Okay, good morning everyone, and welcome to the Embraer's Third Quarter 2016 Results. This conference call is being held at during the Embraer 2016 in the U.S with the presence of investors and the market analysts here in Orlando. This time, the Company will present its third quarter 2016. Afterwards, we will conduct a question-and-answer section and instructions to participate will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded and webcasted at ri.embraer.com.br. This conference includes forward-looking statements or statements about 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 believes, may, will, estimates, continues, anticipates, intends, continues, anticipates, intends, expects and similar words are intended to identify forward-looking statements. Embraer undertakes no obligations to update publicly or revise any forward-looking statements because of 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 might not occur. The Company's actual results could differ substantially from those anticipated in the forward-looking statements. Participants today are Mr. Paulo Cesar de Souza e Silva, President and CEO; Mr. Jose Filippo, Chief Financial Officer and IRO; and myself, Eduardo Couto, Director of Investor Relations. Now, I would like to pass to Filippo to start the presentation. Thank you.

Okay, thank you to everybody joining us in this third quarter results conference. As we do, we'll start with the presentation and then we enter in Q&A session. So with the presentation starting Page 3, the highlights, and starting with the Commercial Aviation business, we had in terms of deliveries, the delivery of 29 E-Jets in the third quarter compared to 21 E-Jets in the same quarter of last year. In terms of sales activities, two important information Colorful Guizhou Airlines order for up to five E190 in China and also the announcement of Aercap to place five E-Jets E2 with Borajet. This reflects what we're seeing the successful placement of E2s by using companies with airline. Regarding certification, we had the approval for E170 and E175 for operation in Russia. We already have this approval for the E190 and E195. Regarding in relation to the E2 development program, we had the third prototype of the E2-190 joining the flight campaign and the status of the order activity with the backlog that reached 272 firm orders and total of 670 commitments. Moving to next page in relation to the highlights of Executive Jets business, starting with the delivery of 25 jets in the third quarter, broken by 13 lights and 12 large, a good mix between large and light; also regarding sales Colorful Yunnan order for two Phenom 300. In relation with the program, we launched the Phenom 100 EV with new avionics and modified engines. And in the Legacy 450 and Legacy 500 program, the first Legacy 450 assembled in Melbourne is now being flight test. As we used the information before regarding the customer satisfaction, we were ranked number one in both AIN and Pro Pilot's Product Support Surveys for 2016. This is something very important for the…

So thanks, Filippo. Hello, guys and good morning. So thanks for coming here to hear us and. So, I think we have to say, it's a very special moments at the Embraer. So, you remember now our call in July, so we've had a couple of announcements that were very important to Embraer. So, the first was the provision on the FCPA; and the second was the revision on the guidance specially for business jet, and I think at that moment, so we started to adjust the Company for the environment that we are seeing in the attributive units, and also regarding the FCPA that was the beginning of the settlement on our case. So, let me elaborate a little bit on this because of course this is a high profile case for us. I think this is over now. We have to turn the stage so the Company fortunately made that mistake years ago. The Company is responsible for debts. So, I think we have already wrote in our press release everything about that internally also we've had few meeting with the leadership explaining what happened, and now so we really have to turn this page and look forward and look into our operations and how we will develop further Embraer going forward. So having said that immediately or in conclusions with the FCPA case, I'd say with the set tomorrow right of the case, we are now -- so, it is a cost reduction like program, it is highly necessary. So, we had -- we need to have efficiency in the Company, and so it was -- it is very much due. We estimated that $200 million and the orientation was that we have to get 200 million costs reduction until end of this year. So, I think…

Okay. Paulo, thank you. I think now we'll enter into the Q&A session. We'll start with the audience here. We have support from the microphone. So, if you want to ask a question, please raise your hand and we will be sending the microphone to you.

Good morning. Pete Skibitski, Drexel Hamilton. So, Paulo, as you said that it sounds like a bulk of the cost take out we'll see new results, I think is that what you said. So is it fair to conclude that adjusted operating margins will rise in 2017 and also I'm curious about if that implies a cash flow will turn to positive in 2017?

Well, yes, margin should be better the next year, right, so that's the plan. Of course, we have an execution risk here, but we have to be focused on execution on the commercialization it's more or less set. So, it was more on the right on the business jet, but we are bullish on the business jet as I mentioned. So, on the cash generation, we should be -- so, I don’t know if you can give -- I'd say that, but we already mentioned right in our comment in July that the cash is used here is going to negative for a couple of reasons, but the one of the main reasons is that as we decided to manufacture business jet this year, but not with pressure on selling end also it delivered this year, right. So, we will go with our inventory of business jets for next year $100 million or $200 million. So, this is one of the reasons that we are having this big net cash negative. But next year, it will be much better.

I think it is important to call that we started the year 2016 and our balance was a negative 100 or better and then we changed that for the negative 400 exactly when we announce that we were reducing our the levels of deliveries in the biz et. So with this some inventories and we could expect 2017 that the opposite way because those inventories will be sold and will be already produced. But don't forget that we still have the level of investments of we choose to peak-in into 2016 and '17 as what we see. So, it's still something that we have to face next year.

Myles Walton, Deutsche Bank. I just got a follow-up on that first. I think the business jet unit, the margins were negative again and Paulo you talked about next year being a better year, are we going to hit low-single digit this year for the full year in business jets? Is that going to be profitable this year? And what is the target for business jet margins over the next couple of years?

Of course, there is the adjustment that we mentioned that they are under process, some adjustments to be made. There is a seasonality of the biz jets with typically the first three quarters are not the best quarters, so we expect to be profitable in 2016. We don't give the guidance for the margin itself, but we mentioned that it'll be like low single-digit that would be something that we would be expecting and we hope that we can get by 2016. That's what we've targeted.

And your target for that business over the medium term?

The medium term of course as we adjust the capacity of that in terms of focusing the price rather than the volumes, the Company will adjust itself as well with those cost reduction measures will affect also biz jets. So, we expect to have profitable business in following years, that's we expect. I'm talking about biz jets specifically.

Cai Von Rumohr from Cowen. So, Paulo, you have up there one of the points being that there would be lower investment after the E2 while Embraer has done a terrific job of developing products. One of the complaints investors have that the cash flow has been not as consistent. If you look out to 2020, do you have any longer term targets where we you think margins should be and where you think cash flow should be as a percent of sales or any sort of metric?

Well, in terms of margins, I think this business should generate double digit margins, right. So, somewhere between 11% to 13%. So, I do expect that going forward with the adjustments that we're making with enhancements about the products going so forth, and of course, we have to counter little bit also the improvement of the market by targeting we're set to have better margins going forward. So, this is our, I'd say targets, right. So, I believe investors will be happy if we can deliver that. So, hopefully, we have to better understand also what is going on in this cycle now. I think in the conservation relation cycle, but it looks like we continue to have a very strong market with pockets of softness right in certain markets. But, however, overall speaking so it's still very good and we're receiving very good interest on E2. So, John, will talk more about that on the opportunities. So, I think business like positive on margin -- on the cash generation, if we don't invest of course we will generate more cash, right. However, it's an industry that we can't afford not to that, so we will have to look at what we will be our next move. So, we don’t have yet anything decided. We are looking as always we do two alternatives, but next forever here what's next in like business jet, what's next in commercial and but not overall is being decided. So, we have to be careful, so we have to -- first of all, I want to monetize this investment that we have made in the next years and to look also into the services business and see which opportunities there would be there in order to grow our business.

Before we get to the next question here just ask to you hold the desks and give the opportunities for the ones that connected for the question.

Yes, we're going to shift to phone. We're going to take a question. Before the next from the audience, we're going to shift and take a question from the phone. Operator, can you help us?

Our first question comes from Noah Poponak with Goldman Sachs.

Paulo, where do you think you can be next year in 2017 relative to that 11% to 13% EBIT margin now you just mentioned?

Noah, good morning. This is a first question. I don’t know, so our plans I mean are planning to be more efficient by all mean, right. So, we get extracted most value on our products and our business units and growing others revenues. So where we are going to be next year is not clear yet, but higher than what we are today and probably less than what I said.

Okay. Can you quantify, are you able to quantify even as roughly what you see as the labor inflation and FX headwinds next year against the $200 million?

Well, labor index, this is unclear, the ask is about to 9%, I do expect that we negotiate to be much lower than that because we are showing to our employees to our people that if we continue to keep growing salaries like this as we did in the previous year, so this is no longer sustainable. Max, I would say 9%, but I do expect that it will be less than that. For the exchange rate, this is much harder to guess. So, I think nobody understands or can guess right exchange rates, so we already saw many forecasts that were not better at the end. I don’t know, we count I think the exchange rates can be around the 3.20 to 3.30 in average next year, right. So, now we are seeing 3.20, we had some real appreciation that last for 30 days given the agreement between Brazilians with the money outside, so very clear in about their investments outside Brazil and pay a fine for that and also by taxes, so a lot of money for the fine, for the taxes went into Brazil. So, that's one of the reasons that the real appreciated in the last 30 days. But today which is the last day of these events, so the real is back around the 3.17 to 3.18. So, I think from now on it's going to be between 3.20 to 3.30.

Can you guys just rebase us on your total company EBIT FX sensitivity just given it's kind of a moving target with the commercial and the defense pieces moving in the opposite direction?

No, it's settled here. Our sensitivity for the FX, it went down a little, but it still remains around 10 to 15 basis points for each $0.10 weaker BRL against the dollar. So, if the BRL gets $0.10 weaker, we tend to expand margins by 10 to 15 basis points.

Let's go back to the Kristine Liwag. Sorry to interrupt you.

Kristine Liwag from Bank of America Merrill Lynch. Post the E2, you guys are pretty clear that for long-term investors that's where you'll get a lot of return, margins of 33, cash flow, but when you look at the competitive dynamics in your market, right. So that's something you want to see market, you're getting a lot more competition out there. You've got the MRJ, you've got the Sukhoi, the Chinese are trying to definitely build narrow body aircraft either in that segment or a little bit higher. When you think about the long-term competitiveness of your portfolio, do you think that there would be a follow onto the E2 after the E2? Or do you think, is your, it's a product really that much better than the competition that you don't need to invest right away? Can you give us a little bit more background on how you're thinking about that issue?

That's a very good. So, of course, that we'll have to look at the markets, right, as always. So, the market is very dynamic. So, we have seen a big movement now from the big manufacturers or the main manufacturers, right, by investing in new products or the ranging of the current products like Boeing and Airbus. So, they took a decision to ranging their narrow bodies of the Bombardier series. And with that, we also had to launch the E2. So, at that moment when these decisions were made, oil price was $130 and $140, and now it is $45 to $50. So, I don't believe that all these new products would be launched, if we would have to take a decision today. So, this shows how the market is dynamic in this regard, right. So, going forward, now, I don't think we'll launch any new aircraft that will be larger than the E2. If Boeing and Airbus are still in this segment in where they are today, so I think we have taken the right decision few years ago when we decided not to go head-to-head with Airbus and Boeing, right. Again, so we are just much able to do a very efficient narrow body, so we have the knowhow, so we have that people, we have the engineers, so we have experience. But we don’t see a strong business case to compete head-to-head with Airbus and Boeing. So, if they decide to move upwards to grow their aircraft in 140 to 150 seaters jet and give up a little bit of this market yet at that moment is different. So, we will look again. So, going forward now from 2018, we are going to have MRJ, we are going to have the Chinese with ERJ doing one more in the market and also Sukhoi. If already in the markets, so they are looking at a new version now of a 150 seat, so we believe that we are in a strong position. So, we have a very good product of the most efficient family of aircrafts in the segment. We are a market share leader. We have incumbency. We have I mean we are with the E-Jets 70 countries -- I am sorry and in more than 60 countries are most one general right operator, so it's a huge incumbencies. So we have to continue to do our homework to continue to be efficient right in the product and customer support and do more of what we are doing with some enhancements. So with that, I believe that we will continue to have successful commercialization.

Great that's very good color and if I could squeeze on more on that margin question. I mean, if I look at the $200 million that you are planned to say that you announced in September 2016, can we expect that all to flow through your numbers in 2017 because if you do the math there it looks like you are pretty much close to double digits in 2017, if that's the case?

It should be half of that, 2017

Thank you. Derek Spronck with RBC Capital Markets. Commercially you had a nice pick-up in deliveries for the third quarter, is that sustainable accounting for seasonality into 2017?

Well, our plan for next year is to deliver more or less the same number of aircraft as we introduce here right in commercialization. So, we don’t know exactly the numbers, so it will guidance next year I think January, February. But we anticipate that's going to be more or less in the same order of what margin to it for the year of 2017.

Okay. The U.S. carriers started converting of any of their options of some of the orders that you won with the ERJ-175 the last few years and have any of the options passed without any of the carriers converting?

Let me ask you to wait a little bit and going to ask John Slattery to like elaborate on right on this in his presentation. Is that, okay?

Yes, that's okay. And then just finally you have about two months left remaining in the year, I'd say that you have a fairly wide range for your EBIT and EBITDA margins, are you tracking closer towards the top end of your guidance range in 2016?

Yes, we're still in the middle, not on top. I think that middle will be fair to expect and we're going to way to get there.

And just finally on the settlement with the Brazilian and U.S. governments, with compliance of the settlement, are there reoccurring costs as you continue to comply with the settlement that you reach with those two countries?

No, regarding the settlement itself, it's done. The Company has its program of improving its processing and everything, I already mentioned that. This is part of the ongoing business. There's only specific cost that we expect it related to the agreement or is set.

Okay, now we're going to take another question from the phone. Operator, can you help us?

The next question comes from Turan Quettawala from Scotiabank from Scotiabank.

Just maybe in terms of the margin targets for next year, you provided really good color on the cost savings there, is there -- can you give us any sense of maybe where pricing is trending I guess more on the executive aviation side. I'm wondering, if that can chew away some of that improvement that you're looking at in terms of cost?

Well, it's no secret, right, that the margins are under pressure. So we're seeing about the markets as it is that it is, so we have five manufacturers, manufacturing around round 650 to 700 aircrafts this year, coming from market that in 2008 was at peak 1,200. So, it's a lot of pressure on just markets, a lot of used inventory still, right. So, it’s a pressure on this market. So, we count on improving the margins next year by reducing our costs on business jet unit. There're inefficiencies still in business jet because we're manufacturing aircraft in Brazil and we're manufacturing aircraft in the U.S. And as transfer 100% of the business aviation into U.S., Melbourne, so there'll be of course less cost associated with that. And this cost reduction plan here also will be in place from January 1st. In addition to that, we believe that we have a product that's merit right to premium and we're seeing the market with the Phenom 300s and the Legacy 450 and the Legacy 500 coming as well. So, as we consolidate this product especially the Legacy 450 and Legacy 500 in the market, so we believe that we'll be able to gain some margin as well. So, this is our forecast, this is our view for next year.

And I guess just one quick one here also on the cash payments, it's about $325 million I guess in terms of both the voluntary retirement and the DOJ payments. All of that is going to go through in Q4. Correct, on a cash side?

No, on cash basis, we can process the 80 billion will be made in next year.

Over that 325?

Yes.

Thank you gentlemen and good morning. Stephen Trent from Citi. Just two questions from me. The first is when you think about the low order campaigns for the E2. Any thoughts is to what is your best case thinking with respect to whether your Canadian rival gets additional help from its federal government, and what I should say help as, so it's haven’t help yet? And the second question just on the military-side when you think about the Super Tucano, any color on potential new demand for that whether it's coming from foreign governments or whether it could come from the eventual retirement of the A-10 in the United States?

Thanks, Steve. On your first question, I think E2 program is going very well, so in both by technical and also by commercial. So, as you look at that we have launched this program in 2013, right, and the three years after. So, we are basically with 284 orders confirmed from and the 600 plus when you consider LOIs and other agreements. So, I believe this is a pipe solid. John Slattery will elaborate a little bit more right on the markets, so we are seeing a tremendous potential by going forward. There are the new events. There are new information that's important to share with you and John will do that. On the Super Tucano, yes, there are more opportunities and I also hold in my comments here because I don’t want to jeopardize Jackson's presentation, okay.

Alexandre Falcao with HSBC. I have two questions. First on the gap between the E1 and E2, if I'm not mistaken it is to have 30 to 40 airplanes to fill up the gap. As we enter in 2017 when is a date that we should see those and can you spend the whole year of 2017 without those gaps? And second where you are willing to go on margins to fill that gap? That's the first question. Thank you.

Thank you, Falco. If you allow me just to going back to Steve's question because a part of this question has been not answered, regarding the Bombardier in Canada and this is the very one, so I think we were already very vocal on this topic and we will continue to be. So, we can't afford to having industry go out and write report that dis-balance the game and putting jeopardy the Latin friendship, right. So, what Bombardier did, of course is not good and may destroy the dynamics of the market because they offered their right product at the low cost, no matter what, as I know you guys, if I ask it here; what was the price? Maybe some of you will say 23 or others will say 21 and 22. So whenever the price is below 27, 28, so this is below cost. And so Government of Canada get back in this case, is banking this gap, and we are very close to our government and our government is taking actions in the sense of by talking to the authorities in Canada to show that this is something that must stop. Recently also the United States government interfered as well and I think last week and also started to be more vocal also right on this problem. So, we do counts, we do believe that Federal Government of Canada will not place this additional investment of $1 billion. If they do of course we'll be very rightly disappointed and go into WTO. It's not Embraer of course it's Brazil that would go to WTO. It's a possibility; however, it's not efficient, right. So, going to WTO is going to take six to eight years years where we have a big dispute there. But what is important is our status in the market meanwhile. So, we're looking into that, so we're focused on that. And hopefully, there'll be no need for that. So, Falco, for your question, can repeat please again? Sorry.

On the gap between the E-1 and E-2?

How we had the gap, yes. Yes, we still had a guess, but we're seeing solid activities and John will talk more about that. So, I believe we have until third quarter of next year, right, to close sales enough to place us in a better position in 2018. So, it still is bad to '18, right. But we still lead more, but we're very positive that being orders coming from the United States for the 76 seaters or 190, 195 from the other countries, we'll get there.

And just final question how much of the Legacy family or how much of the margin increase on the biz jet depends on the Legacy's the 450 and the 500, how much you need to sell that to come to a target or at least to have these improvement in margins going forward?

You mean for next year?

Yes, or and going forward?

Exactly, I don't know how to answer this, so I think we have to look at that and get back to you.

Okay, I think we still a lot of questions, but we're still going to have our individual presentation for the business unit. So, I think with that, we concluded our third quarter 2016 conference call. Thank you very much for all they were connected through the phone. Filippo, do you have any final words.

It's okay.

Okay, so that's it, we conclude our third Q 2016 conference call. Thank you. Have a good day.