Ball Corporation (BALL) Q3 2015 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the Ball Corporation Third Quarter Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. As a reminder, this conference is being recorded, Thursday, October 29, 2015. And I would now like to turn the conference over to John Hayes, Chairman, President, and CEO. Please go ahead. John A. Hayes - Chairman, President & Chief Executive Officer: Great. Thanks, Lena, and good morning, everyone. This is Ball Corporation's Conference Call regarding the company's third quarter 2015 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 the company news releases. 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. Now with regard to Ball's proposed offer for Rexam and consistent with the requirements of the U.K. Takeover Code, we will limit our comments regarding the transactions to: number one, what has already been made public via the 2.7 release; two, where we are in the regulatory process; and three, an update of ongoing economic hedging and debt activities related to the proposed transaction. Also note that there may be certain limitations regarding the depth of our business commentary and certain other items we would normally discuss on a quarterly earnings conference call due to the nature of the proposed transaction. Given the nature of our proposed offer, today's issued press release, webcast and conference call are advertisements and should not be considered a prospectus. Investors should not make any investment decisions in relation to the new Ball shares issued in conjunction with the Rexam transaction except on the basis of information in the prospectus and the scheme documents which are proposed to be published in due course. This presentation and transcription of comments are not for release in whole or in part in, into or from any jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction. For more information on Ball's proposed acquisition of Rexam, please visit the Offer for Rexam page on our website at Ball.com. Now, joining me on the call today 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 up with comments on our aerospace business and the outlook for the remainder of 2015. Our third quarter volumes and results from operations were in line with our expectations and a lower effective tax rate aided the quarter. The headwinds that we acknowledged throughout the year around earnings translation, project startup costs and tough volume comps in North American food continued while others like aluminum premium headwinds and tough volume comps in Brazil started to become slight tailwinds in the quarter. Scott will go into more detail in terms of quantifying these headwinds. As we said in July, overriding these headwinds are the investments we are making to operationally and strategically position Ball for future growth. This week we announced that Ball's Brazilian joint venture partners are exchanging their remaining 39.9% interest in the joint venture for 6 million Ball shares. This exchange will allow us to further streamline our business decision making in the region and across the broader Ball metal beverage business as well as enable us to better serve our customer base and ensure that the beverage can remains a cost competitive package. While we are making progress on around the proposed acquisition of Rexam including ongoing work with the U.S. FTC, receiving the formal Statement of Objections from the European Commission and moving to the next stage with the Brazilian CADE authorities, we continue to remain focused day-to-day on maximizing the value of what we currently do and generating strong free cash flow. Growth capital projects that have become and or that we expect will become operational and we expect will largely benefit 2016 and beyond include the next generation aluminum bottle-shaping technology in North America, which has made its way up the learning curve. In fact we were just there yesterday with our board and I want to thank all of the hard work by the folks in Conroe and elsewhere to help make this a success. In addition, the new Oss, Netherlands specialty beverage can line and the addition of end manufacturing capacity in our existing Lublin, Poland facility, which both help serve European market growth in the quarter; the construction of our Monterrey, Mexico two-line aluminum beverage can facility, which is on track and on budget and will become operational by early 2016; the construction of a new beverage can plant in Myanmar slated to open in early 2016, a new U.S. tinplate aerosol can manufacturing technology that shipped its first commercial product earlier this month; the expansion of our aluminum impact extruded container business in the U.K. is expected to come online during the fourth quarter. And our new impact extruded aerosol facility in India celebrated its grand opening earlier this month. We began to cycle off difficult volume comparisons in Brazil, and the aluminum premium comparisons in Europe in the third quarter, and our continued focus remains on executing on the capital projects, implementing continued cost out initiatives in China and Europe and awaiting award of a variety of aerospace proposals that are in the pipeline. I'm amazed by the amount of work being done by the Ball team. Everyone is contributing day in and day out to our future success. And with that, I'll turn it over to Scott for a review of our third quarter numbers. Scott? Scott C. Morrison - Chief Financial Officer & Senior Vice President: Thanks, John. Ball's comparable diluted earnings per share for the third quarter 2015 were $1.10 versus last year's $1.10. As John alluded to, the following factors contributed to results in the quarter: $0.07 of unfavorable currency translation, largely due to a weaker euro; $0.04 of start-up costs associated with capital projects coming on line in late 2015 and early 2016; and aluminum premium tailwind of $0.03; and $0.05 benefit from a lower year-over-year effective tax rate, due largely to the impact of our economic hedges put in place for the Rexam transaction; and on U.S. dollar borrowings in Brazil and some one-time discrete items. In addition, as mentioned in prior quarters, metal food volumes remain challenging in the third quarter due to the previously disclosed loss of a major food can customer in North America. Much of the difficult comparisons for 2015 are behind us, and free cash flow is now expected to be in the range of $550 million, including approximately $500 million of CapEx, and excluding cash costs associated with the Rexam transaction. As we said earlier this year, our dividend will remain unchanged during the proposed acquisition process. However, we did opportunistically repurchase 2 million shares in the quarter. We will continue to view share repurchases as opportunity-dependent. For the full year 2015, here's an update on various financial metrics. CapEx will be in the range of $500 million, a $50 million increase due to timing on a number of projects being executed as we approach year-end. Interest expense will be roughly $150 million, excluding debt refinancing and other costs. The full year effective tax rate on comparable earnings is now expected to be closer to 24% following the third quarter impact that I talked about previously. Corporate undistributed is estimated to come in just below $90 million. Our GAAP results in the third quarter were unfavorably impacted by the economic hedges we put in place to reduce currency exchange rate exposure associated with the British pound-denominated cash portion of the announced acquisition price for Rexam and to mitigate exposure to interest rate changes associated with anticipated debt issuances also in connection with the cash portion of this proposed acquisition. These economic hedges allow us to lock in the transaction's purchase price economics, though they will likely continue to cause disruption to quarterly GAAP earnings and could accumulate to a sizable figure given currency rate volatility and the projected timeline associated with the proposed transaction. We will continue to break out these items to provide as much transparency as possible. Details on these economic hedges are provided in Note 2 of today's earnings release. Credit quality and liquidity of the company remained solid with comparable EBIT to interest coverage of 5.6 times and net debt to comparable EBITDA at 2.7 times. The company has enough committed credit and available liquidity at quarter-end to consummate the proposed transaction and provide ongoing liquidity for the company. For a complete summary of third quarter 2015 results on a GAAP and non-GAAP basis and details regarding the third quarter, please refer to the Notes section of today's earnings release, which includes a simplified table format summarizing business consolidation activities. Now moving to operations, our metal beverage Americas and Asia segment comparable operating earnings for the third quarter 2015 were down just slightly year-over-year, mainly due to unfavorable pricing and slightly lower volumes in China and some project start-up costs in North America. Brazil volumes bounced back in the third quarter, up double digits versus an easy comp last year. And North American volumes were off just a bit versus the industry being up roughly 1% in the quarter. Progress continues on our Monterrey, Mexico plant, which will start up in early 2016. It appears our cost optimization initiatives in China cannot keep up with the further price erosion in that region. Much great work has been done by colleagues across the segment to support the cost out initiatives taken so far in China. And we will continue to monitor closely the situation, as well as the political situation in Brazil. However to-date, Brazilian can demand has remained strong. And we're off to a good start to their seasonal summer. European beverage comparable earnings were down around $3 million in the third quarter. And on a constant currency basis, they were up year-over-year. Mid-single-digit volume growth and a slight benefit from aluminum premiums in the quarter were almost enough to offset the negative translation impact. Food and household comparable segment earnings were down in the quarter, as segment volumes declined mid-teens following the customer shift in U.S. food cans. Excluding the customer shift, our food can volumes were up slightly with better pet food and salmon can volumes and upper Midwest vegetables faring well, offset by Midwest tomato yields being lower as the pact came to an end. This segment was also impacted by a couple million dollars of unfavorable earnings translation related to the European portion of the extruded aluminum aerosol business, and a small amount of start-up costs relating to capital projects across the segment. We continue to ramp up the next generation steel aerosol can manufacturing technology and further grow our global extruded aluminum businesses, which will all contribute to improving segment performance in 2016 and beyond. In summary, our global packaging businesses are extremely focused on the things that they can control, leveraging prior investments to serve the growing global demand for beverage cans and metal aerosol packaging, as well as preparing for new capital projects to come in online in early 2016. To employees listening in on today's call, thank you for the energy, drive and enthusiasm and working together during what's been a very busy summer. With that, I'll turn it back to you, John. John A. Hayes - Chairman, President & Chief Executive Officer: Great. Thanks, Scott. Our aerospace business reported a solid quarter, given the difficult comps they were up against. Contracted backlog held steady, ending the quarter at $638 million. The aerospace team continues to perform well on existing programs and is focused on reducing its cost structure as it anticipates projects being awarded in early 2013 (sic) [2016]. A side comment, I might just mention that the recent budget agreements in Washington, D.C. actually help us and takes away some of the ambiguity that we were facing into. Now turning to the balance of the year, this message is consistent with prior quarters. It's all about executing on capital projects, generating cash flow, focusing on costs, and reaching completion on the proposed offer for Rexam. Our outlook for the full year has not fundamentally changed since our last update. And while currency translations, start-up and pre-production costs will remain a headwind for the balance of the year, our business remains solid and is on track to generate a significant amount of free cash flow. Together, we are working hard to improve Ball in 2016 and beyond. Now finally, I would like to acknowledge the contributions of and thank Mike Feldser and the excitement we have for Jim Peterson. As you know, earlier this quarter we announced that Mike would be retiring after leading our food and household product segment for 10 years. His commitment and dedication to our company and to our people are above reproach, and we will miss his drive. However, what we gain in Jim is a high energy leader who grew up in the commercial side of our business and we are very excited to build on many of the initiatives begun to make that segment world class. We wish them both all the best on their new journeys. And with that, Lena, we're ready for questions.

Thank you. Our first question comes from the line of George Staphos with Bank of America Merrill Lynch. Please go ahead.

Hi, everyone. Good morning. Thanks for taking my call. Thanks for all the detail. Actually, congratulations both to Jim and Mike, and Mike did a great job after he took over and the food performance is a lot better subsequent to that. I would say my first question is around operations. It sounds like China has maybe taken another step lower. Perhaps it's a mischaracterization, but can you comment in terms of what kind of trend you saw sequentially 3Q versus 2Q? John A. Hayes - Chairman, President & Chief Executive Officer: Yeah. Maybe, George, I'll jump in and ask Scott to chime in. I think the good news is the beverage can continues to grow and take share in China. The bad news is the pricing has gotten worse. We have not been putting any capital in China for several years. We don't intend to because we don't believe with new capital you can make returns in it. So we are weathering the storm. We're battening down the hatches. We're taking out as much cost as possible, just to try and keep up with the price declines. And it's challenging to do that as we sit here right now. Scott C. Morrison - Chief Financial Officer & Senior Vice President: Yeah, I would just echo those comments. And that's why our volume was down just a couple of points, George, because we're not putting in additional capacity. So, it's a tough environment, and it continues to be tough. And I think the outlook is challenging.

Recognizing that this is always going to be the case in any quarter, any year, are you suggesting that there is maybe increased chance of capacity reduction? Because it sounds like you're having difficulty keeping up with the price compression through your own productivity. John A. Hayes - Chairman, President & Chief Executive Officer: Well in terms of our own business, we're currently not contemplating that now. The real issue is there's too much over-capacity in the industry. And our industry is not alone in that. But the question is, with outside of our walls, will the market grow into the existing capacity? Will new capacity stop coming on stream? And could existing capacity be taken offline by other people? Those are the three things that we're paying close attention to.

So, recognizing that you're sold out, there aren't higher cost operations that in theory, if you weren't running them, wouldn't help the P&L sufficiently? That's what I'm hearing. John A. Hayes - Chairman, President & Chief Executive Officer: Correct.

Okay. A couple of quick ones and I'll turn it over and try to come back in queue. You mentioned Monterrey being on track. Can you just remind us? Do you have a contract in place for that facility? And I think you said first quarter, but could you affirm when you expect to start producing commercially there? John A. Hayes - Chairman, President & Chief Executive Officer: Yeah. Operations guys are never the one to get nailed down on it. We expect to be making cans starting up the line early in the first quarter and being producing commercial cans certainly by the end of the first quarter. When I say commercial cans, cans for sale. It might be a little quicker than that, but that's the plan we have currently on the table. It is secured by a long term agreement.

Okay, thanks for that. And then you mentioned EBIT was up in Europe, excluding foreign exchange. So, we appreciate that color, but is there any way to put a finer point on how much Europe would have been up ex the foreign exchange? Thanks guys. I'll turn it over. Scott C. Morrison - Chief Financial Officer & Senior Vice President: Well think about the currency effect I mentioned was $0.07. The vast majority of that's in the beverage business. There is a little bit in the food and household business, but the majority of that's in the beverage business.

Okay. Thank you, Scott. Scott C. Morrison - Chief Financial Officer & Senior Vice President: Yeah. John A. Hayes - Chairman, President & Chief Executive Officer: Thanks, George.

Thank you. And our next question comes from the line of Anthony Pettinari with Citi. Please go ahead.

Good morning. John A. Hayes - Chairman, President & Chief Executive Officer: Good morning.

In food and household, you referenced positive volume trends with pet food in the Midwest. I'm just wondering, ex the large customer loss last year, are you seeing stability in the North American customer base? And in terms of your asset footprint in North America, are you comfortable where you are from a food and household perspective? John A. Hayes - Chairman, President & Chief Executive Officer: Yeah. Absent the loss of the customer, we are seeing stability. I think we talked last quarter on the conference call about the vast majority of our business tied up in their long-term agreement and the overall market is holding in there. So, again, absent the loss of that customer, yeah we see volumes. In fact we were up just a little bit. But don't go crazy with that. I'm sorry, your second question was?

Just in terms of the footprint in North America, are you comfortable where you are from a food side going into 2016? John A. Hayes - Chairman, President & Chief Executive Officer: Yeah. Well, as you know, in light of the loss of the customer, we've actually made some footprint rationalizations relative to head count and other things like that. And we're always looking at trying to optimize it. It's a challenging environment out there. And so while we have nothing currently on the docket in terms of any major restructurings, we're looking at those types of things all the time.

Okay, that's helpful. And then just a couple of questions on Brazil, first, is there anything that motivated the timing of the acquisition of the remainder of the Latapack stake? And then when you look at Brazil into next year, the country is in a deep recession. Do you expect volumes next year to be positive in Brazil, given can continues to gain share, or what are your thoughts about can demand given current market conditions in Brazil? John A. Hayes - Chairman, President & Chief Executive Officer: Well first with respect to your question about the timing of this, I don't think there was anything specific. Yes, we are in the midst of a regulatory approval and I can't go into that. But we've had a very good relationship with our partners for a very long time. And as the world has changed and as Ball has changed and as they have changed, it was just the right opportunity. We're quite excited about what our partners – that they have a conviction in the future of Ball. It does allow us to streamline some of the decision making. And I think really said another way, what they're not doing is our partners are not exiting Brazil. They're not exiting Ball. They're not exiting the beverage can. Rather, they're taking a broader perspective in the investment for the betterment of all. And so I think that's good. Getting to the volume side, as we go into 2016, the first half of 2015 was quite soft. And so, I think the comps are relatively easy. Scott had mentioned our third quarter volumes were strong. The overall industry was up 11% and we were up a bit more than that. As we start into the fourth quarter, we see the similar trends continuing so that's all good news. You're absolutely right that the Brazilian economy and the Brazilian political environment is a challenging one right now. I do know that less beer and less soft drinks are being consumed. But given that beer can growth continues, I think that's a good example of this constant theme we've been talking about of cans taking share in the packaging mix.

Okay, that's helpful. And when you refer to political challenges in Brazil, are you speaking specifically around taxes on beverage or maybe a more difficult tax environment for Ball, or what are the risks from a political perspective in Brazil? John A. Hayes - Chairman, President & Chief Executive Officer: No. I was just specifically talking about the potential impeachment of the President and what that means in terms of a change of a guard around the political side of that, and ultimately what it means. We have no point of view on it. But anytime you have an unstable government, it's usually not healthy.

Got it, got it. I'll turn it over.

Thank you. Our next question comes from the line of Tyler Langton with JPMorgan. Please go ahead.

Yeah. Good morning. Thanks. John A. Hayes - Chairman, President & Chief Executive Officer: Good morning. Scott C. Morrison - Chief Financial Officer & Senior Vice President: Good morning.

Just following up on sort of the Latapack deal, I guess recognizing that you've seen a lot of your earnings variability over the two years, just given the effects of the World Cup, I guess could you talk a little bit about – I mean, I guess do you see this deal still hitting sort of the target level of returns that you look for that 9% threshold, and any kind of thoughts on sort of like a run rate level of earnings, if earnings can rebound from sort of the recent volatility? Just any details there? Scott C. Morrison - Chief Financial Officer & Senior Vice President: Yeah. I would say on the earnings volatility, it's been a pretty good, consistent long-term increase in the earnings in that business. The business has done real well. It does get a little bumpier quarter-to-quarter and it is a more seasonal business. But the overall long-term trajectory of that business has been very solid. We don't see that necessarily changing. I don't think we need much in the way of capital down there. And in terms of returns, this does meet our typical hurdles that we always look at in terms of we want to earn 9% after tax within three years, and this will do that.

Got it. Okay, great. And then just in Europe, could you quantify, Scott, the impact of the metal premium this quarter and then sort of if premiums to stay where they are, what that benefit could be in the fourth quarter and then looking out to 2016? Scott C. Morrison - Chief Financial Officer & Senior Vice President: Yeah. It was a $0.03 positive impact in the third quarter. It should be a little bit more than that in the fourth quarter. And then we'll still get benefit in the first half of next year.

Got it. And then just final question for North America bev can, I think you mentioned your rates of growth were a little bit less than the industry. Could you just talk about how you're growing in beer and CSD and is that the lower growth rate, is that just sort of temporary customers sort of issues? Any detail there would be great. John A. Hayes - Chairman, President & Chief Executive Officer: Yeah. It is customer issues. On the soft drink, we were actually a little bit better than the market on the soft drink side. We're a little bit worse than the market on the beer side. And all of our differential relative to beer had to do with one of our customers taking more of the business in-house.

Fantastic. Okay. Thanks so much.

Thank you. Our next question comes from the line of Philip Ng with Jefferies. Please go ahead.

Hey. A quick question for Scott. To achieve your $550 million free cash flow target, at least based on our math, it's going to take $200 million plus of working capital benefit. So where are you finding some of those opportunities? And as a early read through for next year, can you help us kind of frame what are some of the major levers for free cash flow in 2016? Scott C. Morrison - Chief Financial Officer & Senior Vice President: Well, I'm just going to comment on 2015. I'm not sure about your math because I have a working capital benefit this year a little bit less than last year's benefit. We have a lot of charges coming through non-cash charges that maybe you're not accounting for correctly. Maybe we can take it offline. But...

Okay... Scott C. Morrison - Chief Financial Officer & Senior Vice President: But we had a big pension benefit as well. So I don't know if you're including that. That's part of the cash flow. In terms of looking at next year, every year, we're constantly looking at our working capital, whether it's receivables, inventory payables, and figuring out what we can do better, where we can be more efficient. So it's too early to talk about next year. But rest assured, being an EVA company, we're always focused on that.

Okay. That's helpful. And then I guess Europe, you guys called out a hit from some out-of-pattern freight. Do you expect that to dissipate in the coming quarters, especially with Oss ramping up a little more fully? And then are you at a point where you need to add some capacity in Europe? And did you see some pricing? Just the market seems fairly tight at this point. John A. Hayes - Chairman, President & Chief Executive Officer: Yeah. It's – getting back, we – remember, it is more seasonal in Europe than – the second quarter and third quarter, certainly, than even some other parts of the world. And we were just getting the Oss line up and running. And so as a result of that, right at the peak, we didn't have full capacity. So it did create out-of-pattern shipping. I say that because as we go forward, we expect that to become less as time goes on. You are right, the market is still tight. It remains tight. It's growing nicely. And as a result, we have to think of it longer term about if we need to add additional capacity into that. No final decisions have been made, but we're certainly thinking about that.

Okay. That's helpful. And just one last one for me; can you kind of help remind us what are some of the dates that we need to be mindful of in terms of the regulatory agencies as it relates to Rexam? And what are some of the – what's the process in some of the next steps you guys are taking going forward? Thanks. John A. Hayes - Chairman, President & Chief Executive Officer: Yeah. Maybe what I would ask is to take that offline and give our Head of Investor Relations, Ann Scott a call because every jurisdiction is a bit different. And I wouldn't want to confuse people by misstating something here.

Okay... John A. Hayes - Chairman, President & Chief Executive Officer: It's all in the various documents that she can guide you to.

Okay. That's helpful.

Thank you. And our next question comes from the line of Mark Wilde with BMO Capital Markets. Please go ahead.

Good morning, John. Good morning, Scott. John A. Hayes - Chairman, President & Chief Executive Officer: Good morning. Scott C. Morrison - Chief Financial Officer & Senior Vice President: Morning.

I wondered, could you give us some sense of kind of what's been pushing up the CapEx number as we move through the year? I think it started the year it was about $400 million, then we were $450 million and now $500 million. Scott C. Morrison - Chief Financial Officer & Senior Vice President: Yeah. Sure. CapEx is always a little bit tricky to predict because you always have plans. And the question is how fast are you actually paying for what you're putting in place? We've got some pretty big projects. John ran through the laundry list of projects. Monterrey is a big project. The next-generation aluminum bottle is a big project. The plant build in Myanmar, the impact extruded in the UK, the new India plant, the tin plate aerosol in the U.S. So we have an unusual amount of projects, kind of a higher number of projects than we typically have. And frankly, the faster we can get these things up and running, the better. So I don't look at the CapEx spend as a bad thing. I actually see it as a good thing. And the projects are moving along pretty well. And so, we're actually able to keep pace or even a little bit better pace than where we thought we would be. So that's why it's gone up. It's the same projects; it's nothing new. John A. Hayes - Chairman, President & Chief Executive Officer: Exactly. I think said another way, it's some of the carryover that we thought would be going into 2016 will probably be spent in 2015 because, as we said, we're making good progress on many of these.

Yeah. Okay. So it's not like you've really had any big budget overruns on any of these projects contributing to that? Scott C. Morrison - Chief Financial Officer & Senior Vice President: No. In fact, all of them, the businesses have done a very nice job of managing to budgets. And we generally tend to be on budget and on time or even a little bit ahead of where we thought we would be.

Okay. Second question. John, can you talk a little bit about the implications of ABI, SAB and how that might affect you? Seems like particularly in Latin America, they're going to have a lot of market share. John A. Hayes - Chairman, President & Chief Executive Officer: Yeah. I need to be careful because they're in a regulatory mode, as are we.

Sure. John A. Hayes - Chairman, President & Chief Executive Officer: They currently have a big market share in South America. So, I just observed that. I probably shouldn't go into it, but a lot of the things I read in the public around the United States, China, even Europe, I wouldn't disagree with anything that I've read so far.

Okay. And then the last question I had is, I just wondered coming back to the Ball-Latapack, we can see what you paid for that 39.9%. I wondered if you could help us at all though get a range on what EBITDA down there has been running. John A. Hayes - Chairman, President & Chief Executive Officer: Yeah. It's a bit difficult because we don't – it's buried within one of our segments. I would point you to non-controlling interest on the P&L line, which is their proportionate share of net income that they have to give back.

Right. John A. Hayes - Chairman, President & Chief Executive Officer: And I think there's some other things in the public disclosure that Ann could probably help you with.

Okay. All right. That sounds good. Thanks very much. Good luck in the fourth quarter. Good luck next year. Scott C. Morrison - Chief Financial Officer & Senior Vice President: Thanks. John A. Hayes - Chairman, President & Chief Executive Officer: Thanks.

Thank you. And our next question comes from the line of Alex Ovshey with Goldman Sachs. Please go ahead. Alex Ovshey - Goldman Sachs & Co.: Thank you. Good morning, everyone. Scott C. Morrison - Chief Financial Officer & Senior Vice President: Good morning. Alex Ovshey - Goldman Sachs & Co.: A couple questions around Mexico. Are you starting both lines up at the same time? John A. Hayes - Chairman, President & Chief Executive Officer: No. There will be about a three-month to five-month delay in the second line coming up relative to the first line. Alex Ovshey - Goldman Sachs & Co.: Okay. Scott C. Morrison - Chief Financial Officer & Senior Vice President: That was planned for. John A. Hayes - Chairman, President & Chief Executive Officer: Yes. Scott C. Morrison - Chief Financial Officer & Senior Vice President: Just to be clear, that was planned. It wasn't really a delay. That's how we staged the ramp-up. Alex Ovshey - Goldman Sachs & Co.: Got it. Got it, Scott. Okay. Then just the actual rate of capacity of each line and the expectation for how many cans you'll make this next year and in 2017. John A. Hayes - Chairman, President & Chief Executive Officer: Well, let me put it this way. The Mexican can market is growing quite strongly. And we're actually more excited, as we sit here today, about the opportunities ahead of us than we were when we initiated the project. The facility's going to be a state-of-the-art facility that has capability of approaching a couple billion cans. Alex Ovshey - Goldman Sachs & Co.: Thank you, John, for that. And just last ones here on the Mexico side, can you just say how much of the couple of billion is contracted versus open and how much is new can business versus a share shift from glass into cans? John A. Hayes - Chairman, President & Chief Executive Officer: Well, we feel real good about where we are. And as we said, we make these investments tied to long-term agreements, so I'll stand by those words. There is a lot of growth. The demographics in Mexico are good. The consumption is good in Brazil and the package share shifts are good in Mexico – excuse me. I mentioned Brazil. I meant Mexico. So you got three forces kind of as tailwinds for us there and the industry. Alex Ovshey - Goldman Sachs & Co.: Okay. Got it. Got it. Just two last ones for me, so in North America and the U.S., taking a step back, just look at the CSD and beer trends over the last, call it, six months to nine months, do you think there's been any change in trend? And then just quickly on the food can side in the U.S., given that it's a smaller business, any thoughts around potential exiting the food can to be a lot more focused on aerosol, which is really where the growth fundamentally is? John A. Hayes - Chairman, President & Chief Executive Officer: No. First, I'll answer that question. The answer is no. Recall, we've talked about this in the past that from a tin plate perspective, our food and tinplate aerosol business are commingled from a manufacturing perspective. Every one of our facilities where we make food, we also make aerosol containers as well. And so, we've had some challenges in the food business. No doubt about that. But we actually think we are kind of cycling, starting to see some positive headway in terms of the cost side of the business. It's not going to rebound quickly. We do continue to face challenges of overcapacity and that. But I do think that when combined from a cost of goods sold perspective with our aerosol container business, it makes sense. Getting to your question about North American trends, what we see over the last six months or nine months or so, I don't think anything really appreciably. I do think that you're continuing to see a very good strong growth in specialty. I think you're seeing – actually the beer industry doing a little bit better, particularly on the can side. And I think can continues to take incremental share of the package mix there. I do think CSD is, while it's still declining, it's not declining at the rates it once was, so that's a positive. So, I think all of this paints a picture that it's a bit more constructive today than it was perhaps nine months ago. But we're talking on the margin. I think a lot of it has to do with the economy. There's a lot of new housing builds. There's a lot of construction workers going into convenience stores, buying their energy drinks. Oil, the price of gasoline is cheaper which puts more disposable income in people's pockets. Typically when we see situations like that, we see a little bit more stability in our end markets. Alex Ovshey - Goldman Sachs & Co.: Very helpful, John. Thank you.

Thank you. And our next question comes from the line of Ghansham Panjabi with Robert W. Baird. Please go ahead. Matthew T. Krueger - Robert W. Baird & Co., Inc. (Broker): Hi. This is actually Matt Krueger sitting in for Ghansham. How are you guys doing? John A. Hayes - Chairman, President & Chief Executive Officer: Good. How are you? Matthew T. Krueger - Robert W. Baird & Co., Inc. (Broker): Good. Good. First, can you guys talk about what effects the customer consolidation and anti-trust-driven asset ownership shifts have on your business and the industry as a whole? And then how is Ball positioned to deal with that dynamic moving forward? John A. Hayes - Chairman, President & Chief Executive Officer: Well, I guess just a couple observations. And again, like I said earlier, I'll be a bit more general than perhaps you'd like. But consolidation in our markets generally isn't new. Our customers have been consolidating. Our suppliers have been consolidating. Our competitors have been consolidating. And we too have played a part in that consolidation. I do think in today's world, it's important to – where there's not as much growth around the world than there has been, I think people are looking for efficiency savings and the ability to pass those on to the end-user at the end of the day. And I think a lot of this consolidation is driven by that. So outside of that, this is a world that we've been living in for probably the past 20 years, if not, longer than that. Matthew T. Krueger - Robert W. Baird & Co., Inc. (Broker): Okay. And then earlier, you mentioned one of your North American beer customers taking capacity in-house. Is this a dynamic that you guys expect could continue moving forward in the industry, especially as consolidation accelerates? John A. Hayes - Chairman, President & Chief Executive Officer: Yeah. I think this is a unique situation. But I do think that as maybe some third-party customers of that entity continue to be soft, they try and incrementally fill that in. So it's not a necessarily new phenomenon, nor one that's surprising to us. Matthew T. Krueger - Robert W. Baird & Co., Inc. (Broker): Okay. That's helpful. And then one last question. Can you guys provide any detail on intra-quarter trends by region? Anything that stood out. John A. Hayes - Chairman, President & Chief Executive Officer: Intra-quarter, you mean... Scott C. Morrison - Chief Financial Officer & Senior Vice President: Like full quarter trends year-over-year? Matthew T. Krueger - Robert W. Baird & Co., Inc. (Broker): Yes, just kind of things developed throughout the quarter. Did anything change meaningfully from the beginning to the end and kind of into October? John A. Hayes - Chairman, President & Chief Executive Officer: Oh, I see what you're seeing. Well, we mentioned Brazil was – we've seen decent growth in Brazil when people were expecting it. And sequentially, quarter-over-quarter we saw through this year Brazil getting stronger, and it continues to. Again, some of it's off of weak comps of last year. Some of it's their entering the summer. I think over in Europe, I think as the year has gone on, I think you've seen some strength. I do think that we're entering into a seasonally slow fourth quarter. And so it's always difficult to make predictions around that. But I don't think in Europe or North America, we've seen any appreciable deviations from any trends. Matthew T. Krueger - Robert W. Baird & Co., Inc. (Broker): Okay. That's helpful. That's it for me. Thanks. John A. Hayes - Chairman, President & Chief Executive Officer: Okay. Thank you.

Thank you. And our next question comes from the line of Chip Dillon with Vertical Research Partners. Please go ahead.

Yes. Good morning. Scott C. Morrison - Chief Financial Officer & Senior Vice President: Good morning. John A. Hayes - Chairman, President & Chief Executive Officer: Morning.

The first one has to do with the composition or the changing composition of the standard beverage can in North America, or beverage cans in general. Could you talk a little bit about how much share you have seen the craft beer sector get, at least versus glass and other substrates? Do you have any updated data on that? And where do your customers see that going? And then secondly, within CSC, is – are water becoming a meaningful proportion? And I sense that you're underrepresented there. And are there moves to address that? John A. Hayes - Chairman, President & Chief Executive Officer: Maybe I'll take a stab and Scott can chime in here. First on the craft market, we're very bullish and very excited about what's going on in the craft market. I don't, off the top of my head, have all the exact data points that you're looking for. But craft continues to be the fastest growing category of the beer in North America. The can as a share of the package mix continues to increase. It's in the mid-single – excuse me, mid-teens. And as we talked about in past, that's up from virtually nothing a while back. It is a more complicated business because the run sizes are a bit smaller than others. But we've spent a lot of time, effort and energy helping to support and helping to grow the craft market, and we are committed to that. I think it's a great longer term opportunity for us. And we're going to continue to try to do the most we can because any time you have a category that's winning and you have a container that's underrepresented, it provides opportunity. So that's the way we look at that. With respect to – I think you mentioned water. And it's an excellent question. We have, as Ball, been really focused on sparkling water, in particular. Water, we are – the can is underrepresented. On the still side of the market, candidly it's quite challenging just because the price points of that water and PET, it's – PET has become so thin it's almost like you're buying water out of a bag these days. And it's difficult for the can compete into that. And furthermore, when the consumer thinks about the can, they think about carbonation. They don't necessarily think about still. And so, our focus has been on the sparkling water category, and we've had some wins in that.

Okay. Got you. And then I think I noticed on the release today that there was a very large, I think, hedging loss. And I think that was tied to financing for Rexam. I didn't notice the UK pound moving that dramatically in the third quarter. Could you just talk a little bit about what gave rise to that? Scott C. Morrison - Chief Financial Officer & Senior Vice President: Yeah. It's mostly currency and some interest. We're hedging about £2.3 billion of the purchase price that we have to pay in sterling. So you don't need big changes in rates to have a meaningful impact on the GAAP earnings. So, it's really the hedges we put in place right after the transaction and the movement of the currency over – in the first quarter – or second quarter, we had a big gain, if you recall, and then in the third quarter, had a big loss. So that was the volatility I was talking about in terms of impacting our GAAP earnings.

Gotcha. And last question. You've been good to give us the details of the several projects, or the numerous projects you all have going on around the world in the legacy Ball. Assuming things go as planned with the closing of Rexam, would we expect to see a material slowdown with the expansion, I guess, in terms of thinking of the legacy Ball business? Or would we see that continue? John A. Hayes - Chairman, President & Chief Executive Officer: Well, I think the best way to think about it is bandwidth. And as we've moved to close with Rexam, we want to make sure that it's a seamless and flawless day one and day 100 for our customers. And we're going to be really focusing on the execution and delivering on the commitments we set out for ourselves, our investors, our customers, et cetera. To the extent that there are capital investments that are good growth opportunities that meet our return objectives, we'll certainly consider that because remember, this acquisition is as much about trying to create an environment where we help the can be as sustainable as possible and leveraging the footprint of the combined entities so that we can service our customers even better. So, if there's opportunities that fit within that window, we'd certainly look at them. But I do think if you said you have to prioritize, our prioritization is going to be on the execution of flawless day one, flawless day 100 and flawless day 1,000.

I see. Thank you.

Thank you. And we have a follow-up question coming from the line of George Staphos with Bank of America Merrill Lynch. Please go ahead.

Hi, everyone. Couple questions on the new projects. If you can comment at all in terms of the next-gen aluminum bottle, what's unique to it? When do you think we'd start seeing it to a larger degree in the market? And then similarly, on the new tinplate aerosol technology, if you're at a position right now to comment at all in terms of what's new, what it does for the customer, what it does for you in terms of process supply chain, et cetera. John A. Hayes - Chairman, President & Chief Executive Officer: Yeah. Well, both of these are new technologies. They both have significant lightweight opportunities relative to the current out there. And even on the aluminum, it's – we would have the ability to shape it. And so where we are right now is, both of those are coming out of a startup curve. But there is a whole supply chain filling that needs to occur. I think as time goes on and we're sitting here at the end of October, I think over the – in the fourth quarter, you'll start to see more and more of each of these. And then, I really think as you go into 2016 is really where you'll start to see the difference.

And, John, if I could, and I appreciate the details that you already relayed. On aerosol, what end markets would we possibly see this in? John A. Hayes - Chairman, President & Chief Executive Officer: Well, it's an aerosol container.

Right. John A. Hayes - Chairman, President & Chief Executive Officer: Tinplate aerosol container. So think that. And we've been able to lightweight it, while maintaining the rigidity characteristics for allowing it to hold high pressure.

So you're saying we'd see it pretty much in everything from WD-40 to spray paints to starches to bug spray. So it's basically the whole waterfront. John A. Hayes - Chairman, President & Chief Executive Officer: Yeah, it has that capability. I'd rather, at this time, not get into the specific customer-by-customer. But you're thinking about it correctly.

Okay. I appreciate that. In terms of the Aerospace backlog, it's been holding steady. Obviously developments in Washington have been out of your control. Is your sense that where there has been an opportunity to gauge your progress that you are at least maintaining market share on awards that have been made? And if you could give a little bit more color on the recent agreement, why that helps you out in Aerospace? You mentioned that takes away some uncertainties. If you can give a little bit more color in terms of how that uncertainty was impeding your progress there, or at least your customers' willingness to commit. John A. Hayes - Chairman, President & Chief Executive Officer: Yeah. I think most Americans don't realize that if we had not gotten a budget deal that the sequestering would have gotten worse, not better, and it would've reduced defense budgets, not maintained or even increased them slightly. And that's what this proposed new budget deal is, is a slight increase into that. We haven't had a budget for I don't know how many years. And so we've been working under continuing resolutions for so long, which is kind of just status quo. This allows our government officials to mix and match a little bit more. And as I said on prior calls, we have more proposals in with our customers than I've ever seen at Ball Aerospace. And if we didn't have a budget deal that would've put some of those at risk. And so that's why we feel pretty good about where we are. These, as you know, George, because this business is – it's a portfolio of you either win or you either lose. And so on a probability basis, we have to factor in these things. And so we look at it from a portfolio perspective. We have candidly not one, one or two things this year that we are hoping to, but not expecting to necessarily. But as we get more of these individual discrete programs awarded, I think the portfolio broadens out, and we fully expect to win our fair share of that portfolio.

Okay. I'll circle back maybe a little bit later on on end markets here as well. But last question and I'll turn it over. Start-up costs, Metal Food, did you call that out? I know you mentioned it in the press release. But if you mentioned the dollar amount, I missed it. Scott C. Morrison - Chief Financial Officer & Senior Vice President: More of the start-up costs were on the beverage side, but there was $1 million or $2 million of start-up on the food side as well.

Okay. Thanks, Scott.

Thank you. And we have a follow-up question coming from the line of Mark Wilde with BMO Capital Markets. Please go ahead.

Yeah. Just a couple of follow-ups and both related to questions George just had there. One, in the release you mentioned the stabilization in backlogs in Aerospace. John, can you give us a little more color on why you're confident that that's taking place? John A. Hayes - Chairman, President & Chief Executive Officer: Well, it's stabilized because we had some big programs remember in 2014 that had rolled off and we completed. And that started a kind of a decline. I do think it's kind of leveled off and it's kind of at a steady state. And as I said, we have so many different programs that we're bidding on right now, I just don't want to – it's difficult to be tied down to the exact timing of not only when you're awarded them, but then when you sign the contract. But we expect the next, call it, three months to six months to be a very busy time around the bids and proposals we have outstanding with our Aerospace business.

Yeah. Did you say that you'd either won a couple recently or that you hadn't won a couple recently? John A. Hayes - Chairman, President & Chief Executive Officer: No. We had not won a couple recently.

Yeah. Okay. And then the other question I had is just when you think about sort of all these projects across Ball, is there any way to size sort of what the headwind from start-up costs is across all those businesses in 2015 and 2016? Scott C. Morrison - Chief Financial Officer & Senior Vice President: I think we've been calling it out each quarter in 2015. So start-up in the quarter was $0.04, and for the year it's about $0.09.

Okay. Scott C. Morrison - Chief Financial Officer & Senior Vice President: For 2015.

Yeah. And would you want to make any stab at what that might look like next year, Scott? Scott C. Morrison - Chief Financial Officer & Senior Vice President: Yeah, it should come down. I mean I think there'll be a little bit of ramp up in the first quarter as Mexico comes online and Myanmar comes online. We're bearing some of those costs today. So, you're hiring people and training them at other plants. But as we move through next year, those costs should come down.

Okay. That's good. Thanks very much.

Thank you. And we have a question from the line of Chris Manuel with Wells Fargo. Please go ahead.

Good morning, gentlemen. Scott C. Morrison - Chief Financial Officer & Senior Vice President: Good morning. John A. Hayes - Chairman, President & Chief Executive Officer: Good morning.

I have just actually one question. Most of mine have been asked already. As you're now eight months or so into the process of bringing together Ball and Rexam, you've I think previously said that, and even in your release cited first half 2016 as approximate time still for closing, so two questions related. One, perhaps now that you're this far down the path, do you have a better sense of when closing could be? Could it be more first quarter, second quarter, or potentially slip to later in the year? And then second piece of the question is, you'd established a cap, I believe, of I think it was $1.58 billion at the time. As you now are pretty far down the path, again, with agencies and folks in three different continents, do you have a sense as to perhaps would you be higher or lower, or how that might be progressing as well? And any thoughts with respect to timing of potential divestitures, if there are any? John A. Hayes - Chairman, President & Chief Executive Officer: I appreciate all those questions and I'd love to answer them. But quite honestly, and given UK takeover code, it's premature to update any of our guidance. And at the time that we think it makes sense to do so, we will do so. I know that's not the answer you want to hear, but that's the truth.

No problem. I understand. The last question I had for Scott was, and I know you've been asked this a couple of different ways. A lot of the projects that you've undertaken, and you moved CapEx up a number of times, I think as someone else had noted. These sound like they're move ups as opposed to new projects being brought on stream. So, as we kind of think about 2016, would it be unreasonable to assume that you don't have a big slew of new product announcements or new – I'm sorry, new capacity announcements that you've had this year that CapEx shouldn't be appreciably lower? Scott C. Morrison - Chief Financial Officer & Senior Vice President: Well, first, I would say that the changes to the CapEx, we increased it by $50 million in the last quarter and $50 million in this quarter. It has more to do with the timing of the spend than the totality of the spend. The totality is not any different. There's more pull forward from 2016 into 2015 because these projects are moving along at a pretty good clip. And so when you have the number of projects that we have and the size of the projects we have, you're always hoping they will go well. And frankly, they've gone pretty well. So the spend, we're getting the opportunity to get these things up and running a little bit quicker. Those are the projects we have on the table right now. We haven't announced anything different or beyond that in 2016. So it's premature to comment on 2016. But we're spending a heck of a lot of capital this year. I would expect that to come down somewhat next year.

Okay. That's helpful. Last question coming back to aluminum premium and I think you did detail what it was for the quarter and the plusses and minuses for the year. But could you just remind us cumulatively the last few years, what's your behind? And any change to the thought process that – I mean you haven't changed the number of your contracts yet, I don't believe. Help us triangulate around or make our guesses as to what the benefit might be in 2016. Scott C. Morrison - Chief Financial Officer & Senior Vice President: Well, in 2014, it cost us about €13 million. In 2015, we've kind of detailed out each quarter. For the year it's a negative $0.06. For the quarter it was a positive $0.03. I said in the fourth quarter it'll be a little bit more positive than that and then we'll have more benefit in the first half of next year.

Do you remember what it was in 2013, by chance, as well? I think you were still behind coming out of 2012 and into 2013, if memory serves. Scott C. Morrison - Chief Financial Officer & Senior Vice President: €8 million to €9 million.

Okay. That's helpful. Scott C. Morrison - Chief Financial Officer & Senior Vice President: Okay.

Thank you, gentlemen. Good luck. John A. Hayes - Chairman, President & Chief Executive Officer: All right. Thank you.

Thank you. And we do have a follow-up question coming from the line of George Staphos of Bank of America Merrill Lynch. Please go ahead.

Hi, everyone. One quick one on Aerospace; to the extent that you can, and recognizing perhaps you can't just because of the confidentiality on some of these arrangements, your backlog and some of the projects you hope to win, maybe saying it differently. Which areas of specialty or value add will we see the show up in relative to what Ball does well? I didn't phrase that well, but you know what I mean. So is it more DoD? Is it more vision systems? Is it more deep space explorations? Or any way to categorize where you're seeing more of the interest in what you do in Aerospace? Thanks, guys. And good luck on the quarter. John A. Hayes - Chairman, President & Chief Executive Officer: Yeah, George. It's an excellent question, and in some ways it's across the board. I mean when you think about our Aerospace business, we have a services business which is really a – sometimes the backlog – there really isn't that much of a backlog because it's an IDIQ type of arrangement. But that business has been growing. And the backlog visibility in that is kind of a close to a 12-month cycle than a three-year or four-year cycle. On the NASA, NASA's been declining as an industry. The U.S. government hasn't been funding it to a level. We see some longer term opportunity. But that's probably not a lot in terms of what we see in the near term. Really the near term gets around the DoD and whether it's in our Satellite business or in what we call our Tactical Services business, which has everything from the cameras to antenna work. And we see big builds on the horizon for some of those types of things and that's where the opportunities are coming from.

Thank you, John. John A. Hayes - Chairman, President & Chief Executive Officer: Thank you.

Thank you. And at this time, there are no further questions. John A. Hayes - Chairman, President & Chief Executive Officer: Okay, Lena. Well, thank you very much. We appreciate your help. And thanks for the support of everyone. We look forward to speaking with you as time goes on. And a good finish to 2015. Thanks.