EADS N.V.
Condensed Interim Consolidated Financial Statements for the nine months ending September 30, 2003

First Three Quarters 2003 Report

Condensed Interim Consolidated
Financial Statements of EADS N.V.
for the first three quarters of 2003

Consolidated Income Statements............................................................................... 2
Consolidated Income Statements for the third Quarter 2003 and 2002...................... 2
Consolidated Balance Sheets..................................................................................... 3
Consolidated Cash Flow Statements.......................................................................... 4
Consolidated Statements of Changes in Shareholders’ Equity................................... 5
Notes to the Interim Consolidated Financial Statements (according to IFRS) as at
September 30, 2003 ................................................................................................... 5
1.
The Company .................................................................................................. 52.
Accounting policies ............................................................................................ 5
3.
Changes in the consolidation perimeter and major events of EADS.............................. 6
4.
Segment information .......................................................................................... 6
5.
Significant profit and loss statement items .............................................................. 7
6.
Significant balance sheet items ............................................................................ 8
7.
Significant cash flow items .................................................................................. 98.
Contingencies ................................................................................................ 10
9.
Number of shares ........................................................................................... 10
10.
Earnings per share .......................................................................................... 10
11.
Dividend policy ............................................................................................... 10
12.
Related party transactions................................................................................. 10
13.
Number of employees ...................................................................................... 11

1

05.11.2004

EADS N.V.
Condensed Interim Consolidated Financial Statements for the nine months ending September 30, 2003

Consolidated Income Statements
January 1 September 30, 2003
Revenues
Cost of sales
Gross margin
Selling, administrative & otherexpenses
Research and development
expenses
Other income
Amortization of goodwill
Income before financial result,income taxes and minority
interest
Financial result
Income taxes
Minority interest
Net income (loss)

Earnings per share
Basic
DilutedM€
18.536-14.940
3.596

January 1 September 30, 2002

%
100
-81
19

M€
19.996-16.297
3.699-1.704-9-1.561
145
-422

54
17
-208
13
-124

Deviation

%
100
-82
18

M€
-1.460
1.357
-103

%

-1.749

-8

45

-3

-9
1
-2

-1.356
205
-431

-7
1
-2

-205
-60
9

15
-29
-2

0
0
-1
0
-1

368
-6
-323
-16
23

2
0
-2
0
0

-314

-85

115

-36

-147

-639

-7
-8
-3

€

€

€

-0,15
-0,15

0,03
0,03

-0,18
-0,18

Consolidated Income Statements for the third Quarter 2003 and 2002
July 1 September 30, 2003
Revenues
Cost of sales
Gross margin
Selling, administrative & otherexpenses
Research and development
expenses
Other income
Amortization of goodwill
Income before financial result,income taxes and minority
interest
Financial result
Income taxes
Minority interest
Net loss

Earnings per share
Basic
DilutedM€
5.476-4.527949

July 1 September 30, 2002

%
100
-83
17

M€
6.022
-4.913
1.109

-473

-9

-485
66
-141

-84
71
-57
12
-58

Deviation

%
100
-82
18

M€
-546
386
-160

%

-519

-9

46

-9

-9
1
-2

-480
60
-135

-8
1
-2

-5
6
-6

1
10
4

-2
2
-1
0
-1

35
-20
-94
11
-68

0
0
-1
0
-1

-119
91
37
1
10

-340
-455
-39
9
-15

-9
-8
-14

€

€

€

-0,07
-0,07

-0,08
-0,08

0,01
0,01

2

05.11.2004

EADS N.V.
Condensed Interim Consolidated Financial Statements for the nine months ending September 30, 2003

Consolidated Balance Sheets
September 30, 2003
M€

December 31, 2002%

M€

Deviation

%

M€

%

Fixed assets
Intangible assets

9.638

18

9.789

21

-151

-2

Property, Plant and Equipment

10.75021

10.509

22

241

2

4.957

10

4.875

10

82

2

25.34549

25.173

53

172

1

Financial Assets
Current assets
Inventories

3.850

8

2.700

6

1.150

43

Trade receivables

3.799

7

4.114

9

-315

-8

Other receivables and other assets

8.215

16

5.256

11

2.959

56

Securities

4.627

9

4.497

9

130

3

Cash and cash equivalents

1.673

4

1.703

4

-30

-2

22.16444

18.270

39

3.894

21

Deferred tax assets

2.821

5

2.992

6

-171

-6

Prepaid expenses

994

2

965

2

29

3

51.324100

47.400

100

3.924

8

Total assets
Shareholders' equity
Capital Stock

811

2

811

2

0

0

Reserves

9.294

18

9.658

20

-364

-4

Accumulated other comprehensive
income

4.587

8

2.452

5

2.135

87

Treasury shares

-156

0

-156

0

0

0

14.53628

12.765

27

1.771

14

Minority interests

1.781

3

1.361

3

420

31

Provisions

8.284

16

8.248

17

36

0

Liabilities
Financial liabilities

5.941

12

4.976

10

965

19

Trade liabilities

4.955

10

5.070

11

-115

-2

Other liabilities

10.26920

10.2462223

021.16542

20.292

43

873

4

Deferred tax liabilities

3.087

6

2.014

4

1.073

53

Deferred income

2.471

5

2.720

6

-249

-9

Total liabilities andshareholders' equity

51.324100

47.400

100

3.924

8

3

05.11.2004

EADS N.V.
Condensed Interim Consolidated Financial Statements for the nine months ending September 30, 2003

Consolidated Cash Flow Statements

Net income (loss)
Result applicable to minority interest
Depreciation and amortization of fixed assets
Valuation adjustments
Change in deferred taxes
Results on disposals of fixed assets/businesses
Results of companies accounted for by the equity method
Change in provisions
Change in other operating assets and liabilities
Cash provided by operating activities
Investments:- Payments for investments in intangible and fixed assets- Proceeds from disposal of intangible and fixed assets- Acquisition of subsidiaries (net of cash)- Proceeds from disposal of subsidiaries (net of cash)- Payments for investments in other financial assets- Proceeds from disposal of other financial assets- Increase in equipment of leased assets- Proceeds from disposal of leased assets- Increase in finance lease receivables- Decrease in finance lease receivables
Change of securities
Change in cash from changes in consolidation
Cash used for investing activities
Change in financial liabilities
Dividends paid to shareholders
Dividends paid to minorities
Own shares purchased
OthersCash provided by (used for) financing activities
Effect of foreign exchange rate changes on cash and cash
equivalents
Change in cash and cash equivalents

January 1 January 1 September 30, 2003 September 30, 2002
M€
M€
-124
23
-13
16
1.675
1.715
102
20
-3
191
-20
-68
-156
-83
-362
-607
183
-78
1.282
1.129
-1.328
75
-34
12
-479
240
-327
16
-235
57
288
-158
-1.873
1.284
-240
-30
0
0
1.014

-1.41488-16
66-1.046
646
-102
72
-210
172
-305
-7
-2.056
-715
-403
-103
-152
-1
-1.374

-36
387

-81
-2.382

Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Additional securities medium-term

5.400
5.787
513

7.481
5.099
830

Cash and securities as stated in the Balance Sheet

6.300

5.929

In the first three quarters 2003, securities included in investing activities decreased due to sales by
288 M € (first three quarters 2002: increase of -305 M €). These medium-term securities are included
in Securities as stated in the balance sheet.
As of September 30, 2003, 567 M € are included in Cash and cash equivalents as stated in the
consolidated Cash Flow Statement, which represent EADS’ share in MBDA’s cash and cash
equivalents, deposited at BAe Systems and Finmeccanica. Additionally, Cash and cash equivalents asstated in the consolidated Cash Flow Statement include 98 M € representing the amount Airbus has
deposited at BAe Systems.

4

05.11.2004

EADS N.V.
Condensed Interim Consolidated Financial Statements for the nine months ending September 30, 2003

Consolidated Statements of Changes in Shareholders’ Equity
M€
Equity as of January 1, 2003
Net loss
Dividends
OCI
Equity as of September 30, 2003
Equity as of January 1, 2002
Net income
Dividends
OCI
Treasury shares purchased
Equity as of September 30, 2002

12.765
-124
-240
2.135
14.536
9.877
23
-403
2.165
-152
11.510Notes to the Interim Consolidated Financial Statements (according to IFRS) as
at September 30, 2003
1. The Company
The accompanying Condensed Interim Consolidated Financial Statements (unaudited) present theoperations of European Aeronautic Defence and Space Company EADS N.V. and its subsidiaries(“EADS” or the “Group”), a Dutch public limited liability company (naamloze vennootschap) legallyseated in Amsterdam (Le Carré, Beechavenue 130-132, 1119 PR, Schiphol-Rijk, The
Netherlands), and are prepared and reported in Euros (“€”). EADS’ core business is the
manufacturing of commercial aircraft, civil helicopters, commercial space launch vehicles, missiles,
military aircraft, satellites and defence electronics and rendering of services related to these
activities.
2. Accounting policies
These Condensed Interim Consolidated Financial Statements have been prepared in accordancewith IAS 34 Interim Financial Reporting. The accounting policies used in the preparation of theinterim consolidated financial statements are consistent with those used in the annual
Consolidated Financial Statements for the year ended December 31, 2002, which are disclosed as
an integral part of the Group’s Annual Report 2002. The annual Consolidated Financial
Statements were authorised for issue by EADS’ Board of Directors on March 7, 2003. Except for
the non-capitalization of R&D costs, EADS is following International Financial Reporting Standards(IFRS) principles.
Costs incurring unevenly during the financial year are anticipated or deferred in the interim period
only if it is appropriate to anticipate or defer that type of cost at the end of the financial year.
Income tax expense is recognized based on the best estimate of the weighted-average annual
income tax rate expected for the full year applied on pre-tax income. The estimated annual
average income tax rate for 2003 is 42 % (projected in the first three quarters 2002: 41 %). Pre-tax
income is determined before goodwill amortization charge.

5

05.11.2004

EADS N.V.
Condensed Interim Consolidated Financial Statements for the nine months ending September 30, 2003

These Condensed Interim Consolidated Financial Statements should be read in conjunction withthe annual Consolidated Financial Statements 2002.
3. Changes in the consolidation perimeter and major events of EADSEADS acquired BAe Systems’ 25 percent interest (27,5 percent economic share) in Astrium N.V.
The transaction was signed on January 30, 2003 and is accounted for under the purchase method.
Control of Astrium N.V. as well as of Paradigm Secure Communications Ltd., formerly held jointly
by BAe Systems and EADS, has been transferred to EADS at this date.
At completion of the transaction, EADS acquired BAe Systems’ share in Astrium N.V. for 84 M €.
Prior to completion, EADS and BAe Systems each made a capital contribution into Astrium N.V. of
84 M € (total 168 M €). Taking into account the cash contribution, BAe Systems’ interest has beeneffectively transferred to EADS for no net cash consideration.
Nortel Networks and EADS reorganized their joint telecommunications activities in France andGermany. On September 18, 2003, EADS exchanged its 42 percent ownership interest in Nortel
Networks Germany GmbH & Co. KG and its 45 percent ownership interest in Nortel Networks
France S.A.S. for a 41 percent interest in EADS Telecom France S.A.S., a net additional paymentof 42 M € by Nortel Networks and a waiver of Nortel Networks for financial receivables of 72 M €.
At completion of transaction, EADS holds 100 % of the shares of EADS Telecom France S.A.S..
Apart from these transactions, there were no material acquisitions or disposals of subsidiaries,
business combinations, long-term investments and discontinued operations during the first threequarters 2003.
4. Segment information
The Group operates in 5 divisions (segments) which reflect the internal organizational andmanagement structure according to the nature of the products and services provided:• Airbus — Development, manufacturing, marketing and sale of commercial jet aircraft of morethan 100 seats..
• Military Transport — Development, manufacturing, marketing and sale of military transport
aircraft and special mission aircraft.
• Aeronautics — Development, manufacturing, marketing and sale of civil and military helicopters,
regional turboprop aircraft and light commercial aircraft; and civil and military aircraft conversion
and maintenance services.
• Defence & Security Systems — Development, manufacturing, marketing and sale of missiles
systems; military combat and trainer aircraft; and provision of defence electronics, defencerelated telecommunications solutions; and logistics, training, testing, engineering and otherrelated services.
• Space — Development, manufacturing, marketing and sale of satellites, orbital infrastructuresand launchers; and provision of launch services.
The following table presents information with respect to the Group’s business segments.
Consolidation effects, the holding function of EADS headquarters and other activities not allocableto the divisions are disclosed in the column “HQ/ Conso.”.
Due to the new organizational structure of the Group, the Defence & Security Systems division has
been renamed and restructured, especially the Military Aircraft business unit (military combat and605.11.2004

EADS N.V.
Condensed Interim Consolidated Financial Statements for the nine months ending September 30, 2003

trainer aircraft) has been transferred from Aeronautics division to Defence & Security Systems
division. Prior year figures are adjusted accordingly in these notes.

in M €

AirbusMilitary
Transport

Aeronautics

Defence &Security
SystemsSpace

HQ/ Conso.

Consolidated

Nine months ended September 30, 2003
Revenues

12.051

410

2.452

2.957

1.473

-807

18.536

Research and development
costs

1.308

15

50

149

39

0

1.561

EBIT pre goodwill amort. andexceptionals (see definition
below)

701

-7

112

-18

-184

180

784

Nine months ended September 30, 2002
Revenues

13.750

310

2.440

2.793

1.389

-686

19.996

Research and development
costs

1.071

28

66

154

36

1

1.356

EBIT pre goodwill amort. andexceptionals (see definition
below)

1.072

-79

84

-42

-101

79

1.013

EADS uses EBIT pre goodwill amortization and exceptionals as a key indicator to measure theeconomic performance of the Group and its Segments. The term “exceptionals” refers to income
or expenses of a non-recurring nature, such as amortization expenses of fair value adjustments
relating to the EADS merger, the Airbus combination and the formation of MBDA, as well as
impairment charges.
A reconciliation from Income before financial result, income taxes and minority interests to EBIT
pre goodwill amortization and exceptionals is set forth in the following table (in M €):January 1Sep. 30, 2003

January 1Sep. 30, 2002

Income before financial result, income taxes and minority interests

54

368

Income from investments

137

42

191

410

Goodwill amortisation

422

431

Fair value adjustment

171

172

784

1.013

in M €

Goodwill and exceptionals:

EBIT pre goodwill amortization and exceptionals

5. Significant profit and loss statement items
Revenues in the first three quarters 2003 reached 18.536 M € (first three quarters 2002: 19.996 M€). The decrease mostly reflects lower aircraft deliveries of Airbus Division and a weaker USDollar. This was partly compensated by 100 % consolidation of EADS Astrium in 2003 (previous

705.11.2004

EADS N.V.
Condensed Interim Consolidated Financial Statements for the nine months ending September 30, 2003

year 75 % consolidation) with an impact of 244 M € and increases in Defence and Security
Systems and Military Transport Division.
Gross Margin of 3.596 M € nearly remains stable (first three quarters 2002: 3.699 M €). Lower
deliveries of Airbus Division and inclusion of restructuring costs in Space Division are partly
compensated by a more favourable mix of Airbus aircraft and improvement in other Divisions.
Research and development costs of 1.561 M € (first three quarters 2002: 1.356 M €) increased
mainly because of the Airbus A 380 project.
Other income of 145 M € (first three quarters 2002: 205 M €) decreased, as last year it comprised
the gain on the disposal of the 50 % shares in Aircelle by Airbus (63 M €).
The financial result includes net interest charge of -138 M € (first three quarters 2002: -77 M €),which changed mostly due to a higher interest charge accrued for refundable government
advances in Airbus division and a lower interest net result due to a lower average Net Cashposition.
Income from investments of 137 M € (first three quarters 2002: 42 M €) was mainly influenced by
the positive result of Dassault Aviation whereas the first three quarters 2002 also included a
depreciation of -29 M € on the Arianespace investment. In the third quarter 2003, Dassault
Aviation’s financial performance according to IFRS for the full year 2002 and half-year 2003 was
obtained. Since for third quarter 2003 no specific financial information is available yet from
Dassault Aviation, the half-year net income 2003 of Dassault Aviation according to IFRS was used
as a basis to estimate and report the current net income for the first three quarters, which also
included an update of the prior periods financial performance under IFRS of Dassault Aviation.
Other financial result amounts to 18 M € (first three quarters 2002: 29 M €).
6. Significant balance sheet items
Intangible assets include 9.415 M € (prior year: 9.586 M €) of Goodwill, which is decreased
according to the amortization plan. The reduction of Goodwill is partly compensated by anincrease of 237 M €, mainly coming from the purchase of additional shares of EADS Telecom
France S.A.S. and 100 % consolidation of Astrium.
Due to foreign exchange-rate effects of -194 M €, Property, plant and equipment only increased
in total by 241 M € to 10.750 M € (prior year: 10.509 M €). Most of the increase is made by Airbus,
due to strong capital expenditures related to the A380 project.
Financial Assets of 4.957 M € (prior year: 4.875 M €) increased in total – excluding foreignexchange-rate effect – by 355 M €, coming mainly from new customer financing and change inequity-value of Dassault Aviation.
Inventories of 3.850 M € (prior year: 2.700 M €), net of customer advances, excluding foreignexchange-rate effect of 460 M €, increased due to higher finished goods in Airbus Division andunfinished goods in all divisions, especially in Defence and Security Systems and Space Divisions.
The increase was partly compensated by higher allocated customer advance payments namely in
Airbus Division.
The decrease in Trade receivables by -315 M € (excluding foreign exchange-rate effect: - 238 M€) to 3.799 M € (prior year: 4.114 M €) is mainly due to a higher level of customer payments in
Defence & Security Systems and Aeronautics Divisions, driven by a high level of revenues at prioryears’ end. This effect is partly balanced out by the additional consolidation of 25 % of Astrium andto the newly consolidated Paradigm Services Ltd. in Space Division.

8

05.11.2004

EADS N.V.
Condensed Interim Consolidated Financial Statements for the nine months ending September 30, 2003

The development of the $ / € -rate (from 1 € = 1,05 $ to 1 € = 1,17 $) led to a positive mark-tomarket revaluation of hedging instruments according to IAS 39 and to an increase by 3.088 M € to
5.907 M € classified as part of Other receivables and other assets (in total 8.215 M €, prior year
5.256 M €).
Stockholders‘ equity (including treasury shares) amounts to 14.536 M € (prior year: 12.765 M €),resulting from a Net loss of -124 M €, a dividend payment to shareholders of - 240 M € andchanges in OCI of 2.135 M €.
Minority interests of 1.781 M € (prior year 1.361 M €) mainly represent shares of BAe Systems in
Airbus Group and Finmeccanica in MBDA.
Provisions include 3.686 M € for retirement plans and similar obligations (prior year: 3.392 M €),111 M € of provisions for financial instruments (prior year: 161 M €) and 4.487 M € of otherprovisions (prior year: 4.695 M €). The increase of provisions for pensions of 294 M € results
mainly from 100 % consolidation of Astrium (153 M €). Other provisions are lower, coming fromthe utilization of a tax provision in Airbus Division and foreign exchange-rate effect of -190 M €.
This is partly compensated by an increase in Space division (+166 M €), mainly to cover
restructuring costs for SARA I.
Financial liabilities of 5.941 M € (prior year: 4.976 M €) have mainly increased due to theissuance of a Eurobond loan of 1.500 M €. Additionally, an amount of 236 M € has been
restructured from a risk sharing bank loan to a normal bank loan and was thus reclassified fromother liabilities. Net repayment of bonds by Headquarters (-160 M €) and a foreign exchange-rate
effect of -526 M € partly offset the increase.
Without considering foreign exchange-rate effects of -289 M €, Other liabilities increase by 312 M€ to 10.269 M € (prior year: 10.246 M €). Main impacts of the increase are European Government
refundable advances and tax liabilities, partly compensated by lower non-allocated customer
advance payments.
7. Significant cash flow items
Cash provided by operating activities with the amount of 1.282 M € (first three quarters 2002:
1.129 M €) is mainly driven by a positive EBIT pre goodwill amortization and exceptionals and apositive change in other assets and liabilities (working capital). Working capital is influenced by anincrease of gross inventories in all divisions, which is overcompensated by positive effects from
customer advances, European Government refundable advances and trade receivables.
Consumption of provisions mainly results from former macro-hedges reclassified as micro in 2002
and taxes.
Cash used for investing activities of -1.873 M € (first three quarters 2002: -2.056 M €) isprincipally affected by payments for investments in intangible and fixed assets and customer
finance activities, mainly in Airbus Division. Also included is the impact on Cash and cash
equivalents resulting from the 100% (previous year 75 %) consolidation of Astrium of -160 M €.
Positive effects are coming from the sale of mid-term securities by Headquarters.
Cash provided by financing activities amounts to 1.014 M € (first three quarters 2002: -1.374 M€) and mainly contains new Eurobond loans of 1.500 M € issued in 2003. It is reduced by thedividends paid to shareholders of - 240 M € as well as to BAe Systems of - 30 M € and net
repayment of bonds by Headquarters (-160 M €).

905.11.2004

EADS N.V.
Condensed Interim Consolidated Financial Statements for the nine months ending September 30, 2003

8. Contingencies
Since the last balance sheet date (December 31, 2002), there were no significant changes incontingent liabilities.
9. Number of shares
The total number of shares outstanding is 800.957.248 and 799.284.309 as of September 30,
2003 and 2002, respectively. EADS’ shares are exclusively ordinary shares with a par value of
1,00 €. During the first three quarters 2002, EADS repurchased 9.891.252 ordinary shares in
conjunction with the share-buyback program as approved by the general shareholders’ meeting in
2001. No shares were repurchased during the first three quarters 2003.
10. Earnings per share
Basic earnings per share are calculated by dividing net income (loss) attributable toshareholders by the weighted average number of issued ordinary shares during the period,
excluding ordinary shares purchased by the Group and held as treasury shares:
January 1 to
September 30,
2003
Net income (loss) attributable to shareholders
Weighted average number of ordinary shares outstanding
Basic earnings per share

January 1 to
September 30,
2002-124 M €23 M €

800.957.248

805.389.028-0,15 €

0,03 €For the calculation of the diluted earnings per share, the weighted average number of ordinary
shares is adjusted to assume conversion of all potential ordinary shares. The Group’s only
category of dilutive potential ordinary shares is stock options. Since the exercise price of the stock
options under all existing stock option plans initiated by the Group is exceeding the share price of
EADS shares, to include these potential ordinary shares would be anti-dilutive. As a consequence,
net income as well as the weighted number of ordinary shares in issue are the same for both basic
and diluted earnings per share.
11. Dividend policy
Following the annual shareholders’ meeting held on May 6, 2003, a dividend of 0,30 € per ordinary
share was paid in June 2003 for the business year 2002.
12. Related party transactions
The Group has entered into various transactions with related companies in 2003 and 2002 thathave all been carried out in the normal course of business. As is the Group’s policy, all related
party transactions have to be carried out at arm’s length. Transactions with related parties include
the French State, DaimlerChrysler, Lagardère, and SEPI (Spanish State). Except for thetransactions with the French State the transactions are not considered material to the Group either
individually or in the aggregate. The transactions with the French State include mainly sales fromthe Aeronautics, Defence and Security Systems and Space divisions.

10

05.11.2004

EADS N.V.
Condensed Interim Consolidated Financial Statements for the nine months ending September 30, 2003

13. Number of employees
The number of employees at September 30, 2003 is 108.288 as compared to 103.787 at
September 30, 2002 reflecting 100% consolidation of Astrium (previous year 75 %) as well as
new employments at Airbus mainly in relation with the A380 program ramp up.

11

05.11.2004