Exhibit 13.1

Management’s Discussion and Analysis of Financial Condition and Results of Operations
Ball Corporation and Subsidiaries

Ball Corporation and subsidiaries are referred to collectively as “Ball,” “the company,” “we” and “our” in the following discussion and analysis.

Management’s discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes.

Business Overview

Ball Corporation is one of the world’s leading suppliers of metal and plastic packaging to the beverage and food industries. Our packaging products are produced for a variety of end uses and are manufactured in 50 plants around the world. We also supply aerospace and other technologies and services to government and commercial customers.

        We sell our packaging products primarily to major beverage and food producers 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 beverage and food companies in North America, Europe and the People’s Republic of China (PRC). Because of our customer concentration, our business, financial condition and results of operations could be adversely affected by the loss of a major customer or a change in a supply agreement with a major customer, although our long-term customer relationships and contracts mitigate this risk.

        The can manufacturing industry in the U.S. and Canada is relatively mature and industry share is gained or lost among a small group of competitors. Sales and earnings are improved by reducing our costs, developing and enhancing products and increasing pricing where possible. European demand, however, is still expanding, particularly in eastern and southern Europe. We plan to capitalize on this growth by building a new beverage can manufacturing plant in Belgrade, Serbia, which will service these rapidly growing regions.

        Following the acquisition of Ball Packaging Europe in December 2002, our revenues outside of North America now account for more than 20 percent of consolidated net sales. Prior to 2003, revenues and net earnings in the packaging segments were impacted more by weather patterns than by economic changes. However, due to the increase in our European revenues, our consolidated earnings have become more exposed to foreign exchange rate fluctuations. We attempt to mitigate this exposure through the use of derivative financial instruments, as discussed in the “Financial Instruments and Risk Management” section. The acquisition of Ball Packaging Europe also brought another challenge with the German government’s imposition at the beginning of 2003 of a mandatory deposit on most non-refillable beverage containers. The mandatory deposit situation, which is discussed in more detail in the “International Packaging” section, cost Ball Packaging Europe a significant loss of sales in 2003. While we are hopeful this situation will improve in the future, we are doing what we can to adjust in the interim.

        The primary customers for the products and services provided by our aerospace and technologies segment are U.S. government agencies or their prime contractors. These sales represented approximately 96 percent of segment sales in 2003 and 10 percent of Ball’s consolidated net sales. Our government work has increased significantly in recent years and our contracted backlog was at a record year-end level of $644 million at the end of 2003. It is possible that congressional budget reductions or changes in agency budgets could limit future funding and new contract awards.

        We recognize sales under long-term contracts in the aerospace and technologies segment using the cost-to-cost, percentage of completion method. Our contracts typically consist of approximately two-thirds cost-plus contracts, which are billed at our costs plus an agreed upon profit component, and approximately one-third fixed price contracts. 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 generally include amounts that have been earned but not yet billed.

        Management uses various measures to evaluate company performance. Among the financial measures we use are earnings before interest and taxes, or EBIT, earnings per share, return on investment, cost of capital, free cash flow (generally defined by the company as cash flow from operating activities less capital expenditures) and economic value added. Nonfinancial measures in the packaging segments include production spoilage rates, quality control measures and production and shipment volumes. Other 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.

        We recognize that attracting and retaining quality employees is critically important to the success of Ball and, because of this, we work to pay employees competitively and encourage their ownership in the company’s common stock. For most management employees, a portion of compensation is at risk as an incentive, dependent upon operating performance. For more senior positions, more compensation is at risk. Through our employee stock purchase plan and 401(k) plan, which matches employee contributions in Ball common stock, many employees, regardless of organizational level, have additional opportunities to participate as Ball shareholders. In 2004 we are expanding our employee stock purchase program to Ball Packaging Europe employees.

Consolidated Sales and Earnings

Ball’s operations are organized along its product lines and include three segments – North American packaging, international packaging and 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.

North American Packaging

North American packaging consists of operations located in the U.S. and Canada, which manufacture metal container products, used primarily in beverage and food packaging, and PET (polyethylene terephthalate) plastic container products, used principally in beverage packaging. This segment decreased from 84 percent of consolidated net sales in 2002 to 67 percent in 2003 due to the addition of Ball Packaging Europe.

Metal Beverage Container Sales

North American metal beverage container sales, which represented 69 percent of segment sales in 2003, were slightly higher than in 2002. Higher can end volumes related to Ball’s acquisition of Metal Packaging International, Inc. (MPI) in March 2003 (discussed below) were offset by the negative impact of adverse weather conditions in several regions of the country. Based on publicly available industry information, we estimate that shipments for our metal beverage container product line were approximately 31 percent of total U.S. and Canadian shipments in 2003.

        On March 11, 2003, we acquired MPI, a manufacturer of aluminum beverage can ends, for $28 million. MPI produced just over 2 billion beverage can ends per year, primarily for soft drink companies, and had sales of approximately $42 million in 2002. The former MPI plant, which was located in Northglenn, Colorado, was closed during the second quarter of 2003 and the volumes were consolidated into other Ball facilities.

        North American metal beverage container sales increased 3 percent in 2002 compared to 2001, partially as a result of Ball’s agreement with Coors Brewing Company (Coors), effective January 1, 2002, under which substantially all of Coors’ can requirements for its Shenandoah, Virginia, filling location are manufactured at Ball facilities and sold to Coors. Sales under this agreement began in the first quarter of 2002. North American beverage container operating margins were higher as a result of plants operating at or near full capacity coupled with improved sales prices. In mid-December 2001 we ceased production at the Moultrie, Georgia, beverage can plant; its production of one billion cans per year was consolidated into other Ball plants.

        Through Rocky Mountain Metal Container, LLC, a 50/50 joint venture which is accounted for as an equity investment, Ball and Coors operate Coors’ can and end manufacturing facilities in Golden, Colorado. The joint venture supplies Coors with beverage cans and ends for its Golden, Colorado, and Memphis, Tennessee, breweries and supplies ends to its Shenandoah, Virginia, filling location.

Metal Food Container Sales

North American metal food container sales, which comprised 20 percent of segment sales in 2003, were 3 percent higher than 2002 sales. Sales were unfavorably impacted by competitive pricing, wetter than normal weather in the Midwest growing region and by the extended start-up of a new two-piece food can line in our Milwaukee plant. The new line, which can produce over one billion cans per year, became fully operational during the fourth quarter of 2003. This capacity allows our food container plants to accommodate a multi-year contract with Abbot Laboratories’ Ross Products Division, the makers of a broad range of pediatric and adult nutritional products, as well as to convert some existing three-piece can products to two-piece food cans. We estimate our 2003 shipments of 5.8 billion cans to be approximately 17 percent of total U.S. and Canadian metal food container shipments, based on publicly available industry information.

        Metal food container sales in 2002 were essentially flat compared to those in 2001, which were at record levels. Sales in 2002 were affected by a combination of droughts and floods in the U.S., which negatively impacted our fruit and vegetable processor customers, and the lowest salmon pack in the Pacific Northwest in over a decade.

        The company is in purchase negotiations with ConAgra Grocery Products Company (ConAgra) related to the future of Ball Western Can Company, LLC, its 50/50 joint venture with Ball that operates a food can manufacturing plant in Oakdale, California. The joint venture had been scheduled to terminate on December 31, 2003, but has been extended while negotiations continue. The current negotiations contemplate Ball purchasing ConAgra’s interest in Ball Western Can and providing containers to ConAgra’s packaging locations in California under a long-term supply agreement. These negotiations are expected to be completed in the first quarter of 2004.

Plastic Container Sales

Plastic container sales, which accounted for 11 percent of segment sales in 2003, increased 6 percent compared to 2002 sales, which were higher than 2001 sales by 21 percent. The 2003 increase in sales, which are predominantly to water and carbonated soft drink customers, was made possible by the addition of four plastic bottle blow-molding production lines during the latter part of 2002. Competitive pricing pressure and cold and wet weather conditions on the East Coast and in the Midwest contributed to lower than expected sales. In response to the lower than anticipated sales, we reduced production at certain plants, and reduced the work force and idled some of the equipment at our Watertown, Wisconsin, plastic container plant. We estimate our 2003 shipments of 5.5 billion plastic containers to be approximately 8 percent of total U.S. and Canadian plastic container shipments.

        The increase in plastic container sales in 2002 compared to 2001 was driven by growth in production volumes as well as the company’s acquisition of Wis-Pak Plastics, Inc., in December 2001. Overall operating margins also improved as a result of lower energy, freight and warehousing costs, despite higher operating costs and increased freight between plants in the third quarter as a result of extremely low inventory levels.

North American Packaging Segment Earnings

Operating margins in the North American packaging segment were slightly lower in 2003 than in 2002. Operating margins in 2003 were negatively impacted by approximately $11 million of start-up costs associated with the new two-piece food can line in Milwaukee. Additionally, pricing pressures on food cans and plastic containers have eroded margins compared to 2002. Margins were slightly improved through operating efficiencies, lower spoilage and stringent cost management, particularly in our metal beverage container plants. The metal food and plastic container plants will continue to focus on improving segment margins in 2004 through similar cost reduction programs.

        The North American packaging earnings results over the past three years include various restructuring activities, which were undertaken to improve our operations. In February 2003 we announced the closure of our Blytheville, Arkansas, metal food container plant to address decreased demand for three-piece welded cans. The plant was closed in the second quarter of 2003 and its operations were consolidated into our Springdale, Arkansas plant. In connection with the closure, a charge of $1.9 million ($1.2 million after tax) was recorded in the first quarter of 2003, partially offset by a $0.5 million gain on the sale of a Canadian plant that was included in a restructuring charge taken in 2000. The $1.9 million charge included estimated employee costs, decommissioning costs and an impairment charge on related fixed assets.

        In December 2002 Ball announced the relocation of its plastic container office and research and development facility from Georgia to Colorado. In connection with the relocation, we recorded a pretax charge in 2002 of $1.6 million ($1 million after tax) for employee termination and decommissioning costs and impairment of the leasehold improvements. The office relocation was completed in 2003 and the R&D facility relocation is expected to be completed by the end of 2004. The cost of relocating employees is being charged to current period earnings and totaled $2.7 million in 2003.

        In December 2001 we closed our Moultrie, Georgia, beverage can plant to address overcapacity in the North American beverage can industry. A pretax charge of $24.7 million was recorded in 2001 in connection with this closure. A $1.6 million gain was recorded in the fourth quarter of 2003 when the facility was sold for more than the original estimate and final employee costs were less than anticipated.

International Packaging

International packaging includes the production and sale of metal beverage container products manufactured in Europe and Asia as well as plastic containers manufactured and sold in Asia. This segment increased from 3 percent of consolidated net sales in 2002 to 22 percent in 2003 due to the acquisition of Ball Packaging Europe on December 19, 2002.

Europe

Ball Packaging Europe, which represents approximately one-third of the total European metal beverage can manufacturing capacity, has manufacturing plants located in Germany, the United Kingdom, France, the Netherlands and Poland. European sales of $1 billion in 2003 benefited from a strong euro, but were negatively affected by the January 1, 2003, imposition of a mandatory deposit on one-way metal, PET and glass beverage containers (for beer, carbonated soft drinks and water) in Germany, where four of Ball Packaging Europe’s plants are located. While sales volumes to German customers from our European plants were down approximately 2.2 billion cans in 2003 from prior year levels, warm weather conditions in much of Europe and the continued growth in beverage can usage in eastern and southern Europe have helped to increase volumes in other countries. Ball plans to begin construction in 2004 on a new beverage can plant in Belgrade, Serbia, to serve the growing demand for beverage cans in southern and eastern Europe.

        Due to political and legal uncertainties in Germany, no nationwide system for returning the containers was in place at the time the mandatory deposit was imposed and many retailers stopped carrying beverages in non-refillable containers. The situation is not expected to improve until the deposit is eliminated by once again meeting the mandatory refill quotas or until it is resolved by various courts, intervention by the European Union or by the implementation of a nationwide return system. We have responded by reducing beverage can production at our German plants, implementing aggressive cost reduction measures, entering into price increase negotiations and increasing exports from Germany to other European nations. We also closed a plant in the United Kingdom, delayed capital investment projects in France and Poland and are converting one of our steel can production lines in Germany to aluminum in order to facilitate additional can exports.

PRC

Sales in the PRC in 2003 were relatively flat compared to 2002. Earnings before taxes were significantly improved over the prior year due largely to cost reduction initiatives resulting from the business consolidation actions taken in 2001 (discussed below). Sales in the PRC in 2002 were lower than those in 2001 due to the sale of the general line can business and other PRC restructuring efforts that commenced in the second half of 2001. However, operating earnings improved significantly compared to 2001 due to the business consolidation actions begun in mid-2001.

        In June 2001 we announced a plan to exit the general line metal can business in the PRC and to reduce our PRC beverage can manufacturing capacity by closing two plants. A $237.7 million pretax charge ($185 million after tax and minority interest impact) was recorded in connection with this reorganization. As a result of the realization on asset dispositions in excess of estimated realizable values, as well as employee benefit and severance accruals no longer required as some exit activities were completed, we recorded $3.3 million of earnings in the third quarter of 2003, $5.1 million in December 2002 and $5 million in the fourth quarter of 2001 related to the June 2001 charge. The restructuring activities in the PRC have been substantially completed with the liquidation of certain investments and the sale of certain assets still in process at December 31, 2003. See the discussion in Note 4 to the consolidated financial statements for further information regarding the restructuring of our China operations.

Aerospace and Technologies

Sales in the aerospace and technologies segment were 9 percent higher than in 2002, primarily in defense and commercial space operations. The increase is due to a combination of newly awarded contracts and additions to previously awarded contracts. The segment won some large, strategic contracts, delivered a great deal of sophisticated space and defense instrumentation and continued to sharpen its marketing focus. Operating margins also increased compared to 2002 as a result of strong operating performance and program completions. Two key program milestones and completions in 2003 added close to $8 million to sales and operating margins.

        Our customer, DigitalGlobe, Inc., in which we hold an equity investment, was selected for a contract to provide commercial imagery to the National Geospatial-Intelligence Agency and has selected us to provide the spacecraft and imaging camera for this program. Terms of the contract are not final, but we anticipate this will result in a significant contract for the segment. We also have been involved in four different components of the high-profile Mars Exploration Rovers mission.

        Aerospace and technologies sales in 2002 were 17 percent higher than in 2001, primarily in defense and civil space operations. The increase was due to a combination of newly awarded contracts and additions to previously awarded contracts. During 2002 Ball was selected as part of a team to build NASA’s James Webb Space Telescope. The improvement in operating earnings in 2002 was primarily the result of the strong sales, which were driven by growth in our U.S. government business, and by the disposition of two unprofitable aerospace product lines in 2001.

        In the second quarter of 2001, we ceased operations in two commercial developmental product lines in our aerospace and technologies segment for which we recorded a pretax charge of $16 million ($9.7 million after tax). After the sale of one of the exited product lines, a portion of the estimated exit costs were no longer required. As a result, earnings were recorded of $0.2 million in the third quarter of 2003, $2 million in December 2002 and $2.2 million in December 2001. Also in the fourth quarter of 2002, we recorded a $2.5 million after-tax charge to write off an equity investment in an aerospace company.

        Sales to the U.S. government, either directly as a prime contractor or indirectly as a subcontractor, represented approximately 96 percent of segment sales in 2003 and 2002 and 92 percent in 2001. Contracted backlog for the aerospace and technologies segment at December 31, 2003 and 2002, was $644 million and $497 million, respectively. Year-to-year comparisons of backlog are not necessarily indicative of the trend of future operations.

        For additional information regarding the company’s segments, see the summary of business segment information in Note 2 accompanying the consolidated financial statements. The charges recorded for business consolidation activities were based on the estimates of Ball management, actuaries and other independent parties and were developed from information available at the time. Actual outcomes may vary from the estimates, and, as required, changes, if any, have been or will be reflected in current period earnings. Additional details about our business consolidation activities and associated costs are provided in Note 4 accompanying the consolidated financial statements.

Selling and Administrative Expenses

Selling and administrative expenses were $221.6 million, $170.6 million and $145.6 million for 2003, 2002 and 2001, respectively. Approximately $48.1 million of the increase in 2003 compared to 2002 is related to the acquisition of Ball Packaging Europe in December 2002. The additional increase in 2003 is primarily the result of higher employee costs, incentives and higher pension expense, partially offset by lower expenses in the PRC. Included in employee incentive costs was $4.5 million of increased expense associated with the company’s deposit share program, which is discussed in further detail in Note 14 to the consolidated financial statements. In 2003 we reduced our U.S. pension plan long-term asset return assumption from 9 percent to 8.5 percent and our discount rate from 7.5 percent to 6.75 percent. The changes in the return on pension asset and discount rate assumptions, as well as actual asset performance, resulted in approximately $14.8 million higher North American pension expense for the year compared to 2002, most of which was included in cost of sales.

        Higher expenses in 2002 compared to 2001 were largely related to higher employee incentives, increased pension and medical costs and additions to environmental reserves. In addition, 401(k) plan costs previously accounted for as preferred stock dividends under the company’s leveraged employee stock ownership plan that expired at the end of 2001 are included in selling and administrative costs beginning in 2002. Included in employee incentive costs was $4.7 million of higher expense associated with the company’s deposit share program. Pension expense was higher by $3.7 million as a result of the reduction in the U.S. pension plan asset return assumptions to 9 percent.

        For the U.S. pension plans, we intend to maintain our current return on asset assumptions for 2004. Initially, the discount rate in the U.S. will be reduced from 6.75 percent to 6.25 percent. Based on these assumptions and poor plan asset performance in prior years, North American pension expense for 2004 is anticipated to increase approximately $8.3 million compared to 2003, most of which will be included in cost of sales. Pension expense in Europe is expected to increase by $1.4 million, for a consolidated increase of $9.7 million. A further reduction of the plan asset return assumption by one half of a percentage point would result in additional expense of approximately $3.3 million. Additional information regarding the company’s pension plans is provided in Note 13 accompanying the consolidated financial statements.

Interest and Taxes

Interest expense in 2003 includes $15.2 million of costs associated with the early redemption of the company’s 8.25% senior subordinated notes in August 2003. Interest expense in 2002 includes $5.2 million related to the refinancing of the company’s debt in connection with the acquisition of Ball Packaging Europe. Consolidated interest expense before the debt refinancing costs was $125.9 million in 2003, $75.6 million in 2002 and $88.3 million in 2001. The higher expense in 2003 was associated with the higher level of borrowings subsequent to the acquisition of Ball Packaging Europe. The decrease in 2002 from 2001 was primarily the result of lower interest rates and lower borrowings. The company’s consolidated average borrowing rate was 6.1 percent, 6.8 percent and 7.3 percent for the years ended December 31, 2003, 2002 and 2001, respectively.

        Ball’s consolidated effective income tax rate for 2003 decreased to 31.3 percent compared to 35.6 percent in 2002 as a result of a lower consolidated European income tax rate due primarily to lower profits in Germany, reflecting the impact of the refundable mandatory deposit on non-refillable containers imposed on January 1, 2003, and a tax holiday in Poland. Germany has the highest tax rate of the European countries in which Ball has operations. Excluding the effect of business consolidation costs in 2001, Ball’s effective income tax rate was approximately 35 percent for 2001. The tax benefit rate of 8.6 percent on the loss in 2001 was largely the result of nondeductible goodwill as well as unrealized capital losses included in the second quarter 2001 charge for business consolidation costs in the PRC.

Results of Equity Affiliates

Equity in the earnings of affiliates is attributable to our 50 percent ownership in packaging investments in North America and Brazil and, to a lesser extent, an aerospace business and our minority-owned packaging investments in the PRC and, prior to 2003, in Thailand. Earnings were $11.3 million in 2003, $9.3 million in 2002 and $4 million in 2001. The higher earnings in 2003 compared to 2002 were the result of improved earnings in our joint venture in Brazil, offset by lower earnings in our North American packaging joint ventures and our investment in Thailand no longer being accounted for under the equity method beginning in 2003. Our investment in Thailand was reduced from 40 percent to approximately 7 percent in the fourth quarter of 2002 as a result of a sale of a portion of the company’s shares, with minimal financial impact, and dilution by the investment from a new investor. Higher equity in the earnings of affiliates during 2002 compared to 2001 reflected improved earnings from all joint ventures.

New Accounting Pronouncements

For information regarding recent accounting pronouncements, see Note 1 to the consolidated financial statements.

Financial Condition, Liquidity and Capital Resources

Cash flows from operating activities were $364 million in 2003 compared to $452.3 million in 2002 and $320.8 million in 2001. The lower amount generated in 2003 included $138.3 million for the payment in January 2003 of an accrued withholding tax obligation related to the acquisition of Ball Packaging Europe (discussed further below) which was funded by the seller at the time of closing by the inclusion of €131 million of additional cash.

        Management internally uses a free cash flow measure: (1) to evaluate the company’s operating results, (2) for planning purposes, (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 excluded in 2003 is the $138.3 million withholding tax payment liability assumed in the acquisition of Ball Packaging Europe in December 2002 (discussed above). We believe this is not a comparable free cash flow outflow of the company as it was funded by the seller.

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

        Free cash flow in 2003 was better than the forecasted range of $275 million to $300 million. Most of the unanticipated free cash flow came late in the fourth quarter as more customers took advantage of cash discounts for early payment of receivables, fixed asset spending levels were slightly lower than expected and strong year-end sales coupled with planned production curtailments significantly reduced inventory levels at the end of 2003. Receivables collections were also strong in the aerospace and technologies segment due in part to the efforts to collect payment on large invoices. Cash flow in 2003 also included higher earnings, lower accounts receivable and lower inventories but were offset by lower accounts payable. The increase in 2002 from 2001 includes the working capital effects of higher accrued employee incentive costs, higher taxes currently payable and higher year-end trade accounts payable. The cash outflow for the acquisition of Ball Packaging Europe in 2002 is net of acquired cash of approximately $145.4 million, which includes approximately €131 million for an accrued withholding tax obligation paid out in early January 2003.

        Capital spending of $137.2 million in 2003 was well below depreciation and amortization expense of $205.5 million. Capital spending was lower than expected in 2003, due in part to the delay of projects in Europe in response to the mandatory deposit situation in Germany.

        Based on information currently available, we estimate cash flows from operating activities for 2004 to be between $450 and $500 million, capital spending to be between $175 and $200 million and free cash flow to be between $275 and $300 million. The majority of the increase in capital spending in 2004 compared to 2003 is for the construction of a new beverage can manufacturing plant in Belgrade, Serbia.

        Cash payments required for debt maturities, rental payments under noncancellable operating leases and purchasing obligations in effect at December 31, 2003, are summarized in the following table:

        Contributions to the company’s defined benefit pension plans, not including the unfunded German plans, are expected to be between $35 million and $40 million in 2004. This estimate may change based on plan asset performance.

        Interest-bearing debt at December 31, 2003, decreased $294.1 million to $1,686.9 million from $1,981 million at year-end 2002, and current liabilities, excluding current portion of debt, decreased by $188.4 million from the prior year. A portion of this debt reduction resulted in a $222.7 million reduction in cash and cash equivalents. The $294.1 million reduction in interest-bearing debt includes the net repayment of approximately $394 million of debt, partially offset by the non-cash translation exchange loss on the balance sheet due to the stronger euro and British pound. Cash at December 31, 2002, was unusually high due to cash included in the opening balance sheet of Ball Packaging Europe.

        At December 31, 2003, approximately $404 million was available under the revolving credit facility portions of the multi-currency senior credit facilities. The company also had $179.6 million of short-term uncommitted credit facilities available at the end of the year, of which $39.3 million was outstanding.

        During the fourth quarter of 2003, Ball repaid $160 million of the U.S. dollar denominated Term Loan B and €25 million of the euro denominated Term Loan B. At the time of the early repayment, the interest rate on the U.S. portion of the Term Loan B was reduced by 50 basis points. A pretax charge of $2.9 million ($1.9 million after tax) was recorded as interest expense during the fourth quarter of 2003, which represents the write off of the unamortized deferred financing costs associated with the repaid portion of the Term B loans. We anticipate that future cash flows will allow us to continue to pay down debt and reduce our overall borrowings.

        On August 8, 2003, Ball refinanced its 8.25% Senior Subordinated Notes through the private placement of $250 million of its 6.875% Senior Notes due 2012 at a price of 102% of the principal amount. The 6.875% interest rate on the notes will be offset by the amortization over the life of the notes of the $5 million issue premium paid to Ball on the issuance of the notes, resulting in an effective yield to maturity of 6.58% for the new notes. In connection with the refinancing of the higher interest debt, in the third quarter of 2003, a pretax charge of $15.2 million ($9.9 million after tax) was recorded as interest expense, which consisted of the payment of a $10.3 million call premium and the write off of $4.9 million of unamortized deferred financing costs.

        In 2003 the company exchanged the Senior Notes due 2012 for new notes that are substantially the same in all respects (including principal amount, interest rate, maturity, ranking and covenant restrictions) to the terms of the notes for which they were exchanged, except that the new notes are registered under the Securities Act of 1933, as amended, and therefore are not subject to certain restrictions on transfer which applied to the previous privately placed notes.

        In connection with the acquisition of Ball Packaging Europe, we refinanced approximately $389 million of our existing debt and, as a result, recorded in 2002 a pretax charge of $5.2 million ($3.2 million after tax). This charge, which represented the write off of unamortized deferred financing costs, has been reported as a component of interest expense.

        The company has a receivables sales agreement which provides for the ongoing, revolving sale of a designated pool of trade accounts receivable of Ball’s North American packaging operations, up to $175 million. The agreement qualifies as off-balance sheet financing under the provisions of Statement of Financial Accounting Standards (SFAS) No. 140. Net funds received from the sale of the accounts receivable totaled $175 million and $122.5 million at December 31, 2003 and 2002, 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, 2003, 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 5 and 10, respectively, accompanying the consolidated financial statements.

        Annual cash dividends paid on common stock were 48 cents per share in 2003, 36 cents per share in 2002 and 30 cents per share in 2001. Ball increased its dividends for the third and fourth quarters of 2003 from nine to fifteen cents per share. This change resulted in $6.4 million of higher dividend payments in 2003 than in 2002.

Financial Instruments and Risk Management

In the ordinary course of business, we employ established risk management policies and procedures to reduce our exposure to commodity price changes, changes in interest rates, fluctuations in foreign currencies and fluctuations in prices of the company’s common stock in regard to common share repurchases. Although the instruments utilized involve varying degrees of credit and interest risk, the counter parties to the agreements are financial institutions, which 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 a derivative instrument assuming a hypothetical 10 percent adverse change in market prices or rates. The results of the sensitivity analysis are summarized below. Actual changes in market prices or rates may differ from hypothetical changes.

Commodity Price Risk

We manage our commodity price risk in connection with market price fluctuations of aluminum primarily by entering into can and end sales contracts, which include aluminum-based pricing terms that consider price fluctuations under our commercial supply contracts for aluminum purchases. The terms include a fixed price or an upper limit to the aluminum component pricing. This matched pricing affects substantially all of our North American metal beverage packaging net sales. We also, at times, use certain derivative instruments such as option and forward contracts as cash flow hedges of commodity price risk that are matched to sales contract terms.

        North American steel can sales contracts incorporate annually negotiated metal costs, and plastic container sales contracts include provisions to pass through resin cost changes. As a result, we believe we have minimal, if any, exposure related to changes in the costs of these commodities.

        In Europe and Asia the company manages the aluminum and steel raw material commodity price risks through annual contracts for the purchase of the materials, as well as the sale of cans and ends, 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. The company additionally uses forward and option contracts as cash flow hedges to manage future aluminum price risk and foreign exchange exposures to those sales contracts where there is not a pass through arrangement to minimize the company’s exposure to significant price changes.

        Considering the effects of derivative instruments, the market’s ability to accept price increases and the company’s commodity price exposures to aluminum, a hypothetical 10 percent adverse change in the company’s aluminum prices could have an estimated $9.3 million after-tax reduction of net earnings over a one-year period. Actual results may vary based on actual changes in market prices and rates.

        The company is also exposed to fluctuations in prices for utilities such as natural gas and electricity. A hypothetical 10 percent increase in our utility prices could have an estimated $4 million after-tax reduction of net earnings over a one-year period. Actual results may vary based on actual changes in market prices and rates.

Interest Rate Risk

Our objective in managing exposure to interest rate changes is to limit 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 to manage our mix of floating and fixed-rate debt. Interest rate instruments held by the company at December 31, 2003 and 2002, included pay-floating and pay-fixed interest rate swaps. Pay-fixed swaps effectively convert variable rate obligations to fixed rate instruments. Pay-floating swaps effectively convert fixed-rate obligations to variable rate instruments. Swap agreements expire at various times up to three years.

        Based on our interest rate exposure at December 31, 2003, assumed floating rate debt levels throughout 2004 and the effects of derivative instruments, a 100 basis point increase in interest rates could have an estimated $5.2 million after-tax reduction of 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 associated with foreign 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 and Chinese renminbi. We face currency exposures in our global operations as a result of purchasing raw materials in U.S. dollars. 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, 2003, and the currency exposures, a hypothetical 10 percent reduction in foreign currency exchange rates compared to the U.S. dollar could have an estimated $13.4 million after-tax reduction of net earnings over a one-year period if the company is unable to pass along these increases to its customers. 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 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. The put option contracts allow us to determine the method of settlement, either in cash or shares. As such, prior to the adoption of SFAS No. 150 during the second quarter of 2003, the contracts were considered equity instruments and changes in the fair value were not recognized in our financial statements. Since the adoption of this accounting standard, which is required on a prospective basis, changes in the fair value are recognized in our net earnings. The impact on the 2003 consolidated financial statements since the adoption of SFAS No. 150 was not significant. There were no put option contracts outstanding at December 31, 2003. At December 31, 2002, there were put option contracts outstanding for 100,000 shares at an average price of $46.50 per share, all of which expired without value during 2003. During 2002 we received $0.7 million in premiums for option contracts, which were recorded as a reduction in treasury stock.

        In 2001 we entered into a forward share repurchase agreement to purchase shares of the company’s common stock. Under this agreement, we purchased 736,800 shares in January 2002 an average price of $33.58 per share; 313,400 shares in April 2002 at an average price of $38.95 per share; 195,600 shares in July 2002 at an average price of $45.49 per share and 189,900 shares in December 2002 at an average price of $45.67 per share.

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 above.

        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 for a summary of the company’s critical and significant accounting policies.

        The U.S. economy and the company 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.

Forward-Looking Statements

The company has made or implied certain forward-looking statements in this annual report which are made as of the end of the period covered by this report. These forward-looking statements represent the company’s goals and 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 and demand, particularly during the months when the demand for metal beverage cans is heaviest; product introductions; insufficient production capacity; overcapacity in foreign and domestic metal and plastic container industry production facilities and its impact on pricing and financial results; lack of productivity improvement or production cost reductions; the weather; fruit, vegetable and fishing yields; power and natural resource costs; difficulty in obtaining supplies and energy, such as gas and electric power; shortages in and pricing of raw materials, particularly resin, steel and aluminum 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; loss of profitability and plant closures; insufficient or reduced cash flow; transportation costs; the number and timing of the purchases of the company’s common shares; the ability to obtain adequate credit resources for foreseeable financing requirements of the company’s businesses and to satisfy the resulting credit obligations; regulatory action or federal and state legislation including mandated corporate governance and financial reporting laws; the German mandatory deposit or other restrictive packaging legislation such as recycling laws; environmental and workplace safety regulations; increases in interest rates, particularly on floating rate debt of the company; labor strikes; increases and trends in various employee benefits and labor costs, including pension, medical and health care costs incurred in the countries in which Ball has operations; 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; litigation; antitrust, intellectual property, consumer and other issues; maintenance and capital expenditures; goodwill or other intangible asset impairment; the effect of LIFO accounting on earnings; changes in U.S. generally accepted accounting principles or their interpretation; local economic conditions; the authorization, funding and availability of contracts for the aerospace and technologies segment and the nature and continuation of those contracts and related services provided thereunder; technical uncertainty and schedule of performance associated with such segment contracts; the ability to invoice and collect accounts receivable related to such segment contracts in the ordinary course of business; pricing and ability or inability to sell scrap associated with the production of metal and plastic containers; international business and market risks (including foreign exchange rates and tax rates) in the United States, Europe and particularly in developing countries such as China and Brazil; foreign exchange rates of the U.S. dollar, European euro, British pound, Polish zloty, Hong Kong dollar, Canadian dollar, Chinese renminbi and Brazilian real; terrorist activity or war that disrupts the company’s production, supply, or pricing of the company’s good and services, including raw materials and energy costs, and/or disrupts the ability of the company to obtain adequate credit resources for the foreseeable financing requirements of the company’s businesses; and successful or unsuccessful acquisitions, joint ventures or divestitures and the integration activities associated therewith, including the integration and operation of Ball Packaging Europe. 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 at quarterly or annual earnings reports. You are advised, however, to consult any further disclosures we make on related subjects in our 10-Q, 8-K and 10-K reports to the Securities and Exchange Commission.

Report of Management on Financial Statements

The consolidated financial statements contained in this annual report to shareholders are the responsibility of management. These financial statements have been prepared in conformity with U.S. generally accepted accounting principles and, necessarily, include certain amounts based on management’s informed judgments and estimates. Future events could affect these judgments and estimates.

        In fulfilling its responsibility for the integrity of financial information, management maintains and relies upon a system of internal controls which is designed to provide reasonable assurance that assets are safeguarded from unauthorized use or disposition, that transactions are executed in accordance with management’s authorization and that transactions are properly recorded to permit the preparation of reliable financial statements in all material respects. To assure the continuing effectiveness of the system of internal controls and to maintain a climate in which such controls can be effective, management establishes and communicates appropriate written policies and procedures; selects, trains and develops qualified personnel; maintains an organizational structure that provides defined lines of responsibility, appropriate delegation of authority and segregation of duties; and maintains an ongoing program of internal audits with appropriate management follow-up. Company policies concerning use of corporate assets and conflicts of interest, which require employees to maintain the highest ethical and legal standards in their conduct of the company’s business, are important elements of the internal control system.

        The board of directors oversees management’s administration of company reporting practices, internal controls and the preparation of the consolidated financial statements with the assistance of its audit committee, which is subject to regulation by the Securities and Exchange Commission and the New York Stock Exchange (the Exchange). The board of directors has adopted an audit committee charter that governs the work of the audit committee and is structured to meet the requirements of the Exchange.

R. David Hoover                                                                                              Raymond J. Seabrook
Chairman, president and chief executive officer                                            Senior vice president and chief financial officer

Report of Independent Accountants

To the Board of Directors and Shareholders
Ball Corporation

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, of cash flows and of shareholders’ equity and comprehensive earnings present fairly, in all material respects, the financial position of Ball Corporation and its subsidiaries at December 31, 2003, and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes 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. We believe that our audits provide a reasonable basis for our opinion.

        As discussed in Note 13 to the consolidated financial statements, the Company changed the measurement date for determining the fair value of pension plan assets and plan obligations in 2002 from September 30 to December 31.

PricewaterhouseCoopers LLP
Denver, Colorado
February 23, 2004

Consolidated Statements of Earnings

Ball Corporation and Subsidiaries

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

Consolidated Balance Sheets

Ball Corporation and Subsidiaries

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

Consolidated Statements of Cash Flows

Ball Corporation and Subsidiaries

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

Consolidated Statements of Shareholders’ Equity and Comprehensive Earnings

Ball Corporation and Subsidiaries

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

Notes to Consolidated Financial Statements

Ball Corporation and Subsidiaries

1.    Significant and Critical Accounting Policies

In the application of U.S. generally accepted accounting principles, 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 they are most important to the depiction of the company’s financial condition and results of operations, and their application requires management’s most subjective 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 financial statements.

Revenue Recognition in the Aerospace and Technologies Segment

Sales under long-term contracts in the aerospace and technologies segment are recognized under the cost-to-cost, percentage-of-completion method. This segment records sales using two types of long-term sales contracts – cost-plus sales contracts, which typically represent approximately two-thirds of our contracts, and fixed price sales contracts, which typically represent one-third of our contracts. A cost-plus sales contract is an agreement to perform the contract for cost plus an agreed upon profit component, whereas a fixed price sales contract is an agreement to complete the contract for a fixed price. Cost-plus sales contracts can have different types of fee arrangements, including fixed fee, cost, schedule 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 set at or near the lowest probable level of profit. 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. Our history indicates that the final adjustments made upon completion of our sales contracts have generally resulted in gains. 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.

Defined Benefit Pension Plans and Other Employee Benefits

The company has defined benefit plans that cover the majority of its employees, including those at Ball Packaging Europe, for which we assumed a portion of the assets and liabilities of the former Schmalbach-Lubeca GmbH Pension Plan when we acquired Ball Packaging Europe in December 2002. We also have postretirement plans that provide medical benefits and life insurance for retirees and eligible dependents. The accounting for these plans is subject to the guidance provided in Statement of Financial Accounting Standards (SFAS) No. 87, “Employers Accounting for Pensions,” and SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other than Pensions.” Both of 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 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 these assumptions.

        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.

        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, third party actuarial estimates and current employee statistics.

Goodwill and Other Intangible Asset Valuation

We evaluate the carrying value of goodwill and other indefinite-lived intangible assets 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. Significant judgments and assumptions are required in the evaluation of intangible assets for impairment, most significantly the estimated future cash flows to be generated by these assets. Changes in these estimates could have a material adverse effect on the assessment of our goodwill and other intangible assets, thereby requiring us to write down the assets.

Taxes on Income

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. Deferred tax assets and operating loss, capital loss and tax credit carryforwards 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.

Business Consolidation Costs

The company estimates its liabilities for business consolidation activities, which are approved by senior management, 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 and related benefits, impairment of property and equipment and other assets, including estimates of realizable value, contract termination payments for 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 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.

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). Investments in 20 percent through 50 percent-owned affiliates are accounted for by the equity method where Ball does not control, but exercises significant influence over, operating and financial affairs. Otherwise, investments are included at cost. Significant intercompany transactions are eliminated. The results of subsidiaries and equity affiliates in Asia are reflected in the consolidated financial statements on a one-month lag.

Reclassifications

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

Foreign Currency Translation

Assets and liabilities of foreign operations, where the local currency is the functional currency, 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 loss as a component of shareholders’ equity.

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.

Cash Equivalents

Cash equivalents have original maturities of three months or less.

Derivative Financial Instruments

The company uses derivative financial instruments for the purpose of hedging exposures to fluctuations in interest rates, foreign currency exchange rates, raw materials purchasing and common share repurchases. The company’s derivative instruments are recorded in the consolidated balance sheet 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, the effective portion of the derivative’s gain or loss is initially reported as a component of accumulated other comprehensive loss and subsequently reclassified into earnings when the forecasted transaction affects earnings. The ineffective portion of the gain or loss associated with a cash flow hedge is reported in earnings immediately.

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

Inventories

Inventories are stated at the lower of cost or market. The cost of the aluminum component of U.S. metal beverage container inventories and substantially all inventories within the U.S. metal food container business is determined using the last-in, first-out (LIFO) method of accounting. The cost of remaining inventories is determined using the first-in, first-out (FIFO) method or acquisition cost.

Depreciation and Amortization

Depreciation and amortization is provided using the straight-line method in amounts sufficient to amortize the cost of the assets over their estimated useful lives (buildings and improvements – 15 to 40 years; machinery and equipment – 5 to 15 years; other intangible assets – approximately 6.5 years, weighted average). Through the end of 2001, goodwill was amortized using the straight-line method over 40 years. However, in accordance with SFAS No. 142 (discussed further in the “New Accounting Pronouncements” section) beginning on January 1, 2002, goodwill is no longer amortized. See Note 8 for a table summarizing pro forma net earnings and the per share impact if goodwill had not been amortized in 2001. The company evaluates long-lived assets, including goodwill and other intangible assets, in accordance with the guidelines of SFAS No. 142 and SFAS No. 144 (discussed further in the “New Accounting Pronouncements” section).

        Deferred financing costs are amortized over the terms of the related facilities and the associated expense is 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 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.

Employee Stock Ownership Plan

On December 14, 2001, Ball’s Employee Stock Ownership Plan (ESOP) trust paid the remaining balance of the ESOP loan. At that time, the company discontinued matching the ESOP participants’ contributions to the 401(k). All of the preferred shares were converted into the company’s common shares and distributed to the participants. Prior to that date, the cost of the ESOP was recorded using the shares allocated transitional method under which the annual pretax cost of the ESOP, including preferred dividends, approximated program funding. Compensation and interest components of ESOP cost were included in net earnings and preferred dividends, net of related tax benefits, were shown as a reduction from net earnings.

Earnings Per Share

Basic earnings per share are computed by dividing the net earnings attributable to common shareholders by the weighted average number of common shares outstanding for the period. Shares converted under the ESOP plan are included after December 14, 2001. Diluted earnings per share reflect the potential dilution that could occur if outstanding dilutive stock options were exercised, and prior to final repayment of the ESOP loan by the trust, also included the assumed conversion of the Series B ESOP Convertible Preferred Stock into additional outstanding common shares as well as the related earnings adjustment.

Stock-Based Compensation

Ball has a variety of restricted stock and stock option plans. With the exception of the company’s deposit share program, which is accounted for as a variable plan and is discussed in Note 14, the compensation cost associated with restricted stock grants is calculated using the fair value at the date of grant and amortized over the restriction period. Expense related to stock options is calculated using the intrinsic value method under the guidelines of Accounting Principles Board (APB) Opinion No. 25, and is therefore not included in the consolidated statements of earnings. Ball’s earnings as reported include after-tax stock-based compensation of $7.6 million, $4.2 million and $2.4 million for the years ended December 31, 2003, 2002 and 2001, respectively. If the fair value based method had been used, after-tax stock-based compensation would have been $8.8 million in 2003, $8 million in 2002 and $6 million in 2001, and diluted earnings per share would have been lower by $0.02, $0.07 and $0.07 for the same three periods, respectively. Further details regarding the expense calculated under the fair value based method are provided in Note 14.

New Accounting Pronouncements

On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Act) was signed into law. The Act expanded Medicare to include, for the first time, coverage for prescription drugs. Ball expects that this legislation may eventually reduce the company’s costs for its retiree medical programs. As permitted in Financial Accounting Standards Board (FASB) Staff Position FAS 106-1, Ball has elected to defer financial recognition of this legislation until the FASB issues final accounting guidance and various governmental and regulatory agencies provide the requirements that must be met to obtain these cost reductions, as well as the manner in which such savings should be measured. Final guidance could require the retroactive restatement of previously reported information.

        In December 2003 the FASB issued a revision of SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits”. This statement, which replaces the original SFAS No. 132, retains the original disclosures contained in the original pronouncement while requiring additional disclosures about plan assets, investment strategy, measurement date, plan obligations, cash flows and components of net periodic benefit cost recognized during interim periods. The statement is effective for Ball as of year-end 2003 and the new disclosures have been included in Note 13.

        In May 2003 the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” This statement requires that certain financial instruments previously classified as equity be classified as liabilities or, in some cases, as assets. Prior to adoption of the standard during the second quarter of 2003, Ball accounted for premiums received on written put option contracts on its common shares as a reduction of equity because the company had the option to settle in either shares or cash. Upon adoption of this standard, which was done on a prospective basis, we now account for these premiums in the overall determination of fair market value of such contracts. The adoption of SFAS No. 150 did not have a significant effect on Ball’s consolidated financial statements in 2003.

        In April 2003 the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This statement amends and clarifies financial accounting and reporting for derivative instruments and for hedging activities under SFAS No. 133. In general the statement was effective for Ball on a prospective basis for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after that date. Adopting this standard had no effect on Ball’s 2003 financial statements.

        In January 2003 the FASB issued Interpretation No. (FIN) 46, “Consolidation of Variable Interest Entities,” which it revised in December 2003. FIN 46 and the revision address the consolidation of entities if they possess certain characteristics. The adoption of this standard, which was effective for Ball in 2003, did not have a significant impact on Ball’s 2003 financial statements.

        In December 2002 the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure, an Amendment of FASB Statement No. 123.” SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition the statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. This statement became effective for Ball at the end of 2002. The company is not adopting the voluntary accounting changes of SFAS No. 123. See Note 14 for the required disclosures under SFAS Nos. 123 and 148.

        In May 2002 the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, amendment of FASB Statement No. 13, and Technical Corrections as of April 2002.” This statement affects Ball primarily in its rescission of SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt,” which required all such gains and losses be reported as extraordinary items. Under SFAS No. 145, these items are to be reported as extraordinary items only if they meet the requirements established under APB Opinion No. 30. This statement became effective for Ball on January 1, 2003, and requires that amounts previously reported as extraordinary items be reevaluated in accordance with APB No. 30 and reclassified as appropriate. In its 2002 annual report, Ball originally reported a $3.2 million after-tax charge for early debt extinguishment as an extraordinary item. This charge has been reclassified for comparative purposes under the guidelines of SFAS No. 145 to reflect $5.2 million more interest expense and a $2 million lower provision for income taxes in the fourth quarter of 2002 than was previously reported.

        The FASB issued SFAS No. 141, “Business Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires that the purchase method be used for business combinations. Its provisions became effective for acquisitions after June 30, 2001. SFAS No. 142 establishes accounting guidelines for intangible assets acquired outside of a business combination. It also addresses how goodwill and other intangible assets are to be accounted for after initial recognition in the financial statements. In general goodwill and certain intangible assets are no longer amortized but are tested periodically for impairment. Resulting write-downs, if any, are recognized in the statement of earnings. The adoption of this statement on January 1, 2002, did not result in any impairment charges.

2.    Business Segment Information

Ball’s operations are organized and reviewed by management along its product lines in three reportable segments – North American packaging, international packaging and aerospace and technologies. We have investments in all three segments that are accounted for under the equity method of accounting, and, accordingly, those results are not included in segment sales or earnings. The accounting policies of the segments are the same as those described in the summary of significant and critical accounting policies. See Notes 3 and 4 for information regarding transactions affecting segment results.

North American Packaging

North American packaging consists of operations in the U.S. and Canada, which manufacture metal and PET (polyethylene terephthalate) plastic containers, primarily for use in beverage and food packaging.

International Packaging

International packaging, with operations in several countries in Europe and the People’s Republic of China (PRC), includes the manufacture and sale of metal beverage container products in Europe and Asia, as well as plastic containers in Asia.

Aerospace and Technologies

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

Major Customers

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

Financial data segmented by geographic area are provided below.

Summary of Net Sales by Geographic Area

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

Summary of Business by Segment

(a)     Includes the following business consolidation gains (costs):

3.    Acquisitions

Metal Packaging International (MPI)

On March 11, 2003, Ball acquired MPI, a manufacturer of aluminum beverage can ends, for $28 million. MPI produced just over 2 billion ends per year, primarily for soft drink companies, and had sales of approximately $42 million in 2002. The MPI plant, which had approximately 100 employees and was located in Northglenn, Colorado, was closed during the second quarter of 2003 and the volumes were consolidated into other Ball facilities. A liability of $1.6 million was recorded in the opening balance sheet for the plant closing costs, including $1.1 million for employee related costs and $0.5 million for decommissioning costs. Payments related to the liability totaled $1.1 million through December 31, 2003. The acquisition of MPI is not significant to the North American packaging segment.

Ball Packaging Europe

On December 19, 2002, Ball acquired 100 percent of the outstanding shares of Schmalbach-Lubeca GmbH (a European beverage can manufacturer) for an initial purchase price of €922.3 million at closing (approximately $948 million), plus acquisition costs of $11.6 million, refinancing costs of $28.1 million and the assumption of approximately $20 million of debt and approximately $145 million of cash. The company also assumed approximately $300 million of ongoing pension liabilities. In addition, at closing Ball assumed a €131 million withholding tax liability ($138.3 million at the time of payment), which was paid in January 2003 with cash provided by the seller at the time of the acquisition. The final purchase price was reduced in 2003 by $39.8 million for working capital and other purchase price adjustments, including the final valuation of pension liabilities.

        The acquisition has been accounted for as a purchase, and accordingly, its results have been included in our consolidated financial statements effective from December 19, 2002. With this acquisition, now known as Ball Packaging Europe, we expanded our presence in the global beverage container market, enhanced our customer base and gained entry into the growing European market.

        Ball Packaging Europe and its operations consist of nine beverage can plants and two beverage can end plants, a technical center in Bonn, Germany, and an office in Ratingen, Germany. Of the 11 plants, four are located in Germany, three in the United Kingdom, two in France and one each in the Netherlands and Poland. Ball Packaging Europe closed its plant in Runcorn, England, at the end of December 2003. The cost of the plant closure, along with costs associated with a line conversion and a line shut down at other plants, estimated to be €11.9 million in total, has been accounted for in the opening acquisition balance sheet. These costs include €8.7 million for employee termination costs and €3.2 million for decommissioning costs, of which €2.7 million were paid during 2003.

        Following is a summary of the net assets acquired:

        Ball Packaging Europe’s customer relationships were identified as a valuable intangible asset by an independent valuation firm and assigned a fair value of €50.6 million (approximately $52 million). This intangible asset is being amortized over seven years. Goodwill related to Ball Packaging Europe is included in the international packaging segment. Both goodwill and the intangible asset are nondeductible under European local country corporate tax laws but will generally be deductible in computing earnings and profits for U.S. tax purposes.

        Subsequent increases in actual costs, if any, will be included in current period earnings, and decreases, if any, will result in a further reduction of goodwill.

        The following unaudited pro forma consolidated results of operations have been prepared as if the acquisition 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 acquisition been in effect for the periods presented, nor are they necessarily indicative of the results that may be obtained in the future.

        Pro forma adjustments primarily include the after-tax effect of increased interest expense related to incremental borrowings used to finance the acquisition. The adjustments also include the after-tax effects of amortization of the customer relationship intangible asset and decreased depreciation expense on plant and equipment based on extended useful lives partially offset by increased fair values.

Wis-Pak Plastics

On December 28, 2001, Ball acquired substantially all of the assets of Wis-Pak Plastics, Inc. (Wis-Pak) for approximately $27 million. Additional payments of up to $10 million in total, plus interest, are contingent upon the future performance of the acquired business through 2006. Approximately $4.9 million of these contingent payments, including interest, which have been paid or were payable at the end of 2003, are reflected as an increase in goodwill in the consolidated balance sheet. Under the acquisition agreement, Ball entered into a ten-year agreement to supply 100 percent of Wis-Pak’s annual PET container requirements, which are currently 550 million containers. The company closed one of the two acquired plants during 2002; the after-tax cash costs associated with this closure were approximately $1 million and were substantially paid by the end of 2002. The acquisition is not significant to the North American packaging segment’s financial statements.

4.    Business Consolidation Costs

North American Packaging

2003

In December 2003 Ball completed the sale of the Moultrie, Georgia, facility that was closed in December 2001. A gain of $1.6 million was recorded in connection with this sale and the completion of the Moultrie consolidation activities. In February 2003 Ball announced plans to close its Blytheville, Arkansas, metal food container plant to address decreased demand for three-piece welded cans. In connection with the closure, a charge of $1.9 million ($1.2 million after tax), partially offset by a $0.5 million gain ($0.3 million after tax) on the sale of a Canadian plant that was included in a restructuring charge taken in 2000, was recorded in the first quarter of 2003. The Blytheville plant was closed during the second quarter of 2003 and its operations were consolidated into the Springdale, Arkansas, plant. The remaining actions are expected to be completed in 2004. The $1.9 million charge included $0.8 million for employee severance and benefit costs and $1.1 million for decommissioning costs and an impairment charge on fixed assets. Payments and asset write-downs to reflect estimated realizable values totaling $1 million were made related to these charges during 2003.

2002

In December 2002 Ball announced it would relocate its plastics office and research and development facility from Atlanta, Georgia, to Colorado. In connection with the relocation, a pretax charge of $1.6 million ($1 million after tax) was recorded in the fourth quarter of 2002, including $0.8 million for employee severance and benefit costs and $0.8 million for decommissioning costs and the impairment of leasehold improvements. The office relocation was completed during 2003 and the R&D facility relocation is expected to be completed by the end of 2004. Relocation costs of $2.7 million were incurred in 2003 and charged to continuing operations. Also in December 2002, income of $0.8 million was recorded related to 2001 restructuring activities primarily related to proceeds on asset dispositions and employee benefit and severance accruals no longer required.

2001

In November 2001 Ball announced the closure of its Moultrie, Georgia, plant to address overcapacity in the aluminum beverage can industry in North America. The plant was closed in December 2001 and the company recorded a charge of $24.7 million ($15 million after tax). Details of the charge are summarized in the table below.

International Packaging

The company recorded $3.3 million of earnings in the third quarter of 2003, $5.1 million in December 2002 and $5 million in the fourth quarter of 2001 related to the reversal of portions of a charge taken in June 2001 for the PRC business consolidation activities as a result of the realization on asset dispositions in excess of estimated realizable values, as well as employee benefit and severance accruals no longer required as exit activities were completed. In June 2001 Ball announced the reorganization of its PRC packaging business, which included exiting the general line metal can business and closing two PRC beverage can plants. A $237.7 million pretax charge ($185 million after tax and minority interest impact) was recorded in connection with this reorganization. Details of the charge are included in the table below. The charge for other assets and costs was comprised of $24 million of accounts receivable deemed uncollectible and inventories deemed unsaleable, both as a direct result of the exit plan, and $17.2 million of decommissioning costs, miscellaneous taxes and other exit costs. The restructuring activities in the PRC have been substantially completed with the liquidation of certain investments and the sale of certain assets still in process at December 31, 2003.

Aerospace and Technologies

Earnings were recorded of $0.2 million in the third quarter of 2003, $2 million in December 2002 and $2.2 million in December 2001 related to the reversal of portions of a second quarter 2001 aerospace charge as a result of exit costs no longer required due to the sale of one of the exited product lines. Also in the fourth quarter of 2002, we recorded a $2.5 million after-tax charge to write off an equity investment in an aerospace company. In the second quarter of 2001, we ceased operations in two commercial developmental product lines in our aerospace and technologies business. A pretax charge of $16 million ($9.7 million after tax) was recorded in the second quarter of 2001. Details of the charge are included in the table below. The charge for other assets and costs was comprised of $10 million of accounts receivable deemed uncollectible and inventories deemed unsaleable, both as a direct result of the exit plan, and $3.6 million of decommissioning and other exit costs. These actions were substantially completed by the end of 2002.

        Severance and other benefit costs related to the above actions in the PRC and the U.S. are associated with 1,640 former employees, primarily manufacturing and administrative personnel. The following table summarizes the activity related to the restructuring and plant closing activities for 2001 through 2003: