According to Embraer’s first quarter results, the company delivered 19 executive jets. The Company's operating and financial information is presented, except where otherwise stated, on a consolidated basis in United States dollars (US$) in accordance with US GAAP. The financial data presented in this document as of and for the quarters ended March 31, 2009 (1Q09), December 31, 2009 (4Q09) and March 31, 2010 (1Q10), are derived from the unaudited financial statements, except where otherwise stated.
As a result of a smaller number of aircraft delivered in 1Q10 compared to 1Q09, and a different mix of products, Net sales came down from US$ 1,154.1 million in 1Q09 to US$ 990.1 million in 1Q10. In terms of Gross profit, the reduction was offset by a good revenue mix, in which defense and service contributed with 33.4% of the quarter’s revenue while the average participation of those segments in 2009 was 19.9%.  Net cash is equal to Cash and cash equivalents plus Temporary cash investments minus Loans short-term and long-term.
The EBIT and EBIT margin were US$ 57.4 million and 5.8% respectively. Operating income margin was higher than 1Q09; even adjusting 1Q09 margin by the one-time expenses related to the Company’s restructuring costs. It is important to mention that a portion of the operating expenses are Reals denominated and the appreciation of the Real against the US dollar of 22% from 1Q09 to 1Q10 impacted those expenses.
R&D expenses totaled US$ 36.6 million, which, in annualized basis, would amount US$ 146.4 million and they are in line with the Company’s projections of US$ 160 million for the entire year. Selling expenses increased by 30.9% in 1Q10 compared to 1Q09, due to the increase in executive jet deliveries that required additional customer support efforts and the exchange rate effects already mentioned. The increase in the commercial activities, which reflect some improvement in the marketplace and in the demand for jets, also impacted the Company’s Selling expenses. General and administrative expenses were reduced by US$ 1.9 million and amounted to US$ 35.1 million at the end of the quarter. Other operating expenses and incomes compensated each other during the quarter and had a neutral result for the period.
Net income attributable to Embraer was US$ 35.3 million for the period. The Net margin achieved 3.6%, and was 5.6 points higher than the Net margin for the same period of 2009.
Embraer’s operating cash flow was negative in the first quarter of the year, mainly, due to an increase in Trade accounts receivable. An increase in Inventory and Trade accounts receivable were partially offset by reductions in Trade account payables and increases in Advances from customers. Therefore, the Company had an Operating cash outflow of US$ 46.1 million in 1Q10.
1Q09 2Q09 3Q09 4Q09 2009 YTD 1Q10
The breakdown of 1Q10 net revenue was very positive to the Embraer’s results. The defense and services participation was larger than in the past quarters and totaled more than 33% out of the total revenue. Commercial aviation participation achieved 52.9% and is likely to range that figure throughout the year. On the other hand executive aviation shall contribute more towards the second half of the year as Phenom 300 production ramp up and Legacy 650 starts delivery.
Net sales
Executive aviation deliveries in 1Q10 totaled 19 aircraft, among which 16 Phenom 100s – including the delivery of the 100th Phenom 100, one Phenom 300, and two Legacy 600s. Deliveries reductions can be explained by (i ) some seasonal effects, (ii ) ramp-up in the production of the Phenom 300, and (iii ) Legacy 650 deliveries that will start only in the second half of 2010. The sales environment continues to be weak despite a consistent, but slow, recovery of the market. More than 850 aircraft with less than 10 years of operation are available for sale in the secondary market and more than half of those are less than five years old. In the coming months, the secondary market is expected to continue its recovery, which shall positively impact new aircraft sales.
The Legacy 450 and 500 development program continues on track. In January, the Company concluded its second Man-Machine Interface Advisory Broad in which seasoned pilots and aircraft owners from around the world were heard and the majority of the suggestions were implemented in the final aircraft project. As Luís Carlos Affonso, Embraer Executive Vice President, Executive Jets, said, “Listening to our customers has been an Embraer trade mark. I believe this is the right attitude to have when designing products that respond to market needs, and are intended to always provide customers with a remarkable ownership experience.”

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