FORM 6-K

6-K 1 d912728d6k.htm FORM 6-K FORM 6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

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

under the Securities Exchange Act of 1934

For the month of March 2020

Commission File Number: 001-15102

Embraer S.A.

Av. Brigadeiro Faria Lima, 2170

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

(Address of principal executive offices)

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 ☒ 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): ☐

LOGO

TABLE OF CONTENTS


1. Message from the Chairman of the Board of Directors			3
2. Information and Guidelines for Attendance at the Meetings			4
2.1. Voting at the Meetings			4
2.2. In-Person Attendance at Meetings			5
2.3. Participation through Distance Voting Ballot (Boletim de Voto à Distância)			6
3. Call Notice			8
4. Management’s Proposal on the Agenda			10
4.1. To review the management accounts and to examine, discuss and approve the financial statements for the fiscal year ended December 31, 2019			10
4.2. To review and to resolve on the allocation of net income for the fiscal year ended December 31, 2019			10
4.3. To elect the members of the Fiscal Council			10
4.4. To determine the aggregate annual compensation of the Company’s management			11
4.5. To determine the compensation of the members of the Fiscal Council			12
4.6. To pass a resolution on the amendment to the Company’s Bylaws to change the composition of the Strategy Committee, the Personnel and Governance Committee and other advisory committees of the Board of Directors that may be created			12
4.7. To pass a resolution on the amendment to the Company’s Bylaws to include a rule regarding the possibility of the Company entering into indemnity agreements			12
4.8. To approve the restatement of the Company’s Bylaws in view of the abovementioned amendments			12
4.9. To approve the long-term incentive plan for the Company’s executives			12
LONG-TERM INCENTIVE PLAN – VIRTUAL SHARES			137
ANNEXES:
Annex I – Management’s Considerations			13
Annex II – Opinion and Report of the Audit, Risk and Ethic Committee			51
Annex III – Information about the Candidates for the Fiscal Council			55
Annex IV – Management Compensation			64
Annex V – Proposed Bylaws			101
Annex VI – Report of Proposed Amendments to the Bylaws			130
Annex VII – Long-Term Incentive Plan Proposal			135
Annex VIII – Copy of the Long-Term Incentive Plan			137

This is a free translation of the manual and management proposal for the Embraer’s shareholders’ meetings required pursuant to Brazilian laws. This is not, and shall not be read as, proxy statement compliant with U.S. laws. If there is any inconsistency or ambiguity between the English version and the Portuguese version of this manual and management proposal, the Portuguese version shall prevail.

1. Message from the Chairman of the Board of Directors

São José dos Campos, March 27, 2020

Dear Shareholder,

We are pleased to invite you to attend the Annual and Extraordinary General Shareholders’ Meetings (“Meetings”) of Embraer S.A. (“Embraer” or “Company”), cumulatively called for April 29, 2020, at 10:00 a.m., to be held at the Company’s headquarters located at Avenida Brigadeiro Faria Lima, 2170, in the city of São José dos Campos, State of São Paulo.

Embraer’s shares have been listed on B3 S.A.—Brasil, Bolsa, Balcão (“B3”) since 1989 and on the New York Stock Exchange (NYSE) since July 2000 through American Depositary Receipts (ADRs).

Since the corporate restructuring that took place in 2006, Embraer’s capital stock has been exclusively comprised of common shares, as well as one golden share held by the Brazilian Federal Government, without a control group or a controlling shareholder. Since then, Embraer’s shares have been included in the Novo Mercado segment of B3, the highest level of corporate governance that a company can have in Brazil.

In the Meetings, you will be invited to review and resolve on the matters included in the Call Notice, in accordance with item 3 below. Embraer’s Management presented proposals related to the matters on which to be voted, which are included in this Manual.

For (i) the Annual General Shareholders’ Meeting to take place on first call, the attendance of shareholders representing at least 25% of the capital stock is required, pursuant to Section 125 of Law No. 6,404/76; and (ii) the Extraordinary General Shareholders’ Meeting to take place on first call, the attendance of shareholders representing at least two-thirds of the voting capital stock is required, pursuant to Section 135 of Law No. 6,404/76.

Considering the legal and statutory requirements related to the quorum for these resolutions, I emphasize the importance of your vote on the matters presented herein.

Embraer’s relationship with its shareholders is based on the disclosure of information with transparency, clarity and respect for legal and ethical principles, consolidating and preserving Embraer’s image of leadership and innovation in the capital markets. We hope that the information contained herein, prepared in this spirit, will clarify the matters on the agenda and motivate you to attend the Meetings.

We encourage your attendance in the Meetings, in the best interest of Embraer. Remember, your vote is very important to us.

We appreciate your attention,

Alexandre Gonçalves Silva

Chairman of the Board of Directors

2. Information and Guidelines for Attendance at the Meetings

2.1. Voting at the Meetings

Each common share will be entitled to one vote on the resolutions of the Meetings, subject to the following limits set forth in the Company’s Bylaws:

No shareholder, or Shareholders’ Group (as defined below), Brazilian or foreign, may cast votes in excess of 5% of the shares of the Company’s capital stock; and

The Foreign Shareholders (as defined below) and Foreign Shareholders’ Group (as defined below) may not cast votes in excess of two-thirds of the total votes that may be exercised by the Brazilian Shareholders (as defined below) in attendance.

The above limitations apply to the Foreign Shareholders and Foreign Shareholders’ Group, jointly and successively.

The votes of the Brazilian Shareholders and the Foreign Shareholders on the resolutions of the Meetings will be calculated separately. To that end, the Chairman of the Meetings shall, upon becoming Chairman, determine and communicate the total number of votes that may be cast by the Brazilian Shareholders and by the Foreign Shareholders, observing the voting limits set forth in the Company’s Bylaws. If the total number of votes of the Foreign Shareholders exceeds two-thirds of the votes that may be cast by the Brazilian Shareholders, the number of votes of each Foreign Shareholder, including those received by means of distance voting ballot (boletim de voto à distância) sent directly to the Company or through a third party, shall be proportionately reduced by the percentage of such excess, so that the total number of votes of the Foreign Shareholders does not exceed the limit of 40% of the total votes that may be cast in the Meetings.

For purposes of applying the restriction on the maximum number of votes attributed to each shareholder, you must take into account the following definitions set forth in Embraer’s Bylaws:

Shareholders’ Group – A shareholders’ group are two or more shareholders: (i) that are parties to a voting agreement, either directly or through companies that are subsidiaries, parent companies or companies under common control; (ii) where one shareholder is, directly or indirectly, a controlling shareholder or a controlling parent company of the other shareholder or shareholders; (iii) that are companies directly or indirectly controlled by the same person, or group of persons, who may or may not be shareholders themselves; or (iv) that are companies, associations, foundations, cooperatives and trusts, investment funds or portfolios, universal rights or any other form of organization or undertaking (a) with the same administrators or managers, or further (b) whose administrators or managers are companies that are directly or indirectly controlled by the same person/entity, or group of persons/entities, which may or may not be shareholders.

As for investment funds, only funds with a common administrator, whose policies of investments and exercise of voting rights provides the administrator with full authority to decide and resolve at shareholders’ meetings, will be considered to be a member of a Shareholders’ Group.

The holders of securities issued under the Company’s Depositary Receipts program are not considered a Shareholders’ Group, unless they meet any of the criteria set forth in items (i) through (iv) above.

Any shareholders or Shareholders’ Group that are represented by the same proxy, administrator or attorney in fact shall be deemed members of the same Shareholders’ Group in the Meeting, except in the case of holders of securities issued in connection with the Company’s Depositary Receipts program, when represented by the respective Depositary Bank.

In the event of shareholders’ agreements that govern the exercise of voting rights, all signatories thereto shall be considered members of the same Shareholders’ Group for purposes of the limitation on the number of votes described above.

Foreign Shareholders’ Group – A Shareholders’ Group will be considered foreign whenever one or more of its members is a Foreign Shareholder.

Brazilian Shareholders – The following are Brazilian Shareholders: (i) individuals born or naturalized in Brazil, residing in Brazil or abroad; (ii) legal entities organized under Brazilian law and having their management based in Brazil and which: a) have no foreign controlling shareholder or foreign parent company, unless the latter falls under item “b” of this definition; b) are controlled, directly or indirectly, by one or more individuals referred to in item (i) of this definition; and (iii) investment funds or clubs organized under the laws of Brazil and having their management based in Brazil and whose administrators and/or majority unitholders are persons referred to in items (i) and (ii) of this definition.

Foreign Shareholders – Foreign Shareholders are individuals, legal entities, investment funds or clubs and any other entities not included in the definition of Brazilian Shareholders, and those that fail to prove that they meet the requirements to be registered as Brazilian Shareholders, pursuant to paragraph 2 of Section 10 of the Company’s Bylaws.

Given the guidelines of the Health Ministry (Ministério da Saúde) of the and Government of the State of São Paulo for the prevention and combating of the new coronavirus (COVID-19) and for the safety of its shareholders, the Company suggests that its shareholders, if possible, use the distance voting ballot to participate in the Meetings hereby convened, mainly through sending it to the service providers qualified to collect and transmit the instructions for the distance voting ballot (custodian the provider of bookkeeping services of the Company’s shares), due to the greater simplicity of this process.

2.2. In-person Attendance at Meetings

In order to attend the Meetings in person or by proxy, we request that you present to Embraer, at least 48 hours prior to the date of the Meetings, the following documents:

Power of attorney with special power for representation at the Meetings, in the case of a proxy;

For shareholders who have their shares deposited in the fungible custody of shares (custódia fungível de ações), an extract provided by the custodian institution confirming their respective shareholdings; and

Evidence that such shareholder qualifies as a Brazilian Shareholder or a Foreign Shareholder, (x) presenting a valid identification document or (y) submitting to the Company a certificate issued by the depositary financial institution evidencing the shares in book-entry form or in custody, pursuant to Section 40 of Law No. 6,404/76 (the Company will waive the presentation of the certificate by a holder of book-entry shares listed on the list of shareholders provided by the depositary financial institution), as provided for in Section 20 of the Company’s Bylaws.

For purposes of verifying the limit of votes that may be cast at the Meetings, you shall also inform the Company, at least 48 hours before the Meetings, if you belong to a Shareholders’ Group.

The Company also informs that, for these Meetings, signatures in proxy instruments do not have to be notarized, in order to facilitate the confirmation of powers in view of the current circumstances.

The documents mentioned above must be exclusively delivered through the e-mail investor.relations@embraer.com.br.

The Company clarifies that, as of the date hereof, it has not completed the procedures to change the address of its headquarters to Rodovia Presidente Dutra, s/no.—KM 134—Eugênio de Melo, in the city of São José dos Campos, State of São Paulo, 12247-004, with the competent government agencies, and this change will only take effect when all applicable procedures are completed. The Company also clarifies that even if the change of address takes effect before the date of the Meetings, the Meetings will be held at the place indicated in this manual and in the call notice (Avenida Brigadeiro Faria Lima, 2170, in the city of São José dos Campos, State of São Paulo), pursuant to paragraph 2 of Section 124 of Law No. 6,404/76.

2.3. Participation through Distance Voting Ballot (Boletim de Voto à Distância)

If shareholders wish to send distance voting ballots directly to the Company, they must be sent electronically, accompanied by the following documents:

(i) digital copy of the original distance voting ballot, available on the websites of the Company (ri.embraer.com.br), the Brazilian Securities Commission (Comissão de Valores Mobiliários—CVM) (www.cvm.gov.br) and the Brazilian Stock Exchange (B3 S.A. – Brasil, Bolsa, Balcão) (www.b3.com.br) on the Internet, duly filled in, initialed on all pages and signed at the end;

(ii) to prove oneself as a Brazilian Shareholder or Foreign Shareholder, (x) a digital copy of the original identity document, or (y) the certificate issued by the depositary financial institution evidencing the shares in book-entry form or in custody, pursuant to Section 40 of Law No. 6,404/76 (the Company will waive the presentation of the certificate by a holder of book-entry shares listed on the list of shareholders provided by the depositary financial institution); and

(iii) digital copy of the original of the following documents:

For individuals:

- identity document with photograph of the shareholder;

For legal entities:

- current bylaws or consolidated articles of association and corporate documents that evidence the legal representation of the shareholder; and

- identity document with photograph of the legal representative.

For investment funds:

- current consolidated governing document of the fund;

- bylaws or articles of association of its administrator or manager, as the case may be, according to the voting policy of the fund, and corporate documents evidencing the powers of representation; and

- identity document with photograph of the legal representative.

The above distance voting ballots and documents shall be received by no later than seven days before the date of the Meetings and those received after such date will be disregarded.

The Company waives the certification of signature, notarization and consularization for acceptance of the distance voting ballots. The Company will not require the sworn translation of documents originally drawn up in Portuguese, English or Spanish, or to be accompanied by a translation in those languages. The following identity documents will be accepted, provided they include a photograph: identity card (RG), national registry of foreigners (RNE), driver’s license (CNH), passport or officially recognized professional identification.

Under the terms of the current regulations, the Company will inform the shareholder, through email, within three days, (i) the receipt of the distance voting ballot (boletim de voto à distância), as well as whether the documents received are sufficient for the vote to be valid; or (ii) the need to rectify or resend the distance voting ballot (boletim de voto à distância) or any accompanying documents, describing the procedures and deadlines required for the distance voting ballot (boletim de voto à distância) to be valid.

As an alternative to sending the distance voting ballot directly to the Company, shareholders holding shares issued by the Company may send voting instructions to complete the distance voting ballot by means of: (i) their respective custodian agents, in the case of shares that are deposited in custody (depositário central); or (ii) the financial institution engaged by the Company to provide securities bookkeeping services, in the case of shares that are not deposited in custody (depositário central).

The Company requests that the above documents be sent to the attention of its Investor Relations Department, exclusively through the electronic address: investor.relations@embraer.com.br.

If you have any questions regarding the procedure and deadlines described in this item 2, we ask that you contact the Investor Relations Department at (11) 3040-6874, or by e-mail at investor.relations@embraer.com.br.

3. Call Notice

(The Call Notice will be published in the newspapers Valor Econômico, O Vale and Diário Oficial do Estado de São Paulo in the editions dated March 27, 28 and 31, 2020.)

EMBRAER S.A.

PUBLIC COMPANY

CNPJ No. 07.689.002/0001-89

NIRE 35.300.325.761

Call Notice

We invite the shareholders of Embraer S.A. (“Company” or “Embraer”) to attend the Annual and Extraordinary General Shareholders’ Meetings (“Meetings”), to be held, cumulatively, on April 29, 2020, at 10:00 a.m. local time, at the Company’s headquarters, in the city of São José dos Campos, State of São Paulo, at Avenida Brigadeiro Faria Lima, 2170, to review and resolve on the following agenda:

At the Annual General Shareholders’ Meeting:

1. To review the management accounts and to examine, discuss and approve the financial statements for the fiscal year ended on December 31, 2019;

2. To review and resolve on the allocation of the net income for the fiscal year ended on December 31, 2019;

3. To elect the members of the Fiscal Council;

4. To determine the aggregate annual compensation of the Company’s management; and

5. To determine the compensation of the members of the Fiscal Council.

At the Extraordinary General Shareholders’ Meeting:

1. To review and resolve on the amendment of the Company’s Bylaws to modify the composition of the Strategy Committee, the People and Governance Committee and other advisory committees of the Company’s Board of Directors that may be created in order to allow such committees to be formed by at least three and a maximum of five members, most of whom must be independent members of the Board of Directors and the other members may be external members, as defined in the Company’s Bylaws; and, as detailed in the Manual and Management’s Proposal for the Meetings;

2. To review and resolve on the amendment to the Company’s Bylaws, to include a rule on the possibility of the Company entering into an indemnity agreement (contrato de indenidade) or an indemnity policy (política de indenidade), as detailed in the Manual and Management’s Proposal for the Meetings;

3. To restate the Company’s Bylaws to reflect the amendments set forth above; and

4. To approve the long-term incentive plan for the Company’s executives.

Pursuant to paragraph 6 of Section 124 and to paragraph 3 of Section 135 of Law No. 6,404/76, the documents that are the subject matter of the resolutions of the Meetings hereby called, including those mentioned in articles 9, 10, 11, 12 and 13 of CVM Instruction No. 481/09, are available to our shareholders at the Company’s headquarters and on the internet on the Company’s website (ri.embraer.com.br), the Brazilian Securities Commission (Comissão de Valores Mobiliários – CVM) (www.cvm.gov.br) and the Brazilian Stock Exchange (B3 S.A. – Brasil, Bolsa, Balcão) (www.b3.com.br).

General Instructions:

To participate in the Meetings in person or by proxy, we request that you present to the Company, at least 48 hours prior to the date of the Meetings, the following documents: (i) power of attorney with special powers for representation at the Meetings, in the case of a proxy; (ii) for shareholders who have their shares deposited in the fungible custody of shares, an extract provided by the custodian institution confirming their respective shareholdings; and (iii) evidence that such shareholder qualifies as a Brazilian Shareholder or a Foreign Shareholder, as provided for in Section 20 of the Company’s Bylaws. For purposes of verifying the limit of votes that may be cast at the Meetings, you shall also inform the Company, at least 48 hours before the Meetings, whether you belong to a Shareholders Group (as such term is defined in the Company’s Bylaws).

b)	The documents mentioned in item “a” above shall be sent to the attention of the Investor Relations Department, at investor.relations@embraer.com.br.

In order to participate in the Meetings through distance voting ballot (boletim de voto à distância), shareholders must send a distance voting ballot (boletim de voto à distância) directly to the Company or through third parties, according to the instructions set forth in the Manual and Management’s Proposal for the Meetings released on this same date and available on the websites above.

Given the guidelines of the Health Ministry (Ministério da Saúde) and of the Government of the State of São Paulo for the prevention and combating of the new coronavirus (COVID-19), the Company suggests that its shareholders, if possible, use the distance voting ballot (boletim de voto à distância) to participate in the Meetings hereby convened.

The slates of candidates that are running for the Fiscal Council positions, as proposed by the Fiscal Council are available to shareholders at the Company’s headquarters and on the internet on the websites of B3 S.A. – Brasil, Bolsa, Balcão (www.b3.com.br), the Company (ri.embraer.com.br) and the Brazilian Securities Commission – CVM (www.cvm.gov.br). Shareholders wishing to propose another slate for the Fiscal Council must comply with the provisions in paragraph 2 of Section 31 of the Company’s Bylaws. Any such slate proposed by the shareholders will be made available by the Company as contemplated in paragraph 2 of Section 31 of the Company’s Bylaws.

São José dos Campos, March 27^th, 2020.

Alexandre Gonçalves Silva

Chairman of the Board of Directors

4. Management’s Proposals on the Agenda

Annual General Shareholders’ Meeting:

4.1. To review the management accounts and to examine, discuss and approve the financial statements for the fiscal year ended December 31, 2019

The management accounts are detailed in the Management Report and financial statements, and (i) were approved by the Company’s Board of Directors; and (ii) obtained a favorable opinion from the Company’s Fiscal Council and Audit, Risk and Ethic Committee. The financial statements were audited and obtained a favorable opinion from the Company’s independent auditors, PricewaterhouseCoopers.

The documents to be submitted for shareholders’ approval were published in the newspapers Valor Econômico, O Vale and Diário Oficial do Estado de São Paulo on March 27, 2020, and are available at the Company’s headquarters, the CVM and B3, as well as on the internet on Embraer’s website (ri.embraer.com.br).

The Company’s Board of Directors recommends that its shareholders carefully examine the documents made available by Management to review the Company’s financial statements and, if they agree, to approve these accounts and financial statements.

Pursuant to Section 9, item III, of CVM Instruction No. 481/09, the information set forth in Annex I hereto reflects Management’s comments about the Company’s financial condition.

Moreover, the opinion and report of the Audit, Risk and Ethic Committee are included in Annex II hereto.

4.2. To review and to resolve on the allocation of net income for the fiscal year ended December 31, 2019

Pursuant to the financial statements for the fiscal year ended December 31, 2019, the Company recorded net loss of R$1,316,797,395.00.

The allocation of net loss consists in determining the portions of net loss that will be absorbed by the unrealized revenue, legal and statutory reserves.

The Board of Directors voted to present the following proposal for allocation of net loss for the fiscal year ended December 31, 2019 at the Annual General Shareholders’ Meeting: absorption, by the Investments and Working Capital Reserve set forth in Section 50 of the Company’s Bylaws, of the net loss already assessed for the year (R$1,316,797,395.00), deducted by the result of the proceeds from the sale of treasury shares in view of the exercise of stock options under the Company’s stock option plan in the amount of R$3,002,015.00, as well as the amount of R$8,103,424.00 in investment subsidies used in 2019, reclassified to the “Investment Subsidy Reserve” account, plus the result calculated from adjustments regarding the change in accounting practices, in the amount of R$5,023,000.00, totaling R$1,322,879,834.00 to be absorbed by the Investments and Working Capital Reserve.

The information set forth in Annex 9-1-II of CVM Instruction No. 481/09 will not be presented due to the assessment of loss in the year.

4.3. To elect the members of the Fiscal Council

The election of members of the Fiscal Council must comply with the rules set forth in Section 43, Paragraph 1, of the Company’s Bylaws.

Pursuant to Section 31, Paragraph 1, of the Company’s Bylaws, the slate proposed for the 2020/2021 period is as follows:

Members Alternate Members

Ivan Mendes do Carmo

Tarcísio Luiz Silva Fontenele

José Mauro Laxe Vilela

Wanderley Fernandes da Silva

João Manoel Pinho de Mello

Pedro Jucá Maciel

Maurício Rocha Alves de Carvalho

Mario Ernesto Vampré Hunberg

Mr. Ivan Mendes do Carmo is appointed as Chairman and Mr. José Mauro Laxe Vilela is appointed as Vice-Chairman of the Fiscal Council.

We emphasize that any shareholder, or group of shareholders, that does not comply with the legal deadline to appoint a slate of candidates on the distance voting ballot (boletim de voto à distância) and wishes to appoint an alternative slate for the Fiscal Council, must notify Embraer in this regard, in writing, ten days before the Meetings, including the information related to the candidates set forth in items 12.5 to 12.10 of the Brazilian Annual Report (Formulário de Referência), pursuant to Section 10 of CVM Instruction No. 481/09, as well as the name, identification and professional curriculum of each candidate, attaching to the notice an instrument signed by each candidate confirming his or her acceptance to run for election. Embraer will publish, within eight days before the Meetings, a notice informing shareholders where they can find the list of all proposed candidates and a copy of their identification and professional curriculum.

Each shareholder may only vote for one slate of candidates and the candidates in the slate who receive the highest number of votes at the Meetings will be declared elected.

The information included in items 12.5 to 12.10 of the Brazilian Annual Report (Formulário de Referência) related to the slate of candidates proposed by the Fiscal Council is set forth in Annex III hereto, in compliance with Section 10 of CVM Instruction No. 481/09.

4.4. To determine the aggregate annual compensation of the Company’s management

Pursuant to Section 18, item IV, of the Company’s Bylaws, the Annual General Shareholders’ Meeting must establish the aggregate annual compensation of members of the Company’s management.

Considering the relevance of ensuring that the amounts of the aggregate compensation include the amounts set forth in item 13 of the Brazilian Annual Report (Formulário de Referência), the Company includes in the aggregate compensation the costs related to the stock-based compensation offered to the members of the management. Considering that the fair value of the grants related to the long-term incentive plan is calculated based on the market value of the Company’s shares, the appreciation of the value of these shares is reflected in the value of the stock-based compensation.

Accordingly, the annual aggregate limit proposed by the Board of Directors as compensation of members of the Company’s management is R$69 million for the period between May 2020 and April 2021.

The annual aggregate limit hereby proposed is less than that approved by shareholders in Annual General Shareholders’ Meeting held in 2019, due to the reduction in the number of members of the statutory Board of Officers of the Company.

Please also note that the Annual General Shareholders’ Meeting held in 2019 approved an aggregate limit as compensation to members of the management of R$74 million, and the estimated amount to be effectively realized until April 2020 is approximately R$54 million. The difference between the approved limit and the actual amount is primarily due to the non-achievement of maximum Company targets and the non-payment of the Closing Bonus, due the postponement of the closing of the the strategic partnership between Embraer and The Boeing Company.

Finally, it should be noted the amount subject to approval refers to the period between May 2020 and April 2021, while item 13.2 of the Brazilian Annual Report (Formulário de Referência) reflects the period between January and December 2020.

Pursuant to Section 12, item II, of CVM Instruction No. 481/09, the information set forth in item 13 of the Brazilian Annual Report (Formulário de Referência) is included in Annex IV hereto.

4.5. To determine the compensation of the members of the Fiscal Council

Pursuant to Embraer’s Bylaws, the compensation of the members of the Fiscal Council is established by the Annual General Shareholders’ Meeting that elects them, in compliance with the legal requirements and limits, taking into account their experience, education and reputation.

Pursuant to Section 162, Paragraph 3, of Law No. 6,404/76, the compensation of each member of the Fiscal Council cannot be lower than 10% of the compensation that, on average, is attributed to each Officer, excluding benefits, representation funds and profit sharing.

Accordingly, Embraer’s Board of Directors proposes a monthly compensation for the Chairman of the Fiscal Council in the amount of R$15,000.00 and an individual compensation in the amount of R$13,250.00 for the other members of the Fiscal Council for the period between May 2020 and April 2021, maintaining the same compensation proposed and approved in the previous period.

Extraordinary General Shareholders’ Meeting:

4.6. To pass a resolution on the amendment to the Company’s Bylaws to change the composition of the Strategy Committee, the Personnel and Governance Committee and other advisory committees of the Board of Directors that may be created

The management of Embraer proposes to approve an amendment to the Bylaws to allow the Stategy Committee, the Personnel and Governance Committee and other advisory committees of the Board of Directors hereafter created to also include external members, however, being required to have a majority of independent members.

4.7. To pass a resolution on the amendment to the Company’s Bylaws to include a rule regarding the possibility of the Company entering into indemnity agreements

The management of Embraer proposes to include a rule about the possibility of the Company entering into an indemnity agreement (contrato de indenidade) covering members of the management, Fiscal Council and committees of the Company and of its subsidiaries, as well as certain employees; and set forth a policy applicable to them, in accordance with the CVM Instruction Opinion (Parecer de Orientação) No. 38.

4.8. To approve the restatement of the Company’s Bylaws in view of the abovementioned amendments

The Board of Directors of Embraer proposes to consolidate the Company’s Bylaws in view of the abovementioned amendments.

Embraer’s Board of Directors recommends its shareholders to carefully review a copy of the proposed Bylaws and the report with the proposed amendments contained in Annexes V and VI to this Manual, pursuant to Section 11, items I and II, of CVM Instruction No. 481/09.

4.9. To approve the long-term incentive plan for the Company’s executives

The Company’s management proposes the approval of the Company’s Long-Term Incentive Plan – New Embraer (“Long-Term Incentive Plan”) to: (a) maintain in the Company and its direct or indirect subsidiaries (“Subsidiaries”) and attract highly qualified personnel; and (b) ensure that the individuals who may effectively contribute to a better performance of the Company and securities issued by it have the right to receive a share of the result of their contribution. Accordingly, the Company intends to ensure the continuity of its management and the management of its Subsidiaries and align the interests of executive officers and key persons of the Company and its Subsidiaries with the interests of the Company’s shareholders.

The information related to the Long-Term Incentive Plan, as required pursuant to Article 13 of CVM Instruction No. 481/09, are available in Annexes VII and VIII hereto.

Annex I – Management’s Considerations

(Information set forth in Section 9, item III, of CVM Instruction No. 481/09)

10.1 – Financial Position

The assessment and opinions included herein reflect the views and perceptions of our Executive Officers about our activities, business and performance. The amounts included in this item 10.1 derive from our audited consolidated financial statements for the years ended December 31, 2019, 2018 and 2017.

The following discussion includes forward-looking statements that reflect our current expectations involving risks and uncertainties. Future results and the timing of events may differ materially from those included in these forward-looking statements due to a number of factors, including, but not limited to, other matters set forth in this Company’s Brazilian Annual Report (Formulário de Referência).

The financial information included in items 10.1 through 10.9 must be read in conjunction with our audited consolidated financial statements for the years ended December 31, 2019, 2018 and 2017, and notes thereto. The audited consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB).

The set of audited consolidated financial statements for the year ended December 31, 2019 includes the first year of adoption of IFRS 16/CPC 06(R2) – Leases. The transition method chosen by the Company was the modified retrospective method, with initial application as of January 1, 2019. Accordingly, the comparative financial information for previous periods were not restated and remain as previously reported. For more information on the adoption of such accounting standards, see item 10.4 of Company’s Brazilian Annual Report (Formulário de Referência).

On February 26, 2019, the shareholders of the Company approved the strategic partnership entered into between the Company and Boeing. As a result of the approval of the Transaction (as defined in item 10.3 below), the audited consolidated financial statements for the year ended December 31, 2019 include the classification of the assets and liabilities related to the Commercial Aviation business unit and associated services as held for sale and its results as discontinued operation. The comparative statement of income for the year ended December 31, 2018 was restated to evidence the results of continuing operations separately from the discontinued operation since the beginning of the comparative period.

A company’s functional currency is the currency used in the main economic environment in which the company operates, as this currency influences the prices of goods and services, the competitive forces and regulations of its country of origin, the costs of supplying products and services, and in raising financial resources. In this context, Embraer’s management, after analyzing its operations and business, concluded that the U.S. dollar (“US$” or “dollar”) is its functional currency.

(a)

Financial Position

Financial Indicators

The table below sets forth the main balance sheet indicators of the Company for the last three fiscal years:


Consolidated Highlights	As of December 31,
Amounts in R$ million	2019⁽¹⁾		2018		2017
Cash⁽²⁾		5,159.0		12,429.3		12,861.9
Trade accounts receivable, net		602.3		1,232.3		982.4
Customer financing		–		45.7		54.4
Inventories		5,257.7		9,714.3		7,108.0
Fixed assets⁽³⁾		7,694.4		14,994.4		13,208.4
Trade accounts payable		1,442.9		3,456.8		2,728.0
Indebtedness – Current		60.0		694.7		1,286.6
Indebtedness – Non-current		306.8		13,439.4		12,602.2
Shareholders’ Equity		14,569.5		15,267.0		13.819.5

(1)	In 2019, the assets and liabilities regarding the strategic partnership between Embraer and Boeing were reclassified as assets and liabilities held for sale.

(2)	Includes cash and cash equivalents and current and non-current financial investment assets.

(3)	Includes property, plant and equipment, intangible assets and investments.


Highlights of Assets and Liabilities Held for Sale
Amounts in R$ million	2019
Cash⁽¹⁾		6,046.1
Trade accounts receivable, net		583.4
Customer financing		43.1
Inventories		4,351.6
Fixed assets⁽²⁾		9,099.1
Trade accounts payable		1,913.3
Indebtedness		13,306.6

(1)	Includes cash and cash equivalents and current and non-current financial investment assets

(2)	Includes property, plant and equipment, intangible assets and investments.

As of 2015, the Company started to record non-current financial investments as cash, in addition to cash and cash equivalents and current financial investments, as it understands that this amount, although recorded as non-current, may be used to meet any cash requirement.

For comparative purposes, the ratios below represent the total amount of the balance sheet and statements of income accounts, which include assets and liabilities held for sale:


Consolidated Highlights	As of December 31,
Amounts in R$ million	2019			2018			2017
Debt/Shareholders’ Equity		0.9			0.9			1.0
Inventory turnover		1.9			1.6			2.1
Assets turnover		0.5			0.4			0.5
ROA ⁽¹⁾		(3.0	)%		(1.5	)%		2.3	%
ROE ⁽²⁾		(8.9	)%		(4.2	)%		6.5	%

(1)	ROA – means Return on Assets, calculated as net income/total assets.

(2)	ROE – means Return on Equity, calculated as net income/shareholders’ equity.

(b)

Capital Structure

As of December 31, 2019, total financial indebtedness, including liabilities held for sale, exceeded cash and cash equivalents by R$2,468.34 million. As of December 31, 2018, financial indebtedness exceeded cash and cash equivalents by R$1,704.8 million and, as of December 31, 2017, financial indebtedness exceeded cash and cash equivalents by R$1,026.9 million. The table below sets forth the ratio between our third-party capital and shareholders’ equity, for the last three fiscal years. For comparative purposes, the ratios below represent the total amount of the balance sheet and statements of income accounts, which include assets and liabilities held for sale:


Consolidated	As of December 31,
(Amounts in R$ million, except percentages)	2019			2018			2017
Shareholders’ Equity (Own capital)		14,569.5			15,267.0			13,819.5
Loans and Financing (Third-party capital)		13,673.4			14,134.1			13,888.8
Third-party capital + Own capital		28,243.0			29,401.1			27,708.3
Third-party capital / Own capital		93.8	%		92.6	%		100.5	%

(c)

Payment capacity in relation to assumed financial commitments

The Company maintains its payment capacity in relation to all its financial commitments, presenting a strong cash position. As of December 31, 2019, the Company’s total consolidated cash and cash equivalents amounted to R$5,159.0 million.

As of December 31, 2019, the Company’s total cash and cash equivalents of assets held for sale amounted to R$6,046.1 million.

Using a concept of net cash (cash and cash equivalents plus current and non-current financial investments less financial indebtedness), including assets and liabilities held for sale in the same period, the Company registered a negative amount (net debt) of R$2,468.4 million. In 2019, the generation of cash from operating activities measured by EBITDA totaled a positive amount of R$431.5 million and the total financial debt/EBITDA ratio was 31.7.

For comparative purposes, the ratios below represent the total amount of the balance sheet and statements of income accounts, which include assets and liabilities held for sale:


Consolidated	As of December 31,
Amounts in R$ million	2019			2018			2017
Net Debt		(2,468.3	)		(1,704.8	)		(1,026.9	)
EBITDA⁽¹⁾		431.5			1,016.8			2,107.1
Financial Indebtedness		13,673.3			14,134.1			13,888.8
Shareholders’ Equity		14,569.5			15,267.0			13,819.5
Financial income (expenses)		(452.0	)		(633.0	)		(130.7	)
Financial Indebtedness/EBITDA		31.7			13.9			6.6
EBITDA/Financial expenses		1.0			1.6			15.4
Financial Debt/Shareholders’ Equity		0.9			0.9			0.9

(1)	In 2016, we changed metrics for the calculation of EBITDA, taking into account the amortization of contributions from partners.

The table below sets forth a summary of the Company’s balance sheet, for the last three fiscal years:


Consolidated	As of December 31,
Amounts in R$ million		2019	2018	2017⁽¹⁾
Current assets		34,548.7	27,398.4	23,419.1
Non-current assets		371.6	1,365.9	2,984.1
Investments		32.6	24.3	18.5
Property, plant and equipment		3,905.5	7,612.7	6,962.9
Intangible assets		3,603.9	7,357.5	6,227.1
Right of use		152,4	—	—
Total Assets		42,614.7	43,758.8	39,611.7
Current liabilities		25,739.9	11,734.8	9,272.9
Non-current liabilities		2,305.2	16,757.0	16,519.4
Shareholders’ equity		14,179.0	14,901.3	13,819.4
Non-controlling interest		390.6	365.7	375.3
Total Liabilities		42,614.7	43,758.8	39,611.7

(1)	In 2019, the assets and liabilities regarding the strategic partnership between Embraer and Boeing were reclassified as assets and liabilities held for sale.


Assets and Liabilities Held for Sale
Amounts in R$ million	2019
Cash and cash equivalents		6,046.1
Trade accounts receivable, net		583.4
Inventories		4,351.6
Other assets⁽¹⁾		777.2
Property, plant and equipment		4,392.2
Intangible assets		4,666.0
Right of use		41.0
Total assets held for sale		20,857.4
Trade accounts payable		1,913.3
Indebtedness		13,306.6
Contract liabilities		3,007.1
Other liabilities⁽²⁾		1,862.1
Total liabilities held for sale		20,089.1

(1)	Other assets includes: financial investments, customer financing, contract assets, escrow deposits, income tax and social contribution, other assets and deferred income tax and social contribution.

(2)	Other liabilities includes: lease liabilities, trade accounts payable, taxes and payroll charges payable, income tax and social contribution, financial guarantee and residual value guarantee, unearned income, provisions and deferred income tax and social contribution.

(d)

Sources of funds for working capital and investments in non-current assets used by the Company

Investments in non-current assets consist primarily of expenses with research and development associated with the development of aircrafts for the executive aviation markets and investments in industrial capacity in Brazil and abroad. Generally, these investments are supported by funds provided by operations, borrowings under credit arrangements primarily obtained from government financing agencies, such as the Brazilian Social and Economic Development Bank (BNDES – Banco Nacional de Desenvolvimento Econômico e Social) and the Brazilian Funding Authority for Studies and Projects (FINEP – Financiadora de Estudos e Projetos), contributions in cash from risk-sharing partners, and advance payments from customers.

In 2019 and 2018, the Company did not make any significant use of any of the sources of funds mentioned above.

As part of the group of liabilities held for sale in our financial statements, in 2017, Embraer Netherlands Finance B.V., a subsidiary of the Company, issued US$750.0 million guaranteed notes due February 1, 2027, to meet general corporate purposes.

(e)

Sources of funds for working capital and investments in non-current assets that the Company intends to use to cover liquidity deficiencies

The Company has a Financial Management Policy, approved by the Board of Directors, with the purpose of establishing guidelines applicable to all business areas, focusing on the management of corporate finances, including the management of cash flow and capital structure, in order to set out the risks associated with financial transactions and any liquidity deficiencies.

The Company believes that its traditional sources of funds are sufficient to meet its foreseeable working capital and investment requirements, including (i) continuing to improve the following jet models: Phenom 100EV, the Phenom 300E, the Lineage 1000, the Legacy 650E, the Legacy 450, the Praetor 500 and the Praetor 600, and (ii) other planned capital expenditures.

In case of liquidity deficiency, the Company believes it will be able to access additional source of financing, such as: issuance of corporate bonds, issuance of debentures, import and export financing, credit facilities provided by development agencies in Brazil and credit facilities provided by Brazilian and international banks, whose funds will be subject to market conditions, including cost and credit, in effect at the time of the contracting.

(f)

Levels of indebtedness and characteristics of these debts

At the end of 2019, the Company’s total consolidated debt amounted to R$366.8 million (R$14,134.1 million in 2018), of which 83.6% referred to non-current debt (95.1% in 2018). The weighted average cost of debt denominated in U.S. dollars decreased from 5.27% p.a. in 2018 to 2.43% p.a. in 2019, while the cost of debt denominated in Reais decreased from 2.47% in 2018 to 1.52% p.a. in 2019. At the end of 2018, the Company’s total debt amounted to R$14,134.1 million (R$13,888.8 million in 2017), of which 95.1% referred to non-current debt (90.7% in 2017). The weighted average cost of debt denominated in U.S. dollars increased from 5.18% p.a. in 2017 to 5.27% p.a. in 2018, while the cost of debt denominated in Reais decreased from 3.72% p.a. in 2017 to 2.47% in 2018.

At the end of 2019, the Company’s total debt regarding liabilities held for sale amounted to R$13,306.6 million. The weighted average cost of debt denominated in U.S. dollars is 5.17% p.a.


Indebtedness maturity profile – consolidated
Year	Amount in R$ million		%
2020		60.0		16.4	%
2021		111.7		30.5	%
2022		47.3		12.9	%
2023		34.4		9.2	%
2024		0.3		0.1	%
After 2024		113.0		30.7	%
Total		366.7		100.0	%


Indebtedness maturity profile – liabilities held for sale
Year	Amount in R$ million		%
2020		665.7		5.0	%
2021		814.0		6.1	%
2022		2,016.0		15.2	%
2023		2,133.4		16.0	%
2024		34.1		0.3	%
After 2024		7,643.4		57.4	%
Total		13,306.6		100	%

i.	Material loan and financing agreements

The issuances of bonds are part of the group of liabilities held for sale as of December 31, 2019. We describe below the material financing agreements of the Company and its subsidiaries.

In October 2009, Embraer Overseas issued 6.375% US$500.0 million guaranteed notes due in January 2020 and, as of December 31, 2019, R$665.7 million was outstanding, including principal and accrued interest. The notes have been registered with the U.S. Securities and Exchange Commission (SEC) and listed in the New York Stock Exchange. The notes are fully and unconditionally guaranteed by the Company and interest is paid semiannually.

On June 15, 2012, the Company issued 5.150% US$500.0 million guaranteed notes due on June 15, 2022 and, as of December 31, 2019, R$2,016.0 million was outstanding. The notes have been registered with the SEC and listed on the New York Stock Exchange. Interest is paid semiannually.

Between August and September 2013, the Company, through its subsidiary Embraer Overseas Limited, completed an exchange offer of our notes with maturity in 2017 and 2020 for newly issued notes maturing in 2023. In the offer, US$146.4 million in principal amount of our notes with maturity in 2017 and US$337.2 million in principal amount of our notes with maturity in 2020, which corresponded to approximately 54.9% of the exchanged notes, were exchanged for approximately 5.70% US$540.5 million in principal amount of notes issued by Embraer Overseas due on September 16, 2023, considering the exchange price and the issuance of the new notes. Interest is paid semiannually. As of December 31, 2019, a total of US$2,105.6 million under our notes due 2023 was outstanding.

In June 2015, Embraer Netherlands Finance B.V. issued 5.05% US$1.0 billion guaranteed notes due on June 15, 2025 and, as of December 31, 2019, R$4,021.7 million was outstanding. Interest is paid semiannually and the notes are fully and unconditionally guaranteed by the Company. The notes have been registered with the SEC and listed on the New York Stock Exchange.

In February 2017, Embraer Netherlands Finance B.V., a subsidiary of the Company, issued 5.40% US$750.0 million guaranteed notes due on February 1, 2027 and as of December 31, 2019, R$3,082.2 million was outstanding. Interest is paid semiannually. The notes are unconditionally guaranteed by us. The notes have been registered with the SEC and listed on the New York Stock Exchange.

ii.

Other long-term relationships with financial institutions

There are no other long-term relationships with financial institutions.

iii.

Debt subordination

As of December 31, 2019, our total debt amounted to R$366.7 million, of which 47.7% or R$174.8 million (R$51.3 million referring to current debt and R$123.5 million to non-current debt) corresponded to financings obtained from FINEP. Collaterals include bank guarantees in the total amount of R$174.8 million.

All other credit facilities and financings of the Company correspond to unsecured debt and are pari passu with all the other debts of the Company.

As of December 31, 2019, our total debt regarding liabilities held for sale amounted to R$13,306.6 million, corresponding to unsecured debt that was pari passu with all the other debts of the Company.

iv.

Any restrictions imposed on the company, especially, in relation to indebtedness limits and incurrence of additional debt, distribution of dividends, sale of assets, issuance of additional securities and sale of ownership control

Below are the restrictions imposed on the Company and its subsidiaries under material long-term financing agreements of the Company and its subsidiaries, as of December 31, 2019. We highlight that the agreements described below are part of the group of liabilities held for sale, recorded in our financial statements.

The issuances of notes by the Company and its subsidiaries in 2009, 2012, 2013, 2015 and 2017, in the amounts of US$500 million, US$500 million, US$540.5 million, US$1.0 billion and US$750 million, respectively, are subject to the following restrictions:

(A)

Negative pledge

The assets of the company or guarantor (Embraer S.A.) cannot be pledged as collateral, except if:

(i)	related to the purchase of new assets;

(ii)	in the ordinary course of business regarding the financing of aircrafts by the guarantor to other entity or in import/export transactions;

(iii)

related to debts of the guarantor with BNDES and other international agencies;

(iv)	held by acquired companies;

(v)	they already exist, or result from legal imposition or judicial decision;

(vi)	due to developments related to governmental authorities;

(vii)

already existing in assets to be acquired;

(viii)

related to funds for payment of principal, interest and additional amounts;

(ix)	arising from Capitalized Lease Obligations; or

(x)	in an amount below 10% of the company’s share capital.

(B)

Corporate transactions

The Company and the guarantor may only enter into consolidation/merger and transfer of assets transactions, without the consent of noteholders, if:

(i)	the successor expressly assumes the obligation to repay principal, interest and other obligations;

(ii)	no Default occurs;

(iii)

opinions are delivered confirming the transaction meets all conditions precedent;

(iv)	the successor agrees to assume any resulting costs, ensuring that payments to noteholders will not be affected.

Pursuant to the agreements entered into with BNDES, the Company is required to maintain certain measures and to take actions in order to avoid or correct issues regarding environmental damages, occupational safety and occupational medicine. The Company is also required to maintain its obligations in good standing with environmental agencies and, during the term of the agreement, comply with the laws applicable to persons with disabilities.

The agreements entered into with FINEP are subject to the following restrictive clauses:

(a)	no change in direct or indirect effective control may occur, which, in the opinion of FINEP, may compromise the regular development of the project and/or prevent the due performance of the agreement;

(b)	no corporate agreements or bylaws can include provisions requiring special quorum for resolutions or approval of matters that limit or hinder control in any company of the group by the respective controlling shareholders, or provisions imposing:

(i)

restrictions on the Company’s ability to grow or develop its technologies;

(ii)

restrictions on access to new markets; or

(iii)

restrictions on the payment capacity or affecting the payment of financial obligations derived from the relevant transaction entered into with financial institutions.

(c)	During the term of the agreement, the Company must adopt measures and actions to avoid or correct matters regarding environmental damages, occupational safety and occupational medicine that may be caused by the project financed through such agreement;

(d)	The Company must comply with applicable law regarding the Brazilian Environmental Policy (Política Nacional de Meio Ambiente), maintaining its obligations in good standing with environmental agencies during the term of such agreement;

(e)	There can be no final judgment sentencing Embraer for its acts or the acts of its management in connection with racial or gender discrimination, child labor, slave labor, workplace or sexual harassment, or environmental crime.

As of December 31, 2019, the Company and its subsidiaries were fully in compliance with all the restrictive covenants contained in our financing agreements. All non-financial covenants set forth in agreements that provide for obligations, in effect in 2017, 2018 and 2019, were met in the respective years.

(g)

Maximum amounts contracted and percentages already disbursed

As of December 31, 2019, no credit facilities had been entered into whose disbursements had not been made.

(h)

Significant changes in each item of the Consolidated Balance Sheets

Consolidated operations


(in R$ million, except %)	Dec. 31, 2019⁽¹⁾		VA			Dec. 31, 2018		VA			Dec. 31, 2017		VA			HA 2019 x 2018			HA 2018 x 2017
Assets
Current
Cash and cash equivalents		3,447.0		8.1	%		4,963.0		11.3	%		4,203.7		10.6	%		-30.5	%		18.1	%
Financial investments		1,651.8		3.94	%		6,755.3		15.4	%		7,827.1		19.8	%		-75.5	%		-13.7	%
Trade accounts receivable, net		602.3		1.4	%		1,232.3		2.8	%		982.4		2.5	%		-51.1	%		25.4	%
Derivative financial instruments		5.5		0.0	%		21.1		0.0	%		97.7		0.2	%		-73.9	%		-78.4	%
Customer financing		0		0.0	%		4.8		0.0	%		7.0		0.0	%		-100	%		-31.4	%
Collateralized accounts receivable		16.1		0.0	%		846.5		1.9	%		614.1		1.6	%		-100	%		37.8	%
Contract assets		1,861.8		4.4	%		1,387.1		3.2	%		1,480.3		3.74	%		34.2	%		-6.3	%
Inventories		5,257.7		12.3	%		9,714.3		22.2	%		7,108.0		17.9	%		-45.9	%		36.7	%
Guarantee deposits		0.3		0.0	%		1,316.9		3.0	%		0.3		0.0	%		-100	%		438866.7	%
Income tax and social contribution		364.9		0.9	%		369.2		0.8	%		254.5		0.6	%		-1.2	%		45.1	%
Other assets		483.8		1.1	%		788.0		1.8	%		844.0		2.1	%		-38.6	%		-6.6	%
Assets held for sale		20,857.4		48.9	%		—					—					—
Total current assets		34,548.6		81.1	%		27,398.4		62.6	%		23,419.1		59.1	%		26.1	%		17.0	%
Non-current
Financial investments		60.2		0.1	%		710.9		1.6	%		831.1		2.1	%		-91.5	%		-14.5	%
Trade accounts receivable, net				0.0	%		—		0.0	%		0.1		0.0	%		—			-100	%
Derivative financial instruments		2.8		0.0	%		16.0		0.0	%		16.0		0.0	%		-82.5	%		0	%
Customer financing		0		0.0	%		0.9		0.1	%		47.3		0.1	%		-100	%		-13.5	%
Collateralized accounts receivable		55.0		0.1	%		67.2		0.2	%		341.1		0.9	%		-18.2	%		-80.3	%
Guarantee deposits		2.0		0.0	%		37.9		0.1	%		1,302.7		3.3	%		-94.7	%		-97.1	%
Deferred income tax and social contribution		2.8		0.0	%		83.6		0.2	%		44.3		0.1	%		-96.7	%		88.7	%
Other assets		248.8		0.6	%		409.4		0.9	%		401.5		1.0	%		-39.2	%		2.0	%
Investments		32.6		0.1	%		24.3		0.1	%		18.5		0.0	%		34.2	%		31.4	%
Property, plant and equipment		3,905.5		9.2	%		7.612,7		17.4	%		6,962.9		17.6	%		-48.7	%		9.3	%
Right of use		152.4		0.4	%		—		—			—		—			—			—
Intangible assets		3,603.9		8.5	%		7,357.5		16.8	%		6,227.1		15.7	%		-51.0	%		18.2	%
Total non-current assets		8,066.0		18.9	%		16,360.3		37.4	%		16,192.6		40.9	%		-50.7	%		1.0	%
Total assets		42,614.6		100	%		43,758.8		100.0	%		39,611.7		100.0	%		-2.6	%		10.5	%

(1)	In 2019, the assets and liabilities regarding the strategic partnership between Embraer and Boeing were reclassified as assets and liabilities held for sale.


(in R$ million, except %)	Dec. 31, 2019			VA			Dec. 31, 2018⁽¹⁾			VA			Dec. 31, 2017			VA			HA 2019 x 2018			HA 2018 x 2017
Liabilities
Current
Trade accounts payable		1,442.9			3.4	%		3,456.8			7.9	%		2,728.0			6.9	%		-58.3	%		26.7	%
Lease liabilities		20.0			0.0	%		—			—			—			—			—			—
Loans and financing		60.0			0.1	%		694.7			1.6	%		1,286.6			3.2	%		-91.4	%		-46.0	%
Non-recourse and recourse debt		16.1			0.0	%		1,255.5			2.9	%		58.1			0.1	%		-98.7	%		2060.9	%
Trade accounts payable		654.9			1.5	%		1,117.4			2.6	%		966.6			2.4	%		-41.4	%		15.6	%
Contract liabilities		2,616.4			6.1	%		4,050.6			9.3	%		3,311.7			8.4	%		—			22.3	%
Derivative financial instruments		18.0			0.0	%		31.2			0.1	%		29.2			0.1	%		-42.3	%		6.8	%
Taxes and payroll charges payable		221.4			0.5	%		265.0			0.6	%		233.9			0.6	%		-16.5	%		13.3	%
Income tax and social contribution		171.7			0.4	%		186.0			0.4	%		53.2			0.1	%		-7.7	%		249.6	%
Financial guarantee and residual value guarantee		0			0.0	%		197.5			0.5	%		73.6			0.2	%		-100.0	%		168.3	%
Unearned income		8.1			0.0	%		7.8			0.0	%		—			0.0	%		3.8	%		n.a.
Dividends		5.6			0.0	%		19.3			0.0	%		121.7			0.3	%		-71.0	%		-84.1	%
Provisions		415.8			1.0	%		453.0			1.0	%		410.3			1.0	%		-8.2	%		10.4	%
Liabilities held for sale		20,089.10			47.1	%		—			—			—			—			—			—
Total current liabilities		25,739.9			60.4	%		11,734.8			26.8	%		9,272.9			23.4	%		119.3	%		26.5	%
Loans and financing		306.8			1	%		13,439.4			30.7	%		12,602.2			31.8	%		-97.7	%		6.6	%
Lease liabilities		135.3			0	%		—			—			—			—			—			—
Non-recourse and recourse debt		55.0			0	%		67.2			0.2	%		1,146.1			2.9	%		-53.8	%		-94.1	%
Trade accounts payable		51.3			0	%		111.0			0.3	%		71.2			0.2	%		—			55.9	%
Contract liabilities		138.2			0	%		768.0			1.8	%		415.2			1.0	%		—			85.0	%
Derivative financial instruments					0	%		—			0	%		0.4			0	%		-76.2	%		-100.0	%
Taxes and payroll charges payable		53.8			0	%		225.6			0.5	%		232.1			0.6	%		11.5	%		-2.8	%
Deferred income tax and social contribution		1,097.4			2.6	%		984.3			2.2	%		853.3			2.2	%		-100	%		15.4	%
Financial guarantee and residual value guarantee		—			0	%		391.6			0.9	%		445.3			1.1	%		-77.1	%		-12.1	%
Unearned income		64.8			0.2	%		283.5			0.6	%		303.3			0.8	%		-17.2	%		-6.5	%
Provisions		402.6			0.9	%		486.4			1.1	%		450.3			1.1	%		-86.2	%		8.0	%
Total non-current liabilities		2,305.2			5.1	%		16,757.0			38.3	%		16,519.4			41.7	%		-1.6	%		1.4	%
Total liabilities		28,045.1			65.5	%		28,491.8			65.1	%		25,792.3			65.1	%		-1.6	%		10.5	%
Shareholders’ equity
Capital		5,159.6			12.1	%		5,159.6			11.8	%		4,789.6			12.1	%		0	%		7.7	%
Treasury shares		(75.4	)		-0.2	%		(87.0	)		0.2	%		(134.8	)		-0.3	%		-13.3	%		-35.5	%
Revenue reserves		2,595.4			6.1	%		3,910.2			8.9	%		5,003.9			12.6	%		-33.6	%		-21.9	%
Share-based remuneration		78.9			0.2	%		78.9			0.2	%		78.7			0.2	%		0	%		0.3	%
Equity value adjustment		6,420.4			15.1	%		5,839.5			13.3	%		3,704.3			9.4	%		9.9	%		57.6	%


(in R$ million, except %)	Dec. 31, 2019		VA			Dec. 31, 2018⁽¹⁾		VA			Dec. 31, 2017		VA			HA 2019 x 2018			HA 2018 x 2017
Retained earnings		—		0.0	%		—		0.0	%		2.4		0.0	%		—			-100.0	%
Non-controlling interest		390.6		0.9	%		365.7		0.8	%		375.3		0.9	%		6.8	%		-2.6	%
Total shareholders’ equity		14,569.5		34.2	%		15,267.0		34.9	%		13,819.4		34.9	%		-4.6	%		10.5	%
Total liabilities and shareholders’ equity		42,614.6		100.0	%		43,758.8		100.0	%		39,611.7		100.0	%		-2.6	%		10.5	%

(1)	In 2019, the assets and liabilities regarding the strategic partnership between Embraer and Boeing were reclassified as assets and liabilities held for sale.

Assets and Liabilities Held for Sale


(in R$ million, except %)	Dec. 31, 2019		VA
Cash and cash equivalents		5,854.7		28.1	%
Financial investments		191.4		0.9	%
Trade accounts receivable, net		583.4		2.8	%
Customer financing		43.1		0.2	%
Contract assets		136.1		0.7	%
Inventories		4,351.6		20.9	%
Guarantee deposits		1.8		0	%
Income tax and social contribution		8.3		0	%
Other assets		449.5		2.2	%
Deferred income tax and social contribution		138.3		0.7	%
Property, plant and equipment		4,392.2		21.1	%
Right of use		41.0		0.2	%
Intangible assets		4,666.0		22.4	%
Total assets		20,857.4		100	%


(in R$ million, except %)	Dec. 31, 2019		VA
Trade accounts payable		1,913.3		9.5	%
Lease liabilities		37.9		0.2	%
Loans and financing		13,306.6		66.2	%
Trade accounts payable		534.5		2.7	%
Contract liabilities		3,007.1		15	%
Taxes and payroll charges payable		35.8		0.2	%
Income tax and social contribution		221.4		1.1	%
Financial guarantee and residual value guarantee		565.3		2.8	%
Unearned income		192.1		1.0	%


(in R$ million, except %)	Dec. 31, 2019		VA
Provisions		159.5		0.8	%
Deferred income tax and social contribution		115.7		0.6	%
Total liabilities		20,089.1		100	%

COMPARISON OF THE MAIN CONSOLIDATED BALANCE SHEET ITEMS AS OF DECEMBER 31, 2019 AND DECEMBER 31, 2018

Current Assets

As of December 31, 2019, current assets totaled R$34,548.7 million compared to R$27,398.4 million as of December 31, 2018. Current assets accounted for 81.1% and 62.6% of our total assets as of December 31, 2019 and December 31, 2018, respectively. The 26.1% increase in the current assets was primarily due to the increase in assets held for sale, as a result of the strategic partnership entered into between Embraer and Boeing, as in 2019, the entire amount of assets held for sale was classified as current assets, resulting in this variation.

Non-current assets

As of December 31, 2019, non-current assets totaled R$8,066.0 million, compared to R$16,360.4 million as of December 31, 2018. Non-current assets accounted for 18.9% and 37.4% of total assets as of December 31, 2019 and December 31, 2018, respectively. This significant decrease is primarily due to the strategic partnership entered into between Embraer and Boeing, as in 2019, the amount of assets held for sale was classified as current assets.

Assets Held for Sale

As of December 31, 2019, assets held for sale totaled R$20,857.4 million.

Current liabilities

As of December 31, 2019, current liabilities totaled R$25,739.9 million, compared to R$11,734.8 million as of December 31, 2018. Current liabilities accounted for 60.4% and 26.87% of total liabilities and shareholders’ equity as of December 31, 2019 and December 31, 2018, respectively. This 119.3% increase in the period was basically due to the strategic partnership entered into between Embraer and Boeing, as loans and financing were recorded as non-current liabilities in 2018 and are now recorded as liabilities held for sale.

Non-current liabilities

As of December 31, 2019, non-current liabilities totaled R$2,305.2 million compared to R$16,757.0 million as of December 31, 2018. Non-current liabilities accounted for 5.4% and 38.3% of total liabilities and shareholders’ equity as of December 31, 2019 and December 31, 2018, respectively. This decrease was due to the strategic partnership entered into between Embraer and Boeing, as loans and financing of the discontinued operation were recorded as non-current liabilities in 2018.

Liabilities Held for Sale

As of December 31, 2019, liabilities held for sale totaled R$20,089.1 million.

Shareholders’ equity

As of December 31, 2019, shareholders’ equity totaled R$14,569.6 million, compared to R$15,267.0 million as of December 31, 2018. This 4.6% decrease was primarily due to the net loss for the period.

COMPARISON OF THE MAIN CONSOLIDATED BALANCE SHEET ITEMS AS OF DECEMBER 31, 2018 AND DECEMBER 31, 2017

Current assets

As of December 31, 2018, current assets totaled R$27,398.4 million compared to R$23,419.1 million as of December 31, 2017. Current assets accounted for 62.6% and 59.1% of total assets as of December 31, 2018 and December 31, 2017, respectively. The 17.0% increase in the current assets was primarily due to the 36.7% increase in inventories as a result of fewer deliveries in 2018 compared to 2017. Moreover, guarantee deposits totaled R$1,316.9 million compared to an amount close to zero in 2017.

Non-current assets

As of December 31, 2018, non-current assets totaled R$16,360.4 million compared to R$16,192.6 million as of December 31, 2017. Non-current assets accounted for 37.4% and 40.9% of total assets as of December 31, 2018 and December 31, 2017, respectively. This decrease was primarily due to the depreciation of the Real against the U.S. dollar, which was offset by an average increase of 13% in property, plant and equipment and intangible assets. Nonetheless, non-current assets increased slightly by 1% in 2018 compared to 2017. As a percentage of total assets, non-current assets also decreased slightly from 40.9% to 37.4% in the same period.

Current liabilities

As of December 31, 2018, current liabilities totaled R$11,734.8 million compared to R$9,272.9 million as of December 31, 2017. Current liabilities accounted for 26.8% and 23.4% of total liabilities and shareholders’ equity as of December 31, 2018 and December 31, 2017, respectively. This 26.5% increase in the period was basically due to the depreciation of the Real against the U.S. dollar, in addition to the increase in Non-recourse and recourse debt and contract liabilities, which resulted in the transfer of a portion of non-current liabilities to current liabilities.

Non-current liabilities

As of December 31, 2018, non-current liabilities totaled R$16,757.0 million compared to R$16,519.4 million as of December 31, 2017. Non-current liabilities accounted for 38.3% and 41.7% of liabilities and shareholders’ equity as of December 31, 2018 and December 31, 2017, respectively. Notwithstanding this decrease, non-current liabilities remained stable in 2018 compared to 2017.

Shareholders’ equity

As of December 31, 2018, shareholders’ equity totaled R$15,267.0 million, compared to R$13,819.4 million as of December 31, 2017. This 10.5% increase was primarily due to the increase in capital in the amount of R$370.0 million upon the capitalization of a portion of the investment and working capital reserve, without the issuance of new shares and no change in the number of shares (meeting of the Board of Directors held on March 5, 2019) and equity value adjustment in the period.

Statements of Income


(in R$ million, except %)	Dec. 31, 2019⁽¹⁾			VA			Dec. 31, 2018⁽²⁾			VA			Dec. 31, 2017			VA			HA 2019 x 2018			HA 2018 x 2017
Revenue		10,467.9			100.0	%		7,888.0			100.0	%		18,776.1						32.7	%		-58.0	%
Cost of sales and services		(9,037.3	)		-86.3	%		(7,176.1	)		-91.0	%		(15,262.5	)		-81.3	%		25.9	%		-53.0	%
Gross Profit		1,430.6			13.7	%		712.9			9.0	%		3,513.6			18.7	%		101.9	%		-79.7	%
Operating Income (Expense)
Administrative		(540.0	)		-5.2	%		(497.8	)		-6.3	%		(572.7	)		-3.1	%		8.7	%		-13.1	%
Selling		(584.2	)		-5.6	%		(556.2	)		-7.1	%		(1,009.7	)		-5.4	%		5.0	%		-44.9	%
Research		(78.4	)		-0.7	%		(70.9	)		-0.9	%		(157.6	)		-0.8	%		10.6	%		-55.0	%
Other operating income (expense), net		(869.8	)		-8.3	%		(655.0	)		-8.3	%		(679.0	)		-3.6	%		32.8	%		-3.6	%
Equity in income (losses) of associates		(1.0	)		0.0	%		(1.6	)		0.0	%		4.0			0	%		-37.5	%		-140.0	%
Operating Profit		(643.7	)		-6.1	%		(1,069.6	)		-13.6	%		1,098.6			5.9	%		-39.8	%		197.4	%
Financial income (expense), net		250.4			2.4	%		23.9			0.3	%		(130.7	)		-0.7	%		947.7	%		-118.3	%
Foreign exchange gain (loss), net		(8.1	)		-0.1	%		(18.8	)		0.2	%		20.9			0.1	%		-56.9	%		-190.4	%
Profit (loss) before taxes on income		(401.4	)		-3.8	%		(1,064.4	)		-13.5	%		988.6			5.3	%		-62.3	%		207.7	%
Income tax and social contribution		(446.3	)		-4.3	%		88.0			1.1	%		(86.3	)		-0.5	%		-607.2	%		-202.0	%
Net income of the period		(847.7	)		-8.1	%		(976.4	)		-12.4	%		902.3			4.8	%		-13.2	%		-208.2	%
Net income (loss) of the period from discontinued operations		(446.4	)		-4.3	%		332.9			4.2	%		—			—			-234.1	%		—
Net income of the period		(1,294.1	)		-12.4	%		643.6			-8.2	%		902.3			4.8	%		101.1	%		-171.3	%
Attributable to:
Owners of Embraer		(1,316.8	)		-12.6	%		(669.0	)		-8.5	%		850.7			4.5	%		96.8	%		74,433.3	%
Non-controlling interest		22.7			0.2	%		25.5			0.3	%		51.7			0.0	%		-11.0	%		25,400.0	%
Weighted average number of outstanding shares in the period (in thousands)
Basic		735.9			—			734.1			—			734.3			—			—			—
Diluted		735.9			—			734.1			—			734.8			—			—			—
Profit (loss) per share
Basic		-1.79			0	%		-0.91			—			1.16			—			96.3	%		45.6	%
Diluted		-1.79			0	%		-0.91			—			1.16			—			96.3	%		45.8	%

(1)	In 2019 and 2018, operations related to the strategic partnership between Embraer and Boeing were reclassified as discontinued operations.

Discontinued Operations


(in R$ million, except %)	Dec. 31, 2019		VA			Dec. 31, 2018		VA			HA 2019 x 2018
Revenue		11,334.1					10,833.6					4.6	%
Cost of sales and services		-9,599.3		-84.7	%		-8,739.1		-80.7	%		9.8	%
Gross Profit		1,734.9		15.3	%		2,094.5		19.3	%		-17.2	%
Operating Income (Expense)
Administrative		-211.8		-1.9	%		-172.1		-1.6	%		23.1	%
Selling		-543.8		-4.8	%		-558.1		-5.2	%		-2.6	%
Research		-118.0		-1.0	%		-97.7		-0.9	%		20.8	%
Other operating income (expense), net		-527.4		-4.7	%		-94.0		-0.9	%		461.1	%
Operating Profit		333.9		2.9	%		1,172.6		10.8	%		-71.5	%
Financial income (expense), net		-702.4		-6.2	%		-656.9		-6.1	%		6.9	%
Foreign exchange gain (loss), net		29.1		0.3	%		21.9		0.2	%		32.9	%
Profit (loss) before taxes on income		-339.4		-3.0	%		537.5		5.0	%		-163.1	%
Income tax and social contribution		-107.0		-0.9	%		-204.7		-1.9	%		47.7	%
Net income of the period		-446.4		-3.9	%		332.9		3.1	%		-234.1	%

YEAR ENDED DECEMBER 31, 2019 COMPARED TO YEAR ENDED DECEMBER 31, 2018

Net Revenue

Continuing Operations

In 2019, Embraer delivered 109 executive aircrafts (62 light jets and 47 large jets), compared to a total of 91 aircrafts (64 light jets and 27 large jets) delivered in 2018.

This increase in the number of aircrafts delivered in 2019, the depreciation of the Real in the period, and the progress in the development of agreements in the Defense & Security segment, resulted in revenue of R$10,467.90 million, representing a 33% increase compared to revenue of R$7,888.00 in 2018.

In 2019, revenue from the Executive Aviation business totaled R$5,642.9 million, representing a 34.9% increase compared to R$4,181.6 million in the previous year. Revenue from the Defense & Security business totaled R$3,058.6 million, representing a 39.1% increase compared to R$2,198.6 million in 2018, primarily due to the review of the cost of the KC-390 aircraft recorded in the second quarter of 2018, causing a negative impact of R$458.7 million, as a result of the incident with the KC-390 aircraft involving prototype 001. Finally, in 2019, the Services & Support segment regarding continuing operations is part of the services and support of the Executive Aviation and Defense & Security businesses, having generated R$1,730.5 million in total revenue, representing a 18.1% increase compared to R$1,464.8 million in 2018. Revenue from Other Related businesses totaled R$36.0 million in 2019, representing a 16.5% decrease compared to 2018.

Discontinued Operations

In 2019, if we take into account the deliveries regarding the business of discontinued operations, Embraer delivered 89 commercial aircrafts compared to a total of 90 commercial aircrafts delivered in 2018. Notwithstanding the decrease of one aircraft delivered in 2019 compared to 2018, the depreciation of the Real in the period generated net revenue of R$11,334.1 million, representing a 4.6% increase compared to R$10,833.6 in 2018.

Cost of Sales and Services

Continuing Operations

In 2019, cost of sales and services totaled R$9,0373 million, representing a 25.9% increase compared to R$7,176.1 million in 2018. Increased deliveries of executive jets, increased defense and services revenue and the depreciation of the Real in the period resulted in an increase in cost of sales and services.

Discontinued Operations

In 2019, cost of sales and services totaled R$9,599.3 million, representing a 9.8% increase compared to R$8,739.1 million in 2018. Although deliveries remained stable in 2019 compared to 2018, we had a different mix of products in 2019, with increased deliveries of E2 aircrafts, which are still undergoing its learning curve.

Gross Profit and Gross Margin

Continuing Operations

As a result of the foregoing, in 2019, the Company’s gross profit totaled R$1,430.6 million, representing a 109% increase compared to R$712.0 million in 2018. In 2019, gross margin was 13.7%, representing an increase compared to 9.0% in 2018.

Discontinued Operations

As a result of the foregoing, in 2019, the Company’s gross profit totaled R$1,734.9 million, representing a 17.2% decrease compared to R$2,094.5 million in 2018. In 2019, gross margin was 15.3%, representing a decrease compared to 19.3% in 2018.

Administrative and Selling Expenses

Continuing Operations

In 2019, administrative expenses increased by 8.7% and totaled R$540.9 million, accounting for 5.2% of the revenue for the period.

Discontinued Operations

In 2019, administrative expenses increased by 23.1% and totaled R$ 211.8 million, accounting for 1.9% of the revenue for the period.

Continuing Operations

In 2019, selling expenses totaled R$584.2 million, representing 5.0% increase compared to R$556.2 million in 2018.

Discontinued Operations

In 2019, selling expenses totaled R$543.8 million, representing a 2.6% decrease compared to R$558.1 million in 2018.

In both administrative expenses and selling expenses, the depreciation of the Real had an impact on the increase in expenses, primarily selling expenses, which decreased in U.S. dollars, the Company’s functional currency.

Research Expenses

Continuing Operations

Research expenses totaled R$78.4 million in 2019, compared to R$70.9 million in 2018.

Discontinued Operations

Research expenses totaled R$118.0 million in 2019, compared to R$97.7 million in 2018.

Other Operating Income (Expense)

Continuing Operations

In 2019, other operating income (expense), net totaled an expense of R$869.8 million, representing a 3.8% increase compared to R$655.0 million in 2018, due to the impact of the exchange rate variation mentioned above and an impairment expense in the Executive Aviation business incurred in 2019, which was greater than the impairment expense of the same segment in 2018.

Discontinued Operations

In 2019, other operating income (expense), net totaled an expense of R$527.4 million, representing a 461.1% increase compared to R$94.0 million in 2018, primarily due to the segregation costs related to the strategic partnership entered into between Embraer and Boeing and the impact of the exchange rate variation mentioned above.

Operating Profit

Continuing Operations

In 2019, operating profit and operating margin (EBIT) totaled R$643.7 million and -6.1%, respectively, compared to a loss of R$1,069.6 million and -13.6%, respectively, in 2018. In 2019, we had more deliveries and a better margin in the Executive Aviation business. In 2018, we made adjustments to reflect non-recurring items derived from the review of the cost base of the KC-390 aircraft development program, as a result of the incident with prototype 001 in May 2018, generating a negative impact of R$458.7 million in revenue and the increase in expenses related to impairment of aircrafts used in the Company’s portfolio.

Discontinued Operations

In 2019, consolidated operating profit and operating margin (EBIT) totaled R$333.9 million and 2.9%, respectively, compared to R$1,172.6 million and 10.8%, respectively, in 2018. As described above, this decrease was due to fewer deliveries of aircrafts in 2019, an increased share of E2 jets, whose costs are still high due to their learning curve, and the impacts of the segregation costs related to the strategic partnership entered into between Embraer and Boeing.

Financial income (expense), net

Continuing operations

Financial income (expense), net increased from R$23.9 million in 2018 to R$250.4 million in 2019, primarily due to the increase in interest on non-recurring receivables.

Discontinued Operations

Consolidated financial income (expense), net increased from R$656.9 million in 2018 to R$702.4 million in 2019, primarily due to the effect of exchange rate variation, as debt from discontinued operations is mostly denominated in U.S. dollars.

Net Income (Loss)

Continuing Operations

In 2019, net loss totaled R$847.7 million, compared to net loss of R$976.4 million.

Discontinued Operations

In 2019, net loss totaled R$446.4 million, compared to R$332.9 million in 2018. As described above, discontinued operations had higher costs due to increased deliveries of E2 jets, which is still undergoing its learning curve, and segregation costs related to the strategic partnership entered into between Embraer and Boeing.

YEAR ENDED DECEMBER 31, 2018 COMPARED TO YEAR ENDED DECEMBER 31, 2017

The results for 2017 were not recorded based on continuing and discontinued operations. Accordingly, the analysis below sets forth the Company’s results including both operations in 2017 and 2018.


(in R$ million, except %)	Dec. 31, 2018			VA			Dec. 31, 2017⁽¹⁾			VA			HA 2018 x 2017
Revenue		18,721.6			100.0	%		18,776.1			100.0	%		0.3	%
Cost of sales and services		(15,915.2	)		-85.0	%		(15,262.5	)		-81.3	%		4.3	%
Gross Profit		2,806.4			15.0	%		3,513.6			18.7	%		-20.1	%
Operating Income (Expense)
Administrative		(669.9	)		-3.6	%		(572.7	)		-3.1	%		17.0	%
Selling		(1,114.3	)		-6.0	%		(1,009.7	)		-5.4	%		10.4	%
Research		(168.5	)		-0.9	%		(157.6	)		-0.8	%		6.9	%
Other operating income (expense), net		(749.0	)		-4.0	%		(679.0	)		-3.6	%		10.3	%
Equity in income (losses) of associates		(1.6	)		-0.0	%		4.0			0.0	%		-140	%
Operating Profit		103.1			0.6	%		1,098.5			5.9	%		-90.6	%
Financial income (expense), net		(633.0	)		-3.4	%		(130.7	)		-0.7	%		384.3	%
Foreign exchange gain, net		3.0			0.0	%		20.9			0.1	%		-83.6	%
Profit (loss) before taxes on income		(526.9	)		-2.8	%		988.6			5.3	%		-153.3	%
Income tax and social contribution		(116.7	)		-0.6	%		(86.3	)		-0.5	%		35.2	%
Net income of the period		(643.6	)		-3.4	%		902.3			4.8	%		-171.3	%
Attributable to:
Owners of Embraer		(669.0	)		-3.6	%		850.7			4.5	%		-178.6	%
Non-controlling interest		25.5			0.1	%		51.7			0.3	%		-50.7	%
Weighted average number of outstanding shares in the period (in thousands)
Basic		734.1			—			734.3			—			—
Diluted		734.1			—			734.8			—			—
Profit (loss) per share
Basic		(0.91	)		—			1.16			—			-179	%
Diluted		(0.91	)		—			1.16			—			-179	%

(1)	Restated to reflect the effects of the retrospective adoption of IFRS 9/CPC 48 – Financial Instruments and IFRS 15/CPC 47—Revenue from Contracts with Customers. See note 2.2.1 of the audited consolidated financial statements.

Net Revenue

In 2018, Embraer delivered 90 commercial aircrafts and 91 executive aircrafts (64 light jets and 27 large jets), compared to a total of 101 commercial aircrafts and 109 executive aircrafts (72 light jets and 37 large jets) delivered in 2017.

This decrease in the number of aircrafts delivered in 2018, together with the depreciation of the Real in the period, resulted in revenue of R$18,721.6 million, below the Company’s estimates, although stable compared to revenue of R$18,776.1 million in 2017.

In 2018, revenue from the Commercial Aviation business totaled R$8,706.1 million, representing a 1.8% decrease compared to R$8,863.2 million in 2017. In 2018, revenue from the Executive Aviation business totaled R$4,181.6 million, representing a 1% increase compared to R$4,134.6 million in the previous year. Revenue from the Defense & Security business totaled R$2,198.6 million, representing a 19.6% decrease compared to R$2,733.1 million in 2017, primarily due to the review of the cost of the KC-390 aircraft development program in the second quarter of 2018, causing a negative impact of R$458.7 million, as a result of the incident with the KC-390 involving prototype 001. Finally, in 2018, the Company started to report the Services & Support segment separately from other business units, generating revenue of R$3,577.8 million, representing a 20.9% increase compared to R$2,943.7 million in 2017. Revenue from Other Related businesses totaled R$57.6 million in 2018, representing a 43.2% decrease compared to 2017.

Cost of Sales and Services

In 2018, cost of sales and services totaled R$15,915.2 million, representing a 4.3% increase compared to R$15,262.5 million in 2017. Fewer deliveries in the year, which caused a decrease in cost of sales, were offset by the depreciation of the Real in the period. Costs from the Defense & Security segment also increased, affecting gross profit and gross margin.

Gross Profit and Gross Margin

As a result of the foregoing, in 2018, the Company’s gross profit totaled R$2,806.4 million, representing a 20.1% decrease compared to R$3,513.6 million in 2017. In 2018, gross margin was 15.0%, representing a decrease compared to 18.7% in 2017.

Administrative and Selling Expenses

In 2018, administrative expenses increased by 17.0% and totaled R$669.9 million, accounting for 3.6% of the revenue for the period. Notwithstanding fewer deliveries and lower revenue in 2018, administrative expenses accounted for most of fixed expenses.

In 2018, selling expenses totaled R$1,114.3 million, representing a 10.4% increase compared to R$1,009.7 million in 2017.

In both cases, the depreciation of the Real affected the increase in expenses, especially selling expenses, which decreased upon the assessment of the company’s functional currency, the U.S. dollar.

Research Expenses

Research expenses totaled R$168.5 million in 2018, compared to R$157.6 million in 2017, and were within the Company’s initial estimates, meeting all targets established for the period.

Other Operating Income (Expense)

In 2018, other operating income (expense), net totaled an expense of R$749.0 million, representing a 10.3% increase compared to R$679.0 million in 2017, primarily due to the impact of the exchange rate variation mentioned above.

Operating Profit

In 2018, operating profit and operating margin (EBIT) totaled R$103.1 million and 0.6%, respectively, compared to R$1,098.6 million and 5.8%, respectively, in 2017, below the Company’s initial estimates. The main reasons why the Company’s initial estimate was not achieved were the adjustments made to reflect non-recurring items derived from the review of the cost base of the KC-390 development program, as a result of the incident with prototype 001 in May 2018, generating a negative impact of R$458.7 million in revenue and the increase in expenses related to impairment of aircrafts used in the Company’s portfolio. Moreover, fewer deliveries in the Executive Aviation segment affected the operating results.

Financial income (expense), net

Financial income (expense), net increased from R$130.7 million in 2017 to R$633.0 million in 2018, primarily due to our current net debt position and lower financial income from our cash and cash equivalents, in addition to higher net financial expense recognized in our residual value guarantees.

Net Income (Loss)

In 2018, net loss totaled R$643.6 million and net loss per share totaled R$0.91, compared to Net income of R$902.3 million and net income per share of R$1.16 in 2017. Adjusted net loss, excluding deferred income tax and social contribution and also the net effect, after taxes, of the non-recurring items described above, totaled R$224.3 million in 2018, compared to R$995.0 million in 2017. Net loss per share, excluding these same items, totaled R$0.31 in 2018, compared to net income per share of R$1.36 in 2017.

Statements of Cash Flows

Cash flow set forth in the table below comprises the total amount of the balance sheet and statements of income accounts, which include assets and liabilities held for sale:


(in R$ thousand, except %)	Dec. 31, 2019			Dec. 31, 2018			Dec. 31, 2017			2019 x 2018			2018 x 2017
Operating Activities
Net Income (Loss) for the Period		(1,294.1	)		(643.6	)		902.3			101.1	%		-171.3	%
Items not affecting cash
Depreciation		450.3			580.2			627.0			-22.4	%		-7.5	%
Amortization of government grants		(8.4	)		(13.2	)		(10.7	)		-36.4	%		23.4	%
Amortization		380.7			414.7			469.3			-8.2	%		-11.6	%
Amortization of contribution from suppliers		(89.8	)		(81.1	)		(87.6	)		10.7	%		-7.4	%
Allowance (reversal) for inventory obsolescence		81.5			69.1			37.3			17.9	%		85.3	%
Provision (reversal) for adjustment to market value, inventory, property, plant and equipment and intangible		413.4			379.8			359.8			-8.8	%		5.6	%
Allowance (reversal) for doubtful accounts		(12.3	)		(34.3	)		23.3			-64.1	%		-247.2	%
Loss on fixed assets disposal		109.8			73.9			60.1			48.6	%		23.0	%
Deferred income tax and social contribution		160.0			(96.3	)		(46.4	)		-266.1	%		107.5	%
Accrued interest		11.5			(36.9	)		(101.2	)		-131.2	%		-63.5	%
Interest on marketable securities		-121.1			(123.4	)		(75.6	)		-1.9	%		63.2	%
Equity in associates gains and losses		1.0			1.6			(4.0	)		-37.5	%		-140.0	%
Share-based remuneration		—			0.2			1.6			-100	%		-87.5	%
Foreign exchange gain (loss), net		-35.8			73.3			19.4			-148.8	%		277.8	%
Residual value guarantees		16.7			65.8			(41.9	)		-74.6	%		-257.0	%
Provision for contingencies		—			—			—						—
Provision for voluntary dismissal program		—			—			19.7			—			-100	%
Other		-14.7			(25.0	)		(13.7	)		-41.2	%		82.5	%
Changes in assets
Financial investments		1,932.8			2,637.5			(750.1	)		-26.7	%		-451.6	%
Derivative financial instruments		16.4			88.5			(4.9	)		-81.5	%		-1906.1	%
Collateralized accounts receivable and accounts receivable		816.8			6.3			19.6			12865.1	%		-67.9	%
Customer financing		4.3			17.6			66.8			-75.6	%		-73.7	%
Contract assets		(562.4	)		404.6			(249.7	)		-239.0	%		-262.0	%
Inventories		829.3			(875.0	)		1,342.3			-194.8	%		-165.2	%
Escrow deposits		1,442.9			—			—			—			—
Other assets		33.2			195.5			795.8			-83.0	%		-75.4	%
Changes in liabilities
Trade accounts payable		-172.3			209.6			(403.4	)		-182.2	%		-152.0	%
Non-recourse and recourse debt		-1,330.0			(86.8	)		(32.4	)		1432.3	%		167.9	%
Trade accounts payable		-119.2			(15.0	)		(112.6	)		698.0	%		-86.7	%
Contract liabilities		772.3			359.3			(321.3	)		114.9	%		-211.8	%
Advances from customers		17.4			—			—			-95.8	%		—
Contribution from suppliers		—			419.0			268.9			—			55.8	%
Taxes and payroll charges payable		18.5			139.5			66.5			-86.7	%		109.8	%
Financial guarantees		-62.4			(77.0	)		(129.8	)		-19.0	%		-40.7	%


(in R$ thousand, except %)	Dec. 31, 2019			Dec. 31, 2018			Dec. 31, 2017			2019 x 2018			2018 x 2017
Other payables		89.7			27.4			(170.6	)		-227.4	%		-116.1	%
Unearned income		(27.2	)		(42.9	)		(26.7	)		-36.6	%		60.7	%
Net cash generated (used) in operating activities		3,749.3			4,012.8			2,497.1			-6.6	%		60.7	%
Investing activities
Acquisitions of property, plant and equipment		-1,129.8			(565.1	)		(762.8	)		99.9	%		-25.9	%
Write-off of property, plant and equipment		0.3			1.1			60.0			-72.7	%		-98.2	%
Additions to intangible assets		(1,121.6	)		(1,060.0	)		(1,502.9	)		5.8	%		-29.5	%
Additions to investments in subsidiaries and affiliates		(9.4	)		(8.1	)		(2.0	)		16.0	%		305.0	%
Investments held to maturity		3,849.0			(283.4	)		(1,259.1	)		-1458.2	%		-77.5	%
Loans					—			—			—			—
Dividends received		0.2			0.3			0.3			-33.3	%		0	%
Restricted cash reserved for construction of assets					(0.1	)		3.0			-100.0	%		-103.3	%
Net cash generated (used in) investing activities		1,588.7			(1,915.4	)		(3,463.5	)		-182.9	%		-44.7	%
Financing activities
Proceeds from borrowings		1,534.1			438.2			3,036.8			250.1	%		-85.6	%
Repayment of borrowings		(2,514.5	)		(2,219.1	)		(1,730.5	)		13.3	%		28.2	%
Dividends and interest on shareholders’ equity		(7.3	)		(139.7	)		(173.0	)		-94.8	%		-19.2	%
Proceeds from stock options exercised		8.6			34.7			19.1			-75.2	%		81.7	%
Acquisition of own shares		(47.3	)		—			(48.4	)		—			-100.0	%
Net cash generated (used) in financing activities		(1,026.4	)		(1,885.8	)		1,104.0			-45.6	%		-270.8	%
Increase (decrease) in cash and cash equivalents		4,311.6			211.6			137.6			1937.6	%		53.8	%
Effects of exchange rate changes on cash and cash equivalents		27.0			547.8			20.0			-95.1	%		2639.0	%
Cash and cash equivalents at the beginning of the year		4,963.0			4,203.7			4,046.2			18.1	%		3.9	%
Cash and cash equivalents at the end of the year		9,301.6			4,963.0			4,203.7			87.4	%		18.1	%

Cash and cash equivalents totaled R$9,301.6 million, R$4,963.0 million and R$4,203.7 million as of December 31, 2019, 2018 and 2017, respectively, as set forth in the analysis below:

Net Cash Generated (Used) in Operating Activities

In 2019, net cash generated from operating activities totaled R$3,749.4 million, representing a 6.6% decrease compared to R$4,012.8 million in 2018, primarily due to the decrease in financial investments and contracted assets, inventories and escrow deposits, together with the increase in trade accounts payable and non-recourse and recourse debt, as well as a lower net income compared to 2019.

In 2018, net cash generated from operating activities totaled R$4,012.8 million, representing a significant increase of 60.7% compared to net cash generated from operating activities of R$2,497.1 million in 2017, due to the decrease in inventories in the yearly comparison. Moreover, this improvement in cash results from a higher net income, excluding the effects of non-cash items.

Net Cash Used in Investing Activities

In 2019, net cash generated by investing activities totaled R$1,588.7 million, compared to net cash used in investing activities of R$1,915.4 million in 2018. The main variations between years were due to liquidating financial investments and acquisitions in property, plant and equipment, related to segregation costs of the strategic partnership entered into between Embraer and Boeing.

In 2018, net cash used in investing activities totaled R$1,915.4 million, representing a 44.7% decrease compared to 2017. The main variations between years were due to the 29.5% decrease in additions to intangible assets and the 77.5% decrease in investments held to maturity. The decrease in additions to intangible assets is primarily due to the progress of the development program for the second generation of E2 E-Jets, which requires less cash, already including the certification of the E190-E2 and the expected certification of the E195-E2 in 2019. The decrease in investments held to maturity was primarily due to lower investments in short-term securities (held to maturity).

Net Cash Generated (Used) in Financing Activities

In 2019, net cash used in financing activities totaled R$1,026.4 million, compared to net cash used in financing activities of R$1,885.8 million in 2018, primarily due to the 85.6% decrease in new financings obtained and the 28.2% increase in repaid financings, which increased by 13.3% in 2019. However, we recorded new financings that decreased the use of cash in 2019.

In 2018, net cash used in financing activities totaled R$1,885.8 million, compared to net cash generated in financing activities of R$1,104.0 million in 2017, primarily due to the 85.6% decrease in Proceeds from borrowings and the 28.2% increase in repayment of borrowings.

Discontinued Operation

As disclosed in our financial statements, in note 4.4 – Cash Flow, in 2019, net cash generated from operating activities totaled R$1,191.6 million compared to net cash generated from operating activities of R$1,688.6 million in 2018.

In 2019, net cash used in investing activities totaled R$946.6 million compared to net cash used in investing activities of R$1,080.1 million in 2018.

In 2019, net cash used in financing activities totaled R$75.3 million compared to net cash used in financing activities of R$776.8 million in 2018.

10.2 – Results of Operations and Financial Results

(a) Results of the company’s operations, including (i) a description of any significant components of revenue and (ii) factors that materially affect the results of operations.

Continuing Operations

The main factors that affect the Company’s revenue are: (1) the volume of executive aircraft deliveries; (2) the mix of deliveries of small and large jets for executive aviation; (3) the exchange rate variation, considering the U.S. dollar is the functional currency of the Company; (4) revenues from services regarding maintenance services, parts supply, training, etc., which also significantly contribute to the Company’s revenue; (5) the entry into service of new products; and (6) revenue from the Defense & Security segment.

Discontinued operations

The main factors that affect Company’s result are: (1) the volume of commercial aircraft deliveries; and (2) revenues from services, comprising maintenance services, parts supply, training, etc.

The charts below set forth the total revenue of the Company (continuing and discontinued operations) by business unit and region. The Commercial Aviation segment accounts for most of the revenue of the Company, followed by Executive Aviation, Services & Support and Defense & Security. Geographically, revenue from North America, as a percentage of total revenue, has been increasing in the last three years. North America remained as the main consumer market of Embraer’s products and services, especially in the executive aviation market and regarding E175 commercial jets, as a result of the success of a number of sales campaigns launched in the United States in recent years, where the Company obtained most of all orders of jets with 76 seats. The European market decreased slightly, accounting for 17% of the Company’s revenue. Revenue from Brazil, as a percentage of total revenue, increased to 11% in 2019. Revenue from Latin America and Asia-Pacific/China, as a percentage of total revenue, decreased compared to the previous year, and revenue from Africa and the Middle East remained stable. Together, these regions accounted for 11% of the Company’s revenue.

LOGO

Continuing Operations

In 2019, in regard to continuing operations, operating profit and operating margin (EBIT) totaled a negative amount of R$643.7 million and -6.1%, respectively, primarily due to the Defense & Security segment, as a result of the review of base cost of the development agreement for the KC-390 aircraft. This impact was partially offset by the increase in profitability of the Executive Aviation segment.

Discontinued operations

In 2019, in regard to discontinued operations, operating profit and operating margin (EBIT) totaled R$333.9 million and 2.9%, respectively. The largest elements for result below the margin of these two operations in previous years were decreased profitability in the Commercial Aviation segment (less favorable mix of deliveries), and segregation costs related to the Commercial Aviation segment, related to the strategic partnership entered into between Embraer and Boeing, which totaled R$485.5 million.

(b) Variations in revenues attributable to changes in prices, exchange rates, inflation, changes in volumes and introduction of new products and services

In 2019, Embraer delivered 198 aircrafts in the Commercial and Executive Aviation segments, representing an increase compared to 181 aircrafts delivered in these segments in 2018, which, together with the 13% average depreciation of the Real in the period, generated revenue of R$10,467.9 million from continuing operations and R$11,334.1 million from discontinued operations, within the Company’s estimates, representing an increase compared to revenue of R$7,888.0 million in 2018 from continuing operations and revenue of R$10,833.6 million from discontinued operations.

In 2019, net revenue from the Commercial Aviation business totaled R$8,920.7 million, representing a 2.5% increase compared to R$8,706.1 million in 2018. This slight increase is primarily due to the exchange rate variation in the period, which favored revenues in Reais. In 2019, deliveries in this segment remained virtually stable, totaling 90 and 89 aircrafts in 2018 and 2019, respectively.

In 2019, revenue from the Executive Aviation business totaled R$5,642.9 million, representing a 34.9% increase compared to R$4,181.6 in 2018. In addition to exchange rate variation, as mentioned above, this significant increase was primarily due to increased deliveries in 2019, totaling 109 executive jets, especially the delivery of 47 large jets (in addition to 62 light jets), compared to 91 executive jets (64 light jets and 27 large jets) delivered in 2018.

In 2019, net revenue from the Defense & Security business totaled R$3,058.6 million, representing a 39.1% increase compared to R$2,198.6 million in 2018. In 2018, the decrease in net revenue was due to the base review of the KC-390 aircraft development agreement, as a result of the incident occurred in May 2018, involving prototype 001, which got off lane during tests on the ground.

In 2019, revenue from the Services & Support business totaled R$4,142.9 million, representing a 15.8% increase compared to R$3,577.8 million in 2018, primarily due to exchange rate variation. This revenue comprises three segments of the Company, namely, Commercial Aviation, Executive Aviation and Defense. As described above, the service business of the Commercial Aviation segment is presented as Commercial Aviation discontinued operation in our financial statements and the service business of the Executive Aviation and Defense segments is presented as continuing operations.

In 2019, revenue from Other business totaled R$37.0 million, representing a 35.8% decrease compared to R$57.6 million in 2018.

In 2018, the Company delivered 181 aircrafts in the Commercial and Executive Aviation segments, representing a decrease compared to 210 aircrafts delivered in these segments in 2017, which was offset by the 17% depreciation of the Real in the period, generating revenue of R$18,721.6 million, below the Company’s estimates, albeit in line with revenue of R$18,776.1 million in 2017.

In 2018, net revenue from the Commercial Aviation business totaled R$8,706.1 million, representing a 1.8% decrease compared to R$8,863.2 million in 2017. As explained above, this slight decrease is due to the decrease in deliveries in this segment, from 101 aircrafts in 2017 to 90 aircrafts in 2018, which was offset by the depreciation of the Real.

In 2018, revenue from the Executive Aviation business totaled R$ 4,181.6 million, representing a 1.1% increase compared to R$4,134.6 million in 2017. In this case, the depreciation of the Real generated an increase in revenue, which was offset by fewer deliveries in 2018, i.e., 91 jets (64 light jets and 27 large jets) delivered in 2018, compared to 109 jets (72 light jets and 37 large jets) delivered in 2017.

In 2018, net revenue from the Defense & Security business totaled R$2,198.6 million, representing a 19.6% decrease compared to R$2,733.1 million in 2017, due to the base review of the KC-390 aircraft development program, as a result of the incident that occurred with the prototype.

In 2018, revenue from the Services & Support business, which started to be reported separately from the other segments as of 2018, totaled R$3,577.8 million, representing a 22% increase compared to 2017.

In 2018, revenue from Other business totaled R$57.5 million, representing a 43.4% decrease compared to R$101.5 million in 2017.

(c) Impact of inflation and variation in prices of the main inputs and products, exchange rate and interest rate in the operations and financial results of the company, if material

Considering the functional currency determined by the Company is the U.S. dollar, the foreign exchange gain (loss), net presented in the financial statements of the Company mostly refers to monetary items in currencies other than the U.S. dollar. As a strategy to mitigate risks, the allocation of cash to assets denominated in Reais or U.S. dollars held by Company is one of the main tools to hedge against exchange rate variations.

Considering that the Company issues notes abroad, as described in item 10.1(i) of this Company’s Brazilian Annual Report (Formulário de Referência), and maintains cash primarily in U.S. dollars, the variation in exchange rates directly affects financial results; however, it does not affect the Company’s financial planning because its functional currency is the U.S. dollar.

Interest rates affect Embraer’s financial results. An increase or decrease in local interest rates also influences the financial result of the Company, as it may increase expenses.

In 2019, investments in Reais totaled R$535.6 million, of which R$518.6 million corresponded to continuing operations and R$16.8 million corresponded to discontinued operations, compared to R$1,575.0 million in 2018 and R$2,481.7 million in 2017. Investments abroad are indexed to a pre-fixed rate and, considering interest rates remained stable and relatively low in the period, they did not cause significant variations in the financial results.

In the last three years, the variation in prices of the main inputs and products did not affect the results of operations and/or financial results of the Company.

10.3 – Material events, occurred and expected, in the financial statements

(a) Introduction or sale of operating segment

During 2017, after announcing the creation of a new business unit in 2016, the Company consolidated customer support services and processes previously attributed to each of our business areas to identify synergies and quantify our experience in our Commercial Aviation, Executive Aviation, Defense & Security and Agricultural Aviation units regarding services and support. 2018 was the first year in which the Services and Support segment was separated. The Services and Support segment was created to strengthen Embraer’s know-how and provide the best post-sale service and support solutions to customers through a comprehensive portfolio of innovative and competitive solutions to ensure the operating efficiency of products manufactured by Embraer and other aircraft manufacturers, extending the useful life of commercial, executive and defense aircraft.

In addition to proposing support solutions to customers, OGMA offers Maintenance, Repair and Overhaul (“MRO”) services in connection with a diversified portfolio of defense, commercial and executive aircraft, including aircraft engines and components. Moreover, OGMA plays an important role as supplier of aeronautical metal and composite structures to a number of aircraft manufacturers.

The services and support segment has six macro processes:

•

capturing customers’ needs and developing integrated support and service solutions: developing integrated and competitive solutions related to support, technical services, materials or MRO activities that meet the needs and expectations of Embraer’s customers;

•

selling and managing support and service solutions: selling integrated and competitive technical support; service, materials or MRO activities solutions and managing support and service agreements;

•

providing material solutions: providing parts to customers, through direct sales or special programs, managing the repair of components, and providing inventory management and advisory services on inventory formation, etc.;

•

providing technical solutions: providing technical, operating and maintenance support to customers, including training for pilots and flight attendants; aircraft modification and improvement projects; review of technical, operating and maintenance publications; and support to digital solutions;

•

providing MRO solutions: providing scheduled and unscheduled maintenance services to aircraft, engines and landing gear, aircraft modernization services and component repair;

•

monitoring and ensuring operating excellence and customer relationship excellence: ensuring the operating excellence of material, technical and MRO solutions through the maintenance of the accountability of operating leadership and support areas, consistent monitoring of operating KPIs, and review of customer satisfaction through MFA practices. Maintaining customer relationships with CRM and operating areas that interact directly with customers.

(b) Incorporation, Acquisition or Sale of Equity Interest

Strategic Partnership with Boeing

On January 24, 2019, Embraer, the Boeing Company (“Boeing”) and certain of their subsidiaries entered into the Master Transaction Agreement and certain other transaction agreements, pursuant to which, subject to certain approvals and other conditions precedent, a Brazilian subsidiary of Boeing will acquire a controlling stake in Embraer’s commercial aviation business unit and Embraer and Boeing, or their respective subsidiaries, will form a joint venture for the promotion and development of new markets and applications for the C-390 Millenium multi-mission aircraft (“Transaction”).

On February 26, 2019, the shareholders of Embraer approved the terms and conditions of the Transaction at an extraordinary general shareholders’ meeting. On January 1, 2020, Embraer conducted an internal restructuring, separating its Commercial Aviation business through a contribution, made by Embraer, in the capital stock of Yaborã Indústria Aeronáutica S.A., consisting of net assets comprising assets, liabilities, goods, rights and obligations related to Embraer’s Commercial Aviation business unit.

The consummation of the Transaction remains subject to: (i) the approval of the European Commission; and (ii) the fulfillment of other usual closing conditions. Until this approval is obtained and the other conditions are fulfilled, there is no assurance regarding the consummation of the Transaction or expected timeframe for completion, and Embraer will continue to place their best efforts to close the Transaction within the shortest timeframe possible.

Details of the Transaction are disclosed in the material facts published by the Company on this subject and in the manual for attendance to the extraordinary shareholders’ meeting held on February 26, 2019, available in the IPE Module of Sistema Empresas.NET, in the “Attendance manual” category.

Upon the implementation of the Transaction, the Company will remain a Brazilian publicly-listed company, with shares listed on the Novo Mercado special segment of B3 S.A.—Brasil, Bolsa, Balcão and American Depositary Receipts, or ADRs, listed on the New York Stock Exchange. The Brazilian government will continue to hold the rights deriving from its ownership of the common share of special class issued by the Company (golden share). Embraer will keep its Executive Aviation and Defense & Security business units and will continue to develop and operate them.

Corporate Structure

As of the date hereof, Embraer’s simplified corporate structure is set forth in the chart below:

LOGO

Immediately after the closing of the Transaction, the simplified corporate structures of Embraer, Commercial Aviation NewCo and KC-390 NewCo are set forth in the charts below:

(c) Unusual Events or Transactions

During 2019, Embraer had no unusual events or transactions.

During the first semester of 2018, the 001 prototype under the C-390 Millenium development agreement had an incident that unusually affected the testing campaign for the aircraft certification. This non-recurring event adversely affected total estimated costs for conclusion and the recognition of revenue from the development agreement, with an accumulated negative adjustment recorded as gross profit in the amount of R$458.7 million in the statements of income for the year.

10.4 – Significant Changes to Accounting Standards – Qualifications and Emphasis in the Auditor’s Report

(a) Significant Changes to Accounting Standards

The annual financial statements of the year ended December 31, 2019 include the first year of adoption of IFRS 16/ CPC 06 (R2) – Leases and IFRIC 23/ ICPC 22 – Uncertainty over Income Tax Treatment.

The effects of the adoption of IFRS 16/CPC 06 (R2) – Leases are presented prospectively as of January 1, 2019, and the Company used the modified retrospective method for the transition. The Company used the following methods allowed by the accounting standard for its agreements: (i) not recording lease agreements that, on the initial date, provide for a lease term of 12 months or less (short-term leases); and (ii) not recording agreements with underlying individual asset of amounts lower than US$5,000 (low-value leases).

For the interpretation of IFRIC 23/ ICPC 22, the Company also decided to make a prospective transition. In the assessment of the Company’s management, no significant impacts existed in connection with the recording of liabilities based on this interpretation, as all procedures adopted for the calculation and payment of taxes on income are supported by applicable law and court cases of Administrative and Judicial Courts.

In addition, with the adoption of IFRIC 23/ICPC 22, which seeks to clarify the application of requirements related to the recognition and measurement set forth in IAS12/CPC 32 – Income Taxes in case of uncertainty about the tax treatment applied to the calculation of the relevant taxes (income tax and social contribution on net income), the Company started to review all its proceedings and respective identification, recognition, measurement and disclosure criteria adopted until then.

The review involved the joint work of the relevant law firms and an assessment of the aspects related to uncertain tax treatments, which resulted in a general review of proceedings, their risk classifications and disclosure criteria, in which certain proceedings with a possible chance of loss were not disclosed in financial statements because they were in their initial stage, in the administrative level. Moreover, we also assessed the uniqueness of subject matters, specificities of the aeronautical segment in Brazil and the insufficient number of court precedents.

The Management is disclosing, in Note 26.2, these contingent liabilities related to income tax and social contribution matters that were not previously disclosed, taking into account their historical amounts as of December 31, 2019 and 2018. The Company also changed its accounting policy to record hedge accounting structures, replacing IAS 39/CPC38 by IFRS 9/CPC 48 – Financial Instruments, as of January 1, 2019.

(b) Significant Effects of the Changes to Accounting Practices

The effects to the adoption of IFRS 16/ CPC 06 (R2) as of January 1, 2019 were:

•

recognition of lease liabilities in the total amount of R$43,131 in the Parent Company and R$221,535 in the Consolidated, regarding lease payments based on the cash flows of each agreement, discounted at present value at the incremental loan rate. The weighted average incremental loan rate applied on lease liabilities as of January 1, 2019, was 6.3% p.a.

•

the right-of-use assets representing the right to use the underlying assets of these agreements were measured in an amount equal to the amount of lease liabilities.


	Parent Company			Consolidated
Operating lease agreements as of December 31, 2018		66,808			300,576

- Exclusion of short-term leases recognized as expense based on the straight-line method		(2,839	)		(7,456	)
- Exclusion of low-value leases recognized as expense based on the straight-line method		(5,304	)		(12,575	)
- Discount at the incremental loan rate		(15,534	)		(59,010	)

Lease liabilities recognized as of January 1, 2019		43,131			221,535

In regard to the change in accounting policy for the recording of hedge accounting structures, the Company started to record changes in the fair value of the temporal element of certain hedging instruments (options) included in cash flow hedging structures, previously recognized in financial result in accordance with IAS 39/CPC 38, in other comprehensive income as hedging cost in the cash flow hedging line item. As of January 1, 2019, the amount of R$5,023 was reclassified from revenue reserves to financial instruments reserve, in equity value adjustment in shareholders’ equity, regarding the time value of the options in effect on the date of initial application. No additional accounting impacts occurred as a result of this change.

(c) Qualifications and Emphasis in the Auditor’s Report

Commentary on the independent auditor’s report for the years ended December 31, 2019, 2018 and 2017

The independent auditor’s report included in the Company’s financial statements for the years ended December 31, 2019, 2018 and 2017 did not have any qualifications or emphasis of matter paragraphs.

10.5 Critical Accounting Policies

The Company is required to use estimates to measure certain transactions. The use of estimates is always associated with judgment and subjective perceptions, for which reason the Company identifies its main estimates in its financial statements. The Management of the Company understands that certain variables and assumptions used in its estimates may affect its financial statements and, accordingly, the Company highlights its critical accounting policies in the paragraphs below.

Revenue from Long-term Contracts (Defense & Security)

In the Defense & Security segment, a significant portion of revenue is derived from long-term agreements pursuant to which the control over products and services is transferred to customers (the Brazilian government and foreign governments) over time, applying the incurred cost method, based on accumulated incurred costs divided by total estimated costs to measure progress to completion. During the performance of the agreement, the Company assesses incurred costs and, if required, total estimated costs to completion are adjusted to reflect the variations in relation to estimated amounts, primarily due to material changes in circumstances and new events, such as contractual amendments. Any increase or decrease in revenue and estimated costs to completion are cumulatively recognized in the statements of income for the reporting period in which the circumstances that generated the review were identified by Management. The Management of the Company understands that an inadequate projection of the costs of completion regarding these agreements may cause material distortions in the measurement of the respective revenues.

Residual Value Guarantees

Residual value guarantees provided in the sale of new aircraft may be exercised at the expiration of financing agreements entered into between a financing agent and the customer/operator of these aircraft. At the time of granting, these guarantees are measured at fair value and quarterly reviewed to reflect any losses due to the fair value of these obligations. Residual value guarantees may be exercised if the quoted market value is lower than the guaranteed future fair value. Future fair value is estimated based on aircraft valuations issued by third parties, including information obtained from the sale or lease of similar aircraft in the secondary market. The Management of the Company believes that valuations issued by qualified third parties represent an independent source and is the best way to estimate any exposures related to residual value guarantees.


	*Additional variations in accounting balance^()**
	Exposure as of December 31, 2019		-50%			-25%			Probable scenario			+25%		+50%
Residual value financial guarantee		522,140		(230,730	)		(215,092	)		(3,708	)		374,494		498,959

Total		522,140		(230,730	)		(215,092	)		(3,708	)		374,494		498,959

(*)	25% and 50% positive and negative variations were applied on rates in effect. Effects of variations on the result of discontinued operations.

As of December 31, 2019, residual value guarantees were included in the liabilities related to assets held for sale of the Commercial Aviation business (as disclosed in Note 4 of the financial statements for the year ended December 31, 2019).

Impairment of Non-current Assets

The annual impairment test considers our medium and long-term strategic plan, brought to present value at the weighted average cost of capital, or WACC, rate compatible with the market and that reflects the shareholders expectations of return. In preparing or using this information, the Company uses estimates, as follows:

(a)

Gross expected cash flow – management projects inflows and outflows based on past performance taking into account its business strategy and market development expectations. These projections also take into account the efficiency gains planned for the product cycle.

(b)

Growth rates – the growth rates were reflected in the revenue flow budgeted by the Company, consistent with the forecasts included in industry reports.

(c)

Discount rates – a WACC discount rate that reflects the expected return of investors is used at the time the calculation is made. This rate is also compared with the market to confirm its consistency.

The process of estimating the value in use involves assumptions, judgments and estimates for future cash flows, which represent the Company’s best estimate approved by management. Accordingly, Management understands that the impairment test uses future information based on best estimates and, therefore, any impairment adjustment is adequately assessed.

Classification and presentation of the Commercial Aviation business as assets held for sale and discontinued operation

The Company’s financial statements were prepared taking into account the classification, measurement and presentation of assets, liabilities and results of the Commercial Aviation business and associated services as held for sale and discontinued operations, subject to the terms in effect pursuant to the agreement entered into with Boeing on the base date and the definition of the transaction as ‘highly probable” in the Management’s judgment, in view of IFRS 5/CPC 31, thus designated as such after the approval of the agreement by the Company’s shareholders at the Extraordinary Shareholders’ Meeting held on February 26, 2019 (as disclosed in Note 3.6 of the financial statements for the year ended December 31, 2018). Additional details on the transaction and conditions precedent for its completion are disclosed in Notes 1 and 4 of the financial statements for the year ended December 31, 2019.

As of the moment in which assets are classified as held for sale, the depreciation of property, plant and equipment and the amortization of intangible assets and right of use that comprise the group of assets to be sold cease and are no longer recognized in the result for the year, based on the expectation of realization of the sale of these assets, instead of continuous use. If these assets had not been classified as held for sale, the depreciation and amortization that would have been recognized in the result for the year ended December 31, 2019 would have totaled R$335,401.

10.6 – Material Items not Included in the Financial Statements (off-balance sheet items)

(a) Assets and liabilities directly or indirectly held by the company that are not included in its balance sheet (off-balance sheet items), such as (i) operating lease-purchase agreements, assets and liabilities, (ii) written-off portfolios of receivables, in which the entity maintains its risks and responsibilities, indicating the respective liabilities, (iii) agreements for the future purchase and sale of products or services, (iv) unfinished construction agreements and (v) agreements for future financing disbursements

The Company contracts different types of insurance policies to protect its assets from claims that may result in significant losses. The Company also contracts policies for risks related to mandatory insurance, pursuant to applicable law or in accordance with contractual obligations.

The Company and its subsidiaries maintain civil liability insurance for their operations in Brazil and abroad, including coverage and conditions considered by the Managements of the Company and its subsidiaries to be adequate to inherent risks.

The coverage for pecuniary losses and loss of profits in Brazil and abroad totals R$31,393 million.

As described in note 37 to the financial statements for the year ended December 31, 2019, the Company enters into certain off-balance sheet arrangements, in the ordinary course of business, as follows:

Financial Guarantees (Commercial Aviation)

The Company provides guarantees in the financing of aircrafts. The guarantee is provided to the financing agent and, in the event the customer fails to repay the financing, the Company incurs the first losses, limited to a percentage of the previously agreed outstanding balance. These guarantees are not recorded in the books of the Company until a significant event occurs, such as reorganization or judicial recovery filing of a customer.

The Company provides residual value guarantees that usually assure, within a certain period, that the aircraft will have a market residual value based on its original sales price, subject to a limitation (cap). Upon exercise by a purchaser of its residual value guarantee, the Company bears the difference between the guaranteed residual value and the market value of the aircraft, if any. This monitoring is conducted monthly and if an exposure is identified, the Company establishes a provision.

The table below sets forth quantitative data regarding guarantees the Company renders to third parties. The maximum potential payment (off-balance sheet exposure) represents the worst-case scenario and does not necessarily reflect the results expected by the Company. Estimated proceeds from performance guarantees and underlying assets represent the anticipated values of assets we could liquidate or receive from other parties to offset our payments under guarantees.


	December 31, 2019			December 31, 2018

Maximum amount of financial guarantees		144,597			257,911
Maximum amount of residual value guarantees		823,637			980,770
Mutually excluding exposure (i)		(50,287	)		(104,364	)
Provisions and obligations recorded (Note 23)		(565,327	)		(531,068	)

Off-balance sheet exposure		352,620			603,249

Estimated performance bond and collateralized assets		350,232			688,277

(i)

when an underlying asset is covered by mutually exclusive financial and residual value guarantees, the residual value guarantee may only be exercised if the financial guarantee has expired without having been exercised. On the other hand, if the financial guarantee is exercised, the residual value guarantee is automatically terminated.

Backlog

The Company has a backlog, whose performance obligations are unmet or partially met. The amount of revenue allocated to unmet or partially met performance obligations, as of December 31, 2019, totaled R$67.5 billion, of which R$53.8 billion must be realized in the next five years, based on Company’s estimates.

The Company recognizes revenue in its accounting record when (or to the extent that) the performance of an obligation is accomplished by transferring the promised good or service (i.e., an asset) promised to the customer. The asset is transferred when (or to the extent that) the customer obtains control over this asset.

(b) Others Items not included in the Financial Statements

There are no other items that were not included in the financial statements.

10.7 – Comments on Off-balance Sheet Items

We present below information related to the items mentioned in Item 10.6 of this Company’s Brazilian Annual Report (Formulário de Referência), as well as Management’s evaluation on the effects of those off-balance sheet items in the Company’s financial statements.

(a) How these items change or may change revenue, expenses, operating income (expense), financial expense or other items of the financial statements of the company

Backlog

Backlog comprises unmet or partially met performance obligations with customers, which will be recognized as revenue from sales in the next years. As of December 31, 2019, backlog totaled R$67.5 billion, R$53.8 billion of which is expected to be realized and recognized as revenue in the next five years, based on the Company’s estimates.

Financial Guarantees (Commercial Aviation)

The Company may provide residual value guarantees in the future related to aircrafts sold, which guarantees may be exercised at the end of the financing agreement entered into between a financial agent and the customer/operator of the aircrafts. At the time guarantees are granted, they are measured at fair value and quarterly reviewed to reflect any losses due to the fair value of these obligations, and are recorded as a financial expense of the Company because they are derivative instruments. Residual value guarantees may be exercised if the quoted market value is lower than the guaranteed fair value. Future fair value is estimated based on aircraft valuations issued by third parties, including information obtained from the sale or lease of similar aircrafts in the secondary market.

The Company may provide financial guarantees in the future related to aircrafts sold. The guarantee is granted at fair value; the respective amount is recorded as a deduction from sales and subsequently recognized as sales revenue during the term of the granted guarantee. The Company monitors the credit condition of the borrower and, if any event occurs affecting the credit condition of the borrower or negotiation, the exposure is recalculated taking into account the best estimate at the time in which the payments are probable to occur and may be reliably estimated; the exposure is then recognized as a provision against operating income (expense). When an agreement on the payment of these guarantees is executed, the estimated amounts are reclassified to trade accounts payable.

The exposure of the Company is reduced because, in order to benefit from the guarantee, the guaranteed party must return the underlying asset in specific conditions of use.

(b) Nature and purpose of the transaction

For a description of the nature and purpose of each transaction, see item 10.6(a) of this Company’s Brazilian Annual Report (Formulário de Referência).

(c) Nature and amount of obligations assumed and rights created in favor of the issuer as a result of the transaction

For a description of the amount of obligations assumed and rights created in favor of the Company as a result of off-balance sheet transactions, see item 10.6(a) of this Company’s Brazilian Annual Report (Formulário de Referência).

10.8 – Business Plan

(a) Investments

(i) Quantitative and Qualitative Description of Ongoing and Expected Investments

The main investments in the recent years were devoted to Commercial Aviation and Executive Aviation, as investments in the Defense & Security segment are generally paid by the Brazilian government, which requests the development of projects.

In the Commercial Aviation segment, we highlight the development of the E-2 jets, second generation of the E-Jets models, consisting of the E175-E2, E190-E2 and E195-E2 models, which were launched in June 2013. The first E190-E2 model, sold to a Norwegian customer, i.e., Wideroe, commenced operations in Abril 2018. In 2019, the E195-E2 model was certified and commenced operations in September with the first delivery to AerCap and Azul Linhas Aéreas. The first flight of the E-175 E2 model occurred in December 2019, progressing towards its certification campaign. The estimated investment amount for the E-Jets models is US$1.7 billion, net of contribution from partners.

In October 2018, the Company launched the new Praetor 500 and Praetor 600 executive jets, midsize and super-midsize jets that are more innovative and technologically advanced. The Praetor 600 was certified and commenced operations in the second quarter of 2019, followed by Praetor 500, which was certified and commenced operations in the third quarter of 2019. The Praetor 600 and 500 jets stem from the platform of Legacy 500/450 jets. In 2019, most of the investments of the Company was related to the development of the E2 commercial jet models. The table below sets forth the investments in research and development (R&D) and Capex of the Company, in 2019, 2018 and 2017.


	2019				2018				2017
US$ million	Projection		Realized		Projection		Realized		Projection		Realized
R&D		—		328		350		211		450		434
Capex		—		158		200		94		200		176

Total		—		486		550		305		650		610

(ii) Sources of Funds for Investments

Based on our continuing activities, investments consist primarily of expenses associated with the development of aircraft for the executive aviation markets and investments in industrial capacity in Brazil and abroad. Generally, these investments are supported by funds derived from operations; loans and financing, primarily from government financing agencies, such as BNDES and FINEP; cash contributions from risk-sharing partners; and advances from customers.

In 2018 and 2019, the Company did not obtain material funds.

Integrating the group of liabilities held for sale in our financial statements, regarding the discontinued operation. In 2017, the Company, through its subsidiary Embraer Netherlands Finance B.V, issued US$750 billion guaranteed notes, to meet general corporate purposes.

(iii) Material Ongoing and Expected Divestments

The Company does not have material ongoing or expected divestments.

(b) Provided it has been disclosed, indicate the purchase of plant, equipment, patents or other assets that should materially influence the production capacity of the company.

There has been no purchase of plant, equipment, patents or other assets that should materially influence the production capacity of the Company.

(c) New products and services, indicating (i) a description of ongoing research that has already been disclosed, (ii) total amounts invested by the company in research for the development of new products or services, (iii) ongoing projects that have already been disclosed; and (iv) total amounts invested by the company in the development of new products or services

Based on its business plans and monitoring of the global technological scenario, Embraer sets forth a technological development plan to investigate and develop solutions for the main challenges faced by the Brazilian aeronautic industry in the coming years in connection with design, development, production and commercialization of aircraft, in order to remain competitive. These preparatory efforts to apply advanced technologies will make aircraft lighter, quieter, more comfortable and efficient in terms of consumption of energy and emissions, and will decrease the time required to design and manufacture aircraft, while optimizing resources.

In order to expand the reach of the results and minimize the risks of developments, the Company’s pre-competitive research and development strategy is structured as a program whose key competences are the ability not only to manage and execute multidisciplinary projects, but also maintain and coordinate a network of development partners, integrating several institutions (universities, research institutes, development institutions and companies).

In 2019, the Company’s total investments amounted to US$485.9 million, of which US$278.8 million was earmarked for product development, net of contribution from partners; US$49.4 million for research; and US$157.7 million for capital expenditures. It is important to mention that the capital expenditures amount described above excludes expenses related to equipment and property, plant and equipment, which totaled US$3.3 million, and primarily consist of programs in the Defense & Security segment. These expenses are taken into account based on the terms and conditions of the relevant agreements and, consequently, are not part of the estimated capital expenditures of the Company.

The above data was presented on a consolidated basis in our standardized financial statements. The Company’s investments are financed by its own resources and by third parties.

10.9 – Others Material Factors

It is recommended that the company discloses, in this item, information about expenses with advertisement, sponsorships, partnerships and agreements (convênios), as well as the criteria used to allocate funds to these expenses.

In 2019, the Company’s advertising expenses totaled approximately R$123 million, of which the majority of the expenses are for fairs and exhibitions, advertisement campaigns and other promotional activities. Business areas request these expenses annually and are submitted to the Management of the Company for approval, in order to enable the marketing efforts of products and services.

Annex II – Opinion and Report of the Audit, Risk and Ethics Committee

(Report for purposes of item VI of Section 31-D of CVM Instruction No. 308/99, as included by CVM Instruction No. 509/11 and Opinion in compliance with item III of the Sole Paragraph of Section 9 of CVM Instruction No. 481/09)

Opinion and Summary Report of the Audit, Risk and Ethics Committee

In accordance with the provisions of its Internal Rules, the Audit, Risk and Ethics Committee (“Committee”) of Embraer S.A. (“Embraer” or “Company”) advises the Board of Directors focused on the following issues:

(a)	monitoring and evaluation of business risks, of an operational, marketing, public image, corporate, financial, or legal nature of the markets managed by the Company, through the diagnosis of the risk sources of the activities of the Company;

(b)	evaluation of the adequacy of the risk assessment models mentioned above, as well as the conformity and validation tests of the models used;

(c)	analysis and opinion on the guidelines and policies of risk management, especially to estimate the financial impact from unexpected losses in normal and stress-related situations;

(d)	analysis and opinion on the managerial and accounting information published to the public and regulatory bodies regarding the Company’s risk profile and control;

(e)	assessment of the adequacy of human and financial resources for the risk management of the organization;

(f)	implementation, dissemination, revision, updating and recommendation of training plans in compliance with the Code of Ethics and Conduct of the Company as well as the Company’s Helpline (through which we receive complaints); and

(g)	conducting investigations and proposing corrective measures related to the infractions to the Code of Ethics and Conduct of the Company, delegating certain activities to the Committee of Ethics and Conduct.

In addition, the Committee exercises the functions of (i) Audit Committee for the purposes of US law, especially the Sarbanes-Oxley Act, (ii) Statutory Audit Committee under the terms of Instruction 509, of November 16, 2011 (“CVM Instruction 509”), of the Brazilian Securities Commission (Comissão de Valores Mobiliários—CVM), and of (iii) Ethics and Conduct Committee.

The functions of the Committee are carried out on the basis of the information received from the Board, external auditors, internal audit and those responsible for the risk management and internal controls and for the preparation of financial statements.

The audit committee financial expert, under the terms of the Internal Statute Committee and the applicable regulations, is Mr. Sergio Eraldo de Salles Pinto.

Committee’s Activities in 2019

On May 27, 2019, shareholders approved the amendment to the Bylaws of Embraer, including amendments to the composition of the Committee to comprise one external independent member.

The Committee met eight times between February 25 and December 6, 2019 in order to discuss matters under its authority, as mentioned below.

1.	System of Internal Controls and Risk Management

During 2019 the Committee evaluated, in meetings with the Risks and Internal Controls Management, aspects related to Embraer’s risk management and control.

The Committee, based on the information brought to its attention, registers as positive the efforts being made with the purpose to guarantee the effectiveness of the systems of internal control and risk management of the Company.

2.	External Audit

The Committee maintains a channel of periodic communication with the external auditors in order to discussion the results of projects and relevant accounting aspects, in a manner that allows its members to form their opinion on the Company’s financial statements. In 2019, the Committee met with the Company’s external auditors on five occasions.

The Committee evaluates the quantity and quality of the information provided by the independent auditors, Pricewaterhousecoopers, as satisfactory.

The Committee monitored the activities of the independent external audit with the goal of evaluating its independency, as well as the quality and adequacy of the services provided to the Company.

3.	Internal Audit

The Committee monitored the audit process carried out by the Internal Auditing Board of Executive Officers, by holding periodic meetings and receiving approval of the planning of its projects in respect to 2019 and of the monitoring of its execution.

The Committee positively evaluates the coverage and quality of the work carried out by the Internal Audit Board of Executive Officers. The results of these works, presented at the Committee meetings, did not bring to the Committee’s attention the existence of risks that could significantly affect the sustainability of the Company.

4.	Compliance

The Company monitored, in meetings with the Compliance Board of Executive Officers, the improvement and evolution of the Embraer Enhanced Compliance Program. This long-term project covers the re-examination of all the aspects of the compliance systems and, where appropriate, its improvement and complementation.

Among the compliance matters addressed by the Committee in 2019, in addition to the work of the external monitoring, the following matters are worth mentioning: the reevaluation of the compliance policies and procedures, the communication campaign and the reports from Company’s Helpline (through which we receive complaints) in the view of the reports for the last few years.

5.	FCPA Investigation

Since 2012 the Committee has been responsible for the coordination of the internal FCPA investigation, started in 2010, that resulted in the execution of agreements with North-american authorities (United States Department of Justice – DOJ and Securities and Exchange Commission – SEC) and also Brazilian authorities (Federal Prosecution Office – MPF and Brazilian Exchange Commission – CVM) in 2016. As part of the agreements, the Company agreed to appoint an external and independent monitor, for three years starting in the beginning of 2017, to accompany the fulfillment of the terms of the agreement.

Subsequent to the execution of the agreements, the Committee acted on the recommendation of external monitors for the DOJ, which resulted in the selection of one of the nominees, Attorney Alex Rene, from the law firm Ropes & Gray.

Embraer and the DOJ agreed to extend the monitoring term for a period of 90 days to allow the completion of the monitoring tests for the assessment of compliance, by Embraer, with the final agreements entered into with the DOJ, the SEC and the CVM. Accordingly, the monitoring term will end on April 22, 2020.

The matters related to the investigation and to the execution of the agreements were presented by the Board of Executive Officers and discussed with the Committee in all of the regular meetings held in 2019. In particular, the Committee monitored, analyzed, and made recommendations regarding the work related to (i) the agreements to be entered into in other countries; (ii) investigations and related actions in Brazil and abroad; (iii) the monitoring, through in-person and virtual meetings.

6.	Partnership with Boeing

On January 24, 2019, Embraer and Boeing entered into agreements providing for the creation of a joint venture contemplating assets of the commercial aviation segment of Embraer and associated services, in which Boeing will hold an equity interest of 80% and Embraer will hold an equity interest of 20%; as well as the creation of a joint venture to promote and develop new markets and uses for the multimission C-390 Millenium aircraft, in which Embraer will hold and equity interest of 51% and Boeing will hold an equity interest of 49%.

On February 26, 2019, the Extraordinary Shareholders’ Meeting of the Company approved, with 96.8% of valid votes, the strategic partnership with Boeing.

On January 1, 2020, the internal segregation of the Commercial Aviation business of the Company was implemented, through a contribution, made by Embraer, to the capital stock of wholly-owned subsidiary Yaborã Indústria Aeronáutica S.A., represented by net assets comprising certain assets and liabilities regarding this business unit.

The consummation of the transaction remains subject to: (i) the approval of the European Commission; and (ii) the fulfillment of other conditions that are usual in transactions of this nature. During 2019, the Audit, Risk and Ethics Committee advised the Board of Directors regarding the subjects under its scope in relation to all stages of the transaction described above.

7.	Consolidated and Individual Financial Statements

The Committee analyzed the procedures that involve the process of preparing the individual and consolidated financial statements of the Company and their respective notes. To that effect, the Committee discussed the information regarding 2019 with PricewaterhouseCoopers and the Company’s officers, on a quarterly basis. The internal controls of the Company were thoroughly examined, as well as relevant accounting practices utilized by Embraer in the preparation of the financial statements. It has been verified that they are in accordance with the accounting practices adopted in Brazil and with the International Financial Reporting Standards (IFRS).

8.	Recommendations

Throughout 2019, the Committee periodically reported to the Board of Directors regarding the progress of its projects, stating its opinions and making recommendations on varying subjects within the scope of its competency.

9.	Opinion on the Consolidated Financial Statements for the year ended December 31, 2019

The Committee recommends the approval of Embraer’s consolidated financial statements for the year ended December 31, 2019 by the Board of Directors.

São José dos Campos, March 24, 2020.

Sergio Eraldo de Salles Pinto

Coordinator of the Audit, Risk and Ethics Committee

Israel Vainboim

Member of the Audit, Risk and Ethics Committee

João Cox Neto

Member of the Audit, Risk and Ethics Committee

Márcio de Souza

Member of the Audit, Risk and Ethics Committee

Vanessa Claro Lopes

Member of the Audit, Risk and Ethics Committee

Annex III – Information about the Candidates for the Fiscal Council

(Items 12.5 to 12.10 of the Brazilian Annual Report (Formulário de Referência) as per CVM Instruction No. 480/09)

12.5 – Composition and professional experience of the Fiscal Council:


Name	Date of Birth	Management Body	Date of election	Term of office	Independent member¹
Individual Taxpayer Registry (CPF)	Profession	Elected as	Date of investiture	Elected by the controlling shareholder	Number of consecutive terms
Other titles and functions held with the Company
Professional experience / Statement of any convictions
Ivan Mendes do Carmo	March 1, 1963	Fiscal Council	April 29, 2020	1 year	Yes
279.786.131-00	Economist	Chairman of the Fiscal Council	April 29, 2020	No	13
None.
Main professional experience in the last five years: Embraer S.A.: Member of the Fiscal Council since 2008, serving as Chairman of the Fiscal Council since 2010. Company’s main business activity: Aeronautics. Embraer S.A.: Member of the Audit Committee, from April 2008 to December 2011. Company’s main business activity: Aeronautics. Fundação SISTEL de Seguridade Social: since January 1987. Currently serves as Investments and Finance Manager. Company’s main business activity: Pension fund. Management titles held in other companies or third sector organizations: Member of the Fiscal Council of Bonaire Participações S/A. Education: Mr. Carmo holds a bachelor’s degree and a master’s degree in economics from Fundação Getúlio Vargas – FGV/EPGE-RJ, where he graduated in1986, and an MBA in Finance from the Brazilian Capital Markets Institute (Instituto Brasileiro de Mercado de Capitais – IBMEC), where he graduated in 1996. The Company declares that it is not aware of any of the following events that may have occurred in the last five years: (i) any criminal conviction, even if not yet final and unappealable, with an indication of the stage of the proceeding; (ii) any conviction under administrative proceedings with the CVM and applied penalties, even if not yet final and unappealable, indicating whether the relevant proceeding is pending appeal with the Appeal Board of the Brazilian Financial System; (iii) any final and unappealable judicial or administrative conviction that suspended or disqualified him to exercise any professional or business activity. Mr. Ivan Mendes do Carmo declared to the Company that he is not a politically exposed person as defined in the applicable regulation.

¹	The Company adopts the criteria set forth in the Novo Mercado Listing Rules to determine if a member is independent.


Name	Date of Birth	Management body	Date of election	Term of office	Independent member
Individual Taxpayer Registry (CPF)	Profession	Elected as	Date of investiture	Elected by the controlling shareholder	Number of consecutive terms
Other titles and functions held with the Company
Professional experience / Statement of any convictions
Tarcísio Luiz Silva Fontenele	August 25, 1962	Fiscal Council	April 29, 2020	1 year	Yes
265.672.021-49	Lawyer	Alternate Member of the Fiscal Council	April 29, 2020	No	20
None.
Main professional experience in the last five years: Embraer S.A.: Alternate member of the Fiscal Council, since 2001. Company’s main business activity: Aeronautics. Fundação SISTEL de Seguridade Social: Legal Manager since July 2002. Company’s main business activity: Pension fund. Management titles held in other companies or third sector organizations: Member of the Board of Directors of Bonaire S.A., a company in the energy sector, from October 2014 to December 2019. Education: Mr. Fontenele holds a law degree from the University of the Federal District (Universidade do Distrito Federal – UDF), where he graduated in 1983, and a post-graduate degree in Civil Procedure from ICAT/DF, completed in 1995. The Company declares that it is not aware of any of the following events that may have occurred in the last five years: (i) any criminal conviction, even if not yet final and unappealable, with an indication of the stage of the proceeding; (ii) any conviction under administrative proceedings with the CVM and applied penalties, even if not yet final and unappealable indicating whether the relevant proceeding is pending appeal with the Appeal Board of the Brazilian Financial System; (iii) any final and unappealable judicial or administrative conviction that suspended or disqualified him to exercise any professional or business activity. Mr. Tarcísio Luiz Silva Fontenele represented to the Company that he is not a politically exposed person as defined in the applicable regulation.


Name	Date of Birth	Management body	Date of election	Term of office	Independent member
Individual Taxpayer Registry (CPF)	Profession	Elected as	Date of investiture	Elected by the controlling shareholder	Number of consecutive terms
Other titles and functions held with the Company
Professional experience / Statement of any convictions
José Mauro Laxe Vilela	February 13, 1948	Fiscal Council	April 29, 2020	1 year	Yes
102.631.287-68	Economist	Vice-Chairman of the Fiscal Council	April 29, 2020	No	10
None.
Main professional experience in the last five years: Embraer S.A.: Member of the Fiscal Council, since 2011. Company’s main business activity: Aeronautics. CIA BOZANO: Independent consultant for matters related to the accounting and tax areas, since November 2011. Company’s main business activity: Holding company. Management titles held in other companies or third sector organizations: None. Education: Mr. Vilela holds a bachelor’s degree in economic sciences from Cândido Mendes University (Universidade Cândido Mendes), where he graduated in 1972. The Company declares that it is not aware of any of the following events that may have occurred in the last five years: (i) any criminal conviction, even if not yet final and unappealable, with an indication of the stage of the proceeding; (ii) any conviction under administrative proceedings with the CVM and applied penalties, even if not yet final and unappealable, indicating whether the relevant proceeding is pending appeal with the Appeal Board of the Brazilian Financial System; (iii) any final and unappealable judicial or administrative conviction that suspended or disqualified him to exercise any professional or business activity. Mr. José Mauro Laxe Vilela represented to the Company that he is not a politically exposed person as defined in the applicable regulation.


Name	Date of Birth	Management body	Date of election	Term of office	Independent member
Individual Taxpayer Registry (CPF)	Profession	Elected as	Date of investiture	Elected by the controlling shareholder	Number of consecutive terms
Other titles and functions held with the Company
Professional experience / Statement of any convictions
Wanderley Fernandes da Silva	April 10, 1973	Fiscal Council	April 29, 2020	1 year	Yes
028.343.127-02	Accountant	Alternate Member of the Fiscal Council	April 29, 2020	No	10
None.
Main professional experience in the last five years: Embraer S.A.: Alternate member of the Fiscal Council, since 2011. Company’s main business activity: Aeronautics. Crescera Partners S.A.: Partner, since March 2015. Company’s main business activity: Fund management. Cia Bozano: Responsible for the financial area of Grupo Bozano, managing the payable accounts department and analyzing a number of investment possibilities for the conglomerate, from June 2000 to June 2015. Company’s main business activity: Holding company. Management titles held in other companies or third sector organizations: None. Education: Mr. Silva holds a bachelor’s degree in accounting sciences from the University of the State of Rio de Janeiro (Universidade Estadual do Rio de Janeiro – UERJ), a post-graduate degree in Finance from Fundação Getúlio Vargas – FGV and an MBA in Corporate Finance from the Brazilian Capital Markets Institute (Instituto Brasileiro de Mercado de Capitais – IBMEC). The Company declares that it is not aware of any of the following events that may have occurred in the last five years: (i) any criminal conviction, even if not yet final and unappealable, with an indication of the stage of the proceeding; (ii) any conviction under administrative proceedings with the CVM and applied penalties, even if not yet final and unappealable, indicating whether the relevant proceeding is pending appeal with the Appeal Board of the Brazilian Financial System; (iii) any final and unappealable judicial or administrative conviction that suspended or disqualified him to exercise any professional or business activity. Mr. Wanderley Fernandes da Silva declared to the Company that he is not a politically exposed person as defined in the applicable regulation.


Name	Date of Birth	Management body	Date of election	Term of office	Independent member
Individual Taxpayer Registry (CPF)	Profession	Elected as	Date of investiture	Elected by the controlling shareholder	Number of consecutive terms
Other titles and functions held with the Company
Professional experience / Statement of any convictions
João Manoel Pinho de Mello	August 9, 1973	Fiscal Council	April 29, 2020	1 year	Yes
265.595.338-08	Officer of the Financial and Settlement System of the Central Bank.	Member of the Fiscal Council	April 29, 2020	No	3
None.
Main professional experience in the last five years: Secretary of the Office of Productivity and Antitrust Promotion, from March 2017 to December 2018. Company’s main business activity: Public sector (Ministry of Finance). Folha de São Paulo: columnist of the newspaper, from September 2016 to March 2017. Company’s main business activity: Media. Kennedy School of Government, Harvard University: Fellow from August 2016 to July 2017. Activity: Education. David Rockefeller Center for Latin American Studies, Harvard University: Lemann Visiting Scholar from August 2016 to July 2017. Company’s main business activity: Education (environmental). Pacifico Gestão de Recursos: Partner from January 2011 to August 2016. Company’s main business activity: Funds management. Insper: Professor from January 2014 to date (currently on leave). Company’s main business activity: Educational. Department of Economics of the Catholic University of Rio de Janeiro (Pontifícia Universidade Católica do Rio de Janeiro—PUC-Rio), Brazil: Associate Professor from December 2010 to December 2013. Company’s main business activity: Educational. Management titles held in other companies or third sector organizations: None. Education: Mr. Mello holds a Ph.D in economics from the Department of Economics of Stanford University, where he graduated in 2005; a master’s degree in Economics from the Department of Economics the Catholic University of Rio de Janeiro (Pontifícia Universidade Católica do Rio de Janeiro—PUC-Rio), where he graduated in 2000; a bachelor’s degree in Government Administration from Escola de Administração de Empresas de São Paulo—Fundação Getúlio Vargas (EAESP-FGV), where he graduated in 1997. The Company declares that it is not aware of any of the following events that may have occurred in the last five years: (i) any criminal conviction, even if not yet final and unappealable, with an indication of the stage of the proceeding; (ii) any conviction under administrative proceedings with the CVM and applied penalties, even if not yet final and unappealable, indicating whether the relevant proceeding is pending appeal with the Appeal Board of the Brazilian Financial System; (iii) any final and unappealable judicial or administrative conviction that suspended or disqualified him to exercise any professional or business activity. Mr. João Manoel Pinho de Mello represented to the Company that he is a politically exposed person as defined in the applicable regulation, as he served as Secretary of the Office of Productivity and Antitrust Promotion of the Ministry of Finance of the Brazilian Federal Government, from March 2017 to December 2018.


Name	Date of Birth	Management body	Date of election	Term of office	Independent member
Individual Taxpayer Registry (CPF)	Profession	Elected as	Date of investiture	Elected by the controlling shareholder	Number of consecutive terms
Other titles and functions held with the Company
Professional experience / Statement of any convictions
Pedro Jucá Maciel	December 19, 1980	Fiscal Council	April 29, 2020	1 year	Yes
027.141.784-64	Government Employee	Alternate Member of the Fiscal Council	April 29, 2020	No	3
None.
Main professional experience in the last five years: Brazilian Government: Subsecretary of Strategic Planning of Fiscal Policy – Office of the National Treasury, since July 2016. Company’s main business activity: Public Sector (Ministry of Finance). Terracap: Member of the Fiscal Council, since October 2016. Company’s main business activity: Public Sector – Ministry of Finance. Brazilian Government: Parliamentary Advisor, from January 2015 to July 2016. Company’s main business activity: Public Sector (Federal Senate). Brazilian Government: Chief of Economic Advice, from January 2013 to December 2014. Company’s main business activity: Public Sector (Ministry of Finance). Management titles held in other companies or third sector organizations: None. Education: Mr. Maciel holds a post-doctorate degree in Fiscal Policy from Stanford University, where he graduated in 2010; a Ph.D in economics from Universidade de Brasília (UnB), where he graduated in 2009; a master’s degree in economics from Universidade de Brasília (UnB), where he graduated in 2005; a bachelor’s degree in economics from Universidade Federal do Pernambuco (UFPE), where he graduated in 2002. The Company declares that it is not aware of any of the following events that may have occurred in the last five years: (i) any criminal conviction, even if not yet final and unappealable, with an indication of the stage of the proceeding; (ii) any conviction under administrative proceedings with the CVM and applied penalties, even if not yet final and unappealable, indicating whether the relevant proceeding is pending appeal with the Appeal Board of the Brazilian Financial System; (iii) any final and unappealable judicial or administrative conviction that suspended or disqualified him to exercise any professional or business activity. Mr. Pedro Jucá Maciel represented to the Company that he is not a politically exposed person as defined in the applicable regulation.


Name	Date of Birth	Management body	Date of election	Term of office	Independent member
Individual Taxpayer Registry (CPF)	Profession	Elected as	Date of investiture	Elected by the controlling shareholder	Number of consecutive terms
Other titles and functions held with the Company
Professional experience / Statement of any convictions
Maurício Rocha Alves de Carvalho	September 12, 1961	Fiscal Council	April 29, 2020	1 year	Yes
709.925.507-00	Mechanical Engineer	Member of the Fiscal Council	April 29, 2020	No	5
None.
Main professional experience in the last five years: Embraer S.A.: Member of the Fiscal Council, since 2016. Company’s main business activity: Aeronautics. Condere Consultoria de Estratégia e M&A: Partner, since 2010. Company’s main business activity: Consultancy. Intersmart, Distribuidora de Equipamentos de T.I.: Member of the Board of Directors, from 2009 to December 2014, and Chairman of the Finance Committee, from 2011 to December 2014. Company’s main business activity: Information Technology. Grendene S.A.: Member of the Fiscal Council from 2012 to 2015. Company’s main business activity: Industry. SLC Agrícola: member of the Fiscal Council, since 2013. Company’s main business activity: Agribusiness. Grupo Encalso/Damha: Member of the Board of Directors / Advisory Board in 2016. Company’s main business activity: Construction, real estate development and agribusiness. Mills S.A.: Member of the Fiscal Council, from 2011 to 2014. Company’s main business activity: Engineering. Sonae Sierra Brasil: Member of the Fiscal Council, from 2012 to 2013 Company’s main business activity: Management of shopping centers. Tupy S.A.: Member of the Fiscal Council, from 2010 to 2012. Company’s main business activity: Steel. Insper: Professor of Corporate Finance and Business Assessment in post-graduate and MBA courses, since 2000. Company’s main business activity: Education. Institute of Management Foundation (Fundação Instituto de Administração – FIA): Professor of Corporate Finance and Business Assessment in post-graduate and MBA courses, from 2000 to 2010. Company’s main business activity: Education. Association of Analysts and Investment Professionals in the Capital Markets Industry (Associação de Analistas e Professionais de Investimento do Mercado de Capitais – APIMEC/SP): Professor of Corporate Finance and Business Assessment in post-graduate and MBA courses, from 2000 to 2016. Company’s main business activity: Education. Brazilian Institute of Corporate Governance (Instituto Brasileiro de Governança Corporativa – IBGC): professor of Corporate Finance and Business Assessment in post-graduate and MBA courses, from 2000 to 2012. Company’s main business activity: Education. Association of Analysts and Investment Professionals in Capital Markets Industry (Associação de Analistas e Professionais de Investimento do Mercado de Capitais – APIMEC/SP): Technical Officer, from 2014 to 2016. Management titles held in other companies or third sector organizations: None. Education: Mr. Carvalho holds a bachelor’s degree in mechanical engineering from the Catholic University of Rio de Janeiro (Pontifícia Universidade Católica do Rio de Janeiro – PUC/RJ), where he graduated in 1983; an MBA from Wharton School – University of Pennsylvania, where he graduated in 1988, and has obtained the certifications CFA 2005, CNPI 2006 and IBGC in 2009. The Company declares that it is not aware of any of the following events that may have occurred in the last five years: (i) any criminal conviction, even if not yet final and unappealable, with an indication of the stage of the proceeding; (ii) any conviction under administrative proceedings with the CVM and applied penalties, even if not yet final and unappealable, indicating whether the relevant proceeding is pending appeal with the Appeal Board of the Brazilian Financial System; (iii) any final and unappealable judicial or administrative conviction that suspended or disqualified him to exercise any professional or business activity. Mr. Maurício Rocha Alves de Carvalho represented to the Company that he is not a politically exposed person as defined in the applicable regulation.


Name	Date of Birth	Management body	Date of election	Term of office	Independent member
Individual Taxpayer Registry (CPF)	Profession	Elected as	Date of investiture	Elected by the controlling shareholder	Number of consecutive terms
Other titles and functions held with the Company
Professional experience / Statement of any convictions
Mario Ernesto Vampré Hunberg	June 14, 1940	Fiscal Council	April 29, 2020	1 year	Yes
057.161.178-80	Economist	Alternate Member of the Fiscal Council	April 29, 2020	No	1
None.
Main professional experience in the last five years: Thyssenkrupp Metalúrgica Campo Limpo Ltda.: Member of the Board of Directors, Chief Financial Officer—CFO, from January 2008 to March 2020. Company’s main business activity: Manufacturing of forged and machined auto parts. Management titles held in other companies or third sector organizations: Officer – Represente Campo Limpo Paulista, from 2012 to 2020—CIESP Jundiaí. Coordinator of the Group of CFOs of the Brazil-Germany Chamber of Commerce, from 2014 to 2020. Education: Mr. Hunberg holds a bachelor’s degree in economy from the São Paulo University (Universidade de São Paulo – USP), where he graduated in 1989, and post-graduate studies degree in controllership from Trevisan University (Faculdade Trevisan), where he graduated in 1997. The Company declares that it is not aware of any of the following events that may have occurred in the last five years: (i) any criminal conviction, even if not yet final and unappealable, with an indication of the stage of the proceeding; (ii) any conviction under administrative proceedings with the CVM and applied penalties, even if not yet final and unappealable, indicating whether the relevant proceeding is pending appeal with the Appeal Board of the Brazilian Financial System; (iii) any final and unappealable judicial or administrative conviction that suspended or disqualified him to exercise any professional or business activity. Mr. Mario Ernesto Vampré Hunberg represented to the Company that he is not a politically exposed person as defined in the applicable regulation.

12.6 – Percentage of attendance of each member of the fiscal council at meetings held by the relevant body in the same period, occurring after investiture:


*Fiscal Council*	*All meetings held by the relevant body since investiture*	*Attendance of member at meetings held after investiture (%)*
Ivan Mendes do Carmo	8	88
José Mauro Laxe Vilela	8	100
Maurício Rocha Alves de Carvalho	8	88
João Manoel Pinho de Mello	8	75
Tarcísio Luiz Silva Fontenele (alternate)	8	—
Wanderley Fernandes da Silva (alternate)	8	—
Pedro Jucá Maciel (alternate)	8	—
Mario Ernesto Vampré Hunberg (alternate)	—	—

12.7 – Composition of statutory committees and audit, finance and compensation committees:

Not applicable to the Fiscal Council.

12.8 – In relation to each of the individuals who served as members of the statutory committees, as well as the audit, risk, finance and compensation committees, even if these are non-statutory committees or structures, provide a table setting forth the percentage of attendance at meetings held by the relevant body in the same period, occurring after investiture:

Not applicable to the Fiscal Council.

12.9 – Existence of a relationship as spouses, common-law marriage (união estável) or kinship up to the second degree between (a) members of the management of the issuer, (b) (i) members of the management of the issuer and (ii) members of the management of the issuer’s direct or indirect subsidiaries, (c) (i) members of the management of the issuer or its direct or indirect subsidiaries and (ii) the issuer’s direct or indirect controlling shareholders, and (d) (i) members of the management of the issuer and (ii) members of the management of the issuer’s direct or indirect controlling shareholders:

No such relationships exist in connection with the members of the Fiscal Council.

12.10 – Inform about relationships of subordination, services providers or control maintained, in the last three fiscal years, between members of the management of the issuer and: (a) company, directly or indirectly, controlled by the issuer except those in which the issuer directly or indirectly holds 100% of the capital stock; (b) the issuer’s direct or indirect controlling shareholder; (c) if material, supplier, client, borrower or lender of the issuer, companies controlled by the issuer or their controlling shareholders or companies controlled by them:

No such relationships exist in connection with the members of the Fiscal Council.

Annex IV – Management Compensation

(Pursuant to Section 12, item II, of CVM Instruction No. 481/09)

13.1 – Describe the compensation policy or practice for the board of directors, statutory and non-statutory board of executive officers, fiscal council, statutory committees and audit, risk, finance and compensation committees, addressing the following aspects:

(a) Objectives of the compensation policy or practice, informing if the compensation policy was formally approved, the body responsible for its approval, date of approval and, if the company discloses the policy, the websites where the document is available²

The Company has a Management Compensation Policy approved by the Board of Directors on October 26, 2018, whose purpose is to attract, retain and recognize highly qualified professionals of the Company’s management. The Company also has an Executive Compensation Policy, whose most recent updated version was approved the Board of Directors on March 8, 2017, applicable to all executives of the Company.²

We monitor variations in the external environment and annually compare our compensation practices with those of reference markets and companies of equivalent size. We also aim to align the interests of management with those of our shareholders.

(b) Composition of compensation, indicating:

i. Description of the compensation elements and the objectives of each one of them

The members of the Board of Directors receive a monthly fixed compensation. The Company also offers life and health insurance, to the extent that the members of the Board of Directors bear the costs involved. Members of the Board of Directors do not receive any variable compensation. The objective of paying exclusively a fixed compensation to the members of the committees is to be aligned with best market practices.

The members of the advisory committees (Audit, Risk and Ethics Committee; Personnel and Governance Committee; and Strategy Committee) receive a specific monthly fixed compensation for participating in each committee (limited to two committees). The members of committees do not receive variable compensation. The objective of paying exclusively a fixed compensation to the members of the committees is to be aligned with best market practices.

The members of the Statutory Board of Executive Officers and Non-statutory Board of Executive Officers receive a monthly fixed compensation and a variable compensation (short- and long-term incentives). For the determination of compensation elements, the Company adopts an “internal parameter,” which is based on programs under the responsibility of each executive officer, and an “external parameter,” which is established by market research. The objective of paying fixed and variable compensation to the members of the Board of Executive Officers is to be aligned with the Company’s business and best market practices.

(a)	Fixed Monthly Compensation: annually determined based on market references. The Company adjusts these amounts as it deems necessary each year.

(b)	Direct and Indirect Benefits: life and health insurance and private social security equivalent to those offered to the Company’s employees.

(c)

Short-term Variable Compensation (“CP”): bonus paid in cash aimed at prioritizing the retention of executives and the alignment of their earnings with those of the shareholders. Accordingly, the higher the impact of the program, more weight is attributed to CP, which is paid in installments. Therefore, the amount of CP to be distributed among eligible executives will be calculated based on the assement on corporate financial performance target indicators set forth by the Company and approved by the Board of Directors, subject to the Company’s financial condition and the respective individual action programs, and its calculation varies directly based on the achievement of concrete targets.

²	Wording amended by Section 5 of CVM Instruction No. 586, dated June 8, 2017.

(d)

Long-term Incentives (“ILP”): long-term incentives include the “Stock Option Program of Embraer S.A. for Statutory Executive Officers and Employees” (the “Stock Option Plan”) and the “Long-term Incentive Plan for Executives of Embraer” (the “Phantom Shares Plan”). The main objectives of the general conditions of the long-term incentive adopted by the Company are: (a) retaining and attracting highly qualified personnel; and (b) ensuring individuals who can effectively contribute to the best performance of the Company and its securities the right to share the profits derived from their contribution. Moreover, these long-term incentives intend to ensure the continuity of the management of the Company and align the interests of executive officers with those of the shareholders of the Company.

The ILP amounts are determined based on market references, subject to the conditions set forth in the respective instruments, which are better described in item 13.4 of the Company’s Annual Report (Formulário de Referência).

Additionally, in 2018, the Board of Directors established an extraordinary award applicable to executives, including Statutory Officers, whose target was the achievement of results set forth in increased efficiency and cost reduction programs, internally known as the Passion for Excellence Program.

The members of the Fiscal Council receive a fixed monthly salary, whose annual amount is approved at the Annual General Shareholders’ Meeting and is in accordance with the limits set forth in paragraph 3 of section 162 of Law No. 6,404 of December 15, 1976. No direct or indirect benefits are currently offered to the members of the Fiscal Council. The amounts detailed below in the total compensation of the Fiscal Council refer to benefits granted in periods prior to their cancellation.

ii. The proportion of each element in total compensation

In accordance with the structure of the compensation policy of the Company, the proportion of each element in total compensation may vary based on the results of the Company.

The table below breaks down the compensation paid by the Company in the year ended December 31, 2019:


Body	Fixed Compensation			Compensation due to Participation in Committees (*)			Direct and Indirect Benefits			Variable Compensation			Benefits motivated by termination of office			Stock-based Compensation (**)			Total
Board of Directors		61.27	%		22.07	%		16.67	%		—			—			—			100.00	%

Statutory Board of Executive Officers		26.03	%		—			27.84	%		16.00	%		11.86	%		18.28	%		100.00	%
Fiscal Council		83.33	%		—			16.67	%		—			—			—			100.00	%

(*)

Fixed compensation of members of the Board of Directors who are members of committees. Please note that: (i) the committees are comprised by independent members of the Board of Directors and external members; (ii) all independent members of the Board of Directors are members of committees; and (iii) members of the committees are only entitled to a fixed compensation.

(**)	Refers to the cost of grants for the Company related to Long-term Incentives.

The table below breaks down the compensation paid by the Company in the year ended December 31, 2018:


Body	Fixed Compensation			Compensation due to Participation in Committees (*)			Direct and Indirect Benefits			Variable Compensation			Benefits motivated by termination of office			Stock-based Compensation (**)			Total
Board of Directors		69.21	%		23.50	%		7.29	%		—			—			—			100.00	%

Statutory Board of Executive Officers		29.86	%		—			12.24	%		19.09	%		8.68	%		30.13	%		100.00	%
Fiscal Council		97.67	%		—			2.33	%		—			—			—			100.00	%

(*)

Fixed compensation of members of the Board of Directors who are members of committees. Please note that: (i) the committees are comprised exclusively by the members of the Board of Directors; (ii) all members of the Board of Directors are members of the committees; and (iii) members of the committees are only entitled to a fixed compensation.

(**)	Refers to the cost of grants for the Company related to Long-term Incentives.

The table below breaks down the compensation paid by the Company in the year ended December 31, 2017:


Body	Fixed Compensation			Compensation due to Participation in Committees (*)			Direct and Indirect Benefits			Variable Compensation			Benefits motivated by termination of office			Stock-based Compensation (**)			Total
Board of Directors		74.54	%		23.43	%		2.03	%		—			—			—			100.00	%

Statutory Board of Executive Officers		35.68	%		—			8.08	%		23.37	%		10.54	%		22.33	%		100.00	%
Fiscal Council		91.09	%		—			8.91	%		—			—			—			100.00	%

(*)

(**)	Refers to the cost of grants for the Company related to Long-term Incentives

iii. Calculation and adjustment method for each of the compensation elements

The determination of the compensation of the members of the Board of Executive Officers, Board of Directors and each member of its Committees on a market basis takes into account the complexity, sophistication and challenges that are inherent to the Company’s business, subject to the annual global compensation of members of management approved by the Shareholders’ Meeting.

The fixed compensation of members of the Board of Directors is periodically reviewed based on market research and adjusted based on the global compensation amount that was approved by the Company’s shareholders for each year.

The fixed amounts paid to the members of advisory committees (Audit, Risk and Ethics Committee, Personnel and Governance Committee and Strategy Committee) are periodically reviewed based on market research and adjusted based on the global compensation amount that was approved by the Company’s shareholders for each year.

In order to define the market surveyed, publicly-traded public sector companies with good governance practices are consulted, and the statistical metrics using P25 to P90 averages are used as a reference for comparative studies in order to support the decisions regarding the compensation of top executives.

Note: Statistical metrics are used to identify and compare salaries paid by the Company and any shifts from the salaries paid in the market. P25 to P90 averages are some of the references used to indicate a position within the researched sample. For example, P25 is the value that is within 25% of the sample and P90 is the value that is within 90% of the sample.

The total compensation of the Statutory Board of Executive Officers consists of three components, one of which is fixed and two are variable, one is short-term and the other is long-term, as set forth below:

RT = RF + CP + ILP

where:

RT= Total compensation

RF = fixed compensation (salary or fees) established based on the duties and responsibilities that are inherent to the exercise of the function

CP= short-term variable compensation (granted annually and whose amounts are determined based on the achievement of pre-established targets)

ILP = long-term incentive that reflects the appreciation of the Company’s shares on the stock exchange and, consequently, increase the returns for the shareholders

Total compensation amounts (RT) must be planned annually, based on market research and take into account the economic and financial condition of the Company. Emphasis must be given on the retention of executives and the alignment of their gains with the gains of the shareholders. Accordingly, the higher the impact of the program, more weight must be attributed to the variable compensation – CP and ILP, reflecting the profitability and appreciation of the Company, respectively. ILP will only be a reference for the current fiscal year and vesting will occur on a future date, in accordance with the conditions set forth in the Phantom Shares Plan and Stock Option Plan.

The fixed and variable compensations of each body do not follow a specific calculation and adjustment method, but are based on the criteria described above.

iv. Reasons that justify the composition of compensation

Board of Directors and Advisory Committees

The main objective is to attract members with good reputations and appropriate profiles, compensating them in a manner compatible with the market, and, thus providing the necessary conditions to better perform their functions. Benchmark of compensation is obtained by specialized research, conducted with companies similar in size to Embraer.

Note: Companies of similar size are those that are comparable in terms of area of operations, number of employees, revenue, business segment, processes for the development of products or production, global operations, etc.

Statutory Board of Executive Officers

Total compensation amounts (RT) are planned annually based on market research with companies whose size, complexity and challenges are equivalent to those of Embraer. Through this research, we seek to determine not only the amounts practiced in the market, but also the proportionality of its components (Fixed and Variable Compensation, Short- and Long-term incentives). The Company favors the retention of its executives and aims to maintain and attract highly-qualified executive officers and key qualified personnel, aligning their interests with the interests of the Company’s shareholders. Additionally, the objective is to ensure that the executives who effectively contribute to the best performance of the Company and its securities have a share in the profits derived from their contribution.

Fiscal Council

The monthly compensation of the Fiscal Council, pursuant to paragraph 3 of Section 162 of Law No. 6,404/76, is established in an amount equivalent to at least 10% of the average monthly compensation of each Executive Officer of the Company, excluding benefits, representation funds and profit sharing.

v. Existence of unpaid members and reasons for this fact

No members of the Board of Directors, advisory committees, Board of Executive Officers or Fiscal Council are unpaid for the titles they hold in the Company.

c. Main performance indicators that are taken into account to determine each element of compensation

The performance indicators that are taken into account to determine the short-term variable compensation are: (i) annual assessment of the “Action Plan,” an instrument entered into with each statutory and non-statutory officer every year, setting forth the results intended by the Company for that year and the actions planned for each one in order to achieve these results; and (ii) global performance result of the Company.

Accordingly, the CP and ILP compensations vary based on the economic results and the operating result of the Company. CP is affected by the assessment of the individual Action Plans (PA), ILP is related to the increase in value of the Company’s shares and performance targets set forth in the Plan.

The amount of short-term incentive to be effectively payed to executives in each fiscal year is tied to the respective individual Action Plans and its assessment varies directly based on the achievement of the results set forth therein.

The performance indicator set forth in the Action Plan is specific for each executive based on his or her functions, for example: for an officer from the business area, the performance indicator may be “achieved sales” and net revenue; while, the performance indicator for an officer from the finance area may encompass financial indicators (such as net revenue, generation of cash flow from operations, commercial and administrative expenses); and finally, the performance indicator for an officer from the technical area may be products developed, etc.

The content of the Action Plan is reviewed annually in the business planning cycle and approved by the Company’s Board of Directors.

Accordingly, every year, each executive is assessed based on the achievement of his or her specific Action Plan and his or her short-term variable compensation is influenced by that result.

d. Explain how the compensation is structured to reflect the evolution of performance indicators

The short- and long-term variable compensation of all Statutory and Non-Statutory Executive Officers is determined by individual performance indicators, set forth annually in their Action Plans, and by evaluation factors of the Company. Therefore, the short- and long-term variable compensation is directly tied to the evolution of those performance indicators.

e. Explain how the compensation policy or practice is aligned with the interests of the issuer in the short-, medium- and long-term

The objective of Embraer’s Human Resources Policy is to transmit the Company’s thinking and posture in the adoption of compensation practices that are compatible with the market in order to attract, retain and recognize professionals, aligning individual objectives with corporate objectives, as well as technical requirements and financial conditions, in a system of partnership and sharing of the generated wealth, encouraging all to achieve and surpass previously agreed results.

Embraer aims to maintain a competitive compensation for its management compared to the market in order to retain and attract management members that allow it to achieve its short-, medium- and long-term objectives.

A significant portion of the short-term variable compensation depends directly on the achievement of actual targets by professionals, as detailed in item 13.1(c) of the Company’s Annual Report (Formulário de Referência). In turn, the remaining portion results from a global assessment of the performance of each professional, in view of his or her strategic position in the Company and the practices of companies with similar characteristics in the market. The payment of the short-term variable compensation is also tied to the performance of the Company, assuming the existence of profit in the fiscal year. Accordingly, compensation is tied to the retention of professionals and the achievement of positive results by the Company, which shows the alignment of interests.

f. Existence of compensation supported by direct or indirect subsidiaries, controlled companies or parent companies

Not applicable, as subsidiaries and controlled companies do not pay compensation to members of the Board of Directors, the Board of Executive Officers or the Fiscal Council of Embraer.

g. Existence of any compensation or benefit tied to the occurrence of a certain corporate event, such as the sale of corporate control of the company

There has been no corporate event related to the sale of control of the company. However, within the scope of the business combination with Boeing, the Board of Directors of the Company approved the granting of bonus and incentives for the retention of executives of the Company, including some Statutory Officers, and the respective payments are subject to the closing of the referred business combination with Boeing, and included in the global budget to be approved by the Annual Shareholders’ Meeting to be held in 2020.

h. Practices and procedures adopted by the Board of Directors to determine the individual compensation of the members of the Board of Directors and Board of Executive Officers, indicating:³

the bodies and committees of the Company that participate in the decision-making process, identifying how they participate.

The objective of the Personnel and Governance Committee, in accordance with its internal regulations, is to advise the Board of Directors in the determination and approval of the compensation and human resources policy of the Company, regarding compensation and benefits criteria, as well as the individual compensation of members of management.

ii.

criteria and methods used to determine individual compensation, informing whether studies to verify market practices are used, and if so, the comparison criteria and coverage of these studies.

The criteria and methods used to determine individual compensation are described in item b) above.

iii.

the frequency and form of assessment used by the Board of Directors to evaluate the adequacy of the compensation policy of the company.

The Board of Directors annually assesses the compensation policy of the Company, based on the recommendation of the Human Resources Committee, which recurrently includes this matter in the agenda of its meetings. ⁴

13.2 – Total compensation of members of the board of directors, statutory board of executive officers and fiscal council


Total compensation expected for the fiscal year ending December 31, 2020 – Annual Amounts
	Board of Directors		Statutory Board of Executive Officers		Fiscal Council		Total
Total number of members		11.00		6.00		5.00		22.00
Number of paid members		11.00		10.50		5.00		26.50
Fixed annual compensation
Salary or pró-labore		8,077,810.00		10,528,288.00		816,000.00		19,422,098.00
Direct and indirect benefits		0.00		320,382.00		0.00		320,382.00
Participation in committees		3,060,000.00		0.00		0.00		3,060,000.00
Others(*)		3,029,485.00		6,700,332.00		163,200.00		9,893,017.00
Description of other fixed compensation
Variable compensation
Bonus		0.00		13,503,000.00		0.00		13,503,000.00
Profit sharing		0.00		0.00		0.00		0.00
Attendance at meetings		0.00		0.00		0.00		0.00
Commissions		0.00		0.00		0.00		0.00
Others(*)		0.00		291,200.00		0.00		291,200.00
Description of other variable compensation
Post-employment		0.00		4,880,563.00		0.00		4,880,563.00
Termination of office		0.00		1,857,600.00		0.00		1,857,600.00
Stock-based compensation		0.00		10,639,118.00		0.00		10,639,118.00
Notes		The number of members corresponds to the annual average assessed monthly. Participation in committees refers to the fixed compensation of the members of the Board of Directors who are members of committees.		The number of members corresponds to the annual average assessed monthly. Stock-based compensation refers to the cost of grants for the Company related to the Long-term Incentives.		The number of members corresponds to the annual average assessed monthly.
Total compensation		14,167,296.00		48,720,483.00		979,200.00		63,866,979.00

(*)	The amount in the “others” field corresponds to social contributions paid by the Company as a result of compensation paid.

³	Wording amended by Section 5 of CVM Instruction No. 586, dated June 8, 2017.

⁴	Wording amended by Article 5 of CVM Instruction No. 586, dated June 8, 2017.


Total compensation for the fiscal year ended December 31, 2019 – Annual Amounts
	Board of Directors		Statutory Board of Executive Officers		Fiscal Council		Total
Total number of members		11.00		6.08		5.00		22.08
Number of paid members		11.00		10.42		5.00		26.42
Fixed annual compensation
Salary or pró-labore		8,125,054.00		10,356,764.00		813,532.00		19,295,350.00
Direct and indirect benefits		0.00		319,725.00		0.00		319,725.00
Participation in committees		2,926,250.00		0.00		0.00		2,926,250.00
Others(*)		2,210,261.00		4,606,105.00		162,706.00		6,979,072.00
Description of other fixed compensation
Variable compensation
Bonus		0.00		6,364,385.00		0.00		6,364,385.00
Profit sharing		0.00		0.00		0.00		0.00
Attendance at meetings		0.00		0.00		0.00		0.00
Commissions		0.00		0.00		0.00		0.00
Others(*)		0.00		192,598.00		0.00		192,598.00
Description of other variable compensation
Post-employment		0.00		4,563,869.00		0.00		5,958,148.00
Termination of office		0.00		4,718,400.00		0.00		4,718,400.00
Stock-based compensation()**		0.00		8,665,435.00		0.00		7,271,155.00
Notes		The number of members corresponds to the annual average assessed monthly. Participation in committees refers to the fixed compensation of the members of the Board of Directors who are members of committees.		The number of members corresponds to the annual average assessed monthly. Stock-based compensation refers to the cost of grants for the Company related to the Long-term Incentives.		The number of members corresponds to the annual average assessed monthly.
Total compensation		13,261,565.00		39,787,280.00		976,239.00		54,025,083.00

(*)	The amount in the “others” field corresponds to social contributions paid by the Company as a result of compensation paid. In 2019, social security (INSS) contribution increased by 27.2% due to the end of the Payroll Tax Exclusion.

(**)

In 2019, the expense of “Stock-based compensation” was reallocated to the “Post-Employment” line, related to rights in connection with grants of Virtual Shares of retired statutory officers, as described in item 13.4 of the Company’s Annual Report (Formulário de Referência). For the year ended December 31, 2019, the total accounting expense related to “Stock-based compensation” is presented in a single line in Note 15.3 to the Company’s Financial Statements.


Total compensation for the Fiscal Year Ended December 31, 2018 – Annual Amounts
	Board of Directors		Statutory Board of Executive Officers		Fiscal Council		Total
Total number of members		11.00		8.07		5.05		24.12
Number of paid members		11.00		8.07		5.05		24.12
Fixed annual compensation
Salary or pró-labore		8,217,000.00		11,974,000.00		822,000.00		21,013,000.00
Direct and indirect benefits(*)		131,000.00		605,000.00		21,000.00		757,000.00
Compensation due to Participation in committees		2,790,000.00		0.00		0.00		2,790,000.00
Others(**)		734,000.00		3,160,000.00		54,000.00		3,948,000.00
Description of other fixed compensation
Variable compensation
Bonus		0.00		7,657,000.00		0.00		7,657,000.00
Profit sharing		0.00		0.00		0.00		0.00
Attendance at meetings		0.00		0.00		0.00		0.00
Commissions		0.00		0.00		0.00		0.00
Others(**)		0.00		313,000.00		0.00		313,000.00
Description of other variable compensation
Post-employment		0.00		832,000.00		0.00		832,000.00
Termination of office		0.00		3,480,000.00		0.00		3,480,000.00
Stock-based compensation		0.00		12,083,000.00		0.00		12,083,000.00
Notes		The number of members corresponds to the annual average assessed monthly. Participation in committees refers to the fixed compensation of the members of the Board of Directors who are members of committees.		The number of members corresponds to the annual average assessed monthly. Stock-based compensation refers to the cost of grants for the Company related to the Long-term Incentives.		The number of members corresponds to the annual average assessed monthly.
Total compensation		11,872,000.00		40,103,000.00		897,000.00		52,873,000.00

(*)	The amount in the “Direct and indirect benefits” field of the Fiscal Council column refers to the benefits granted in periods prior to their cancellation.

(**)	The amount in the “Others” field corresponds to social contributions paid by the Company as a result of compensation paid.


Total compensation for the Fiscal Year Ended December 31, 2017 – Annual Amounts
	Board of Directors		Statutory Board of Executive Officers		Fiscal Council		Total
Total number of members		11.00		7.42		5.00		23.42
Number of paid members		11.00		7.42		5.00		23.42
Fixed annual compensation
Salary or pró-labore		8,120,000.00		11,777,000.00		822,000.00		20,719,000.00
Direct and indirect benefits(*)		221,000.00		554,000.00		80,000.00		855,000.00
Participation in committees		2,553,000.00		0.00		0.00		2,553,000.00
Others(**)		0.00		467,000.00		0.00		467,000.00
Description of other fixed compensation
Variable compensation
Bonus		0.00		7,710,000.00		0.00		7,710,000.00
Profit sharing		0.00		0.00		0.00		0.00
Attendance at meetings		0.00		0.00		0.00		0.00
Commissions		0.00		0.00		0.00		0.00
Others		0.00		0.00		0.00		0.00
Description of other variable compensation
Post-employment		0.00		830,000.00		0.00		830,000.00
Termination of office		0.00		3,480,000.00		0.00		3,480,000.00
Stock-based compensation		0.00		7,590,00.00		0.00		7,590,000.00
Notes		The number of members corresponds to the annual average assessed monthly. Participation in committees refers to the fixed compensation of the members of the Board of Directors who are members of committees.		The number of members corresponds to the annual average assessed monthly. Stock-based compensation refers to the cost of grants for the Company related to the Long-term Incentives.		The number of members corresponds to the annual average assessed monthly.
Total compensation		10,894,000.00		32,408,000.00		902,000.00		44,204,000.00

(*)	The amount in the “Direct and indirect benefits” field in the Fiscal Council column refers to the benefits granted in periods prior to their cancellation.

(**)	The amount in the “Others” field corresponds to social contributions paid by the Company as a result of compensation paid.

13.3 – Variable compensation of the board of directors, statutory board of executive officers and fiscal council


Variable compensation – fiscal year ended December 31, 2020 (R$ thousand)
	Board of Directors		Statutory Board of Executive Officers		Fiscal Council		Total
Total number of members		11.00		6.00		5.00		22.00
Number of paid members		0.00		6.00		0.00		6.00
Bonus
Minimum amount set forth in the compensation plan		0.00		0.00		0.00		0.00
Maximum amount set forth in the compensation plan		0.00		13,503.00		0.00		13,503.00
Amount set forth in the compensation plan, if targets were achieved		0.00		13,503.00		0.00		13,503.00
Profit sharing
Minimum amount set forth in the compensation plan		0.00		0.00		0.00		0.00
Maximum amount set forth in the compensation plan		0.00		0.00		0.00		0.00
Amount effectively recognized in the result of the fiscal year		0.00		0.00		0.00		0.00


Variable compensation – fiscal year ended December 31, 2019 (R$ thousand)
	Board of Directors		Statutory Board of Executive Officers		Fiscal Council		Total
Total number of members		11.00		6.08		5.00		22.08
Number of paid members		0.00		6.08		0.00		6.08
Bonus
Minimum amount set forth in the compensation plan		0.00		0.00		0.00		0.00
Maximum amount set forth in the compensation plan		0.00		12,605.00		0.00		12,605.00
Amount set forth in the compensation plan, if targets were achieved		0.00		12,605.00		0.00		12,605.00
Amount effectively recognized in the result of the fiscal year		0.00		6,364.00		0.00		6,364.00
Profit sharing
Minimum amount set forth in the compensation plan		0.00		0.00		0.00		0.00
Maximum amount set forth in the compensation plan		0.00		0.00		0.00		0.00
Amount set forth in the compensation plan, if targets were achieved		0.00		0.00		0.00		0.00
Amount effectively recognized in the result of the fiscal year		0.00		0.00		0.00		0.00


Variable compensation – fiscal year ended December 31, 2018 (R$ thousand)
	Board of Directors		Statutory Board of Executive Officers		Fiscal Council		Total
Total number of members		11.00		8.07		5.05		24.12
Number of paid members		0.00		8.07		0.00		8.07
Bonus
Minimum amount set forth in the compensation plan		0.00		0.00		0.00		0.00
Maximum amount set forth in the compensation plan		0.00		12,235.00		0.00		12,235.00
Amount set forth in the compensation plan, if targets were achieved		0.00		12,235.00		0.00		12,235.00
Amount effectively recognized in the result of the fiscal year		0.00		7,657.00		0.00		7,657.00
Profit sharing
Minimum amount set forth in the compensation plan		0.00		0.00		0.00		0.00
Maximum amount set forth in the compensation plan		0.00		0.00		0.00		0.00
Amount set forth in the compensation plan, if targets were achieved		0.00		0.00		0.00		0.00
Amount effectively recognized in the result of the fiscal year		0.00		0.00		0.00		0.00


Variable compensation – fiscal year ended December 31, 2017 (R$ thousand)
	Board of Directors		Statutory Board of Executive Officers		Fiscal Council		Total
Total number of members		11.00		7.42		5.00		23.42
Number of paid members		0.00		7.42		0.00		7.42
Bonus
Minimum amount set forth in the compensation plan		0.00		0.00		0.00		0.00
Maximum amount set forth in the compensation plan		0.00		12,185.00		0.00		12,185.00
Amount set forth in the compensation plan, if targets were achieved		0.00		12,185.00		0.00		12,185.00
Amount effectively recognized in the result of the fiscal year		0.00		7,710.00		0.00		7,710.00
Profit sharing
Minimum amount set forth in the compensation plan		0.00		0.00		0.00		0.00
Maximum amount set forth in the compensation plan		0.00		0.00		0.00		0.00
Amount set forth in the compensation plan, if targets were achieved		0.00		0.00		0.00		0.00
Amount effectively recognized in the result of the fiscal year		0.00		0.00		0.00		0.00

13.4 – Stock-based compensation plan for the board of directors and statutory board of executive officers

The Company currently has two stock-based compensation plans in place, namely, the “Stock Option Plan of Embraer S.A. for Statutory Executive Officers and Employees,” approved on April 19, 2010 (the “Stock Option Plan”), and the “Long-term Incentive Plan for Executives of Embraer,” approved on February 25, 2014 (the “Phantom Shares Plan”).

Stock Option Plan

a. Terms and general conditions

The executive officers and employees of the Company and the executive officers (or individuals holding equivalent titles) and employees of the Company’s subsidiaries are eligible to participate in the Stock Option Plan. The Stock Option Plan is managed by the Board of Directors, duly advised by its Personnel and Governance Committee in all stages.

The other terms and conditions of the Stock Option Plan are described in the items below.

b. Main objectives of the plan

The objectives of the Stock Option Plan are to: (i) retain and attract highly qualified personnel for the Company, identified as key to the future and perpetuity of the Company; and (ii) ensure the individuals who effectively contribute to the best performance of the Company and its securities the right to share the profits derived from their contribution. Additionally, we also intend to ensure the continuity of the management of the Company and its subsidiaries and align the interests of executive officers and key personnel of the Company and its subsidiaries with those of the shareholders of the Company. Once these objectives are achieved, the Stock Option Plan will have contributed to the constant improvement of the results of the Company, providing an increasing return to its shareholders.

c. How the plan contributes to these objectives

The attractiveness of the Stock Option Plan as a form of variable compensation is linked to the increase of the value of the Company’s shares over time. This type of results-based compensation attracts and retains professionals with the profile desired by the Company, as it ensures these professionals the possibility to share the positive results they helped to achieve. Accordingly, in general, to the extent to which each participant of the Stock Option Plan may contribute to and benefit from the Company’s earnings, the Stock Option Plan aligns the interests of participants with the interests of shareholders, who seek sustainable results in the short-, medium- and long- term.

d. How the plan fits within the compensation policy of the company

The Stock Option Plan fits within the compensation policy of the Company as part of a potential long-term incentive, tied to the increase of the value of the Company’s shares at the São Paulo Stock Exchange (B3 S.A. – Brasil, Bolsa, Balcão), or B3.

e. How the plan aligns the interests of management with the interests of the company in the short-, medium- and long-term

The Stock Option Plan aligns long-term interests, as short-term interests are met by other elements of compensation. Long-term alignment occurs as a result of the nature of the incentive itself: if shares increase in value, shareholders and participants benefit; if shares do not increase in value, shareholders and participants do not benefit. Additionally, the Stock Option Plan also aligns interests by potentially increasing the retention of participants in the Company or even attracting external personnel for hiring.

f. Maximum number of shares covered

Under the terms of the Stock Option Plan, the Board of Directors is authorized to grant options to purchase of up to 1.5% of the Company’s common shares in each fiscal year or, in the event of capital increase, up to 5% out of the one billion shares cap set forth in Section 7 of the Bylaws. The current capital stock of the Company totals 740,465,044 shares. As of December 31, 2019, the last grant under the Stock Option Plan was in effect, granted on March 20, 2013. From the total of 4,494,000 stock options granted, 1,315,910 stock options were cancelled and 2,882,882 stock options were exercised. As of December 31, 2019, a total of 295,208 stock options were still left to be exercised and were fully exercisable.

g. Maximum number of options to be granted

Same as item “f” above.

h. Vesting conditions of the options

As a general rule, the stock options vest as follows and in the following periods: (a) at the end of the third and fourth years, respectively, from the date of the grant of the call option (“Grant Date”), the participant will acquire the right to exercise a portion corresponding to 33% and 33%, respectively, of the shares of the stock option lot(s); and (b) at the end of the fifth year from the Grant Date, the participant will exercise the remaining 34% of shares of the stock option lot(s).

i. Criteria to determine the purchase or exercise price

The purchase price of the option to purchase the shares will be determined by the Board of Directors on the Grant Date, subject to the following principles: (a) the purchase price will be determined in Brazilian Reais, based on the weighted average trading transactions with the shares of the Company on B3, in the last 60 trading days before the Grant Date; (b) the amount obtained according to the previous item may be, at the discretion of the Board of Directors, increased by up to 30% to adjust for the effect of movements that the Board of Directors deem to be speculative affecting the share price in the same period.

j. Criteria to determine the exercise period

Once each portion of the stock option vests, the Participant may exercise it, in whole or in part, as a lump sum or in installments, up to the maximum of seven years from the Grant Date. The maximum period is consistent with the long-term objectives mentioned in items “b” and “c.”

k. Form of settlement

The purchase price of the stock option will be paid at the moment of the relevant exercise, in Brazilian Reais. The Board of Directors may establish other forms of settlement at the moment it grants the options.

l. Restriction on the transfer of shares

No restrictions on the transfer of shares apply once they have been exercised.

m. Criteria and events that, having occurred, cause the suspension, change or termination of the plan

In the event of dissolution and liquidation of the Company, the Stock Option Plan will be terminated and the granted options that have not been exercised at such time will be automatically terminated.

The existing Stock Option Plan and the granted stock options will not prevent corporate reorganization transactions involving the Company. The Board of Directors and the companies involved in such transactions will resolve on the applicable adjustments based on equity to protect the legitimate interests of the Participants.

n. Effects of the termination of office of members of management bodies of the company on their rights set forth in the stock-based compensation plan

In the event of termination of office of members of management of the Company due to permanent disability and death or retirement, except early retirement, the final date of the exercise of the stock option will be anticipated, so as not to exceed 12 months from the date of termination, retirement or death, as applicable. If the stock options are exercised, the participant or his or her successors, as applicable, must pay the purchase price in a lump sum, unless otherwise resolved by the Board of Directors.

In the other cases of termination of office of members of management of the Company, the final date of the exercise period will be anticipated; not exceeding six months from the date of termination, and the purchase price must be paid in a lump sum, unless otherwise resolved by the Board of Directors.

Phantom Shares Plan

a. Terms and general conditions

Executive officers and employees of the Company and executive officers (or individuals holding equivalent titles) and employees of the Company’s subsidiaries are eligible to participate in the Phantom Shares Plan.

The Phantom Shares Plan grants “Virtual Shares” for participants. The Company will pay the amount of the Phantom Shares Plan, by converting the Virtual Shares into Reais based on the average price (weighted by the trading volume) of the shares issued by the Company traded on B3 in the last 30 trading days immediately prior to the 10^th day preceding the date on which the Board of Directors determined the respective amounts (also “Grant Date”).

Participants in the plan will receive two classes of Virtual Shares, 50% in the form of “Virtual Restricted Shares” and 50% in the form of “Virtual Performance Shares.”

The other terms and conditions of the Phantom Shares Plan are described in the items below.

b. Main objectives of the plan

The main objective of this Phantom Shares Plan is to retain and attract highly qualified personnel to the Company and its direct and indirect subsidiaries.

c. How the plan contributes to these objectives

The Phantom Shares Plan allows executives who can effectively contribute to the best performance of the Company and the increase of the price of the Company’s securities to share the profits derived from their contribution.

d. How the plan fits in the compensation policy of the company

The Phantom Shares Plan fits in the compensation policy of the Company as a potential long-term incentive.

e. How the plan aligns the interests of management with the interests of the company in the short-, medium- and long-term

The Phantom Shares Plan integrates the long-term element of the compensation of the Company, as the incentive is paid within a period of three to five years. Moreover, the Participants only vest in the Phantom Shares Plan if the conditions precedent set forth in item “j” below are met, which conditions involve the achievement of the long-term targets of the Company. Another element that aligns long-term interests is tying Phantom Shares Plan amounts to the market value of the shares of the Company, as the amount to be paid is obtained upon the conversion of the Virtual Shares into the official currency of Brazil, or Brazilian Reais (R$), based on the average price (weighted by the trading volume) of the Company’s shares EMBR3 on B3 in the last ten trading days prior to the 15^th day of the anniversary months described in item “j” below.

f. Maximum number of shares covered

Not applicable, as the Phantom Shares Plan does not provide for the effective delivery of shares of the Company to participants.

g. Maximum number of options to be granted

Not applicable. No stock options are granted under the Phantom Shares Plan.

h. Vesting conditions

Not applicable. Once assessed, the amount payable to executives under the Phantom Shares Plan is paid in cash.

i. Criteria to determine the purchase or exercise price

Not applicable.

j. Criteria to determine the exercise period

Virtual Restricted Shares: the Participant is entitled to receive the amount corresponding to the Virtual Restricted Shares in the following proportions: (i) 33% after the third anniversary of the Grant Date; (ii) 33% after the fourth anniversary of the Grant Date; and (iii) 34% after the fifth anniversary of the Grant Date. By scheduling the receipt of the incentive, the Company seeks to ensure that Participants work to obtain medium- and long-term results for the Company.

Virtual Performance Shares: the Participant is entitled to receive the amount corresponding to a certain percentage of his or her Virtual Performance Shares after the third anniversary of the Grant Date, subject to the achievement of the corporate performance targets set forth by the Company, which are, since 2017, associated to the corporate cost reduction project, with actions that are annually reviewed by the Board of Executive Officers and approved by the Board of Directors. The percentage of achievement of targets may vary from 85% to 135%, and the number of Virtual Shares of the Participant is prorated according to these percentages. If the achievement of targets is below 85% in the assessment period, the Participant is not entitled to any payment regarding the granted Virtual Performance Shares.

The maximum payment term of this benefit is consistent with the long-term objectives mentioned in items “b” and “c” above.

k. Form of settlement

The Phantom Shares Plan will be settled in cash.

l. Restrictions on the transfer of shares

Not applicable.

m. Criteria and events that, having occurred, cause the suspension, change or termination of the plan

In the event of dissolution and liquidation of the Company, the Phantom Shares Plan and the rights granted under it and not yet exercised will be automatically terminated.

n. Effects of termination of office of members of management bodies of the company on their rights set forth in the stock-based compensation plan

In the event of termination of office of members of the management of the Company due to death or permanent disability of the participant, subject to a different resolution by the Board of Directors, all Virtual Restricted Shares attributed to him or her will be converted into reais based on the average price (weighted by the trading volume) of the Company’s shares on the B3 in the last ten trading days prior to the date of the relevant termination, and payment will be made together with the payment of the other applicable severance pay. With regards to the Virtual Performance Shares, the Participant will be entitled to receive a pro rata amount, based on the period of employment calculated from the Grant Date until termination, and all other conditions set forth in the Phantom Shares Plan will be maintained.

In the event of death, payment will be made to the successors of the Participant, pursuant to the law.

In the event of termination due to retirement of the Participant (except proportional retirement) before the vesting periods to receive the benefit, as described in item “j” above, subject to a different resolution by the Board of Directors, the Participant will not be entitled to any payment related to the Virtual Restricted Shares if termination occurs one year before the Grant Date. If termination occurs one year after the Grant Date, the Participant will be entitled to the full amount, to be paid on the originally scheduled dates. With regards to the Virtual Performance Shares, the Participant will be entitled to receive a pro rata amount, based on the period of employment calcul