Ball Annual Report 2007 | Quarterlytics

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FY2007 Annual Report · Ball

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Ball Corporation 2007 Annual Report

Growth, Innovation, Sustainability

Who We Are
Ball Corporation is a provider of metal and plastic packaging for beverages, foods and household products,
and of aerospace technologies and services to defense and civilian government agencies. Founded in
1880, the company and its subsidiaries employ more than 15,500 people. Ball Corporation’s stock is
traded on the New York Stock Exchange under the symbol BLL.

Mission
To be the premier provider to our packaging and aerospace customers of the products and services that
we offer as we aggressively manage our business.

Strategy
Our strategy is to grow our worldwide beverage can business and aerospace business, to improve the
performance of the food and household products packaging division and plastic packaging division
and to utilize free cash flow and earnings growth to increase shareholder value.

Financial Highlights
Ball Corporation and Subsidiaries

($ in millions, except per share amounts)

2007

2006

Stock Performance
Annual return to common shareholders (share price appreciation

plus assumed reinvested dividends) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.0%
Closing market price per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45.00
Total market value of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,510
Shares outstanding at year end (000s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100,224
Shares outstanding assuming dilution (000s)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100,956

Operating Performance
Net sales(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,390
Earnings before taxes(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
365
Earnings before interest and taxes (EBIT) (3)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
514
Net earnings(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
281
Basic earnings per share (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.78
Diluted earnings per share (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.74
0.40
Cash dividends per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

10 .9%
$ 43 .60
$ 4,540
104,137
104,715

$ 6,622
447
$
581
$
330
$
3 .19
$
3 .14
$
0 .40
$

(1) Represents shares outstanding at year end plus the assumed exercise of options that are “ in-the-money” at year end, less an estimate of shares
that could be repurchased at the year-end market price of Ball stock using the assumed exercise proceeds. This measure is not the same as the
diluted weighted average shares outstanding used in the calculation of diluted earnings per share.

(2) Net sales in 2007 have been reduced by a pretax legal settlement of $85.6 million.
(3) Includes business consolidation activities and other items affecting comparability between years of pretax expense of $44.6 million

($27 million after tax) and $35.5 million ($20.5 million after tax) in 2007 and 2006, respectively. 2007 net sales have been reduced
by a pretax legal settlement of $85.6 million ($51.8 million after tax) while 2006 net earnings include a $75.5 million pretax gain
($46.1 million after tax) related to insurance proceeds in connection with a fire at one of Ball’s German plants. Additional details are
available in the company’s consolidated financial statements.

(4) Management utilizes earnings before interest and taxes (EBIT) as an internal measure for evaluating operating results and for planning

purposes. EBIT is shown prior to interest expense of $149.4 million in 2007 and $134.4 million in 2006.

This Summary Annual Report should be read in conjunction with the audited consolidated financial statements and other information
contained in Ball Corporation’s Annual Report on Form 10-K for 2007 furnished with the Company’s Proxy Statement for the
2008 Annual Meeting of Shareholders.

About the cover
WorldView-2, Ball’s Alumi-Tek™ bottle and recycling education are key aspects of growth, innovation and sustainability
at Ball Corporation.

We are taking aggressive steps to position Ball Corporation

for future growth and create value for our shareholders. We are

focused on improving performance by executing on our strategy

to expand our global beverage can business in some of the

world’s strongest growth markets, exploit the core competencies of

Ball Aerospace, rationalize and reposition assets in our metal food

and household products packaging business and rebalance our plastic

packaging portfolio by emphasizing growth in our higher-margin specialty

packages while improving the pricing of our commodity bottles.

In addition, we have embarked on a companywide initiative

to make Ball a more sustainable enterprise.

Ball Corporation 2007 Annual Report

2007 Letter to Shareholders

Dear Fellow Shareholder,

Ball Corporation’s 2007 results were a record for our company in terms of sales, earnings and free cash
flow. We are generally pleased with those results. We also know that we can do better.

To that end, we have taken actions to improve the company’s performance and better position
Ball for continued growth. Our corporate strategy is to grow our worldwide beverage can business
and aerospace business, to improve the performance of the food and household products packaging
business and plastic packaging business and to utilize free cash flow and earnings growth to increase
shareholder value.

During the year we repurchased $211 million of our company’s stock and in January 2008 we
repurchased an additional $131 million of our stock, reducing the number of shares outstanding
to approximately 98 million. Including reinvestment of dividends, Ball’s stock returned 4 percent
to shareholders in 2007. That is less than the S&P 500 Index’s total return of 5.5 percent and
we are disappointed in the return, given the strong overall performance of our company and
the opportunities in front of us.

In January 2008 we strengthened our overall management team with the promotion of
John A. Hayes to chief operating officer of the corporation. John has done an outstanding job
of running our European packaging subsidiary during the past three years and brings leadership,
integrity, energy, intellect and experience to his new assignment.

The strategic actions we are taking capitalize on the strengths of our global beverage can

business and directly address the challenges in our underperforming
businesses. We continue to face rising costs, particularly for raw
materials and energy, but are taking steps to raise prices, recover
those costs and more effectively operate in this environment. In
addition, the expansion of sustainability practices in our operations
continues as our employees worldwide work to make Ball a more
sustainable enterprise and, ultimately, create more value for
our stakeholders.

Strategic Growth In Expanding Markets
Our packaging products businesses accounted for 89 percent
of Ball’s total net sales in 2007, 32 percent of that coming from
markets outside the United States. Our largest single product line –
aluminum and steel beverage cans – experienced strong growth in
Europe. Our sales volume there increased more than 9 percent in
2007, to 14.4 billion cans from 13.2 billion cans in 2006. Our sales
volume in China grew as well, to 2.4 billion cans.

To benefit from growth in those and other markets, Ball

announced in 2007 and early 2008 plans for new beverage can plants

R. David Hoover
Chairman, President
and Chief Executive Officer

Ball Corporation 2007 Annual Report

growing
markets

When Ball announced in 2007
plans for a new line to produce
24-ounce beverage cans in the
company’s Monticello, Ind.,
plant, it was in response to the
continued growth in demand
for specialty cans.

Ball makes 18 different
bev er age can sizes, more
than any other can maker, as
well as unique cans featuring
emboss ing, reclosability and
widgets for special functionality.
More than 15 percent of our
world wide beverage can busi-
ness is comprised of specialty
cans. Demand for specialty
cans continues to increase
as beverage com panies look
to unique features to better
differentiate their brands.
The proven benefits of
beverage cans – safe, reliable,
convenient, easily transport able
and recyclable – are propelling
increased growth in regions
such as central and eastern
Europe, China, India and South
America. We are expanding our
metal beverage can operations
to meet that demand and
capitalize on opportunities.

A new plant in Poland and the
24-ounce line in Indiana, among
other investments, are expected
to pay immediate dividends.
Other projects, such as a new
beverage can plant in India,
will likely take longer to fully
develop. The combination
positions Ball well for continued
growth in our largest business.

A Ball’s Alumi-Tek™ bottle, produced at our Monticello, Ind., plant, offers consumers the
con ven ience of reclosability and uses less metal than competing aluminum bottles. Eric Crume,
maintainer, examines a bottle after the necking process.

b In 2007 Ball announced plans to build a new plant in one of the largest potential markets in
the world – India. The plant will use existing manufacturing equipment and is expected to begin
production by mid-2009.

c Ball produced the first steel beverage can with a temperature indicator which signals to
consumers that the contents are the ideal temperature to drink. It launched in the United
Kingdom in summer 2007.

d This image of downtown Houston was taken by WorldView-1, the world’s only half-meter
resolution commercial imaging satellite, built by Ball Aerospace and launched in September
2007. Ball is also building WorldView-2. (Image courtesy of DigitalGlobe®)

Ball Corporation 2007 Annual Report

driving
innovation

Innovation doesn’t happen in
a vacuum. Finding out what
customers and consumers
want drives product develop-
ment at Ball. We use a variety
of research methods, including
online surveys, focus groups,
in-home studies, shop-alongs,
customer discussions and
concept development and
testing, to better understand
the needs of today’s – and
tomorrow’s – market.

From recent studies, we
learned more about how an
aging population relates to
packaging, and how changes
in shapes, appearance, reclos-
ability and functionality can
improve consumer appeal.

Another Ball study explored
how consumers value the shape
of a package. Findings from that
study were used in the develop-
ment of Ball’s Aergo™ custom
shaped aerosol can, which was
launched in the aerosol food
market in 2007. Aergo™, which
can also be used for personal
care and household products,
offers a premium appearance
and comfortable grip that
differentiates the product.

Our customers are integral
to our innovation approach. In
July 2007, Ball hosted its first
North American Packaging
Solutions Forum. A cross-
section of customers attended
the multi-day event to see first-
hand Ball’s latest innovative
solutions to help build brands
and differentiate products. The
next forum is scheduled for
July 2008.

A Ball is the only PET bottle producer in North America to offer PLASMAX, a transparent
barrier for oxygen sensitive products such as beer, wine and juices. Amy Jarecki, plant manager
of Ball’s Watertown, Wis., plastic packaging facility, removes a bottle from a production line for
a quality check. (PLASMAX is a registered trademark of SIG Group.)

b The first can with a Ball Resealable End launched in France in 2008, offering the conven ience
of resealability as well as the traditional advantages of the can for logistics and easy recycling.

c Our Aergo™ shaped aerosol can launched in the aerosol food market in 2007, providing an
eye-catching packaging profile for consumers looking for something different.

d The NEXTSat spacecraft, part of the Orbital Express mission, receives final inspection in a
Ball Aerospace clean room. The spacecraft participated in 2007 in the first U.S. autonomous
satellite servicing demonstration to help determine the feasibility of extending the life of future
on-orbit spacecraft by refueling or even upgrading them in space.

Ball Corporation 2007 Annual Report

We are generally pleased with our 2007 results. We also know
that we can do better. We have taken actions to improve the company’s
performance and better position Ball for continued growth.
performance and better position Ball for continued growth.

in India, Poland and Brazil, and capacity speed-ups
at existing plants in Poland and Germany. Earlier last
year, we added an aluminum beverage can line to our
Hermsdorf, Germany, plant and began production at
our rebuilt Hassloch, Germany, steel beverage can plant,
which had been destroyed by fire in April 2006.

Lublin, Poland, will be the site of a new Ball beverage can
plant that will begin supplying the growing central and
eastern European market in 2009.

India is a new market for us, one in which we have
long had an interest. In January 2008, we secured the
land for a plant site near Aurangabad in the state of
Maharashtra. The plant will be positioned strategically
to supply the two-piece beverage can needs for the
majority of existing and currently planned beverage
can filling lines in India. It will begin operation
with one manufacturing line, using certain existing
equipment from other Ball operations, with a capacity
of approximately 600 million cans annually. The
first commercial cans are expected to be produced
by mid-2009.
The Polish can market continues to experience significant growth and increased approximately
30 percent in 2007 versus 2006. We announced plans to build a beverage can manufacturing plant
in Lublin, which is in eastern Poland near the borders with Belarus and Ukraine. Initially, the plant
will have one production line with an annual capacity of approximately 750 million cans per year,
and will be built to accommodate additional manufacturing lines in the future.

Currently we sell significantly more cans in the Polish market than we produce locally. Our
existing plant in Radomsko serves us well for central and southern Poland, while our Hermsdorf,
Germany, plant supplies western Poland. The Lublin plant will provide us with geographic coverage
across eastern Poland and in countries farther to the east. The plant is expected to be operational in
the first half of 2009.

In Brazil, Ball – through Latapack-Ball Embalagens, Ltda., our
50-50 joint venture can company there – will build a new, one-line
metal beverage container plant in southeastern Brazil. Its initial
capacity will be 900 million cans per year, which can be expanded to
2 billion cans per year as demand grows. Cash flows from the joint
venture will be used to finance the plant and production is expected to
begin in mid-2009.

The multi-year project begun in 2005 to consolidate our beverage
can end-making capabilities as part of our conversion to a new, more
metal-efficient design is drawing to a close. By 2009, Ball will make
beverage can ends in three U.S. locations instead of five, on more
efficient and faster production lines operated by approximately

John A. Hayes was elected
chief operating officer
of Ball Corporation
in January 2008.

Ball Corporation 2007 Annual Report

300 fewer people. Surplus equipment may be employed
elsewhere in our global beverage can business as we
capitalize on growth opportunities.

Net Sales by Segment

Restructuring And Rationalizing Food And
Household Products Packaging, Plastic Packaging
Businesses For Improved Results

We need to improve the performance of our metal food
and household products packaging and our plastic
packaging businesses. While we made progress in 2007
on optimizing the manufacturing footprint of those
businesses to drive improved performance, we continue
to review other value-creating measures.

37%

10%

11%

16%

26%

Metal beverage packaging, Americas
Metal beverage packaging, Europe/Asia
Metal food & household packaging, Americas
Aerospace & technologies
Plastic packaging, Americas

Ball is the leading manufacturer of steel aerosol cans
in North America, and the third largest producer of steel
food cans. Although we have realized synergies from
combining the aerosol can business we acquired in 2006 with our existing two- and three-piece
metal food container business, results from our aerosol operations have been negatively
affected by overcapacity in that industry and its pricing impacts as well as inefficiencies in
those acquired facilities.

In October 2007, we announced plans to close aerosol container manufacturing plants in

Commerce, Calif., and Tallapoosa, Ga., and to exit the custom and decorative tinplate can business
in our Baltimore facility as part of a restructuring. The two aerosol plant closures will result in
a net reduction in manufacturing capacity of 10 production lines, including the relocation of
two high-speed aerosol lines into existing metal food container facilities in Oakdale, Calif., and
Chestnut Hill, Tenn.

Closing these aerosol facilities removes significant capacity from the industry and, coupled with

other changes within our manufacturing operations, will allow us to supply our customers from
a consolidated asset base. When completed in 2009, the actions are expected to yield annualized
pretax cost savings in excess of $15 million and will improve the division’s plant utilization rate
to more than 85 percent from about 70 percent.

We continue to review metal food and household products packaging facilities as we restructure

the division for improved performance. Our primary focus in 2008 is to increase the selling
prices of our products, reduce costs and improve our profit margins, while successfully integrating
production from the plants that are closing into other Ball plants with minimal disruption. This
business offers potential for significant future earnings growth and we are focused on achieving
that potential.

Our plastic packaging division manufactures a variety of products made of polyethylene
terephthalate (PET) and polypropylene (PP) resin. Our PET products have traditionally been
bottles for beverages, including water, carbonated soft drinks and juices, while our PP containers
package foods and some beverages filled at higher temperatures.

Improvements in both plastic bottles and filling technology recently caused a shift for some
foods such as condiments from PP to PET bottles. We are able to accommodate these changes since
we make both types of bottles. Improved pricing and our continued focus on reducing costs and
growing our specialty PET and PP container business will be key to improving the performance
of this division.

Ball Corporation 2007 Annual Report

sustainable
evolution

While “sustainability” is rela-
tively new as a business term,
Ball has engaged in environ-
mental, social and economic
sustainability practices for
many years.

Our lightweighting program

has reduced the amount of
metal in our beverage cans
more than 40 percent since
1969. We worked with our
packaging suppliers to develop
water-based coatings and
compounds to replace solvent-
based materials in our manu-
facturing processes, resulting
in a significant reduction in
volatile organic compounds.
And our aerospace and
packaging businesses use
a system that prevents the
purchase of materials flagged
for environmental or health
and safety criteria.

Ball established a company-

wide task force in 2007 to
identify important sustainability
issues. In mid-2008, Ball will
publish its first sustainability
report, which will be a
catalyst for improvement
and further engagement
with our stakeholders.

Our core purpose requires
that we ask how we can make it
better, be better and do better,
for our own good and the good
of those who have a stake in our
success. Formalizing our sus -
tainability efforts comple ments
our core purpose and offers new
opportunities to achieve it.

A Ball strongly supports organizations such as recan and the recal foundation in Serbia, Poland
(shown here) and China, which conduct activities for consumers to learn more about the benefits
of recycling.
b Ball is replacing older high-intensity discharge lighting systems in our North American
packaging plants with high-intensity fluorescent lighting systems, which are about 50 percent
more energy efficient.
c Installing more efficient manifolds like this one optimizes compressed air use in our
manufacturing operations, reducing energy needs in some processes by 40 percent.
d NASA Goddard Space Flight Center awarded Ball Aerospace in 2007 a contract to build
the Operational Land Imager for the eighth Landsat Data Continuity Mission. The Landsat
Program provides multispectral imagery for applications such as agricultural monitoring,
natural resource management and land-use planning.

Ball Corporation 2007 Annual Report

Ball Aerospace Marks A Record Year
Ball Aerospace & Technologies Corp., had its best year
ever, reporting sales of $788 million and earnings of
$64.6 million in 2007.

Ball Aerospace began the year by being selected
in January by DigitalGlobe®, provider of the world’s
highest resolution commercial satellite imagery and
geospatial information products, to build WorldView-2,
its third satellite in a constellation of spacecraft that
offer the highest-resolution commercial imagery
of Earth.

In 2008, the Hubble Space Telescope will receive two Ball
Aerospace-built upgrades, the Cosmic Origins Spectrograph
and the Wide Field Camera 3. They will help extend the
operating life of the telescope until at least 2013, and
greatly enhance its scientific capability. (Image courtesy
of NASA)

We finished 2007 with the exciting news that the
flyby spacecraft built for the successful Deep Impact
mission in 2005 has been funded by NASA to embark
on a new mission to encounter comet Hartley 2 on
October 11, 2010.

In between, Ball Aerospace built a contract backlog
of $774 million and continued to pursue three strategic growth areas – intelligence, surveillance
and reconnaissance; weather and environment; and space superiority. Our track record of growing
organically by focusing on existing core competencies positions us well for continued success.

Expanding Sustainability Practices In Our Operations Worldwide

Sustainability practices are not new to Ball Corporation. For decades our company’s economic
success has depended significantly on our ability to reduce, reuse and recycle through innovations
in our processes and our products. Ball launched a formal sustainability initiative in 2007 with the
creation of a companywide task force. We developed new processes to gather sustainability data and
identified the company’s key opportunities in this arena. In mid-2008, we will include our findings
in our first sustainability report.

Sustainability is a critical business issue. There is no question that it will be a differentiator for us
as a company with customers and other important stakeholders, just as our culture, our technology
and our expertise are differentiators.

Our focus is to find the overlap between our business interests and the interests of the environment

and society. We plan to measure our progress in terms of the triple bottom line – environmental,
social and economic impact and performance. As we expand our sustainability efforts, we are
confident that we are on the right path for our business, our employees and our shareholders.

Pursuing Opportunities In 2008

Ball Corporation reported strong results in 2007, in a year when approximately 75 percent of our
company performed well. We plan to strategically grow our worldwide beverage can business in
2008 through building new facilities or expanding existing facilities in growing markets, and to
maintain our emphasis on our company’s specialty can business. As our customers look for ways to
further differentiate their products, we will continue to offer innovative solutions – specialty sizes
and features that add value – across multiple packaging substrates.

The further restructuring and integration of our metal food and household products packaging

and plastic packaging businesses better position them for improved performance. We are also
expanding throughout the company the implementation of an initiative that we began in our metal
food container facilities to reduce costs and operate more efficiently. We believe those actions will
lead to significant benefits.

Ball Corporation 2007 Annual Report

There is no question that sustainability will be a
There is no question that sustainability will be a
differentiator for us as a company, just as our culture,
our technology and our expertise are differentiators.

Comparison of Year-End Value of $100 Invested December 31, 1997

BLL

$350

$500

$400

$550

$450

$600

S&P 500

Dow Containers

Ball Aerospace is leveraging
its core competencies to continue
to expand our business. We are
excited to be part of contracts
such as WorldView-2 and the
Advanced Airborne Telemetry
System for the U.S. Navy, as
well as other new and existing
Department of Defense and
science programs. The timing
of these and other programs as
they either ramp up or approach
delivery has a significant effect
on Ball Aerospace’s results, and
while 2008 may not be another record year, it should continue to build on our success.

At Fiscal Year-End 97

$150

$250

$100

$200

$300

$50

100.00 131.36 114.67 136.67 212.27 309.87 363.93 542.53 494.88 548.64 570.87
Ball. Corp.
S&P 500
100.00 128.58 155.64 141.46 124.65 97.10 124.96 138.55 145.36 168.32 177.57
Dow Containers 100.00 89.69 85.66 55.62 69.88 75.18 89.52 107.11 106.43 119.30 127.33

Howard M. Dean, who has been a member of Ball Corporation’s board of directors since 1984,
will retire from our board in 2008. Howard’s many contributions to Ball over the years are greatly
appreciated. In January, the board of directors elected Robert W. Alspaugh, former chief executive
officer of KPMG International, to the board. Bob has worked with a diverse array of clients across
many industries, including manufacturing, and his global expertise will benefit Ball as we continue
to expand our business in new and developing markets.

I am excited about the opportunities in front of us and the management team we have in place
to capitalize on those opportunities. We intend to execute on our strategy to grow our worldwide
beverage can business and our aerospace business, to improve our food and household products
packaging and plastic packaging businesses and to use our cash flow and earnings growth to increase
shareholder value through share repurchases, strategic investment in our businesses and dividends.
While 2008 will not be without its challenges, we have faced challenges many times during
our 128-year history. Each time our employees – the heart of our company and the single biggest
reason for our longevity – have risen to meet them. I fully expect it will happen again and that
Ball Corporation will continue to create and return value to our shareholders.

R. David Hoover
Chairman, President and Chief Executive Officer

Ball Corporation 2007 Annual Report

Ten-Year Review of Selected Financial Data

Ball Cor por ati on and Subsidiaries

($ in millions, except per share amounts)

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

Net sales . . . . . . . . . . . . . . . . . . . $ 7,475.3 $ 6,621.5 $ 5,751.2 $ 5,440.2 $ 4,977.0 $ 3,858.9 $ 3,686.1 $ 3,664.7 $ 3,707.2 $ 2,995.7
Legal settlement . . . . . . . . . . . . .
−

(85.6)

−

Total net sales . . . . . . . . . . . . . . . $ 7,389.7 $ 6,621.5 $ 5,751.2 $ 5,440.2 $ 4,977.0 $ 3,858.9 $ 3,686.1 $ 3,664.7 $ 3,707.2 $ 2,995.7

Net earnings (loss)(1) . . . . . . . . . . $ 281.3 $ 329.6 $ 272.1 $ 302.1 $ 232.2 $ 152.6 $ (100.6) $
Preferred dividends, net of tax . .

(2.0)

−

74.1 $ 100.8 $
(2.6)

(2.7)

11.7
(2.8)

Earnings (loss) attributable to

common shareholders(1). . . . . . $ 281.3 $ 329.6 $ 272.1 $ 302.1 $ 232.2 $ 152.6 $ (102.6) $

71.5 $ 98.1 $

8.9

Return on average common

shareholders’ equity . . . . . . . . . 22.4%

32.7%

27.9%

31.8%

35.7%

30.6%

(17.9)%

11.0%

15.7%

1.5%

Basic earnings (loss)

per share(1)(2) . . . . . . . . . . . . . . $

2.78 $

3.19 $

2.52 $ 2.73 $ 2.08 $

1.35 $ (0.93) $ 0.62 $ 0.81 $ 0.07

Weighted average common

shares outstanding (000s)(2) . . 101,186

103,338

107,758

110,846

111,710

112,634

109,759

116,160

120,681

121,552

Diluted earnings (loss)

per share(1)(2) . . . . . . . . . . . . . . . $

2.74 $

3.14 $ 2.48 $ 2.65 $ 2.03 $

1.33 $ (0.93) $

0.58 $ 0.76 $ 0.07

Diluted weighted average

common shares
outstanding (000s)(2) . . . . . . . 102,760

Property, plant and

104,951

109,732

113,790

114,275

115,076

109,759

124,068

129,798

130,368

equipment additions(3) . . . . . . $ 308.5 $ 279.6 $ 291.7 $ 196.0 $ 137.2 $ 158.4 $ 68.5 $ 98.7 $ 107.0 $ 84.2
Depreciation and amortization . . $ 281.0 $ 252.6 $ 213.5 $ 215.1 $ 205.5 $ 149.2 $ 152.5 $ 159.1 $ 162.9 $ 145.0
Total assets . . . . . . . . . . . . . . . . . $ 6,020.6 $ 5,840.9 $ 4,361.5 $ 4,485.0 $ 4,070.4 $ 4,130.9 $ 2,315.7 $ 2,653.2 $ 2,729.6 $ 2,855.6

Total interest bearing debt and

capital lease obligations . . . . . . $ 2,358.6 $ 2,451.7 $ 1,589.7 $ 1,660.7 $ 1,686.9 $ 1,981.0 $ 1,064.1 $ 1,137.3 $ 1,196.7 $ 1,356.6
Common shareholders’ equity . . . $ 1,342.5 $ 1,165.4 $ 853.4 $ 1,093.9 $ 808.6 $ 491.4 $ 506.2 $ 643.0 $ 652.7 $ 595.4
Market capitalization(4) . . . . . . . . $ 4,510.1 $ 4,540.4 $ 4,138.8 $ 4,956.2 $ 3,359.1 $ 2,904.8 $ 2,043.8 $ 1,292.0 $ 1,174.0 $ 1,393.3
Net debt to

48.9%

market capitalization(4) . . . . . .
94.9%
Cash dividends per share(2) . . . . . $
0.15 $ 0.15 $
0.15
Book value per share(2) . . . . . . . . $ 13.39 $ 11.19 $
5.73 $ 5.47 $ 4.89
Market value per share(2) . . . . . . . $ 45.00 $ 43.60 $ 39.72 $ 43.98 $ 29.785 $ 25.595 $ 17.675 $ 11.515 $ 9.845 $ 11.44
Annual return (loss) to

0.40 $ 0.40 $ 0.40 $
8.19 $

0.18 $
0.15 $
7.17 $ 4.33 $ 4.38 $

0.35 $ 0.24 $
9.71 $

50.7%

86.0%

49.1%

59.3%

48.0%

29.5%

36.9%

98.9%

common shareholders(5) . . . . .

4.0%

10.9%

Working capital . . . . . . . . . . . . . . $ 329.8 $ 307.0 $

(8.8)%

48.8%

31.4%
67.9 $ 256.6 $ 63.2 $ 154.1 $ 220.9 $ 313.6 $ 223.2 $ 198.8

46.0%

19.2%

55.3%

17.4%

(12.7)%

Current ratio . . . . . . . . . . . . . . . .

1.22

1.21

1.06

1.26

1.07

1.14

1.38

1.48

1.33

1.29

(1) Includes business consolidation activities and other items affecting comparability between years of after-tax expense of $27 million, $20.5 million and $13.4 million in
2007, 2006 and 2005, respectively, after-tax income of $9.5 million, $2.3 million and $0.5 million in 2004, 2003 and 2002, respectively, and after-tax expenses of
$205.2 million in 2001. 2007 net sales have been reduced by a pretax legal settlement of $85.6 million ($51.8 million after tax) while 2006 net earnings include a
$46.1 million after-tax gain related to insurance proceeds in connection with a fire at one of Ball’s German plants. Also includes $12.3 million, $9.9 million and
$3.2 million of after-tax debt refinancing costs in 2005, 2003 and 2002, respectively, reported as interest expense. Additional details about the 2007, 2006 and 2005
items are available in Notes 4, 5, 6 and 13 to the consolidated financial statements within Item 8 of the included Form 10-K.
(2) Amounts have been retrospectively adjusted for two-for-one stock splits effected on August 23, 2004, and February 22, 2002.
(3) Amount in 2007 and 2006 do not include the offsets of $48.6 million and $61.3 million, respectively, of insurance proceeds received to replace fire-damaged assets in our

Hassloch, Germany, plant.

(4) Market capitalization is defined as the number of common shares outstanding at year end, multiplied by the year-end closing price of Ball common stock. Net debt is total

debt less cash and cash equivalents.

(5) Change in stock price plus dividend yield assuming reinvestment of all dividends paid.

Ball Corporation 2007 Annual Report

Directors, Corporate and Operating Management

Directors

Robert W. Alspaugh
Retired chief executive officer
of KPMG International of
New York City

Hanno C. Fiedler
Retired chairman and
chief executive officer
of Ball Packaging Europe

R. David Hoover
Chairman of the board,
president and chief executive
officer of Ball Corporation

John F. Lehman
Chairman of J.F.
Lehman & Company
of New York City

Georgia R. Nelson
President and chief executive
officer of PTI Resources,
L.L.C., of Chicago

Jan Nicholson
President of
The Grable Foundation
of Pittsburgh

George M. Smart
Retired president of
Sonoco-Phoenix, Inc.,
of Canton, Ohio

Theodore M. Solso
Chairman and chief executive
officer of Cummins Inc. of
Columbus, Indiana

Stuart A. Taylor II
Chief executive officer
of The Taylor Group,
L.L.C., of Chicago

Erik H. van der Kaay
Retired chairman of the
board of Symmetricom
of San Jose, California

Committees

Audit
Robert W. Alspaugh
Jan Nicholson
George M. Smart
Theodore M. Solso
Erik H. van der Kaay

Finance
Hanno C. Fiedler
John F. Lehman
Jan Nicholson
Erik H. van der Kaay

Human Resources
Georgia R. Nelson
George M. Smart
Theodore M. Solso
Stuart A. Taylor II

Nominating /
Corporate Governance
Robert W. Alspaugh
John F. Lehman
Georgia R. Nelson
Stuart A. Taylor II

Director Retirement

Howard M. Dean, the longest-serving member of Ball’s board of
directors, will retire from our board in 2008. Howard provided
a steady and experienced voice to our board for 24 years, as Ball
Corporation grew from a U.S. company with sales of $1 billion to an
international enterprise with annual sales of more than $7 billion.
Ball Corporation and its employees thank Howard for his many
contributions and wish him well.

Director Emeritus

John W. Fisher
Chairman of the board emeritus; retired chairman, president and
chief executive officer of Ball Corporation

Corporate and Operating Management

Charles E. Baker
Vice president, general counsel and
assistant corporate secretary

Douglas K. Bradford
Vice president and controller

Michael W. Feldser
President, metal food & household
products packaging division, Americas

John R. Friedery
Senior vice president, Ball Corporation;
president, metal beverage packaging,
Americas and Asia

Larry J. Green
President, plastic packaging division, Americas

John A. Hayes
Executive vice president and chief operating officer

Harold L. Sohn
Senior vice president, corporate relations

Michael D. Herdman
President, Ball Packaging Europe

R. David Hoover
Chairman of the board, president
and chief executive officer

Scott C. Morrison
Vice president and treasurer

Lisa A. Pauley
Vice president, administration and compliance

Raymond J. Seabrook
Executive vice president and chief financial officer

David L. Taylor
President and chief executive officer,
Ball Aerospace & Technologies Corp.

Terence P. Voce
Chairman and chief executive officer,
Ball Asia Pacific Ltd.

David A. Westerlund
Executive vice president, administration,
and corporate secretary

Leroy J. Williams
Vice president, information technology
and services

Ball Corporation 2007 Annual Report

Shareholder Information

Quarterly Stock Prices and Dividends
Quarterly prices for the company’s common stock, as reported
on the composite tape, and quarterly dividends in 2007 and
2006 were:

2007

4th

3rd

2nd

1st

Quarter Quarter Quarter Quarter

High . . . . . . . . . . . . . . $ 56.05 $ 55.87 $ 55.75 $ 47.91

Low . . . . . . . . . . . . . . . 43.99 46.75

45.85 43.51

Dividends per share . . .

.10

2006

4th

3rd

2nd

1st

Quarter Quarter Quarter Quarter

High . . . . . . . . . . . . . . . $ 44.08 $ 41.76 $ 44.34 $ 45.00

Low . . . . . . . . . . . . . . . . 39.67 35.03

34.16

38.53

Dividends per share . . . .

.10

Quarterly Results and Company Information
Quarterly financial information and company news are posted
on www.ball.com. For investor relations call (303) 460-3537.

Purchase Plan
A dividend reinvestment and voluntary stock purchase plan
for Ball Corporation shareholders permits purchase of the
company’s common stock without payment of a brokerage
commission. Participants in this plan may have cash dividends
on their shares automatically reinvested and, if they choose,
invest by making optional cash payments. Additional information
on the plan is available by writing Computershare, Dividend
Reinvestment Service, P.O. Box 43081, Providence, RI
02940-3081. The toll-free number is (800) 446-2617, and
the Web site is www.computershare.com/investor. You can
access your Ball Corporation common stock account
information on the Internet 24 hours a day, 7 days a week
through Computershare’s Web site. If you need assistance,
please call Computershare at (877) 843-9327 between 8 a.m.
and 5 p.m. Eastern time.

Annual Meeting
The annual meeting of Ball Corporation shareholders will
be held to tabulate the votes cast and to report the results
of voting on the matters listed in the proxy statement sent to all
shareholders. No other business and no presentations are planned.
The meeting to report voting results will be held on Wednesday,
April 23, 2008, at 9 a.m. (MDT) at Ball Corporation’s
headquarters in Broomfield, Colo.

Annual Report on Form 10-K
The Annual Report on Form 10-K for 2007 filed by the
company with the United States Securities and Exchange
Commission is enclosed.

Certifications
The company has filed with the New York Stock Exchange
the chief executive officer’s annual certification regarding
compliance with the NYSE’s corporate governance listing
standards. The company also has filed with the United States
Securities and Exchange Commission all required certifications
by its chief executive officer and its chief financial officer
regarding the quality of the company’s public disclosures.

Transfer Agents
Computershare
P.O. Box 43069
Providence, RI 02940-3069

Registrars
Computershare
P.O. Box 43069
Providence, RI 02940-3069

Investor Relations
Ann T. Scott
Director, Investor Relations
Ball Corporation
P.O. Box 5000
Broomfield, CO 80038-5000
(303) 460-3537

Equal Opportunity
Ball Corporation is an equal opportunity employer.

Ball Corporation 2007 Annual Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2007
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number 1-7349
Ball Corporation
State of Indiana 35-0160610
10 Longs Peak Drive, P.O. Box 5000
Broomfield, Colorado 80021-2510
Registrant’s telephone number, including area code: (303) 469-3131
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Stock, without par value

Name of each exchange
on which registered
New York Stock Exchange
Chicago Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES [X] NO [ ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES [ ] NO [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [X]

Accelerated filer [ ]

Non-accelerated filer [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES [ ] NO [X]

The aggregate market value of voting stock held by non-affiliates of the registrant was $5,445 million based upon the
closing market price and common shares outstanding as of July 1, 2007.

Number of shares outstanding as of the latest practicable date.

Class
Common Stock, without par value

Outstanding at February 3, 2008
97,547,020

DOCUMENTS INCORPORATED BY REFERENCE

1. Proxy statement to be filed with the Commission within 120 days after December 31, 2007, to the extent indicated in

Part III.

Ball Corporation and Subsidiaries
ANNUAL REPORT ON FORM 10-K
For the year ended December 31, 2007

INDEX

PART I.

Information about the business

Page Number

Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Submission of Matters to a Vote of Security Holders

Market for the Registrant’s Common Stock and Related Stockholder Matters
Five-Year Review of Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of

Operations

Forward-Looking Statements
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Earnings for the Years Ended December 31, 2007,

2006 and 2005

Consolidated Balance Sheets at December 31, 2007, and December 31, 2006
Consolidated Statements of Cash Flows for the Years Ended December 31,

2007, 2006 and 2005

Consolidated Statements of Shareholders’ Equity and Comprehensive Earnings

for the Years Ended December 31, 2007, 2006 and 2005

Notes to Consolidated Financial Statements
Changes in and Disagreements with Accountants on Accounting and

Financial Disclosure
Controls and Procedures
Other Information

Directors and Executive Officers of the Registrant
Executive Compensation
Security Ownership and Certain Beneficial Owners and Management
Certain Relationships and Related Transactions
Principal Accountant Fees and Services

Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.

PART II.

Item 5.
Item 6.
Item 7.

Item 7A.
Item 8.

Item 9.

Item 9A.
Item 9B.

PART III.

Item 10.
Item 11.
Item 12.
Item 13.
Item 14.

PART IV.

Item 15.

Exhibits, Financial Statement Schedules

Index to Exhibits

1
9
14
14
17
19

19
21

22
33
34
36
36

37
38

40
41

86
86
86

87
88
88
88
88

Item 1. Business

PART I

Ball Corporation (Ball, we, the company or our) is one of the largest packaging companies in the world. Our
predecessor company, Ball Brothers Glass Manufacturing Company, was founded in 1880 by five Ball brothers.
Today, in addition to metal and plastic packaging products, we provide aerospace products and services through a
wholly owned subsidiary, Ball Aerospace & Technologies Corp. (Ball Aerospace). In 2007 our total consolidated net
sales were $7.4 billion. Packaging is responsible for 89 percent of that number; Ball Aerospace contributes the rest.

We are headquartered in Broomfield, Colorado, and employ approximately 15,500 people worldwide. Our stock is
traded on the New York Stock Exchange and the Chicago Stock Exchange under the ticker symbol BLL.

Today, Ball’s packaging businesses make metal and plastic packaging for beverages, foods and household products.
Our largest product lines are aluminum and steel beverage cans, which contributed 63 percent of our 2007 total net
sales and 85 percent of our 2007 total segment earnings before interest and taxes. We also produce steel food cans,
steel aerosol cans, polyethylene terepthalate (PET) and polypropylene plastic bottles for beverages and foods,
plastic pails, steel paint cans and decorative steel tins. Our ongoing packaging business dates back to 1969 when
Ball began supplying beverage cans.

Ball Aerospace is a leader in the design, development and manufacture of innovative aerospace systems. It produces
spacecraft, instruments and sensors, radio frequency and microwave technologies, data exploitation solutions and a
variety of advanced aerospace technologies and products that enable deep space missions. Our packaging and
aerospace businesses share a long history and a common financial philosophy, and we benefit from the presence of
each.

Our corporate strategy is to grow our worldwide beverage can business and our U.S. aerospace business, to improve
the performance of the metal food and household products packaging, Americas, and plastic packaging, Americas,
segments and to utilize free cash flow and earnings growth to increase shareholder value.

Our Financial Philosophy

Ball Corporation maintains a clear and disciplined financial strategy focused on improving shareholder returns
through:

• Long-term earnings per share growth of 10 percent to 15 percent over time
•
•

Increasing Economic Value Added (EVA®)
Focusing on free cash flow generation

The compensation of a majority of our employees is tied directly to the company’s performance through our EVA®
incentive program. When the company performs well, our employees are paid more. If the company doesn’t
perform well, our employees get paid less or no incentive compensation.

We use free cash flow as a lever as we manage our capital structure. The cash generated by our businesses is used
primarily: (1) to evaluate the company's operating results, (2) to plan stock buy-back levels, (3) to evaluate strategic
investments and (4) to evaluate the company's ability to incur and service debt. We also will, when we believe it
will benefit the company and our shareholders, make strategic acquisitions or divest parts of our business.

Page 1 of 94

Our Core Purpose and Values

We believe that our core purpose and core values are integral to our company’s performance. They play an
important role in our relationships with employees, customers, suppliers, investors and other key stakeholders. We
realize that other companies have similar principles, under a variety of names. The proof is in the way a company
and its employees conduct business every day. Ball Corporation has existed for 128 years. We believe our core
purpose and core values have had much to do with our longevity and success.

Ball Corporation is in business to add value to all of its stakeholders, whether it is providing quality products and
services to customers, an attractive return on investment to shareholders, a meaningful work life for employees or a
contribution of time, effort and resources to our communities. In all of our interactions, we ask how we can get
better for our own good and the good of those who have a stake in our success. Our core values include integrity,
respect, motivation, flexibility, innovation and teamwork.

Information Pertaining to Our Packaging Business

A substantial part of Ball’s packaging sales are made directly to companies in packaged beverage and food
businesses, including SABMiller and bottlers of Pepsi-Cola and Coca-Cola branded beverages and their affiliates
that utilize consolidated purchasing groups. Sales to SABMiller plc and PepsiCo, Inc., represented 11 percent and
9 percent of Ball’s consolidated net sales, respectively, for the year ended December 31, 2007. Additional details
about sales to major customers are included in Note 2 to the consolidated financial statements, which can be found
in Item 8 of this Annual Report (Financial Statements and Supplementary Data).

Our principal packaging businesses are the manufacture and sale of aluminum, steel, polyethylene terephthalate
(PET) and polypropylene containers, primarily for beverages, foods and household products. Our packaging
products are sold in highly competitive markets, primarily based on quality, service and price. The packaging
business is capital intensive, requiring significant investment in machinery and equipment.

Profitability is sensitive to selling prices, production volumes, labor, transportation, utility and warehousing costs,
as well as the availability and price of raw materials, such as aluminum, steel, plastic resin and other direct
materials. These raw materials are generally available from several sources, and we have secured what we consider
to be adequate supplies and are not experiencing any shortages. There is a high concentration of suppliers in both
North America and in Europe. In North America two steel suppliers provide more than 70 percent of our tinplate
steel and four aluminum suppliers provide virtually all of our requirements. In Europe, three steel suppliers and
three aluminum suppliers provide approximately 95 percent of our requirements.

We believe we have limited our exposure related to changes in the costs of aluminum, steel and plastic resin as a
result of: (1) the inclusion of provisions in most aluminum container sales contracts to pass through aluminum cost
changes, as well as the use of derivative instruments, (2) the inclusion of provisions in certain steel container sales
contracts to pass through steel cost changes and the existence of certain other steel container sales contracts that
incorporate annually negotiated metal costs and (3) the inclusion of provisions in substantially all plastic container
sales contracts to pass through resin cost changes. In 2007 we were able to pass through the majority of steel cost
increases levied by producers, and we continually attempt to reduce manufacturing and other material costs as much
as possible. While raw materials and energy sources, such as natural gas and electricity, may from time to time be in
short supply or unavailable due to external factors, and the pass through of steel and aluminum costs to our
customers may be limited in some instances, we cannot predict the timing or effects, if any, of such occurrences on
future operations.

Research and development (R&D) efforts in the North American packaging segments, as well as in the European
metal beverage container business, are primarily directed toward packaging innovation, specifically the
development of new sizes and types of containers, as well as new uses for the current containers. Other R&D efforts
in these segments seek to improve manufacturing efficiencies. Our North American packaging R&D activities are
primarily conducted in the Ball Technology & Innovation Center (BTIC) located in Westminster, Colorado. The
European R&D activities are primarily conducted in a technical center located in Bonn, Germany.

Page 2 of 94

Our Reporting Segments

Ball Corporation reports its financial performance in five segments – metal beverage packaging, Americas; metal
beverage packaging, Europe/Asia; metal food and household products packaging, Americas; plastic packaging,
Americas; and aerospace and technologies. The segments are organized on a product line and geographic market
basis. Prior periods required to be shown in this Annual Report on Form 10-K (Annual Report) have been
conformed to the current presentation.

Metal Beverage Packaging, Americas, Segment

Industry Background

According to publicly available information and company estimates, the combined U.S. and Canada metal beverage
container markets decreased in 2007 to 105 billion units from 106 billion units in 2006. Four companies
manufacture substantially all of the metal beverage containers in the U.S. and Canada. Two of these producers and
three other independent producers also manufacture metal beverage containers in Mexico. Ball produced nearly
33 billion recyclable beverage cans in the U.S. and Canada in 2007 – about 31 percent of the total market. Sales
volumes of metal beverage containers in North America tend to be highest during the period from April through
September. All of the beverage cans produced by Ball in the U.S. and Canada are made of aluminum.

Beverage container production capacity in the U.S., Canada and Mexico exceeds demand. In order to more closely
balance capacity and demand within our business, from time to time we consolidate our can and end manufacturing
capacity into fewer, more efficient facilities, and we are actively considering additional plant rationalizations. We
also attempt to efficiently match capacity with the changes in customer demand for our packaging products. To that
end, during 2005 Ball commenced a project to upgrade and streamline its North American beverage can end
manufacturing capabilities, a project expected to result in productivity improvements and reduced manufacturing
costs. We have installed the majority of production modules in this multi-year project, the final modules are in the
design and installation phase and the project is expected to be mostly completed in 2009. In connection with this
project, the can end manufacturing operations at the Reidsville, North Carolina, plant were shut down during the
fourth quarter of 2006.

The aluminum beverage can competes aggressively with other packaging materials. The glass bottle has shown
resilience in the packaged beer industry, while the PET container continues its growth in the carbonated soft drink
and water industry. In Canada, metal beverage containers have captured significantly lower percentages of
packaged beverage industry volumes than in the U.S., particularly in the packaged beer industry.

The 2006 recycling rate in the United States for aluminum cans was 52 percent, the highest recycling rate for any
beverage container. The aluminum can sheet we currently buy contains an average of 41 percent post consumer
recycled content and approximately 9 percent post industrial content, reducing the amount of virgin material to
50 percent.

Ball’s Operations

Metal beverage packaging, Americas, represents Ball’s largest segment, accounting for 37 percent of consolidated
net sales in 2007. Metal beverage containers are primarily sold under multi-year supply contracts to fillers of
carbonated soft drinks, beer, energy drinks and other beverages. Decorated two-piece aluminum beverage cans are
produced at 16 manufacturing facilities in the U.S. and one each in Canada and Puerto Rico. Can ends are produced
within three of the U.S. facilities, as well as in a fourth facility that manufactures only ends.

Through Rocky Mountain Metal Container, LLC, a 50/50 joint venture, which is accounted for as an equity
investment, Ball and Coors Brewing Company (Coors), a wholly owned subsidiary of Molson Coors Brewing
Company, operate beverage can and end manufacturing facilities in Golden, Colorado. Coors and our largest North
American brewery customer, Miller Brewing Company, have announced plans to combine their U.S. businesses in
2008, subject to regulatory approvals. We also participate in a 50/50 joint venture in Brazil, Latapack-Ball
Embalagens, Ltda., that manufactures aluminum cans and ends and is accounted for as an equity investment.

Page 3 of 94

Metal Beverage Packaging, Europe/Asia, Segment

Industry Background

The European beverage can market is approximately 50 billion cans, about half the size of the North American
beverage can market. The European market is growing significantly, however, and is highly regional in terms of
growth and packaging mix. Growth in central and eastern Europe has been particularly strong in recent years. In
Poland alone, the beverage can market grew by approximately 30 percent from 2006 to 2007. In Germany, the
return of the beverage can market is continuing after it was essentially eliminated in 2003 due to issues surrounding
the implementation of mandatory deposit legislation. Total production grew to about 3.2 billion cans in 2007, still
far below its peak of 7.3 billion cans in 2001. However, the German consumption is only approximately 500 million
cans while the majority of German production is still being exported.

Sales volumes of metal beverage containers in Europe tend to be highest during the period from May through
August with a smaller increase in demand during the Christmas season. As in North America, the metal beverage
container competes aggressively with other packaging materials used by the European beer and carbonated soft
drink industries. The glass bottle is heavily utilized in the packaged beer industry, while the PET container is
increasingly utilized in the carbonated soft drink, juice and mineral water industries. Recycling rates vary
throughout Europe, but average around 53 percent for aluminum and steel containers, which exceeds the European
Union’s goal of 50 percent recycling for metals. Due in part to the intrinsic value of aluminum and steel, metal
packaging recycling rates in Europe compare favorably to those of other packaging materials. Ball’s European
operations helped establish and financially support recycling initiatives in growing markets such as Poland, Serbia
and the People’s Republic of China (PRC) to educate consumers about the benefits of recycling aluminum and steel
cans and to increase recycling rates.

The beverage can market in the PRC is approximately 11 billion cans, of which Ball’s consolidated operations
represent an estimated 22 percent, with an additional 13 percent manufactured by two joint ventures in which we
participate. Six other manufacturers make up the remainder of the market. Capacity grew rapidly in the PRC in the
late 1990s, resulting in a supply/demand imbalance. A number of can makers, including Ball, responded by
rationalizing capacity. Demand growth has resumed and projected annual growth is expected to be in the 6 percent
range in the near term.

Ball’s Operations

Ball Packaging Europe is the largest metal beverage container manufacturer in Germany, France and the Benelux
countries and the second largest metal beverage container manufacturer in the United Kingdom and Poland. Ball
Asia Pacific Limited is one of the largest manufacturers of beverage cans in China.

The metal beverage packaging, Europe/Asia, segment, which accounted for 26 percent of Ball’s consolidated net
sales in 2007, consists of 10 beverage can plants and two beverage can end plants in Europe, as well as operations
in the PRC. Of the 12 European plants, four are located in Germany, three in the United Kingdom, two in France
and one each in the Netherlands, Poland and Serbia. The European plants produced slightly more than 14 billion
cans in 2007, with approximately 60 percent of those being produced from aluminum and 40 percent from steel. Six
of the can plants use aluminum and four use steel. We have also announced plans to construct a second beverage
can plant in Poland with production scheduled to commence in 2009. Overall, Ball Packaging Europe is the second
largest metal beverage container producer in Europe, with an estimated 29 percent of European shipments, and
produces two-piece beverage cans and can ends for producers of beer, carbonated soft drinks, mineral water, fruit
juices, energy drinks and other beverages.

On April 1, 2006, a fire in our Hassloch, Germany, plant damaged the majority of the plant’s building and
machinery and equipment. Property insurance proceeds largely covered equipment replacement and clean-up costs,
and business interruption insurance proceeds generally covered lost volumes and other costs. In June 2007 we
successfully started up a rebuilt Hassloch plant, which operates two steel beverage can manufacturing lines. Also in
the first half of 2007, we started up a new aluminum beverage can manufacturing line in our Hermsdorf, Germany,
plant.

Page 4 of 94

In 2005 Ball completed the construction of an aluminum beverage can manufacturing plant in Belgrade, Serbia, to
serve the growing demand for beverage cans in southern and eastern Europe. Ball announced plans in January 2008
to build a new beverage can manufacturing plant in Poland in order to meet the rapidly growing demand for
beverage cans there and elsewhere in central and eastern Europe. The plant will be built in Lublin, which is in
eastern Poland near the borders of Belarus and Ukraine. It will initially have one production line with an annual
capacity of approximately 750 million cans per year and is expected to begin production in the first half of 2009. In
addition during the fourth quarter of 2007, Ball announced plans for a beverage can plant in India that primarily will
use existing manufacturing equipment from other Ball facilities.

European raw material supply contracts are generally for a period of one year, although Ball Packaging Europe has
negotiated some longer term agreements. Aluminum is purchased primarily in U.S. dollars, while the functional
currencies of Ball Packaging Europe and its subsidiaries are non-U.S. dollars. The company minimizes the resulting
foreign exchange rate risk through the use of derivative contracts. In addition, purchase and sales contracts include
fixed price, floating and pass-through pricing arrangements.

Capacity in the PRC has continued to grow in recent years, resulting in a continuing supply/demand imbalance.
Demand growth in the PRC continues to be strong and is projected to grow by approximately 6 percent annually in
the near term. Ball is undertaking selected capacity increases in its existing facilities in order to participate in the
projected growth and may establish or obtain additional manufacturing capacity in the coming years if growth in
demand continues. Our operations include the manufacture of aluminum cans and ends in three plants in the PRC
located in the north, central and south regions. In addition we participate in two joint ventures that manufacture
aluminum cans and ends in the PRC.

We also manufacture and sell high-density plastic containers in two PRC plants primarily servicing the motor oil
industry.

Metal Food & Household Products Packaging, Americas, Segment

Industry Background

The metal food and household products packaging, Americas, segment competes primarily in the steel tinplate food
and aerosol can markets in North America. The steel tinplate food can market consists of approximately 31 billion
cans annually, of which about 40 percent are three-piece cans and 60 percent are two-piece cans. The steel tinplate
aerosol can market is approximately 3.2 billion cans annually. Growth in both markets is expected to be essentially
flat over time. Service, quality and price are important competitive factors.

Sales volumes of metal food containers in North America tend to be highest from June through October as a result
of seasonal fruit, vegetable and salmon packs. We estimate our 2007 shipments of more than 5.6 billion steel food
containers to be approximately 18 percent of total U.S. and Canadian metal food container shipments. We estimate
our aerosol business accounts for approximately 51 percent of total annual U.S. and Canadian steel aerosol
shipments.

Competitors in the metal food container product line include two national and a small number of regional suppliers
and self manufacturers. Several producers in Mexico also manufacture steel food containers. Competition in the
U.S. steel aerosol can market primarily includes two national suppliers. Steel containers also compete with other
packaging materials in the food and household products industry including glass, aluminum, plastic, paper and the
stand-up pouch. As a result, demand for this product line is dependent on product innovation and cost reduction.
Service, quality and price are among the other key competitive factors.

Ball’s Operations

The metal food and household products packaging, Americas, segment accounted for 16 percent of consolidated net
sales in 2007. The two major product lines in this segment are steel food and, subsequent to the acquisition of
U.S. Can in March 2006, aerosol containers.

Page 5 of 94

Ball produces two-piece and three-piece steel food containers and ends for packaging vegetables, fruit, soups, meat,
seafood, nutritional products, pet food and other products. These containers and ends are manufactured in nine
plants in the U.S. and Canada and sold primarily to food processors in North America.

The segment also manufactures and sells aerosol cans, paint cans and custom and specialty containers in eight plants
in the U.S. and is the largest manufacturer of aerosol cans in North America. In addition, the company manufactures
and sells aerosol cans in two plants in Argentina.

In October 2007, as part of a restructuring of Ball’s metal food and household products packaging division,
Americas, Ball announced plans to close aerosol container manufacturing plants in Tallapoosa, Georgia, and
Commerce, California. Ball also announced its intention to exit the custom and decorative tinplate can business
based in its Baltimore, Maryland, manufacturing plant. The company recorded a largely non-cash, after-tax charge
of approximately $27 million in the fourth quarter of 2007, primarily related to the plant closures and equipment
relocation. When completed throughout 2008, the actions are expected to yield annual pretax cost savings in excess
of $15 million and improve the aerosol business’ plant utilization rate to more than 85 percent from about
70 percent.

In December 2006 the company closed a leased facility in Alliance, Ohio, which was one of the manufacturing
locations acquired from U.S. Can, and a metal food can manufacturing plant in Burlington, Ontario, which was part
of the metal food can operations prior to the U.S. Can acquisition. The closure of the Alliance plant was treated as
an opening balance sheet item related to the acquisition. A pretax charge of $33.6 million ($27.4 million after tax)
was recorded in the fourth quarter in respect of the Burlington plant closure. As part of these realignment projects,
responsibility for the U.S. Can plastic container business was transferred to the company’s plastic packaging,
Americas, segment effective January 1, 2007.

Plastic Packaging, Americas, Segment

Industry Background

Demand for containers made of PET and polypropylene has increased in the beverage and food markets, with
improved barrier technologies and other advances. This growth in demand is expected to continue. While PET and
polypropylene beverage containers compete against metal, glass and cardboard, the historical increase in the sales of
PET containers has come primarily at the expense of glass containers and through new market introductions.
Competition in the PET plastic container industry is intense and includes several national and regional suppliers and
self manufacturers, while Ball is one of three major competitors in the polypropylene container industry. Service,
quality and price are important competitive factors with price being by far the most important, resulting in poor
margins for most of the industry. The ability to produce customized, differentiated plastic containers is also a key
competitive factor.

Ball’s Operations

Plastic packaging, Americas, accounted for 10 percent of Ball’s consolidated net sales in 2007. We estimate our
2007 shipments of 6 billion plastic bottles to be approximately 9 percent of total U.S. PET container shipments. In
addition, this segment produced approximately 900 million food and specialty containers during 2007. The
company operates eight plastic container manufacturing facilities in the U.S. and one in Canada.

Most of Ball’s PET containers are sold under long-term contracts to suppliers of bottled water and carbonated soft
drinks, including bottlers of Pepsi-Cola branded beverages and their affiliates that utilize consolidated purchasing
groups. Most of our polypropylene containers are also sold under long-term contracts, primarily to food packaging
companies. Plastic beer containers are being produced for several of our customers, and we are manufacturing
plastic containers for the single serve juice and wine markets. Our line of Heat-Tek® PET plastic bottles for hot-
filled beverages, such as sports drinks and juices, includes sizes from 8 ounces to 64 ounces.

Ball’s emphasis in this segment is on customized, differentiated containers. This includes unique barrier plastics
such as Ball’s Heat-Tek® and SIG Technology AG’s Plasmax® heat set bottles. The company is not investing in
the carbonated soft drink and bottled water business, which is a commodity business, where return on investment
has been unacceptable.

Page 6 of 94

Aerospace and Technologies Segment

Ball’s aerospace and technologies segment, which accounted for 11 percent of consolidated net sales in 2007,
includes national defense solutions, advanced technologies and products, and civil and operational space businesses.
The segment develops spacecraft, sensors and instruments, radio frequency systems and other advanced
technologies for the civil, commercial and national security aerospace markets. The majority of the aerospace and
technologies business involves work under contracts, generally from one to five years in duration, as a prime
contractor or subcontractor for the National Aeronautics and Space Administration (NASA), the U.S. Department of
Defense (DoD) and other U.S. government agencies. Contracts funded by the various agencies of the federal
government represented 84 percent of segment sales in 2007. The percentage representing U.S. government sales
decreased in 2007 due to higher revenues related to the WorldView 1 and WorldView 2 contracts with DigitalGlobe
Inc. WorldView 1 and WorldView 2 are remote sensing satellites used to provide detailed maps and data about the
Earth’s surface for civil government mapping, land-use planning, disaster relief, exploration, defense and
intelligence, and visualization and simulation environments.

Geopolitical events and executive and legislative branch priorities have yielded considerable growth opportunities
in areas matching Ball Aerospace’s core capabilities. However, there is strong competition for new business. The
civil space systems, defense solutions and operational space businesses include hardware, software and services
sold primarily to U.S. customers, with emphasis on space science and exploration, environmental and Earth
sciences, and defense and intelligence applications. Major contractual activities frequently involve the design,
manufacture and testing of satellites, remote sensors and ground station control hardware and software, as well as
related services such as launch vehicle integration and satellite operations.

Other hardware activities include: target identification, warning and attitude control systems and components;
cryogenic systems for reactant storage, and sensor cooling devices using either closed-cycle mechanical
refrigerators or open-cycle solid and liquid cryogens; star trackers, which are general-purpose stellar attitude
sensors; and fast-steering mirrors. Additionally, the aerospace and technologies segment provides diversified
technical services and products to government agencies, prime contractors and commercial organizations for a
broad range of information warfare, electronic warfare, avionics, intelligence, training and space systems needs.

Backlog in the aerospace and technologies segment was $774 million and $886 million at December 31, 2007 and
2006, respectively, and consists of the aggregate contract value of firm orders, excluding amounts previously
recognized as revenue. The 2007 backlog includes $473 million expected to be recognized in revenues during 2008,
with the remainder expected to be recognized in revenues thereafter. Unfunded amounts included in backlog for
certain firm government orders, which are subject to annual funding, were $463 million and $492 million at
December 31, 2007 and 2006, respectively. Year-to-year comparisons of backlog are not necessarily indicative of
the trend of future operations. On December 24, 2007, Ball Aerospace entered into an agreement to sell its small
Australian defense services business to a subsidiary of QinetiQ plc. This sale was completed on February 15, 2008.

The company’s aerospace and technologies segment has contracts with the U.S. government or its contractors that
have standard termination provisions. The government retains the right to terminate contracts at its convenience.
However, if contracts are terminated in this manner, Ball is entitled to reimbursement for allowable costs and profits
on authorized work performed through the date of termination. U.S. government contracts are also subject to
reduction or modification in the event of changes in government requirements or budgetary constraints.

In the opinion of the company, none of its active patents is essential to the successful operation of its business as a
whole.

Patents

Page 7 of 94

Research and Development

Note 20, "Research and Development," in the consolidated financial statements within Item 8 of this report, contains
information on company research and development activity. Additional information is also included in Item 2,
“Properties.”

Sustainability and the Environment

Sustainability is a systematic way of thinking about the things we do every day as a global company and how our
activities interact with our world. Whether it is being more environmentally protective, helping our customers
become more sustainable or investing further in our communities, we are committed to making Ball a more
sustainable enterprise. Environmental awareness, a key component of sustainability, is not new to us. For many
years, we have found ways to reduce our own environmental footprint while providing a safe and healthy
environment for our diverse workforce.

Ball views the global emergence of sustainability as an opportunity. In 2007 we started a formal sustainability
initiative and have created a cross-functional employee task force that is developing processes for capturing
sustainability-related data and identifying existing and new opportunities in all of our activities. We are using the
triple bottom line – environmental, economic and social aspects of sustainability – in our approach. Key issues for
our company include recycling, climate change, energy use, water conservation, diversity and regulated chemicals
and emissions. Those areas of focus may be expanded or become more specific as we continue this process. We
plan to issue a corporate sustainability report in 2008 using the G3 Reporting Framework issued by the Global
Reporting Initiative as a reporting framework. We are engaging our key stakeholders to help us develop and
implement our plans. As we move forward, we will be posting additional information on our website.

Compliance with federal, state and local laws relating to protection of the environment has not had a material
adverse effect upon the capital expenditures, earnings or competitive position of the company. As more fully
described under Item 3, “Legal Proceedings,” the U.S. Environmental Protection Agency and various state
environmental agencies have designated the company as a potentially responsible party, along with numerous other
companies, for the cleanup of several hazardous waste sites. However, the company’s information at this time
indicates that these matters will not have a material adverse effect upon the liquidity, results of operations or
financial condition of the company.

Legislation that would prohibit, tax or restrict the sale or use of certain types of containers, or would require
diversion of solid wastes, including packaging materials, from disposal in landfills, has been or may be introduced
anywhere we operate. While container legislation has been adopted in some jurisdictions, similar legislation has
been defeated in public referenda and legislative bodies in numerous others. The company anticipates that
continuing efforts will be made to consider and adopt such legislation in many jurisdictions in the future. If such
legislation were widely adopted, it potentially could have a material adverse effect on the business of the company,
including its liquidity, results of operations or financial condition, as well as on the container manufacturing
industry generally, in view of the company’s substantial global sales and investment in metal and PET container
manufacturing. However, the packages we produce are widely used and perform well in U.S. states, Canadian
provinces and European countries that have deposit systems.

Employees

At the end of December 2007, the company employed approximately 15,500 people worldwide, including
11,100 employees in the U.S. and 4,400 in other countries. There are an additional 1,000 people employed in
unconsolidated joint ventures in which Ball participates. Approximately one-third of Ball's North American
packaging plant employees are unionized and most of our European plant employees are union workers. Collective
bargaining agreements with various unions in the U.S. have terms of three to five years and those in Europe have
terms of one to two years. The agreements expire at regular intervals and are customarily renewed in the ordinary
course after bargaining between union and company representatives. The company believes that its employee
relations are good and that its safety, training, education and retention practices assist in enhancing employee
satisfaction levels.

Page 8 of 94

Where to Find More Information

Ball Corporation is subject to the reporting and other information requirements of the Securities Exchange Act of
1934, as amended (Exchange Act). Reports and other information filed with the Securities and Exchange
Commission (SEC) pursuant to the Exchange Act may be inspected and copied at the public reference facility
maintained by the SEC in Washington, D.C. The SEC maintains a website at www.sec.gov containing our reports,
proxy materials, information statements and other items. The company also maintains a website at www.ball.com on
which it provides a link to access Ball’s SEC reports free of charge.

The company has established written Ball Corporation Corporate Governance Guidelines; a Ball Corporation
Executive Officers and Board of Directors Business Ethics Statement (Ethics Statement); a Business Ethics booklet;
and Ball Corporation Audit Committee, Nominating/Corporate Governance Committee, Human Resources
Committee and Finance Committee charters. These documents are set forth on the company’s website at
www.ball.com under the section “Investors,” under the subsection “Financial Information,” and under the link
“Corporate Governance.” A copy may also be obtained upon request from the company’s corporate secretary.

The company intends to post on its website the nature of any amendments to the company’s codes of ethics that
apply to executive officers and directors, including the chief executive officer, chief financial officer and controller,
and the nature of any waiver or implied waiver from any code of ethics granted by the company to any executive
officer or director. These postings will appear on the company’s website at www.ball.com under the section
“Investors,” under the subsection “Financial Information,” and under the link “Corporate Governance.”

Item 1A. Risk Factors

Any of the following risks could materially and adversely affect our business, financial condition or results of
operations.

The loss of a key customer could have a significant negative impact on our sales.

While we have diversified our customer base, we do sell a majority of our packaging products to relatively few
major beverage, packaged food and household product companies, some of which operate in North America, South
America, Europe and Asia.

Although more than 70 percent of our customer contracts are long-term, these contracts are terminable under certain
circumstances, such as our failure to meet quality or volume requirements. Because we depend on relatively few
major customers, our business, financial condition or results of operations could be adversely affected by the loss of
any of these customers, a reduction in the purchasing levels of these customers, a strike or work stoppage by a
significant number of these customers' employees or an adverse change in the terms of the supply agreements with
these customers.

The primary customers for our aerospace segment are U.S. government agencies or their prime contractors. These
sales represented approximately 9 percent of Ball's consolidated 2007 net sales. Our contracts with these customers
are subject to several risks, including funding cuts and delays, technical uncertainties, budget changes, competitive
activity and changes in scope.

We face competitive risks from many sources that may negatively impact our profitability.

Competition within the packaging industry is intense. Increases in productivity, combined with existing or potential
surplus capacity in the industry, have maintained competitive pricing pressures. The principal methods of
competition in the general packaging industry are price, service and quality. Some of our competitors may have
greater financial, technical and marketing resources. Our current or potential competitors may offer products at a
lower price or products that are deemed superior to ours.

Page 9 of 94

We are subject to competition from alternative products, which could result in lower profits and reduced cash
flows.

Our metal packaging products are subject to significant competition from substitute products, particularly plastic
carbonated soft drink bottles made from PET, single serve beer bottles and containers made of glass, cardboard or
other materials. Competition from plastic carbonated soft drink bottles is particularly intense in the United States
and the United Kingdom. There can be no assurance that our products will successfully compete against alternative
products, which could result in a reduction in our profits or cash flow.

We have a narrow product range, and our business would suffer if usage of our products decreased.

For the 12 months ended December 31, 2007, 63 percent of our consolidated net sales were from the sale of metal
beverage cans, and we expect to derive a significant portion of our future revenues from the sale of metal beverage
cans. Our business would suffer if the use of metal beverage cans decreased. Accordingly, broad acceptance by
consumers of aluminum and steel cans for a wide variety of beverages is critical to our future success. If demand for
glass and PET bottles increases relative to cans, or the demand for aluminum and steel cans does not develop as
expected, our business, financial condition or results of operations could be materially adversely affected.

Our business, financial condition and results of operations are subject to risks resulting from increased
international operations.

We derived 29 percent of our consolidated net sales from outside of the U.S. for the year ended December 31, 2007.
This sizeable scope of international operations may lead to more volatile financial results and make it more difficult
for us to manage our business. Reasons for this include, but are not limited to, the following:

•

•
•
•
•
•

political and economic instability in foreign markets, including instability that might result from Kosovo’s
recent declaration of independence from Serbia;
foreign governments' restrictive trade policies;
the imposition of duties, taxes or government royalties;
foreign exchange rate risks;
difficulties in enforcement of contractual obligations and intellectual property rights; and
the geographic, language and cultural differences between personnel in different areas of the world.

Any of these factors could materially adversely affect our business, financial condition or results of operations.

We are exposed to exchange rate fluctuations.

For the 12 months ended December 31, 2007, 72 percent of our consolidated net sales were attributable to
operations with the U.S. dollar as their functional currency, 12 percent with the euro as the functional currency and
16 percent were attributable to operations having functional currencies other than the U.S. dollar or the euro.

Our reporting currency is the U.S. dollar. Historically, Ball's foreign operations, including assets and liabilities and
revenues and expenses, have been denominated in various currencies other than the U.S. dollar, and we expect that
our foreign operations will continue to be so denominated. As a result, the U.S. dollar value of Ball's foreign
operations has varied, and will continue to vary, with exchange rate fluctuations. Ball has been, and is presently,
primarily exposed to fluctuations in the exchange rate of the euro, British pound, Canadian dollar, Polish zloty,
Chinese renminbi, Brazilian real, Argentine peso and Serbian dinar.

A decrease in the value of any of these currencies, especially the euro, British pound, Polish zloty, Chinese renminbi
and Canadian dollar, relative to the U.S. dollar, could reduce our profits from foreign operations and the value of
the net assets of our foreign operations when reported in U.S. dollars in our financial statements. This could have a
material adverse effect on our business, financial condition or results of operations as reported in U.S. dollars. In
addition fluctuations in currencies relative to currencies in which the earnings are generated may make it more
difficult to perform period-to-period comparisons of our reported results of operations.

Page 10 of 94

We actively manage our exposure to foreign currency fluctuations, particularly our exposure to fluctuations in the
euro to U.S. dollar exchange rate, in order to mitigate the effect of foreign cash flow and reduce earnings volatility
associated with foreign exchange rate changes. We primarily use forward contracts and options to manage our
foreign currency exposures and, as a result, we experience gains and losses on these derivative positions offset, in
part, by the impact of currency fluctuations on existing assets and liabilities. Our inability to properly manage our
exposure to currency fluctuations could materially impact our results.

Our business, operating results and financial condition are subject to particular risks in certain regions of the
world.

We may experience an operating loss in one or more regions of the world for one or more periods, which could
have a material adverse effect on our business, operating results or financial condition. Moreover, overcapacity,
which often leads to lower prices, exists in a number of regions, including North America, South America and Asia,
and may persist even if demand grows. As growth continues in the European and other markets, other overcapacity
situations could occur as our competitors also expand to meet growth expectations. Our ability to manage such
operational fluctuations and to maintain adequate long-term strategies in the face of such developments will be
critical to our continued growth and profitability.

If we fail to retain key management and personnel, we may be unable to implement our key objectives.

We believe that our future success depends, in part, on our experienced management team. Losing the services of
key members of our management team could make it difficult for us to manage our business and meet our
objectives.

Decreases in our ability to apply new technology and know-how may affect our competitiveness.

Our success depends partially on our ability to improve production processes and services. We must also introduce
new products and services to meet changing customer needs. If we are unable to implement better production
processes or to develop new products, we may not be able to remain competitive with other manufacturers. As a
result, our business, financial condition or results of operations could be adversely affected.

Bad weather and climate changes may result in lower sales.

We manufacture packaging products primarily for beverages and foods. Unseasonably cool weather can reduce
demand for certain beverages packaged in our containers. In addition poor weather conditions or changes in climate
that reduce crop yields of fruits and vegetables can adversely affect demand for our food containers. The effects of
global warming on climate could have various effects on the demand for our products in different regions around
the world.

We are vulnerable to fluctuations in the supply and price of raw materials.

We purchase aluminum, steel, plastic resin and other raw materials and packaging supplies from several sources.
While all such materials are available from independent suppliers, raw materials are subject to fluctuations in price
attributable to a number of factors, including general economic conditions, commodity price fluctuations
(particularly aluminum on the London Metal Exchange), the demand by other industries for the same raw materials
and the availability of complementary and substitute materials. Although we enter into commodities purchase
agreements from time to time and use derivative instruments to hedge our risk, we cannot ensure that our current
suppliers of raw materials will be able to supply us with sufficient quantities at reasonable prices. Increases in raw
material costs could have a material adverse effect on our business, financial condition or results of operations.
Because our North American contracts often pass raw material costs directly on to the customer, increasing raw
material costs may not impact our near-term profitability but could decrease our sales volumes over time. In Europe,
our contracts do not typically allow us to pass on increased raw material costs and we regularly use derivative
agreements to manage this risk. Our hedging procedures may be insufficient and our results could be materially
impacted if materials costs increase.

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Prolonged work stoppages at plants with union employees could jeopardize our financial position.

As of December 31, 2007, approximately one third of our employees in North America and most of our employees
in Europe were covered by one or more collective bargaining agreements. These collective bargaining agreements
have staggered expirations during the next several years. Although we consider our employee relations to be
generally good, a prolonged work stoppage or strike at any facility with union employees could have a material
adverse effect on our business, financial condition or results of operations. In addition, we cannot ensure that upon
the expiration of existing collective bargaining agreements, new agreements will be reached without union action or
that any such new agreements will be on terms satisfactory to us.

Our business is subject to substantial environmental remediation and compliance costs.

Our operations are subject to federal, state and local laws and regulations relating to environmental hazards, such as
emissions to air, discharges to water, the handling and disposal of hazardous and solid wastes and the cleanup of
hazardous substances. The U.S. Environmental Protection Agency has designated us, along with numerous other
companies, as a potentially responsible party for the cleanup of several hazardous waste sites. Based on available
information, we do not believe that any costs incurred in connection with such sites will have a material adverse
effect on our financial condition, results of operations, capital expenditures or competitive position.

There can be no assurance that any acquisition, including the U.S. Can and Alcan businesses, will be
successfully integrated into the acquiring company (see Note 3 to the consolidated financial statements within
Item 8 of this report for details of recent acquisitions).

While we have what we believe to be well designed integration plans, if we cannot successfully integrate U.S. Can’s
and Alcan’s operations with those of Ball, we may experience material negative consequences to our business,
financial condition or results of operations. The integration of companies that have previously been operated
separately involves a number of risks, including difficulties in assimilating and integrating new businesses,
additional demands on management, expenses related to undisclosed or potential liabilities, retention of major
customers and other risks.

Prior to the acquisitions, Ball, U.S. Can and Alcan operated as separate businesses. We may not be able to achieve
potential synergies or maintain the levels of revenue, earnings or operating efficiency that each business had
achieved or might achieve separately. The successful integration of U.S. Can’s and Alcan’s operations will depend
on our ability to manage those operations, realize opportunities for revenue growth presented by strengthened
product offerings and, to some degree, eliminate redundant and excess costs.

If we were required to write down all or part of our goodwill, our net earnings and net worth could be materially
adversely affected.

We have $1,863.1 million of goodwill recorded on our consolidated balance sheet as of December 31, 2007. We
are required to periodically determine if our goodwill has become impaired, in which case we would write down the
impaired portion of our goodwill. If we were required to write down all or a significant part of our goodwill, our net
earnings and net worth could be materially adversely affected.

If the investments in Ball's pension plans do not perform as expected, we may have to contribute additional
amounts to the plans, which would otherwise be available to cover operating expenses.

Ball maintains noncontributory, defined benefit pension plans covering substantially all of its North American and
United Kingdom employees, which we fund based on certain actuarial assumptions. The plans' assets consist
primarily of common stocks, fixed income securities and, in the U.S., alternative investments. Our North American
pension plans were substantially funded as of December 31, 2007. However, if the investments in the plans do not
perform at expected levels or if longevity increases, we will have to contribute additional funds to ensure that the
plans will be able to pay out benefits as scheduled. Such an increase in funding could result in a decrease in our
available cash flow and net earnings, and the recognition of such an increase could result in a reduction to our
shareholders' equity.

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Our significant debt level could adversely affect our financial health and prevent us from fulfilling our
obligations under the notes issued pursuant to our bond indentures.

On December 31, 2007, we had total debt of $2,358.6 million. Our ratio of earnings to fixed charges as of that date
was 3 times (see Exhibit 12 attached to this Annual Report). Our level of debt could have important consequences,
including the following:

•

•
•
•

•

use of a large portion of our cash flow to pay principal and interest on our notes, the credit facilities and
our other debt, which will reduce the availability of our cash flow to fund working capital, capital
expenditures, research and development expenditures and other business activities;
increase our vulnerability to general adverse economic and industry conditions, including the credit risks
stemming from the recent subprime mortgage crisis;
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we
operate;
restrict us from making strategic acquisitions or exploiting business opportunities;
place us at a competitive disadvantage compared to our competitors that have less debt;
limit our ability to make capital expenditures in order to maintain our manufacturing plants in good
working order and repair; and
limit, along with the financial and other restrictive covenants in our debt, among other things, our ability to
borrow additional funds, dispose of assets or pay cash dividends.

In addition approximately one-half of our debt bears interest at variable rates. If market interest rates increase,
variable-rate debt will create higher debt service requirements, which would adversely affect our cash flow. While
we sometimes enter into agreements limiting our exposure, any such agreements may not offer complete protection
from this risk.

We will require a significant amount of cash to service our debt and fund other investment opportunities. Our
ability to generate cash depends on many factors beyond our control.

Our ability to make payments on and to refinance our debt, including the notes, and to fund planned capital
expenditures and research and development efforts, will depend on our ability to generate cash in the future. This is
subject to general economic, financial, competitive, legislative, regulatory and other factors that may be beyond our
control.

Based on our current level of operations, we believe our cash flow from operations, available cash and available
borrowings under our credit facilities will be adequate to meet our liquidity needs for the next several years, barring
any unforeseen circumstances beyond our control.

We cannot be certain that our business will generate sufficient cash flow from operations or that future borrowings
will be available to us under our credit facilities or otherwise in an amount sufficient to enable us to pay our debt,
including the notes, or to fund our other liquidity needs. We may need to refinance all or a portion of our debt,
including the notes, on or before maturity. We cannot assure you that we will be able to refinance any of our debt,
including our credit facilities and our senior notes, on commercially reasonable terms or at all.

We are subject to U.S. generally accepted accounting principles (U.S. GAAP), under which we are often required
to make changes in our accounting and reported results.

U.S. GAAP changes are routine and have become more frequent and significant over the past few years. These
changes can have significant effects on our reported results when compared to prior periods and may even require
us to retrospectively adjust prior periods. In the application of U.S. GAAP, management is required to make
estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingencies and
reported amounts of revenues and expenses. These estimates are based on historical experience and various other
assumptions believed to be reasonable under the circumstances. Actual results could differ from these estimates
under different assumptions or conditions.

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Item 1B. Unresolved Staff Comments

There were no matters required to be reported under this item.

Item 2. Properties

The company’s properties described below are well maintained, are considered adequate and are being utilized for
their intended purposes.

Ball’s corporate headquarters and the aerospace and technologies segment offices are located in Broomfield,
Colorado. The Colorado-based operations of the aerospace and technologies business occupy a variety of company-
owned and leased facilities in Broomfield, Boulder and Westminster, which together aggregate 1.4 million square
feet of office, laboratory, research and development, engineering and test and manufacturing space. Other aerospace
and technologies operations carry on business in smaller company-owned and leased facilities in Georgia, New
Mexico, Ohio, Virginia and Washington, D.C.

The offices of the company’s North American packaging operations are located in Westminster, Colorado, and the
offices for the European packaging operations are located in Ratingen, Germany. Also located in Westminster is the
Ball Technology and Innovation Center, which serves as a research and development facility for the North
American metal packaging and plastic container operations. The European Technical Center, which serves as a
research and development facility for the European beverage can manufacturing operations, is located in Bonn,
Germany.

Information regarding the approximate size of the manufacturing locations for significant packaging operations,
which are owned or leased by the company, is set forth below. Facilities in the process of being shut down have
been excluded from the list. Where certain locations include multiple facilities, the total approximate size for the
location is noted. In addition to the facilities listed, the company leases other warehousing space.

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Plant Location

Metal beverage packaging, Americas, manufacturing facilities:

Approximate
Floor Space in
Square Feet

Fairfield, California
Torrance, California
Golden, Colorado
Tampa, Florida
Kapolei, Hawaii
Monticello, Indiana
Kansas City, Missouri
Saratoga Springs, New York
Wallkill, New York
Reidsville, North Carolina
Findlay, Ohio (a)
Whitby, Ontario
Guayama, Puerto Rico
Conroe, Texas
Fort Worth, Texas
Bristol, Virginia
Williamsburg, Virginia
Kent, Washington
Milwaukee, Wisconsin (a)

Metal beverage packaging, Europe/Asia, manufacturing facilities:

Europe
Bierne, France
La Ciotat, France
Braunschweig, Germany
Hassloch, Germany
Hermsdorf, Germany
Weissenthurm, Germany
Oss, The Netherlands
Radomsko, Poland
Belgrade, Serbia
Deeside, U.K.
Rugby, U.K.
Wrexham, U.K.

Asia
Beijing, PRC
Hubei (Wuhan), PRC
Shenzhen, PRC
Taicang, PRC (leased)
Tianjin, PRC

358,000
382,000
509,000
238,000
132,000
356,000
496,000
290,000
317,000
447,000
733,000
205,000
230,000
275,000
328,000
245,000
400,000
166,000
392,000

263,000
393,000
258,000
283,000
290,000
331,000
231,000
309,000
352,000
109,000
175,000
222,000

267,000
237,000
331,000
52,000
47,000

(a)

Includes both metal beverage container and metal food container manufacturing operations.

Page 15 of 94

Plant Location

Metal food and household products packaging, Americas, manufacturing
facilities:

Approximate
Floor Space in
Square Feet

North America
Springdale, Arkansas
Richmond, British Columbia
Oakdale, California
Danville, Illinois
Elgin, Illinois
Baltimore, Maryland (232,000 square feet leased)
Columbus, Ohio
Findlay, Ohio (a)
Hubbard, Ohio
Chestnut Hill, Tennessee
Horsham, Pennsylvania
Weirton, West Virginia (leased)
DeForest, Wisconsin
Milwaukee, Wisconsin (a)

South America
Buenos Aires, Argentina (leased)
San Luis, Argentina

Plastic packaging, Americas, manufacturing facilities (all North America):

Chino, California (leased)
Newnan, Georgia (leased)
Batavia, Illinois
Ames, Iowa (including leased warehouse space)
Delran, New Jersey
Baldwinsville, New York (leased)
Bellevue, Ohio
Brampton, Ontario (leased)
Watertown, Wisconsin

366,000
194,000
370,000
118,000
496,000
352,000
305,000
733,000
175,000
315,000
132,000
266,000
400,000
397,000

34,000
32,000

578,000
185,000
387,000
840,000
675,000
508,000
390,000
130,000
111,000

(a)

Includes both metal beverage container and metal food container manufacturing operations.

In addition to the consolidated manufacturing facilities, the company has ownership interests of 50 percent or less in
packaging affiliates located primarily in the U.S., PRC and Brazil.

Page 16 of 94

Item 3. Legal Proceedings

North America

As previously reported in the company’s Quarterly Report on Form 10-Q dated November 7, 2007, during the
second quarter of 2007, Miller Brewing Company (Miller) asserted various claims against Ball Metal Beverage
Container Corp. (BMBCC), a wholly owned subsidiary of the company, alleging that BMBCC breached its contract
with Miller for the supply of aluminum beverage containers. BMBCC disputed the claims and asserted that it had
performed in accordance with the supply contract. As previously reported, BMBCC and Miller settled their dispute
on October 4, 2007. The settlement terms include the payment by BMBCC to Miller of approximately $70 million
on January 31, 2008, and minor adjustments to the provisions of BMBCC’s supply arrangement with Miller. The
overall settlement resulted in a third quarter charge to the company of $85.6 million ($51.8 million after tax).
BMBCC will continue to supply all of Miller’s beverage can and end requirements through 2015.

As previously reported, the company is investigating potential violations of the Foreign Corrupt Practices Act in
Argentina, which came to our attention on or about October 15, 2007. Based on our investigation to date, we do not
believe this matter involved senior management or management or other employees who have significant roles in
internal control over financial reporting.

As previously reported, on October 6, 2005, Ball Metal Beverage Container Corp. (BMBCC), a wholly owned
subsidiary of the company, was served with an amended complaint filed by Crown Packaging Technology, Inc.
et. al. (Crown), in the U.S. District Court for the Southern District of Ohio, Western Division at Dayton, Ohio. The
complaint alleges that the manufacture, sale and use of certain ends by BMBCC and its customers infringes certain
claims of Crown’s U.S. patents. The complaint seeks unspecified monetary damages, fees, and declaratory and
injunctive relief. BMBCC has formally denied the allegations of the complaint. The parties are awaiting a decision
from the trial court on claim construction. At the present time, the court has not set a new trial date. Based on the
information available to the company at the present time, the company does not believe that this matter will have a
material adverse effect upon the liquidity, results of operations or financial condition of the company.

As previously reported, the U.S. Environmental Protection Agency (USEPA) considers the company a Potentially
Responsible Party (PRP) with respect to the Lowry Landfill site located east of Denver, Colorado. On June 12,
1992, the company was served with a lawsuit filed by the City and County of Denver (Denver) and Waste
Management of Colorado, Inc., seeking contributions from the company and approximately 38 other companies.
The company filed its answer denying the allegations of the complaint. On July 8, 1992, the company was served
with a third-party complaint filed by S.W. Shattuck Chemical Company, Inc., seeking contribution from the
company and other companies for the costs associated with cleaning up the Lowry Landfill. The company denied
the allegations of the complaints.

In July 1992 the company entered into a settlement and indemnification agreement with Chemical Waste
Management, Inc., and Waste Management of Colorado, Inc. (collectively Waste Management) and Denver
pursuant to which Waste Management and Denver dismissed their lawsuit against the company, and Waste
Management agreed to defend, indemnify and hold harmless the company from claims and lawsuits brought by
governmental agencies and other parties relating to actions seeking contributions or remedial costs from the
company for the cleanup of the site. Several other companies, which are defendants in the above-referenced
lawsuits, had already entered into the settlement and indemnification agreement with Waste Management and
Denver. Waste Management, Inc., has agreed to guarantee the obligations for Waste Management. Waste
Management and Denver may seek additional payments from the company if the response costs related to the site
exceed $319 million. In 2003 Waste Management, Inc., indicated that the cost of the site might exceed $319 million
in 2030, approximately three years before the projected completion of the project. The company might also be
responsible for payments (based on 1992 dollars) for any additional wastes that may have been disposed of by the
company at the site but which are identified after the execution of the settlement agreement. While remediating the
site, contaminants were encountered, which could add an additional cleanup cost of approximately $10 million. This
additional cleanup cost could, in turn, add approximately $1 million to total site costs for the PRP group.

At this time, there are no Lowry Landfill actions in which the company is actively involved. Based on the
information available to the company at this time, the company does not believe that this matter will have a material
adverse effect upon the liquidity, results of operations or financial condition of the company.

Page 17 of 94

The company previously reported that, on August 1, 1997, the USEPA sent notice of potential liability to 19 PRPs
concerning past activities at one or more of the four Rocky Flats parcels (including land owned by Precision
Chemicals now owned by Great Western Inorganics) at the Rocky Flats Industrial Park site (RFIP) located in
Jefferson County, Colorado. The RFIP site also includes the American Ecological Recycling and Research
Company (AERRCO) site and a site owned by Thoro Products Company. Based upon sampling at the site in 1996,
the USEPA determined that additional site work would be required to determine the extent of contamination and the
possible cleanup of the site. In 1996 the USEPA requested that the PRPs perform certain site work. On
December 19, 1997, the USEPA issued an Administrative Order on Consent (AOC) to conduct engineering
estimates and cost analyses. The company has funded approximately $70,000 toward these costs. The PRPs have
negotiated an agreement and the company contributed $5,000 as an initial group contribution. The company has
agreed to pay 12 percent of the costs of cleanup at the AERRCO site and a percentage of the cleanup costs on the
Thoro site. On January 8, 2003, and October 9, 2003, the company made additional payments of $97,200 each (total
$194,400) toward the cost of cleanup. The company paid $35,355 in 2004 toward the cleanup. An air sparge and
soil vapor extraction system was installed at a total cost of $1.1 million and was placed in operation in May 2005.
Based on the information available to the company at this time, the company does not believe that this matter will
have a material adverse effect upon the liquidity, results of operations or financial condition of the company.

As previously reported, in October 2001 representatives of Vauxmont Intermountain Communities (Vauxmont)
notified six of the PRPs at the AERRCO site, including the company (AERRCO PRPs), that hazardous materials
might have contaminated property owned by Vauxmont. The AERRCO site is contained within the RFIP site.
Vauxmont also alleges that it lost $7 million on a contract with a home developer for the purchase of a portion of
the land. Vauxmont representatives requested that the AERRCO PRPs study any contamination to the Vauxmont
real estate. The AERRCO PRPs agreed to undertake such a study and sought the USEPA’s final approval. The
sampling results were made available to all parties. No further claims have been made against the company by
Vauxmont to date. Based on the information available to the company at the present time, the company does not
believe that this matter will have a material adverse effect upon the liquidity, results of operations or financial
condition of the company.

As previously reported, during July 1992, the company received information that it had been named a PRP with
respect to the Solvents Recovery of New England Site (SRSNE) located in Southington, Connecticut. According to
the information received, it is alleged that the company contributed approximately 0.08816 percent of the waste
contributed to the site on a volumetric basis. The PRP group has been involved in negotiations with the USEPA
regarding the remediation of the site. The company has paid approximately $17,500 toward site investigation and
remediation efforts. The PRP group spent $15 million through the end of 2001. Approximately $1.5 million more
was spent to complete a Remedial Investigation and Feasibility Study and pay for remediation work through 2003.
As of December 2001, projected remediation cost estimates for a bioremediation and enhanced oxidation system
ranged from $20 million to $30 million. The PRP group offered a $5.5 million settlement to resolve the USEPA
claim of $16 million for past costs at the SRSNE site. PRP/USEPA negotiations to resolve the past cost claims from
the USEPA have not been resolved and are not being actively pursued by the PRP group. A natural resources
damage claim of approximately $4.5 million is anticipated. USEPA gave final approval for a $29 million
remediation plan for the site on October 11, 2005. The cost of the site remedy is now expected to be approximately
$82 million. The company will be responsible for approximately 0.00109 percent of the future site costs. Based on
the information available to the company at the present time, the company does not believe that this matter will have
a material adverse effect upon the liquidity, results of operations or financial condition of the company.

On December 30, 2002, the company received a 104(e) letter from the USEPA pursuant to the Comprehensive
Environmental Response Compensation and Liability Act (CERCLA) requesting answers to certain questions
regarding the waste disposal practices of Heekin Can Company and the relationship between the company and
Heekin Can Company. Region 5 of the USEPA is involved in the cleanup of the Jackson Brothers Paint Company
site, which consists of four, and possibly five, sites in and around Laurel, Indiana. The Jackson Brothers Paint
Company apparently disposed of drums of waste in those sites during the 1960s and 1970s. The USEPA has alleged
that some of the waste that has been uncovered was sent to the sites from the Cincinnati plant operated by Heekin
Can Company. The Indiana Department of Environmental Management referred this matter to the USEPA for
removal of the drums and cleanup. At the present time, there are an undetermined number of drums at one or more
of the sites that have been initially identified by the USEPA as originating from Heekin Can Company. The USEPA
has sent 104(e) letters to seven PRPs including Heekin Can Company. On January 30, 2003, the company

Page 18 of 94

responded to the request for information pursuant to Section 104(e) of CERCLA. The USEPA has initially
estimated cleanup costs to be between $4 million and $5 million. Based on the information available to the company
at the present time, the company does not believe that this matter will have a material adverse effect upon the
liquidity, results of operations or financial condition of the company.

Europe

In January 2003 the German government passed legislation that imposed a mandatory deposit of 25 eurocents on all
one-way packages containing beverages except milk, wine, fruit juices and certain alcoholic beverages. Ball
Packaging Europe GmbH (BPE), together with certain other plaintiffs, contested the enactment of the mandatory
deposit for non-returnable containers based on the German Packaging Regulation (Verpackungsverordnung) in
Federal and State Administrative Court. All other proceedings have been terminated except for the determination of
minimal court fees that are still outstanding in some cases, together with minimal ancillary legal fees. The relevant
industries, including BPE and its competitors, have successfully set up a Germany-wide return system for one-way
beverage containers, which has been operational since May 1, 2006, the date required under the deposit legislation.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to the security holders during the fourth quarter of 2007.

Part II

Item 5. Market for the Registrant’s Common Stock and Related Stockholder Matters

Ball Corporation common stock (BLL) is traded on the New York Stock Exchange and the Chicago Stock Exchange.
There were 5,424 common shareholders of record on February 3, 2008.

Common Stock Repurchases

The following table summarizes the company’s repurchases of its common stock during the quarter ended
December 31, 2007.

Purchases of Securities

Total Number
of Shares
Purchased(a)

Average Price
Paid per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs

Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans
or Programs(b)

October 1 to October 28, 2007
October 29 to November 25,

705,292

$ 53.53

2007

431,170

$ 48.11

November 26 to December 31,

2007
Total

8,310(c)

1,144,772

$ 44.99
$ 51.42

705,292

431,170

8,310
1,144,772

4,904,824

4,473,654

4,465,344

(a) Includes open market purchases and/or shares retained by the company to settle employee withholding tax liabilities.
(b) The company has an ongoing repurchase program for which shares are authorized for repurchase from time to time by

Ball’s board of directors. On January 23, 2008, Ball's board of directors authorized the repurchase by the company of up to
a total of 12 million shares of its common stock. This repurchase authorization replaces all previous authorizations.
(c) Does not include 675,000 shares under a forward share repurchase agreement entered into in December 2007 and settled

on January 7, 2008, for approximately $31 million. Also does not include shares to be acquired in 2008 under an
accelerated share repurchase program entered into in December 2007 and funded on January 7, 2008.

Page 19 of 94

Quarterly Stock Prices and Dividends

Quarterly prices for the company's common stock, as reported on the New York Stock Exchange composite tape,
and quarterly dividends in 2007 and 2006 (on a calendar quarter basis) were:

2007

2006

4th

3rd

2nd

1st

4th

3rd

2nd

1st

Quarter Quarter Quarter Quarter

High
Low
Dividends per share

$56.05
43.99
0.10

Shareholder Return Performance

$ 55.87 $ 55.75 $ 47.91
43.51
0.10

46.75
0.10

45.85
0.10

$ 44.08
39.67
0.10

$ 41.76
35.03
0.10

$ 44.34
34.16
0.10

$ 45.00
38.53
0.10

The line graph below compares the annual percentage change in Ball Corporation’s cumulative total shareholder
return on its common stock with the cumulative total return of the Dow Jones Containers & Packaging Index and
the S&P Composite 500 Stock Index for the five-year period ended December 31, 2007. It assumes $100 was
invested on December 31, 2002, and that all dividends were reinvested. The Dow Jones Containers & Packaging
Index total return has been weighted by market capitalization.

TOTAL RETURN TO STOCKHOLDERS
(Assumes $100 investment on 12/31/02)

s
r
a
l
l
o
D

200

180

160

140

120

100

12/31/2002

12/31/2003

12/31/2004

12/31/2005

12/31/2006

12/31/2007

Ball Corporation

DJ Container & Packaging Index

S&P 500 Index

Total Return Analysis

Ball Corporation
DJ Container & Packaging Index
S&P 500 Index

12/31/2002
$ 100.00
$ 100.00
$ 100.00

12/31/2003
$ 117.45
$ 119.07
$ 128.68

12/31/2004
$ 175.08
$ 142.46
$ 142.69

12/31/2005 12/31/2006 12/31/2007
$ 184.23
$ 177.06
$ 159.71
$ 169.35
$ 158.68
$ 141.56
$ 182.87
$ 173.34
$ 149.70

www.researchdatagroup.com/S&P.htm

Page 20 of 94

Item 6. Selected Financial Data

Five-Year Review of Selected Financial Data
Ball Corporation and Subsidiaries

($ in millions, except per share amounts)

2007

2006

2005

2004

2003

Net sales
Legal settlement (1)
Total net sales

Net earnings (1)
Return on average common

shareholders’ equity

Basic earnings per share (1)(2)
Weighted average common shares

outstanding (000s) (2)

Diluted earnings per share (1)(2)
Diluted weighted average common
shares outstanding (000s) (2)

Property, plant and equipment

additions (3)

Depreciation and amortization
Total assets
Total interest bearing debt and capital

lease obligations

Common shareholders’ equity
Market capitalization (4)
Net debt to market capitalization (4)
Cash dividends per share (2)
Book value per share (2)
Market value per share (2)
Annual return (loss) to common

shareholders (5)

Working capital
Current ratio

$ 7,475.3
(85.6)
$ 7,389.7

$ 6,621.5
–
$ 6,621.5

$ 5,751.2
–
$ 5,751.2

$ 5,440.2
–
$ 5,440.2

$ 4,977.0

–

$ 4,977.0

$ 281.3

$ 329.6

$ 272.1

$ 302.1

$ 232.2

22.4%

32.7%

27.9%

31.8%

35.7%

$ 2.78

$ 3.19

$ 2.52

$ 2.73

$ 2.08

101,186

103,338

107,758

110,846

111,710

$ 2.74

$ 3.14

$ 2.48

$ 2.65

$ 2.03

102,760

104,951

109,732

113,790

114,275

$ 308.5
$ 281.0
$ 6,020.6

$ 279.6
$ 252.6
$ 5,840.9

$ 291.7
$ 213.5
$ 4,361.5

$ 196.0
$ 215.1
$ 4,485.0

$ 2,358.6
$ 1,342.5
$ 4,510.1
48.9%
$ 0.40
$ 13.39
$ 45.00

$ 2,451.7
$ 1,165.4
$ 4,540.4
50.7%
$ 0.40
$ 11.19
$ 43.60

$ 1,589.7
$ 853.4
$ 4,138.8
36.9%
$ 0.40
$ 8.19
$ 39.72

$ 1,660.7
$ 1,093.9
$ 4,956.2
29.5%
$ 0.35
$ 9.71
$ 43.98

4.0%

$ 329.8
1.22

10.9%
$ 307.0
1.21

(8.8)%
$ 67.9
1.06

48.8%
$ 256.6
1.26

$ 137.2
$ 205.5
$ 4,070.4

$ 1,686.9
$ 808.6
$ 3,359.1
49.1%
$ 0.24
$ 7.17
$ 29.785

17.4%
$ 63.2
1.07

(1)

Includes business consolidation activities and other items affecting comparability between years of after-tax expense of $27 million,
$20.5 million and $13.4 million in 2007, 2006 and 2005, respectively, and after-tax income of $9.5 million and $2.3 million in 2004
and 2003, respectively. 2007 net sales have been reduced by a pretax legal settlement of $85.6 million ($51.8 million after tax) while
2006 net earning include a $46.1 million after-tax gain related to insurance proceeds in connection with a fire at one of Ball’s
German plants. Also includes $12.3 million and $9.9 million of after-tax debt refinancing costs in 2005 and 2003, respectively,
reported as interest expense. Additional details about the 2007, 2006 and 2005 items are available in Notes 4, 5, 6 and 13 to the
consolidated financial statements within Item 8 of this report.

(2) Amounts have been retrospectively adjusted for a two-for-one stock split effected on August 23, 2004.
(3) Amounts in 2007 and 2006 do not include the offsets of $48.6 million and $61.3 million, respectively, of insurance proceeds

received to replace fire-damaged assets in our Hassloch, Germany, plant.

(4) Market capitalization is defined as the number of common shares outstanding at year end, multiplied by the year-end closing price

of Ball common stock. Net debt is total debt less cash and cash equivalents.

(5) Change in stock price plus dividend yield assuming reinvestment of all dividends paid.

Page 21 of 94

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis should be read in conjunction with the consolidated financial statements
and accompanying notes. Ball Corporation and its subsidiaries are referred to collectively as “Ball” or “the
company” or “we” or “our” in the following discussion and analysis.

BUSINESS OVERVIEW

Ball Corporation is one of the world’s leading suppliers of metal and plastic packaging to the beverage, food and
household products industries. Our packaging products are produced for a variety of end uses and are manufactured
in plants around the world. We also supply aerospace and other technologies and services to governmental and
commercial customers.

We sell our packaging products primarily to major beverage and food companies and producers of household
products with which we have developed long-term customer relationships. This is evidenced by our high customer
retention and our large number of long-term supply contracts. While we have diversified our customer base, we do
sell a majority of our packaging products to relatively few major companies in North America, Europe, the People’s
Republic of China (PRC) and Argentina, as do our equity joint ventures in Brazil, the U.S. and the PRC. We also
purchase raw materials from relatively few suppliers. Because of our customer and supplier concentration, our
business, financial condition and results of operations could be adversely affected by the loss of a major customer or
supplier or a change in a supply agreement with a major customer or supplier, although our long-term relationships
and contracts mitigate these risks.

In the rigid packaging industry, sales and earnings can be improved by reducing costs, developing new products,
expanding volume and increasing prices. In 2009 we expect to complete a project to upgrade and streamline our
North American beverage can end manufacturing capabilities, a project that in 2007 began to generate productivity
gains and cost reductions in the metal beverage packaging, Americas, segment. While the U.S. and Canadian
beverage container manufacturing industry is relatively mature, the European, Asian and Brazilian beverage can
markets are growing and are expected to continue to grow. We are capitalizing on this growth by increasing
capacity in some of our European can manufacturing facilities and by announcing plans to establish a plant in India.
To better position the company in the European market, the capacity from the fire-damaged Hassloch, Germany,
plant was replaced with a mix of steel beverage can manufacturing capacity in the Hassloch plant and aluminum
beverage can manufacturing capacity in the company’s Hermsdorf, Germany, plant. All three lines were in
commercial production by the end of the second quarter of 2007. Additionally, the company has announced plans
for speeding up certain lines in Europe and building a new plant in Poland. We are also considering additional can
and end manufacturing capacity there and in the PRC.

The company regularly evaluates expansion opportunities in growing international markets, including existing and
developing markets in Europe, the PRC, Brazil and other parts of the world. We recently announced our intention to
build a beverage can manufacturing plant in India, as well as the new plant in Poland to meet the rapidly growing
demand for beverage cans there and in central and eastern Europe. We also recently announced the company’s
participation in a one-line metal beverage can plant in Brazil. This plant will be owned by Ball’s unconsolidated
50 percent owned joint venture, Latapack-Ball Embalagens, Ltda., and its construction will be financed by cash
flows from the joint venture.

As part of our packaging strategy, we are focused on developing and marketing new and existing products that meet
the needs of our customers and the ultimate consumer. These innovations include new shapes, sizes, opening
features and other functional benefits of both metal and plastic packaging. This packaging development activity
helps us maintain and expand our supply positions with major beverage, food and household products customers.
As part of this focus, we are installing a new 24-ounce can production line in our Monticello, Indiana, facility
expected to be operational in mid-2008.

Ball’s consolidated earnings are exposed to foreign exchange rate fluctuations. We attempt to mitigate this exposure
through the use of derivative financial instruments, as discussed in “Quantitative and Qualitative Disclosures About
Market Risk” within Item 7A of this report.

Page 22 of 94

The primary customers for the products and services provided by our aerospace and technologies segment are U.S.
government agencies or their prime contractors. It is possible that federal budget reductions and priorities, or
changes in agency budgets, could limit future funding and new contract awards or delay or prolong contract
performance.

We recognize sales under long-term contracts in the aerospace and technologies segment using the cost-to-cost,
percentage of completion method of accounting. Our present contract mix consists of approximately 70 percent
cost-type contracts, which are billed at our costs plus an agreed upon and/or earned profit component, while the
remainder are fixed price contracts. We include time and material contracts in the fixed price category because such
contracts typically provide for the sale of engineering labor at fixed hourly rates. Failure to be awarded certain key
contracts could adversely affect segment performance during 2008 compared to 2007.

Throughout the period of contract performance, we regularly reevaluate and, if necessary, revise our estimates of
total contract revenue, total contract cost and progress toward completion. Because of contract payment schedules,
limitations on funding and other contract terms, our sales and accounts receivable for this segment include amounts
that have been earned but not yet billed.

Management uses various measures to evaluate company performance. The primary financial metric we use is
economic value added (tax-effected operating earnings, as defined by the company, less a charge for net operating
assets employed). Our goal is to increase economic value added on an annual basis. Other financial metrics we use
are earnings before interest and taxes (EBIT); earnings before interest, taxes, depreciation and amortization
(EBITDA); diluted earnings per share; operating cash flow and free cash flow (generally defined by the company as
cash flow from operating activities less capital expenditures). These financial measures may be adjusted at times for
items that affect comparability between periods. Nonfinancial measures in the packaging segments include
production efficiency and spoilage rates, quality control figures, environmental, health and safety statistics and
production and shipment volumes. Additional measures used to evaluate performance in the aerospace and
technologies segment include contract revenue realization, award and incentive fees realized, proposal win rates and
backlog (including awarded, contracted and funded backlog).

We recognize that attracting and retaining highly talented employees are essential to the success of Ball and,
because of this, we strive to pay employees competitively and encourage their ownership of the company’s common
stock as part of a diversified portfolio. For most management employees, a meaningful portion of compensation is at
risk as an incentive, dependent upon economic value-added operating performance. For more senior positions, more
compensation is at risk through economic value-added performance and various stock compensation plans. Through
our employee stock purchase plan and 401(k) plan, which matches employee contributions with Ball common stock,
employees, regardless of organizational level, have opportunities to own Ball stock.

CONSOLIDATED SALES AND EARNINGS

The company has five reportable segments organized along a combination of product lines and geographic areas:
(1) metal beverage packaging, Americas; (2) metal beverage packaging, Europe/Asia; (3) metal food and household
products packaging, Americas; (4) plastic packaging, Americas; and (5) aerospace and technologies. We also have
investments in companies in the U.S., the PRC and Brazil, which are accounted for using the equity method of
accounting and, accordingly, those results are not included in segment sales or earnings.

Effective January 1, 2007, a plastic pail product line with 2007 net sales of $52.1 million was transferred from the
metal food and household products packaging, Americas, segment to the plastic packaging, Americas, segment.
Prior periods have been retroactively adjusted to the current presentation.

Page 23 of 94

Metal Beverage Packaging, Americas

The metal beverage packaging, Americas, segment consists of operations located in the U.S., Canada and Puerto
Rico, which manufacture metal container products used in beverage packaging. During the second quarter of 2007,
Miller Brewing Company (Miller), a U.S. customer, asserted various claims against a wholly owned subsidiary of
the company, primarily related to the pricing of the aluminum component of the containers supplied by the
subsidiary, and on October 4, 2007, the dispute was settled in mediation. Miller received $85.6 million
($51.8 million after tax) on settlement of the dispute and Ball retained all of Miller’s beverage can and end supply
through 2015. Miller received a one-time payment of approximately $70 million ($42 million after tax) in
January 2008 (recorded on the December 31, 2007, consolidated balance sheet in other current liabilities) with the
remainder of the settlement to be recovered over the life of the supply contract through 2015.

Including the reduction in net sales resulting from the legal settlement, this segment accounted for 37 percent of
consolidated net sales in 2007 (39 percent in 2006). Sales were 6 percent higher in 2007 than in 2006 with flat
volumes being offset by higher sales prices, which were primarily due to rising aluminum prices and the pass
through of various cost increases to customers. These favorable factors were offset by the legal settlement, which
decreased sales by 3 percent in 2007 as compared to 2006. Sales were 9 percent higher in 2006 than in 2005 due to
an increase in beverage can shipments in excess of 4 percent coupled with higher aluminum prices passed through
to our customers. The higher can shipments over 2005 were driven by favorable weather in many parts of the U.S.
and Canada, as well as the promotion of 12-ounce can packages by beer and soft drink companies. Based on
publicly available information, we estimate that our shipments of metal beverage containers were approximately
31 percent of total U.S. and Canadian shipments in 2007. We continue to focus efforts on the growing custom
beverage can business, which includes cans of different shapes, diameters and fill volumes, and cans with added
functional attributes for new products and product line extensions.

Including the effect of the legal settlement, earnings in the segment were $213.6 million in 2007 compared to
$269.4 million in 2006 and $234.8 million in 2005. Contributing to the higher segment earnings in 2007, before the
legal settlement, compared to 2006 were gains from sourcing of raw materials that totaled approximately
$30 million. Also contributing were approximately $9 million of lower manufacturing costs related to the new end
technology project and improved production efficiencies. These gains were offset by increased repairs and
maintenance costs and higher labor and other conversion costs, a portion of which could not be passed through to
our customers.

The third quarter of 2005 included a pretax charge of $19.3 million ($11.7 million after tax) related to a project to
significantly upgrade and streamline our North American beverage can end manufacturing capabilities. The project
is expected to be largely completed in 2009. Segment earnings growth in 2006 compared to 2005 (before the end
project charge), although aided by 9 percent higher sales in 2006, was constrained by product mix and continued
year-over-year cost growth, particularly higher energy, other direct material and freight costs, which, combined,
were approximately $20 million higher than in 2005.

Metal Beverage Packaging, Europe/Asia

The metal beverage packaging, Europe/Asia, segment includes metal beverage packaging products manufactured
and sold in Europe and Asia, as well as plastic containers manufactured and sold in Asia. This segment accounted
for 26 percent of consolidated net sales in 2007 (23 percent in 2006). Ball Packaging Europe, which represents an
estimated 29 percent of total European metal beverage container manufacturing capacity, has manufacturing plants
located in Germany, the United Kingdom, France, the Netherlands, Poland and Serbia.

Segment sales in 2007 were 26 percent higher than in 2006, due to over 9 percent sales volume growth, higher
pricing and a 9 percent year-over-year impact from the increase in the euro. Higher segment volumes were aided by
overall market dynamics in Europe that favor beverage cans, as well as growth in Europe of custom can volumes.
Offsetting these favorable volume trends were the impacts of the colder and wetter than normal summer weather in
many parts of Europe.

Page 24 of 94

Segment can shipments were more than 9 percent higher in 2006 than in 2005. Higher segment sales volumes were
aided by strong European demand, favorable European weather, Germany hosting the World Cup soccer
championship during June and July 2006 and continued growth in the PRC market. Segment sales, which grew
12 percent in 2006, also benefited slightly from the strength of the euro. The new beverage can plant in Belgrade,
Serbia, built to serve the growing demand for beverage cans in southern and eastern Europe, became fully
operational during the third quarter of 2005. The Serbian plant was constructed to accommodate a second can
production line and a can end manufacturing module for future growth. Ball has announced its intention to increase
capacity in this segment through the construction of a beverage can manufacturing plant in India, as well as a
second beverage can plant in Poland.

Earnings in the segment were $256.1 million in 2007, $268.7 million in 2006 and $180.5 million in 2005. Segment
earnings in 2006 included a $75.5 million property insurance gain related to a fire at the company’s Hassloch,
Germany, metal beverage can plant (further details are provided below). The fourth quarter of 2005 included a
$9.3 million gain primarily resulting from the final settlement of all tax obligations related to liquidating PRC
operations for amounts less than originally estimated. First quarter 2005 segment earnings included a $3.4 million
expense for the write off of the remaining carrying value of an equity investment in the PRC.

Segment earnings in 2007 compared to 2006, excluding the $75.5 million property insurance gain, increased due to
a combination of $76 million in net margin increases from higher sales volumes and price recovery initiatives,
$16 million from cost control programs and $13 million due to a stronger euro. These earnings improvements were
partially offset by $15.9 million of lower business interruption insurance recognition in 2007 and $26 million of
other higher costs. Segment earnings in 2006 were higher than in 2005 due largely to 9 percent sales higher
volumes, certain price recovery initiatives and effective manufacturing and selling, general and administrative cost
controls. These gains were partially offset by higher raw material, freight and energy costs, and price/cost
compression in the PRC.

On April 1, 2006, a fire in the metal beverage can plant in Hassloch, Germany, damaged a significant portion of the
building and machinery and equipment. The property insurance proceeds recorded for the year ended December 31,
2006, which were based on replacement cost, were €86.3 million ($109.3 million), of which €26 million
($32.4 million) was received in April 2006, €22.7 million ($28.9 million) was received in October 2006 and the
remainder of €37.6 million ($48.6 million), which was recorded in other long-term assets at December 31, 2006,
was received in January 2007. A €26.7 million ($33.8 million) fixed asset write down was recorded to reflect the
estimated impairment of the assets damaged as a result of the fire. As a result, a pretax gain of €59.6 million
($75.5 million) was recorded in the 2006 consolidated statement of earnings to reflect the difference between the net
book value of the impaired assets and the property insurance proceeds. An additional €27.2 million ($35.1 million)
and €40 million ($51 million) were recorded in cost of sales in 2007 and 2006, respectively, for insurance
recoveries related to business interruption costs, as well as €11.3 million ($14.3 million) in 2006 to offset clean-up
costs.

Metal Food and Household Products Packaging, Americas

The metal food and household products packaging, Americas, segment consists of operations located in the U.S.,
Canada and Argentina. The company acquired U.S. Can Corporation (U.S. Can) on March 27, 2006, and with that
acquisition, added to its metal food can business the production and sale of aerosol cans, paint cans, plastic pails and
decorative specialty cans. Effective January 1, 2007, responsibility for the plastic pail product line with 2007 net
sales of $52.1 million was transferred to the plastic packaging, Americas, segment. Accordingly, 2006 segment
amounts have been retrospectively adjusted to reflect the transfer.

Segment sales in 2007 constituted 16 percent of consolidated net sales (17 percent in 2006) and were 4 percent
higher than 2006 sales. The higher 2007 sales were impacted by 10 percent for the inclusion of a full year’s sales
from the acquisition of U.S. Can, partially offset by lost business that resulted in a 2007 sales decline of 3 percent,
as well as customer operating issues in food cans, including a fire in a customer’s factory, and unfavorable weather
conditions in the Midwest.

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Segment sales in 2006 were 38 percent higher than 2005 sales. The primary reason for the increase was 45 percent
higher sales due to the acquisition of U.S. Can, combined with the pass through of higher raw material costs,
partially offset by 12 percent lower third quarter food can volumes. During 2007, 2006 and 2005, we were not able
to pass through all of the steel price increases and surcharges levied by steel producers and this resulted in margin
compression. Based on publicly available trade information, we estimate our 2007 shipments of 5.6 billion steel
food containers and 1.6 billion aerosol containers to be approximately 18 percent and 51 percent of total U.S. and
Canadian metal food container and steel aerosol container shipments, respectively.

A segment loss of $8 million was incurred in 2007 compared to earnings of $2.4 million in 2006 and $19.1 million
in 2005. These amounts included pretax charges of $44.2 million in 2007, $35.5 million in 2006 and $11.2 million
in 2005, respectively, for business consolidation activities. The 4 percent lower earnings in 2007 compared to 2006
(before the business consolidation activity charges) were due to increased steel and coating material costs, partially
offset by improved manufacturing performance in 2007 and higher cost of sales in the second quarter of 2006
related to $6.1 million of purchase accounting adjustments for inventory valuations associated with the acquired
U.S. Can finished goods inventory. Higher sales volumes related to the U.S. Can acquisition helped improve
segment earnings in the last nine months of 2006, despite the negative impact of lower food can volumes
attributable to the loss of a customer in late 2005 and a poor salmon harvest in 2006. Additionally, segment earnings
in 2006 were reduced by the $6.1 million of purchase accounting adjustments discussed previously, partially offset
by lower freight and other direct material costs of $4 million. While pricing pressures continue on all of our raw
materials, other direct materials and freight and utility costs, we continue to seek price increases in the market place
to improve our margins.

On October 24, 2007, Ball announced plans to close two manufacturing facilities and to exit the custom and
decorative tinplate can business located in Baltimore, Maryland. Ball will close its food and household products
packaging facilities in Tallapoosa, Georgia, and Commerce, California, both of which manufacture aerosol and
general line cans. The two plant closures will result in a net reduction in manufacturing capacity of 10 production
lines, including the relocation of two high-speed aerosol lines into existing Ball facilities, and will allow us to
supply customers from a consolidated asset base. When completed throughout 2008, the actions are expected to
yield annualized pretax cost savings in excess of $15 million and improve the aerosol plant utilization rate to more
than 85 percent from about 70 percent. The cash costs of these actions are expected to be offset by proceeds on asset
dispositions and tax recoveries. A pretax charge of $41.9 million ($25.4 million after tax) was recorded in the fourth
quarter of 2007 related to these closures. We also recorded a $2.3 million ($1.4 million after tax) pension annuity
expense related to a previously closed plant.

In October 2006 the company announced plans to close two manufacturing facilities in North America by the end of
that year as part of the realignment of the metal food and household products packaging, Americas, segment
following the acquisition of U.S. Can earlier in the year. The company closed a leased facility in Alliance, Ohio,
which was one of 10 manufacturing locations acquired from U.S. Can, and a plant in Burlington, Ontario, which
was part of the metal food can operations prior to the U.S. Can acquisition. The closure of the Ohio plant was
treated as an opening balance sheet item. A pretax charge of $35.5 million ($28.7 million after tax) was recorded in
2006, primarily related to the Burlington closure, for employee termination and pension costs, plant
decommissioning costs and fixed asset impairment, as well as the shut down of a metal food can manufacturing line
in the Whitby, Ontario, plant. When the Burlington building is sold, the estimated costs of the closures will be cash
flow neutral after tax benefits and anticipated proceeds.

The year ended December 31, 2005, included a net pretax charge of $11.2 million ($7.5 million after tax) for
pension, severance and other employee benefit costs related to a reduction in force in the Burlington plant combined
with the closure of a three-piece food can manufacturing plant in Quebec.

The company continues to evaluate the segment’s manufacturing structure and expects to identify other
opportunities to improve efficiencies. Additional details regarding business consolidation activities are available in
Note 5 accompanying the consolidated financial statements included within Item 8 of this Annual Report.

Page 26 of 94

Plastic Packaging, Americas

The plastic packaging, Americas, segment consists of operations located in the U.S. and Canada that manufacture
polyethylene terephthalate (PET) and polypropylene plastic container products used mainly in beverage and food
packaging, as well as high density polyethylene and polypropylene containers for industrial and household product
applications. On March 28, 2006, Ball acquired certain North American plastic bottle container assets from Alcan
Packaging (Alcan), including two plastic container manufacturing plants in the U.S. and one in Canada, as well as
certain manufacturing equipment and other assets from other Alcan facilities. Effective January 1, 2007, the plastic
packaging, Americas, segment assumed responsibility for plastic pail assets acquired as part of the U.S. Can
acquisition. Accordingly, 2006 segment amounts have been retrospectively adjusted to reflect the transfer.

Segment sales in 2007 comprised 10 percent of consolidated net sales (10 percent in 2006) and increased 8 percent
compared to 2006 primarily due to an increase of 7 percent related to the March 2006 acquisition of Alcan and the
inclusion of the acquired U.S. Can plastic pail business, as well as an increase of 3 percent for higher sales volumes.
Segment sales in 2006 increased 42 percent compared to 2005, including 34 percent related to plant and other asset
acquisitions from Alcan and U.S. Can and 6 percent related to higher sales volumes. In view of the substandard
performance related to our PET soft drink margins, we continue to focus on price recovery initiatives, as well as our
PET development efforts in the custom hot-fill, beer, wine, flavored alcoholic beverage, and specialty container
markets. In the polypropylene plastic container arena, development efforts are primarily focused on custom
packaging markets.

Segment earnings were $25.9 million in 2007, $28.3 million in 2006 and $16.7 million in 2005. Earnings were
lower in 2007 than in 2006 primarily due to lower sales margins related to approximately $5 million of customer
pricing concessions and $2 million of higher labor and overhead costs. The earnings inhibitors were partially offset
by approximately $2 million from volume growth in specialty PET sales combined with the incremental margin
impact of sales in the first quarter of 2007 related to the acquired Alcan and U.S. Can plants.

Segment earnings in 2006 were higher than in 2005 largely due to the margin impact of the incremental sales related
to the Alcan and U.S. Can acquisitions, partially offset by $9 million of higher energy and labor costs and
approximately $2 million incurred for a litigation claim that was favorably resolved in July 2006. Earnings in the
second quarter of 2006 also included purchase accounting adjustments of $1.2 million, which increased cost of sales
due to the valuation of inventories associated with the acquired Alcan finished goods inventory.

We estimate our 2007 shipments of 6 billion PET plastic bottles to be approximately 9 percent of total U.S. and
Canadian PET container shipments. In addition, the plastic packaging, Americas, segment produced approximately
900 million food and specialty containers during 2007.

Aerospace and Technologies

Aerospace and technologies segment sales represented 11 percent of 2007 consolidated net sales (10 percent in
2006) and were 17 percent higher than in 2006. Sales in 2006 were 3 percent lower than in 2005. The higher sales
in 2007 were due to new programs, cost overruns and increased scope on previously awarded contracts, with
$58 million attributable to the WorldView and other commercial space operations contracts. Lower sales in 2006
compared to 2005 were largely due to contracts being completed during the period, as well as the impact of
government funding reductions and program delays. The aerospace and technologies business won a number of
large, strategic contracts and delivered a considerable amount of sophisticated space and defense instrumentation
throughout the three-year period.

Segment earnings were $64.6 million in 2007, $50 million in 2006 and $54.7 million in 2005. Earnings
improvement in 2007 was primarily due to higher net sales, particularly $12 million related to the WorldView and
other commercial space contracts, an improved contract mix and better program execution. Earnings in 2006 were
negatively affected by lower sales due to program delays and unfavorable contract mix. The first quarter of 2005
included expense of $3.8 million for the write down to net realizable value of an equity investment in an aerospace
company. This investment was sold in October 2005 for approximately its carrying value.

Page 27 of 94

Some of the segment’s high-profile contracts include: the WorldView 1 and WorldView 2 advanced commercial
remote sensing satellites; the James Webb Space Telescope, a successor to the Hubble Space Telescope; the Space-
Based Space Surveillance System, which will detect and track space objects such as satellites and orbital debris;
NPOESS, the next-generation satellite weather monitoring system; and a number of antennas for the Joint Strike
Fighter.

Sales to the U.S. government, either directly as a prime contractor or indirectly as a subcontractor, represented
84 percent of segment sales in 2007, 90 percent of segment sales in 2006 and 87 percent in 2005. Contracted
backlog for the aerospace and technologies segment at December 31, 2007 and 2006, was $774 million and
$886 million, respectively. Year-to-year comparisons of backlog are not necessarily indicative of the trend of future
operations.

Additional Segment Information

For additional information regarding the company’s segments, see the summary of business segment information in
Note 2 accompanying the consolidated financial statements within Item 8 of this report. The charges recorded for
business consolidation activities were based on estimates by Ball management, actuaries and others and were
developed from information available at the time. If actual outcomes vary from the estimates, the differences will be
reflected in current period earnings in the consolidated statement of earnings and identified as business
consolidation gains and losses. Additional details about our business consolidation activities and associated costs
are provided in Note 5 accompanying the consolidated financial statements within Item 8 of this report.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses were $323.7 million, $287.2 million and $233.8 million for
2007, 2006 and 2005, respectively. Contributing to higher expenses in 2007 compared to 2006 were $4.5 million of
additional SG&A from the U.S. Can acquisition, higher research and development costs and aerospace bid and
proposal costs of $9.4 million, increased sales and marketing efforts of $5.4 million and $15.8 million of
compensation and benefit increases, including year-over-year incentive compensation costs. Also, a $5.8 million
out-of-period foreign currency adjustment was included in SG&A expenses in the first quarter of 2006 (discussed in
further detail in Note 19 accompanying the consolidated financial statements included within Item 8 of this report).

The increase in SG&A expenses in 2006 compared to 2005 was primarily the result of $20 million of incremental
SG&A (after realized synergies) from the acquired U.S. Can operations, the $5.8 million out-of-period foreign
currency adjustment, higher expense of $6.3 million associated with the adoption of Statement of Financial
Accounting Standards No. 123 (revised 2004), $2 million for higher rates associated with the company’s receivables
sales agreement, $5 million of increased legal fees related to patent litigation, $6.7 million for an initial mark-to-
market adjustment to one of the company’s deferred compensation stock plans due to a plan amendment, as well as
compensation and benefit increases.

Interest and Taxes

Consolidated interest expense was $149.4 million in 2007; $134.4 million in 2006 and $116.4 million, including
debt refinancing costs of $19.3 million, in 2005. The higher expense for each successive year was primarily due to
the additional borrowings used to finance the acquisitions of U.S. Can and the Alcan assets, combined with higher
interest rates in 2007. The debt refinancing costs in 2005 of $19.3 million were costs associated with the refinancing
of the company’s senior credit facilities and the redemption in the last half of 2005 of the company’s 7.75% senior
notes, which were due in August 2006.

Ball’s consolidated effective income tax rate for 2007 was 26.3 percent compared to 29.4 percent in 2006 and
29.2 percent in 2005. The lower effective rate in 2007 was the result of earnings mix (higher foreign earnings taxed
at lower rates) and net tax benefit adjustments of $17.2 million recorded in the third quarter of 2007, as compared to
$6.4 million in 2006. These net tax benefit adjustments were the result of enacted income tax rate reductions in
Germany and the United Kingdom and a tax loss related to the company’s Canadian operations. These benefits were
offset by a tax provision to adjust for the final settlement negotiations concluded in the quarter with the Internal
Revenue Service (IRS) related to a company-owned life insurance plan (discussed below). Based on current
estimates, the 2008 effective income tax rate is expected to be around 33 percent.

Page 28 of 94

During 2007 the company concluded final settlement negotiations with the IRS on the deductibility of interest
expense on incurred loans from a company-owned life insurance plan. An additional accrual of $7 million was made
in the third quarter to adjust the accrued liability to the final settlement of $18.4 million, including interest, for the
years 2000-2004, which were under examination, and for the unaudited years 2005-2007. This settlement included
agreement on the prospective treatment of interest deductibility on the policy loans, which will not have a
significant impact on earnings per share, cash flow or liquidity in future periods. Further details are available in
Note 14 to the consolidated financial statements within Item 8 of this report.

While the effective tax rates for 2006 and 2005 are similar, the 2006 rate was impacted by a tax benefit of
$8.1 million associated with a foreign exchange loss as a result of the change in the functional currency of a
European subsidiary in the local statutory accounts. The one-time benefit was somewhat offset by a higher foreign
tax rate differential due to taxation of the German property insurance gain at the marginal rate of 39 percent and a
valuation allowance on a Canadian net operating loss resulting from the 2006 business consolidation costs. The
2005 rate was impacted by the tax benefit recorded on the repatriation of foreign earnings at legislated reduced rates
plus the tax benefit on business consolidation costs applied at the higher marginal rate.

Results of Equity Affiliates

Equity in the earnings of affiliates is primarily attributable to our 50 percent ownership in packaging investments in
the U.S. and Brazil. Earnings were $12.9 million in 2007, $14.7 million in 2006 and $15.5 million in 2005.

CRITICAL AND SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING
PRONOUNCEMENTS

For information regarding the company’s critical and significant accounting policies, as well as recent accounting
pronouncements, see Note 1 to the consolidated financial statements within Item 8 of this report.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Cash Flows and Capital Expenditures

Our primary sources of liquidity are cash provided by operating activities and external borrowings. We believe that
cash flows from operations and cash provided by short-term and revolver borrowings, when necessary, will be
sufficient to meet our ongoing operating requirements, scheduled principal and interest payments on debt, dividend
payments and anticipated capital expenditures. However, our liquidity could be impacted significantly by a decrease
in demand for our products, which could arise from competitive circumstances, or any of the other factors we
describe in Item 1A, “Risk Factors.”

Cash flows from operating activities were $673 million in 2007 compared to $401.4 million in 2006 and
$558.8 million in 2005. The improvement over 2006 was primarily due to higher net earnings before the legal
settlement in 2007 and the insurance gain in 2006 related to the Hassloch fire. The improvement in 2007 was also
the result of reduced changes in working capital components and lower income tax payments, partially offset by
higher pension contributions.

Cash flows from operating activities in 2006 were negatively affected by higher cash pension funding and higher
working capital levels compared to the prior year. The higher working capital was a combination of higher than
planned raw material inventory levels, higher income tax payments and higher accounts receivable balances, the
latter resulting primarily from the repayment of a portion of the accounts receivable securitization program and late
payments from customers in Europe.

Management internally uses a free cash flow measure: (1) to evaluate the company’s operating results, (2) to plan
stock-buy back levels, (3) to evaluate strategic investments and (4) to evaluate the company’s ability to incur and
service debt. Free cash flow is not a defined term under U.S. generally accepted accounting principles, and it should
not be inferred that the entire free cash flow amount is available for discretionary expenditures. The company
defines free cash flow as cash flow from operating activities less additions to property, plant and equipment (capital
spending). Free cash flow is typically derived directly from the company’s cash flow statements; however, it may be
adjusted for items that affect comparability between periods. An example of such an item included in 2006 is the
property insurance proceeds for the replacement of the fire-damaged assets in our Hassloch, Germany, plant, which

Page 29 of 94

are included in capital spending amounts. Another example is the company’s decision in 2007 to contribute an
additional $44.5 million ($27.3 million) to its pension plans as part of its overall debt reduction plan.

Based on this, our consolidated free cash flow is summarized as follows:

($ in millions)

2007

2006

2005

Cash flows from operating activities
Incremental pension funding, net of tax
Capital spending
Proceeds for replacement of fire-damaged assets
Free cash flow

$ 673.0
27.3
(308.5)
48.6
$ 440.4

$ 401.4

–
(279.6)
61.3
$ 183.1

$ 558.8

–

(291.7)

–

$ 267.1

Based on information currently available, we estimate cash flows from operating activities for 2008 to be
approximately $650 million, capital spending to be approximately $350 million and free cash flow to be in the
$300 million range. Capital spending of $259.9 million (net of $48.6 million in insurance recoveries) in 2007 was
below depreciation and amortization expense of $281 million. We continue to invest capital in our best performing
operations, including projects to increase custom can capabilities, improve beverage can and end making
productivity and add more beverage can capacity in Europe, as well as expenditures in the aerospace and
technologies segment. Of the $350 million of planned capital spending for 2008, approximately $180 million will be
spent on top-line sales growth projects.

Debt Facilities and Refinancing

Interest-bearing debt at December 31, 2007, decreased $93.1 million to $2,358.6 million from $2,451.7 million at
December 31, 2006. The 2007 debt decrease from 2006 was primarily attributed to debt payments offset by higher
foreign exchange rates.

At December 31, 2007, $705 million was available under the company’s multi-currency revolving credit facilities.
The company also had $345 million of short-term uncommitted credit facilities available at the end of the year, of
which $49.7 million was outstanding.

On October 13, 2005, Ball refinanced its senior secured credit facilities and during the third and fourth quarters of
2005, Ball redeemed its 7.75% senior notes due August 2006 primarily through the drawdown of funds under the
new credit facilities. The refinancing and redemption resulted in a pretax debt refinancing charge of $19.3 million
($12.3 million after tax) to reflect the call premium associated with the senior notes and the write off of unamortized
debt issuance costs.

The company has a receivables sales agreement that provides for the ongoing, revolving sale of a designated pool of
trade accounts receivable of Ball’s North American packaging operations, up to $250 million. The agreement
qualifies as off-balance sheet financing under the provisions of Statement of Financial Accounting Standards
(SFAS) No. 140, as amended by SFAS No. 156. Net funds received from the sale of the accounts receivable totaled
$170 million and $201.3 million at December 31, 2007 and 2006, respectively, and are reflected as a reduction of
accounts receivable in the consolidated balance sheets.

The company was not in default of any loan agreement at December 31, 2007, and has met all payment obligations.
The U.S. note agreements, bank credit agreement and industrial development revenue bond agreements contain
certain restrictions relating to dividends, investments, financial ratios, guarantees and the incurrence of additional
indebtedness.

Additional details about the company’s receivables sales agreement and debt are available in Notes 7 and 13,
respectively, accompanying the consolidated financial statements within Item 8 of this report.

Page 30 of 94

Other Liquidity Items

Cash payments required for long-term debt maturities, rental payments under noncancellable operating leases,
purchase obligations and other commitments in effect at December 31, 2007, are summarized in the following table:

($ in millions)

Long-term debt
Capital lease obligations
Interest payments on long-term debt (b)
Operating leases
Purchase obligations (c)
Common stock repurchase agreements
Legal settlement

Total payments on contractual

Total

$ 2,302.6
4.4
698.6
218.5
6,092.6
131.0
70.0

Payments Due By Period (a)

Less than
1 Year

$ 126.1
1.0
142.9
49.9
2,397.2
131.0
70.0

1-3 Years

3-5 Years

$ 547.6
0.8
246.3
71.7
3,118.8

–
–

$ 1,174.9
0.5
152.5
42.5
576.6
–
–

More than
5 Years

$ 454.0
2.1
156.9
54.4
–
–
–

obligations

$ 9,517.7

$ 2,918.1

$ 3,985.2

$ 1,947.0

$ 667.4

(a) Amounts reported in local currencies have been translated at the year-end exchange rates.
(b) For variable rate facilities, amounts are based on interest rates in effect at year end and do not contemplate the effects of

hedging instruments.

(c) The company’s purchase obligations include contracted amounts for aluminum, steel, plastic resin and other direct
materials. Also included are commitments for purchases of natural gas and electricity, aerospace and technologies
contracts and other less significant items. In cases where variable prices and/or usage are involved, management’s best
estimates have been used. Depending on the circumstances, early termination of the contracts may not result in penalties
and, therefore, actual payments could vary significantly.

Contributions to the company’s defined benefit pension plans, not including the unfunded German plans, are
expected to be $49 million in 2008. This estimate may change based on plan asset performance. Benefit payments
related to these plans are expected to be $66 million, $70 million, $74 million, $77 million and $82 million for the
years ending December 31, 2008 through 2012, respectively, and a total of $473 million for the years 2013 through
2017. Payments to participants in the unfunded German plans are expected to be approximately $26 million in each
of the years 2008 through 2012 and a total of $136 million for the years 2013 through 2017.

In accordance with United Kingdom pension regulations, Ball has provided an £8 million guarantee to the plan for
its defined benefit plan in the United Kingdom. If the company’s credit rating falls below specified levels, Ball will
be required to either: (1) contribute an additional £8 million to the plan; (2) provide a letter of credit to the plan in
that amount or (3) if imposed by the appropriate regulatory agency, provide a lien on company assets in that amount
for the benefit of the plan. The guarantee can be removed upon approval by both Ball and the pension plan trustees.

Our share repurchase program in 2007 was $211.3 million, net of issuances, compared to $45.7 million net
repurchases in 2006 and $358.1 million in 2005. The net repurchases included the $51.9 million settlement on
January 5, 2007, of a forward contract entered into in December 2006 for the repurchase of 1,200,000 shares.
However, the 2007 net repurchases did not include a forward contract entered into in December 2007 for the
repurchase of 675,000 shares. The contract was settled on January 7, 2008, for $31 million in cash.

On December 12, 2007, in a privately negotiated transaction, Ball entered into an accelerated share repurchase
agreement to buy $100 million of its common shares using cash on hand and available borrowings. The company
advanced the $100 million on January 7, 2008, and received approximately 2 million shares, which represented
90 percent of the total shares as calculated using the previous day’s closing price. The exact number of shares to be
repurchased under the agreement, which will be determined on the settlement date (no later than June 5, 2008), is
subject to an adjustment based on a weighted average price calculation for the period between the initial purchase
date and the settlement date. The company has the option to settle the contract in either cash or shares. Including the
settlements of the forward share purchase contract and the accelerated share repurchase agreement, we expect to
repurchase approximately $300 million of our common shares, net of issuances, in 2008.

Annual cash dividends paid on common stock were 40 cents per share in 2007, 2006 and 2005. Total dividends paid
were $40.6 million in 2007, $41 million in 2006 and $42.5 million in 2005.

Page 31 of 94

Contingencies

The company is subject to various risks and uncertainties in the ordinary course of business due, in part, to the
competitive nature of the industries in which we participate, our operations in developing markets outside the U.S.,
changing commodity prices for the materials used in the manufacture of our products and changing capital markets.
Where practicable, we attempt to reduce these risks and uncertainties through the establishment of risk management
policies and procedures, including, at times, the use of derivative financial instruments as explained in Item 7A of
this report.

From time to time, the company is subject to routine litigation incident to its business. Additionally, the U.S.
Environmental Protection Agency has designated Ball as a potentially responsible party, along with numerous other
companies, for the cleanup of several hazardous waste sites. Our information at this time does not indicate that these
matters will have a material adverse effect upon the liquidity, results of operations or financial condition of the
company.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingencies at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Future events could affect these estimates. See Note 1 to the consolidated
financial statements within Item 8 of this report for a summary of the company’s critical and significant accounting
policies.

The U.S. and European economies have experienced minor general inflation during the past several years.
Management believes that evaluation of Ball’s performance during the periods covered by these consolidated
financial statements should be based upon historical financial statements.

Page 32 of 94

Forward-Looking Statements

The company has made or implied certain forward-looking statements in this report, which are made as of the end
of the time frame covered by this report. These forward-looking statements represent the company’s goals, and
results could vary materially from those expressed or implied. From time to time we also provide oral or written
forward-looking statements in other materials we release to the public. As time passes, the relevance and accuracy
of forward-looking statements may change. Some factors that could cause the company’s actual results or outcomes
to differ materially from those discussed in the forward-looking statements include, but are not limited to:
fluctuation in customer and consumer growth, demand and preferences; loss of one or more major customers or
changes to contracts with one or more customers; insufficient production capacity; overcapacity in foreign and
domestic metal and plastic container industry production facilities and its impact on pricing; failure to achieve
anticipated productivity improvements or production cost reductions, including those associated with capital
expenditures such as our beverage can end project; changes in climate and weather; fruit, vegetable and fishing
yields; power and natural resource costs; difficulty in obtaining supplies and energy, such as gas and electric power;
availability and cost of raw materials, as well as the recent significant increases in resin, steel, aluminum and energy
costs, and the ability or inability to include or pass on to customers changes in raw material costs; changes in the
pricing of the company’s products and services; competition in pricing and the possible decrease in, or loss of, sales
resulting therefrom; insufficient or reduced cash flow; transportation costs; the number and timing of the purchases
of the company’s common shares; regulatory action or federal and state legislation including mandated corporate
governance and financial reporting laws; mandatory deposit or restrictive packaging legislation such as recycling
laws; interest rates affecting our debt; labor strikes; increases and trends in various employee benefits and labor
costs, including pension, medical and health care costs; rates of return projected and earned on assets and discount
rates used to measure future obligations and expenses of the company’s defined benefit retirement plans; boycotts;
antitrust, intellectual property, consumer and other litigation; maintenance and capital expenditures; goodwill
impairment; changes in generally accepted accounting principles or their interpretation; accounting changes; local
economic conditions; the authorization, funding, availability and returns of contracts for the aerospace and
technologies segment and the nature and continuation of those contracts and related services provided thereunder;
delays, extensions and technical uncertainties, as well as schedules of performance associated with such segment
contracts; international business and market risks such as the devaluation or revaluation of certain currencies and
the activities of foreign subsidiaries; international business risks (including foreign exchange rates and activities of
foreign subsidiaries) in Europe and particularly in developing countries such as the PRC and Brazil; changes in the
foreign exchange rates of the U.S. dollar against the European euro, British pound, Polish zloty, Serbian dinar,
Hong Kong dollar, Canadian dollar, Chinese renminbi, Brazilian real and Argentine peso, and in the foreign
exchange rate of the European euro against the British pound, Polish zloty and Serbian dinar; terrorist activity or
war that disrupts the company’s production or supply; regulatory action or laws including tax, environmental and
workplace safety; technological developments and innovations; successful or unsuccessful acquisitions, joint
ventures or divestitures and the integration activities associated therewith; changes in senior management; changes
to unaudited results due to statutory audits of our financial statements or management’s evaluation of the company’s
internal controls over financial reporting; and loss contingencies related to income and other tax matters, including
those arising from audits performed by U.S. and foreign tax authorities. If the company is unable to achieve its
goals, then the company’s actual performance could vary materially from those goals expressed or implied in the
forward-looking statements. The company currently does not intend to publicly update forward-looking statements
except as it deems necessary in quarterly or annual earnings reports. You are advised, however, to consult any
further disclosures we make on related subjects in our 10-K, 10-Q and 8-K reports to the Securities and Exchange
Commission.

Page 33 of 94

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Financial Instruments and Risk Management

In the ordinary course of business, we employ established risk management policies and procedures to reduce our
exposure to fluctuations in commodity prices, interest rates, foreign currencies and prices of the company’s common
stock in regard to common share repurchases. Although the instruments utilized involve varying degrees of credit,
market and interest risk, the counterparties to the agreements are expected to perform fully under the terms of the
agreements.

We have estimated our market risk exposure using sensitivity analysis. Market risk exposure has been defined as the
changes in fair value of derivative instruments, financial instruments and commodity positions. To test the
sensitivity of our market risk exposure, we have estimated the changes in fair value of market risk sensitive
instruments assuming a hypothetical 10 percent adverse change in market prices or rates. The results of the
sensitivity analysis are summarized below.

Commodity Price Risk

We manage our North American commodity price risk in connection with market price fluctuations of aluminum
primarily by entering into container sales contracts that include aluminum-based pricing terms that generally reflect
price fluctuations under our commercial supply contracts for aluminum purchases. The terms include fixed, floating
or pass through aluminum component pricing. This matched pricing affects substantially all of our metal beverage
packaging, Americas, net sales. We also, at times, use certain derivative instruments such as option and forward
contracts as cash flow and fair value hedges of commodity price risk where there is not a pass-through arrangement
in the sales contract.

Most of the plastic packaging, Americas, sales contracts include provisions to fully pass through resin cost changes.
As a result, we believe we have minimal exposure related to changes in the cost of plastic resin. Most metal food
and household products packaging, Americas, sales contracts either include provisions permitting us to pass through
some or all steel cost changes we incur, or they incorporate annually negotiated steel costs. In 2007 and 2006, we
were able to pass through to our customers the majority of steel cost increases. We anticipate that we will be able to
pass through the majority of the steel price increases that occur through the end of 2008.

In Europe and Asia, the company manages the aluminum and steel raw material commodity price risks through
annual and long-term contracts for the purchase of the materials, as well as certain sales of containers, that reduce
the company's exposure to fluctuations in commodity prices within the current year. These purchase and sales
contracts include fixed price, floating and pass-through pricing arrangements. We also use forward and option
contracts as cash flow hedges to manage future aluminum price risk and foreign exchange exposures for those sales
contracts where there is not a pass-through arrangement to minimize the company’s exposure to significant price
changes. We also use option contracts to limit the impacts of European inflation in certain multi-year contracts.

Considering the effects of derivative instruments, the market’s ability to accept price increases and the company’s
commodity price exposures, a hypothetical 10 percent adverse change in the company’s steel, aluminum and resin
prices could result in an estimated $6 million after-tax reduction in net earnings over a one-year period.
Additionally, if foreign currency exchange rates were to change adversely by 10 percent, we estimate there could be
a $12 million after-tax reduction in net earnings over a one-year period for foreign currency exposures on raw
materials. Actual results may vary based on actual changes in market prices and rates. Sensitivity to foreign
currency exposures related to metal increased over prior years due to an increase in metal purchases and related
payables at our foreign operations, which are subject to foreign currency fluctuations.

The company is also exposed to fluctuations in prices for utilities such as natural gas and electricity, as well as the
cost of diesel fuel as a component of freight cost. A hypothetical 10 percent increase in our utility prices could result
in an estimated $10 million after-tax reduction of net earnings over a one-year period. A hypothetical 10 percent
increase in our diesel fuel surcharge could result in an estimated $2 million after-tax reduction of net earnings over
the same period. Actual results may vary based on actual changes in market prices and rates.

Page 34 of 94

Interest Rate Risk

Our objective in managing our exposure to interest rate changes is to manage the impact of interest rate changes on
earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, we use a variety of
interest rate swaps, collars and options to manage our mix of floating and fixed-rate debt. Interest rate instruments
held by the company at December 31, 2007, included pay-fixed interest rate swaps and interest rate collars. Pay-
fixed swaps effectively convert variable rate obligations to fixed rate instruments. Collars create an upper and lower
threshold within which interest rates will fluctuate.

Based on our interest rate exposure at December 31, 2007, assumed floating rate debt levels throughout 2008 and
the effects of derivative instruments, a 100 basis point increase in interest rates could result in an estimated
$8 million after-tax reduction in net earnings over a one-year period. Actual results may vary based on actual
changes in market prices and rates and the timing of these changes.

Foreign Currency Exchange Rate Risk

Our objective in managing exposure to foreign currency fluctuations is to protect foreign cash flows and earnings
from changes associated with foreign currency exchange rate changes through the use of cash flow hedges. In
addition, we manage foreign earnings translation volatility through the use of foreign currency options. Our foreign
currency translation risk results from the European euro, British pound, Canadian dollar, Polish zloty, Chinese
renminbi, Brazilian real, Argentine peso and Serbian dinar. We face currency exposures in our global operations as
a result of purchasing raw materials in U.S. dollars and, to a lesser extent, in other currencies. Sales contracts are
negotiated with customers to reflect cost changes and, where there is not a foreign exchange pass-through
arrangement, the company uses forward and option contracts to manage foreign currency exposures.

Considering the company’s derivative financial instruments outstanding at December 31, 2007, and the currency
exposures, a hypothetical 10 percent reduction (U.S. dollar strengthening) in foreign currency exchange rates
compared to the U.S. dollar could result in an estimated $23 million after-tax reduction in net earnings over a one-
year period. This amount includes the $12 million currency exposure discussed above in the “Commodity Price
Risk” section. This hypothetical adverse change in foreign currency exchange rates would also reduce our
forecasted average debt balance by $84 million. Actual changes in market prices or rates may differ from
hypothetical changes.

Common Share Repurchases

In connection with the company’s ongoing share repurchases, the company periodically sells put options, which
give the purchasers of those options the right to sell shares of the company’s common stock to the company on
specified dates at specified prices upon the exercise of those options. Our objective in selling put options is to lower
the average purchase price of acquired shares. There were no put option contracts outstanding at the end of 2007.

On December 3, 2007, Ball entered into a forward repurchase agreement for the purchase of 675,000 shares of its common
stock. This agreement was settled for $31 million on January 7, 2008, and the shares were delivered that day. On
December 12, 2007, we also entered into an accelerated share repurchase agreement for approximately $100 million. The
agreement provided for the delivery of approximately 2 million shares, which represented 90 percent of the total estimated
shares to ultimately be delivered. The $100 million was paid on January 7, 2008, at the time the shares were delivered. The
remaining shares and average price per share will be determined at the conclusion of the contract, which is expected to
occur no later than June 5, 2008.

Page 35 of 94

Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Ball Corporation:

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly,
in all material respects, the financial position of Ball Corporation and its subsidiaries at December 31, 2007 and
2006, and the results of their operations and their cash flows for each of the three years in the period ended
December 31, 2007 in conformity with accounting principles generally accepted in the United States of America.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2007, based on criteria established in Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's
management is responsible for these financial statements, for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is
to express opinions on these financial statements and on the Company's internal control over financial reporting
based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We believe
that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
February 25, 2008

Page 36 of 94

Consolidated Statements of Earnings
Ball Corporation and Subsidiaries

($ in millions, except per share amounts)

Net sales
Legal settlement (Note 4)

Total net sales

Costs and expenses

Cost of sales (excluding depreciation)
Depreciation and amortization (Notes 2, 9 and 11)
Business consolidation costs (Note 5)
Property insurance gain (Note 6)
Selling, general and administrative

Years ended December 31,
2006

2007

2005

$ 7,475.3
(85.6)
7,389.7

$ 6,621.5

–
6,621.5

$ 5,751.2

–

5,751.2

6,226.5
281.0
44.6
–
323.7
6,875.8

5,540.4
252.6
35.5
(75.5)
287.2
6,040.2

4,802.7
213.5
21.2
–
233.8
5,271.2

Earnings before interest and taxes

513.9

581.3

480.0

Interest expense (Note 13)

Interest expense before debt refinancing costs
Debt refinancing costs

Total interest expense

Earnings before taxes
Tax provision (Note 14)
Minority interests
Equity in results of affiliates
Net earnings

Earnings per share (Notes 16 and 17):

Basic
Diluted

(149.4)
–
(149.4)

364.5
(95.7)
(0.4)
12.9
$ 281.3

(134.4)
–
(134.4)

446.9
(131.6)
(0.4)
14.7
$ 329.6

(97.1)
(19.3)
(116.4)

363.6
(106.2)
(0.8)
15.5
$ 272.1

$ 2.78
$ 2.74

$ 3.19
$ 3.14

$ 2.52
$ 2.48

Weighted average shares outstanding (000s) (Note 17):

Basic
Diluted

101,186
102,760

103,338
104,951

107,758
109,732

Cash dividends declared and paid, per share

$ 0.40

The accompanying notes are an integral part of the consolidated financial statements.

Page 37 of 94

Consolidated Balance Sheets
Ball Corporation and Subsidiaries

($ in millions)
Assets
Current assets

Cash and cash equivalents
Receivables, net (Note 7)
Inventories, net (Note 8)
Deferred taxes and prepaid expenses (Note 14)

Total current assets

Property, plant and equipment, net (Notes 6 and 9)
Goodwill (Notes 3 and 10)
Intangibles and other assets, net (Notes 11 and 14)

Total Assets

Liabilities and Shareholders’ Equity
Current liabilities

Short-term debt and current portion of long-term debt (Note 13)
Accounts payable
Accrued employee costs
Income taxes payable (Note 14)
Other current liabilities (Note 4)

Total current liabilities

Long-term debt (Note 13)
Employee benefit obligations (Note 15)
Deferred taxes and other liabilities (Note 14)

Total liabilities

Contingencies (Note 23)
Minority interests

Shareholders’ equity (Note 16)

Common stock (160,678,695 shares issued – 2007; 160,026,936 shares issued – 2006)
Retained earnings
Accumulated other comprehensive earnings (loss)
Treasury stock, at cost (60,454,245 shares – 2007; 55,889,948 shares – 2006)

Total shareholders’ equity

Total Liabilities and Shareholders’ Equity

The accompanying notes are an integral part of the consolidated financial statements.

December 31,

2007

2006

$ 151.6

582.7
998.1
110.5
1,842.9

1,941.2
1,863.1
373.4
$ 6,020.6

$ 176.8
763.6
238.0
15.7
319.0
1,513.1

2,181.8
799.0
183.1
4,677.0

$ 151.5
579.5
935.4
94.9
1,761.3

1,876.0
1,773.7
429.9
$ 5,840.9

$ 181.3
732.4
201.1
71.8
267.7
1,454.3

2,270.4
847.7
102.1
4,674.5

1.1

1.0

760.3
1,765.0
106.9
(1,289.7)
1,342.5
$ 6,020.6

703.4
1,535.3
(29.5)
(1,043.8)
1,165.4
$ 5,840.9

Page 38 of 94

Consolidated Statements of Cash Flows
Ball Corporation and Subsidiaries

($ in millions)

Cash Flows from Operating Activities

Net earnings
Adjustments to reconcile net earnings to cash provided by

operating activities:
Depreciation and amortization
Legal settlement (Note 4)
Property insurance gain (Note 6)
Business consolidation costs (Note 5)
Deferred taxes
Other, net

Working capital changes, excluding effects of acquisitions:

Receivables
Inventories
Accounts payable
Accrued employee costs
Income taxes payable and current deferred tax assets, net
Other, net

Cash provided by operating activities

Cash Flows from Investing Activities

Additions to property, plant and equipment
Business acquisitions, net of cash acquired (Note 3)
Property insurance proceeds (Note 6)
Other, net

Cash used in investing activities
Cash Flows from Financing Activities

Long-term borrowings
Repayments of long-term borrowings
Change in short-term borrowings
Debt prepayment costs
Debt issuance costs
Proceeds from issuances of common stock
Acquisitions of treasury stock
Common dividends
Other, net

Cash provided by (used in) financing activities

Effect of exchange rate changes on cash
Change in cash and cash equivalents
Cash and Cash Equivalents – Beginning of Year
Cash and Cash Equivalents – End of Year

Years ended December 31,
2006

2005

2007

$ 281.3

$ 329.6

$ 272.1

281.0
85.6
–
42.3
(21.0)
(30.9)

26.9
(41.0)
27.4
32.7
32.2
(43.5)
673.0

(308.5)
–
48.6
(5.9)
(265.8)

0.3
(74.5)
(95.8)
–
–
46.5
(257.8)
(40.6)
9.5
(412.4)
5.3
0.1
151.5
$ 151.6

252.6
–
(75.5)
34.2
38.2
(40.4)

(57.0)
(132.2)
121.6
53.1
(62.4)
(60.4)
401.4

(279.6)
(791.1)
61.3
16.0
(993.4)

949.4
(205.0)
23.0
–
(8.1)
38.4
(84.1)
(41.0)
7.6
680.2
2.3
90.5
61.0
$ 151.5

213.5
–
–
19.0
(51.6)
17.7

(32.8)
(71.7)
113.2
(17.2)
51.2
45.4
558.8

(291.7)
−
–
1.7
(290.0)

882.8
(949.7)
68.4
(6.6)
(4.8)
35.6
(393.7)
(42.5)
(0.2)
(410.7)
4.2
(137.7)
198.7
$ 61.0

The accompanying notes are an integral part of the consolidated financial statements.

Page 39 of 94

Consolidated Statements of Shareholders’ Equity and Comprehensive Earnings
Ball Corporation and Subsidiaries

($ in millions, except share amounts)

Number of Common Shares Outstanding (000s)

Balance, beginning of year
Shares issued for stock options, other stock plans and business

acquisitions, net of shares exchanged (a)

Balance, end of year

Number of Treasury Shares Outstanding (000s)

Balance, beginning of year
Shares purchased, net of shares reissued (a)(c)(d)
Balance, end of year

Common Stock

Years ended December 31,
2006

2005

2007

160,027

158,383

652
160,679

(55,890)
(4,564)
(60,454)

1,644
160,027

(54,183)
(1,707)
(55,890)

157,506

877
158,383

(44,815)
(9,368)
(54,183)

Balance, beginning of year
Shares issued for stock options and other stock plans, net of shares

$ 703.4

$ 633.6

$ 610.8

exchanged (cash and noncash)

Shares issued for business acquisitions (a)
Tax benefit from option exercises
Balance, end of year

Retained Earnings

Balance, beginning of year
Net earnings
Common dividends, net of tax benefits
Adoption of new accounting standard (Note 14)
Balance, end of year

Accumulated Other Comprehensive Earnings (Loss) (Note 16)

Balance, beginning of year
Foreign currency translation adjustment
Pension and other postretirement items, net of tax (b)
Effective financial derivatives, net of tax

Net other comprehensive earnings (loss) adjustments

Adoption of new accounting standard (b)
Accumulated other comprehensive earnings (loss)

Treasury Stock

Balance, beginning of year
Shares purchased, net of shares reissued (c)(d)
Diversification of deferred compensation stock plan
Shares returned in business acquisitions (a)
Balance, end of year
Comprehensive Earnings

Net earnings
Net other comprehensive earnings adjustments (see details above) (b)
Comprehensive earnings (b)

47.4
–
9.5
$ 760.3

$ 1,535.3
281.3
(40.2)
(11.4)
$ 1,765.0

28.7
33.6
7.5
$ 703.4

$ 1,246.0
329.6
(40.3)
–

$ 1,535.3

$ (29.5)

$ (100.7)

90.0
57.9
(11.5)
136.4
–

$ 106.9

$(1,043.8)
(214.9)
(31.0)
–

$(1,289.7)

$ 281.3
136.4
$ 417.7

57.2
55.9
6.0
119.1
(47.9)
$ (29.5)

$ (925.5)
(104.4)
–
(13.9)
$(1,043.8)

$ 329.6
119.1
$ 448.7

15.5
–
7.3
$ 633.6

$ 1,015.0
272.1
(41.1)
–

$ 1,246.0

$ 33.2
(74.3)
(43.6)
(16.0)
(133.9)
–

$ (100.7)

$ (564.9)
(360.6)
–
–

$ (925.5)

$ 272.1
(133.9)
$ 138.2

(a) In connection with the acquisition of U.S. Can (discussed in Note 3), 758,981 shares were originally issued at $44.28 per share.
As a result of a purchase price adjustment, 314,225 shares were subsequently returned to Ball and recorded as treasury stock.

(b) Within the company’s 2006 annual report, the consolidated statement of changes in shareholders’ equity for the year ended

December 31, 2006, included a transition adjustment of $47.9 million, net of tax, related to the adoption of SFAS No. 158,
“Employers’ Accounting for Defined Benefit Pension Plans and Other Postretirement Plans, an Amendment of FASB Statements
No. 87, 88, 106 and 132(R),” as a component of 2006 comprehensive earnings rather than only as an adjustment to accumulated
other comprehensive loss. The 2006 amounts have been revised to correct the previous reporting.

contracts not settled until after December 31. The contracts were settled for $31 million in January 2008 and $51.9 million in
January 2007, respectively.

(d) Includes 588,662 shares, 716,420 and 939,139 shares reissued in 2007, 2006 and 2005, respectively. The total amounts related to

these share reissuances were $26.5 million, $27.2 million and $36.1 million in each of these three years, respectively.

The accompanying notes are an integral part of the consolidated financial statements.

Page 40 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

1. Critical and Significant Accounting Policies

In the application of accounting principles generally accepted in the United States of America, management is
required to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of
contingencies and reported amounts of revenues and expenses. These estimates are based on historical experience
and various other assumptions believed to be reasonable under the circumstances. Actual results could differ from
these estimates under different assumptions or conditions.

Critical Accounting Policies

The company considers certain accounting policies to be critical, as their application requires management’s best
judgment in making estimates about the effect of matters that are inherently uncertain. Following is a discussion of
the accounting policies we consider critical to our consolidated financial statements.

Revenue Recognition in the Aerospace and Technologies Segment

Sales under long-term contracts in the aerospace and technologies segment are primarily recognized under the cost-
to-cost, percentage-of-completion method. This business segment sells using two types of long-term sales contracts
– cost-type sales contracts, which represent approximately 70 percent of sales, and fixed price sales contracts, which
account for the remainder. A cost-type sales contract is an agreement to perform the contract for cost plus an agreed
upon profit component, whereas fixed price sales contracts are completed for a fixed price or involve the sale of
engineering labor at fixed rates per hour. Cost-type sales contracts can have different types of fee arrangements,
including fixed fee, cost, milestone and performance incentive fees, award fees or a combination thereof.

During initial periods of sales contract performance, our estimates of base, incentive and other fees are established
at a conservative estimate of profit over the period of contract performance. Throughout the period of contract
performance, we regularly reevaluate and, if necessary, revise our estimates of total contract revenue, total contract
cost and extent of progress toward completion. Provision for estimated contract losses, if any, is made in the period
that such losses are determined to be probable. Because of sales contract payment schedules, limitations on funding
and contract terms, our sales and accounts receivable generally include amounts that have been earned but not yet
billed. As a prime U.S. government contractor or subcontractor, the aerospace and technologies segment is subject
to a high degree of regulation, financial review and oversight by the U.S. government.

Acquisitions

The company accounts for acquisitions using the purchase method as required by Statement of Financial
Accounting Standards (SFAS) No. 141, “Business Combinations.” Under SFAS No. 141, the acquiring company
allocates the purchase price to the assets acquired and liabilities assumed based on their estimated fair values at the
date of acquisition, including intangible assets that can be identified and named. The purchase price in excess of the
fair value of the net assets and liabilities is recorded as goodwill. Among other sources of relevant information, the
company uses independent appraisals and actuarial or other valuations to assist in determining the estimated fair
values of the assets and liabilities.

Goodwill and Other Intangible Assets

We evaluate the carrying value of goodwill annually, and we evaluate our other intangible assets whenever there is
evidence that certain events or changes in circumstances indicate that the carrying amount of these assets may not
be recoverable. Goodwill is tested for impairment using a fair value approach, using discounted cash flows to
establish fair values. We recognize an impairment charge for any amount by which the carrying amount of goodwill
exceeds its fair value. When available and as appropriate, we use comparative market multiples to corroborate
discounted cash flow results. When a business within a reporting unit is disposed of, goodwill is allocated to the
gain or loss on disposition using the relative fair value methodology.

Page 41 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

1. Critical and Significant Accounting Policies (continued)

We amortize the cost of other intangibles over their estimated useful lives unless such lives are deemed indefinite.
Amortizable intangible assets are tested for impairment based on undiscounted cash flows and, if impaired, written
down to fair value based on either discounted cash flows or appraised values. Intangible assets with indefinite lives
are tested annually for impairment and written down to fair value as required.

Defined Benefit Pension Plans and Other Employee Benefits

The company has defined benefit plans that cover the majority of its employees. We also have postretirement plans
that provide certain medical benefits and life insurance for retirees and eligible dependents. The accounting for
these plans is subject to the guidance provided in SFAS No. 158, “Employers’ Accounting for Defined Benefit
Pension and Other Postretirement Plans, an Amendment of FASB Statements No. 87, 88, 106, and 132(R);” SFAS
No. 87, "Employers’ Accounting for Pensions;" SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions" and SFAS No. 112, “Employers' Accounting for Postemployment Benefits, an amendment of
FASB Statements No. 5 and 43.” These statements require that management make certain assumptions relating to
the long-term rate of return on plan assets, discount rates used to measure future obligations and expenses, salary
scale inflation rates, health care cost trend rates, mortality and other assumptions. We believe that the accounting
estimates related to our pension and postretirement plans are critical accounting estimates, because they are highly
susceptible to change from period to period based on the performance of plan assets, actuarial valuations, market
conditions and contracted benefit changes. The selection of assumptions is based on historical trends and known
economic and market conditions at the time of valuation. However, actual results may differ substantially from the
estimates that were based on the critical assumptions.

Pension plan liabilities are revalued annually based on updated assumptions and information about the individuals
covered by the plan. For pension plans, accumulated gains and losses in excess of a 10 percent corridor, the prior
service cost and the transition asset are amortized on a straight-line basis from the date recognized over the average
remaining service period of active participants. For other postemployment benefits, the 10 percent corridor is not
used.

Effective with its December 31, 2006, year-end reporting, Ball adopted SFAS No. 158, “Employers’ Accounting for
Defined Benefit Pension Plans and Other Postretirement Plans, an Amendment of FASB Statements No. 87, 88, 106
and 132(R),” which requires the recognition of the funded status of each defined benefit pension plan and other
postretirement benefit plan on the consolidated balance sheet. Each overfunded plan is recognized as an asset and
each underfunded plan is recognized as a liability.

In addition to defined benefit and postretirement plans, the company maintains reserves for employee medical
claims, up to our insurance stop-loss limit, and workers’ compensation claims. These are regularly evaluated and
revised, as needed, based on a variety of information, including historical experience, actuarial estimates and current
employee statistics.

Taxes on Income

Deferred tax assets, including operating loss, capital loss and tax credit carry forwards, are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that any portion of these tax attributes will
not be realized. In addition, from time to time, management must assess the need to accrue or disclose a possible
loss contingency for proposed adjustments from various federal, state and foreign tax authorities that regularly audit
the company in the normal course of business. In making these assessments, management must often analyze
complex tax laws of multiple jurisdictions, including many foreign jurisdictions.

Page 42 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

1. Critical and Significant Accounting Policies (continued)

Deferred income taxes reflect the future tax consequences of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each balance sheet date, based upon enacted income tax laws and
tax rates. Income tax expense or benefit is provided based on earnings reported in the financial statements. The
provision for income tax expense or benefit differs from the amounts of income taxes currently payable, because
certain items of income and expense included in the consolidated financial statements are recognized in different
time periods by taxing authorities.

In June 2006 the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB
Statement No. 109,” which prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. The company records
the related interest expense and penalties, if any, as a tax expense, consistent with the practice prior to adoption.
Additional details about the adoption of FIN 48 are provided in Note 14. In May 2007 the FASB amended FIN 48
by issuing FSP FIN 48-1, which provides guidance on how an enterprise should determine whether a tax position is
effectively settled for the purpose of recognizing previously unrecognized tax benefits. The adoption of
FSP FIN 48-1 did not result in any changes to the amounts recorded upon the initial adoption of FIN 48 or during
the year ended December 31, 2007.

Business Consolidation Costs

The company estimates its liabilities for business consolidation activities by accumulating detailed estimates of
costs and asset sales proceeds, if any, for each business consolidation initiative. This includes the estimated costs of
employee severance, pension and related benefits; impairment of property and equipment and other assets, including
estimates of net realizable value; contract termination payments for contracts and leases; contractual obligations and
any other qualifying costs related to the exit plan. These estimated costs are grouped by specific projects within the
overall exit plan and are then monitored on a monthly basis. Such disclosures represent management's best
estimates, but require assumptions about the plans that may change over time. Changes in estimates for individual
locations and other matters are evaluated periodically to determine if a change in estimate is required for the overall
restructuring plan. Subsequent changes to the original estimates are included in current period earnings and
identified as business consolidation gains or losses.

Derivative Financial Instruments

The company uses derivative financial instruments for the purpose of hedging exposures to fluctuations in interest
rates, foreign currency exchange rates, product sales, raw materials purchasing, inflation rates and common share
repurchases. The company’s derivative instruments are recorded in the consolidated balance sheets at fair value. For
a derivative designated as a fair value hedge of a recognized asset or liability, the gain or loss is recognized in
earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk
being hedged. For a derivative designated as a cash flow hedge, or a derivative designated as a fair value hedge of a
firm commitment not yet recorded on the balance sheet, the effective portion of the derivative's gain or loss is
initially reported as a component of accumulated other comprehensive earnings and subsequently reclassified into
earnings when the forecasted transaction affects earnings. The ineffective portion of the gain or loss associated with
all hedges is reported in earnings immediately. In the statements of cash flows, hedge activities are classified in the
same category as the items being hedged. Derivatives that do not qualify for hedge accounting are marked to market
with gains and losses reported immediately in earnings.

Realized gains and losses from hedges are classified in the consolidated statements of earnings consistent with the
accounting treatment of the items being hedged. Gains and losses upon the early termination of effective derivative
contracts are deferred in accumulated other comprehensive earnings and amortized to earnings in the same period as
the originally hedged items affect earnings.

Page 43 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

1. Critical and Significant Accounting Policies (continued)

Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of Ball Corporation and its controlled subsidiaries
(collectively, Ball, the company, we or our). Equity investments in which we exercise significant influence, but do
not control and are not the primary beneficiary, are accounted for using the equity method of accounting.
Investments in which we do not exercise significant influence over the investee are accounted for using the cost
method of accounting. Intercompany transactions are eliminated.

Cash Equivalents

Cash equivalents have original maturities of three months or less.

Inventories

Inventories are stated at the lower of cost or market using the first-in, first-out (FIFO) cost method of accounting.

Depreciation and Amortization

Property, plant and equipment are carried at the cost of acquisition or construction and depreciated over the
estimated useful lives of the assets. Depreciation and amortization are provided using the straight-line method in
amounts sufficient to amortize the cost of the assets over their estimated useful lives (buildings and improvements –
10 to 40 years; machinery and equipment – 3 to 15 years; other intangible assets – 13 years, weighted average).

Deferred financing costs are amortized over the life of the related loan facility and are reported as part of interest
expense. When debt is repaid prior to its maturity date, the write-off of the remaining unamortized deferred
financing costs, or pro rata portion thereof, is also reported as interest expense.

Environmental Reserves

We estimate the liability related to environmental matters based on, among other factors, the degree of probability
of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. We record our best
estimate of a loss when the loss is considered probable. As additional information becomes available, we assess the
potential liability related to our pending matters and revise our estimates.

Revenue Recognition in the Packaging Segments

Sales of products in the packaging segments are recognized when delivery has occurred and title has transferred,
there is persuasive evidence of an agreement or arrangement, the price is fixed and determinable, and collection is
reasonably assured.

Page 44 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

1. Critical and Significant Accounting Policies (continued)

Stock-Based Compensation

Ball has a variety of restricted stock and stock option plans. The compensation cost associated with restricted stock
grants has been calculated using the fair value at the date of grant and amortized over the restriction period. Stock-
based compensation is reported as part of selling, general and administrative expenses in the consolidated
statements of earnings. In the fourth quarter of 2006, Ball amended one of its deferred compensation stock plans to
allow for limited diversification beginning in 2007, which required an initial mark-to-market adjustment of
$6.7 million.

Effective January 1, 2006, the company adopted SFAS No. 123 (revised 2004), “Share-Based Payment,” and
elected to use the modified prospective transition method and the Black-Scholes valuation model. Tax benefits
associated with option exercises are reported in financing activities in the consolidated statements of cash flows
beginning in 2006. Prior to January 1, 2006, expense related to stock options was calculated using the intrinsic
value method under the guidelines of Accounting Principles Board (APB) Opinion No. 25 and has therefore not
been included in the consolidated statements of earnings in 2005. Ball’s earnings as reported included after-tax
stock-based compensation of $6.6 million for the year ended December 31, 2005. If the fair value based method had
been used, after-tax stock-based compensation would have been $8.7 million in 2005 and diluted earnings per share
would have been lower by $0.02. Further details regarding the expense calculated under the fair value based method
are provided in Note 16.

Foreign Currency Translation

Assets and liabilities of foreign operations are translated using period-end exchange rates, and revenues and
expenses are translated using average exchange rates during each period. Translation gains and losses are reported
in accumulated other comprehensive earnings as a component of shareholders’ equity.

Reclassifications

Certain prior year amounts have been reclassified in order to conform to the current year presentation.

New Accounting Pronouncements

In December 2007 the Financial Accounting Standards Board (FASB) issued SFAS No. 141 (revised 2007),
“Business Combinations,” which replaces the original SFAS No. 141 issued in June 2001. The new standard retains
the fundamental requirements in Statement 141 that the purchase method of accounting be used for all business
combinations and for an acquirer to be identified for each business combination. SFAS No. 141 (revised 2007)
requires an acquirer to recognize the assets acquired and liabilities assumed measured at their fair values on the
acquisition date, which replaces SFAS No. 141’s cost-allocation process. SFAS No. 141 (revised 2007) also
requires the costs incurred to effect the acquisition and related restructuring costs to be recognized separately from
the business combination. The new standard will be effective for Ball on a prospective basis beginning on
January 1, 2009.

In April 2007 the FASB issued FASB Staff Position (FSP) Interpretation No. (FIN) 39-1, “Amendment of FASB
Interpretation No. 39,” which amends the terms of FIN 39, paragraph 3 to replace the terms “conditional contracts”
and “exchange contracts” with the term “derivative instruments” as defined in SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities.” It also amends paragraph 10 of FIN 39 to permit a reporting entity
to offset fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to
return cash collateral (a payable) against fair value amounts recognized for derivative instruments executed with the
same counterparty under the same master netting arrangement that have been offset in accordance with that
paragraph. FSP FIN 39-1 became effective for Ball as of January 1, 2008, and its effect is still under evaluation.

Page 45 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

1. Critical and Significant Accounting Policies (continued)

In February 2007 the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities Including an Amendment of FASB Statement No. 115,” which permits companies to choose, at specified
election dates, to measure certain financial instruments and other eligible items at fair value. Unrealized gains and
losses on items for which the fair value option has been elected are subsequently reported in earnings. The decision
to elect the fair value option is generally irrevocable, is applied instrument by instrument and can only be applied to
an entire instrument. The standard became effective for Ball as of January 1, 2008, and at this time, we do not
expect to elect the fair value option for any eligible items.

In September 2006 the FASB issued SFAS No. 157, “Fair Value Measurements,” which establishes a framework
for measuring value and expands disclosures about fair value measurements. Although it does not require any new
fair value measurements, the statement emphasizes that fair value is a market-based measurement, not an entity-
specific measurement, and should be determined based on the assumptions that market participants would use in
pricing the asset or liability. The standard became effective for Ball as of January 1, 2008, and is still being
evaluated for its effect on the company’s financial statements. In February 2008 the FASB delayed the effective
date for certain nonfinancial assets and liabilities until January 1, 2009.

2. Business Segment Information

Ball’s operations are organized and reviewed by management along its product lines in five reportable segments:

Metal beverage packaging, Americas: Consists of operations in the U.S., Canada and Puerto Rico, which
manufacture and sell metal containers, primarily for use in beverage packaging.

Metal beverage packaging, Europe/Asia: Consists of operations in several countries in Europe and the People’s
Republic of China (PRC), which manufacture and sell metal beverage containers in Europe and Asia, as well as
plastic containers in Asia.

Metal food & household products packaging, Americas: Consists of operations in the U.S., Canada and Argentina,
which manufacture and sell metal food cans, aerosol cans, paint cans and custom and specialty cans.

Plastic packaging, Americas: Consists of operations in the U.S. and Canada, which manufacture and sell
polyethylene terephthalate (PET) and polypropylene containers, primarily for use in beverage and food packaging.
Effective January 1, 2007, this segment also includes the manufacture and sale of plastic containers used for
industrial and household products, which were previously reported within the metal food and household products
packaging, Americas, segment.

Aerospace and technologies: Consists of the manufacture and sale of aerospace and other related products and the
providing of services used primarily in the defense, civil space and commercial space industries.

The accounting policies of the segments are the same as those in the condensed consolidated financial statements.

We also have investments in companies in the U.S., PRC and Brazil, which are accounted for under the equity
method of accounting and, accordingly, those results are not included in segment sales or earnings.

Page 46 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

2. Business Segment Information (continued)

Effective January 1, 2007, a plastic product line with 2007 net sales of $52.1 million was transferred from the metal
food and household products packaging, Americas, segment to the plastic packaging, Americas, segment. In the
third quarter of 2006, the company changed its expense allocation method by allocating to each of the packaging
segments stock-based compensation expense previously included in corporate undistributed expenses. Prior periods
have been conformed to the current presentation.

Major Customers

Following is a summary of Ball’s major customers and their respective percentages of consolidated net sales for the
years ended December 31:

SABMiller plc
PepsiCo, Inc. and affiliates
All bottlers of Pepsi-Cola or Coca-Cola branded beverages
U.S. government agencies and their prime contractors

Summary of Net Sales by Geographic Area

($ in millions)

2007
2006
2005

2007

11%
9%
28%
9%

2006

11%
9%
29%
9%

2005

11%
10%
27%
11%

U.S.

Foreign (a)

Consolidated

$ 5,268.4
4,868.6
4,133.3

$ 2,121.3
1,752.9
1,617.9

$ 7,389.7
6,621.5
5,751.2

Summary of Long-Lived Assets by Geographic Area (b)

($ in millions)

2007
2006

U.S.

Germany (c)

Other (d)

Consolidated

$ 2,052.3
2,117.1

$ 1,441.1
1,289.9

$ 684.3
672.6

$ 4,177.7
4,079.6

(a) Includes the company’s net sales in the PRC, Canada and certain European countries (none of which was individually

significant), intercompany eliminations and other.

(b) Long-lived assets primarily consist of property, plant and equipment; goodwill; and other intangible assets.
(c) For reporting purposes, Ball Packaging Europe’s goodwill and intangible assets have been allocated to Germany. The total

amounts allocated were $1,108.9 million and $1,021.7 million at December 31, 2007 and 2006, respectively.

(d) Includes the company’s long-lived assets in the PRC, Canada and certain European countries, not including Germany

(none of which was individually significant), intercompany eliminations and other.

Page 47 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

2. Business Segment Information (continued)

Summary of Business by Segment

($ in millions)
Net Sales

Metal beverage packaging, Americas
Legal settlement (Note 4)

Total metal beverage packaging, Americas

Metal beverage packaging, Europe/Asia
Metal food & household products packaging, Americas
Plastic packaging, Americas
Aerospace & technologies

Net sales

Consolidated Earnings

Metal beverage packaging, Americas
Legal settlement (Note 4)
Business consolidation costs (Note 5)

Total metal beverage packaging, Americas

Metal beverage packaging, Europe/Asia
Property insurance gain (Note 6)
Business consolidation gains (Note 5)

Total metal beverage packaging, Europe/Asia

Metal food & household products packaging, Americas
Business consolidation costs (Note 5)

Total metal food & household products packaging, Americas

Plastic packaging, Americas
Business consolidation costs (Note 5)
Total plastic packaging, Americas

Aerospace & technologies

Segment earnings before interest and taxes

Corporate undistributed expenses

Earnings before interest and taxes

Interest expense (a)
Tax provision
Minority interests
Equity in results of affiliates (Note 11)

Net earnings

(a) Includes $19.3 million of debt refinancing costs in 2005.

2007

2006

2005

$ 2,849.5
(85.6)
2,763.9
1,902.2
1,183.4
752.4
787.8
$ 7,389.7

$ 299.2
(85.6)
–
213.6

256.1
–
–
256.1

36.2
(44.2)
(8.0)

26.3
(0.4)
25.9

64.6

552.2
(38.3)
513.9
(149.4)
(95.7)
(0.4)
12.9
$ 281.3

$ 2,604.4

–
2,604.4
1,512.5
1,138.7
693.6
672.3
$ 6,621.5

$ 2,390.4

–
2,390.4
1,354.5
824.0
487.5
694.8
$ 5,751.2

$ 269.4

$ 254.1

–
–
269.4

193.2
75.5
–
268.7

37.9
(35.5)
2.4

28.3
–
28.3

50.0

–
(19.3)
234.8

171.2
–
9.3
180.5

30.3
(11.2)
19.1

16.7
–
16.7

54.7

618.8
(37.5)
581.3
(134.4)
(131.6)
(0.4)
14.7
$ 329.6

505.8
(25.8)
480.0
(116.4)
(106.2)
(0.8)
15.5
$ 272.1

Page 48 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

2. Business Segment Information (continued)

Summary of Business by Segment (continued)

($ in millions)
Depreciation and Amortization

Metal beverage packaging, Americas
Metal beverage packaging, Europe/Asia
Metal food & household products packaging, Americas (a)
Plastic packaging, Americas (a)
Aerospace & technologies

Segment depreciation and amortization

Corporate

Depreciation and amortization

Property, Plant and Equipment Additions

Metal beverage packaging, Americas
Metal beverage packaging, Europe/Asia
Metal food & household products packaging, Americas (a)
Plastic packaging, Americas (a)
Aerospace & technologies

Segment property, plant and equipment additions

Corporate

Property, plant and equipment additions

Total Assets

Metal beverage packaging, Americas
Metal beverage packaging, Europe/Asia
Metal food & household products packaging, Americas (a)
Plastic packaging, Americas (a)
Aerospace & technologies

Segment assets

Corporate assets, net of eliminations

Total assets

Investments in Affiliates

Metal beverage packaging, Americas
Metal beverage packaging, Europe/Asia
Aerospace & technologies
Corporate (b)

Investments in affiliates

2007

2006

2005

$ 73.4
91.9
42.8
51.6
17.9
277.6
3.4
$ 281.0

$ 87.4
150.7
23.0
20.2
23.0
304.3
4.2
$ 308.5

$ 74.2
80.3
32.2
46.2
16.4
249.3
3.3
$ 252.6

$ 88.7
82.1
19.4
51.1
34.5
275.8
3.8
$ 279.6

$ 69.0
73.4
16.3
36.8
14.9
210.4
3.1
$ 213.5

$ 109.9
97.9
16.8
27.6
33.1
285.3
6.4
$ 291.7

December 31,

2007

2006

$ 1,169.6
2,600.5
1,141.7
568.8
278.7
5,759.3
261.3
$ 6,020.6

$ 13.5
0.2
7.5
56.4
$ 77.6

$ 1,147.2
2,412.7
1,094.9
609.0
268.2
5,532.0
308.9
$ 5,840.9

$ 15.7
0.2
7.5
53.1
$ 76.5

(a) Amounts in 2006 have been retrospectively adjusted for the transfer of a plastic pail product line with assets of

approximately $65 million from the metal food and household products packaging, Americas, segment to the plastic
packaging, Americas, segment, which occurred as of January 1, 2007.
(b) Includes equity investments not evaluated as part of the segments’ assets.

Page 49 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

3. Acquisitions

2006

U.S. Can Corporation

On March 27, 2006, Ball acquired all of the issued and outstanding shares of U.S. Can Corporation (U.S. Can) for
444,756 common shares of Ball Corporation (valued at $44.28 per share for a total of $19.7 million).
Contemporaneously with the acquisition, Ball also refinanced $598.2 million of U.S. Can debt, including
$26.8 million of bond redemption premiums and fees, and the company expects to realize approximately
$44 million of acquired net operating tax loss and credit carryforwards of which approximately $13 million have
been utilized as of December 31, 2007. The acquired operations are included in the metal food and household
products packaging, Americas, segment, except for a plastic pail product line that was transferred to the company’s
plastic packaging, Americas, segment effective January 1, 2007, for which 2006 amounts have been retrospectively
adjusted. The acquisition has been accounted for as a purchase and, accordingly, its results have been included in
the consolidated financial statements since March 27, 2006.

Alcan Packaging

On March 28, 2006, Ball acquired North American plastic bottle container assets from Alcan Packaging (Alcan) for
$184.7 million cash. The acquired business primarily manufactures and sells barrier polypropylene plastic bottles
used in food packaging and, to a lesser extent, barrier PET plastic bottles used for beverages and food. The
operations acquired form part of Ball’s plastic packaging, Americas, segment. The acquisition has been accounted
for as a purchase and, accordingly, its results have been included in the consolidated financial statements since
March 28, 2006.

Ball Asia Pacific Limited

In the fourth quarter of 2006, Ball Asia Pacific Limited, an indirect wholly owned subsidiary of Ball Corporation,
acquired all the minority ownership interest in its PRC-based high-density polypropylene plastic container business
for $4.6 million in cash. The acquisition of the minority interest was not significant to the company.

Page 50 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

3. Acquisitions (continued)

Following is a summary of the net assets acquired in the U.S. Can and Alcan transactions. The valuations were
performed by management, including the identification and valuation of acquired intangible assets and of liabilities,
including the development and assessment of associated costs of consolidation and integration plans. Management
also performed valuations of certain assets and liabilities including inventory; property, plant and equipment;
intangible assets; and pension and other post-retirement obligations. During the first quarter of 2007, the company
completed its final valuation of the acquired assets and liabilities and revised the preliminary purchase price
allocations accordingly. The final allocation compared to the December 31, 2006, preliminary allocation resulted
primarily in an increase in identifiable intangible assets for both acquisitions.

($ in millions)

U.S. Can
(Metal Food &
Household Products
Packaging,
Americas)

Alcan (Plastic
Packaging,
Americas)

Cash
Property, plant and equipment
Goodwill
Intangibles
Other assets, primarily inventories and

receivables

Liabilities assumed (excluding refinanced debt),

primarily current
Net assets acquired

$ 0.2
164.6
353.2
63.9

220.1

(184.1)
$ 617.9

$ –

73.6
48.6
33.7

40.1

(11.3)
$ 184.7

Total

$ 0.2
238.2
401.8
97.6

260.2

(195.4)
$ 802.6

The customer relationships and acquired technologies of both acquisitions were identified as valuable intangible
assets, and the company assigned to them an estimated life of 20 years. Because the acquisition of U.S. Can was a
stock purchase, neither the goodwill nor the intangible assets are tax deductible for U.S. income tax purposes unless,
and until such time as, the stock is sold. However, because the Alcan acquisition was an asset purchase, the
amortization of goodwill and intangible assets is deductible for U.S. tax purposes.

The following unaudited pro forma consolidated results of operations have been prepared as if the acquisitions had
occurred as of January 1 in each of the periods presented. The pro forma results are not necessarily indicative of the
actual results that would have occurred had the acquisitions been in effect for the periods presented, nor are they
necessarily indicative of the results that may be obtained in the future.

($ in millions, except per share amounts)

Net sales
Net earnings
Basic earnings per share
Diluted earnings per share

December 31,

2006

2005

$ 6,799.0
330.5
3.20
3.15

$ 6,497.1
288.7
2.67
2.62

Pro forma adjustments primarily include the after-tax effects of: (1) increased interest expense related to incremental
borrowings used to finance the acquisitions; (2) increased depreciation expense on property, plant and equipment
based on increased fair values; and (3) increased amortization expense attributable to intangible assets arising from
the acquisitions.

Page 51 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

4. Legal Settlement

During the second quarter of 2007, Miller Brewing Company (Miller), a U.S. customer, asserted various claims
against a wholly owned subsidiary of the company, primarily related to the pricing of the aluminum component of
the containers supplied by the subsidiary, and on October 4, 2007, the dispute was settled in mediation. Miller
received $85.6 million ($51.8 million after tax) on settlement of the dispute, and Ball retained all of Miller’s
beverage can and end supply through 2015. Miller received a one-time payment of approximately $70 million
($42 million after tax) in January 2008 (recorded on the December 31, 2007, consolidated balance sheet in other
current liabilities) with the remainder of the settlement to be recovered over the life of the supply contract through
2015.

5. Business Consolidation Activities

Following is a summary of business consolidation activities included in the consolidated statements of earnings for
the years ended December 31:

($ in millions)

2007

2006

2005

Metal beverage packaging, Americas
Metal beverage packaging, Europe/Asia
Metal food & household products packaging, Americas
Plastic packaging, Americas

$ –
–
(44.2)
(0.4)
$ (44.6)

$ –
–
(35.5)
–
$ (35.5)

$ (19.3)
9.3
(11.2)
–
$ (21.2)

2007

Metal Food & Household Products Packaging, Americas

On October 24, 2007, Ball announced plans to close two manufacturing facilities and to exit the custom and
decorative tinplate can business located in Baltimore, Maryland. Ball will close its food and household products
packaging facilities in Tallapoosa, Georgia, and Commerce, California, both of which manufacture aerosol and
general line cans. The two plant closures will result in a net reduction in manufacturing capacity of 10 production
lines, including the relocation of two high-speed aerosol lines into existing Ball facilities. A pretax charge of
$41.9 million ($25.4 million after tax) was recorded in the fourth quarter in connection with the closure of the
aerosol plants, including $10.7 million for severance costs, $23 million for the write down to net realizable value of
fixed assets, $2.4 million for excess inventory and $5.8 million for other associated costs. No cash costs were
incurred in 2007. The carrying value of fixed assets remaining for sale in connection with the plant closures was
$9.4 million at December 31, 2007.

The company also recorded a $2.3 million pretax pension annuity expense ($1.4 million after tax) related to a
previously closed food can plant. The pension settlement payment was made in December 2007.

Plastic Packaging, Americas

In the fourth quarter of 2007, Ball recorded a pretax charge of $0.4 million ($0.2 million after tax) for severance
costs related to the termination of approximately 50 employees in response to lost sales. The severance amounts are
expected to be paid in the first quarter of 2008.

Page 52 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

5. Business Consolidation Activities (continued)

2006

Metal Food & Household Products Packaging, Americas

In October 2006 the company announced plans to close two manufacturing facilities in North America as part of the
realignment of the metal food and household products packaging, Americas, segment following the acquisition
earlier in the year of U.S. Can. The company closed a leased facility in Alliance, Ohio, which was one of
10 manufacturing locations acquired from U.S. Can, and a food can plant in Burlington, Ontario. A pretax charge of
$33.6 million ($27.4 million after tax) was recorded in the fourth quarter related to the Burlington closure,
comprised of $7.8 million of severance costs, $16.8 million of pension costs, $2.9 million of plant decommissioning
costs and $6.1 million for the write off of obsolete equipment and related spare parts and tooling. Payments of
$11 million were made in 2007 against the Burlington reserves for employee severance and other associated costs,
and only $1 million of severance costs remain to be paid. The carrying value of fixed assets remaining for sale in
connection with the Burlington plant closure was $14.5 million at December 31, 2007. The closure of the Ohio
plant, estimated to cost approximately $1 million for employee and other costs, has been treated as an opening
balance sheet item related to the acquisition and all costs were incurred and paid as of December 31, 2007.

The fourth quarter also included a net charge of $0.9 million ($0.6 million after tax) to shut down a welded food can
line at the Richmond, British Columbia, plant and record the recovery of business consolidation costs previously
expensed. All activities have been completed and all costs have been incurred as of the end of 2007.

In the second quarter, earnings of $0.4 million ($0.2 million after tax) were recorded to reflect the excess proceeds
on the disposition of fixed assets previously written down in a 2005 business consolidation charge.

In the first quarter, a pretax charge of $2.1 million ($1.4 million after tax) was recorded to shut down a metal food
can production line in the Whitby, Ontario, plant. The charge was comprised of $0.6 million of employee
termination costs, $0.7 million for equipment removal and other decommissioning costs and $0.8 million for
impairment of plant equipment and related spares and tooling. Production from the line has ceased and other related
activities were completed during 2006. The fourth quarter of 2006 included $0.7 million of earnings ($0.5 million
after tax) to reflect the net proceeds on the disposition of the plant’s fixed assets. As of the end of 2007, all costs
have been incurred and paid and no reserve balances remain.

2005

Metal Beverage Packaging, Americas

The company announced in July 2005 the commencement of a project to upgrade and streamline its North American
beverage can end manufacturing capabilities. The project is expected to be completed in early 2009 and will result
in productivity gains and cost reductions. A pretax charge of $19.3 million ($11.7 million after tax) was recorded in
the third quarter of 2005 in connection with this project. The pretax charge included $11.7 million for employee
severance, pension and other employee benefit costs, $1.6 million for decommissioning costs and $6 million for the
write off of obsolete equipment spare parts and tooling. Payments of $2.4 million were made in 2007 against the
reserve. Severance and other employee benefit costs of $4.4 million remain at December 31, 2007, all of which are
expected to be paid in 2008 and 2009 as the remaining end modules are put into operation. Pension costs will be
paid over the retirement period for the affected employees.

Page 53 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

5. Business Consolidation Activities (continued)

Metal Food & Household Products Packaging, Americas

In the fourth quarter, a pretax charge of $4.6 million ($3.1 million after tax) was recorded for pension, severance
and other employee benefit costs related to a reduction in force in a Canadian food can plant. All costs have been
incurred and paid as of December 31, 2007.

In the second quarter, a pretax charge of $8.8 million ($5.9 million after tax) was recorded in connection with the
closure of a three-piece food can manufacturing plant in Baie d’Urfe, Quebec. The plant was closed in the third
quarter, and the subsequent real estate sale resulted in the second quarter charge being offset by a $2.2 million gain
($1.5 million after tax) in the fourth quarter. All costs have been incurred and paid as of December 31, 2007.

Metal Beverage Packaging, Europe/Asia

The company recorded $9.3 million of earnings in 2005, primarily related to the final settlement of PRC tax
obligations, and an adjustment to reclassify an asset to be put in service previously held for sale, related to a PRC
business consolidation charge taken in the second quarter of 2001. Tax clearances from the applicable authorities
were required during the formal liquidation process. These matters have been concluded.

6. Property Insurance Gain

On April 1, 2006, a fire in the Hassloch, Germany, metal beverage can plant in the company’s metal beverage
packaging, Europe/Asia, segment damaged a significant portion of the plant’s building and machinery and
equipment. A €26.7 million ($33.8 million) fixed asset write down was recorded in 2006 to reflect the estimated
impairment of the assets damaged as a result of the fire. As a result, a pretax gain of €59.6 million ($75.5 million)
was recorded in the 2006 consolidated statement of earnings to reflect the difference between the net book value of
the impaired assets and the property insurance proceeds. In accordance with the agreement reached with the
insurance company, property insurance proceeds of €48.7 million ($61.3 million) were received in 2006 and the
final proceeds of €37.6 million ($48.6 million) were received in January 2007. An additional €27.2 million
($35.1 million) and €40 million ($51 million) were recorded in cost of sales in 2007 and 2006, respectively, for
insurance recoveries related to business interruption costs, as well as €11.3 million ($14.3 million) in 2006 to offset
clean-up costs.

Page 54 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

7. Accounts Receivable

($ in millions)

Trade accounts receivable, net
Business interruption insurance receivable (Note 6)
Other receivables

December 31,

2007

$ 505.4
–
77.3

$ 582.7

2006

$ 422.2
35.9
121.4

$ 579.5

Trade accounts receivable are shown net of an allowance for doubtful accounts of $13.2 million at December 31,
2007, and $9.8 million at December 31, 2006. Other receivables include non-income tax receivables, such as
property tax and sales tax; certain vendor rebate receivables; and other similar items.

A receivables sales agreement provides for the ongoing, revolving sale of a designated pool of trade accounts
receivable of Ball’s North American packaging operations of up to $250 million. The agreement qualifies as off-
balance sheet financing under the provisions of SFAS No. 140, as amended by SFAS No. 156. Net funds received
from the sale of the accounts receivable totaled $170 million and $201.3 million at December 31, 2007 and 2006,
respectively, and are reflected as a reduction of accounts receivable in the consolidated balance sheets. Fees
incurred in connection with the sale of accounts receivable, which are reported as part of selling, general and
administrative expenses, totaled $11.4 million in 2007, $9.7 million in 2006 and $7.7 million in 2005.

Net accounts receivable under long-term contracts, due primarily from agencies of the U.S. government and their
prime contractors, were $136 million and $125.3 million at December 31, 2007 and 2006, respectively, and
included $48.1 million and $62.4 million, respectively, representing the recognized sales value of performance that
had not been billed and was not yet billable to customers. The average length of the long-term contracts is
approximately 4 years and the average length remaining on those contracts at December 31, 2007, was 17 months.
Approximately $0.6 million of unbilled receivables at December 31, 2007, is expected to be collected after one year
and is related to customary fees and cost withholdings that will be paid upon milestone or contract completions, as
well as final overhead rate settlements.

8. Inventories

($ in millions)

Raw materials and supplies
Work in process and finished goods

December 31,

2007

$ 433.6
564.5

$ 998.1

2006

$ 445.6
489.8

$ 935.4

Page 55 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

9. Property, Plant and Equipment

($ in millions)

Land
Buildings
Machinery and equipment
Construction in progress

Accumulated depreciation

December 31,

2007

2006

$ 92.2
820.1
2,914.2
154.7

3,981.2
(2,040.0)

$ 88.5
764.1
2,618.6
215.1

3,686.3
(1,810.3)

$ 1,941.2

$ 1,876.0

Property, plant and equipment are stated at historical cost. Depreciation expense amounted to $263.8 million,
$238 million and $202.1 million for the years ended December 31, 2007, 2006 and 2005, respectively.

The change in the net property, plant and equipment balance during 2007 is primarily the result of capital spending
and changes in foreign currency exchange rates, offset by depreciation. A fixed asset write down of €26.7 million
($33.8 million) was included in accumulated depreciation at December 31, 2006, to record the estimated impairment
of the assets damaged as a result of the fire at the company’s Hassloch, Germany, metal beverage can plant (see
Note 6).

10. Goodwill

($ in millions)

Balance at December 31, 2006
Purchase accounting adjustments (a)
Transfer of plastic pail product line
FIN 48 adoption adjustments

(Notes 1 and 14)

Effects of foreign currency exchange

rates

Metal
Beverage
Packaging,
Americas

Metal
Beverage
Packaging,
Europe/Asia

$ 279.4

$ 1,020.6

–
–

–

–
–

(9.3)

104.0

Metal Food
& Household
Products
Packaging,
Americas

Plastic
Packaging,
Americas

$ 389.0
(4.7)
(30.0)

$ 84.7
(1.0)
30.0

–

0.4

Total

$ 1,773.7
(5.7)
–

(9.3)

104.4

Balance at December 31, 2007

$ 279.4

$ 1,115.3

$ 354.3

$ 114.1

$ 1,863.1

(a) Related to the final purchase price allocations for the U.S. Can and Alcan acquisitions discussed in Note 3.

In accordance with SFAS No. 142, goodwill is not amortized but instead tested annually for impairment. There has
been no goodwill impairment since the adoption of SFAS No. 142 on January 1, 2002.

Page 56 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

11. Intangibles and Other Assets

($ in millions)

Intangibles and Other Assets:

Investments in affiliates
Prepaid pension
Other intangibles (net of accumulated amortization of $92.9
and $70.7 at December 31, 2007 and 2006, respectively)

Company-owned life insurance
Deferred tax asset
Property insurance receivable (Note 6)
Other

December 31,

2007

2006

$ 77.6
10.3

121.9
88.9
4.3
–
70.4

$ 76.5
2.3

116.2
77.5
34.9
49.7
72.8

$ 373.4

$ 429.9

Total amortization expense of other intangible assets amounted to $17.2 million, $14.6 million and $11.4 million for
the years ended December 31, 2007, 2006 and 2005, respectively. Based on intangible assets and foreign currency
exchange rates as of December 31, 2007, total annual intangible asset amortization expense is expected to be
approximately $17 million in each of the years 2008 and 2009 and approximately $6 million for each of the years
2010 through 2012.

12. Leases

The company leases warehousing and manufacturing space and certain equipment in the packaging segments and
office and technical space in the aerospace and technologies segment. During 2005 and 2003, we entered into leases
that qualify as operating leases for book purposes and capital leases for tax purposes. Under these lease
arrangements, Ball has the option to purchase the leased equipment at the end of the lease term, or if we elect not to
do so, to compensate the lessors for the difference between the guaranteed minimum residual values totaling
$16.3 million and the fair market value of the assets, if less. Certain of the company’s leases in effect at
December 31, 2007, include renewal options and/or escalation clauses for adjusting lease expense based on various
factors.

Total noncancellable operating leases in effect at December 31, 2007, require rental payments of $49.9 million,
$40.4 million, $31.3 million, $23.5 million and $19 million for the years 2008 through 2012, respectively, and
$54.4 million combined for all years thereafter. Lease expense for all operating leases was $85.3 million,
$83.1 million and $74 million in 2007, 2006 and 2005, respectively.

Page 57 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

13. Debt and Interest Costs

Short-term debt at December 31, 2007, includes $49.7 million outstanding under uncommitted bank facilities
totaling $345 million. At December 31, 2006, $140.1 million was outstanding under uncommitted bank facilities
totaling $329 million. The weighted average interest rate of the outstanding short-term facilities was 5.7 percent at
December 31, 2007, and 4.8 percent at December 31, 2006.

Long-term debt at December 31 consisted of the following:

(in millions)

Notes Payable

6.875% Senior Notes, due December 2012

(excluding issue premium of $2.7 in 2007 and
$3.2 in 2006)

6.625% Senior Notes, due March 2018 (excluding

2007

2006

In Local
Currency

In U.S. $

In Local
Currency

In U.S. $

$ 550.0

discount of $0.8 in 2007 and $0.9 in 2006)

$ 450.0

450.0

$ 450.0

450.0

Senior Credit Facilities

Term A Loan, British sterling denominated, due
October 2011 (2007 – 6.85%; 2006 – 6.11%)
Term B Loan, euro denominated, due October 2011

(2007 – 5.55%; 2006 – 4.46%)

Term C Loan, Canadian dollar denominated, due
October 2011 (2007 – 5.485%; 2006 – 5.205%)

Term D Loan, U.S. dollar denominated, due

October 2011 (2007 – 5.72%; 2006 – 6.225%)
U.S. dollar multi-currency revolver borrowings, due

October 2011 (2006 – 6.225%)

British sterling multi-currency revolver borrowings,
due October 2011 (2007 – 6.92%; 2006 – 6.14%)

Industrial Development Revenue Bonds

Floating rates due through 2015 (2007 – 3.46% to

3.7%; 2006 – 3.97% to 4.15%)

Other

Less: Current portion of long-term debt

₤ 82.9

€ 341.3

164.7

498.2

₤ 85.0

€ 350.0

C$ 126.8

127.6

C$ 134.0

$ 487.5

487.5

$ 500.0

–

4.2

$ 15.0

₤ 4.0

166.4

462.0

114.9

500.0

15.0

7.8

$ –

₤ 2.1

$ 13.0
Various

$ 20.0
Various

13.0
13.7
2,308.9
(127.1)
$ 2,181.8

20.0
25.5
2,311.6
(41.2)
$ 2,270.4

The senior credit facilities bear interest at variable rates and also include (1) a multi-currency, long-term revolving
credit facility that provides the company with up to the equivalent of $715 million and (2) a Canadian long-term
revolving credit facility that provides the company with up to the equivalent of $35 million. Both revolving credit
facilities expire in October 2011. At December 31, 2007, taking into account outstanding letters of credit,
$705 million was available under the revolving credit facilities.

Page 58 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

13. Debt and Interest Costs (continued)

Long-term debt obligations outstanding at December 31, 2007, have maturities of $127.1 million, $160 million,
$388.4 million, $625.1 million and $550.3 million for the years ending December 31, 2008 through 2012,
respectively, and $456.1 million thereafter. Ball provides letters of credit in the ordinary course of business to
secure liabilities recorded in connection with industrial development revenue bonds and certain self-insurance
arrangements. Letters of credit outstanding at December 31, 2007 and 2006, were $41 million and $52.4 million,
respectively.

The notes payable and senior credit facilities are guaranteed on a full, unconditional and joint and several basis by
certain of the company’s domestic wholly owned subsidiaries. Certain foreign denominated tranches of the senior
credit facilities are similarly guaranteed by certain of the company’s wholly owned foreign subsidiaries. Note 22
contains further details as well as condensed, consolidating financial information for the company, segregating the
guarantor subsidiaries and non-guarantor subsidiaries.

The company was not in default of any loan agreement at December 31, 2007, and has met all debt payment
obligations. The U.S. note agreements, bank credit agreement and industrial development revenue bond agreements
contain certain restrictions relating to dividend payments, share repurchases, investments, financial ratios,
guarantees and the incurrence of additional indebtedness.

2006

On March 27, 2006, Ball expanded its senior secured credit facilities with the addition of a $500 million Term D
Loan facility due in installments through October 2011. Also on March 27, 2006, Ball issued at a price of
99.799 percent $450 million of 6.625% senior notes (effective yield to maturity of 6.65 percent) due in March 2018.
The proceeds from these financings were used to refinance existing U.S. Can debt with Ball Corporation debt at
lower interest rates, acquire certain North American plastic container net assets from Alcan and reduce seasonal
working capital debt. (See Note 3 for further details of the acquisitions.)

2005

On October 13, 2005, Ball refinanced its senior secured credit facilities to extend debt maturities at lower interest
rate spreads and provide the company with additional borrowing capacity for future growth. During the third and
fourth quarters of 2005, Ball redeemed its 7.75% senior notes due in August 2006. The refinancing and senior note
redemptions resulted in a debt refinancing charge of $19.3 million ($12.3 million after tax) for the related call
premium and unamortized debt issuance costs.

A summary of total interest cost paid and accrued follows:

($ in millions)

2007

2006

2005

Interest costs before refinancing costs
Debt refinancing costs
Total interest costs
Amounts capitalized
Interest expense

$ 155.8
–
155.8
(6.4)
$ 149.4

$ 142.5

–
142.5
(8.1)
$ 134.4

$ 102.4
19.3
121.7
(5.3)
$ 116.4

Interest paid during the year (a)

$ 153.9

$ 125.4

$ 138.5

(a) Includes $6.6 million paid in 2005 in connection with the redemption of the company’s senior and senior subordinated

notes.

Page 59 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

14. Taxes on Income

The amount of earnings before income taxes is:

($ in millions)

U.S.
Foreign

The provision for income tax expense is:

($ in millions)
Current
U.S.
State and local
Foreign
Uncertain tax positions
Repatriation of foreign earnings

Total current

Deferred
U.S.
State and local
Foreign
Repatriation of foreign earnings

Total deferred

2007

$ 155.0
209.5
$ 364.5

2007

$ 18.0
7.0
80.2
11.5
–
116.7

5.8
(0.9)
(25.9)
–
(21.0)

2006

2005

$ 252.6
194.3
$ 446.9

2006

$ 51.7
10.7
31.0
–
–
93.4

17.1
2.6
18.5
–
38.2

$ 208.5
155.1
$ 363.6

2005

$ 75.0
15.3
51.5
–
16.0
157.8

(12.5)
(2.6)
(17.3)
(19.2)
(51.6)

Provision for income taxes

$ 95.7

$ 131.6

$ 106.2

The income tax provision recorded within the consolidated statements of earnings differs from the provision
determined by applying the U.S. statutory tax rate to pretax earnings as a result of the following:

($ in millions)

2007

2006

2005

Statutory U.S. federal income tax
Increase (decrease) due to:
Foreign tax holiday
Company-owned life insurance
Tax rate differences
Research and development tax credits
Manufacturing deduction
State and local taxes, net
Statutory rate reduction
Foreign subsidiary stock loss
Uncertain tax positions
Foreign exchange loss of European subsidiary
Other, net

Provision for taxes
Effective tax rate expressed as a percentage

of pretax earnings

$ 127.6

$ 156.4

$ 127.2

(1.3)
(3.9)
(6.3)
(4.5)
(3.3)
3.9
(10.4)
(17.2)
11.5
–
(0.4)
$ 95.7

(6.1)
(5.8)
(1.1)
(11.6)
(2.0)
9.0
–
–
–
(8.1)
0.9
$ 131.6

(5.6)
(3.2)
(3.1)
(10.6)
(2.9)
8.3
–
–
–
–
(3.9)
$ 106.2

26.3%

29.4%

29.2%

Page 60 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

14. Taxes on Income (continued)

The lower effective rate in 2007 was the result of earnings mix (higher foreign earnings taxed at lower rates) and net
tax benefit adjustments of $17.2 million recorded in the third quarter of 2007, as compared to $6.4 million in 2006.
These net tax benefit adjustments were the result of enacted income tax rate reductions in Germany and the United
Kingdom and a tax loss related to the company’s Canadian operations. These benefits were offset by a tax provision
to adjust for the final settlement negotiations concluded in the fourth quarter with the Internal Revenue Service
(IRS) related to a company-owned life insurance plan (discussed below).

In 1995 Ball Packaging Europe’s Polish subsidiary was granted a tax holiday. Under the terms of the holiday, an
exemption was granted on manufacturing earnings for up to €39.5 million of income tax. At December 31, 2007,
the tax exemption had been fully utilized. In 2005 Ball Packaging Europe’s Serbian subsidiary was granted a tax
holiday. Under the terms of the holiday, the earnings of this subsidiary are exempt from income taxation for a
period of 10 years beginning in the first year the Serbian subsidiary has taxable earnings. As of December 31, 2007,
the 10-year period had commenced and eight years remain.

Net income tax payments were $63.6 million, $138.6 million and $99 million for 2007, 2006 and 2005,
respectively.

The significant components of deferred tax assets and liabilities at December 31 were:

($ in millions)

Deferred tax assets:

Deferred compensation
Accrued employee benefits
Plant closure costs
Accrued pensions
Inventory and other reserves
Net operating losses
Other

Total deferred tax assets

Valuation allowance

Net deferred tax assets

Deferred tax liabilities:

Depreciation
Goodwill and other intangible assets
LIFO inventory reserves
Other

Total deferred tax liabilities

Net deferred tax liability

2007

2006

$ 64.2
105.0
32.1
33.4
25.8
45.2
23.0
328.7
(17.8)
310.9

(261.6)
(81.4)
(19.6)
(22.9)
(385.5)
$ (74.6)

$ 58.7
113.8
21.6
93.0
19.4
46.9
36.8
390.2
(13.4)
376.8

(289.9)
(71.4)
(24.2)
(24.8)
(410.3)
$ (33.5)

At December 31, 2007, the net deferred tax liability was included in the consolidated balance sheets as follows:

($ in millions)

2007

2006

Deferred taxes and prepaid expenses
Intangibles and other assets, net
Income taxes payable
Deferred taxes and other liabilities

Net deferred tax liability

$ 48.3
4.3
(1.4)
(125.8)
$ (74.6)

$ 39.0
34.9
(11.4)
(96.0)
$ (33.5)

The change in deferred taxes during 2007 is primarily attributable to book depreciation exceeding tax depreciation
and a decrease in accrued pension liabilities.

Page 61 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

14. Taxes on Income (continued)

At December 31, 2007, Ball Corporation and its domestic subsidiaries had net operating loss carryforwards,
expiring between 2020 and 2026, of $64.6 million with a related tax benefit of $25.2 million. Also at December 31,
2007, Ball Packaging Europe and its subsidiaries had net operating loss carryforwards, with no expiration date, of
$54.4 million with a related tax benefit of $14.6 million. Ball Packaging Products Canada Corp. had a net operating
loss carryforward, with no expiration date, of $15.8 million with a related tax benefit of $5.4 million. Due to the
uncertainty of ultimate realization, these European and Canadian benefits have been offset by valuation allowances
of $8.6 million and $5.4 million, respectively. Upon realization, $5.3 million of the European valuation allowance
will be recognized as a reduction in goodwill. At December 31, 2007, the company has foreign tax credit
carryforwards of $5.8 million; however, due to the uncertainty of realization of the entire credit, a valuation
allowance of $3.8 million has been applied to reduce the carrying value to $2 million.

Effective January 1, 2007, Ball adopted FIN No. 48, “Accounting for Uncertainty in Income Taxes.” As of the date
of adoption, the accrual for uncertain tax position was $45.8 million, and the cumulative effect of the adoption was
an increase in the reserve for uncertain tax positions of $2.1 million. The accrual includes an $11.4 million
reduction in opening retained earnings and a $9.3 million reduction in goodwill. A reconciliation of the
unrecognized tax benefits follows:

($ in millions)

Balance at January 1, 2007
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for settlements
Effect of foreign currency exchange rates
Balance at December 31, 2007

Balance sheet classification:

Income taxes payable
Deferred taxes and other liabilities

Total

As Adjusted for
Accounting Change

$ 45.8
3.9
7.6
(18.4)
2.2
$ 41.1

$ 4.2
36.9
$ 41.1

The amount of unrecognized tax benefits at December 31, 2007, that, if recognized, would reduce tax expense is
$35.9 million. At this time there are no positions where the unrecognized tax benefit is expected to increase or
decrease significantly within the next 12 months. U.S. Federal and state income tax returns filed for the years 2000-
2006 are open for audit, with an effective settlement of the Federal returns through 2004. The income tax returns
filed in Europe for the years 2002 through 2006 are also open for audit. The company’s significant filings in Europe
are in Germany, France, the Netherlands, Poland, Serbia and the United Kingdom.

The company recognizes the accrual of interest and penalties related to unrecognized tax benefits in income tax
expense. During the year ended December 31, 2007, Ball recognized approximately $2.7 million of interest
expense. The accrual for uncertain tax positions at December 31, 2007, includes approximately $5.1 million
representing potential interest expense. No penalties have been accrued.

The 2007 provision for income taxes included an $11.5 million accrual under FIN No. 48. The majority of this
provision was related to the effective settlement during the third quarter of 2007 with the Internal Revenue Service
for interest deductions on incurred loans from a company-owned life insurance plan. The total accrual at
December 31, 2007, for the effective settlement of the applicable prior years 2000-2004 under examination, and
unaudited years 2005 through 2007, was $18.4 million, including estimated interest. The settlement resulted in a
majority of the interest deductions being sustained with prospective application that results in no significant impact
to future earnings per share or cash flows.

Page 62 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

14. Taxes on Income (continued)

On October 22, 2004, the American Jobs Creation Act of 2004 (Jobs Act) was signed into law. The Jobs Act
provided certain domestic companies a temporary opportunity to repatriate previously undistributed earnings of
controlled foreign subsidiaries at a reduced federal tax rate, approximating 5.25 percent. Under the company’s
approved distribution plan, the company received a distribution of $488.4 million, of which approximately $320.3
million was taxable and subject to the provisions of the Jobs Act. In the third quarter of 2005, the company
recorded a current tax payable of $16 million that was more than offset by the release of $19.2 million of accrued
taxes on prior year unremitted foreign earnings, resulting in a net decrease in tax expense of $3.2 million for that
period.

Notwithstanding the 2005 distribution pursuant to the Jobs Act, management’s intention is to indefinitely reinvest
undistributed foreign earnings of Ball’s controlled foreign corporations and, as a result, no U.S. income or foreign
withholding tax provision has been made. It is not practicable to estimate the additional taxes that may become
payable upon the eventual remittance of these foreign earnings.

15. Employee Benefit Obligations

($ in millions)

Total defined benefit pension liability
Less current portion

Long-term defined benefit pension liability

Retiree medical and other postemployment benefits
Deferred compensation
Other

December 31,

2007

2006

$ 406.2
(25.7)
380.5
193.3
185.4
39.8
$ 799.0

$ 510.6
(24.1)
486.5
191.1
144.0
26.1
$ 847.7

Certain management employees may elect to defer the payment of all or a portion of their annual incentive
compensation into the company’s deferred compensation plan and/or the company’s deferred compensation stock
plan. The employee becomes a general unsecured creditor of the company with respect to amounts deferred.
Amounts deferred into the deferred compensation stock plan receive a 20 percent company match with a maximum
match of $20,000 per year. Amounts deferred into the stock plan are represented in the participant's account as stock
units, with each unit having a value equivalent to one share of Ball’s common stock. Beginning in 2007, participants
in the stock plan were allowed to reallocate a prescribed number of units to other notional investment funds,
comparable to those described above, subject to specified time constraints.

The company's pension plans cover substantially all U.S., Canadian and European employees meeting certain
eligibility requirements. The defined benefit plans for salaried employees, as well as those for hourly employees in
Germany and the United Kingdom, provide pension benefits based on employee compensation and years of service.
Plans for North American hourly employees provide benefits based on fixed rates for each year of service. The
German plans are not funded but the company maintains book reserves, and annual additions to the reserves are
generally tax deductible. With the exception of the German plans, our policy is to fund the plans on a current basis
to the extent deductible under existing tax laws and regulations and in amounts sufficient to satisfy statutory funding
requirements. We also have defined benefit pension obligations in France and Austria, the assets and liabilities of
which are insignificant.

Page 63 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

15. Employment Benefit Obligations (continued)

Defined Benefit Pension Plans

An analysis of the change in benefit accruals for 2007 and 2006 follows:

($ in millions)
Change in projected benefit

obligation:
Benefit obligation at prior year end
Service cost
Interest cost
Benefits paid
Net actuarial gain
Business acquisitions
Effect of exchange rates
Plan amendments and other
Benefit obligation at year end

Change in plan assets:

Fair value of assets at prior year end
Actual return on plan assets
Employer contributions (a)
Contributions to unfunded German

plans (b)
Benefits paid
Business acquisitions
Effect of exchange rates
Other
Fair value of assets at end of year

Funded status

U.S.

2007
Foreign

Total

U.S.

2006
Foreign

Total

$ 805.3
40.9
47.1
(45.8)
(17.0)
–
–
9.4
839.9

679.6
64.2
97.5

–
(45.8)
–
–
–
795.5
$ (44.4)

$ 634.5
8.9
30.5
(55.2)
(49.9)
–
53.6
2.3
624.7

251.9
11.4
18.2

24.0
(55.2)
–
20.6
2.3
273.2
$(351.5)(b)

$ 1,439.8
49.8
77.6
(101.0)
(66.9)
–
53.6
11.7
1,464.6

931.5
75.6
115.7

24.0
(101.0)
–
20.6
2.3
1,068.7
$(395.9)

$ 778.0
26.9
45.8
(34.6)
(19.3)
51.7
–
(43.2)
805.3

570.6
65.6
39.7

–
(34.6)
38.3
–
–
679.6
$(125.7)

$ 593.6
9.3
26.9
(45.1)
(10.3)
–
57.1
3.0
634.5

213.7
29.1
15.2

22.0
(45.1)
–
14.9
2.1
251.9
$(382.6)(b)

$ 1,371.6
36.2
72.7
(79.7)
(29.6)
51.7
57.1
(40.2)
1,439.8

784.3
94.7
54.9

22.0
(79.7)
38.3
14.9
2.1
931.5
$(508.3)

(a) 2007 contributions include additional pension contributions of $44.5 million ($27.3 million after tax) to bring North

American plan obligations to a 95 percent or higher funded status level.

(b) The German plans are unfunded and the liability is included in the company’s consolidated balance sheets. Benefits are
paid directly by the company to the participants. The German plans represented $328.5 million and $333.4 million of the
total unfunded status at December 31, 2007 and 2006, respectively.

Amounts recognized in the consolidated balance sheets for the funded status at December 31 consisted of:

($ in millions)

Prepaid pension cost
Defined benefit pension liabilities

U.S.

$ –

(44.4)
$ (44.4)

2007
Foreign

$ 10.3
(361.8)
$ (351.5)

Total

U.S.

$ 10.3
(406.2)
$ (395.9)

$ –

(125.7)
$ (125.7)

2006
Foreign

$ 2.3
(384.9)
$ (382.6)

Total

$ 2.3
(510.6)
$ (508.3)

Page 64 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

15. Employee Benefit Obligations (continued)

Amounts recognized in accumulated other comprehensive earnings (loss) at December 31 consisted of:

($ in millions)

Net loss
Net prior service credit
Tax effect and foreign exchange rates

U.S.

$ 180.0
2.0
(71.9)
$ 110.1

2007
Foreign

$ 6.8
(5.8)
(12.1)
$ (11.1)

Total

U.S.

$ 186.8
(3.8)
(84.0)
$ 99.0

$ 220.2
(5.7)
(85.0)
$ 129.5

2006
Foreign

$ 50.3
(6.3)
(21.7)
$ 22.3

Total

$ 270.5
(12.0)
(106.7)
$ 151.8

The accumulated benefit obligation for all U.S. defined benefit pension plans was $832.1 million and
$804.8 million at December 31, 2007 and 2006, respectively. The accumulated benefit obligation for all foreign
defined benefit pension plans was $571.6 million and $584.1 million at December 31, 2007 and 2006, respectively.
Following is the information for defined benefit plans with an accumulated benefit obligation in excess of plan
assets at December 31:

($ in millions)

Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets

U.S.

$ 839.9
832.1
795.5

2007
Foreign

Total

U.S.

2006
Foreign

Total

$ 328.8
318.9
0.3(a)

$1,168.7
1,151.0
795.8

$ 805.3
804.8
679.6

$ 579.7
529.9
194.8(a)

$1,385.0
1,334.7
874.4

(a) The German plans are unfunded and, therefore, there is no fair value of plan assets associated with them. The unfunded

status of those plans was $328.5 million and $333.4 million at December 31, 2007 and 2006, respectively.

Components of net periodic benefit cost were:

($ in millions)

U.S.

2007
Foreign

Total

U.S.

2006
Foreign

Total

U.S.

2005
Foreign

$ 40.9
47.1

$ 8.9
30.5

$ 49.8
77.6

$ 26.9
45.8

$ 9.3
26.9

$ 36.2
72.7

$ 24.2
40.1

$ 8.4
28.1

(54.5)

(18.5)

(73.0)

(51.1)

(15.5)

(66.6)

(46.2)

(14.7)

(60.9)

0.9

(0.5)

0.4

3.0

(0.3)

2.7

4.8

(0.1)

4.7

Total

$ 32.6
68.2

13.5
0.8
48.7

5.0
2.1
27.5

0.1

18.5
2.9
76.2

1.4

18.4
–
43.0

1.2

3.3
2.2
25.9

0.1

21.7
2.2
68.9

1.3

15.5
–
38.4

1.0

2.3
3.0
27.0

–

17.8
3.0
65.4

1.0

Other Postemployment Benefits

The company sponsors defined benefit and defined contribution postretirement health care and life insurance plans
for substantially all U.S. and Canadian employees. Employees may also qualify for long-term disability, medical
and life insurance continuation and other postemployment benefits upon termination of active employment prior to
retirement. All of the Ball-sponsored postretirement health care and life insurance plans are unfunded and, with the
exception of life insurance benefits, are self-insured.

In Canada, the company provides supplemental medical and other benefits in conjunction with Canadian provincial
health care plans. Most U.S. salaried employees who retired prior to 1993 are covered by noncontributory defined
benefit medical plans with capped lifetime benefits. Ball provides a fixed subsidy toward each retiree's future
purchase of medical insurance for U.S. salaried and substantially all nonunion hourly employees retiring after
January 1, 1993. Life insurance benefits are noncontributory. Ball has no commitments to increase benefits provided
by any of the postemployment benefit plans.

Page 68 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

15. Employee Benefit Obligations (continued)

An analysis of the change in other postretirement benefit accruals for 2007 and 2006 follows:

($ in millions)

2007

2006

Change in benefit obligation:

Benefit obligation at prior year end
Service cost
Interest cost
Benefits paid
Net actuarial gain
Business acquisitions
Curtailment gain
Plan amendments
Effect of exchange rates
Benefit obligation at year end

Change in plan assets:

Fair value of assets at prior year end
Employer contributions
Benefits paid
Medicare Part D subsidy
Fair value of assets at end of year

Funded status

Components of net periodic benefit cost were:

($ in millions)

Service cost
Interest cost
Amortization of prior service cost
Recognized net actuarial gain
Net periodic benefit cost

$ 185.1
3.1
10.2
(15.3)
(3.1)
–
–
(5.9)
3.9
178.0

–
15.3
(15.4)
0.1
–

$ 176.0
3.3
10.8
(10.4)
(20.7)
26.5
(1.2)
0.8
–
185.1

–
10.4
(10.8)
0.4
–

$ (178.0)

$ (185.1)

2007

$ 3.1
10.2
0.4
0.6
$ 14.3

2006

$ 3.3
10.8
1.5
2.4
$ 18.0

2005

$ 2.6
9.7
1.5
2.3
$ 16.1

The estimated net loss and prior service cost for the other postretirement plans that will be amortized from
accumulated other comprehensive earnings (loss) into net periodic benefit cost during 2008 are $0.4 million and
$0.3 million, respectively.

The assumptions used for the determination of benefit obligations and net periodic benefit cost were the same as
used for the U.S. and Canadian defined benefit pension plans. For other postretirement benefits, accumulated gains
and losses, the prior service cost and the transition asset are amortized over the average remaining service period of
active participants.

For the U.S. health care plans at December 31, 2007, a 9 percent health care cost trend rate was used for pre-65 and
post-65 benefits, and trend rates were assumed to decrease to 5 percent in 2012 and remain at that level thereafter.
For the Canadian plans, a 9 percent health care cost trend rate was used, which was assumed to decrease to
5 percent by 2016 and remain at that level in subsequent years.

Health care cost trend rates can have an effect on the amounts reported for the health care plan. A one-percentage
point change in assumed health care cost trend rates would increase or decrease the total of service and interest cost
by $0.4 million and the postretirement benefit obligation by approximately $4 million to $5 million.

Page 69 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

15. Employee Benefit Obligations (continued)

Other Benefit Plans

Through December 31, 2006, the company matched employee contributions to the 401(k) plan with shares of Ball
common stock, up to 50 percent of up to 6 percent of a participant’s annual salary. Effective January 1, 2007, the
company matches U.S. salaried employee contributions with shares of Ball common stock, up to 100 percent of the
first 3 percent of a participant’s salary plus 50 percent of the next 2 percent. The expense associated with the
company match amounted to $20.8 million, $16.1 million and $14.3 million for 2007, 2006 and 2005, respectively.

In addition, substantially all employees within the company’s aerospace and technologies segment who participate
in Ball’s 401(k) plan receive a performance-based matching cash contribution of up to 4 percent of base salary. The
company recognized $8.7 million and $6.3 million of additional compensation expense related to this program for
the years 2007 and 2005, respectively. There was no matching contribution for the year ended December 31, 2006.

In 2007 the company’s 401(k) plan matching contributions could not exceed $9,000 per employee and the limit on
employee contributions was $15,500 per employee.

16. Shareholders’ Equity

At December 31, 2007, the company had 550 million shares of common stock and 15 million shares of preferred
stock authorized, both without par value. Preferred stock includes 120,000 authorized but unissued shares
designated as Series A Junior Participating Preferred Stock.

Under the company's shareholder Rights Agreement dated July 26, 2006, as amended, one preferred stock purchase
right (Right) is attached to each outstanding share of Ball Corporation common stock. Subject to adjustment, each
Right entitles the registered holder to purchase from the company one one-thousandth of a share of Series A Junior
Participating Preferred Stock at an exercise price of $185 per Right. Subject to certain limited exceptions for passive
investors, if a person or group acquires 10 percent or more of the company's outstanding common stock (or upon
occurrence of certain other events), the Rights (other than those held by the acquiring person) become exercisable
and generally entitle the holder to purchase shares of Ball Corporation common stock at a 50 percent discount. The
Rights, which expire in 2016, are redeemable by the company at a redemption price of $0.001 cent per Right and
trade with the common stock. Exercise of such Rights would cause substantial dilution to a person or group
attempting to acquire control of the company without the approval of Ball's board of directors. The Rights would
not interfere with any merger or other business combinations approved by the board of directors.

The company increased its share repurchase program in 2007 to $211.3 million, net of issuances, compared to
$45.7 million net repurchases in 2006 and $358.1 million in 2005. The net repurchases in 2007 included a forward
contract entered into in December 2006 for the repurchase of 1,200,000 shares. The contract was settled on
January 5, 2007, for $51.9 million in cash. The 2007 net repurchases did not include a forward contract entered into
in December 2007 for the repurchase of 675,000 shares. That contract was settled on January 7, 2008, for
$31 million in cash.

On December 12, 2007, in a privately negotiated transaction, Ball entered into an accelerated share repurchase
agreement to buy $100 million of its common shares. The company advanced the $100 million on January 7, 2008,
and received approximately 2 million shares, which represented 90 percent of the total shares as calculated using the
previous day’s closing price. The exact number of shares to be repurchased under the agreement, which will be
determined on the settlement date of June 5, 2008, is subject to an adjustment based on a weighted average price
calculation for the period between the initial purchase date and the settlement date. The company has the option to
settle the contract in either cash or shares.

In connection with the employee stock purchase plan, the company contributes 20 percent of up to $500 of each
participating employee’s monthly payroll deduction toward the purchase of Ball Corporation common stock.
Company contributions for this plan were $3.2 million each in 2007, 2006 and 2005.

Page 70 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

16. Shareholders’ Equity (continued)

On October 24, 2007, Ball announced the discontinuance of the company’s discount on the reinvestment of
dividends associated with the company’s dividend reinvestment and voluntary stock purchase plan for non-
employee shareholders. The 5 percent discount was discontinued on November 1, 2007.

Accumulated Other Comprehensive Earnings (Loss)

The activity related to accumulated other comprehensive earnings (loss) was as follows:

($ in millions)

December 31, 2004
2005 change
December 31, 2005
2006 change
Effect of SFAS No. 158 adoption (a)
December 31, 2006
2007 change
December 31, 2007

Foreign
Currency
Translation

$ 148.9
(74.3)
74.6
57.2
–
131.8
90.0
$ 221.8

Pension and
Other
Postretirement
Items,
Net of Tax

$ (126.3)
(43.6)
(169.9)
55.9
(47.9)
(161.9)
57.9
$ (104.0)

Effective
Financial
Derivatives,
Net of Tax

Accumulated
Other
Comprehensive
Earnings (Loss)

$ 10.6
(16.0)
(5.4)
6.0
–
0.6
(11.5)
$ (10.9)

$ 33.2
(133.9)
(100.7)
119.1
(47.9)
(29.5)
136.4
$ 106.9

(a) Within the company’s 2006 annual report, the consolidated statement of changes in shareholders’ equity for the year ended

December 31, 2006, included a transition adjustment of $47.9 million, net of tax, related to the adoption of SFAS No. 158,
“Employers’ Accounting for Defined Benefit Pension Plans and Other Postretirement Plans, an Amendment of FASB
Statements No. 87, 88, 106 and 132(R),” as a component of 2006 comprehensive earnings rather than only as an
adjustment to accumulated other comprehensive loss. The 2006 amounts have been revised to correct the previous
reporting.

Notwithstanding the 2005 distribution pursuant to the Jobs Act, management’s intention is to indefinitely reinvest
foreign earnings. Therefore, no taxes have been provided on the foreign currency translation component for any
period. The change in the pension and other postretirement items is presented net of related tax expense of
$31.3 million and $2.9 million for 2007 and 2006, respectively, and a related tax benefit of $27.3 million for 2005.
The change in the effective financial derivatives is presented net of related tax benefit of $3.2 million for 2007,
related tax expense of $5.7 million for 2006 and related tax benefit of $10.7 million for 2005.

Stock-Based Compensation Programs

Effective January 1, 2006, Ball adopted SFAS No. 123 (revised 2004), “Share Based Payment,” which is a revision
of SFAS No. 123 and supersedes APB Opinion No. 25. The new standard establishes accounting standards for
transactions in which an entity exchanges its equity instruments for goods or services, including stock option and
restricted stock grants. The major differences for Ball are that (1) expense is now recorded in the consolidated
statements of earnings for the fair value of new stock option grants and nonvested portions of grants made prior to
January 1, 2006, and (2) the company’s deposit share program (discussed below) is no longer a variable plan that is
marked to current market value each month through earnings. Upon adoption of SFAS No. 123 (revised 2004), Ball
has chosen to use the modified prospective transition method and the Black-Scholes valuation model.

Page 71 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

16. Shareholders’ Equity (continued)

The company has shareholder-approved stock option plans under which options to purchase shares of Ball common
stock have been granted to officers and certain employees at the market value of the stock at the date of grant.
Payment must be made at the time of exercise in cash or with shares of stock owned by the option holder, which are
valued at fair market value on the date exercised. In general, options issued through December 31, 2007, are
exercisable in four equal installments commencing one year from the date of grant and terminate 10 years from the
date of grant.

A summary of stock option activity for the year ended December 31, 2007, follows:

Outstanding Options

Nonvested Options

Beginning of year
Granted
Vested
Exercised
Canceled/forfeited
End of period
Vested and exercisable, end of period
Reserved for future grants

Weighted
Average
Exercise
Price

$ 26.69
49.32

21.37
44.20
32.06
24.44

Number of
Shares

4,852,978
949,200

(985,373)
(69,800)
4,747,005
3,082,025
4,799,707

Number of
Shares

1,286,937
949,200
(501,357)

(69,800)
1,664,980

Weighted
Average Grant
Date Fair Value

$ 10.27
11.22
9.99

10.70
10.88

The options granted in April 2007 included 402,168 stock-settled stock appreciation rights, which have the same
terms as the stock options. The weighted average remaining contractual term for all options outstanding at
December 31, 2007, was 6.2 years and the aggregate intrinsic value (difference in exercise price and closing price at
that date) was $61.4 million. The weighted average remaining contractual term for options vested and exercisable at
December 31, 2007, was 4.8 years and the aggregate intrinsic value was $63.4 million. The company received
$21.1 million from options exercised during 2007. The intrinsic value associated with these exercises was
$28.5 million, and the associated tax benefit of $9.5 million was reported as other financing activities in the
consolidated statement of cash flows. The total fair value of options vested during 2007, 2006 and 2005 was
$5 million, $4.8 million and $15.5 million, respectively.

These options cannot be traded in any equity market. However, based on the Black-Scholes option pricing model,
adapted for use in valuing compensatory stock options in accordance with SFAS No. 123 (revised 2004), options
granted in 2007, 2006 and 2005 have estimated weighted average fair values at the date of grant of $11.22 per
share, $10.46 per share and $11.65 per share, respectively. The actual value an employee may realize will depend
on the excess of the stock price over the exercise price on the date the option is exercised. Consequently, there is no
assurance that the value realized by an employee will be at or near the value estimated. The fair values were
estimated using the following weighted average assumptions:

Expected dividend yield
Expected stock price volatility
Risk-free interest rate
Expected life of options
Estimated forfeiture rate

2007 Grants

2006 Grants

2005 Grants

0.81%
17.94%
4.55%
4.75 years
12.00%

0.92%
19.70%
5.01%
4.54 years
14.63%

1.01%
30.09%
3.89%
4.75 years
N/A

Page 72 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

16. Shareholders’ Equity (continued)

For the years ended December 31, 2007 and 2006, the company recognized in selling, general and administrative
expenses pretax expense of $15.9 million ($9.6 million after tax) and $12.9 million ($7.8 million after tax),
respectively, for share-based compensation arrangements. These amounts represented $0.10 per basic share and
$0.09 per diluted share in 2007, respectively, and $0.08 per basic share and $0.07 per diluted share in 2006,
respectively. At December 31, 2007, there was $31.2 million of total unrecognized compensation cost related to
nonvested share-based compensation arrangements. This cost is expected to be recognized in earnings over a
weighted average period of 2.5 years.

In addition to stock options, the company issues to officers and certain employees restricted shares and restricted
stock units, which vest over various periods but generally in equal installments over five years. Compensation cost
is recorded based upon the fair value of the shares at the grant date. The adoption of SFAS No. 123 (revised 2004)
did not change the accounting for compensation cost for the company’s normal restricted share program.

To encourage certain senior management employees and outside directors to invest in Ball stock, Ball adopted a
deposit share program in March 2001 (subsequently amended and restated in April 2004) that matches purchased
shares with restricted shares. In general, restrictions on the matching shares lapse at the end of four years from date
of grant, or earlier if established share ownership guidelines are met, assuming the relevant qualifying purchased
shares are not sold or transferred prior to that time. Through December 31, 2005, under the principles of APB
Opinion No. 25, this plan was accounted for as a variable plan where compensation expense was recorded based
upon the current market price of the company’s common stock until restrictions lapsed. Upon adoption of
SFAS No. 123 (revised 2004) on January 1, 2006, grants under the plan are accounted for as equity awards and
compensation expense is now recorded based upon the fair value of the shares at the grant date. The company
recorded $6.5 million, $6.7 million and $7.3 million of expense in connection with this program in 2007, 2006 and
2005, respectively.

In April 2007 the company’s board of directors granted 170,000 performance-contingent restricted stock units to
key employees, which will cliff vest if the company’s return on average invested capital during a 33-month
performance period is equal to or exceeds the company’s estimated cost of capital. If the performance goal is not
met, the shares will be forfeited. Current assumptions are that the performance targets will be met and, accordingly,
grants under the plan are being accounted for as equity awards and compensation expense is recorded based upon
the fair value (closing market price) of the shares at the grant date. On a quarterly basis, the company reassesses the
probability of the goal being met and adjusts compensation expense as appropriate. No such adjustment was
considered necessary at the end of 2007. The expense associated with the performance-contingent grants totaled
$2.2 million in 2007.

Page 73 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

17. Earnings Per Share

The following table provides additional information on the computation of earnings per share amounts:

($ in millions, except per share amounts)

Diluted Earnings per Share:

Net earnings

Weighted average common shares (000s)
Dilutive effect of stock options and restricted shares
Weighted average shares applicable to diluted earnings

Years ended December 31,
2006

2007

2005

$ 281.3

$ 329.6

$ 272.1

101,186
1,574

103,338
1,613

107,758
1,974

per share

102,760

104,951

109,732

Diluted earnings per share

$ 2.74

$ 3.14

$ 2.48

The following outstanding options were excluded from the diluted earnings per share calculation since they were
anti-dilutive (i.e., the sum of the proceeds, including the unrecognized compensation, exceeded the average
closing stock price for the period):

Option Price:

$39.74
$43.69
$49.32

Years ended December 31,
2006

2007

2005

–
470,025
926,300
1,396,325

–
896,200
–
896,200

709,250
–
–
709,250

18. Financial Instruments and Risk Management

Policies and Procedures

Commodity Price Risk

Page 74 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

18. Financial Instruments and Risk Management (continued)

In Europe and Asia, the company manages the aluminum and steel raw material commodity price risks through
annual and long-term contracts for the purchase of the materials, as well as for certain sales of containers, that
reduce the company’s exposure to fluctuations in commodity prices within the current year. These purchase and
sales contracts include fixed price, floating and pass-through pricing arrangements. We also use forward and option
contracts as cash flow hedges to manage future aluminum price risk and foreign exchange exposures for those sales
contracts where there is not a pass-through arrangement to minimize the company’s exposure to significant price
changes. We also use option contracts to limit the impacts of European inflation in certain multi-year contracts.

The company had aluminum contracts hedging its aluminum exposure with notional amounts of approximately
$1 billion and $260.3 million at December 31, 2007 and 2006, respectively. The aluminum contracts include cash
flow and fair value hedges that offset sales contracts of various terms and lengths. Cash flow and fair value hedges
related to forecasted transactions and firm commitments expire within the next four years. Included in shareholders’
equity at December 31, 2007, within accumulated other comprehensive earnings, is a net after-tax loss of
$16 million associated with these contracts, of which a net loss of $17 million is expected to be recognized in the
consolidated statement of earnings during 2008. All of the losses on these derivative contracts will be offset by
higher revenue from sales contracts. The consolidated balance sheet at December 31, 2007, included $32 million in
prepaid expenses and $50.2 million in liabilities related to unrealized gains/losses on unsettled derivative contracts.
The consolidated balance sheet at December 31, 2006, included $29.7 million in prepaid expenses and $34.8 million
in liabilities for these gains/losses.

Interest Rate Risk

At December 31, 2007, the company had outstanding interest rate swap agreements in Europe with notional
amounts of €135 million paying fixed rates. Approximately $4.1 million of a net after-tax gain associated with these
contracts is included in accumulated other comprehensive earnings at December 31, 2007, of which $1.3 million is
expected to be recognized in the consolidated statement of earnings during 2008. At December 31, 2007, the
company had outstanding interest rate collars in the U.S. totaling $100 million. The value of these contracts in
accumulated other comprehensive earnings at December 31, 2007, was insignificant. Approximately $1.1 million of
net gain related to the termination or deselection of hedges is included in accumulated other comprehensive earnings
at December 31, 2007. The amount recognized in 2007 earnings related to terminated hedges was insignificant.

The fair value of all non-derivative financial instruments approximates their carrying amounts with the exception of
long-term debt. Rates currently available to the company for loans with similar terms and maturities are used to
estimate the fair value of long-term debt based on discounted cash flows. The fair value of derivatives generally
reflects the estimated amounts that we would pay or receive upon termination of the contracts at December 31,
taking into account any unrealized gains and losses on open contracts.

Page 75 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

18. Financial Instruments and Risk Management (continued)

($ in millions)
Long-term debt, including current portion
Unrealized pretax gain on derivative contracts

Foreign Currency Exchange Rate Risk

2007

2006

Carrying
Amount
$ 2,308.9
–

Fair
Value
$ 2,323.6
5.7

Carrying
Amount
$ 2,311.6
–

Fair
Value
$ 2,314.1
4.1

Our objective in managing exposure to foreign currency fluctuations is to protect foreign cash flows and earnings
from changes associated with foreign currency exchange rate changes through the use of cash flow hedges. In
addition, we manage foreign earnings translation volatility through the use of foreign currency options. Our foreign
currency translation risk results from the European euro, British pound, Canadian dollar, Polish zloty, Serbian dinar,
Brazilian real, Argentine peso and Chinese renminbi. We face currency exposures in our global operations as a
result of purchasing raw materials in U.S. dollars and, to a lesser extent, in other currencies. Sales contracts are
negotiated with customers to reflect cost changes and, where there is not a foreign exchange pass-through
arrangement, the company uses forward and option contracts to manage foreign currency exposures. Such contracts
outstanding at December 31, 2007, expire within four years, and the amounts included in accumulated other
comprehensive earnings related to these contracts were insignificant.

19. Quarterly Results of Operations (Unaudited)

The company’s fiscal years end on December 31 and the fiscal quarters generally end on the Sunday nearest the
calendar quarter end.

($ in millions, except per share amounts)

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Total

2007

Net sales (a)
Gross profit (b)
Net earnings

$ 1,694.2
242.6
$ 81.2

$ 2,032.8
288.7
$ 105.9

$ 1,906.5
184.0
$ 60.9

$ 1,756.2
201.4
$ 33.3

$ 7,389.7
916.7
$ 281.3

Basic earnings per share (c)
Diluted earnings per share (c)

$ 0.79
$ 0.78

$ 1.04
$ 1.03

$ 0.60
$ 0.59

$ 0.33
$ 0.33

$ 2.78
$ 2.74

2006

Net sales
Gross profit (b)
Net earnings

$ 1,364.9
159.6
$ 44.4

$ 1,842.5
231.2
$ 129.8

$ 1,822.3
248.7
$ 107.1

$ 1,591.8
219.1
$ 48.3

$ 6,621.5
858.6
$ 329.6

Basic earnings per share (c)
Diluted earnings per share (c)

$ 0.43
$ 0.42

$ 1.25
$ 1.23

$ 1.04
$ 1.02

$ 0.47
$ 0.46

$ 3.19
$ 3.14

(a) Net sales in the third quarter of 2007 are shown net of an $85.6 million legal settlement (see Note 4).
(b) Gross profit is shown after depreciation and amortization related to cost of sales of $246.5 million and $222.5 million for

the years ended December 31, 2007 and 2006, respectively.

(c) Earnings per share calculations for each quarter are based on the weighted average shares outstanding for that period. As

a result, the sum of the quarterly amounts may not equal the annual earnings per share amount.

Page 76 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

19. Quarterly Results of Operations (Unaudited) (continued)

Subsequent to the issuance of its financial statements for the year ended December 31, 2005, the company
determined that certain foreign currency exchange losses had been inadvertently deferred for the years 2005, 2004
and 2003. As a result, selling, general and administrative expenses were understated by $2.5 million, $2.3 million
and $1 million in 2005, 2004 and 2003, respectively. Management has assessed the impact of these adjustments and
does not believe these amounts are material, individually or in the aggregate, to any previously issued financial
statements or to our full year results of operations for 2006. A cumulative $5.8 million pretax out-of-period
adjustment was included in selling, general and administrative expenses in the first quarter of 2006.

The unaudited quarterly results of operations included business consolidation costs and other significant items that
impacted the company’s operating performance. A summary of the items in 2007 and 2006 follows (all amounts are
shown after tax):

($ in millions, except per share amounts)

2007

Legal settlement (Note 4)
Business consolidation costs (Note 5)

Basic earnings per share
Diluted earnings per share

2006

Business consolidation (costs) gain

(Note 5)

Property insurance gain (Note 6)
Tax benefit for change in statutory

functional currency

Basic earnings per share
Diluted earnings per share

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

$ –
–
$ –

$ –
$ –

$ (1.4)
–

–
$ (1.4)

$ (0.01)
$ (0.01)

$ –
–
$ –

$ –
$ –

$ 0.3
45.2

–
$ 45.5

$ 0.44
$ 0.43

$ (51.8)
–
$ (51.8)

$ (0.50)
$ (0.50)

$ –

1.7

–
$ 1.7

$ 0.02
$ 0.02

$ –

(27.0)
$ (27.0)

$ (0.27)
$ (0.27)

$ (27.5)
(0.8)

8.1
$ (20.2)

$ (0.19)
$ (0.19)

Total

$ (51.8)
(27.0)
$ (78.8)

$ (0.76)
$ (0.76)

$ (28.6)
46.1

8.1
$ 25.6

$ 0.25
$ 0.24

Other than the items discussed above, fluctuations in sales and earnings for the quarters in 2007 and 2006 reflected
the number of days in each fiscal quarter, as well as the normal seasonality of our businesses.

20. Research and Development

Research and development costs are expensed as incurred in connection with the company’s internal programs for
the development of products and processes. Costs incurred in connection with these programs, the majority of
which are included in cost of sales, amounted to $27.4 million, $22.5 million and $24.6 million for the years ended
December 31, 2007, 2006 and 2005, respectively.

21. Subsequent Event

On February 15, 2008, Ball Aerospace & Technologies Corp. completed the sale of its shares in Ball Solutions
Group Pty Ltd (BSG) to QinetiQ Pty Ltd for approximately $10.5 million. BSG was previously a wholly-owned
Australian subsidiary of Ball Aerospace that provided services to the Australian department of defense and related
government agencies. The sale is expected to result in a pretax gain of approximately $3 million.

Page 77 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

22. Subsidiary Guarantees of Debt

As discussed in Note 13, the company’s notes payable and senior credit facilities are guaranteed on a full,
unconditional and joint and several basis by certain of the company’s domestic wholly owned subsidiaries. Certain
foreign denominated tranches of the senior credit facilities are similarly guaranteed by certain of the company’s
wholly owned foreign subsidiaries. The senior credit facilities are secured by: (1) a pledge of 100 percent of the
stock owned by the company in its material direct and indirect majority-owned domestic subsidiaries and (2) a
pledge of the company’s stock, owned directly or indirectly, of certain foreign subsidiaries, which equals 65 percent
of the stock of each such foreign subsidiary. The following is condensed, consolidating financial information for the
company, segregating the guarantor subsidiaries and non-guarantor subsidiaries, as of December 31, 2007 and 2006,
and for the years ended December 31, 2007, 2006 and 2005 (in millions of dollars). Separate financial statements
for the guarantor subsidiaries and the non-guarantor subsidiaries are not presented because management has
determined that such financial statements would not be material to investors.

CONDENSED, CONSOLIDATING STATEMENT OF EARNINGS
For the Year Ended December 31, 2007

Ball
Corporation

Guarantor Non-Guarantor
Subsidiaries

Subsidiaries Adjustments

Total

Eliminating Consolidated

($ in millions)

Net sales
Legal settlement
Total net sales

Costs and expenses

Cost of sales (excluding depreciation

and amortization)

Depreciation and amortization
Business consolidation costs
Selling, general and administrative
Equity in results of subsidiaries
Intercompany license fees

Earnings (loss) before interest and taxes
Interest expense
Earnings (loss) before taxes
Tax provision
Minority interests
Equity in results of affiliates
Net earnings (loss)

$ 2,101.4

(125.2) $ 7,475.3
(85.6)
7,389.7

–
(125.2)

–
2,101.4

1,642.6
98.6
2.7
83.7
–
1.5
1,829.1

272.3
(61.7)
210.6
(58.0)
(0.4)
11.2
163.4

(125.2)
–
–
–
298.7
–
173.5

(298.7)
–
(298.7)
–
–
–

(298.7) $

6,226.5
281.0
44.6
323.7
–
–

6,875.8

513.9
(149.4)
364.5
(95.7)
(0.4)
12.9
281.3

−
–
–

$ 5,499.1
(85.6)
5,413.5

–
3.4
−
71.3
(298.7)
(71.0)
(295.0)

295.0
(34.3)
260.7
20.6
–
–

$ 281.3

4,709.1
179.0
41.9
168.7
–
69.5
5,168.2

245.3
(53.4)
191.9
(58.3)
–
1.7
$ 135.3

Page 78 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

22. Subsidiary Guarantees of Debt (continued)

CONDENSED, CONSOLIDATING STATEMENT OF EARNINGS
For the Year Ended December 31, 2006

($ in millions)

Net sales

Costs and expenses

Cost of sales (excluding depreciation

and amortization)

Depreciation and amortization
Business consolidation costs
Selling, general and administrative
Property insurance gain
Equity in results of subsidiaries
Intercompany license fees

Earnings (loss) before interest and taxes
Interest expense
Earnings (loss) before taxes
Tax provision
Minority interests
Equity in results of affiliates
Net earnings (loss)

Ball
Corporation

−

–
3.3
−
71.6
–
(349.6)
(70.4)
(345.1)

345.1
(27.8)
317.3
12.3
–
–

$ 329.6

Guarantor Non-Guarantor
Subsidiaries

Subsidiaries Adjustments

Total

Eliminating Consolidated

$ 5,056.9

$ 1,733.0

(168.4) $ 6,621.5

4,349.9
160.3
–
135.5
–
–
66.3
4,712.0

344.9
(53.1)
291.8
(94.9)
–
3.7
$ 200.6

1,358.9
89.0
35.5
80.1
(75.5)
–
4.1
1,492.1

240.9
(53.5)
187.4
(49.0)
(0.4)
11.0
149.0

(168.4)
–
–
–
–
349.6
–
181.2

(349.6)
–
(349.6)
–
–
–

(349.6) $

5,540.4
252.6
35.5
287.2
(75.5)
–
–

6,040.2

581.3
(134.4)
446.9
(131.6)
(0.4)
14.7
329.6

CONDENSED, CONSOLIDATING STATEMENT OF EARNINGS
For the Year Ended December 31, 2005

($ in millions)

Net sales
Costs and expenses

Cost of sales (excluding depreciation

and amortization)

Depreciation and amortization
Business consolidation costs
Selling, general and administrative
Equity in results of subsidiaries
Intercompany license fees

Earnings (loss) before interest and taxes
Interest expense
Earnings (loss) before taxes
Tax provision
Minority interests
Equity in results of affiliates
Net earnings (loss)

Ball
Corporation

−

–
3.1
−
15.5
(268.9)
(68.6)
(318.9)

318.9
(38.5)
280.4
(8.3)
–
–

$ 272.1

Guarantor Non-Guarantor
Subsidiaries

Subsidiaries Adjustments

Total

Eliminating Consolidated

$ 4,396.7

$ 1,582.5

(228.0) $ 5,751.2

3,781.1
129.2
19.3
147.7
–
67.4
4,144.7

252.0
(35.8)
216.2
(82.7)
–
2.7
$ 136.2

1,249.6
81.2
1.9
70.6
–
1.2
1,404.5

178.0
(42.1)
135.9
(15.2)
(0.8)
12.8
132.7

(228.0)
–
–
–
268.9
–
40.9

(268.9)
–
(268.9)
–
–
–

(268.9) $

4,802.7
213.5
21.2
233.8
–
–

5,271.2

480.0
(116.4)
363.6
(106.2)
(0.8)
15.5
272.1

Page 79 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

22. Subsidiary Guarantees of Debt (continued)

($ in millions)

ASSETS
Current assets

CONDENSED, CONSOLIDATING BALANCE SHEET
December 31, 2007

Ball
Corporation

Guarantor Non-Guarantor
Subsidiaries
Subsidiaries

Eliminating Consolidated
Adjustments

Total

Cash and cash equivalents
Receivables, net
Inventories, net
Deferred taxes and prepaid expenses

Total current assets

70.1
1.1
−
25.8
97.0

1.9
164.9
719.9
53.5
940.2

Property, plant and equipment, net
Investment in subsidiaries
Goodwill
Intangibles and other assets, net
Total assets

24.4
2,274.7

–
98.0
$ 2,494.1

1,047.5
413.7
740.8
142.8
$ 3,285.0

LIABILITIES AND

SHAREHOLDERS’ EQUITY

Current liabilities

Short-term debt and current portion

of long-term debt
Accounts payable
Accrued employee costs
Income taxes payable
Other current liabilities

Total current liabilities

Long-term debt
Intercompany borrowings
Employee benefit obligations
Deferred taxes and other liabilities

Total liabilities

Minority interests
Shareholders’ equity

Convertible preferred stock

Preferred shareholders’ equity

Common stock
Retained earnings
Accumulated other comprehensive

earnings (loss)

Treasury stock, at cost

Common shareholders’ equity
Total shareholders’ equity
Total liabilities and

50.5
99.4
11.8
15.5
59.9
237.1

1,448.4
(694.3)
180.9
(20.5)
1,151.6

−

–
–

760.3
1,765.0

106.9
(1,289.7)
1,342.5
1,342.5

2.5
387.9
160.2
–
186.8
737.4

9.6
514.3
229.7
62.7
1,553.7

−

–
–

819.7
998.9

(87.3)
−
1,731.3
1,731.3

79.6
416.7
278.2
31.2
805.7

869.3
81.0
1,122.3
132.6
3,010.9

123.8
276.3
66.0
0.2
72.3
538.6

723.8
180.0
388.4
140.9
1,971.7

1.1

4.8
4.8

642.8
235.7

154.8
−

1,033.3
1,038.1

$ –
–
−
–
–

–

(2,769.4)
−
−

$ (2,769.4)

151.6
582.7
998.1
110.5
1,842.9

1,941.2

–

1,863.1
373.4
$ 6,020.6

−
–
−
–
–
–

–
–
–
–
–

−

(4.8)
(4.8)

(1,462.5)
(1,234.6)

(67.5)
−
(2,764.6)
(2,769.4)

176.8
763.6
238.0
15.7
319.0
1,513.1

2,181.8
−
799.0
183.1
4,677.0

1.1

–
–

760.3
1,765.0

106.9
(1,289.7)
1,342.5
1,342.5

shareholders’ equity

$ 2,494.1

$ 3,285.0

3,010.9

(2,769.4)

$ 6,020.6

Page 80 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

22. Subsidiary Guarantees of Debt (continued)

($ in millions)

ASSETS
Current assets

CONDENSED, CONSOLIDATING BALANCE SHEET
December 31, 2006

Ball
Corporation

Guarantor Non-Guarantor
Subsidiaries
Subsidiaries

Eliminating Consolidated
Adjustments

Total

Cash and cash equivalents
Receivables, net
Inventories, net
Deferred taxes and prepaid expenses

Total current assets

110.3
(0.3)
−
15.8
125.8

2.3
238.3
671.2
36.3
948.1

Property, plant and equipment, net
Investment in subsidiaries
Goodwill
Intangibles and other assets, net
Total assets

27.2
1,855.2

–
102.4
$ 2,110.6

1,093.2
438.3
754.4
141.2
$ 3,375.2

38.9
341.5
264.2
42.8
687.4

755.6
81.1
1,019.3
186.3
2,729.7

$ –
–
−
–
–

–

(2,374.6)
−
−

$ (2,374.6)

151.5
579.5
935.4
94.9
1,761.3

1,876.0

–

1,773.7
429.9
$ 5,840.9

LIABILITIES AND

SHAREHOLDERS’ EQUITY

Current liabilities

Short-term debt and current portion of

12.5

11.2

157.6

long-term debt
Accounts payable
Accrued employee costs
Income taxes payable
Other current liabilities

Total current liabilities

Long-term debt
Intercompany borrowings
Employee benefit obligations
Deferred taxes and other liabilities

Total liabilities

Minority interests
Shareholders’ equity

Convertible preferred stock

Preferred shareholders’ equity

Common stock
Retained earnings
Accumulated other comprehensive

earnings (loss)

Treasury stock, at cost

Common shareholders’ equity
Total shareholders’ equity
Total liabilities and

98.3
9.5
19.2
79.1
218.6

1,498.9
(1,069.6)
173.9
123.4
945.2

−

−
−

703.4
1,535.3

(29.5)
(1,043.8)
1,165.4
1,165.4

404.1
137.1
–
91.2
643.6

13.6
1,012.7
272.8
(121.8)
1,820.9

−

−
−

819.7
861.0

(126.4)
−
1,554.3
1,554.3

230.0
54.5
52.6
97.4
592.1

757.9
56.9
401.0
100.5
1,908.4

1.0

179.6
179.6

495.4
48.6

96.7
−
640.7
820.3

−

–
−
–
–
–

–
–
–
–
–

−

(179.6)
(179.6)

(1,315.1)
(909.6)

29.7
−
(2,195.0)
(2,374.6)

181.3

732.4
201.1
71.8
267.7
1,454.3

2,270.4
−
847.7
102.1
4,674.5

1.0

−
−

703.4
1,535.3

(29.5)
(1,043.8)
1,165.4
1,165.4

shareholders’ equity

$ 2,110.6

$ 3,375.2

2,729.7

(2,374.6)

$ 5,840.9

Page 81 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

22. Subsidiary Guarantees of Debt (continued)

CONDENSED, CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2007

Ball

Corporation Subsidiaries

Guarantor Non-Guarantor
Subsidiaries

Eliminating Consolidated
Adjustments

Total

$ 281.3

$ 135.3

163.4

(298.7) $

281.3

($ in millions)

Cash flows from operating activities

Net earnings (loss)
Adjustments to reconcile net earnings

to cash provided by operating
activities:
Depreciation and amortization
Legal settlement
Business consolidation costs
Deferred taxes
Equity earnings of subsidiaries
Other, net
Working capital changes, net
Cash provided by operating

activities

Cash flows from investing activities
Additions to property, plant and

equipment

Investments in and advances to

affiliates

Property insurance proceeds
Other, net

Cash provided by (used in)

investing activities

Cash flows from financing activities

Long-term borrowings
Repayments of long-term borrowings
Change in short-term borrowings
Proceeds from issuances of common

stock

Acquisitions of treasury stock
Common dividends
Other, net

Cash used in financing activities

3.4
–
–
(8.3)
(298.7)
0.8
164.8

179.0
85.6
41.9
13.2
−
(13.3)
(103.6)

98.6
–
0.4
(25.9)
–
(18.4)
(26.5)

143.3

338.1

191.6

(4.2)

91.6
–
(7.4)

80.0

–
(27.5)
6.4

46.5
(257.8)
(40.6)
9.5
(263.5)

(150.8)

(153.5)

(173.8)
–
(1.3)

82.2
48.6
2.8

(325.9)

(19.9)

0.1
(12.7)
–

–
–
–
–
(12.6)

–

(0.4)

2.3

0.2
(34.3)
(102.2)

–
–
–
–
(136.3)

5.3

40.7

38.9

–
–
–
−
298.7
–
–

−

–

–
–
–

–

–
–
–

–
–
–
–
–

–

−

–

−

281.0
85.6
42.3
(21.0)
–
(30.9)
34.7

673.0

(308.5)

−
48.6
(5.9)

(265.8)

0.3
(74.5)
(95.8)

46.5
(257.8)
(40.6)
9.5
(412.4)

5.3

0.1

151.5

151.6

Effect of exchange rate changes on cash

–

Change in cash and cash equivalents

Cash and cash equivalents − beginning

of year

Cash and cash equivalents − end of

(40.2)

110.3

year

70.1

1.9

79.6

Page 82 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

22. Subsidiary Guarantees of Debt (continued)

CONDENSED, CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2006

Ball

Corporation Subsidiaries

Guarantor Non-Guarantor
Subsidiaries

Eliminating Consolidated
Adjustments

Total

$ 329.6

$ 200.6

149.0

(349.6) $

329.6

($ in millions)

Cash flows from operating activities

Net earnings (loss)
Adjustments to reconcile net earnings

to cash provided by operating
activities:
Depreciation and amortization
Property insurance gain
Business consolidation costs
Deferred taxes
Equity earnings of subsidiaries
Other, net
Working capital changes, net
Cash provided by operating

activities

Cash flows from investing activities
Additions to property, plant and

equipment

Business acquisitions, net of cash

acquired

Investments in and advances to

affiliates

Property insurance proceeds
Other, net

Cash provided by (used in)

investing activities

Cash flows from financing activities

Long-term borrowings
Repayments of long-term borrowings
Change in short-term borrowings
Proceeds from issuances of common

stock

Acquisitions of treasury stock
Common dividends
Other, net

Cash provided by (used in)

financing activities

3.3
–
–
1.4
(349.6)
30.8
46.9

160.3
–
–
18.4
−
(45.1)
(69.0)

89.0
(75.5)
34.2
18.4
–
(26.1)
(115.2)

62.4

265.2

73.8

(3.7)

(192.5)

–

(759.6)

(754.1)
–
(1.0)

689.5
–
9.1

(758.8)

(253.5)

949.1
(45.0)
(25.8)

38.4
(84.1)
(41.0)
7.1

0.3
(3.8)
–

–
–
–
(7.6)

(83.4)

(31.5)

64.6
61.3
7.9

18.9

–
(156.2)
48.8

–
–
–
–

798.7

(11.1)

(107.4)

Effect of exchange rate changes on cash

–

Change in cash and cash equivalents

Cash and cash equivalents − beginning

of year

Cash and cash equivalents − end of

102.3

8.0

–

0.6

1.7

2.3

(12.4)

51.3

year

$ 110.3

2.3

38.9

Page 83 of 94

–
–
–
−
349.6
–
–

−

–

–
–
–

–

–
–
–

–
–
–
–

–

−

–

−

252.6
(75.5)
34.2
38.2
–
(40.4)
(137.3)

401.4

(279.6)

(791.1)

−
61.3
16.0

(993.4)

949.4
(205.0)
23.0

38.4
(84.1)
(41.0)
(0.5)

680.2

2.3

90.5

61.0

151.5

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

22. Subsidiary Guarantees of Debt (continued)

CONDENSED, CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2005

Ball

Corporation Subsidiaries

Guarantor Non-Guarantor
Subsidiaries

Eliminating Consolidated
Adjustments

Total

$ 272.1

$ 136.2

132.7

(268.9) $

272.1

3.1
–
(11.3)
(268.9)
30.0
15.3

129.2
19.1
(3.8)
−
(8.4)
5.5

81.2
(0.1)
(36.5)
–
(3.9)
67.3

–
–
−
268.9
–
–

operating activities

40.3

277.8

240.7

($ in millions)

Cash flows from operating activities

Net earnings (loss)
Adjustments to reconcile net earnings

to cash provided by operating
activities:
Depreciation and amortization
Business consolidation costs (gains)
Deferred taxes
Equity earnings of subsidiaries
Other, net
Working capital changes, net
Cash provided by (used in)

Cash flows from investing activities
Additions to property, plant and

equipment

Investments in and advances to

affiliates
Other, net

Cash provided by (used in)

investing activities

Cash flows from financing activities

Long-term borrowings
Repayments of long-term borrowings
Change in short-term borrowings
Proceeds from issuances of common

stock

Acquisitions of treasury stock
Common dividends
Other, net

Cash provided by (used in)

financing activities

(6.4)

(182.9)

(102.4)

683.9
(9.5)

(102.1)
11.3

(581.8)
(0.1)

668.0

(273.7)

(684.3)

60.0
(493.0)
29.0

35.6
(393.7)
(42.5)
(9.5)

0.4
(3.4)
–

–
–
–
–

(814.1)

(3.0)

822.4
(453.3)
39.4

–
–
–
(2.1)

406.4

4.2

(33.0)

84.3

Effect of exchange rate changes on cash

–

Change in cash and cash equivalents

(105.8)

Cash and cash equivalents − beginning

of year

Cash and cash equivalents − end of

113.8

–

1.1

0.6

year

8.0

1.7

51.3

Page 84 of 94

213.5
19.0
(51.6)
–
17.7
88.1

558.8

(291.7)

−
1.7

(290.0)

882.8
(949.7)
68.4

35.6
(393.7)
(42.5)
(11.6)

(410.7)

4.2

(137.7)

198.7

61.0

−

–

–
–

–

–
–
–

–
–
–
–

–

−

–

−

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

23. Contingencies

The company is subject to various risks and uncertainties in the ordinary course of business due, in part, to the
competitive nature of the industries in which we participate, our operations in developing markets, changing
commodity prices for the materials used in the manufacture of our products and changing capital markets. Where
practicable, we attempt to reduce these risks and uncertainties through the establishment of risk management
policies and procedures, including, at times, the use of certain derivative financial instruments.

Pursuant to the merger agreement, a certain portion of the common share consideration issued for the acquisition of
U.S. Can was placed in escrow and was subsequently converted into cash, which remains in escrow. During the
second quarter of 2007, Ball asserted claims against the former shareholders of U.S. Can, and the escrowed cash
will be used to satisfy such claims to the extent they are agreed or sustained. The representative for the former
shareholders of U.S. Can filed a lawsuit against the company in the first quarter of 2008 seeking a declaration of the
parties’ rights and obligations with respect to the claims asserted by the company.

24. Indemnifications and Guarantees

During the normal course of business, the company or the appropriate consolidated direct or indirect subsidiaries
have made certain indemnities, commitments and guarantees under which the specified entity may be required to
make payments in relation to certain transactions. These indemnities, commitments and guarantees include
indemnities to the customers of the subsidiaries in connection with the sales of their packaging and aerospace
products and services; guarantees to suppliers of direct or indirect subsidiaries of the company guaranteeing the
performance of the respective entity under a purchase agreement; indemnities for liabilities associated with the
infringement of third party patents, trademarks or copyrights under various types of agreements; indemnities to
various lessors in connection with facility, equipment, furniture, and other personal property leases for certain
claims arising from such leases; indemnities pursuant to agreements relating to certain joint ventures; indemnities in
connection with the sale of businesses or substantially all of the assets and specified liabilities of businesses; and
indemnities to directors, officers and employees of the company to the extent permitted under the laws of the State
of Indiana and the United States of America. The duration of these indemnities, commitments and guarantees varies,
and in certain cases, is indefinite. In addition, the majority of these indemnities, commitments and guarantees do not
provide for any limitation on the maximum potential future payments the company could be obligated to make. As
such, the company is unable to reasonably estimate its potential exposure under these items. The company has not
recorded any liability for these indemnities, commitments and guarantees in the accompanying consolidated balance
sheets. The company does, however, accrue for payments under promissory notes and other evidences of incurred
indebtedness and for losses for any known contingent liability, including those that may arise from
indemnifications, commitments and guarantees, when future payment is both reasonably determinable and probable.
Finally, the company carries specific and general liability insurance policies and has obtained indemnities,
commitments and guarantees from third party purchasers, sellers and other contracting parties, which the company
believes would, in many circumstances, provide recourse to any claims arising from these indemnifications,
commitments and guarantees.

The company’s senior notes and senior credit facilities are guaranteed on a full, unconditional and joint and several
basis by certain of the company’s wholly owned domestic subsidiaries. Certain foreign denominated tranches of the
senior credit facilities are similarly guaranteed by certain of the company’s wholly owned foreign subsidiaries.
These guarantees are required in support of the notes and credit facilities referred to above, are co-terminous with
the terms of the respective note indentures and credit agreement and would require performance upon certain events
of default referred to in the respective guarantees. The maximum potential amounts that could be required to be paid
under the guarantees are essentially equal to the then outstanding principal and interest under the respective notes
and credit agreement, or under the applicable tranche. The company is not in default under the above notes or credit
facilities.

Page 85 of 94

Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries

24. Indemnifications and Guarantees (continued)

Ball Capital Corp. II is a separate, wholly owned corporate entity created for the purchase of receivables from
certain of the company’s wholly owned subsidiaries. Ball Capital Corp. II’s assets will be available first and
foremost to satisfy the claims of its creditors. The company has provided an undertaking to Ball Capital Corp. II in
support of the sale of receivables to a commercial lender or lenders, which would require performance upon certain
events of default referred to in the undertaking. The maximum potential amount that could be paid is equal to the
outstanding amounts due under the accounts receivable financing (see Note 7). The company, the appropriate
subsidiaries and Ball Capital Corp. II are not in default under the above credit arrangement.

From time to time, the company is subject to claims arising in the ordinary course of business. In the opinion of
management, no such matter, individually or in the aggregate, exists that is expected to have a material adverse
effect on the company’s consolidated results of operations, financial position or cash flows.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There were no matters required to be reported under this item.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to seek to ensure that material information relating to the
company, including its consolidated subsidiaries, is made known to the officers who certify the company’s financial
reports and to other members of senior management and the board of directors. Based on their evaluation as of
December 31, 2007, the chief executive officer and chief financial officer of the company have concluded that the
company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934) were effective.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our
management, including our chief executive officer and chief financial officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting based on the framework in “Internal Control –
Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on our evaluation under the framework in “Internal Control – Integrated Framework,” our management concluded
that our internal control over financial reporting was effective as of December 31, 2007.

The effectiveness of our internal control over financial reporting as of December 31, 2007, has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is
included in Item 8, “Financial Statements and Supplementary Data.”

Changes in Internal Control

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2007,
that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.

Item 9B. Other Information

There were no matters required to be reported under this item.

Page 86 of 94

Item 10. Directors and Executive Officers of the Registrant

The executive officers of the company as of December 31, 2007, were as follows:

Part III

1. R. David Hoover, 62, Chairman, President and Chief Executive Officer since April 2002 and a director since 1996.
Mr. Hoover was President and Chief Executive Officer from January 2001 until April 2002 and Vice Chairman,
President and Chief Operating Officer from April 2000 to January 2001; Vice Chairman, President and Chief
Financial Officer from January 2000 to April 2000; Vice Chairman and Chief Financial Officer, 1998-2000; Executive
Vice President and Chief Financial Officer, 1997-1998; Executive Vice President, Chief Financial Officer and
Treasurer, 1996-1997; Executive Vice President and Chief Financial Officer, 1995-1996; Senior Vice President and
Chief Financial Officer, 1992-1995; Vice President and Treasurer, 1988-1992; Assistant Treasurer, 1987-1988; Vice
President, Finance and Administration, Technical Products, 1985-1987; Vice President, Finance and Administration,
Management Services Division, 1983-1985.

2. Raymond J. Seabrook, 56, Executive Vice President and Chief Financial Officer since April 2006; Senior Vice

President and Chief Financial Officer, April 2000 to April 2006; Senior Vice President, Finance, April 1998 to April
2000; Vice President, Planning and Control, 1996-1998; Vice President and Treasurer, 1992-1996; Senior Vice
President and Chief Financial Officer, Ball Packaging Products Canada, Inc., 1988-1992.

John A. Hayes, 42, Executive Vice President and Chief Operating Officer since January 23, 2008; Senior Vice
President, Ball Corporation, and President, Ball Packaging Europe, April 25, 2007, to January 23, 2008; Vice
President, Ball Corporation, and President, Ball Packaging Europe, March 2006 to April 25, 2007; Executive Vice
President of Ball’s European packaging business, July 2005 to March 2006; Vice President, Corporate Strategy,
Marketing and Development, January 2003 to July 2005; Vice President, Corporate Planning and Development, April
2000 to January 2003; Senior Director, Corporate Planning and Development, February 1999 to April 2000; Vice
President, Mergers and Acquisitions/Corporate Finance, Lehman Brothers, Chicago, Illinois, April 1993 to February
1999.

John R. Friedery, 51, President, Metal Beverage Packaging, Americas and Asia, since January 23, 2008; Senior Vice
President and Chief Operating Officer, North American Packaging, January 2004 to January 23, 2008; President,
Metal Beverage Container, 2000 to January 2004; Senior Vice President, Manufacturing, 1998-2000; Vice President,
Manufacturing, 1996-1998; Plant Manager, 1993-1996; Assistant Plant Manager, 1992-1993; Administrative
Manager, 1991-1992; General Supervisor, 1989-1991; Production Supervisor, 1988-1989.

5. Charles E. Baker, 50, Vice President, General Counsel and Assistant Corporate Secretary since April 2004; Associate
General Counsel, 1999 to April 2004; Senior Director, Business Development, 1995-1999; Director, Corporate
Compliance, 1994-1997; Director, Business Development, 1993-1995.

6. Harold L. Sohn, 61, Senior Vice President, Corporate Relations, since April 25, 2007; Vice President, Corporate

Relations, 1993 to April 25, 2007; Director, Industry Affairs, Packaging Products, 1988-1993.

7. David A. Westerlund, 57, Executive Vice President, Administration since April 2006 and Corporate Secretary since

December 2002; Senior Vice President, Administration, April 1998 to April 2006; Vice President, Administration,
1997-1998; Vice President, Human Resources, 1994-1997; Senior Director, Corporate Human Resources, July 1994-
December 1994; Vice President, Human Resources and Administration, Ball Glass Container Corporation, 1988-
1994; Vice President, Human Resources, Ball-InCon Glass Packaging Corp., 1987-1988.

8. Scott C. Morrison, 45, Vice President and Treasurer since April 2002; Treasurer, September 2000 to April 2002;
Managing Director/Senior Banker of Corporate Banking, Bank One, Indianapolis, Indiana, 1995 to August 2000.

9. Douglas K. Bradford, 50, Vice President and Controller since April 2003; Controller since April 2002; Assistant

Controller, May 1998 to April 2002; Senior Director, Tax Administration, January 1995 to May 1998; Director, Tax
Administration, July 1989 to January 1995.

Page 87 of 94

Other information required by Item 10 appearing under the caption "Director Nominees and Continuing Directors"
and "Section 16(a) Beneficial Ownership Reporting Compliance," of the company’s proxy statement to be filed
pursuant to Regulation 14A within 120 days after December 31, 2007, is incorporated herein by reference.

Item 11. Executive Compensation

The information required by Item 11 appearing under the caption "Executive Compensation" in the company’s
proxy statement, to be filed pursuant to Regulation 14A within 120 days after December 31, 2007, is incorporated
herein by reference. Additionally, the Ball Corporation 2000 Deferred Compensation Company Stock Plan, the Ball
Corporation 2005 Deferred Compensation Company Stock Plan, the Ball Corporation Deposit Share Program and
the Ball Corporation Directors Deposit Share Program were created to encourage key executives and other
participants to acquire a larger equity ownership interest in the company and to increase their interest in the
company’s stock performance. Non-employee directors also participate in the 2000 Deferred Compensation
Company Stock Plan.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information required by Item 12 appearing under the caption "Voting Securities and Principal Shareholders," in
the company’s proxy statement to be filed pursuant to Regulation 14A within 120 days after December 31, 2007, is
incorporated herein by reference.

Securities authorized for issuance under equity compensation plans are summarized below:

Equity Compensation Plan Information

Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
(a)

Weighted-average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)

Number of Securities

Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding Securities
Reflected in Column (a))
(c)

4,747,005

$ 32.06

4,799,707

–

Plan category

Equity compensation plans

approved by security holders
Equity compensation plans not
approved by security holders

Total

4,747,005

$ 32.06

4,799,707

Item 13. Certain Relationships and Related Transactions

The information required by Item 13 appearing under the caption "Ratification of the Appointment of Independent
Registered Public Accounting Firm," in the company’s proxy statement to be filed pursuant to Regulation 14A
within 120 days after December 31, 2007, is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information required by Item 14 appearing under the caption "Certain Committees of the Board," in the
company’s proxy statement to be filed pursuant to Regulation 14A within 120 days after December 31, 2007, is
incorporated herein by reference.

Page 88 of 94

Part IV

Item 15. Exhibits, Financial Statement Schedules

(a)

(1) Financial Statements:

The following documents are included in Part II, Item 8:

Report of independent registered public accounting firm

Consolidated statements of earnings – Years ended December 31, 2007, 2006 and 2005

Consolidated balance sheets – December 31, 2007 and 2006

Consolidated statements of cash flows – Years ended December 31, 2007, 2006 and 2005

Consolidated statements of shareholders’ equity and comprehensive earnings – Years ended December 31,
2007, 2006 and 2005

Notes to consolidated financial statements

(2) Financial Statement Schedules:

Financial statement schedules have been omitted as they are either not applicable, are considered insignificant
or the required information is included in the consolidated financial statements or notes thereto.

(3) Exhibits:

See the Index to Exhibits, which appears at the end of this document and is incorporated by reference herein.

Page 89 of 94

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

BALL CORPORATION
(Registrant)

By:

/s/ R. David Hoover
R. David Hoover
Chairman, President and Chief Executive Officer
February 25, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.

(1)

Principal Executive Officer:

/s/ R. David Hoover
R. David Hoover

Chairman, President and Chief Executive Officer

February 25, 2008

(2)

Principal Financial Accounting Officer:

/s/ Raymond J. Seabrook
Raymond J. Seabrook

Executive Vice President and Chief Financial Officer

February 25, 2008

(3)

Controller:

/s/ Douglas K. Bradford
Douglas K. Bradford

Vice President and Controller
February 25, 2008

(4)

A Majority of the Board of Directors:

/s/ Robert W. Alspaugh
Robert W. Alspaugh

/s/ Howard M. Dean
Howard M. Dean

/s/ Hanno C. Fiedler
Hanno C. Fiedler

/s/ R. David Hoover
R. David Hoover

/s/ John F. Lehman
John F. Lehman

/s/ Georgia R. Nelson
Georgia R. Nelson

/s/ Jan Nicholson
Jan Nicholson

Director
February 25, 2008

Director

February 25, 2008

Director

February 25, 2008

Chairman of the Board and Director

February 25, 2008

Director
February 25, 2008

Director

February 25, 2008

Director

February 25, 2008

Page 90 of 94

/s/ George M. Smart
George M. Smart

/s/ Theodore M. Solso
Theodore M. Solso

/s/ Stuart A. Taylor II
Stuart A. Taylor II

/s/ Erik H. van der Kaay
Erik H. van der Kaay

Director
February 25, 2008

Director

February 25, 2008

Director

February 25, 2008

Director

February 25, 2008

*By R. David Hoover as Attorney-in-Fact pursuant to a Limited Power of Attorney executed by the directors listed
above, which Power of Attorney has been filed with the Securities and Exchange Commission.

BALL CORPORATION
(Registrant)

By:

/s/ R. David Hoover
R. David Hoover
As Attorney-in-Fact
February 25, 2008

Page 91 of 94

Ball Corporation and Subsidiaries
Annual Report on Form 10-K
For the year ended December 31, 2007

Index to Exhibits

Exhibit
Number

Description of Exhibit

2.1

2.2

Share Sale and Transfer Agreement dated August 29/30, 2002, among Schmalbach-Lubeca Holding
GmbH, AV Packaging GmbH, Ball Pan-European Holdings, Inc. and Ball Corporation (filed by
incorporation by reference to Ball Corporation’s Quarterly Report on Form 10-Q for the quarter ended
September 29, 2002) filed November 14, 2002.

Amendment Agreement, dated December 18, 2002, among Schmalbach-Lubeca Holding GmbH, AV
Packaging GmbH, Ball Pan-European Holdings, Inc., Ball Corporation and Ball (Germany) Acquisition
GmbH, amending the Share Sale and Transfer Agreement, dated August 29/30, 2002, among Schmalbach-
Lubeca Holding GmbH, AV Packaging GmbH, Ball Pan-European Holdings, Inc. and Ball Corporation
(filed by incorporation by reference to the Current Report on Form 8-K, dated December 19, 2002) filed
December 31, 2002.

3.i

Amended Articles of Incorporation as of June 24, 2005 (filed by incorporation by reference to the Quarterly
Report on Form 10-Q dated July 3, 2005) filed August 9, 2005.

3.ii

Bylaws of Ball Corporation as amended January 22, 2008. (Filed herewith.)

4.1(a)

Registration Rights Agreement, dated as of December 19, 2002, by and among Ball Corporation, Lehman
Brothers, Inc., Deutsche Bank Securities Inc., Banc of America Securities LLC, Banc One Capital Markets,
Inc., BNP Paribas Securities Corp., Dresdner Kleinwort Wasserstein-Grantchester, Inc., McDonald
Investments Inc., Sun Trust Capital Markets, Inc. and Wells Fargo Brokerage Services, LLC and certain
subsidiary guarantors of Ball Corporation (filed by incorporation by reference to Exhibit 4.1 of the Current
Report on Form 8-K, dated December 19, 2002) filed December 31, 2002.

4.1(b)

Senior Note Indenture, dated as of December 19, 2002, by and among Ball Corporation, certain subsidiary
guarantors of Ball Corporation and The Bank of New York, as Trustee (filed by incorporation by reference
to the Current Report on Form 8-K dated December 19, 2002) filed December 31, 2002.

10.1

10.2

10.3

10.4

10.5

1988 Restricted Stock Plan and 1988 Stock Option and Stock Appreciation Rights Plan (filed by
incorporation by reference to the Form S-8 Registration Statement, No. 33-21506) filed April 27, 1988.

Ball Corporation Deferred Incentive Compensation Plan (filed by incorporation by reference to the Annual
Report on Form 10-K for the year ended December 31, 1987) filed March 25, 1988.

Ball Corporation 1986 Deferred Compensation Plan, as amended July 1, 1994 (filed by incorporation by
reference to the Quarterly Report on Form 10-Q for the quarter ended July 3, 1994) filed August 17, 1994.

Ball Corporation 1988 Deferred Compensation Plan, as amended July 1, 1994 (filed by incorporation by
reference to the Quarterly Report on Form 10-Q for the quarter ended July 3, 1994) filed August 17, 1994.

Ball Corporation 1989 Deferred Compensation Plan, as amended July 1, 1994 (filed by incorporation by
reference to the Quarterly Report on Form 10-Q for the quarter ended July 3, 1994) filed August 17, 1994.

Page 92 of 94

Exhibit
Number

10.6

10.7

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

10.18

10.19

10.20

Description of Exhibit

Amended and Restated Form of Severance Benefit Agreement that exists between the company and its
executive officers, effective as of August 1, 1994, and as amended on January 24, 1996 (filed by
incorporation by reference to the Quarterly Report on Form 10-Q for the quarter ended March 22, 1996)
filed May 15, 1996.

Ball Corporation 1986 Deferred Compensation Plan for Directors, as amended October 27, 1987 (filed by
incorporation by reference to the Annual Report on Form 10-K for the year ended December 31, 1990)
filed April 1, 1991.

1991 Restricted Stock Plan for Nonemployee Directors of Ball Corporation (filed by incorporation by
reference to the Form S-8 Registration Statement, No. 33-40199) filed April 26, 1991.

Ball Corporation Economic Value Added Incentive Compensation Plan dated January 1, 1994 (filed by
incorporation by reference to the Annual Report on Form 10-K for the year ended December 31, 1994)
filed March 29, 1995.

Ball Corporation 1997 Stock Incentive Plan (filed by incorporation by reference to the Form S-8
Registration Statement, No. 333-26361) filed May 1, 1997.

1993 Stock Option Plan (filed by incorporation by reference to the Form S-8 Registration Statement,
No. 33-61986) filed April 30, 1993.

Ball Corporation Supplemental Executive Retirement Plan (filed by incorporation by reference to the
Quarterly Report on Form 10-Q for the quarter ended October 2, 1994) filed November 15, 1994.

Ball Corporation Long-Term Cash Incentive Plan, dated October 25, 1994, amended and restated effective
January 1, 2003 (filed by incorporation by reference to the Annual Report on Form 10-K for the year ended
December 31, 2003) filed March 12, 2004.

Amended and Restated Form of Severance Agreement (Change of Control Agreement) that exists between
the company and its executive officers (filed by incorporation by reference to the Annual Report on
Form 10-K for the year ended December 31, 2005) filed February 22, 2006.

Ball Corporation 2000 Deferred Compensation Company Stock Plan (filed by incorporation by reference to
the Annual Report on Form 10-K for the year ended December 31, 2001) filed March 28, 2002.

Ball Corporation Deposit Share Program, as amended (filed by incorporation by reference to the Quarterly
Report on Form 10-Q for the quarter ended July 4, 2004) filed August 11, 2004.

Ball Corporation Directors Deposit Share Program, as amended. This plan is referred to in Item 11, the
Executive Compensation section of this Form 10-K (filed by incorporation by reference to the Quarterly
Report on Form 10-Q for the quarter ended July 4, 2004) filed August 11, 2004.

Ball Corporation 2005 Deferred Compensation Plan, effective January 1, 2005 (filed by incorporation by
reference to the Current Report on Form 8-K dated December 23, 2005) filed December 23, 2005.

Ball Corporation 2005 Deferred Compensation Company Stock Plan, effective January 1, 2005 (filed by
incorporation by reference to the Current Report on Form 8-K dated December 23, 2005) filed
December 23, 2005.

Ball Corporation 2005 Deferred Compensation Plan for Directors, effective January 1, 2005 (filed by
incorporation by reference to the Current Report on Form 8-K dated December 23, 2005) filed
December 23, 2005.

Page 93 of 94

Exhibit
Number

10.21

Description of Exhibit

Credit agreement dated October 13, 2005, among Ball Corporation, Ball European Holdings S.ar.l., Ball
Packaging Products Canada Corp. and each Other Subsidiary Borrower, Deutsche Bank AG, New York
Branch, as a Lender, Administrative Agent and Collateral Agent and The Bank of Nova Scotia, as the
Canadian Administrative Agent (filed by incorporation by reference to the Current Report on Form 8-K
dated October 17, 2005) filed October 17, 2005.

10.22

Subsidiary Guaranty Agreement dated as of October 13, 2005, among certain Domestic subsidiaries listed
therein as Guarantors, and Deutsche Bank AG, New York Branch, as Administrative Agent (filed by
incorporation by reference to the Current Report on Form 8-K dated October 17, 2005) filed October 17,
2005.

18.1

18.2

99.1

99.2

Statement re: Computation of Earnings per Share (filed by incorporation by reference to the notes to the
consolidated financial statements in Item 8, “Financial Statements and Supplementary Data”).

Statement re: Computation of Ratio of Earnings to Fixed Charges. (Filed herewith.)

Ball Corporation Executive Officers and Board of Directors Business Ethics Statement (filed by
incorporation by reference to the Annual Report on Form 10-K for the year ended December 31, 2005)
filed February 22, 2006.

Letter re: Change in Accounting Principles regarding change in pension plan valuation measurement date
(filed by incorporation by reference to the Annual Report on Form 10-K for the year ended December 31,
2002) filed March 27, 2003.

Letter re: Change in Accounting Principles regarding the change in accounting for certain inventories (filed
by incorporation by reference to the Annual Report on Form 10-K for the year ended December 31, 2006)
filed February 22, 2007.

List of Subsidiaries of Ball Corporation. (Filed herewith.)

Consent of Independent Registered Public Accounting Firm. (Filed herewith.)

Limited Power of Attorney. (Filed herewith.)

Certifications pursuant to Rule 13a-14(a) or Rule 15d-14(a), by R. David Hoover, Chairman of the Board,
President and Chief Executive Officer of Ball Corporation, and by Raymond J. Seabrook, Executive Vice
President and Chief Financial Officer of Ball Corporation. (Filed herewith.)

Certifications pursuant to Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of
the United States Code, by R. David Hoover, Chairman of the Board, President and Chief Executive
Officer of Ball Corporation, and by Raymond J. Seabrook, Executive Vice President and Chief Financial
Officer of Ball Corporation. (Furnished herewith.)

Specimen Certificate of Common Stock (filed by incorporation by reference to the Annual Report on
Form 10-K for the year ended December 31, 1979) filed March 24, 1980.

Cautionary statement for purposes of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995, as amended. (Filed herewith.)

Page 94 of 94

Core Purpose
Ball Corporation is in business to add value to all of its stakeholders, whether it is providing quality products and
services to customers, an attractive return on investment to shareholders, a meaningful work life for employees
or a contribution of time, effort and resources to our communities as we strive to make Ball a more successful
and sustainable enterprise. In all of our interactions, we ask how we can get better – how we can make it better,
be better and do better, for our own good and the good of those who have a stake in our success.

Core Values
Integrity Our reputation for integrity is one of our most important assets. We will not compromise our
integrity or risk damage to our reputation in return for financial gain or for any reason.

Respect We respect our employees, our customers, our suppliers, our shareholders – indeed, all of
our stakeholders. In all of our dealings we strive to show that respect and to treat people with dignity.

Motivation We have a strong desire to be successful and to be measured against the best.

Flexibility We are willing to challenge our own assumptions and adapt to changing circumstances
for the long-term good of the corporation.

Innovation We strive to be creative and innovative in our products, our processes and the way
we conduct business.

Teamwork We operate as a team. Everyone has his or her job, but it takes all of us working together
for the company to succeed.

Five Keys to Success
Close to Customers We have a total commitment to being close to our customers and understanding their
needs and future direction. This commitment extends throughout our organization.

Creativity & Imagination Our employees’ creativity and imagination enable us to deliver innovations in products,
process development and the way we conduct business so we can better serve our customers, grow the company
and increase the value of the enterprise.

Behave Like Owners By behaving as true owners of the business, our employees deliver superior results and
provide the best value in the products and services we supply to our customers.

Attention to Detail By managing our operations with relentless attention to detail we are creating safe workplaces
while building a great business that consistently delivers superior value.

Build on Strengths We intend to build on our heritage of ethics, integrity, quality and value in all our dealings by
treating all stakeholders the way we would like to be treated.

Paper: The cover and front section of this annual report are printed on Forest Stewardship Council-certified Mohawk
Options paper, a process-chlorine-free, 100-percent post-consumer waste paper manufactured entirely using Green-e
certified wind electricity and containing 100-percent post-consumer recycled fiber. The financial section of this report is
printed on FSC-certified Domtar, Opaque Plainfield paper. Both papers are certified by SmartWood for FSC standards.

The FSC trademark identifies paper made from forests that have been certified in accordance with the rules of the
Forest Stewardship Council. FSC trademark © 1996 Forest Stewardship Council A.C. SW-COC-68

Printing: The Hennegan Company has earned FSC Chain-of-Custody certification from the Rainforest Alliance’s
SmartWood program. In addition, this printer uses environmentally friendly, soy-based inks.

are trademarks of Ball Corporation Reg. U.S. Pat. & Tm. Office.

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Ball Corporation
10 Longs Peak Drive
Broomfield, CO 80021
(303) 469-3131
www.ball.com