Ladies and gentlemen, thank you for standing by. Welcome to the Ball Corporation's Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, the call is being recorded Thursday, October 24, 2013. I would now like to turn the conference over to John Hayes, Chairman, President and Chief Executive Officer. Please proceed.

Thank you, James, and good morning, everyone. This is Ball Corporation's conference call regarding the company's third quarter 2013 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-K and in other company SEC filings, as well as company news releases. If you do not 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. It was great seeing many of you in New York earlier this month at our investor field trip. We hope that you walked away with a better sense of who we are and more importantly, where we're going. A special thanks to Ann Scott for organizing a great event. Now joining me on the call this morning is Scott Morrison, Senior Vice President and Chief Financial Officer. I'll provide a brief overview of our company's performance, Scott will discuss financial and global packaging metrics, and then I'll finish it up with comments out of our aerospace business and the outlook for the remainder of 2013. Our third quarter results came in ahead of expectations, excluding the impact of a provision for customer receivable, which Scott will speak to in a moment. Solid operating performance across our various business units, a strong year-over-year vegetable pack in North America and a normalization of volumes in our global beverage business, where volumes were up across all regions, save for the previously announced loss of some 12-ounce business in North America, all contributed to stronger performance as we expected. As we have discussed previously, we knew that we had…

Thanks, John. Ball's comparable diluted earnings per share from continuing operations in the third quarter were $1 versus last year's $0.90. In addition, the company recorded an after-tax charge totaling approximately $32 million, primarily related to a provision for our customer receivable. Due to the confidential nature of the customer situation, we are unable to talk about it in great detail here, but will provide more details in the 10-Q. Our metal beverage Americas and Asia segment comparable earnings were down roughly $7 million year-over-year. Cost containment program, excellent operating performance at the plant level and double-digit specialty can growth in the Americas nearly offset segment volumes being down mid-single digits in the quarter due to a loss of the 12-ounce business in North America that has been well documented. Brazil volumes were up strongly, again, year-over-year and our China volumes were up mid-single digits. Across the segment, we are running at high-asset utilization rates and the recently installed second line at our Alagoinhas, Brazil facility is online and ramping up to meet our customer's new brewery located just down the road. European segment profit increased in the quarter in the mid-upper-single digit volume growth brought about by better weather conditions, coupled with reduced labor and input cost, both of which continue to be addressed aggressively. In the food and household segment, earnings were higher due to better volumes, our recently acquired Mexico plant and good performance in our steel and aluminum aerosol business. Segment volume increased nearly 10% in the quarter as a result of the favorable North American seasonal fruit and vegetable pack and solid aerosol container demand. Transitioning from operations, during the quarter, our corporate undistributed cost and the effective tax rate were in line with expectations and year-to-date. We have repurchased of net $268 million of…

Thanks, Scott. Our aerospace business continued to perform well in the quarter with solid execution on existing programs. During this quarter, the Ball-built WISE spacecraft was roused from a 2-year hibernation to resume its near-Earth asteroid hunting mission. We also delivered the STPSat-3 satellite for the U.S. Air Force Operationally Responsive Space-3 mission, and contracted backlog at the quarter end was $942 million, down just slightly from the previous quarter. Despite lingering effects of sequestration and the recent U.S. government shutdown, we continue to see operationally -- opportunities, excuse me, both domestically and internationally to help grow our aerospace business. Now looking out across our company today. Our businesses are leveraging new processes and systems, our world-class employee base and their EVA mindset to drive cost-out initiatives and execution on key programs and projects. We have invested prudently in our businesses for incremental EVA dollar growth, whether it has been specialty growth in North America, geographic growth in Latin and South America or cost-out initiatives in Europe and Asia, which we expect to generate positive returns in 2014 and beyond. In Europe beverage, we are on track to get back to our operating margins consistent with the 2010, 2011 period by 2015. And in our global food and household products packaging business, we are ramping up aluminum aerosol production and focusing on maximizing the returns across our steel product lines. In summary, we expect continued strong free cash flow and full year 2013 comparable results to exceed full year 2012 comparable diluted earnings per share. Given our operational momentum and reduced future CapEx target, we expect 2014 to be more consistent with our historical earnings per share growth goal of 10% to 15%, and higher free cash flow generation. And with that, James, we are ready for questions.

[Operator Instructions] And our first question is from the line of Philip Gresh from JP Morgan Asset Management. Phil M. Gresh - JP Morgan Chase & Co, Research Division: First question for you, it sounds like the volumes are pretty good in Europe. I was bouncing between calls, but I think you said up mid- to high-single digits. I would just to get a little bit more color, just kind of regionally or by country or whatever additional color you could give about your volume performance.

Certainly. As you know, I think on our second quarter call we said -- we started to see at the beginning of July some more normalized weather patterns, and the good weather led to an increase in fillings in Europe. For us, I think it was largely driven by the Benelux region, by France, by U.K. even Poland, and to a lesser extent, Germany. And so those, as you all know, is the sweet spot of where we operate. So I think we were just the beneficiaries of much more normalized weather. And as we said, across Europe, for us, it was mid- to upper-single digit, kind of 7 percent-ish range. Phil M. Gresh - JP Morgan Chase & Co, Research Division: Got it. Okay. Second question on Europe, there has been so much out around this aluminum premiums issue. I'm just wondering if you think about like the past few years and the run-ups in those premiums, do you have any sense that you could give us about -- or quantification you could give us as to just how much of a headwind that's been for you over time?

Sure. Phil, this is Scott. Last year, it cost us probably around EUR 4 million. It started to ramp up in the back half of the year last year. This year, kind of a full year, it's probably going to be closer to EUR 8 million or EUR 9 million. They've just started to moderate recently. But with inventories, you know we have to flush inventories through the system, we really didn't get any benefit of that yet. But that's kind of the magnitude of the cost that's hit us in the past year -- 1.5 years. Phil M. Gresh - JP Morgan Chase & Co, Research Division: Got it. That's very helpful. And then just last question, curious how you're feeling about China today. Where are we kind of on the supply/demand curve heading into 2014? How are you thinking about pricing for next year? It seems like maybe flat to down at best, but I just want to get your thoughts here.

Yes. I think you're spot on. Not much has changed from our point of view about China. And what I mean by that is, number one, we are -- do continue to see strong growth in volumes. Number two, there still is a fair amount of excess capacity. I think either some of the players have slowed down some of their growth plans, but others have continued on. And so from a pricing perspective, it's not getting any better as we sit here today. I don't think it's getting materially worse, but it's certainly not getting better. And so until some of this capacity is better utilized with growth in the market, I think our expectation is that we're not going to have much upward mobility in pricing.

Our next question is from the line of George Staphos from Merrill Lynch.

It's actually Alax Wang sitting in for George. First, can you discuss maybe what the pace of delayering in Europe and how that's going for you guys?

I'm sorry, you said the pace of what in Europe?

Delayering?

Delayering?

Delayering? Well, if you're talking about the pace of our cost, I think there's really -- we're just continuing to move down that continuum of taking cost out. We said on the second quarter it's going to take some time because you have to have the various discussions with work [ph] councils and unions. And we announced the closure of our Ratingen, Germany administration facility, but that won't close until the first quarter or so of 2014. And so while we've been taking some short-term measures to take cost out, and our guys have been doing -- our folks have been doing a great job of that, this is more of an 18-month type of play. And as we said, it's really the second half of 2014 and going into 2015 when we really will start to see the benefits of that.

Okay. In terms of the timing wise, everything is to your expectations at present?

We are on track.

Okay. And then just second question. Can you discuss what you're seeing or maybe hearing from customers about marketing programs and trends in North America beverage, particularly in CSD?

Yes. We did see some -- particularly around the Labor Day weekend, we did see some greater than recent normal promotional activity by the soft drink customers, as well as some even some of the beer customers. There have been, I think, both on the beer and the CSD side, they continue to focus on the revenue line. But I also -- we also see that they are much more constructive about the volume relative to the price increases. And their price increases, I think, have been a little bit more moderate over the past few months as they go into 2014. I do know, in both of those segments, new products are very important. I think the biggest question on the soft drink side is not how cans are doing, but rather why are consumers drinking less CSD and what are they drinking instead? And I think the soft drink companies are very focused on that, whether it's natural, low-calorie sweeteners or new products that help respond to that new channel opportunities. So I think we are seeing a slightly more constructive end market. But having said that, it's still is -- the growth is anemic at best. And we need to -- if there's one thing that we are focused on, particularly on the soft drink side, I'm less concerned about beer, but we're very much focused on trying to make sure that we understand what's going on from the soft drink perspective.

Our next question is from the line of Chris Manuel from Wells Fargo.

A couple of questions for you. First, could you -- as we think about what the free cash flow might look like next year and parts of working capital -- I'm sorry, CapEx heading into next year, where are you at, early thinking with respect to those and any big projects or things that may spill over into next year?

Well, we had -- Chris, this is Scott. We had about $100 million of carrying capital this year, so I would expect -- we're spending in a pretty decent clip this year and so I would expect to have less carryover capital into 2014. So I think capital will come down. There's still some growth projects that we're evaluating that would be in that number. But I think, overall, CapEx should start to trend down and free cash flow will trend up. We have some more things on the working capital front that we think will benefit us next year. And so we feel pretty good about the growth in the free cash flow for 2014.

That's helpful. So when you think about weak metal in a different way, when you think about utilization levels globally and you put in a bunch of capacity in China, you've got -- some still going in, in Brazil, as you have those now all fully contributing or I guess the plants down in Brazil is still ramping up and coming together. But where do you think you'll be at utilization? Do you have pockets where -- including, I guess, Vietnam, and there too you did some work there, where do you think you'll end up being for utilization? Are you running -- going to be running tight over the next year or 2, that those would be areas you might be looking at for capacity? How would we kind of think about where you'd be targeting?

Yes. I think, across the board in every region in which we participate, we're running pretty tight relative to capacity. Certainly, with the closure of Milwaukee, that was -- and you all know that we've been very assertive in managing our supply and demand there. That really depends on what the market or growth, or lack thereof, occurs in 2014. But we're tight, as we speak, in North America and Europe, we're very tight. And I do think that over the next 18 months, our #1 priority is the cost-out. But as we start to think about going into 2015, we have to think about capacity because we are getting very tight there. China, we really haven't added all that much capacity. We've moved the facility from Shenzhen up into Foshan, but that wasn't necessarily net-net any significant increase in capacity. So we're running very tight there. You mentioned Vietnam, I think all of Southeast Asia, I think there's probably some more opportunity, but we're going to be balanced around that. And then in Brazil, as you rightly pointed out, the second line in Alagoinhas is just getting started up. So I don't see any new capacity going into Brazil. I think some of the growth projects Scott were talking about, we haven't finalized them right now, but it's looking at geography and it's looking at new products. I think those are the 2 big areas when you think about where it could come from.

Last question was when I looked at some of the language in your press release, you talked about investing in the extruded aluminum, are you referring to what you're doing down in Latin America or are there thoughts for additional potential lines either in North America or Europe there?

No. I think our intent was -- that was talking about Latin America. Mexico, specifically.

Our next question is from the line of Usha Guntupalli from Goldman Sachs.

A quick question. First, could you provide any early read on fourth quarter volumes across regions?

I think it's premature to talk about fourth quarter volumes. I will say the weather continues to moderate and we haven't seen any meaningful deviations from the trend lines we saw in the July, August, September. But as you know, the fourth quarter is seasonally slow. The only deviation I'll point out from that is probably in the food can business, where we thought a quarter ago that we would get some -- it would pushed -- some of the opportunity would be pushed into the fourth quarter, which it doesn't look like it will. You also -- we had a very strong fourth quarter in that segment in the third quarter. And so I think, while we thought some of that maybe pushed to the fourth, I think it stayed in the third. But absent that, the volume trends are -- particularly in the beverage side I was referring to, is nothing inconsistent with what we'd expect.

That's helpful. And looking at the next 12 to 18 months, could you remind us about the major cost savings that you expect to achieve across segments?

Yes. Very quickly, in Europe, we'll start there. We talked about getting back to a more normalized margin structure, which was -- if you look back in the 2010, 2011 time frame, it was 11% to 12%. And we said over the 18 months, we have a clear line of sight and we don't have to rely on net pricing to get there, although we are also focused on net pricing. I think in North America beverage, our folks has done a very good job in managing a difficult situation, not only with the losses in 12-ounce business, but also with the very tough macroeconomic environment relative to the beverage can demand here in North America. And so we continue to take cost out. And I think the Milwaukee, Wisconsin rationalization is a good example of that. I think our food and household products business here in North America, over the next 12 to 18 months, is very much focused on it. As we start to cycle into end of 2015, when we'll have a lost of some business there. But our guys are very -- our folks are very much on top of that. And as we sit here today, I think our folks are up for the challenge, no doubt. Down in Brazil, it's not so much about a cost-out, as it is managing and optimizing the supply/demand relative to what we expect to be a very strong year next year. Because, as I mentioned, the summer months are really October through March, and then they have the World Cup in June and July. And then in Asia, we have to be low-cost there. And I think we've proven over time that we are low cost and what we're trying to do is widen the gap relative to particularly the local competitors there, because of our global know-how and global expertise. So that's just a quick snapshot of the various levers that we're trying to pull from a cost perspective.

Our next question is from the line of James Armstrong from Vertical Research Partners.

My first question is on the food can segment. And I know this is really early days, but could you update us on any progress you've made to offset the volume being lost in 2015?

Well, the short answer is nothing material that we can add at this time. We had an Investor Day that was webcast a few weeks ago, if not close to a month ago, and we talked in a slightly more granular way about -- we have half a dozen or so various discrete items that we are focused on from a project perspective, and we expect to begin to execute on those in the fourth quarter. But really, more likely, the first half of 2014. This business remains with us throughout '14, so it's really '15. We've got 15 months or so to manage it. And I think our folks are very much in tune and focused on what needs to be done.

Perfect. And then switching gears. In the aerospace segment, have you seen any major impact from the government shutdown. Also, as sequestration hits the government aerospace contracts with potential for more, could you give us a sense of what you are replacing those contracts with?

Yes. First, in term -- we did see -- and we've seen this since sequestration kicked in, in March. We've seen a slowdown in decision-making at the government and with the complete shutdown for what, 16 days or so it was, everything just stopped. And so that's why I inferred our backlog was down slightly, but nothing fundamentally has changed. I think just decision-making is taking a little bit longer. I will say it's a bit frustrating that they just punted just a couple of months, and so we're talking about the January-February time frame having a very similar set of discussion. And that just puts timing of decision-making up in the air as well. So that gives me little bit of concern. But again, as I said, the fundamentals of what we do for the U.S. government has not changed at all, nor has the opportunity set. We have, however, as we've talked in the past, looked at other scenes [ph] of growth and revenues, whether it's internationally or with some more commercial or commercially oriented opportunities. And whether it's a Sentinel program, which is done in a non-for-profit world that's not affiliated with the U.S. government or the GEMS just contract we won in South Korea, I think those are good examples of the types of things we're looking at, and we continue to explore those opportunities. And we do believe that, over time, we're going to win our fair share of those.

Our next question is from the line of Todd Wenning from MorningStar.

As you look across your various businesses, which segment do you think has the most momentum in terms of EVA dollar generation going into 2014?

That's a good question. I think all -- to one degree or another, our European folks have really rallied around the cost-out. And given that, that is in our control, more than anything else, we don't have to rely on weather, we don't have to rely on external demand. We see a clear line of sight there. I think down in Brazil as well. As I mentioned, the 2 summers and -- actually, as we sit here right now, we're actually in Brazil, we've brought our board down here this week and we see a lot of very good momentum. And it's quite clear that a lot of the market share gains of cans relative to glass are not just temporary, they're permanent. And so we're feeling pretty good about Brazil. In North America, it really is a volume game there and so our folks have been doing a great job there. But it's just -- it's too premature to predict what 2014 volumes will look like. And I think the same with China relative to the volumes versus the price mix. So it's really about Europe and Brazil, I think, have the greatest line of sight into EVA dollar generation.

Great. And then as more specialty can capacity is being added by the industry in North America and Europe, have you seen the margins spread between standard and specialty contract in a meaningful way?

No, we haven't. Any maturation curve of any new product, you need to expect over time that it will rather gravitate more towards a mean. But I think what we're trying to do is stay out ahead and have the flexibility for our customers. So when we talk about specialty, we're not just talking about one different can size, we're talking about a wide variety. In North America and/or in Europe, we're making over 20 different sizes in each of those locations. And so it allows us the flexibility to flip between sizes on behalf of our customers, and I think they find there's value there -- in there for them as well.

Our next question is from the line of Joe Stivaletti from Goldman Sachs.

I was just wondering, from a bigger picture perspective, if you could talk about your appetite for acquisitions, if that's something that you're spending much time on and what areas might be most likely?

Well, I think we're always spending a fair amount of time on acquisitions. Many times nothing happens, but that doesn't mean there isn't a lot of activity going on. As we've talked about in the past, it's -- given that we're a very disciplined EVA company, sometimes it's challenging to compete against private equity and other buyers when interest rates are still low and liquidity is still free. And I think we see that right now. As we go forward though, I think there has been great opportunities when we're disciplined and we're tenacious on one hand, but also patient on the other hand to take advantage of situations when they arise, when others are not as aggressive or cannot be aggressive from a financial or operational perspective. So we haven't announced anything, but don't assume we haven't been looking and haven't been actively pursuing opportunities. And as we sit now, liquidity is still relatively free. And so it makes it a bit more challenging for us to compete. But over the long term, we've been able to make a lot of money for our shareholders and for our company by maintaining our discipline.

Are there any particular areas, whether it's geographic areas, product-type areas that would be -- that are sort of higher up on the priority list as you consider potential acquisitions?

Well, our pipeline, I think, is full of everything. Everything from aerospace -- in January, we made a very small acquisition and that's gone exceedingly well. And so that was more trying to get into a new customer base. On the packaging side, whether it's geographic -- we've talked about the need for consolidation in China, in particular. I think over the longer term, there could be opportunities there. I think there's further rationalization opportunities in some of the more mature markets and mature product lines, and we're focused on those. But the one thing about acquisitions that we've realized is, if you overpay for an acquisition, in our markets, it's always very, very difficult to get it back. And so that's why we've been maintaining a disciplined approach.

Our next question is from the line of Ghansham Punjabi from Robert W. Baird. Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division: Just kind of judging by your customer comments, whether it's branded or private label, it seems like most of your customers were surprised at the rapid decline in diet soda over the summer, and I guess that's been true for the full year as well. John, can you just sort of touch on how your portfolio is positioned against that trend in terms of how it falls in North American footprint compared to the average, if you will, for diet soda as a function of the category? And also, are you seeing anything comparable in Europe as well in terms of declines in diet soda?

No. In fact, let me start with Europe first. No, in fact, the strength -- soft drink was stronger than beer, at large [ph] as an industry and for Ball in Europe during the third quarter. And I do think some of it has to do with market share gains and other things like that. I think here in North America, Ghansham, there are several things going on. The first half, there was some weather issues. There's also has been a pricing versus volume strategy, I think, of the soft drink industry generally speaking. But then it is also a demographic, and people are drinking less sodas and people are drinking less diet sodas. Diet soda is skewed towards the older consumer, and they've been drinking less. And so I think our customers are acutely focused on that from a product formulation perspective, as well as a channel perspective. You're seeing the -- many more different types of SKUs out in the marketplaces, our customers try and find the sweet spot relative to those various demographics. And I -- we expect a fair amount of innovation from a category perspective in 2014 because those customers are very much in tune with the macro trends going on. Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then in terms of Europe, was there anything unusual for the industry as to why volumes were so strong? Because, again, kind of reverting to -- for example, Heineken, yesterday, they weren't exactly thrilled with the volume profile in Europe. So what drove the strength in Europe for the industry during the third quarter, you think?

It's always difficult to tell just in the quarter, but you're absolutely right. I think it has to do with -- the can has been winning relative to other packaging substrates. At the end of the day, we continue to see slow but steady in Europe. Slow but steady improvements in terms of cans as a share of the package mix, and that adds incremental growth to any of the liquid growth. So that's probably the biggest thing that's going on.

[Operator Instructions] Our next question is from the line of Al Kabili from Macquarie.

This is Danny Moran in for Al this morning. Just one quick one for me. Did you receive any benefit from lower European metal premiums in the quarter? And can you give us any visibility on any potential tailwinds in '14?

No. The premiums just started to moderate in the quarter. And with the inventory that we are running through the system, we saw really, virtually, no benefit of that. It provides some potential upside next year if they keep moderating, but we're not -- we haven't until we bake that in. So no real impact in the third quarter. We're still seeing higher cost than we were a year ago.

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

I was curious, if we could just go back to Europe one more time. I was wondering if there's any specific regions or countries where you're seeing this outsize growth? And then you talked about getting back to 11% to 12% margin in the region by 2014 and '15, but it appears we're already there. So I'm just wondering if this is sustainable in the near term?

Yes. First, the answer is, as I mentioned, the volumes were up nicely in the third quarter relative to where our strength is, which is really Germany, Benelux, France and the U.K. I do think some of that was a bounce back because the first half of the year was very tough. And as the summer came, I think there was just the consumer unleashing, if you will, of getting out and taking advantage of the weather. So I wouldn't read into that too much. Overall, as an industry, we're a little bit stronger than our long-term expectations. We've said 2% to 5% growth over the medium to long term in Europe, in part driven by the market share gains I've talked about for cans relative to glass and others. And that was kind of at the upper end. The growth was at the upper end up that, so I wouldn't read too much into it. And then -- I'm sorry, your second question, I forget now.

I was just talking about the margin and whether or not that's going to be sustainable in the near term, because I thought that we -- you had discussed at the Investor Day being more of a 2014, '15 event when we got back to 11% to 12% margins in that business.

Yes. Well, in the quarter, I know we are above that. But remember, we're a seasonal business, so we look at that on an annualized basis. What really drove the improvement in the third quarter, a little bit of cost out because there are folks who've been getting after that. But as we said, that's a longer-term issue. It was really that we have strong volume. And when you're in a volume-sensitive business, those things help. We had negative volumes in the first half of the year, and I think that hurt. But -- so I wouldn't read into that other than, number one, we are on track of what we said; and number two, these cost-out programs really to hit in a more meaningful way the second half of 2014 and 2015.

Okay. I guess my follow-up question is on Brazil. It appears the ramp-up is going as planned, but industry trends appear to be subdued right now. So I'm just trying to understand what gives you confidence that you will actually see a double summer materialize, even with the World Cup coming. Now what are your customers expecting? And I would expect that you guys are -- your volumes should outpace the industry given your new capacity, but I just wanted to get your thoughts on that.

Yes, I think in Brazil, everyone, I believe, is very much looking forward to 2014. There's going to be a tremendous amount of promotional activity here. They're expecting millions of visitors, which is going to help. I think, to your point, we do have new capacity coming on. And as you know, this business is chunky, if you will. And when you have new capacity on, you're usually the ones grabbing the incremental growth in the near term. But I think over the long term, our competitors have grabbed some growth in the past when we weren't putting capacity in and they were. So I just think from our product perspective, our customer portfolio perspective, we're in pretty good shape for 2014 in Brazil.

Okay. And you're happy with your mix of specialty cans in that region?

Yes. We definitely are.

Our next question is from the line of Anthony Pettinari from Citi.

This is actually William Mitchell filling in for Anthony. Just one quick one for you guys. How much of the volume growth in metal, food and household products was due to the annual food pack?

Well, we -- as Scott said, we were upper-single digits on volumes, and the overall market was up about 3%. It's interesting when you look at it, what was strong and what was weak relative to the industry. What was strong was the vegetable pack and pet food. And what was weak was fruit and soups. We do not participate in a large way in the fruit or the soups. And so I think we just benefited from a customer mix that had a strong pack. So what I'd say is all the growth we saw was related to the pack because that's the way the business works.

There are no further questions from the phone lines at this time.

Okay. Well, thank you very much for participating. We look forward to what hopefully is a strong finish to 2013 and a more constructive 2014. And we look forward to talking to you in January.

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