircraft value
Credit ratings of the airlines companies
Current and future market outlook
Aircraft expected availability level in the market


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.

US$ million 2002 2003
Financial Guarantees 1,175 1,229
RVGs 624 627
Mutually Exclusive Exposure (362) (392)
Provisions & Liabilities Recorded (14) (67)
Off Balance Sheet Exposure 1,422 1,297
Estimated proceeds from performance
guarantees and underlying assets 1,748 1,650

Source: 20 F note 34



Repurchase Options (Put Options)

Provide the customer with the right to sell the aircraft back to the
Company in the future, according to defined price rules.

These put options may become exercisable at various times

Can be exercised at the customer’s sole discretion.

The put 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
aircraft during the exercise period as assessed at the date of sale.

Put obligations:

As of December 2003: US$ 500 million
As of today: ~ US$ 100 million


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

Trade up options

Provide that if and when the Company launches a new corporate jet model,
this customer has the right to trade-up to the new model and has the right
to sell the aircraft back to the Company in the future.

The trade-up price is determined as a percentage of the original purchase
price of the corporate jets.

11 Corporate jets are subject to trade up


3rd. Quarter 2004
Financial Results

Brazilian GAAP /
US GAAP

Net Sales & Gross Margin

R$ Million US$ Million
BR GAAP US GAAP
36.2% 924 937
38.1%
35.3% 35.0%
36.8%

649 626

32.2% 439 33.2%
31.8% 3,034
2,734 32.3% 32.6%

1,929 1,816
1,296

3Q03 4Q03 1Q04 2Q04 3Q04 3Q03 4Q03 1Q04 2Q04 3Q04
Revenue Gross Margin


Gross Margin Evolution

BR GAAP US GAAP
44.6%
41.6% 39.6% 39.4% 37.7%
32.0%
31.1% 35.8% 32.8%
33.2% 32.0%
26.9% 28.3% 28.6% 26.9% 28.3%

160 161 36 36
160 161
131 131
96 101 96 101
60 70 70
60
32 32

1997 1998 1999 2000 2001 2002 2003 9M04 1997 1998 1999 2000 2001 2002 2003 9M04
EMBRAER 170 Jet Deliveries Gross Margin EMBRAER 170 Jets Deliveries Gross Margin


Revenue Breakdown

US GAAP & BR GAAP US GAAP & BR GAAP
Sales per Segment Sales per Market
9M04 9M04
Brazil
7%
Defense
11%

Corporate
4%
Commercial
Airline
Customer
78% Foreing
Services &
Others Market
7% 93%


EBIT & Margin

BR GAAP US GAAP
17.6% 18.4%
17.1% 16.9% 24.4%
14.1%

13.3% 13.6%
558
11.0% 153
462 11.3%
123 127
339
221 255 73
49

3Q03 4Q03 1Q04 2Q04 3Q04 3Q03 4Q03 1Q04 2Q04 3Q04


Net Income & Margin

BR GAAP US GAAP
16.5%
14.5% 14.5%

12.6%
10.7% 12.1%
10.4%

8.7%
114
6.9% 382 397 103
80
280 68
4.4%
195
89 19

3Q03 4Q03 1Q04 2Q04 3Q04 3Q03 4Q03 1Q04 2Q04 3Q04


Working Capital

US GAAP /
Brazilian GAAP

Accounts Receivables

BR GAAP US GAAP

2,821
981
2,052
703
1,292 1,457
970 465 472
356

3Q03 4Q03 1Q04 2Q04 3Q04 3Q03 4Q03 1Q04 2Q04 3Q04


Accounts Receivables

US$ Million - US GAAP

95

189
886 157
194
166 514
271 315
190
3Q03 4Q03 1Q04 2Q04 3Q04

Commercial Airline Market Others

Others = Defense + Customer Services


Inventories

BR GAAP US GAAP

4,155
3,647 3,823 1,390
3,328 3,346 1,258 1,231
1,111 1,158

3Q03 4Q03 1Q04 2Q04 3Q04 3Q03 4Q03 1Q04 2Q04 3Q04


Net Cash (Debt)

BR GAAP US GAAP

944
304
642 629 222 220
516 178

(521) (178)

3Q03 4Q03 1Q04 2Q04 3Q04
3Q03 4Q03 1Q04 2Q04 3Q04


Hedging Strategy

• Firm backlog of US$11.0 billion
• 93% revenues in US$
• 83% of R&D & PP&E investments in R$
• 37% of total cash disbursements in R$

Main Objective of the Hedging Strategy

Optimize the Natural Hedge of the Cash Flow


Loans Breakdown
Bank Debt - US$ 1,169.2 million
September 30, 2004

Currency Breakdown Debt Maturity

Local
Currency
7%

Long Term
63%
Short Term
37%

Foreign
Currency
93%

Considering Swap effects; from US$ and Yen to R$
Cost of Local Currency = 12.4 • Loan Average Maturity: 2 years and 11 months
Cost of Foreing Currency = US$ variation + 3.9% p/a


Balance Sheet

US GAAP

79% 82% 84% 86% 86%
87% 88% 88%

21% 18% 16% 14% 14%
13% 12% 12%

Assets Liabilities Assets Liabilities Assets Liabilities Assets Liabilities

12/31/2003 03/31/2004 06/30/2004 09/31/2004

Other Currencies US$


Balance Sheet

US GAAP
Includes Derivatives

79% 82% 84% 86% 87%
88% 88% 89%

21% 18% 16% 14%
12% 12% 11% 13%

Assets Liabilities Assets Liabilities Assets Liabilities Assets Liabilities

12/31/2003 03/31/2004 06/30/2004 09/31/2004

Other Currencies US$


ECA’s - Export Credit Agencies
Aerospace Sector Support*
US$ Billion
7
6.3
5.9 5.8
6
5.0
5 4.5
4.2
4 3.5
2.7 3.0 2.9
3 2.6 2.7 2.7
2.6
2.4
2.2
1.8 1.95
2
1.4 (a)
1.0
1 0.6 0.7

0
1998 1999 2000 2001 2002 2003

US-EXIM EU-ECA's EDC BNDES
•US-EXIM & EU-ECA’s: commercial aircraft more than 70 seats (a) Direct and indirect disbursement
•EDC commercial aircraft of 50-70-90 seats
Source: US-Exim - Competitiveness Report 2001/2002
•BNDES: commercial aircraft 30-50 seats EDC Annual Report 2000/2001/2002/2003

ERJ 145 Family* and EMB-170
Financing Methods – YEAR 2004

Total Regional Jet delivered: 106 (through Sep/04)
Total amount exported: US$ 2.05 Billion
Total amount financed by BNDES: US$ 490 Million

Market
76.1%

BNDES
23.9%

* Includes Corporate and Authority Transportation


ERJ 145 Family* and EMB-170
Financing Methods

Total Regional Jet delivered: 847 (through Sep/04)
Total amount exported: US$ 14.46 Billion
Total amount financed by BNDES: US$ 6.42 Billion

BNDES
44.4%
Market
55.6%

* Includes Corporate and Authority Transportation


ERJ Financing Methods

Total RJ Aircraft Delivered: 847 (Sep 04)

Cash
5% Finance Lease
5%
Operating Lease
5%
Tax Lease
46%

Straight
Financing
Bridge 34%
3%


ERJ Financing Methods

Tax Lease

UK Tax Japanese Tax
Polish Tax
Lease Lease
Lease
9% 1%
Single Investor 3%
Lease
18%

USLL
68%
French Tax
Lease
1%


EETC – Annual volume of new issues

Amount US$ Million
8,084
(1994~2004)
6,621
6,030

3,594
2,688
2,204 2,305
1,486
762 985 785

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Oct/04

Source: Citigroup – EETC Trading Observer – October 14, 2004

Aircraft Financing – EETC 2003
2003-ERJ1 Pass Through Trust Certificate Offering

ü U$ 415 million total volume
ü Standard&Poors BBB and Moody’s Ba3
ratings
ü Priced at T + 347 bps with coupon of 7.875%
ü Unwrapped Single Tranche transaction – first
unwrapped transaction since October 2001
ü More than 3 times oversubscribed and spread
over (75) different accounts
ü Citigroup and Morgan Stanley as Joint
Bookrunners
ü Awarded “Deal of the Year” by Airfinance
Journal for 2003


Aircraft Financing – EETC 2004
2004-ERJ1 Pass Through Trust Certificate Offering

ü U$ 174 million total volume
üUnwrapped Single Tranche transaction
ü Significant portion of aircraft pre-funded
üPriced at T + 484 bps with coupon of 9.5%
ü Standard&Poors BBB- and Moody’s Ba2
ratings
ü Citigroup and Morgan Stanley as Joint
Bookrunners with Citigroup acting as sole
structuring agent


PP&E and R&D – Cash Flow
US$ million

200

180 158.6
PP&E 99.6
160
114.2
R&D 136
140

120
60.1 69.6 143.8

100

80 18.8
127.7
60 44.1

40

20

0
2000 2001 2002 2003 2004 E

Does not include cash contribution from risk sharing partners


Cash Contribution – Risk Sharing Partners
US$ million

300

246 14
250
- 1 107
-
200

150
72

100

24
50
28

-
Total 2001 2002 2003 2004E 2005E 2006E 2007/2010E


Investments Forecast

Defence investments are funded by their contracts and are not
included in the R&D expenses, but in Cost of Sales and
Services.
US$ million
2005 2006
R&D Total 119 66
- Commercial Aviation 89 37
- Corporate Aviation 11 12
- Others 19 17
Defence 88 38
Productivity and PP&E 77 59
TOTAL 284 163

Does not include new programs


Backlog

17.5 17.7 17.8 18.5
17.3

10.4 10.6 10.9 10.5 11.0

3Q03 4Q03 1Q04 2Q04 3Q04
Firm Orders Options
US$ Billion


Investor Relations
Department

Phone: (55 12) 3927 1216
investor.relations@embraer.com.br
www.embraer.com.br

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