ERJ Embraer SA

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 6-K

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Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

For the month of May 2017

Commission File Number: 001-15102

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Embraer S.A.

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Av. Brigadeiro Faria Lima, 2170

12227-901 São José dos Campos, São Paulo, Brazil

(Address of principal executive offices)

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Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F x Form 40-F ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

HIGHLIGHTS

·          In 1Q17, Embraer delivered 18 commercial and 15 executive (11 light and 4 large) jets, representing a decline from the 21 commercial and 23 executive (12 light and 11 large) jet deliveries in 1Q16;

·          The Company’s firm order backlog ended the quarter at US$ 19.2 billion;

·          Revenues in 1Q17 were US$ 1,026.3 million, representing a decline of 21.6% as compared to 1Q16, due largely to a decline in commercial jet and executive jet deliveries ;

·          Adjusted EBIT and Adjusted EBITDA ¹ margins were 3.0% and 10.1%, respectively, in 1Q17. Adjusted EBIT and Adjusted EBITDA exclude the impact of US$ 7.6 million in additional provisions related to the Company’s voluntary dismissal program;

·          1Q17 Net income attributable to Embraer shareholders and Earnings per ADS were US$ 42.5 million and US$ 0.23, respectively. Adjusted Net income (excluding the impact of FX-related non-cash deferred income tax and social contribution and the aforementioned provision) for the quarter was US$ 23.2 million, representing Adjusted Earnings per ADS of US$ 0.13 in 1Q17;

·          In January, Embraer issued US$ 750 million in principal value of bonds at par, with maturity in 2027 and a coupon rate of 5.4%. The Company finished 1Q17 with a total cash position of US$ 3,482.0 million and total debt of US$ 4,287.8 million, yielding a net debt position of US$ 805.8 million;

·          In March, the Company announced that it successfully completed the inaugural flight of the first prototype of the E-195 E2 commercial jet, several months ahead of schedule. All three jet models of the E2 program remain on track for their respective entry into service plans – the E-190 E2 in the first half of 2018, the E-195 E2 in the first half of 2019 and the E-175 E2 in 2021;

·          Embraer reiterates all aspects of its financial and delivery outlook for 2017.

Main financial indicators ^[2]

 

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São Paulo, Brazil, May 2, 2017 - (BM&FBOVESPA: EMBR3, NYSE: ERJ). The Company's operating and financial information is presented, except where otherwise stated, on a consolidated basis in United States dollars (US$) in accordance with IFRS. The financial data presented in this document as of and for the quarters ended March 31, 2016 (1Q16), December 31, 2016 (4Q16) and March 31, 2017 (1Q17), are derived from the unaudited financial statements, except annual financial data and where otherwise stated.

REVENUES and gross margin

In 1Q17, Embraer delivered 18 commercial and 15 executive aircraft (11 light jets and 4 large jets), for a total of 33 jets delivered in the quarter. This compares to deliveries of 44 jets in 1Q16, consisting of 21 commercial and 23 executive aircraft (12 light jets and 11 large jets). The Company’s first quarter deliveries are generally the weakest in terms of seasonality, and Embraer remains confident in its 2017 guidance for 97 to 102 total commercial jet deliveries and 105 to 125 total executive jet deliveries (70-80 light jets and 35-45 large jets). Revenues in 1Q17 were US$ 1,026.3 million, representing a decline of 21.6% compared to the prior year period, as a result of lower commercial and executive jet deliveries, as well as the postponement of the Geostationary Defense and Communications Satellite (SGDC) launch, initially scheduled for 1Q17, due to a general strike in French Guiana.

Consolidated gross margin declined from 20.0% in 1Q16 to 15.1% in 1Q17, largely due to a less favorable mix and lower deliveries in the Executive Jets segment combined with the postponement of the satellite launch, which caused milestone-related revenues to shift to later this year.

EBIT

EBIT and EBIT margin in 1Q17 were US$ 23.4 million and 2.3%, respectively, down from US$ 85.7 million in EBIT and 6.5% EBIT margin reported in 1Q16. Adjusted EBIT and EBIT margin, excluding a US$ 7.6 million provision related to the Company’s voluntary dismissal program, were US$ 31.0 million and 3.0%, respectively. The year-over-year decline in revenues and its impact on fixed cost dilution, combined with the aforementioned lower gross margin, were the main drivers of the decline in adjusted EBIT margin in 1Q17 as compared to 1Q16.

Administrative expenses totaled US$ 42.6 million in 1Q17, which was a slight increase from the US$ 39.0 million reported in 1Q16, largely driven by a less favorable exchange rate in the current year’s quarter, as the average Brazilian Real to U.S. Dollar exchange rate in 1Q17 appreciated 19% relative to the average exchange rate in 1Q16. Selling expenses declined from US$ 101.4 million in 1Q16 to US$ 70.9 million in 1Q17, due largely to cost efficiencies and lower marketing-related expenses in the Executive Jets segment during the quarter. Research expenses rose slightly to US$ 8.2 million in 1Q17 from US$ 6.6 million in the prior year, principally due to the aforementioned less favorable exchange rate in the quarter. Other operating income (expense) improved to an expense of US$ 9.3 million (US$ 1.7 million in expense excluding the voluntary dismissal program provision) in 1Q17 as compared to an expense of US$ 28.5 million in 1Q16 principally due to lower provisions for impairment of used aircraft in 1Q17.

net income

Net income attributable to Embraer shareholders and earnings per ADS for 1Q17 were US$ 42.5 million and US$ 0.23 per basic share, respectively. This compares to net income attributable to Embraer shareholders and earnings per ADS in 1Q16 of US$ 103.9 million and US$ 0.57 per basic share, respectively.

Adjusted net income (loss), excluding deferred income tax and social contribution as well as the impact of the voluntary dismissal program provision, was US$ 23.2 million in 1Q17 as compared to US$ (1.7) in 1Q16. Adjusted earnings per ADS excluding deferred income tax and social contribution was US$ 0.13 per basic share in 1Q17, compared to an adjusted loss per ADS of US$ (0.01) in 1Q16.

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monetary balance sheet accounts and other measures

The Company ended 1Q17 with a net debt position of US$ 805.8 million, compared to the net debt position of US$ 574.7 million as of the end of 2016, principally due to negative Free cash flow in the quarter. Embraer’s total loans position at the end of the quarter was US$ 4,287.8 million, an increase of US$ 527.9 million compared to the Company’s loan position at the end of 2016, due largely to the US$ 750 million 10-year bond issuance completed in January.

Adjusted net cash used by operating activities net of adjustments for financial investments (and excluding cash payments related to the Company’s Voluntary Dismissal Program) was an outflow of US$  47.7 million in 1Q17 and adjusted Free cash flow for the quarter was negative US$  199.3 million. This compares to net cash used by operating activities net of adjustments for financial investments of negative US$ 14.2 million and Free cash flow of negative US$ 201.5 million in 1Q16.

Net additions to total PP&E were US$ 34.5 million in 1Q17, including values related to spare parts pool programs, aircraft under lease or available for lease, CAPEX and proceeds from sale of PP&E. Of the total 1Q17 additions to PP&E, CAPEX amounted to US$ 35.4 million, additions of aircraft available for lease was US$ 4.8 million, additions of pool program spare parts totaled US$ 12.3 million, and proceeds from sale of PP&E slightly offset these investments with an inflow of US$ 18.0 million. A portion of the reported CAPEX includes investments related to certain contracted capital expenditures in the Defense & Security segment. These expenditures are included in the terms and conditions of their respective contracts and were not considered in the Company’s CAPEX Outlook of US$ 200 million for 2017. This contracted CAPEX totaled US$ 2.4 million in 1Q17. Excluding these expenditures, CAPEX for 1Q17 was US$ 33.0 million.

In 1Q17, Embraer invested a total of US$ 117.1 million in product development, which was mostly offset by US$ 86.0 million in contributions from suppliers. The spending on product development, and also the contributions from suppliers, are related to the development of the E-Jets E2 commercial jet program, which continues to progress according to schedule. Development expenditures net of contributions from suppliers in 1Q17 were US$ 31.1 million. The Company expects spending to ramp as the year progresses to finish 2017 in line with its US$ 400 million Outlook for the year.

 

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The Company’s total debt increased US$ 527.9 million to US$ 4,287.8 million in 1Q17 compared to US$ 3,759.9 million in 4Q16. Short-term debt at the end of 1Q17 was US$ 322.9 million and long-term debt was US$ 3,964.9 million. The increase in long-term debt is due to the aforementioned issuance of US$ 750 million in 10-year bonds in January, at a 5.4% coupon rate and yield to maturity. The average loan maturity of the Company’s debt at the end of 1Q17 increased to 6.3 years from the 5.3 years reported at the end of 4Q16. The cost of Dollar denominated loans at the end of 1Q17 was 5.12% p.a., stable compared to the end of 2016. The cost of Real denominated loans decreased from 5.00% at the end of 2016 to 4.51% p.a. at the end of 1Q17.

The Company’s EBITDA over the last 12 months (EBITDA LTM) to financial expenses (gross) for 1Q17 decreased to 2.12 relative to 4Q16’s value of 2.46. At the end of 1Q17, 19% of total debt was denominated in Reais , vs. 22% at the end of 2016. Embraer’s cash allocation management strategy continues to be an important tool to mitigate exchange rate risks. By balancing cash allocation in Real and Dollar denominated assets, the Company attempts to neutralize its balance sheet exchange rate exposure. Of total cash at the end of 1Q17, 67% was denominated in US Dollars.

Complementing its strategy to mitigate exchange rate risks, the Company entered into certain financial hedges in order to reduce its 2017 cash flow exposure. The Company’s cash flow exposure is due to the fact that approximately 10% of its net revenues are denominated in Reais while approximately 20% of total costs are denominated in Reais . Having more Real denominated costs than revenues generates this cash flow exposure. For 2017, around 45% of the Company’s Real cash flow exposure is hedged if the US Dollar depreciates below an average rate floor of R$ 3.40. For exchange rates above this level, the Company will benefit up to an average exchange rate cap of R$ 3.76.    

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operational balance sheet accounts

One of the principal reasons for the lower adjusted operating cash flow generation in 1Q17 as compared to 1Q16 was due to higher working capital during the current period. Inventories increased US$ 161.8 million from the end of 2016 to finish 1Q17 at US$ 2,658.2 million, primarily due to the normal seasonal pattern of investment in inventory in preparation for higher expected deliveries in the remainder of the year. In addition, three finished executive jets originally programmed for delivery in 1Q17 were delivered in early 2Q17, leading to a higher ending inventory figure at the end of 1Q17. At the end of 1Q17, trade accounts receivable were also higher, at US$ 678.7 million, representing an increase of US$ 13.3 million from the level of receivables at the end of 2016. Other impacts on cash flow during 1Q17 included a decrease of US$ 57.3 million in trade accounts payable to end the quarter at US$ 894.8 million, and a US$ 14.6 million decrease in advances from customers to end 1Q17 at US$ 841.6 million.

Intangibles increased US$ 13.6 million, from US$ 1,664.6 million at the end of 2016 to US$ 1,678.2 million at the end of 1Q17 as a consequence of continued investments in product development. Property, plant and equipment ended 1Q17 at US$ 2,183.7 million, compared to the US$ 2,154.2 million at the end of 2016.

Total Backlog

Considering all deliveries as well as firm orders obtained during the period, the Company’s total firm order backlog decreased US$ 0.4 billion during 1Q17 to end the quarter at US$ 19.2 billion.

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segment Results

The Commercial Aviation segment represented 62.0% of consolidated revenues in 1Q17, as compared to the 54.3% reported in 1Q16. The portion of Executive Jets revenues decreased from 30.7% in 1Q16 to 22.0% in 1Q17, due to a 43.8% decline in revenues on lower deliveries in 1Q17 as compared to 1Q16. The share of Defense & Security revenues increased slightly from 14.5% in 1Q16 to 15.2% in 1Q17, though revenues finished with a year-over-year decline of 17.7% in 1Q17. Other segment revenues as a percentage of total 1Q17 revenues were 0.8% versus 0.5% in the prior year period.

During the quarter, Embraer announced Brazil’s Azul as the launch operator for the E195-E2 and Norway’s Widerøe as the launch operator for the E190-E2.

In January 2017, Embraer signed a contract with Widerøe, the largest regional airline in Scandinavia, for up to 15 E2 jets. The Norwegian regional carrier will place the E190-E2, the first member of the second generation E-Jet family, into revenue service in the first half of 2018. Azul, the largest operator of the current generation E195s in the world, will fly the E195-E2 in the first half of 2019. The deal between Embraer and Azul was firmed in 2015 and is for up to 50 aircraft, consisting of 30 firm orders and 20 purchase rights.

The E-Jets E2 development program remains on time, on specification and on budget. The company performed in March the maiden flight of the E190-E2 fourth prototype. The aircraft will be used for interior tests such as cabin evacuation, environmental comfort and internal noise. Also in March, the E195-E2 took off for the first time. The flight, originally scheduled for the second half of the year, happened just three weeks after the roll out.

The current E-Jets customer base has been continuously expanding. Throughout the first quarter of 2017, South Africa’s Airlink joined the E-Jet operator family. The airline is acquiring five E-Jets — three E170s and two E190s ―, from ECC Leasing, a wholly-owned Embraer subsidiary, as part of a planned growth and modernization strategy. Airlink will start to receive the aircraft in the first half of 2017.

In the segment of commercial jets with 70 to 130 seats, Embraer maintains its leadership with more than 50% of the sales and 60% of the deliveries in the world market.

At the end of 1Q17, the order book (backlog) and cumulative deliveries for Commercial Aviation were as follows:

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During the first quarter of 2017, Embraer announced that the Phenom 300 was the industry’s best selling business jet across all segments in 2016, marking the fourth consecutive year of this achievement for this model. Embraer delivered 63 Phenom 300 jets in 2016, the highest volume of any business jet model, according to the General Aviation Manufacturers Association (GAMA).

Also during 1Q17, Embraer appointed Michael Amalfitano as the new President and CEO of its Executive Jets business unit. Mr. Amalfitano succeeded Marco Tulio Pellegrini, who was appointed as the new CEO of OGMA – Indústria Aeronáutica de Portugal.

In March, two important aircraft delivery milestones also took place. The first Phenom 100EV model was delivered in Melbourne, FL to an undisclosed US customer and the 400th Phenom 300 was delivered to Elite Jets, an air charter/taxi company, recently established in Naples, Florida. The delivery occurred during a ceremony at Embraer’s Customer Center, also in Melbourne, FL. The 400th Phenom 300 joins Elite Jets’ all-new Embraer aircraft fleet, now consisting of one Legacy 500 and four Phenom 300s.

Defense & security

In 1Q17, Embraer delivered two Super Tucano aircraft to the United States Air Force (USAF) that will be commissioned to Lebanon.

With respect to the KC-390 program, the development and certification progressed with tests in cooperation with the Brazilian Air Force to evaluate the aerial refueling system and the aircraft cargo handling system. In addition, crosswind tests were performed in Punta Arenas, Chile and Río Gallegos, Argentina.

The Geostationary Defense and Communication Satellite Program (SGDC), whose integration is under the responsibility of Visiona Tecnologia Espacial, had the satellite and launcher ready for launch, but due to events of force majeure, given a general strike and social movements in French Guiana, its launch was postponed until after the general strike ends. Visiona continues to offer its service of satellite imagery analysis, via a constellation of 27 satellites, with the objective of developing large remote sensing projects in Brazil and neighboring countries. Visiona seeks to consolidate itself as the national leader in satellite imagery, and during 1Q17 was successful in winning contracts with companies such as Suzano Papel e Celulose and CTG.

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The Services and Support area signed logistical support contracts with the Panamanian Government for the Legacy 600 jet, with the Mexican Air Force for its surveillance aircraft, and with the Indian Air Force for its Legacy 600 fleet. A contract was also signed with the Colombian Air Force for technical publication revisions covering all Embraer platforms.

Atech, jointly with the Government of India, during the country’s Republic Day inaugurated the AAI (Airports Authority of India) Command and Control Center. During LAAD 2017, an international airshow for Defense and Security, Atech launched ARKHE, a set of integrated and efficient products for Command and Control systems. The SAGITARIO traffic control system was also completed in APP (Approach Control Center) Salvador and ACC (Area Control Center) Recife.

class action UPDATE

In August, 2016, a putative securities class action was filed in a U.S. court against the Company and certain of its former and current executives, asserting claims in connection with allegedly false and misleading statements and omissions concerning the FCPA investigation and related matters. In October, 2016, a federal Court in New York appointed a lead plaintiff and a leading counsel for the putative class action. In December 2016, lead plaintiff filed an amended complaint. The Court has not yet issued a briefing schedule for the motion to dismiss and other procedural aspects of the case. So far the Company believes that there is no adequate base to estimate provisions related to this matter.

Reconciliation OF IFRS and “non gaap” information

We define Free cash flow as operating cash flow less Additions to property, plant and equipment, Additions to intangible assets, Financial investments and Other assets. Free cash flow is not an accounting measure under IFRS. Free cash flow is presented because it is used internally as a measure for evaluating certain aspects of our business. The Company also believes that some investors find it to be a useful tool for measuring Embraer's cash position. Free cash flow should not be considered as a measure of the Company's liquidity or as a measure of its cash flow as reported under IFRS. In addition, Free cash flow should not be interpreted as a measure of residual cash flow available to the Company for discretionary expenditures, since the Company may have mandatory debt service requirements or other nondiscretionary expenditures that are not deducted from this measure.  Other companies in the industry may calculate Free cash flow differently from Embraer for purposes of their earnings releases, thus limiting its usefulness for comparing Embraer to other companies in the industry.

EBITDA LTM represents earnings before interest, taxation, depreciation and amortization accumulated over a period of the last 12 months. It is not a financial measure of the Company’s financial performance under IFRS. EBIT as mentioned in this press release refers to earnings before interest and taxes, and for purposes of reporting is the same as that reported on the Income Statement as Operating Profit before Financial Income.

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Adjusted Net Income is a non-GAAP measure, calculated by adding Net Income attributable to Embraer Shareholders plus Deferred Income tax and social contribution for the period, as well as removing the impact of non-recurring items. Furthermore, under IFRS for purposes of calculating Embraer’s Income Tax benefits (expenses), the Company is required to record taxes resulting from gains or losses due to the impact of the changes in the Real to the US Dollar exchange rate over non-monetary assets (primarily Inventories, Intangibles, and PP&E). It is important to note that taxes resulting from gains or losses over non-monetary assets are considered deferred taxes and are accounted for in the Company’s consolidated Cash Flow statement, under Deferred income tax and social contribution.

Some Financial Ratios based on “non GAAP” information

  (i) Total debt represents short and long-term loans and financing.

(ii) Net debt represents cash and cash equivalents, plus financial investments, minus short and long-term loans and financing.

(iii) Total capitalization represents short and long-term loans and financing, plus shareholders equity.

(iv) Financial expense (gross) includes only interest and commissions on loans.

(v) The table at the end of this release sets forth the reconciliation of Net income to adjusted EBITDA, calculated on the basis of financial information prepared with IFRS data, for the indicated periods.

(vi) Interest expense (gross) includes only interest and commissions on loans, which are included in Interest income (expense), net presented in the Company’s consolidated Income Statement.

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FINANCial statements

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Investor Relations

Eduardo Couto, Chris Thornsberry, Caio Pinez, Nádia Santos, Paulo Ferreira and Viviane Pinheiro.

(+55 12) 3927- 1000

investor.relations@embraer.com.br

http://ri.embraer.com.br

Follow Embraer’s IR Department on twitter: @IREmbraer

ABOUT EMBRAER

Embraer is a global company headquartered in Brazil with businesses in commercial and executive aviation, defense & security. The company designs, develops, manufactures and markets aircraft and systems, providing customer support and services.

Since it was founded in 1969, Embraer has delivered more than 8,000 aircraft. About every 10 seconds an aircraft manufactured by Embraer takes off somewhere in the world, transporting over 145 million passengers a year.

Embraer is the leading manufacturer of commercial jets up to 130 seats. The company maintains industrial units, offices, service and parts distribution centers, among other activities, across the Americas, Africa, Asia and Europe.

For more information, please visit www.embraer.com.br

This document may contain projections, statements and estimates regarding circumstances or events yet to take place. Those projections and estimates are based largely on current expectations, forecasts of future events and financial trends that affect Embraer’s businesses. Those estimates are subject to risks, uncertainties and suppositions that include, among others: general economic, political and trade conditions in Brazil and in those markets where Embraer does business; expectations of industry trends; the Company’s investment plans; its capacity to develop and deliver products on the dates previously agreed upon, and existing and future governmental regulations. The words “believe”, “may”, “is able”, “will be able”, “intend”, “continue”, “anticipate”, “expect” and other similar terms are intended to identify potentialities. Embraer does not undertake any obligation to publish updates nor to revise any estimates due to new information, future events or any other facts. In view of the inherent risks and uncertainties, such estimates, events and circumstances may not take place. The actual results may therefore differ substantially from those previously published as Embraer expectations.

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