Business Context and Reporting Period
This Form 6-K filing by Embraer S.A. (NYSE: ERJ) covers the month of July 2010. The report details a strategic commercial agreement announced on July 20, 2010, at the Farnborough International Airshow. Embraer is the world's largest manufacturer of commercial jets up to 120 seats, with operations in Brazil, China, France, Portugal, Singapore, and the United States.
Key Financial Metrics and Order Backlog
The filing does not provide specific revenue, profit, cash flow, or margin figures for the reporting period. However, it discloses the following backlog and workforce data as of June 30, 2010:
- Firm Order Backlog: US$ 15.2 billion.
- Workforce: 16,781 employees (excluding partly owned subsidiaries).
- New Order Value: The filing announces a Letter of Intent (LOI) for 15 EMBRAER 190 jets, with five re-confirmable orders and five options, representing a potential total of 20 aircraft. The specific monetary value of this LOI is not stated.
Material Changes and New Developments
The primary material event in this filing is the signing of an LOI with Air Lease Corp., a newly formed leasing company led by Steven Udvar-Házy. This agreement marks a significant expansion of the E-Jets family's presence in the leasing market. The deal includes:
- 15 firm orders for the EMBRAER 190.
- 5 re-confirmable orders.
- 5 options, bringing the potential total to 20 aircraft.
The EMBRAER 190 is positioned for both regional and mainline operations, seating 98 to 114 passengers.
Outlook, Management Commentary, and Risks
Management Commentary: Embraer executives expressed pride in partnering with Steven Udvar-Házy, citing his experience as a major supporter for the new leasing company's success. Air Lease Corp. leadership indicated strong conviction in the EMBRAER 190's economics and reliability for mainline operations.
Risks and Contingencies: The filing includes a standard disclaimer regarding forward-looking statements. Risks include general economic, political, and trade conditions in Brazil and global markets; industry trends; investment plans; capacity to deliver products on agreed dates; and governmental regulations. Actual results may differ substantially from expectations.
Key Facts for Investor Verification
- Verify the conversion of the 15-aircraft LOI into firm orders and the exercise of the 5 re-confirmable orders and 5 options.
- Monitor the financial impact of the US$ 15.2 billion backlog on future revenue recognition.
- Assess the operational performance and market reception of the EMBRAER 190 in mainline operations as promoted by Air Lease Corp.
- Review subsequent filings for updates on the specific valuation of the Air Lease Corp. deal.