Ball Corporation (BALL) Q3 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Third Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, October 25, 2012. I would now like to turn the conference over to John Hayes, President and CEO. Please go ahead, sir.

Thank you, Amit, and good morning, everyone. This is Ball Corporation's conference call regarding the company's third quarter 2012 results. The information provided during this call will contain forward-looking statements. Actual results or outcomes may differ materially from those that may be expressed or implied. Some factors that could cause the results or outcomes to differ are in the company's latest 10-Q and in other company SEC filings, as well as company news releases. Now if you don't already have our earnings release, it's available on our website at ball.com. Information regarding the use of non-GAAP financial measures may also be found on our website. Joining me on the call today are Scott Morrison, Senior Vice President and CFO; and Ray Seabrook, Executive Vice President and COO, Global Packaging. In a moment, Scott will discuss our financial results for the quarter. Ray will follow with details about our packaging, operating performance, and I will close with comments on aerospace and the outlook for the fourth quarter. Ball reported third quarter 2012 results ahead of last year's third quarter. Recall that we had mentioned in July that our second half 2012 results would be up year-over-year and, to date, we've performed slightly better than we expected. During the quarter, we made several -- we made progress on all of our Drive for 10 strategic levers. Several highlights include: In our North American beverage container business, we continue to aggressively manage our overall supply to meet market demand. We announced in August we are removing 12-ounce beverage can capacity from our system, converting additional 12-ounce capacity as specialty containers and redistributing can end-making equipment to existing Ball end centers. In addition, during the quarter, we initiated the voluntary separation program for salaried U.S. employees that will help rightsize our administrative expenses relative to our current business. In our beverage can businesses outside of North America, volumes improved nicely due to the startup of our Alagoinhas, Brazil; Qingdao, China and Ho Chi Minh City, Vietnam facilities. In fact, on a global basis, volumes were up nearly 7%. In our aerospace business, we continue to leverage our technological expertise as we align with growing markets, resulting in a record contracted backlog of $1.1 billion. We also announced our intentions to acquire an extruded aluminum manufacturing facility in Mexico and form a joint venture in Argentina with Envases del Plata, which broadens our geographic reach and brings new capabilities to our metal food and household business. And finally, during the quarter, we acquired the beverage can business of [indiscernible], a small regional beverage can manufacturer in Italy, for approximately $15 million. In the first year of operation, this investment will exceed our return hurdle. While world economies may have slowed a bit, our businesses are faring well as we continue to actively manage the business, and our pace of cost optimization and cash generation is accelerating. I'll turn it over to Scott to talk about our quarter, and then Ray will provide color on our operations. And I'll return to comment on our aerospace business and the outlook for 2012. Scott?

Thanks, John. Ball's comparable diluted earnings per share from continuing operations for the third quarter of 2012 were $0.90 versus last year's $0.81, an increase of 11%. Also in the quarter, the company recorded after-tax charges totaling $26.4 million related mainly to the relocation of our European headquarters and previously announced plant closures. The following factors contributed favorably to third quarter results: higher volumes in Europe, Brazil and China, as well as specialty can volume growth; solid program performance in our aerospace business and a lower share count. FX translation negatively impacted the third quarter by $0.03. For a complete summary of the third quarter results on a GAAP and non-GAAP basis, please refer to the Notes Section of today's earnings release. Recapping key financial metrics for 2012, full year corporate undistributed costs are expected to come in closer to $65 million. Interest expense will be around $177 million. The full year 2012 effective tax rate is projected to be around 28%, with the fourth quarter rate closer to 31%. Given recent global growth trends, full year 2012 CapEx is anticipated to run under $350 million. Therefore, we continue to expect 2012 free cash flow to be at least $0.5 billion. At current exchange rates, year-end net debt is expected to be just over $3 billion, and we will return the majority of our free cash flow to shareholders via share repurchases and dividends versus debt paydown. Just as a heads up, in the fourth quarter, Ball will record a $38-million after-tax charge for the closeout of certain Canadian pension plans, costs associated with an employee voluntary separation program in the U.S., and additional cost associated with previously announced plant closures. With that I'll turn it over to Ray to talk more about the packaging operations.

Thanks, Scott. Comparable third quarter operating results in the metal beverage, Americas and Asia segment were 18% above last year's level and through 9 months are up 6%. Third quarter Brazil performance was much improved from last year's level due largely to the contribution from or our new Alagoinhas plants, which came online in the second quarter, and strong year-over-year volume gains. In Asia, our new can plant in Vietnam is coming up to speed, and our plant in Qingdao, China ran very well in the third quarter. Asia operating results are still well ahead of last year's level through the quarter and through the first 9 months. Sales volumes in North America were relatively flat through the first 9 months compared to a year ago. We continue to focus on controlling costs, and we were seeing a more favorable sales mix in that business, which has resulted in higher comparable segment operating earnings in the quarter and year-to-date. European third quarter operating results on a euro basis were up 8%, however, on a U.S.-dollar basis, were lower due to a weaker euro exchange rate. Year-over-year third quarter volume gains were somewhat offset by continuing price cost squeeze in that beverage can business. Third quarter earnings in the U.S. metal food and household products segment were less than expected due to Midwest drought, but slightly improved over last year. Year-to-date earnings in this business were below last year due to inventory gains made in 2011 that were not realized this year. With that said, we expect fourth quarter segment earnings to be noticeably higher in the fourth quarter of 2011 when we took a significant amount of manufacturing downtime for inventory control. So far, 2002 (sic) [2012] has been a successful but tough year, with customer volume shifts in 12-ounce, growing specialty can demand, challenging growing conditions for our food can customers and 3 new plants coming online. I'm proud of our people who have effectively managed through these challenges and opportunities and expect a good finish to the year. With that, I'll turn it back to you, John.

Great. Thank you, Ray. Our aerospace business continued to perform well, with solid execution on existing programs and strong new wins that set us up well for the future. Previously awarded fixed-price programs continue to ramp up and, as you can see from our better-than-expected segment earnings, program performance is quite good. Margins for the quarter remained in the double digits. And as I mentioned earlier, contracted backlog ended the quarter at $1.1 billion. While uncertainty remains around the U.S. government plans and sequestration, Ball's strong track record should keep us well positioned no matter the outcome of this important issue. In summary, after a very good 9-month performance which was slightly above our expectations, we remain on track to achieve our goal of 10% to 15% diluted earnings per share growth for 2012. While it's a bit premature to discuss our 2013 outlook, we are proactively focusing on cost optimization and growth opportunities that will drive future performance and continued strong free cash flow. We are on track to fill the gap in 2013 related to North American volume shift. Further emerging market growth, mix shifts to more specialty containers, more normalized weather in North America and Europe and continued growth in aerospace all should serve as catalysts for good performance next year and beyond. We will continue our long-standing disciplined capital deployment strategy to return value to our shareholders, manage existing operations to match market demand and grow the EVA dollars we generate over the near and long term. And with that, Amit, we're ready for questions. Amit, if you would, we're ready for questions.

[Operator Instructions] And our first question comes from the line of George Staphos from Bank of America Merrill Lynch.

I'll ask 3 questions and turn it over. First of all, Ray, could you give us a breakdown in the third quarter of what volumes were on a year-on-year basis? I think I saw in the press release and in your -- heard in your remarks more of a year-to-date comment. So could you run that by us in terms of a year-on-year for the third quarter volume progression?

You want that? Yes, I -- the -- in the North America/Asia segment -- our North America business was up just slightly, and in China and Brazil, they were up -- they were both up in the 20% range. In Europe, we had a strong volume quarter. We had volumes up almost 10% in Europe. And of course, they were down in food and household.

Did you have a food and household number?

Yes. Remember, we've got an aerosol in the food business. So the aerosol was down about 4%, and food was down about 7%.

Next question, can you -- I think John mentioned that you're making progress to filling some of the volume that you had seen shift this year for '13. If possible, could you provide a bit more color in terms of that process? And are you worried at all about perhaps some of the negative publicity around energy drinks recently, what that might mean in terms of your efforts and your customer's demand?

Yes, George. With respect to your first question, the -- with the closure of our Columbus facility and taking out effectively 4 lines, of which 2, 2.5 were being utilized this year, we're going to be pretty tight next year overall.

Yes. George, I would tell you that, I think, next year, we look like we might have a half line open, which is fundamentally full.

Yes. Exactly. And so we feel pretty good about the necessary decisions we had to make there. Obviously, it's dependent upon what happens in the marketplace, but we're assuming a relatively flat market for 2013. And then with respect to your question about energy, no, we're not overly concerned. It's not a big part of our portfolio. It's certainly less than 5%. And if we had to, we could move that over into the beer segment relatively quickly because we have been running very strong on the specialty side of our house. And we continue to expect to have strong growth in that segment as well.

Okay. And last one, on aerospace, the backlog, nice pick up. Is there any way that you can comment, realizing a lot of these programs are in the black, in terms of where the backlog improvement was?

Yes. What I would tell you, George, is most of that backlog is, as you described, in the black. And so we really can't comment on it. But we have some -- there's certainly some good wins there that we feel good about.

And our next question comes from the line of Ghansham Panjabi from Robert W. Baird. Matthew R. Wooten - Robert W. Baird & Co. Incorporated, Research Division: It's actually Matt Wooten sitting in for Ghansham today. With many in the industry adding specialty can capacity in North America, can you quantify the current pace of volume growth? And do have any concern about the specialty can capacity in the near term? And if not, how about over the next 2 to 3 years?

Well, our specialty growth has been quite strong over the past couple of years. I think I mentioned, on the second quarter, year-to-date, it was up mid-20%, and we continue that pace right now. So I think it's very strong. It's masking obviously the decline in 12-ounce. And what we're seeing from our customers, not only North America but around the world, increased emphasis and interest on specialty sizes, everything from a 5.5-ounce, all the way up to the jumbo can. In terms of new capacity coming on, there's a lot of growth that's occurring in it. We constantly monitor that. And obviously, we're not going to be doing anything that we don't have business contracted for like we always do. So no, as we sit here today, we're not overly concerned about it because it's a good news story with respect to the growth. Matthew R. Wooten - Robert W. Baird & Co. Incorporated, Research Division: I appreciate the color. And then as a follow on and back to the aerospace business for a second, recognizing that backlog was really high, have you seen any signs or any negative implications of a pending fiscal cliff in the U.S.?

Well, the short answer is no because we've been given no guidance by the -- our customers on this, because I don't think they know what's going on. The one thing that I can tell you is many of these new projects, and somewhat, most of our existing projects are of a strategic nature. And so we think, at least in the short term, they are reasonably well inoculated from any issues. Certainly we have some product lines that are more tactical in nature that could have some impact, but it's a very small part of our portfolio. So as we sit here today, we don't expect any meaningful dislocation relative to our business wins there. But obviously, time will tell. If it goes late into 2013, I think all cards are on the table. But as we sit here for the next, call it, 6 months or so, we feel pretty good.

And our next question comes from the line of Philip Ng from Jefferies. Philip Ng - Jefferies & Company, Inc., Research Division: I know it's still pretty early in the process, but how should we be thinking about pricing in 2013? I'm particularly interested in any color around Europe and China. I mean, demand/supply seems to be firming up in Europe, but a little more challenging in China.

Yes, I think you're right. China, fundamentally, we're sitting with a -- the industry is sitting with probably 25% excess capacity. That excess capacity is being eaten up pretty quickly by, obviously, the growth in the market. I would say that the next 18 to 24 months, we should see that excess capacity eaten up. But in China, the pricing is difficult. What's helping us in China obviously is the volume growth. So I would say, from a perspective, pricing is difficult but volume is making up for the difference. In Europe, again, there is a little bit of excess capacity in certain spots. It's probably more in the east than the west. And pricing has been difficult, but we are seeing signs of that starting to firm up a little bit. Philip Ng - Jefferies & Company, Inc., Research Division: Okay. And can you give us a sense of what your outlook is for growth in China? Because there is -- I mean, at least Alcoa lowered their guidance pretty sharply. I just want to get your view.

Yes. We actually even had a board meeting this past week in China. And the fundamentals, I think, still remain quite strong. Ray talked about the overcapacity, but there's a tremendous amount of can filling investment going in. And despite some of the slowdown on a GDP basis in China, the rise of the middle class is still continuing. This migration from the rural areas to the urban areas that we've discussed in the past is continuing on. Ray had mentioned earlier that our volume was quite strong, and I think the overall industry volume was good, largely because the can has a share, the package mix is small. And so I think -- certainly, there is -- like in any market that's growing so strongly, you're going to have hiccups here and there. But we think long term the China market is still going to be pretty healthy. Philip Ng - Jefferies & Company, Inc., Research Division: Okay. And then just one last final question for me. Historically speaking, you guys have allocated capital pretty evenly between CapEx, M&A and just returning cash to shareholders. 2012 was more of a robust year in terms of growth with Brazil and China. You guys have done an incredible job of buying back stock. How should we be thinking about the split for 2013?

It's pretty early right now. But our balance sheet is in great shape, we don't have much in the way of current maturity. So we won't be paying down debt other than current -- what comes due. And growth CapEx is dependent upon the opportunities that present themselves. And absent that, we'll use most of the free cash flow to buy back our stock.

The third leg of that is the whole M&A side, and that's kind of like growth capital. It's opportunity-driven. And if we see good opportunities, which, from time to time we do -- witness the Envases transaction -- we'll utilize that. But you never -- we never go into any given year planning on spending x percent or x amount of dollars on M&A. Philip Ng - Jefferies & Company, Inc., Research Division: From your vantage point, I guess, between -- the split between growth on the emerging market side versus M&A, would the bias be more towards M&A this year? I mean, for 2013?

We just -- our bias is returning capital in the most prudent way and creating value in the most prudent way for our shareholders. And so our M&A activities as well as our external growth opportunities are opportunity-specific. And so absent anything that, we're going to buy back -- continue to buy back our stock and return that capital to our shareholders.

And our next question comes from the line of Chip Dillon from Vertical Res.

Could you talk a little bit about -- it seems like, from what we've been hearing and -- from some of the beverage companies that the beer business in Europe has been a bit stronger than what you would think reading the headlines. And what do you ascribe that to? And is it mostly affecting the can business more than bottles? Or how would you view the beneficiary of that?

Well, I don't know if the beer business in Europe or at large is all that strong. I certainly know that the overall beer can market in Europe in the third quarter was relatively flat. Now a lot of that had to do with poor weather in Western Europe and the U.K. And I know the can has not been losing share in the beer market. So I think perhaps maybe better than expectations, but it's certainly not blowing the lights out.

Got you. It just looked like -- I asked that because SABMiller talked about having very strong volumes over there. But maybe it's just that one company.

Yes.

Yes. And then as a follow-up, and you might have addressed this, but given that one of your competitors has postponed some of their capital spending or projects in China and Brazil, do you think the longer-term outlook there isn't as strong as maybe you thought earlier? Or do you think it's more just tied to the economy? And I'm really thinking about China because I know you all pointed out a year ago how low the beer penetration is in cans versus other substrates when you look at China versus other parts of the world.

Yes. No, I -- we still think, long-term, the fundamentals are very strong. For example, the beer market in China year-to-date is up 6.5%, irrespective of package type. And so obviously, that's a good news story. I think really why some of these projects are sliding to the right, even for ourselves, has much to do with supply and demand and -- more than anything else. But as Ray pointed out, with the growth we're seeing in China, that could be sopped up relatively quickly. And so you just got to -- we're keeping our eye on that and being close to our customers.

And our next question comes from the line of Chris Manuel from Wells Fargo Securities.

A couple of questions for you. First, could you give us a little more color on the couple of acquisitions that you announced? The facility in Italy, how big is it, a couple of lines, et cetera, what you expect there, and is it full or capacity opportunity there, number one? And a little more color potentially on what you hope to do with the aerosol assets?

Well, first, with respect to the small Italian acquisition, that was, as I said, the beverage can portion of it. They had a very old, small outdated line that we're going to be taking out of their facility and moving those volumes into existing Ball facilities. And that will free up that existing line for deployment in other parts of the world as we continue to explore other geographies. With respect to Envases del Plata, we've talked over the last 18 months or so about our strategic thrust on the aluminum impact extruded side. We acquired Aerocan about 18 months ago, and this is just the logical next step. We're taking -- acquiring in its entirety their Mexican plant. And then we're joint venturing. We have at tinplate business down in Argentina. They obviously have an aluminum impact extruded. We share similar customers so we're forming a joint venture there with options in the future to either acquire it or dispose it back to the seller. We're in the midst of our due diligence now finalizing that, and we're subject to regulatory approval. And that's a little bit unknown right now, but we expect, as we sit here today, for these things to, most likely, close in the fourth quarter.

All right. The last 2 quick ones I had were, as you look globally at capacity, with volumes up so strong in Europe and then you talked about some of the elements here with Italy, it sounds like that's going to be folded into existing and can somewhat close. Do you -- I think you've -- are towards the end of your plant openings that you've announced globally with elements in Vietnam and China, et cetera. Do you envision any areas of the world where you might need further capacity as you look out the next year or two?

Brazil. We -- that new plant we just built -- we have a good customer that is just down the road. And we've just found out lately we have another one of our good customer is also building a brewery down the road. So I think we're going to need more capacity in Brazil. And that's the immediate capacity that I see. John?

Yes. And probably, over the next year or two, we've talked about this before, but we're getting recently [ph] tight in Europe. We've had some pricing issues, and I think our #1 focus and priority is getting those pricing issues right before we focus on any incremental capacity. And so -- I think we talked about that either in the first or second quarter conference call. And so that's what -- our plan right now. But go to the longer term, if Europe at large continues to grow as it is, we are going to need some capacity. We just want to focus on getting our business right there, first.

Yes. And then the last one is as you kind of [indiscernible] and went through some of the puts and takes, as you think about 2013, and then you've got a couple of these acquisitions to add, you still have some flow-through from plants you've brought online as they come up the learning curve. You've got some headwinds here in North America with business moving around, although you've done good work to fill those in. As you think about all these and put them together, does 2013, in your mind, seem to shake out as though you can still kind of fit within your long-term earnings growth objective?

It's premature to say that right now because obviously, we're in the midst of our planning process. But what I'd tell you is, largely because of the North American volume shift, we -- our guys have done a great job of clawing back to profitability in that business. But it took away some of the upside in it. So as we sit here right now -- it probably would be difficult to certainly get to the upper end of that range, but we're certainly focused on trying to achieve that lower end of the range, yes.

Our next question comes from the line of Adam Josephson from KeyBanc.

What volume trends did you experience in Europe intra-quarter? And what regional differences existed, if any?

Well, as I said, we had a very strong volume quarter in the third quarter in our European beverage can. And that's mainly because -- if you remember, last year, summer didn't show up in Europe. So the last year's third quarter was dreadful. So that's why I think probably everybody was up fairly substantial in the third quarter. Year-to-date, we're up about 5%, with the market growing about 3%. And for us, our business is primarily concentrated in Western Europe. Of course, we do have operations in Eastern Europe. And Western Europe was a little bit stronger-growing than East Europe. John, do you have anything to add?

The only outlier to what Ray just said was the U.K., where the weather was atrocious throughout the second and third quarter. And I think overall volumes, from an industry and for ourselves, were down in the U.K. But outside of that, Ray is spot on.

And just one for Scott. Scott, by roughly how much have your CapEx expectations come down for this year?

Well, as we've moved through the year, things have kind of slid to the right a little bit. That's why I've said for -- the most we've spent in a quarter -- we spent a little over $200 million through 9 months. And the most we've spent in a quarter historically is about $140 million. That's why I think we're going to trend lower than the $350 million. How much lower depends on how much -- how many things get closed out by the end of the year versus sliding to the right a little bit.

Right. But you would -- I would expect, in the future, you'd still be spending in excess of the $200 million of maintenance CapEx?

Yes. We're still seeing growth opportunities. We're seeing selective places where we still want to deploy capital and where we can get the returns. So we're going to continue to do that.

And our next question comes from the line of Phil Gresh from JPMorgan. Phil M. Gresh - JP Morgan Chase & Co, Research Division: I wanted to follow up on the 2013, just referencing some commentary from the last quarter call about Americas/Asia. You've been talking a couple of times on this call about the gap that you have to fill for the capacity closure. Is it fair to say that -- with the commentary hopefully better than flattish, I think was the comment made last quarter for what next year's EBIT could look like in this segment. Is that a fair characterization, that it would be kind of somewhere between flattish and what you're seeing this year, kind of in the low-single digits? Or how are you thinking about that? Is there a risk that it's actually down next year, that you actually -- you have something else to make up for?

Yes. I think it was me that made that comment. And what I would tell you is that we've been very fortunate in the U.S. We've filled up -- we pretty much filled up the open capacity that we had. I said I think we have about a half line open in all of our system in the U.S. for '13, and that's pretty much full. And we expect -- Brazil is still growing for us, and we're expecting another very strong year in Brazil. And while price is very difficult in China, volume is very good. So as we sit here today, I would tell you, I expect it to be up a little bit from where it is this year. Phil M. Gresh - JP Morgan Chase & Co, Research Division: Got it. Okay. And then just on China, just out of curiosity, I mean, there's -- it's a more fragmented market than the other markets. So with some of the slowing growth and the excess capacity there, would you think that there's a possibility that this market kind of consolidates sooner than we might have otherwise thought, maybe 6 to 12 months ago?

I think that's a fair comment. And I think there's a reasonable shot at something like that. You just think about what we've done and then what we read about what our competitors have done in terms of things sliding to the right. I think there is a general recognition that there is overcapacity. And typically, when the industries have overcapacity, there's consolidation. So obviously we keep our eyes open to those types of things all the time. And if it makes sense, we'd certainly look at it. Phil M. Gresh - JP Morgan Chase & Co, Research Division: Okay. And then just on kind of Asia in general. One of your peers has pretty significant exposure in Asia x China. You kind of made the move in Vietnam. How are you thinking about perhaps other markets throughout Asia at this stage? Is this -- would this be a goal over the next couple of years? Or just how are you thinking about that?

Yes, I think it's certainly an objective. You all know that through a joint venture, we've had an interest in Thailand for a long time and with that same partner, we've moved into Vietnam. And I think there's other opportunities, if they make sense, that we'd certainly look at them with our partners like that. So it's a been a good partnership. There's good growth throughout Southeast Asia from a volume perspective. And if we can make the economics work, we'd certainly take a look at it.

Our next question comes from the line of Debbie Jones from Deutsche Bank.

I was just wondering if we could go back to Brazil, the comments you made about the new capacity coming on. I'm wondering if we should expect an even bigger volume bump in the next quarter as you continue to ramp up. It was my impression that when you did -- I think it was Tres Lagos [ph]? Please correct me if I'm wrong -- 2011, that that ramp up went pretty quickly? And then I guess my follow-up on that would be do you see the need to add more capacity in that region over the next few years? Are you happy with your current footprint or where you would actually just add another line at one of these facilities? Or would you expect that you need to move out of that area?

Well, for us -- remember, Brazil this year started off very, very slowly. We had a very, very slow first quarter in Brazil. And the second quarter was better, but it was still very, very slow. And then they were going to have a tax on beverages, and they've moved that back. And in the third quarter, it's really taken off for us, and we're expecting a very strong fourth quarter as well. As I said before, at least initially, we're not -- we're going to fill out plants as opposed to building another plant. We've only got one line in that new Alagoinhas plant we built, and there's certainly room for some more capacity to be added in there, and that's what I would expect to happen in the next very short period.

Okay. And then just kind of moving out of region, we haven't discussed -- I've seen a lot of announcements of capacity coming on in South Africa, and I believe some of the major players provide either technology or ends to that market. And I'm just wondering if that will ever become a market that you guys might be willing to move into?

Well, the short answer is we take a look at markets like that all the time. It's a market where the can demand has not been growing, and they're having some economic difficulties down there. So I wouldn't expect anything, in the very short term, for us to be doing anything. But we do, from time to time, look at opportunities like that. And if we can make economic sense, as I said before, we would certainly proceed on -- with those.

Okay. And then if I could just ask one more question on China. We've asked a lot about the need for more consolidation in that market, and my characterization has always been that the existing players would probably want a little bit more than what you or some of your peers would be willing to pay. And I'm just wondering what kind of the strategy would be, if there are not some smaller, maybe self-manufacturers or single-plant players that you guys think you might be able to consolidate over the next year or so. That would be helpful.

Well, I think, as I said before, generally speaking, when there is overcapacity in markets, you see consolidation. And usually, what happens is the big -- the strong remain strong, and the weak ones are the ones that are consolidated. So it falls directly in line with what you were just saying. And if it works for us from an economic point of view, from a geographic footprint point of view and from a customer portfolio point of view, we'd certainly look at it.

[Operator Instructions] And our next question comes from the line of Al Kabili from Credit Suisse. Albert T. Kabili - Crédit Suisse AG, Research Division: Just first question is on free cash flow. And certainly, the working capital improvement this year is impressive. I was just wondering what you think of the opportunity next year along those lines? Is the free cash flow next year sustainable relative to this year? You have CapEx down, but working cap might be hard to repeat. I just wanted to get some thoughts around that.

We've had a number of good programs that are benefiting us this year on the working capital front. We have some things that are yet to come that will happen next year. So I -- while it's too early to call what working capital will look like next year, I'm still fairly positive on how that will develop next year. So I don't think it's -- I don't think we're going to have to give anything back that we got this year necessarily. Albert T. Kabili - Crédit Suisse AG, Research Division: Okay, great. All right. And then also, related on -- just a quick housekeeping question on corporate costs. What should we be thinking about going forward? I know the second quarter was a little bit lower than I was expecting, at least -- or the third quarter, I'm sorry.

Yes, they ran a little -- full year is going to run closer to $65 million because of the benefit that we got in the third quarter. On a full -- in a typical year, it should run a little bit higher than that. We had some unusual benefits in the third quarter that won't repeat themselves in the fourth quarter. Albert T. Kabili - Crédit Suisse AG, Research Division: Okay, okay. Got it. All right. Last question is just on -- is on the rationalizations in North American beverage. Is there a way to help us think about what the fixed cost reduction is associated with those? Or -- we know you're going to -- there's some volume loss there. Kind of help us with maybe what some of the offsetting is on the footprint side.

Well, if you recall, in the past, when we've closed facilities, we said the fixed cost savings was -- depending on facility, was in the range of $25 million or so. The Columbus plant was a little bit bigger than a typical plant, and we closed an end facility as well. So you should expect the fixed cost savings to be north of that. That's one of the reasons why both Ray and I said that we feel reasonably comfortable that we'll be able to claw back most if not all of the shortfall relative to volume loss.

Your next question comes from the line of Scott Gaffner from Barclays.

Question is just around the share repurchase. I think you said, now that you're going to do about -- at least $500 million of share repo in 2012, if I look on the second quarter call, I think you were at $275 million year-to-date. It looks like, at the end of the 3 quarter, you bought back about $300 million of shares. How should we think about the timing of that? How do you sort of look at that and decide when is the best time to do share repo, or -- how do you think about that as we move into the balance of the year?

Well -- I mean, obviously, we try to be opportunistic if we can. But to buy $200 million in the last quarter, you've got to be buying it everyday. Phil M. Gresh - JP Morgan Chase & Co, Research Division: Right. Okay. So you're actively in the market. I mean, is there a period -- a window when you have to -- when you're no longer allowed to buy near the end of the year? Or you can buy all the way through the year?

You could put a variety of programs in place to be able to buy through blackout periods. That's usually not problematic. Phil M. Gresh - JP Morgan Chase & Co, Research Division: Okay. Looking at the North American slugs business, right, you've got significant market share there. You did an aerosol acquisition. What do you think about overall vertical integration of that business longer term? Do you think there's a -- do you have a target rate for vertical integration, or do you -- pretty comfortable with where you stand currently?

I think we're pretty comfortable with where we stand currently. We got in the business because as we started to explore the aluminum impact extruded, we realized the importance of having good quality slugs to make good quality containers, and that was the business premise behind getting in that. And so that hasn't changed at all. And so it is a good source of quality slugs for us. And then we don't have to point fingers at our suppliers.

Right. Okay. And then just lastly, I think somebody earlier talked about the negative publicity around energy drinks and the impact on your business. But I sort of look at it from a different angle. Is that -- maybe this is an opportunity for you. We've heard a lot about reclosable and resealable options for cans. It doesn't seem to have been adopted very much, whether -- at least in North America. Do you think this is maybe an opportunity for you to advance some of the reclosable and resealable innovation that you have?

Well, it very well could be. Whether you want to talk about the Alumi-Tek bottle, you want to talk about the resealable end that we produced in Europe -- but actually, we do sell it here in North America. I do think whether it's energy drink or whether it's anything that is looking at portion control, there are opportunities there. And our business development folks are actively pursuing those.

Our next question comes from the line of Alton Stump from Longbow Research.

I just wanted to get back to European bev cans. Obviously, this has already been asked, but I was shocked at how good that number was. I get the fact that the comp was easy. But just with how poor weather was, particularly in northern Europe in the quarter, is there any certain thing, or are you able to identify as to how much lift you think you got -- obviously from either the Olympics, or maybe a tail end of the Cup games, if that helps at all, either -- if there's something else going on there that drove that huge 10% growth number?

I think the biggest thing actually when you take a look at it from a volume perspective was the Benelux region was quite strong. And what's in the Benelux region is largely multinational beer companies that export out of that area into other geographies. And I think we're the -- a beneficiary of that. So if we had to isolate it to one thing, that was probably the biggest surprise relative to our own internal expectations.

[Operator Instructions] And our next question is a follow-up question, comes from the line of Chris Manuel from Wells Fargo Securities.

A quick follow-up, this is actually Gabe. In China, is there -- are there any sort of anti-competitive issues that would preclude you from making a purchase in any particular region within China, given that it's obviously a large country?

I think that that's such a general question, it's too difficult to answer. Obviously, we would have to be mindful that if we were to acquire something that was adjacent or very close to one of our facilities, in the absence of other competitors in the region, obviously that would be a challenge. But I think there's enough competitors out there that we could probably weave our way through.

There are no further questions from the phone lines at this time, Mr. Hayes. I will now turn the call back to you.

Okay, great. Well, thanks, Amit, and thank you everyone. I just want to remind everyone that our January earnings call will take place on Thursday, January 31, 2013. So we look forward to having a strong finish to the year, and we'll talk to you then. Thanks, everyone.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.