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 September 30, 2001

                                      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          (I.R.S. Employer Identification No.)
incorporation or organization)

                           2401 Pleasant Valley Road
                              York, Pennsylvania
                   ----------------------------------------
                   (Address of principal executive offices)

                                     17402
                                  ----------
                                  (zip code)

                                (717) 849-8500
             ----------------------------------------------------
             (Registrant's telephone number, including area code)

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





                                      1
<PAGE>

                       GRAHAM PACKAGING HOLDINGS COMPANY
                                     INDEX


                         PART I. FINANCIAL INFORMATION


                                                                    Page Number
Item 1:  Condensed Consolidated Financial Statements:

         CONDENSED CONSOLIDATED BALANCE SHEETS -
            At September 30, 2001 and December 31, 2000.................. 3

         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - For the
            Three Months and Nine Months ended September 30, 2001 and
            October 1, 2000.............................................. 4

         CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
            (DEFICIT) - For the Year Ended December 31, 2000 and Nine
            Months ended September 30, 2001.............................. 5

         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - For the
             Nine Months ended September 30, 2001 and October 1, 2000.... 6

         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS............ 7

Item 2:  Management's Discussion and Analysis of Financial
             Condition and Results of Operations......................... 13

Item 3.  Quantitative and Qualitative Disclosures About Market Risk...... 21

                          PART II. OTHER INFORMATION

Item 6:  Exhibits and Reports on Form 8-K................................ 22

Signature:............................................................... 23





                                      2
<PAGE>



PART I.  FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements


                       GRAHAM PACKAGING HOLDINGS COMPANY
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                                  September 30,          December 31,
                                                                                       2001                  2000
                                                                                  -------------          ------------
                                                                                             (in thousands)
<S>                                                                               <C>                    <C>
ASSETS
Current assets:
   Cash and cash equivalents...................................................    $     4,407           $     9,844
   Accounts receivable, net....................................................        119,012               112,329
   Inventories.................................................................         65,386                65,401
   Prepaid expenses and other current assets...................................         16,500                12,572
                                                                                   -----------           -----------

Total current assets...........................................................        205,305               200,146
Property, plant and equipment:
   Property, plant and equipment...............................................      1,063,443             1,012,580
   Less accumulated depreciation...............................................        481,239               440,787
                                                                                   -----------           -----------
Property, plant and equipment, net.............................................        582,204               571,793
Other assets...................................................................         39,241                49,360
                                                                                   -----------           -----------
Total assets...................................................................    $   826,750           $   821,299
                                                                                   ===========           ===========

LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current liabilities:
   Accounts payable and accrued expenses.......................................    $   168,558           $   213,819
   Current portion of long-term debt...........................................         28,253                27,359
                                                                                   -----------           -----------
Total current liabilities......................................................        196,811               241,178
Long-term debt.................................................................      1,056,478             1,032,820
Other non-current liabilities..................................................         17,469                11,618
Minority interest..............................................................          2,248                    62
Commitments and contingent liabilities (see Note 10)...........................            ---                   ---
Partners' capital (deficit):
   Partners' capital (deficit).................................................       (391,589)             (433,997)
   Notes receivable for ownership interests....................................         (2,293)               (1,147)
   Accumulated other comprehensive income (loss)...............................        (52,374)              (29,235)
                                                                                   -----------           -----------
Total partners' capital (deficit)..............................................       (446,256)             (464,379)
                                                                                   -----------           -----------
Total liabilities and partners' capital (deficit)..............................    $   826,750           $   821,299
                                                                                   ===========           ===========
</TABLE>
              See accompanying notes to the financial statements.


                                      3
<PAGE>

                       GRAHAM PACKAGING HOLDINGS COMPANY
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                     Three Months Ended                   Nine Months Ended
                                                             ---------------------------------    --------------------------------
                                                              September 30,      October 1,        September 30,      October 1,
                                                                   2001             2000                2001             2000
                                                             ---------------  ----------------    ----------------  --------------
                                                                                         (in thousands)
<S>                                                            <C>              <C>                 <C>               <C>
Net sales....................................................  $  226,384       $  209,222          $  697,525        $  617,771
Cost of goods sold...........................................     186,436          175,427             580,968           512,042
                                                               ----------       ----------          ----------        ----------
Gross profit.................................................      39,948           33,795             116,557           105,729
Selling, general, and administrative expenses................      14,032           14,898              42,507            40,683
Impairment charges ..........................................       1,391              ---               5,088               ---
Special charges and unusual items............................         ---              232                 147               885
                                                               ----------       ----------          ----------        ----------
Operating income.............................................      24,525           18,665              68,815            64,161
Interest expense, net........................................      24,363           26,475              75,569            75,977
Other expense (income) ......................................           8              (18)                443               178
Minority interest............................................         210               (3)                267              (621)
                                                               ----------       ----------          ----------        ----------
Loss before income taxes.....................................         (56)          (7,789)             (7,464)          (11,373)
Income tax provision.........................................         206              329                 184               742
                                                               ----------       ----------          ----------        ----------
Net loss.....................................................  $     (262)      $   (8,118)         $   (7,648)       $  (12,115)
                                                               ==========       ==========          ==========        ==========
</TABLE>

             See accompanying notes to the financial statements.



                                      4
<PAGE>

                       GRAHAM PACKAGING HOLDINGS COMPANY
       CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                                         Notes        Accumulated
                                                                       Partners'     Receivable for      Other
                                                                        Capital        Ownership     Comprehensive
                                                                       (Deficit)       Interests     Income (Loss)       Total
                                                                     ------------    ------------    -------------    ----------
                                                                                           (in thousands)
<S>                                                                   <C>             <C>             <C>             <C>
Balance at January 1, 2000........................................    $ (439,123)     $      ---      $  (18,848)     $ (457,971)
  Net loss for the year...........................................       (45,637)            ---             ---         (45,637)
  Cumulative translation adjustment...............................           ---             ---         (10,387)        (10,387)
                                                                                                                      ----------
  Comprehensive income (loss).....................................                                                       (56,024)
  Capital contribution............................................        50,000          (1,147)            ---          48,853
  Recapitalization................................................           763             ---             ---             763
                                                                      ----------      ----------      ----------      ----------
Balance at December 31, 2000......................................      (433,997)         (1,147)        (29,235)       (464,379)
  Net loss for the period.........................................        (7,648)            ---             ---          (7,648)
  Cumulative effect of change in accounting for derivatives.......           ---             ---             392             392
  Changes in fair value of derivatives............................           ---             ---         (14,697)        (14,697)
  Cumulative translation adjustment...............................           ---             ---          (8,834)         (8,834)
                                                                                                                      ----------
  Comprehensive income (loss).....................................                                                       (30,787)
  Capital contribution............................................        50,000          (1,146)            ---          48,854
  Recapitalization................................................            56             ---             ---              56
                                                                      ----------      ----------      ----------      ----------
Balance at September 30, 2001.....................................    $ (391,589)     $   (2,293)     $  (52,374)     $ (446,256)
                                                                      ==========      ==========      ==========      ==========
</TABLE>

             See accompanying notes to the financial statements.



                                      5
<PAGE>

                       GRAHAM PACKAGING HOLDINGS COMPANY
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                                                   Nine Months Ended
                                                                                          ------------------------------------
                                                                                           September 30,        October 1,
                                                                                               2001                2000
                                                                                          ----------------    ----------------
                                                                                                    (in thousands)
<S>                                                                                         <C>                 <C>
Operating activities:
  Net loss................................................................................  $    (7,648)        $   (12,115)
  Adjustments to reconcile net loss to net cash (used in) provided by operating
    activities:
    Depreciation and amortization.........................................................       52,914              47,836
    Impairment charges....................................................................        5,088                 ---
    Amortization of debt issuance fees....................................................        3,475               3,476
    Accretion of Senior Discount Notes....................................................       11,120              10,053
    Minority interest.....................................................................          267                (621)
    Equity in earnings of joint venture...................................................          246                 (37)
    Foreign currency transaction loss.....................................................          210                 273
    Other non-cash recapitalization expense...............................................           56                 594
    Changes in operating assets and liabilities:
      Accounts receivable.................................................................       (7,349)            (25,264)
      Inventories.........................................................................          207             (14,501)
      Prepaid expenses and other current assets...........................................       (3,648)              1,425
      Other non-current assets and liabilities............................................         (559)              1,719
      Accounts payable and accrued expenses...............................................      (55,115)             17,401
                                                                                            -----------         -----------
Net cash (used in) provided by operating activities.......................................         (736)             30,239

Investing activities:
      Net purchases of property, plant and equipment......................................      (62,544)           (124,627)
      Loan to affiliate...................................................................       (2,606)             (1,169)
      Acquisitions of/investments in businesses, net of cash acquired.....................          453                (109)
      Other...............................................................................         (191)                (13)
                                                                                            -----------         -----------
Net cash used in investing activities.....................................................      (64,888)           (125,918)
Financing activities:
      Net proceeds from issuance of long-term debt........................................       11,636              45,795
      Notes for ownership interests.......................................................       (1,146)             (1,147)
      Capital contributions...............................................................       49,984              50,053
      Debt issuance fees and other........................................................          106              (1,051)
                                                                                            -----------         -----------
Net cash provided by financing activities.................................................       60,580              93,650
Effect of exchange rate changes...........................................................         (393)               (753)
                                                                                            -----------         -----------
Decrease in cash and cash equivalents.....................................................       (5,437)             (2,782)
Cash and cash equivalents at beginning of period..........................................        9,844               5,983
                                                                                            -----------         -----------
Cash and cash equivalents at end of period................................................  $     4,407         $     3,201
                                                                                            ===========         ===========
</TABLE>

             See accompanying notes to the financial statements.



                                      6
<PAGE>



                       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 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. In
the opinion of 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, 2000 is derived from audited financial
statements. The condensed consolidated financial statements and notes thereto
should be read in conjunction with the consolidated financial statements and
notes thereto for the year ended December 31, 2000. The results of operations
for the three and nine months ended September 30, 2001 are not necessarily
indicative of the results to be expected for the full year ending December 31,
2001.

         All entities and assets owned by Holdings are referred to
collectively as the "Company".

Derivatives

         On January 1, 2001 the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities", as amended by SFAS No. 138. In connection with the
adoption of the new Statement, the Company recorded $0.4 million in Other
Comprehensive Income ("OCI") as a cumulative change in accounting for
derivatives designated as cash flow-type hedges prior to adopting SFAS No. 133.

         The Company enters into interest rate swap agreements to hedge the
exposure to increasing rates with respect to its Senior Credit Agreement. The
differential to be paid or received as a result of these swap agreements is
accrued as interest rates change and recognized as an adjustment to interest
expense related to the Senior Credit Agreement. These interest rate swaps are
accounted for as cash flow hedges. Therefore, the effective portion of the
change in the fair value of the interest rate swaps is recorded within OCI,
$14.7 million for the nine months ended September 30, 2001. As a result of
monthly and quarterly swap settlements, approximately one-half of the amount
recorded within OCI is expected to be recognized as interest expense in the
next twelve months. Hedge ineffectiveness, if any, is recorded as a component
of net income. These interest rate swap agreements expire at various points
through 2003. Treatment of these interest rate swaps as cash flow hedges is
based on Management's best interpretation of SFAS No. 133. Certain issues
currently under consideration by the Financial Accounting Standards Board may
make it more difficult for the Company's interest rate swaps to qualify for
hedge accounting. If the Company's swaps do not qualify for hedge accounting,
changes in the fair value of these interest rate swaps will be recorded as a
component of net income as they occur rather than as a component of OCI.

         The Company also enters into forward exchange contracts, when
considered appropriate, to hedge the exchange rate exposure on transactions
that are denominated in a foreign currency. These forward contracts are
accounted for as fair value hedges. During the nine months ended September 30,
2001, there was no net gain or loss recognized in earnings as a result of fair
value hedges. The Company has no outstanding forward exchange contracts as of
September 30, 2001.

Reclassifications

         Certain reclassifications have been made to the 2000 financial
statements to conform to the 2001 presentation.



                                      7
<PAGE>


2.  Debt Arrangements

         Long-term debt consisted of the following:
<TABLE>
<CAPTION>
                                              September 30,      December 31,
                                                  2001               2000
                                              --------------    -------------
                                                       (in thousands)
<S>                                           <C>               <C>
Term loans..................................  $  531,938        $  546,900
Revolving loans.............................     155,000           125,500
Revolving credit facilities.................       6,132             5,805
Senior Subordinated Notes...................     225,000           225,000
Senior Discount Notes.......................     147,800           136,680
Other.......................................      18,861            20,294
                                              ----------        ----------
                                               1,084,731         1,060,179
Less amounts classified as current..........      28,253            27,359
                                              ----------        ----------
                                              $1,056,478        $1,032,820
                                              ==========        ==========
</TABLE>

         On February 2, 1998 the Company refinanced the majority of its
existing credit facilities in connection with the 1998 recapitalization and
entered into a senior Credit Agreement (the "Senior Credit Agreement") with a
consortium of banks. The Senior Credit Agreement was amended on August 13,
1998 to provide for an additional Term Loan Borrowing of an additional $175
million and on March 30, 2000 as described below (the "Amendments"). The
Senior Credit Agreement and the Amendments consist of four term loans to
Graham Packaging Company, L. P. (the "Operating Company") with initial term
loan commitments totaling $570 million and two revolving loan facilities to
the Operating Company totaling $255 million. The unused availability of the
revolving loan facilities at September 30, 2001 was $98.8 million. As part of
the Amendments to the Senior Credit Agreement, if certain events of default
were to occur, or if the Company's Net Leverage Ratio were above 5.15:1.0 at
September 30, 2000, Blackstone agreed to make an equity contribution to the
Company through the administrative agent of up to $50 million. An equity
contribution of $50 million was made by the Company's owners to the Company on
September 29, 2000, satisfying Blackstone's first obligation under the
Amendments. The Company's Net Leverage Ratio being above 5.15:1.0 at September
30, 2000 was not an event of default under the Senior Credit Agreement and
Amendments. The March 30, 2000 Amendment also changed the terms under which
the Company can access $100 million of Growth Capital Revolving Loans from a
dollar for dollar equity match to a capital call with various test dates based
on certain leverage tests for quarters ending on or after June 30, 2001. The
March 30, 2000 Amendment provided for up to an additional $50 million equity
contribution by Blackstone; allowed the proceeds of the equity contribution to
be applied to Revolving Credit Loans; and changed certain covenants,
principally to increase the amount of permitted capital expenditures in 2000
and subsequent years. Pursuant to the terms of the Capital Call Agreement, an
additional equity contribution of $50 million was made by the Company's owners
to the Company on March 29, 2001, satisfying Blackstone's final obligation
under the Capital Call Agreement dated as of August 13, 1998, as amended on
March 29, 2000. This equity contribution was made in advance and in
satisfaction of any capital call tests for quarters ending on or after June
30, 2001. The Company used the proceeds of the Capital Calls to reduce its
outstanding Revolving Credit Loans. In addition, the Senior Credit Agreement
and Amendments contain 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.
On September 30, 2001 the Company was in compliance with all covenants.

         Interest paid during the nine months ended September 30, 2001 and
October 1, 2000, net of amounts capitalized, totaled $68.2 million and $66.8
million, respectively.


                                      8
<PAGE>


3.  Inventories

         Inventories consisted of the following:

<TABLE>
<CAPTION>
                                       September 30,         December 31,
                                            2001                2000
                                       --------------       --------------
                                                 (in thousands)
<S>                                     <C>                 <C>
Finished goods........................  $   46,903          $   43,085
Raw materials and parts...............      18,483              22,316
                                        ----------          ----------
                                        $   65,386          $   65,401
                                        ==========          ==========
</TABLE>


4.  Impairment Charges

         Due to operating losses and cash flow deficits experienced in the
Company's Argentine operations and the loss or reduction of business in
Argentina, and the loss or reduction of business at the Sovico, Italy plant,
the Company evaluated the recoverability of its long-lived assets in these
locations. The Company determined that the expected future undiscounted cash
flows were below the carrying value of its long-lived assets. Accordingly, the
Company adjusted the carrying values of these long-lived assets to their
estimated fair values, resulting in impairment charges of $3.7 million related
to the Argentine operations, which includes $3.1 million of goodwill
associated with these assets, and $1.4 million related to the Sovico, Italy
plant. These impairment charges totaled $1.4 million and $5.1 million for the
three and nine months ended September 30, 2001, respectively.

5.  Accounts Payable and Accrued Expenses

         Accounts payable and accrued expenses included the following:

<TABLE>
<CAPTION>
                                              September 30,      December 31,
                                                   2001              2000
                                              -------------     --------------
                                                        (in thousands)
<S>                                           <C>                 <C>
Accounts payable..............................$   97,639          $  146,659
Accrued employee compensation and benefits....    22,155              22,800
Accrued interest..............................     8,262              14,962
Other.........................................    40,502              29,398
                                              ----------          ----------
                                              $  168,558          $  213,819
                                              ==========          ==========
</TABLE>

         For the year ended December 31, 2000, the Company incurred
reorganization costs in North America and Europe of $4.5 million, which
included the legal liability of severing 53 employees. For the nine months
ended September 30, 2001 the Company incurred additional costs of $0.1
million. The amount of the reorganization costs paid and the amount of the
remaining accrual as of September 30, 2001 were $3.5 million and $1.1 million,
respectively. The remaining accrual as of September 30, 2001 is included
within accrued employee compensation and benefits, above.


6.  Income Taxes

         The Company does 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. For the Company's foreign
operations subject to tax in their local jurisdictions, deferred 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. During 2001
and 2000, some of the Company's various taxable entities incurred additional
net operating losses for which no carryforward benefit has been recognized.



                                      9
<PAGE>



7.  Acquisitions

Purchase of additional 1% interest in Masko Graham Joint Venture

         On March 30, 2001 the Company acquired an additional 1% interest in
Masko Graham Joint Venture ("Masko Graham") for a total interest of 51%. The
total purchase price (including acquisition-related costs) for the entire 51%
interest in the operating assets was $1.4 million, net of liabilities assumed.
The investment was accounted for under the equity method of accounting prior
to March 30, 2001. The acquisition was recorded on March 30, 2001 under the
purchase method of accounting and accordingly, the results of operations of
Masko Graham are consolidated in the financial statements of the Company
beginning on March 30, 2001. The initial purchase price has been allocated to
assets acquired and liabilities assumed based on fair values. Goodwill is
being amortized over 20 years on the straight-line basis. The allocated fair
value of assets acquired and liabilities assumed is summarized as follows (in
thousands):


Current assets............................... $  3,743
Property, plant and equipment................    8,210
Goodwill.....................................      954
                                              --------

Total........................................   12,907
Less liabilities assumed.....................   11,474
                                              --------

Net cost of acquisition...................... $  1,433
                                              ========

Pro Forma Information

         The following table sets forth unaudited pro forma results of
operations assuming that the acquisition had taken place on January 1, 2000.

<TABLE>
<CAPTION>
                                    Three Months Ended                   Nine Months Ended
                             ----------------------------------  ----------------------------------
                              September 30,      October 1,       September 30,      October 1,
                                   2001             2000               2001             2000
                             ----------------  ----------------  ----------------  ----------------
                                                        (in thousands)
<S>                            <C>              <C>                <C>              <C>
Net sales....................  $  226,384       $  211,681         $  700,239       $  624,607
Net loss.....................        (262)          (8,113)            (7,644)         (12,103)
</TABLE>

         These unaudited pro forma results have been prepared for comparative
purposes only and include certain adjustments, such as additional depreciation
expense as a result of a step-up in the basis of fixed assets and increased
interest expense on acquisition debt. They do not purport to be indicative of
the results of operations which actually would have resulted had the
combination been in effect on January 1, 2000, or of future results of
operations of the entities.


8.  Special Charges and Unusual Items

         The special charges and unusual items relate to stay bonuses and the
granting of certain ownership interests to Management pursuant to the terms of
the 1998 recapitalization. These expenses have been fully recognized over the
three years from the date of the 1998 recapitalization.


9.  Rent Expense

         The Company was a party to various leases involving real property and
equipment during 2001 and 2000. Total rent expense for operating leases
amounted to $5.6 million and $16.3 million for the three and nine months ended
September 30, 2001, respectively, and $4.9 million and $14.4 million for the
three and nine months ended October 1, 2000, respectively.




                                      10
<PAGE>

10.  Contingencies

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


11.  Condensed Operating Company Data

         Condensed financial data for the Operating Company as of September
30, 2001 and December 31, 2000 was as follows:

<TABLE>
<CAPTION>
                                                             September 30,          December 31,
                                                                  2001                  2000
                                                            -----------------     -----------------
                                                                        (in thousands)
<S>                                                          <C>                    <C>
Current assets..........................................     $   212,299            $    207,139
Noncurrent assets.......................................         617,271                 616,659
Total assets............................................         829,570                 823,798
Current liabilities.....................................         196,811                 241,178
Noncurrent liabilities..................................         928,396                 907,820
Partners'capital (deficit)..............................        (295,637)               (325,200)
</TABLE>

          Condensed financial data for the Operating Company for the three and
nine months ended September 30, 2001 and October 1, 2000 was as follows:

<TABLE>
<CAPTION>
                                                      Three Months Ended                   Nine Months Ended
                                               ----------------------------------  ----------------------------------
                                                September 30,      October 1,       September 30,      October 1,
                                                     2001             2000               2001             2000
                                               ----------------- ----------------  ----------------- ----------------
                                                                          (in thousands)
<S>                                              <C>               <C>               <C>               <C>
Net sales......................................  $  226,384        $  209,222        $  697,525        $  617,771
Gross profit...................................      39,948            33,795           116,557           105,729
Net income (loss)..............................       3,700            (4,557)            3,792            (1,756)
</TABLE>


          Full separate financial statements and other disclosures of the
Operating Company have not been presented. Management has determined that such
financial information is not material to investors.


12.  Comprehensive Income (Loss)

          Comprehensive income (loss) for the three and nine months ended
September 30, 2001 and October 1, 2000 was as follows:

<TABLE>
<CAPTION>
                                                                    Three Months Ended                  Nine Months Ended
                                                            ----------------------------------- ----------------------------------
                                                             September 30,      October 1,       September 30,      October 1,
                                                                  2001             2000               2001             2000
                                                            ---------------  ------------------ ----------------  ----------------
                                                                                       (in thousands)
<S>                                                            <C>              <C>               <C>               <C>
Net loss.................................................      $    (262)       $   (8,118)       $  (7,648)        $ (12,115)
Cumulative effect of change in accounting for
derivatives..............................................            ---               ---              392               ---
Changes in fair value of derivatives.....................         (8,277)              ---          (14,697)              ---
Foreign currency.........................................          4,576            (9,451)          (8,834)          (15,859)
                                                               ---------        ----------        ---------         ---------
Comprehensive income (loss)..............................      $  (3,963)       $  (17,569)       $ (30,787)        $ (27,974)
                                                               =========        ==========        =========         =========
</TABLE>




                                      11
<PAGE>

13.  Segment Information

          The Company is organized and managed on a geographical basis in
three operating segments: North America, which includes the United States and
Canada, Europe and Latin America. Segment information for the three and nine
months ended September 30, 2001 and October 1, 2000 was as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                   North                         Latin
                                                                  America         Europe        America        Total
                                                                  -------         ------        -------        -----
<S>                                                             <C>              <C>            <C>          <C>
Net sales            Three Months Ended September 30, 2001      $  183,947       $ 35,952       $ 6,485      $  226,384
                     Three Months Ended October 1, 2000            168,724         33,107         7,391         209,222

                     Nine Months Ended September 30, 2001          565,019        112,985        19,521         697,525
                     Nine Months Ended October 1, 2000             489,968        106,294        21,509         617,771

Net income (loss)    Three Months Ended September 30, 2001           2,948         (2,903)         (307)           (262)
                     Three Months Ended October 1, 2000             (2,085)        (5,457)         (576)         (8,118)

                     Nine Months Ended September 30, 2001            4,931         (8,371)       (4,208)         (7,648)
                     Nine Months Ended October 1, 2000              (2,415)        (8,724)         (976)        (12,115)
</TABLE>


14.  New Accounting Pronouncements

          On June 29, 2001, Statement of Financial Accounting Standards
("SFAS") No. 141, "Business Combinations", was approved by the Financial
Accounting Standards Board ("FASB"). SFAS No. 141 requires that the purchase
method of accounting be used for all business combinations initiated after
June 30, 2001. Goodwill and certain intangible assets will remain on the
balance sheet and not be amortized. On an annual basis, and when there is
reason to suspect that their values have been diminished or impaired, these
assets must be tested for impairment, and write-downs may be necessary. The
Company is required to implement SFAS No. 141 for any acquisition initiated on
or after July 1, 2001 and it has not determined the impact, if any, that this
statement will have on its consolidated financial position or results of
operations.

          On June 29, 2001, SFAS No. 142, "Goodwill and Other Intangible
Assets", was approved by the FASB. SFAS No. 142 changes the accounting for
goodwill from an amortization method to an impairment-only approach.
Amortization of goodwill, including goodwill recorded in past business
combinations, will cease upon adoption of this statement. The Company is
required to implement SFAS No. 142 on January 1, 2002 and it has not
determined the impact, if any, that this statement will have on its
consolidated financial position or results of operations.

          On October 3, 2001, SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", was approved by the FASB. SFAS No. 144
addresses the financial accounting and reporting for the impairment or
disposal of long-lived assets. The Company is required to implement SFAS No.
144 on January 1, 2002 and it has not determined the impact, if any, this
statement will have on its consolidated financial position or results of
operations.


15.  Subsequent Event

          On November 8, 2001, the Company announced the closing of its
facility in Burlington, Ontario, Canada. Manufacturing operations are expected
to cease during the first quarter of 2002. The Company expects to incur a one
time non-recurring charge over the next six months of approximately $3.7
million. Not included in these costs is an expected gain on the eventual sale
of the land and building.



                                      12
<PAGE>



Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operation

         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 the Company's future
financial position, economic performance and results of operations, as well as
the Company's 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 the negative thereof or variations
thereon or similar terminology. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, the
Company can give no assurance that such expectations will prove to have been
correct. Important factors that could cause actual results to differ
materially from the issuers' expectations include, without limitation, the
Company's exposure to fluctuations in resin prices and its dependence on resin
supplies, competition in the Company's markets, including the impact of
possible new technologies, the high degree of leverage and substantial debt
service obligations of the Operating Company and Holdings, the restrictive
covenants contained in instruments governing indebtedness of the Company, a
decline in the domestic motor oil business, risks associated with the
Company's international operations, the Company's dependence on significant
customers and the risk that customers will not purchase the Company's products
in the amounts expected by the Company under their requirements contracts, the
Company's dependence on key management and its labor force and the material
adverse effect that could result from the loss of their services, risks
associated with environmental regulation, risks associated with possible
future acquisitions, and the possibility that the Company may not be able to
achieve success in developing and expanding its business, including its
hot-fill PET plastic container business. See "Business - Certain Risks of the
Business" in Holdings' Annual Report on Form 10-K for the fiscal year ended
December 31, 2000. All forward-looking statements attributable to the Company,
or persons acting on its behalf, are expressly qualified in their entirety by
the cautionary statements set forth in this paragraph.


Overview

         The Company is a worldwide leader in the design, manufacture and sale
of customized blow molded plastic containers for the branded food and
beverage, household and personal care, and automotive lubricants markets with
60 plants throughout North America, Europe and Latin America. The Company's
primary focus is to operate in select markets that will position it to benefit
from the growing conversion to high performance plastic packaging from more
commodity packaging. The Company targets branded consumer product
manufacturers for whom customized packaging design is a critical component in
their efforts to differentiate their products to consumers. The Company
initially pursues these attractive product areas with one or two major
consumer products companies in each category that it expects will lead the
conversion to plastic packaging for that category. The Company utilizes its
innovative design, engineering and technological capabilities to deliver
highly customized, high performance products to its customers in these areas
in order to distinguish and increase sales of their branded products. The
Company collaborates with its customers through joint initiatives in product
design and cost reduction, and innovative operational arrangements, which
include on-site manufacturing facilities.

         Management believes that critical success factors to the Company's
business are its ability to:

          o    serve the complex packaging demands of its customers which
               include some of the world's largest branded consumer products
               companies;

          o    forecast trends in the packaging industry across product lines
               and geographic territories (including those specific to the
               rapid conversion of packaging products from glass, metal and
               paper to plastic); and

          o    make the correct investments in plant and technology necessary
               to satisfy the two factors mentioned above.

         Management believes that the area with the greatest opportunity for
growth continues to be in producing containers for the food and beverage
market because of the continued conversion to and growing consumer demand for
plastic packaging. This has included a significant growth in demand for
hot-fill PET containers for juices, juice


                                      13
<PAGE>

drinks, sport drinks, teas and other food products. Since the beginning of
1997, the Company has invested over $260 million in capital expenditures to
expand its technology, machinery and plant structure to prepare for what it
believed would be the growth in the hot-fill PET area. For the year ended
December 31, 2000, the Company's sales of hot-fill PET containers had grown to
$246.6 million from $68.2 million in 1996. The Company has also experienced
significant growth in containers for drinkable yogurts as these single-serve
products increase in popularity globally, particularly due to the market
leadership of one of Graham's key customers.

         The Company's household and personal care net sales have grown in
recent years, as package conversion trends continue from other packaging forms
in some of its product lines. The Company continues to benefit as liquid
fabric care detergents, hard-surface cleaners and liquid automatic dishwashing
detergents, which are packaged in plastic containers, capture an increased
share from powdered detergents and cleaners, which are predominantly packaged
in paper-based containers. The Company has upgraded its proprietary machinery
in the United States to new larger blow molders to standardize production
lines, improve flexibility and reduce manufacturing costs.

         The Company's North American one-quart motor oil container product
line is in a mature industry. The Company has been able to partially offset
pricing pressures by renewing or extending contracts, improving manufacturing
efficiencies, line speeds, labor efficiency and inventory management and
reducing container weight and material spoilage. Unit volume in the domestic
one-quart motor oil industry has continued to decline at an average annual
rate of 1% to 2% for the past several years. Management believes this decline
will continue for the next several years but believes there are significant
volume opportunities for automotive product business in foreign countries,
particularly those in Latin America.

         Consistent with its strategy to expand in selected international areas,
the Company currently operates 25 facilities, either on its own or through
joint ventures, in Argentina, Belgium, Brazil, Canada, France, Germany,
Hungary, Italy, Mexico, Poland, Spain, Turkey and the United Kingdom. During
the latter portion of 2000, the Company experienced a decline in its
operations in the United Kingdom. This reduction in business was the result of
the loss of a key customer in that location. Also in 2000, the Company
experienced a downturn in financial performance in certain plants in France
and in 2001, in Argentina. Also in 2001, the Company experienced a loss or
reduction of business at its Sovico, Italy plant. Although Management is
addressing these issues, some of these performance declines are considered to
be other than temporary. Given the recent troubled economy in Latin America,
Management closely monitors its operations and investment there.

         For the nine months ended September 30, 2001, 82% of the Company's
net sales were generated by the top twenty customers, the majority of which
are under long-term contracts with terms ranging from three to twelve years;
the remainder of which were generated by customers with whom the Company has
been doing business for over 17 years on average. Prices under these
arrangements are typically related 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
the Company.

         Based on industry data, the following table summarizes average market
prices per pound of polyethylene terephthalate, or PET, and high-density
polyethylene, or HDPE, resins in North America over the following three and
nine month periods:

<TABLE>
<CAPTION>
                                               Three Months Ended                   Nine Months Ended
                                       -----------------------------------  -----------------------------------
                                         September 30,      October 1,        September 30,      October 1,
                                             2001              2000               2001              2000
                                       ------------------ ----------------  -----------------  ----------------

<S>                                        <C>                <C>              <C>               <C>
PET....................................    $  0.68            $  0.67          $  0.67           $  0.61
HDPE...................................       0.40               0.46             0.45              0.45
</TABLE>


         In general, the Company's dollar gross profit is substantially
unaffected by fluctuations in the prices of PET and HDPE resins, the primary
raw materials for the Company's products, because industry practice and the
Company's agreements with its customers permit substantially all price changes
to be passed through to customers by means of corresponding changes in product
pricing. Consequently, the Company believes that cost of goods sold, as well
as certain other expense items, should not be analyzed solely on a percentage
of net sales basis. 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 the Company's customers, and could result in a
slower pace of conversions to plastic containers.


                                      14
<PAGE>

         The Company does 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 its partners. The Company may make tax
distributions to its partners to reimburse them for such tax obligations, if
any. The Company's foreign operations are subject to tax in their local
jurisdictions. Most of these entities have historically incurred net operating
losses.


Results of Operations

         The following tables set forth the operating segments and product
categories for the Company's net sales (in millions) and such net sales
expressed as a percentage of total revenues:


<TABLE>
<CAPTION>
                                                Three Months Ended                         Nine Months Ended
                                     ----------------------------------------- ------------------------------------------
                                        September 30,         October 1,          September 30,          October 1,
                                            2001                 2000                 2001                  2000
                                     -------------------- -------------------- -------------------- ---------------------
<S>                                   <C>          <C>     <C>          <C>      <C>         <C>     <C>         <C>
North America........................ $  183.9     81.2%   $  168.7     80.7%    $  565.0    81.0%   $  490.0    79.3%
Europe...............................     36.0     15.9        33.1     15.8        113.0    16.2       106.3    17.2
Latin America........................      6.5      2.9         7.4      3.5         19.5     2.8        21.5     3.5
                                      --------    -----    --------    -----     --------   -----    --------   -----
Total Net Sales...................... $  226.4    100.0%   $  209.2    100.0%    $  697.5   100.0%   $  617.8   100.0%
                                      ========    =====    ========    =====     ========   =====    ========   =====
</TABLE>

<TABLE>
<CAPTION>
                                                Three Months Ended                         Nine Months Ended
                                     ----------------------------------------- ------------------------------------------
                                        September 30,         October 1,          September 30,          October 1,
                                            2001                 2000                 2001                  2000
                                     -------------------- -------------------- -------------------- ---------------------
<S>                                  <C>          <C>     <C>          <C>      <C>          <C>     <C>          <C>
Food & Beverage                      $  124.1     54.8%   $  103.8     49.6%    $  384.6     55.1%   $  300.5     48.7%
Household and Personal Care.........     51.5     22.8        53.2     25.4        157.2     22.6       156.6     25.3
Automotive..........................     50.8     22.4        52.2     25.0        155.7     22.3       160.7     26.0
                                     --------    -----    --------    -----     --------    -----    --------    -----
Total Net Sales                      $  226.4    100.0%   $  209.2    100.0%    $  697.5    100.0%   $  617.8    100.0%
                                     ========    =====    ========    =====     ========    =====    ========    =====
</TABLE>

Three Months Ended September 30, 2001 Compared to Three Months Ended
October 1, 2000

Net Sales. Net sales for the three months ended September 30, 2001 increased
$17.2 million or 8.2% to $226.4 million from $209.2 million for the three
months ended October 1, 2000. The increase in sales was primarily due to an
18.8% increase in units sold, principally due to additional food and beverage
business where units increased by 36.2%. On a geographic basis, sales for the
three months ended September 30, 2001 in North America were up $15.2 million
or 9.0% from the three months ended October 1, 2000. The North American sales
increase included higher units sold of 13.8%. North American sales in the food
and beverage business contributed $18.1 million to the increase, while sales
in the automotive business remained approximately the same and sales in the
household and personal care business were $2.9 million lower. Units sold in
North America increased 33.2% in the food and beverage business and 0.4% in
the automotive business, but decreased 7.4% in the household and personal care
business. Sales for the three months ended September 30, 2001 in Europe were
up $2.9 million or 8.8% from the three months ended October 1, 2000. The
European sales increase included higher units sold of 30.4%. The growth in
sales due to capital investments made in recent periods was offset by exchange
rate changes of approximately $0.6 million for the three months ended
September 30, 2001 compared to the three months ended October 1, 2000. Sales
for the three months ended September 30, 2001 in Latin America were down $0.9
million or 12.2% from the three months ended October 1, 2000. The decrease in
the Latin American sales was primarily due to exchange rate changes of
approximately $2.0 million, offset by a 0.1% increase in units sold.

Gross Profit. Gross profit for the three months ended September 30, 2001
increased $6.1 million to $39.9 million from $33.8 million for the three
months ended October 1, 2000. The increase in gross profit resulted primarily
from the higher sales volume in North America and Europe and improved
operating performance in Europe as compared to the prior year. Gross profit
for the three months ended September 30, 2001 increased $2.4 million in North
America and $4.0 million in Europe, while decreasing $0.3 million in Latin
America when compared to the three months ended October 1, 2000.

Selling, General & Administrative Expenses. Selling, general and
administrative expenses for the three months ended September 30, 2001
decreased $0.9 million to $14.0 million from $14.9 million for the three
months ended

                                      15
<PAGE>

October 1, 2000. The decrease in 2001 selling, general and administrative
expenses is due primarily to non-recurring charges incurred for the three
months ended October 1, 2000, including costs related to a postponed initial
public offering and global reorganization charges, offset by overall growth of
the business. As a percent of sales, selling, general and administrative
expenses, excluding non-recurring charges, increased to 6.1% of sales for the
three months ended September 30, 2001 from 5.2% for the three months ended
October 1, 2000.

Impairment Charges. Due to the loss or reduction of business at the Sovico,
Italy plant, the Company evaluated the recoverability of its long-lived assets
in this location. The Company determined that the expected future undiscounted
cash flows were below the carrying value of its long-lived assets.
Accordingly, the Company adjusted the carrying values of these long-lived
assets to their estimated fair values, resulting in an impairment charge of
$1.4 million for the three months ended September 30, 2001.

Special Charges and Unusual Items. No special charges and unusual items were
incurred during the three months ended September 30, 2001. Special charges and
unusual items of $0.2 million in the three months ended October 1, 2000
related to compensation costs incurred in connection with the 1998
recapitalization.

Interest Expense, Net. Interest expense, net decreased $2.1 million to $24.4
million, including $3.9 million of non-cash interest on the Company's Senior
Discount Notes, for the three months ended September 30, 2001 from $26.5
million, including $3.4 million of non-cash interest on the Company's Senior
Discount Notes, for the three months ended October 1, 2000. The decrease was
primarily related to lower interest rates for the three months ended September
30, 2001 as compared to the three months ended October 1, 2000.

Net Loss. Primarily as a result of factors discussed above, net loss was $0.3
million for the three months ended September 30, 2001 compared to net loss of
$8.1 million for the three months ended October 1, 2000.


Nine Months Ended September 30, 2001 Compared to Nine Months Ended
October 1, 2000

Net Sales. Net sales for the nine months ended September 30, 2001 increased
$79.7 million or 12.9% to $697.5 million from $617.8 million for the nine
months ended October 1, 2000. The increase in sales was primarily due to a
22.4% increase in units sold, principally due to additional food and beverage
business where units increased by 43.9%, and an increase in resin prices. On a
geographic basis, sales for the nine months ended September 30, 2001 in North
America were up $75.0 million or 15.3% from the nine months ended October 1,
2000. The North American sales increase included higher units sold of 20.1%.
North American sales in the food and beverage business and the household and
personal care business contributed $75.6 million and $1.4 million,
respectively, to the increase, while sales in the automotive business were
$2.0 million lower. Units sold in North America increased 48.5% in the food
and beverage business, but decreased 1.6% and 2.6% in the household and
personal care and the automotive businesses, respectively. Sales for the nine
months ended September 30, 2001 in Europe were up $6.7 million or 6.3% from
the nine months ended October 1, 2000. The European sales increase included
higher units sold of 28.1%. The growth in sales due to capital investments
made in recent periods was offset by exchange rate changes of approximately
$5.7 million for the nine months ended September 30, 2001 compared to the nine
months ended October 1, 2000. Sales for the nine months ended September 30,
2001 in Latin America were down $2.0 million or 9.3% from the nine months
ended October 1, 2000. The decrease in the Latin American sales was primarily
due to exchange rate changes of approximately $4.2 million, offset by a 2.1%
increase in units sold.

Gross Profit. Gross profit for the nine months ended September 30, 2001
increased $10.9 million to $116.6 million from $105.7 million for the nine
months ended October 1, 2000. The increase in gross profit resulted primarily
from the higher sales volume in North America and Europe and improved
operating performance in Europe as compared to the prior year. Gross profit
for the nine months ended September 30, 2001 increased $7.0 million in North
America and $4.2 million in Europe, while decreasing $0.3 million in Latin
America when compared to the nine months ended October 1, 2000.

Selling, General & Administrative Expenses. Selling, general and
administrative expenses for the nine months ended September 30, 2001 increased
$1.8 million to $42.5 million from $40.7 million for the nine months ended
October 1, 2000. The increase in 2001 selling, general and administrative
expenses is due primarily to overall growth of the business, offset by
non-recurring charges incurred for the nine months ended October 1, 2000,
including costs related to a postponed initial public offering and global
reorganization charges. As a percent of sales, selling, general and
administrative expenses, excluding non-recurring charges, remained at 5.9% of
sales for each of the nine months ended September 30, 2001 and the nine months
ended October 1, 2000.

                                      16
<PAGE>

Impairment Charges. Due to operating losses and cash flow deficits experienced
in the Company's Argentine operations and the loss or reduction of business in
Argentina, and the loss or reduction of business at the Sovico, Italy plant,
the Company evaluated the recoverability of its long-lived assets in these
locations. The Company determined that the expected future undiscounted cash
flows were below the carrying value of its long-lived assets. Accordingly, the
Company adjusted the carrying values of these long-lived assets to their
estimated fair values, resulting in impairment charges of $3.7 million related
to the Argentine operations, which includes $3.1 million of goodwill
associated with these assets, and $1.4 million related to the Sovico, Italy
plant for the nine months ended September 30, 2001.

Special Charges and Unusual Items. Special charges and unusual items decreased
$0.8 million to $0.1 million for the nine months ended September 30, 2001 from
$0.9 million for the nine months ended October 1, 2000. Special charges and
unusual items in the nine months ended September 30, 2001 and in the nine
months ended October 1, 2000 related to compensation costs incurred in
connection with the 1998 recapitalization.

Interest Expense, Net. Interest expense, net decreased $0.4 million to $75.6
million, including $11.1 million of non-cash interest on the Company's Senior
Discount Notes, for the nine months ended September 30, 2001 from $76.0
million, including $10.1 million of non-cash interest on the Company's Senior
Discount Notes, for the nine months ended October 1, 2000. The decrease was
primarily related to lower interest rates for the nine months ended September
30, 2001 as compared to the nine months ended October 1, 2000.

Other Expense (Income). Other expense (income) was $0.4 million for the nine
months ended September 30, 2001 as compared to $0.2 million for the nine
months ended October 1, 2000. The higher expense was due primarily to a higher
equity loss in the nine months ended September 30, 2001 as compared to the
nine months ended October 1, 2000.

Net Loss. Primarily as a result of factors discussed above, net loss was $7.6
million for the nine months ended September 30, 2001 compared to net loss of
$12.1 million for the nine months ended October 1, 2000.


Effect of Changes in Exchange Rates

         In general, the Company's results of operations are affected by
changes in foreign exchange rates. Subject to market conditions, the Company
prices its products in its foreign operations in local currencies. As a
result, a decline in the value of the U.S. dollar relative to these other
currencies can have a favorable effect on the profitability of the Company,
and an increase in the value of the dollar relative to these other currencies
can have a negative effect on the profitability of the Company. Exchange rate
fluctuations decreased other comprehensive loss by $4.6 million for the three
months ended September 30, 2001, increased other comprehensive loss by $9.5
million for the three months ended October 1, 2000 and increased other
comprehensive loss by $8.8 million and $15.9 million for the nine months ended
September 30, 2001 and October 1, 2000, respectively.


Euro Conversion

         On January 1, 1999, eleven of fifteen member countries of the
European Economic Union fixed conversion rates between their existing
currencies, legacy currencies, and one common currency, the euro. The euro
trades on currency exchanges and may be used in business transactions.
Conversion to the euro eliminated currency exchange rate risk between the
member countries. Beginning in January 2002, new euro-denominated bills and
coins will be issued and the legacy currencies will be withdrawn from
circulation.

         The Company is actively addressing the many areas involved with the
introduction of the euro, including information management, finance, legal and
tax. This review includes the conversion of information technology, and
business and financial systems, and evaluation of currency risk, as well as
the impact on the pricing and distribution of the Company's products.

         One outcome of the introduction of the euro is the trend toward more
uniform pricing in all European markets, including those that have not adopted
the euro as their common currency. The Company believes the effect of the
introduction of the euro, as well as any related cost of conversion, will not
have a material adverse impact on its financial condition and results of
operations.


                                      17
<PAGE>

Derivatives

         On January 1, 2001 the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities", as amended by SFAS No. 138. In connection with the
adoption of the new Statement, the Company recorded $0.4 million in Other
Comprehensive Income ("OCI") as a cumulative change in accounting for
derivatives designated as cash flow-type hedges prior to adopting SFAS No. 133.

         The Company enters into interest rate swap agreements to hedge the
exposure to increasing rates with respect to its Senior Credit Agreement. The
differential to be paid or received as a result of these swap agreements is
accrued as interest rates change and recognized as an adjustment to interest
expense related to the Senior Credit Agreement. These interest rate swaps are
accounted for as cash flow hedges. Therefore, the effective portion of the
change in the fair value of the interest rate swaps is recorded within OCI,
$14.7 million for the nine months ended September 30, 2001. As a result of
monthly and quarterly swap settlements, approximately one-half of the amount
recorded within OCI is expected to be recognized as interest expense in the
next twelve months. Hedge ineffectiveness, if any, is recorded as a component
of net income. These interest rate swap agreements expire at various points
through 2003. Treatment of these interest rate swaps as cash flow hedges is
based on Management's best interpretation of SFAS No. 133. Certain issues
currently under consideration by the Financial Accounting Standards Board may
make it more difficult for the Company's interest rate swaps to qualify for
hedge accounting. If the Company's swaps do not qualify for hedge accounting,
changes in the fair value of these interest rate swaps will be recorded as a
component of net income as they occur rather than as a component of OCI.

         The Company also enters into forward exchange contracts, when
considered appropriate, to hedge the exchange rate exposure on transactions
that are denominated in a foreign currency. These forward contracts are
accounted for as fair value hedges. During the nine months ended September 30,
2001, there was no net gain or loss recognized in earnings as a result of fair
value hedges. The Company has no outstanding forward exchange contracts as of
September 30, 2001.


Liquidity and Capital Resources

         In the nine months ended September 30, 2001, the Company funded,
through its various borrowing arrangements and a $50.0 million capital
contribution from the Company's owners, $0.7 million of operating activities
and $64.9 million of investing activities, including $62.5 million of capital
expenditures.

         The Company's Senior Credit Agreement currently consists of four term
loans to the Operating Company with initial term loan commitments totaling
$570 million and two revolving loan facilities to the Operating Company
totaling $255 million. Unused availability under the revolving credit
facilities at September 30, 2001 is $98.8 million. The obligations of the
Operating Company under the Senior Credit Agreement are guaranteed by Holdings
and certain other subsidiaries of Holdings. The term loans are payable in
quarterly installments through January 31, 2007, and require payments of $20.0
million in 2001, $25.0 million in 2002, $27.5 million in 2003, $93.0 million
in 2004 and $64.9 million in 2005. The Company expects to fund scheduled debt
repayments from cash from operations and unused lines of credit. The revolving
loan facilities expire on January 31, 2004.

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

         The Company's 1998 recapitalization included the issuance of $225
million of Senior Subordinated Notes due 2008 and the issuance of $169 million
aggregate principal amount at maturity of Senior Discount Notes due 2009 which
yielded gross proceeds of $100.6 million. At September 30, 2001, the aggregate
accreted value of the Senior Discount Notes was $147.8 million. The Senior
Subordinated Notes are unconditionally guaranteed on a senior subordinated
basis by Holdings and mature on January 15, 2008, with interest payable on
$150 million at a fixed rate of 8.75% and with interest payable on $75 million
at LIBOR plus 3.625%. The Senior Discount Notes mature on January 15, 2009,
with cash interest payable semi-annually beginning July 15, 2003 at 10.75%.
The effective interest rate to maturity on the Senior Discount Notes is
10.75%. At September 30, 2001, the Company's outstanding indebtedness was
$1,084.7 million.

         An equity contribution of $50 million was made by the Company's
owners to the Company on September 29, 2000, satisfying Blackstone's first
capital call obligation under the Senior Credit Agreement and Capital Call


                                      18
<PAGE>

Agreement. As part of the Second Amendment to the Senior Credit Agreement, if
certain events of default were to occur, or if the Company's Net Leverage
Ratio were above certain levels for test periods beginning June 30, 2001,
Blackstone agreed to make an additional equity contribution to the Company
through the administrative agent of up to $50 million. The Company's Net
Leverage Ratio being above the specified levels at June 30, 2001 or thereafter
is not an event of default under the Senior Credit Agreement. An additional
equity contribution of $50 million was made by the Company's owners on March
29, 2001, satisfying Blackstone's final obligation under the Capital Call
Agreement dated as of August 13, 1998, as amended on March 29, 2000, for all
future test periods. The Company used the proceeds of the Capital Calls to
reduce its outstanding Revolving Credit Loans.

         As market conditions warrant, the Company and its major
equityholders, including Blackstone Capital Partners III Merchant Banking
Fund L.P. and its affiliates, may from time to time repurchase debt securities
issued by the Company in privately negotiated or open market transactions, by
tender offer or otherwise.

         Earnings before minority interest, extraordinary items, interest,
income taxes, depreciation and amortization expense, the ongoing $1 million
per year fee paid pursuant to the Blackstone monitoring agreement, non-cash
equity income in earnings of joint ventures, other non-cash charges,
recapitalization expenses, special charges and unusual items and certain
non-recurring charges ("Adjusted EBITDA") increased $5.1 million or 13.2% to
$43.8 million for the three months ended September 30, 2001 from $38.7 million
for the three months ended October 1, 2000. Adjusted EBITDA increased $11.7
million or 9.9% to $130.2 million for the nine months ended September 30, 2001
from $118.5 million for the nine months ended October 1, 2000. Adjusted 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. Adjusted EBITDA is included in this Form 10-Q to provide
additional information with respect to the ability of Holdings and the
Operating Company to satisfy their debt service, capital expenditure and
working capital requirements and because certain covenants in Holdings' and
the Operating Company's borrowing arrangements are tied to similar measures.
While Adjusted EBITDA and similar measures are frequently used as a measure of
operations and the ability to meet debt service requirements, these terms are
not necessarily comparable to other similarly titled captions of other
companies due to the potential inconsistencies in the method of calculation.
Adjusted EBITDA is calculated as follows:

<TABLE>
<CAPTION>
                                                                   Three Months Ended                Nine Months Ended
                                                             --------------------------------  ------------------------------
                                                              September 30,      October 1,     September 30,    October 1,
                                                                   2001             2000            2001            2000
                                                             ---------------  ---------------  --------------  -------------
                                                                                        (in millions)
<S>                                                               <C>              <C>            <C>            <C>
Net loss....................................................      $  (0.3)         $  (8.1)       $   (7.6)      $  (12.1)
Interest expense, net.......................................         24.4             26.5            75.6           76.0
Income tax expense..........................................          0.2              0.3             0.2            0.7
Depreciation and amortization...............................         17.0             15.5            52.9           47.8
Impairment charges..........................................          1.4              ---             5.1            ---
Fees paid pursuant to the Blackstone monitoring agreement...          0.2              0.2             0.7            0.7
Equity income in earnings of joint venture..................          ---              ---             0.2            ---
Minority interest...........................................          0.2              ---             0.3           (0.6)
Special charges and unusual items/certain non-recurring
charges (1)(2)..............................................          0.7              4.3             2.8            6.0
                                                                  -------          -------        --------       --------
Adjusted EBITDA ............................................      $  43.8           $ 38.7        $  130.2       $  118.5
                                                                  =======           ======        ========       ========
</TABLE>

(1)      The three and nine months ended September 30, 2001 include
         special charges and unusual items related to compensation costs
         incurred in connection with the 1998 recapitalization ($0.0 million
         and $0.1 million, respectively), global reorganization costs ($0.7
         million and $2.5 million, respectively) and other costs ($0.0 million
         and $0.2 million, respectively). The three and nine months ended
         October 1, 2000 include special charges and unusual items related to
         compensation costs incurred in connection with the 1998
         recapitalization ($0.2 million and $0.9 million, respectively),
         global reorganization costs ($2.6 million and $3.6 million,
         respectively), costs related to a postponed initial public offering
         ($1.2 million and $1.2 million, respectively) and other costs ($0.3
         million and $0.3 million, respectively).

(2)      Does not include project startup costs, which are treated as
         non-recurring in accordance with the definition of EBITDA under the
         Company's Senior Credit Agreement. These startup costs were $0.8
         million and $2.0 million for the three months ended September 30,
         2001 and October 1, 2000, respectively, and $3.7 million and $4.8
         million for the nine months ended September 30, 2001 and October 1,
         2000, respectively.

                                      19
<PAGE>

         Management believes that capital investment to maintain and upgrade
property, plant and equipment is important to remain competitive. Management
estimates that the annual capital expenditures required to maintain the
Company's current facilities are currently approximately $30 million per year.
Additional capital expenditures beyond this amount will be required to expand
capacity. Capital expenditures for the nine months ended September 30, 2001
were $62.5 million. For each of the fiscal years 2001 and 2002, the Company
expects to incur approximately $100 million of capital expenditures. However,
total capital expenditures will depend on the size and timing of growth
related opportunities. The Company's principal sources of cash to fund capital
requirements will be net cash provided by operating activities and borrowings
under its Senior Credit Agreement.

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

          o    in respect of overhead, tax liabilities, legal, accounting and
               other professional fees and expenses;

          o    to fund purchases and redemptions of equity interests of
               Holdings or Investor LP 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 such
               person's death, disability, retirement or termination of
               employment or other circumstances with certain annual dollar
               limitations; and

          o    to finance, starting on July 15, 2003, the payment of cash
               interest payments on the Senior Discount Notes.


New Accounting Pronouncements

         On June 29, 2001, Statement of Financial Accounting Standards
("SFAS") No. 141, "Business Combinations", was approved by the Financial
Accounting Standards Board ("FASB"). SFAS No. 141 requires that the purchase
method of accounting be used for all business combinations initiated after
June 30, 2001. Goodwill and certain intangible assets will remain on the
balance sheet and not be amortized. On an annual basis, and when there is
reason to suspect that their values have been diminished or impaired, these
assets must be tested for impairment, and write-downs may be necessary. The
Company is required to implement SFAS No. 141 for any acquisition initiated on
or after July 1, 2001 and it has not determined the impact, if any, that this
statement will have on its consolidated financial position or results of
operations.

         On June 29, 2001, SFAS No. 142, "Goodwill and Other Intangible
Assets", was approved by the FASB. SFAS No. 142 changes the accounting for
goodwill from an amortization method to an impairment-only approach.
Amortization of goodwill, including goodwill recorded in past business
combinations, will cease upon adoption of this statement. The Company is
required to implement SFAS No. 142 on January 1, 2002 and it has not
determined the impact, if any, that this statement will have on its
consolidated financial position or results of operations.

         On October 3, 2001, SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", was approved by the FASB. SFAS No. 144
addresses the financial accounting and reporting for the impairment or
disposal of long-lived assets. The Company is required to implement SFAS No.
144 on January 1, 2002 and it has not determined the impact, if any, this
statement will have on its consolidated financial position or results of
operations.

Subsequent Event

          On November 8, 2001, the Company announced the closing of its
facility in Burlington, Ontario, Canada. Manufacturing operations are expected
to cease during the first quarter of 2002. The Company expects to incur a one
time non-recurring charge over the next six months of approximately $3.7
million. Not included in these costs is an expected gain on the eventual sale
of the land and building.


                                      20
<PAGE>



         Item 3.  Quantitative and Qualitative Disclosures About Market Risk

         See the information set forth in Item 7A of Holdings' Annual Report
on Form 10-K for the fiscal year ended December 31, 2000 for complete
quantitative and qualitative disclosures about market risk. The following
table provides disclosure as of September 30, 2001 for financial instruments
that have experienced material changes in fair value since December 31, 2000.


<TABLE>
<CAPTION>
                           Expected Maturity Date of Interest Rate Swap Agreements at
                                           September 30, 2001
                                            (In thousands)                                                    Fair Value
                           -----------------------------------------------------------------------------     September 30,
                               2001      2002         2003        2004        2005   Thereafter   Total          2001
                               ----      ----         ----        ----        ----   ----------   -----          ----
<S>                            <C>     <C>          <C>           <C>         <C>         <C>    <C>          <C>
Derivatives matched
  against liabilities:
Pay fixed swaps                 --     $200,000     $300,000        --          --         --    $500,000     $(14,305)
  Pay rate                      --        5.81%       5.25%         --          --         --          --           --
  Receive rate                  --        2.37%       3.21%         --          --         --          --           --
</TABLE>




                                      21
<PAGE>


PART II  OTHER INFORMATION


Item 6.       Exhibits and Reports on Form 8-K

     (a)      Exhibits

              None

     (b)      Reports on Form 8-K

              No reports on Form 8-K were required to be filed during the
              quarter ended September 30, 2001.




                                      22
<PAGE>



                                   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:  November 13, 2001


                        GRAHAM PACKAGING HOLDINGS COMPANY
                        (Registrant)

                        By: BCP/Graham Holdings L.L.C.,
                              its General Partner


                        By: /s/ John E. Hamilton
                            ------------------------------------------
                            John E. Hamilton
                            Vice President, Finance and Administration
                            (chief accounting officer and duly authorized
                             officer)



                                      23