John A. Hayes - Chairman, Chief Executive Officer and President Scott C.

Morrison - Chief Financial Officer and Senior Vice President

Ghansham Panjabi - Robert W. Baird & Co.

Incorporated, Research Division Christopher D. Manuel - Wells Fargo Securities, LLC, Research Division Tyler J.

Langton - JP Morgan Chase & Co, Research Division Scott L. Gaffner - Barclays Capital, Research Division Mark Wilde - BMO Capital Markets Canada George L.

Staphos - BofA Merrill Lynch, Research Division Anthony Pettinari - Citigroup Inc, Research Division Albert T. Kabili - Macquarie Research Chip A.

Dillon - Vertical Research Partners, LLC Deborah Jones - Deutsche Bank AG, Research Division Philip Ng - Jefferies LLC, Research Division Adam J. Josephson - KeyBanc Capital Markets Inc., Research Division Andrew Feinman

Thank you, Edison, and good morning, everyone. This is Ball Corporation's conference call regarding the company's third quarter 2014 results.

The information provided during this call will contain forward-looking statements. Actual results or outcomes may differ materially from those that may be expressed or implied.

Some factors that could cause the results or outcomes to differ are in the company's latest 10-K and in other company SEC filings as well as company news releases. If you don't already have our earnings release, it's available on our website at ball.com.

Information regarding the use of non-GAAP financial measures may also be found on our website. Joining me on the call today 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 will finish up with comments on our Aerospace business and the outlook for the remainder of 2014.

In short, we had a solid third quarter with strong Beverage and Aerospace operating performance and a lower tax rate offsetting weaker can demand in Brazil and North American food. During the third quarter, many of the second half themes that we referenced in our last earnings call came true.

Volume comps were challenging year-over-year, aluminum headwinds remained and our food and household segment continued to work through operational challenges at our U.S. metals service center.

In spite of these challenges, there were a number of highlights as well. Lower operating costs in our European beverage can segment offset the LME premia headwinds we expected.

Continued specialty can and beer container growth in North America nearly offset weaker demand for standard carbonated soft drink containers. Strong performance in our European impact-extruded aluminum and Aerospace businesses continued.

Ball was again selected for the Dow Jones Sustainability World and North American Indices for the second time in a row. Our food and household products business received the Partner to Win supplier award from Unilever.

And the Ball-built WorldView-3 satellite was successfully launched from Vandenberg Air Force Base. As we close out 2014, we remain very focused on controlling the things we can control and managing through this low-growth environment.

Given our year-to-date results and cash flow, very strong cash flow generation, 2014 is shaping up to be a very strong year for Ball Corporation. And with that, I'll turn it over to Scott for a review of our third quarter numbers.

Scott?

Thanks, John. Ball's comparable diluted earnings per share were $1.10 versus last year's $1.

In addition to John's comments around operating performance and a lower tax rate, a lower share count also contributed to our improved results. During the first 9 months, we acquired a net $308 million of stock and returned another $55 million to shareholders in the form of dividends.

And for 2014, the majority of our free cash flow is expected to be returned to shareholders via share repurchases and dividends. For the full year, there are a few minor tweaks to our 2014 financial metrics.

Free cash flow is now expected to exceed $600 million. Share buybacks will continue to be in the range of $500 million.

CapEx should end the year around $375 million if ongoing project dollars are spent on schedule. Interest expense will be closer to $160 million.

The effective tax rate is now expected to be in the range of 25%, primarily due to the release of some uncertain tax positions due to lapses of the statute of limitations. And full year corporate undistributed is now expected to be closer to $85 million due to higher medical and incentive compensation costs.

Net balance sheet debt at the end of the quarter was approximately $3.1 billion. Credit quality and liquidity of the company remains quite solid, with comparable EBIT-to-interest coverage of 5.7x and net debt to comparable EBITDA of 2.5x.

Committed credit and available liquidity at quarter end was in excess of $1 billion. For a complete summary of third quarter results on a GAAP and non-GAAP basis, please refer to the Notes section of today's earnings release.

Also as a heads-up for the fourth quarter, Ball will record a noncash charge of approximately $40 million related to a settlement of pension obligations for certain former employees. The settlement should reduce the company's pension liabilities by approximately $80 million at year end and generate ongoing administrative and PBGC premium savings for the company's U.S.

pension plans. Now moving to operations.

Our metal beverage Americas and Asia segment comparable earnings were roughly flat versus third quarter 2013. While operating performance was excellent at the plant level, and mid-single-digit volume growth in China and double-digit specialty can growth in North America contributed to segment results, mid-teens volume declines in Ball's Brazilian business post-World Cup muted the segment's third quarter performance.

Ultimately, Ball's mix of customers underperformed the overall market post the World Cup, resulting in us underperforming the Brazilian can industry, which was up around 1% in the third quarter. More importantly, as we head into the fourth quarter in Brazil, the summer selling season is upon us, and we expect Ball's volumes to bounce back to seasonal fourth quarter norms.

European segment profit was up roughly $3 million in the third quarter on essentially flat volumes, and aluminum premium headwinds being more than offset by anticipated cost-out efforts. As John briefly touched on, the LME premium is meaningfully higher than it was in our last conference call, and we expect EUR 6 million of premium cost to flow through in the fourth quarter.

Depending on the strength of fourth quarter volumes, our ongoing cost savings initiatives might be enough to offset the aluminum premium headwinds for the remainder of this year. Food and household comparable segment earnings were down approximately $15 million in the quarter, as segment volume declines and manufacturing inefficiencies in our U.S.

metals service center pressured the results. More specifically, North American food can volumes were down nearly 8%, with about half the decline due to a very poor salmon pack.

On the flip side, our extruded -- European extruded aluminum business continues to perform at a high level. As the food and household segment enters 2015, improving operating efficiencies, pruning the manufacturing footprint and related administrative and plant headcounts are items within our control, and the team is executing on these initiatives to ensure a rightsized cost base after the January 1, 2015, customer shift.

In summary, our global beverage operating team continues to execute on near-term capital projects that will improve our business in North America, Europe and Asia in the second half of 2015 while also identifying additional cost-efficient, high-returning growth opportunities to benefit Ball in future years. With that, I'll turn it back to you, John.

Great. Thanks, Scott.

Our Aerospace business continues to exceed expectations. During the quarter, solid execution, a flawless on-orbit deployment of a Ball-built satellite, and niche product wins for antennas and sensors are some of the highlights.

Contracted backlog ended the quarter at $846 million. And while we have secured some smaller contract awards in the third quarter, larger programs that we are in the process of bidding on are expected to be awarded either late this year or more likely in 2015.

Overall government contracting continues to slide slightly to the right, and we're keeping a close eye on this during the election cycle. Now looking out across our company today.

We are pleased with our year-to-date results and the incredible employee effort it took to accomplish them. Though some challenges still exist, there are also many opportunities to improve our businesses going forward.

With 9 months under our belt, we remain confident in our ability to achieve our long-term diluted EPS growth goal of 10% to 15% per year while growing both our EVA dollars, and as we've done for the prior 5 years, returning nearly all the free cash flow back to our fellow shareholders. And with that, Edison, we're ready for questions.

First off, for the volume declines in Brazil, is it a customer-specific issue that maybe impacted numbers during the third quarter? Any specific region within Brazil that stood out as particularly weak?

And also, can you quantify what's actually happening in October there?

Ghansham, this is Scott. It really is customer-specific.

We -- our customer base wasn't one of the official sponsors of the World Cup, and the other customers, I think, saw a bump in the second quarter. And I think that got carried into the third quarter.

And so it really was customer-specific, I don't think anything to get too alarmed about. We're seeing -- we're only 1 month into the fourth quarter, but it appears like it's tracking back to normal and what we would have expected.

So we expect the fourth quarter to be more normalized.

Okay. And then just kind of thinking about 2015.

Realizing it's a little bit early, but I was focusing on Americas, Asia, you do have an FX headwind there. The World Cup, obviously, benefited, at least part of 2014.

And North American CSD seems to be sort of a sluggish category, and it seems like that's probably a good run rate for next year as well. Do you actually foresee operating income going up year-over-year in 2015 for that segment?

Yes. I think if you go piece by piece, North American beverage continues to perform very well.

Cost-out activities being very efficient. Growth in specialty can is helping to grow earnings and grow EVA dollars in that business.

Brazil, we talked about before, even in the second quarter, we thought 2015 would be flatter, but they're doing some things from a cost-out perspective that I think will help it from an efficiency standpoint. In Asia, the volumes continue to grow.

It's really dependent on pricing, where pricing settles out when we get to the end of this year and into next year. But with volume growth, hopefully, we can offset any pricing pressures.

So actually do expect it to grow next year.

If I could take one second and focus on the metal food and household, you specifically cited some inefficiencies in service centers, and I was thinking that you were consolidating a few of those. Is there anything extra to that?

Or could you give us some color there?

Yes, you're right, Chris. We have, over the last couple of years, consolidated those, and we've just -- we've had -- there's been a variety of issues.

As I said on the second quarter, some of them have been self-inflicted, some of them have not. And what I mean by that, to give you a little bit more color around that, is we have actually put -- we took out some of the excess slack in our capacity.

And when you do that, it puts a higher burden on you to perform, and we haven't been performing as well as we could. Having said that, we've had some quality issues from some of our metal suppliers and some on-time delivery that has exacerbated that a little bit.

The way -- given that it's a service center and it's on the front end of the manufacturing part of our supply chain, if you will, we did see this coming, and that's why we said back at the end of the second quarter that for the second half of this year that we'd have to kind of flow this through, and that's exactly what we're doing. We are very much focused.

We think we are on the right track, but it's just going to take a little bit of time. And as we go into 2015, we expect this to sequentially get much better.

Okay. And have you quantified what the headwind was for this, or could you?

No, we talked about -- I think in the second quarter, I did say roughly 1/3 of our decline was related to volume and roughly 2/3 manufacturing, and that held generally true in the third quarter.

Okay, that's helpful. Last question I had was on the Aerospace side.

It looked like you had another really strong quarter there. And were there any elements that were unusual with performance payments?

You mentioned a flawless execution. Bottom line, I guess what we're trying to get our arms around is how we should think about '15 as kind of a normalized rate there, given what you see in the backlog that you have today?

Yes. It's -- roughly speaking, I think year-to-date, we've made about $70 million of EBIT in that business.

And so that averages about, what, $23-or-so million. And I do think that our business has been running well.

I think -- the bigger issue, I think, Chris, is not so much that because we've talked about it being lumpy, and there wasn't anything out of the -- extraordinary in the quarter. I think it's really as much as to when the government and some of these commercial enterprises are going to start awarding contracts and getting money flowing.

Because like everything with the government, seems like things just start to push out a little bit. A couple of quarters ago, we thought that we'd have a lot of these opportunities decided by the end of '14, and now it looks like they're kind of split between the end of '14 and the first quarter of '15.

And so nothing to be alarmed about. It's just still sliding a little bit, and that's really going to be the driver as we go into 2015.

Just had a question on the European beverage, I guess volume's down a little bit. And do you think that's more of just tough comps?

Or just -- are you generally seeing a slowdown going forward? I don't know if you have any sort of thoughts on what Q4 could look like.

No, it was really tough comps, Tyler. Last year, if you remember, volumes really started to ramp up in the third quarter and in the fourth quarter.

So we knew we had tougher comps in the second half of the year, and that's how that works. We're seeing that.

Yes. It's interesting also, the weather in the third quarter was not all that good.

And you just look at some of our customers' results, both on the soft drink and the beer side. And when you try and look geography, region by region, what was going on, you really kind of saw it in many different places, everywhere from the East to France, Netherlands, U.K.

They were all softer than we had expected and flat to down slightly, actually.

And are you seeing any sign that's getting a little bit better through October? Or is it too early to tell?

Fourth quarter is kind of a slower volume quarter. So I wouldn't expect big trends out of this quarter, but I think it's kind of normalized.

Yes. Exactly.

Okay. And then just with China.

I mean, I guess you -- how much more, I guess, with your existing capacity do you think you can kind of continue to grow? I guess you're up mid-single digits this quarter.

I mean, can you -- outside of capacity, can you continue to kind of grow with the market, given your current footprint?

I think we can continue to speed things up, but those guys are doing a really good job of being able to eke out more and more out of those facilities. But we're still seeing solid growth, and so we'll be careful about how we deploy capital.

But where we think we can get decent returns, we'll deploy capital and grow.

Yes. We've been -- as you know, we've been full all year, but we've been able to "eke out" mid- to upper-single digit volumes.

So at some point in time, the low-hanging fruit will be over, but as Scott said, I think that our guys have been doing a very nice job of getting -- sweating the assets.

Okay. And just last question on working capital.

Now it looks like it's going to be a strong contributor this year and sort of in the past several years, the same thing. I mean, is there a lot much more -- I mean, I know you're always working to get more, but could it be as big of a contributor just going forward?

Or should things slow down a little bit?

Every year, I keep thinking we're about done with what we can do. And our people across the business, in the businesses, in treasury, in IT, in sourcing, have all done a great job of continuing to have various types of programs to eke out more benefits, more dollars out of working capital.

I think we're going to have another decent year this year of being a source of funds, and I think it will continue in '15. How much beyond that, I don't know, but I think we'll see another benefit next year.

Just wanted to focus on the free cash flow for a minute in 2014. You did take it up by $50 million.

I didn't hear on the CapEx part if you took CapEx down. But could you walk through the bridge between the $550 million and $600 million of free cash flow in 2014?

It's mostly better working -- we still think we're going to spend -- we got to spend at a pretty good clip in the fourth quarter to get to the $375 million, but we're still thinking we're going to get to the $375 million. But most of the change really had to do with working capital.

Yes, certainly relative to our prior expectations. I think, year-over-year, it's coming from all that.

I think we have much stronger net income and earnings growth as well as working capital.

And is the better working capital coming from the facility closures? Or is there something you can point to that was really driving better working capital for the year?

I think when you go through our balance sheet, you can see it everywhere. I think we've done a very good job on the receivables side of it.

We've done an excellent job on the inventory side of it. Our days outstanding have improved meaningfully.

And then on the payables side, as Scott had mentioned, everywhere from IT to sourcing to manufacturing, our folks have been doing a very good job of not only measuring but managing those things.

Okay. And when I look at -- you mentioned still thinking $375 million of CapEx in 2014.

Obviously, some of that slipped from, I think, 2013 to 2014 before. But assuming nothing slips into 2015, what sort of step-down should we assume in CapEx as we move into 2015?

Well, Scott, in my life at Ball, I've never seen capital not slip into the next year. So there'll be some that'll slip.

We've got a number of good-sized projects we're working on that will go into '15. We're adding specialty capacity in Europe and in North America.

We'll be building our Myanmar plant. We've got some growth in aluminum aerosol.

We're still finding good opportunities to deploy capital and get above target returns. So right now, to call 2015 CapEx is probably too early, but we'll update you as we get in -- kind of get into next year on what that might look like.

I wondered if we could get just a sense of what you see as kind of underlying beverage can growth outside of North America right now. What's Brazil doing?

What's the underlying market in China? And what are you seeing in Europe?

I think one of the bigger trends that we continue to see in most places is that can continues to take share from other forms of packaging, particularly in the beer category. And so I do think -- and we've talked about this earlier on the call that there has been a -- in the third quarter, there was a bit of a slowdown in Brazil, for example.

The overall market was much more muted after the World Cup. There was a mix issue relative to customer base there.

But I don't think fundamentally, things have changed in a material way. In Europe, the weather wasn't all that great, and the overall economy is a bit softer than expected in Europe.

But again, we don't see any trends that are different than what we saw. Over in Asia, China in particular, but also Southeast Asia, we continue to see beer growing faster than, perhaps, the herbal teas and the energy drinks and the soft drinks, and you're seeing cans continue to take share from competitive packages in those categories.

And so nothing fundamentally has changed. I think there were some issues related to the third quarter that we saw, but we don't expect those to be a trend, so to speak.

Okay. And then you guys have talked about a new product for an undisclosed customer in North America in 2015.

I just -- I wondered when we'll be able to get some sense of what the product might be and then the size of that opportunity for Ball.

I think in the -- certainly, as we go into 2015 and the first half of 2015, it's something that our customer has asked us not to talk about until they're ready to talk about it. So we're respecting their wishes.

And finally, can you just talk about the metal premium issue as we move toward 2015?

Yes. It continues to be a headwind.

It was a bigger headwind in the third quarter. It grew a little bit, so it's even a little larger headwind in the fourth quarter.

And if it doesn't come down, it would be a drag into '15. But it's been pretty volatile.

But right now, we said, in the fourth quarter, it's probably EUR 6 million or EUR 7 million different year-over-year.

All right. And it sounds, Scott, from just listening to other players in the industry that we're not likely to see terms change contractually over the next year or so with regards to passing that premium on.

Is that your view as well?

Well, you need to have contracts mature and roll off and then renegotiate new contracts. So you don't get that much of your contracts that roll off each year, maybe 1/3 roughly.

And so on new contracts, I think it's something where -- it hasn't been just a temporary spike. It's been pretty much a permanent rise or what appears to be a longer-term rise in the premium.

And so that needs to come into play when we're looking at what the products should be priced at.

I guess my first question was just a piggyback on Mark's prior question. You talked about trends not changing relative to the third quarter's one-off issues, but I was hoping you might be able to actually talk specifically about fourth quarter.

In Brazil, are you seeing a year-on-year increase at this juncture in beverage can shipments, recognizing that, seasonally, things should be picking up anyway? And for Europe and for China, can you talk to what the early growth rates are in the quarter?

And then on the same topic of growth, if you mentioned it, I've missed it. What did you say your North American beverage can volumes grew at in 3Q?

George, this is John. Let me try and handle that.

It's -- recognize that the month of October isn't even finished, so it's kind of tough to talk about that. But in Brazil, as Scott said, we had kind of expected kind of flattish volumes in the second half of this year and in the third quarter, they were a bit softer than that.

But we are ramping up towards their summer selling season, and we're seeing much more -- volumes much more getting back to kind of flattish -- it depends as an industry, maybe up very, very slightly. But I think, for us -- and that's all I can comment on right now because I've seen no industry data for us down in Brazil, they have bounced back from what was a soft third quarter full stop.

I think, in Asia, we're seeing the exact same thing. We're seeing decent growth there, and we're -- we are -- because we're tight from a capacity point of view, we are trying to sell as many as we can and get as many out the door as we can.

And over in Europe, we have seen -- it really was -- when you go back and look at the quarter, it was really in the month of August that we saw some softness. And I think as you go into the October, November, December, the biggest time of the month -- of the quarter in the fourth quarter is really the month of late November and December because that's around the Christmas season.

And so it's before that, but everything's kind of going according to what our expectations would be. Getting back to your question in North America bev, I think the overall market was down, call it, about 1-ish percent.

We're about the same as well. I think that when you take a step back, Scott had mentioned our specialty was up double digit, our beer was up a couple of percent and our soft drink was off 3-ish percent, plus or minus.

And so that's -- when you weighted average all of that, that's why we're off very slightly relative to being flat.

I want to go back to food and household. You said that the manufacturing issues were roughly comparable 2Q to 3Q in terms of their proportion of the year-on-year decline, if we look at 2Q '13 to 2Q '14 and similarly 3Q and 3Q.

Yet if I did my math correctly, the dollar decline in 3Q versus 3Q was greater than what we saw in 2Q. So is that just the cumulative effect of seasonality and just you have that much more volume in the third quarter and, therefore, the inefficiencies were magnified by that?

Or were there some other factors at work? And then specific to the manufacturing issues, are you having any kind of quality issues either with the sheet you're producing, the decoration you're doing, anything like that?

Or is it more on the, if you will, the supplier side?

Well, getting to your question, you're absolutely right because the third quarter is the seasonally high selling point for it. I think it was magnified a bit by that.

And as you know, when you -- the turns, from an inventory perspective, in that business are lower than they are in the beverage can business. And so it takes some time for it to snake through the system, if you will.

And so that's why we're able -- we knew that was -- as we look forward into the third quarter, that would be forthcoming. With respect to the quality issues, I don't think -- it certainly is a combination of things, but when you're -- we're not running smoothly and then you have some quality issues from the metal perspective, I think it puts a little bit more stress on the system.

But again, I think most of it, we believe, is to be behind us not completely, but as we go into 2015, we feel pretty confident where we sit right now that we've got our hands on the issue and that we're cycling through these issues.

Okay. And I guess my last question before I turn it over.

Our rough math would suggest that pension, if we look at current discount rates, might be worth a $0.10 plus of headwind next year to the company. Do you have an official view or unofficial view that you care to share at this juncture?

A little too early to tell, George, because it's all set right at the end of the year. You're right, right now, if rates stayed where they're at, it's a bit of a headwind.

But part of what I mentioned of this -- or paying out terms -- certain term-vested pension and reducing our liability will help net income next year. So that's a plus.

So you kind of have to get through the end of the year to know what it will do, but I'd say, net-net, it's probably not a big mover one way or the other.

I just had a follow-up question on pack mix shifts. You talked about the shift to cans you're seeing outside of the U.S.

And I was just wondering about if you could talk about what you've seen in the U.S. this year.

It seems like cans have outperformed glass more than some of us had expected. And I was wondering, are your conversations with customers accelerating?

Or would you expect this to continue into 2015, even if the consumer gets a little bit stronger? I was just wondering if you could provide some detail on what you're seeing in the U.S.

Yes. I think, largely where we've seen the growth, and you see it from an industry perspective as well as a Ball perspective, is on the beer side.

And the can as a share of the package mix on the beer side has continued to grow, even through the first 3 quarters of 2014. So I think that's a trend that certainly we've been benefiting from.

Some of it has to do with the craft beer that we've talked about in past conference calls. Some of it has to do with consumer preferences.

I don't see any appreciable change as we go into 2015. Obviously, it's a bit premature.

But at some point in time, the can will be well penetrated relative to that. So I wouldn't expect over the long term that we're going to infinitely continue to gain share as a percentage of the package mix, but we've certainly been a beneficiary of it right now.

But we do also, at the same time, see on the craft side, continued good penetration growth into that area.

Okay, that's helpful. And then just shifting to food and household.

Can you talk a little bit more about the India opportunity in extruded aluminum and what your investment there is?

Yes. I don't think we've disclosed the size of investment.

But it's a decent size but not huge, to be honest. But it's a great opportunity as that business continues to -- the customer base continues to globalize.

We had a great opportunity to make an investment in there. And we expect kind of by this time next year, we'll be up and running.

We're focusing on not only the regional customers but some of the global customers as well. And well, as I said, we're only putting 1 line initially, so it's not that big of an investment.

I think, over time, we will be happy that we've gotten into the business because in India, the market for those containers is several hundred million, and it's growing at 20-plus percent.

Okay. So the real earnings contribution there is in 2016, essentially?

Yes, I think so.

John, I wanted to circle up with some of your earlier comments on expecting some growth in the Americas and Asia bev segment. How instrumental do you see North America earnings growth in that view next year?

And I guess that's part one of that question.

I do think there is some earnings growth in North America, I think both from this mix issue as specialty continues to grow. But equally important, we've been spending a lot of time, and there's a fair amount of fruit we can go after in terms of the freight logistics and optimizing our footprint perspective.

Over the past several years, we've put some systems in place that have been helpful in terms of providing a level of transparency around our costs on the freight and transportation at a far greater clip than we've had in the past. And so we have specific plans that we're going after some of those things.

So I think for those 2 reasons, mix as well as the cost side of our business, I think there's some upside there.

Okay. And following on that, any -- at this juncture, can you give us a sense maybe what you think the cost-out opportunity is there?

And in addition, is there anything specific that you have visibility on, some sort of contractual gains, specific share gain on cans for next year that belies some of the confidence as well?

No. I think on -- second part first.

I just think we have a pretty good footprint in terms of specialty, and that has been growing. We're overweighted towards beer, and that's been growing.

So I think qualitatively, we feel okay there. And then on the cost-out side, it's a bit premature to talk about that.

But it's not insignificant dollars when you think about we've got a base, we've got a revenue base of well in excess of $3 billion there. And so I think there's real opportunity there.

I appreciate that. And then just a second question is just based on -- assuming aluminum premiums look like they'll continue to be a headwind, what's the opportunity next year -- some of the -- you've been able with cost-outs this year, you've been quite successful at that, offsetting this.

What's the opportunity to continue to maybe offset some of the headwinds next year with cost-outs? And just as some of the contracts roll off, maybe the opportunity to recover some of the loss margin as well.

Sure. Well, our guys continue to be very focused on taking cost out.

I was just with the European guys recently, and they have a number of things that they're working on that will continue to make their business more efficient. On the contract side, you have to wait until those customer contracts expire and you're negotiating a new one before you can get any kind of a pass-through or change the pricing mechanism so that you're incorporating into your price.

So that takes a little bit longer. But in all of our businesses, we're always very focused on costs and making ourselves more efficient and offsetting these kind of headwinds.

The only thing I would add is -- we don't -- let's not forget that we've -- making an investment to continue to grow our business in Oss in the Netherlands. In 2013, we have been running full out.

And typically, when you run full out with the seasonality that business has, you leave some money on the table relative to some of the freight and other opportunities. I'd mentioned that we're doing a lot in North America, and we -- I think our European folks are trying to grab on to some of the ideas that our North American people have been doing.

And there's a lot of opportunity. As we get a little bit more capacity to be able to run a little bit more smoothly, I think to optimizing the shipping lanes and the freight costs, there's going to be some opportunities over time there as well.

John, I had a question about the -- I noticed the other day, or maybe it was yesterday, you all appointed a new director to the board. And I didn't know if that was a replacement director or an -- and it looks like he has quite a background in aerospace.

And I didn't know if that was basically a sign that maybe you're going to make aerospace a bigger part of what Ball is all about.

Well, a couple of things I'd point out. Number one, we have -- we, like many companies, have mandatory retirements for our directors at 72 years old.

And so without going into any details, over the next few years, we have directors retiring. And so this was -- Mike's a wonderful person, has a great reputation, has a lot of great experience, not only in the aerospace side but just in general management.

He's a finance person by background. He ran Boeing Capital for a while.

So he has a lot of very good finance expertise. And as we started talking with him, it just made a lot of sense to get him on board and help with the transition over time as by natural forces, some of our board members retire.

Okay, got you. And then going back to India, that's been obviously -- not only does it have great opportunity with being the second most populous country, but it's been a challenge for other folks in the packaging business there.

And I was just wondering, as you look to India, could we see what looks like to be a food can initiative eventually become a beverage can initiative? And if it did, does it make sense that -- can you do something like that in baby steps?

Or as we've seen in most other places, the scale of investment required make that less likely?

Well, yes. First, in India, just so we're clear, it's actually an aluminum impact-extruded opportunity.

And as you know, the scale of that relative to putting a beverage can line is very, very different. And so this is an opportunity for us to start small and grow as that market continues to grow.

Whether or not we then think about using the experience learned in doing business in India and gravitate it over the beverage can side, that remains to be seen. But you are right, the scale of beverage can investments, at least historically, have been much greater and very different than impact-extruded.

We have -- particularly in Asia, our guys have done a very good job of really focusing on how to make smaller-scale investments on the beverage can side, and it's probably premature to talk about that a little bit. But we have no specific plans as we sit here today to be announcing and building beverage can capacity in India.

But certainly, you never know.

And then last quick one. I know Brazil has seen a major move in the last 5, 10 years in displacing other substrates for aluminum.

And I think in the beer category, we must be pushing the mid-40s in terms of the percent that are in a can. And I think North America is around 55%.

If you could correct those numbers and tell us how many more years do you think we get until we hit sort of a saturation point in Brazil?

Well, it's a good question. I think your numbers are generally in line with what reality is.

In North -- excuse me, in the United States, it's actually a little bit higher, it's probably 57%, 58%. It's interesting when you go around the world and you look at it, you look at the can penetration rates.

In the U.K., it's north of 60%. We mentioned the United States.

In other places, it's lower. It really depends.

And there's 2 factors that go into it. Number one, it's consumer preference.

But number two, it's also on-trade versus off-trade. I think down in Brazil, you have seen a shift over time as people have more disposable income that they have been moving a little bit more to the off-trade, and as they move to the off-trade, they've gone to one-way packaging.

And as they go to one-way packaging, they've gone to the can. That is a trend that we see time and time again, and I think even you're seeing it a bit in China, for example, as the can as a share of the package mix continues to grow there.

So I think you're directionally correct. Will it get to 55%?

Will it get to 60%? When will it get to that?

It's a bit premature to speculate. But you're absolutely right, probably 6, 7, 8 years ago, it was in the 20%, now it's in the mid-40s.

I was hoping you could talk about -- well, there have been a few large M&A moves in the space lately. And I'm just wondering about Ball's appetite for M&A right now.

And if you could maybe contrast those opportunities with internal projects or share repurchases?

Yes. Well, Debbie, as you know, we are all about EVA discipline.

And we've made a tremendous amount of money over time by being very disciplined around that. And nothing has changed on that front.

Right now, as we sit here, we see more opportunities, actually, over the past couple of years, in terms of internal greenfield investments where we've been able to generate returns relative to the prices one has to pay in the M&A world. Sometimes, the M&A world comes and goes, depending on financing markets and depending on other things like that.

And so we're going to continue to deploy capital per our EVA discipline, whether internal or external. And in the meantime, we've created a tremendous amount of value for our shareholders by being disciplined and if we don't see opportunities by buying back our stock and returning it to our shareholders that way.

And so the key point of all that is nothing's changing.

Okay. And I guess as a follow-up, if I could just ask a question on China.

Should we expect Ball to grow in line with the industry at this point without adding new capacity? And then are you more or less optimistic about China than you were maybe 6 months to a year ago?

Well, I think we're going to -- if it grows at 20%, we're not able to add capacity to that level. So I think we could get a little bit smaller from a market share standpoint.

We want to make sure that we're deploying capital where we can make money. Am I feeling better or worse about it?

It still continues to grow, but there's still a ton of competition. So pricing environment is not as disciplined.

I'm hoping that what we've seen in the last year is the floor of pricing, but you just kind of never know. We're trying to focus on all the things that we can control, from a cost-out standpoint, to make our business more efficient and more profitable without relying upon price recovery.

And if price recovery happens, we'll get a nice leverage on that, but kind of control what you can control.

Guys, it's actually Phil. Hopped on a little late.

A question for you, Scott. Free cash flow for 2014 coming in really strong.

I understand that working capital is quite advantageous this year. But thinking about '15, is $600 million a good base to work on going forward?

I'm sorry. What was the number you threw out?

$600 million free cash flow.

For '15?

Yes.

Yes. It kind of depends on what the CapEx is and what working capital is.

So I wouldn't -- I'm not -- what I said was that we could continue to generate money out of working capital next year as we did this year. And I don't think there'll be a meaningful difference in CapEx, so I think it should stay relatively high.

I think free cash flow should stay relatively high. Whether it starts from $600 million or not, I don't know

Okay, that's helpful. And then your food can business, from a margin standpoint, it's a bit lighter than we expected.

Part of that is, obviously, the operational setbacks. But how much of that was pricing too?

I understand you guys ceded some price in the quarter. And how should we be thinking about margin next year with one of your lower-margin customers exiting your portfolio?

Yes. From a pricing perspective, it's nothing appreciable.

It really had to do with volumes and operating performance that -- Phil, I know you weren't on, but we talked about earlier. So if you want to talk offline or if you want to read the transcript, that's fine.

As we go into next year, margins, actually, on a pure margin basis, it probably should be better because when you look at the mix issues of that, I think it's premature to say because we haven't quantified those things. But we already have begun to take actions to take additional costs out of our system.

And so from a margin percentage perspective, it should be better next year.

Okay, that's helpful. And just my last question.

On the extruded aluminum business, India is a new opportunity for you. I would have imagined Brazil being a larger opportunity set.

Can you talk about what's available there? Or are you guys approaching it more from an M&A standpoint?

Well, I think I'd rather not go into any specific details about what our strategic plans are. But what I would say is, on a global basis, there continues to be opportunities.

That package grows, is growing in many places. The growth is a bit more muted here in the United States, although it is growing here.

A lot of filling is going from the United States down into Mexico, and there is some growth down in South America generally, whether it's Brazil, whether it's Argentina. In fact, Argentina is quite a large user of those containers.

So we keep our eyes on that. And it's really a function of where we can generate the most EVA dollars, whether it's greenfield investments or M&A opportunities.

Forgive me if my questions were asked. I just got on a bit late.

Just one about 2015, and I know it's early, but can you talk about -- in broad terms, about which segments you think you can grow next year and profit-wise. I mean, Brazil is obviously facing tough comparisons.

North America, both in bev and food, are flattish, modestly down. Europe is, obviously, a tough economy at the moment.

And aerospace has had a really terrific year this year. So I would think the year-ago comparisons next year would be fairly challenging.

So any thoughts you have along those lines would be appreciated.

Why doesn't Scott -- why don't you jump on beverage, and I'll go through the other one.

Okay. Yes, we did cover that, but I'll give you quick color on that.

North American beverage, we feel pretty good about. It's all dependent on volume, what happens with 12 ounce in soft drink business.

But our specialty business continues to grow, and so we've been able to grow earnings and EVA dollars in that business, and we'd expect that to continue to occur next year. China, the volumes continue to grow.

And while the pricing environment remains tough, we've been able to grow volumes and offset some of that price pressure. We haven't got into the real season of setting the price for next year.

So we don't have that good of visibility into what '15 looks like, but our guys are doing a nice job on the cost side. In Brazil, we've had -- our business probably didn't get as much of a pop from the World Cup as we thought it would.

And so next year does look slower, but I think we can continue to improve the profitability. We're probably not at the pace that we've had, a couple of jumps we've had in the last few years.

And in Europe, there's a lot of cost-out still going on. There's volume growth, specialty volume growth.

And it depends on business -- aluminum premium come off a lot or not. If it stays high, it is a pretty significant headwind.

So we'll see. But we feel pretty good about where all the businesses are at, and then more importantly, the investments that we're making today that will make our business better later in '15 and then -- and definitely in '16.

Yes. And then from a food and household products as well as an aerospace perspective, I think food's going to be challenged and make the profitability just because of this customer shift that's happening 1/1/15.

Although having said that, we fully expect to get back on track, relative to the operational improvements or issues we've been having in 2014, so that will provide a positive bridge. It's premature to say, can we get back to the full year '14 because '14 hasn't even finished.

I think it's a bit of a stretch, but our guys are pushing real hard. Our men and women pushing really hard on that.

And then on the aerospace side, you are right, we have been growing very nicely. We have a number of proposals outstanding as we go into 2015.

So it's dependent upon that. But I think, overall, when you take a step back and you think about how we feel, not only going into '15 but longer term, I think we feel pretty good.

We're making investments in Myanmar. We're making specialty investments in North America.

We're building -- expanding our footprint in Europe through the Oss. From a cost-out perspective, we've spent a lot of money on the systems side of our business, and we see a lot of low-hanging fruit from a freight and warehouse logistics in addition to just continuous improvement there.

And we continue to see opportunities to capture our share of the growth, whether it be in the Americas, Europe or certain parts of Asia. And so I think we feel okay as we sit here today, looking out, saying we can continue to grow our business and make it a stronger, healthier business while, at the same time, as I've said before, maintaining a very strict discipline around the EVA dollar generation that we always talk about.

And just one on -- John, on North American beverage cans. How would you characterize the market at the moment?

Obviously, CSD remains fairly weak. One of your competitors yesterday talked about weakness among the mega-beer brands in the U.S.

But you've got specialty growing for you, obviously, to some extent. So to what extent is the growth in specialty offsetting these other factors?

And how do you see that playing out beyond this year?

Well, I think earlier, maybe you weren't on, but we talked about we had growth in specialty and we had growth in beer this year. And soft drink has been down.

I think year-to-date, we're up slightly. We're up probably about 1% or so for the full year.

Forget about the third quarter for a minute. It's driven by growth in specialty, growth in beer, offset by declines in CSD.

We all know that CSD is under a lot of pressure, but let's broaden the definition, and what I'm talking about is not just sodas. It's sparkling beverages.

And I think we've seen some good growth in sparkling waters and some other things like that. I do know that the soda companies are acutely focused on trying to make sure that they're as relevant in today's environment, where health and wellness plays a more important part.

Will they be able to turn that tide at a rate better than they have in the past? It's premature to see.

But I do think, as we go into 2015, what I just described, even though some of these "mega-beer brands" are having a little bit of volume issues, the can has been winning relative to other substrates, and we still have only upper single digit, if not very low teens, penetration on the craft side.

Given your EVA discipline and the fact that you have been patient, I've been thinking that this was -- this is probably a good opportunity for you to at least consider deploying some capital in the aerospace and technologies business, given the uncertainties in that industry and the prices of those companies have come down. And so then today, you announced this really great new board member, Michael Cave, who you would -- I would think could really help you a lot in that process.

So the question is, do you think we might see some opportunities for increases in the value of Ball Corporation through its hidden gem, the aerospace and technologies business sometime in the investable future?

Yes, Andy, this is John. Two observations.

Number one is I think in each and every one of our businesses, we're going to continue to be very disciplined on the EVA dollar side of it. Having said that, I do think that as we look into the aerospace side of the business, there are opportunities, as you point out.

As a wise, old colleague once said, you need motive and opportunity at the same time. And so you have to be patient about these things.

But when you're patient and you're digging hard, opportunities over time come your way. And so we have been looking in that area.

Obviously, we haven't announced anything. We made a small acquisition in January of last year that's doing very well, and it got us into a whole new customer segment, which is great.

So we continue to look at things like that. So I wouldn't disagree with your thesis that you're laying out.

But obviously, we're continuing to focus, but we're going to be disciplined.

Just a couple of emerging markets issues. One, John, I wonder if you guys can just explain to us how you think about that Indian market for beverage cans, because it's just kind of amazing to me that we're seeing so much expansion in Myanmar, Cambodia, Vietnam, elsewhere, and yet that beverage can market in India relative to the size of the market seems so, so small at this point.

What will it take for that to grow? And then the other question I have for you is, is there a way to kind of tap into some of these smaller but faster growing markets in places like Southern Africa?

Can you build a facility that's less than 800 million cans or 1 billion cans?

Well, as you know, scale is important in beverage cans. We often talk about India being India.

Well, there's, I believe, 26 different states there. Some ban the consumption of alcohol, some do not.

And so you really have to get much more prescriptive in looking at it. You also have the urban versus rural areas where you have so many people.

But the number of people that can actually consume packaged goods is a very small number, particularly when you look at the price points of what they earn versus what it costs to do that type of thing. And so it's always been the dream that it's going to continue to grow.

But at the end of the day, beverage business remains a scale business, and that even gets to your question about Africa. There's only a couple of countries to date that have shown any ability to have enough scale where it makes sense, whether it's South Africa or whether it's Angola, Nigeria.

Those are really the 3 only places other than the far north of Africa that have any kind of beverage can manufacturing facilities. As that continues to grow and the middle class starts to develop, it's no different than India.

I think that's the most important thing. The middle class has to grow before you see opportunities there.

I will try to ask these in sequence, just given it's late in terms of timing. First of all, John or Scott, would it be possible to parse in your CapEx this year and perhaps next year what you're spending on some of the newer initiatives?

I'm not asking to identify each one, but if maybe there's a way to aggregate the total that you're spending on the cost-out programs, the new line in North America, Oss and so on. Would that be possible, at least on a public forum?

Yes. I think, George, if you think about it, just take $375 million of capital and think -- maintenance capital is probably between $150 million and $200 million.

So you've got a couple of hundred million dollars of growth, if you will, growth capital. From a -- when you say cost-out, it really hasn't been that much spending on cost-out.

Most of the spending that we're doing is on adding, really, a lot of specialty capacity, whether it's in Europe or North America or in the past, Brazil, or even in Asia. So a lot of it is growth capital with better than typical returns over time.

Now you got to mature into those returns. But they're investments that we're likely to make.

And also in the aluminum aerosol business, we've added some capacity there. So most of that $200 million of growth is really focused on better returning type projects and not really -- we haven't had to spend a lot of capital on cost-out.

I would say, it's a small minority of what we're spending in total.

All right. So the freight and logistical and all the other points that you made in terms of potential cost-out for 2015 and beyond, that will require relatively little incremental investment either in terms of capital or, for that matter, other cash cost.

Would that be a fair point?

Yes. I think in the total scheme of things, if you think we're spending $375 million, way less than 10% of it is on cost-out stuff.

Okay. And then in terms of looking back at third quarter, just from the standpoint of trying to establish a base for the future, would it be fair to say that your profits, if we actually had visibility into this, Brazilian profits were clearly down because of your volume decline, but your North American and Chinese -- or Asian, excuse me, profitability was up year-on-year?

Yes. Looks -- both those businesses have performed well.

Really, the quarter was all about -- the miss was all about what happened in Brazil and the volumes.

Okay. The last one, and I'll turn it over.

China, can you comment at all in terms of whether you are closer than you were, say, 3 months ago to a new investment there, recognizing it'll be driven by EVA, contracts, et cetera? And totally switching gears on free cash flow, I recognize you raised free cash flow guidance.

A lot of it is from working capital. But interestingly, the third quarter versus third quarter free cash performance was actually down.

So was there anything else -- or how do you raise free cash flow guidance despite free cash being down year-on-year in third quarter?

Okay. Well, I guess, by the factor of every day that goes on, we're closer technically to when we spend capital in China.

So I guess we're closer from that standpoint. But on a serious note, we're continuing to do a good job of getting our cost structure in a place where we can make investments and get the returns.

That's really the magic of future capital spending in China. We've got to be able to make the returns, not just to grow with the market.

The second part of your question had to do with free cash flow guidance and the change?

In third quarter.

That's correct.

Third quarter this year versus third quarter last year?

It was down, yet you raised your numbers. You mentioned working capital.

We get it. But was there anything else that drove that increase in free cash flow guidance despite what was a year-on-year worsening in free cash flow?

I see what you're saying. No.

It's got to do with all the other things, non-earnings things that we're doing on inventories, payables, receivables, all of those other factors.

And Edison, thank you. We appreciate everyone's participation on our conference call, and we look forward to finishing up 2014 strong.

And we'll talk to you all in January. Thanks.