Embraer (ERJ) reported that a decrease in income from operations resulted in a net income and net margin of $65.3 million and 8.1 percent, respectively, in the first quarter 2006, lower than the $96.5 million in net income and the 12.6 percent net margin posted in the first quarter of 2005. Still, the company's overall financial performance significantly improved: its net cash position reached $302.5 million, compared to a net debt position of $166.8 million at the end of the year-ago period.

First quarter 2006 earnings for Embraer rose by $45 million on net sales of $808.3 million and net income of $65.3 million. At the same time, it reported that its current backlog totaled $10.4 billion. The company, producer of ERJ regional jets, also reported that gross margin decreased to 28.7 percent compared to the 35.1 percent in the year-ago period. The company cited the 17.7 percent average appreciation of the Brazilian real against the U.S. dollar for the reduction (almost half of operating expenses are real denominated). It also cited the learning curve associated with the introduction of its EJets. Operating income reached $36.5 million, a sharp decline from the $124.5 million experienced in the year-ago quarter, again associated with the real. Results also were affected by costs associated with customer support for the ERJ 190 as well as the development of a sales force and marketing strategy for its Phenom 100 and 300 VLJs, which boosted R&D expenses to $8.7 million.

Deliveries of the company's EJets doubled compared to the first quarter of 2005, a factor that changed the product mix over the period, which in turn contributed to the impact on gross margin. A total of 27 jets were delivered during the quarter, including 21 jets to the airline market, four Legacy 600s to the executive jet market and two Embraer 170s to the defense and government market. It delivered five 50-seat ERJ LRs to China Eastern Airlines Wuhan Ltd., acquired from Harbin Embraer. During the quarter, it also announced that USAirways Group (LCC) reached an agreement to convert the previously ordered 57 ERJ 170s into 25 firm orders for the ERJ 190 and 32 additional orders for the 190, subject to reconfirmation by the airline. AeroRepublica of Bogota placed a firm order for five ERJ 190s with options for an additional 20 aircraft; Royal Jordanian acquired seven firm ERJ 195s with deliveries to start in this year's fourth quarter.