Good morning, ladies and gentlemen and welcome to the Audio Conference Call that will review Embraer’s Third Quarter 2014 Results. Thank you for standing by. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions to participate will be given at that time. (Operator Instructions) As a reminder, this conference is being record and webcasted at ir.embraer.com.br. This conference call includes forward-looking statements or statements about the events or circumstances which have not occurred. Embraer has based these forward-looking statements largely on its current expectations and projections about future events and financial trends affecting the business and its future financial performance. These forward-looking statements are subject to risks, uncertainties, and assumptions, including, among other things, general economic, political and business conditions in Brazil and in other markets where the company is present. The words believe, may, will, estimates, continues, anticipates, intends, expects, and similar words are intended to identify forward-looking statements. Embraer undertakes no obligation to update publicly or revise any forward-looking statements because of the new information, future events, or other factors. In light of these risks and uncertainties, the forward-looking events and circumstances discussed on this conference call may not occur. The company's actual results could differ substantially from those anticipated in the forward-looking statements. Participants on today's conference call are Mr. Frederico Curado, President and CEO; Mr. Jose Filippo, Chief Financial Officer and IRO; and Mr. Luciano Froes, Director of Investor Relations. I would now like to turn the conference over to Mr. Jose Filippo. Please go ahead, sir.

Okay, thank you. And good morning to all participants. We will start this event with a presentation and then we will be moving to the Q&A section. So if you could go and start with Page 3. Before the first business highlights, I would like to recall this important date which was last August 19th that Embraer celebrated its 45th anniversary, which is a very important moment for the company that happened last August. With next page, Page 4, now the business highlights and starting with inauguration of Embraer Engineering and Technology Center in Melbourne, Florida. This facility is initially focused on the effective Jet business, but later will expand to all our other business segments. Continuing with the example of Embraer's commitment to sustainability, we have the milestone of a 10 year anniversary of the certification of the Ethanol Powered Ipanema Airplane. And in line with that, Embraer was listed for the fifth consecutive year on the Dow Jones Sustainability Index. During the third quarter, also Embraer received several awards and recognition in Brazil, especially related to people management and corporate governance, important and very -- important priority for the company. Next page, Page 5, now moving into the business unit highlights, starting with the Commercial Aviation business. We had a delivery in the third quarter of 19 E-Jets, a couple less than we planned, which we expect to be delivered in the fourth quarter. Also, we continue to sell our current generation, two important announcements. First one is Japan Airlines, which signed a firm order for 15 E-Jets with additional 12 options, together with Republic Airways Holdings signed a contract for 50 firm jets which will operate under the United Express brand. In relation to the E2 development, we are moving along with an important event with the…

Thank you. (Operator Instructions) And our first question comes from Pete Skibitski from Drexel Hamilton. Your line is now open. Please go ahead.

I guess first question I'll ask is on the large cabin business jets, you delivered 10 year-to-date. And I was wondering of the 15 or so you need to deliver in fourth quarter to meet your guidance, could you give us a sense of how many of those have already been ordered as of today or maybe how many are really close to closing?

Sure. So we forecast from 80 to 90 of the light jets and 25 to 30 of the large cabin jets. So as of today, we believe we are going to come to the lower end on the small cabin. We're probably on the right in the middle of the range with maybe some potential upside within the range. On the large cabin though, we look more towards the lower end and with maybe a little bit risk on the lower end of the larger cabin. Having said that, we are still comfortable that between the two families, we shall achieve the revenue guidance for the segment for the year.

And then, I had a question on gross margins also. 19.5%, they were up about 30 basis points year-over-year on really comparable revenue overall and comparable revenue at commercial also. But the mix was much better last year at commercial as well as at executive. So, I wanted to ask how do I reconcile that? Is it all FX related or maybe are the margin headwinds on the 175 maybe not going to be as bad as you'd initially suspected? I was wondering if you could help me understand that.

Pete, it’s Luciano. So a little bit more color on that. Basically, when we think about the consolidated gross margin, you had a slightly lower, let’s say, Commercial Aviation segment margin driven again largely because of the mix of more E175s in the quarter. But that was offset to some extent by higher gross margins in both the executive jets as well as the defense and security segment.

And Executive, was that just lower selling expenses within this segment? Or actually, no, that wouldn't impact gross margin. How would -- why were gross margins higher in executive this quarter given the mix was so much worse?

Actually there were a lot of Phenom 300s delivered in the quarter, 14 out of the 15 light jets. So that contributed to that. That reflects this gross margin of north of 22% that I alluded to.

Thank you. And our next question comes from Cai von Rumohr from Cowen & Company. Your line is now open. Please go ahead. Cai von Rumohr - Cowen & Company: So, I guess you're saying you're keeping your cash flow guidance, but you also indicated, I think, that CapEx plan of 250 million but you only did about 106 million as you define it in the nine months; and your development plan of 320 million, you've done 111 million. So, you indicated 320 million is probably high. So, those are pluses. How come the cash flow wouldn't be even better than that? What are the offsets to that?

The investments will be lower, but as we mentioned, we have the pressure on working capital and so that’s what we expect to see. So we’re working on reducing the accounts receivable. We had a higher number in the end of the third quarter. We expect to see that coming down in the fourth quarter. That’s what we’re working. Cai von Rumohr - Cowen & Company: If it comes down 300 million, you basically would be down year-over-year and you would be up. So, I'm still a little bit confused in terms of what the real offset is, because it looks like that should correct itself in the third quarter unless there's something else happening.

Yes, but there will be going the next generation in the fourth quarter which is stronger than the previous quarters that we’ll be adding.

Cai, this is Frederico. Just add a little bit of color. As we can see the year-to-date cumulative free cash flow, it’s significantly negative. So we ought to generate a very strong quarter, which we are foreseeing. But I must say we do have a risk in this $300 million accounts receivable or related to defense, more specific for the Brazilian government programs. So there is a risk there which may even prevent us from achieving our guidance. So, the view is that we will -- I mean this is due so this is something which it’s contractually due. But it is of course the fiscal or let’s say the governmental budgets in Brazil, it’s public information, there are some constraints. So I think we must at this stage emphasize that there is a downside risk to that guidance. Cai von Rumohr - Cowen & Company: And just one two-part follow-up. Could you maybe give us color in terms of 2016, how you're sold out in terms of the E-Jets?

It’s looking good. I mean I would not put a figure at this stage, Cai, but it’s getting better. So, when we were sitting in 2012 looking at '14 and '13 looking at '15 and now '14 looking at '16, so we’re probably in the most comfortable position on top of these three years. Cai von Rumohr - Cowen & Company: And the last one, labor, where are you with your labor negotiations? And what kind of a wage hike should we expect for 2015?

Okay. Let me take the opportunity to give you a broader answer. We have several factories in Brazil. So, I mean, we have already settled an agreement with the factory in Botucatu, that’s a 7.4% increase in wages applicable from September on. The same proposal has been offered to our plants in Gaviao Peixoto where the defense people are, Sorocaba Taubate and Sao Jose dos Campos. We have not yet a position from the Gaviao Peixoto and Taubate unions and we had a negative position from the Sao Jose dos Campos union. We have three units in Sao Jose dos Campos and one of them, our employee since last night, they have not been allowed – the union has completely blocked the entrances of the factory. So, we are paralyzed in our operations in that specific site, which is our largest site in Sao Jose dos Campos. The other two sites in Sao Jose, they are operating normally. So, I mean we do not know how long that’s going to take to settle. It's considered that this will end up in the legal system, in the courts. But it is, our proposal is final and what we really regret is that this specific union in Sao Jose dos Campos with this very let's say aggressive attitude of really blocking people’s right to go and come freely is something we have seen happening in the same region in General Motors plant and the outcome is very negative for both the company and employees. So, we just now have to see how this thing unfolds. And technically, obviously we have some slack as far as being able to be shut down for a few days and still deliver all of our guidance numbers and deliver et cetera, but at this stage we have to live day-by-day and see how this thing unfolds. Other than that factory, everything is operating well.

Thank you. And our next question comes from Derek Spronck from RBC Capital Markets. Your line is now open. Please go ahead.

My first question is on 2015 aerospace production. You should have a fairly good visibility on your productions guideline for 2015. Can you provide any color as to how you see 2015 shaping up as that compares to 2014 with regards to executive production as well as commercial aviation production?

I think it's a fair question. Of course we will provide specific directions around early March. But an indication, we see on commercial jets, production levels are probably sustaining with a possibility of a little bit of a higher number. Well, I think sustain the same levels probably a very fair assumption at this stage. We will have a pressure on the gross margin due to pricing. Pricing has become aggressive with of course the stiffening of the competition. Obviously, on the tailwind side we have a potentially more favorable FX next year and our continuous effort to hold productivity to keep our cost where they should be. Also, the standardization of the assembly line where we have large quantities of airplanes, 175 airplanes for the same customer, that also should give us some benefit as far as productivity. On business jets, two important markets we see some down, some reduction in activity. These are Brazil and China. But on the other hand, we are seeing increasing level of activity in Europe, believe it or not, and in United States. So that add to the fact that we will be ramping up the Legacy 500 next year, so we’re probably looking to some degree of increase in our business jet business. And as we increase the top-line, of course the trend is we also improve our results because we do not need probably much more, if any, more fixed cost to do that. As far as defense, I pretty might see a stable activity, a lot of execution to be done. We have been executing very, very well in that business. In this particular business, FX will play against us because of course a large part of our revenues is in reais. But it's probably a wash, so our stability is probably a fair outlook at this stage.

Just another quick question on the Legacy 500 and the 450. I was at the MBAA and there was quite a bit of buzz around those two aircraft products. Has that buzz and anticipation of the product, has that been translating into a good order backlog and healthy pricing/margins on the first initial order set?

As far as book orders, I would say it has been reflected in the pipeline. So there is a significant amount -- increase in activity in the pipeline. So hopefully that will translate in a few months in actual orders and increasing backlog. And you are right, I mean the product is really superior. So we do expect that family to move us in a good direction. As far as margins in the very first units, no, I mean this is much more industrial, typical industrial learning curve. The only comment I would add is that this is -- I mean so far and I am knocking on the wood here, has been the best entry into service that we have had in our airplane programs and this is not just a coincidence. We invested a significant amount of work and money in testing and rigs and et cetera to achieve that. So, so far there plan is -- we have one prototype continued its flying, way ahead of the initial deliveries, and the airplane has a very good degree of maturity. So we should have, I think it’s fair to say we should have a relatively smooth learning curve ahead of us.

Thank you. And our next question comes from Myles Walton from Deutsche Bank. Your line is now open. Please go ahead.

Hey, Fred, I was hoping you could give me a little color on the defense sales for the year. I think the target is $1.2 billion to $1.3 billion and you did $1.1 billion year-to-date. So, I guess I'm a little confused that the fourth quarter could fall off quite that much.

Myles, you are right. I mean I think if in the executive jet business we may be looking at the lower end of the revenue guidance in this answer, you certainly will be looking at the high end. And in that case, I think we have some upside risk of surpassing that. So it's a fair question, a fair point.

And then is there anything in particular that's driving it -- modernization work or short-cycle work? I would just imagine with the reais weakening, it would have actually been more of a headwind to your full year, but…

Myles, no, it's across the board. I mean, one antidote that we have for a potential negative impact in the reais revenues – revenues in reais in the first quarter or fourth quarter is the deliveries of the LAS Super Tucano in the United States. So, I think again, it's very likely that we are in the end range or even surpass it.

And then one other one was that you talked about in the release the lower development and R&D expense and you talked about it on the call. And you made a point to say that development timelines haven't moved though. So, presumably, the cost of -- the net cost of your developments have actually come down. And I'm curious, is that more from a supplier contribution perspective or just the net cost of your developments have come down, and in particular, on what programs?

It's a combination of factors, Myles, also a little bit of a conservative planning probably from our engineering. This has been probably the most, the highest volume of engineering work the Company has ever endeavored. So I think there is maybe a little of conservatism there. There was a little bit of efficiency in sales, so there is a continuous efforts from our current team to drive efficiency. And also as you mentioned our partner's contribution which are more event related, so I think the combination of several factors shall keep us probably below 300, I'd say more maybe between 250 and 300.

And then, just one last one, just to confirm, you said the defense sales flattish into '15 or growth and presumably you're going to overachieve your guidance this year. So, I guess that's flat to where you achieve, but maybe growth from where your guidance currently is, is that the way to think about it?

That's a good question for clarification. I may answer flattish as far as the guidance.

Thank you. And our next question comes from Joe Nadol from JPMorgan. Your line is now open. Please go ahead.

Just the first question on the $300 million of defense's receivables. Are those related to any milestones like first flight on the 390 or is this now due and payable and the government is just late?

No, it’s contractual, so we have progress accrual. And it’s not past due. I mean, I am just raising this possibility because of course we do remember last quarter we did have this I think $150 million to $200 million which was a little bit past due which was paid. So we sense some difficulties there. But contractually speaking and we know the efforts on the government side are to honor those payments. But I think at this stage it’s correct here to say that yes there is a risk.

But is it due? Is it in any way tied to first flight on the KC-390?

No, it is not. The way we have the revenues in our contract is just development - percentage of completion, that’s the term. So there's no specific event, first flight, which we still believe is going to happen, by the way.

Okay. That’s my next question. So, on another area, the Legacy 650, you said you expect growth next year overall in executive driven by the 500, which of course makes sense. I'm wondering if you could give a little more commentary on the 650 and how it's competing right now? There's a lot of new aircraft in the mid-cabin area. And what your expectations are going into next year for deliveries of that platform?

I think we probably will also see some improvement in the 650. It’s an airplane that has a very good potential in the U.S. I think we have our homework to do as far as our own marketing, our own the way to sell the product and then to really have it in the market, positioning in the market. It’s a great product and I think we ought to do a better job. So yes, I also expect improvement in the 650. As far as the Lineage, this is much more a niche product. So we also will be seeing low single-digit numbers, 3, 4, 5, 6, things in that range year-over-year. But the 650 should perform better. This has not been a great year for the 650 and it should improve next year.

Can you give just a little more color on that, Fred? I don't want to push too much on it. But there is a lot of new competition and there are some signs of certainly the U.S. market improving in general. I know this has been more of a European product at times in the past. But maybe a little more color on why you don't think it sold as well this year and why you do think it will get better next year?

Yes, and very candidly, Joe, I think it’s been more our own ability to market the aircraft. I think there is nothing wrong with the airplane, quite the contrary. And we have had a specific, let’s say, under-performance in the United States. So this airplane is not an European scenario airplane. This airplane is perfect for the U.S. But I think we have done a much better job of selling the airplane abroad than we have in the U.S. So we are focusing on that as well. And these things does not happen overnight, but my team is really focusing also improving the 650 next year.

And then just one more, if you guys wouldn't mind providing as you've done in recent calls, the segment operating margins and gross margins?

Well, the third quarter, specific quarter?

In Q3, yes.

Yeah, specific quarter. We, as far as operating margin – Luciano, help me here, it's around 4% commercial, around 13% defense and a negative 5.5% for executive due to the very low deliveries.

I'm sorry, I missed the commercial. And if you wouldn't mind giving gross as well?

Commercial and gross…

Commercial gross was 15.9%, 16%, and operating margin 4%; executive 22% gross and negative 5.5%; defense 23% gross and 13% operating margin.

Thank you. And our next question comes from Eduardo Couto from Morgan Stanley. Your line is now open. Please go ahead.

I have a question on the currency, on the BRL. We saw a big movement in the currency in the last month or so. Can you remind us what is the lag between the movement in the currency and the impact of that in your results? Or in other words, when can we expect to see this 2.50 or even weaker BRL being reflected on ERJ's results?

Go ahead, Filippo.

Normally it takes like two quarters to have the full impact because it has to pass by the inventories and then go to revenue. So that’s the timing of the effect typically.

Growing, right, from no impact to full impact.

Yes.

Within due course.

So, probably we’re going to see that more reflected next year?

Yes. We still can capture something if it remains in that level in the last quarter. But if it stays -- because we normally reduce the inventories in the end of the year. So if it was a stable quarter, several quarters, that would be something like that. But they're probably going to capture a part of that in the last quarter as we deliver most of the inventory.

And just the second question regarding commercial orders. Can we expect to know more orders from the U.S. already next year or are the conversion of options into firm orders in the U.S. already in 2015 or this is more for '16, '17?

No, I think it's correct to assume that we should see some more activity next year, which will lead us towards filling up the production line like the back end of 2016 and mainly 2017. So yes, we expect that.

And just a final point, Fred. Can you give us your view regarding this Brazilian regional aviation plan? I think it should be approved this month in the Congress. So, any additional thoughts on that?

Yes, we're obviously very close to the issue. There will be -- the issue is in Congress right now. There was a report issued yesterday by the special commission and the report changed the government executive branch project. So they've decided to postpone the vote from today to next Tuesday. So we are in the hope that in Congress they do not distort the bill sent by executive branch. But now it's really down to the basic politics in Congress and we will know by Tuesday. So, at this stage it's a bit hard to predict where this thing is going.

Can we expect coming out of this regional plan or it's still too early to assume that?

If the project -- if the bill sent by the executive branch is approved as it was issued, yes, there will be a -- because it's a cascade effect. Fundamentally there will be a support for probably 100 more, 50 to 100 new communities which do not have air service today, this is low density traffic. So that will drive demand for more airplanes and for smaller airplanes, airplanes typical of our size. So, we have -- as it is public information, we have been discussing not only with Azul, which has already confirmed a new order, but also with TAM and GOL in that respect. But it's kind of a go, no go. And if the plan is approved, I think the potential is there. And by the way, this is not -- I mean we have to expect some competition there as well. There is no protection for our airplane. So, Bombardier, we also have ATR which has a large fleet in Brazil, they also will potentially benefit. We work very hard to present that, but it's a potential for regional airplanes in Brazil, which still today is very much concentrated in the trunk lines and it's a little bit uneven fleet distribution compared to the U.S. or Europe.

Thank you. Our next question comes from Darryl Genovesi from UBS. Your line is now open. Please go ahead.

Can you just put a little bit more -- and I know you've done some of this already -- but just put a little bit more color on the moving pieces for 2015? So, I guess, in particular, I think you guys have given some guidance in the past with regard to the real for a -- I guess 1% EBIT margin benefit for every 10% as the real weakens. Is that guidance still good or has that changed with the ramp-up of the Florida factory?

Hi Darryl. So as far as next year, it's still a little bit too early to try to put specific numbers on that. Of course, we have to see exactly where the revenue and cost structure will be, especially as all the three business units comprise the revenues and cost structure. So, of course, the general move will help and is a tailwind, but putting specific figures for next year, we'll have to wait a little bit more to get more clarity. As Fred mentioned in early March, we’ll have a better view there.

Is the, when I'm just thinking about the percentage move on your currency exposure, I mean my impression is that almost all of that is related to Brazilian labor. So, when thinking about the big weakening in the real that we've seen year-to-date relative to the labor inflation numbers that you're talking about, I mean should we assume that those apply on roughly the same dollar cost base?

On the cost, we may simplify that. But keep in mind that there is also the pricing issue which I mentioned, specifically more on the executive jet – sorry, on the commercial jet side, smaller airplanes, 175 and the 190, so lower price airplane, and large transactions and stiff competition. So, we are sorry, but I think we really cannot advance much further at this stage.

Maybe a little bigger picture question then. With regard to the Legacy 450 and 500, any updated thoughts on what you think the ultimate market is for those airplanes? I think you guys had initially thought of it as kind of a 40-a-year kind of number. But with the additional capacity that you're putting into Florida for Legacy 450 and 500 production, I think maybe your expectations there have increased? Is that a fair assessment?

You are breaking up, so the last part of your question we missed it, because you are breaking up.

Now is that better?

Yes.

I was saying, with regard to the ultimate Legacy 450 and 500 production rate that you think you can achieve, I think a few years ago you were sort of characterizing it as a 40-a-year kind of opportunity. And just wondering if that expectation has increased? I guess, based on the fact that you guys are putting more mid-sized capacity into Florida, it sounds like maybe your expectation had moved up there? And just wondering where you think that program ultimately goes?

I mean now if you look at the segment pre-crisis, that segment was a very healthy one. So although in the short term we may look at numbers which are in the 40 or 50 range, I mean we have decided to have just in Melbourne where these airplanes will be manufactured, just there we're going to have -- already launched the infrastructure for six a month, so 72 airplanes. We will start producing these airplanes in Brazil. So if that goes beyond the [indiscernible] which may sound like a little bit of a dream today, but if you look back to pre-crisis numbers, the numbers were actually higher than that. We can easily add capacity. So today, we are committed to have infrastructure for 72 airplanes a year, six airplanes a month. We will of course add as the demand takes us.

Thank you. And our last question comes from Pete Skibitski from Drexel Hamilton. Your line is now open. Please go ahead.

Yes, Fred, I just wanted to ask on the Saab contract for Gripens getting signed with the FAB. I think I read it to be $5.4 billion, which seemed to be larger than I expected anyway. So, I was just wondering if you could tell us what Embraer's share of that would be at this point now that it's signed and maybe what kind of a timeframe you'd expect to get started and complete that contract?

My understanding about it, although that we have no direct involvement in this contract with Saab and the air force, that this 5.4 billion is probably related to escalation and stuff like that. So there is -- to my knowledge, there is no change in the subject matter of the contract. But it's six airplanes and all the logistics associated. We have moved from an MoU through a, let's call, very advanced MoU or almost like semi-contract with Saab. And at this stage, I do not have yet numbers, so I can't tell you the x-percent is going to be us. But as far as scope of work, you have significant, the most significant amount of engineering work on the [indiscernible] version. We also have a significant amount of work in engineering as far as the adaptations of the aircraft to the Brazil Air Force's specific requirements. We will assemble a number of their planes in Brazil. That number maybe probably no less than 15 airplanes, the last 15 airplanes in Brazil. That is still under discussion. And we also -- there is also a provision where there will be some sort of a joint marketing of the airplanes between Embraer and Saab to new markets. So it's -- I mean this is a complex content. And as I said, we will be able to put figures on that probably within six months. There is some work which will be started very, very small as far as just contacts between engineering teams. So timeframe is six months, we shall have a full and final contract between Embraer and Saab, and then of course we'd be able to disclose to you more precise figures.

Are you expecting to generate some revenue on it in 2015? Is that a fair statement?

No. If there is some, it would be negligible. No.

Thank you. This concludes today’s question-and-answer session. And that does conclude Embraer’s audio conference for today. Thank you very much for your participation. Have a good day.