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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549-1004





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2008

OR



| ̈ | 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: 333-53603-03





GRAHAM PACKAGING HOLDINGS
COMPANY

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Pennsylvania                                                   |  | 23-2553000                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                         |  |           
|---------------------------------------- |  | ----------
|2401 Pleasant Valley Road                |  |           
|York, Pennsylvania                       |  | 17402     
|(Address of principal executive offices) |  | (Zip Code)

(717) 849-8500

(Registrants telephone number, including area code)





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   ̈    No  x

Indicate by check mark whether the registrant is
a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2
of the Exchange Act. (Check one):



|                                                                         |  |                             
|------------------------------------------------------------------------ |  | ----------------------------
|Large accelerated filer   ̈                                               |  | Accelerated filer   ̈        
|                                                                         | 
|Non- accelerated filer  x    (Do not check if smaller reporting company) |  | Smaller reporting company   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes   ̈    No  x









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GRAHAM PACKAGING HOLDINGS COMPANY

INDEX



|                              |  |                                                                                                                         |  |            
|----------------------------- |  | ----------------------------------------------------------------------------------------------------------------------- |  | -----------
|                              |  |                                                                                                                         |  | Page Number
|PART I. FINANCIAL INFORMATION |  |                                                                                                                        
|                              |  |                                                                                                                        
|Item  1:                      |  | Financial Statements:                                                                                                   |  |            
|                              |  |                                                                                                                        
|                              |  | CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)  At June 30, 2008 and December 31, 2007                              |  | 3          
|                              |  |                                                                                                                        
|                              |  | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)  For the three and six months ended June 30, 2008 and 2007 |  | 4          
|                              |  |                                                                                                                        
|                              |  | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)  For the six months ended June 30, 2008 and 2007           |  | 5          
|                              |  |                                                                                                                        
|                              |  | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)                                                        |  | 6          
|                              |  |                                                                                                                        
|Item  2:                      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                   |  | 29         
|                              |  |                                                                                                                        
|Item  3:                      |  | Quantitative and Qualitative Disclosures About Market Risk                                                              |  | 41         
|                              |  |                                                                                                                        
|Item  4T:                     |  | Controls and Procedures                                                                                                 |  | 42         
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                        
|                              |  |                                                                                                                        
|Item  1:                      |  | Legal Proceedings                                                                                                       |  | 44         
|                              |  |                                                                                                                        
|Item  1A:                     |  | Risk Factors                                                                                                            |  | 44         
|                              |  |                                                                                                                        
|Item  6:                      |  | Exhibits                                                                                                                |  | 44         
|                              | 
|Signature                     |  | 45                                                                                                                     



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PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



|                                                             |  |                |           |   |                  |   |           |  
|------------------------------------------------------------ |  | -------------- | --------- | - | ---------------- | - | --------- | -
|                                                             |  | June 30,2008   |           |   | December 31,2007 |  
|                                                             |  | (In thousands) |          
|ASSETS                                                       |  |                |           |   |                  |   |           |  
|Current assets:                                              |  |                |           |   |                  |   |           |  
|Cash and cash equivalents                                    |  | $              | 52,855    |   |                  | $ | 18,314    |  
|Accounts receivable, net                                     |  |                | 277,446   |   |                  |   | 247,953   |  
|Inventories                                                  |  |                | 273,510   |   |                  |   | 266,184   |  
|Deferred income taxes                                        |  |                | 7,081     |   |                  |   | 7,520     |  
|Prepaid expenses and other current assets                    |  |                | 54,774    |   |                  |   | 40,698    |  
|                                                             |  |                |           |   |                  |   |           |  
|Total current assets                                         |  |                | 665,666   |   |                  |   | 580,669   |  
|Property, plant and equipment, net                           |  |                | 1,238,094 |   |                  |   | 1,242,418 |  
|Intangible assets, net                                       |  |                | 51,441    |   |                  |   | 52,852    |  
|Goodwill                                                     |  |                | 311,617   |   |                  |   | 306,719   |  
|Other non-current assets                                     |  |                | 48,245    |   |                  |   | 51,175    |  
|                                                             |  |                |           |   |                  |   |           |  
|Total assets                                                 |  | $              | 2,315,063 |   |                  | $ | 2,233,833 |  
|                                                             |  |                |           |   |                  |   |           |  
|                                                             |  |               
|LIABILITIES AND PARTNERS CAPITAL (DEFICIT)                  |  |                |           |   |                  |   |           |  
|Current liabilities:                                         |  |                |           |   |                  |   |           |  
|Current portion of long-term debt                            |  | $              | 43,233    |   |                  | $ | 45,695    |  
|Accounts payable                                             |  |                | 183,815   |   |                  |   | 166,573   |  
|Accrued expenses and other current liabilities               |  |                | 186,278   |   |                  |   | 184,559   |  
|Deferred revenue                                             |  |                | 34,066    |   |                  |   | 25,024    |  
|                                                             |  |                |           |   |                  |   |           |  
|Total current liabilities                                    |  |                | 447,392   |   |                  |   | 421,851   |  
|Long-term debt                                               |  |                | 2,478,871 |   |                  |   | 2,488,637 |  
|Deferred income taxes                                        |  |                | 28,172    |   |                  |   | 25,778    |  
|Other non-current liabilities                                |  |                | 87,459    |   |                  |   | 84,964    |  
|Commitments and contingent liabilities (see Notes 12 and 13) |  |                |           |   |                  |   |           |  
|Partners capital (deficit):                                 |  |                |           |   |                  |   |           |  
|General partners                                             |  |                | (39,904   | ) |                  |   | (41,508   | )
|Limited partners                                             |  |                | (764,298  | ) |                  |   | (796,694  | )
|Notes and interest receivable for ownership interests        |  |                | (2,000    | ) |                  |   | (1,939    | )
|Accumulated other comprehensive income                       |  |                | 79,371    |   |                  |   | 52,744    |  
|                                                             |  |                |           |   |                  |   |           |  
|Total partners capital (deficit)                            |  |                | (726,831  | ) |                  |   | (787,397  | )
|                                                             |  |                |           |   |                  |   |           |  
|Total liabilities and partners capital (deficit)            |  | $              | 2,315,063 |   |                  | $ | 2,233,833 |  
|                                                             |  |                |           |   |                  |   |           |  

See accompanying notes to condensed consolidated financial statements.



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GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |           |  
|----------------------------------------------- |  | -------------------------- | ------- | - | ------------------------ | - | ------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                |  | Three Months EndedJune 30, |         |   | Six Months EndedJune 30, |  
|                                                |  | 2008                       |         |   | 2007                     |   |         | 2008 |  |   | 2007      |  
|                                                |  | (In thousands)             |        
|Net sales                                       |  | $                          | 688,244 |   |                          | $ | 650,969 |      |  | $ | 1,357,647 |   |  | $ | 1,272,754 |  
|Cost of goods sold                              |  |                            | 580,703 |   |                          |   | 552,766 |      |  |   | 1,157,002 |   |  |   | 1,094,391 |  
|                                                |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |           |  
|Gross profit                                    |  |                            | 107,541 |   |                          |   | 98,203  |      |  |   | 200,645   |   |  |   | 178,363   |  
|Selling, general and administrative expenses    |  |                            | 36,213  |   |                          |   | 33,097  |      |  |   | 69,150    |   |  |   | 68,282    |  
|Asset impairment charges                        |  |                            |        |   |                          |   |        |      |  |   | 15        |   |  |   |          |  
|Net loss on disposal of fixed assets            |  |                            | 139     |   |                          |   | 891     |      |  |   | 285       |   |  |   | 2,456     |  
|                                                |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |           |  
|Operating income                                |  |                            | 71,189  |   |                          |   | 64,215  |      |  |   | 131,195   |   |  |   | 107,625   |  
|Interest expense                                |  |                            | 42,181  |   |                          |   | 52,110  |      |  |   | 93,015    |   |  |   | 107,994   |  
|Interest income                                 |  |                            | (178    | ) |                          |   | (133    | )    |  |   | (327      | ) |  |   | (294      | )
|Other (income) expense, net                     |  |                            | (514    | ) |                          |   | 592     |      |  |   | (1,335    | ) |  |   | 702       |  
|                                                |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |           |  
|Income (loss) before income taxes               |  |                            | 29,700  |   |                          |   | 11,646  |      |  |   | 39,842    |   |  |   | (777      | )
|Income tax provision                            |  |                            | 1,392   |   |                          |   | 6,515   |      |  |   | 7,776     |   |  |   | 9,707     |  
|                                                |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |           |  
|Net income (loss)                               |  | $                          | 28,308  |   |                          | $ | 5,131   |      |  | $ | 32,066    |   |  | $ | (10,484   | )
|                                                |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |           |  
|Net income (loss) allocated to general partners |  | $                          | 1,415   |   |                          | $ | 257     |      |  | $ | 1,603     |   |  | $ | (524      | )
|Net income (loss) allocated to limited partners |  | $                          | 26,893  |   |                          | $ | 4,874   |      |  | $ | 30,463    |   |  | $ | (9,960    | )

See accompanying notes to condensed consolidated financial statements.



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GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                         |  |                          |          |   |      |   |          |  
|---------------------------------------------------------------------------------------- |  | ------------------------ | -------- | - | ---- | - | -------- | -
|                                                                                         |  | Six Months EndedJune 30, |         
|                                                                                         |  | 2008                     |          |   | 2007 |  
|                                                                                         |  | (In thousands)           |         
|Operating activities:                                                                    |  |                          |          |   |      |   |          |  
|Net income (loss)                                                                        |  | $                        | 32,066   |   |      | $ | (10,484  | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                          |          |   |      |   |          |  
|Depreciation and amortization                                                            |  |                          | 87,756   |   |      |   | 101,684  |  
|Amortization of debt issuance fees                                                       |  |                          | 5,178    |   |      |   | 9,696    |  
|Net loss on disposal of fixed assets                                                     |  |                          | 285      |   |      |   | 2,456    |  
|Pension expense                                                                          |  |                          | 1,253    |   |      |   | 1,500    |  
|Asset impairment charges                                                                 |  |                          | 15       |   |      |   |         |  
|Stock compensation expense                                                               |  |                          | 1,933    |   |      |   | 294      |  
|Foreign currency transaction (gain) loss                                                 |  |                          | (490     | ) |      |   | 889      |  
|Interest on receivable for ownership interests                                           |  |                          | (61      | ) |      |   | (50      | )
|Changes in operating assets and liabilities:                                             |  |                          |          |   |      |   |          |  
|Accounts receivable                                                                      |  |                          | (24,104  | ) |      |   | (34,249  | )
|Inventories                                                                              |  |                          | (3,422   | ) |      |   | (9,243   | )
|Prepaid expenses and other current assets                                                |  |                          | (4,948   | ) |      |   | 7,041    |  
|Other non-current assets                                                                 |  |                          | (3,736   | ) |      |   | (4,994   | )
|Accounts payable and accrued expenses                                                    |  |                          | 24,193   |   |      |   | 36,673   |  
|Pension contributions                                                                    |  |                          | (924     | ) |      |   | (2,246   | )
|Other non-current liabilities                                                            |  |                          | 2,358    |   |      |   | 12,389   |  
|                                                                                         |  |                          |          |   |      |   |          |  
|Net cash provided by operating activities                                                |  |                          | 117,352  |   |      |   | 111,356  |  
|                                                                                         |  |                          |          |   |      |   |          |  
|Investing activities:                                                                    |  |                          |          |   |      |   |          |  
|Cash paid for property, plant and equipment                                              |  |                          | (68,186  | ) |      |   | (67,838  | )
|Proceeds from sale of property, plant and equipment                                      |  |                          | 692      |   |      |   | 1,043    |  
|                                                                                         |  |                          |          |   |      |   |          |  
|Net cash used in investing activities                                                    |  |                          | (67,494  | ) |      |   | (66,795  | )
|                                                                                         |  |                          |          |   |      |   |          |  
|Financing activities:                                                                    |  |                          |          |   |      |   |          |  
|Proceeds from issuance of long-term debt                                                 |  |                          | 234,066  |   |      |   | 554,781  |  
|Payment of long-term debt                                                                |  |                          | (249,692 | ) |      |   | (567,600 | )
|Purchase of partnership units                                                            |  |                          |         |   |      |   | (3,140   | )
|Debt issuance fees                                                                       |  |                          |         |   |      |   | (4,500   | )
|                                                                                         |  |                          |          |   |      |   |          |  
|Net cash used in financing activities                                                    |  |                          | (15,626  | ) |      |   | (20,459  | )
|                                                                                         |  |                          |          |   |      |   |          |  
|Effect of exchange rate changes on cash and cash equivalents                             |  |                          | 309      |   |      |   | 218      |  
|                                                                                         |  |                          |          |   |      |   |          |  
|Increase in cash and cash equivalents                                                    |  |                          | 34,541   |   |      |   | 24,320   |  
|Cash and cash equivalents at beginning of period                                         |  |                          | 18,314   |   |      |   | 13,327   |  
|                                                                                         |  |                          |          |   |      |   |          |  
|Cash and cash equivalents at end of period                                               |  | $                        | 52,855   |   |      | $ | 37,647   |  
|                                                                                         |  |                          |          |   |      |   |          |  
|Supplemental disclosures                                                                 |  |                          |          |   |      |   |          |  
|Cash paid for interest, net of amounts capitalized                                       |  | $                        | 92,710   |   |      | $ | 109,317  |  
|Cash paid for income taxes (net of refunds)                                              |  |                          | 4,918    |   |      |   | 7,108    |  
|Non-cash investing activities:                                                           |  |                          |          |   |      |   |          |  
|Capital leases                                                                           |  |                          | 2,302    |   |      |   | 533      |  
|Accruals for purchases of property, plant and equipment                                  |  |                          | 11,012   |   |      |   | 22,859   |  

See accompanying notes to condensed consolidated financial statements.



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



|1. | Basis of Presentation
|-- | ---------------------

The accompanying unaudited
condensed consolidated financial statements of Graham Packaging Holdings Company (Holdings), a Pennsylvania limited partnership, have been prepared in accordance with accounting principles generally accepted in the United States of
America (generally accepted accounting principles) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X and therefore do not include all of the information and footnotes required by
generally accepted accounting principles for complete annual financial statements. All entities and assets owned by Holdings are referred to collectively with Holdings as the Company. Graham Packaging Company, L.P., Holdings
wholly-owned subsidiary, is referred to as the Operating Company. In the opinion of the management of the Company (Management), all adjustments (consisting only of usual recurring adjustments considered necessary for a fair
presentation) are reflected in the condensed consolidated financial statements. The condensed consolidated balance sheet as of December 31, 2007, is derived from audited financial statements. The condensed consolidated financial statements and
notes included in this report should be read in conjunction with the audited consolidated financial statements and notes for the year ended December 31, 2007. The results of operations for the six months ended June 30, 2008, are not
necessarily indicative of the results to be expected for the full year ending December 31, 2008.

Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. (FIN) 48, Accounting for
Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109. FIN 48 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. FIN 48 also provides guidance on accounting for derecognition, interest, penalties, accounting in interim periods, disclosure and classification of matters related to uncertainty in income taxes and transitional
requirements upon adoption of FIN 48. The Company adopted FIN 48 effective January 1, 2007, which resulted in an increase in the Companys other non-current liabilities for unrecognized tax benefits of $10.0 million (including interest of
$2.2 million and penalties of $4.8 million), an increase in the Companys non-current deferred tax assets of $5.2 million and a corresponding decrease in partners capital of $4.8 million.

In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) 157, Fair Value Measurements. This
statement establishes a single authoritative definition of fair value, sets out a framework to classify the source of information used in fair value measurements, identifies additional factors that must be disclosed about assets and liabilities
measured at fair value based on their placement in the new framework and modifies the long-standing accounting presumption that the transaction price of an asset or liability equals its initial fair value. In February 2008, the FASB delayed the
effective date for certain non-financial assets and liabilities until January 1, 2009. The Company adopted SFAS 157 effective January 1, 2008, for financial assets and liabilities (see Note 10). The Company is currently in the process of
assessing the impact of the adoption of SFAS 157 on its financial statements as it relates to its non-financial assets and liabilities.

In
February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115. Under SFAS 159, companies may elect to measure specified
financial instruments and warranty and insurance contracts at fair value on a contractbycontract basis, with changes in fair value recognized in earnings each reporting period. SFAS 159 is effective for fiscal years beginning after
November 15, 2007. The Company did not elect to measure any additional assets or liabilities at fair value that are not already measured at fair value under existing standards. Therefore, the adoption of this standard had no impact on the
Companys financial statements.

In December 2007, the FASB issued SFAS 141(Revised 2007) (SFAS 141(R)), Business
Combinations. SFAS 141(R) establishes principles and requirements for the reporting entity in a business combination, including recognition and measurement in the financial statements of the identifiable assets acquired, the liabilities
assumed and any noncontrolling interest in the acquiree. This statement also establishes disclosure requirements to enable financial statement users to evaluate the nature and financial effects of the business combination. SFAS 141(R) applies
prospectively to business combinations for which the acquisition date is on or after the beginning of the first fiscal year beginning after December 15, 2008. SFAS 141(R) also applies to prospective changes in acquired tax assets and
liabilities recognized as part of the Companys previous acquisitions, by requiring such changes to be recorded as a component of the income tax provision. The Company expects SFAS 141(R) will have an impact on accounting for future business
combinations, once adopted, and on prospective changes, if any, of previously acquired tax assets and liabilities.



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial
StatementsAmendment of ARB No. 51. SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, changes in a parents ownership of a noncontrolling
interest, calculation and disclosure of the consolidated net income attributable to the parent and the noncontrolling interest, changes in a parents ownership interest while the parent retains its controlling financial interest and fair value
measurement of any retained noncontrolling equity investment. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company does not expect the adoption to have a significant impact on its
financial statements.

In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging
Activities. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entitys financial
position, financial performance and cash flows. It requires disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information about an entitys liquidity by requiring
disclosure of derivative features that are credit riskrelated, and requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative instruments. It is effective for financial
statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is currently in the process of assessing the impact of the adoption of SFAS 161 on its financial statement disclosures.

In May 2008, the FASB issued SFAS 162, The Hierarchy of Generally Accepted Accounting Principles. This statement identifies the sources of
accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United
States. This statement is effective 60 days following the Securities and Exchange Commissions approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles. It is not expected that this Statement will result in a change in the Companys current accounting practice.

Derivatives

During 2004, the Company entered into four interest rate swap agreements, under which the Company received
variable interest based on the Eurodollar rate and paid fixed interest at a weighted average rate of 3.89%, on $700.0 million of term loans. During 2005, the Company entered into three additional interest rate swap agreements, under which the
Company received variable interest based on the Eurodollar rate and paid fixed interest at a weighted average rate of 4.43%, on $225.0 million of term loans. These interest rate swap agreements expired in December 2007 and January 2008. During 2007,
the Company entered into two interest rate collar agreements, which became effective in January 2008, under which the Company purchased a cap at a Eurodollar rate of 4.70% and sold a floor at a weighted average Eurodollar rate of 2.88%, on $385.0
million of term loans. During 2008, the Company entered into forward exchange contracts to hedge the exchange rate exposure on transactions that are denominated in foreign currencies. At June 30, 2008, the Company had contracts for Canadian
Dollars, Polish Zloty and Pound Sterling totalling $13.2 million. The interest rate swaps, interest rate collars and forward exchange contracts are accounted for as cash flow hedges. The hedges are highly effective as defined in SFAS 133,
Accounting for Derivative Instruments and Hedging Activities. The change in fair value on the effective portion of these cash flow hedges is recorded in other comprehensive income (loss) and was an unrealized gain of $2.9 million and an
unrealized loss of $2.2 million for the three months ended June 30, 2008 and 2007, respectively, and was an unrealized loss of $0.4 million and $5.2 million for the six months ended June 30, 2008 and 2007, respectively. Of the amount
recorded within accumulated other comprehensive income (loss) as of June 30, 2008, 66% is expected to be recognized in interest expense in the next twelve months.

Comprehensive Income

Changes in fair value of derivatives designated and accounted for as cash flow
hedges, amortization of prior service costs and unrealized actuarial losses included in net periodic benefit costs for pension and post-retirement plans and foreign currency translation adjustments are included in other comprehensive income (loss)
and are added to net income (loss) to determine total comprehensive income (loss).



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



Option Plans

The Company adopted SFAS 123(R), Share-Based Payment, on January 1, 2006, using the prospective method. In accordance with SFAS 123(R), the Company applied this statement prospectively to awards
issued, modified, repurchased or cancelled after January 1, 2006.

The Company continued to account for equity based compensation to
employees for awards outstanding as of January 1, 2006, using the intrinsic value method prescribed in Accounting Principles Board Opinion (APB) 25, Accounting For Stock Issued To Employees. The exercise prices of all
options were equal to or greater than the fair value of the units on the dates of the grants and, accordingly, no compensation cost has been recognized under the provisions of APB 25.

A summary of the changes in the options outstanding under the option plans for the six months ended June 30, 2008, is as follows:



|                               |  |         |   |  |                                     |        |                                                   |     |                                      |   |     
|------------------------------ |  | ------- | - |  | ----------------------------------- | ------ | ------------------------------------------------- | --- | ------------------------------------ | - | ----
|                               |  | Options |   |  | WeightedAverageExercisePrice/Option |        | WeightedAverageRemainingContractualTerm(in
years) |     | AggregateIntrinsicValue(in millions)
|Outstanding at January 1, 2008 |  | 1,446.4 |   |  | $                                   | 34,921 |                                                   |     |                                      |   |     
|Granted(1)                     |  | 356.7   |   |  |                                     | 36,747 |                                                   |     |                                      |   |     
|Exercised                      |  |        |   |  |                                     |       |                                                   |     |                                      |   |     
|Forfeited (1)                  |  | (425.8  | ) |  |                                     | 45,562 |                                                   |     |                                      |   |     
|                               |  |         |   |  |                                     |        |                                                   |     |                                      |   |     
|Outstanding at June 30, 2008   |  | 1,377.3 |   |  | $                                   | 32,104 |                                                   | 8.0 |                                      | $ | 16.9
|                               |  |         |   |  |                                     |        |                                                   |     |                                      |   |     
|Vested or expected to vest     |  | 1,113.9 |   |  | $                                   | 33,188 |                                                   | 7.9 |                                      | $ | 12.5
|Exercisable at June 30, 2008   |  | 535.5   |   |  | $                                   | 30,794 |                                                   | 7.0 |                                      | $ | 7.3 



|(1) | Includes 291.7 options that had a weighted average exercise price of $51,579, which were cancelled and re-granted at an exercise price of $36,747.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------

In the first six months of 2008, the Company cancelled 291.7 options of approximately 125 employees that had a weighted average exercise price of $51,579
and re-granted 291.7 options at an exercise price of $36,747, which was the Companys fair value on March 7, 2008. As a result, the Company will incur incremental compensation expense of approximately $1.1 million over the four year
vesting period of the re-granted options. The incremental expense recorded during the six months ended June 30, 2008, was $0.4 million, including $0.3 million related to the acceleration of vesting upon the termination of employment of the
Companys former Chief Operating Officer on April 30, 2008.

On February 1, 2008, the Company extended the term for certain
options granted on February 2, 1998, for which any unexercised options would have expired on February 2, 2008. No change was made to the number of options, nor the exercise price, and the options remained fully vested. This extension of
the term is considered a modification under SFAS 123(R) which required a charge to expense in the first quarter of 2008 of $0.7 million for the difference between the fair value of the options after the modification and the fair value of the options
before the modification.

Reclassification

A reclassification has been made to the 2007 financial statements to conform to the 2008 presentation, as follows:



| |  |  | a reclassification to reflect pension expense and pension contributions as separate components of cash provided by operating activities in the Condensed
Consolidated Statements of Cash Flows. Amounts for these line items were previously included in changes in other non-current liabilities and changes in accounts payable and accrued expenses.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



|2. | Accounts Receivable, Net
|-- | ------------------------

Accounts receivable, net
are presented net of an allowance for doubtful accounts of $6.0 million and $5.7 million at June 30, 2008, and December 31, 2007, respectively. Management performs ongoing credit evaluations of its customers and generally does not require
collateral.



|3. | Concentration of Credit Risk
|-- | ----------------------------

For the six months
ended June 30, 2008 and 2007, respectively, 71.2% and 73.8% of the Companys net sales were generated by its top twenty customers. The Company had sales to one customer, PepsiCo, which exceeded 10% of total sales for the six months ended
June 30, 2008 and 2007. The Companys sales to PepsiCo, approximately 100% of which were made in North America, were 14.9% and 15.6% of total sales for the six months ended June 30, 2008 and 2007, respectively.

The Company had $176.5 million and $148.5 million of accounts receivable from its top twenty customers as of June 30, 2008, and December 31,
2007, respectively. The Company had $34.8 million and $24.3 million of accounts receivable from PepsiCo as of June 30, 2008, and December 31, 2007, respectively.



|4. | Inventories
|-- | -----------

Inventories, stated at the lower of
cost or market, consisted of the following:



|               |  |                |         |                  |   |        
|-------------- |  | -------------- | ------- | ---------------- | - | -------
|               |  | June 30,2008   |         | December 31,2007
|               |  | (In thousands)
|Finished goods |  | $              | 183,356 |                  | $ | 188,236
|Raw materials  |  |                | 90,154  |                  |   | 77,948 
|               |  |                |         |                  |   |        
|Total          |  | $              | 273,510 |                  | $ | 266,184
|               |  |                |         |                  |   |        



|5. | Property, Plant and Equipment, Net
|-- | ----------------------------------

A summary of
property, plant and equipment, net is presented in the following table:



|                                                |  |                               |  |                |           |                  |   |          
|----------------------------------------------- |  | ----------------------------- |  | -------------- | --------- | ---------------- | - | ---------
|                                                |  | ExpectedUsefulLives(in years) |  | June 30,2008   |           | December 31,2007
|                                                |  |                               |  | (In thousands)
|Land                                            |  |                               |  | $              | 42,097    |                  | $ | 45,560   
|Buildings and improvements                      |  | 7-31.5                        |  |                | 238,988   |                  |   | 239,914  
|Machinery and equipment                         |  | 3-15                          |  |                | 1,884,926 |                  |   | 1,804,497
|Construction in progress                        |  |                               |  |                | 79,365    |                  |   | 91,413   
|                                                |  |                               |  |                |           |                  |   |          
|Property, plant and equipment                   |  |                               |  |                | 2,245,376 |                  |   | 2,181,384
|Less: accumulated depreciation and amortization |  |                               |  |                | 1,007,282 |                  |   | 938,966  
|                                                |  |                               |  |                |           |                  |   |          
|Property, plant and equipment, net              |  |                               |  | $              | 1,238,094 |                  | $ | 1,242,418
|                                                |  |                               |  |                |           |                  |   |          



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



Depreciation expense, including depreciation expense on assets recorded under capital leases, for the
three months ended June 30, 2008 and 2007, was $42.2 million and $49.3 million, respectively, and for the six months ended June 30, 2008 and 2007, was $84.3 million and $96.4 million, respectively.

The Company capitalizes interest on borrowings during the active construction period of major capital projects. Capitalized interest is added to the cost
of the underlying assets and is amortized over the useful lives of assets. Interest capitalized for the six months ended June 30, 2008 and 2007, was $2.4 million and $2.6 million, respectively.

The Company closed its plant located in Edison, New Jersey in the first half of 2008. The land and buildings at this location, having a carrying value of
$6.6 million, are deemed to be held for sale, and as such have been reclassified from property, plant and equipment to prepaid expenses and other current assets on the Condensed Consolidated Balance Sheet (Unaudited) as of June 30, 2008.



|6. | Intangible Assets, Net
|-- | ----------------------

The gross carrying amount
and accumulated amortization of the Companys intangible assets subject to amortization as of June 30, 2008, were as follows:



|                       |  |                      |        |                         |   |         |     |  |                                    |        |  |         
|---------------------- |  | -------------------- | ------ | ----------------------- | - | ------- | --- |  | ---------------------------------- | ------ |  | --------
|                       |  | Gross CarryingAmount |        | AccumulatedAmortization |   |         | Net |  | Weighted AverageAmortizationPeriod
|                       |  |                      |        | (In thousands)          |   |         |     |  |                                   
|Patented technology    |  | $                    | 25,364 |                         | $ | (6,859  | )   |  | $                                  | 18,505 |  | 11 years
|Customer relationships |  |                      | 37,086 |                         |   | (4,850  | )   |  |                                    | 32,236 |  | 18 years
|Licensing agreements   |  |                      | 601    |                         |   | (275    | )   |  |                                    | 326    |  | 1 year  
|Non-compete agreement  |  |                      | 1,500  |                         |   | (1,126  | )   |  |                                    | 374    |  | 5 years 
|                       |  |                      |        |                         |   |         |     |  |                                    |        |  |         
|Total                  |  | $                    | 64,551 |                         | $ | (13,110 | )   |  | $                                  | 51,441 |  |         
|                       |  |                      |        |                         |   |         |     |  |                                    |        |  |         

The gross carrying amount and accumulated amortization of the Companys intangible assets
subject to amortization as of December 31, 2007, were as follows:



|                       |  |                      |        |                         |   |         |     |  |                                    |        |  |         
|---------------------- |  | -------------------- | ------ | ----------------------- | - | ------- | --- |  | ---------------------------------- | ------ |  | --------
|                       |  | Gross CarryingAmount |        | AccumulatedAmortization |   |         | Net |  | Weighted AverageAmortizationPeriod
|                       |  |                      |        | (In thousands)          |   |         |     |  |                                   
|Patented technology    |  | $                    | 24,421 |                         | $ | (5,646  | )   |  | $                                  | 18,775 |  | 11 years
|Customer relationships |  |                      | 36,288 |                         |   | (3,342  | )   |  |                                    | 32,946 |  | 18 years
|Licensing agreements   |  |                      | 601    |                         |   |        |     |  |                                    | 601    |  | 1 year  
|Non-compete agreements |  |                      | 1,543  |                         |   | (1,013  | )   |  |                                    | 530    |  | 5 years 
|                       |  |                      |        |                         |   |         |     |  |                                    |        |  |         
|Total                  |  | $                    | 62,853 |                         | $ | (10,001 | )   |  | $                                  | 52,852 |  |         
|                       |  |                      |        |                         |   |         |     |  |                                    |        |  |         

Amortization expense for the six months ended June 30, 2008 and 2007, was $2.8 million and
$3.8 million, respectively. Remaining estimated aggregate amortization expense for 2008 is $2.8 million. The estimated aggregate amortization expense for each of the next five years ending December 31 is as follows (in thousands):



|     |  |      
|---- |  | -----
|2009 |  | 5,000
|2010 |  | 4,700
|2011 |  | 4,600
|2012 |  | 4,600
|2013 |  | 4,400



|7. | Goodwill
|-- | --------

The changes in the carrying amount of
goodwill were as follows:



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



|                                         |  |                     |         |               |   |                     |  |       |       |  |   |        
|---------------------------------------- |  | ------------------- | ------- | ------------- | - | ------------------- |  | ----- | ----- |  | - | -------
|                                         |  | NorthAmericaSegment |         | EuropeSegment |   | SouthAmericaSegment |  | Total
|                                         |  | (In thousands)     
|Balance at December 31, 2007             |  | $                   | 286,295 |               | $ | 18,607              |  | $     | 1,817 |  | $ | 306,719
|Foreign currency translation adjustments |  |                     | 2,391   |               |   | 2,379               |  |       | 128   |  |   | 4,898  
|                                         |  |                     |         |               |   |                     |  |       |       |  |   |        
|Balance at June 30, 2008                 |  | $                   | 288,686 |               | $ | 20,986              |  | $     | 1,945 |  | $ | 311,617
|                                         |  |                     |         |               |   |                     |  |       |       |  |   |        



|8. | Accrued Expenses and Other Current Liabilities
|-- | ----------------------------------------------

Accrued expenses and other current liabilities consisted of the following:



|                                           |  |                |         |                  |   |        
|------------------------------------------ |  | -------------- | ------- | ---------------- | - | -------
|                                           |  | June 30,2008   |         | December 31,2007
|                                           |  | (In thousands)
|Accrued employee compensation and benefits |  | $              | 61,075  |                  | $ | 68,409 
|Accrued interest                           |  |                | 27,197  |                  |   | 32,069 
|Accrued sales allowance                    |  |                | 33,369  |                  |   | 29,622 
|Other                                      |  |                | 64,637  |                  |   | 54,459 
|                                           |  |                |         |                  |   |        
|                                           |  | $              | 186,278 |                  | $ | 184,559
|                                           |  |                |         |                  |   |        

In recent years, the Company has initiated a series of restructuring activities to reduce costs,
achieve synergies and streamline operations.

For the six months ended June 30, 2008, the Company recognized severance expense in the
United States of $1.8 million (reflected in cost of goods sold) related to the closure of its plant in Edison, New Jersey and the related severing of 115 employees, 89 of whom were terminated by June 30, 2008. The total expected severance
expense related to this plant closure is approximately $2.1 million. Substantially all of the cash payments for these termination benefits are expected to be made by March 31, 2009. The Company also recognized severance expense of $1.8 million
(reflected in selling, general and administrative expenses) related to the separation of its former Chief Operating Officer on April 30, 2008. Substantially all of the cash payments for these termination benefits are expected to be made by
June 30, 2010.

For the year ended December 31, 2007, the Company recognized severance expense in the United States of $2.1
million (reflected predominantly in selling, general and administrative expenses) related to the severing of 59 employees, all of whom were terminated by June 30, 2008. Substantially all of the cash payments for these termination benefits are
expected to be made by September 30, 2008. The Company also recognized severance expense in France of $1.9 million (reflected in selling, general and administrative expenses) related to the severing of 14 employees, eleven of whom were
terminated as of June 30, 2008. Substantially all of the cash payments for these termination benefits are expected to be made by December 31, 2008.

For the year ended December 31, 2006, the Company recognized severance expense in the United States of $1.6 million (reflected predominantly in selling, general and administrative expenses) related to the
severing of 46 employees, all of whom were terminated by June 30, 2008. All of the cash payments for these termination benefits have been made as of June 30, 2008. The Company also recognized severance expense of $5.3 million (reflected in
selling, general and administrative expenses) related to the separation of its former Chief Executive Officer and Chief Financial Officer on December 3, 2006. Substantially all of the cash payments for these termination benefits are expected to
be made by December 31, 2009.

For the year ended December 31, 2005, the Company recognized severance expense in the United
States of $2.3 million (reflected in selling, general and administrative expenses) related to the severing of 16 employees. All of the cash payments for these termination benefits have been made as of June 30, 2008. The Company also recognized
severance expense in France of $3.8 million (reflected in cost of goods sold) related to the severing of 37 employees. Substantially all of the cash payments for these termination benefits are expected to be made by December 31, 2008.



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



The following table summarizes these severance accruals, and related expenses and payments, by
operating segment. At June 30, 2008, $1.5 million of the consolidated balance was included in other non-current liabilities and the remainder was included in accrued employee compensation and benefits:



|                                         |  |                |        |   |        |   |        |       |  |   |        |  
|---------------------------------------- |  | -------------- | ------ | - | ------ | - | ------ | ----- |  | - | ------ | -
|                                         |  | NorthAmerica   |        |   | Europe |   |        | Total | 
|                                         |  | (In thousands) |       
|Balance at January 1, 2007               |  | $              | 6,762  |   |        | $ | 1,072  |       |  | $ | 7,834  |  
|Charged to expense during the year       |  |                | 2,067  |   |        |   | 1,951  |       |  |   | 4,018  |  
|Payments during the year                 |  |                | (4,125 | ) |        |   | (711   | )     |  |   | (4,836 | )
|Foreign currency translation adjustments |  |                |       |   |        |   | 84     |       |  |   | 84     |  
|Other adjustments                        |  |                | (42    | ) |        |   | (270   | )     |  |   | (312   | )
|                                         |  |                |        |   |        |   |        |       |  |   |        |  
|Balance at December 31, 2007             |  |                | 4,662  |   |        |   | 2,126  |       |  |   | 6,788  |  
|Charged to expense during the period     |  |                | 3,616  |   |        |   | 86     |       |  |   | 3,702  |  
|Payments during the period               |  |                | (2,896 | ) |        |   | (1,324 | )     |  |   | (4,220 | )
|Foreign currency translation adjustments |  |                |       |   |        |   | 136    |       |  |   | 136    |  
|Other adjustments                        |  |                | (8     | ) |        |   |       |       |  |   | (8     | )
|                                         |  |                |        |   |        |   |        |       |  |   |        |  
|Balance at June 30, 2008                 |  | $              | 5,374  |   |        | $ | 1,024  |       |  | $ | 6,398  |  
|                                         |  |                |        |   |        |   |        |       |  |   |        |  

In addition to the above costs, as of December 31, 2006, the Company had accrued payments
made on January 5, 2007, to the Companys former Chief Executive Officer and Chief Financial Officer for the repurchase of all of their outstanding partnership units and options, pursuant to separation agreements dated as of
December 3, 2006. The gross amount accrued as of December 31, 2006, and paid in 2007, was $3.4 million.



|9. | Debt Arrangements
|-- | -----------------

Long-term debt consisted of the
following:



|                                              |  |                |           |                  |   |          
|--------------------------------------------- |  | -------------- | --------- | ---------------- | - | ---------
|                                              |  | June 30,2008   |           | December 31,2007
|                                              |  | (In thousands)
|Term loan                                     |  | $              | 1,851,562 |                  | $ | 1,860,938
|Revolving Credit Facility                     |  |                |          |                  |   |         
|Foreign and other revolving credit facilities |  |                | 12,105    |                  |   | 14,501   
|Senior Notes                                  |  |                | 250,000   |                  |   | 250,000  
|Senior Subordinated Notes                     |  |                | 375,000   |                  |   | 375,000  
|Capital leases                                |  |                | 31,399    |                  |   | 33,180   
|Other                                         |  |                | 2,038     |                  |   | 713      
|                                              |  |                |           |                  |   |          
|                                              |  |                | 2,522,104 |                  |   | 2,534,332
|Less amounts classified as current            |  |                | 43,233    |                  |   | 45,695   
|                                              |  |                |           |                  |   |          
|Total                                         |  | $              | 2,478,871 |                  | $ | 2,488,637
|                                              |  |                |           |                  |   |          

The Companys credit agreement consists of a term loan B to the Operating Company totaling
$1,851.6 million (the Term Loan or Term Loan Facility) and a $250.0 million revolving credit facility (the Revolving Credit Facility and, together with the Term Loan, the Credit Agreement). The
obligations of the Operating Company under the Credit Agreement are guaranteed by Holdings and certain other subsidiaries of Holdings. The Term Loan is payable in quarterly installments and requires payments of $18.7 million in each of 2008, 2009
and 2010 and $1,804.8 million in 2011. The Revolving Credit Facility expires on October 7, 2010. Availability under the Revolving Credit Facility as of June 30, 2008, was $239.0 million (as reduced by $11.0 million of outstanding letters
of credit). Interest under the Credit Agreement is payable at (a) the Alternate Base Rate (ABR) (the higher of



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



the Prime Rate or the Federal Funds Rate plus 0.50%) plus a margin ranging from 1.00% to 1.75%; or (b) the Eurodollar Rate (the applicable
interest rate offered to banks in the London interbank eurocurrency market) plus a margin ranging from 2.00% to 2.75%. A commitment fee of 0.50% is due on the unused portion of the Revolving Credit Facility. In addition, the Credit Agreement
contains certain affirmative and negative covenants as to the operations and financial condition of the Company, as well as certain restrictions on the payment of dividends and other distributions to Holdings. As of June 30, 2008, the Company
was in compliance with all covenants.

Substantially all domestic tangible and intangible assets of the Company are pledged as collateral
pursuant to the terms of the Credit Agreement.

Pursuant to its terms, on March 30, 2007, the Credit Agreement was amended in order
to, among other things, increase the Term Loan Facility by approximately $305.0 million (the Amendment). Proceeds of the Amendment were used to pay off the second-lien credit agreement ($250.0 million), with $50.0 million being used to
reduce outstanding borrowings on the Revolving Credit Facility and approximately $5.0 million being used to pay fees and expenses.

The
Company has outstanding $250.0 million in Senior Notes of the Operating Company and $375.0 million in Senior Subordinated Notes of the Operating Company (collectively the Notes). The Notes are unconditionally guaranteed, jointly and
severally, by Holdings and mature on October 7, 2012 (Senior Notes), and October 7, 2014 (Senior Subordinated Notes). Interest on the Senior Notes is payable semi-annually at 8.50% and interest on the Senior Subordinated Notes is payable
semi-annually at 9.875%.



|10. | Fair Value Measurement
|--- | ----------------------

On January 1, 2008,
the Company adopted SFAS 157, which did not have a significant impact on its financial statements. SFAS 157 established the following fair value hierarchy that prioritizes the inputs used to measure fair value:



|         |  |                                                                                                                                                                                                                                                                                          
|-------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level 1: |  | Level 1 inputs are quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability
occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|         | 
|Level 2: |  | Level 2 inputs include the following:                                                                                                                                                                                                                                                    
|         |  | a) Quoted prices in active markets for similar assets or liabilities.                                                                                                                                                                                                                    
|         |  | b) Quoted prices in markets that are not active for identical or similar assets or liabilities.                                                                                                                                                                                          
|         |  | c) Inputs other than quoted prices that are observable for the asset or liability.                                                                                                                                                                                                       
|         |  | d) Inputs that are derived primarily from or corroborated by observable market data by correlation or other means.                                                                                                                                                                       
|         | 
|Level 3: |  | Level 3 inputs are unobservable inputs for the asset or liability.                                                                                                                                                                                                                       

The following table presents the Companys financial assets and liabilities that were
accounted for at fair value on a recurring basis as of June 30, 2008, by level within the fair value hierarchy:



|                                 |  |                               |   |         |   |         |  |   |  
|-------------------------------- |  | ----------------------------- | - | ------- | - | ------- |  | - | -
|                                 |  | Fair Value Measurements Using
|                                 |  | Level 1                       |   | Level 2 |   | Level 3
|                                 |  | (In thousands)               
|Assets:                          |  |                               |   |         |   |         |  |   |  
|Derivative financial instruments |  | $                             |  |         | $ | 63      |  | $ | 
|Liabilities:                     |  |                               |   |         |   |         |  |   |  
|Derivative financial instruments |  | $                             |  |         | $ | 1,174   |  | $ | 

The Companys derivative financial instruments are interest rate collars based on LIBOR swap
rates and forward exchange contracts, which are observable at commonly quoted intervals for the full term of the derivatives and therefore considered a level 2 input.



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



|11. | Income Taxes
|--- | ------------

Holdings and the Operating Company,
as limited partnerships, do not pay U.S. federal income taxes under the provisions of the Internal Revenue Code, as the applicable income or loss is included in the tax returns of the partners. However, certain U.S. subsidiaries acquired as part of
the acquisition in 2004 of the blow molded plastic container business of Owens-Illinois, Inc. (O-I Plastic) are corporations and are subject to U.S. federal and state income taxes. The Companys foreign operations are subject to tax
in their local jurisdictions. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse. The Company previously established a valuation allowance with respect to
certain deferred tax assets. During the first six months of 2008, the valuation allowance decreased by $2.1 million.

The Company had $9.6
million of Unrecognized Tax Benefits (UTB), exclusive of interest and penalties, as of June 30, 2008, resulting primarily from related party interest free loans, related party technical assistance payments and related party
administrative allocations in various non-U.S. subsidiaries of the Company and disallowed related party interest expense in various U.S. states and in certain non-U.S. subsidiaries. For the six months ended June 30, 2008, the Company recorded a
net increase in UTB of $0.3 million, exclusive of interest and penalties, resulting from an increase of $1.1 million for tax positions taken in prior periods, a decrease of $1.2 million related to expired statutes of limitation on prior tax
positions and an increase of $0.4 million for current year tax positions. Offsetting long-term deferred income tax assets at June 30, 2008, were $0.8 million. Upon adoption of FIN 48, the Company elected to treat interest and penalties related
to taxes as a component of income tax expense. As of June 30, 2008, the Company had recorded additional UTB of $7.2 million related to interest and penalties. The Company expects that the UTB balance will decrease within the next twelve months
by approximately $2.4 million as a result of expiring statutes of limitation. Approximately $11.2 million of UTB at June 30, 2008, if recognized, would impact the Companys effective tax rate.



|12. | Commitments
|--- | -----------

The Company is a party to various
capital and operating leases involving real property and equipment. Total rent expense for operating leases was $13.7 million and $27.5 million for the three and six months ended June 30, 2008, respectively, and $13.5 million and $27.6 million
for the three and six months ended June 30, 2007, respectively.



|13. | Contingencies and Legal Proceedings
|--- | -----------------------------------

The Company is
a party to various litigation matters arising in the ordinary course of business. The ultimate legal and financial liability of the Company with respect to such litigation cannot be estimated with certainty, but Management believes, based on its
examination of these matters, experience to date and discussions with counsel, that ultimate liability from the Companys various litigation matters will not be material to the business, financial condition, results of operations or cash flows
of the Company.



|14. | Condensed Guarantor Data
|--- | ------------------------

On October 7, 2004,
the Operating Company and GPC Capital Corp. I (CapCo I) co-issued $250.0 million aggregate principal amount of 8.5% Senior Notes due 2012 and $375.0 million aggregate principal amount of 9.875% Senior Subordinated Notes due 2014.
Holdings and the domestic subsidiaries of the Operating Company have fully and unconditionally guaranteed these notes. These guarantees are both joint and several. Both the Operating Company and CapCo I are 100%-owned subsidiaries of Holdings.

The following unaudited condensed consolidating information presents, in separate columns, the condensed consolidating balance sheets as
of June 30, 2008, and December 31, 2007, and the related condensed consolidating statements of operations for the three and six months ended June 30, 2008 and 2007, and condensed consolidating statements of cash flows for the six
months ended June 30, 2008 and 2007, for (i) Holdings on a parent only basis, with its investments in the Operating Company and CapCo I recorded under the equity method, (ii) the Operating Company, a wholly-owned subsidiary of
Holdings, on a parent only basis, with its



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



investments in subsidiaries recorded under the equity method, (iii) the guarantor domestic subsidiaries of the Operating Company, (iv) the
non-guarantor subsidiaries of the Company, (v) CapCo I, a co-issuer of the Notes, and (vi) the Company on a consolidated basis.



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF JUNE 30, 2008

(In thousands)



|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|------------------------------------------------- |  | ------------------------------ | -------- | - | --------------------------- | - | --------- | ---------- |  | -------------- | --------- | ------- | - | ------------ |  | - | ------------ |  | - | ---------- | - |  | - | --------- | -
|                                                  |  | GrahamPackagingHoldingsCompany |          |   | GrahamPackagingCompany,L.P. |   |           | Guarantors |  | Non-Guarantors |           | CapCo I |   | Eliminations |  |   | Consolidated | 
|ASSETS                                            |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Current assets:                                   |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Cash and cash equivalents                         |  | $                              |         |   |                             | $ | 27,272    |            |  | $              | 2         |         | $ | 25,581       |  | $ |             |  | $ |           |   |  | $ | 52,855    |  
|Accounts receivable, net                          |  |                                |         |   |                             |   | 91,552    |            |  |                | 99,755    |         |   | 86,139       |  |   |             |  |   |           |   |  |   | 277,446   |  
|Inventories                                       |  |                                |         |   |                             |   | 98,944    |            |  |                | 113,958   |         |   | 60,608       |  |   |             |  |   |           |   |  |   | 273,510   |  
|Deferred income taxes                             |  |                                |         |   |                             |   |          |            |  |                | 2,690     |         |   | 4,391        |  |   |             |  |   |           |   |  |   | 7,081     |  
|Prepaid expenses and other current assets         |  |                                |         |   |                             |   | 7,301     |            |  |                | 23,454    |         |   | 24,019       |  |   |             |  |   |           |   |  |   | 54,774    |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total current assets                              |  |                                |         |   |                             |   | 225,069   |            |  |                | 239,859   |         |   | 200,738      |  |   |             |  |   |           |   |  |   | 665,666   |  
|Property, plant and equipment, net                |  |                                |         |   |                             |   | 482,180   |            |  |                | 435,102   |         |   | 320,812      |  |   |             |  |   |           |   |  |   | 1,238,094 |  
|Intangible assets, net                            |  |                                |         |   |                             |   | 6,906     |            |  |                | 37,611    |         |   | 6,924        |  |   |             |  |   |           |   |  |   | 51,441    |  
|Goodwill                                          |  |                                |         |   |                             |   | 9,246     |            |  |                | 235,924   |         |   | 66,447       |  |   |             |  |   |           |   |  |   | 311,617   |  
|Net intercompany                                  |  |                                |         |   |                             |   | 1,159,772 |            |  |                |          |         |   |             |  |   |             |  |   | (1,159,772 | ) |  |   |          |  
|Investment in subsidiaries                        |  |                                |         |   |                             |   | 262,483   |            |  |                | 312,653   |         |   |             |  |   |             |  |   | (575,136   | ) |  |   |          |  
|Other non-current assets                          |  |                                |         |   |                             |   | 43,504    |            |  |                | 296       |         |   | 4,445        |  |   |             |  |   |           |   |  |   | 48,245    |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total assets                                      |  | $                              |         |   |                             | $ | 2,189,160 |            |  | $              | 1,261,445 |         | $ | 599,366      |  | $ |             |  | $ | (1,734,908 | ) |  | $ | 2,315,063 |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|                                                  |  |                                |          |   |                             |   |          
|LIABILITIES AND PARTNERS CAPITAL (DEFICIT)       |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Current liabilities:                              |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Current portion of long-term debt                 |  | $                              |         |   |                             | $ | 30,767    |            |  | $              | 286       |         | $ | 12,180       |  | $ |             |  | $ |           |   |  | $ | 43,233    |  
|Accounts payable                                  |  |                                |         |   |                             |   | 72,140    |            |  |                | 58,660    |         |   | 53,015       |  |   |             |  |   |           |   |  |   | 183,815   |  
|Accrued expenses and other current liabilities    |  |                                |         |   |                             |   | 87,867    |            |  |                | 37,718    |         |   | 60,693       |  |   |             |  |   |           |   |  |   | 186,278   |  
|Deferred revenue                                  |  |                                |         |   |                             |   | 20,878    |            |  |                | 7,954     |         |   | 5,234        |  |   |             |  |   |           |   |  |   | 34,066    |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total current liabilities                         |  |                                |         |   |                             |   | 211,652   |            |  |                | 104,618   |         |   | 131,122      |  |   |             |  |   |           |   |  |   | 447,392   |  
|Long-term debt                                    |  |                                |         |   |                             |   | 2,476,319 |            |  |                | 718       |         |   | 1,834        |  |   |             |  |   |           |   |  |   | 2,478,871 |  
|Deferred income taxes                             |  |                                |         |   |                             |   | 302       |            |  |                | 12,102    |         |   | 15,768       |  |   |             |  |   |           |   |  |   | 28,172    |  
|Other non-current liabilities                     |  |                                |         |   |                             |   | 40,629    |            |  |                | 15,066    |         |   | 31,764       |  |   |             |  |   |           |   |  |   | 87,459    |  
|Investment in subsidiaries                        |  |                                | 539,742  |   |                             |   |          |            |  |                |          |         |   |             |  |   |             |  |   | (539,742   | ) |  |   |          |  
|Net intercompany                                  |  |                                | 187,089  |   |                             |   |          |            |  |                | 932,888   |         |   | 39,795       |  |   |             |  |   | (1,159,772 | ) |  |   |          |  
|Commitments and contingent liabilities            |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Partners capital (deficit)                       |  |                                | (726,831 | ) |                             |   | (539,742  | )          |  |                | 196,053   |         |   | 379,083      |  |   |             |  |   | (35,394    | ) |  |   | (726,831  | )
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total liabilities and partners capital (deficit) |  | $                              |         |   |                             | $ | 2,189,160 |            |  | $              | 1,261,445 |         | $ | 599,366      |  | $ |             |  | $ | (1,734,908 | ) |  | $ | 2,315,063 |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2007

(In thousands)



|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|------------------------------------------------- |  | ------------------------------ | -------- | - | --------------------------- | - | --------- | ---------- |  | -------------- | --------- | ------- | - | ------------ |  | - | ------------ |  | - | ---------- | - |  | - | --------- | -
|                                                  |  | GrahamPackagingHoldingsCompany |          |   | GrahamPackagingCompany,L.P. |   |           | Guarantors |  | Non-Guarantors |           | CapCo I |   | Eliminations |  |   | Consolidated | 
|ASSETS                                            |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Current assets:                                   |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Cash and cash equivalents                         |  | $                              |         |   |                             | $ | 3,815     |            |  | $              | 2         |         | $ | 14,497       |  | $ |             |  | $ |           |   |  | $ | 18,314    |  
|Accounts receivable, net                          |  |                                |         |   |                             |   | 82,376    |            |  |                | 85,232    |         |   | 80,345       |  |   |             |  |   |           |   |  |   | 247,953   |  
|Inventories                                       |  |                                |         |   |                             |   | 90,207    |            |  |                | 125,974   |         |   | 50,003       |  |   |             |  |   |           |   |  |   | 266,184   |  
|Deferred income taxes                             |  |                                |         |   |                             |   |          |            |  |                | 3,564     |         |   | 3,956        |  |   |             |  |   |           |   |  |   | 7,520     |  
|Prepaid expenses and other current assets         |  |                                |         |   |                             |   | 5,891     |            |  |                | 2,636     |         |   | 32,171       |  |   |             |  |   |           |   |  |   | 40,698    |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total current assets                              |  |                                |         |   |                             |   | 182,289   |            |  |                | 217,408   |         |   | 180,972      |  |   |             |  |   |           |   |  |   | 580,669   |  
|Property, plant and equipment, net                |  |                                |         |   |                             |   | 493,442   |            |  |                | 456,634   |         |   | 292,342      |  |   |             |  |   |           |   |  |   | 1,242,418 |  
|Intangible assets, net                            |  |                                |         |   |                             |   | 6,397     |            |  |                | 39,657    |         |   | 6,798        |  |   |             |  |   |           |   |  |   | 52,852    |  
|Goodwill                                          |  |                                |         |   |                             |   | 9,246     |            |  |                | 235,924   |         |   | 61,549       |  |   |             |  |   |           |   |  |   | 306,719   |  
|Net intercompany                                  |  |                                |         |   |                             |   | 1,175,957 |            |  |                |          |         |   |             |  |   |             |  |   | (1,175,957 | ) |  |   |          |  
|Investment in subsidiaries                        |  |                                |         |   |                             |   | 214,570   |            |  |                | 274,025   |         |   |             |  |   |             |  |   | (488,595   | ) |  |   |          |  
|Other non-current assets                          |  |                                |         |   |                             |   | 46,573    |            |  |                | 355       |         |   | 4,247        |  |   |             |  |   |           |   |  |   | 51,175    |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total assets                                      |  | $                              |         |   |                             | $ | 2,128,474 |            |  | $              | 1,224,003 |         | $ | 545,908      |  | $ |             |  | $ | (1,664,552 | ) |  | $ | 2,233,833 |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|                                                  |  |                                |          |   |                             |   |          
|LIABILITIES AND PARTNERS CAPITAL (DEFICIT)       |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Current liabilities:                              |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Current portion of long-term debt                 |  | $                              |         |   |                             | $ | 30,878    |            |  | $              | 228       |         | $ | 14,589       |  | $ |             |  | $ |           |   |  | $ | 45,695    |  
|Accounts payable                                  |  |                                |         |   |                             |   | 58,760    |            |  |                | 60,255    |         |   | 47,558       |  |   |             |  |   |           |   |  |   | 166,573   |  
|Accrued expenses and other current liabilities    |  |                                |         |   |                             |   | 102,208   |            |  |                | 29,140    |         |   | 53,211       |  |   |             |  |   |           |   |  |   | 184,559   |  
|Deferred revenue                                  |  |                                |         |   |                             |   | 11,076    |            |  |                | 7,057     |         |   | 6,891        |  |   |             |  |   |           |   |  |   | 25,024    |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total current liabilities                         |  |                                |         |   |                             |   | 202,922   |            |  |                | 96,680    |         |   | 122,249      |  |   |             |  |   |           |   |  |   | 421,851   |  
|Long-term debt                                    |  |                                |         |   |                             |   | 2,487,756 |            |  |                | 518       |         |   | 363          |  |   |             |  |   |           |   |  |   | 2,488,637 |  
|Deferred income taxes                             |  |                                |         |   |                             |   | 300       |            |  |                | 12,599    |         |   | 12,879       |  |   |             |  |   |           |   |  |   | 25,778    |  
|Other non-current liabilities                     |  |                                |         |   |                             |   | 37,804    |            |  |                | 15,187    |         |   | 31,973       |  |   |             |  |   |           |   |  |   | 84,964    |  
|Investment in subsidiaries                        |  |                                | 600,308  |   |                             |   |          |            |  |                |          |         |   |             |  |   |             |  |   | (600,308   | ) |  |   |          |  
|Net intercompany                                  |  |                                | 187,089  |   |                             |   |          |            |  |                | 940,797   |         |   | 48,071       |  |   |             |  |   | (1,175,957 | ) |  |   |          |  
|Commitments and contingent liabilities            |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Partners capital (deficit)                       |  |                                | (787,397 | ) |                             |   | (600,308  | )          |  |                | 158,222   |         |   | 330,373      |  |   |             |  |   | 111,713    |   |  |   | (787,397  | )
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total liabilities and partners capital (deficit) |  | $                              |         |   |                             | $ | 2,128,474 |            |  | $              | 1,224,003 |         | $ | 545,908      |  | $ |             |  | $ | (1,664,552 | ) |  | $ | 2,233,833 |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED
JUNE 30, 2008

(In thousands)



|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|-------------------------------------------- |  | ------------------------------ | ------- | - | --------------------------- | - | ------- | ---------- |  | - | -------------- | - |  | ------- | ------- | ------------ |  | - | ------------ |  | - | ------- | - |  | - | ------- | -
|                                             |  | GrahamPackagingHoldingsCompany |         |   | GrahamPackagingCompany,L.P. |   |         | Guarantors |  |   | Non-Guarantors |   |  | CapCo I |         | Eliminations |  |   | Consolidated | 
|Net sales                                    |  | $                              |        |   |                             | $ | 290,680 |            |  | $ | 270,607        |   |  | $       | 151,111 |              |  | $ |             |  | $ | (24,154 | ) |  | $ | 688,244 |  
|Cost of goods sold                           |  |                                |        |   |                             |   | 238,203 |            |  |   | 239,473        |   |  |         | 127,181 |              |  |   |             |  |   | (24,154 | ) |  |   | 580,703 |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|Gross profit                                 |  |                                |        |   |                             |   | 52,477  |            |  |   | 31,134         |   |  |         | 23,930  |              |  |   |             |  |   |        |   |  |   | 107,541 |  
|Selling, general and administrative expenses |  |                                |        |   |                             |   | 15,320  |            |  |   | 13,299         |   |  |         | 7,594   |              |  |   |             |  |   |        |   |  |   | 36,213  |  
|Asset impairment charges                     |  |                                |        |   |                             |   |        |            |  |   |               |   |  |         |        |              |  |   |             |  |   |        |   |  |   |        |  
|Net loss (gain) on disposal of fixed assets  |  |                                |        |   |                             |   | 87      |            |  |   | 92             |   |  |         | (40     | )            |  |   |             |  |   |        |   |  |   | 139     |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|Operating income                             |  |                                |        |   |                             |   | 37,070  |            |  |   | 17,743         |   |  |         | 16,376  |              |  |   |             |  |   |        |   |  |   | 71,189  |  
|Interest expense, net                        |  |                                |        |   |                             |   | 25,281  |            |  |   | 15,280         |   |  |         | 1,442   |              |  |   |             |  |   |        |   |  |   | 42,003  |  
|Other expense (income), net                  |  |                                |        |   |                             |   | 85      |            |  |   | (163           | ) |  |         | (436    | )            |  |   |             |  |   |        |   |  |   | (514    | )
|Equity in earnings of subsidiaries           |  |                                | (28,308 | ) |                             |   | (17,145 | )          |  |   | (9,751         | ) |  |         |        |              |  |   |             |  |   | 55,204  |   |  |   |        |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|Income (loss) before income taxes            |  |                                | 28,308  |   |                             |   | 28,849  |            |  |   | 12,377         |   |  |         | 15,370  |              |  |   |             |  |   | (55,204 | ) |  |   | 29,700  |  
|Income tax provision                         |  |                                |        |   |                             |   | 541     |            |  |   | 103            |   |  |         | 748     |              |  |   |             |  |   |        |   |  |   | 1,392   |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|Net income (loss)                            |  | $                              | 28,308  |   |                             | $ | 28,308  |            |  | $ | 12,274         |   |  | $       | 14,622  |              |  | $ |             |  | $ | (55,204 | ) |  | $ | 28,308  |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE
30, 2008

(In thousands)



|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|-------------------------------------------- |  | ------------------------------ | ------- | - | --------------------------- | - | ------- | ---------- |  | - | -------------- | - |  | ------- | ------- | ------------ |  | - | ------------ |  | - | ------- | - |  | - | --------- | -
|                                             |  | GrahamPackagingHoldingsCompany |         |   | GrahamPackagingCompany,L.P. |   |         | Guarantors |  |   | Non-Guarantors |   |  | CapCo I |         | Eliminations |  |   | Consolidated | 
|Net sales                                    |  | $                              |        |   |                             | $ | 585,092 |            |  | $ | 534,333        |   |  | $       | 288,102 |              |  | $ |             |  | $ | (49,880 | ) |  | $ | 1,357,647 |  
|Cost of goods sold                           |  |                                |        |   |                             |   | 486,817 |            |  |   | 475,777        |   |  |         | 244,288 |              |  |   |             |  |   | (49,880 | ) |  |   | 1,157,002 |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|Gross profit                                 |  |                                |        |   |                             |   | 98,275  |            |  |   | 58,556         |   |  |         | 43,814  |              |  |   |             |  |   |        |   |  |   | 200,645   |  
|Selling, general and administrative expenses |  |                                |        |   |                             |   | 28,588  |            |  |   | 25,240         |   |  |         | 15,322  |              |  |   |             |  |   |        |   |  |   | 69,150    |  
|Asset impairment charges                     |  |                                |        |   |                             |   | 3,262   |            |  |   | (3,507         | ) |  |         | 260     |              |  |   |             |  |   |        |   |  |   | 15        |  
|Net (gain) loss on disposal of fixed assets  |  |                                |        |   |                             |   | (727    | )          |  |   | 1,077          |   |  |         | (65     | )            |  |   |             |  |   |        |   |  |   | 285       |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|Operating income                             |  |                                |        |   |                             |   | 67,152  |            |  |   | 35,746         |   |  |         | 28,297  |              |  |   |             |  |   |        |   |  |   | 131,195   |  
|Interest expense, net                        |  |                                |        |   |                             |   | 55,571  |            |  |   | 34,124         |   |  |         | 2,993   |              |  |   |             |  |   |        |   |  |   | 92,688    |  
|Other expense (income), net                  |  |                                |        |   |                             |   | 192     |            |  |   | (820           | ) |  |         | (707    | )            |  |   |             |  |   |        |   |  |   | (1,335    | )
|Equity in earnings of subsidiaries           |  |                                | (32,066 | ) |                             |   | (21,577 | )          |  |   | (11,102        | ) |  |         |        |              |  |   |             |  |   | 64,745  |   |  |   |          |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|Income (loss) before income taxes            |  |                                | 32,066  |   |                             |   | 32,966  |            |  |   | 13,544         |   |  |         | 26,011  |              |  |   |             |  |   | (64,745 | ) |  |   | 39,842    |  
|Income tax provision                         |  |                                |        |   |                             |   | 900     |            |  |   | 298            |   |  |         | 6,578   |              |  |   |             |  |   |        |   |  |   | 7,776     |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|Net income (loss)                            |  | $                              | 32,066  |   |                             | $ | 32,066  |            |  | $ | 13,246         |   |  | $       | 19,433  |              |  | $ |             |  | $ | (64,745 | ) |  | $ | 32,066    |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED
JUNE 30, 2007

(In thousands)



|                                             |  |                                |        |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |        
|-------------------------------------------- |  | ------------------------------ | ------ | - | --------------------------- | - | ------- | ---------- |  | - | -------------- | - |  | ------- | ------- | ------------ |  | - | ------------ |  | - | ------- | - |  | - | -------
|                                             |  | GrahamPackagingHoldingsCompany |        |   | GrahamPackagingCompany,L.P. |   |         | Guarantors |  |   | Non-Guarantors |   |  | CapCo I |         | Eliminations |  |   | Consolidated
|Net sales                                    |  | $                              |       |   |                             | $ | 268,032 |            |  | $ | 280,003        |   |  | $       | 126,021 |              |  | $ |             |  | $ | (23,087 | ) |  | $ | 650,969
|Cost of goods sold                           |  |                                |       |   |                             |   | 221,518 |            |  |   | 246,208        |   |  |         | 108,127 |              |  |   |             |  |   | (23,087 | ) |  |   | 552,766
|                                             |  |                                |        |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |        
|Gross profit                                 |  |                                |       |   |                             |   | 46,514  |            |  |   | 33,795         |   |  |         | 17,894  |              |  |   |             |  |   |        |   |  |   | 98,203 
|Selling, general and administrative expenses |  |                                |       |   |                             |   | 10,458  |            |  |   | 16,516         |   |  |         | 6,123   |              |  |   |             |  |   |        |   |  |   | 33,097 
|Net loss (gain) on disposal of fixed assets  |  |                                |       |   |                             |   | 702     |            |  |   | 505            |   |  |         | (316    | )            |  |   |             |  |   |        |   |  |   | 891    
|                                             |  |                                |        |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |        
|Operating income                             |  |                                |       |   |                             |   | 35,354  |            |  |   | 16,774         |   |  |         | 12,087  |              |  |   |             |  |   |        |   |  |   | 64,215 
|Interest expense, net                        |  |                                |       |   |                             |   | 30,838  |            |  |   | 19,799         |   |  |         | 1,340   |              |  |   |             |  |   |        |   |  |   | 51,977 
|Other (income) expense, net                  |  |                                |       |   |                             |   | (11,922 | )          |  |   | (130           | ) |  |         | 402     |              |  |   |             |  |   | 12,242  |   |  |   | 592    
|Equity in (earnings) loss of subsidiaries    |  |                                | (5,131 | ) |                             |   | 10,121  |            |  |   | (2,001         | ) |  |         |        |              |  |   |             |  |   | (2,989  | ) |  |   |       
|                                             |  |                                |        |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |        
|Income (loss) before income taxes            |  |                                | 5,131  |   |                             |   | 6,317   |            |  |   | (894           | ) |  |         | 10,345  |              |  |   |             |  |   | (9,253  | ) |  |   | 11,646 
|Income tax provision                         |  |                                |       |   |                             |   | 1,186   |            |  |   | 276            |   |  |         | 5,053   |              |  |   |             |  |   |        |   |  |   | 6,515  
|                                             |  |                                |        |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |        
|Net income (loss)                            |  | $                              | 5,131  |   |                             | $ | 5,131   |            |  | $ | (1,170         | ) |  | $       | 5,292   |              |  | $ |             |  | $ | (9,253  | ) |  | $ | 5,131  
|                                             |  |                                |        |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |        



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE
30, 2007

(In thousands)



|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|-------------------------------------------- |  | ------------------------------ | ------- | - | --------------------------- | - | ------- | ---------- |  | - | -------------- | - |  | ------- | ------- | ------------ |  | - | ------------ |  | - | ------- | - |  | - | --------- | -
|                                             |  | GrahamPackagingHoldingsCompany |         |   | GrahamPackagingCompany,L.P. |   |         | Guarantors |  |   | Non-Guarantors |   |  | CapCo I |         | Eliminations |  |   | Consolidated | 
|Net sales                                    |  | $                              |        |   |                             | $ | 532,643 |            |  | $ | 537,862        |   |  | $       | 249,268 |              |  | $ |             |  | $ | (47,019 | ) |  | $ | 1,272,754 |  
|Cost of goods sold                           |  |                                |        |   |                             |   | 445,222 |            |  |   | 480,941        |   |  |         | 215,247 |              |  |   |             |  |   | (47,019 | ) |  |   | 1,094,391 |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|Gross profit                                 |  |                                |        |   |                             |   | 87,421  |            |  |   | 56,921         |   |  |         | 34,021  |              |  |   |             |  |   |        |   |  |   | 178,363   |  
|Selling, general and administrative expenses |  |                                |        |   |                             |   | 24,145  |            |  |   | 31,283         |   |  |         | 12,854  |              |  |   |             |  |   |        |   |  |   | 68,282    |  
|Net loss (gain) on disposal of fixed assets  |  |                                |        |   |                             |   | 1,741   |            |  |   | 1,028          |   |  |         | (313    | )            |  |   |             |  |   |        |   |  |   | 2,456     |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|Operating income                             |  |                                |        |   |                             |   | 61,535  |            |  |   | 24,610         |   |  |         | 21,480  |              |  |   |             |  |   |        |   |  |   | 107,625   |  
|Interest expense, net                        |  |                                |        |   |                             |   | 65,144  |            |  |   | 39,384         |   |  |         | 3,172   |              |  |   |             |  |   |        |   |  |   | 107,700   |  
|Other (income) expense, net                  |  |                                |        |   |                             |   | (11,854 | )          |  |   | (291           | ) |  |         | 602     |              |  |   |             |  |   | 12,245  |   |  |   | 702       |  
|Equity in loss (earnings) of subsidiaries    |  |                                | 10,484  |   |                             |   | 16,584  |            |  |   | (2,346         | ) |  |         |        |              |  |   |             |  |   | (24,722 | ) |  |   |          |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|(Loss) income before income taxes            |  |                                | (10,484 | ) |                             |   | (8,339  | )          |  |   | (12,137        | ) |  |         | 17,706  |              |  |   |             |  |   | 12,477  |   |  |   | (777      | )
|Income tax provision (benefit)               |  |                                |        |   |                             |   | 2,145   |            |  |   | (1,240         | ) |  |         | 8,802   |              |  |   |             |  |   |        |   |  |   | 9,707     |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|Net (loss) income                            |  | $                              | (10,484 | ) |                             | $ | (10,484 | )          |  | $ | (10,897        | ) |  | $       | 8,904   |              |  | $ |             |  | $ | 12,477  |   |  | $ | (10,484   | )
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE
30, 2008

(In thousands)



|                                                             |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|------------------------------------------------------------ |  | ------------------------------ | - | --------------------------- | - | -------- | ---------- |  | - | -------------- | - |  | ------- | ------- | ------------ |  | ------------ | - |  | - | - |  | - | -------- | -
|                                                             |  | GrahamPackagingHoldingsCompany |   | GrahamPackagingCompany,L.P. |   |          | Guarantors |  |   | Non-Guarantors |   |  | CapCo I |         | Eliminations |  | Consolidated |  
|Operating activities:                                        |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash provided by operating activities                    |  | $                              |  |                             | $ | 61,577   |            |  | $ | 23,426         |   |  | $       | 32,349  |              |  | $            |  |  | $ |  |  | $ | 117,352  |  
|                                                             |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Investing activities:                                        |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash paid for property, plant and equipment              |  |                                |  |                             |   | (24,667  | )          |  |   | (19,262        | ) |  |         | (23,565 | )            |  |              |  |  |   |  |  |   | (67,494  | )
|Acqusition of/investment in a business, net of cash acquired |  |                                |  |                             |   |         |            |  |   | (4,025         | ) |  |         | 4,025   |              |  |              |  |  |   |  |  |   |         |  
|                                                             |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash used in investing activities                        |  |                                |  |                             |   | (24,667  | )          |  |   | (23,287        | ) |  |         | (19,540 | )            |  |              |  |  |   |  |  |   | (67,494  | )
|                                                             |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Financing activities:                                        |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Proceeds from issuance of long-term debt                     |  |                                |  |                             |   | 182,815  |            |  |   |               |   |  |         | 51,251  |              |  |              |  |  |   |  |  |   | 234,066  |  
|Payment of long-term debt                                    |  |                                |  |                             |   | (196,268 | )          |  |   | (139           | ) |  |         | (53,285 | )            |  |              |  |  |   |  |  |   | (249,692 | )
|                                                             |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash used in financing activities                        |  |                                |  |                             |   | (13,453  | )          |  |   | (139           | ) |  |         | (2,034  | )            |  |              |  |  |   |  |  |   | (15,626  | )
|                                                             |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Effect of exchange rate changes on cash and cash equivalents |  |                                |  |                             |   |         |            |  |   |               |   |  |         | 309     |              |  |              |  |  |   |  |  |   | 309      |  
|                                                             |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Increase in cash and cash equivalents                        |  |                                |  |                             |   | 23,457   |            |  |   |               |   |  |         | 11,084  |              |  |              |  |  |   |  |  |   | 34,541   |  
|Cash and cash equivalents at beginning of period             |  |                                |  |                             |   | 3,815    |            |  |   | 2              |   |  |         | 14,497  |              |  |              |  |  |   |  |  |   | 18,314   |  
|                                                             |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Cash and cash equivalents at end of period                   |  | $                              |  |                             | $ | 27,272   |            |  | $ | 2              |   |  | $       | 25,581  |              |  | $            |  |  | $ |  |  | $ | 52,855   |  
|                                                             |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  



22



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE
30, 2007

(In thousands)



|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|------------------------------------------------------------- |  | ------------------------------ | - | --------------------------- | - | -------- | ---------- |  | - | -------------- | - |  | ------- | ------- | ------------ |  | ------------ | - |  | - | - |  | - | -------- | -
|                                                              |  | GrahamPackagingHoldingsCompany |   | GrahamPackagingCompany,L.P. |   |          | Guarantors |  |   | Non-Guarantors |   |  | CapCo I |         | Eliminations |  | Consolidated |  
|Operating activities:                                         |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash provided by operating activities                     |  | $                              |  |                             | $ | 72,246   |            |  | $ | 26,714         |   |  | $       | 12,396  |              |  | $            |  |  | $ |  |  | $ | 111,356  |  
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Investing activities:                                         |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash paid for property, plant and equipment               |  |                                |  |                             |   | (29,183  | )          |  |   | (26,225        | ) |  |         | (11,387 | )            |  |              |  |  |   |  |  |   | (66,795  | )
|Acquisition of/investment in a business, net of cash acquired |  |                                |  |                             |   | (3,031   | )          |  |   |               |   |  |         | 3,031   |              |  |              |  |  |   |  |  |   |         |  
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash used in investing activities                         |  |                                |  |                             |   | (32,214  | )          |  |   | (26,225        | ) |  |         | (8,356  | )            |  |              |  |  |   |  |  |   | (66,795  | )
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Financing activities:                                         |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Proceeds from issuance of long-term debt                      |  |                                |  |                             |   | 527,775  |            |  |   |               |   |  |         | 27,006  |              |  |              |  |  |   |  |  |   | 554,781  |  
|Payment of long-term debt                                     |  |                                |  |                             |   | (538,410 | )          |  |   | (489           | ) |  |         | (28,701 | )            |  |              |  |  |   |  |  |   | (567,600 | )
|Purchase of partnership units                                 |  |                                |  |                             |   | (3,140   | )          |  |   |               |   |  |         |        |              |  |              |  |  |   |  |  |   | (3,140   | )
|Debt issuance fees                                            |  |                                |  |                             |   | (4,500   | )          |  |   |               |   |  |         |        |              |  |              |  |  |   |  |  |   | (4,500   | )
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash used in financing activities                         |  |                                |  |                             |   | (18,275  | )          |  |   | (489           | ) |  |         | (1,695  | )            |  |              |  |  |   |  |  |   | (20,459  | )
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Effect of exchange rate changes on cash and cash equivalents  |  |                                |  |                             |   |         |            |  |   |               |   |  |         | 218     |              |  |              |  |  |   |  |  |   | 218      |  
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Increase in cash and cash equivalents                         |  |                                |  |                             |   | 21,757   |            |  |   |               |   |  |         | 2,563   |              |  |              |  |  |   |  |  |   | 24,320   |  
|Cash and cash equivalents at beginning of period              |  |                                |  |                             |   | 1,456    |            |  |   | 1              |   |  |         | 11,870  |              |  |              |  |  |   |  |  |   | 13,327   |  
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Cash and cash equivalents at end of period                    |  | $                              |  |                             | $ | 23,213   |            |  | $ | 1              |   |  | $       | 14,433  |              |  | $            |  |  | $ |  |  | $ | 37,647   |  
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



|15. | Comprehensive Income (Loss)
|--- | ---------------------------

Comprehensive income
(loss) for the three and six months ended June 30, 2008 and 2007, was as follows:



|                                                                                                                                                                                                                                                                                          |  |                            |        |      |                          |        |      |  |   |        |   |  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ------ | ---- | ------------------------ | ------ | ---- |  | - | ------ | - |  | - | ------- | -
|                                                                                                                                                                                                                                                                                          |  | Three Months EndedJune 30, |        |      | Six Months EndedJune 30, |       
|                                                                                                                                                                                                                                                                                          |  | 2008                       |        | 2007 |                          |        | 2008 |  |   | 2007   |  
|                                                                                                                                                                                                                                                                                          |  | (In thousands)             |       
|Net income (loss)                                                                                                                                                                                                                                                                         |  | $                          | 28,308 |      | $                        | 5,131  |      |  | $ | 32,066 |   |  | $ | (10,484 | )
|Changes in fair value of derivatives, net of tax of $0 for all periods presented in 2008 and 2007                                                                                                                                                                                         |  |                            | 2,906  |      |                          | (2,311 | )    |  |   | (404   | ) |  |   | (5,164  | )
|Change in amortization of prior service costs and unrealized actuarial losses included in net periodic benefit costs for pension and
post-retirement plans, net of a tax provision of $19 for both the three and six months ended June 30, 2008 and $0 for both periods presented in 2007 |  |                            | 191    |      |                          | 83     |      |  |   | 474    |   |  |   | (4,682  | )
|Currency translation adjustments, net of a tax provision of $159 and $349 for the three and six months ended June 30, 2008, respectively,
and $0 for both the three and six months ended June 30, 2007.                                                                                   |  |                            | 12,677 |      |                          | 9,416  |      |  |   | 26,557 |   |  |   | 10,373  |  
|                                                                                                                                                                                                                                                                                          |  |                            |        |      |                          |        |      |  |   |        |   |  |   |         |  
|Comprehensive income (loss)                                                                                                                                                                                                                                                               |  | $                          | 44,082 |      | $                        | 12,319 |      |  | $ | 58,693 |   |  | $ | (9,957  | )
|                                                                                                                                                                                                                                                                                          |  |                            |        |      |                          |        |      |  |   |        |   |  |   |         |  



24



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



|16. | Segment Information
|--- | -------------------

The Company is organized and
managed on a geographical basis in three operating segments: North America, Europe and South America. Segment information for the three and six months ended June 30, 2008 and 2007 and as of June 30, 2008 and December 31, 2007,
representing the reportable segments currently utilized by the chief operating decision makers, was as follows:



|                                            |  |                                  |  |              |           |   |        |   |         |                |  |   |              |   |  |       |        |   |  |   |           |  
|------------------------------------------- |  | -------------------------------- |  | ------------ | --------- | - | ------ | - | ------- | -------------- |  | - | ------------ | - |  | ----- | ------ | - |  | - | --------- | -
|                                            |  |                                  |  | NorthAmerica |           |   | Europe |   |         | SouthAmerica   |  |   | Eliminations |   |  | Total |       
|                                            |  |                                  |  |              |           |   |        |   |         |                |  |   | (a)          |   |  |       |       
|                                            |  |                                  |  |              |           |   |        |   |         | (In thousands) |  |   |              |   |  |       |       
|Net sales (b) (c)                           |  | Three months ended June 30, 2008 |  | $            | 584,111   |   |        | $ | 80,412  |                |  | $ | 24,101       |   |  | $     | (380   | ) |  | $ | 688,244   |  
|                                            |  | Three months ended June 30, 2007 |  |              | 565,904   |   |        |   | 68,405  |                |  |   | 16,795       |   |  |       | (135   | ) |  |   | 650,969   |  
|                                            |  | Six months ended June 30, 2008   |  |              | 1,157,234 |   |        |   | 157,022 |                |  |   | 44,206       |   |  |       | (815   | ) |  |   | 1,357,647 |  
|                                            |  | Six months ended June 30, 2007   |  |              | 1,105,083 |   |        |   | 136,098 |                |  |   | 33,334       |   |  |       | (1,761 | ) |  |   | 1,272,754 |  
|                                            |  |                                  |  |              |           |  
|Operating income (loss)                     |  | Three months ended June 30, 2008 |  | $            | 63,194    |   |        | $ | 8,800   |                |  | $ | (805         | ) |  | $     |       |   |  | $ | 71,189    |  
|                                            |  | Three months ended June 30, 2007 |  |              | 57,610    |   |        |   | 5,531   |                |  |   | 1,074        |   |  |       |       |   |  |   | 64,215    |  
|                                            |  | Six months ended June 30, 2008   |  |              | 116,702   |   |        |   | 14,781  |                |  |   | (288         | ) |  |       |       |   |  |   | 131,195   |  
|                                            |  | Six months ended June 30, 2007   |  |              | 95,473    |   |        |   | 10,345  |                |  |   | 1,807        |   |  |       |       |   |  |   | 107,625   |  
|                                            |  |                                  |  |              |           |  
|Depreciation and amortization               |  | Three months ended June 30, 2008 |  | $            | 37,045    |   |        | $ | 5,608   |                |  | $ | 1,323        |   |  | $     |       |   |  | $ | 43,976    |  
|                                            |  | Three months ended June 30, 2007 |  |              | 45,101    |   |        |   | 5,634   |                |  |   | 1,219        |   |  |       |       |   |  |   | 51,954    |  
|                                            |  | Six months ended June 30, 2008   |  |              | 73,944    |   |        |   | 11,253  |                |  |   | 2,559        |   |  |       |       |   |  |   | 87,756    |  
|                                            |  | Six months ended June 30, 2007   |  |              | 88,324    |   |        |   | 10,947  |                |  |   | 2,413        |   |  |       |       |   |  |   | 101,684   |  
|                                            |  |                                  |  |              |           |  
|Asset impairment charges                    |  | Three months ended June 30, 2008 |  | $            |          |   |        | $ |        |                |  | $ |             |   |  | $     |       |   |  | $ |          |  
|                                            |  | Three months ended June 30, 2007 |  |              |          |   |        |   |        |                |  |   |             |   |  |       |       |   |  |   |          |  
|                                            |  | Six months ended June 30, 2008   |  |              | 15        |   |        |   |        |                |  |   |             |   |  |       |       |   |  |   | 15        |  
|                                            |  | Six months ended June 30, 2007   |  |              |          |   |        |   |        |                |  |   |             |   |  |       |       |   |  |   |          |  
|                                            |  |                                  |  |              |           |  
|Interest expense, net                       |  | Three months ended June 30, 2008 |  | $            | 40,661    |   |        | $ | 826     |                |  | $ | 516          |   |  | $     |       |   |  | $ | 42,003    |  
|                                            |  | Three months ended June 30, 2007 |  |              | 50,673    |   |        |   | 959     |                |  |   | 345          |   |  |       |       |   |  |   | 51,977    |  
|                                            |  | Six months ended June 30, 2008   |  |              | 89,985    |   |        |   | 1,488   |                |  |   | 1,215        |   |  |       |       |   |  |   | 92,688    |  
|                                            |  | Six months ended June 30, 2007   |  |              | 105,452   |   |        |   | 1,577   |                |  |   | 671          |   |  |       |       |   |  |   | 107,700   |  
|                                            |  |                                  |  |              |           |  
|Other (income) expense, net                 |  | Three months ended June 30, 2008 |  | $            | (271      | ) |        | $ | (16     | )              |  | $ | (227         | ) |  | $     |       |   |  | $ | (514      | )
|                                            |  | Three months ended June 30, 2007 |  |              | (11,896   | ) |        |   | 233     |                |  |   | 11           |   |  |       | 12,244 |   |  |   | 592       |  
|                                            |  | Six months ended June 30, 2008   |  |              | (578      | ) |        |   | (204    | )              |  |   | (553         | ) |  |       |       |   |  |   | (1,335    | )
|                                            |  | Six months ended June 30, 2007   |  |              | (11,776   | ) |        |   | 152     |                |  |   | 82           |   |  |       | 12,244 |   |  |   | 702       |  
|                                            |  |                                  |  |              |           |  
|Income tax (benefit) provision              |  | Three months ended June 30, 2008 |  | $            | (810      | ) |        | $ | 2,226   |                |  | $ | (24          | ) |  | $     |       |   |  | $ | 1,392     |  
|                                            |  | Three months ended June 30, 2007 |  |              | 3,600     |   |        |   | 2,437   |                |  |   | 478          |   |  |       |       |   |  |   | 6,515     |  
|                                            |  | Six months ended June 30, 2008   |  |              | 3,055     |   |        |   | 4,539   |                |  |   | 182          |   |  |       |       |   |  |   | 7,776     |  
|                                            |  | Six months ended June 30, 2007   |  |              | 4,452     |   |        |   | 4,694   |                |  |   | 561          |   |  |       |       |   |  |   | 9,707     |  
|                                            |  |                                  |  |              |           |  
|Identifiable assets (b) (c) (d)             |  | As of June 30, 2008              |  | $            | 988,536   |   |        | $ | 197,459 |                |  | $ | 52,099       |   |  | $     |       |   |  | $ | 1,238,094 |  
|                                            |  | As of December 31, 2007          |  |              | 1,014,642 |   |        |   | 182,497 |                |  |   | 45,279       |   |  |       |       |   |  |   | 1,242,418 |  
|                                            |  |                                  |  |              |           |  
|Goodwill                                    |  | As of June 30, 2008              |  | $            | 288,686   |   |        | $ | 20,986  |                |  | $ | 1,945        |   |  | $     |       |   |  | $ | 311,617   |  
|                                            |  | As of December 31, 2007          |  |              | 286,295   |   |        |   | 18,607  |                |  |   | 1,817        |   |  |       |       |   |  |   | 306,719   |  
|                                            |  |                                  |  |              |           |  
|Cash paid for property, plant and equipment |  | Six months ended June 30, 2008   |  | $            | 51,099    |   |        | $ | 11,478  |                |  | $ | 5,609        |   |  | $     |       |   |  | $ | 68,186    |  
|                                            |  | Six months ended June 30, 2007   |  |              | 59,211    |   |        |   | 6,254   |                |  |   | 2,373        |   |  |       |       |   |  |   | 67,838    |  



|(a) | To eliminate intercompany transactions.
|--- | ---------------------------------------

|(b) | The Companys net sales for Europe include countries having significant sales as follows: Poland, France, Rotselaar (Belgium) and Spain which totaled
approximately $17.1 million, $15.8 million, $13.8 million and $10.5 million, respectively, for the three months ended June 30, 2008, and approximately $14.8 million, $13.8 million, $10.9 million and $9.7 million, respectively, for
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



| | the three months ended June 30, 2007. The Companys net sales for Europe include countries having significant sales as follows: Poland, France,
Rotselaar (Belgium) and Spain which totaled approximately $33.2 million, $31.5 million, $27.3 million and $20.2 million, respectively, for the six months ended June 30, 2008, and approximately $30.6 million, $27.2 million, $22.9 million and
$17.8 million, respectively, for the six months ended June 30, 2007. The Companys identifiable assets for Europe include countries having significant identifiable assets as follows: Poland, France, Rotselaar (Belgium) and Spain which
totaled approximately $52.3 million, $38.6 million, $36.3 million and $32.5 million, respectively, as of June 30, 2008, and $46.7 million, $38.3 million, $33.0 million and $30.1 million, respectively, as of December 31, 2007.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | The Companys net sales for North America include sales in Mexico which totaled approximately $40.4 million and $34.9 million for the three months ended June 30, 2008 and
2007, respectively, and $74.5 million and $69.2 million for the six months ended June 30, 2008 and 2007, respectively. Identifiable assets in Mexico totaled approximately $67.5 million and $59.7 million as of June 30, 2008, and
December 31, 2007, respectively. Approximately all of the North America reportable segments remaining net sales and identifiable assets are in the United States.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) | Represents property, plant and equipment, net.
|--- | ----------------------------------------------

Product Net Sales
Information

The following is supplemental information on net sales by product category:



|                        |  |                            |         |                          |   |         |  |      |           |  |   |          
|----------------------- |  | -------------------------- | ------- | ------------------------ | - | ------- |  | ---- | --------- |  | - | ---------
|                        |  | Three Months EndedJune 30, |         | Six Months EndedJune 30,
|                        |  | 2008                       |         | 2007                     |   | 2008    |  | 2007
|                        |  | (In thousands)            
|Food and Beverage       |  | $                          | 425,786 |                          | $ | 410,118 |  | $    | 842,486   |  | $ | 785,468  
|Household               |  |                            | 124,446 |                          |   | 124,073 |  |      | 248,763   |  |   | 255,566  
|Automotive Lubricants   |  |                            | 89,668  |                          |   | 66,532  |  |      | 171,775   |  |   | 130,725  
|Personal Care/Specialty |  |                            | 48,344  |                          |   | 50,246  |  |      | 94,623    |  |   | 100,995  
|                        |  |                            |         |                          |   |         |  |      |           |  |   |          
|Total Net Sales         |  | $                          | 688,244 |                          | $ | 650,969 |  | $    | 1,357,647 |  | $ | 1,272,754
|                        |  |                            |         |                          |   |         |  |      |           |  |   |          



|17. | Pension Plans
|--- | -------------

The components of net periodic
pension cost for the Companys defined benefit pension plans consisted of the following:



|                                                     |  |                            |        |   |                         |   |        |      |  |   |        |   |  |   |        |  
|---------------------------------------------------- |  | -------------------------- | ------ | - | ----------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                     |  | Three Months EndedJune 30, |        |   | Six Moths EndedJune 30, |  
|                                                     |  | 2008                       |        |   | 2007                    |   |        | 2008 |  |   | 2007   |  
|                                                     |  | (In thousands)             |       
|Components of net periodic pension cost:             |  |                            |        |   |                         |   |        |      |  |   |        |   |  |   |        |  
|Service cost                                         |  | $                          | 703    |   |                         | $ | 772    |      |  | $ | 1,407  |   |  | $ | 1,538  |  
|Interest cost                                        |  |                            | 1,414  |   |                         |   | 1,306  |      |  |   | 2,829  |   |  |   | 2,604  |  
|Expected return on plan assets                       |  |                            | (1,682 | ) |                         |   | (1,514 | )    |  |   | (3,365 | ) |  |   | (3,019 | )
|Net amortization and deferral of prior service costs |  |                            | 218    |   |                         |   | 215    |      |  |   | 436    |   |  |   | 429    |  
|Employee contributions                               |  |                            | (27    | ) |                         |   | (26    | )    |  |   | (54    | ) |  |   | (52    | )
|                                                     |  |                            |        |   |                         |   |        |      |  |   |        |   |  |   |        |  
|Net periodic pension cost                            |  | $                          | 626    |   |                         | $ | 753    |      |  | $ | 1,253  |   |  | $ | 1,500  |  
|                                                     |  |                            |        |   |                         |   |        |      |  |   |        |   |  |   |        |  

The Company previously disclosed in its financial statements for the year ended December 31,
2007, that it expected to contribute $5.9 million to its pension plans in 2008. As of June 30, 2008, $0.9 million of contributions to its pension plans have been made.

The Company recognized $2.1 million of expense for its 401(k) plans in the second quarter of each of 2008 and 2007, and $4.2 million of expense for its
401(k) plans in the first half of each of 2008 and 2007.



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



|18. | Transactions with Related Parties
|--- | ---------------------------------

The Company had
transactions with entities affiliated through common ownership. The Company made payments to Graham Engineering Company for equipment and related services of $0.3 million and $1.8 million for the three months ended June 30, 2008 and 2007,
respectively, and $0.9 million and $3.2 million for the six months ended June 30, 2008 and 2007, respectively. The Graham Family Investors (defined as Graham Capital Company, GPC Investments LLC and Graham Alternative Investment Partners I or
affiliates thereof or other entities controlled by Donald C. Graham and his family) and Blackstone Management Partners III L.L.C. have supplied management services to the Company since 1998. The Company has recorded $1.3 million of expense for these
services for each of the three months ended June 30, 2008 and 2007, and $2.5 million of expense for these services for each of the six months ended June 30, 2008 and 2007. Under monitoring agreements, the Company is obligated to make
annual payments of $2.0 million and $3.0 million to the Graham Family Investors and Blackstone Management Partners III L.L.C., respectively.

At June 30, 2008, the Company had loans outstanding to certain management employees for the purchase of shares of BMP/Graham Holdings Corporation, which owns, directly and indirectly, 85% of the Company. These loans were made in
connection with the capital call payments made on September 29, 2000, and March 29, 2001, pursuant to the capital call agreement dated as of August 13, 1998. The proceeds from the loans were used to fund managements share of the
capital call payments. The loans mature on September 28, 2012, and March 30, 2013, respectively, and accrue interest at a rate of 6.22%. The loans are secured by a pledge of the stock purchased by the loans and by a security interest in
any bonus due and payable to the respective borrowers on or after the maturity date of the loans. The loans and related interest, totaling $2.0 million as of June 30, 2008, and $1.9 million as of December 31, 2007, are reflected in
Partners Capital (Deficit) on the Condensed Consolidated Balance Sheets (Unaudited).

On behalf of Blackstone Capital Partners III
Merchant Banking Fund L.P., Blackstone Offshore Capital Partners III L.P. and Blackstone Family Investment Partnership III L.P. (the Blackstone Investors), the Company made payments to the Companys former Chief Executive Officer
and Chief Financial Officer on January 5, 2007 for its repurchase of all of their outstanding partnership units, pursuant to separation agreements dated as of December 3, 2006. As a result of these payments, the Blackstone Investors became
the owners of the partnership units and owe the Company $4.2 million. This receivable is reflected in Partners Capital (Deficit) on the Condensed Consolidated Balance Sheets (Unaudited).



|19. | Subsequent Event
|--- | ----------------

On July 1, 2008, the
Companys partners (Sellers) and the Company, including a wholly-owned subsidiary of the Company, GPC Capital Corp. II (CapCoII or GPC), entered into an Equity Purchase Agreement (the Purchase
Agreement) with Hicks Acquisition Company I, Inc. (HACI), a publicly traded special purpose acquisition company, pursuant to which, through a series of transactions including an IPO Reorganization, HACIs stockholders will
acquire a majority of the outstanding common stock of GPC and GPC will own, either directly or indirectly, 100% of the partnership interests of the Operating Company (the Transaction).

Under the terms of the Purchase Agreement:



| |  |  | HACI will purchase an aggregate of 54.4 million of newly registered shares of GPC common stock (including the earnout shares defined below) from the Sellers
for an aggregate purchase price of $350.0 million in cash. Such shares of GPC common stock will be distributed to holders of HACI common stock on a one-for-one basis. 2.8 million shares of HACI common stock that are held by HACIs founder
will be converted into shares of GPC common stock that will not have any voting or economic rights unless certain post-closing GPC common stock trading price targets are met by September 28, 2012 (the earnout shares);
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | GPC will issue up to an additional 16.6 million shares to the stockholders of HACI, less the number of shares of HACI common stock that are converted into the
right to receive cash pursuant to conversion rights in accordance with HACIs amended and restated certificate of incorporation, in exchange for all then-remaining cash in HACI (after payment of expenses and discharge of liabilities);
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



| |  |  | The Sellers will retain 33.0 million shares of GPC common stock and may be entitled to receive additional shares of GPC common stock based on a net debt
closing adjustment provided for in the Purchase Agreement;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Outstanding warrants to acquire shares of HACI common stock will become entitled to acquire the same number of shares of GPC common stock on the same terms and
conditions as the existing warrants; except that 2.8 million warrants that are held by the sponsor of HACI will be converted into warrants to acquire shares of GPC common stock with an exercise price of $10 per share and an expiration date of
September 28, 2012 and would not become exercisable unless certain post-closing GPC common stock trading price targets are met;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Sellers will receive an aggregate of 2.8 million warrants to purchase shares of GPC common stock with an exercise price of $7.50 per share and an
expiration date of September 28, 2012 that do not become exercisable unless certain post-closing GPC common stock trading price targets are met; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Unexercised options issued by the Company to certain employees will be converted into options to purchase GPC common stock based on an exchange ratio determined in
accordance with the Purchase Agreement and the vesting of certain options will be accelerated.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Assuming no conversion of
HACI common stock into the right to receive cash or exercise of warrants, HACIs existing public stockholders, together with certain related parties, will own approximately 68% of GPCs voting common stock outstanding after the completion
of the Transaction and the Sellers will own approximately 32% of GPCs common stock outstanding after the completion of the Transaction. The Blackstone Investors will remain in the aggregate GPCs largest stockholder.

The Company has determined that this transaction would be reported as a business combination, and that HACI will be deemed the accounting acquirer, as
defined by SFAS 141, Business Combinations. Additionally, the transaction has been structured to preserve the Companys existing debt structure; and management does not believe that this transaction will result in a breach, or
result in a default under, the Companys existing credit facilities or constitute a change of control under the indentures of the Companys existing senior and senior subordinated notes issues.

The Company expects to complete this transaction in the fourth quarter of 2008.



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

All statements
other than statements of historical facts included in this Report on Form 10-Q, including statements regarding our future financial position, economic performance and results of operations, as well as our business strategy, budgets and projected
costs and plans and objectives of management for future operations, and the information referred to under Quantitative and Qualitative Disclosures About Market Risk (Part I, Item 3), are forward-looking statements. In addition,
forward-looking statements generally can be identified by the use of forward-looking terminology such as may, will, expect, intend, estimate, anticipate, believe or
continue or similar terminology. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, managements beliefs and certain assumptions made by
management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks,
uncertainties and assumptions that are difficult to predict. Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the
results expressed or implied by such forward-looking statements. Unless otherwise required by law, we also disclaim any obligation to update our view of any such risks or uncertainties or to announce publicly the result of any revisions to the
forward-looking statements made in this report. Readers should carefully review the risks and uncertainties under Risk Factors(Part I, Item 1A) in the Annual Report on Form 10-K of Graham Packaging Holdings Company
(Holdings) for the fiscal year ended December 31, 2007. All forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements set forth in this
paragraph.

Overview

We are a
worldwide leader in the design, manufacture and sale of customized blow molded plastic containers for the branded food and beverage, household, automotive lubricants and personal care/specialty product categories. As of the end of June 2008, we
operated 83 manufacturing facilities throughout North America, Europe and South America. Our primary strategy is to operate in select markets that will position us to benefit from the growing conversion to value-added plastic packaging from more
commodity packaging.

Management believes that critical success factors to our business are our ability to:



| |  |  | develop proprietary technologies that provide a meaningful competitive advantage in the marketplace;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | maintain relationships with and serve the complex packaging demands of our customers which include some of the worlds largest branded consumer products
companies;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | participate in growth opportunities associated with the conversion of packaging products from glass, metal and paper to plastic; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | make investments in plant and technology necessary to satisfy the three factors mentioned above.
| | - |  | ------------------------------------------------------------------------------------------------



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Management believes that the area with the greatest opportunity for growth continues to be in producing
containers for the food and beverage product category because of the continued conversion to plastic packaging, including the demand for containers for juices, juice drinks, nutritional beverages, sports drinks, teas, yogurt drinks, snacks, beer and
other food products. Since much of the growth in this area has been in the sale of smaller sized containers, over the past few years we have experienced an overall mix shift toward smaller containers. Based on internal estimates, management believes
we are a leader in the value-added segment for hot-fill polyethylene terephthalate (PET) juice containers. Management also believes we are a leading participant in the rapidly growing market of yogurt drinks and nutritional beverages
where we manufacture containers using polyolefin resins. From the beginning of 2005 through June 30, 2008, we have invested over $455.0 million in capital expenditures, including acquisitions, in the food and beverage product category.

Growth in our household container product category was fueled in prior years by conversions from powders to liquids for such products as
detergents, household cleaners and automatic dishwashing detergent. Powdered products are typically packaged in paper-based containers such as fiber wound cans and paperboard cartons. Our strongest position is in fabric care, where management
believes we are a leader in plastic container design and manufacture. It should be noted the fabric care industry is now offering some brands in a concentrated formula which management believes will negatively impact sales in this product category
by $50.0 million to $70.0 million on an annual basis. We have continually upgraded our machinery, principally in the United States, to new, larger, more productive blow molders in order to standardize production lines, improve flexibility and reduce
manufacturing costs.

Our North American one-quart motor oil container product category is in a mature industry. Unit volume in the one
quart motor oil industry decreased approximately 10% per year from 2005 through 2007 as the product category migrated towards the quick-lube market and larger multi-quart packages. Although we produce multi-quart containers, these sales only
partially offset the loss in sales of one-quart containers.

Our personal care/specialty product category is driven by new product launch
and re-launch cycles of our customers. Based on the volume of our sales to many major suppliers of personal care/specialty products, management believes we are among the leading suppliers in this product category which includes products for the hair
care, skin care, oral care and specialty markets. Management believes that our leading supply position results from our commitment to and reputation in new product development and flexible manufacturing processes and operations.

As of June 30, 2008, we operated 29 manufacturing facilities outside of the United States in Argentina, Belgium, Brazil, Canada, Finland, France,
Hungary, Mexico, the Netherlands, Poland, Spain, Turkey, the United Kingdom and Venezuela. Over the past few years, we have expanded our international operations with the addition of a new plant in each of Brazil and the Netherlands, as well as the
acquisition of the blow-molded plastic container business of Owens-Illinois Inc. (O-I Plastic), which included the addition of plants in Finland, Mexico, the Netherlands, the United Kingdom and Venezuela, and the acquisition of certain
plants in Brazil, Belgium and Turkey from Tetra-Pak Inc. on March 24, 2005.

For the six months ended June 30, 2008, 71.2% of our
net sales were generated by our top twenty customers. The majority of the top twenty customers were under long-term contracts with terms up to ten years, while the balance represents customers with whom we have been doing business for over 20 years
on average. Prices under these arrangements are typically tied to market standards and, therefore, vary with market conditions. In general, the contracts are requirements contracts that do not obligate the customer to purchase any given amount of
product from us. We had sales to one customer, PepsiCo, which exceeded 10% of total sales for the six months ended June 30, 2008 and 2007. Our sales to PepsiCo, approximately 100% of which were made in North America, were 14.9% and 15.6% of
total sales for the six months ended June 30, 2008 and 2007, respectively.



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The largest component of our cost of goods sold is resin costs. Based on industry data, the following
table summarizes average market prices per pound of PET and high-density polyethylene (HDPE) resins in the United States during the three and six months ended June 30, 2008 and 2007:



|     |  |                            |      |                          |   |      |  |      |      |  |   |     
|---- |  | -------------------------- | ---- | ------------------------ | - | ---- |  | ---- | ---- |  | - | ----
|     |  | Three Months EndedJune 30, |      | Six Months EndedJune 30,
|     |  | 2008                       |      | 2007                     |   | 2008 |  | 2007
|PET  |  | $                          | 0.93 |                          | $ | 0.82 |  | $    | 0.91 |  | $ | 0.80
|HDPE |  | $                          | 0.91 |                          | $ | 0.70 |  | $    | 0.88 |  | $ | 0.67

Changes in the cost of resin are passed through to customers by means of corresponding changes in
product pricing in accordance with our agreements with these customers and industry practice. A sustained increase in resin prices, to the extent that those costs are not passed on to the end-consumer, would make plastic containers less economical
for our customers and could result in a slower pace of conversions to plastic containers.

Holdings and Graham Packaging Company, L.P.,
Holdings wholly-owned subsidiary (the Operating Company), as limited partnerships, do not pay U.S. federal income taxes under the provisions of the Internal Revenue Code, as the applicable income or loss is included in the tax
returns of the partners. However, certain U.S. subsidiaries acquired as part of O-I Plastic are corporations and are subject to U.S. federal and state income taxes. Our foreign operations are subject to tax in their local jurisdictions.

Results of Operations

The following tables set
forth the major components of our net sales and such net sales expressed as a percentage of total net sales:



|                |  |                            |       |  |                          |   |  |      |       |  |       |   |  |   |         |  |       |   |  |   |         |  |       |  
|--------------- |  | -------------------------- | ----- |  | ------------------------ | - |  | ---- | ----- |  | ----- | - |  | - | ------- |  | ----- | - |  | - | ------- |  | ----- | -
|                |  | Three Months EndedJune 30, |       |  | Six Months EndedJune 30, |  
|                |  | 2008                       |       |  | 2007                     |   |  | 2008 |       |  | 2007  |  
|                |  | (Dollars in millions)      |      
|North America   |  | $                          | 583.8 |  | 84.8                     | % |  | $    | 565.8 |  | 86.9  | % |  | $ | 1,156.5 |  | 85.2  | % |  | $ | 1,104.8 |  | 86.8  | %
|Europe          |  |                            | 80.3  |  | 11.7                     |   |  |      | 68.4  |  | 10.5  |   |  |   | 156.9   |  | 11.6  |   |  |   | 134.6   |  | 10.6  |  
|South America   |  |                            | 24.1  |  | 3.5                      |   |  |      | 16.8  |  | 2.6   |   |  |   | 44.2    |  | 3.2   |   |  |   | 33.4    |  | 2.6   |  
|                |  |                            |       |  |                          |   |  |      |       |  |       |   |  |   |         |  |       |   |  |   |         |  |       |  
|Total Net Sales |  | $                          | 688.2 |  | 100.0                    | % |  | $    | 651.0 |  | 100.0 | % |  | $ | 1,357.6 |  | 100.0 | % |  | $ | 1,272.8 |  | 100.0 | %
|                |  |                            |       |  |                          |   |  |      |       |  |       |   |  |   |         |  |       |   |  |   |         |  |       |  



|                        |  |                            |       |  |                          |   |  |      |       |  |       |   |  |   |         |  |       |   |  |   |         |  |       |  
|----------------------- |  | -------------------------- | ----- |  | ------------------------ | - |  | ---- | ----- |  | ----- | - |  | - | ------- |  | ----- | - |  | - | ------- |  | ----- | -
|                        |  | Three Months EndedJune 30, |       |  | Six Months EndedJune 30, |  
|                        |  | 2008                       |       |  | 2007                     |   |  | 2008 |       |  | 2007  |  
|                        |  | (Dollars in millions)      |      
|Food and Beverage       |  | $                          | 425.8 |  | 61.9                     | % |  | $    | 410.1 |  | 63.0  | % |  | $ | 842.4   |  | 62.1  | % |  | $ | 785.5   |  | 61.7  | %
|Household               |  |                            | 124.4 |  | 18.1                     |   |  |      | 124.1 |  | 19.1  |   |  |   | 248.8   |  | 18.3  |   |  |   | 255.6   |  | 20.1  |  
|Automotive Lubricants   |  |                            | 89.7  |  | 13.0                     |   |  |      | 66.5  |  | 10.2  |   |  |   | 171.8   |  | 12.7  |   |  |   | 130.7   |  | 10.3  |  
|Personal Care/Specialty |  |                            | 48.3  |  | 7.0                      |   |  |      | 50.3  |  | 7.7   |   |  |   | 94.6    |  | 6.9   |   |  |   | 101.0   |  | 7.9   |  
|                        |  |                            |       |  |                          |   |  |      |       |  |       |   |  |   |         |  |       |   |  |   |         |  |       |  
|Total Net Sales         |  | $                          | 688.2 |  | 100.0                    | % |  | $    | 651.0 |  | 100.0 | % |  | $ | 1,357.6 |  | 100.0 | % |  | $ | 1,272.8 |  | 100.0 | %
|                        |  |                            |       |  |                          |   |  |      |       |  |       |   |  |   |         |  |       |   |  |   |         |  |       |  



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Three Months Ended June 30, 2008, Compared to Three Months Ended June 30, 2007

The following table sets forth the summary of the condensed consolidated statements of income and related percentage changes for the periods indicated:



|                                             |  |                            |       |   |      |   |       |                       |  |         |  
|-------------------------------------------- |  | -------------------------- | ----- | - | ---- | - | ----- | --------------------- |  | ------- | -
|                                             |  | Three Months EndedJune 30, |       |   |      |  
|                                             |  | 2008                       |       |   | 2007 |   |       | % Increase/(Decrease) | 
|                                             |  | (Dollars in millions)      |       |   |      |  
|Net sales                                    |  | $                          | 688.2 |   |      | $ | 651.0 |                       |  | 5.7     | %
|Cost of goods sold                           |  |                            | 580.7 |   |      |   | 552.8 |                       |  | 5.0     |  
|                                             |  |                            |       |   |      |   |       |                       |  |         |  
|Gross profit                                 |  |                            | 107.5 |   |      |   | 98.2  |                       |  | 9.5     |  
|% of net sales (1)                           |  |                            | 15.6  | % |      |   | 15.1  | %                     |  |         |  
|Selling, general and administrative expenses |  |                            | 36.2  |   |      |   | 33.1  |                       |  | 9.4     |  
|% of net sales (1)                           |  |                            | 5.3   | % |      |   | 5.1   | %                     |  |         |  
|Net loss on disposal of fixed assets         |  |                            | 0.1   |   |      |   | 0.9   |                       |  | (88.9   | )
|                                             |  |                            |       |   |      |   |       |                       |  |         |  
|Operating income                             |  |                            | 71.2  |   |      |   | 64.2  |                       |  | 10.9    |  
|% of net sales (1)                           |  |                            | 10.3  | % |      |   | 9.9   | %                     |  |         |  
|Interest expense                             |  |                            | 42.2  |   |      |   | 52.1  |                       |  | (19.0   | )
|Interest income                              |  |                            | (0.2  | ) |      |   | (0.1  | )                     |  | 100.0   |  
|Other (income) expense, net                  |  |                            | (0.5  | ) |      |   | 0.6   |                       |  | > 100.0 |  
|Income tax provision                         |  |                            | 1.4   |   |      |   | 6.5   |                       |  | (78.5   | )
|                                             |  |                            |       |   |      |   |       |                       |  |         |  
|Net income                                   |  | $                          | 28.3  |   |      | $ | 5.1   |                       |  | > 100.0 | %
|                                             |  |                            |       |   |      |   |       |                       |  |         |  



|(1) | As resin prices can fluctuate significantly, we believe that our gross profit, as well as certain expense items, should not be analyzed solely on a percentage of net sales basis.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net Sales.Net sales for the three months ended June 30, 2008, increased $37.2 million, or 5.7%, from the three
months ended June 30, 2007. The increase in sales was primarily due to an increase in resin costs which are passed through to customers and the positive impact of changes in exchange rates, offset by lower volume and price reductions both from
operational cost savings shared with our customers and in response to competitive pressure. Container units sold decreased 3.3%. On a geographic basis, sales for the three months ended June 30, 2008, in North America increased $18.0 million, or
3.2%, from the three months ended June 30, 2007, primarily due to an increase in resin costs which are passed through to customers, offset by lower volume and price reductions both from operational cost savings shared with our customers and in
response to competitive pressure. North American sales in the food and beverage and automotive lubricants product categories contributed $7.9 million and $19.6 million, respectively, to the increase, while the household and personal care/specialty
product categories decreased $6.6 million and $2.9 million, respectively. Container units sold in North America increased in the automotive lubricants product category by 5.1% and decreased in the food and beverage, household and personal
care/specialty product categories by 2.7%, 6.5% and 8.4%, respectively. Sales for the three months ended June 30, 2008, in Europe increased $11.9 million, or 17.4%, from the three months ended June 30, 2007. The increase in sales was
primarily due to currency conversion of $11.7 million. Sales for the three months ended June 30, 2008, in South America increased $7.3 million, or 43.5%, from the three months ended June 30, 2007. The increase in sales was primarily due to
currency conversion of $3.1 million and an increase in resin costs which are passed through to customers.

Gross Profit.Gross
profit for the three months ended June 30, 2008, increased $9.3 million, or 9.5%, from the three months ended June 30, 2007. Gross profit for the three months ended June 30, 2008, increased in North America and Europe by $6.8 million
and $3.8 million, respectively, while South America decreased by $1.3 million, when compared to the three months ended June 30, 2007. The overall increase in gross profit was driven by several factors including ongoing expense reduction
initiatives, lower depreciation and amortization expense of $7.8 million and a weakening of the dollar against the euro and other currencies of $4.2 million, partially offset by higher project startup costs (primarily costs associated with the
startup of equipment and new plants) of $1.5 million and price reductions referred to above.

Selling, General & Administrative
Expenses.Selling, general and administrative expenses for the three months ended June 30, 2008, increased $3.1 million, or 9.4%, from the three months ended June 30, 2007. The increase was primarily due to an increase in severance and
stock-based compensation costs related to the termination of employment of our former Chief Operating Officer, professional fees related to the pending acquisition (as further described in Subsequent Event) and a weakening of the
dollar against the euro and other currencies, partially offset by a decrease in consulting expenses and ongoing expense reduction efforts.



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Interest Expense. Interest expense for the three months ended June 30, 2008, decreased $9.9
million from the three months ended June 30, 2007. The decrease was primarily related to a decrease in interest rates (average 90-day LIBOR decreased from 5.4% for the three months ended June 30, 2007 to 2.8% for the three months ended
June 30, 2008).

Income Tax Provision.Income tax provision for the three months ended June 30, 2008 decreased $5.1
million from the three months ended June 30, 2007. The decrease was primarily related to a decrease in unrecognized tax benefits associated with intercompany transactions in Mexico, a decrease in valuation allowances placed on Mexico deferred
tax assets and a decrease in tax on repatriation of unremitted earnings to the U.S.

Net Income.Primarily as a result of the
factors discussed above, net income was $28.3 million for the three months ended June 30, 2008, compared to net income of $5.1 million for the three months ended June 30, 2007.

Six Months Ended June 30, 2008, Compared to Six Months Ended June 30, 2007

The following
table sets forth the summary of the condensed consolidated statements of income and related percentage changes for the periods indicated:



|                                             |  |                          |         |   |      |   |         |                       |  |         |  
|-------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | --------------------- |  | ------- | -
|                                             |  | Six Months EndedJune 30, |         |   |      |  
|                                             |  | 2008                     |         |   | 2007 |   |         | % Increase/(Decrease) | 
|                                             |  | (Dollars in millions)    |         |   |      |  
|Net sales                                    |  | $                        | 1,357.6 |   |      | $ | 1,272.8 |                       |  | 6.7     | %
|Cost of goods sold                           |  |                          | 1,157.0 |   |      |   | 1,094.4 |                       |  | 5.7     |  
|                                             |  |                          |         |   |      |   |         |                       |  |         |  
|Gross profit                                 |  |                          | 200.6   |   |      |   | 178.4   |                       |  | 12.4    |  
|% of net sales (1)                           |  |                          | 14.8    | % |      |   | 14.0    | %                     |  |         |  
|Selling, general and administrative expenses |  |                          | 69.1    |   |      |   | 68.3    |                       |  | 1.2     |  
|% of net sales (1)                           |  |                          | 5.1     | % |      |   | 5.4     | %                     |  |         |  
|Net loss on disposal of fixed assets         |  |                          | 0.3     |   |      |   | 2.5     |                       |  | (88.0   | )
|                                             |  |                          |         |   |      |   |         |                       |  |         |  
|Operating income                             |  |                          | 131.2   |   |      |   | 107.6   |                       |  | 21.9    |  
|% of net sales (1)                           |  |                          | 9.7     | % |      |   | 8.5     | %                     |  |         |  
|Interest expense                             |  |                          | 93.0    |   |      |   | 108.0   |                       |  | (13.9   | )
|Interest income                              |  |                          | (0.3    | ) |      |   | (0.3    | )                     |  |        |  
|Other (income) expense, net                  |  |                          | (1.4    | ) |      |   | 0.7     |                       |  | > 100.0 |  
|Income tax provision                         |  |                          | 7.8     |   |      |   | 9.7     |                       |  | (19.6   | )
|                                             |  |                          |         |   |      |   |         |                       |  |         |  
|Net income (loss)                            |  | $                        | 32.1    |   |      | $ | (10.5   | )                     |  | > 100.0 | %
|                                             |  |                          |         |   |      |   |         |                       |  |         |  



|(1) | As resin prices can fluctuate significantly, we believe that our gross profit, as well as certain expense items, should not be analyzed solely on a percentage of net sales basis.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net Sales.Net sales for the six months ended June 30, 2008, increased $84.8 million, or 6.7%, from the six
months ended June 30, 2007. The increase in sales was primarily due to an increase in resin costs which are passed through to customers and the positive impact of changes in exchange rates, offset by lower volume and price reductions both from
operational cost savings shared with our customers and in response to competitive pressure. Container units sold decreased 2.1%. On a geographic basis, sales for the six months ended June 30, 2008, in North America increased $51.7 million, or
4.7%, from the six months ended June 30, 2007, primarily due to an increase in resin costs which are passed through to customers, offset by lower volume and price reductions both from operational cost savings shared with our customers and in
response to competitive pressure. North American sales in the food and beverage and automotive lubricants product categories contributed $40.6 million and $34.9 million, respectively, to the increase, while the household and personal care/specialty
product categories decreased $16.4 million and $7.4 million, respectively. Container units sold in North America increased in the automotive lubricants product category by 3.3% and decreased in the household and personal care/specialty product
categories by 10.0% and 10.4%, respectively, while the food and beverage product category remained flat. Sales for the six months ended June 30, 2008, in Europe increased $22.3 million, or 16.6%, from the six months ended June 30, 2007.
The increase in sales was primarily due to currency conversion of $21.9 million. Sales for the six months ended June 30, 2008, in South America increased $10.8 million, or 32.3%, from the six months ended June 30, 2007. The increase in
sales was primarily due to currency conversion of $5.7 million.



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##### Table of Contents

Gross Profit.Gross profit for the six months ended June 30, 2008, increased $22.2 million,
or 12.4%, from the six months ended June 30, 2007. Gross profit for the six months ended June 30, 2008, increased in North America and Europe by $17.6 million and $5.9 million, respectively, while South America decreased by $1.3 million,
when compared to the six months ended June 30, 2007. The overall increase in gross profit was driven by several factors including ongoing expense reduction initiatives, lower depreciation and amortization expense of $13.7 million and a
weakening of the dollar against the euro and other currencies of $7.5 million, partially offset by price reductions referred to above.

Selling, General & Administrative Expenses.Selling, general and administrative expenses for the six months ended June 30, 2008, increased $0.8 million, or 1.2%, from the six months ended June 30, 2007. The
increase was primarily due to an increase in severance costs related to the termination of employment of our former Chief Operating Officer, an increase in stock-based compensation expense, a weakening of the dollar against the euro and other
currencies and professional fees related to the pending acquisition (as further described in Subsequent Event), partially offset by a decrease in consulting expenses and ongoing expense reduction efforts.

Interest Expense. Interest expense for the six months ended June 30, 2008, decreased $15.0 million from the six months ended June 30,
2007. The decrease was primarily related to the write-off in 2007 of $4.5 million of deferred financing fees in connection with the March 30, 2007 amendment to our Credit Agreement and a decrease in interest rates (average 90-day LIBOR
decreased from 5.4% for the six months ended June 30, 2007 to 3.0% for the six months ended June 30, 2008).

Income Tax
Provision.Income tax provision for the six months ended June 30, 2008 decreased $1.9 million from the six months ended June 30, 2007. The decrease was primarily related to a decrease in unrecognized tax benefits associated with
intercompany transactions in Mexico, a decrease in valuation allowances placed on Mexico deferred tax assets and a decrease in tax on repatriation of unremitted earnings to the U.S. These decreases were partially offset by income tax benefits
recorded during the first quarter of 2007 associated with a 2004 Internal Revenue Service audit for the Companys U.S. corporate group.

Net Income (Loss).Primarily as a result of the factors discussed above, net income was $32.1 million for the six months ended June 30, 2008, compared to net loss of $10.5 million for the six months ended June 30, 2007.

Effect of Changes in Exchange Rates

In general, our results of operations are affected by changes in foreign exchange rates. Subject to market conditions, we price our products in our foreign operations in local currencies. Income and expense accounts and cash flow items are
translated at average monthly exchange rates during the period. As a result, a decline in the value of the U.S. dollar relative to the local currencies of profitable foreign subsidiaries can have a favorable effect on our profitability, and an
increase in the value of the U.S. dollar relative to the local currencies of profitable foreign subsidiaries can have a negative effect on our profitability. Included in other (income) expense, net were foreign exchange gains of $0.5 million for the
three months ended June 30, 2008, foreign exchange losses of $0.6 million for the three months ended June 30, 2007, foreign exchange gains of $1.4 million for the six months ended June 30, 2008, and foreign exchange losses of $0.7
million for the six months ended June 30, 2007.

Assets and liabilities are translated at exchange rates in effect at the balance
sheet date. Net exchange gains or losses resulting from the translation of foreign financial statements are recorded as a separate component of Partners Capital (Deficit) under the caption accumulated other comprehensive income.
Exchange rate fluctuations increased comprehensive income by $12.7 million and $9.4 million for the three months ended June 30, 2008 and 2007, respectively, increased comprehensive income by $26.6 million for the six months ended June 30,
2008, and decreased comprehensive loss by $10.4 million for the six months ended June 30, 2007.

Derivatives

During 2004, we entered into four interest rate swap agreements, under which we received variable interest based on the Eurodollar rate and paid fixed
interest at a weighted average rate of 3.89%, on $700.0 million of term loans. During 2005, we entered into three additional interest rate swap agreements, under which we received variable interest based on the Eurodollar rate and paid



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fixed interest at a weighted average rate of 4.43%, on $225.0 million of term loans. These interest rate swap agreements expired in December 2007 and January
2008. During 2007, we entered into two interest rate collar agreements, which became effective in January 2008, under which we purchased a cap at a Eurodollar rate of 4.70% and sold a floor at a weighted average Eurodollar rate of 2.88%, on $385.0
million of term loans. During 2008, we entered into forward exchange contracts to hedge the exchange rate exposure on transactions that are denominated in foreign currencies. At June 30, 2008, we had contracts for Canadian Dollars, Polish Zloty
and Pound Sterling totalling $13.2 million. The interest rate swaps, interest rate collars and forward exchange contracts are accounted for as cash flow hedges. The hedges are highly effective as defined in Statement of Financial Accounting
Standards (SFAS) 133, Accounting for Derivative Instruments and Hedging Activities. The change in fair value on the effective portion of these cash flow hedges is recorded in other comprehensive income (loss) and was an
unrealized gain of $2.9 million and an unrealized loss of $2.2 million for the three months ended June 30, 2008 and 2007, respectively, and was an unrealized loss of $0.4 million and $5.2 million for the six months ended June 30, 2008 and
2007, respectively. Of the amount recorded within accumulated other comprehensive income (loss) as of June 30, 2008, 66% is expected to be recognized in interest expense in the next twelve months.

Liquidity and Capital Resources

In the six months
ended June 30, 2008, through our operating activities of $117.4 million, we funded $67.5 million of investing activities and $15.6 million of financing activities.

Our credit agreement consists of a senior secured term loan in an aggregate principal amount of $1,851.6 million outstanding as of June 30, 2008 (the Term Loan or Term Loan Facility) and a
$250.0 million senior secured revolving credit facility (the Revolving Credit Facility and, together with the Term Loan, the Credit Agreement). The obligations of the Operating Company and GPC Capital Corp. I (CapCo
I) under the Credit Agreement are guaranteed by Holdings and certain other subsidiaries of Holdings. The Term Loan is payable in quarterly installments and requires payments of $18.7 million in each of 2008, 2009 and 2010 and $1,804.8 million
in 2011 (disregarding any mandatory or voluntary prepayments that may reduce such scheduled amortization payments). The final maturity date of the Term Loan Facility is October 7, 2011. The Revolving Credit Facility expires on October 7, 2010.
Availability under the Revolving Credit Facility as of June 30, 2008, was $239.0 million (as reduced by $11.0 million of outstanding letters of credit). We expect to fund scheduled debt repayments from cash from operations and unused lines of
credit. Substantially all unused lines of credit have no major restrictions and are provided under notes between the Company and the respective lending institution. As of June 30, 2008, we were in compliance with all covenants in the Credit
Agreement.

As of June 30, 2008, we have outstanding $250.0 million in Senior Notes of the Operating Company and $375.0 million in Senior
Subordinated Notes of the Operating Company (collectively the Notes). The Notes are unconditionally guaranteed, jointly and severally, by Holdings and domestic subsidiaries of the Operating Company and mature on October 7, 2012
(Senior Notes), and October 7, 2014 (Senior Subordinated Notes). Interest on the Senior Notes is payable semi-annually at 8.50% and interest on the Senior Subordinated Notes is payable semi-annually at 9.875%.

At June 30, 2008, our total indebtedness was $2,522.1 million.

The Credit Agreement and the Indentures contain a number of significant covenants. We believe that these covenants are material terms of these agreements and that information about the covenants is material to an
investors understanding of our financial condition and liquidity. Covenant compliance EBITDA (as defined below) is used to determine our compliance with many of these covenants. Any breach of covenants in the Credit Agreement (including those
that are tied to financial ratios based on covenant compliance EBITDA) could result in a default under the Credit Agreement and the lenders could elect to declare all amounts borrowed to be immediately due and payable. Any such acceleration would
also result in a default under the Indentures. Additionally, these covenants restrict our ability to dispose of assets, repay other indebtedness, incur additional indebtedness, pay dividends, prepay subordinated indebtedness, incur liens, make
capital expenditures, investments or acquisitions, engage in mergers or consolidations, engage in transactions with affiliates and otherwise restrict our activities. Under the Credit Agreement, we are required to satisfy specified financial ratios
and tests. We may also be required to make annual excess cash flow payments as defined in the Credit Agreement. As of June 30, 2008, we were in compliance with the financial ratios and tests specified in the Credit Agreement.



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##### Table of Contents

Covenant compliance EBITDA is defined as EBITDA (i.e., earnings before interest, taxes, depreciation and
amortization) further adjusted to exclude non-recurring items, non-cash items and other adjustments required in calculating covenant compliance under the Credit Agreement and the Indentures, as shown in the table below. Covenant compliance EBITDA is
not intended to represent cash flow from operations as defined by generally accepted accounting principles and should not be used as an alternative to net income as an indicator of operating performance or to cash flow as a measure of liquidity. We
believe that the inclusion of covenant compliance EBITDA in this quarterly report on Form 10-Q is appropriate to provide additional information to investors about the calculation of certain financial covenants in the Credit Agreement and the
Indentures. Because not all companies use identical calculations, these presentations of covenant compliance EBITDA may not be comparable to other similarly titled measures of other companies. A reconciliation of net loss to covenant compliance
EBITDA is as follows:

Reconciliation of net loss to EBITDA



|                              |  |                                  |        |  
|----------------------------- |  | -------------------------------- | ------ | -
|                              |  | Four Quarters EndedJune 30, 2008 |       
|                              |  | (In millions)                    |       
|Net loss                      |  | $                                | (163.5 | )
|Interest income               |  |                                  | (0.9   | )
|Interest expense              |  |                                  | 195.6  |  
|Income tax provision          |  |                                  | 17.8   |  
|Depreciation and amortization |  |                                  | 189.1  |  
|                              |  |                                  |        |  
|EBITDA                        |  | $                                | 238.1  |  
|                              |  |                                  |        |  

Reconciliation of EBITDA to covenant compliance EBITDA



|                                          |  |                                  |      
|----------------------------------------- |  | -------------------------------- | -----
|                                          |  | Four Quarters EndedJune 30, 2008
|                                          |  | (In millions)                   
|EBITDA                                    |  | $                                | 238.1
|Asset impairment charges                  |  |                                  | 157.9
|Other non-cash charges (a)                |  |                                  | 19.2 
|Fees related to monitoring agreements (b) |  |                                  | 5.0  
|Non-recurring items (c)                   |  |                                  | 34.8 
|                                          |  |                                  |      
|Covenant compliance EBITDA                |  | $                                | 455.0
|                                          |  |                                  |      



|(a) | Represents the net loss on disposal of fixed assets and stock-based compensation expense.
|--- | -----------------------------------------------------------------------------------------

|(b) | Represents annual fees paid to Blackstone Management Partners III L.L.C. and a limited partner of Holdings under monitoring agreements.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

|(c) | We are required to adjust EBITDA, as defined above, for the following non-recurring items as defined in the Credit Agreement:
|--- | -----------------------------------------------------------------------------------------------------------------------------



|                                   |  |                                  |     
|---------------------------------- |  | -------------------------------- | ----
|                                   |  | Four Quarters EndedJune 30, 2008
|                                   |  | (In millions)                   
|Reorganization and other costs (i) |  | $                                | 24.1
|Project startup costs (ii)         |  |                                  | 10.7
|                                   |  |                                  |     
|                                   |  | $                                | 34.8
|                                   |  |                                  |     



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|(i) | Represents non-recurring costs related to consulting expenses associated with restructuring of the business, employee severance, plant closure costs, professional fees related to
the pending acquisition (as further described in Subsequent Event), an aborted acquisition and other costs defined in the Credit Agreement.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(ii) | Represents non-recurring costs associated with project startups.
|---- | ----------------------------------------------------------------

Under the applicable debt agreements, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is also tied to ratios based on covenant compliance EBITDA. The Credit Agreement
requires that we maintain a senior secured debt to covenant compliance EBITDA ratio at a maximum of 5.50x for the most recent four quarter period. For the four quarters ended June 30, 2008, the Operating Companys covenant compliance
EBITDA was $455.0 million and the senior secured debt to covenant compliance EBITDA ratio was 4.05x. The ability of the Operating Company to incur additional debt and make certain restricted payments under its Notes is tied to a covenant compliance
EBITDA to fixed charges (primarily cash interest expense) ratio of 2.0x, except that the Operating Company may incur certain debt and make certain restricted payments without regard to the ratio, such as up to $2.2 billion under the Credit Agreement
and investments equal to 7.5% of the Operating Companys total assets. The covenant compliance EBITDA to fixed charges ratio was 2.40x for the four quarters ended June 30, 2008.

Substantially all of our domestic subsidiaries tangible and intangible assets are pledged as collateral pursuant to the terms of the Credit
Agreement.

Under the Credit Agreement, the Operating Company is subject to restrictions on the payment of dividends or other
distributions; provided that, subject to certain limitations, the Operating Company may pay dividends or other distributions to Holdings:



| |  |  | with respect to overhead, tax liabilities, legal, accounting and other professional fees and expenses; and
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | to fund purchases and redemptions of equity interests of Holdings or BMP/Graham Holdings Corporation held by then present or former officers or employees of
Holdings, the Operating Company or their subsidiaries or by any employee stock ownership plan upon that persons death, disability, retirement or termination of employment or other circumstances with annual dollar limitations.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We and our subsidiaries, affiliates or significant shareholders (including The Blackstone Group L.P. and its affiliates)
may from time to time, subject to limitations in our debt agreements and in our or their sole discretion, purchase, repay, redeem or retire any of our outstanding debt or equity securities (including any publicly issued debt or equity securities),
in privately negotiated or open market transactions, by tender offer or otherwise.

Cash paid for property, plant and equipment, excluding
acquisitions, for the six months ended June 30, 2008, was $68.2 million. Management believes that capital expenditures to maintain and upgrade property, plant and equipment are important to remain competitive. Management estimates that on
average the annual maintenance capital expenditures are approximately $30 million to $40 million per year. Additional capital expenditures beyond this amount will be required to expand capacity or improve our cost structure.

For the fiscal year 2008, we expect to incur capital investments ranging from $150 million to $165 million. However, total capital investments will
depend on the size and timing of growth related opportunities. Our principal sources of cash to fund ongoing operations and capital requirements have been and are expected to continue to be net cash provided by operating activities and borrowings
under the Credit Agreement. Management believes that these sources will be sufficient to fund our ongoing operations and our foreseeable capital requirements.



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Off-Balance Sheet Arrangements

Other than letter of credit agreements and operating leases, as of June 30, 2008, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K. We had letter of
credit agreements outstanding in the amount of $11.0 million as of June 30, 2008, and December 31, 2007.

Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. (FIN) 48,
Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109. FIN 48 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. FIN 48 also provides guidance on accounting for derecognition, interest, penalties, accounting in interim periods, disclosure and classification of matters related to uncertainty in income
taxes and transitional requirements upon adoption of FIN 48. We adopted FIN 48 effective January 1, 2007, which resulted in an increase in other non-current liabilities for unrecognized tax benefits of $10.0 million (including interest of $2.2
million and penalties of $4.8 million), an increase in non-current deferred tax assets of $5.2 million and a corresponding decrease in partners capital of $4.8 million.

In September 2006, the FASB issued SFAS 157, Fair Value Measurements. This statement establishes a single authoritative definition of fair
value, sets out a framework to classify the source of information used in fair value measurements, identifies additional factors that must be disclosed about assets and liabilities measured at fair value based on their placement in the new framework
and modifies the long-standing accounting presumption that the transaction price of an asset or liability equals its initial fair value. In February 2008, the FASB delayed the effective date for certain non-financial assets and liabilities until
January 1, 2009. We adopted SFAS 157 effective January 1, 2008, for financial assets and liabilities (see Note 10 of the Notes to Condensed Consolidated Financial Statements (Unaudited) for further discussion). We are currently in the
process of assessing the impact of the adoption of SFAS 157 on our financial statements as it relates to non-financial assets and liabilities.

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115. Under SFAS 159, companies may elect to measure
specified financial instruments and warranty and insurance contracts at fair value on a contractbycontract basis, with changes in fair value recognized in earnings each reporting period. SFAS 159 is effective for fiscal years beginning
after November 15, 2007. We did not elect to measure any additional assets or liabilities at fair value that are not already measured at fair value under existing standards. Therefore, the adoption of this standard had no impact on our
financial statements.

In December 2007, the FASB issued SFAS 141(Revised 2007) (SFAS 141(R)), Business
Combinations. SFAS 141(R) establishes principles and requirements for the reporting entity in a business combination, including recognition and measurement in the financial statements of the identifiable assets acquired, the liabilities
assumed and any noncontrolling interest in the acquiree. This statement also establishes disclosure requirements to enable financial statement users to evaluate the nature and financial effects of the business combination. SFAS 141(R) applies
prospectively to business combinations for which the acquisition date is on or after the beginning of the first fiscal year beginning after December 15, 2008. SFAS 141(R) also applies to prospective changes in acquired tax assets and
liabilities recognized as part of our previous acquisitions, by requiring such changes to be recorded as a component of the income tax provision. We expect SFAS 141(R) will have an impact on accounting for future business combinations, once adopted,
and on prospective changes, if any, of previously acquired tax assets and liabilities.

In December 2007, the FASB issued SFAS 160,
Noncontrolling Interests in Consolidated Financial StatementsAmendment of ARB No. 51. SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent,
changes in a parents ownership of a noncontrolling interest, calculation and disclosure of the consolidated net income attributable to the parent and the noncontrolling interest, changes in a parents ownership interest while the parent
retains its controlling financial interest and fair value measurement of any retained noncontrolling equity investment. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008. We do not expect
the adoption to have a significant impact on our financial statements.

In March 2008, the FASB issued SFAS 161, Disclosures about
Derivative Instruments and Hedging Activities. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their
effects on an entitys financial position, financial performance and cash



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flows. It requires disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information
about an entitys liquidity by requiring disclosure of derivative features that are credit riskrelated, and requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative
instruments. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We are currently in the process of assessing the impact of the adoption of SFAS 161 on our financial statement
disclosures.

In May 2008, the FASB issued SFAS 162, The Hierarchy of Generally Accepted Accounting Principles. This statement
identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting
principles in the United States. This statement is effective 60 days following the Securities and Exchange Commissions approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present
Fairly in Conformity With Generally Accepted Accounting Principles. It is not expected that this Statement will result in a change in our current accounting practice.

Subsequent Event

On July 1, 2008, the Companys partners (Sellers) and the
Company, including a wholly-owned subsidiary of the Company, GPC Capital Corp. II (CapCoII or GPC), entered into an Equity Purchase Agreement (the Purchase Agreement) with Hicks Acquisition Company I, Inc.
(HACI), a publicly traded special purpose acquisition company, pursuant to which, through a series of transactions including an IPO Reorganization, HACIs stockholders will acquire a majority of the outstanding common stock of GPC
and GPC will own, either directly or indirectly, 100% of the partnership interests of the Operating Company (the Transaction).

Under the terms of the Purchase Agreement:



| |  |  | HACI will purchase an aggregate of 54.4 million of newly registered shares of GPC common stock (including the earnout shares defined below) from the Sellers
for an aggregate purchase price of $350.0 million in cash. Such shares of GPC common stock will be distributed to holders of HACI common stock on a one-for-one basis. 2.8 million shares of HACI common stock that are held by HACIs founder
will be converted into shares of GPC common stock that will not have any voting or economic rights unless certain post-closing GPC common stock trading price targets are met by September 28, 2012 (the earnout shares);
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | GPC will issue up to an additional 16.6 million shares to the stockholders of HACI, less the number of shares of HACI common stock that are converted into the
right to receive cash pursuant to conversion rights in accordance with HACIs amended and restated certificate of incorporation, in exchange for all then-remaining cash in HACI (after payment of expenses and discharge of liabilities);
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Sellers will retain 33.0 million shares of GPC common stock and may be entitled to receive additional shares of GPC common stock based on a net debt
closing adjustment provided for in the Purchase Agreement;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Outstanding warrants to acquire shares of HACI common stock will become entitled to acquire the same number of shares of GPC common stock on the same terms and
conditions as the existing warrants; except that 2.8 million warrants that are held by the sponsor of HACI will be converted into warrants to acquire shares of GPC common stock with an exercise price of $10 per share and an expiration date of
September 28, 2012 and would not become exercisable unless certain post-closing GPC common stock trading price targets are met;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Sellers will receive an aggregate of 2.8 million warrants to purchase shares of GPC common stock with an exercise price of $7.50 per share and an
expiration date of September 28, 2012 that do not become exercisable unless certain post-closing GPC common stock trading price targets are met; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Unexercised options issued by the Company to certain employees will be converted into options to purchase GPC common stock based on an exchange ratio determined in
accordance with the Purchase Agreement and the vesting of certain options will be accelerated.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Assuming no conversion of
HACI common stock into the right to receive cash or exercise of warrants, HACIs existing public stockholders, together with certain related parties, will own approximately 68% of GPCs voting common stock outstanding after the completion
of the Transaction and the Sellers will own approximately 32% of GPCs common stock outstanding after the completion of the Transaction. The Blackstone Investors will remain in the aggregate GPCs largest stockholder.

The Company has determined that this transaction would be reported as a business combination, and that HACI will be deemed the accounting acquirer, as
defined by SFAS 141, Business Combinations. Additionally, the transaction has been structured to preserve the Companys existing debt structure; and management does not believe that this transaction will result in a breach, or
result in a default under, the Companys existing credit facilities or constitute a change of control under the indentures of the Companys existing senior and senior subordinated notes issues.

The Company expects to complete this transaction in the fourth quarter of 2008.



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##### Table of Contents

|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

The quantitative and qualitative disclosures about market risk are discussed in Part II, Item 7A in the Annual Report on Form 10-K of Holdings for the fiscal year ended December 31, 2007. Other than as set forth below, there have
been no material changes in information reported since the year ended December 31, 2007.

Long-Term Debt

Our long-term debt consists of both variable-rate and fixed-rate debt. Our variable-rate debt, including our Credit Agreement, totaled $1,865.3 million
and $1,875.7 million at June 30, 2008, and December 31, 2007, respectively. The fair value of this long-term debt, including the current portion, was approximately $1,786.6 million and $1,875.7 million at June 30, 2008, and
December 31, 2007, respectively. Our fixed-rate debt, including $250.0 million of Senior Notes and $375.0 million of Senior Subordinated Notes, totaled $656.8 million and $658.7 million at June 30, 2008, and December 31, 2007,
respectively. The fair value of this long-term debt, including the current portion, was approximately $600.5 million and $588.8 million at June 30, 2008, and December 31, 2007, respectively. Based on the outstanding amount of our variable
rate indebtedness at June 30, 2008, a one percentage point change in the interest rates for our variable rate indebtedness would impact interest expense by an aggregate of approximately $18.7 million, after taking into account the outstanding
notional amount of our interest rate collar agreements at June 30, 2008.

Derivatives

The following table presents information for our interest rate collars, interest rate swaps and forward exchange contracts. The interest rate collars,
interest rate swaps and foreign exchange contracts are accounted for as cash flow hedges. The notional amount does not necessarily represent amounts exchanged by the parties, and therefore is not a direct measure of our exposure to credit risk. The
fair value approximates the cost to settle the outstanding contracts.



|                            |  |                |         |   |                   |   |         |  
|--------------------------- |  | -------------- | ------- | - | ----------------- | - | ------- | -
|                            |  | June 30, 2008  |         |   | December 31, 2007 |  
|                            |  | (In thousands) |        
|Collars:                    |  |                |         |   |                   |   |         |  
|Notional amount             |  | $              | 385,000 |   |                   | $ | 385,000 |  
|Fair value  (liability)    |  |                | (655    | ) |                   |   | (785    | )
|Swaps:                      |  |                |         |   |                   |   |         |  
|Notional amount             |  |                |        |   |                   |   | 275,000 |  
|Fair value  asset          |  |                |        |   |                   |   | 78      |  
|Forward exchange contracts: |  |                |         |   |                   |   |         |  
|Notional amount             |  |                | 13,242  |   |                   |   |        |  
|Fair value  (liability)    |  |                | (456    | ) |                   |   |        |  



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|Item 4T. | Controls and Procedures
|-------- | -----------------------



| | (a) | Evaluation of Disclosure Controls and Procedures
| | --- | ------------------------------------------------

As of the end of the period covered by this Quarterly Report on Form 10-Q, Management performed an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the
Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commissions rules and forms, and that such information is accumulated and communicated to our Management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions
regarding required disclosures. Based on the identification and the evaluation of the material weaknesses in internal control over financial reporting described below, our Chief Executive Officer and Chief Financial Officer concluded that, as of
June 30, 2008, our disclosure controls and procedures were not effective.

As disclosed in our Annual Report on Form
10-K for the year ended December 31, 2007, Management identified the following material weaknesses in our internal control over financial reporting as of December 31, 2007.



| | a. | We did not maintain an effective control environment over financial reporting. Specifically, Management identified the following material weaknesses:
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | ineffective review/monitoring to ensure the completeness and accuracy of the key factors/inputs, calculations and methodologies/assumptions supporting accounting
estimates, primarily in the area of asset impairments in accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | ineffective review/monitoring of account reconciliations to ensure that account balances were accurate and agreed to appropriate supporting detail, calculations or
other documentation.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | We did not maintain an effective control environment over computer system access and segregation of duties. Specifically, Management identified the following material weakness:
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | certain personnel had incompatible duties or access to critical financial application programs and data that was beyond the requirements of their assigned
responsibilities that could allow the creation, processing and review of financial data without independent review and/or authorization.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Management has engaged in, and continues to engage in, substantial efforts to address the material weaknesses in our internal control over financial reporting. The following describes the on-going changes made to our
internal control over financial reporting subsequent to December 31, 2007, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting:



| | 1. | Actions taken to remediate financial reporting weaknesses
| | -- | ---------------------------------------------------------



| |  |  | enhanced the oversight/review of the development of accounting estimates to ensure that the key factors/inputs, calculations and the methodologies/assumptions
supporting these estimates were consistent and accurate.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | redefined ownership of and enhanced the oversight/review of account reconciliations to ensure that reconciliation documentation was consistent and that account
balances were accurate and agreed to appropriate supporting detail, calculations or other documentation.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | 2. | Actions taken to remediate segregation of duties weaknesses involving inappropriate access to our information technology systems
| | -- | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have implemented, and will continue to further implement, procedures to more closely limit user access to our information technology systems.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------

We plan to make additional changes to our personnel, policies, procedures and systems during 2008 in
order to specifically address the deficiencies identified and strengthen our internal controls. While we believe that these remedial actions will result in correcting the material weaknesses in our internal control over financial reporting and
system access/segregation of duties, the exact timing of when the conditions will be corrected is dependent upon future events.



| | (b) | Changes in Internal Controls
| | --- | ----------------------------

The changes
that could materially affect or are reasonably likely to materially affect our internal control over financial reporting are discussed in Item 4T(a) above.



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##### Table of Contents

PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

For a
description of our legal proceedings, see Note 13 of the Notes to the Condensed Consolidated Financial Statements (Unaudited) which is incorporated by reference in response to this item.



|Item 1A. | Risk Factors
|-------- | ------------

In addition to the
other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in Holdings Annual Report on Form 10-K for the year ended December 31, 2007, which could
materially affect our business, financial condition or future results. The risk factors in Holdings Annual Report on Form 10-K have not materially changed.



|Item 6. | Exhibits
|------- | --------



|              |  |                                                                                                                                                                                                                                                                                        
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 2.1   |  | Equity purchase agreement by and between Graham Packaging Holdings Company and Hicks Acquisition Company I, Inc. (incorporated herein by reference to Exhibit 2.1 to Form 8-K filed by the Company
on July 9, 2008 (File No. 333-53603-03)).                                           
|Exhibit 3.1   |  | Certificate of Limited Partnership of Graham Packaging Holdings Company (incorporated herein by reference to Exhibit 3.5 to the Registration Statement on Form S-4 filed by the Company on July
13, 1998 (File No. 333-53603-03)).                                                     
|Exhibit 3.2   |  | Fifth Amended and Restated Agreement of Limited Partnership of Graham Packaging Holdings Company dated as of February 2, 1998 (incorporated herein by reference to Exhibit 3.6 to the Registration
Statement on Form S-4 filed by the Company on May 26, 1998 (File No. 333-53603-03)).
|Exhibit 10.1* |  | 2008 Graham Packaging Holdings Company Management Option Plan.                                                                                                                                                                                                                         
|Exhibit 10.2* |  | Side agreement to employment agreement between Graham Packaging Company, L.P. and Roger Prevot dated April 21, 2008.                                                                                                                                                                   
|Exhibit 10.3  |  | Form of Option Unit Agreement pursuant to the Graham Packaging Holdings Company 2008 Management Option Plan (incorporated herein by reference to Exhibit 10.1 to Form 8-K filed by the Company on
April 10, 2008 (File No. 333-53603-03)).                                             
|Exhibit 31.1* |  | Certification required by Rule 15d-14(a).                                                                                                                                                                                                                                              
|Exhibit 31.2* |  | Certification required by Rule 15d-14(a).                                                                                                                                                                                                                                              
|Exhibit 32.1* |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                
|Exhibit 32.2* |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                



*  Filed herewith.



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##### Table of Contents

SIGNATURE

Pursuant to the requirements 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.

Dated: August 7, 2008



|                                  |  |                                                       
|--------------------------------- |  | ------------------------------------------------------
|GRAHAM PACKAGING HOLDINGS COMPANY
|(Registrant)                     
|                                  | 
|By:                               |  | /s/ William E. Hennessey                              
|                                  |  | William E. Hennessey                                  
|                                  |  | Vice President and Corporate Controller               
|                                  |  | (chief accounting officer and duly authorized officer)



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EXHIBIT LIST



|               |  |                                                                                                                                                                                                                                                                                        
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibit                                                                                                                                                                                                                                                                 
|2.1            |  | Equity purchase agreement by and between Graham Packaging Holdings Company and Hicks Acquisition Company I, Inc. (incorporated herein by reference to Exhibit 2.1 to Form 8-K filed by the Company
on July 9, 2008 (File No. 333-53603-03)).                                           
|               | 
|3.1            |  | Certificate of Limited Partnership of Graham Packaging Holdings Company (incorporated herein by reference to Exhibit 3.5 to the Registration Statement on Form S-4 filed by the Company on July
13, 1998 (File No. 333-53603-03)).                                                     
|               | 
|3.2            |  | Fifth Amended and Restated Agreement of Limited Partnership of Graham Packaging Holdings Company dated as of February 2, 1998 (incorporated herein by reference to Exhibit 3.6 to the Registration
Statement on Form S-4 filed by the Company on May 26, 1998 (File No. 333-53603-03)).
|               | 
|10.1*          |  | 2008 Graham Packaging Holdings Company Management Option Plan.                                                                                                                                                                                                                         
|               | 
|10.2*          |  | Side agreement to employment agreement between Graham Packaging Company, L.P. and Roger Prevot dated April 21, 2008.                                                                                                                                                                   
|               | 
|10.3           |  | Form of Option Unit Agreement pursuant to the Graham Packaging Holdings Company 2008 Management Option Plan (incorporated herein by reference to Exhibit 10.1 to Form 8-K filed by the Company on
April 10, 2008 (File No. 333-53603-03)).                                             
|               | 
|31.1*          |  | Certification required by Rule 15d-14(a).                                                                                                                                                                                                                                              
|               | 
|31.2*          |  | Certification required by Rule 15d-14(a).                                                                                                                                                                                                                                              
|               | 
|32.1*          |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                
|               | 
|32.2*          |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                



*  Filed herewith.



46