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

First Half-year 2003 Report

Condensed Interim Consolidated
Financial Statements of EADS N.V.
for the first half-year of 2003

Consolidated Income Statements............................................................................... 2
Consolidated Income Statements for the second Quarter 2003 and 2002 ................. 2
Consolidated Balance Sheets..................................................................................... 3
Consolidated Cash Flow Statements.......................................................................... 4
Consolidated Statements of Changes in Shareholder’s Equity................................... 5
Notes to the Interim Consolidated Financial Statements (according to IFRS) as atJune 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 ...................................................................................................... 99.
Number of shares ................................................................................................. 9
10.
Earnings per share ............................................................................................ 9
11.
Dividend policy ............................................................................................... 10
12.
Related party transactions................................................................................. 10
13.
Number of employees ...................................................................................... 10
14.
Subsequent events .......................................................................................... 101

25.07.2003

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

Consolidated Income Statements
January 1 - June 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€
13.060-10.413
2.647%

January 1 - June 30,
2002

100
-80
20

M€
13.974-11.384
2.590-1.231-10-1.076
79
-281

138
-54
-151
1
-66

%

Deviation

100
-81
19

M€
-914
971
57

%

-1.230

-9

-1

0

-8
1
-2

-876
145
-296

-7
1
-2

-200
-66
15

23
-46
-5

1
0
-2
0
-1

333
14
-229
-27
91

2
0
-1
0
1

-195
-68
78
28
-157

-59
-486
-34
-104
-173

-7
-9
2

€

€

€

-0,08
-0,08

0,11
0,11

-0,19
-0,19

Consolidated Income Statements for the second Quarter 2003 and 2002
April 1 - June 30, 2003
100
-79
21

M€
7.566
-6.145
1.421

-682

-9

Other income
Amortization of goodwill

-548
24
-141

Income before financial result,income taxes and minority
interest
Financial result
Income taxes
Minority interest
Net income

234
-40
-152
-15
27

Revenues
Cost of sales
Gross margin
Selling, administrative & otherexpenses
Research and development
expenses

Earnings per share
Basic
DilutedM€
7.540-5.9591.581%

April 1 - June 30, 2002%

Deviation
M€

%

100
-81
19

-26
186
160

0
-3
11

-611

-8

-71

12

-7
0
-2

-473
33
-149

-6
0
-2

-75
-9
8

16
-27
-5

3
-1
-2
0
0

221
59
-133
-31
116

3
0
-1
0
2

13
-99
-19
16
-89

6
-168
14
-52
-77

€

€

€

0,03
0,03

0,14
0,14

-0,11
-0,11

2

25.07.2003

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

Consolidated Balance Sheets
June 30, 2003
M€

December 31, 2002%

M€

Deviation

%

M€

%

Fixed assets
Intangible assets

9.616

18

9.789

21

-173

-2

Property, Plant and Equipment

10.66021

10.50922151

1Financial Assets

4.947

10

4.875

10

72

1

25.22349

25.17353

50

0Inventories

3.645

7

2.700

6

945

35

Trade receivables

4.025

8

4.114

9

-89

-2

Other receivables and other assets

7.519

15

5.256

11

2.263

43

Securities

4.825

9

4.497

9

328

7

Cash and cash equivalents

1.777

4

1.703

4

74

4

21.79143

18.270

39

3.521

19

Deferred tax assets

2.973

6

2.992

6

-19

-1

Prepaid expenses

1.018

2

965

2

53

5

Total assets

51.005100

47.400

100

3.605

8

811

2

811

2

0

0

Reserves

9.352

18

9.658

20

-306

-3

Accumulated other comprehensive
income

4.156

8

2.452

5

1.704

69

Treasury shares

-156

0

-156

0

0

0

14.16328

12.765

27

1.398

11

Minority interests

1.771

4

1.361

3

410

30

Provisions

8.400

16

8.248

17

152

2

Financial liabilities

5.688

11

4.976

10

712

14

Trade liabilities

4.773

9

5.070

11

-297

-6

Other liabilities

10.59221

10.24622346

321.05341

20.292

43

761

4

Deferred tax liabilities

2.948

6

2.014

4

934

46

Deferred income

2.670

5

2.720

6

-50

-2

Total liabilities andshareholders' equity

51.005100

47.400

100

3.605

8

Current assets

Shareholders' equity
Capital Stock

Liabilities

3

25.07.2003

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

Consolidated Cash Flow Statements

Net income (loss)
Income (Loss) 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

January 1 - June 30,
2003

January 1 - June 30,
2002

M€

M€
-66
-1
1.089
54
-22
-7
-69
-130
425
1.273

91
27
1.131
3
87
-52
-58
-207
-53
969

-823
37
-9
0
-262
94
-248
14
-131
16
71
-158
-1.399
857
-240
-5
0
1
613

-855
58
-6
52
-926
584
-35
36
-83
156
-290
-7
-1.316
-571
-404
0
-79
3
-1.051

-20
467

-71
-1.469Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Additional securities medium-term

5.401
5.868
734

7.481
6.012
831

Cash and securities as stated in the Balance Sheet

6.602

6.843

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- Additions of subsidiaries (net of cash)- Proceeds from disposal of subsidiaries- Payments for investments in other financial assets- Proceeds from disposal of other financial assets- Additions in equipment of leased assets- Proceeds from disposal of leased assets- Additions in finance lease receivables- Proceeds from disposal 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
Treasury shares purchased
OthersCash provided by (used for) financing activities
Effect of foreign exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents

Cash used for investing activities in the first half-year 2003 does include divestment of securities of
71 M € (first half-year 2002: investment of -290 M €); these medium-term securities are included in
Securities as stated in the balance sheet.
As of June 30, 2003, 584 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, depositedat BAe Systems and Finmeccanica. Additionally, Cash and cash equivalents as stated in the
consolidated Cash Flow Statement include 179 M € representing the amount Airbus has deposited at
BAe Systems.

4

25.07.2003

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

Consolidated Statements of Changes in Shareholder’s Equity
M€
Equity as of January 1, 2003
Net loss

12.765-66

Dividends

-240

OCI

1.704

Equity as of June 30, 2003

14.163Equity as of January 1, 2002

9.877

Net income

91

Dividends

-403

OCI

2.538

Treasury shares purchased-79

Equity as of June 30, 2002

12.024

Notes to the Interim Consolidated Financial Statements (according to IFRS) as
at June 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 that incur 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 41 % (projected in the first half-year 2002: 39 %). Pre-tax
income is determined before goodwill amortization charge.

5

25.07.2003

EADS N.V.
Condensed Interim Consolidated Financial Statements for the six months ending June 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 System 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.
Apart from this, there were no material acquisitions or disposals of subsidiaries, businesscombinations, long-term investments and discontinued operations during the first half-year 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 ofaircraft and special mission aircraft.

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

625.07.2003

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

in M €

AirbusMilitary
Transport

Aeronautics

Defence &Security
SystemsSpace

HQ/ Conso.

Consolidated-504

13.060Six months ended June 30, 2003
Revenues

8.773

268

1.613

1.902

1.008

Research and development
costs

901

11

34

103

27

EBIT pre goodwill amort. andexceptionals (see definition
below)

621

-8

59

-28

-131

79

592

9.870

234

1.606

1.856

882

-474

13.974

Research and development
costs

680

22

52

99

24

-1

876

EBIT pre goodwill amort. andexceptionals (see definition
below)

874

-72

29

-37

-85

66

775

1.076

Six months ended June 30, 2002
Revenues

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 €):Jan. 1- June 30, Jan. 1- June 30,
2003
2002

in M €
Income before financial result, income taxes and minority interests

138

333

Income from associates

55

29

193

362

Goodwill amortisation

281

296

Fair value adjustment

118

117

592

775

Goodwill and exceptionals:

EBIT pre goodwill amortization and exceptionals

5. Significant profit and loss statement items
Revenues in the first half-year 2003 reached 13.060 M € (first half-year 2002: 13.974 M €). The
decrease mostly reflects lower aircraft deliveries of Airbus and a weaker US-Dollar. This was partly
compensated by 100 % consolidation of Astrium in 2003 (previous year 75 % consolidation) with
an impact of 163 M € and growth in Defence & Security Systems division.

7

25.07.2003

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

Research and development costs of 1.076 M € (first half-year 2002: 876 M €) increased mainly
because of the Airbus A 380 project.
Other income of 79 M € (first half-year 2002: 145 M €) decreased, as last year it comprised thegain on the disposal of the 50 % shares in Aircelle by Airbus (63 M €).
The financial result includes net interest charge of -101 M € (first half-year 2002: -58 M €), whichchanged mostly due to higher interest expenses for refundable government advances in Airbus
division and a lower average Net Cash-position. Income from investments of 55 M € (first half-year
2002: 29 M €) was mainly influenced by the positive result of Dassault Aviation whereas the firsthalf-year 2002 also included a depreciation on the Arianespace investment. Since for the first halfyear no financial figures are available yet from Dassault Aviation, the prior half-year net income
according to Dassault Aviation Statutory Financial Statements was used as a basis to report thecurrent half-year ‘s income from this equity investment, adjusted by dividends received. Moreover,other financial result amounted to -8 M € (first half-year 2002: 43 M €). Prior half-year’s otherfinancial result was mainly influenced by foreign currency financial instruments, which did not
qualify for hedge accounting according to IAS 39.
6. Significant balance sheet items
Intangible assets include 9.397 M € of Goodwill, which is decreased according to theamortization plan. Due to the 100 % consolidation of Astrium, Goodwill has increased by 65 M €.
Due to foreign exchange-rate effects, Property, plant and equipment only increased by 151 M €to 10.660 M €. The biggest contribution to the increase is made by Airbus (159 M €, excluding
foreign exchange-rate effect: 284 M €), which resulted mostly from strong capital expenditures
related to the A380 project.
Financial Assets of 4.947 M € (prior year 4.875 M €) increased – excluding foreign exchange-rate
effect – by 291 M €, coming mainly from new customer financing.
Inventories, net of customer advances, include the impact of the 100% consolidation of Astrium
and were affected by a weaker $ / €-rate on US-Dollar-denominated customer advance payments.
The decrease in Trade receivables is mainly due to a higher level of customer payments in
Defence & Security Systems and Aeronautics, driven by a high level of revenues at prior years’end. This effect is partly balanced out by Airbus and the additional consolidation of 25 % ofAstrium in Space.
The development of the $ / € -rate (from 1 € = 1,05 $ to 1 € = 1,14 $) led to a positive mark-tomarket revaluation of hedging instruments according to IAS 39 and to an increase by 2.508 M € to
5.327 M € classified as part of Other receivables and other assets.
Provisions include 3.608 M € for retirement plans and similar obligations, 164 M € of provisions
for financial instruments and 4.628 M € of other provisions. The increase of 152 M € resulted
mainly from provisions for pensions, due to the 100 % consolidation of Astrium.
Financial liabilities have increased mainly due to the issuance of a Eurobond loan of 1.000 M €.
Additionally, an amount of 236 M € has been restructured from a risk sharing bank loan to anormal bank loan and was thus reclassified from other liabilities. Repayment of bank loans by
Airbus (-226 M €) and a foreign exchange-rate effect of -427 M € led to a reduction of this position.
Other liabilities mainly include 4.565 M € of European Governments refundable advances and3.607 M € of customer advance payments.

825.07.2003

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

7. Significant cash flow items
Cash provided by operating activities with the amount of 1.273 M € mainly results from a
positive EBIT and a positive cash flow from change in working capital. The reclassification of
236 M € as mentioned above has not been considered in the cash flow statement because of its
neutrality on the balance of Cash and cash equivalents.
Cash used for investing activities (-1.399 M €) is mainly driven by an outflow for investments in
fixed assets (capital expenditures -823 M €) and customer finance activities. Also included is theimpact on Cash and cash equivalents resulting from the 100% (previous year 75 %) consolidationof Astrium of -160 M €.
Cash provided by financing activities amounts to 613 M € and contains mainly a new
Eurobond loan of 1 billion € issued in 2003. It is reduced by the dividends paid to shareholders of- 240 M € and repayment of bank loans by Airbus (-226 M €).
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 804.331.343 as of June 30, 2003 and2002, respectively. EADS’ shares are exclusively ordinary shares with a par value of 1,00 €.
During the first half-year 2002, EADS repurchased 4.844.218 ordinary shares in conjunction withthe share-buyback program as approved by the general shareholders’ meeting in 2001. No shareswere repurchased during the first half-year 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:

Net income (loss) attributable to shareholders
Weighted average number of ordinary shares outstanding
Basic earnings per share

January 1, 2003
to June 30, 2003

January 1, 2002
to June 30, 2002

-66 M €

91 M €

800.957.248

807.655.628-0,08 €

0,11 €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.

9

25.07.2003

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

11. Dividend policy
Following the annual shareholders’ meeting held on May 6, 2003, a dividend of 0,30 € per ordinary
share was paid 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 & Security Systems and Space divisions.
13. Number of employees
The number of employees at June 30, 2003 is 107.845 as compared to 103.058 at June 30, 2002
reflecting 100% consolidation of Astrium (previous year 75 %) as well as new employments at
Airbus in relation with the A380 program ramp up.
14. Subsequent events
Nortel Networks and EADS will re-organize their joint telecommunications activities in France andGermany. Therefore, Nortel Networks will acquire those shares of Nortel Networks Germany
GmbH & Co. KG and Nortel Networks France SAS, which are currently held by EADS. At thesame time, EADS will increase its ownership in EADS Telecom to 100 percent as a result of
acquiring Nortel Networks current ownership stake in that company.
These transactions are subject to the receipt of customary regulatory approvals, which are
expected to be received within the third quarter.

10

25.07.2003