Ladies and gentlemen, thank you for standing by and welcome to the Ball Corporation fourth quarter earnings conference call. As a reminder, this conference is being recorded Thursday, February 2, 2017. I would now like to turn the conference over to John Hayes. Please go ahead, sir.

Great. Thank you, Maleka, and good morning, everyone. This is Ball Corporation's conference call regarding the company's fourth quarter and full year 2016 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's news releases. If you don't already have our fourth quarter earnings release, it's available on our website at ball.com. Information regarding descriptions are a new segment reporting and the use of non-GAAP financial measures may also be found in the notes section of today's earnings release, which includes a simplified table format summarizing business consolidation and other activities, as well as a reconciliation of comparable operating earnings and diluted earnings per share calculations. Now joining me on the call today is Scott Morrison, Senior Vice President and our 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 2017 and beyond. We are pleased with our fourth quarter and full year 2016 results. The momentum that we expected to accelerate in late 2016 and into 2017 is on track and our financial goals for 2017 and beyond remain intact. As we reiterated at our December Investor Day, we will continue to strive for perfection in all aspects of our work to ensure that the metal containers we produce are the most sustainable packages in their respective supply chains from a cost, quality, innovation and recycling point of view and that our aerospace products and systems we deliver go…

Thanks, John. Ball's comparable diluted earnings per share for the fourth quarter 2016 were $0.87 versus last year's $0.80, and full year 2016 comparable results were $3.49 versus last year's $3.48. Fourth quarter comparable diluted earnings per share reflect year-over-year improvement largely due to the beverage can acquisition and solid operational performance in nearly all of our businesses that was partially offset by softer demand in Brazil, higher interest expense, a higher tax rate, and a notably higher share count. The fourth quarter effective tax rate was lower than we expected back in the third quarter, largely due to favorable 2016 fourth quarter one-time items. Also with regard to taxes, a significant portion of the cash taxes related to the transaction-related divestments have been settled as of the year-end 2016. Our GAAP results for 2016 were impacted by transaction-related costs, hedging, purchase accounting, and other customary closing adjustments associated with the sale of the divested business. Details are provided in Note 2 of today's earnings release, and additional information will also be provided in our 10-K, expected to be filed by March 1, 2017. Our beverage packaging North and Central America segment comparable operating earnings for the fourth quarter of 2016 were up year over year due to the contribution of the recently acquired plants in the U.S. and Mexico, plant efficiencies, and continued specialty can growth. Industry demand across North America grew 0.6% in the fourth quarter and 1.2% for the full year 2016. Relative to CMI industry data, meaning excluding Mexico, Ball was in line with the industry during the quarter and year. Every month our new Monterrey, Mexico facility continues to make production improvements, and our key customer continues to execute its business development plans in the region with continuing solid U.S. demand for their products. As…

Great. Thanks, Scott. Our aerospace business reported improved fourth quarter results, driven by solid contract performance and the initial ramp-up related to our growing backlog. Congratulations again to the entire aerospace team. Our contracted backlog closed the year at $1.4 billion and we've won even more work in the month of January. Given the growth in this segment, we will be expanding our Westminster, Colorado aerospace manufacturing center and investing in additional test equipment. As we mentioned in the release and at our December Investor Day, our aerospace business will see a nice step up in sales and operating earnings in 2017, the pace of which will increase quarter on quarter as we roll in the new contracts and move through the year. Now across the company, and as look forward, we continue to gain even more visibility into our customer's plans for promoting our containers in 2017 and beyond. The opportunities before us in packaging and aerospace are numerous and we have the team in place to execute. While we are proud of what we have accomplished so far, there is much work to be done, and our team is focused on achieving the financial benefits from the transaction, adding flexibility to our manufacturing network to proactively serve our customers, managing our cost base with a sense of urgency and managing the growth and investment in our aerospace business. As I mentioned in my introduction, our financial goal and aspirations for 2017 and beyond remain the same. Scott mentioned our 2017 goals and by 2019 we continue to drive towards generating $2 billion of comparable EBITDA and in excess of $1 billion of comparable free cash flow. And when we have a greater line of sight to our leverage getting to 3.5 times, we will accelerate the return of value to our fellow shareholders. And with that, Maleka, we're ready for questions.

Thank you, sir. And our first question is from the line of Scott Gaffner with Barclays. Please go ahead. Your line is now open.

Thanks. Good morning, John. Good morning, Scott.

Hi.

Hi.

Can you talk a little bit about the margins within the European beverage packaging segment? I mean, they came in about 300 basis points lower than our estimate. Sounds like maybe there's some seasonality in that business that we didn't anticipate. But how did it compare relative to your expectations? And can you talk about sequentially how we should think about that as we move into the first quarter 2017?

Yes. Sure, Scott. This is Scott. Yeah. I think it's important to know that what we bought is exactly as we expected. If you're comparing year over year, it's a bit of an apple and an orange. Remember the business that we bought is much more seasonal than what we had. And the fourth quarter is traditionally pretty slow. We got a bigger concentration of business in Russia and the Nordics which really slows down in the fourth quarter. And then if you're comparing back to before, it's a bit of apples and oranges. In 2015, we were building inventory because of things that were going to happen in early 2016 which helped margins. In fourth quarter of this year, we were managing inventory levels and took some down time which hurts margins. So it's really not a fair comparison. As we said before, we have a big opportunity over the next few years to get the margins to a more acceptable level and we have plans in place and we're looking at everything from revenue to mix to all of our costs to improve the business. But you've got to be a little patient here. It takes a little bit of time. It doesn't happen overnight. And I think we'll see nice progress in 2017 and even more in 2018 and beyond. But I think it's important to know that the business isn't different than our expectations.

And sequentially into the first quarter, does that business normally improve sequentially or how should we think about that?

I think what you'll start to see – we'll get some of the benefit of the synergies in the first quarter but it will start to ramp up as you move through the year. And we're still getting our arms around in total what seasonality is going to look like as to how strong it will be. But I think we'll build momentum as we move through the year.

Scott, this is John. I do think it is fair to say, given what Scott said about Russia and the Nordics, the fourth and first quarter it is more seasonal than what you used to see in the old Ball European business.

Okay. Last question for me. Just if I look at the comparable EBIT in 2016 I know it came in in your range but it came in near the low end of the range. So does that make the 2017 targets a little bit more of a stretch from here or could you just sort of frame that out a little bit for us?

No. No. Remember that, I think, Scott, end of third quarter we said it's going to be in the range of $1 billion but it could be a light depending on the volumes. We said volumes were a bit softer in Brazil and a little bit softer in Europe and as a result of that we were within spitting distance of that. But it does not change what we see in 2017 at all.

Okay. Thanks, guys.

Thanks.

And our next question is from the line of George Staphos with Bank of America Merrill Lynch. Please go ahead. Your line is now open.

Thanks, everyone. Good morning. Appreciate all the details. Gentlemen, if you could provide a little bit more detail on the performance improvement plans that you have directed at Europe for this year and what would be involved in those. And then I know it's difficult to talk about volumes given the whole complexion of the business has changed over time but is there a way to talk about how European volumes either from an industry standpoint or relative to your initial numbers going into the quarter progressed and where they stood relative to your expectations. Thanks. And I had a follow on after that.

Yeah. Let me start, George, and then John can chime in. This is not dissimilar than what we needed to do in Europe a few years ago. We know how to do this. We've done this before. And it's really looking at everything from revenue to mix, customer mix, size mix, everything, all of your costs from things that are variable to things that are fixed. And so it's really going through every line item on your P&L and on your balance sheet frankly to manage it in a tighter way. And so we've got a number of different action items that we need to execute on over the next few years. And then on top of that the synergy realization, we're well on our way to seeing good progress on that front. So it's really every different aspect.

Let me give you a little bit of granularity...

Performance – go ahead, Scott. Go ahead, John. Sorry.

Just a little bit more granular details to what exactly – when Scott was talking about customer mix and size mix. If you recall the former Ball business was a little bit more weighted towards beer. The business we acquired is a little bit more weighted to soft drink. As we all know, beer is less seasonal than soft drink, particularly in Europe with the Christmas season. And so as we look forward and we're trying to rebalance a variety of different things, you should be thinking about that.

Fair enough. What I was going to ask, so the performance improvement plan would be on top of whatever synergy target you had for Europe for 2017. Would that be fair? Or is it inclusive?

No, that's fair. I mean, everything counts right. So the synergy, the things we want to get out of the supply chain, things we want to do from that perspective are part of it but that's not the whole of it. It's every aspect of it.

And it's also important to note that – recall the former Ball business back in the 2014 – 2015 timeframe we actually went through a big cost optimization program to get the business in line and we have the same management team that's executing on this.

Is there a way to size what the opportunity is in 2017? Should we look at 2014 to 2015 as the goal post to look at for what it could look like in 2017 and 2018?

Let's put it in context. I think when you think about what our business did historically in that and I never like to talk about margins because you had to worry about the metal pass through. But metal has been relative stable. It's typically depending on where metal is it's in the 11% to 13%. I think 2015 we ended up about 11.5% in our old business. The business we acquired, as we've said at the Investor Meeting in December and I think even on the third quarter, it's lower than that. So if you use as a marker what are we trying to drive for, should we be able to get to where the old Ball business was? Yeah. But, as Scott said, it's not going to happen overnight and I think it's a couple year plan. So through the end of 2018, we ought to be able to get there.

Okay, I appreciate that. Last one for me and I'll turn it over. Brazil, can you talk a little bit about the volume trends there? You said some of it was beer, some of it was GDP. What are your customers talking about in terms of growth outlook for 2017? And how are you optimizing capacity around that? Thank you, guys.

Good question, George. The macro environment down in Brazil is tough. Volumes are softer in 2017 due to the economy and the GDP is down approximately 3% to 4%. From an overall consumption, just to give you context, the beer, these are Nielsen numbers, beer was down 4.5% for the year and down 10% in the fourth quarter. CSD was down a little over 8% for the year and 16% in the fourth quarter. So what you're seeing is our softness there is just a direct reflection of what's going on. What we're hearing and what we're seeing is when you really start to peel away and look at the economy, real wages have been declining there for about 36 months or so. People expect that to be bottoming out and people expect in the second half of 2017 to have consumption expected to improve because real wages are flattening and perhaps will even reverse from that. That remains to be seen but I think the general consensus of Brazil is that it's reached its worst point right now and now the question is how quickly will it start to rebound and that's the question of the day. What we're seeing in our business, as we said, in the fourth quarter the weather played a big part in the first half of the fourth quarter and recall this is their summer but it really did pick up nicely. I do know that carnival is a little bit later this year. It's at the end of February versus the beginning of February and what impact that will have. It's still within the quarter, so it's unclear. But more importantly, what's going to happen after carnival. But those are the things that's going through. What we're hearing from our customers, candidly, it's a mix. There's been some questions about is the can continuing to grow relative to other substrates? And what I'd tell you is looking at facts and looking at data, you look and we have not seen any change in mix over the past year. So cans are still solidly in the upper 40% of penetration, depending on what statistics you look at, Scobee (24:57) or Nielsen. And I do think that right now the consumer is hurting and that's what's really driving overall beverage consumption down in Brazil.

Thank you.

Okay. Thanks, George.

And our next question is from the line of Tyler Langton with JPMorgan. Please go ahead. Your line is now open.

Yes. Good morning. Thank you. Just, I guess, the South American. Obviously, you mentioned the volume declines but your margins held up pretty well despite that. I guess, can you talk a little bit about what drove that? And then if volumes are sort of more normal this year, is there room for – I know you don't like to talk about margins too much but could margins sort of extend further? Just any color there would be helpful.

Yes. I think as we said in the third quarter, we have a good business down there. We've got scale down there. We've got a great management team down there. And so margins were relatively flat. I think our folks have been managing this volatility down in Brazil quite well. We have been, when I say managing it, managing the supply demand quite well to make sure we're not building inventories too quickly and we're not just sitting on idle capacity. So we have to shut our lines to manage that in the off season, we certainly have and will plan on doing that. So, as we look forward, in terms of the margin of the business, we have a certain level of synergies, expectations down in South America but it's not nearly as large as some of the other places, in part, because it's a well-run business and there wasn't a lot of overlap between what we acquired and what remained from our business going forward. So I wouldn't expect significantly big changes in the margin profile going forward on that. But, as Scott said, in 2016, I'll call it, pro forma year over year, we expect improvement in that business.

Okay. That's helpful. And then just switching to the U.S. now that you've owned the Rexam assets for a little bit, could you just talk a little bit about how much you think you can improve the assets that you acquired? Is there significant potential there?

Yes. Yes, there is. I talked about best practice sharing in my earlier statements, everything from line efficiencies to plant floor system. We had talked in the past that some of these plants were a little under-capitalized relative to what we would describe as state-of-the-art. And so we've been focused on that. As I mentioned, we continue to look at optimizing our footprint to make sure we have the right facilities in the right place to service our customers. Obviously, we announced Reedsville, which was last quarter, I believe and we haven't done anything else. But we continue to look at opportunities like that.

And then just final question just on the other line, I guess. It was $23 million with corporate $32 million. Can you just talk a little bit about what you're seeing? I guess, the other pieces are really China and EMEA, just what's happening there.

Yes. China, actually, is stabilizing. We think it is flatter in 2017, and it will still probably be a little bit of a loss at the operating profit line. EMEA is a pretty challenging market. It's pretty volatile. Egypt has been pretty volatile but the business in total is nicely profitable.

Yeah. And overall can demand generally in that region, whether it's India, whether it's Turkey, whether it's Egypt or it's Saudi Arabia, it's still, like Scott said, it's volatile. But it's still strong. And I just point to India and think about India and the growth that's happened there, we've been waiting for two decades for the can to really take off there. Whether it's at that point, don't know. But we are seeing double-digit improvements in volumes in that part of the world. So it is a strong growth area.

Okay, great. Thanks so much.

Thank you.

And our next question is from the line of Anthony Pettinari with Citi. Please go ahead. Your line is now open.

Good morning.

Good morning.

Regarding the Egyptian pound issue, as you think about the rest of the acquired assets from Rexam in the Middle East and maybe some other regions that Ball hadn't participated in, are there other businesses where you think you have that kind of FX exposure or maybe FX risk that you may need to address in one way or the other? Or are you confident that it was just Egypt?

The Egypt situation was something we inherited and something we've subsequently stopped adding to the exposure. In general, we have less. We used to say dollar or if the euro moved a penny it would move our earnings a penny. That doesn't happen anymore. We're pretty well balanced from a euro/dollar standpoint. We'll probably be affected more on a translation basis as it relates to the ruble. As the ruble strengthens it will help us. But we don't have any big exposures from a currency standpoint.

Yes. And again, remember it was because the pound was frozen. The only other place in the world in which we operate that that's happened in the last decade I think was Argentina and even that was just a very short-term time and we have operations in Argentina that didn't affect us. So, as Scott said, we just inherited a situation that we've been able to put a cap on. Put it that way.

Yeah. And we're dealing with it.

Great. Great. And then just on metal, we've seen a little bit of inflation and European premium has ticked up a little bit, obviously not nearly as much as a couple years ago. But when you think about the impact of European premium, is there any headwind to you? And do you have the ability to hedge that exposure again relative to two, three years ago?

Yes, we do have the ability to hedge that and we have put our practices in place as to how we take care of that so we take that risk off the table. So we shouldn't see an impact from European premiums.

Okay, that's helpful. I'll turn it over.

Thanks.

Thank you.

And our next question is from the line of Ghansham Panjabi with Baird. Please go ahead. Your line is now open. Ghansham Panjabi - Robert W. Baird & Co., Inc.: Hey, guys. Good morning. I guess first up going back to, John, the value capture commentary from your last call, is there any update you can share on that as it relates to 2017? And I guess I'm asking because of the context of inflation, which seems to have picked up, whether it's steel, tinplate, energy, or maybe even labor costs. How are you thinking about that particular risk as it relates to Ball in 2017?

No, I think in terms of the value capture I think you're referring to, we said and we reaffirmed today that we expect to generate in excess of $150 million of synergy related to that. When you talk about some of the things you talked about, there is inflation. And I just think about steel, and steel is up upper single digits. You talked about energy. We do a pretty good job of managing that. One of the things that actually could be over the next couple of years, there's always a lag around that but could be net benefit to that is we have various mechanisms that we have to pass through the inflation or candidly deflation as well. And over the past couple years we've actually had to pass through deflation. And so in an inflationary environment, we should be able to recapture any costs and through the efficiencies that our folks continue to work on, we think there's – net-net-net it's certainly not a negative. And if we do this correctly and take the costs out appropriately, it could be a positive. Ghansham Panjabi - Robert W. Baird & Co., Inc.: Okay. And then just in terms of the $150 million in synergies for 2017, what run rate did you exit out of 2016 into 2017? And maybe, Scott, how should we think about that phasing in of the progression on a quarterly basis for 2017?

There's not a heck of a lot that we got in 2016 because we closed Millbank right at the end of the year, and so there were costs that were running off in the fourth quarter but not a heck of a lot. As we go into 2017, we'll get a little bit in the first quarter and then things will start ramping up as we get into Q2 and Q3.

When you think about what we've said here, in 2016, the net synergies were more or less a wash because we had cost to achieve Milbank and other things like that. We'll get a full year's results of Milbank. We will only get a half year results of Charlotte. I said because of the way the inventory builds we'll get three quarters of a benefit of the sourcing side of it. And then as you look at some of the other best practice things, I think those gain momentum as time goes on. And as you're really running full out, which you know is more of a second and third quarter phenomenon than it is a first quarter, that's when we really start to see some of those benefits. And then as we go into 2018, and as we said by through 2018 and 2019, we expect to get another $150 million, and we still see a line of sight to that. Ghansham Panjabi - Robert W. Baird & Co., Inc.: Okay, and just one final one on food. You mentioned aligning the cost structure with the supply/demand situation in the U.S. in your press release. Does that include capacity cuts in metal food cans in year-end? Thanks so much.

As you know, we've been embarking on that. That's what the investment in Canton, Ohio and the closure at Weirton, West Virginia is. We've talked about this before on the food side of the business. The volume has been soft, but you also have to realize there are so many different types of SKUs it's not like the beverage can business when you're running 24x7. There are certain lines that are only running 30% to 50% of the time. And so we're actively looking at that all the time, and we are going to make sure that we are focused to ensure our costs are as optimized as possible relative to our revenue base. Ghansham Panjabi - Robert W. Baird & Co., Inc.: Okay, perfect. Thank you.

Thanks.

And our next question is from the line of Mark Wilde with BMO Capital Markets. Please go ahead. Your line is now open.

Good morning, Scott. Good morning, John.

Good morning.

Good morning.

I wondered, John. Is it too early to talk about any kind of impact you're seeing from this talk about border taxes with Mexico, just in terms of beer exports into the U.S.?

Yes, I think it is premature. I'll let Scott talk to it because he's right in the middle of it.

I think we're a long way from actual legislation. We've talked to senior officials both in the administration and the House regarding some of the tax policy items, and there's a whole slew of things that are being talked about. And I believe the net effect of all of the proposals is probably a net positive to us. As it relates to the border tax specifically, the target is not, and I get this from both the administration and the people in the House, the target is not traditional Mexican products, but ones that have been made in the U.S. and are now made in Mexico. And it would strike me that nothing is more traditional than Mexican beer. And remember the size of this that we're importing about 1.5% of our global volume, and the plant we acquired from Rexam in Mexico produces about 2 billion units. Most of that stays in Mexico or goes further south. So I think people are overreacting to that a bit.

Okay. Scott, is it also possible to get some sense of what you're seeing in terms of just the mix for the beer, for the brewers down in Mexico because it seems like if you have to ship this stuff a long a way, the can has an advantage in terms of weight and cubing out.

You're absolutely right, and that's why we have seen great growth in the can with our customer. And that's why you see can as a share of the package mix in there increasing, particularly on the beer side. On the CSD side, it's relatively flat, but certainly on the beer side for exactly you said, it's the most efficient package from a distribution point of view. It's the most sustainable package, and the overall economics of it makes a tremendous amount of sense for them.

Okay. And then last question. John, you mentioned that you had some new wins in aerospace in January. Can you quantify that for us?

Every month you end up having new wins, but we did win an exciting program. It's a longer term program with NASA that, as you all know, we haven't really been doing a lot with NASA over the past few years because the NASA budgets have been flat to declining, and so I think that was a nice sign going forward. We continue to have great opportunities in the classified world serving the various Department of Defense and intelligence communities. And so as we go forward, we still think there's a lot of great opportunity there. But we're very excited where we are, and we're very excited about where we're going on that business.

Okay, I'll turn it over. Thanks.

Thanks.

Thanks.

And our next question is from the line of Adam Josephson with KeyBanc Capital Markets. Please go ahead, your line is now open.

Good morning. Thanks, John, Scott, and hope you're doing well. Just back to Europe for a second. I think, Scott, you mentioned volume was a touch lighter than you were expecting. You've obviously talked about these restructuring actions that you're taking or contemplating taking. Can you just help me better understand exactly what's going on there? I think you said nothing is different than what you anticipated when you acquired the business, but something seems to be happening. So can you just help me understand what, if anything, is happening differently than you might have thought six months ago?

I don't know if it's different. I think we run our business a little bit differently than the way it was run before. And so we will take downtime and manage inventories to do the right thing for our business. We're not trying to run things for one quarter, or for the next quarter. And so I think it's just how we manage the assets might be a little bit different, and probably we'll be a little more aggressive going forward, especially as it relates to the balance sheet. John, did you want to say something?

No, that's exactly it. Again, don't underestimate. Ball in the past had no exposure to the northern markets, meaning Nordics and Russia, and now we do. And as you know, because of weather those are much more seasonal. And then the other thing is don't underestimate what Scott just mentioned about taking downtime on our manufacturing to make sure that the – we're an EVA company. And that's the right EVA decision to do. And so taking downtime because the inventories were getting a little large was the right thing to do to position ourselves for 2017.

Thanks. Just one follow-up on that. What happened demand-wise such that the inventories got out of whack?

No, you know it's – the way I look at it is I think the business was in the first six months of the year that was under different ownership was just running, running, running, running. And when we got a hold of it, just to give you a sense, the overall demand in Europe was up 1%, 1.5% for the full year.

Right.

It's typically been 2% to 3%. So that's running (39:52) little bit soft. The fourth quarter is about a 1% increase. So not bad, but not the 2% to 3%. And when you have such a large business, it matters. And when I say it matters is then when you're managing inventories and you're taking down time, that's effectively what was going on and it wasn't a surprise to us. Maybe, candidly, maybe we could have articulated the seasonality a little bit better to you all, but hopefully this clarifies it.

I wouldn't overread any of this. You know there's not a fundamental change in our business from what we expected.

Right. Okay. Scott, just back – and then you mentioned Brazil. It seems like Brazil is weaker than you would have expected 6 months ago, 12 months ago, whatever the timeframe. Why would that not – the additional weakness in Brazil not affect your ability to hit your 2017 targets?

Well, it's – I think the biggest – it was really the fourth quarter. Third quarter wasn't weaker, but fourth quarter when you have beer off 10%-plus in terms of consumption, I'm not talking about cans, I'm talking about consumption of beer...

Right.

And CSD off even more than that, that points directly to the issues I was talking about the weather. I was down in Rio in December and I remember it being in Celsius 15 degrees and raining. It ought to be 25 degrees, 30 degrees and sunny there. I know it's a profound difference. And you combine that with the overall economy and the weakness of it, I think that's what it is. Our business held up well despite that. And I think as we go into 2017 our folks down there have done a very good job of managing supply/demand, making sure inventories aren't getting out of line but at the same time ensuring we have the right packages at the right time for our customers. And as we go through, that's exactly what we see in 2017.

Thanks. And just one last one, just on Brazil again. Have you hazard a guess as to what industry volumes will be, beer or cans, in 2017 in Brazil just based on whatever it is you know today?

I think based on what we know today I would expect it to be a little softer in the first half and a little stronger in the second half, all things being equal and that's largely driven by the expectations of what's going on with the economy. I think that the consumer is still eating and drinking, and I do think if assuming weather is normalized I would expect overall can demand to be relatively flat. We're not probably gaining shares as a percent of the penetration, package penetration, but we're not losing share as well. And so I would expect overall flat volumes for the year but it might be a little softer in the first half and a little stronger in the second half.

Great. Thanks a lot, John.

And our next question is from the line of Chip Dillon with Vertical Research Partners. Please go ahead. Your line is now open.

Yes. Good morning. Most of my questions have been answered but I did want to ask you all it seems to me that I don't believe beyond the Madrid, Spain plan, I might have missed something that you have a lot going on, on the capital side, which obviously is understanding as you assimilate Rexam. But as you go into 2018 and I know it's early days, do you think you'll need to do more footprint addition? Or do you think that can hold off for longer? And, I guess, what I'm really asking is directionally, do you think that $500 million CapEx number moves upwards or stays where it is next year?

We actually spent a little heavier last year than what we had forecasted. We spent about $600 million last year which was actually a good thing because that means John ran through a bunch of those projects that came online in the quarter. So that means we start to get the benefit of that sooner. Every project as it stands on its own merits and its own returns. So we'll see what kind of opportunities. We're still seeing a lot of opportunities. That's why I've said $500 million of CapEx for 2017 because that still has some growth capital in it besides Spain but we'll update you as we go through the year and what the opportunities are. And as we are ready to talk about them publicly, we'll tell you on these calls.

One of the things that Scott just mentioned is important. We spent a little bit more than we had thought we would in terms of CapEx and despite that, our net debt was below where we had targeted. It was at $6.9 billion versus $7 billion despite the $600 million in CapEx. So it just shows the cash flow capability we have here.

Okay. And then, John, you mentioned you were expanding the aerospace capability out in Colorado. Is this because of a change in the focus of some of the I guess of the governments and other customers away from other folks that do similar things? Is it different programs? Or is it just a general increase in activity?

I think it's a combination of all that. When you look back over – and we're investing. It's not huge dollars, number one. I want to make sure that's clear. But we're – it's a capacity issue. We don't have enough manufacturing space to execute on all the wins that we've gotten. Those wins have come from a combination of, number one, the government hasn't spent a lot of money in some of these strategic, I would call it these higher strategic classified programs, and we're gaining more than our fair share in it. Number two, I think there's a lot of new technologies out there. And you just think in the commercial world what's been going on, and you translate that into using technologies to do some of the things for the government in a different way. That's another part of it. And then I just think overall growth. And I think about our tactical products part of the business that makes the sensors, makes the antennas for the joint strike fighter, for example. That is ramping up in a meaningful way. We've only made probably less than 100 planes as a country in that. And they have plans for making hundreds upon hundreds of those. So as that ramps up, we too have to ramp up our capabilities to supply the sensor suites and the antennas we're due for that. So that's just one example of what we're talking about.

Okay, that's helpful. Thank you.

And our next question is from the line of Phil Ng with Jefferies. Please go ahead. Your line is now open.

Hey, guys. What's driving just marginally weaker volumes out of Europe? I know there's been some supply constraints. Is that part of that? And as we look out to 2017, should we expect volumes to track closer to 2% to 3% this year? Just wanted to get some puts and takes. And then just lastly, that market has been pretty tight. Could we see some commercial improvements this year?

I think to answer your question, no, it hasn't been supply constraint. It is a tight market but I don't believe it's been supply constrained. Remember, the economies in Europe continue to be weak. They continue to be weak and real wage growth is non-existent there. The population is getting a little bit older. And so until you see some economic activity there, I think that's a part of it. I also think the weather's been part of it. The weather throughout Europe, and when you look over the balance of the whole year, it was on par. A little bit colder, a little bit wetter than what you're traditionally used to. The benefit the can has we continue to win share as a percent of the package mix. And I still think those are – you're seeing continued improvements in those categories, whether it's in the north, south, east or west. So what does that mean as we look into 2017? It's too early to predict because you can't predict weather. But we see nothing fundamental, nothing structural that would change that 2% to 3% growth rate over the next number of years.

Our business is just a little more seasonal than it was before. So that's part of it.

Okay. And I guess maybe a question for you, Scott. Maybe this is a dumb question. But for Europe, you called out margins were impacted a bit by step-up in the fixed assets and due to just a bigger mix in the assets you acquired. But I would have thought the operating earnings adjustment will kind of strip down any step up from D&A. Can you just quantify the impact and explain it a little bit more?

Well, you have to step the depreciation on the assets, so there's going to be about $4 million per quarter in additional depreciation on those assets. What we kind of exclude is the amortization of the customer intangibles but the asset write-up will flow through the P&L.

Okay. Okay, that's helpful.

Okay (48:30)

And then, I guess, switching gears a little bit, tinplate prices I would expect is going up, are you expecting any short-term mismatch from a price/cost standpoint on the positive side or negative side? I know in the past there's been some noise around that when you see moves on tinplate prices. thanks.

Yeah, tinplate, as I mentioned earlier, tinplate pricing is going up, probably upper single digits. But I think you talk about any noise, I don't think there's any appreciable noise. You obviously have inventory built up and things like that but it's also how you pass through these things with customers. So I wouldn't read into it too much.

And our next question is from the line of Debbie Jones with Deutsche Bank. Please go ahead. Your line is now open.

Hi, good morning.

Good morning.

I had two questions. One broader on North America and then one about your guidance. I think this was the first year since 2010, if you include Canada, where North America saw volumes increase for the beverage can. And I was wondering, it's kind of interesting to me, do you think that that is a trend that is sustainable? We talked a lot about things that are helping such as specialty cans and beer growth specifically craft beer, but that hasn't seemed to offset the weakness in years prior. What are you expecting for the next two or three years?

Debbie, it's a great question and 2016 was the first year in many years that the overall can market was up. Beer for the last number of years has actually been doing well. What was most exciting was that the non-alcoholic side for the year was actually in positive territory. We've talked about these 3% to 4% declines since 2008 – 2009. And so what you're seeing is you saw positive. Really, there are many things that are driving that. I think the shift to smaller sizes is driving that, which is part of it. When people are drinking less soft drink in total literage but they still want their servings, and so the smaller sizes are helping. And I just think the overall repositioning of the sparkling side of the world, when I say sparking, it's not just CSD but it's also sparkling waters. And then as you mentioned on the beer side, things have been going well. It's been a little bit challenging, I'd describe it mainstream brands, but in terms of some of the other things, craft that you mentioned and some other places and the proliferation of different sizes has been a net benefit. So is it a secular thing? Time will tell. But certainly the tone and tenor and the discussions with our customers as we sit here today is a lot more constructive than it's been over the last three, four, or five years in terms of their use of metal packaging in their overall mix profile.

Okay, thanks. And then my second question on the guidance commentary, Scott, you said comparable operating guidance you confirmed of $1.3 billion to $1.4 billion in 2017. When I run that through my model, you exceed the 20% EPS growth that you targeted or highlighted earlier. And maybe I need to do this offline, but I'm just wondering if that's a fair statement. And then what D&A are you expecting in the 2017 as well with the step up?

We said 20% to 30%, and we have I think it's about $430 million – $440 million of depreciation and amortization, and that excludes the amortization of the customer intangible, which will run about $1.30 billion to $1.40 billion.

But, Debbie, to answer your question, you're right, we stand by the $1.3 billion to $1.4 billion. We said $280 million of interest expense. We said tax would be at 28% and interest count would be around 178 million shares absent any share repurchase. So when you do that math, you're absolutely right. And that's why we've said 20% to 30%. Nothing has changed by that, and that's what we stand by.

Okay, thanks. I'll turn it over.

And our next question is from the line of Chris Manuel with Wells Fargo. Please go ahead. Your line is now open.

Good morning, gentlemen. Scott, I wondered if you could – I know you don't have the full cash flow statement filed yet but maybe give us a couple – or a read around a couple of components. What was the working capital component that you had embedded into 2016, and then how are you thinking it looks in 2017?

In 2017, I think we have a small – we have a source of capital, about $100 million of working capital that will benefit us in 2017. We also, in that free cash flow guidance, pension will be a little bit of a negative from a cash flow standpoint year over year in 2017 versus 2016. I don't have all the components of working capital. All I know is the net debt, despite us spending $40 million – $50 million more in – actually about $60 million more in capital, the debt came in lower than what we were expecting. It came in below $7 billion. So we did a heck of a job on working capital, but I don't have those components yet.

Okay. And then when we think about – you had targeted some share repurchase in 2017 I think in earlier presentations and slide decks and things that there could be some towards the end of the year. But is there anything – if you're feeling pretty confident and have the line of sight that you talked about into this being a $750 million to $850 million year and still the different cash and EBITDA target down in the future, is there anything that prohibits you from buying shares earlier in 2017 as opposed to later?

No, we don't have any prohibition. In fact, we bought some shares in the fourth quarter when the stock got particularly soft. But our orientation is to get, as we progress through the year and our numbers firm up and we feel better about them and feel there's a decent line of sight to that 3.5 times, then we'll be more active. But we're sitting here, it's February 5 or something, so it's early. So I'm always ahead of the game.

And we have...

Okay, please go ahead.

So we have another follow-up question. It is from the line of George Staphos with Bank of America Merrill Lynch. Please go ahead.

Thanks, guys. I'll try to make it quick because I know we're late in the call. Some of the work that we've done, we've seen cans continue to take share within custom and within the beer market overall. And from our vantage point, one of the things that has helped that has been the proliferation of customers use of craft beers. You've called it out. Now having said that, we've also seen craft slow down in recent quarters. What are your customers telling you, if anything, about whether that's a sustained trend or whether you should expect continued growth in craft, and with it, if you buy the premise, good growth for the can? That's question one. Question two would be back on border tax and deductibility. Some of your customers have talked about sourcing their COGS in North America if in fact the water flows under the bridge and you do have some border deductibility issue. Recognizing it's early, it would seem that cans would have a little bit more, again, ability to help in that regard relative to some of the other packaging stuff, but could you comment at all in that regard? Thanks, guys, and good luck in the quarter.

Yes, George. This is John. I will try and take it, yes. Overall craft beer consumption has slowed down. The can, however, continues to take share in that. And just to give you a sense in our portfolio, for the 2016, craft cans were up about 28% or so, close to 30%. What's interesting when you peel that away, and we've talked about this before, the bigger brands are growing a little bit more slowly than the smaller brands. You know, our top 5 customers grew at about 10%, 15% while the rest of them grew at about 40%. And so what you're seeing is this long tail where many of these smaller brewers that were only in bottles, now they're moving to cans. And I think some of the larger brands have already moved into cans. But overall, I'll still take 10% to 15% growth on the big ones and 40% on the little ones. That's what we're seeing in the craft beer industry. As it relates to what you were saying about Mexico, the only thing I'll point out is we source all of our aluminum from American facilities. And so when you think about these various issues, that actually is another thing that helps out, all things being equal, relative to what you were just talking about. I do think if we say anything more than that, we're just prematurely speculating. As Scott said, we're going to have to see what all shakes out here, but I do think that that is a net plus for the metal beverage can.

Okay. Appreciate it. That's what we thought. We'll turn it over.

Thanks, George.

And I'm showing no further question at this time, sir.

Okay. Thank you, Maleka. Thank you for your help and thanks for everyone participating. We look forward to a very exciting, strong, and healthy 2017 and we look forward to seeing you all soon. Thank you.