Financial Statements - Embraer RI

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First Quarter 2012 Results in IFRS

EMBRAER RELEASES FIRST QUARTER 2012 RESULTS HIGHLIGHTS:  In the first quarter of 2012 (1Q12), Embraer delivered 21 commercial and 13 executive (12 light and 1 large) jets, surpassing the 20 commercial and eight executive jets delivered in the same period of 2011;  As a result of aircraft deliveries, coupled with revenues from aviation services and the Company’s growing Defense and Security business, 1Q12 Revenues reached R$ 2,049.2 million and gross margin was 23.2% for the period; 1

 EBIT and EBITDA margins were 7.5% and 12.9% respectively, in 1Q12;  Net income attributable to Embraer and Earnings per ADS totaled R$ 111.2 million and R$ 0.1536, respectively, in 1Q12;  Net cash2 position totaled R$ 549.9 million. MAIN FINANCIAL INDICATORS: in million of Reais, except % and per share data

IFRS

Revenues EBIT EBIT Margin % EBITDA EBITDA Margin % Adjusted Net Income (Loss) ³ Net income (loss) attributable to Embraer Shareholders Earnings (loss) per share - ADS basic (R$) Earnings per Share - diluted Net Cash

1

2

4Q11 3,667.3 (15.4) -0.4% 101.3 2.8% (260.2) (171.6) (0.2371) (0.2369) 836.2

1Q11 1,756.6 156.6 8.9% 259.8 14.8% 151.4 174.3 0.2410 0.2405 822.2

1Q12 2,049.2 153.3 7.5% 263.8 12.9% 116.3 111.2 0.1536 0.1532 549.9

EBITDA is a non-GAAP measure. Net cash is equal to Cash and cash equivalents plus short-term Financial assets minus short and long-term Loans.

3

Adjusted Net Income (Loss) (excluding Deferred income tax and social contribution) is a non-GAAP measure, calculated by adding Net income attributable to Embraer Shareholders plus Deferred income tax and social contribution for the period. Furthermore, under IFRS for Embraer’s Income Tax benefits (expenses) the Company is required to record taxes resulting from unrealized gains or losses due to the impact of the changes in the Real to US Dollar exchange rate over non-monetary assets (primarily Inventory, Intangibles and PP&E). It is important to note that taxes resulting from gains or losses over non-monetary assets are considered deferred taxes and are accounted for in the Company’s consolidated Cash flow statement, under Deferred income tax and social contribution.

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First Quarter 2012 Results in IFRS

São José dos Campos, April 26, 2012 - (BM&FBOVESPA: EMBR3, NYSE: ERJ) The Company's operating and financial information is presented, except where otherwise stated, on a consolidated basis in Real, in accordance with IFRS. The financial data presented in this document as of and for the quarters ended March 31, 2011 (1Q11), December 31, 2011 (4Q11) and March 31, 2012 (1Q12), are derived from the unaudited financial statements, except where otherwise stated. REVENUES AND GROSS MARGIN As a result of aircraft deliveries and product mix, 1Q12 Revenues increased to R$ 2,049.3 million, compared to R$ 1,756.6 million in 1Q11. During 1Q12, the contribution of aviation services to the Company’s total revenue was 14%, compared to 15.4% in 1Q11. Furthermore, as mentioned in the 1Q11 earnings release, the gross margins for aviation services during that period were unusually high also impacting gross margins for that period. Considering the decrease in revenues from aviation services, and a more normalized gross margin in that business in 1Q12, the gross margin for 1Q12 was 23.2%, compared to 24.3% in 1Q11. The Company’s on-going efforts to maximize operational efficiencies also contributed positively to gross margins during 1Q12. EBIT EBIT and EBIT margin in 1Q12 were R$ 153.3 million and 7.5%, respectively, compared to EBIT of R$ 156.6 million and EBIT margin of 8.9% in 1Q11. It is important to mention that a portion of the operating expenses, primarily labor in Brazil, are Real denominated and the 10% increase in wages at the end of 2011, resulting from the annual settlement between the labor union and the Company, impacted these expenses. Research expenses totaled R$ 28,1 million, which, on an annualized basis, would amount to US$ 100 million as the Company expectations for total 2012 Selling expenses reached R$ 192.2 million, an increase when compared to R$ 156,7 in 1Q11, mainly driven by the Company’s efforts towards expanding its customer support network, particularly in the Executive aviation segment. Administrative expenses for 1Q12 reached R$ 125.6 million and were also higher compared to the R$ 95.4 million for 1Q11, as a result of the wage increases mentioned above, which were not entirely offset by the depreciation of the Real. Other operating income, net totaled R$ 24.1 million for 1Q12 compared to R$ 14.0 million for 1Q11. NET INCOME Net income attributable to Embraer and Earnings per ADS, for 1Q12, were R$ 111.2 million and R$ 0.1536, respectively. The Net margin reached 5.4%, compared to 9,9% in 1Q11. The difference in Net margin comes primarily as a result of an increase in Financial expenses, coupled with higher Income tax expense for the period, which totaled R$ 26.7 million in 1Q12, compared to Income tax income of R$ 4.2 million in 1Q11. This difference in Income tax expenses comes mainly as a result of the dividends paid in the form of interest on shareholders’ equity, which are tax deductible, that were distributed during 1Q11 and reduced the Income tax for that period and during 1Q12 there were no dividends distributed.

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First Quarter 2012 Results in IFRS

MONETARY BALANCE SHEET ACCOUNTS AND OTHER MEASURES The Company’s Net cash position for the period decreased by R$ 286.3 million, reaching R$ 549.9 million, due to less operating net cash in 1Q12 than in 4Q11. The decrease in Net cash comes mainly as a consequence of an increase in the Company’s Inventories, which were partially offset by an increase in Trade accounts payable. in million of Reais

Balance Sheet Data Cash and cash equivalents Financial assets Total cash position Loans short-term Loans long-term Total loans position Net cash*

(1) 4Q11

(2) 1Q11

2,532.7 1,413.6 3,946.3 472.2 2,637.9 3,110.1 836.2

(2) 1Q12

2,121.4 1,166.4 3,287.8 248.9 2,216.7 2,465.6 822.2

2,617.6 1,555.0 4,172.6 960.1 2,662.6 3,622.7 549.9

* Net cash = Cash and cash equivalents + Financial assets short-term - Loans short-term and long-term (1) Derived from audited financial information. (2) Derived from unaudited financial information.

Considering the above, Net cash used by operating activities was negative R$ 225.1 million. As the Company expects to meet its 2012 aircraft delivery guidance, which will lead to a decrease in Inventories, Operating cash flow is expected to improve through the remainder of the year. in million of Reais

1Q11 Net cash generated (used) by operating activities Financial assets adjustment (1) Additions to property, plant and equipment Additions to intangible assets Free cash flow

100.6 (79.0) (152.7) (80.2) (211.3)

2Q11 133.7 43.4 (147.5) (95.4) (65.8)

3Q11 276.3 (218.2) (119.5) (81.2) (142.6)

4Q11

1Q12

348.5 418.5 (138.3) (108.3) 520.4

(225.1) 110.4 (70.1) (114.4) (299.2)

(1) Unrealized gain (losses) on Financial assets.

Additions to PP&E totaled R$ 70.1 million in 1Q12. Total PP&E includes spare parts pool programs, aircraft under lease or available for lease and CAPEX. In 1Q12 CAPEX accounted for R$ 55.8 million in additions to PP&E. Furthermore, as the Company continues to build up its inventory of spare parts to adjust for the growing customer demand for its spare parts Pool programs, in 1Q12, the level of investments in Pool program spare parts totaled R$ 14.3 million. The Company also added a total of R$ 114.4 million to Intangible assets in 1Q12, related to all investments made for product development throughout 1Q12. Additionally, 1Q12 investments in Development (net of contributions from suppliers) totaled R$ 114.0 million, the Company expects total 2012 Development investments to be in line with its US$ 350 million outlook. The following tables outline the detailed investments in PP&E and R&D for 1Q12.

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First Quarter 2012 Results in IFRS

in million of Reais

Additions Contributions from suppliers Development (Net of contributions from suppliers) Research R&D

1Q11 80.1 (25.1) 55.0 32.1 87.1

2Q11 95.4 (2.3) 93.1 30.4 123.5

3Q11 81.2 (121.0) (39.8) 34.3 (5.5)

4Q11 108.3 (0.6) 107.7 46.8 154.5

1Q12 114.4 (0.4) 114.0 28.1 142.1

CAPEX Additions of aircraft available for or under lease Additions of Pool programs spare parts PP&E

1Q11 64.5 35.7 52.5 152.7

2Q11 51.0 59.7 36.8 147.5

3Q11 65.2 0.1 54.2 119.5

4Q11 96.0 13.5 28.8 138.3

1Q12 55.8 14.3 70.1

During 1Q12, as a result of the need for additional working capital to support the Company’s ongoing operations, the Company’s total debt increased to R$ 3,622.7 million, compared to R$ 512.6 million in 4Q11. This increase comes primarily from an increase in Short-term loans, which reached R$ 960.1 million in 1Q12. Long-term loans increased and totaled R$ 2,662.6 million in 1Q12. Furthermore, as a consequence of the increase in total debt, the Company’s total cash position also increased R$ 226.3 million and totaled R$ 4,172.6 million in 1Q12. Considering the Company’s current debt profile, the average loan maturity decreased from 4.8 to 4.2 years and is in line with the Company’s business cycle. Furthermore, the cost of Dollar denominated loans decreased from 5.9% to 5.1% p.a. and the cost of Real denominated loans remained stable, going from 5.1% to 5.0% p.a. The Adjusted EBITDA to financial expenses (gross) ratio increased in 1Q12, compared to 4Q11, from 5.33 to 4.98. As of 1Q12, 34.3% of total debt was denominated in Reals. The Company’s financial results for the period would have totaled R$ 5.7 million, if not for the impact of certain provisions related to residual value guarantee obligations which totaled R$ 19,9 million. These provisions are a result of the quarterly re-evaluation of the outstanding residual value guarantees, based on the most recent aircraft valuations received from thirdparty independent aircraft appraisal firms. Considering these provisions, the financial result for the period was negative R$ 13.7 million.

Embraer’s cash allocation management strategy continues to be one of the most important tools to mitigate exchange rate risks. In other words, by balancing cash allocation in Real and Dollar denominated assets, the Company attempts to neutralize its balance Page 4

First Quarter 2012 Results in IFRS

sheet exchange rate exposure. Of total cash in 1Q11, 50% was denominated in Reals. OPERATIONAL BALANCE SHEET ACCOUNTS Inventories increased by R$ 529.7 million and totaled R$ 4,832.2 million in 1Q12, as the Company expects to experience some growth in the number of deliveries in the following quarters. Trade accounts receivable remained stable and totaled R$ 910.4 million. On the other hand, Trade accounts payable grew R$ 171.7 million, to R$ 1,728.4 million, and Advances from customers increased R$ 15.4 million, totaling R$ 2,022.6 million, and combined, these increases contributed to partially offset the negative impact of the increase in Inventories on the Company’s working capital requirements. in million of Reais

Balance Sheet Data Trade accounts receivable Customer and commercial financing Inventories Property, plant and equipment Intangible Trade accounts payable Advances from customers Total shareholders' equity

(1) 2011 949.2 191.9 4,291.0 2,720.7 1,516.2 1,556.7 2,007.2 5,848.4

(2) 1Q11 659.0 91.7 4,170.3 2,048.8 1,188.4 1,476.4 1,786.5 5,207.9

(2) 1Q12 910.4 204.0 4,832.2 2,651.2 1,550.7 1,728.4 2,022.6 5,785.0

(1) Derived from audited financial information. (2) Derived from unaudited financial information.

Intangible increased R$ 34.5 million during 1Q12, totaling R$ 1,550.7 million, primarily due to investments made in aircraft program development, mainly the Legacy 450 & 500. Property, plant and equipment and Customer and commercial financing remained relatively stable and totaled R$ 2,651.2 million and R$ 204.0 million, respectively. TOTAL BACKLOG During 1Q12, Embraer delivered a total of 21 commercial and 13 executive aircraft. Considering all deliveries, as well as firm orders obtained during the period, the Company’s firm order backlog was US$ 14.7 billion at the end of 1Q12. The following chart presents the Company’s backlog evolution through 1Q12.

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First Quarter 2012 Results in IFRS

SEGMENT RESULTS 1Q12 Revenues mix by segment varied when compared to 1Q11, as a result of a higher participation from the Defense and Security and Executive aviation segments, which represented 20.1% and 13.2% of total Revenues for the period, respectively. This increase was compensated by the lower participation in total Revenues from the Commercial aviation and Others segments, which represented 65.7% and 1.1%, respectively. Additionally, total aviation services revenues in 1Q12 remained stable when compared to 1Q11. Net revenues by segment Commercial Aviation - Commercial Aviation services

Defense and Security Business - Defense and Security Business services

Executive Aviation - Executive Aviation services

Others Total

4Q11 R$M 1,948.2 162.7

530.1 98.6

1,097.5 45.7

91.5 3,667.3

% 53.1 4.4 14.5 2.7 29.9 1.2 2.5 100.0

(1) 1Q11 R$M 1,250.5 173.6

282.1 67.3 192.7 29.9 31.3 1,756.6

1Q12 R$M 1,345.4

% 71.2 9.9 16.0 3.8 11.0 1.7 1.8 100.0

160.5

411.3 88.0

270.1 38.7

22.4 2,049.2

% 65.7 7.8 20.1 4.3 13.2 1.9 1.1 100.1

(1) Derived from unaudited financial information.

COMMERCIAL AVIATION In 1Q12, Embraer delivered 21 jets to the commercial aviation market and E-Jets orders rose to 1,063, with 60 companies in 42 countries. The family of E-Jets operators continued to grow and welcomed two new airlines – Bulgaria Air and Estonian Air. As Paulo Cesar de Souza e Silva, Embraer's President of Commercial Aviation, said: "The E-Jets family customer base expansion reinforces the important role these jets play in the commercial aviation market, whether to adjust capacity to demand, substitute older airplanes, or develop new markets. The E-Jets are helping airlines to increase efficiency in the current scenario of weak economic conditions and rising fuel costs.” Deliveries Commercial Aviation EMBRAER 170 EMBRAER 175 EMBRAER 190 EMBRAER 195

4Q11

1Q11 32 7 18 7

1Q12 20 1 2 11 6

21 2 13 6

In 1Q12, Embraer closed sales for 12 new commercial jets: ten E195 to Azul, one E190 to BA CityFlyer, and one E170 to JAL (customer disclosed on April 4).

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First Quarter 2012 Results in IFRS

EXECUTIVE AVIATION

Executive Aviation delivered a total of 12 light and 1 large jets, in 1Q12, totaling 13 aircraft which represents an increase of approximately 60% over total deliveries in the same quarter of the previous year. The Company expects that the total revenue guidance for 2012 will be met. Deliveries Executive Aviation Light jets Large jets

4Q11 50 40 10

1Q11 8 6 2

1Q12 13 12 1

Embraer successfully performed the first engine run of the Legacy 500, in January, and has already started ground tests. The program is on schedule and the aircraft’s first flight is scheduled for the third quarter of 2012. In 1Q12, the Company delivered the 300th jet of the Phenom family and the 100th executive jet to the Brazilian market, which also was the first Phenom 300 in a MEDEVAC version. Embraer continues to gain increased attention in the Chinese Market. The highlight was the sale of three ultra-large Lineage 1000 jets to Minsheng, of China, and the delivery of a large Legacy 650 jet to movie star Jackie Chan, who was recently named the ambassador for Embraer Executive Jets. In 1Q12, Embraer expanded relationships with current authorized service centers in Asia to cover the full line of Embraer Executive Jets, with additions in India, Singapore, Western Australia and Japan. Embraer has also announced the creation of a dedicated business aviation service center in the city of Sorocaba, located 90 kilometers from São Paulo’s State capital, in Brazil. This service center will constitute, together with other centers in Brazil and worldwide, a global support network in strategic places to better serve our customers. DEFENSE AND SECURITY

The Defense and Security market continues to present a favorable scenario for growth, with a series of campaigns underway for various applications including transportation of officials and authorities; training and light attack; intelligence, surveillance and reconnaissance systems; aircraft modernization; military transportation; and command and control systems and services. In addition, the Company is also pursuing major participation in projects in Brazil, such as the Integrated System for Border Monitoring (SISFRON), and security for the upcoming major sporting events. As for the modernization programs, two flight test prototypes and eight serial production AMX jets are already at Embraer’s facilities to start revitalization and later modernization activities. The first modernized prototype is set to have its first flight in the first semester 2012. The Brazilian navy´s AF-1 (A-4 Skyhawk) modernization program continues on track and reached another important milestone in the first quarter with the avionics RIG power on. The program comprises the upgrade of 12 aircraft. The AEW India program is moving ahead as contracted. In the first quarter, the second aircraft ordered by the Indian government performed its maiden flight. The first two of three aircraft ordered by the Indian government are scheduled for delivery in the second semester.

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First Quarter 2012 Results in IFRS

In March, Embraer Defense and Security disclosed that it has signed contracts with three African nations for the acquisition of the A-29 Super Tucano light attack and advanced training turboprop. The Burkina Faso Air Force, the first operator of this model in Africa, has already received three aircraft that are used on border patrol missions. The Angola Air Force acquired six of this aircraft for the same mission, and the first three will be delivered in 2012. Also, the Air Force of Mauritania chose the A-29 Super Tucano to carry out counterinsurgency missions. The total value of the contracts – including an extensive logistical, training, and replacement parts package – comes to more than US$ 180 million. With these orders, nine air forces have now chosen the A-29 Super Tucano in Latin America, Africa and Southeast Asia, and the aircraft is already operating in six of them. Regarding the U.S. Air Force (USAF) Light Air Support (LAS) program, the procurement process is running as follows:



On December 30, 2011, the LAS contract was awarded to Embraer Defense and Security and its partner Sierra Nevada Corporation (SNC), the prime contractor.



In February 2012 the USAF canceled the procurement process due to internal documentation issues.



A new request for proposals (RFP) is expected to be issued by the USAF in the second quarter of 2012.



A new contract award is expected in 2013.

The KC-390 program is ongoing and on schedule. All main program suppliers were already selected and they are working alongside Embraer Defense and Security. In January, Embraer Defense and Security increased its stake in Portugal’s OGMA. As per the signed agreement, 30% of the shares were acquired, representing the capital of AIRHOLDING, SGPS, S.A., from the European Aeronautic Defense and Space Company (EADS). This is an additional investment in Portugal, in order to strengthen the strategic partnership between Brazil and the European Union. The final transfer should occur after the approval of the Portuguese competition regulators.

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(A free translation of the original in Portuguese)

Embraer S.A. Quarterly information (ITR) at March 31, 2012 and Report on Review of Quarterly information

1

REPORT ON REVIEW OF QUARTERLY INFORMATION ................................................................................... 5 1.

OPERATIONS ...................................................................................................................................................................... 12

2.

PRESENTATION OF THE FINANCIAL STATEMENTS AND ACCOUNTING PRACTICES ................................... 12

3.

CRITICAL ACCOUNTING ESTIMATES .......................................................................................................................... 20

4.

FINANCIAL INSTRUMENTS............................................................................................................................................ 23

5.

CASH AND CASH EQUIVALENTS .................................................................................................................................. 25

6.

FINANCIAL ASSETS .......................................................................................................................................................... 25

7.

TRADE ACCOUNTS RECEIVABLE, NET........................................................................................................................ 26

8.

CUSTOMER AND COMMERCIAL FINANCING............................................................................................................ 27

9.

COLLATERALIZED ACCOUNTS RECEIVABLE AND RECOURSE AND NON-RECOURSE DEBT ..................... 28

10. INVENTORIES .................................................................................................................................................................... 29 11. OTHER ASSETS .................................................................................................................................................................. 29 12. GUARANTEE DEPOSITS................................................................................................................................................... 30 13. INVESTMENTS ................................................................................................................................................................... 31 14. RELATED PARTY TRANSACTIONS ............................................................................................................................... 33 15. PROPERTY, PLANT AND EQUIPMENT......................................................................................................................... 37 16. INTANGIBLE ASSETS ....................................................................................................................................................... 38 17. FINANCIAL LIABILITIES BY CATEGORY .................................................................................................................... 40 18. LOANS AND FINANCING ................................................................................................................................................. 41 19. TRADE ACCOUNTS PAYABLE......................................................................................................................................... 43 20. OTHER PAYABLES ............................................................................................................................................................ 44 21. ADVANCES FROM CUSTOMERS .................................................................................................................................... 44 22. TAXES AND PAYROLL CHARGES PAYABLE AND INCOME TAX SOCIAL CONTRIBUTION............................ 44 23. OTHER PROVISIONS ........................................................................................................................................................ 45 24. PROVISIONS FOR CONTINGENCIES ............................................................................................................................ 46 25. POST-RETIREMENT BENEFITS ..................................................................................................................................... 48 26. SHAREHOLDERS' EQUITY.............................................................................................................................................. 49 27. STOCK COMPENSATION.................................................................................................................................................. 50 28. EARNINGS PER SHARE ................................................................................................................................................... 51 29. OTHER OPERATING INCOME (EXPENSE), NET........................................................................................................ 52 30. REVENUE AND (EXPENSES) BY NATURE .................................................................................................................. 53 31. FINANCIAL INCOME (EXPENSE), NET ........................................................................................................................ 54 32. FOREIGN EXCHANGE GAINS (LOSSES), NET............................................................................................................ 54 33. INCOME TAXES.................................................................................................................................................................. 54 34. IMPAIRMENT TEST........................................................................................................................................................... 56 35. FINANCIAL GUARANTEES AND RESIDUAL VALUE GUARANTEES..................................................................... 57 36. FINANCIAL INSTRUMENTS............................................................................................................................................ 57 37. RESPONSIBILITIES AND COMMITMENTS ................................................................................................................. 73 38. SUPPLEMENTARY CASH FLOW INFORMATION ...................................................................................................... 74 39. SEGMENT INFORMATION - CONSOLIDATED............................................................................................................ 74

2

Embraer S.A. Balance Sheets In thousands of Reais

Report on Review of Quarterly Information

To the Board of Directors and Shareholders Embraer S.A.

Introduction We have reviewed the accompanying parent company and consolidated interim accounting information of Embraer S.A. included in the Quarterly Information Form (ITR) for the quarter ended March 31, 2012, comprising the balance sheet as at that date and the statements of income, comprehensive income, changes in equity and cash flows for the quarter then ended, presented in Brazilian reais, and a summary of significant accounting policies and other explanatory information. Management is responsible for the preparation of the parent company interim accounting information in accordance with the accounting standard CPC 21, Interim Financial Reporting, of the Brazilian Accounting Pronouncements Committee (CPC), and of the consolidated interim accounting information in accordance with CPC 21 and International Accounting Standard (IAS) 34 - Interim Financial Reporting issued by the International Accounting Standards Board (IASB), as well as the presentation of this information in accordance with the standards issued by the Brazilian Securities Commission (CVM), applicable to the preparation of the Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim accounting information based on our review. Scope of review We conducted our review in accordance with Brazilian and International Standards on Reviews of Interim Financial Information (NBC TR 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Brazilian and International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion on the parent company interim information Based on our review, nothing has come to our attention that causes us to believe that the accompanying parent company interim accounting information included in the quarterly information referred to above has not been prepared, in all material respects, in accordance with CPC 21 applicable to the preparation of the Quarterly Information, and presented in accordance with the standards issued by the CVM.

The accompanying notes are an integral part of these consolidated financial statements. 3

Embraer S.A. Balance Sheets In thousands of Reais

Conclusion on the consolidated interim information Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim accounting information included in the quarterly information referred to above has not been prepared, in all material respects, in accordance with CPC 21 and IAS 34 applicable to the preparation of the Quarterly Information, and presented in accordance with the standards issued by the CVM. Other matters Statements of value added We have also reviewed the parent company and consolidated statements of value added for the quarter ended March 31, 2012. These statements are the responsibility of the Company’s management, and are required to be presented in accordance with standards issued by the CVM applicable to the preparation of Quarterly Information (ITR) and are considered supplementary information under IFRS, which do not require the presentation of the statement of value added. These statements have been submitted to the same review procedures described above and, based on our review, nothing has come to our attention that causes us to believe that they have not been prepared, in all material respects, in a manner consistent with the parent company and consolidated interim accounting information taken as a whole. São José dos Campos, April 24, 2012.

PricewaterhouseCoopers Auditores Independentes CRC 2SP000160/O-5

Valdir Augusto de Assunção Contador CRC 1SP135319/O-9

The accompanying notes are an integral part of these consolidated financial statements. 4

Embraer S.A. Balance Sheets In thousands of Reais

ASSETS CURRENT Cash and cash equivalents Financial assets Trade accounts receivable, net Accounts receivable from subsidiaries Derivative financial instruments Customer and commercial financing Collateralized accounts receivable Inventories Other assets

NON-CURRENT ASSETS Trade accounts receivable Accounts receivable from subsidiaries Financial assets Customer and commercial financing Collateralized accounts receivable Inventories Guarantee deposits Deferred income tax Derivative financial instruments Other assets Investments Property, plant and equipment Intangible assets

Parent Company 03.31.2012 12.31.2011

Note

5 6 7 36 8 9 10 11

7 6 8 9 10 12 33 36 11 13 15 16

TOTAL ASSETS

1,637,134 1,345,046 295,999 360,213 5,967 4,580 3,976,580 348,393 7,973,912

1,609,030 1,250,803 330,225 284,007 4,041 4,655 3,429,856 363,497 7,276,114

2,617,621 1,554,979 900,072 16,949 43,148 25,239 4,824,097 425,919 10,408,024

2,532,671 1,413,565 948,759 15,465 22,597 27,936 4,283,172 452,537 9,696,702

1,036,121 125,630 366,830 82,518 432,235 2,680,515 998,283 1,383,200 7,105,332

1,016,280 131,480 380,408 92,953 421,397 2,706,861 1,024,703 1,343,595 7,117,677

10,286 97,446 160,930 860,185 8,113 859,579 112,517 38,717 484,557 4,632 2,651,167 1,550,663 6,838,792

428 102,630 169,278 886,753 7,838 884,191 123,601 42,570 460,363 5,171 2,720,661 1,516,189 6,919,673

15,079,244

14,393,791

17,246,816

16,616,375

The accompanying notes are an integral part of these consolidated financial statements. 5

Consolidated 03.31.2012 12.31.2011

Embraer S.A. Balance Sheets In thousands of Reais

LIABILITIES

Parent Company 03.31.2012 12.31.2011

Note

CURRENT Trade accounts payable Loans and financing Non-recourse and recourse debt Other payables Accounts payable to subsidiaries Contribution from suppliers Advances from customers Taxes and payroll charges payable Income tax and social contribution Derivative financial instruments Provisions for contingencies Dividends Unearned income Other provisions

23

NON-CURRENT LIABILITIES Loans and financing Non-recourse and recourse debt Other payables Contribution from suppliers Advances from customers Derivative financial instruments Taxes and payroll charges payable Deferred income tax and social contribution Financial guarantee Provisions for contingencies Unearned income Other provisions

18 9 20 0 21 36 22 22 35 24 0 23

19 18 9 20

Consolidated 03.31.2012 12.31.2011

1,462,866 768,550 45,255 61,647 1,456,237 91,944 283 10,116 215 240,178 450,585 4,587,876

1,175,284 335,573 44,392 48,480 1,366,965 140,731 324 9,671 216 245,046 409,747 3,776,429

1,728,411 960,124 569,128 137,851 1,612 1,675,981 119,043 37,787 1,640 10,348 215 240,869 558,619 6,041,628

1,556,705 472,235 586,797 152,525 1,659 1,605,844 167,304 21,050 1,838 9,999 216 245,841 508,585 5,330,598

2,521,104 10,466 1,414 346,599 698,687 892,707 97,833 224,647 78,518 4,871,975 9,459,851

2,491,397 10,466 1,845 401,389 722,027 928,273 102,547 229,003 89,084 4,976,031 8,752,460

2,662,555 269,030 25,278 1,414 346,599 360 701,685 42,671 892,707 103,009 258,784 116,055 5,420,147 11,461,775

2,637,920 280,960 26,304 1,845 401,389 389 725,591 43,094 928,273 107,576 157,487 126,516 5,437,344 10,767,942

Noncontrolling interest TOTAL SHAREHOLDERS' EQUITY

4,789,617 (315,771) 2,303,788 26,380 10,191 (1,302,687) 107,875 5,619,393 5,619,393

4,789,617 (320,220) 2,302,401 21,831 (1,152,298) 5,641,331 5,641,331

4,789,617 (315,771) 2,303,788 26,380 10,191 (1,302,687) 107,875 5,619,393 165,648 5,785,041

4,789,617 (320,220) 2,302,401 21,831 (1,152,298) 5,641,331 207,102 5,848,433

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

15,079,244

14,393,791

17,246,816

16,616,375

0 21 22 22 36 24 0

TOTAL LIABILITIES SHAREHOLDERS' EQUITY Capital Treasury shares Revenue reserves Share-based remuneration Noncontrolling acquisition results Cumulative translation adjustments Retained earnings

26

27

The accompanying notes are an integral part of these consolidated financial statements. 6

Embraer S.A. Statements of Income Three months ended March 31, 2012 and 2011 In thousands of Reais, except earnings per share

Parent Company 03.31.2012 03.31.2011

Note Revenue Cost of sales and services Gross Profit Operating Income ( Expense ) Administrative Selling Research Other operating (expense) income, net Equity Operating profit before financial income (expense)

29 13

Consolidated 03.31.2012 03.31.2011

1,593,206 (1,236,080) 357,126

1,477,957 (1,149,194) 328,763

2,049,158 (1,573,746) 475,412

1,756,604 (1,329,803) 426,801

(89,641) (165,397) (27,658) 54,200 (2,732) 125,898

(69,730) (126,295) (31,400) 36,539 (7,685) 130,192

(125,557) (192,230) (28,133) 24,234 (386) 153,340

(95,350) (156,700) (32,149) 14,026 156,628

Financial income (expense), net Foreign exchange gain (loss), net Profit before taxes on income

31 32

(9,239) (997) 115,662

12,775 6,650 149,617

(14,155) 484 139,669

10,165 5,433 172,226

Income tax (expense) income Net income

33

(4,419) 111,243

24,759 174,376

(26,731) 112,938

4,222 176,448

Atributable to : Owners of Embraer Noncontrolling interest Weighted average number of shares (in thousands) Basic Diluted

-

-

111,243 1,695

174,376 2,072

724,040 725,938

723,665 725,020

724,040 725,938

723,665 725,020

0.1536 0.1532

0.2410 0.2405

0.1536 0.1532

0.2410 0.2405

28

Earnings per share (R$) Basic Diluted

The accompanying notes are an integral part of these consolidated financial statements. 7

Embraer S.A. Statements of Comprehensive Income Quarters ended March 31 In thousands of Reais

Parent Company 03.31.2012 31.03.2011 Net income Other comprehensive income Financial instruments available for sale Other comprehensive income (i) Total of comprehensive income

Consolidated 03.31.2012 31.03.2011

111,243

174,376

112,938

176,448

(150,517) 128 (150,389)

(104,492) (104,492)

(193,666) 128 (193,538)

(102,044) (102,044)

(39,146)

69,884

(80,600)

74,404

Attributable to: Owners of Embraer Noncontrolling interest

(39,146) (41,454)

(i) amounts are net of deferred income tax.

The accompanying notes are an integral part of these consolidated financial statements. 8

69,884 4,520

Embraer S.A. Statements of Shareholders’ Equity In thousands of Reais

Atributable to owners of Embraer Revenue reserves Treasury Shares

Capital At December 31, 2010 Total comprehensive income Net income for the period Cumulative translation adjustments Financial instruments available for sale Total comprehensive income Share-based remuneration Stock option grants exercised Allocation of profits: Investment subsidy Legal reserve Interest on own capital (R$ 0.28 per share) Reserve for investments and working capital At December 31, 2011 Net income for the year Cumulative translation adjustments Financial instruments available for sale Total comprehensive income Share-based remuneration Stock option grants exercised Noncontrolling acquisition results Allocation of profits: Investment subsidy At March 31, 2012

4,789,617 -

Noncontrolling acquisition results

Share-based remuneration

(320,250)

5,809

-

30

16,022 -

4,789,617

(320,220)

21,831

-

4,789,617

4,449 (315,771)

-

-

-

-

Invesment Subsidy

Additional proposed dividends

Statutory Reserve

50,033 -

230,958 -

(loss) income

For investment and working capital

45,255 -

2,046,043 -

Retained earnings

Actuarial gain on post employment benefit obligations

-

1,917

-

-

-

-

156,297 156,297 (14)

11,113 61,146

7,815 238,773

(45,255) -

(43,561) 2,002,482

(11,113) (7,815) (180,916) 43,561 -

Cumulative translation adjustment

Total

(1,803,246)

-

5,046,136

-

650,774 650,774 -

(1,743) (1,743) -

156,297 650,774 (1,743) 805,328 16,022 16

1,917

(1,152,472)

(1,743)

(226,171) 5,641,331

-

4,549 -

10,191

-

-

-

-

111,243 111,243 (1,981) -

-

(150,517) (150,517) -

26,380

10,191

1,387 62,533

238,773

-

2,002,482

(1,387) 107,875

1,917

(1,302,989)

9

Other comprehensive income

128 128 (1,615)

111,243 (150,517) 128 (39,146) 4,549 2,468 10,191 5,619,393

Embraer S.A. Statements of Value Added Quarters ended March 31 In thousands of Reais

Parent Company 03.31.2012 03.31.2011 REVENUE Gross revenue of products and services Provision for doubtful acount - reversals and additions Revenue related to construction of own assets Other revenues INPUT MATERIAL PURCHASED FROM THIRD PARTIES Raw materials consumed Materials, electricity, third-party services and other

Consolidated 03.31.2012 03.31.2011

1,598,366 (330) 108,035 39,953 1,746,024

1,492,526 (20) 43,438 32,004 1,567,948

2,057,889 (2,116) 124,287 41,574 2,221,634

1,771,400 (2,610) 79,653 32,019 1,880,462

(909,645) (220,926) (1,130,571)

(877,693) (135,648) (1,013,341)

(1,181,562) (276,351) (1,457,913)

(1,051,622) (220,450) (1,272,072)

GROSS VALUE ADDED

615,453

554,607

763,721

608,390

Depreciation and amortization

(69,114)

(58,592)

(110,532)

(103,223)

VALUE ADDED PRODUCED BY THE COMPANY

546,339

496,015

653,189

505,167

VALUE ADDED RECEIVED IN TRANSFER Equity in the earnings(loss) of subsidiaries Financial income

(2,732) 66,109

(7,685) 60,922

(386) 67,892

64,633

TOTAL VALUE ADDED FOR DISTRIBUTION

609,716

549,252

720,695

569,800

DISTRIBUTION OF VALUE ADDED Personnel Taxes, charges and contributions Income tax and social contribution expense (benefit) Insterests and rentals Interest on own capital/dividends Retained earnings Noncontrolling interest

333,328 81,146 4,419 79,580 111,243 -

208,345 150,688 (26,309) 42,152 88,675 85,701 -

407,305 108,891 5,142 86,419 111,243 1,695

268,452 91,863 (22,864) 55,901 88,675 85,701 2,072

DISTRIBUTED VALUE ADDED

609,716

549,252

720,695

569,800

The accompanying notes are an integral part of these consolidated financial statements. 10

Embraer S.A. Statements of Cash Flow Quarters ended March 31 In thousands of Reais

Parent Company 31.03.2012 Operating activities: Net income Items not affecting cash and cash equivalents Depreciation Amortization Allowance (reversal) for inventory obsolescence Provision for market value Deferred income tax and social contribution Accrued interest Equity in the earnings of subsidiaries and associates Stock option Foreign exchange gain (loss), net Residual value guarantee Other Changes in assets and liabilities: Financial assets Collateralized accounts receivable and accounts receivable Customer and commercial financing Inventories Other assets Trade accounts payable Non-recourse and recourse debt Other accounts payable Contribution from suppliers Advances from customers Taxes and payroll charges payable Financial guarantees Other provisions and provisions for contingencies Unearned income Net cash generated by operating activities Investing activities: Additions to property, plant and equipment Proceeds from sale of property, plant and equipment Additions to intangible assets Investments in associates Investments in held to maturity securities Restricted cash reserved for construction of assets Net cash (used in) investing activities Financing activities: Repayment of borrowings Proceeds from borrowings Dividends and interest on own capital Investment subsidy Acquisition of own shares for treasury Net cash generated by (used in) financing activities Effects of exchange rate changes on cash and cash equivalents (Decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the quarter Cash and cash equivalents at the end of the quarter

111,243 15 16

13 27 35

15 16 13

Consolidated

31.03.2011

31.03.2012

31.03.2011

174,376

112,938

176,448

20,888 48,226 (3,910) 4,419 3,404 2,732 4,549 2,204 19,878 526

17,748 40,844 4,654 (558) (26,309) 631 7,685 4,442 (19,200) 155 (148)

58,111 52,421 (10,455) 5,300 5,142 5,327 386 4,549 618 19,878 8,899

58,284 44,939 16,693 1,948 (22,864) 2,628 4,442 (19,216) 155 5,584

(92,081) (107,841) 1,952 (620,881) (1,776) 277,575 21,999 (14,073) 82,099 (71,888) (28,737) 33,218 4,492 (301,783)

(21,136) (103,200) 1,819 (583,077) 4,226 244,226 13,495 (11,622) 155,990 (22,819) (25,630) 46,603 (7,867) (104,672)

(144,062) 22,054 (17,473) (630,261) (13,119) 176,721 (4,726) (5,362) (14,075) 72,746 (54,152) (28,737) 45,873 106,405 (225,054)

48,972 (93,930) 23,740 (622,647) 40,552 263,186 (4,176) (9,548) (11,622) 176,855 (10,255) (25,630) 55,863 143 100,544

(23,934) (110,432) (31,158) (165,524)

(20,642) 435 (76,206) (96,413)

(70,123) 6 (114,427) 3,097 (2,296) (183,743)

(152,709) 678 (80,168) 2,359 (229,840)

904,900 (416,641) 2,468 490,727

750,747 (641,274) (133,472) (23,999)

973,840 (431,059) (31,158) 2,468 514,091

736,273 (643,779) (133,474) (40,980)

4,684 28,104

(13,841) (238,925)

(20,344) 84,950

(29,546) (199,822)

1,609,030 1,637,134

1,668,509 1,429,584

The accompanying notes are an integral part of these consolidated financial statements. 11

2,532,671 2,617,621

2,321,199 2,121,377

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

1.

Operations Embraer S.A. (the Parent Company and together with subsidiaries as "Consolidated" or "the Company”) is a publicly-held company incorporated under the laws of the Federative Republic of Brazil with headquarters in São José dos Campos, State of São Paulo, Brazil. The corporate purpose of the Company is: (i) The development, production and sale of jet and turboprop aircraft for civil and defense aviation, aircraft for agricultural use, structural components, mechanical and hydraulic systems, aviation services and technical activities related to the production and maintenance of aerospace material; (ii) The design, construction and sale of equipment, materials, systems, software, accessories and components to the defense, security and energy industries and the promotion or performance of technical activities related to production and maintenance, to achieve the highest technological and quality standards; and (iii) The performance of other technological, industrial, commercial and service activities related to the defense, security and energy industries; (iv) Contribution to the formation of technical professionals necessary to the aerospace industry. The Company’s shares are listed on the enhanced corporate governance segment of the Stock Exchange in Brazil (“BM&FBOVESPA”), known as the New Market (“Novo Mercado”). The Company also has American Depositary Shares (evidenced by American Depositary Receipts - ADRs) which are registered with the Securities and Exchange Commission (“SEC”) and are listed on the New York Stock Exchange (“NYSE”). The Company has no controlling group and its capital comprises only common shares. The Company has consolidated wholly-owned and jointly controlled entities and/or commercial representation offices. They are located in Brazil, United States of America (the "U.S."), France, Spain, Portugal, China and Singapore and their activities comprise sales, marketing, and after sales and maintenance services.

2.

Presentation of the Financial Statements and Accounting Practices

2.1

Presentation and preparation of the financial statements The presentation of the interim parent company and consolidated financial statements are in accordance with International Accounting Standards – ("IAS") IAS 34/CPC 21 issued respectively by the International Accounting Standards Board (“IASB”) and by the CPC (Brazilian Accounting Pronouncements Committee), regarding interim reports. The (i) parent company interim financial statements were prepared in accordance with accounting practices adopted in Brazil as issued by the CPC , (ii) the consolidated interim financial statements were prepared in accordance with accounting practices adopted in Brazil as issued by the CPC and International Financial Reporting Standards (“IFRS”) as issued by the IASB, and (iii) should be read in conjunction with the respective financial statements of Embraer S.A. as of December 31, 2011 a) Basis of preparation These financial statements were prepared under the historical cost convention and adjusted to reflect assets and liabilities measured at fair value through profit or loss or marked to market when available for sale. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management of the Company to exercise its judgment in the process of applying the Company's accounting policies. The areas which involve a higher degree of judgment or complexity, or assumptions and estimates significant to the financial statements are disclosed in Note 3. The actual results may differ from these estimates and assumptions.

12

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

b) Consolidation The Company's consolidated financial statements have been prepared and are presented in accordance with IFRS which comprises (i) IFRS, (ii) the International Accounting Standard (IAS), and (iii) Interpretations originated by the International Financial Reporting Interpretations Committee (IFRIC) or former Standing Interpretations Committee (SIC). The consolidated financial statements presented in accordance with IFRS are consistent with those presented in accordance with accounting practices adopted in Brazil as issued by the CPC. The consolidated financial statements include the accounts of the Company and all (i) majority-owned subsidiaries in which the Company, directly or indirectly has the power to direct the subsidiary’s financial and operating policies (ii) special purpose entities ("SPEs") for which the Company has control, (iii) exclusive investment funds and (iv) joint ventures, as follows: ELEB - Equipamentos Ltda. - "ELEB" - a wholly-owned subsidiary located in São José dos Campos, produces and sells precision hydraulic and mechanical equipment for the aviation industry, mainly for Embraer aircraft. Embraer Aircraft Holding Inc. - "EAH" - a wholly-owned subsidiary, located in Fort Lauderdale, U.S., responsible for corporate and institutional activities. It has the following subsidiaries also located in the U.S.: • Embraer Aircraft Customer Services, Inc. - "EACS" – located in Florida, sells spare parts and product support to customers in the U.S., Canada and the Caribbean. • Embraer Aircraft Maintenance Services Inc. - "EAMS" – located in Delaware, provides maintenance services for aircraft and components. • Embraer Training Services - "ETS" - located in Dallas, is responsible for corporate and institutional activities and has a 51% subsidiary, Embraer CAE Training Services - "ECTS", also located in Delaware, which provides training for pilots, mechanics and crew. • Embraer Executive Jet Services, LLC - "EEJS" - located in Delaware, provides after sales support services and maintenance services for executive aircraft. • Embraer Services Inc. - "ESI" – located in Delaware, provides support in the U.S. for the defense and commercial market programs. • Embraer Executive Aircraft, Inc. - "EEA" - located in Delaware, has its operational base in Melbourne, Florida where it provides final assembly and delivery of the Phenom executive jet. Embraer Australia PTY Ltd. - "EAL" - a wholly-owned subsidiary - located in Melbourne, Australia, provided after-sales support services to customers in the Australasian and Asian regions. The company is currently inactive. Embraer Aviation Europe SAS - "EAE" - a wholly-owned subsidiary - located in Villepinte, France, is responsible for corporate and institutional activities and has the following subsidiaries: •

Embraer Aviation International SAS - "EAI" - located in Villepinte - sells parts and provides after sales support services in Europe, Africa and the Middle East.



Embraer Europe SARL - "EES" - located in Villepinte - provides sales representation for the Company in Europe, Africa and the Middle East.

Embraer Credit Ltd. - "ECL" - a wholly-owned subsidiary - located in Delaware, provides support for sales operations. Embraer GPX Ltda - "GPX" – a subsidiary with 99,9% of its capital is held by Embraer, located in Gavião

13

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Peixoto, State of São Paulo, provides specialized aircraft maintenance services. Embraer Overseas Limited - "EOS" - a wholly-owned subsidiary - located in the Cayman Islands, B.W.I., with the sole objective of carrying out financial transactions, including rising and investing funds, and provides intercompany loans for Embraer companies. Embraer Representation LLC - "ERL" - a wholly-owned subsidiary - located in Delaware - provides commercial and institutional representation for the Company. Embraer Spain Holding Co. SL - "ESH" - a wholly-owned subsidiary - located in Spain - coordinates investments in subsidiaries abroad, including those focused on activities that support the sale of aircraft and management of assets derived from these operations. ESH's operations are carried out by the following subsidiaries: •



ECC Investment Switzerland AG, located in Switzerland, holds 100% of the capital of the following: •

ECC Insurance & Financial Co. Ltd. – “ECC Insurance” - located in the Cayman Islands, is an in-house insurance company providing cover for the financial guarantees offered to customers and/or financing agents involved in structuring the sales of Embraer aircraft.



Embraer Finance Ltd. - "EFL" - located in the Cayman Islands, assists customers in obtaining third-party financing, as well as providing support for some of the Company's purchase and sale transactions.

Harbin Embraer Aircraft Industry Company Ltd. - "HEAI" - located in Harbin, in China, manufactures aircraft in order to meet the air transportation market demand in China.

Embraer Netherlands B.V. – “ENL” - a wholly-owned subsidiary incorporated in 2011, located in Holland, has as its main objective the coordination of the investments in the subsidiaries abroad, including those intended to support the marketing activities of aircraft and asset management from these operations. The activities of ENL are effected by its subsidiaries: •

Embraer Asia Pacific PTE. Ltd. - "EAP" - a wholly-owned subsidiary, located in Singapore, created in 2006 with the objective of providing after-sales support services in Asia.



Airholding SGPS, S.A. - a wholly-owned subsidiary, located in Portugal. Its main activity is its 65% participation in the voting capital of OGMA - Indústria Aeronáutica de Portugal S.A., a Portuguese aviation maintenance and production company. The remaining 35% of the voting capital is held by Empresa Portuguesa de Defesa - EMPORDEF.



ECC Leasing Co. Ltd. – “ECC Leasing” - located in Dublin, Ireland, leases and sells used aircraft.



EMBRAER CAE Training Services Ltd. - "ECUK" - located in Burges Hill, United Kingdom, provides training for pilots, mechanics and crew. CAT holds 51% of its capital.



EMBRAER Portugal - SGPS S.A. - a wholly-owned subsidiary located in Evora, Portugal, coordinates investments and economic activities in its subsidiaries in Portugal. •

EMBRAER-Portugal Estruturas Metalicas S.A - located in Évora, Portugal, manufactures, assembles, maintains and sells parts, components and metal sets and carries out other technological, industrial, commercial and service activities related to the metal products industry.



Embraer-Portugal Estruturas em Compositos S.A. - located in Évora, Portugal manufactures, assembles and sells structures based on parts and sets in composite materials and carries out other technological, industrial, commercial and service activities related to the composite, non-metal products manufacturing industry.

14

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated



Embraer (China) Aircraft Technical Services Co., Ltd – “ECA”, based in Beijing, China, provides aftersales support services, maintenance services and to sells parts to customers in the China.

ECC do Brasil Cia. de Seguros - "ECC" – a wholly-owned subsidiary (99.99%), located in Rio de Janeiro, Brazil, registered with the Private Insurance Agency - SUSEP. Its objective is to deal solely with export credit insurance. In 2007, Embraer's Board of Directors approved the proposal to sell all of its shares in ECC, and in 2009, Embraer signed a contract to this effect, subject to approval of SUSEP, which has not yet been granted. On April, 2011, SUSEP denied the transfer request as certain requirements had not been fulfilled by the purchaser. SUSEP advised the purchaser to file for approval through administrative proceedings after fulfilling all requirements. The proceedings are ongoing. Indústria Aeronáutica Neiva Ltda. - "Neiva" – a subsidiary with 99.9% of its capital held by Embraer, located in Botucatu, State of Sao Paulo, Brazil, sells agricultural aircraft and related parts and components. Embraer Defesa e Segurança Participações S.A. – a wholly-owned subsidiary, incorporated in 2011 and located in São José dos Campos, coordinates the investments in the Defense and Security segment and holds interests in the following companies: •

Orbisat Indústria e Aerolevantamento S.A. – 90% of its capital is held by Embraer Defesa e Segurança Participações S.A., located in São José dos Campos, where it develops technology for remote sensing and builds air, sea and land surveillance radars.



Atech Negócios em Tecnologia S.A. – a joint venture, 50% owned by Embraer Defesa e Segurança Participações S.A., located in São Paulo, develops strategic solutions for command, control, communications, computers and intelligence and provides specialized consulting service and technical and logistics support in all of the following phases of a project: conceptualization, specification, development, integration, implementation management, installation, testing, maintenance and training.



Harpia Sistemas S.A. - “Harpia” - located in Brasilia, Distrito Federal, Brazil, incorporated on September 5, 2011 through a partnership between Embraer Defesa e Segurança Participações S.A. and AEL Sistemas (a subsidiary of Elbit Systems Ltd. domiciled in Israel) each owning 51% and 49% respectively. Its main activity is the development, construction, sale, maintenance, modernization and after-sales services of unmanned aerial vehicles (“UAV’s”). Harpia will also focus on marketing, development, systems integration, manufacturing, sales and after-sales support of simulators and modernization of avionics systems. As of March 31, 2012, this company was not yet in operation.

Special Purpose Companies - "SPEs" - the Company handles some of its aircraft sale financing transactions through SPEs, in which the Company has no direct or indirect interest. Although it has no equity interests, the Company controls the operations of the SPEs or takes a majority share of their risks and rewards. The SPEs are consolidated in the financial statements by the Company. The consolidated SPEs, over which the Company has no control, are: PM Limited, Refine Inc., RS Limited, River One Ltd. and Table Inc. Other SPEs over which Embraer has no control or continuous involvement were not consolidated, based on technical analyses made by Management. Exclusive Investment Funds - in connection with its business strategies, the Company has investments in exclusive funds, which are consolidated in the financial statements. The balances of marketable securities and investments maintained through these Funds are recorded in the Cash and cash equivalents or Financial assets accounts, taking into consideration the original maturities of the securities and the fund investment strategies, which anticipate the negotiation of these securities in periods that reflect the immediate liquidity of the amounts (Note 5 and 6).

15

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

All accounts and transactions originated by the consolidated entities are eliminated c) Parent company financial statements The parent company’s financial statements were prepared in accordance with accounting practices adopted in Brazil, based on Brazilian Corporate Law, the Pronouncements, Interpretations and Guidelines issued by the CPC and the rules and regulations of the CVM, and are issued together with the consolidated financial statements. d) Investments in associates Investments in associates are not consolidated in the financial statements and are accounted for using the equity method. As of March 31, 2012 the principal associate was Aero Seating Technologies LLC - "AST", located in San Gabriel, U.S., which is an associate of EAH which owns 36.7% of its share capital and mainly manufactures and maintains aircraft seats. e) Interest in other entities Interest in other entities are not consolidated in the financial statements and as of March 31, 2012 these were represented by AEL Systems SA - "AEL", domiciled in Porto Alegre, Brazil, in which Embraer Defesa e Segurança Participações S.A. has a 25% interest. Its main activities are research, development, manufacture and sales of electronic components, electronic equipment used in aviation and software programs. Despite its 25% interest, Embraer Defesa e Segurança Participações S.A. does not have significant influence over AEL, and, therefore the investment is classified as a non current financial asset, measured at fair value and the changes in valuations are recognized in shareholders’ equity as Comprehensive income. 2.2

Summary of significant accounting policies There were no significant changes in the Company's accounting practices in relation to those disclosed in the financial statements of December 31, 2011. The following concepts and practices related to the functional currency in terms of its impact on the financial statements. (i) Parent Company's functional currency After analyzing Embraer's operations and businesses, particularly in relation to the factors involved in determining its functional currency, Management concluded that the Parent company's functional currency is the US dollar ("US$" or "dollar"). This conclusion was based on analysis of the following indicators: • Currency that most influences sales prices of goods and services; • Currency of the country whose competitive forces and regulations most determine the sales price of its goods and services; • Currency that most influences labor, materials and other costs of providing goods or services; • Currency in which the funds for financial operations are largely obtained; and • Currency in which revenue from operations is usually accumulated. (ii) Financial Statements presentation currency In accordance with Brazilian legislation, these financial statements are being presented in Reais, converting the financial statements prepared in the functional currency of the Company to Reais, using

16

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

the following criteria: • Assets and liabilities at the closing rate of the period; •

The Statements of income, of Comprehensive income, of Cash flows and of Value added at the monthly average rate and



Shareholders’ equity is maintained at the historic formation amounts.

The exchange gain/losses resulting from this translation are recorded in a specific shareholders’ equity account-Cumulative Translation Adjustments. (iii) Financial Statements conversion for subsidiaries For the subsidiaries with functional currencies other than U.S. dollars, assets and liabilities are translated using the monthly average rate. The resulting translation adjustments are recognized in a specific account in shareholders' equity, "Cumulative translation adjustments" The consolidated balance sheets, statements of income and cash flow in the functional currency (US dollar), translated into the presentation currency (Brazilian real), are shown below. CONSOLIDATED BALANCE SHEET (in thousands) 03.31.2012 ASSETS CURRENT ASSETS Cash and cash equivalents Financial assets Trade accounts receivable Derivative financial instruments Customer and commercial financing Collateralized accounts receivable Inventories Other assets

NON-CURRENT ASSETS Trade accounts receivable Financial assets Customer and commercial financing Collateralized accounts receivable Inventories Guarantee deposits Deferred income tax and social contribution Derivative financial instruments Other assets Investments Property, plant and equipment Intangible assets

TOTAL ASSETS

US$

12.31.2011 R$

US$

R$

1,436,596 853,400 493,975 9,302 23,680 13,851 2,647,548 233,752 5,712,104

2,617,621 1,554,979 900,072 16,949 43,148 25,239 4,824,097 425,919 10,408,024

1,350,182 753,579 505,789 8,245 12,046 14,893 2,283,384 241,251 5,169,369

2,532,671 1,413,565 948,759 15,465 22,597 27,936 4,283,172 452,537 9,696,702

5,645 53,480 88,321 472,084 4,452 471,752 61,751 21,249 265,934 2,542 1,455,006 851,031 3,753,247

10,286 97,446 160,930 860,185 8,113 859,579 112,517 38,717 484,557 4,632 2,651,167 1,550,663 6,838,792

228 54,713 90,243 472,733 4,179 471,368 65,893 22,694 245,420 2,757 1,450,401 808,289 3,688,918

428 102,630 169,278 886,753 7,838 884,191 123,601 42,570 460,363 5,171 2,720,661 1,516,189 6,919,673

9,465,351

17,246,816

8,858,287

16,616,375

17

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

(in thousands) 03.31.2012 LIABILITIES CURRENT Trade accounts payable Loans and financing Non-recourse and recourse debt Other payables Contribution from suppliers Advances from customers Taxes and payroll charges payable Income tax and social contribution Derivative financial instruments Provisions for contingencies Dividends Unearned income Other provisions

US$

12.31.2011 R$

US$

R$

948,582 526,933 312,347 75,655 885 919,807 65,333 20,738 900 5,679 118 132,193 306,580 3,315,750

1,728,411 960,124 569,128 137,851 1,612 1,675,981 119,043 37,787 1,640 10,348 215 240,869 558,619 6,041,628

829,889 251,751 312,825 81,312 885 856,085 89,191 11,222 980 5,331 115 131,059 271,129 2,841,774

1,556,705 472,235 586,797 152,525 1,659 1,605,844 167,304 21,050 1,838 9,999 216 245,841 508,585 5,330,598

1,461,256 147,649 13,873 776 190,220 198 385,097 23,419 489,933 56,533 142,025 63,692 2,974,671 6,290,421

2,662,555 269,030 25,278 1,414 346,599 360 701,685 42,671 892,707 103,009 258,784 116,055 5,420,147 11,461,775

1,406,291 149,782 14,023 983 213,983 208 386,817 22,974 494,868 57,350 83,957 67,445 2,898,681 5,740,455

2,637,920 280,960 26,304 1,845 401,389 389 725,591 43,094 928,273 107,576 157,487 126,516 5,437,344 10,767,942

Noncontrolling interest TOTAL SHAREHOLDERS' EQUITY

1,438,007 (181,172) 1,740,906 12,244 5,593 6,959 61,483 3,084,020 90,910 3,174,930

4,789,617 (315,771) 2,303,788 26,380 10,191 (1,302,687) 107,875 5,619,393 165,648 5,785,041

1,438,007 (183,725) 1,740,904 9,652 2,587 3,007,425 110,407 3,117,832

4,789,617 (320,220) 2,302,401 21,831 (1,152,298) 5,641,331 207,102 5,848,433

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

9,465,351

17,246,816

8,858,287

16,616,375

NON-CURRENT LIABILITIES Loans and financing Non-recourse and recourse debt Other payables Contribution from suppliers Advances from customers Derivative financial instruments Taxes and payroll charges payable Deferred income tax and social contribution Financial guarantee Provisions for contingencies Unearned income Other provisions TOTAL LIABILITIES STOCKHOLDERS' EQUITY Capital Treasury shares Revenue reserves Share-based remuneration Noncontrolling acquisition results Cumulative translation adjustments Retained earnings

18

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

CONSOLIDATED STATEMENTS OF INCOME (in thousands)

03.31.2012 US$ Revenue Cost of sales and services Gross Profit Operating Income ( Expense ) Administrative Selling Research Other operating income, net Equity Operating profit before financial income Financial income (expense), net Foreign exchange gain (loss), net Profit before taxes on income Income tax (expense) income Net income Atributable to : Owners of Embraer Noncontrolling interest

19

03.31.2011 R$

US$

R$

1,155,865 (887,691) 268,174

2,049,158 (1,573,746) 475,412

1,055,746 (799,276) 256,470

1,756,604 (1,329,803) 426,801

(71,046) (108,716) (15,952) 13,476 (215) 85,721

(125,557) (192,230) (28,133) 24,234 (386) 153,340

(57,226) (93,990) (19,279) 8,413 94,388

(95,350) (156,700) (32,149) 14,026 156,628

(7,887) 401 78,235

(14,155) 484 139,669

6,078 3,273 103,739

10,165 5,433 172,226

(14,587) 63,648

(26,731) 112,938

2,619 106,358

4,222 176,448

62,677 971

111,243 1,695

105,116 1,242

174,376 2,072

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

CONSOLIDATED CASH FLOW (in thousands) 2011 US$ Operating activities Net income Items not affecting cash and cash equivalents: Depreciation Amortization Allowance (reversal) for inventory obsolescence Provision for market value Deferred income tax and social contribution Accrued interest Equity in the earnings of subsidiaries and associates Stock option Foreign exchange gain (loss), net Residual value guarantee Other Changes in assets and liabilities: Financial assets Accounts receivable and collateralized Customer and commercial financing Inventories Other assets Trade accounts payable Recourse and recourse debt Other accounts payable Contribution from suppliers Advances from customers Taxes and payroll charges payable Financial guarantees Other provisions and provisions for contingencies Unearned income Net cash generated by (used in) operating activities

US$

R$

63,648

112,938

106,358

176,448

32,778 29,630 (5,851) 2,952 2,457 3,663 215 2,591 183 11,072 5,126

58,111 52,421 (10,455) 5,300 5,142 5,327 386 4,549 618 19,878 8,899

34,961 26,985 10,017 1,174 (13,823) 1,619 2,685 (11,533) 93 3,600

58,284 44,939 16,693 1,948 (22,864) 2,628 4,442 (19,216) 155 5,584

(77,662) 9,241 (9,712) (357,508) (7,291) 98,811 (2,611) (3,067) (7,951) 41,325 (30,160) (16,007) 26,059 59,202 (128,867)

(144,062) 22,054 (17,473) (630,261) (13,119) 176,721 (4,726) (5,362) (14,075) 72,746 (54,152) (28,737) 45,873 106,405 (225,054)

29,488 (56,494) 14,190 (371,930) 24,212 157,693 (2,519) (5,789) (6,978) 105,733 (5,961) (15,335) 33,543 82 62,071

48,972 (93,930) 23,740 (622,647) 40,552 263,186 (4,176) (9,548) (11,622) 176,855 (10,255) (25,630) 55,863 143 100,544

(39,648) 3 (64,629) 1,743 (1,279)

(70,123) 6 (114,427) 3,097 (2,296)

(91,794) 151 (48,097) 1,414 -

(152,709) 678 (80,168) 2,359 -

Net cash used in investing activities

(103,810)

(183,743)

(138,326)

(229,840)

Financing activities: Proceeds from borrowings Repayment of borrowings Dividends and interest on own capital Acquisition of own shares for treasury Net cash (used in) financing activities

549,369 (240,713) 1,360 292,661

973,840 (431,059) 2,468 514,091

440,758 (387,918) (79,721) (26,881)

736,273 (643,779) (133,474) (40,980)

26,430 86,414

(20,344) 84,950

12,523 (90,613)

(29,546) (199,822)

Investing activities: Additions to property, plant and equipment Proceeds from sale of property, plant and equipment Additions to intangible assets Business acquisition Investments in held to maturity securities Restricted cash reserved for construction of assets

Effects of exchange rate changes on cash (Decrease) in cash and cash equivalents

1,350,182 1,436,596

Cash and cash equivalents at the beginning of the quarter Cash and cash equivalents at the end of the quarter

3.

2010 R$

2,532,671 2,617,621

1,393,110 1,302,497

2,321,199 2,121,377

Critical Accounting Estimates The preparation of the financial statements in accordance with IFRS and CPCs requires management to make estimates and adopt assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the fair value of financial instruments on the balance sheet dates and the reported amounts of revenues and expenses during the reporting period. Significant estimates for which changes in the near term are considered reasonably possible and that may have a material impact on the financial statements are disclosed. Actual results may differ from such estimates.

20

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and adopt assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the fair value of financial instruments and guarantees on the balance sheet dates and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from such estimates. The most important accounting policies, including the variables and assumptions underlying the estimates, and the sensitivity of those judgments to different variables and conditions are described below: a)

Sales and other operating revenues

The Company recognizes revenues from sales made by the commercial, executive, aviation services and Defense and security business when benefits and risk of ownership are transferred to customers, which, in the case of aircraft, occurs when delivery is made, and, in the case of aviation services, when the service is rendered. The Company also recognizes rental revenue for leased aircraft, classified as operating leases on a straight-line basis over the lease term and, when presenting information by operating segment, rental revenue is recorded in Other related businesses line of the segment reporting. In the Defense and security segment, a significant portion of revenues is derived from long-term development contracts with the Brazilian and foreign governments accounted for on the POC (Percentage of Completion) method. These contracts contain provisions for price escalation based on a mix of indices related to raw material and labor cost. From time to time, the Company reassesses the expected margins of certain long-term contracts, adjusting revenue recognition based upon projected costs to completion. Use of the POC method requires the Company to estimate the total costs to be incurred on the contracts. Were the total costs to be incurred to come in 10% below Management’s estimates, the amount of revenue recognized in the period of 2012 would increase by R$ 198,475 and if the total costs were to come in by 10% above the estimate, the amount of revenue recognized would decrease by R$ 177,201. Revenue under Exchange Pool Programs is recognized monthly over the contract term and consists in part of a fixed fee and in part a variable fee directly related to aircraft flying hours. The Company enters into transactions that represent multiple-element arrangements, such as training, technical assistance, spare parts and others concessions, which are included in the aircraft purchase price. Multiple-element arrangements are assessed to determine whether they can be separated into more than one unit of accounting when all of the following criteria are met: • the delivered item has value to the client on a stand-alone basis; • there is objective and reliable evidence of the fair value of the undelivered item; and • if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially under the Company’s control. If these criteria are not met, the arrangement is accounted for as a single unit of accounting, which results in revenue being deferred until the earlier of when such criteria are met or when the last completed element is delivered. If these criteria are met for each element and there is objective and reliable evidence of fair value for all units of accounting in an arrangement, the arrangement consideration is allocated to the separate units of accounting based on each unit's relative fair value. b)

Product warranties

Generally, aircraft sales are accompanied by a standard warranty for systems, accessories, equipment, parts and software manufactured by the Company and/or by the Company’s risk-sharing partners and supplies. The Company recognizes warranty expenses, as Cost of sales and services, at the time of sale based on the estimated warranty costs anticipated to be incurred. These estimates are based on a number of factors, including historical warranty claims and cost experience, the type and duration of the warranty

21

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

coverage, volume and mix of aircraft sold and in service and warranty coverage available from the related suppliers. Actual product warranty costs may have different patterns from past experience, mainly when a new family of aircraft enters service, which could require the Company to increase the product warranty reserve. The warranty period is three years for spare parts and five years for components that are a part of the aircraft when sold. c)

Guarantees and residual value

The Company may offer financial and residual value guarantees. The Company reviews the value of these commitments relative to the aircraft's anticipated future fair value and, in the case of financial guarantees, the creditworthiness of the obligor. Provisions and losses are recorded when and if payments become probable and are reasonably estimable. The Company estimates future fair value using third-party appraisals of aircraft valuations, including information developed from the sale or lease of similar aircraft in the secondary market. The Company evaluates the creditworthiness of obligors for which it provides credit guarantees by analyzing a number of factors, including third-party credit ratings and the estimated obligors' borrowing costs. d)

Residual interests in aircraft

In structured financing arrangements, an entity purchases an aircraft from the Company, 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. A third-party financial institution facilitates the financing of the aircraft and a portion of the credit risk remains with that third party. Although it has no equity interests, the Company controls the SPEs operations or takes a majority share of their risks and rewards. When the Company no longer holds control, the assets and liabilities related to the aircraft are deconsolidated from the Company's balance sheet. The Company evaluates control characteristics over the SPE principally based on a qualitative assessment. This includes a review of the SPE's capital structure, contractual relationships and terms, nature of the SPE's operations and purpose, nature of the SPE's interests issued, and the Company’s interests in the entity which either create or absorb variability. The Company evaluates the design of the SPE and the related risks the entity and the variable interest holders are exposed to in evaluating consolidation. In a few cases, when it is unclear from a qualitative standpoint if the Company has control over the SPE, it uses a quantitative analysis to calculate the probability-weighted expected losses and probability-weighted expected residual returns using cash flow and statistical risk measurement modeling. e)

Impairment

Long-lived assets held for use are subject to an impairment assessment if facts and circumstances indicate that the carrying value is no longer recoverable based upon the discounted future cash flows of the asset or its net realizable value. Assets are grouped based on families of aircraft produced by the Company, which are the Company’s cash-generating units (“CGU”). Assumptions are used to determine the expected discounted cash flows including the forecasts of future cash flows and the net realizable values, which are based on the best estimates of future sales and operating costs, primarily on existing firm orders, expected future orders, contracts with suppliers and general market conditions. Changes in these forecasts could significantly change the amount of impairment recorded, if any. The Company registers the net accounting value of the underlying assets if the sum of the expected future cash flows or the net realizable value is less than accounting value.

f)

Fair value of financial instruments

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Company uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period.

22

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

g)

Income taxes

The Company is subject to income taxes in multiple jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Company recognizes liabilities based on estimates of whether additional taxes will be due. When the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. Because the majority of the Company’s tax basis is in Reais and its functional currency is the dollar, the income tax expense line item is highly sensitive to the effects of changes in exchange rates particularly from changes in its non-monetary assets. Had the Real devalued or appreciated by 10% against the dollar in relation to the actual exchange rate as at March 31, 2012, the Deferred income tax expense would have higher or lower by approximately R$ 212,000. 4.

Financial Instruments a) Financial instruments by category: (i)

Parent Company 03.31.2012

Note

Cash and cash equivalents Accounts receivable from subsidiaries Financial assets Trade accounts receivable, net Customer and commercial financing Derivative financial instruments Derivative Instrument - Designated as fair value hedge

5 6 7 8 36 36

Loans and receivables

1,396,334 295,999 130,210 1,822,543

Assets measured at fair value through profit or loss

1,637,134 1,345,046 783 2,982,963

Hedge accounting

5,184 5,184

Total

1,637,134 1,396,334 1,345,046 295,999 130,210 783 5,184 4,810,690

03.31.2011

Note

Cash and cash equivalents Accounts receivable from subsidiaries Financial assets Trade accounts receivable, net Customer and commercial financing Derivative Instrument - Designated as fair value hedge

(ii)

5 6 7 8 36

Loans and receivables

1,300,287 330,225 136,135 1,766,647

Consolidated

23

Assets measured at fair value through profit or loss

1,609,030 1,250,803 2,859,833

Hedge accounting

4,041 4,041

Total

1,609,030 1,300,287 1,250,803 330,225 136,135 4,041 4,630,521

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

03.31.2012

Note

Cash and cash equivalents Financial assets Collateralized accounts receivable Trade accounts receivable, net Customer and commercial financing Derivative financial instruments Derivative Instrument - Designated as fair value hedge

5 6 9 7 8 36

Loans and receivables

Assets measured at fair value through profit or loss

885,424 910,358 204,078 1,999,860

Assets available for sale

2,617,621 1,546,197 50,482 4,214,300

Investments held to maturity

15,073 15,073

91,155 91,155

Hedge accounting

Total

5,184 5,184

2,617,621 1,652,425 885,424 910,358 204,078 50,482 5,184 6,325,572

03.31.2011

Note

Cash and cash equivalents Financial assets Collateralized accounts receivable Trade accounts receivable, net Customer and commercial financing Derivative financial instruments Derivative financial instruments - fair value hedge

5 6 9 7 8 36

Loans and receivables

Assets measured at fair value through profit or loss

914,689 949,187 191,875 2,055,751

2,532,671 1,403,301 53,994 3,989,966

Assets available for sale

15,620 15,620

Investments held to maturity

Hedge accounting

97,274 97,274

4,041 4,041

Total

2,532,671 1,516,195 914,689 949,187 191,875 53,994 4,041 6,162,652

b) Credit rating of financial instruments:

Cash and cash equivalents Financial assets Total Based on external appraisal: AAA AA A BBB Total

Parent Company 03.31.2012 12.31.2011 1,637,134 1,609,030 1,345,046 1,250,803 2,982,180 2,859,833

2,656,774 196,364 108,199 20,843 2,982,180

24

2,518,758 170,405 160,646 10,024 2,859,833

Consolidated 03.31.2012 12.31.2011 2,617,621 2,532,671 1,652,425 1,516,195 4,270,046 4,048,866

3,736,623 254,139 257,861 21,423 4,270,046

3,508,324 236,355 293,488 10,699 4,048,866

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Collateralized accounts receivable Trade accounts receivable, net Customer and commercial financing Accounts receivable from subsidiaries Total

Parent Company 03.31.2012 12.31.2011 295,999 330,225 130,210 136,135 1,396,334 1,300,287 1,822,543 1,766,647

Based on internal appraisal: Group 1 Group 2 Group 3 Total

965 73,084 1,748,494 1,822,543

1,929 52,093 1,712,625 1,766,647

Consolidated 31.03.2012 12.31.2011 885,424 914,689 910,358 949,187 204,078 191,875 1,999,860 2,055,751

281,018 1,718,842 1,999,860

2,246 194,287 1,859,218 2,055,751

Group 1 : New customers (less than one year) Group 2 : Customers (more than one year) impaired Group 3 : Customers (more than one year) not impaired

5.

Cash and cash equivalents

Cash and banks Cash equivalents Repurchase agreements (i) Private securities (ii) Fixed deposits (iii) Investment funds (iv)

Parent Company 03.31.2012 12.31.2011 10,827 10,290

216,754 806,518 555,464 47,571 1,637,134

128,434 594,816 854,100 21,390 1,609,030

Consolidated 03.31.2012 12.31.2011 395,101 252,792

216,754 816,051 1,056,833 132,882 2,617,621

128,434 600,426 1,412,416 138,603 2,532,671

The average annual interest rates as at March 31, 2012, for financial investments in Real and in dollar were 10.61% and 1.57% (11.84% and 1.37% p.a. as at December 31, 2011), respectively. At March 31, 2012 and December 31, 2011, the cash equivalents denominated in Real comprised:

6.

(i)

purchases of assets, mainly government securities, with the commitment to repurchase at a rate previously established by the parties, generally with a one-day term;

(ii)

mainly Bank Deposit Certificates - CDBs issued by Brazilian financial institutions with original maturities of 90 days or less or for which there are no penalties or other restrictions for early redemption;

(iii)

fixed-term deposits with highly-rated financial institutions with terms of less than 90 days; and

(iv)

Money Market Funds consisting of portfolios comprised of securities issued by international institutions abroad with a low level of risk and with daily liquidity.

Financial Assets

25

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated Parent Company 03.31.2012 31.12.2011 Held for Trading Financial instruments Public securities Private securities Money market funds Investment funds Other

950,178 100,426 54,695 238,988 759 1,345,046 1,345,046 -

Current Assets Non-current assets

854,559 97,930 56,308 241,247 759 1,250,803 1,250,803 -

Consolidated Held for Trading Financial instruments Public securities Private securities Money market funds Investment funds Public securities(i) Other Current Assets Non-current assets

03.31.2012 Held to Available maturity

954,688 100,426 109,657 380,648 778 1,546,197 1,546,178 19

20,375 70,780 91,155 8,801 82,354

2010 Held for

Held to

Available

Trading

maturity

for sale

Total

for sale 15,073 15,073 15,073

954,688 100,426 109,657 380,648 20,375 86,631 1,652,425 1,554,979 97,446

858,959 97,930 56,308 389,326 778 1,403,301 1,403,282 19

25,088 72,186 97,274 10,283 86,991

15,620 15,620 15,620

Total 858,959 97,930 56,308 389,326 25,088 88,584 1,516,195 1,413,565 102,630

At March 31, 2012 and December 31, 2011, the financial assets were comprised of treasury securities and securities of exclusive investment funds. The portfolios of the exclusive investment funds in Brazil were mainly comprised of highly liquid Federal Government securities and Brazilian financial institution securities, measured at their realizable values. The funds are exclusively for the benefit of the Company and are managed by third parties who charge a monthly commission. The investments are marked to market daily at fair value through profit or loss, as the Company classifies these investments as held for trading. At March 31, 2012 and December 31, 2011, the portfolios of the exclusive investment funds abroad was comprised of securities issued by institutions abroad with a low level of risk and daily liquidity, measured at their realizable values. The investments are adjusted to market value daily with changes in fair value reflected in results of operations since the Company considers these investments as intended for trading. These private money market funds have no significant financial obligations. The financial obligations are restricted to asset management, custody fees, audit fees and similar expenses. No assets from the Company were used as guarantee of these obligations and the fund creditors have no right of recourse against the general credit of the Company. (i)

7.

Held to maturity securities are receivables that represent securities issued by the Brazilian Government, comprising National Treasury Bills - NTN, denominated in US dollars, acquired by the Company from its customers as an adjustment of the interest rates payable by the Export Financing Program ("PROEX ") between the 11th and 15th year after the aircraft sale, recorded at present value, since the Company intends and has the ability to hold them in portfolio to maturity.

Trade Accounts Receivable, Net

26

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Foreign customers Brazilian Air Force (i) Domestic customers Provision for doubtful accounts Less-current portion Long-term portion

Parent Company 03.31.2012 12.31.2011 269,740 250,153 12,542 71,243 25,428 20,344 307,710 341,740 (11,711) (11,515) 295,999 330,225 295,999 330,225 -

Consolidated 03.31.2012 12.31.2011 691,220 615,306 250,393 373,718 45,219 35,833 986,832 1,024,857 (76,474) (75,670) 910,358 949,187 900,072 948,759 10,286 428

(i) Brazilian Air Force is considered a related party to the Company.

Unbilled accounts receivables recognized under the POC for Defense and Security segment totaled R$ 149,571 and R$ 150,151 at March 31, 2012, respectively. At March, 31 2012, the accounts receivable of R$ 222,915 in the Parent Company and R$ 629,340 Consolidated (at December 31, 2011 R$ 278,132 Parent Company and R$ 754,900 Consolidated) were fully performing. At March 31, 2012, the accounts receivable of R$ 73,084 Parent Company and R$ 281.018 Consolidated (December 31, 2011 - R$ 52,093 Parent Company and R$ 194,287 Consolidated) were overdue, but not impaired. These accounts relate to independent customers with no recent default history. The analysis of past due accounts receivable is presented below:

Up to 90 days From 91 to 180 days More than 180 days

Parent Company 03.31.2012 12.31.2011 54,038 29,164 9,875 10,674 9,171 12,255 73,084 52,093

Consolidated 03.31.2012 12.31.2011 140,139 84,437 28,109 42,773 112,770 67,077 281,018 194,287

The accounts receivable denominated in the following currencies are:

Reais U.S. dollars Euros Other currencies

8.

Parent Company 03.31.2012 12.31.2011 33,352 84,862 261,849 245,363 798 295,999 330,225

Consolidated 03.31.2012 12.31.2011 60,861 103,097 766,016 755,538 83,295 90,353 186 199 910,358 949,187

Customer and Commercial Financing Customer and commercial financing refers to the partial financing of certain sales of new aircraft by the Company, at average interest rates at March 31, 2012 of 5.20% p.a. Parent Company and 5.08%p.a. Consolidated (December 31, 2011 – 5.20% p.a. Parent Company and 5.16% Consolidated) and secured by the aircraft covered by the financing, discounted to present value when applicable. The monthly, quarterly and half-yearly maturities are classified as follows:

Less-current portion Long-term portion Total

Parent Company 03.31.2012 31.12.2011 4,580 4,655 125,630 131,480 130,210 136,135

27

Consolidated 03.31.2012 31.12.2011 43,148 22,597 160,930 169,278 204,078 191,875

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

At March 31, 2012 and December 31, 2011, customer and commercial financing were fully performing. At March 31, 2012, the long-term maturities of the customer and commercial financing are as follows:

Year 2013 2014 2015 2016 2017 After 2017

9.

Parent Company 10,023 8,689 17,060 31,791 5,861 52,206 125,630

Consolidated 20,455 19,342 27,329 36,420 7,382 50,002 160,930

Collateralized Accounts Receivable and Recourse and Non-Recourse Debt (a)

Collateralized accounts receivable

Consolidated 03.31.2012 12.31.2011 658,734 688,327 835,250 859,867 (608,560) (633,505) 885,424 914,689 25,239 27,936 860,185 886,753

Minimum lease payments receivable Estimated residual value of leases aircraft Unearned income - future interest Net amount receivable Less - current Non - current

At March 31, 2012, the maturities of the amounts classified as non-current assets are as follows:

Consolidated 21,647 21,171 19,228 26,227 55,115 716,797 860,185

2013 2014 2015 2016 2017 After 2017

(b)

Recourse and Non-Recourse Debt Consolidated 03.31.2012 12.31.2011 792,817 820,109 45,341 47,648 838,158 867,757 569,128 586,797 269,030 280,960

With right of recourse Without right of recourse Less-current portion Long-term portion

At March 31, 2012, the maturities of the amounts classified as non-current liabilities are as follows:

28

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Consolidated 15,023 19,655 19,228 26,227 55,115 133,782 269,030

2013 2014 2015 2016 2017 After 2017

10.

Inventories

Work-in-process Raw materials Spare parts Finished goods (i) Inventory in transit Aircraft available for sales Advances to suppliers Consumption materials Provision for adjustment to market value Provision for obsolescence Less - current portion Long - term portion

(i)

Parent Company 03.31.2012 12.31.2011 1,595,546 1,420,741 959,315 1,015,865 251,838 245,077 793,301 483,136 402,225 296,865 20,562 19,943 42,667 43,764 (88,874) (95,535) 3,976,580 3,429,856 3,976,580 3,429,856 -

Consolidated 03.31.2012 12.31.2011 1,710,472 1,486,742 1,276,367 1,329,311 683,382 673,951 799,907 483,136 389,115 314,514 163,487 234,906 100,031 105,149 44,320 45,538 (89,150) (119,406) (245,721) (262,831) 4,832,210 4,291,010 4,824,097 4,283,172 7,838 8,113

The following aircraft were held in inventory at: •

March,31, 2012: two Embraer 175, nine EMBRAER 190, one Legacy 600, two Legacy 650, four Phenom 100, four Phenom 300, two Lineage and two Ipanema; and



December, 31, 2010: one Embraer 175, two Embraer 190, one Legacy 600, three Legacy 650, four Phenom 100, three Phenom 300, two Lineage and four Ipanema.

Through to April 19, 2012, the Company had delivered two EMBRAER 190, two EMBRAER 175 which had been held in inventory at March 31, 2012.

11.

Other assets

29

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated Parent Company 03.31.2012 12.31.2011 273,778 260,898 331,729 324,720 33,387 72,529 41,893 44,500 51,620 25,292 7,912 11,607 6,893 7,097 4,815 5,197 791 492 12,600 12,600 15,210 19,962 780,628 784,894 348,393 363,497 432,235 421,397

Taxes recoverable (i) Court-mandated escrow deposits (ii) Credit with suppliers (iii) Prepaid expenses Advances to employees Indemnity assets (iv) Advances of commissions Advances for services rendered Prepaid Insurance Restricted cash Compulsory loan Collateral pledge Advance for future capital increase Other Less - current portion Long - term portion

(i)

Taxes recoverable: Parent Company 03.31.2012 12.31.2011 124,862 119,918 76,483 73,375

Income tax and social contribution witheld ICMS (State value-added tax) and IPI (Excise Tax) PIS(Social Integration Program) and COFINS(Contribution for Social Security) Others

58,890 13,543 273,778 194,046 79,732

Less - Current portion Long - term portion

12.

Consolidated 03.31.2012 12.31.2011 331,224 321,193 334,174 327,331 38,905 73,243 63,693 63,752 54,091 26,656 29,168 28,897 7,912 11,607 7,397 7,724 5,486 5,260 888 3,314 1,478 1,510 1,749 1,451 34,311 40,962 910,476 912,900 425,919 452,537 484,557 460,363

57,765 9,840 260,898 184,910 75,988

Consolidated 03.31.2012 12.31.2011 138,438 135,174 100,358 111,505 65,254 27,174 331,224 226,422 104,802

63,778 10,736 321,193 233,628 87,565

(ii)

Court-mandated escrow deposits relate to amounts deposited in connection with pending legal actions, substantially income tax and social contribution assessed on export revenues. A corresponding accrual was made in liabilities (Note 22).

(iii)

Refers to rework carried out on products supplied by third parties, which will be reimbursed in accordance with contractual agreements.

(iv)

Assets recorded in a business combination, when the Company has negotiated the right of offset from the sellers, for possible future liabilities.

Guarantee deposits

Sales structure guarantees (i) Sales financing guarantees (ii) Other Long-term portion

(i)

Parent Company 03.31.2012 12.31.2011 362,786 376,293 4,044 4,115 366,830 380,408

Consolidated 03.31.2012 12.31.2011 492,450 503,465 362,786 376,293 4,343 4,433 859,579 884,191

US dollar amounts deposited in an escrow account as collateral for the financing of certain aircraft sold. If the guarantor of the debt (unrelated party) is required to pay the lender, the guarantor will be entitled to the amount in the escrow account. The amount deposited will be released at maturity of the financing contracts (between 2013 and 2021) if the aircraft purchaser does not default on the loan. The interest on the escrow account is added to the principal and recognized by the Company as Financial income.

30

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

In 2004, seeking to ensure profitability compatible with the term of the guarantee, the Company invested US$ 123,400 in structured notes. In the event of default by Embraer, the maturity dates of these notes will be accelerated and the notes would be realized at market value, limited to a minimum of the amounts originally invested. Any amount by which the market value exceeds the amount invested will be paid to the Company in the form of bonds, or loans of that amount. Events of default that could result in early maturity of the notes include, among other: (a) insolvency of Embraer or filing for reorganization proceedings; and (b) default or restructuring of the Embraer debt in financing agreements. The calculated interest is added to the principal and recognized by the Company as financial income. (ii)

13.

Financial investments denominated in US dollars and held by third-party financial institutions as a pledge under a specific sale financing structure. These investments earn interest at the annual LIBOR rate.

Investments a) Investments value Parent Company 03.31.2012 12.31.2011 In subsidiaries Aero Seating Technologies LLC ECC do Brasil Cia. de Seguros - ECC ELEB Equipamentos Ltda. - ELEB Embraer Austrália PTY Ltd. – EAL Embraer Aircraft Holding Inc. – EAH Embraer Ásia Pacific PTE Ltd. - EAP Embraer Aviation Europe SAS - EAE Embraer Cataluña S.L. Embraer Credit Ltd. – ECL Embraer Defesa e Segurança Part. S.A. Embraer GPX Ltda. - GPX Embraer Netherlands B.V. – ENL Embraer Overseas Limited - EOS Embraer Representation LLC – ERL Embraer Spain Holding Co. S.L. - ESH EPE´s Indústria Aeronáutica Neiva Ltda. – NEIVA Others

4,068 106,158 551 395,059 289,138 8,301 101,122 8,019 441,018 18,492 143,559 1,114,003 45,727 5,300 2,680,515

b) Changes in investments in the Parent Company

31

4,071 102,817 574 403,044 266,942 358,345 8,228 103,447 6,129 56,871 18,919 151,864 1,174,204 46,216 5,190 2,706,861

Consolidated 03.31.2012 12.31.2011 4,623 9 4,632

5,163 8 5,171

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Balance at 12.31.2011 ECC do Brasil Cia. de Seguros - ECC ELEB Equipamentos Ltda. - ELEB Embraer Austrália PTY Ltd. – EAL Embraer Aircraft Holding Inc. – EAH Embraer Aviation Europe SAS - EAE Embraer Cataluña S.L. Embraer Credit Ltd. – ECL Embraer Defesa e Segurança Part.S.A. Embraer GPX Ltda. - GPX Embraer Netherlands B.V. – ENL (i) Embraer Overseas Limited - EOS Embraer Representation LLC – ERL Embraer Spain Holding Co. S.L. - ESH SPE´s Indústria Aeronáutica Neiva Ltda. – NEIVA

Equity in the (loss)

4,071 102,817 574 403,044 266,942 358,345 8,228 103,447 6,129 56,871 18,919 151,864 1,174,204 46,216 5,190 2,706,861

Cummulative translation adjustment

(3) 6,102 (13) 3,455 20,372 42 299 (190) 1,890 (5,880) 116 (3,883) (25,980) 822 119 (2,732)

Write off / Transference

(2,761) (10) (11,440) 1,824 (11,215) (226) (2,135) 1,506 (543) (4,422) (34,221) (1,311) (9) (64,963)

Noncontrolling acquisition results

(347,172) 347,172 -

Addition

10,191 10,191

31,158 31,158

Balance at 03.31.2012 4,068 106,158 551 395,059 289,138 8,301 101,122 8,019 441,018 18,492 143,559 1,114,003 45,727 5,300 2,680,515

(i) On March 13, 2012, Embraer SA through its wholly owned subsidiary Embraer Netherlands BV completed the acquisition of a 30% stake in Airholding SGPS SA acquired from EADS - European Aeronautic, Defense and Space for EUR 13 million (R$ 31,158). The gain arising from the acquisition of the non-controlling interest of R$ 10,191, was posted to shareholders’ equity. .

Balace at 12.31.2010 ECC do Brasil Cia. de Seguros - ECC ELEB Equipamentos Ltda. - ELEB Embraer Austrália PTY Ltd. – EAL Embraer Aircraft Holding Inc. – EAH Embraer Ásia Pacific PTE Ltd. - EAP Embraer Aviation Europe SAS - EAE Embraer Cataluña S.L. Embraer Credit Ltd. – ECL Embraer Defesa e Segurança Part.S.A. Embraer GPX Ltda. - GPX Embraer Netherlands B.V. – ENL Embraer Overseas Limited - EOS Embraer Representation LLC – ERL Embraer Spain Holding Co. SL - ESH SPE´s Indústria Aeronáutica Neiva Ltda. – NEIVA

4,003 74,827 681 352,155 21,576 171,195 6,160 1,949 15,905 190,949 1,429,609 2,269,009

Equity in the (loss)

Cummulative translation adjustment

(35) 15,536 (176) 7,540 5,194 77,476 21,299 1,156 1,753 4,180 2,164 906 (57,337) (90,746) 45,258 5,781 39,949

103 12,454 69 43,349 1,526 18,271 5,809 912 10,969 3,851 2,108 18,252 166,578 958 (60) 285,149

Dividends (28,296) 331,237 (331,237) (28,296)

Addition 90,725 50,856 141,581

Provision for net capital deficiency (531) (531)

c) Information on the direct subsidiaries 03.31.2012

ECC do Brasil Cia. de Seguros - ECC ELEB Equipamentos Ltda. - ELEB Embraer Austrália PTY Ltd. – EAL Embraer Aircraft Holding Inc. – EAH Embraer Aviation Europe SAS - EAE Embraer Cataluña S.L. Embraer Credit Ltd. – ECL Embraer Defesa e Segurança Part.S.A. Embraer GPX Ltda. - GPX Embraer Netherlands B.V. – ENL Embraer Overseas Limited - EOS Embraer Representation LLC – ERL Embraer Spain Holding Co. SL - ESH Indústria Aeronáutica Neiva Ltda. – NEIVA

Holding % 99.99 100.00 100.00 100.00 100.00 100.00 100.00 100.00 99.99 100.00 100.00 100.00 100.00 99.99

Total assets 4,725 280,572 1,102 642,828 313,954 48,851 101,122 36,949 577,453 1,644,519 189,093 1,122,073 26,692

32

Total liabilities 657 170,670 551 238,481 23,096 40,550 28,930 136,435 1,626,027 45,534 8,070 21,242

Stockholder´s equity 4,068 109,902 551 404,347 290,858 8,301 101,122 8,019 441,018 18,492 143,559 1,114,003 5,450

Net income (loss) for the period (3) 5,337 (13) 3,288 20,304 42 299 (190) 1,891 (5,880) 116 (3,883) (25,980) 114 (4,558)

Balace at 12.31.2011 4,071 102,817 574 403,044 266,942 358,345 8,228 103,447 6,129 56,871 18,919 151,864 1,174,204 46,216 5,190 2,706,861

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated 12.31.2011

ECC do Brasil Cia. de Seguros - ECC ELEB Equipamentos Ltda. - ELEB Embraer Austrália PTY Ltd. – EAL Embraer Aircraft Holding Inc. – EAH Embraer Aviation Europe SAS - EAE Embraer Cataluña S.L. Embraer Credit Ltd. – ECL Embraer Defesa e Segurança Part.S.A. Embraer GPX Ltda. - GPX Embraer Netherlands B.V. – ENL Embraer Overseas Limited - EOS Embraer Representation LLC – ERL Embraer Spain Holding Co. SL - ESH Indústria Aeronáutica Neiva Ltda. – NEIVA

Holding % 99.99 100.00 100.00 100.00 100.00 100.00 100.00 100.00 99.99 100.00 100.00 100.00 100.00 99.99

Total assets 4,707 275,403 1,134 657,785 300,377 450,299 50,293 103,447 31,909 74,843 1,688,745 197,281 1,182,157 23,436

Total liabilities 636 167,907 560 245,000 31,630 91,953 42,065 25,780 17,972 1,669,826 45,417 7,954 18,086

Stockholder´s equity 4,071 107,496 574 412,785 268,747 358,346 8,228 103,447 6,129 56,871 18,919 151,864 1,174,203 5,350

Net income (loss) for the period (35) 14,076 (176) 12,996 69,152 21,299 1,156 1,753 4,180 2,164 906 (57,337) (90,746) 5,814 (14,798)

For purposes of calculating equity adjustments, unrealized transactions were eliminated on sales from the Parent Company to subsidiaries and also from subsidiaries to the Parent Company or between subsidiaries. 14.

Related Party Transactions (a)

Related party transactions

Related party transactions are those between the Parent Company and the direct or indirect subsidiaries in the Note 2.1 b or with direct or indirect shareholders (Banco do Brasil, BNDES and Brazilian Air Force), in similar conditions with independent parties: •

The assets mainly comprise: (i) accounts receivable from subsidiaries for spare parts and aircraft sales and product development, under similar conditions to those with third parties, considering the volumes, terms, risks involved and policies; (ii) intercompany loans with overseas subsidiaries at interest rates incurred by the Company in raising funds in foreign currency; (iii) amounts received on behalf of Embraer by its subsidiary Embraer Finance Ltd. - EFL, without interest; (iv) balances of financial investments (v) bank current account balances.



The liabilities, basically refer to: (i) purchases of aircraft components and spare parts under conditions similar to those with third parties, considering the volumes, terms, risks involved and corporate policies; (ii) advances received on account of sales contracts, in accordance with the contract; (iii) commissions on sales of aircraft and spare parts under similar conditions to those with third parties; (iv) financing for research and product development at market rates for this type of financing; (v) loans and financing under normal market conditions; (vi) intercompany loans with overseas subsidiaries at interest rates normally incurred by the Company in raising funds in foreign currency, and (vii) export financing.



The statement of income accounts basically comprise: (i) purchases and sales of aircraft, components and spare parts and development of products for the Defense market; (ii) financial income from intercompany loans and financial investments; (iii) interest on financing for research and product development, import and export financing and advances on exchange contracts; and (iv) sales commissions on aircraft and spare parts.

33

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

(i) Parent Company – March, 31 2012

Banco do Brasil S.A. Banco Nacional de Desenvolvimento Econômico e Social – BNDES Comando da Aeronáutica ECC do Brasil Cia. de Seguros – ECC ECC Investment Switzerland AG. – SWIN ECC Leasing Co. Ltd – LESC ELEB - Equipamentos Ltda Embraer Aircraft Customer Services, Inc. – EACS Embraer Aircraft Holding Inc. – EAH Embraer Aircraft Maintenance Services Inc. – EAMS Embraer Australia PTY Ltd. – EAL Embraer Aviation International SAS – EAI Embraer Aviation Europe SAS – EAE Embraer Ásia Pacific PTE. Ltd. Embraer CAE Training Services – ECTS Embraer CAE Training Services (UK Limited) – ECUK Embraer Catalunha S.L. (ESH2) Embraer China Aircraft Technical Services Co., Ltd. – BJG Embraer Credit Ltd. – ECL Embraer Europe SARL – EES Embraer Executive Aircraft Inc. – MLB Embraer Executive Jet Services – EEJS Embraer Finance Ltd. – EFL Embraer GPX Ltda – GPXS Embraer Netherlands BVA (ENL) Embraer Representation LLC – ERL Embraer Services Inc. – ESI Embraer Spain Holding Co. SL – ESH Entidade de propósito específico – EPE´s Financiadora de Estudo e Projetos – FINEP Harbin Embraer Aircraft Industry Company Ltd. – HEAI Indústria Aeronáutica Neiva Ltda. – NEIVA OGMA – Indústria Aeronáutica de Portugal SA. Orbisat da Amazônia Indústria e Aerolevantamento S.A.

Current Assets Liabilities 739,186 675,428 308,728 12,542 292,246 1 4,709 1,781 3,041 5,210 155,745 69,066 1,830 1,575 74,352 21,466 5 5,693 24,523 14,962 1,293 193 9,840 13,161 25 70,482 1,110 1 2,149 1,141 19,779 6,456 234 6,815 24,050 8 1,204 302 100 1,679 1,623 1,119,229 1,454,505

Non Current Assets Liabilities 362,786 884,883 758,723 651 181,596 52,191 82,857 80,277 92,674 38,303 503,075 489 43,505 5,316 126,159 12,600 32,713 1,489,033 1,769,765

Financial Result (426) (14,110) 11 1,708 721 827 359 592 1,526 205 35 (969) 784 (8,737)

Profit (loss) 109,183 23 (117) (13,738) 8 (9,459) (7,667) (4,963) 4,981 1,020 3 885 (239) 79,920

(ii) Parent Company – December 31, 2011 Current Assets Liabilities 1,039,800 112 307,542 71,243 238,074 1 4,718 698 3,016 5,780 127,029 52,082 1,863 1,117 62,938 16,053 6 10,029 23,245 15,888 2,711 185 7,540 7,453 25 41,369 938 1 2,272 1,174 18,068 7,524 241 3,646 44,825 385 6 103 1,371 815 1,402,523 719,363

Banco do Brasil S.A. Banco Nacional de Desenvolvimento Econômico e Social – BNDES Comando da Aeronáutica ECC do Brasil Cia. de Seguros – ECC ECC Investment Switzerland AG. – SWIN ECC Leasing Co. Ltd – LESC ELEB - Equipamentos Ltda Embraer Aircraft Customer Services, Inc. – EACS Embraer Aircraft Holding Inc. – EAH Embraer Aircraft Maintenance Services Inc. – EAMS Embraer Aviation International SAS – EAI Embraer Aviation Europe SAS – EAE Embraer Ásia Pacific PTE. Ltd. Embraer CAE Training Services – ECTS Embraer CAE Training Services (UK Limited) – ECUK Embraer Catalunha S.L. (ESH2) Embraer China Aircraft Technical Services Co., Ltd. – BJG Embraer Credit Ltd. – ECL Embraer Europe SARL – EES Embraer Executive Aircraft Inc. – MLB Embraer Executive Jet Services – EEJS Embraer Finance Ltd. – EFL Embraer GPX Ltda – GPXS Embraer Netherlands BVA (ENL) Embraer Services Inc. – ESI Embraer Spain Holding Co. SL – ESH Entidade de propósito específico – EPE´s Financiadora de Estudo e Projetos – FINEP Harbin Embraer Aircraft Industry Company Ltd. – HEAI Indústria Aeronáutica Neiva Ltda. – NEIVA OGMA – Indústria Aeronáutica de Portugal SA. Orbisat da Amazônia Indústria e Aerolevantamento S.A.

34

Non Current Assets Liabilities 376,293 676,058 631 166,062 50,738 84,421 82,263 92,223 39,432 530,763 671 17,856 5,297 247,849 12,600 26,934 1,486,184 923,907

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

(iii) Parent Company – March, 31 2011

Banco do Brasil S.A. Banco Nacional de Desenvolvimento Econômico e Social – BNDES Comando da Aeronáutica ECC do Brasil Cia. de Seguros – ECC ECC Leasing Co. Ltd – LESC ELEB - Equipamentos Ltda Embraer Aircraft Customer Services, Inc. – EACS Embraer Aircraft Holding Inc. – EAH Embraer Aircraft Maintenance Services Inc. – EAMS Embraer Aviation International SAS – EAI Embraer Aviation Europe SAS – EAE Embraer Ásia Pacific PTE. Ltd. Embraer CAE Training Services – ECTS Embraer Catalunha S.L. (ESH2) Embraer China Aircraft Technical Services Co., Ltd. – BJG Embraer Europe SARL – EES Embraer Executive Aircraft Inc. – MLB Embraer Finance Ltd. – EFL Embraer GPX Ltda – GPXS Embraer Netherlands BVA (ENL) Embraer Services Inc. – ESI Embraer Spain Holding Co. SL – ESH Entidade de propósito específico – EPE´s Financiadora de Estudo e Projetos – FINEP Harbin Embraer Aircraft Industry Company Ltd. – HEAI Indústria Aeronáutica Neiva Ltda. – NEIVA OGMA – Indústria Aeronáutica de Portugal SA. Orbisat da Amazônia Indústria e Aerolevantamento S.A.

Financial Result 21,664 (36,765) 17 5,805 2,666 2,925 1,116 218 6,060 55 35 1,742 (1,524) 2,057 6,071

Profit (loss) 349,873 (1,895) (461) (22,267) 5 (1,778) (29,618) (21,587) 823 (8,982) (13,452) 5,438 (39) 3,264 (40) (140,025) 2,944 7,427 27 526 130,183

(iv) Consolidated – March 31, 2012 Current Liabilities 909,159 342,650 314,735 250,393 446,634 24,050 1,159,552 1,128,069

Assets Aero Seating Technologies LLC (AST) Banco do Brasil S.A. Banco Nacional de Desenvolvimento Econômico e Social – BNDES Comando da Aeronáutica Empresa Portuguesa de Defesa – EMPORDEF Financiadora de Estudo e Projetos – FINEP

35

Non Current Assets Liabilities 2,733 362,786 462,970 11,662 126,159 362,786 603,524

Financial Result 15,772 (14,506) (969) 297

Profit (loss) 234,639 234,639

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

(v) Consolidated – December 31, 2011

Banco do Brasil S.A. Banco Nacional de Desenvolvimento Econômico e Social – BNDES Comando da Aeronáutica Aero Seating Technologies LLC (AST) Financiadora de Estudo e Projetos – FINEP

Current Assets Liabilities 1,260,091 564,856 112 313,572 373,718 391,310 45,130 1,633,921 1,314,868

Non Current Assets Liabilities 376,293 690,556 2,814 247,849 376,293 941,219

(vi) Consolidated – March 31, 2011

Banco do Brasil S.A. Banco Nacional de Desenvolvimento Econômico e Social – BNDES Comando da Aeronáutica Financiadora de Estudo e Projetos – FINEP

(b)

Financial Result 28,281 (38,714) (1,593) (12,026)

Profit (loss) 356,808 356,808

Brazilian Federal Government

The Brazilian Federal Government, through its direct and indirect interests holds a "golden share” of Embraer's stock and is a significant shareholder. At March 31, 2012, in addition to its “golden share”, the Brazilian Federal Government held an indirect 5.37% stake in the Company’s capital through the BNDESPAR, a wholly-owned subsidiary of the Banco Nacional do Desenvolvimento Econômico e Social BNDES (the Brazilian Development Bank, or “BNDES”), which, in turn, is controlled by the Brazilian Federal Government. As a result, transactions between Embraer and the Brazilian Federal Government or its agencies come within the definition of related party transactions. The Brazilian government plays a key role in the Company’s business activities, including as: •

a major customer of defense products (through the Brazilian Air Force);



a source for research and development debt financing through technology development institutions such as the FINEP and the BNDES;



an export credit agency (through the BNDES); and



a source of short-term and long-term financing and a provider of asset management and commercial banking services (through Banco do Brasil).

(c)

Remuneration of key Management personnel: 03.31.2012 8,134 2,086 10,220

Short-term benefits (i) Stock option program Total remuneration

(i)

12.31.2011 7,190 1,562 8,752

Include salaries and social security contributions, profit sharing, bonus and severance pay.

36

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Key Management includes members of the statutory Board of Directors and Executive Directors. During the period ended March 31, 2012 and 2011, no remuneration was paid on post-employment benefits or long-term benefits. 15.

Property, Plant and Equipment There was no change in useful life for fixed assets in the previous year. The useful lives by asset class at March 31, 2012 are shown below: Average useful life (years)

Class of assets

Buldings and improvements Installations Machinery and equipm ent Furniture and fixtures Vehicles Aircraft Com puters and peripherals Tooling Other assets Exchange pool program assets

29 20,5 11 7,5 9,5 12,5 5 10 5 8,5

a) Parent Company Buildings land improvements

Land Cost At December 31,2011 Additions Disposals Reclassifications* Translation adjustments At March 31,2012 Accumulated depreciation At December 31,2011 Depreciation Disposals Translation adjustments At March 31,2012 Net At December 31,2011 At March 31,2012

Accumulated depreciation At December 31,2010 Depreciation Disposals Reclassifications* Translation adjustments At December 31,2011 Net At December 31,2010 At December 31,2011

Furniture and fixtures

Vehicles

Computers and peripherals

Aircraft

Tooling

Other assets

Construction in progress

Total

19,136 (548) 18,588

544,865 190 5,191 (15,343) 534,903

224,538 (14) 589 (6,413) 218,700

516,340 3,298 (144) 237 (14,666) 505,065

64,391 81 (82) 794 (1,824) 63,360

15,404 129 314 (434) 15,413

1,628 (47) 1,581

184,387 7,664 (342) (7,456) (5,261) 178,992

556,348 667 (50) 6,687 (15,724) 547,928

14,653 8,063 (879) (240) 21,597

9,428 3,842 (81) (5,477) (443) 7,269

2,151,118 23,934 (713) (60,943) 2,113,396

-

(173,875) (2,224) 4,897 (171,202)

(153,075) (1,078) 4,351 (149,802)

(321,576) (4,542) 103 9,071 (316,944)

(33,315) (690) 73 934 (32,998)

(10,502) (209) 296 (10,415)

(1,628) 47 (1,581)

(159,941) (1,334) 334 4,545 (156,396)

(270,321) (10,700) 7,481 (273,540)

(2,182) (111) 58 (2,235)

-

(1,126,415) (20,888) 510 31,680 (1,115,113)

370,990 363,701

71,463 68,898

194,764 188,121

31,076 30,362

4,902 4,998

-

24,446 22,596

286,027 274,388

12,471 19,362

9,428 7,269

1,024,703 998,283

-

19,136 18,588

Buildings land improvements

Land Cost At December 31,2010 Additions Disposals Reclassifications* Translation adjustments At December 31,2011

Machinery and equipment

Installations

Installations

Machinery and equipment

Furniture and fixtures

Vehicles

Computers and peripherals

Aircraft

Tooling

-

Other assets

Construction in progress

Total

16,998 2,138 19,136

477,189 204 6,599 60,873 544,865

198,801 636 25,101 224,538

428,817 31,922 (1,089) (291) 56,981 516,340

51,704 5,109 (664) 1,051 7,191 64,391

12,330 1,001 (338) 657 1,754 15,404

1,446 182 1,628

154,306 30,633 (1,027) (19,740) 20,215 184,387

453,736 12,228 (41) 29,427 60,998 556,348

5,359 17,925 (11,142) 2,511 14,653

3,051 12,936 (7,197) 638 9,428

1,803,737 111,958 (3,159) 238,582 2,151,118

-

(146,221) (8,272) (19,382) (173,875)

(132,274) (3,716) (17,085) (153,075)

(270,144) (16,319) 722 3 (35,838) (321,576)

(27,208) (2,506) 112 1 (3,714) (33,315)

(9,008) (611) 336 (33) (1,186) (10,502)

(1,446) (182) (1,628)

(137,131) (5,386) 395 31 (17,850) (159,941)

(212,737) (27,244) (30,340) (270,321)

(1,856) (85) (241) (2,182)

-

(938,025) (64,139) 1,565 2 (125,818) (1,126,415)

330,968 370,990

66,527 71,463

158,673 194,764

24,496 31,076

3,322 4,902

-

17,175 24,446

240,999 286,027

3,503 12,471

3,051 9,428

865,712 1,024,703

-

16,998 19,136

-

* Non-cash transactions.

In the parent company, the depreciation expenses were charged to the statements of income as (i) Cost of sales - R$ 17,606 (March 31, 2011 - R$ 15,244) (ii) Selling expenses - R$ 722 (March 31, 2011 - R$ 121) and (iii) Administrative expenses R$ 2,560 (March 31, 2011 - R$ 2,383).

37

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

b) Consolidated Buildings and land improvements

Land Cost At December 31,2011 Additions Disposals Impairment Reclassifications* Translation adjustments At March 31,2012

Machinery and equipment

Furniture and fixtures

Vehicles

Aircraft

Computers and peripherals

Tooling

Other assets

Spare part exchange pools

Construction in progress

Total

20,682 -

803,604 1,449

235,222 80

900,677 6,686

89,690 662

26,189 146

895,104 -

226,581 9,155

573,257 728

14,651 17,019

659,207 14,343

175,068 19,855

4,619,932 70,123

(543) 20,139

(36) 5,191 (21,575) 788,633

(56) 718 (6,565) 229,399

(150) 526 (19,273) 888,466

(146) 796 (2,181) 88,821

(49) 314 (497) 26,103

(5,300) (3,896) (25,613) 860,295

(353) (7,686) (5,862) 221,835

(50) 6,687 (16,208) 564,414

67,908 1,567 101,145

(6,985) 666,565

(2,904) (74,453) (1,109) 116,457

(3,744) (5,300) (3,895) (104,844) 4,572,272

-

(239,431) (4,669) 2 6,435 (237,663)

(159,324) (1,164) 2 4,467 (156,019)

(564,843) (9,071) 108 11,527 (562,279)

(51,938) (1,052) 135 1,168 (51,687)

(19,649) (314) 49 331 (19,583)

(227,183) (16,061) 90 6,762 (236,392)

(191,601) (1,969) 340 4,918 (188,312)

(273,797) (10,760) 7,579 (276,978)

(2,217) (259) 54 (2,422)

(169,288) (12,792) (7,690) (189,770)

-

(1,899,271) (58,111) 636 90 35,551 (1,921,105)

564,173 550,970

75,898 73,380

335,834 326,187

37,752 37,134

6,540 6,520

667,921 623,903

34,980 33,523

299,460 287,436

12,434 98,723

489,919 476,795

175,068 116,457

2,720,661 2,651,167

Accumulated depreciation At December 31,2011 Depreciation Disposals Reclassifications* Translation adjustments At March 31,2012 Net At December 31,2011 At March 31,2012

Installations

-

20,682 20,139

Buildings land improvements

Land Cost At December 31,2010 Additions Additions business combinations Disposals Impairment Reclassifications* Translation adjustments At December 31,2011 Accumulated depreciation At December 31,2010 Depreciation Depreciation business combinations Impairment Reclassifications* Translation adjustments At December 31,2011 Net At December 31,2010 At December 31,2011

Installations

Machinery and equipment

Furniture and fixtures

Vehicles

Aircraft (i)

Computers and peripherals

Tooling

Other assets

Spare part exchange pools

-

Construction in progress (ii)

Total

18,416 2,266 20,682

657,068 204 (39) 60,573 85,798 803,604

208,035 250 29 (19) 930 25,997 235,222

730,916 37,054 36,322 (7,042) 7,238 96,189 900,677

74,851 7,508 292 (1,663) 1,059 7,643 89,690

21,978 1,255 27 (485) 657 2,757 26,189

787,165 108,962 5,152 (4,812) (107,841) 106,478 895,104

191,807 30,678 1,992 (3,365) (19,422) 24,891 226,581

457,041 16,912 (41) 37,599 61,746 573,257

5,314 17,935 116 (11,140) 2,426 14,651

299,338 172,322 136,733 50,814 659,207

66,725 164,888 667 (77,494) 20,282 175,068

3,518,654 557,968 44,597 (12,654) (4,812) 28,892 487,287 4,619,932

-

(195,999) (16,659) (26,773) (239,431)

(137,553) (4,043) (11) 17 (1) (17,733) (159,324)

(464,071) (29,598) (22,503) 6,769 3 (55,443) (564,843)

(44,451) (2,989) (61) 1,094 1 (5,532) (51,938)

(17,082) (982) (7) 483 (33) (2,028) (19,649)

(151,643) (60,944) 344 9,748 (24,688) (227,183)

(164,589) (7,223) (1,068) 2,535 30 (21,286) (191,601)

(215,601) (27,467) (30,729) (273,797)

(1,855) (121) (241) (2,217)

(124,736) (31,849) (12,703) (169,288)

-

(1,517,580) (181,875) (23,650) 11,242 9,748 (197,156) (1,899,271)

18,416 20,682

461,069 564,173

70,482 75,898

266,845 335,834

30,400 37,752

4,896 6,540

635,522 667,921

27,218 34,980

241,440 299,460

3,459 12,434

174,602 489,919

66,725 175,068

2,001,074 2,720,661

-

-

* Non-cash transactions.

In the Consolidated financial statements, the depreciation expenses were charged to the statements of income as (i) Cost of sales - R$ 42,736 ( March 31, 2011 - R$ 47,787 ) (ii) Selling expenses - R$ 9,889 (March 31, 2011 - R$ 6,874) and (iii) Administrative expenses R$ 5,486 (March 31 - 2011 - R$ 3,623). No financial expenses were capitalized in quarter through March, 31 2012. At March 31, 2012, R$ 524,162 of property, plant and equipment were encumbered to loans and financing guarantees and labor contingencies. 16.

Intangible Assets Internally developed intangible assets refer to the costs incurred in developing programs for each new aircraft, including support services, production labor, materials and direct labor allocated to the construction of prototype aircraft or significant components and also applications of advanced technologies to make aircraft lighter, quieter, more comfortable and energy / emission efficient, in addition to being projected and manufactured in less time and with better use of resources. a) Parent Company

38

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Intangible cost At December 31,2011 Additions Contributions from suppliers Translation adjustments At March 31,2012 Amortization acumulated At December 31,2011 Amortization Amortization of contribution from suppliers Translation adjustments At March 31,2012 Intangible net At December 31,2011 At March 31,2012

Intangible cost At December 31,2010 Additions Contributions from suppliers Translation adjustments At December 31,2011 Amortization acumulated At December 31,2010 Amortization Amortization of contribution from suppliers Translation adjustments At December 31,2011 Intangible net At December 31,2010 At December 31,2011

Embraer's Development Defense and Commercial Executive Security Aviation Aviation 1,802,781 1,178,083 45,188 15,694 89,186 (369) (51,125) (31,155) (1,294) 1,766,981 1,236,114 43,894

External acquisitons Other

Software

Total

2,244 646 (53) 2,837

213,021 4,906 (6,006) 211,921

3,241,317 110,432 (369) (89,633) 3,261,747

(1,378,373) (32,757) 11,917 38,870 (1,360,343)

(329,936) (12,120) 2,160 9,134 (330,762)

(42,027) 1,203 (40,824)

(1,785) 51 (1,734)

(145,601) (3,349) 4,066 (144,884)

(1,897,722) (48,226) 14,077 53,324 (1,878,547)

424,408 406,638

848,147 905,352

3,161 3,070

459 1,103

67,420 67,037

1,343,595 1,383,200

Embraer's Development Defense and Commercial Executive Security Aviation Aviation 1,578,360 876,610 39,709 24,897 313,088 474 (1,723) (147,283) 201,247 135,668 5,005 1,802,781 1,178,083 45,188

External acquisitons Other

Software

Total

1,652 332 260 2,244

168,200 21,952 22,869 213,021

2,664,531 360,743 (149,006) 365,049 3,241,317

(1,145,091) (120,008) 39,205 (152,479) (1,378,373)

(229,192) (76,929) 11,011 (34,826) (329,936)

(37,132) (193) (4,702) (42,027)

(1,230) (356) (199) (1,785)

(118,053) (11,357) (16,191) (145,601)

(1,530,698) (208,843) 50,216 (208,397) (1,897,722)

433,269 424,408

647,418 848,147

2,577 3,161

422 459

50,147 67,420

1,133,833 1,343,595

b) Consolidated

Intangible cost At December 31,2011 Additions Contributions from suppliers Translation adjustments At March 31,2012 Amortization acumulated At December 31,2011 Amortization Amortization of contribution from suppliers Translation adjustments At March 31,2012

Embraer's Development Defense and Commercial Executive Security Aviation Aviation 1,827,383 1,236,417 48,823 15,895 90,688 960 (369) (51,821) (32,774) (1,224) 1,791,088 1,294,331 48,559

External acquisitons

4,219 813 (227) 4,805

268,406 6,071 (7,541) 266,936

Business acquisiton 109,271 (3,128) 106,143

Other

Software

Total 3,494,519 114,427 (369) (96,715) 3,511,862

(1,392,800) (33,168) 11,917 39,269 (1,374,782)

(341,778) (13,514) 2,160 9,422 (343,710)

(44,109) (43) 1,260 (42,892)

(3,671) (39) 119 (3,591)

(193,016) (5,080) 5,358 (192,738)

(2,956) (577) 47 (3,486)

(1,978,330) (52,421) 14,077 55,475 (1,961,199)

434,583 416,306

894,639 950,621

4,714 5,667

548 1,214

75,390 74,198

106,315 102,657

1,516,189 1,550,663

Intangible net At December 31,2011 At March 31,2012

Intangible cost At December 31,2010 Additions Contributions from suppliers

Additions from business combinations Translation adjustments At December 31,2011 Amortization acumulated At December 31,2010 Amortization Amortization of contribution from suppliers Disposals Translation adjustments At December 31,2011 Intangible net At December 31,2010 At December 31,2011

Embraer's Development Defense and Commercial Executive Security Aviation Aviation 1,599,163 921,747 41,759 25,978 319,849 1,721 (1,723) (147,283) 203,965 142,104 5,343 1,827,383 1,236,417 48,823

Other 7,182 (4,490) 1,527 4,219

External acquisitons Business acquisiton 216,167 21,962 1,911 105,601 28,366 3,670 268,406 109,271

Software

(1,156,572) (121,571) 39,205 238 (154,100) (1,392,800)

(235,320) (82,013) 11,011 716 (36,172) (341,778)

(38,655) (201) (5,253) (44,109)

(3,409) (114) 10 (158) (3,671)

(158,547) (12,876) (21,593) (193,016)

442,591 434,583

686,427 894,639

3,104 4,714

3,773 548

57,620 75,390

39

Total 2,786,018 365,020 (149,006) 107,512 384,975 3,494,519

- (1,592,503) (2,545) (219,320) 50,216 964 (411) (217,687) (2,956) (1,978,330)

106,315

1,193,515 1,516,189

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

In the quarter ended March 31, 2012, the Company capitalized interest of R$ 3,526 in intangible assets. 17.

Financial Liabilities by Category a) Parent Company 03.31.2012 Note

Loans and financing Trade accounts payable and others liabilities (i) Financial guarantee and of residual value Derivative financial instruments Leasing

Liabilities mensured at fair value throught profit or loss

18

Financial liabilities measured at amortised cost

244,905 283 245,188

35 36 18

3,289,596 1,580,234 647,802 58 5,517,690

Total

3,289,596 1,580,234 892,707 283 58 5,762,878

31.12.2011 Note

Loans and financing Trade accounts payable and others liabilities (i) Financial guarantee and of residual value Derivative financial instruments Leasing

(i)

Liabilities mensured at fair value throught profit or loss

18

Financial liabilities measured at amortised cost

224,233 324 224,557

35 36 18

2,826,889 1,278,622 704,040 81 4,809,632

Total

2,826,889 1,278,622 928,273 324 81 5,034,189

The amount refers to trade accounts payable, other accounts payable and non-recourse and recourse debt.

b) Consolidated

03.31.2012 Note

Loans and financing Trade accounts payable and others liabilities (i) Financial guarantee and of residual value Leasing Derivative financial instruments - fair value hedge

Liabilities mensured at fair value throught profit or loss

18 35 18 36

Financial liabilities measured at amortised cost

Total

244,905 2,000

3,619,138 2,729,698 647,802 3,541 -

3,619,138 2,729,698 892,707 3,541 2,000

248,905

7,000,179

7,249,084

31.12.2011 Note

Loans and financing Trade accounts payable and others liabilities (i) Financial guarantee and of residual value Leasing Derivative financial instruments

(i)

Liabilities mensured at fair value throught profit or loss

18

224,233 2,227 226,460

35 18 36

Total

3,104,731 2,603,291 704,040 5,424 6,417,486

Total

3,104,731 2,603,291 928,273 5,424 2,227 6,643,946

The amount refers to trade accounts payable, other accounts payable and non-recourse and recourse debt.

40

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

18.

Loans and Financing a) Parent Company

Parent Company

Currency

Contractual interest rate - %

Effective interest rate - %

Maturity

Other currencies: Working Capital

US$

6.38%

6.38%

2020

1,636,217

1,683,203

Export Financing

US$

1.40% a 2.10%

1.40% a 2.10%

2012

430,547

-

Finance leasing

US$

6.48%

6.48%

2012

58 2,066,822

In local currency: Export Financing

R$

4.5% a 9.0%

4.5% a 9.0%

2013

760,952

759,815

Project development

R$

TJLP + 1.92% a 5.0% 3.5% a 4.5%

TJLP + 1.92% a 5.0% 3.5% a 4.5%

2018

461,880

383,871

03.31.2012

12.31.2011

81 1,683,284

1,222,832 3,289,654 768,550 2,521,104

Total Less - current portion Long - term portion

1,143,686 2,826,970 335,573 2,491,397

b) Consolidated

Consolidated

Currency

Contractual interest rate - %

Effective interest rate - %

US$

1,00% a 6,38%

1,00% a 6,72%

Libor 1M + 0,50% a 1,10% Euribor 6M + 1,75% 1,5% a 2,68%

Libor 1M + 0,50% a 1,10% Euribor 6M + 1,75% 1,5% a 2,68%

2020

Maturity

03.31.2012

12.31.2011

Other currencies:

Working capital Euro

1,724,258

1,751,803

92,187

55,434

Project development

US$

6.87%

6.87%

2015

1,932

2,156

Advances on foreign exchange contracts

US$

1,40% a 2,10%

1,40% a 2,10%

2012

430,547

-

Property, plant and equipment

US$

2.62% Libor 1M + 2,44%

2.62% Libor 1M + 2,44%

2035

Euro

Euribor 3M

Euribor 3M

6,16% a 7,95%

6,16% a 7,95%

US$

Libor 12M + 2,54% a 3,40%

Libor 12M + 2,54% a 3,40%

Finance leasing

2014

128,742

132,662

1,174

-

1,637

3,404

2,380,477

1,945,459

In local currency:

Export financing

R$

4,5% a 9,0%

4,5% a 9,0%

2013

760,952

759,815

Project development

R$

TJLP + 1,92% a 5,0% 3,5% a 4,5%

TJLP + 1,92% a 5,0% 3,5% a 4,5%

2018

479,378

402,861

Finance leasing

R$

CDI + 0,49% a 2,46%

CDI + 0,49% a 2,46%

2015

Total Less - current portion Long - term portion

1,872 1,242,202 3,622,679 960,124 2,662,555

2,020 1,164,696 3,110,155 472,235 2,637,920

In October 2006, the Company's wholly-owned finance subsidiary Embraer Overseas Limited, which operates exclusively in the international capital markets, issued US$ 400 million in Guaranteed Notes at 6.375% p.a. due on January 24, 2017 in an offering subsequently registered with the SEC. In October 2009, Embraer Overseas Limited issued US$ 500 million of 6.375% p.a. guaranteed notes due on January

41

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

15, 2020. Both Notes are fully and unconditionally guaranteed by the Company and, accordingly, are presented in the Company’s balance sheet as third party transactions. The Company has a standby syndicated credit line of US$ 1.0 billion disbursable through September 2012. The maintenance cost is included in Financial expense. As of March 31, 2012 and 2011, the Company had not drawn down any funds from this facility. On March 8, 2012, Embraer S.A. signed a contract for a non-reimbursable revolving credit line with four Brazilian financial institutions for R$ 1 billion, equivalent to US$ 549 million, and maturity date on March 8, 2015. Each institution committed R$ 250,000, allowing the Company to draw down the entire amount or lesser amounts, between March 9, 2012 and February 7, 2015. This line of credit incurs an annual cost of CDI plus 1.30% when paid. The maintenance costs for this line of credit will be included in Financial results. The Company has the following undrawn borrowing facilities: Parent Company 03.31.2012 12.31.2011 - Maturing within one year - Maturing more than one year

1,822,100 1,000,000 2,822,100

Consolidated 03.31.2012 12.31.2011

1,875,800 1,875,800

1,822,100 1,000,000 2,822,100

1,875,800 1,875,800

On March 31, 2011, the Company signed financing agreements with BNDES and FINEP, both in Real, classified for development projects. The agreements will mature in April 2018. Drawdowns of R$ 402,563 had been made through March 2012. At March 31, 2012, the long-term financing agreements will mature as follows: Parent Company 2013 2014 2015 2016 2017 After 2017

Consolidated

521,587 88,746 86,687 80,513 765,871 977,700 2,521,104

533,027 101,450 104,291 96,907 773,862 1,053,018 2,662,555

c) Currency analysis Total debt is denominated in the following currencies: Parent Company 03.31.2012 Loans and financing US dollar Brazilian Real Euro

2,066,822 1,222,832 3,289,654

42

12.31.2011 1,683,284 1,143,686 2,826,970

Consolidated 03.31.2012 2,287,116 1,242,202 93,361 3,622,679

12.31.2011 1,890,025 1,164,696 55,434 3,110,155

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

d) Interest and guarantees

The Real loans (34.3% of the total at March 31, 2012) are subject to fixed interest or interest based on the Brazilian Long-term Interest Rate (“TJLP”). The weighted average rate at March 31, 2012 was 4.98% p.a. (5.14% p.a. at December 31, 2011). The US dollar loans at March 31, 2012 (63.1% of the total at March 31, 2012) are mainly subject to fixed interest. The weighted average rate was 5.06% p.a. (5.91% p.a. at December 31, 2011). The Euro loans (2.06% from total at March 31, 2012) are subject to annual weighted interest rates of 1.14% p.a. (0.74% p.a. at December 31, 2011). The effective rates on the foreign currency financing, which includes the financial structuring costs incurred and already paid, result in an average effective weighted rate equivalent to LIBOR + 3.91% p.a. at March 31, 2012 (LIBOR + 4.41% p.a. in December 31, 2011). Real estate, machinery, equipment, commercial pledges and bank guarantees totaling R$ 629,891 were provided as collateral for loans. The subsidiaries’ loans, guaranteed by the parent company, total R$ 216,191 at March 31, 2012 (December, 2011 – R$ 185,616). e) Restrictive clauses The long-term financing agreements are subject to restrictive clauses, consistent with normal market practices, which establish control over the degree of leverage through the ratio of total consolidated indebtedness/EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization, as defined), as well as limits for debt service cover based on the EBITDA/net financial expense. Agreements also include customary restrictions on the creation of new encumbrances on assets, change of control of the Company, sale of assets and payment of dividends in excess of the minimum mandatory dividend in the event of default on the financing, and transactions with affiliated companies. As of March 31, 2012, the parent company and subsidiaries were in compliance with all the restrictive clauses. 19.

Trade Accounts Payable Parent Company 03.31.2012 12.31.2011 Foreign suppliers Risk partners (i) Domestic suppliers Subsidiaries Less - current portion Long - term portion

672,169 638,686 68,741 83,270 1,462,866 1,462,866 -

527,546 485,634 100,159 61,945 1,175,284 1,175,284 -

Consolidated 03.31.2012 12.31.2011 973,764 638,686 115,961 1,728,411 1,728,411 -

919,119 485,634 151,952 1,556,705 1,556,705 -

(i) The Company's risk-sharing suppliers /partners develop and produce significant aircraft components, including engines, hydraulic components, avionics, wings, tail sections, interiors, and parts of fuselage, among others. Certain contracts between the Company and these risk partners are long-term and include deferral of payments for components and systems until a negotiated term after delivery. Once the risk partners have been selected and the aircraft development and production program has commenced, changing suppliers is more challenging. For example, in the case of engines, the aircraft is specially designed to accommodate a given component, which cannot be easily replaced by another supplier without incurring delays and significant additional expense. This dependence makes the Company vulnerable to the performance, quality and financial position of its risk partners. The total amount by currency is presented in Financial Instruments (Note 36(d)).

43

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

20.

Other Payables Parent Company 03.31.2012 12.31.2011 Other accounts payable (i) Contractual obligations (ii) Security deposit Insurance Commercial incentives Accrued materials (iii) Financial credit (iv)

31,120 12,156 9,736 2,709 55,721 45,255 10,466

Less - current portion Long - term portion

21.

Consolidated 03.31.2012 12.31.2011

32,781 12,028 7,252 2,797 54,858 44,392 10,466

85,790 55,449 12,851 12,057 7,252 2,797 2,633 178,829 152,525 26,304

(i)

Expenses incurred in the month, for payment in the following month;

(ii)

Represents mainly amounts provided to cover maintenance costs of aircraft under operating under lease agreements;

(iii)

Accessories or components to be installed in aircraft already delivered, in accordance with the contracts;

(iv)

Amounts provided to compensate customers for certain financing costs;

Advances from Customers

Parent Company 03.31.2012 12.31.2011 Denominated in U.S. Dollar Denominated in Real

1,450,816 352,020 1,802,836 1,456,237 346,599

Less - current portion Long - term portion

22.

70,752 53,567 11,931 12,186 9,736 2,709 2,248 163,129 137,851 25,278

Consolidated 03.31.2012 12.31.2011

1,498,385 269,969 1,768,354 1,366,965 401,389

1,663,580 359,000 2,022,580 1,675,981 346,599

1,731,034 276,199 2,007,233 1,605,844 401,389

Taxes and Payroll Charges Payable and Income Tax Social Contribution

Parent Company 03.31.2012 12.31.2011

Consolidated 03.31.2012 12.31.2011

Income tax and social contribution (ii) INSS (social security contribution) (iii) Refinanced taxes (i) IRRF (Witholding income tax) PIS e COFINS (iv) FGTS (Government Employee Severance Indemnity Fund) Others Taxes and social charges payable

463,755 257,449 31,927 13,286 10,009 8,402 5,803 790,631

461,014 250,817 81,377 30,145 9,930 12,972 16,503 862,758

471,622 262,020 35,612 15,062 10,236 8,631 17,545 820,728

469,113 255,827 85,262 33,113 10,506 13,525 25,549 892,895

Income tax and social contribution

790,631

862,758

37,787 858,515

21,050 913,945

Less - current portion Long-term portion

91,944 698,687

140,731 722,027

156,830 701,685

188,354 725,591

(i)

The Tax Amnesty and Refinancing program which the Company elected to join in May 2011, had the effect of reducing the balance by R$ 39,509 by offsetting credits against amounts due to the Federal Government.

The Company is challenging, through both administrative and judicial proceedings, the

44

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

constitutionality, of the tax base for purposes of its calculation and expansion, as well as the rate increase on certain taxes, social contributions and charges, with the aim of ensuring its right to withhold payment or recover amounts paid in previous years. By means of administrative and judicial proceedings, the Company has obtained injunctions and similar measures to suspend collection or offset payment of taxes and social contributions and charges. Provisions have been recorded for the amount of taxes not collected (suspended) due to preliminary legal decisions, and updated based on changes in the SELIC interest rate until that the final and definitive decision is obtained and are comprised mainly of the following issues: (ii)

The Company is claiming constitutional immunity for the social contribution on exports and the right to recognize IPI credit on exempt purchases, which are taxed at a zero rate or tax exempt. The social contribution on exports lawsuit is with the Federal Supreme Court, awaiting judgment of an Extraordinary Appeal, in which a suspensive effect was granted in the Company's favor. Additionally the Company included part of the administrative processes of social contribution of 2001 in the Tax Amnesty and Refinancing program established by Provisional Measure No. 449, later converted into Law No. 11941/09 (“REFIS”). The application to the program resulted in the reversal of R$ 15,112 reflected in the Financial income (expense). From the amount involved of R$ 455,044 (Parent Company and Consolidated) in the year ended in 2011, the Company has made court-mandated escrow deposits of R$ 186,062 (Note 11).

(iii)

This refers to the increase in the work-related accident insurance (“SAT”) rate. The Company is challenging the legality of the levy and absence of technical criteria for such rates since 1995, the liability for which is suspended following a lower court decision in a civil suit. The amount involved R$ 196,522 at March 31, 2012 (2011 – R$ 193,125). On February 18, 2009, the Company filed a suit contesting the payment of social security on dismissal notices paid. As a result of a lower court injunction in favor of the Company, the amounts relating to notices to be paid were excluded from the calculation base for the employer's social security contribution and a provision was recorded, pending a definitive successful outcome of the court case. The process was judged in favor of the Company by the Federal Court 3rd Region and is awaiting judgment on the Federal Union appeal. The amount involved at March 31, 2012 is R$ 15,920 (December 31, 2011– R$ 15,087) in the Parent Company, R$ 16,204 (2011-R$ 15,366) in the Consolidated.

(iv)

This refers to contributions to the PIS/PASEP fund (Social Integration Program / Public Servant Fund) which the Company is contesting for certain periods. The dispute involving the calculation was based on the non-cumulative system, which was included under the terms of Law 11,941/09, and the suit was consequently discontinued. The Company continues to contest by lawsuit the criteria for the benefits application related to the payments installments. The other dispute relates to the addition of the exchange rate gains/losses in the PASEP basis for calculation. The amount involved in the suit is R$ 9,595.

The provisions for the above cases will remain open until a final unappealable decision is received. 23.

Other Provisions

45

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Parent Company 03.31.2012 12.31.2011 Provisions related to payroll Product warranty (i) Employee profit-sharing program Post-retirement benefits Other

263,581 193,446 68,902 3,174 529,103 450,585 78,518

Less - current portion Long - term portion

(i)

Consolidated 03.31.2012 12.31.2011

241,422 205,699 49,455 2,255 498,831 409,747 89,084

352,929 205,444 84,410 8,013 23,878 674,674 558,619 116,055

322,377 217,128 62,590 8,262 24,744 635,101 508,585 126,516

Recorded to cover the expenditures related to products, including warranties and contractual obligations to implement improvements to aircraft delivered to meet performance targets.

The activity in the provision account was as follows: Parent Company Accrued payroll and related charges At December 31,2010 Additions Used/payments Reversals Translation adjustments At December 31,2011 Additions Used/payments Reversals Translation adjustments At March 31,2012

Product warranties

216,798 367,541 (342,915) (2) 241,422 45,583 (23,424) 263,581

Accrued employee profit sharing

203,481 557,013 (543,341) (35,321) 23,867 205,699 66,640 (64,086) (7,487) (7,320) 193,446

Post retirement benefits

62,692 49,454 (51,154) (11,537) 49,455 19,448 (1) 68,902

16,000 (16,000) -

Others 10,484 7,662 (15,891) 2,255 1,155 (225) (11) 3,174

Losses on investments in other companys 589 1,111 (1,729) 29 -

Total 510,044 982,781 (610,386) (407,502) 23,894 498,831 132,826 (64,311) (30,911) (7,332) 529,103

Consolidated

At December 31,2010 Additions Used/payments Reversals Translation adjustments At December 31,2011 Additions Used/payments Reversals Translation adjustments At March 31,2012

24.

Accrued payroll and related charges 257,535 406,257 1,502 (342,915) (2) 322,377 54,038 (743) (23,424) 681 352,929

Product warranties 214,478 648,059 (543,341) (126,512) 24,444 217,128 67,577 (64,159) (7,700) (7,402) 205,444

Accrued employee profit sharing 71,603 53,678 (51,154) (11,537) 62,590 21,820 84,410

Post retirement benefits 22,658 2,489 (372) (16,000) (513) 8,262 (249) 8,013

Others 32,299 7,863 (15,408) (10) 24,744 1,667 (1,787) (746) 23,878

Total 598,573 1,118,346 (608,773) (496,964) 23,919 635,101 145,102 (66,689) (31,124) (7,716) 674,674

Provisions for contingencies The Company had the following provision for contingencies: Parent Company 03.31.2012 12.31.2011 Labor related Tax related Civil related Less-current portion Long-term portion

60,900 45,770 1,279 107,949 10,116 97,833

65,579 45,360 1,279 112,218 9,671 102,547

The activity in the provision for contingencies account was as follows:

46

Consolidated 03.31.2012 12.31.2011 63,435 48,643 1,279 113,357 10,348 103,009

67,992 48,304 1,279 117,575 9,999 107,576

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Parent Company Labor At December 31, 2010 Additions Interest Monetary adjustments Transferences Payments Reversals Translation adjustments At December 31, 2011 Interest Monetary adjustments Payments Reversals At March 31.2012

74,232 10,734 14,799 994 (1,279) (2,608) (31,293) 65,579 (1,970) (127) (882) (1,700) 60,900

Taxes 47,882 1,869 (4,302) (89) 45,360 410 45,770

Civil 1,279 1,279 1,279

Total 122,114 10,734 16,668 994 (6,910) (31,293) (89) 112,218 (1,560) (127) (882) (1,700) 107,949

Consolidated Labor At December 31, 2010 Additions Interest Monetary adjustments Transferences Payments Reversals Translation adjustments At December 31, 2011 Additions Interest Monetary adjustments Payments Reversals Translation adjustments At March 31.2012

76,849 11,047 14,799 1,246 (1,075) (3,096) (31,613) (165) 67,992 167 (1,968) (127) (882) (1,703) (44) 63,435

Taxes 51,182 18 1,787 77 (204) (4,803) 247 48,304 42 418 (96) (25) 48,643

Civil 1,279 1,279 1,279

Total 128,031 11,065 16,586 1,323 (7,899) (31,613) 82 117,575 209 (1,550) (127) (978) (1,703) (69) 113,357

The Company is party to labor and tax lawsuits and is contesting these cases at both the administrative and judicial levels. The lawsuits are supported by judicial deposits, when applicable and recorded in Other Assets. The provisions for probable losses in these lawsuits are estimated and updated by Management, based on the advice of the Company’s external legal counsel. These contingencies have informed the same legal basis to those contained in the annual financial statements of the Company. There was no change, only the updates and additions arising from the same grounds as those observed in previous periods. Possible contingent liabilities In response to a tax assessment notice filed by the Brazilian Federal Revenue Authorities in September 2010 and June 2011, the Company is contesting the basis of calculation, the rates of taxes charged on certain remittances abroad and also the accounting and recognition of an indemnity received in a contractual dissolution. The amount involved at March 31, 2012 is R$ 305,927. The Company filed a defense challenging the notification within the legal timeframe and is awaiting the revenue office's assessment and judgment of its defense. The likelihood of a negative outcome in this dispute is considered possible by the Company's legal advisors and, for this reason, no provision has been recorded in the financial statements.

47

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

The Company received a subpoena from the SEC, which inquired about certain operations concerning sales of aircraft abroad. In response to this SEC-issued subpoena and associated inquiries into the possibility of non-compliance with the U. S. Foreign Corrupt Practices Act (“FCPA”), the Company retained outside counsel to conduct an internal investigation on transactions carried out in three specific countries. The investigation remains ongoing and the Company, through its outside counsel, continues to cooperate fully with the authorities responsible for reviewing the matter (SEC and US Department of Justice). Management, with the support of the Company’s outside counsel, has concluded that, as of March 31, 2012, it is still not possible to estimate the duration, scope or results of the investigation. In the event that an illegal activity is identified or the parties enter into an agreement to bring finality to the matter, the Company may be required to pay substantial fines, as provided in the FCPA. Management, based upon the advice of the Company’s outside counsel, believes that, as of March 31, 2012, there is no basis for estimating a provision or quantifying any possible contingency. 25.

Post-Retirement Benefits (a)

Defined contribution pension plan

The Company and certain subsidiaries sponsor a defined contribution pension plan for their employees, in which participation is optional. Contributions by the Company's to the plan for the quarters ended March 31, 2012 and 2011 were R$ 8,778 and R$ 11,223, respectively. Items (b) and (c) shown below, are calculated annually, and are unchanged from those presented at December 31, 2011. (b)

Post-retirement healthcare benefits provided by subsidiaries

EAH sponsors post-retirement medical care which was modified in 2007. Employees hired after 2007 do not have the right to this benefit. The expected cost for the benefited employees and their dependents is accrued based on actuarial valuations. The main actuarial assumptions utilized at December 31, 2011 and 2010 were as follows: Other Post retirement Benefits (%) % 2011 5.25 4.50 7.75 5.50

Average discount rate Net periodic benefit cost Expected return on plan assets Rate of compensation increase

The composition of plan assets was as follows: 2011 Mutual funds invested primarily in stocks Mutual funds invested primarily in bonds Other - cash

68% 31% 1% 100%

The benefit payments, which reflect expected future service, are expected to be paid to participants under the post-retirement medical plan as follows:

48

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Year 2012 2013 2014 2015 2016 2017 - 2021

Other benefits post retirement(%) 484 505 492 492 508 2,911 5,392

For measurement purposes, an annual rate of increase in the per capita cost of covered health and dental care benefits of 7% was assumed. The rate is expected to decrease to 5% in 2012. Assumed health care cost trend rates have a significant effect on the amounts reported for the postretirement health care plan. A one percentage point change in assumed health care cost trend rates would not have material effects on the post-retirement benefit. 26.

Shareholders' equity

(a)

Capital The authorized capital is divided into 1,000,000,000 common shares. The Company's subscribed and paid up capital at March 31, 2012 is R$ 4,789,617 and comprises 740,465,044 common shares, without par value, of which 16,425,000 shares are held in Treasury.

(b)

Brazilian Government Golden share The Federal Government holds one ”golden share” with the same voting rights as other holders of common shares but which grants it certain additional rights as established in article 9 of the Company’s bylaws, including veto rights over decisions pertaining to the following matters: I - Change of the Company's name or its corporate objective; II - Alteration and/or application of the Company's logo; III - Creation and/or modification of military programs (whether or not the Federal Republic of Brazil is involved); IV - Training third parties in technology for military programs; V - Interruption of the supply of maintenance and spare parts for military aircraft; VI - Transfer of control of the Company's stock control; VII - Any changes in (i) article 9 of the Company’s bylaws, article 4, the main clause of art. 10, articles 11, 14 e 15, sub-item III of art. 18, paragraphs 1 and 2 of art. 27, sub-item X of art. 33, sub-item XII of art. 39 or Chapter VII of the Company’s bylaws, or (ii) the rights attributed by the bylaws to the special class share.

(c)

Treasury Shares Common shares acquired before April 4, 2008, from the Reserve for investments and working capital. This operation was conducted in accordance with instructions of the Board of Directors meeting held on December 7, 2007, and corresponded to 16,425,000 common shares and R$ 315,771 on March 31, 2012. The shares lose their voting and economic rights during the period in they are held in Treasury

49

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Quantity 16,798,400 (373,400) 16,425,000

In the beginning of the year Used for stock option plan (ii) At March 31, 2012

(i)

The beneficiaries of the shares used in the share-based compensation plan include the Statutory Board of Directors, Executive Directors and certain employees (Note 27).

At March 31, 2012 the market value of the shares held in Treasury was R$ 240,462. (d)

Interest on own capital According to Brazilian fiscal legislation, interest on own capital is recorded in the accounts as a Financial expense for tax purposes. However, for purposes of these financial statements, the amount is excluded from the net income and reclassified to shareholders' equity; the tax benefits arising from the distributions are included net income . In meetings held in March, 2012, the Statutory Board of Directors approved Management's proposal not to distribute interest on own capital.

(e)

Other Comprehensive Income Comprises the following adjustments:

27.

i)

Foreign exchange gains/losses resulting from translation of the consolidated financial statements in the functional currency to the presentation currency (Real);

ii)

Foreign exchange gains/losses resulting from translation of the foreign subsidiaries’ financial statements, measured in the functional currency other than of the Company (dollar), to the functional currency;

iii)

Other - these refer to unrealized actuarial gains (losses) resulting from the healthcare plans sponsored by the Company and to fair value variation of financial instruments available for sale.

Stock Compensation The Extraordinary General Meeting of April 19, 2010 approved the Stock option grant program offered to directors and employees of the Company and its subsidiaries who have been employed for at least two years. Vesting under the program’s policy occurs at three points in time: (i) from 20% after the first year, (ii) 30% after the second year (iii) from 50% after the third year, always taking the date on which each stock option was granted. At the Extraordinary General Meeting held on January 10, 2012, a majority vote changed clauses 6.1 and 7.1 of the Stock option grant program, with respect to the timing and percentage of entitlement to exercise options to purchase shares. The exercise of the options will be: (i) 33% after 3 years, period (ii) 33% after the 4th year and period (iii) 34% after 5 years, always from the date of grant of each option. The exercise price of each option is established on the grant date based on the weighted average of the shares quoted in the last 60 trading sessions, and may be adjusted by up to 30% to eliminate the effects of any speculative trading. Participants will have a maximum of five years to exercise the option, as from the grant date. Stock options granted

50

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated



On April 30, 2010, call options were granted for 6,510,000 shares, with an exercise price of R$ 10.19 per share. The fair value attributed to these options was based on the Black-Scholes pricing model, whereby the value of each option was calculated at R$ 1.77 for the portion that may be exercised as from the end of the first year, R$ 2.74 for the portion that may be exercised as from the end of the second year and R$ 3.44 for the portion that may be exercised as from the end of the third year. This model takes into consideration the value of the underlying asset, the exercise price, time remaining before exercising, probability of the option being exercised, historical volatility based on daily closing price of the shares over the last six months and the weighted interest rate for the period of each lot based on the DI interbank interest rate published by BM&FBOVESPA. The vesting period was determined in accordance with the Management decision and considers the end of the grace period as the basis for calculation. Accordingly, the options were calculated with defined exercise timeframes of one year, two years and three years as the options are expected to be exercised at the end of each grace period.



On January 18, 2011, call options were granted for 6,345,000 shares and on March 16, 2011 additional call options for 150,000 shares were granted, with an exercise price of R$ 12.05 and R$ 12.89 per share, respectively. The fair value attributed to the options was based on the BlackScholes pricing model, whereby the value of each option granted on January 18, 2011 was calculated at R$ 1.89 for the portion that may be exercised as from the end of the first year, R$ 2.88 for the portion that may be exercised as from the end of the second year and R$ 3.62 for the portion that may be exercised as from the end of the third year. For the option granted on March 16, 2011 the calculated fair values were R$ 2.11 for the portion that may be exercised as from the end of the first year, R$ 3.22 for the portion that may be exercised as from the end of the second year and R$ 4.08 for the portion that may be exercised as from the end of the third year.



On January 23, 2012, 4,860,000 options were granted to purchase shares at an exercise price of R$ 11.50 per share. The fair value attributed to these options was determined using the standard Black-Scholes pricing model and the value of each option was determined at R$ 4.35 with early exercise rights at the end of the third year, R$ 4.49 with early exercise rights at the end of fourth year and R$ 4.61 with early exercise rights at the end of the fifth year.

in thousands of options

6,510,000 6,345,000 150,000 4,860,000

(307,000) (68,000) -

(333,000) (420,000) -

Outstanding share options 5,870,000 5,857,000 150,000 4,860,000

17,865,000

(375,000)

(753,000)

16,737,000

Grants Grants on April 30, 2010 Grants on January 18, 2011 Grants on March 16, 2011 Grants on January 23, 2012 As of March 31, 2012

Exercised (i)

Canceled (ii)

Weighted average Exercible share exercise Price options 928,400 10.19 1,117,000 12.05 12.89 11.50 2,045,400

(i) Exercise of stock option related to the first and second award granted by the Company. (ii) Cancellations refer to shares granted to directors or employees no longer employed by the Company. As provided in the Stock option grant program, in the event of termination, options, will be canceled by proportionally to rights not yet vested. 28.

Earnings per Share

(a)

Basic Basic earnings per common share were computed by dividing net income attributable to Embraer available to shareholders by the weighted average number of shares during the period, excluding shares held in Treasury.

51

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated Parent Company 03.31.2012 03.31.2011

Net income attributable to owners of Embraer

111,243 111,243

174,376 174,376

111,243 111,243

174,376 174,376

Weighted average number of shares (in thousands)

724,040

723,665

724,040

723,665

0.1536

0.2410

0.1536

0.2410

Basic earnings per share - U.S. dollars

(b)

Consolidated 03.31.2012 03.31.2011

Diluted Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding to assume conversion of all potentially dilutable shares. The Company has only one category of potentially dilutable shares, with options to purchase shares for which a calculation is made to determine the number of shares that could be acquired at fair value (determined as the average market price of the Company's share), based on the monetary value of subscription rights attached options to purchase shares in circulation. The number of shares calculated as described above is compared with the number of shares issued assuming the exercise of options to purchase shares.

Parent Company 03.31.2012 03.31.2011 Net income attributable to owners of Embraer

111,243

174,376

111,243

174,376

Profit used to determine diluted earnings per share

111,243

174,376

111,243

174,376

Weighted average number of shares (in thousands) - diluted

724,040

723,665

724,040

723,665

1,898

1,355

1,898

1,355

725,938

725,020

725,938

725,020

0.1532

0.2405

0.1532

0.2405

Dilution for the issuance of stock options (in thousands) (i)

Weighted average number of shares (in thousands) - diluted Diluted earnings per share - in Reais

(i)

29.

Consolidated 03.31.2012 03.31.2011

Refers to the effect of potentially dilutive shares for the quarters ended March 31, 2012 and 2011.

Other Operating Income (Expense), Net

52

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated Parent Company 03.31.2012 03.31.2011 Contractual fines (i) Taxes on other revenues Other sales Recovery of expenses Expenses system projects Provision for contingencies Royalties Aircraft maintenance and flights costs - fleet Flight safety standards Product modifications Restructuring expenses (ii) Third parties' aircraft maintenance Others

38,289 (10,638) 3,058 1,738 (2,390) 5,796 2,714 (2,158) (1,780) (1,995) 21,566 54,200

28,339 (9,280) 3,053 2,451 (1,937) (5,126) 4,286 (1,851) (1,716) (1,509) (405) 20,234 36,539

Consolidated 03.31.2012 03.31.2011 37,522 (10,732) 3,528 2,003 (2,390) 5,753 2,714 (2,453) (1,780) (1,995) (395) (7,541) 24,234

27,848 (9,425) 3,800 2,903 (1,937) (5,133) 3,169 (1,863) (1,716) (1,509) (219) (405) (1,487) 14,026

(i) Substantially composed of fines charged to customers for the cancellation of sales contracts, especially in the Executive Aviation segment, as provided for in contract. (ii) Corresponds to costs incurred as a result of the review of cost base and headcount to right-size to demand for commercial and executive aircraft. 30.

Revenue and (Expenses) by Nature The Company opted to present the statements of income by function. The table shows the detailed costs and expenses by nature: Parent Company 03.31.2012 03.31.2011

Consolidated 03.31.2012 03.31.2011

As presented in the statements of income: Net revenue Cost of sales and services Administrative Selling Research Other income (expenses), net Equity in earnings of subsidiaries/investees Operating profit

1,593,206 (1,236,080) (89,641) (165,397) (27,658) 54,200 (2,732) 125,898

1,477,957 (1,149,194) (69,730) (126,295) (31,400) 36,539 (7,685) 130,192

2,049,158 (1,573,746) (125,557) (192,230) (28,133) 24,234 (386) 153,340

1,756,604 (1,329,803) (95,350) (156,700) (32,149) 14,026 156,628

Revenue (expenses) by nature: Revenue from sales of goods Revenue from sales of services Sales deductions Material cost attributed to the product Depreciation Amortization Personnel expenses Selling expenses Other income (expense) Operating profit

1,437,742 161,239 (5,775) (1,166,966) (20,888) (48,226) (109,800) (40,067) (81,361) 125,898

1,342,869 150,338 (15,250) (1,090,602) (17,748) (40,844) (90,595) (26,418) (81,558) 130,192

1,768,156 291,292 (10,290) (1,463,214) (58,111) (52,421) (169,955) (49,277) (102,840) 153,340

1,515,574 262,063 (21,033) (1,226,580) (58,284) (44,939) (137,385) (7,979) (124,809) 156,628

53

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

31.

Financial Income (Expense), Net Parent Company 03.31.2012 03.31.2011 Financial income: Interest on cash and cash equivalents and financial assets Interest on receivables Financial restructuring revenue Residual value guarantee Other Total financial revenues Financial expenses: Interest on loans and financing Interest on taxes, social charges and contributions Financial restructuring costs IOF tax on financial transactions Residual value guarantee Other Total financial expenses Financial income (expense), net

32.

Consolidated 03.31.2012 03.31.2011

51,329 14,762 18 66,109

52,733 7,928 261 60,922

55,727 12,133 32 67,892

56,117 8,237 279 64,633

(41,771) (7,257) (536) (2,668) (19,878) (3,238) (75,348) (9,239)

(33,200) (11,878) (278) (283) (155) (2,353) (48,147) 12,775

(46,646) (7,264) (583) (2,785) (19,878) (4,891) (82,047) (14,155)

(37,084) (11,886) (1,398) (289) (155) (3,656) (54,468) 10,165

Foreign Exchange Gains (Losses), Net Parent Company 03.31.2012 03.31.2011 Monetary and foreign exchange variations Income: Cash and cash equivalents and financial assets Tax credits Trade accounts receivable, net Advances to suppliers Other Expenses: Taxes and charges payable Loans and financing Provisions Accounts payable Advances from customers Provisions for contingencies Trade accounts payable Deferred taxes Other Net monetary and foreign exchange variations Derivative transactions Foreign exchange gain (loss), net

33.

Consolidated 03.31.2012 03.31.2011

86,197 4,725 (6,075) 10,608 95,455

41,582 6,072 7,275 14,769 69,698

86,280 5,352 3,857 (2,155) 4,364 97,698

41,392 8,246 10,645 711 4,497 65,491

(24,398) (28,759) (6,511) (633) 3,396 (2,141) (38,500) (113) (97,659) (2,204)

(19,337) (14,545) (7,734) 258 (6,373) (1,943) (643) (181) (50,498) 19,200

(24,478) (29,539) (6,605) (1,590) 2,705 (2,203) (35,683) 55 (978) (98,316) (618)

(19,504) (15,112) (7,913) (4,031) 849 (1,983) 2,421 334 (1,336) (46,275) 19,216

1,207 (997)

(12,550) 6,650

1,102 484

(13,783) 5,433

Income Taxes As the tax basis for the majority of the Parent Company’s assets and liabilities is recorded in Real and the accounting basis is measured in US dollars (functional currency), the fluctuation in the exchange rate significantly impacts the tax basis and which is reflected in the deferred income tax expense (benefit). Based on expectation of future taxable income, the Company recorded deferred tax assets represented by tax loss carryforwards. Credits relating to temporary differences on non-deductible provisions, represented by labor contingencies, provisions and disputed taxes will be realized as such proceedings are concluded.

54

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

a)

Deferred taxes Parent Company 03.31.2012 12.31.2011

Consolidated 03.31.2012 12.31.2011

Deferred tax assets Deferred tax liabilities

82,518 -

92,953 -

112,517 (42,671)

123,601 (43,094)

Deferred tax assets (liabilities), net

82,518

92,953

69,846

80,507

The components of deferred tax assets and liabilities at March 31, 2012 and December 31, 2011 are as follows: Parent Company 03.31.2012 12.31.2011 Temporarily non-deductible provisions Difference from tax basis and accounting basis Difference from tax basis and accounting basis of nonmonetary assets (i) Tax loss carryforwards Research and development tax incentives Effect of IFRS adjustments (ii) Property, plant and equipment revaluation 1990 Property, plant and equipment revaluation 1988 Cumulative translation adjustments for investments Others Deferred tax assets (liabilities), net

Consolidated 03.31.2012 12.31.2011

684,765 (71,480)

729,962 120,888

699,713 (65,693)

819,423 120,888

101,008 51,797 (625,194) 108,061 (8,661) (3,588) (6,637) (147,553) 82,518

42,712 4,919 (622,099) (139,846) (12,400) (3,362) (745) (27,076) 92,953

109,345 58,105 (638,585) 73,399 (8,661) (3,588) (6,637) (147,552) 69,846

48,917 9,520 (634,210) (141,289) (12,400) (3,362) (745) (126,235) 80,507

(i) tax effects of on differences between the tax basis and accounting books arising from the use of the dollar as the functional currency. (ii)

tax differences between tax basis and accounting books primarily due to residual value guarantees and unrealized profits.

The change of deferred income tax that affected the financial statements was as follows: Parent Company From the statement of income At December 31, 2010 Tax loss carryforwards Temporarily non-deductible provisions Differences from tax basis and accounting basis of nonmonetary assets Differences from tax basis and accounting basis Research and development tax incentives Effect of conversion of deferred tax Price index restatement reserve Cumulative translation adjustments for investments Effect of IFRS adjustments Others At December 31, 2011 Tax loss carryforwards Temporarily non-deductible provisions Differences from tax basis and accounting basis of nonmonetary assets Differences from tax basis and accounting basis Research and development tax incentives Effect of conversion of deferred tax Price index restatement reserve Cumulative translation adjustments for investments Effect of IFRS adjustments Others At March 31, 2012

234,940

Consolidated

Other comprehensive income

From the statement of income

Total

(38,637)

196,303

266,424

Other comprehensive income

Total

(53,672)

212,752

(1,098) 146,192

-

(1,098) 146,192

(10,059) 180,605

-

(10,059) 180,605

(225,132) 21,118 2,176 296 (95,925) 36,380

-

(225,132) 21,118 2,176 3,253 296 9,390 (95,925) 36,380

(231,462) 21,118 2,935 296 (97,549) (5,815)

(1,704) 9,390 -

(231,462) 21,118 2,935 (1,704) 296 9,390 (97,549) (5,815)

118,947

3,253 9,390 -

92,953

126,493

46,878 (45,197)

-

46,878 (45,197)

48,585 (119,710)

-

48,585 (119,710)

58,296 (192,368) (3,095) 3,512 248,031 (120,476)

(2,055) (3,961) -

58,296 (192,368) (3,095) (2,055) 3,512 (3,961) 248,031 (120,476)

60,428 (186,581) (4,375) 3,512 214,688 (21,689)

(1,558) (3,961) -

60,428 (186,581) (4,375) (1,558) 3,512 (3,961) 214,688 (21,689)

82,518

121,351

114,528

(25,994)

(32,010)

55

(45,986)

(51,505)

80,507

69,846

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

b)

Analysis of current and deferred tax income (expense)

Parent Company 03.31.2012 03.31.2011 Recording of tax losses Increase (decrease) in unrecognized credits

46,878 -

Tax losses

(48) -

46,878

Effect of increase (decrease) in temporary differences Effect of differences from Law 6,404 to Law 11,638 Effect of differences from Law 11,638/07 to IFRS Temporary differences

(48)

(165,256) 306,327 (192,368) (51,297)

Deferred tax benefit (expense)

30,112 (3,755) 26,357

(4,419)

Tax benefit (expense) for the year Total income tax and social contribution income (expense)

(4,419)

c)

Consolidated 03.31.2012 03.31.2011 48,585 -

(452) -

48,585

(452)

(120,573) 275,117 (208,271) (53,727)

27,074 (3,758) 23,316

26,309

(5,142)

22,864

(1,550)

(21,589)

(18,642)

24,759

(26,731)

4,222

Reconciliation of income tax expense Parent Company 03.31.2012 03.31.2011

Consolidated 03.31.2012 03.31.2011

Profit before taxation Income tax and social contribution expense at the nominal Brazilian composite tax rate - 34% Tax on profits of overseas subsidiaries Differences from tax basis and accounting basis of nonmonetary assets Research and development tax incentives Interest on own capital Exchange variation on investments Effect of conversion of income Equity Gains (loss) on interest results Fiscal credits (recognized and non recognized) and tax rate Other Income tax and social contribution income (expense) benefit as reported

115,662

149,617

139,669

172,226

(39,325)

(50,870)

(47,487)

(58,557)

(143)

-

-

-

50,051

23,835

52,263

24,166

(17,752) 13,143 (6,216) (985)

30,138 14,763 16,282 10,871 (30,123) -

208 (17,752) 5,324 (985)

30,138 14,763 16,282 10,174 -

(3,192) 34,906

9,863 75,629

(11,538) (6,764) 20,756

(28,870) (3,874) 62,779

(4,419)

24,759

(26,731)

4,222

The effective tax rate was 5.5% for the Parent Company and 19.4% for the Consolidated in the quarter ended March 31, 2012. 34.

Impairment test At March 31, 2012, the Company performed an evaluation of all of its cash-generating units (“CGU’s”). No evidence of indications of impairment was identified. Therefore, no impairment loss was recognized in the period ended March 31, 2012 (except for aircraft).

56

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

35.

Financial Guarantees and Residual Value Guarantees Below is the activity of the financial guarantees accounts:

Financial guarantee At December 31,2010 Additions Disposals Reversal Market value Guarantee recognition Translation adjustments At December 31,2011 Disposals Market value Guarantee recognition Translation adjustments At March 31,2012

220,531 (77,426) (24,592) 23,460 141,973 (5,512) (4,147) 132,314

Financial guarantee of residual value 18,466 63,117 3,781 85,364 19,878 (2,147) 103,095

Additional provision (i) 126,798 666,519 (38,819) (77,149) 23,587 700,936 (23,225) (20,413) 657,298

Total 365,795 666,519 (38,819) (154,575) 63,117 (24,592) 50,828 928,273 (23,225) 19,878 (5,512) (26,707) 892,707

(i) Refers to provisions made in 2010 and 2011 to meet financial guarantees offered to the financing agent of transactions with MESA AirGroup and American Airlines, which filed for bankruptcy protection (Chapter 11) in 2010 and 2011, respectively (Note 35 to the Financial Statements at December 31, 2011). 36.

Financial Instruments a)

Fair value of financial instruments

The fair value of the Company's financial assets and liabilities were determined using available market information and appropriate valuation methodologies. However, considerable judgment was required in interpreting market data to generate estimates of fair values. As a consequence, the estimates presented below are not necessarily indicative of the amounts that might be realized in a current market exchange. The use of different assumptions and/or methodologies could have a material effect on the estimated realizable values. The following methods were used to estimate the fair value of each category of financial instrument for which it is possible to estimate the fair value. The book values of cash, cash equivalents, and commercial papers debt securities, accounts receivable and current liabilities are approximately their fair values. The fair value of securities held to maturity is estimated by the discounted cash flow methodology. The fair value of noncurrent loans is based on the discounted value of the contractual cash flows. The discount rate used, when applicable, is based on the future market yield curve for the cash flows of each liability. The fair values of financial instruments at March 31 are as follows:

57

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Parent Company 03.31.2012 Carrying Fair amounts value

12.31.2011 Carrying Fair amounts value

Financial assets Cash and cash equivalents Accounts receivable from subsidiaries Financial assets Trade accounts receivable, net Customer commercial financing Derivative Instrument - fair value hedge

1,637,134 1,396,334 1,345,046 295,999 130,210 5,967

1,637,134 1,396,334 1,345,046 295,999 130,210 5,967

1,609,030 1,300,287 1,250,803 330,225 136,135 4,041

1,609,030 1,300,287 1,250,803 330,225 136,135 4,041

Financial liabilities Loans and financing Trade accounts payable and other liabilities Financial Guarantee Derivative financial instruments

3,289,654 1,580,234 892,707 283

3,467,045 1,580,234 892,707 283

2,826,970 1,278,622 928,273 324

2,952,213 1,278,622 928,273 324

Consolidated 03.31.2012 12.31.2011 Carrying Fair Carrying Fair amounts value amounts value Financial assets Cash and cash equivalents Financial assets Trade accounts receivable, net Customer and commercial financing Collateralized accounts receivable Derivative financial instruments Derivative Instrument - Designated as fair value hedge

2,617,621 1,652,425 885,424 910,358 204,078 50,482 5,184

2,617,621 1,652,425 885,424 910,358 204,078 50,482 5,184

2,532,671 1,516,195 914,689 949,187 191,875 53,994 4,041

2,532,671 1,516,195 914,689 949,187 191,875 53,994 4,041

Financial liabilities Loans and financing Trade accounts payable and other liabilities Financial Guarantee of residual value Derivative financial instruments

3,622,679 2,729,698 892,707 2,000

3,812,014 2,729,698 892,707 2,000

3,110,155 2,603,291 928,273 2,227

3,251,038 2,603,291 928,273 2,227

b)

Classification

The Company considers "fair value" to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. The Company primarily applies the market approach for recurring fair value measurements and endeavors to utilize the best available information. Accordingly, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The Company is able to classify fair value balances based on the observable inputs. A fair value hierarchy is used to prioritize the inputs used to measure fair value. The three Levels of the fair value hierarchy are as follows: (i)

Level 1 - quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives and listed equities.

58

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

(ii)

Level 2 - pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. However, they can be directly or indirectly observable at the balance sheet date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category include non-exchange traded derivatives such as over-the-counter forwards and options.

(iii)

Level 3 - pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in Management's best estimate of fair value. At each balance sheet date, the Company performs an analysis of all instruments and includes in Level 3 all of those whose fair value is based on significant unobservable inputs.

The following table sets forth by Level within the fair value hierarchy the Company's financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2012. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. a) Parent Company

03.31.2012 Quoted prices in active markets for identical assets(level 1) Assets Held for trading Derivative disignated at fair value Derivative

Significant other observable inputs (level 2)

759 5,184 783

149,086 -

1,345,046 5,184 783

-

283

-

283

12.31.2011 Significant other Significant unobservable observable inputs (level inputs (level 3) 2)

Quoted prices in active markets for identical assets(level 1)

Liabilities Derivative financial instruments

Total

1,195,201 -

Liabilities Derivative financial instruments

Assets Held for trading Derivative disignated at fair value

Significant unobservable inputs (level 3)

Total

1,097,151 -

759 4,041

152,893 -

1,250,803 4,041

-

324

-

324

59

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Fair value measurement using significant unobservable inputs (level 3) - 03.31.2012 At 12.31.2011 Unrealized profits (losses) Exchange variation At 03.31.2012

152,893 570 (4,377) 149,086

Fair value measurement using significant unobservable inputs (level 3) - 03.31.2012 At 12.31.2010 Unrealized profits (losses) Exchange variation At 12.31.2011

150,072 2,821 152,893

b) Consolidated

03.31.2012 Significant other Significant unobservable observable inputs (level inputs (level 3) 2)

Quoted prices in active markets for identical assets(level 1)

Total

Assets Held for trading Derivative financial instruments Derivative dignated at fair value

1,396,333 -

778 50,482 5,184

164,159 -

1,561,270 50,482 5,184

Liabilities Derivative financial instruments

-

2,000

-

2,000

12.31.2011 Quoted prices in active markets for identical assets(level 1)

Significant other observable inputs (level 2)

Significant unobservable inputs (level 3)

Total

Assets Held for trading Derivative financial instruments Derivative dignated at fair value

1,249,630 -

778 53,994 4,041

168,513 -

1,418,921 53,994 4,041

Liabilities Derivative financial instruments

-

2,227

-

2,227

60

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Fair value measurement using significant unobservable inputs (level 3) - em 03.31.2012 168,513 At 12.31.2011 Profits (losses) unrealized Exchange variation

570 (4,924)

At 03.31.2012

164,159

Fair value measurement using significant unobservable inputs (level 3) at - 12.31.2011 At 12.31.2010 Purchase (sales) Profits (losses) unrealized Exchange variation At 12.31.2011

172,336 (25,253) (258) 21,688 168,513

Financial risk management policy The Company has and follows a risk management policy to direct transactions, which involves the diversification of transactions and counterparties. This policy provides for regular monitoring and management of the nature and general situation of the financial risks in order to assess the results and the financial impact on cash flows. The credit limits and risk rating of the counterparties are also reviewed periodically. The Company's risk management policy was established by the Executive Directors and submitted to the Statutory Board of Directors, and provides for a Financial Management Committee. Under this policy, the market risks are mitigated when there is no counterparty in the Company's operations and when it is considered necessary to support the corporate strategy. The Company's internal control procedures provide for a consolidated monitoring and supervision of the financial results and of the impact on cash flows. The Financial Management Committee assists the Financial Department in examining and reviewing information in relation to the economic scenario and its potential impact on the Company's operations, including significant risk management policies, procedures and practices. The financial risk management policy includes the use of derivative financial instruments to mitigate the effects of interest rate fluctuations and to reduce the exposure to exchange rate risk. The use of these instruments for speculative purposes is forbidden. (a)

Capital risk management The Company uses capital management to ensure the continuity of its investment program and offer a return to its shareholders and benefits to its stakeholders and also to maintain an optimized capital structure in order to reduce costs. The Company may review its dividends payment policy, pay back capital to the shareholders, issue new shares or sell assets in order to maintain or adjust its capital structure (to reduce the financial indebtedness, for instance). Liquidity and the leverage level are constantly monitored in order to mitigate refinance risk and to maximize the return to the shareholders. The ratio between the liquidity and the return to the

61

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

shareholders may be changed pursuant to the assessment of Management. Accordingly, the Company has been able to keep cash levels higher than the balance of financial indebtedness and to maintain access to liquidity by establishing and maintaining a standby credit line (Note 18). The capital management may be changed due to economy scenario alterations or to strategic repositioning of the Company. At March 31, 2012, the consolidated balance of cash and cash equivalents exceeded the Company’s financial indebtedness by R$ 549,921 (December 31, 2011 - R$ 836,100) resulting, in liquid terms, in a leverage-free capital structure. Of the total financial indebtedness at March 31, 2012, 26.5% was short-term (15.2% in December 31, 2011) and the average weighted term was equivalent to 4.2 years (4.8 years in December 31, 2011). Own capital accounted for 33.3% at March 31, 2012 and 35.2% of the total liabilities at December 31, 2011. (b)

Credit risk The Company may incur losses on amounts receivable from sales of spare parts and services. To reduce this risk, customer credit analyses are made continuously. In relation to accounts receivable from aircraft sales, the Company may have credit risks until the financing structure has been completed. To minimize this credit risk, the Company operates with financial institutions to facilitate structuring of the financing. To cover risk of loss from doubtful accounts, the Company has recorded an allowance in an amount considered sufficient by management to cover expected losses on realization of the receivables. The financial management policy establishes that assets in the investment portfolios in Brazil and overseas should have a minimum risk classification as investment grade, and also establishes a maximum exposure level of 15% of the shareholders' equity of the issuing financial institution and, in the case of a non-financial institution, a maximum of 5% of the total amount of the issue. Counterparty risks in derivative transactions are managed by contracting transactions through highlyrated financial institutions and registration with the Clearing House for the Custody and Financial Settlement of Securities “CETIP”.

(c)

Liquidity risk This is the risk of the Company not having sufficient liquid funds to honor its financial commitments as a result of a mismatch of terms or volumes of estimated receipts and payments. To manage the liquidity of cash in Dollar and Real, Management has established projections and assumptions based on contracts for future disbursements and receipts, which are monitored daily by the Company, aiming to detect possible mismatches well in advance allowing the Company to adopt mitigation measures in advance, always trying to reduce the risk and financial cost.

The following table provides additional information related to undiscounted contractual obligations and commercial commitments and their respective maturities.

62

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Parent Company One to three Three to five years years

Total

Less than one year

More than five years

At March 31,2012 Loans Trade accounts payable Financial guarantees Other liabilities Capital lease Total

4,100,719 1,462,866 892,707 313,631 58 6,769,981

911,353 1,462,866 557,671 21,301 58 2,953,249

872,344 169,047 110,505 1,151,896

390,362 127,288 118,405 636,055

1,926,660 38,701 63,420 2,028,781

At December 31,2011 Loans Trade accounts payable Financial guarantees Other liabilities Capital lease Total

3,642,973 1,175,284 928,273 328,553 83 6,075,166

483,270 1,175,284 595,141 25,922 83 2,279,700

842,958 159,789 109,578 1,112,325

359,400 130,709 130,148 620,257

1,957,345 42,634 62,905 2,062,884

Total

Less than one year

Consolidated One to three years

Three to five years

More than five years

At March 31,2012 Loans Trade accounts payable Recourse and non recourse debt Financial guarantees Other liabilities Capital lease Total

4,424,194 1,728,411 838,158 892,707 392,813 4,683 8,280,966

1,017,283 1,728,411 569,128 557,671 12,054 2,335 3,886,882

901,001 53,906 169,047 63,633 2,104 1,189,691

430,577 81,342 127,288 120,861 244 760,312

2,075,333 133,782 38,701 196,265 2,444,081

At December 31,2011 Loans Trade accounts payable Recourse and non recourse debt Financial guarantees Other liabilities Capital lease Total

3,965,127 1,556,705 867,757 928,273 302,806 5,958 7,626,626

588,438 1,556,705 586,797 595,141 11,087 2,692 3,340,860

872,001 59,496 159,789 70,286 2,936 1,164,508

400,099 83,740 130,709 132,994 330 747,872

2,104,589 137,724 42,634 88,439 2,373,386

The above table shows the outstanding principal and anticipated interest due at maturity date. For the fixed rate liabilities, the interest expenses were calculated based on the rate established in each loan contract. For the floating rate liabilities, the interest expenses were calculated based on a market forecast for each period (e.g. LIBOR 6m - 12m), dated on December 31, 2011 (d)

Market risk (i)

Interest rate risk

This risk arises from the possibility that the Company might incur losses on account of interest rate fluctuations that increase the financial expense of liabilities and related to floating interest rates that reduce the assets income subject to floating interest rates and / or when the fluctuation in the determination of fair value price of assets or liabilities that are marked to market by fixed rates. Financial investments - Company policy for managing the risk of fluctuations in interest rates on financial

63

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

investments is to measure market risk by the Value-At-Risk - VAR methodology, analyzing a variety of risk factors that might affect the return on the investments. The financial income determined in the period already reflects the effects of marking the assets in the Brazilian and foreign investment portfolios to market. Loans and financing - the Company uses derivative contracts to hedge against the risk of fluctuations in interest rates on certain transactions, and also continuously monitors market interest rates to evaluate the potential need to contract new derivative transactions to protect against the risk of volatility in these rates. At March 31, 2012, the Company's consolidated financial investments and loans and financing are indexed/ denominated as follows:

Financial investments . In real . In US Dollars

Pre-fixed Amount 610,144 610,144

Loans . In real . In US Dollars

3,111,815 1,044,993 2,066,822

% 20.47% 20.47%

94.61% 31.77% 62.84%

Parent Company Post-fixed Amount % 2,372,036 79.54% 2,079,131 69.72% 292,905 9.82%

177,839 177,839 -

5.41% 5.41% -

Total Amount 2,982,180 2,079,131 903,049

% 100.00% 69.72% 30.28%

3,289,654 1,222,832 2,066,822

100.00% 37.17% 62.83%

Total Amount 2,982,180 2,079,131 903,049

% 100.00% 69.72% 30.28%

3,289,652 1,222,832 2,066,822

100.00% 37.17% 62.83%

AFTER DERIVATIVES

Financial investments . In real . In US Dollars

Pre-fixed Amount 610,144 610,144

Loans . In real . In US Dollars

2,903,005 836,185 2,066,822

Financial investments . In real . In US Dollars . In other currencies

Pre-fixed Amount 1,588,629 1,237,289 351,340

Loans . In real . In US Dollars . In other currencies

3,265,944 1,045,427 2,127,156 93,361

% 20.47% 20.46%

88.25% 25.42% 62.83%

% 37.20% 28.98% 8.23% 90.15% 28.86% 58.72% 2.58%

Post-fixed Amount 2,372,036 2,079,131 292,905

386,647 386,647 -

% 79.54% 69.72% 9.82%

11.75% 11.75% -

Consolidated Post-fixed Amount % 2,681,417 62.80% 2,113,192 49.49% 568,225 13.31% 356,735 196,775 159,960 -

9.85% 5.43% 4.42% -

Total Amount 4,270,046 2,113,192 1,805,514 351,341

% 100.00% 49.49% 42.28% 8.23%

3,622,679 1,242,202 2,287,116 93,361

100.00% 34.29% 63.13% 2.58%

Total Amount 4,270,047 2,113,192 1,805,514 351,341

% 100.00% 49.49% 42.28% 8.23%

3,622,679 1,242,202 2,287,116 93,361

100.00% 34.29% 63.13% 2.58%

AFTER DERIVATIVES

Financial investments . In real . In US Dollars . In other currencies

Pre-fixed Amount 1,588,630 1,237,289 351,341

Loans . In real . In US Dollars . In other currencies

3,067,695 836,619 2,137,715 93,361

% 37.20% 28.98% 8.23% 84.68% 23.09% 59.01% 2.58%

64

Post-fixed Amount 2,681,417 2,113,192 568,225 554,984 405,583 149,401 -

% 62.80% 49.49% 13.31% 15.32% 11.20% 4.12% -

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

At March 31, 2012, the financial assets and loans post-fixed for the Parent Company and Consolidated were indexed/ denominated as follows:

Financial investments CDI LIBOR Loans TJLP CDI

Financial investments . CDI . LIBOR Loans . TJLP . LIBOR . CDI

(ii)

Parent Company Without derivative effect With derivative effect Amount % Amount % 2,372,036 100.00% 2,372,036 100.00% 2,079,131 87.65% 2,079,131 87.65% 292,905 12.35% 292,905 12.35% 177,839 177,839 -

100.00% 100.00% -

Consolidated Without derivative effect Amount % 2,681,417 100.00% 2,113,192 78.81% 568,225 21.19% 356,735 194,905 159,960 1,870

100.00% 54.64% 44.84% 0.52%

386,647 177,839 208,808

100.00% 46.00% 54.00%

With derivative effect Amount % 2,681,417 100.00% 2,113,192 78.81% 568,225 21.19% 554,984 194,905 149,401 210,678

100.00% 35.12% 26.92% 37.96%

Foreign exchange rate risk

The Company uses the US dollar as its functional currency (Note 2.2(b)). Consequently, the Company's operations which are most exposed to foreign exchange gains/losses are those denominated in Real (labor costs, local expenses, financial investments and loans and financing) as well as investments in subsidiaries in currencies other than the US dollar. Company policy for protection against foreign exchange risks on assets and liabilities is mainly based on seeking to maintain a balance between assets and liabilities indexed in each currency and daily management of foreign currency purchases and sales to ensure that, on realization of the transactions contracted, this natural hedge will occur. This policy minimizes the effect of exchange rate changes on assets and liabilities already contracted, but does not protect against the risk of fluctuations in future results due to the appreciation or depreciation of the Real that can, when measured in dollars, show an increase or reduction of the share of costs when Real denominated. The Company, in certain market conditions, may protect itself against future expenses and revenues, denominated in foreign currency, mismatches seeking to minimize future exchange rate gains/losses effects in the results. Efforts to minimize the foreign exchange risk for rights and liabilities denominated in currencies other than the functional currency may involve transaction s with derivatives, such as swaps, exchange options and Non-Deliverable Forwards (“NDF”) to balance the portion of the Company’s expenses and obligations denominated in Real. At March 31, 2012 the Company's assets and liabilities, denominated by currency, were as follows:

65

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Parent Company Without the effect of With the effect of derivative transactions derivative transactions 03.31.2012 31.12.2011 03.31.2012 31.12.2011 Loans Brazilian real U.S. Dollars

1,222,832 2,066,822 3,289,654

1,143,686 1,683,284 2,826,970

1,222,832 2,066,822 3,289,654

1,143,686 1,683,284 2,826,970

78,137 1,376,876 7,321 532 1,462,866 4,752,520

110,760 1,055,556 8,761 207 1,175,284 4,002,254

78,137 1,376,876 7,321 532 1,462,866 4,752,520

110,760 1,055,556 8,761 207 1,175,284 4,002,254

2,079,131 903,046 3 2,982,180

1,685,156 1,174,648 26 3 2,859,833

2,079,131 903,046 3 2,982,180

1,685,156 1,174,648 26 3 2,859,833

Total (2)

33,352 261,849 798 295,999 3,278,179

84,862 245,363 330,225 3,190,058

33,352 261,849 798 295,999 3,278,179

84,862 245,363 330,225 3,190,058

Net exposure (1 - 2): Brazilian real U.S. Dollars Euro Other currencies

(811,514) 2,278,803 6,523 529

(515,572) 1,318,829 8,735 204

(811,514) 2,278,803 6,523 529

(515,572) 1,318,829 8,735 204

Trade accounts payable Brazilian real U.S. Dollars Euro Other currencies Total (1) Cash and cash equivalents and financial investments Brazilian real U.S. Dollars Euro Other currencies

Trade accounts receivable: Brazilian real U.S. Dollars Euro

66

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Consolidated Without the effect of With the effect of derivative transactions derivative transactions 03.31.2012 31.12.2011 03.31.2012 31.12.2011 Loans Brazilian real U.S. Dollars Euro

1,242,202 2,287,116 93,361 3,622,679

1,164,696 1,890,025 55,434 3,110,155

1,242,202 2,287,116 93,361 3,622,679

1,164,696 1,890,025 55,434 3,110,155

74,359 1,564,053 87,926 2,073 1,728,411 5,351,090

106,416 1,325,873 123,254 1,162 1,556,705 4,666,860

74,359 1,564,053 87,926 2,073 1,728,411 5,351,090

106,416 1,325,873 123,254 1,162 1,556,705 4,666,860

2,113,191 1,832,605 226,528 97,722 4,270,046

1,724,016 2,134,009 37,911 152,930 4,048,866

2,113,191 1,832,605 226,528 97,722 4,270,046

1,724,016 2,134,009 37,911 152,930 4,048,866

Total (2)

60,861 766,016 83,295 186 910,358 5,180,404

103,097 755,538 90,353 199 949,187 4,998,053

60,861 766,016 83,295 186 910,358 5,180,404

103,097 755,538 90,353 199 949,187 4,998,053

Net exposure (1 - 2): Brazilian real U.S. Dollars Euro Other currencies

(857,491) 1,252,548 (128,536) (95,835)

(556,001) 326,351 50,424 (151,967)

(857,491) 1,252,548 (128,536) (95,835)

(556,001) 326,351 50,424 (151,967)

Trade accounts payable Brazilian real U.S. Dollars Euro Other currencies Total (1) Cash and cash equivalents and financial investments Brazilian real U.S. Dollars Euro Other currencies

Trade accounts receivable: Brazilian real U.S. Dollars Euro Other currencies

The Company has other financial assets and liabilities that are also subject to exchange variation, not included in the previous note; however, they are used to minimize exposure in the currencies reported. (iii)

Derivatives

The Company uses derivatives to protect its operations against the risk of fluctuations in foreign exchange and interest rates; they are not used for speculative purposes. Gains and losses on derivative transactions are recorded monthly in income, taking into account the realizable value of these instruments. The provision for unearned gains and losses is recorded in the balance sheet under Derivative financial instruments, and the contra item under Foreign exchange gain (loss), net, except for the operations designed as hedge accounting. Hedge accounting – Fair value At the time of designation of the hedge, the Company formally documents the relationship between hedging instruments and items that are hedged, including the risk management objectives and strategy in the conduct of the transaction, together with the methods to be used for evaluating the effectiveness of the relationship. The Company continually assesses the contracts to determine whether the instruments are

67

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

"highly effective" in offsetting changes the fair values of the respective items of the subject contract during the period for which the hedge is designated, and actual results of each hedge are within the range 80% to 125%. On March 31, 2012 the Company designated for hedge accounting the derivative financial instruments (swap) designed to convert financing operations subject to fixed interest rate of 9.00% p.a. into a floating rate equivalent to a CDI (Interbank Deposit Certificate) rate of 75.08% p.a. The amount of funding and the reference value of the derivative correspond to R$ 200,000. Hedge Accounting of Cash Flow At the time of initial designation of the hedge, the Company formally documents the relationship between hedging instruments and hedged items, including risk management objectives and strategy in the conduct of the transaction, together with the methods to be used for evaluating the effectiveness of the relationship. The Company continually evaluates the hedging relationship to conclude whether this relationship will be “highly effective” in offsetting changes in fair value of its hedging instruments and hedge during the period for which the hedge is designated as high performers and actual results of each hedging relationship within the range 80 to 125%. The objective of the cash flow hedge accounting is to protect probable cash outflows of salary expenses, in addition to medical plan expenses that are Real denominated from exchange rate volatility. The related cash flow is expected to be realized monthly, commencing in January 2012 and through January 2013. The projected cash flow will impact the statement of income when the expenses are recognized. At March, 31 2012, the Company designated as cash flow hedges the certain zero-cost collar derivative financial instruments. Those instruments consist of the purchase of puts with a strike price of R$ 1.7500 and the selling of calls with an average strike price of R$ 2.3490; have been contracted with the same counterparty and with zero net premium. The reference value for the contracted instruments was R$ 567.0 million (equivalent to US$ 324.0 million converted at the exchange rate of R$ 1.75). The fair value of hedge accounting instruments on March 31, 2012 is presented in the "Exchange swap contracts". The fair value of hedge accounting instruments is determined through the Garman– Kohlhagen model, which is commonly used in the market to measure similar instruments. Cross-currency interest rate swaps These cross-currency interest rate swaps are contracted with the main objective of exchanging the debt at floating rates for fixed interest rates, and exchanging US dollars for Real or vice-versa, as applicable. At March 31, 2012, the Company had no contracts subject to margin calls. At March 31, 2012, the Company had hired a swap designated as a fair value hedge, by which the debt with a reference value for the Real amount of R$ 200,000 equivalent to US$ 109,763 thousand of a fixed rate of 9.00% p.a. was swapped for a floating rate of 75.08% p.a. of the CDI (Interbank Deposit Certificate), as below : Parent Company

Purpose Export financing - fair value hedge Company asset Company liability Counterparty Bradesco Goldman Sachs

Type

"Swap" "Swap"

Original currency

Present currency

Notional amount (in thousands)

Average rate agreed - %

R$

R$

200,000

9.00% p.a. 75.08% CDI p.a.

Total

68

Gain (loss) Book value Fair value 03.31.2012 03.31.2012

Gain (loss) Book value Fair value 12.31.2011 12.31.2011

5,184

5,184

4,041

4,041

2,592 2,592 5,184

2,592 2,592 5,184

2,021 2,020 4,041

2,021 2,020 4,041

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

At March 31, 2012, the Company contracted swaps which effectively converted R$ 287,364 (US$ 157,710 thousand) of obligations with and without recourse from a fixed interest rate of 6.00% p.a. to a floating interest rate of LIBOR + 1.21% p.a., and through a subsidiary executed a swap transaction in the amount of R$ 10,558 equivalents to US$ 5,794 thousand converting financing transactions subject to floating interest rate of LIBOR 1 month + 2.44% p.a. to fixed rates of 5.23% p.a. The swap operations were as follows: Consolidated

Purpose

Type

Recourse and non-recourse debt Company asset Company liability Counterparty Natixis Export financing - fair value hedge Company asset Company liability Counterparty Bradesco Goldman Sachs Acquisition property, plant and equipment Company asset Company liability Counterparty Compass Bank

"Swap" "Swap"

"Swap" "Swap"

"Swap" "Swap"

Original Present Notional amount currencycurrency (in thousands)

US$

R$

US$

US$

R$

US$

287,364 287,364

Average rate agreed - %

6.00%a.a. Libor + 1.21% a.a

200,000

10,535 10,535

9.00% a.a. 75.08% CDI a.a.

Libor 1M + 2.44% a.a. 5.23% a.a.

Total

Gain (loss) Book value Fair value 03.31.2012 03.31.2012

Gain (loss) Book value Fair value 31.12.2011 31.12.2011

49,110

49,110

53,373

53,373

49,110

49,110

53,373

53,373

5,184

5,184

4,041

4,041

2,592 2,592

2,592 2,592

2,021 2,021

2,021 2,021

(1,128)

(1,128)

(1,283)

(1,283)

(1,128) 53,166

(1,128) 53,166

(1,283) 56,131

(1,283) 56,131

Swaps - are valued at present value of future flow rates calculated by applying the contract to maturity and discounted to present value at the date of financial statements for the prevailing market rates. Swaps – these are valued at present value, at the market rate on the base date, of the future flows determined by applying the contractual rates up to maturity and discounting to present value on the date of the financial statements at the current market rates. Exchange swap contracts At March 31, 2012 the Company had contracted options designated as cash flow hedges in the amount of R$ 567,000 million equivalent to US$ 324,000 thousand by purchasing a put option with an average exercise price of R$ 1,7500 and selling a call option with an average price of R$ 2,4390. At March 31, 2012 the closing rate between the put option and call option values generated no gain or loss. Other derivatives At March 31, 2012, the Company held swaps, equivalent to R$ 45,553 giving it an asset linked to an Exchange Coupon and a liability at a pre-fixed interest rate, as below: Gain (loss) Purpose Other Company asset Company liability Counterparty JP Morgan

Type

"Swap" "Swap"

Original currency

Present currency

Notional amount (in thousands)

Average rate agreed - %

US$

US$

45,553 45,553

Cupom USD Pré

Total

Gain (loss)

Book value

Fair value

Book value

Fair value

03.31.2012

03.31.2012

12.31.2011

12.31.2011

500

500

(324)

(324)

500 500

500 500

(324) (324)

(324) (324)

These swap contracts are subject to Brazilian sovereign risk, and in case of an event that limits the convertibility of the Brazilian Real and or change the taxes, could result in the redemption of the operations in Brazil in the form of bonds issued by the Brazilian Government (“LTN's” - National Treasury Bills) with a swap transaction into dollar for such securities.

69

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Sensitivity analysis Pursuant to CVM Instruction 475/08, the sensitivity analysis below presents a stress factor of 25% and 50% applied to the financial instruments, including derivatives, showing the potential effects the monetary and foreign exchange variations would have had on the financial income and expense in the quarter ended March 31, 2012. Statistical simplifications made to isolate the variability of the risk factor in question. Consequently, the following estimates do not necessarily represent the amounts that would have been determined. The use of different hypotheses and/or methodologies could have a material effect on the estimates presented below. Methodology: Based on the balances shown in the tables in item (c) above, and assuming that these remain constant, the Company calculated the interest and exchange gain/loss for each of the projected scenarios. In evaluating the interest rate risk, only the financial statements risks were considered, that is, the operations subject to prefixed interest rates were not included. The probable scenario is based on the Company's estimates for each of the variables indicated; the 25% and 50% stress factor were applied to the balances at the balance sheet dates. In the sensitivity analysis of derivative contracts, positive and negative variations of 25% and 50% were applied on the market yield curve (BM&FBOVESPA) at the balance sheet dates. a.

Interest risk factor Parent Company Additional variations in book balances (*) Risk factor

Financial investments Loans Net impact

CDI CDI CDI

Financial investments Loans Net impact

LIBOR LIBOR LIBOR

Loans Net impact

TJLP TJLP

Rates considered Rates considered Rates considered

CDI LIBOR TJLP

Amounts exposed at 03.31.2012

-50%

Probable scenario

-25%

2,079,131 2,079,131

(98,967) (98,967)

(49,483) (49,483)

292,905 292,905

(686) (686)

(343) (343)

177,839 (177,839) 9.52% 0.47% 6.00%

(10,811) (10,811) 257 257

+25%

+50%

49,483 49,483

98,967 98,967

343 343

686 686

5,335 5,335

2,668 2,668

-

(2,668) (2,668)

(5,335) (5,335)

4.76% 0.23% 3.00%

7.14% 0.35% 4.50%

9.00% 0.56% 6.00%

11.90% 0.59% 7.50%

14.28% 0.70% 9.00%

(*) The positive and negative variations of 25% and 50% were applied on the rates in effect at 03.31.2012

Consolidated Additional variations in book balances (*) Risk factor

Financial investments Loans Net impact

CDI CDI CDI

Financial investments Loans Net impact

LIBOR LIBOR LIBOR

Loans Net impact

TJLP TJLP

Rates considered Rates considered Rates considered

CDI LIBOR TJLP

Amounts exposed at 03.31.2012

-50%

-25%

Probable scenario

+25%

+50%

2,113,192 1,870 2,111,322

(100,588) 89 (100,499)

(50,294) 45 (50,249)

(10,989) 10 (10,979)

50,294 (45) 50,249

100,588 (89) 100,499

568,225 159,960 408,265

(1,330) 374 (956)

(665) 187 (478)

499 (140) 359

665 (187) 478

1,330 (374) 956

194,905 (194,905)

5,847 5,847

2,924 2,924

-

(2,924) (2,924)

(5,847) (5,847)

4.76% 0.23% 3.00%

7.14% 0.35% 4.50%

9.00% 0.56% 6.00%

11.90% 0.59% 7.50%

14.28% 0.70% 9.00%

9.52% 0.47% 6.00%

(*) The positive and negative variations of 25% and 50% were applied on the rates in effect at 03.31.2012

70

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

b. Foreign exchange risk factor Parent Company Additional variations in book balances (*) Risk factor Assets Financial investments Other assets Liabilities Loans and financing Other liabilities Net impact

BRL BRL

Amounts exposed at 03.31.2012 2,907,896 2,079,131 828,765 2,879,101 1,222,832 1,656,269 28,795

BRL BRL

Exchange rate considered

1.8221

-50%

Probable scenario

-25%

+25%

+50%

1,453,949 1,039,566 414,383

726,974 519,783 207,191

35,269 25,217 10,052

(726,974) (519,783) (207,191)

(1,453,949) (1,039,566) (414,383)

(1,439,551) (611,416) (828,135) 14,398

(719,775) (305,708) (414,067) 7,199

(34,921) (14,832) (20,089) 348

719,775 305,708 414,067 (7,199)

1,439,551 611,416 828,135 (14,398)

1.3666

1.8000

2.2776

0.9111

2.7332

(*) The positive and negative variations of 25% and 50% were applied on the rates in effect at 03.31.2012

Consolidated Additional variations in book balances (*) Risk factor Assets Financial investments Other assets Liabilities Loans and financing Other liabilities Net impact

BRL BRL

Amounts exposed at 03.31.2012 2,932,400 2,113,192 819,208 2,928,814 1,242,202 1,686,612 3,586

BRL BRL

Exchange rate considered

1.8221

-50%

-25%

Probable scenario

+25%

+50%

1,466,200 1,056,596 409,604

733,100 528,298 204,802

35,567 25,631 9,936

(733,100) (528,298) (204,802)

(1,466,200) (1,056,596) (409,604)

(1,464,407) (621,101) (843,306) 1,793

(732,204) (310,551) (421,653) 896

(35,523) (15,066) (20,457) 44

732,204 310,551 421,653 (896)

1,464,407 621,101 843,306 (1,793)

1.3666

1.8000

2.2776

0.9111

2.7332

(*) The positive and negative variations of 25% and 50% were applied on the rates in effect at 03.31.2012

c.

Derivative contracts Parent Company Additional variations in book balances (*) Risk factor

Amounts exposed at 03.31.2012

-50%

Probable scenario

-25%

+25%

+50%

Interest swap - fair value hedge

CDI

5,184

11,825

5,720

1,219

(5,364)

(12,190)

Hedge desifnated as cash flow Other derivative Total

US$ Exchange coupon

500 5,684

(13) 11,812

-

-

(6) 5,714

(1) 1,218

(5,701) 4 (11,061)

(19,901) 12 (32,079)

Rate considered Rate considered Rate considered

CDI US$ Exchange coupon

9.52% 1.8221 2.30%

4.76% 0.9111 1.15%

7.14% 1.3666 1.73%

9.00% 1.8000 2.58%

11.90% 2.2776 2.88%

14.28% 2.7332 3.45%

(*) The positive and negative variations of 25% and 50% were applied on the rates in effect at 03.31.2012 Consolidated Additional variations in book balances (*) Risk factor

Amounts exposed at 03.31.2012

-50%

Probable scenario

-25%

+25%

+50%

Interest swap Interest swap - fair value hedge

LIBOR CDI

47,982 5,184

11,951 11,825

5,946 5,720

(1,974) 1,219

(5,541) (5,364)

(10,744) (12,190)

Hedge desifnated as cash flow Others derivatives Total

US$ Exchange coupon

500 53,666

(13) 23,763

-

-

(6) 11,660

(1) (756)

(5,701) 4 (16,602)

(19,901) 12 (42,823)

Rate considered Rate considered Rate considered Rate considered

LIBOR CDI US$ Exchange coupon

0.47% 9.52% 1.8221 2.30%

0.23% 4.76% 0.9111 1.15%

0.35% 7.14% 1.3666 1.73%

0.56% 9.00% 1.8000 2.58%

0.59% 11.90% 2.2776 2.88%

0.70% 14.28% 2.7332 3.45%

(*) The positive and negative variations of 25% and 50% were applied on the rates in effect at 03.31.2012

d. Residual Value Guarantees The residual value guarantees are reported in a manner similar to financial derivative instruments (Note

71

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

2.2 (cc)). Methodology: From the residual value guarantee contracts in force, the Company ascertains any changes in values based on third party appraisals. The probable scenario is based on the Company's expectation of recording the provisions on a statistical basis, and the positive and negative variations of 25% and 50% have been applied to the third party appraisals at the balance sheet date. Additional variations in book balances (*) Amounts exposed at 03.31.2012

-50%

-25%

Probable scenario

+25%

+50%

Financial guarantee of residual value

103,095

(690,379)

(133,986)

(538)

81,528

97,474

Total

103,095

(690,379)

(133,986)

(538)

81,528

97,474

Measurement of the current residual value guarantees is based on the market value of the aircraft which is obtained from the reports of independent appraisers. Based on these appraisals, the Company prepares simulations of hypothetical scenarios in order to measure the impact of variations on the residual values of the aircraft and compare these with the values provided. If a provision is considered to be insufficient to cover the probable execution of the guarantees, it is increased to adjust it to the Company’s exposure at the balance sheet date. e.

Derivative contracts that comprise exclusive Investment Funds

The Company maintains a structure of exclusive funds, which are consolidated in the financial statements, as the Company controls these funds. These funds were set up with the objective of outsourcing the management of the Company's short-term financial investments. The managers have discretion, within the restrictions established in the investment policy, to select the assets that will comprise the investment portfolio. All the funds are classified as multimarket and they may hold derivatives in their portfolio as a means of attaining the proposed profitability objective. These derivatives relate exclusively to the positions taken by the funds themselves and are in no way connected with the Company’s own derivatives used as a hedge to mitigate its risks exposures. The following tables show the derivatives held by the funds at March 31, 2012, and the sensitivity analysis of the main risk factors to which the instruments are exposed. Certain statistical simplifications were made in to isolate the variability of the risk factors in question. Consequently, the actual results may differ from these estimates. The following estimates do not necessarily represent the results that might be determined in future financial statements. The use of different hypotheses and/or methodologies could have a material effect on the estimates presented below. (i)

Description of derivative instruments held by the funds

72

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

Type

Nº of contracts

Purchase - Forward DI Purchase - Forward DI Purchase - Forward DI Purchase - Forward DI Purchase - Forward DI Purchase - Forward DI Sales - Forward DI Purchase - Forward Dolar Purchase - Forward Dolar Total

(ii)

Due date

835 153 134 202 49 5 8 5 1

Unit market price

January-13 April-13 July-13 January-14 April-14 January-15 January-16 April-12 May-12

Reference value at 03.31.2012

93,799 91,871 89,778 85,243 83,098 76,654 68,816 1,822 1,837

(78,322) (14,056) (12,030) (17,219) (4,072) (383) 551 456 92 (124,983)

Sensitivity analysis Additional variations in the return of the fund

Risk factor

Reference value 03.30.2012

CDI USD Total

Rates used CDI Dolar

37.

Responsibilities and Commitments

(a)

Trade-in

-50%

Probable Scenario

-25%

25%

50%

(125,531) 548 (124,983)

(5,465) 274 (5,191)

(2,671) 137 (2,534)

(575) 7 (567)

2,552 (136) 2,416

4,997 (273) 4,724

9.52% 1.8221

4.76% 0.9111

4.76% 1.3666

9.00% 1.8000

11.90% 2.2776

14.28% 2.7332

The Company has one trade-in aircraft option agreement. All trade-in transactions are directly tied to contractual obligations with the customer and the purchase of new aircraft. The exercise of the trade-in option is dependent on the customer complying with all the contractual clauses. These options establish that the price of the asset given in payment may be put towards the purchase price of a new and more upto-date aircraft model produced by the Company. The trade-in is priced based on a percentage of the original purchase price of the aircraft. The Company continuously monitors all trade-in commitments in order to anticipate any adverse economic impact. Based on the current evaluation of the Company and third-party independent appraisals, the Company believes that any aircraft accepted under trade-in may be sold or leased in the market without significant losses. (b)

Leases In the parent company’s statements the operating leases refer to telephone and computer equipment and in the consolidated statements also include non-cancelable operating leases of land and equipment of the subsidiary EAH . These leases expire at various dates through 2020. At March 31, 2012, the Company has operating leases with payments scheduled as follows:

Year 2012 2013 2014 2015 2016 After 2016

Parent Company 6,729 12,292 9,460 6,142 297 34,920

73

Consolidated 9,026 14,492 11,481 8,199 2,330 30,448 75,977

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

(c)

Financial Guarantees The table below provides quantitative data on the Company's financial guarantees provided to third parties. The maximum potential payments (0ff balance exposure) represent the worst-case scenario and do not necessarily reflect the results expected 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. 03.31.2012 805,962 982,107 (382,320) (235,410) 1,170,339 1,618,886

Maximum financial guarantees Maximum residual value guarantees Mutually exclusive exposure (i) Provisions and liabilities recorded (Note 35) Off-balance sheet exposure Estimated proceeds from financial guarantees and underlying assets

12.31.2011 884,557 1,017,088 (393,588) (227,281) 1,280,776 1,681,659

(i) When an underlying asset is covered by mutually exclusive financial and residual value guarantees, the residual value guarantee may only be exercised if the financial guarantee has expired without having been exercised. On the other hand, if the financial guarantee is exercised, the residual value guarantee is automatically terminated. To benefit from guarantee, the counterparty must ensure that the aircraft meets with strict conditions for its return. 38.

Supplementary cash flow information a) Payments made during the year and transactions not affecting cash and cash equivalents: Parent Company 03.31.2012 03.31.2011 Payments made during the year : Income tax and social contribution Interest Non-cash financing and investing transactions Disposals property, plant and equipment for providing for the sale of inventory

39.

Consolidated 03.31.2012 03.31.2011

24,356

3,253 47,010

12,541 22,128

6,317 1,073

-

-

(3,806)

-

Segment information - consolidated Management defines the Company’s operating segments based on the reports used for strategic decision reviewed by the chief operating decision-maker. The chief operating decision-maker analyzes the business, dividing it into geographic sectors and into markets for specific products. From a geographic perspective, the performance of the operations is segregated into the following markets: Brazil, North America, Latin America, Pacific Asia, Europe and Others. From a product perspective, the analysis considers the following market segments: I - Commercial Aviation Market The Commercial Aviation market operations mainly involve the development, production and sale of commercial jets and rendering of support services, particularly in the regional aviation segment and operating leasing of aircraft. •

ERJ 145 family, comprising the ERJ 135, ERJ 140 and ERJ 145 jets, certified to operate with 37, 44 and 50 seats, respectively

74

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated



EMBRAER 170/190 family, comprising the EMBRAER 170, a 70-seat jet, EMBRAER 175, a 76seat jet, EMBRAER 190, a 100-seat jet and the EMBRAER 195, a 108-seat jet. The EMBRAER 170 model has been operating commercially since 2004, the EMBRAER 175 and EMBRAER 190 models started commercial operations in 2006, and the EMBRAER 195 model in 2007.

II - Defense and Security business The Defense and Security business operations mainly involve research, development, production, modification and support for military defense aircraft, and related products and systems. The Company's principal customer is the Brazilian Defense Ministry and, in particular, the Brazilian Air Force. •

Super Tucano - a light attack aircraft, especially developed to operate in severe climates, subject to extremes of temperature and humidity, and equipped with sophisticated navigation and attack, training and flight simulation systems.



AMX - an advanced ground attack jet, developed and produced through a cooperation agreement between Brazil and Italy. Embraer was contracted by the Brazilian Air Force to modernize these aircraft.



F-5BR Program - modernization of the F-5 jet fighters.



The ISR family (Intelligence, Surveillance and Reconnaissance), based on the ERJ 145 platform, includes the EMB 145 AEW&C - Airborne Early Warning and Control, EMB 145 AGS - Remote Sensing and Air to Ground Surveillance and P-99 - Maritime Patrol and Anti-submarine Warfare models. Originally developed for the SIVAM program, different versions were ordered by the Greek, Mexican and, more recently, the Indian governments.



KC-390 - The scope of the KC-390 Program is to develop and produce two prototype aircraft for military transport and in-flight refueling.



190PR - Based on the EMBRAER 170/190 platform, this jet is developed for transportation of the President of the Republic of Brazil and members of his staff.

III - Executive Aviation Market The Executive Aviation market operations mainly involve the development, production and sale of executive jets and providing support services for this market segment, as well as, operating leases of aircraft. •

Legacy 600 and Legacy 650 - executive jets in the Super Mid Size and Large categories which started to be delivered in 2002 and 2010, respectively.



Phenom - executive jets in the Entry Jet and Light Jet categories, comprising the Phenom 100 model, the first deliveries of which were made in 2008, and the Phenom 300, deliveries of which started in 2009.



Lineage 1000 - An ultra-large executive jet. Deliveries of this model started in 2009.



Legacy 500 and Legacy 450- executive jets in the Mid Size and Midlight categories, respectively, launched in April 2008.

IV - Other Operations in this segment relate to supply of structural parts and mechanical and hydraulic systems, and production of agricultural crop-spraying aircraft and customer training.

75

Embraer S.A. Notes to the Interim Financial Statements In thousands of Reais, unless otherwise stated

a) Statement of income data by operating segment – quarter ended March 31, 2012

Revenue Cost of sales and services Gross Profit Gross Profit % Operating income (expense) Operating profit before financial income (expense) Financial income (expense), net Foreign exchange gains (losses), net

Commercial Aviation 1,345,358 (1,011,830) 333,528 24.8%

Defense and security 411,304 (312,076) 99,228 24.1%

Executive Aviation 270,143 (234,306) 35,837 13.3%

(190,975) 142,553

(64,200) 35,028

(62,021) (26,184)

Other

Unallocated

Total

22,353 (15,534) 6,819 30.5%

-

2,049,158 (1,573,746) 475,412 23.2%

(4,876) 1,943

-

(322,072) 153,340

-

-

-

-

(14,155) 484

(14,155) 484 139,669

-

-

-

-

(26,731)

(26,731) 112,938

Profit before taxes on income Income tax (expense) income Net income

b) Revenue by geographic area - quarter ended March 31, 2012

North America Europe Asia Pacific Latin America, except Brazil Brazil Other Total

Commercial Aviation 370,044 622,190 303,516 19,190 21,918 8,500 1,345,358

Defense and security 6,343 82,567 25,620 8,355 263,480 24,939 411,304

Executive Aviation 143,647 9,972 57,996 16,420 17,597 24,511 270,143

Other

Total

13,678 (2) 8,677 22,353

533,712 714,727 387,132 43,965 311,672 57,950 2,049,158

c) Statement of income data by operating segment – quarter ended March 31, 2011 Commercial Aviation 1,250,539 (935,628) 314,911 25.2%

Defense and security 282,100 (225,786) 56,314 20.0%

Executive Aviation 192,684 (144,822) 47,862 24.8%

(168,391) 146,520

(42,395) 13,919

Financial income (expense), net Foreign exchange gains (losses), net Profit before taxes on income

-

Income tax (expense) income Net income

-

Net Revenue Cost of sales and services Gross Profit Gross Profit % Operating income (expense) Operating profit before financial income (expense)

Other

Unallocated

Total

31,281 (23,567) 7,714 24.7%

-

1,756,604 (1,329,803) 426,801 24.3%

(52,909) (5,047)

(6,478) 1,236

-

(270,173) 156,628

-

-

-

10,165 5,433

-

-

-

4,222

10,165 5,433 172,226 4,222 176,448

d) Revenue by geographic area - quarter ended March 31, 2011

North America Europe Asia Pacific Latin America, except Brazil Brazil Other Total

Commercial Aviation 247,599 284,271 360,417 184,669 165,520 8,063 1,250,539

***

76

Defense and security 13,045 61,414 39,216 18,217 139,344 10,864 282,100

Executive Aviation 35,484 9,420 1,307 48,385 97,744 344 192,684

Other 20,309 326 181 30 10,418 17 31,281

Total 316,437 355,431 401,121 251,301 413,026 19,288 1,756,604

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Financial Statements - Embraer RI

First Quarter 2012 Results in IFRS EMBRAER RELEASES FIRST QUARTER 2012 RESULTS HIGHLIGHTS:  In the first quarter of 2012 (1Q12), Embraer delivered 2...

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