EADS management view on Some specific Balance Sheet items Hans Peter Ring, CFO Pierre de Bausset, SVP Investor Relations

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1 EADS management view on Some specific Balance Sheet items Hans Peter Ring, CFO Pierre de Bausset, SVP Investor Relations Global Investors Forum Munich 28 th /29 th April 2003 The rationale behind this workshop We sense from investors : A large disparity in calculation of EADS EV Confusion re. the nature of certain EADS financial items We wish to share and discuss with you our perception and analysis of balance sheet items and operations, and their impact on EV EV is important to us: it represents the sum of our resources to be rewarded by our EBIT/EBITDA Analyst calculations range from simple (net debt (cash) as reported) to more complex (adding pensions, provisions (too many?), customer deposits (why?).). 2

2 EV calculation by some brokers EV examples calculated by brokers in bn 19,0 17,0 15,0 13,0 11,0 9,0 7,0 5,0 5,6 broker 1 6,4 Market cap* 17,5 14,2 11,5 broker 2 broker 3 broker 4 * Based on April 24 closing : 7.95 A wide range of different outcomes 3 Our basic view on Enterprise Value (EV) EV methodology should be : easy to compute from publicly available information applicable identically to peers computed under the continuing operations assumption must be consistent with revenues / results adjustments Quasi-debt EV = total resources that need to be rewarded by results Net Debt if Debt > Cash Market capitalisation Non-operating assets Net Cash If Cash > Debt 4

3 Main adjustments to EV from EADS management perception EV is market capitalisation, plus or minus the following items : Include in EV Exclude from EV Corresponding EBIT adjustment Off-blance sheet commitments for customer financing Pensions Provisions if they have cash impact and are not recurring Net cash position, adjusted from Reduce EADS EBIT by minority minority shares and nonrecourse nad deposit backed debt (20% Airbus, 12,5% contribution MBDA) Estimated value of collateral of customer financing European government advances if EBIT is then adjusted Investments (Dassault-Aviation and others) Add back Net Interest Cost to EBIT Correct EBIT by the temporary R&D impact due to A380 & A /600 programs Reduce EBIT by the income from investments 5 Minority valuation impact on EV Minority valuation issues: EADS consolidates 100% of Airbus and 50% of MBDA to reflect control while holding respectively 80% and 37.5% in each Minority results / balance sheet contributions do not belong to EADS shareholders Minority value needs to be excluded from EV but at which value? Any valuation used as an assumption is subjective Proposed treatment for valuation purposes : Adjust net cash (debt) position by the minority shares Exclude minority shares from Revenues/Results Main minorities considered hereafter : 20% Airbus and 12.5% MBDA 6

4 Adjusting the net cash (debt) position For Valuation purposes, our internal perception is that reported Net cash (debt) position should be adjusted for : in euro millions EADS Reported Minority shares 20% Airbus share 12,5% MBDA share Debts adjustments debt backed by cash deposit* nonrecourse debt** Adjusted net cash (debt) position for EV Securities and cash equivalents Gross cash Financial liabilities Net cash position page in reference doc / * 80% share of 1146 m defeased bank deposit re. Airbus customer financing ** 80% share of 749 m non-recourse debt re. Airbus customer financing 7 Off-balance sheet commitments Most of off-balance sheet commitments are related to customer financing (reference document page 135) Reported Financial liabilities include debt generated by on-balance sheet customer financing, BUT off-balance sheet customer financing has to be included in EV : EADS with 100% Airbus EADS with 80% Airbus in euro millions (NPV) Off-balance sheet commitments for aircraft financing : Airbus (ref. doc. page 97) % ATR (ref. doc page 98) Total Other commitments for euro 740 m (car rentals, facilities leases, ) are normal procurement operations with corresponding charge on EBIT => no impact on EV (reference document page 137) 8

5 Customer financing collateral value Customer financing activity (whether on- or off-balance sheet) is typically collaterised by the underlying aircraft Airbus risk pricing model results in a very conservative estimate of aircraft collateral (15% to 20% below market estimates) Exclude this collateral value from EV : in euro millions EADS with 100% Airbus EADS with 80% Airbus Aircraft value used as collateral : Airbus (ref. doc. page 97) % ATR (ref. doc page 98) Total adjustments Provisions impact on EV four main items : Airbus 100% consolidated Total Provisions in millions ) Customer financing provision ) Pensions ) Total hedge provision ) Other provisions Total Provisions ( ) Besides, the overall Customer financing impact already treated,. Which provisions should be treated as quasi-debt? Provisions detail pages 130 to 132 in reference document 10

6 Pensions accounting and cash impact EADS at year-end 2002* Total Defined Benefit Obligations 4287 m Net Obligations ( Funded Status ) 3755 m Fair value of plan assets 532 m Provision recognised in in balance sheet : : 3357 m Unrecognised actuarial loss** :: m ** actuarial loss not provided in provision because below the 10% threshold Pensions provision already fully charged in past EBIT Very limited exposure to equities No expected cash outflow required from EADS except annual pension payment net of actual return to plan assets ( 155 m in 02) Net Periodic Cost ( 319 m in 2002) is fully charged to EBIT and includes Interest cost ( 229 m in 2002) * see pages 130 to 132, reference document 11 Pensions impact on EV : 2 options Our view Include in quasi-debt to reflect future commitments : Outstanding Provision : 3357 m Unrecognised actuarial loss: and 398 m Add back interest cost to EBIT/EBITDA : 229 m Alternative Pensions not treated as quasi-debt No impact on EV No EBIT/EBITDA adjustments 12

7 Hedge accounting (IAS39) main principles EADS total hedge portfolio ($ 40 bn at year-end 2002) includes no remaining macro-hedge = all hedges are allocated to underlying commercial contracts ( micro-hedge ) IAS39 (applicable from January 2001) treatment of micro-hedges : P&L impact Hedged revenues/ebit recorded at the hedge rate No impact on financial result To the extent of hedge in place, no impact from market rates changes on the P&L Balance Sheet impact Total hedge portfolio is marked-to-market at each closing (provision is negative/assets is positive) Balance sheet is balanced through OCI, deferred tax and minorities accounts Former macro-hedge that have been reclassified as microhedge mature at their historic hedge rate from cash perspective but corresponding revenues/ebit are accounted at the forward $ rate prevailing at the date of their reclassification (January 1 st 2001) 13 Hedge accounting (IAS39) impact on EV Hedge marked-to-market value ( m) in EADS balance sheet as of Year-end 2002 (pre-tax and including minority share) ASSETS Other assets 2819 LIABILITIES Provisions 161 Of Of which which m for for former former macro macro reclassified reclassified as as micro micro Under the continuing operation assumption, this gain/loss will NEVER be realised No impact on cash No impact on P&L Except the impact from former macro reclassified as micro Add to quasi-debt the remaining cash impact from former macro-hedges reclassified as micro-hedges 300 m*; ie. 156 m, net of tax and 20% Airbus** * see page 106, reference document ** +300 x (1-20%) x (1-35% tax rate) =

8 Other provisions Airbus 100% consolidated Provisions in millions Other provisions* * excluding pensions, customer financing,and hedge These provisions Include provisions for outstanding costs, restructuring, loss-making contracts, Management views these as ongoing, continuing operations The net annual change (excluding forex impact) is charged to EBIT and mostly tax deductible They represent real future expenses (after tax). But since they are rather recurring, there is no significant annual impact on cash, nor on EBIT Our view : no impact on EV 15 European government refundable advances main issues Are NOT strictly a financial debt because: Risk-sharing Paid back on an aircraft-delivery basis over program lifetime Secured by the 1992 US/EU agreements Including government advances in EV penalises EADS twice : EV quasi-debt is increased... while full R&D expense is charged to EBIT with no capitalisation at all Assuming the success of corresponding programs, gvt advances will be repaid thanks to future programme EBIT A conservative approach allows 3 options * Included in «other liabilities»- see pages 120 and 133, reference document 16

9 European government refundable advances impact on EV Logical alternative: Easy alternative: Include in EV outstanding European Government refundable at year-end 2002 : 4265 m*, or 3507 m excluding 20% Airbus. No adjustment needed to EV or to EBIT! Add back to EADS EBIT either 1/3 of A380 and A /600 R&D expense : 356 m, ie. 284m excluding 20% Airbus, or a virtual value for future EBIT derived from the programmes * Included in «other liabilities»- see pages 120 and 133, reference document 17 in bn Customer Pre-Delivery Payments (PDP) Customer PDP (part in excess of work-in-progress and current assets) are reported in other liabilities. They are not debt because they are : not refundable secure future deliveries available for short-term investments with yield reflection of EADS policy to preserve cash They are recurring and relate to all programs 5,0 4,5 4,0 3,5 3,0 2,5 2,0 EADS PDP in "other liabilities" 2000* Reported PDP estimate with constant $ * Estimate 2000 year with 100% Airbus Our view : PDP are part of working capital No impact on EV Customer PDP at year-end 2002 ( 3.6 bn) Other EADS divisions 44% Airbus 56% 18

10 Investments These assets are strategic and yield some result but their EBIT / EBITDA is not included in EADS operating results. Dassault-Aviation : (46% stake) Net book value 1333 m (reference doc page 127) market value 1055 m (April24 stock price : 227) EBIT contribution to be adjusted : 111 m representing our share of D.A. net income (reference doc page 122) Exclude from EV EV :: 1055 m Reduce EBIT by by 111 m Other investments : participations in Nortel JV, Embraer, Arianespace, Patria, Net book value 810 m (reference doc page 127) No EBIT contribution except book value depreciation ( (24) m in 2002) (reference doc p.122) Exclude from EV EV :: 810 m 19 EADS perception of EV calculation and corresponding valuation ratio EADS view on EV calculation in euro millions year Today market cap Total EV Based on 2002 figures EV // adjusted EBIT 5,0 EV // adjusted Revenues 30% 20

11 Appendixes 21 EADS view on EV calculation * 20% Global Investor Airbus Forum and % MBDA (Consolidated) (excluding main minorities*) year-end 2002 in m EADS EADS Number of shares in mios Stock price in (April 24 close) 7,94 7,94 Market capitalisation Net (cash) debt position Deposit backed debt Non-recouse debt Adjusted net debt position Off-Balance Sheet customer financing Collateral value of aircraft Pensions provisions Unrecognised Pension (actuarial losses) Hedge impact European gvt advances Dassault 46% Stake (based on April 24 price: 227) Other investments Total adjustments to EV EV at year-end 02 in m

12 EADS view on Revenues/EBIT consistent with our EV * 20% Global Investor Airbus Forum and % MBDA (Consolidated) (excluding main minorities*) 2002 values in m EADS EADS Revenues MBDA minority share -212 Airbus minority share Adjusted revenues for valuation Reported EBIT pre-goodwill & exceptional restructuring, non-recurring charges which would be not included above 0 0 Dassault Aviation contribution MBDA minority share -4 Airbus minority share /3 of A /600 & A380 R&D Pension Interest cost Adjusted EBIT for valuation Hedge accounting (IAS39) impact on EV /01/2001 with 100% Airbus Provisions in millions Total hedge provision, of which related to micro-hedge part former macro reclassified as micro (estim) related to macro-hedge part Represents mostly the the marked-to-market valueof of the the former macros reclassified as as micro Negative cash impact is is offset in in EBIT by by the the release of of this provisionas as the the corresponding hedge mature Approximate cash impactis: is: 2001 :: bn; bn; 2002 :: bn bn and from 2003 :: bn bn Represents the the remaining cash impact from hedge accounting * see page 106, reference document 24

13 European government refundable advances breakdown Eurocopter 4% Airbus A380 27% Airbus WB 3% European governments advances at year-end 2002 ( 4265 m) MTA 2% Others 5% Airbus LR 59% in m Oustanding at year-end Advances received in of which Airbus 899 Advances repaid in Interest accrued 169 Exchange difference -99 Oustanding at year-end Customer advances breakdown Customer advances payments at year-end in m PDP (pre-delivery-pyaments) in "other liabilities" Allocated to receivables Allocated to inventories Total customer advances with constant $ Total customer advances 26