Embraer Releases Fourth Quarter and Fiscal Year 2007 Results in US GAAP

SAO JOSE DOS CAMPOS, Brazil, March 13 /PRNewswire-FirstCall/ -- Embraer NYSE: ERJ, the world's leading manufacturer of commercial jets up to 120 seats, recorded fourth quarter 2007 (4Q07) net sales of US$1,875.0 million and net sales for FY 2007 of US$5,245.2 million. Net Income for 4Q07 and for the full year totaled US$200.9 million and US$489.3 million, equivalent to diluted earnings per ADS of US$1.0838 and US$2.6400, respectively.

In 4Q07, Embraer added new customers to the firm order backlog for the EMBRAER 170/190 jets family after signing sales contracts with Suzuyo & Co., from Japan; TACA, from El Salvador; NAS Air, from Saudi Arabia; and Virgin Nigeria, from Nigeria, as well as Lufthansa and Air France/KLM. The Executive Aviation segment continued to grow, especially for the Phenom family, with more than 700 firm orders, on December 31, 2007. During the same period, the Defense and Government segment signed contracts with Thailand's Army and Navy.

The firm order backlog on December 31, 2007, increased 9.3% over the previous quarter, and reached a record high of US$18.8 billion, and highlighted sales to the Executive Aviation market and the favorable performance of the EMBRAER 170/190 family. Our backlog accumulated a total of 764 firm orders and 786 options booked.

In 4Q07, Embraer delivered 61 jets for the Commercial Aviation, Executive Aviation and Defense and Government segments. Total deliveries in 2007 were 169 jets, the highest deliveries in a year in the Company's history, which was consistent with Embraer's delivery guidance of 165 to 170 aircraft announced in 2007. Embraer reaffirms its delivery guidance for 2008 of between 195 and 200 aircraft, for the Commercial Aviation, Executive Aviation and Defense and Government segments, and 10 to 15 Phenom 100 jets. The certification process for the Phenom 100 is expected to be concluded in the second half of 2008, as planned.

Net revenues for 4Q07 totaled US$1,875.0 million, a 77.0% increase compared to US$1,059.6 million for the fourth quarter of 2006 (4Q06). Deliveries for 4Q07 totaled 61 aircraft, a 64.9% increase compared to 37 jets delivered in 4Q06. For fiscal year 2007, net revenues totaled US$5,245.2 million, a 39.5% increase compared to fiscal year 2006 revenues of US$3,759.5 million.

To meet the deliveries scheduled for 2007 and to improve its production capacity, Embraer hired and trained approximately 4,500 new employees, implemented a new third shift and widely used overtime work, resulting in an increase of the Company's production costs and, consequently, a reduction in its margins. Gross Margin for 4Q07 totaled 23.4%, representing a decrease from the 24.5% gross margin of 4Q06, and an increase from the 21.8% gross margin of the third quarter of 2007 (3Q07). For fiscal year 2007, gross margin totaled 22.5% representing a decrease when compared to fiscal year 2006, mainly due to the production difficulties previously reported.

Income from operations reached US$178.8 million in 4Q07, 113.6% above the US$83.7 million recorded for the same period last year. The increase is due to the higher number of deliveries in the quarter and to a favorable decision for the Company in a tax dispute that permitted it to reverse US$29.7 million in provisions. In 2007, income from operations was US$455.7 million, an increase of 32.9%, over the US$342.8 million in 2006, for the same reasons.

The increased operating results led to increases in net income, which was US$200.9 million in 4Q07, in comparison with US$124.4 million in 4Q06. Due to the increase in production costs, net margin decreased to 10.7% in 4Q07, compared to 11.7% in 4Q06. For the same reasons, net income increased to US$489.3 million in 2007 from US$390.1 million in 2006, and net margins decreased to 9.3% from 10.4%, respectively.

For the year ended December 31, 2007, the Company maintained its high level of liquidity, and its cash position at the end of 2007 was US$740.1 million.

2007 in perspective

In April 2007, the Board of Directors elected Mr. Frederico Fleury Curado as President and CEO of Embraer, to succeed Mr. Mauricio Botelho, who continues as Chairman of the Board of Directors.

At the end of 2007, Embraer's firm order backlog was a record US$18.8 billion. In the same period, 145 new firm orders for EMBRAER 170/190 aircraft were signed, and the Company continued the successful sales of the Phenom family, of which 700 jets have already been sold. The Legacy 600 and Lineage 1000 aircraft also maintained positive sales performance during the period.

In 2007, new customers were added to Embraer's firm order backlog, such as M1 Travel from Lebanon, Montenegro Airlines, Alpi Eagles, Lufthansa and Air France/KLM from Europe, Aeromexico and TACA from Latin America, Virgin Nigeria from Africa, and Suzuyo & Co. Ltd., from Japan.

During 2007 the Company undertook positive measures to adjust its industrial processes to meet the deliveries scheduled for the period. These measures included the hiring of new employees, implementing a third shift for some production processes and introducing the lean manufacturing system, all of which enabled the Company to deliver a total of 169 jets in 2007 and, thus, reach its established goal.

In February 2007, Embraer concluded a secondary offering of 11.3% of the total capital of the Company for portions of the shareholding positions of BNDES Participacoes S.A. - BNDESPAR, Caixa de Previdencia dos Funcionarios do Banco do Brasil - PREVI, Fundacao SISTEL de Securidade Social and the totality of the shares then held by European Aeronautic Defence and Space Company- EADS France and Dassault Aviation S.A.

In the second quarter, Embraer created a new business area called Aviation Services, to reinforce its presence in the after-sale market and to be better prepared to serve the future deliveries of its E-Jets and executive jets, worldwide. Due to that, the Company started the construction of its first service center at Williams Gateway Airport in Mesa, Arizona, Embraer and three weeks later the Company also started the construction of its second wholly- owned, U.S service center for executive jets, at Bradley International Airport in Windsor Locks, Connecticut. These facilities will be dedicated to support full-service of our executive jets and are scheduled for completion in mid- 2008.

The Phenom 100 aircraft flew for the first time on July 2007, completing an important and significant milestone in its certification process. As of December 2007, the Company had three pre-serial aircraft working on the flight test phase and certification process.

The 1000th jet of the ERJ family was delivered at Harbin Embraer Aircraft Industry Co. Ltd., in Harbin, China. This delivery marked an important achievement for the ERJ 145 family program, which was responsible for the turnaround of the Company in the 1990s. In addition, the ERJ 145 family platform has been used to launch products for the Executive Aviation and Defense and Government segments.

This document may contain forward-looking statements regarding circumstances or events yet to take place. Such statements are based largely on current expectations, forecasts of future events, assumptions and on financial tendencies that affect the Company's businesses, and may prove not to be accurate and are not guarantees of performance. They are subject to risks, uncertainties and assumptions that are difficult to predict and that may include, among others: general economic, political and trade conditions in Brazil and in those markets where the Company does business; expectations on industry trends; the Company's investment plans; its capacity to develop and deliver products on the dates previously agreed upon; and existing and future governmental regulations. The actual results can, therefore, differ substantially from those previously published as Company expectations. Further, in view of the inherent risks and uncertainties, the estimates, events and circumstances in such statements may not occur. The words "believe", "may", "is able", "will be able", "estimate", "intend", "continue", "project", "anticipate", "expect" and other similar terms are supposed to identify such forward-looking statements. The Company is not obligated to publish updates nor to revise any such statements due to new information, future events or otherwise.